changes to self assessment threshold for 2023-24 in the UK; london accountants

Self-Assessment Threshold Change for 2023-24: Find out if you’re affected

Change to Self Assessment Threshold: Are you affected?

The world of tax is always evolving, and we understand how crucial it is for our clients to stay informed. Recent changes by HMRC regarding the Self-Assessment threshold could affect many taxpayers, and we’re here to break it down for you.

Increased Threshold for Self-Assessment from 2023-24

Starting from 6 April 2023, HMRC has announced a notable increase in the threshold for Self-Assessment for taxpayers who are taxed solely through PAYE. The previous limit was set at £100,000, but this has now risen to £150,000.

While on paper this does mean fewer individuals will need to submit Self Assessment returns, HMRC thresholds (including tax bands) drift upwards annually to match wage inflation.

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Impact on 2022-23 Tax Returns

It’s important to note that if you’re submitting a Self-Assessment tax return for the 2022-23 period, the earlier threshold of £100,000 still applies. However, taxpayers who have a reported income ranging between £100,000 and £150,000, and do not fit any other Self-Assessment criteria, can expect an “exit letter” from HMRC. Receiving this letter signifies that you won’t be required to file an annual Self-Assessment tax return, granted you meet the set qualifications.

Criteria for 2023-24 and Beyond

Despite the increased threshold for those taxed under PAYE, certain conditions will still necessitate a Self-Assessment tax return. You will have to file one if:

  1. You have received any untaxed income.
  2. You’re a partner in a business partnership.
  3. You’re liable to the High Income Child Benefit Charge.
  4. You’re a self-employed individual with a gross income surpassing £1,000.

Act Promptly!

If this is your first time completing a Self-Assessment return, it’s essential to notify HMRC swiftly. The deadline to inform them is by 5 October following the tax year’s conclusion. And if the 2022-23 tax year applies to you, remember to electronically file your tax return and settle any tax obligations by 31 January 2024.

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About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Higher rate tax relief on gifts to charities

The gift aid scheme, which was originally introduced in 1990, allows charities to reclaim from HMRC the basic rate of Income Tax deducted from qualifying donations by UK taxpayers. This means that where a basic rate taxpayer claims gift aid on a £100 donation, the charity can reclaim from HMRC the £25 of tax paid on that donation.

If you are a higher rate or additional rate Income Tax payer you can also claim additional tax relief on the difference between the basic rate and your highest rate of tax.

For example:

If you donated £5,000 to charity, the total value of the donation to the charity is £6,250. You can claim back additional tax back of:

  • £1,250 if you pay tax at the higher rate of 40% (£6,250 × 20%),
  • £1,562.50 if you pay tax at the additional rate of 45% (£6,250 × 25%).

Taxpayers also have the option to carry back their charitable donations to the previous tax year. A request to carry back the donation must be made before or at the same time as your previous year’s Self-Assessment return is completed.

This means that if you made a gift to charity in the current 2023-24 tax year that ends on 5 April 2024, you can accelerate repayment of any tax associated with your charitable giving by carrying back the donation to the previous tax year, 2022-23. This can be a useful strategy to maximise tax relief if you will not be paying higher rate tax in the current tax year but did so in the previous tax year. This should be done as part of the Self-Assessment tax return for 2022-23 which must be submitted by 31 January 2024.

You can only claim if your donations qualify for gift aid. This means that your donations from both tax years together must not be more than 4 times what you paid in tax in the previous year.

Source:HM Revenue & Customs| 28-08-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Reducing self-assessment payments on account

Self-assessment taxpayers are usually required to pay their income tax liabilities in three instalments each year. The first two payments are due on:

  • 31 January during the tax year e.g., for 2022-23 the first payment on account was due on 31 January 2023.
  • 31 July following the tax year e.g., for 2022-23 the second payment on account was due on 31 July 2023.

These payments on account are based on 50% of the previous year’s net income tax liability. In addition, the third (or only) payment of tax will be due on 31 January following the end of the tax year.

There is no requirement to make payments on account where your net Income Tax liability for the previous tax year is less than £1,000 or if more than 80% of that year’s tax liability has been collected at source.

The payments are based on 50% of your previous year’s net income tax liability. If you think that your income for the next tax year will be lower than the previous tax year, you can apply to have your payment on account reduced. This can be done using HMRC’s online service or by completing form SA303.

HMRC’s internal manuals are clear that a reason for requesting a reduction in the payments on account must be given. A request without a reason is not a valid claim.

There are no restrictions on the number of claims to adjust payments on account a taxpayer or agent can make. However, there is a time limit which means that the claim must be received before the 31 January following the tax year in question, for example by 31 January 2024 for the year 2022-23.

There is no requirement to notify HMRC if your taxable profits have increased year on year.

Source:HM Revenue & Customs| 28-08-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Self-Assessment threshold change

The £100,000 threshold for Self-Assessment change for taxpayers taxed through PAYE only, increased from £100,000 to £150,000 with effect from 6 April 2023. However, the Self-Assessment for 2022-23 tax returns remains at £100,000.  

Taxpayers who submit a Self-Assessment tax return for 2022-23 showing income between £100,000 and £150,000 taxed through PAYE and do not meet any of the other criteria for submitting a Self-Assessment return will be sent an exit letter by HMRC. This will remove the requirement for an annual Self-Assessment tax return to be submitted by qualifying taxpayers.

For the 2023-24 tax year onward, taxpayers will still need to submit a Self-Assessment tax return if their income taxed through PAYE is below £150,000 but they meet one of the other criteria for submitting a Self-Assessment return, for example:

  • receipt of any untaxed income;
  • partner in a business partnership;
  • liability to the High Income Child Benefit Charge; or
  • self-employed individual and with gross income of over £1,000.

Taxpayers that need to complete a Self-Assessment return for the first time should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a Self-Assessment return needs to be filed. If you are required to submit a Self-Assessment return for 2022-23, you should ensure that you file your tax return electronically and pay any tax due by 31 January 2024.

HMRC has an online tool available at www.gov.uk/check-if-you-need-tax-return/ that can help taxpayers decide if they are required to submit a Self-Assessment return.

Source:HM Revenue & Customs| 28-08-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Do you need to submit a Self-Assessment tax return?

There are a number of reasons why you might need to complete a Self-Assessment return for the first time. This includes if you are self-employed, have an annual income over £100,000 and / or have income from savings, investment or property.

Taxpayers that need to complete a Self-Assessment return for the first time (for the 2022-23 tax year) should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October 2023.

HMRC has an online tool www.gov.uk/check-if-you-need-tax-return/ that can help you check if you are required to submit a Self-Assessment return.

The following list summarises some of the reasons when taxpayers are usually required to submit a Self-Assessment return:

  • newly self-employed (earning more than £1,000);
  • individuals with multiple sources of income;
  • taxpayers that have received any untaxed income, for example earning money for creating online content;
  • individuals with income over £100,000, and note, that from tax year 2023-24 the Self-Assessment threshold for individuals taxed through PAYE only, will change from £100,000 to £150,000;   
  • those who earn income from property that they own and rent out;
  • who are a new partner in a business partnership;
  • taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
  • those receiving interest on savings or investment income of £10,000 or more before tax;
  • taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax; and
  • taxpayers who are self-employed and earn less than £1,000 but wish to pay Class 2 NICs voluntarily to protect their entitlement to State Pension and certain benefits.
Source:HM Revenue & Customs| 21-08-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Checking your Simple Assessment tax bill

Simple Assessment is a method by which HMRC can assess where additional Income Tax is due by a taxpayer. A Simple Assessment letter is usually issued to taxpayers with reasonable straight forward tax affairs. The Simple Assessment notice of liability does not require taxpayers to submit a Self-Assessment tax return.

