Tax Diary May/June 2024

1 May 2024 – Due date for corporation tax due for the year ended 30 July 2023.

19 May 2024 – PAYE and NIC deductions due for month ended 5 May 2024. (If you pay your tax electronically the due date is 22 May 2024).

19 May 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2024. 

19 May 2024 – CIS tax deducted for the month ended 5 May 2023 is payable by today.

31 May 2024 – Ensure all employees have been given their P60s for the 2023/24 tax year.

1 June 2024 – Due date for corporation tax due for the year ended 31 August 2023.

19 June 2024 – PAYE and NIC deductions due for month ended 5 June 2024. (If you pay your tax electronically the due date is 22 June 2024).

19 June 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2024. 

19 June 2024 – CIS tax deducted for the month ended 5 June 2024 is payable by today.

Source:HM Revenue & Customs | 14-04-2024

Class 4 NICs who is liable?

Most self-employed people are required to pay Class 4 National Insurance contributions (NICs) if their profits are £12,570 or more a year.

Class 4 NIC rates for the tax year 2024-25 are 6% (2023-24: 9%) for chargeable profits between £12,570 and £50,270 plus 2% on any profits over £50,270.

A number of categories of people are exempt from paying Class 4 NICs, these include:

  • People under the age of 16 at the beginning of the year of assessment.
  • People over State pension age at the beginning of the year of assessment. A person who attains State pension age during the course of the year of assessment remains liable for Class 4 NICs for the whole of that year.
  • Trustees, guardians etc of an incapacitated person are exempted from Class 4 NICs on that income.

The Class 4 NIC rate is lower than the corresponding rate for employees who pay National Insurance at 8% on the same income levels. Both the employed and self-employed pay 2% National Insurance contributions on income above the higher rate threshold.

Source:HM Revenue & Customs | 15-04-2024

Post Transaction Valuation Checks

A Post Transaction Valuation Check (PTVC) can be requested from HMRC for an individual to work out a capital gains tax liability or for companies to calculate corporation tax liability on chargeable gains. The request for a PTVC should be made using the CG34 form. HMRC’s guidance says the form must be completed and sent to the address on the form at least three months before the relevant tax return filing date.

The PTVC is a service offered by HMRC to check valuations after a disposal has been made, including a deemed disposal following a claim that an asset has become of negligible value but before the completion of a self-assessment return. This service is available to all taxpayers, individuals, trustees and companies.

If HMRC agrees with the valuations set out they will not question the use of those valuations in the return, unless there are any important facts affecting the valuations that have not been disclosed. Agreement to the valuations does not always mean that HMRC agree the gain or loss. When the return is filed, HMRC will consider the other figures used. If an agreement cannot be reached, HMRC will suggest alternatives such as using specialist valuers.

Source:HM Revenue & Customs | 15-04-2024

View and prove your immigration status

A UK Visas and Immigration (UKVI) account can be used by eligible users to view and prove their immigration status online. This may be required to provide proof of your status to employers or higher education providers.

The service can also be used to update personal details or to check what rights you have in the UK, for example the right to work, rent or claim benefits.

You will have a UKVI if you have ever:

  • applied to the EU Settlement Scheme;
  • used the ‘UK Immigration: ID Check’ app to prove your identity when applying for a visa;
  • created one when applying for a visa (you will have received a UKVI account confirmation email); and
  • created one to get access to an eVisa (an online record of your immigration status) – you will have received an email about this.

If you are unable to access your account, then you will need to recover your UK Visas and Immigration Account by calling the UK Visas and Immigration phone line on 0300 790 6268.

Source:Home Office | 15-04-2024

Taxable employment benefits from April 2026

From April 2026, the government will mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions on benefits in kind via payroll software. This represents a significant change to the current system and should reduce the administrative requirements and simplify the tax system for both employers and employees.

This means that the 2025-26 tax year will be the last year that employers will be able to file P11Ds and P11D(b)s with HMRC in most cases. From April 2026, tax on employment benefits will be collected in real time and not through tax codes in arrears. Class 1A National Insurance contributions will also be collected in real time for each pay period rather than at the end of the year. HMRC has said that this change will remove the need for 4 million end of year returns to be submitted.

