Learning Ecommerce Accounting: Guide for UK Businesses

Ecommerce Accounting: Introduction for UK Businesses

Are you an ecommerce entrepreneur in the UK looking to navigate the complex world of accounting? Managing the financial aspects of your online business can be daunting, but with the right knowledge and support, you can streamline your processes and ensure compliance while focusing on growing your venture.

At CIGMA Accounting, we understand the unique needs of ecommerce businesses, and we’re here to help you master ecommerce accounting from purchase orders to tax management. Let’s delve into what ecommerce accounting entails and how it can benefit your UK-based online enterprise.

Understanding Ecommerce Accounting

Ecommerce accounting is more than just tracking sales and expenses; it’s about meticulously recording, organizing, and managing all financial transactions specific to your online business. From purchase orders to sales tax management, here’s a breakdown of key components to simplify your understanding:

1. Purchase Orders and Sales Orders:
These documents form the foundation of your ecommerce transactions. Purchase orders detail what your customers want to buy, while sales orders outline the specifics of each sale, including payment information and delivery details.

2. Accounts Payable and Receivable:
Stay on top of outstanding bills and invoices, ensuring timely payments from customers while managing your own financial obligations.

3. Cost of Goods Sold (COGS):
Calculate the total cost of production and distribution of your products, including shipping, warehousing, and other direct expenses. Understanding COGS is crucial for accurately assessing your profitability.

4. Ecommerce Sales Tax:
Navigating tax regulations can be challenging, especially for online businesses with customers across different states. Ensure compliance by tracking and remitting applicable state and local taxes, understanding sales tax nexus, and fulfilling tax obligations accordingly.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

Ecommerce Tax Management

Tax management is a critical aspect of ecommerce accounting, and overlooking it can lead to costly consequences. Here’s how CIGMA Accounting can support your UK-based ecommerce business:

1. Comprehensive Tax Planning:
Our experts help you develop a strategic tax plan tailored to your ecommerce operations, ensuring compliance with UK tax regulations while maximizing tax efficiency.

2. Accurate Tax Filing:
From quarterly estimated taxes to year-end filings, we handle all aspects of tax preparation, keeping you updated on deadlines and obligations to avoid penalties.

3. Sales Tax Compliance:
With our in-depth knowledge of UK tax laws, we assist you in determining when and where to charge sales tax, minimizing the risk of non-compliance and associated fines.

4. Proactive Tax Advice:
Stay informed about changes in tax legislation and how they impact your ecommerce business. Our proactive approach ensures that you’re always ahead of the curve when it comes to tax matters.

Partner with CIGMA for Ecommerce Success

At CIGMA Accounting, we’re dedicated to helping UK ecommerce businesses thrive. From expert tax management to comprehensive accounting services, we’re your trusted partner every step of the way.

Let us handle the numbers so you can focus on growing your online venture with confidence. Reach out to us today to learn more about how we can support your ecommerce accounting needs.


Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

127 Farringdon Road

Farringdon

London

EC1R 3DA

cigma accounting guide to employee change reporting for HMRc; london accountant; farringdon accountant

Guide to HMRC reporting: Employee Changes

Understanding HMRC Reporting: Essential Employee Changes for UK Businesses

In the intricate world of business finance, meticulous reporting is not just a legal obligation but also a crucial aspect of maintaining accuracy and compliance. As a UK-based accounting firm committed to your financial success, CIGMA Accounting understands the importance of navigating HM Revenue and Customs (HMRC) regulations effectively. Today, we delve into the nuances of reporting employee changes to HMRC, shedding light on the essential details that every business owner should know.

Why Reporting Employee Changes Matters

Businesses in the UK are required to adhere to strict reporting protocols outlined by HMRC. Central to this is the Full Payment Submission (FPS), a vital submission that must be completed every time employees are paid. This submission ensures that HMRC has accurate and up-to-date information regarding your workforce.

Require accounting services?

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What Constitutes an Employee Change?

When it comes to reporting employee changes, several scenarios warrant additional information on your FPS. These include:

  1. New Employee:
    Whenever a new employee joins your team, it’s imperative to include their details in your FPS.

  2. Employee Departure:
    Similarly, when an employee leaves your company, this change must be promptly reported to HMRC.

  3. Workplace Pension Commencement:
    If you start paying an employee a workplace pension, this information needs to be communicated through your FPS.

  4. End of Tax Year:
    The last report of the tax year requires specific attention, necessitating comprehensive reporting to HMRC.

  5. Address Change:
    Any change in an employee’s address should be updated in your FPS submission.

  6. Additional Notifications:
    Beyond the standard changes, there are specific instances where HMRC must be informed, such as when an employee becomes a director, reaches State Pension age, works abroad, goes on jury service, or passes away.

  7. Contracted-Out Company Pension:
    If an employee joins or leaves a contracted-out company pension scheme, this must be reported accordingly.

  8. Special Circumstances:
    Other scenarios, including an employee turning 16, being called up as a reservist, or undergoing a gender change, require meticulous reporting to HMRC.

Managing Leave of Absence

In instances where an employee takes a leave of absence, it’s essential to indicate this change in your FPS reports. By marking ‘Yes’ in the ‘Irregular payment pattern indicator,’ you ensure that HMRC is aware of the irregularity in payment patterns until the employee’s return.

Partner with CIGMA Accounting for Compliance and Efficiency

Navigating HMRC regulations can be daunting, but with the right support, your business can thrive while remaining compliant. At CIGMA Accounting, we offer tailored solutions designed to streamline your financial processes and ensure seamless HMRC reporting. From payroll management to comprehensive tax advisory services, we’re here to empower your business every step of the way.


Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

127 Farringdon Road

Farringdon

London

EC1R 3DA

handling late filing penalties with hmrc; wimbledon accountant; london accountant

Handling late filing penalties from HMRC

How should you handle late filing penalties?

Are you one of the 3.8 million individuals who have yet to file their 2022-23 self-assessment return? With the 31 January 2024 deadline already passed, it’s essential to understand the consequences of missing this crucial date, especially if you’re in the UK.

Consequences of Missing the Filing Deadline

If you’ve missed the filing deadline, you’re subject to penalties imposed by HM Revenue & Customs (HMRC). Here’s what you need to know:

  1. £100 Fixed Penalty:
    For returns up to 3 months late, HMRC imposes a fixed penalty of £100, regardless of whether you owe tax or not.

  2. Daily Penalties:
    After 3 months, daily penalties of £10 per day, up to a maximum of £900, are added to your outstanding balance.

  3. Further Penalties:
    If your return is still outstanding after 6 months, a penalty of 5% of the tax due or £300 (whichever is greater) is applied. The same penalty is levied after 12 months.

  4. Late Payment Penalties:
    In addition to filing penalties, there are penalties for paying outstanding tax late. These penalties accrue at 5% after 30 days, 6 months, and 12 months, respectively.

  5. Interest Charges:
    HMRC also applies interest charges on any tax paid late.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

What can you do?

If you’re facing penalties due to missed deadlines or late payments, it’s crucial to take action promptly. Here’s how CIGMA Accounting can help:

  1. Appeals Process:
    If you have a reasonable excuse for missing deadlines, you can appeal against HMRC penalties. CIGMA Accounting can assist you in preparing and submitting your appeal, ensuring it meets HMRC’s requirements.

  2. Payment Assistance:
    If you’re unable to pay your tax bill in full, CIGMA Accounting can help you negotiate a Time to Pay arrangement with HMRC, allowing you to repay the amount owed in manageable instalments.

  3. Proactive Approach:
    Rather than ignoring the issue, CIGMA Accounting advises clients to be proactive and contact HMRC as soon as possible if they’re unable to meet their tax obligations. Ignoring the problem can exacerbate the situation, leading to further penalties and interest charges.

Why Choose CIGMA Accounting?

At CIGMA Accounting, we understand the complexities of UK tax regulations and the importance of timely compliance. By partnering with us, you gain access to:

  • Expert Guidance:
    Our team of qualified accountants provides personalized advice tailored to your specific circumstances, ensuring you understand your tax obligations and rights.

  • Compliance Assurance:
    We keep abreast of changes in tax legislation and deadlines, ensuring you remain compliant and avoid unnecessary penalties.

  • Strategic Support:
    Beyond tax compliance, we offer strategic advice to help you optimize your financial position and achieve your long-term goals.

Take Action Today

Don’t let missed deadlines and tax penalties derail your financial health. Contact CIGMA Accounting today to discuss your situation and explore your options for resolving outstanding tax liabilities. With our expert guidance and proactive approach, you can regain control of your finances and avoid future penalties.


Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

127 Farringdon Road

Farringdon

London

EC1R 3DA

cigma accounting guide to carer's credit; london accountant; wimbledon accountant; farringdon accountant

A Guide to Carer’s Credit from CIGMA Accounting

Unlocking Financial Support: A Guide to Carer's Credit

Are you tirelessly caring for someone for at least 20 hours a week? If so, you might be eligible for Carer’s Credit, a National Insurance credit designed to bridge gaps in your National Insurance record. This credit not only supports your caregiving responsibilities but also plays a crucial role in enhancing your State Pension.

What is carer's credit?

Carer’s Credit is a valuable resource for those dedicating a substantial amount of time to care. It’s a National Insurance credit that aids in filling gaps in your National Insurance record, ensuring your State Pension is based on a comprehensive record.

Notably, eligibility is not impacted by your income, savings, or investments, making it a versatile financial support option.

If you qualify for Carer’s Credit, you receive credits that contribute to filling gaps in your National Insurance record. This means you can fulfill caregiving duties without compromising your eligibility for the State Pension.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

Eligibility Criteria for carer's credit

To be eligible for Carer’s Credit, you must:

  • Be aged 16 or over
  • Be under State Pension age
  • Care for one or more people for at least 20 hours a week

The person you’re caring for must receive one of the following benefits:

  • Disability Living Allowance care component at the middle or highest rate
  • Attendance Allowance
  • Constant Attendance Allowance
  • Personal Independence Payment daily living part
  • Armed Forces Independence Payment
  • Child Disability Payment (CDP) care component at the middle or highest rate
  • Adult Disability Payment daily living component at the standard or enhanced rate

Even if the person you care for doesn’t receive these benefits, you may still be eligible. In such cases, a signed ‘Care Certificate’ from a health or social care professional can demonstrate the appropriateness of your caregiving level.

Carers not qualifying for Carer’s Allowance may still be eligible for Carer’s Credit.

Breaks in Caring and Eligibility

Carer’s Credit remains accessible even during breaks in caregiving, allowing for interruptions of up to 12 weeks. Whether it’s a short holiday, hospitalization of the cared-for person, or your own hospital stay, you’ll still receive Carer’s Credit during these periods.

If your break in caring extends beyond 12 weeks, it’s essential to inform the Carer’s Allowance Unit promptly.

 

You do not need to apply for Carer’s Credit if you:

  • Get Carer’s Allowance – credits are automatic
  • Receive Child Benefit for a child under 12 – credits are automatic
  • Are a foster carer – apply for National Insurance credits instead

Need Assistance from an Accountant?

CIGMA Accounting takes pride in offering holistic financial advice, so you can take of both your business and those close to you. Become a CIGMA partner today and find out how we secure your family’s financial future.