The Simple Assessment process was first announced by HMRC back in 2016. However, the rollout has been paused a number of times. The process can be used in various situations, for example, where it is not possible to collect the whole of a person’s annual Income Tax liability through PAYE, if HMRC is owed £3,000 or more and if there is tax to be paid on the State Pension.

Recipients of a Simple Assessment tax bill should check that the amounts shown in the letter match your records, for example, your P60, bank statements or letters from the Department for Work and Pensions (DWP).

If the amounts are correct, you will need to pay your Simple Assessment tax bill. 

You must pay by either:

  • 31 January – for any tax you owe from the previous tax year; or
  • within 3 months of the issue date if you received your letter after 31 October.

The tax year runs from 6 April to 5 April. In some cases, HMRC will allow the payments to be made in instalments.

A taxpayer who does not agree with the Simple Assessment has 60 days from the date it was issued to contact HMRC, setting out the reasons for their objections. If no objections are raised within 60 days, the Simple Assessment is automatically finalised.

Source:HM Revenue & Customs| 21-08-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Claiming tax relief on employment expenses

If you are an employee that needs to buy substantial equipment to use as part of your employment you may be able to claim tax relief. In most cases you can claim tax relief on the full cost of this type of equipment. Tax relief is reduced if your employer provides a financial contribution towards buying the item.

The way to claim tax relief depends on the amount you are claiming. HMRC provides the following information on making a claim:

Claims up to £2,500

You can make your claim:

  • Using a Self-Assessment tax return if you already file a return.
  • By using HMRC’s online service or by printing and posting form P87 if you do not file a tax return.
  • By phone if you have had a successful claim in a previous year and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions).

Claims over £2,500

  • You can only claim using a Self-Assessment tax return. You need to register if you do not file a return.

There are different rules if you are an employee using your own uniforms, work clothing and tools for work. You cannot claim relief on the initial cost of buying small tools or clothing for work. However, it is possible to claim for the cost of repairing or replacing small tools you need to provide as an employee (for example, scissors or an electric drill), or cleaning, repairing or replacing specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a 'flat rate deduction'. 

You have four years from the end of the tax year to make a claim. For example, there is a deadline of 5 April 2024 for making a claim dating back to the 2019-20 tax year. 

Source:HM Revenue & Customs| 13-08-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Let Property Campaign

The Let Property Campaign provides landlords who have undeclared income from residential property lettings in the UK or abroad with an opportunity to regularise their affairs by disclosing any outstanding liabilities whether due to misunderstanding of the tax rules or due to deliberate tax evasion. Participation in the campaign is open to all residential property landlords with undisclosed taxes. The campaign is not suitable for those letting out non-residential properties.

Landlords who do not avail of the opportunity and are targeted by HMRC can face penalties of up to 100% of the tax due together with possible criminal prosecution. Taxpayers that come forward will benefit from better terms and lower penalties. Landlords that make an accurate voluntary disclosure are likely to face a maximum penalty of 0%, 10% or 20% depending on the circumstances of their disclosure. The penalties would be in addition to the tax and interest due. There are higher penalties for offshore liabilities. 

There are three main stages to taking part in The Let Property Campaign:

  1. notifying HMRC that you wish to take part;
  2. preparing an actual disclosure; and
  3. making a formal offer together with payment.

The campaign is open to all individual landlords renting out residential property. This includes landlords with multiple properties and specialist landlords with student or workforce rentals. Once HMRC have been notified of the wish to take part in the campaign, landlords usually have 90 days to calculate and pay any tax owed.

Source:HM Revenue & Customs| 13-08-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Need to tell HMRC about extra income?

There is an online tool that allows taxpayers to check if they need to notify HMRC about additional income. The online tool can be found at www.gov.uk/check-additional-income-tax.

This could include earnings from:

  • selling goods, for example at car boot sales or auctions, or online;
  • Undertaking casual jobs such as gardening, food delivery or babysitting;
  • charging other people for using your equipment or tools; and
  • renting out property or part of your home, including for holidays (for example, through an agency or online).

In most cases, these types of income are taxable. However, there are two separate annual £1,000 tax allowances for property and trading income. If you have both types of income highlighted below, then you can claim a £1,000 allowance for each. The online tool will indicate if this is relevant.

The £1,000 exemptions from tax apply to:

  • If you make up to £1,000 from self-employment, casual services (such as babysitting or gardening) or hiring personal equipment (such as power tools). This is known as the trading allowance.
  • If your annual gross property income is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on a tax return. For example, from renting a driveway. This is known as the property allowance.

Where each respective allowance covers all the individual’s relevant income (before expenses) the income is tax-free and does not have to be declared. Taxpayers with higher amounts of income will have the choice, when calculating their taxable profits, of deducting the allowance from their receipts, instead of deducting the actual allowable expenses. 

Source:HM Revenue & Customs| 04-08-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

HMRC recommends early filing of tax returns

The 2022-23 tax year ended on 5 April 2023 and the new 2023-24 tax year started on 6 April 2023. Many taxpayers will be happy to leave dealing with their 2022-23 tax returns until later this year or even until January 2024.

The 31 January 2024 is not just the final date for submission of the 2022-23 Self-Assessment tax return but also an important date for payment of tax due. This is the final payment deadline for any remaining tax due for the 2022-23 tax year. In addition, the 31 January 2024 is also the due date for the first payment on account for 2023-24.

HMRC’s recent press release recommends early filing of tax returns. In most circumstances, we would agree with this recommendation. By preparing your tax return early in the tax year you have not accelerated the payment date, but you will know what your tax bill will be well before the payment deadline of 31 January 2024. You can also spread the cost of your tax bill using HMRC’s Budget Payment Plan and avoid the eleventh-hour rush.

Remember that calculating how much tax you may owe is a separate process to filing the return, and so you will also need to remember to file your return and pay any tax due by 31 January 2024. This strategy should also give you time to set aside enough money to pay any tax payable. Of course, if you are owed a repayment of tax then it is a useful strategy to file your tax return as soon as possible and thus accelerate the repayment.

Source:HM Revenue & Customs| 31-07-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Tax on savings interest

Understanding Tax Exemptions on Savings Interest for 2023-24

As a UK taxpayer, knowing how the tax exemptions work on savings interest can be a significant aspect of your financial planning. In this article, we will break down the tax rules for the tax year 2023-24, including the starting rate for savings, the personal savings allowance (PSA), and the procedures for reclaiming overpaid tax.

Important to note is that the deadline for making claims for the 2019-20 tax year is 5 April 2024.

No Tax on Interest for Low Income

If your taxable income is less than £17,570 for the 2023-24 tax year, you won’t have to pay any tax on the interest you receive. This figure comes from the £5,000 starting rate limit for savings (which is taxed at 0%) plus the current £12,570 personal allowance.

However, if your non-savings income surpasses £17,570, the starting rate limit for savings no longer applies.

Tapered Relief for Middle-Income Brackets

For those earning between £12,570 and £17,570 from non-savings income, there’s a tapered relief system. Every £1 of non-savings income over your personal allowance reduces your starting rate for savings by £1.

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The Personal Savings Allowance

The Personal Savings Allowance (PSA) is another feature of the tax system that is beneficial to many savers. For basic-rate taxpayers, the first £1,000 of savings income interest is tax-free, while for higher-rate taxpayers, the tax-free allowance stands at £500. However, if you’re an additional rate taxpayer, with a taxable income of over £125,140, the PSA does not apply.

Interest from ISA's and Premium Bonds

It’s important to note that interest from ISAs and premium bonds does not count towards these limits. So even if you have these types of savings, you can still benefit from the PSA.

Deduction of Tax from Savings Interest

Banks and building societies no longer automatically deduct tax from savings interest. If you’re required to pay tax on your savings income, you’ll need to declare this in your annual Self-Assessment tax return.