HMRC has said that they will engage with stakeholders to discuss their proposals to inform design and delivery decisions and draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.

Source:HM Revenue & Customs | 15-04-2024

Changes to Scottish Income Tax rates 2024-25

A reminder of the changes to Scottish Income Tax rates for the 2024-25 tax year. It was announced as part of the Scottish Budget measures that a new tax band called the advanced rate band will apply a 45% tax rate on annual income between £75,000 and £125,140 and would come into effect from 6 April 2024. 

In addition, 1p was added to the top rate of tax and the starter and basic rate bands were increased in line with inflation (6.7%, based on Consumer Price Index from September 2023). There were no changes to the Starter, Basic, Intermediate and Higher tax rates and the Higher rate threshold was maintained at £43,662. The measures are expected to raise an additional £1.5 billion in Income Tax revenue.

The Scottish rates and bands for 2024-25 are as follows:

Starter rate – 19% £12,571 – £14,876
Basic rate – 20% £14,877 – £26,561
Intermediate rate – 21% £26,562 – £43,662
Higher rate – 42% £43,663 – £75,000
Advanced rate – 45% £75,001 – £125,140
Top rate – 48% Above £125,140

The standard personal allowance for 2024-25 remains frozen at £12,570. 

Source:The Scottish Government | 15-04-2024

Payrolling employee expenses and benefits

Employers can register on a voluntary basis (before the start of the tax year) to report and account for tax on certain benefits and expenses via the RTI system. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits at the tax year end.

Registration is now open to payroll your benefits from 6 April 2024. Effective 6 April 2023, HMRC ceased accepting new informal arrangements. If you have had one of these informal arrangements in place, you must register to payroll your expenses and benefits for 2024-25.

The deadline for submitting the 2023-24 forms P11D, P11D(b) and P9D is 6 July 2024. These forms can be submitted using commercial software or via HMRC’s PAYE online service. HMRC no longer accepts paper P11D and P11D(b) forms. Employees must also be provided with a copy of the information relating to them on these forms by the same date. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits.

It should be noted that a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. The deadline for paying Class 1A NICs is 22 July 2024 (or 19 July if paying by cheque).

Where no benefits were provided from 6 April 2023 to 5 April 2024 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D's accurately, including all the details of cars and loans provided. There are penalties of £100 per 50 employees for each month or part month a P11D(b) is late. There are also penalties and interest if late payments are made.

Source:HM Revenue & Customs | 15-04-2024

Settling energy disputes

Business owners that are in dispute with their energy suppliers will be interested in the free support on offer from the Energy Ombudsman.

In a recent press release the Department for Energy Security and Net Zero confirmed the following:

“Businesses will get free support to resolve issues with their energy contracts, as part of government and Ofgem changes to tackle cowboy practices like hidden fees, inaccurate energy bills and pressurising sales tactics for energy contracts.

“Small organisations with fewer than 50 employees will be entitled to free support from the Energy Ombudsman on disputes with their energy supplier. It will extend the service to cover 99% of all businesses in Great Britain, giving them the confidence to grow – as part of the government’s long-term plan to boost the economy and improve economic security for all.

“The Ombudsman has the power to order suppliers to provide compensation of up to £10,000 or take action to resolve issues – such as raising standards for their customers, or to credit or amend customer accounts.

“The move will also enable businesses and other organisations to settle disputes with their energy broker via the Ombudsman, without the need for costly legal proceedings – as part of changes set out by the government and Ofgem today. It is a first step in a crackdown on rogue energy brokers targeting small organisations with thousands of pounds in hidden fees.

“Energy Affordability Minister Amanda Solloway has warned energy brokers to end these unacceptable practices, with the government planning to consult later this year on regulating brokers and other third-party intermediaries.”

Source:Other | 15-04-2024

COVID Bounce Back abuse

The Insolvency Service has recently published information confirming that a total of 831 company directors were banned in 2023-24 for Covid support scheme abuse, up more than 80% on the previous year, and that the average length of director disqualification for Covid misconduct in 2023-24 was almost 10 years.

