CHARTERED ACCOUNTANTS (ICAEW)

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Claiming tax relief for expenses online

Employees who incur expenses in undertaking their job may be able to claim tax relief for those expenses where they are not reimbursed by their employer. The expenses will qualify for relief if they are incurred wholly, exclusively and necessarily in the performance of the duties of their employment or meet the deductibility conditions for particular types of expenses, such as travel expenses or professional fees and subscriptions.Last year, HMRC introduced new evidence requirements for claims f...

Timing your payments around the year end

For unincorporated businesses, from 6 April 2024 onwards the cash basis is the default basis of accounts preparation. Unlike the accruals basis under which income and expenditure must be matched to the accounting period to which it relates, where the cash basis is used, income is only taken into account when received and expenditure when paid. This presents some tax planning opportunities around the end of the tax year as regards the timing of income and expenditure.1. Consider delaying invoicin...

Time running short to use your 2024/25 personal allowance

Most individuals are entitled to receive a personal allowance. This is the amount that they are able to earn before they pay tax. For 2024/25, the personal allowance is set at £12,570. The allowance is for the tax year only – if you do not use it in the tax year, you lose the benefit of it; you cannot carry any unused amount forward to the next tax year.As the end of the tax year approaches, if you have yet to use your 2024/25 personal allowance, you may want to consider whether there is scop...

Have you used your capital gains tax annual exempt amount?

Individuals have a separate tax-free allowance for capital gains tax purposes – the capital gains tax annual exempt amount. Although it has been reduced considerably in recent years and is only £3,000 for 2024/25, making use of the allowance can still generate tax savings of up to £720.The annual exempt amount applies to reduce the amount of net gains for the year on which capital gains tax is chargeable. The exempt amount is deducted from chargeable gains for the year after allowable losses...

Should we pay a dividend before the end of the tax year?

If you are the owner of a personal or family company, it is prudent to review your dividend strategy before the 2024/25 tax year comes to an end as assessing whether paying a dividend before 6 April 2025 would be beneficial.Sufficient retained profitsThe first point to note is that dividends are payable from retained profits and the payment of a dividend can only be entertained where the company has sufficient retained profits from which to pay a dividend. These are post-tax profits on which cor...

Can one company lend to another? Tax implications

Although the economy is said to be stagnating with little growth on the horizon, many smaller companies are doing well and have healthy bank balances. However, with the interest rate return on cash in a bank account being relatively low, some companies are looking to invest spare cash elsewhere if investing in their own company is not desired or possible. Companies that are connected can lend to each other usually without anytax implications so long as conditions under the loan relationship rule...

Tax implications of paying mileage payments of more than the approved amount

Employees often use their own cars for business journeys and are paid a mileage allowance by their employer to cover the cost of fuel and associated costs, such as insurance and wear and tear. The amount that the employer is able to pay tax-free is governed by the approved mileage allowance payments (AMAPs) scheme. The scheme does not apply to employees with company cars.The schemeUnder the AMAP scheme, an employer can make tax-free mileage payments to an employee using their own vehicle for bus...

VAT flat rate scheme – is it worth it?

The VAT flat rate scheme is a simplified scheme for smaller VAT-registered businesses. While using the scheme will save work, this may come at a cost if the amount of VAT paid to HMRC under the scheme is more than would be payable if traditional VAT accounting is used. This will depend on the actual VAT charged and incurred, the flat rate percentage for the trader’s business sector and whether the trader is a limited cost trader.Eligible tradersA trader can use the flat rate scheme if they are...

Action you can take if you are struggling to pay your tax

Tax due under Self Assessment for 2023/24 should have been paid in full by midnight on 31 January 2025, along with the first payment on account for 2024/25. Financially, January is a difficult time for many people and they may be unable to find the funds to pay all the tax that they owe. Where this is the case, ignoring the problem will not make it go away; rather, it will make it worse as interest and penalties will be charged, increasing the amount that will have to be paid to HMRC to clear th...

Deferring Class 1 National Insurance contributions

Where an employee has more than one job, they may be able to defer the payment of Class 1 National Insurance contributions in one or more of those jobs to ensure that the contributions that they pay for the year do not exceed the annual maximum.If earnings in one job are at least equal to the upper earnings limit, the employee will pay primary contributions on that job at the main rate on all earnings between the primary threshold and the upper earnings limit. Where this is the case, they only n...

Claim a refund if you have overpaid tax

There are various reasons why tax may be overpaid, and when more tax has been paid than is due, it is understandable that the taxpayer will want this to be refunded as soon as possible. The process for claiming a refund depends on why the overpayment arose.EmployeesAn employee may have paid too much tax on their employment income. This may be the case if their tax code is incorrect or because they have incurred expenses on which tax relief is due.A claim for relief for employment expenses can be...

Starting a business as a sole trader

When starting a business, there are various decisions to make and tasks to perform. One of the first questions to address is whether to run the business as a sole trader, whether to set up a partnership with others or whether to form a company. The way in which a business is operated will determine the taxes that are payable and legal obligations that must be met.A person operating as a sole trader is in business for themselves. This is arguably the simplest way to run a business.Registering wit...

Using salary sacrifice to beat the rise in employer’s NIC

One of the more unpopular Budget announcements was the rise in employer’s National Insurance from 13.8% to 15% from 6 April 2025. The Class 1A rate and Class 1B rate are similarly increased, meaning that it will hit employers on the provision of both cash pay and taxable benefits. It will also make it more expensive for employers to settle an employee’s tax liability through a PAYE Settlement Agreement; Class 1B contributions apply on both the items included in the agreement in place of the ...

