CHARTERED ACCOUNTANTS (ICAEW)

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Marriage allowance – A possible tax break for married couples or civil partnerships

Marriage allowance – A possible tax break for married couples or civil partnershipsDespite 4.2 million couples being eligible for the tax break, only 1.8 million are claiming the marriage allowance (MA) – a benefit worth £252 a year. The main reason for not claiming is probably because those eligible are either unaware of the allowance or, if they are aware of it, think they are not eligible.For example, many commentators and HMRC's website state that to claim one partner must have income l...

Capital gains tax year-end planning

Capital gains tax year-end planningNoone wants to pay more tax than they need to and, where possible, disposals should be timed to ensure that the best result is achieved from a tax perspective. Where a disposal is made around the end of the tax year, accelerating or delaying the disposal date can impact on the tax that is paid. This is particularly true this year, as the capital gains tax annual exempt amount falls from £6,000 for 2023/24 to £3,000 for 2024/25.Don’t waste the exempt amountE...

Have you used your 2023/24 dividend allowance?

Have you used your 2023/24 dividend allowance?As we move into the final months of the 2023/24 tax year, it is time to give some thought to whether you have used your 2023/24 dividend allowance yet, and whether it is worth extracting further profits as dividends before the end of the tax year. Once a salary has been taken equal to the personal allowance of £12,570, it is tax efficient to extract further profits as dividends.Nature of the dividend allowanceThe dividend allowance is available to a...

Cash basis extended

Cash basis extendedIf you are running an unincorporated business, either as a sole trader or as a partnership comprising only partners who are individuals, you can use the accruals basis to prepare your accounts or, if you are eligible, the cash basis. For 2023/24 and previous years, the cash basis is only available to traders whose turnover, computed in accordance with the cash basis rules, is £150,000 or less. However, following a consultation, the availability of the cash basis is to be exte...

National Insurance cut for employees and directors

National Insurance cut for employees and directorsIn his November 2023 Autumn Statement, the Chancellor announced a reduction in the main primary rate of Class 1 National Insurance from 12% to 10%. Rather than waiting until the start of the 2024/25 tax year to bring in the change, it applies from 6 January 2024.The change will benefit employers and directors, but will cause something of a headache for employers who will need to implement the change in-year.Primary Class 1 contributionsPrimary co...

NIC payable by the self-employed from April 2024

NIC payable by the self-employed from April 2024The self-employed have historically paid two classes of National Insurance – Class 2 and Class 4. However, this is set to change from April 2024 with the abolition of Class 2 National Insurance contributions.What are Class 2 contributions?The payment of Class 2 contributions has enabled a self-employed person to build up entitlement to the state pension and contributory benefits.Class 2 contributions are flat-rate weekly contributions payable whe...

PAYE settlement agreements –What are they and how do you set one up?

PAYE settlement agreements –What are they and how do you set one up?The usual method of declaring employees’ benefits in kind and taxable expenses is via the annual P11D form submission. Employers can also 'payroll' these benefits and expenses instead, although completion of a P11D(b) for declaring National Insurance is required.However, not all employers want their employees to pay tax on those benefits and this is where PAYE settlement agreements (PSAs) come in. This may be as a goodwill g...

Is it time to disincorporate?

Is it time to disincorporate?On 26 October 2023 one of the most significant pieces of company legislation came into being. The main thrust of the Economic Crime and Corporate Transparency Act 2023 is to 'prevent companies and others from carrying out unlawful activities, or facilitating others to carry out unlawful activities'. New obligations are to be imposed on companies that may be of particular concern to directors of micro-companies (currently companies that have a turnover of £632,000 or...

Can mileage claims include loan interest?

Can mileage claims include loan interest?The Approved Mileage Allowance Payment (AMAP) was introduced in 2002 as a statutory simplification to allow employers to make tax-free payments up to certain limits to their employees when they carry out business travel in their cars, vans, motorcycles or cycles. The Allowance is a set rate supposedly to help cover the cost of fuel, vehicle excise duty (VED) and upkeep of the car or van and has been the same amount since April 2011:·   &nb...

Beware property PM partnerships involving hybrid arrangements

Beware property PM partnerships involving hybrid arrangementsHMRC have recently published a spotlight warning landlords to avoid schemes offering hybrid property arrangements that purport to save tax. HMRC’s view is that the scheme does not work and landlords who are tempted by the advertised advantages might find themselves out of pocket.Nature of the arrangementsThe arrangements are based on the landlord or joint owners of the property transferring their property to a limited liability partn...

Divorce and the former marital home

Divorce and the former marital homeOn separation or divorce, it is common for one spouse to move out of the family home and for the other spouse to continue to live there. Where the couple have children, the spouse remaining in the family home may do so until the youngest child reaches the age of 18, at which point the family home is sold and the proceeds shared. Alternatively, the departing spouse may transfer their interest in the family house to the remaining spouse as part of a divorce settl...

When does period of ownership for PRR start?

When does period of ownership for PRR start?Private residence relief (PRR) removes the capital gains tax charge that would otherwise arise on a gain on the disposal of an only or main residence. The relief shelters the gain to the extent that it has been lived in as a main residence. Qualifying periods of absence and the last nine months of ownership are also covered by the relief if the property is not occupied as an only or main residence throughout.Where a house is built and lived in as a mai...