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

using the flat rate VAT scheme to minimise your business VAT in the UK; wimbledon accountant; farringdon accountant; london accountant

Make VAT Efficient: Understand Flat Rate VAT

Maximizing VAT Efficiency: Understanding the VAT Flat Rate Scheme

Navigating the complexities of VAT can be a challenging endeavor for UK businesses, especially when looking for ways to simplify and potentially reduce tax liabilities. CIGMA Accounting, a leading UK accounting firm, sheds light on the VAT Flat Rate Scheme – an often underutilized yet beneficial approach for eligible businesses.

What is the VAT Flat Rate Scheme?

The VAT Flat Rate Scheme is a government initiative designed to streamline the VAT process for small businesses. Instead of calculating VAT based on the standard method (the difference between VAT charged to customers and VAT paid on purchases), businesses pay a fixed rate of VAT to HMRC. This simplification can lead to reduced administrative burdens and potential cost savings.

  • Fixed VAT Rate: Pay a set percentage of your VAT-inclusive turnover.
  • Simplified Accounting: Less paperwork and simpler VAT calculations.
  • First-Year Discount: Enjoy a 1% discount in your first year of VAT registration



Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

Eligibility Criteria

To join the VAT Flat Rate Scheme, businesses must:

  • Be VAT-registered.
  • Have a VAT taxable turnover of £150,000 or less (excluding VAT).

Joining and leaving the scheme

Joining is straightforward – either apply online when registering for VAT or use form VAT600FRS if already VAT registered. Leaving the scheme is equally simple; however, businesses must exit if they are no longer eligible or if their turnover exceeds certain thresholds.

Calculate your flat rate

The VAT flat rate varies depending on your business type. For instance, accountancy services have a rate of 14.5%, while catering services range from 4.5% to 12.5%, depending on the period. Notably, ‘limited cost businesses’ – those spending less on goods – are subject to a higher rate of 16.5%.

CIGMA Accounting’s Expert Insights

  1. Assessment is Crucial:
    Before opting for the scheme, it’s vital to assess whether it’s financially beneficial for your business. Factors like your industry, expenses, and turnover play a crucial role in this decision.

  2. Navigating Limited Cost Trader Rules:
    Introduced in April 2017, these rules can significantly affect your VAT rate. Understanding whether you fall into this category is essential for accurate tax computation.

  3. Monitor Your Turnover:
    Stay vigilant about your turnover. Exceeding the £230,000 threshold means you’ll need to exit the scheme.

  4. Capital Purchases Exception:
    Remember, you can still reclaim VAT on certain capital assets over £2,000.

  5. Professional Guidance is Key:
    VAT legislation can be complex. Seeking advice from experienced accountants like CIGMA Accounting can ensure compliance and optimize your tax position.

Need Assistance from an Accountant?

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

financial strategies for 2024; london accountant; farringdon accountant; cigma accounting

Navigating Turbulent Times: Smart Financial Strategies for 2024

Navigating Turbulent Times: Smart Financial Strategies for 2024

As we step into a fresh new year, it’s the perfect time for business owners to engage in some essential business planning, particularly in the realm of protecting business capital. With the ongoing downturn in global trade – influenced by geopolitical tensions and economic challenges – it’s crucial to adopt a proactive approach in safeguarding your financial resources. CIGMA Accounting, a leading UK-based accounting firm, is here to guide you through these tumultuous times with expert advice and tailored solutions.

Understanding the Current Economic Climate

The business world is currently facing a myriad of challenges. The war in Ukraine, tensions in the Middle East, and disruptions in the Red Sea have significantly impacted global trade.

Additionally, the persistence of inflation, soaring interest rates, and escalating costs are creating a challenging environment for businesses. In such a scenario, it’s vital for business owners to implement strategies that protect their capital base, ensuring they’re well-positioned to re-engage with the market as consumer spending starts to rebound.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

Strategic Steps to Protect Your Business Capital

1. Analyze and Adjust Fixed Costs:
Begin by listing all your fixed costs – the expenses that incur regardless of your income. Scrutinize these costs and identify which ones can be temporarily eliminated or reduced. While some costs might be tied to contracts, exploring options for flexibility is crucial.

2. Negotiate with Stakeholders:
Reach out to suppliers, landlords, and service providers to negotiate possible moratoriums on payments, reduced payment terms, or even contract cancellations. Open communication in these times can lead to mutually beneficial arrangements.

3. Revise Your Business Plan:
After addressing your immediate expenses, it’s time to rework your business plan. This should include strategies for navigating potential cash flow dips and a clear action plan for the upcoming year.

4. Prepare for a Market Rebound:
Anticipate and plan for the resurgence of consumer interest. How will your business adapt to meet the increased demand for your goods or services? This foresight is key to staying ahead in the game.

The CIGMA Accounting Advantage

At CIGMA Accounting, we understand the nuances of your business. Our expertise is not just in number crunching, but in comprehending the journey you’ve embarked on – the late nights, the hurdles you’ve overcome, and your aspirations for growth. Partnering with us means you’re not just getting accounting services; you’re gaining a strategic ally who’s invested in your success.

Why Choose CIGMA Accounting?

  • Personalized Advice: We know that each business is unique. Our tailored advice is designed to suit your specific needs and circumstances.
  • Expert Knowledge: Our team is equipped with the latest knowledge in finance and tax regulations, ensuring you’re always one step ahead.
  • Proactive Support: We don’t just react to problems; we help you anticipate and prepare for them.


Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

127 Farringdon Road

Farringdon

London

EC1R 3DA

business asset disposal relief guide by cigma accounting; london accountant; farringdon accountant

Navigating Business Asset Disposal Relief for UK Entrepreneurs

Navigating Business Asset Disposal Relief for UK Entrepreneurs

For UK entrepreneurs and business owners considering the sale of their business, shares in a trading company, or an interest in a trading partnership, understanding Business Asset Disposal Relief (BADR) is crucial. At CIGMA Accounting, we’re dedicated to guiding you through the intricacies of BADR to ensure you maximize your financial benefits.

What is Business Asset Disposal Relief?

Previously known as Entrepreneurs’ Relief prior to 6 April 2020, BADR offers a significantly reduced Capital Gains Tax (CGT) rate of 10% on qualifying assets, as opposed to the standard rate. This relief is available when exiting a business under specific conditions, providing substantial tax savings.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

Eligibility Criteria for BADR

To qualify for BADR, certain conditions must be met, including:

  1. For Business Owners:

    • You must be a sole trader or a business partner.
    • The business must have been owned by you for at least 2 years up to the sale date.
  2. For Shareholders:

    • You need to be an employee or office holder in the company.
    • The company must primarily be involved in trading activities.
    • For non-EMI shares, you must hold at least 5% of the shares and voting rights.
  3. Special Considerations for EMI Shares:

    • Shares must be acquired post-5 April 2013.
    • The option to buy them should have been granted at least 2 years before their sale.

The Financial Aspect: Calculating Your Tax

When claiming BADR, the calculation of your tax liability involves:

  • Summing up gains on qualifying assets and deducting any losses.
  • Applying the 10% tax rate to the remaining amount after your tax-free allowance.
  • For higher rate Income Tax payers, different rates apply for gains not covered by BADR (28% for residential property and 20% for other assets).
  • Basic rate taxpayers have varied rates based on their total taxable income and the nature of the gains.

Lifetime Limit and Claiming Process

An essential aspect of BADR is its £1 million lifetime limit, which can be higher for assets sold before 11 March 2020. Claims for BADR are made either through self-assessment tax return or by completing Section A of the Business Asset Disposal Relief helpsheet.

Professional Assistance from CIGMA Accounting

Navigating the complexities of BADR can be challenging.
At CIGMA Accounting, we offer expert guidance and support to ensure you meet all the qualifying criteria and maximize your relief. Our team is equipped to handle all aspects of your claim, from initial assessment to filing the necessary paperwork.

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

UK tax diary for october and november 2023, farringdon accountant

Key UK tax dates for October and November 2023

How to claim work from home tax relief in the UK

As we step into the final quarter of the year, it’s vital to stay ahead of the impending UK tax deadlines to ensure a smooth end to the financial year. Below, we have listed the crucial tax dates for October and November 2023 that UK businesses and individuals need to keep in mind.

October 2023

1st October 2023

  • Corporation Tax – Companies with a year-end of 31st December 2022 must ensure their Corporation Tax is settled by this date. Meeting this deadline is critical to avoiding penalties.

19th October 2023

A critical day with multiple deadlines, take note of the following:

  • PAYE and NIC deductions – The deductions due for the month ending 5th October 2023 should be completed. If you are paying electronically, you have until 22nd October to settle these dues.
  • CIS300 Monthly Return – The filing deadline for the CIS300 monthly return for the month ended 5 October 2023.
  • CIS Tax – Ensure to settle the CIS tax deducted for the month ended 5th October 2023.

31st October 2023

  • Self-Assessment Tax Return – This is the last date to file a paper version of your 2022-23 self-assessment tax return. Don’t miss this to avoid potential late filing penalties.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

November 2023

1st November 2023

  • Corporation Tax – Businesses with a year-end date of 31st January 2023 must ensure to pay their Corporation Tax by this date.

19th November 2023

Mark this date for several important submissions:

  • PAYE and NIC deductions – Due for the month ending 5th November 2023. If you are planning to settle this electronically, the due date extends to 22nd November 2023.
  • CIS300 Monthly Return – File the CIS300 monthly return for the month ended 5th November 2023 by this date to remain compliant.
  • CIS Tax – The CIS tax deducted for the month ended 5th November 2023 should be paid by today.

Need Assistance from an Accountant?

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

file your company accounts early to avoid penalties; london accountant; farringdon accountant

Early company account filing can save you from penalties

Early company accounting filing can save you from penalties

Running a business in the UK entails several responsibilities, and foremost among them is ensuring that your company’s accounts are filed on time. Companies House, the executive agency responsible for company registration, has recently emphasised the importance of this duty and emphasised the fines that result from late filing.

Mandatory Requirement for All

Companies House has made it clear: all limited companies must deliver their annual accounts each year, regardless of whether they actively trade or not. This also encompasses dormant companies. Thus, no company is exempt from this requirement.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

Directorial Responsibilities

As a director, your role is multifaceted. It’s not only about growth and profits, but also about ensuring the company remains compliant with set regulations. This includes keeping all company records updated and ensuring timely submissions.

Credit Scores & Financial Reputation

Late or missing account filings could negatively impact your company’s credit score. This might hinder your access to vital financing options, and potentially deter other businesses from collaborating or transacting with you.

Consequences of Late Filing

Apart from the financial repercussions, there are potential legal consequences to be aware of:

  • Filing late by up to 1 month results in a £150 fine.

  • Delays of more than 1 month but less than 3 months result in a £375 fine.

  • If your accounts are late by more than 3 months but less than 6 months, the penalty stands at £750.

  • Delays of over 6 months see the penalty rise to a hefty £1,500.

Furthermore, in addition to these fines, you risk acquiring a criminal record or facing disqualification.

Need Assistance from an Accountant?

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

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.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

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.

Need Assistance?