Reporting residential property gains

Owners of investment properties and second homes may decide to sell up for a variety of reasons. They may wish to take advantage of a more buoyant market as buyers rush to beat the reduction in the residential SDLT threshold from 1 April 2025. The end of the favourable tax regime for furnished holiday lets may see landlords sell up, while those sitting on a large capital gain may decide to realise that gain while the higher rate of capital gains tax on residential gains remains at 24%. Whatever ...

Beat the SDLT deadline

There is a stamp duty land tax (SDLT) deadline on the horizon – from 1 April 2025, there are changes to both the residential SDLT threshold and that applying to first-time buyers. Completing a purchase before that date could save the buyer £2,500 in SDLT. For a first-time buyer, the potential savings are more.Residential SDLT thresholdThe SDLT threshold was temporarily increased from £125,000 to £250,000 from 23 September 2022. It reverts to £125,000 from 1 April 2025. Prior to that date, ...

FHL – relief for finance and investment costs from April 2025

Landlords letting furnished holiday accommodation have hitherto enjoyed a range of tax benefits, including the ability to deduct interest and finance costs in full when calculating their taxable profits. However, the favourable regime for furnished holiday lettings comes to an end on 5 April 2025. From that date, landlords letting furnished holiday accommodation will be subject to the same tax rules as apply to other residential lets. While corporate landlords will still be able to deduct intere...

Planned changes to agricultural property relief

Protests by farmers following the October 2024 Budget have catapulted agricultural property relief (APR) into the spotlight. But what is the relief, who can benefit and how is it changing?Nature of APRAPR and its companion relief, business property relief (BPR), are inheritance tax reliefs which reduce or eliminate the inheritance tax payable when qualifying assets are passed on, either during the transferor’s lifetime or on their death. There are two rates of relief – 100% and 50%.APR is av...

Gift the holiday let by 5 April 2025 to benefit from hold-over relief

The favourable tax regime for furnished holiday lettings is to come to an end on 5 April 2025. This will mean that landlords of furnished holiday lettings will lose access to a range of valuable capital gains tax reliefs, including gift hold-over relief.Nature of the reliefGift hold-over relief is a capital gains tax relief that may be available on gifts of business assets. Where the relief is claimed, the capital gains tax that would otherwise be payable on the gift is deferred until the recipi...

When a dwelling is uninhabitable

Stamp duty land tax (SDLT) is charged at the residential rates on residential property and at the non-residential rates on non-residential or mixed property. For the residential rates to apply, the building must be ‘used or suitable for use as a dwelling or in the process of being constructed or adapted for such use’. Where the property is derelict and cannot be used as a dwelling, SDLT is charged at the non-residential rates. If the property in question is a second or subsequent residential...

The tax implications of buying a commercial property at auction

Purchasing a commercial property at auction is a common occurrence. Although usually the sale or lease of a commercial property is exempt from VAT, sometimes the commercial property listed for auction is being sold in circumstances where the question of whether a charge to VAT arises. HMRC deems 'commercial property' as a non-residential building such as a shop, office, warehouse, restaurant, farm, etc. and includes some student accommodation, hotels and care homes. If a business is selling a co...

When would taking benefits in kind be more tax efficient than salary and dividends?

For many years the most tax-efficient method of withdrawing monies from a company by a sole director/owner has been to take salary up to the employer's secondary employer's NIC limit, with the balance taken as dividends. However, since July 2022, this standard calculation has changed such that withdrawing profits in the form of benefits in kind (BIK) may now be a consideration.By setting the employee primary NIC threshold and the personal allowance at the same amount of £12,570 and retaining th...

Tax implications where an employer provides a van to an employee

Benefits in kind (BIK) are goods and services provided to an employee (or a member of their family or household) for free or at significantly reduced cost. The type of benefit and the way it is provided can affect the tax and NICs to be paid and the reporting requirements.Private use of a company vehicle creates a taxable BIK, with the amount of  benefit depending on the type of vehicle and fuel. The tax charge on an employee's private use of a van is generally lower than that of a car (zer...

What to do if you cannot pay your tax bill

As the cost of living crisis continues to bite, you may find that come 31 January 2025 you are struggling to pay your Self Assessment tax bill. If this is the case, it is important that you do not bury your head in the sand – the bill will not go away and, with the addition of interest and penalties, will become bigger. However, there are options available which may allow you to pay what you owe over a longer period.Coding outIf you filed your 2023/24 tax return online by 30 December 2024 or f...

Using the VAT flat rate scheme

The VAT flat rate scheme is a simplified flat rate scheme which can be used by smaller businesses to save work. Under the scheme, businesses pay a set percentage of their VAT inclusive turnover to HMRC rather than the difference between the VAT that they charge and the VAT they suffer on the goods and services that they buy. The percentage that they need to pay depends on the sector in which they operate, and also on whether they are a limited cost business. The main advantage of the scheme is t...

Is it worth paying voluntary Class 3 NICs?

The payment of National Insurance contributions is linked to entitlement to the state pension. If sufficient National Insurance contributions of the right type are paid for a tax year, that year counts as a qualifying year for state pension and benefit purposes. A person may also secure a qualifying year if they are awarded National Insurance credits for that year. This may be because they have low earnings or are in receipt of certain benefits, such as child benefit or carer’s allowance.Peopl...