Depreciation versus capital allowances

Depreciation versus capital allowancesTax and accounting rules are not identical and it is sometimes necessary to adjust the accounting profit to arrive at the profit for tax purposes. One area where the rules differ is in the write-off of capital expenditure.For accounting purposes, depreciation is charged to the accounts so as to write off the asset over its useful economic life. This may, for example, be on a 33% reducing balance basis or on a 25% straight line basis.By contrast, for tax purp...

Reporting payment to HMRC if you pay your employees early in December

Reporting payment to HMRC if you pay your employees early in DecemberStrict reporting deadlines apply under Real Time Information (RTI). Employers are required to report employees’ pay and deductions to HMRC electronically on the Full Payment Submission (FPS) at or before the time that the payment is made to the employee. Employers who report late for more than one tax month in the tax year are charged penalties. While HMRC do allow a three-day period of grace and will not charge a penalty if ...

Can you benefit from the marriage allowance?

Can you benefit from the marriage allowance?The marriage allowance is not a separate allowance as such – rather, it is a transfer of part of one spouse or civil partner’s personal allowance to their spouse or civil partner. It should not be confused with the married couple’s allowance which is available where at least one spouse or civil partner was born before 6 April 1935.The marriage allowance allows one spouse or civil partner to transfer 10% of their personal allowance (as rounded to ...

Reclaiming section 455 tax paid

Reclaiming section 455 tax paidIn personal and family companies, directors often borrow money from the company as this is a cheaper and easier option than taking out a commercial loan. However, there can be tax consequences for both the director and the company.If the loan balance exceeds £10,000 at any point in the tax year, a tax charge would arise under the benefit in kind rules if the interest paid by the director on the loan, if any, is less than that which would be payable at the official...

Submit your tax return by 30 December to have your tax collected through PAYE

Submit your tax return by 30 December to have your tax collected through PAYEAlthough the deadline for submitting your 2022/23 tax return online is midnight on 31 January 2024, if you owe tax and you want to have it collected through PAYE via an adjustment to your tax code, you will need to file your tax return by the earlier date of 30 December 2023.If the option to pay any tax you owe via PAYE is available to you, it can be attractive. Not only are you saved from having to pay the bill in full...

The Autumn Statement 2023 - Key Points

The Autumn Statement 2023 - Key PointsThe 2023 Autumn Statement was presented against a background of inflation falling from recent peaks. Annual inflation for the last quarter of 2023 is now expected to be 4.8%, against a previously anticipated 2.9%. With recent large price increases now baked in, the government’s 2% target is now forecast to be hit in the first half of 2025, a year later than previously thought.GDP growth is now forecast to be 0.6% for 2023, compared with the projection last...

Plain English guide to profit and loss

Plain English guide to profit and lossHere's our Plain English guide to profit and loss and what this report reveals about your finances.What is profit and loss?Your profit and loss statement is commonly called your ‘P&L’. It’s also sometimes referred to as your income statement or statement of earnings.Your P&L is a breakdown of your company’s revenue (money coming into the company as sales and other income) and your expenditure (direct costs, overheads, expenses and other costs...

Are employee parties tax-free?

Are employee parties tax-free?If the rules around social functions are followed, staff events like your end-of-year party, or your summer barbecue are tax-deductible for you, as the employer, and tax-free for your staff.This means you can claim back some of the expenses you incur when putting on a social event for your team, while also helping to build better team bonds.Whether your party is taking place in the office, at a local restaurant or via Zoom for your remote-working teams, yo...

Company year-end preparations: time to get ready

Company year-end preparations: time to get readyAs your company year-end date gets closer, there are a number of administrative and financial tasks to start planning for – so it’s a good idea to get yourself organised and ready.There are several things to check, either on the year-end date, or before the end of your company’s financial year. Some tasks are simple administrative processes, while others involve a deeper dive into your accounts. But, on the whole, this is about getting on top...

Can directors and employees receive gifts from the company tax free?

Can directors and employees receive gifts from the company tax free?Giving gifts to your employees can be a great way to increase engagement and raise the overall morale of your team. But how much can you give before there are tax implications? And how do the rules differ if you’re giving gifts to your directors?The good news is that you can give gifts that don’t exceed £50 in value to your employees without any tax or National Insurance (NI) charges arising – as long as you follow HMRCâ€...

What home-office expenses are deductible for your business?

What home-office expenses are deductible for your business?With greater use of home-working now the norm for many UK businesses, it’s important to think about the deductible expenses that you may be able to claim when working from a home office.Working from home results in us using more power, more broadband and more heating than when working from an office space, or from a coworking space outside the home. But which elements of your home expenses can you claim back? And how does the process w...

Redundancy –Taxation of payments

Redundancy –Taxation of paymentsMaking any employee redundant is a difficult decision and potentially distressing for all involved. Getting the process wrong could result in one or more employment tribunal claims. Professional advice should always be sought.When an employee is made redundant, various elements may comprise the final payment. Apart from the normal earnings from the employment (salary, accrued holiday pay, accrued bonuses, etc.) to the last deemed working day, payments made speci...

Associated company rules – Implications post-1 April 2023

Associated company rules – Implications post-1 April 2023It is eight years since companies had to deal with two tax rates and marginal relief when calculating their corporation tax liability. That system has now been reinstated and, as of 1 April 2023, the amount of corporation tax will depend on a company’s profits as follows:·         under £50,000 – small profits rate of 19%·         above £250,000 – m...