The Covid Bounce Back Loan Scheme was introduced at the start of the pandemic in 2020. It helped small and medium-sized businesses borrow between £2,000 and £50,000 at a low interest rate, guaranteed by the government. 

Businesses were entitled to a single loan of up to 25% of their turnover under the scheme. 

Individuals could only use the loans for the economic benefit of the business and not for personal purposes. 

Enforcement action taken against those that have abused the support schemes has ranged from companies being wound-up in court to criminal convictions, compensation orders and director disqualifications. 

The Insolvency Service has successfully applied to have 1,430 directors banned for abusing Covid support schemes since it started investigating potential financial wrongdoing in this area in 2021. 

Source:Other | 15-04-2024

Paying VAT on goods from EU to Northern Ireland

There are special procedures for moving goods in and out of Northern Ireland. Under the Northern Ireland Protocol, all Northern Ireland businesses continue to have access to the whole UK market. 

There is specific guidance published by HMRC that should be followed for goods that are received into Northern Ireland from a supplier in the EU.

  • If you are registered for VAT in the UK and receive goods in Northern Ireland from countries in the EU, you will normally account for the VAT through your VAT Return. You will need to account for the VAT at the same rate that you would have paid if you had bought them from a UK supplier. This VAT is known as acquisition VAT, and you can normally reclaim some or all of this if the acquisitions relate to VAT taxable supplies that you make.
  • If you are not VAT registered and receive goods in Northern Ireland from countries in the EU, your supplier will charge VAT at the local rate in the EU country from which the goods are supplied. If you are not already registered for VAT in the UK and buy goods worth £90,000 (£85,000 prior to 1 April 2024) you may be required to register for VAT.

You may also be required to complete an Intrastat Supplementary Declaration if your acquisitions of goods from the EU exceed an annual amount. The delivery terms threshold for both arrivals and dispatches is currently £24 million.

Source:HM Revenue & Customs | 08-04-2024

VAT retail schemes

VAT retail schemes are a special set of schemes used by retail businesses to account for VAT. The schemes are used by businesses that sell a significant amount of low value and/or small quantity items to the public with different VAT liabilities.

The use of the schemes can save businesses a significant amount of time in calculating the amount of VAT due to HMRC on each sale. In many circumstances, it would be extremely difficult for these businesses to account for VAT using standard VAT accounting. By using the VAT retail scheme, retailers are able to calculate VAT due to HMRC at the standard, reduced and zero rates of VAT as a proportion of sales. Usually this is done on a day by day basis.

There are a number of standard VAT retail schemes:

  • the point of sale scheme
  • two apportionment schemes
  • two direct calculation schemes

There is also the option of using a bespoke scheme. The use of a bespoke scheme is obligatory for retailers with a turnover excluding VAT of £130 million or more.

The decision as to which retail scheme to be used is usually driven by a combination of looking at the scheme that provides the best result for the business in question combined with the cost of using the scheme with the important caveat that HMRC are of the opinion that the chosen scheme is fair and reasonable.

Source:HM Revenue & Customs | 08-04-2024

Termination payment clearance process

The tax treatment of termination payments has changed significantly over recent years. The changes have aligned the rules for tax and secondary National Insurance contributions (employer (NICs)) by making an employer liable to pay NICs on termination payments they make to their employees. 

HMRC has announced that it is aligning its approach to providing advance assurance on certain termination payment enquiries. 

HMRC guidance had previously committed HMRC to giving a binding answer if you made enquiries on termination cases involving:  

  • the disability and injury compensation exception;
  • the foreign service exception;
  • how the £30,000 threshold applies to payments made by the third party and by the employer; and
  • non-cash provisions.

HMRC will no longer give a binding answer on these cases outside the normal Non-Statutory Clearance process, for example, where there is a genuine point of uncertainty on the correct treatment.

This means that any future enquiries from taxpayers and employers on termination payments should be dealt with through the existing Non-Statutory Clearance procedure. HMRC will no longer provide clearance outside of the Non-Statutory Clearance route.

Source:HM Revenue & Customs | 08-04-2024

HMRC continues to target till fraud

HMRC has, for many years, looked to target businesses that deliberately undertake electronic sales suppression (ESS). ESS happens where a business deliberately manipulates its electronic sales records in order to hide or reduce the value of individual transactions. 