Reclaiming Overpaid Tax on Savings Interest

If you’ve overpaid tax on your savings interest, you can submit a claim to have it repaid. Claims can be backdated for up to four years from the end of the current tax year. This means that as of the 2023-24 tax year, you can still make claims for overpaid interest dating back to the 2019-20 tax year.

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About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Getting a SA302 tax calculation

The SA302 tax calculation and tax year overview documents are commonly used as evidence of income for loan or mortgage purposes for the self-employed. The forms have become more widely used since the mortgage rules have required evidence of income for the self-employed. The SA302 provides this evidence for the last four years Self-Assessment tax returns.

The SA302 shows the breakdown of the income returned on the taxpayer’s tax return, including commercial versions. The tax year overview confirms the tax due from the return submitted to HMRC and shows any payments made, cross referencing the Tax Calculation with HMRC records.

Self-Assessment taxpayers can use HMRC’s online service to request an SA302 tax calculation. It takes 72 hours after an online tax return has been submitted before the documents are available to print.

Most lenders will accept a SA302 printed from online accounts or from the commercial software used to submit returns. HMRC has been working with the Council of Mortgage Lenders and their members to increase the number of lenders who will accept self-serve copies.

Source:HM Government| 10-07-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Cannot pay your tax on time?

The second payment on account for Self-Assessment taxpayers for the 2022-23 tax year is due on 31 July 2023. Taxpayers are usually required to pay their Income Tax liabilities in three instalments each year. The first payment was due on 31 January 2023. The final balancing payment of tax will be due on 31 January 2024.

If you are having trouble paying your tax on time you may be eligible to receive support with your tax affairs. An online payment plan for Self-Assessment tax bills can be used to set up instalment arrangements for paying tax liabilities up to £30,000.

Taxpayers that want to use the online option must have filed their latest tax return within 60 days of the payment deadline and intend to pay their debt within the following 12 months or less. Taxpayers that qualify for a Time to Pay arrangement using the self-serve Time to Pay facility online, can do so without speaking to an HMRC adviser.

Taxpayers with Self-Assessment tax payments that do not meet the above requirements need to contact HMRC to formally request a Time To Pay arrangement. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

HMRC will only offer taxpayers the option of extra time to pay if they think they genuinely cannot pay in full but will be able to pay in the future. If HMRC do not think that more time will help, they can require immediate payment of a tax bill and start enforcement action if no payment is forthcoming.

Source:HM Revenue & Customs| 10-07-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Updating your tax return

There are special rules to follow if you have submitted a Self-Assessment return and subsequently realise you need to change it. For example, this can happen if you made a mistake like entering a number incorrectly or missed information from the return.

If you filed your return online, you could amend your return online as follows:

  1. Sign in to your personal tax account using your Government Gateway user ID and password.
  2. From ‘Your tax account’, choose ’Self-Assessment account’ (if you do not see this, skip this step).
  3. Choose ‘More Self-Assessment details’.
  4. Choose ‘At a glance’ from the left-hand menu.
  5. Choose ‘Tax Return options’.
  6. Choose the tax year for the year you want to amend.
  7. Go into the tax return, make the corrections and file it again.

You must wait three days (72 hours) after filing before updating your return. If you opted to file your return on paper, you will need to download a new return and fill in the pages that you wish to change and write ‘amendment’ on each page. You must also include your name and Unique Taxpayer Reference on each page and then send the corrected pages to the address where you sent your original return.

If you used commercial software to submit your Self-Assessment return, then you should contact your software provider in the first instance. If your software provide cannot help, then you should contact HMRC.

The deadline for making changes for the 2021-22 tax year using any of the methods outlined above is 31 January 2024. If you have missed the deadline, you will need to write to HMRC instead. For example, if you found a mistake in your 2020-21 return after 31 January 2023. In the letter, you will need to say which tax year you are correcting, why you think you have paid too much or too little tax and by how much. You can claim a refund up to four years after the end of the tax year it relates to.

Source:HM Revenue & Customs| 10-07-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Advising HMRC about changes in your income

There are a number of reasons why you might need to contact HMRC about changes in your income. 

HMRC’s guidance states that this could happen because you:

  • did not realise you needed to tell HMRC about it;
  • were not sure how to declare it; or
  • did not declare it because you could not pay the tax.

For example, reasons you may need to contact HMRC are if you are self-employed, a company director, have annual income over £100,000 and / or have undeclared income from savings, investment, property or overseas income. The £100,000 threshold for the Self-Assessment threshold for taxpayers taxed through PAYE only, has increased from £100,000 to £150,000 with effect from 6 April 2023. However, the Self-Assessment for 2022-23 tax returns remains at £100,000.  

Taxpayers that need to complete a Self-Assessment return for the first time should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a Self-Assessment return needs to be filed. If you are required to submit a Self-Assessment return for 2022-23, you should ensure that you file your tax return electronically and pay any tax due by 31 January 2024.

HMRC has an online tool www.gov.uk/check-if-you-need-tax-return/ that can help you check if you are required to submit a Self-Assessment return.

There are two small exemptions from tax that may apply:

  • If you make up to £1,000 from self-employment, casual services (such as babysitting or gardening) or hiring personal equipment (such as power tools). This is known as the trading allowance.
  • If your annual gross property income is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on a tax return. For example, from renting a driveway. This is known as the property allowance.

Where each respective allowance covers all the relevant income (before expenses) the income is tax-free and does not have to be declared.

If you have undeclared income, it is always preferable to contact HMRC as soon as possible. We would be happy to assist.

Source:HM Revenue & Customs| 03-07-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Tax relief for charitable donations

The Gift Aid scheme is available to all UK taxpayers. The charity or Community Amateur Sports Clubs (CASC) concerned can take a taxpayer’s donation and, provided all the qualifying conditions are met, can reclaim the basic rate tax which provides an extra 25p for every pound donated to charity.

Higher rate and additional rate taxpayers are eligible to claim tax relief on the difference between the basic rate and their highest rate of tax. This can be actioned through their Self-Assessment tax return or by asking HMRC to amend their tax code.

For example:

If a taxpayer donates £500 to charity, the total value of the donation to the charity is £625. The taxpayer can claim additional tax back of:

  • £125 if they pay tax at 40% (£625 × 20%),
  • £156.25 if they pay tax at 45% (£625 × 20%) plus (£625 × 5%).

Taxpayers should be aware that one of the conditions of qualifying for tax relief is that you must have paid enough tax (or any tax) in the relevant tax year. The rules state that your donations will qualify for tax relief as long as you have not claimed more than 4 times what you have paid in tax in that tax year. If you have claimed more tax relief than you are entitled to you will need to notify the charity and pay back any excess tax relief to HMRC.

Taxpayers can also give money to charity from their wages using the payroll giving scheme. The scheme allows taxpayers to make a tax free donation to charity directly from their pay or pension if their employer runs a payroll giving scheme, approved by HMRC. 

At Spring Budget 2023, the government announced that with effect from 15 March 2023, tax reliefs and exemptions for charities will be restricted to UK charities. Any non-UK charities that were registered with HMRC for tax reliefs and exemptions as of 15 March 2023, can continue to claim tax relief until 5 April 2024. This means that from April 2024, taxpayers will no longer be eligible to claim UK tax relief on donations to these non-UK charities and the charities themselves will be unable to claim Gift Aid.

Source:HM Revenue & Customs| 03-07-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

hmrc deadlines july and august 2023; london accountant; wimbledon accountant

Key HMRC Deadlines for July and August 2023 You Need to Know

Key HMRC Deadlines for July and August 2023

As we step into July and August 2023, it’s essential to stay updated with the upcoming deadlines from HM Revenue and Customs (HMRC). Here’s a comprehensive guide to help you navigate these crucial dates and ensure that your business remains tax compliant.