For personalized advice and further assistance, feel free to get in touch with our expert team at CIGMA Accounting. We’re dedicated to simplifying the complexities of the financial world for you.


Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

127 Farringdon Road

Farringdon

London

EC1R 3DA

survey reveals best and worst banks in great britain; london accountant

The Best and Worst Banks in Great Britain Revealed

BEST AND WORST BANKS IN GREAT BRITAIN

If you’re in the market for a new bank, whether for your personal or business needs, you’ll want to take a close look at the latest rankings. Recently, a comprehensive survey in Great Britain asked current account holders to rate their providers on various metrics, such as online and mobile services, branch and overdraft facilities, and the quality of relationship management for businesses. Read on to find out the top-rated and bottom-rated banks to help you make an informed decision.

Top-Ranked Personal Current Account Providers

1. Monzo

Monzo tops the list for personal current accounts. Known for its excellent mobile banking experience, Monzo offers convenient services and a user-friendly interface.

2. Starling Bank

Following closely behind is Starling Bank. Similar to Monzo, it offers a fantastic online and mobile banking service. Its financial products are designed to be straightforward and easy to use.

3. First Direct

A pioneer in telephone banking, First Direct has successfully transferred its emphasis on customer service to the digital world, earning itself the third spot on the list.

Require accounting services?

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Bottom-Ranked Personal Current Account Providers

Virgin Money, Royal Bank of Scotland

Tied for the last spot are Virgin Money and the Royal Bank of Scotland. While both banks have a long-standing presence in the UK, they seem to fall short in satisfying the modern consumer’s banking needs.

TSB

TSB comes in just above the last two, facing challenges in areas like online and mobile services, as well as customer satisfaction in general.

Top-Ranked Business Current Account Providers

Monzo, Starling Bank

Monzo and Starling Bank claim the top spots for business accounts as well, indicating a strong performance across both personal and business banking services.

Handelsbanken

Handelsbanken stands out for offering excellent relationship management, which is a crucial aspect for small businesses.

Bottom-Ranked Business Current Account Providers

HSBC UK

HSBC UK finds itself at the bottom of the list, signaling the need for improvement in multiple areas, particularly in relationship management for small businesses.

The Co-operative Bank, Virgin Money

Also struggling in the business banking sector are The Co-operative Bank and Virgin Money, who will need to up their game to compete with the leaders in the field.

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VAT recovery when leasing business vehicles; farringdon accountant; london accountant

How to Navigate VAT Recovery When Leasing Business Vehicles

How to claim work from home tax relief in the UK

The world of VAT (Value-Added Tax) can seem complicated, especially when it involves leasing vehicles for your business. While leasing often provides flexibility and financial benefits, the intricacies of VAT recovery on these leases can be confusing. This guide aims to simplify VAT treatment related to motor expenses, helping your business make the most out of tax recovery options.

What You Need to Know About VAT and Leasing Vehicles

Leasing Company’s Perspective:

If you run a leasing company, good news! You can generally recover the VAT incurred on the purchase of cars, provided they are leased at a commercial rate. This can offer you considerable savings and lower your operating costs.

Business Leasing a Car:

If your business is leasing a car for official purposes, the rules are a bit different. The tax authority, HMRC, allows the recovery of 50% of the VAT charged on what it considers a ‘qualifying car.’ This 50% that you can’t reclaim is designed to cover any private use of the car. It means that your business can recover the other 50% subject to the normal rules of input VAT recovery.

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Special Cases: Taxis and Driving Schools

For businesses that lease cars primarily for use as taxis or for providing driving instruction, there is a beneficial exception. You can reclaim all of the VAT charged on the lease if the vehicle is a qualifying car and is intended primarily for either:

  1. Hire with a driver for carrying passengers, or
  2. Providing driving instruction

This exception allows you to maximize VAT recovery and keep your business running efficiently.

Self-Drive Hire and Daily Rental

Do note that the 50% restriction on VAT recovery isn’t limited to just leasing scenarios; it also applies to self-drive hires or daily rentals. If you are hiring a car simply to replace an ordinary company car that’s temporarily off the road, the 50% VAT recovery block will still apply.

Key Takeaways

  1. Leasing Companies:
    Can usually recover all the VAT incurred if the cars are leased at commercial rates.
  2. Businesses Leasing Cars:
    Can generally recover 50% of the VAT on a qualifying car, the remaining 50% is blocked to account for private use.
  3. Special Business Uses:
    Taxis and driving schools may reclaim 100% of the VAT.
  4. Self-Drive or Daily Rentals:
    Subject to the 50% VAT recovery block, similar to leased cars.

Understanding the intricacies of VAT recovery on leased vehicles can go a long way in optimizing your business expenses. If you need specialized advice tailored to your business needs, feel free to reach out to our team of expert accountants who can guide you through the VAT maze.

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national insurance contributions for self-employed; wimbledon accountant

Class 2 and Class 4 NICs: Quick Reference for Self-Employed Individuals in the UK

How to claim work from home tax relief in the UK

When you’re self-employed in the UK, understanding your National Insurance contributions (NICs) is critical for both compliance and for securing your future benefits such as the State Pension. For the 2023-24 tax year, the HMRC highlights two primary classes of NICs that self-employed individuals need to be familiar with: Class 2 NICs and Class 4 NICs. Here’s a quick reference of what these contributions mean for you.

What are Class 2 NICs?

Class 2 National Insurance Contributions are payable by almost all self-employed individuals. However, if you earn under the Small Profits Threshold (SPT), which is currently set at £6,725 for the 2023-24 tax year, you are exempt from these payments.

Key Features:

  • Rate: The flat weekly rate for Class 2 NICs is £3.45.
  • Benefits: Payments count towards the basic State Pension, employment and support allowance, maternity allowance, and bereavement benefits.

