Getting tax relief sooner for charitable donations
If you are a higher rate or additional rate taxpayer, you are eligible to claim relief on the difference between the basic rate and your highest rate of tax. The charity you donate to can reclaim the basic rate of tax from donations made by taxpayers.
If you donated £5,000 to charity, the total value of the donation to the charity is £6,250. You can claim back additional tax back of:
£1,250 if you pay tax at the higher rate of 40% (£6,250 × 20%),
£1,562.50 if you pay tax at ... read more
Early birds get time to pay
The 2018-19 tax year ended on 5 April 2019 and the new 2019-20 tax year started on 6 April 2019. Many taxpayers will be tempted to delay dealing with their 2018-19 tax returns until late this year or January 2020.
The 31 January 2020 is not just the final date for submission of the 2018-19 Self Assessment tax return, but also an important date for payment of tax due. This is the final payment deadline for any remaining tax due for the 2018-19 tax year. In addition, the 31 January 2020 is also ... read more
When do you have to register to submit a tax return?
There are a number of reasons why you may need to register with HMRC to submit a tax return. This includes if you:
are self-employed and earning more than £1,000,
are a company director,
have an annual income over £100,000 and / or if you have certain income from savings, investment or property.
If you need to complete a tax return for the first time, you should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax ... read more
Minimum wage increases come into effect
The new National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2019. The NLW was introduced on 1 April 2016 and is the minimum hourly rate that must be paid to those aged 25 or over. The NLW increase is the biggest single increase since the rate was introduced. The new rate is £8.21 which is a 38p or almost 5% increase. This means that some 1.8 million employees earning the NLW will see an extra £690 a year in their pay packet.
The hourly rate of the NMW ... read more
Air Passenger Duty changes
Air Passenger Duty (APD) is a departure tax levied on most air travel. Each geographical band has two rates of Air Passenger Duty, one for standard class and the second for 'other' higher classes of travel (usually premium economy / business / first class).
The band A (short-haul) rate ranges from £13 for a standard class journey and £26 for an 'other' class of travel, remain unchanged from 1 April 2019. The Band B (long-haul) rates for journeys over 2,000 miles range from £78 to £172, a small ... read more
Carry forward of unused pensions allowance
The annual allowance for tax relief on pensions has been fixed at the current level of £40,000 since 6 April 2014. Since April 2016, the annual allowance has been further reduced for high earners. Those with income in excess of £150,000 will usually have their allowance tapered. For every £2 their income exceeds £150,000 the annual allowance is reduced by £1, up to a maximum reduction of £30,000 for individuals whose income is over £210,000.
However, any unused annual allowance can usually be ... read more
CGT – transfer of partnership to an LLP
Limited Liability Partnerships (LLPs) retain the flexibility of a partnership with the added advantage that a partners personal liability is limited. At least two members must be 'designated members' and the law places extra responsibilities on them.
For Capital Gains Tax purposes, the transfer of a business from a partnership to a LLP will not constitute a disposal by the partners of their interests in the original partnership’s assets unless their fractional interests in partnership assets ... read more
How is ordinary commuting defined for travel costs
As a general rule, there is no tax relief for ordinary commuting. The term 'ordinary commuting' is defined to mean travel between a permanent workplace and home, or any other place that is not a workplace. Case law has also confirmed that travel between home and a permanent workplace is ordinary commuting even where home is also a workplace.
In practical terms this means that there is no deduction for the cost of travel between an employee's permanent workplace and:
an employee's home (with ... read more
Dormant bank accounts
There is a free tracing service called 'mylostaccount' to find lost bank accounts. The service brings together the three tracing schemes of the British Bankers' Association (BBA), the Building Societies Association (BSA) and National Savings and Investments (NS&I) into a single website (www.mylostaccount.org.uk) and is free of charge.