1 July 2023 – Corporation Tax
The due date for corporation tax for the fiscal year ending 30 September 2022 is 1st July 2023. This deadline applies to corporations and businesses operating within the UK, and it pertains to the tax owed on all profits from your trading, investments, and chargeable gains. Ensure your business has calculated and prepared to pay its tax liability by this date.

 

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6 July 2023Forms P11D and P11D(b)
By 6th July 2023, businesses should complete and submit the P11D and P11D(b) forms. These forms concern the return of benefits and expenses (P11D) and the return of Class 1A National Insurance Contributions (NICs) (P11D(b)). This obligation primarily concerns employers who have provided certain benefits to their directors or employees.

19 July 2023 – Class 1A NICs
The payment for Class 1A NICs is due by 19 July 2023. However, if you plan to pay electronically, the deadline extends to 22 July 2023. This payment pertains to employers who have provided benefits such as company cars to their employees.

19 July 2023 – PAYE and NIC deductions
PAYE and NIC deductions for the month ending 5 July 2023 must be made by 19 July 2023. If you opt to make your payment electronically, the due date extends to 22 July 2023. This deadline applies to all employers who deduct PAYE and NICs from their employees’ wages.

19 July 2023 – CIS300 monthly return and CIS tax
The deadline for filing the CIS300 monthly return for the month ending 5 July 2023, and payment of the CIS tax deducted for the same period, is 19 July 2023. This applies to contractors operating under the Construction Industry Scheme (CIS).

1 August 2023 – Corporation Tax
For the fiscal year ended 31 October 2022, the due date for corporation tax is 1 August 2023. All corporations and businesses operating within the UK need to ensure they’ve prepared to meet this deadline.

19 August 2023 – PAYE and NIC deductions
For the month ending 5 August 2023, the PAYE and NIC deductions are due by 19 August 2023. Electronic payments can be made until 22 August 2023. All employers deducting PAYE and NICs from their employees’ wages need to take note of this deadline.

19 August 2023 – CIS300 monthly return and CIS tax
The filing deadline for the CIS300 monthly return and payment for the CIS tax deducted for the month ending 5 August 2023 is 19 August 2023. This is crucial for contractors operating under the CIS.

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About the Author
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Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Marriage Allowance how it works

The marriage allowance is available to married couples and those in a civil partnership where a spouse or civil partner does not pay tax or does not pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2023-24).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) does not pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,571 to £50,270 for the 2023-24 tax year. The limits for those living in Scotland may vary slightly from these figures.

Claiming the allowance could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year. In fact, even if a spouse or civil partner has died since 5 April 2018, the surviving person can still claim the allowance (if they qualify) by contacting HMRC’s Income Tax helpline.

If you meet the eligibility requirements and have not yet claimed the allowance, you can backdate your claim to 6 April 2017. This could result in a total tax refund of up to £1,242 if you can claim for 2019-20, 2020-21, 2021-22, 2022-23 as well as the current 2023-24 tax year. Even if you are no longer eligible, but you would have been in all or any of the preceding years, you can still claim your entitlement.

Source:HM Revenue & Customs| 26-06-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Offshore taxpayers offered chance to come clean

HMRC is currently writing to UK residents who were named in the leaked Pandora Papers and offering them the chance to regularise their tax affairs. The letters are being sent to UK residents named in the files of 14 offshore financial service providers. 

During 2021 and 2022, the International Consortium of Investigative Journalists released more than 11 million records from 14 offshore service providers, this is known as the Pandora Papers. HMRC has been analysing this data, which is the largest ever release of financial documents to identify UK residents with untaxed offshore assets.

HMRC’s letters, which started distribution earlier this month, warn recipients to report all their overseas income or gains on which they owe UK tax or face penalties of up to 200% of any tax due or prosecution.

There are typically two methods for making a disclosure.

  1. The Contractual Disclosure Facility (CDF) is a facility for taxpayers to disclose serious tax fraud to HMRC. The CDF is only suitable for taxpayers who want to confess to tax fraud. It is not a method to notify HMRC about errors, mistakes or avoidance schemes where no fraud has taken place. HMRC will not criminally investigate and prosecute taxpayers over fraud disclosed as part of the CDF contract. This is in return for the taxpayer meeting some important conditions including making a full, open, and honest disclosure of all the tax fraud committed. If all the conditions are met, the investigation will be conducted using civil powers, with a view to a civil settlement for tax, interest and a financial penalty.
  2. The Worldwide Disclosure Facility (WDF) was launched in September 2016 and is open to those who want to disclose a UK tax liability that relates wholly or partly to an offshore issue. Unlike previous disclosure opportunities, the WDF does not offer any special terms for settling tax affairs and in most cases any interest and penalties levied will be charged in full. The WDF Facility does not provide any protection from prosecution and so where there is deliberate and/or fraudulent conduct, such as evasion, the CDF is the more appropriate facility.

Recipients of these letters should seek professional advice as a matter of urgency.

Source:HM Revenue & Customs| 19-06-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

HMRC’s Self-Assessment line summer closure

HMRC Self-Assessment Helpline closes for the summer

In a surprising move, the UK’s HM Revenue & Customs (HMRC) announced the summer closure of its Self-Assessment helpline from 12 June to 4 September 2023. This action forms part of a trial to encourage the redirection of Self-Assessment queries to HMRC’s robust digital services including online guidance, a digital assistant, and webchat services.

Scheduled during a quieter period for Self-Assessment inquiries, the helpline will reopen on 4 September 2023, five months before the Self-Assessment deadline on 31 January 2024. Historically, the volume of calls decreases by about 50% during the summer months compared to the period between January and April.

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However, this closure is expected to cause some disruption for taxpayers. The Chair of the Treasury Committee is seeking clarification that HMRC has thoroughly evaluated the costs and benefits of this decision. The short notice of the closure is also a point of concern, emphasising the need for transparency from HMRC in decision-making processes that impact numerous individuals.

In defense of the closure, HMRC highlights that this trial will reallocate 350 advisers (full-time equivalent) to handle urgent calls on other lines and respond to customer correspondence. Furthermore, HMRC points out that a significant 97% of Self-Assessment taxpayers prefer using its online services, with the same percentage filing their assessments online.

Need Assistance from an Accountant?

The change will undoubtedly influence how taxpayers interact with HMRC over the summer. If you are one of the affected individuals with Self-Assessment queries, don’t hesitate to reach out. We remain ready and happy to assist you during this transitional period.

Reach out to us by completing this form and one of our staff members will get in touch within one business day. 


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About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Effects of settlement legislation

The settlement legislation is intended to prevent an individual from gaining a tax advantage by diverting his or her income to another person who is liable at a lower rate of tax or is not liable to Income Tax.

Where a settlor has retained an interest in a property in a settlement the income arising is treated as the settlor’s income for all tax purposes. A settlor can be said to have retained an interest if the property or income may be applied for the benefit of the settlor, a spouse or civil partner.

In general, the anti-avoidance settlements legislation can apply where an individual enters into an arrangement to divert income to someone else and in the process, tax is saved.

These arrangements must be:

  • bounteous, or
  • not commercial, or
  • not at arm’s length, or
  • in the case of a gift between spouses or civil partners, wholly or substantially a right to income.

However, there are a number of everyday scenarios where the settlements legislation does not apply. In fact, after much case law in this area, HMRC has confirmed that if there is no 'bounty' or if the gift to a spouse or civil partner is an outright gift which is not wholly, or substantially, a right to income, then the legislation will not apply.

Source:HM Revenue & Customs| 11-06-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Check text messages from HMRC

HMRC has issued an updated version of their online guidance entitled ‘Check if a text message you've received from HMRC is genuine’. The guidance provides a current list of genuine text messages issued by HMRC.

