CHARTERED ACCOUNTANTS (ICAEW)

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The benefits or otherwise of voluntary VAT registration

Many businesses strive to keep their turnover under the VAT registration limit (currently £90,000) because not only are they wary of the additional administrative costs but also because they believe that adding VAT to the invoice will make their business uncompetitive. However, even if a business has not reached the limit, voluntary VAT registration can offer significant benefits, not least including creating a more professional image and enhancing credibility, signalling to customers and poten...

Calculating a director's National Insurance contributions

For most employees, National Insurance contributions (NIC) earnings periods are calculated based on their regular pay intervals. In contrast, all directors have an annual earnings period, regardless of their actual pay intervals, where contributions for the year are calculated by reference to the annual NIC thresholds.There are two methods of calculation – the annual earnings period basis and the alternative basis. While both methods result in the same total NIC amount owed by both the directo...

Is it worth making a formal complaint about HMRC? The role of the Adjudicator’s Office

For many of HMRC's 'customers' who have spent more than 30 minutes trying to get through on the phone, the thought of making a formal complaint to someone about the service may seem attractive, especially if some recompense may be forthcoming. There is someone to contact but unfortunately their remit is restricted to specific cases.HMRC operates a two-tier complaints system. The first tier involves the taxpayer lodging a complaint with HMRC's own internal process. After a decision has been made,...

Five tax-free health and welfare benefits

Employers are able to provide employees with a range of health and welfare benefits without giving rise to a tax charge under the benefits in kind legislation.1. Health screening and medical check-upsEmployees can benefit from one health screening assessment or medical check-up each tax year free of tax. A health screening assessment is an assessment to identify employees who may be at particular risk of ill health, while a medical check-up is a physical examination of the employee by a health p...

Should you pay voluntary Class 2 National Insurance?

Self-employed earners whose earnings exceed the lower profits limit (set at £12,570 for 2025/26) must pay Class 4 National Insurance contributions on their profits. These are payable at the rate of 6% on profits between the lower limit and the upper limit, set at £50,270 for 2025/26, and at a rate of 2% on profits in excess of the upper profits limit. It is the payment of Class 4 National Insurance contributions which provides a self-employed earner with a qualifying year for state pension pur...

Taxation of savings income in 2025/26

There are various ways to enjoy savings income without paying tax on it. In addition to the personal allowance, basic and higher rate taxpayers benefit from a personal savings allowance. Taxpayers whose taxable non-savings income is not more than £5,000 can also enjoy a zero rate on savings income in the savings rate band. In addition, savings income held in tax-free accounts such as ISAs can also be enjoyed free of tax.Personal allowanceIf the personal allowance has not been fully used elsewhe...

Relief for additional expenses of working from home

In a post on X, HMRC recently warned taxpayers ‘not to get caught out by ads promising quick refunds for working from home’, urging taxpayers to check that they were eligible before making a claim.So what relief is available to employees who sometimes or always work from home?The ruleA deduction can be claimed for employment expenses to the extent that they are incurred wholly, exclusively and necessarily in the performance of the duties of the employment. In relation to expenses incurred wh...

Employ a worker on a small salary to access the Employment Allowance

Employer’s National Insurance rose considerably from 6 April 2025. Not only did the rate increase from 13.8% to 15%, but the secondary threshold also fell from £9,100 to £5,000. This is the amount that an employer can pay before a liability to secondary Class 1 National Insurance contributions arises. For 2025/26, the secondary threshold is equivalent to only £96 per week and £417 per month.For employers who are able to benefit from the Employment Allowance, there is an element of relief a...

UK and overseas property businesses

Profits arising from land or property are treated as arising from a property business. For tax purposes, profits from land and property in the UK are kept separate from those arising from land and property overseas. Thus, a person who has, for example, rental property both in the UK and abroad will have two property businesses – a UK property business and an overseas property business.UK property businessA person’s UK property business consists of every business which that person carries on ...

Jointly owned holiday lets – Should you make a Form 17 election?

The favourable tax regime for furnished holiday lettings (FHLs) came to an end on 5 April 2025. For 2025/26 and later tax years, furnished holiday lets are treated in the same way as other residential lets for tax purposes.The end of the FHL regime has implications for jointly held properties.Where a property is jointly owned by spouses or civil partners, the general rule is that the income is treated as arising to each partner equally for tax purposes, regardless of their individual shares in t...

Enjoy £1,000 of property income tax-free

The property allowance enables individuals to enjoy property income of up to £1,000 each tax year free of tax and without the need to report it to HMRC. This provides opportunities for individuals to earn some tax-free income by letting out their drive where there is an event nearby or letting out their house while on holiday. However, the allowance cannot be used to shelter rent received from a personal or family company for the use of an office in the director’s house.If total rental income...

Post-cessation expenses – When and how are they allowable?

Sometimes a business may have ceased trading but then receives income that has not been included in the final cessation accounts, e.g. an insurance payment may be received or a debt that the business owner thought would never be paid is paid. Such receipts would have arisen due to the previous carrying on of the trade. Any such income is charged to tax separately from the profit of the trade (i.e. the previous cessation period is not reopened) but the receipt is still taxed as trading income.Sim...