This type of fraud is hard to spot as it tries to reduce the recorded turnover of the business and the corresponding tax liabilities while providing what appears to be a credible and compliant audit trail. This can be done by misusing built in till functions or installing software specifically designed to suppress sales.

HMRC officers are continuing to target businesses across the country that are suspected of being involved in making, supplying or promoting ESS systems. These businesses can face fines of up to £50,000 and criminal investigations. HMRC is also actively targeting users of these systems who will also face having to pay back tax evaded, financial penalties and possible criminal convictions. HMRC has confirmed that they will continue to contact and target till fraud throughout 2024.

HMRC is also urging affected businesses to voluntarily come forward and use the online portal to disclose their undeclared sales and stop using ESS software immediately. If businesses do not come forward, HMRC may issue an assessment and open an investigation, and harsher penalties will apply.

Source:HM Revenue & Customs | 08-04-2024

Using the starter PAYE checklist

Employers that take on a new employee need to work out which tax code and starter declaration to use in their payroll software. Incorrect tax codes can lead to a new employee paying more tax than is due.

Employers will require certain information from their new employee in order to ensure that the correct tax code and starter declaration information is entered on the payroll software. In most cases, all the necessary information can be found on the employees P45. It is important to remind new employees to bring this with them on their first day of work.

If the employee does not have a P45 the necessary information can be collected by asking the new employee to complete HMRC's online starter PAYE checklist. A paper version can also be completed if the new employee is unable to use the online version. This information must be held in the employers’ payroll records for the current year and the 3 following tax years. Once the information has been collated, HMRC’s online tool can be used to work out the employee’s tax code.

The starter checklist can be used by a new employee if:

  • they have a student or postgraduate loan;
  • their personal details are different to those shown on their P45;
  • they do not have a P45; and
  • they have been sent to work temporarily in the UK by their overseas employer.

Once the checklist has been completed, the new employee should email, post or give the completed list to their employer. There is no requirement to send the checklist to HMRC.

Source:HM Revenue & Customs | 08-04-2024

Accessing the HMRC mobile APP

HMRC’s free tax app is available to download from the App Store for iOS and from the Google Play Store for Android. The latest version of the app includes updated functionality.

The app can be used to see:

  • your tax code and National Insurance number;
  • your income and benefits;
  • your income from work in the previous 5 years;
  • how much you will receive in tax credits and when they will be paid;
  • your Unique Taxpayer Reference (UTR) self-assessment;
  • how much self-assessment tax you owe;
  • your Child Benefit; and
  • your State Pension.

The app can also be used to complete a number of tasks that usually require the user to be logged on to a computer. This includes:

  • get an estimate of the tax you need to pay;
  • make a self-assessment payment;
  • set a reminder to make a self-assessment payment;
  • report tax credits changes and complete your renewal;
  • access your Help to Save account;
  • using HMRC’s tax calculator to work out your take home pay after Income Tax and National Insurance deductions;
  • track forms and letters you have sent to HMRC;
  • claim a refund if you have paid too much tax;
  • ask HMRC’s digital assistant for help and information;
  • update your name and / or postal address;
  • save your National Insurance number to your digital wallet; and
  • choose to be contacted by HMRC electronically, instead of by letter.
Source:HM Revenue & Customs | 08-04-2024

What do we mean by profit?

When most business owners refer to business profits, they are likely to mean the difference between sales and costs, and more concisely, that sales exceed costs.

However, the word “profits” can prove to be a moveable feast as HMRC, banks and traders will likely have a different interpretation.

For example, do costs include:

  • intangible overheads like depreciation;
  • the write-off of goodwill; or
  • taxation.

The distinctions can prove to be important especially if comparisons are being made for benchmarking purposes – comparing the results of a business with the results for the relevant industry sector.

Company accounts display sales, costs, intangible write-offs and corporation tax charges, but any dividends taken by directors as part of their remuneration package – most directors of small companies take low salaries and high dividends to save NIC costs – are not deducted as a cost in the Profit & Loss account. And so reported profits after tax are not the complete story; any dividends taken by working directors need to be considered as these will reduce retained profits.