The list has been updated to include details of a text message HMRC is sending to some taxpayers about a Self-Assessment tax check. 

HMRC is also sending certain taxpayers a text message if they call an HMRC helpline from a mobile phone. These messages might include a link to relevant GOV.UK information or webchat.

Although these communications are genuine, taxpayers should still be wary of receiving phishing texts, emails and phone calls that are purported to come from HMRC. Messages from HRMC will never ask for personal or financial information.

Fake messages can appear to be genuine but clicking on a link from within the message or email can result in personal information being compromised and the possibility of computer viruses affecting your computer or smartphone. If you are unsure as to the validity of any message it should not be opened until the sender can be verified. Any suspicious text messages can be sent to 60599 or by email to phishing@hmrc.gov.uk.

Source:HM Revenue & Customs| 04-06-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

double tax treaties in the UK: what they are and how to claim after being taxed twice; london accountant; farringdon accountant

Understanding double tax treaties in the UK

Understanding double tax treaties in the UK

Double tax treaties, also known as double taxation agreements, play a vital role in facilitating international trade and investment by preventing double taxation. These agreements are designed to provide relief and clarity to taxpayers operating across borders. In this blog post, we will explore the concept of double tax treaties, examine their impact on taxpayers, and shed light on the countries with which the United Kingdom (UK) has such treaties.

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What are Double Tax Treaties?

Double tax treaties, also known as tax conventions or tax treaties, are agreements established between two or more countries to resolve potential conflicts regarding taxation. These treaties aim to eliminate or reduce instances of double taxation, where the same income is taxed by more than one jurisdiction. By doing so, they help avoid situations where taxpayers could be subjected to excessive tax burdens, fostering a favourable environment for cross-border trade and investments.

Double tax treaties typically address several key aspects, including:

Tax Residency
Determining an individual or entity’s tax residency status is essential to determine which country has the primary right to tax their income.

Income Categories
The treaties define the various types of income, such as dividends, interest, royalties, and capital gains, and allocate taxing rights between the countries involved.

Avoidance of Double Taxation
The agreements specify mechanisms to avoid double taxation, such as granting exemptions, providing tax credits, or applying a reduced tax rate.

Exchange of Information
Double tax treaties often include provisions for the exchange of information between tax authorities to prevent tax evasion and ensure compliance.

 

Which Taxpayers are Affected by double taxation agreements?

Double tax treaties impact different categories of taxpayers engaging in international activities. These include:

Individuals
Individuals who are tax residents of one country but earn income in another are directly affected by double tax treaties. These can include employees working abroad, students receiving scholarships, or retirees receiving pensions from foreign sources.

Businesses
Multinational corporations, small and medium-sized enterprises (SMEs), and sole proprietors engaged in cross-border trade or investment activities are significantly affected. Double tax treaties provide clarity on the taxation of business profits, dividends, interest, and royalties, avoiding potential tax burdens.

Investors
Individuals or entities investing in foreign countries may be subject to various taxes, including capital gains tax. Double tax treaties can help mitigate the impact of such taxes by providing relief or reducing tax rates.

 

Which countries have Double Tax Treaties with the UK?

The UK has an extensive network of double tax treaties with numerous countries worldwide. These treaties aim to promote international trade and investment by facilitating fair and efficient tax treatment. Here are some notable countries with which the UK has double tax treaties:

United States
The UK US double tax treaty helps prevent double taxation on income and capital gains for individuals and businesses operating across these two countries.

Germany
The double tax treaty between the UK and Germany addresses various aspects of taxation, including business profits, dividends, interest, and royalties, benefiting taxpayers from both nations.

France
The double tax treaty between the Uk and France focusses on avoiding double taxation, determining tax residency, and ensuring effective exchange of information, benefiting taxpayers in both countries.

China
The UK and China have a double tax treaty that helps avoid double taxation and provides relief for individuals and businesses earning income in both jurisdictions.

These examples represent only a fraction of the countries with which the UK has double tax treaties. The UK’s extensive network of such agreements enhances certainty, reduces barriers, and encourages cross-border economic activities.

 

How to claim tax relief if you are taxed twice

To claim relief on foreign income and avoid being taxed twice, there are a few important steps to follow. If you haven’t been taxed yet, you should apply for tax relief in the country where your income originates by contacting the foreign tax authority and submitting the necessary form or letter. If you’ve already paid tax on your foreign income, you can claim Foreign Tax Credit Relief when reporting your overseas income in your UK tax return.

The amount of relief you receive depends on the double-taxation agreement between the UK and the country where your income is from. Make sure to consult HM Revenue and Customs (HMRC) or seek professional tax advice if you have any uncertainties or need assistance with double-taxation relief.

You can also read our full post on claiming relief for double taxation.

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About the Author
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Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

work from home tax relief; london accountant; UK income tax relief

How to claim work from home tax relief in the UK

How to claim work from home tax relief in the UK

If you work from home, you may be eligible for work from home tax relief on some of your expenses. This will depend on whether working from home is a choice or is required by your work.

The amount of tax relief you can claim depends on how much your tax band and how much you spend on work-related expenses. When using the standard rate of relief, individuals paying the Basic Rate of tax can get up to £62 per year in tax relief, while those paying the Additional Rate of tax can get up to £140 per year.

It is worth noting that the tax relief for working from home is not a special scheme, but simply one of the job expenses you can claim tax relief on if they are not paid for by employers. You can click here to read our post on tax relief for travel expenses.

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Who Can Claim Work from Home Tax Relief?

Just like tax relief for other work expenses, you can only claim tax relief on working from home when your employer gives you no alternatives and they do not already reimburse you for those costs.

You can claim tax relief if you work from home and:

  • Your employer requires you to work from home, or requires you to travel an unreasonable distance every day to reach their office.
  • Your employer does not have an office, or has no appropriate facilities for you at their office.

You cannot claim tax relief if you work from home and:

  • Your employment contract allows you to work from home some or all of the time.
  • You work from home because of the coronavirus pandemic.
  • You work from home because your employer’s office is full.

What working from home expenses Can You Claim For?

HMRC will only allow you to claim expenses that are necessary, and are used only for work purposes. You can claim tax relief for the following expenses:

  • Heating and lighting for your work area.
  • Electricity for your work area.
  • Phone calls made for work purposes.
  • Internet access for work purposes.
  • Stationery and other office supplies.
  • Equipment used for work purposes, such as a computer or printer.

How Much tax relief Can You Claim when working from home?

You can claim tax relief on the full cost of the expenses listed above. However, you will have to keep accurate records to submit to HMRC. If you do not want to manage receipts, you can claim the standard rate, which assumes you spend £6 per week on the costs of working from home.

Now that you have your total expenses (either the exact amount or £6 per week), you multiply this by your tax rate to determine how much relief you will get. Using the standard £6 per week, this means that those paying the 20% Basic Rate of tax can receive £1.2 per week (£62.4 per year) in tax relief.

How to Claim Work from Home Tax Relief

To claim tax relief for your work-related expenses, you can either:

  • Claim the flat rate of £6 per week. You do not need to keep evidence of your expenses if you claim the flat rate.
  • Claim the actual amount of your expenses. You will need to keep evidence of your expenses, such as receipts, bills, or contracts, if you claim the actual amount.

You can work expense-related tax relief using HMRC’s online portal. If you submit a Self Assessment tax return for any reason, you must claim the relief on your tax return rather than through the online portal.

Deadline for Claiming Work expense Tax Relief

You can claim tax relief for your work-related expenses up to four years after the end of the tax year in which you incurred the expenses. For example, you can claim tax relief for expenses you incurred in the 2022/23 tax year until the end of the 2026/27 tax year. You can of course also claim relief for up to four years previous, meaning you can still claim expenses from the 2019/20 tax year in your 2023/24 tax return.