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What are Class 4 NICs?

If you’re self-employed and your annual profits exceed £12,570, you’re also required to pay Class 4 NICs in addition to Class 2 NICs.

Key Features:

  • Rates: Class 4 NIC rates for 2023-24 are 9% on chargeable profits between £12,570 and £50,270. An additional 2% is payable on any profits over £50,270.

are you exempt?

There are a few professions where Class 2 NICs are not applicable. These include:

  • Examiners, moderators, invigilators, and people who set exam questions.
  • People who run businesses involving land or property.
  • Ministers of religion who do not receive a salary or stipend.
  • Individuals making investments for themselves or others, but not as a business and without a fee or commission.

If you belong to any of these categories, it may be beneficial for you to get a State Pension forecast and consider making voluntary Class 2 NICs to make up for missing years.

Next steps

  1. Calculate Your Earnings:
    Verify if you cross the Small Profits Threshold or the £12,570 limit for Class 4 NICs.
  2. Check Exemptions:
    Ensure that you don’t fall under any of the categories that are exempt from Class 2 NICs.
  3. State Pension Forecast:
    It’s wise to check your State Pension forecast to understand how your NICs impact your future benefits.
  4. Consult an Expert:
    Given the intricacies, it might be beneficial to consult with a tax advisor or accounting professional to help you navigate the NIC landscape.

Understanding your National Insurance contributions is vital for financial planning and fulfilling your tax obligations. If you have more questions about how these classes apply to your situation, feel free to get in touch with us.


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VAT for no consideration; london accountant; farringdon accountant

VAT Supplies for No Consideration: What You Need to Know

VAT Supplies for No Consideration: What You Need to Know

Value Added Tax, commonly known as VAT, is a part of everyday business transactions. However, not all supplies are straightforward, and the landscape gets complicated when dealing with VAT supplies for no consideration. This concept seems counter-intuitive because, in most cases, ‘supply’ generally involves a transaction for some kind of ‘consideration,’ whether in the form of money or in-kind.

But did you know that UK VAT law includes provisions for transactions made without consideration? These are considered supplies for VAT purposes. In this article, we’ll delve into these less talked about, yet critical areas of VAT compliance, guided by the information from HM Revenue and Customs (HMRC).

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What is Consideration?

Although the VAT Act 1994 doesn’t provide a legal definition for ‘consideration,’ HMRC refers to a definition from the EC 2nd VAT Directive Annex A13. It defines “consideration” as everything received in return for the supply of goods or services, including incidental expenses like packing, transport, and insurance. However, it should be noted that this directive is no longer in force after Brexit, but the conceptual framework remains.

Supplies for No Consideration: The Exceptions

1. Permanent Transfer/Disposal of Business Assets

If a business permanently transfers or disposes of its assets, the transaction is treated as a supply for VAT purposes. For example, if you give away a business laptop to an employee, this counts as a supply and is VAT applicable.

2. Temporary Application of Business Assets to Non-Business Use

When a business uses its assets for non-business activities temporarily, it constitutes a supply for VAT purposes. Suppose your business owns a vehicle primarily used for business tasks but occasionally gets used for private purposes. In that case, that non-business usage is subject to VAT.

3. Self-Supply of Goods or Services

When a business uses its own resources to generate goods or services, this ‘self-supply’ is considered a supply for VAT purposes. For instance, a construction company building its own office must account for VAT on the self-supplied labor and materials.

4. Retention of Business Assets After VAT Deregistration

If a business retains its assets after deregistering for VAT, this also constitutes a supply for VAT purposes. VAT will be calculated based on the market value of the assets at the time of deregistration.

5. Non-Business Use of Services with Recovered Input Tax

If services are put to private or other non-business use where input tax had previously been recovered, it is deemed a supply for VAT purposes.

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Connected persons for tax purposes

Breaking Down Connected Persons for UK Capital Gains Tax

When it comes to Capital Gains Tax (CGT) in the UK, understanding the concept of “connected persons” is essential. However, navigating the statutory definition set out in Section 286 of the Taxation of Chargeable Gains Act (TCGA) 1992 can be complex.

In this article, we’ll provide a clear and comprehensive guide to connected persons for CGT purposes, including insights from HMRC’s internal guidance. If you’re a taxpayer or an investor, it’s crucial to grasp this concept to ensure compliance with the tax regulations and make informed financial decisions.

What are Connected Persons for Capital Gains Tax?

According to Section 286 of the TCGA 1992, a person is considered connected with an individual for CGT purposes if they fall under any of the following categories:

  1. Spouse or Civil Partner: Any person who is legally married to the individual or in a registered civil partnership with them is automatically considered connected.

  2. Relatives: Connection also extends to relatives, including brothers, sisters, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.) and their respective spouses or civil partners.

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Notable Exceptions for connected persons

It’s important to note that the term “relative” does not encompass all family relationships. Specifically, nephews, nieces, uncles, and aunts are not considered connected persons for CGT purposes.

Furthermore, there are certain scenarios where individuals are excluded from being connected persons, as outlined in HMRC’s internal guidance:

  1. Widows/Widowers and Surviving Civil Partners: Unless a connection can be established by means not involving the deceased spouse or civil partner, widows, widowers, and surviving civil partners of deceased persons are not considered connected for CGT.

  2. Dissolution of Civil Partnership or Divorce: Following the dissolution of a civil partnership or a divorce, individuals in addition to the former civil partner or spouse may cease to be connected for CGT purposes.

Need Assistance from an Accountant?