The question, what is profit, is therefore dependent for its usefulness as an indicator of a businesses’ health, only if its definition is fully appreciated.

Source:Other | 08-04-2024

New employment protections

New legislation, including three Government backed cross party Acts, came into force from 6 April 2024.

Pregnant women and new parents will now receive special treatment in a redundancy situation, as a suite of new laws are introduced – delivering the Government’s plan to support families and back hardworking Brits.

New laws will protect workers by strengthening existing redundancy protections to cover pregnancy and a period of time after parents return to work.

The Government-backed package of Acts will also boost support to vulnerable workers offering greater flexibility and confidence to workers and businesses – to help galvanise productivity, help grow the economy and tackle inactivity.

Families will receive new employment protections, including redundancy protections for pregnant women and new parents and a new leave entitlement for unpaid carers. In addition, there will be new flexible paternity leave and pay for parents of babies due on or after 6 April 2024. 

Against a backdrop of skills and labour shortages, these measures will help businesses to attract and retain talented staff. The measures also support groups more likely to fall out of the workforce, such as parents and disabled people, enabling them to thrive in the workplace.

Source:Other | 08-04-2024

Measures to support household budgets from 1 April

In a recent press release the government confirmed the following policies to support household incomes from 1 April 2024.

  1. The National Living Wage has officially risen from £10.42 an hour to £11.44. This marks a £1,800 annual boost to full-time workers’ pay packets. This means nobody over 21 will earn less than two-thirds of the average hourly wage increase – putting more money in the pockets of around 3 million of UK’s lowest paid workers.
  2. Households will also save around £250 a year on average thanks to a drop in energy bills introduced by Ofgem. This marks a 12.3% fall from the previous quarter, which brings prices down to their lowest since Russia’s invasion of Ukraine in February 2022.
  3. An increase to the Local Housing Allowance means some of the poorest families on either Universal Credit or Housing Benefit will gain around £800 a year on average. 
  4. Additionally, these changes run alongside the roll out of 15 hours of free childcare, which will save working parents an average of £3,450 a year – the first stage in the £8 billion childcare package that was announced by the Chancellor last year.

Clearly the recent increases in inflation have had a major impact on spending power and although the above measures are welcomed, the real increases in purchasing power are to some extent reduced by the continuing increase in prices.

However, since October 2022, the Consumer Prices Index (CPI) has already more than halved from 11.1% to 3.4%. This is stabilising the financial situation for many families, and the government expects that by Quarter 4 2024 (October-December) CPI will have fallen to 1.4%.

Source:Other | 04-04-2024

To register or not to register

In the recent Spring Budget, the VAT registration threshold was raised to £90,000 (previously £85,000) which means that smaller businesses that did not want to register for VAT, now have an additional £5,000 of turnover they can make each year without needing to register for VAT.

Obviously, if you sell goods or services to other businesses, and they are likely to be registered for VAT, if you are eventually required to register you can do so without changing your price structure; clients can simply claim back the VAT you have added to their bills.

But problems arise if you sell to non-business customers who cannot claim back VAT.

Once your business breaches the £90,000 turnover threshold you will be faced with two choices:

  1. Reduce your prices so your customer pays no more for your services. For example, if the pre-VAT price was £120, following registration, you would need to reduce your price to £100, which plus VAT at 20% would equal £120. Unless you could increase your sales volume, this would have a serious impact on your profitability.
  2. The second choice would be to pass on the VAT to customers. In this case your price would stay at £120, but you would need to charge customers £144 (£120 plus 20% VAT). Unless the goods or services you were selling had limited alternative suppliers, this price hike will likely reduce your sales and profitability.

So, although welcome, the rise in the VAT registration threshold to £90,000 will not overly excite traders who are grappling with the need to increase prices already, to counter inflation, and cope with rising costs.

Traders caught in this do I register or not conundrum do have choices, but they require serious consideration. If you need help to consider your options, please call.

Source:Other | 04-04-2024

Tax-free mileage expenses

If you use your own vehicle for business journeys you may be able to claim a tax-free allowance from your employer known as a Mileage Allowance Payment or MAP. The allowance is paid when employees use their own car, van, motorcycle or bike for work purposes. It is important to note that this tax-free allowance is not available for journeys to and from work but is available where employees use their own vehicles to undertake other business-related mileage. 

