CHARTERED ACCOUNTANTS (ICAEW)

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MTD and landlords – the new timetable

MTD and landlords – the new timetableUnder the original plans, landlords with rental income (or combined rental and business income) of more than £10,000 would have needed to comply with Making Tax Digital for Income Tax (MTD for ITSA) from 6 April 2024.However, the start date has now been delayed, and its introduction is to be phased in.Phased introductionMTD for ITSA will now apply from 6 April 2026. However, from that date, it will only apply to self-employed traders and landlords with bus...

Time the sale to take advantage of higher annual exempt amount

Time sale to take advantage of higher annual exempt amountA gain on the sale of an investment property, such as a buy-to-let or second home, will be liable to capital gains tax to the extent that it is sheltered by losses or the annual exempt amount. The annual exempt amount is like a personal allowance for capital gains tax purposes and allows individuals to realise net gains in the tax year up to the level of the annual exempt amount free of capital gains tax. Where losses are realised in the ...

Mortgage interest and tax relief

Mortgage interest and tax reliefMany landlords purchase their investment properties with the aid of a mortgage. In the current climate of rising interest rates, landlords may be wondering whether any tax relief is available to help them. While tax relief is available for interest and finance costs (but not capital repayments), the nature of the relief depends on the type of let. The relief may also be capped if the landlord has extended the mortgage since first letting the property.No tax relief...

Take advantage of the limited window to save SDLT

Take advantage of the limited window to save SDLTIn the ill-fated mini Budget, the then Chancellor increased the residential stamp duty land tax threshold from £125,000 to £250,000 with effect from 23 September 2022. The first time buyer threshold was also increased by £125,000 to £425,000; it now applies where a first-time buyer buys a home costing £625,000 or less.Unlike many of the mini Budget announcements, the current Chancellor did not reverse this measure. However, he did impose a ti...

Completing the property pages of the self-assessment tax return

Completing the property pages of the self-assessment tax returnIf you receive rental income from properties that you let out, you will need to tell HMRC about it on the property pages of your self-assessment tax return. The exception to this is where you let a furnished room or rooms in your home and the income that you receive is below the rent-a-room limit (£7,500 a year where one person receives the income and £3,750 where it is received by two or more people), or if your total income from ...

Main residence exemption – When does it apply?

Main residence exemption – When does it apply?Generally, when a person sells a home that they have lived in as their main residence, they will not have to pay tax on any gain that has arisen since they purchased the property. This is because of the capital gains main residence exemption which takes the resulting gain outside the capital gains tax charge. However, as for all tax exemptions, it is subject to the associated conditions being met. The fact that a property is occupied as a home is i...

Rising mortgage costs – What tax relief is available?

Rising mortgage costs – What tax relief is available?In a climate of interest rate hikes and rising mortgage rates, property investors will want to ensure that they do not miss out on tax relief where it is available. The rules that provide relief for interest and finance costs depend on the type of let, and the rules on traditional residential lettings are now much less generous than they have been in the past. Where a landlord has a mortgage on a let property, tax relief is only available fo...

New UK corporation tax rates from April 2023

Did you know that the UK corporation tax rates are changed from April 2023?From 1 April 2023, the rate of corporation tax changes from 19% to a variable rate between 19% to 25%, depending on the profits made by your business. This could mean a change to what you will owe in tax for the 2023/24 tax year.What are the main changes to corporation tax?Prior to the change, corporation tax (CT) is charged at 19% for most companies. The only exceptions are companies in specific sectors like banking, oil...

Recent SDLT changes

In his recent mini-Budget, the then Chancellor announced a number of stamp duty land tax (SDLT) changes. What are the changes and how will they affect the SDLT that you will pay on your property purchase?Residential propertySDLT on residential property is payable at the residential rates where the consideration exceeds the residential threshold. A supplement of 3% applies where the purchase is of a second or subsequent residential property costing £40,000 or more which is not an exchange of you...

Are you able to claim small business rate relief for your furnished holiday let?

Holiday homes and holiday lets are treated differently – holiday lets are liable for business rates while holiday home owners must pay council tax. This can work to the landlord’s advantage, particularly if small business rate relief is available. However, owners of holiday properties should be warned – new rules are coming into effect from April 2023 to ensure only those properties that are actually let as holiday accommodation will be within business rates rather than council tax. Nature...

CGT on residential property gains – are you aware of the 60-day limit?

Statistics published by HMRC in August 2022 revealed that in the 2021/22 tax year, 129,000 taxpayers reported residential property disposal using HMRC’s online service, filing 137,000 returns in respect of 141,000 disposal and paying £1.7 billion in tax. However, an estimated 26,500 returns (20%) were filed late, suggesting some ignorance around the rules and the filing deadlines. What do you need to know? Need to report residential property gains Where a chargeable gain is made on the sale ...

Five tax-efficient ways to extract profits

If you operate your business as a personal or family company, you will need to extract some or all of the profits if you wish to use them personally. When it comes to tax, not all profit extraction methods are equal. While personal circumstances will dictate the most efficient way for you to extract profits, the following five extraction methods should be considered as part of a tax-efficient profit extraction strategy. Method 1: salary Paying a small salary can be tax-efficient where the recipi...

What are disbursements for VAT?

