c25e1948 db7d 4896 b88c a843b9138792 800x380 - Limits to loss relief claims against income or capital gains

Limits to loss relief claims against income or capital gains

There are a number of tax reliefs available for self-employed taxpayers that make a trading loss. This includes a partners' share of partnership trading losses.

There may also be restrictions if the claimant:

  • worked for less than 10 hours a week on average on commercial activities of the trade
  • is a limited partner or a member of a limited liability partnership
  • has a trade which is carried on wholly overseas
  • has claimed certain capital allowances,
  • has income from oil extraction activities or oil rights

There is also an overall cap on certain income tax reliefs. The cap is set at 25% of income or £50,000, whichever is the greater. There is a separate type of loss relief available for those operating under the cash basis. No loss relief is available if the trade is not run commercially and for profit, for example if a trade is run as a hobby.

Source: HM Revenue & Customs Tue, 08 Mar 2022 00:00:00 +0100
ae72225b 1900 44c4 95f8 61e7773e1a0b 800x380 - Claiming for business use of own car or van

Claiming for business use of own car or van

If you are an employee, you may be able to claim tax relief for using your own vehicle, be it a car, van, motorcycle or bike. There is generally no tax relief for travel to and from your place of work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to undertake other business-related mileage.

Employers usually make payments based on a set rate per mile depending on the mode of transport used. There are approved mileage rates published by HMRC. The approved mileage allowance payment rates are available where you use your own car on a business trip. Where the approved mileage rates are used, the payments to you are not regarded as a taxable benefit.

Where an employer pays less than the published rates, the employee can make a claim for the shortfall using mileage allowance relief. For all cars and vans the approved mileage allowance payment for the first 10,000 business miles is 45p per mile and 25p per mile for every additional business mile. The approved mileage rates are 20p per mile for bicycle travel and 24p per mile for motorcycle travel.

There is an additional passenger payment you can receive of 5p per passenger per business mile from your employer. This is available if you carry fellow employees in your car or van on journeys which are also work journeys for your colleagues. 

Source: HM Revenue & Customs Tue, 01 Mar 2022 00:00:00 +0100
fb0d71c8 6410 4088 b267 45fef97f77ca 800x380 - Spreading the cost of tax bills

Spreading the cost of tax bills

One of the announcements by HMRC at the start of the coronavirus pandemic was the introduction of emergency measures to help those affected by COVID-19 using the existing Time to Pay service. Many businesses and self-employed people with outstanding tax liabilities were eligible to receive support with their tax affairs through this service.

Since April 2021, Self-Assessment taxpayers have used the online Time to Pay service to pay more than £310 million worth of tax in instalments. The option to spread your tax bill remains available for the 2020-21 tax year.

Once you have filed your Self-Assessment return for 2020-21 there is an option to set up an online Time to Pay arrangement to spread the cost of any tax due on 31 January 2022 for up to 12 months. This option is available for debts up to £30,000 and the payment plan needs to be set up no later than 60 days after the due date of a debt. This should be done sooner rather than later as a 5% late payment penalty will be charged if tax remains outstanding and a payment plan has not been set up before 1 April 2022.

If you owe Self-Assessment tax payments of over £30,000 or need longer than 12 months to pay in full, you can still apply to set up a Time to Pay arrangement with HMRC, but this cannot be done using the online service.

HMRC has already announced that due to the coronavirus pandemic, fines for taxpayers that file their Self-Assessment returns late will be waived until 28 February 2022. However, interest will be applied to any outstanding balance from 1 February 2022 so you should try and pay your tax bill or enter a suitable payment arrangement as soon as possible.

Source: HM Revenue & Customs Tue, 22 Feb 2022 00:00:00 +0100
38248c2a 22f2 429c ac8d 11bf088577bf 800x380 - Don’t miss out on this tax allowance

Don’t miss out on this tax allowance

HMRC is using Valentine’s Day to issue a reminder to married couples and those in civil partnerships to sign up for the marriage allowance – if they are eligible and haven’t yet done so.

The marriage allowance applies to married couples and those in a civil partnership where a spouse or civil partner doesn’t pay tax or doesn’t pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2021-22).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) doesn’t pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,570 to £50,270 in 2021-22. The limits are somewhat different for those living in Scotland.

