CHARTERED ACCOUNTANTS (ICAEW)

Back to Blog

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...

Relief for FHL losses post April 2025

From 6 April 2025 onwards, furnished holiday lettings are treated for tax purposes in the same way as other residential lets, and residential lets and furnished holiday lets owned by the same person (or same persons) form part of the same property rental business.Prior to 6 April 2025, furnished holiday lettings had their own regime. Under these rules, losses from furnished holiday lettings could only be carried forward and set against future profits from furnished holiday lets – they could no...

ATED returns for 2025/26

The annual tax on enveloped dwellings (ATED) is a tax that is payable mostly by non-natural persons (mostly companies) owning UK residential property valued at more than £500,000. Unless one of the exemptions applies, the company will need to file an ATED return and pay the associated tax.The returnWhere a property within the charge is held on 1 April 2025, the ATED return for the period from 1 April 2025 to 31 March 2026 must be filed by 30 April 2025. The return will normally be filed online ...

Looking ahead to MTD for landlords

The way that many landlords will report details of their income and expenses to HMRC is changing from April 2026 onwards. This is when Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) comes into effect. Landlords who fall within the scope of MTD for ITSA will need to keep digital records, use MTD-compatible software and send quarterly updates to HMRC. This will impose new compliance obligations on them and change the way in which they interact with HMRC.Start date 1: 6 April 2026...

Reporting 2024/25 taxable expenses and benefits

If as an employer you provided employees with taxable expenses and benefits in the 2024/25 tax year, you will need to ensure that you meet your reporting obligations in respect of those benefits. This will include providing information to HMRC and to your employees. The exact nature of your reporting obligations will depend on whether or not you payrolled those benefits.Payrolled benefitsWhere benefits are taxed through the payroll (payrolling), much of the reporting to HMRC is done on an ongoin...

Taxation of company cars in 2025/26 and beyond

Employees with a company car available for their private use pay tax on the benefit. The amount that is charged to tax is a percentage of the list price of the car and any optional accessories, as adjusted to reflect any capital contributions made by the employee up to £5,000. The percentage, which is known as the ‘appropriate percentage’, depends on the level of the car’s CO2 emissions. A supplement applies to diesel cars that fail to meet emissions standards. The charge is adjusted to r...

Official rate of interest

The official rate of interest is a rate set by HMRC which is used to calculate the benefit in kind tax charge on cheap employment-related loans, and also the amount charged to tax in respect of the provision of employer-provided living accommodation where the cost of that accommodation is more than £75,000.Employment-related loansThe amount charged to tax in respect of the benefit of a taxable cheap employment-related loan is found by comparing the amount of interest paid by the employee (if an...

Pension savings in 2025/26

Putting money into a registered pension scheme can be tax efficient. Individuals can make contributions in their own right, or even for someone else, and employers can make contributions on their employees’ behalf (and indeed must do so under auto-enrolment). Tax relief is available on contributions up to certain limits.Auto-enrolmentUnder auto-enrolment, employers must enrol eligible employees into a registered pension scheme and make contributions on their behalf. An eligible employee is one...

National Insurance changes from April 2025

Last October Chancellor Rachel Reeves announced some far-reaching National Insurance changes which will affect employers from April 2025. She also confirmed the rates applying to employees and to the self-employed.EmployersThe 2025/26 tax year starts on 6 April 2025. From that date, the secondary threshold (which is the point at which employers start paying secondary contributions on employees’ earnings unless one of the higher secondary thresholds applies) falls to £96 per week (£417 per mo...

End your FHL business by 5 April to benefit from existing reliefs

The favourable tax regime that applies to landlords letting furnished holiday accommodation comes to an end on 5 April 2025. For 2025/26 and later tax years, furnished holiday lets will be treated in the same way as other residential lettings. While this will absolve the landlord from the need to hit letting and availability targets (other than the less onerous ones needed for business rates purposes), the ability to benefit from valuable capital gains tax reliefs will also be lost. However, the...

What counts as agricultural property for APR?

Farmers have been hitting the headlines of late following the October 2024 Budget announcement that the rate of agricultural property relief and business property relief will be cut from April 2026 so that the 100% rate will only apply to the first £1 million of combined business and agricultural property from that date. In excess of this, the relief will be given at a rate of 50% – equivalent to an inheritance tax (IHT) charge of 20%. Farmers will continue to benefit from the nil rate band a...

Relief for interest on mixed residential and commercial properties

The way in which unincorporated landlords obtain relief for interest depends on the nature of the property that they let. Where the property is a commercial property, the interest and finance costs can be deducted in full in calculating the taxable profits. However, for residential properties (with the exception of furnished holiday lets for 2024/25 and earlier tax years), relief for interest is now given in the form of a tax reduction, rather than as a deduction in calculating taxable profits. ...