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Wimbledon Accountant

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About the Author
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Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

guide to tax relief for work expenses in the uk; london accountant; learn how to claim for job costs you pay yourself

Guide to tax relief for work expenses in the UK

Guide to tax relief for work expenses in the UK

If you find yourself paying for job costs out of your own pocket, making the most of available tax reliefs is essential. In the UK, HM Revenue and Customs (HMRC) offers tax relief for certain job-related expenses that are not reimbursed by your employer.

In this blog post, we will provide a comprehensive overview of the tax relief options available to UK taxpayers, including working from home, uniforms and work clothing, personal protective equipment (PPE), vehicles used for work, travel and overnight expenses, and buying other equipment.

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Which work expenses qualify for tax relief?

To be eligible for tax relief, expenses must be required for your job, bought with your own money, and only used for work purposes. You cannot claim relief for expenses that are reimbursed by your employer or for which your employer gives you an alternative. For example, you cannot claim tax relief on the cost of buying a work phone when your employer offers to pay for one, but you would rather get a different model.

In the rest of this post we explore the different expenses that are eligible for tax relief, assuming that HMRC’s conditions outlined above are met.

Work from Home tax relief

With the rise of remote work, many individuals find themselves working from home either full-time or part-time. HMRC allows eligible individuals to claim tax relief for additional household costs incurred while working from home.

To be eligible, you must meet certain criteria, such as living far away from your office or your employer not having a physical office. You cannot claim tax relief if you choose to work from home or due to COVID-19.

Allowable expenses include business phone calls and a portion of your gas and electricity bills. You can either claim a flat rate expense of £6 a week (for previous tax years, it was £4 a week) or the exact amount of your extra costs. However, to claim your exact expenses you will have to provide HMRC will receipts.

You can read our full post on claiming work from home tax relief here.

Tax relief for Uniforms, Work Clothing, and Tools

If your job requires you to wear a uniform or specialised work clothing, you may be eligible for tax relief on the cost of repairing, replacing, or cleaning them. A uniform is a set of clothing that identifies you as having a certain occupation, such as a nurse or police officer. Even if the clothing does not identify your occupation but is necessary for your work, such as overalls or safety boots, you may still be able to claim tax relief. Small tools can also qualify for this relief, such as electric drills or cameras.

It is important to clarify that you can only claim relief on the costs of cleaning, repairing, or replacing your specialist clothing or tools. You cannot claim for the initial cost of purchasing these items.

Also important to point out is that you cannot claim tax relief for the cost of buying or cleaning everyday clothing used for work. Similarly, you cannot claim tax relief for personal protective equipment (PPE) as your employer should either provide it free of charge or reimburse you for the costs.

You have the option to claim either the exact amount, which must be backed up by receipts, or you can claim the ‘flat rate expense’ for your job. You can find the list of available flat rates on HMRC’s website.

 

tax relief on fuel and Vehicles Used for Work

If you use your own vehicle for work purposes, such as cars, vans, motorcycles, or bicycles, you may be eligible to claim tax relief. However, this does not include commuting to and from your regular workplace, unless it is a temporary place of work. The amount you can claim depends on whether you own or lease the vehicle yourself or if it is provided by your employer.

If you use your own vehicle, you can claim tax relief based on approved mileage rates, which cover the cost of owning and running the vehicle. For company cars used for business trips, you can claim tax relief on fuel and electricity expenses, provided you keep records to show the actual cost.

You can click here to read our full post on travel and mileage expense claims.

Travel and Overnight Expenses

If your job requires you to travel for work purposes, you may be eligible to claim tax relief on certain expenses. This includes public transport costs, hotel accommodation for overnight stays, food and drink, congestion charges and tolls, parking fees, business phone calls, and printing costs.

However, it’s important to note that you generally cannot claim for regular commuting expenses unless you’re travelling to a temporary place of work. This means that you cannot claim mileage costs for your daily commute from home to work and vice versa. You can click here to read our full post on travel and mileage expense claims.

Buying Other Equipment

In most cases, you can claim tax relief on the full cost of substantial equipment, such as a computer, that is necessary for your work. This falls under the annual investment allowance (AIA), a type of capital allowance. You can currently claim for expenses up to £1 million under the AIA.

However, you cannot claim capital allowances for cars, motorcycles, or bicycles used for work. You will have to claim business mileage and fuel costs, as described above. For smaller items like uniforms and tools that have a shorter lifespan, you can claim tax relief in a different way.

Need Assistance from an Accountant?

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Wimbledon Accountant

165-167 The Broadway

Wimbledon

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Farringdon Accountant

127 Farringdon Road

Farringdon

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EC1R 3DA



About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

self assessment tax return for landlords in the UK; london accountant; self assessment; rental income

Self Assessment Tax Return for Landlords in the UK

If you are earning rental income in the UK, understanding your tax obligations is crucial. Filing a self assessment tax return for landlords can be complex, but with the right knowledge and guidance, you can ensure compliance and maximise your financial benefits. In this blog post, we will provide a quick guide to help private landlords navigate the process of filing a tax return in the UK.

Do I need to file a Self Assessment Tax Return for rental income?

As a private landlord in the UK, filing a tax return is a legal requirement when earning over a certain threshold. Self-employed people and landlords earning over £1000 in a tax year have to file a Self Assessment return with HMRC. This first £1000 is tax-free. Failing to file a tax return can result in penalties, fines, and possible legal consequences.

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Key Steps in Filing a Tax Return for Landlords in the UK

1. Registering for self-assessment

To begin the tax return process, you must register for self-assessment with HMRC. This involves obtaining a Unique Taxpayer Reference (UTR) number, which will be used to identify you for tax purposes. Registration can be done online through the HMRC website.

2. Organising your rental income and expenses

Keeping detailed records of your rental income and expenses is essential for accurate tax reporting. Maintain a comprehensive record of all rental income received and associated expenses incurred during the tax year. This includes rent received, property repairs, insurance costs, mortgage interest payments, and other relevant expenses.

3. Understanding allowable expenses

Certain expenses incurred as a landlord are deductible, reducing your overall taxable income. We provide a breakdown of allowable expenses below, such as property repairs, maintenance costs, letting agent fees, landlord insurance premiums, and more. Understanding these deductions will help you optimise your tax position.

4. Keeping accurate records

To support your tax return, it’s important to maintain accurate records. Retain invoices, receipts, and relevant documents for at least six years. These records will serve as evidence of your income and expenses, ensuring transparency during any potential HMRC audits.

Tax-Deductible and allowable Expenses for Landlords

There are two types of tax-deductible rental expenses, allowable expenses and domestic items. These costs can be deducted from your total income as tax relief before calculating your taxable income and final tax owed.

how much tax do I pay on rental income; tax return for landlords; self assessment; rental income; london accountant

Allowable expenses for rental income

Allowable expenses are the day-to-day running costs for providing a rental property, which can be deducted from your income before calculating tax. These do not include improvements to the property.

Repairs and maintenance
Expenses related to repairs and maintenance of your rental property can be claimed as deductions. This includes fixing structural issues, replacing faulty appliances, and general upkeep of the property.

Insurance premiums
The cost of insuring your rental property is an allowable expense. This includes landlord insurance, public liability insurance, and any other relevant policies.

Letting agent fees
If you engage a letting agent to manage your property, the fees you pay to them are deductible expenses. This includes tenant finding, advertising, and property management fees.

Other allowable expenses
There are various other deductible expenses that landlords may incur, such as legal and accountancy service fees, council tax, utility bills, and cleaning services.