The allowance permits the lower earning partner to transfer up to £1,260 of their unused personal tax-free allowance to a spouse or civil partner. This could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year.

If you meet the eligibility requirements and have not yet claimed the allowance, then you can backdate your claim as far back as 6 April 2017. This could result in a total tax break of up to £1,220 if you can claim for 2017-18, 2018-19, 2019-20, 2020-21 as well as the current 2021-22 tax year. If you claim now, you can backdate your claim for four years (if eligible) as well as for the current tax year. In fact, even if you are no longer eligible or would have been in all or any of the preceding years then you can claim your entitlement.

Source: HM Revenue & Customs Tue, 15 Feb 2022 00:00:00 +0100
8165b503 8e28 4e01 b461 ac42fe65e6af 800x380 - Paying tax underpayments via tax code

Paying tax underpayments via tax code

One of the less well-known ways of paying your Self-Assessment tax bill is to do so through your tax code.

This can only be done where all the following apply:

  • you owe a Self-Assessment balancing payment of less than £3,000;
  • you already pay tax through PAYE, for example you’re an employee or you get a company pension
  • you submitted your paper tax return by 31 October or your online tax return online by 30 December

The coding threshold also entitles taxpayers to have tax underpayments collected via their tax code, provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts such as Self-Assessment liabilities, tax credit overpayments and outstanding Class 2 NIC contributions. Instead of paying off debts in a lump sum, money is collected in equal monthly instalments over the tax year along with the usual deductions.

Source: HM Revenue & Customs Tue, 15 Feb 2022 00:00:00 +0100
423c28bc 48c7 4a1c 84d6 26d409a99472 800x380 - 19% fail to file on time

19% fail to file on time

HMRC has confirmed that more than 10.2 million people submitted their 2020-21 Self-Assessment tax returns by the 31 January deadline. This leaves over 2.3 million taxpayers or 19% that have missed the deadline and are yet to file. Are you among those that missed the 31 January 2021 filing deadline for your 2020-21 Self-Assessment returns?

HMRC has already announced that due to the coronavirus pandemic, fines for taxpayers that file their Self-Assessment returns late will be waived until 28 February 2022. However, interest will be applied to any outstanding balance due from 1 February 2022 so you should try and pay your tax bill as soon as possible. If you are unable to pay your tax bill, then there are a number of options for you to defer the payment that was due on 31 January 2022.

This includes an option to set up an online time to pay payment plan to spread the cost tax due on 31 January 2022 for up to 12 months. This option is available for debts up to £30,000 and the payment plan needs to be set up no later than 60 days after the due date of a debt. This should be done sooner rather than later as a 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, before 1 April 2022.

If you owe Self-Assessment tax payments of over £30,000 or need longer than 12 months to pay in full, you can still apply to set up a time to pay arrangement with HMRC, but this cannot be done using the online service.

HMRC’s Director General for Customer Services, said:

'We’re waiving penalties this year, to give those who missed the deadline an extra month. And customers can set up a monthly payment plan online if they’re worried about paying their tax bill. Search ‘Self-Assessment’ on GOV.UK to find out more.'

Source: HM Revenue & Customs Tue, 08 Feb 2022 00:00:00 +0100
507339da f70a 4e27 823b daf901164751 800x380 - How to join MTD ITSA pilot

How to join MTD ITSA pilot

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the MTD for ITSA. Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The option to sign-up as an individual for MTD for ITSA is currently only available to individuals using a recognised provider offering software that is compatible with MTD for ITSA.

HMRC recently shared the following update on the pilot to software developers.

'As we progress the MTD ITSA pilot it is important that we manage it in a controlled way so that we can test and expand effectively. So, from 9th December, customers will only be able to sign up for the MTD ITSA Pilot through their software provider (in essence how it is currently happening). As we expand the pilot, this will enable HMRC and developers to ensure that all customers entering the pilot (and their agents where applicable) receive the support and guidance that they need.   

Customers who are already participating in the Pilot can continue to do so. HMRC will be sharing more detail in early 2022 including the Pilot outline plan which will include a roadmap identifying when various customer types will be eligible to join MTD ITSA. MTD also continues to work on the Customer Support Model to support customers more come into the service from April 2022.'

