CHARTERED ACCOUNTANTS (ICAEW)

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Take advantage of the property rental toolkit

HMRC publish a property rental toolkit which can be used to avoid making common errors when reporting income from property on the Self Assesment tax return. It can be found on the Gov.uk website.The toolkit was published in 2022 but has recently been updated to take account of the end of the favourable tax regime for furnished holiday lettings, which came to an end on 5 April 2025. However, it should be remembered when reporting income from furnished holiday lettings in the Self Assessment tax r...

Tax implications of failing to pay rent on a property held in a SIPP

Using a Self Invested Personal Pension (SIPP) to hold commercial property which can be rented to your personal or family company can be beneficial. Instead of paying rent to a third party, it is paid into your pension scheme. The company is able to deduct the rent paid when calculating its taxable profits, but the SIPP does not pay tax on the rent, which builds up in the pension scheme, nor does it pay capital gains tax when the property is sold.However, there are some downsides to be aware of, ...

Relief for post-letting expenses

All good things come to an end, and a property rental business is no exception. However, expenses may be incurred in relation to that property rental business after it has ceased. Where this is the case, it may be possible to obtain tax relief for those expenses.End of the property rental businessA property business may comprise more than one let property (including holiday lets). The business will only come to an end when all the properties have been disposed of or are being used for other purp...

Calculating adjusted net income and why it matters

Adjusted net income is a key measure of income for tax purposes. It is total taxable income before taking account of any personal allowances and after deducting trading losses, pension contributions and certain tax reliefs, such as Gift Aid.The calculationStep 1Calculate your net income for the year.To do this you first need to work out your taxable income. This will include:· income from employment;· profits from self-employment;· taxable state benefits;· most pensions, including the state ...

Dealing with a Simple Assessment letter

Simple Assessment is used by HMRC to collect tax underpayments from taxpayers with straightforward tax affairs. It removes the need for the taxpayer to complete a Self Assessment tax return.HMRC will issue a Simple Assessment where there is an underpayment of tax which cannot be collected through PAYE. Each year HMRC undertake a PAYE reconciliation process and issue a P800 calculation. Where this shows that tax is owing which cannot be recovered through PAYE, they may issue a Simple Assessment. ...

When do you need to register for VAT and how do you do it?

If you are running a business, regardless of whether you operate as a sole trader, in partnership or the business is run as a limited company, you will need to register for VAT if your total taxable turnover in the previous 12 months exceeds the VAT registration threshold of £90,000 or if you expect your taxable turnover to be more than £90,000 in the next 30 days.If both you and your business are based outside the UK and you supply goods or services to the UK (or expect to do so in the next 3...

Making a loan from a personal company to a family member

There are many possible situations in which a person may make a loan to a family member, for example, a parent may lend money to an adult child to provide them with a deposit for a property. Where the parent has a personal or family company and there are unextracted profits in the company, it may seem sensible for the company to lend the money rather than for the parent to do so personally. However, this may have tax consequences which can be easily overlooked.Loans to participatorsWhere the com...

Capital allowances for cars

Cars are a special case when it comes to capital allowances. While capital allowances may be claimed on cars used in a business, partners and sole traders have the option of using the simplified expenses system instead.Where the cash basis is used, it is not possible to deduct the full cost of the car in the year of purchase – such a deduction is prohibited under the cash basis capital expenditure rules.No annual investment allowanceThe annual investment allowance (AIA) allows immediate write-...

Too much cash in the company?

Although many companies are facing difficult times, some have managed to accumulate a sizeable amount of cash in their business's current account. Leaving this cash where it is brings with it the impact of inflation eroding the amount, together with potential tax problems when withdrawn by the director, including sometimes being taxed at a high tax rate. Paying off any loans should be a priority, as should ensuring compliance with HMRC payments. If the company plans to expand, acquire another bu...

HMRC has methods of collecting outstanding taxes

Tax bills need to be paid on time otherwise interest and possibly penalties will accrue. HMRC is amenable to payment by instalments under the Time to Pay scheme should payment not be made by the due dates. However, if no contact is made, HMRC will commence its debt management process including passing the debt to its Debt Management and Banking department. Time to Pay should ideally be sought before the debt becomes due and, while there is no automatic right to pay tax by instalments after the d...

Holiday time – Can any expenses for travel, hotels, etc be claimed if you visit a client on business whilst you are on holiday?

The hot weather often brings thoughts of holidays, but for those in business, work is always on the mind. So, what is the tax position if you combine business with pleasure by visiting a supplier in the area where you are also on holiday?As a general rule, if you operate as a business, you can deduct expenses incurred ‘wholly and exclusively’ for the purposes of the trade. This test will be met where an expense is incurred solely for business purposes. However, in reality, it is sometimes no...

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...