Tax deductible Domestic items

The costs for replacing furnishings in rental property can be deducted from your income before calculating tax. However, to qualify for this tax relief, the old items being replaced must no longer be used at the rental property.

Domestic items include:

  • Beds.
  • Curtains.
  • Fridges.
  • Crockery and cutlery.
  • Carpets.
  • Sofas.

Tax relief for mortgage interest payments

If you have a buy-to-let mortgage, you can receive a tax credit amount equal to 20% (the Basic Rate of income tax) of your mortgage interest payments. This does not reduce your total taxable income, and therefore does not help keep your taxable income in a lower tax bracket.

This means that individuals in the Higher Rate (40%) or Additional Rate (45%) income tax brackets do not receive full tax relief on their mortgage interest payments. Read our guide to Personal Income Tax for more detailed information on income brackets, tax bands, and available income tax relief.

Important Deadlines for landlord tax returns

The self-assessment tax return deadlines in the UK are the same for landlords, self-employed individuals and those looking to claim income tax relief. The tax year runs from April 6th to April 5th the following year, and the tax return must be filed by January 31st following the end of the tax year. It is crucial to adhere to these deadlines to avoid penalties. You can learn more with our post detailing HMRC self assessment penalties for failing to file returns / pay tax on time.

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Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

the best way to pay yourself as a company director in the UK; london accountant; dividends taxation; income tax

How to best pay yourself as a UK company director

As a new company director in the UK, you are likely wondering how to best pay yourself through your company. You have several options for transferring company profits into personal income, including salaries, dividends, and investments. This post outlines the pros and cons of each, and gives you the information you will need to make your income as tax efficient as possible.

 

How can a company director pay themselves?

Company directors are considered employees of the company and so take a salary which is subject to income tax. Directors can also pay themselves using dividends, which are a common method of distributing profits to shareholders (which includes directors).

Salaries and dividends are subject to different tax rates, tax-free allowances, and National Insurance obligations, which we break down below.

 

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What is the difference between salary and dividends?

Dividends are a way for companies to distribute a portion of their profits to their shareholders. As a director, you can choose to pay yourself through dividends instead of a salary. Dividends are typically paid out after the company has paid its taxes and can be a tax-efficient way to receive income.

However, there are some basic rules to follow. Firstly, your company must have sufficient profits to pay dividends, and you should keep records of these profits. Secondly, dividends must be declared and approved by the company’s shareholders. Lastly, dividends cannot be paid if the company is insolvent or if the payment would render it insolvent.

When it comes to tax purposes, it’s important to find the right balance. Dividends are subject to lower tax rates than salaries. You also do not need to pay National Insurance Contributions on dividend income, which you would have to do so on any salary income.

Lastly, as is also the case with personal income tax, a certain amount of dividends you receive is tax-free.

You can read our full guide to dividends to learn more.

 

What is the most efficient way for a company director to pay themselves?

From the explanation above, it should be clear that paying yourself efficiently as a company director involves balancing tax-free personal allowances and differing tax obligations.

The table below should be very helpful in outlining these differences between salary and dividends.

company director pay; dividends tax; income tax; london accountant

At the most basic level, directors clearly want to use all of their available tax-free personal allowance. That means taking at least £12,570 as salary and £1,000 as dividends.

It is important to note that once you reach the Higher Rate income bracket, your personal allowance amount begins to decrease. And in the Additional Rate bracket, there is zero tax-free personal allowance.

An important factor that is left out of the above table is the added cost of National Insurance Contributions on salary income. National Insurance Contributions must be paid both by the employee and employer. The basic NIC rate for employees is currently 12% of earnings, and an additional 13.8% of earnings to be paid by the employer. These are basic figures, see our guide to National Insurance for a detailed understanding.

As a company director, you will effectively bear both of these costs, making salary income even less appealing when compared to dividends. A common strategy is to take enough of a salary that the director qualifies for state benefits such as the State Pension, but that does not incur NIC payments.

Under most circumstances, dividends will be more tax efficient than salary income, though how easy it is to distribute dividends will depend on the structure of your company and its shareholders.

Using investments as tax-efficient income sources

It is also important to take advantage of any other tax free allowances that HMRC makes available. An example of this would be transferring company profits into investments, rather than personal salary. In that way, you could take advantage of the tax-free capital gains allowance of £6,000.

Trusts are another way of accomplishing this, and which have their own tax-free capital gains allowance of £3,000.

It is also essential to consider how increased income may push you into a new tax band, and create much higher tax liability. For example, the dividend tax rate jumps from 8.75% in the first income bracket to 33,75% in the second.

As such, it may be more profitable in the long term to reinvest money into business (tax-free), or into other investments, rather than taking extra personal income that pushes you into a higher tax band.

 

Need Assistance from an Accountant?

Our CIMA-certified Management Accountants specialise in working with businesses to form companies, create financial strategies and take care of regulation compliance.

We’d be more than happy to help you with your accounting needs in London, or anywhere else in the UK!

Reach out to us by completing this form and one of our staff members will get in touch within one business day. 


Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

127 Farringdon Road

Farringdon

London

EC1R 3DA



About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Claim a tax refund for work expenses

HMRC has issued a press release to remind employees that may be able to claim a claim tax relief for bills they pay that are related to their employment. The most recent figures show that more than 800,000 taxpayers claimed tax refunds for work expenses during the 2021-22 tax year with an average claim of £125. A claim can be made online by using HMRC’s online portal at GOV.UK.

A claim for valid purchases can be made against receipts or as a 'flat rate deduction'. The flat rate deductions are set amounts that HMRC has agreed are typically spent each year by employees in different occupations. These deductions range from £60 to £1,022. If an occupation isn’t listed, employees can still claim a standard annual amount of £60 in tax relief if they pay their own expenses.

This means that qualifying basic rate taxpayers can claim back £12 (20% x £60) and higher rate taxpayers £24 (40% x £60) per year. Claims can usually be backdated for up to 4 years. 

Employees may also be able to claim tax relief for other expenses such as using their own vehicles, professional fees, union memberships, subscriptions and for buying work-related equipment. As a general rule, there is no tax relief for ordinary commuting to and from an employee’s regular place of work.

HMRC’s Director General for Customer Strategy and Tax Design, said:

'Every penny counts, and we want to make sure employed workers are getting what they deserve – their hard-earned cash straight back into their pockets. To make a claim just search ‘employee tax relief’ on GOV.UK. It is the quickest way of getting a tax refund on your work-related expenses and ensures you get 100% of the money back.'

There is no tax relief available if an employee is fully reimbursed by their employer.

Source:HM Revenue & Customs| 22-05-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Residence affects Income Tax in UK

There is an interesting anomaly that can affect taxpayers with homes in Scotland and other parts of the UK. Where this is the case, the question arises as to whether or not the taxpayer is liable to pay Income Tax in Scotland or elsewhere.

As a general rule, the Scottish rate of Income Tax (SRIT) is payable on the non-savings and non-dividend income of those defined as Scottish taxpayers. The definition of a Scottish taxpayer is generally focused on the question of whether the taxpayer has a 'close connection' with Scotland or elsewhere in the UK. The liability to SRIT is not based on nationalist identity, location of work or the source of a person’s income e.g., receiving a salary from a Scottish business.

Where a taxpayer has a home in Scotland and also elsewhere in the UK, they need to ascertain which is their main home based on published guidance and the facts on the ground.

HMRC’s guidance on the issue states the following:

  • Your main home is usually where you live and spend most of your time.
  • It does not matter whether you own it, rent it or live in it for free.
  • Your main home may be the home where you spend less time if that’s where:
    • most of your possessions are;
    • your family lives if you’re married or in a civil partnership;
    • you are registered for matters like your bank account, GP or car insurance; and
    • you are a member of clubs or societies.