It will be interesting to see what further sign-ups will be enabled once the pilot roadmap is published.

Source: HM Revenue & Customs Tue, 08 Feb 2022 00:00:00 +0100
e894f913 9530 4910 94e3 19ccc9ef8355 800x380 - Working for yourself

Working for yourself

Newly self-employed taxpayers should notify HMRC as soon as practicable when they begin working for themselves. However, HMRC must be officially notified by 5 October following the end of the tax year so that a Self-Assessment return can be issued on time and to avoid any unnecessary penalties.

HMRC’s guidance says that you are probably self-employed if you:

  • run your business for yourself and take responsibility for its success or failure;
  • have several customers at the same time;
  • can decide how, where and when you do your work;
  • can hire other people at your own expense to help you or to do the work for you;
  • provide the main items of equipment to do your work;
  • are responsible for finishing any unsatisfactory work in your own time;
  • charge an agreed fixed price for your work;
  • sell goods or services to make a profit (including through websites or apps).

The newly self-employed should also register to pay National Insurance contributions (NICs) and to monitor whether a VAT registration is required.

There is a £1,000 tax allowances for miscellaneous trading income that has been available to taxpayers since April 2017. This is known as the trading allowance.

The exemption from tax applies to taxpayers who have trading income of up to £1,000 from:

  • self-employment;
  • casual services, for example, babysitting or gardening;
  • hiring personal equipment, for example, power tools.

Where this £1,000 allowance covers all the individual’s relevant income (before expenses) the income is tax-free and does not have to be declared to HMRC.

Source: HM Revenue & Customs Tue, 01 Feb 2022 00:00:00 +0100
fda172cc 32cd 4a4e 87ae f09201820356 800x380 - Income Tax set-off of rental business losses

Income Tax set-off of rental business losses

Where a property business makes a loss, the loss can usually be carried forward and set against future rental business profits. HMRC’s guidance is clear that any losses made in one rental business cannot be carried across to any other rental business the customer carries on at the same time in a different legal capacity.

Under limited circumstances property losses can be set against general income of the same year or the following year. However, where a property business claims loss relief against general income, they must take the full amount of the loss available up to the amount of their general income.

Income Tax rental business losses can only be set against general income to the extent that they are attributable to:

  • certain capital allowances,
  • certain agricultural expenses

A claim has to be made on or before the first anniversary of 31 January following the end of the year of assessment. For example, where relief is to be claimed for the 2021-22 tax year, the normal filing date would be 31 January 2023 and the claim for property loss relief must be made by 31 January 2024.

There are exceptions to the loss relief rules for properties that are let on uncommercial terms (for example, at a nominal rent to a relative).

Source: HM Government Tue, 01 Feb 2022 00:00:00 +0100
423c28bc 48c7 4a1c 84d6 26d409a99472 800x380 - HMRC agree delay in tax return deadline

HMRC agree delay in tax return deadline

HMRC has announced that late filing penalties will be waived for taxpayers that file their 2020-21 Self-Assessment returns by 28 February 2022. The due date of 31 January 2022 remains and HMRC is still encouraging taxpayers to try and meet this deadline. Taxpayers should try and pay their tax bill by 31 January 2022 as interest will accrue from 1 February 2022 on any outstanding liabilities.

There had been concerns from Self-Assessment taxpayers and their agents for the government to soften its stance on late filing penalties in view of the continuing pandemic. The confirmation that no late filing penalty will be issued, giving one month’s grace has been broadly welcomed. 

HMRC expects more than 12.2 million people to complete a Self-Assessment tax return for the 2020-21 and almost 6.5 million returns have already been submitted. 

HMRC’s Deputy Chief Executive and Second Permanent Secretary, said:

'We know the pressures individuals and businesses are again facing this year, due to the impacts of COVID-19. Our decision to waive penalties for one month for Self-Assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.'

There are also a number of options for taxpayers to defer payments due on 31 January 2022 and pay by instalments over 12 months. This includes using the self-serve Time to Pay facility online for debts up to £30,000 or by making an arrangement with HMRC.

Source: HM Revenue & Customs Tue, 11 Jan 2022 00:00:00 +0100