Using former FHL losses
From 6 April 2025, furnished holiday lets are treated in the same way as other lets for tax purposes. Landlords letting both holiday accommodation and other properties (whether residential or commercial) calculate the profit for their property business as a whole, taking into account the income and expenses from all properties. It is only the total income and total expenses that are relevant – there is no need to calculate the profit and loss for each property or each type of property separate...
August 5, 2025Holiday lets and business rates
Although the end of the tax regime for furnished holiday lettings relieved landlords of the need to keep track of the number of days for which the holiday let was available for letting and actually let, some day counting is still needed for business rate purposes. Depending on the lettings profile, the landlord may be eligible for business rates rather than council tax, and this may be very advantageous. The tests that need to be met depend on whether the property is in England or in Wales. Diff...
August 5, 2025Earn tax-free income from renting out your garage
There is a demand for garage space, particularly from tradespeople who want somewhere to store their tools safely rather than leaving them in their van overnight and vulnerable to theft. If you have a garage that you are not using, you could potentially earn money from renting it out. Even better, you may be able to enjoy rental income of up to £1,000 a year tax-free.The property allowanceThe property allowance is a tax allowance which enables a landlord to earn rental income of £1,000 a year ...
August 5, 2025Temporary staff and auto-enrolment
Employers have a duty to enrol eligible staff in a pension scheme. Staff are eligible if they are aged between 22 and state pension age and earn more than £192 per week (£833 per month).Where an employer takes on seasonal or temporary staff, they must still assess them. However, the assessment will need to take into account that the worker may only work for the employer for short periods of time, they may join and leave in the middle of pay periods and their earnings and hours may vary. The em...
August 5, 2025What happens to your estate if you die intestate?
In an ideal world, everyone’s estate would be distributed according to their wishes. However, where someone dies without making a will, who gets what is determined by the intestacy provisions. The way in which the estate is distributed depends on the value of the estate and whether the deceased is married or in a civil partnership and whether they have children. The rules explained below apply in England and Wales; different rules apply in Scotland and Northern Ireland.Jointly owned homeIn Eng...
August 5, 2025Correcting errors in your VAT return
It is easy to make mistakes when completing your VAT return. However, where mistakes are made, it is important to correct them. This is fairly straightforward to do.Four-year windowYou can correct errors in your next VAT return if the error was made in the preceding four years and it is either less than £10,000 or between £10,000 and £50,000 but less than 1% of your total sales value.Errors that are more than £50,000 or more than £10,000 and greater than 1% of the total sales value must be ...
August 5, 2025Tax implications of writing off a director’s loan
Personal and family companies often make loans to directors. However, there can be tax and National Insurance implications of doing so. Where the loan remains outstanding nine months and one day after the end of the accounting period in which it is made, a tax charge arises on the company. Tax charges may also arise if the loan is written off.HMRC have recently written to individuals who between 6 April 2019 and 5 April 2023 received a director’s loan that has been released or written off and ...
August 5, 2025Credit notes or VAT bad debt relief claim – which?
Bad debts pose a significant challenge for every business. Staying on top of non-payments is essential for maintaining a healthy cash flow and ensuring the financial stability of a business, but what is the VAT situation if an invoice is not paid?Credit note or bad debt relief?The rules for claiming bad debt relief (BDR) on a VAT return and issuing credit notes to customers are very different. When faced with an unpaid invoice, the temptation may be to issue a credit note, as tax relief would be...
August 5, 2025The tax consequences of not repaying an 'illegal dividend'
Dividends can only be declared out of a company’s available undistributed profits and even if the bank account is in credit as at the date of withdrawal, it does not necessarily mean that sufficient profit has been made to cover the payment. ‘Profit’ in this instance is defined in the Companies Act 2006 as being ‘accumulated realised profits…less ....accumulated, realised losses’. Therefore, a dividend could be paid in a loss-making period, provided that there are sufficient 'distrib...
August 5, 2025The tax position when partners do not receive the profit share they are allocated
In a partnership, the activities are considered to be conducted by the individual partners rather than the partnership itself, as a partnership is not a separate legal entity. Consequently, the partnership does not pay tax or National Insurance contributions (NIC). Instead, each partner pays tax separately on their allocated share of profits or losses, similar to a sole trader. If one partner is a company, it is taxed on its share of profits and capital gains according to corporation tax rules.S...
August 5, 2025Take 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...
July 3, 2025Tax 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, ...
July 3, 2025Relief 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...
July 3, 2025Calculating 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 ...
July 3, 2025Dealing 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. ...
July 3, 2025When 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...
July 3, 2025Making 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...
July 3, 2025Capital 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-...
July 3, 2025Too 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...
July 3, 2025HMRC 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...
July 3, 2025Holiday 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...
July 3, 2025The 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...
June 5, 2025Calculating 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...
June 5, 2025Is 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,...
June 5, 2025Five 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...
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