Employers usually make payments based on a set rate per mile depending on the mode of transport used. There are approved mileage rates published by HMRC. For cars, the approved mileage allowance payment for the first 10,000 business miles is 45p per mile and 25p per mile for every additional business mile. An equivalent payment of 20p per mile is available for bicycle travel and 24p per mile for motorcycle travel. These rates have been fixed for many years and HMRC has recently confirmed that they will continue to apply for the 2024-25 tax year.

If an employee travels with business colleagues, they can claim an additional 5p per passenger per business mile for each qualifying passenger. Where an employer pays less than the published rates, the employee can make a tax relief claim for the shortfall using Mileage Allowance Relief (MAR). There is no equivalent to MAR for passenger payments, which means if the employer pays less than 5p per mile to carry a passenger, the driver cannot claim any tax relief on the difference.

It is important to note that if employees are paid more than the approved mileage rates then the excess is treated as a BiK. Conversely, if employees are paid less than the published rates then they can make a tax claim for the shortfall using MAR. There is no equivalent to the MAR for passenger payments.

Source:HM Revenue & Customs | 01-04-2024

Online check how to import or export goods

HMRC has a useful online tool to help UK business owners check how to import or export goods. This online tool can be used by businesses, the self-employed and agents acting on behalf of a business.

Using the online tool you can obtain information on:

  • the commodity codes (reference numbers) you need to classify goods for import and export declarations;
  • paying the right VAT and duties for your goods;
  • which licences and certificates you will need for your goods; and
  • how to move goods into a specific country.

There are many special procedures to be aware of when importing or exporting goods to / from the UK. Following the end of the Brexit transition period, the process for importing / exporting goods to / from the EU effectively mirrors the process for all other international destinations. There are different rules if you are moving goods in or out of Northern Ireland under what is known as the Windsor framework.

The online check can be a useful tool for smaller businesses and the self-employed to familiarise themselves with the necessary requirements and work accordingly. Businesses can make customs declarations themselves or hire a third party such as a courier, freight forwarder or customs agent to do the paperwork.

Source:HM Revenue & Customs | 01-04-2024

Restarting a dormant or non-trading company

HMRC must be informed when a non-trading or dormant company starts trading and becomes active for Corporation Tax purposes. Companies can use HMRC Online Services to supply the relevant information. 

When a company has previously traded and then stops it would normally be considered as dormant. A company can stay dormant indefinitely, however, there are costs associated with doing this and certain filings must still be made to Companies House. The costs of restarting a dormant company are typically less than starting from scratch again. 

The following steps are required:

  1. Tell HMRC that your business has restarted trading by registering for Corporation Tax again.
  2. Send accounts to Companies House within 9 months of your company’s year end.
  3. Pay any Corporation Tax due within 9 months and 1 day of your company’s year end.
  4. Send a Company Tax Return – including full statutory accounts – to HMRC within 12 months of your company’s year end.

Whilst reporting dates for annual returns and accounts should remain the same. The Corporation Tax accounting period is different and is set by reference to the date when the company restarts business activities.

Source:Companies House | 01-04-2024

Claim tax relief if working from home

If you are an employee who is working from home, you may be able to claim tax relief for part of your household bills that are related to your work. If your expenses or allowances are not paid by your employer, you can claim tax relief directly from HMRC.

You can claim tax relief if you have to work from home, for example because:

  • your job requires you to live far away from your office; and/or
  • your employer does not have an office.

Tax relief is not usually available if you choose to work from home. This includes if your employment contract lets you work from home some or all of the time or if your employer's office is unable to accommodate you.

Employees can claim tax relief of £6 per week (or £26 a month for employees paid monthly) to cover additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount.

Employees will receive tax relief based on their highest tax rate. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week, you will receive £1.20 per week in tax relief (20% of £6). Alternatively, employees can claim the exact amount of extra costs they have incurred but will need to provide evidence to HMRC. HMRC will accept backdated claims for up to 4 previous tax years.