It is also possible to change which home counts as your main home if there has been a material change in the underlying facts. Scottish taxpayer status applies for a whole tax year. It is not possible to be a Scottish taxpayer for part of a tax year.

Source:The Scottish Government| 22-05-2023


About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Comparing company formations in the UK

Comparing company formations in the UK

All legal profit-seeking businesses fall into one of two broad categories: unincorporated and incorporated. The difference is that incorporated forms have what is called a ‘separate legal personality’. The business is considered its own entity under the law.

This means that those in charge of unincorporated businesses bear full responsibility for the company’s debts. The people running incorporated businesses, on the other hand, have what is called ‘limited liability’ – they only stand to lose what they have already invested.

To incorporate or not?

The most important difference between being self-employed and running a limited company is liability and the amount you are taxed. As explained above, self-employed individuals have full responsibility for any losses, while shareholders in a limited company only lose as much as they paid (or promised to pay) for their shares.

Company income is not taxed at the same level as personal income tax paid by employees and people that are self-employed. At under £50,000 annual income, corporate tax is only 1% lower than the standard 20%.

But above £50,270 your personal tax rate jumps to 40%. Even the highest corporate tax rate is only 25%, which means gaining income from a limited company more tax efficient no matter how much you earn.

Company formation agents

Company formation agents are independent, professional firms that specialise in company formation and registration with Companies House.

We at CIGMA Accounting specialise in helping sole traders incorporate their businesses. If you’re looking to take advantage of the lower tax rates for companies, our CIMA-registered accountants would be happy to assist with company formation in London and across the UK.

Contact us here or scroll to the end of this page to get a free quote.

Unincorporated businesses

These businesses are not considered as separate entities from the owners. This means that owners have full responsibility, i.e. ‘liability’, for the company’s debts and legal obligations. Owners are considered self-employed and must submit annual self-assessment tax returns.

Sole Trader

This is the simplest way to set up and run a business. Ownership and control of the business rests solely with a single person. Regulation for the Sole Trader is minimal. There is no requirement to write a formal constitution for the business, and no need to register with the government’s Company House.

Profits are treated as personal income which is subject to income tax as well as national insurance contributions. Being a Sole Trader is risky by nature, as the owner has unlimited personal liability for the business’ debts and contracts.

Of course they also own all of the business’ assets, and can employ staff. It is unlikely that being a Sole Trader is best for any businesses that need more than small amounts of external investment. Being unincorporated puts limits on borrowing money and raising money by selling shares. 

Unincorporated Association

Unincorporated Associations are groups of people that agree, i.e. ‘contract’, to work together for a specific purpose. These businesses usually have a constitution setting out its purpose, rules, and members.

They are usually run by a kind of management committee, all of whom have unlimited liability (unless specifically made immune in the constitution). They are subject to the same restrictions as the Sole Trader.

Partnership

A partnership is a relatively simple way for two or more people to set up a business aimed at making profit. While formal agreement isn’t needed for a partnership to form, it is usual to draw up a legally binding ‘partnership agreement’. This sets out things like the capital put in by each member, and how profits will be shared.

Partners share all the risks and responsibilities of the business. Partners do not need to be individual people, they can also be any ‘legal person’ – such as a company. In these cases, the partners have extra tax and reporting obligations.

Limited Partnership

This is not to be confused with the similarly named, but incorporated, Limited Liability Partnership. These businesses have two kinds of partners: general partners and limited partners.

Limited partners may not be involved in the management of the business and their liability is limited to the amount they have already invested. Unlike other unincorporated businesses, Limited Partnerships must register with Companies House.

Trust

Trusts are essentially legal tools for holding assets with the aim to separate legal ownership from economic interest. A trust holds assets on behold of another person or business, and is run by a small group of trustees.

Trusts usually just manage assets and do not give out profits. They are often used alongside unincorporated associations which can’t own property themselves.

Incorporated businesses

Incorporated forms of business are considered their own legal persons. This gives the owners of the business limited liability for its debts and obligations, but they are subject to stricter regulations.

Limited Company

The Limited Company is the most common kind of legal business, and is subject to corporate tax rather than personal income tax. They must have two constitutional documents:

  • A Memorandum, which records the fact that the founding members wish to form a company together. This cannot be amended.
  • Articles of Association, which sets out legally binding rules regarding decision-making, ownership, and profit sharing.

A Limited Company is owned by members, who have all invested in the business. The company’s finances are separate from the members’ personal finances. There are two ways to determine members: shares and guarantees.

Most companies are Limited by Shares. This means members own one or more shares in the company and are known as shareholders. If the company must be liquidated, the shareholders only stand to lose the amount still unpaid on shares. Shareholders also have voting rights, which may depend on the kind of share they own.

A company can also be Limited by Guarantee. This is where members give a guarantee to pay a set amount if the company fails and goes into liquidation.

The day to day management of a company, performed by a ‘director’ or board of directors, is in principle separate from its ownership. However, directors can also be members, meaning that the simplest Limited Company is a single member who owns and directs the whole company.

Limited Companies have a greater ability to finance themselves as they can use their assets as securities for loans. The stricter regulation on Limited Companies includes accountability to both shareholders and the public, as well as the need to provide annual reports to Companies House.

While Private Limited Companies are most common, Public Limited Companies are also possible. These companies can sell shares to the public, but attract even more regulation. This is to protect the public investor who is usually much less involved in managing the business than a private investor.

Limited Liability Partnership

A Limited Liability Partnership (LLP) is similar to a normal partnership, but with limited liability for the partners. Each member must register as self-employed with the HMRC and submit annual self-assessments. At least two members must be ‘designated members’, who are responsible for appointing auditors and filing accounts at Companies House.

LLPs have much more freedom than companies in arranging their internal affairs, making decisions, and sharing profits.

Community Interest Company

A Community Interest Company (CIC) is a form of company (limited by shares or guarantee) created for ‘social enterprises’. They want to use their profits and assets for community benefit. CICs have the flexibility and limited liability of companies, but also special features to make sure they serve the interest of the community:

  • CICs must submit statements and evidence every year to satisfy the ‘community interest test’.
  • CICs have an ‘asset lock’ to restrict the transfer of the company’s assets.
  • CICs have caps on profits paid to members

WHAT DO YOU NEED TO INCORPORATE YOUR BUSINESS?

In order to make your application to Companies House, you will need the following:

  •  A company name
  • Your business activity (SIC) code. You can find it here
  • A registered office address. CIGMA accounting offers a service for using our address if you do not have a registered office.
  • List of shareholders or guarantors
  • List of directors
  • List of people with significant control (PSCs)
  • Details about your capital investments

is a company registration number the same as a VAT number?

No, your Company Registration Number (CRN) is not the same as your VAT registration number (VRN). Neither of these are to be confused with your Unique Taxpayer Reference number (UTR). The UTR is a 10-digit number issues by HMRC. The CRN is an 8-digit number assigned by Companies House to all new limited companies or LLPs. 

What is a company registration number?

The Company Registration Number (CRN) is an 8-digit number assigned by Companies House to all new limited companies or LLPs. 

You can find your CRN on your company’s Certificate of Incorporation or by using this online tool from Companies House.

What is a vat registration number?

A VAT registration number contains 9 digits and is issued by HMRC. You must register for VAT is your total VAT taxable annual turnover is greater than £85,000. You can check wich products and services are exempt from VAT here.

Need Assistance from an Accountant?

No matter your type of business, CIGMA Accounting can help manage your finances and tax obligations. Our organisation is registered with the Chartered Institute of Management Accounting (CIMA), and our accountants specialise in personal finance and cooperating with business management.

We believe small businesses can change the world, and love helping them work in the most tax-efficient way.

Reach out to us by completing this form and one of our staff members will get in touch within one business day. 




About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.