Being aware of who is considered a connected person can impact various transactions, such as property transfers, gifts, or sales, and may result in different tax treatment. To ensure compliance with the tax regulations and make informed financial decisions, seeking guidance from a reputable UK accounting firm with expertise in CGT matters is highly recommended.

If you require professional assistance with understanding connected persons or any other tax-related queries, our team of experienced accountants at CIGMA Accounting is here to help. Contact us today for expert advice tailored to your specific needs.


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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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The Construction Industry Scheme

Navigating the UK Construction Industry Scheme (CIS)

The Construction Industry Scheme (CIS) is a set of tax and National Insurance rules specifically crafted for individuals and businesses operating in the UK construction industry. Whether you’re a ‘contractor’ or a ‘subcontractor’, understanding CIS can ensure you manage your tax obligations effectively.

What is the Construction Industry Scheme (CIS)?

The CIS is a tax initiative by the UK government that mandates contractors to deduct a portion of payments made to subcontractors and transfer this amount directly to Her Majesty’s Revenue and Customs (HMRC). These deductions are essentially advance payments towards the subcontractor’s tax and National Insurance liabilities.

Who Does the Construction Industry Scheme Apply to?

The CIS applies to contractors who pay subcontractors for construction work or businesses that have spent more than £3 million on construction in the 12 months since their first payment. While subcontractors are not obligated to register for the CIS, they will see a 30% deduction from their payments if they remain unregistered. However, if a subcontractor registers under the CIS, this deduction is reduced to 20%. Alternatively, subcontractors can apply for gross payment status.

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What are the Reporting Obligations under C.I.S.?

Under the CIS, contractors are required to submit monthly returns online, which detail payments made to subcontractors for each tax month (from the 6th of one month to the 5th of the next). The deadline for submission is 14 days after the end of the tax month. If a contractor doesn’t make any payments to subcontractors in a particular month, they must submit a ‘CIS nil return’ or notify HMRC that no return is due.

Changes in VAT Rules under the c.i.s.

As of 1 March 2021, the VAT rules for building contractors and subcontractors have changed. For certain specified supplies, subcontractors no longer add VAT to their services for most building customers. Instead, contractors are required to pay the output VAT on behalf of their registered subcontractor suppliers – a mechanism known as the Domestic Reverse Charge. Contractors can then reclaim the output tax paid as input VAT, as per the standard rules.

Need Assistance from an Accountant?

Navigating the intricacies of the CIS can be daunting, but it’s an essential aspect of tax compliance for contractors and subcontractors in the UK construction industry. Partner with a trusted UK accounting firm to ensure you meet your CIS obligations, allowing you to focus on what you do best – building and creating.

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Tax on property you inherit

Tax implications when inheriting property

Inheriting property can be an emotionally charged and complex process. Not only do you have to deal with the emotional turmoil that comes with losing a loved one, but you also need to navigate the complicated world of tax laws associated with your inheritance. In this comprehensive guide, we will shed light on the UK Inheritance Tax (IHT), Stamp Duty, Income Tax, and Capital Gains Tax related to inherited property, and we will discuss your responsibilities in these matters.

Understanding Inheritance Tax (IHT)

The first tax-related aspect you need to consider when you inherit property is the Inheritance Tax. According to HM Revenue and Customs (HMRC), the estate of the deceased individual is usually liable to pay any IHT due. This means that as a beneficiary, you’re not generally expected to pay tax on the inheritance you receive. The IHT is deducted from the estate before the distribution of any cash or assets to the beneficiaries.

IHT is currently payable at a rate of 40% on death and 20% on lifetime gifts. However, there’s a potential reduction on some assets if the deceased leaves 10% or more of the ‘net value’ of their estate to a charity. It’s a testament to the UK’s commitment to charitable giving and can be a worthwhile consideration when estate planning.

Stamp Duty, Income Tax, and Capital Gains Tax

You’ll be relieved to know that when you inherit a property, you are generally not liable for Stamp Duty. Likewise, Income Tax or Capital Gains Tax are not immediately applicable upon receiving your inheritance.

That said, there are situations where you may need to pay Income Tax or Capital Gains Tax. For instance, you would need to pay Capital Gains Tax on any profit earned from an increase in property value if you decide to sell the property after the date of inheritance. Additionally, you would also be liable to Income Tax on any rental income generated from the inherited property.

If you inherit a property and this means you now own two properties, it’s crucial to inform HMRC which property is your primary residence within two years. This information is significant as it influences the tax implications if and when you decide to sell one of the properties.

Navigating Through The Inheritance Process

HMRC would usually make contact if there were any IHT due from you. However, if the property is held in a trust, special rules apply.

Inherited property can indeed raise many questions concerning tax liabilities. This complexity underscores the importance of getting expert advice to ensure you navigate the process appropriately, understand your tax obligations, and avoid any unwelcome surprises.

At CIGMA Accounting, we are dedicated to helping our clients understand and manage the potential tax implications that come with inheriting property. Our team of experienced tax advisors is here to guide you every step of the way.

Contact us today to learn more about our services and how we can support you in understanding and navigating the tax implications of inherited property. Our mission is to make your tax matters as straightforward as possible, providing you with peace of mind in what may be a challenging time.


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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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National Insurance credits

QUICK READS: NATIONAL INSURANCE CREDITS

At CIGMA Accounting, we understand the complexity of the UK’s National Insurance system and the value of optimising your benefits. This article explains National Insurance credits, a crucial element that can help build your National Insurance record and ultimately increase the entitlements you receive, including the State Pension.

National Insurance credits provide an invaluable lifeline for those not currently working, and thus, not contributing to their National Insurance. These credits can fill gaps in your National Insurance record, and we see it especially relevant to those who are job-seeking, on sick leave, maternity, paternity or adoption leave, caring for someone, or serving on a jury.