Employees may also be able to claim tax relief for using their own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your regular place of work. The rules are different for temporary workplaces where the expense is usually allowable or if an employee uses their own vehicle to do other business-related mileage. Employees may also be able to claim tax relief on equipment they have bought, such as a laptop, chair or mobile phone.

Source:HM Revenue & Customs | 01-04-2024

Claim tax relief on pension contributions

You can usually claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of income tax paid.

This means that if you are:

  • A basic rate taxpayer, you get 20% pension tax relief.
  • A higher rate taxpayer, you can claim 40% pension tax relief.
  • An additional rate taxpayer, you can claim 45% pension tax relief.

The first 20% of tax relief is usually automatically applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your self-assessment tax return.

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are some regional differences if you are based in Scotland.

There is an annual allowance for tax relief on pensions of £60,000. This limit remains unchanged in the new 2024-25 tax year. There is also a rule that allows you to carry forward any unused amount of your annual allowance for three tax years.

The lifetime limit for tax relief on pension contributions was removed with effect from 6 April 2023 and has now been abolished.

Source:HM Revenue & Customs | 01-04-2024

More about emergency tax codes

The letters in an employee’s tax code signify their entitlement (or not) to the annual tax free personal allowance. The tax codes are updated annually and help employer’s work out how much tax to deduct from an employee’s pay packet. 

The basic personal allowance for the tax year starting 6 April 2024 is £12,570 and the tax code for an employee entitled to the standard tax-free Personal Allowance is 1257L. This is the most common tax code and is used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).

Emergency tax codes can be used if HMRC does not receive a taxpayer’s income details in time after a change in circumstances such as:

  • a new job
  • working for an employer after being self-employed
  • receiving company benefits or the State Pension

Employees on an emergency tax code will see one of the following codes on their payslip:

  • 1257L W1
  • 1257L M1
  • 1257L X

These codes mean that an employee’s tax calculation is based only on what they are paid in the current pay period. The emergency tax codes are temporary and will usually be updated once the necessary details about previous income or pension payments are sent to HMRC. Taxpayers will remain on an emergency tax code until they have paid the correct tax for the year.

Source:HM Revenue & Customs | 01-04-2024

Entitlement to carer’s allowance

Carer’s credit is a National Insurance credit that can help carers to fill gaps in their National Insurance record. Carers who don’t qualify for Carer’s Allowance may qualify for Carer’s Credit. This may also help carers increase their State Pension entitlement.

The Carer’s Credit is available to qualifying applicants caring for one or more people for at least 20 hours per week. A carer’s income, savings or investments do not affect their eligibility for Carer’s Credit. The carer must also be aged 16 or over and under the State Pension age to qualify.

The person the carer is looking after must usually receive one of the following benefits:

  • Personal Independence Payment – daily living component
  • Disability Living Allowance – the middle or highest care rate
  • Attendance Allowance
  • Constant Attendance Allowance at or above the normal maximum rate with an Industrial Injuries Disablement Benefit
  • Constant Attendance Allowance at the basic (full day) rate with a War Disablement Pension
  • Armed Forces Independence Payment
  • Child Disability Payment – the middle or highest care rate
  • Adult Disability Payment – daily living component at the standard or enhanced rate

If the person being cared for is not receiving one of the qualifying benefits, the Department for Work and Pensions (DWP) will consider whether the level of care provided is appropriate to still qualify for Carer's Credit. The DWP will usually consider the level of care as appropriate if there is a signed care certificate confirming this from a health or social care professional. 

Source:HM Revenue & Customs | 25-03-2024

Rent a Room Scheme – another income stream

The rent-a-room scheme is a set of special rules designed to help homeowners who rent-a-room in their home to create a valuable tax free income stream. If you are using this scheme, you should ensure that rents received from lodgers during the current tax year do no exceed £7,500. The tax exemption is automatic if you earn less than £7,500 and there are no specific tax reporting requirements. Homeowners can opt out of the scheme and record property income and expenses as usual if this is beneficial.

The relief applies to the letting of furnished accommodation and is used when a bedroom is rented out to a lodger by homeowners in their home. The relief simplifies the tax and administrative burden for those with rent-a-room income up to £7,500. The limit is reduced by half if the income from letting accommodation in the same property is shared by a joint owner of the property.