The service offers a way for savers to search for their lost accounts by enabling them to complete one form to search the majority of banks and building ... read more
Employment law changes taking effect in April 2019
The National Minimum Wage (NMW) and National Living Wage (NLW) rates will increase from 1 April 2019. The NLW for workers aged 25 or over will increase to £8.21 per hour, the NMW standard rate for workers aged 21 to 24 will increase to £7.70 per hour, the NMW development rate for workers aged 18 to 20 will increase to £6.15 per hour, the NMW young workers rate for those aged 16 and 17 will increase to £4.35 per hour and the NMW apprentice rate will increase to £3.90 per hour.
The ... read more
Making Tax Digital for VAT
The deadline for businesses with a turnover above the VAT threshold to keep digital records for VAT purposes using Making Tax Digital (MTD), is here. For VAT returns periods starting on or after 1 April 2019, businesses with a turnover above the VAT threshold (currently £85,000) will have to:
keep their records digitally (for VAT purposes only), and
provide their VAT return information to HMRC through MTD functional compatible software.
Businesses need to sign up for MTD for VAT in order to ... read more
Repay your employer for private fuel
Where an employee with a company car is provided with fuel for their own private use by their employers, the default position is that the employee is required to pay the car fuel benefit charge. The charge is determined by reference to the CO2 rating of the car, applied to a fixed amount, currently £23,400. For example, a vehicle with a CO2 rating of 150g/km would create a taxable benefit of £7,254. The car fuel benefit charge will increase to £24,100 for the 2019-20 tax ... read more
Do you employ an au pair?
There are special rules that need to be taken into account if you employ an au pair in your home. This is because au pairs are not usually considered as workers or employees and are not entitled to the National Minimum Wage or paid holidays.
An au pair is effectively treated as a member of the family they live with and receive 'pocket money' instead of salary. The au pair may be liable to Income Tax and National Insurance if the amount of ‘pocket money’ they receive is high ... read more
Is HMRC’s message real or fake?
HMRC has issued an updated version of their online guidance on Genuine HMRC contact and recognising phishing emails and texts. The guidance provides a current list of genuine messages from HMRC. This includes email messages, text messages and telephone contacts from HMRC.
The latest updates on the list includes confirmation that HMRC is contacting selected taxpayers by phone in relation to National Minimum Wage or National Living Wage enquiries. Taxpayers will be asked some basic questions ... read more
Income excluded from UK property business
Most of our readers will be aware of the £1,000 property income allowance that came into effect on 6 April 2017. This allowance applies to income from property (including foreign property). If your annual gross property income is £1,000 or less, the amount is exempt from tax and doesn’t need to be reported on your tax return. In practice, the use of this allowance is limited, but could work, for example, if you rented your parking space for a small amount of extra income.
HMRC ... read more
Person liable to pay tax on post-cessation receipts
There are special rules for the taxation of post-cessation receipts, those received after a trade has ceased. The legislation clearly states that the person who receives or is entitled to the post-cessation receipt is the person who is subject to Income Tax or Corporation Tax on the income. This does not have to be the same person who carried on the original trade.
The only test to consider when deciding whether these rules apply is if the income is a post-cessation receipt. If it is, then ... read more
What is a post-cessation expense?
There are special rules for the taxation of post-cessation receipts and post-cessation expenses. This article explains how, or if, post cessation expenses can be claimed.
In order to be an allowable post-cessation expense, the trade must have ceased, and the expense must have been considered deductible in calculating trading profits.
This means that the expense still has to meet the wholly and exclusively test and be revenue, not capital, expenditure. The expenditure can be apportioned if ... read more
There are special VAT rules that allow two or more corporate bodies to be treated as a single taxable person for VAT purposes known as a VAT group.
Advantages of group registration
The representative member accounts for any tax due on supplies made by the group to third parties outside the group. This is particularly helpful if your accounting is centralised.
As the group is treated as a single taxable person, you do not normally account for VAT on goods or services supplied between group ... read more