HMRC's increased powers for spotting 'invisible income'

HMRC can enquire into any tax return and request information to establish whether that return is correct. No reasons need be given for the enquiry and will invariably not be disclosed. Regardless of the reasons for failing to declare income, HMRC has extensive means to uncover undeclared and under-reported income.'Connect'At the core of HMRC's investigation efforts is a powerful computer program called 'Connect'. This software analyses large quantities of data to identify fluctuations, patterns ...

Partnerships – The tax implications of the death of a partner

Partnerships are the only business entities that can be formed by oral agreement, created automatically when two or more persons engage in a business ‘with a view’ (to making) ’a profit’. ‘Persons’ include artificial persons as well as individuals and as such a partnership could comprise an individual, a company and even a trust.Unless the partners agree terms (written or otherwise), the Partnership Act 1890 applies to all unlimited partnerships. Under the Act, profits and losses are...

Holiday lets – Business rates or council tax?

Landlords letting holiday accommodation may be able to pay business rates rather than council tax on their property. This will generally be cheaper, and if they qualify for small business rate relief, depending on the value of the property, they may not have anything to pay.Properties in EnglandA property will be treated as a self-catering property for business rates purposes if, in the previous 12 months, it was available to let commercially for short periods for at least 140 nights and was act...

SDLT and linked transactions

Special rules apply for stamp duty land tax (SDLT) purposes where there is more than one sale and purchase between the same buyer and seller. It is important that property investors are aware of this as it may lead to a much higher SDLT bill than they were expecting. The rules outlined below apply for SDLT purposes on transactions in England and Northern Ireland.Nature of linked transactionsTwo or more property transactions that involve the same buyer and seller are treated as ‘linked’ for S...

Incorporating your property business

Running a property business through a limited company has become increasingly popular, not least because the rate of corporation tax paid on profits will generally be lower than the rate of income tax paid by an unincorporated landlord and interest and finance costs are deductible in full. With the end of the favourable tax regime for furnished holiday lettings, landlords with holiday lets may be considering incorporating their business. What are the pros and cons?AdvantagesOne of the main advan...

Extension to MTD for ITSA

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is introduced progressively from 6 April 2026. It will require unincorporated traders and landlords whose income is over the trigger threshold to keep digital records and make quarterly returns and a final declaration to HMRC using MTD-compatible software.The start dates for traders and landlords with trading and/or property income in excess of £30,000 have been known for some time (albeit they are now later than originally announ...

10 benefits of filing your 2024/25 tax return early

As the 2024/25 tax year has now come to an end, individuals who need to file a Self Assessment tax return for that year can now do so. Although the return does not have to be filed online until 31 January 2026, there are benefits of filing early.1. Get it out of the wayThere is something very satisfying about ticking an item off a ‘to do’ list. Filing your 2024/25 tax return sooner rather than later will get it out of the way and mean that is no longer hanging over you. This will give you pe...

Reporting 2024/25 benefits and expenses

Employers who provided taxable benefits and expenses to employees in the 2024/25 tax year need to meet compliance obligations in respect of those benefits. The obligations will vary depending on whether the benefits and expenses have been payrolled or not or included in a PAYE Settlement Agreement (PSA).Payrolled benefitsWhere an employer payrolled benefits in 2024/25, those benefits were taxed through the payroll and reported to HMRC under Real Time Information (RTI) on the Full Payment Submiss...

New thresholds for off-payroll working

The off-payroll working rules apply where a worker provides their services to a medium or large private sector company or to a public sector body through an intermediary, such as a personal service company. To comply with the rules, the end client must undertake a status assessment. If this reveals that the worker would be an employee if they provided their services direct to the end client, rather than through the intermediary, the end client (or the fee payer if different) must deduct tax and ...

Claiming mileage relief

Employees may pay for the fuel that they use for business journeys undertaken in their own car or in a company car. Often, an employer will reimburse this cost by paying a mileage allowance. However, where employees meet the costs themselves, they are able to claim tax relief. The relief available depends on whether the employee is using their own car or a company car. Employees are also able to claim relief if their employer pays a mileage allowance which is less than the tax-free rates set by ...

Investing in woodlands – Tax implications of an unusual type of investment

Drive along a country road and you may come across signs advertising 'Woodlands for sale'. Such signs invite investment in commercial woodlands which can come with valuable tax breaks.Tax on profitsProfits from selling the timber, whether felled or standing, are exempt from income and corporation tax but only if the woodland is managed on a 'commercial basis' with a view to making profits. The downside of non-taxable profits is that there is no tax relief for losses or costs incurred in managing...

MTD – A time to incorporate?

After years of deferral, the long-anticipated Making Tax Digital (MTD) for Income Tax start date has finally been confirmed. This is a significant development that will impact millions of business owners and landlords, necessitating a change in the way their earnings are reported to HMRC. In the Autumn Budget 2024 the government confirmed that by the end of this parliament all self-employed individuals and landlords with incomes over £20,000 will come within the MTD regime. In comparison, no ti...

Business entertainment – usually not allowable – but when can you claim

HMRC’s rules state that expenditure on business entertainment or gifts cannot be claimed as a deduction against profits (and therefore also non-VAT deductible), even if a genuine expense of the trade or business. However, that is not entirely true – there are a few exceptions.What is 'entertaining'?The rules are designed to prevent tax relief from being used as a means to subsidise personal or social costs, but interestingly there is no legal definition of what constitutes 'entertaining'. Th...