The rent-a-room limit includes any amounts received for meals, goods and services provided, such as cleaning or laundry. If gross receipts are more than the limit taxpayers can choose between paying tax on the actual profit (gross rents minus actual expenses and capital allowances) or the gross receipts (and any balancing charges) minus the allowance – with no deduction for expenses or capital allowances.

Source:HM Revenue & Customs | 25-03-2024

HMRC to accept service of legal proceedings by email

HMRC has issued an updated ‘news story’ to confirm that, where possible, new legal proceedings and pre-action letters can be served on the department using email instead of post. This measure was originally introduced in April 2020 in response to the COVID-19 pandemic. The update confirms that this is a permanent change and not just limited to COVID-19 arrangements.

New legal proceedings in England and Wales to be served on the Solicitor for HMRC should be emailed to: newproceedings@hmrc.gov.uk. If you use email instead of hard copy, you must send the relevant documents to the same email address – whether or not an HMRC lawyer, paralegal or litigator has already been assigned to the case. HMRC may challenge any attempt to serve new legal proceedings on the department using a different HMRC email address.

Correspondence required to be sent to the Solicitor for HMRC in compliance with any pre-action protocol to the Civil Procedure Rules, including the Pre-Action Protocol for Judicial Review, can be emailed to: preactionletters@hmrc.gov.uk.

There is a different email address (expertadviceservice@hmrc.gov.uk) for the service of employment law claims on HMRC.

These email addresses are for the service of new proceedings and pre-action letters only. There is separate guidance if you wish to request a review of a tax decision by HMRC or appeal to the First-tier Tribunal (Tax Chamber). 

Source:HM Revenue & Customs | 25-03-2024

What are the off-payroll working rules?

The rules for individuals providing services via an intermediary such as a personal service company (PSC) are complex. The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.

The off-payroll working rules usually shift the responsibility for deciding whether the intermediaries’ legislation applies, known as IR35, from the intermediary itself to the client receiving the service. In most cases, the client will be responsible for determining the employment status of the worker. However, if a worker provides services to a small client outside the public sector, the worker’s intermediary is responsible for deciding the worker’s employment status and if the rules apply.

You may be affected by these rules if you are:

  • a worker who provides their services through their own intermediary to a client;
  • a client who receives services from a worker through their intermediary; or
  • an agency or other supplier providing workers’ services through their intermediary.

There are different rules that apply to those working for a small business and those working for medium or large-sized businesses.

Private sector companies and voluntary sector organisations are considered medium or large-sized if they meet two or more of the following conditions:

  • have an annual turnover of more than £10.2 million;
  • have a balance sheet total of more than £5.1 million; 
  • have more than 50 employees.

There are a number of scenarios that fall outside the off-payroll working rules. If you think you might be affected, we would be happy to help with looking at this issue.

Source:HM Revenue & Customs | 25-03-2024

Assistance with debt management

Earlier this month, saw the 10th anniversary of the StepChange Debt Charity’s annual Debt Awareness Week. This is designed to shine a spotlight on the causes of problem debt.

The focus on this year's campaign is looking at the main barriers to getting debt advice. This includes understanding that many people can take too long to get the help they need because they:

  • Don’t understand what debt advice is and how it works;
  • Are dealing with anxiety, stress or a mental health condition;
  • Are worried about my credit file;
  • Never have enough time to get debt advice; or
  • Feel ashamed and do not want their loved ones to find out.

It is important to be aware that there are various options available to help people who have serious debts that they cannot pay. Insolvency solutions include bankruptcy, Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs).

A senior leader within the bankruptcy and Debt Relief Order teams at the Insolvency Service has the following usual advice:

‘The first step for people who are struggling to pay off their debts is to seek free, regulated debt advice. They will identify the solution that is best for them. 

Sometimes this will be a formal solution, like bankruptcy or a Debt Relief Order. But a regulated debt adviser will make sure that whatever people decide will be the right solution for them. 

Your first step is picking up the phone, getting on webchat or visiting a debt advice office, and having that conversation.’

Source:Other | 25-03-2024