You can click here to read our full guide to UK National Insurance.

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Our firm often receives inquiries on how to apply for National Insurance credits. The process varies depending on the specific circumstances; sometimes they are applied automatically, while in other cases, an application is necessary. To better understand your situation, we recommend seeking professional advice.

Two primary types of National Insurance credits exist – Class 1 and Class 3. Class 3 credits contribute towards your State Pension and some bereavement benefits. Class 1 credits not only cater to the same benefits as Class 3 but also offer additional ones like Jobseeker’s Allowance.

However, it’s important to note that National Insurance credits usually don’t apply to self-employed individuals who pay Class 2 National Insurance or older married women who opted to pay a reduced rate of National Insurance before April 1977.

Need Assistance from an Accountant?

At CIGMA Accounting, we make it our mission to guide you through these complexities, helping you make informed decisions about your financial future. If you have more questions about National Insurance credits or other financial matters, reach out to us and our sales team will be in touch for a free consultation!


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Selling overseas property

UK CAPITAL GAINS TAX WHEN SELLING OVERSEAS PROPERTY

Are you a UK resident contemplating selling an overseas property? You need to understand the implications of Capital Gains Tax (CGT) on your transaction. This piece will guide you through what you need to know about CGT, your potential liabilities, and any possible exemptions or reliefs.

In the 2023-24 tax year, UK residents are liable for Capital Gains Tax when selling overseas property at a profit. A change in the annual exempt amount means you can exclude the first £6,000 of gains from CGT, down from £12,300 in the previous year.

You can click here to read our full guide to Capital Gains Tax in the UK.

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Capital gains rates and double taxation

When it comes to the rates of CGT, it’s usually a flat 20% on most gains for individuals. However, basic rate taxpayers with modest capital gains might qualify for a 10% rate. But beware, if your combined taxable income and gains cross the higher rate threshold, anything above this level is taxed at 20%.

When dealing with the disposal of residential property that’s not your primary residence, higher rates apply. Basic rate taxpayers face an 18% CGT, while higher-rate taxpayers have a 28% duty.

One critical point to remember is that you might also owe tax in the country where the property is located. But don’t worry – relief from double taxation could be available, thanks to various tax agreements between the UK and other countries. Dual residents can also seek additional guidance to understand their tax obligations better.

Do remember, there are special regulations if you’re a UK resident, but your permanent home (domicile) is overseas. To avoid any unexpected tax surprises, it’s always best to consult with tax professionals.

If you’re navigating the complexities of selling overseas property and Capital Gains Tax, our accounting experts are here to help. Contact us today for personalised advice and guidance tailored to your situation.


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how to claim double taxation relief in the UK; london accountant

Double Taxation: How to Claim Relief for Foreign Income

Double Taxation: How to Claim Relief for Foreign Income

If you earn income from a foreign source, you may find yourself in a situation where you’re taxed twice — both by the country where your income originates and by the UK. However, the good news is that you can often claim tax relief to recover some or all of the additional tax you’ve paid. In this blog post, we’ll explore the process of claiming relief for foreign income in an easy-to-understand manner.

This post explores double taxation for UK residents. There is a separate process for UK non-residents who are being taxed on their UK income by the foreign country in which they reside.

 

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Claiming Relief Before Being Taxed on Foreign Income

In some cases, you may need to apply for tax relief in the country where your income is generated before it is taxed. This is typically applicable when:

  1. Your income is exempt from foreign tax but is taxed in the UK (e.g., most pensions).
  2. It is required by the double-taxation agreement between the two countries.

To initiate the process, you should contact the foreign tax authority and request the appropriate form. If there is no form available, you can apply by letter. Before applying, you must prove your eligibility for tax relief. You can do this by either completing the form and sending it to HM Revenue and Customs (HMRC), who will verify your residency status and return the form to you, or by including a UK certificate of residence if you are applying by letter. Once you have obtained proof of eligibility, you should send the form or letter to the foreign tax authority.

Claiming Relief After Paying Tax on Foreign Income

If you have already paid tax on your foreign income, you can generally claim Foreign Tax Credit Relief when reporting your overseas income in your tax return. The amount of relief you receive depends on the UK’s double-taxation agreement with the country where your income originates.

Even if there is no specific agreement in place, you will usually still be eligible for relief unless the foreign tax does not correspond to UK Income Tax or Capital Gains Tax. If you’re unsure about whether you qualify for relief or need assistance with double-taxation relief, don’t hesitate to reach out to us at CIGMA Accounting for assistance.

Determining the Amount of double taxation Relief

It’s important to note that the full amount of foreign tax paid may not be refunded to you. The relief you receive will be reduced if:

  1. The double-taxation agreement specifies a lower relief amount.
  2. The income would have been taxed at a lower rate in the UK.

HMRC provides guidance on how Foreign Tax Credit Relief is calculated, including special rules for interest and dividends, which can be found in their ‘Foreign notes’ section. However, it’s essential to remember that you cannot claim this relief if the UK’s double-taxation agreement requires you to claim tax back from the country where your income originates.

Capital Gains Tax

When it comes to Capital Gains Tax, typically, you’ll pay tax in the country where you are a resident and be exempt from tax in the country where the capital gain occurs. Usually, you won’t need to make a claim for relief.

However, there is an exception for UK residential property. Regardless of your residency status, you are required to pay Capital Gains Tax on any gains made from UK residential property.

When to Claim Capital Gains Relief

The rules for claiming relief vary depending on the nature of the asset generating the gain. If the asset cannot be taken out of the country, such as land or a house, or if it is used for business purposes in that country, you’ll need to pay tax in both countries and seek relief from the UK.

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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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