There may be occasions where your company makes payments on behalf of a client. These payments are known as ‘disbursements’ and have to be treated correctly for VAT purposes. If your clients are not able to reclaim all their VAT on purchases, it can be beneficial to show these disbursements separately on your invoices. We’ll explain how this process works and the benefits of accounting for disbursements for VAT purposes in this way. How do disbursements work? Disbursements are costs incurr...

Holiday lettings – beware of longer lets

Furnished holiday lettings enjoy favourable tax treatment as long as certain conditions are met, allowing landlords of holiday lets to access certain valuable reliefs, such as business asset disposal relief and business asset rollover relief. The landlord can also claim capital allowances for items such as fixtures, furniture and equipment. As winter approaches and bookings start to dwindle, longer lets can be appealing. But is this wise from a tax perspective? Conditions To qualify as a furnis...

Corporation tax: carry forward or carry back your losses?

If your business makes a loss for tax purposes, that might sound like bad news. But the reality is that you can turn this loss to your advantage, with the right tax planning. In many circumstances, your loss can be offset against other taxable income. This means you can reduce your payable tax, or even get a refund on the tax you’ve already paid. Not a bad outcome – and something that could be a significant financial boost for your company. So, what can you do to offset this loss? What ...

Help if you are struggling to meet your tax bills

Inflation is at a ten-year high and the ensuing cost of living crisis means that many people may be struggling to pay the tax that they owe. If this is you, what can you do about it? While it may be tempting to bury your head in the sand and hope that the bill will magically disappear, this is a really bad idea. Ignoring the problem will in this instance make it worse; HMRC will eventually want their money and have a range of tools available to them to help them achieve this. It is far better to...

Transferring Assets Between Spouses

Although spouses and civil partners are taxed independently, there are some tax breaks available. One of these is the ability for spouses and civil partners to transfer assets between them at a value that for capital gains tax gives rise to neither a gain nor a loss. This can be very useful from a tax planning perspective. No gain/no loss rule The no gain/no loss rule essentially means that where an asset is transferred from one spouse to another, the value of that asset is equal to the transfe...

Your Q4 2022 deadlines for the diary

Staying on the ball with the latest accounting, tax and compliance deadlines helps you stay organised with your returns. Here are the deadlines and cut-off points for Q4 of 2022 to add to your diary.NOTE: If your company’s accounting period is longer than 12 months, the first tax payment deadline is normally 21 months and 1 day after your accounting period started, and the second one is 9 months and 1 day after your accounting period ends.For example, a company with an accounting period runnin...

Why are some expenses not allowed for tax?

As a business owner, you’ll be looking for every opportunity to claim back expenses and minimise your tax liability. But not everything that falls under expenses is tax-deductible.To give you a better understanding of which costs are allowed and which are not allowed, we’ve highlighted the main areas where business owners habitually trip up with their expense claims.How do you know if expenses are allowable?The starting point for working out if expenses are (or are not) deductible for tax is...

What's An Associated Company and How it Can Affect your Tax

Knowing what constitutes an ‘associated company’ is about to become an important piece of information for business owners to know.From 1 April 2023, the rules to decide whether or not you need to pay tax in instalments are changing. Whether you pay in instalments will soon be determined by the number of companies considered to be associated with each other.From that date, the tax rate you pay will depend on your business’s taxable profits and the number of companies considered to be associ...

Take Advantage of the Rent a Room Scheme

If you are feeling the pinch and you have a spare room in your home, you may consider renting it out to earn some additional money to help meet your living costs. As university and college terms start, now is a good time to let as students will be looking for accommodation. Even better, the rent-a-room scheme enables you to earn the money you receive from letting the room tax-free. You cannot use the scheme if you let the room unfurnished (but you may qualify for the property letting exemption o...

Getting Ready for the Extension of Making Tax Digital

Keeping the UK’s tax system running effectively and up to date with advances in technology is no easy task. But the introduction of the Government’s ‘Making Tax Digital (MTD)’ initiative is intended to solve this problem, by moving most taxation over to a digital model.Making Tax Digital for VAT began in April 2019, making it compulsory for VAT-registered companies that met the £85k turnover registration threshold to comply with the MTD rules. But the MTD initiative will soon be ex...

Paying PAYE by Recurring Direct Debit

Employers must act as a tax collector for HMRC, deducting tax, National Insurance and, if applicable, student loan deductions, from their employees’ pay and pay these over to HMRC with their employer’s National Insurance contributions. The payments must reach HMRC by 22nd of the following tax month where payment is made electronically, and by the earlier date of 19th of the following tax month where payment is made by cheque. As penalties are charged if the payments are made late for more th...

Take Advantage of the Dividend Allowance

Where a business is operated as a family company, it is necessary to extract the profits from the company in order to use them outside the company for personal use, such as to meet living expenses. Extracting profits may trigger further tax and National Insurance liabilities, and when formulating a strategy, it is advisable to extract profits in as tax-efficient manner as possible. What this will look like will, to a certain extent, depend on individual circumstances. However, that said, a popul...

Lettings Relief - Do you Qualify?

In the halcyon days of buy-to-let ownership, landlords were able to benefit from lettings relief if they sold a let property which at some point had been their only or main residence. This could reduce the chargeable gain by as much as £40,000. While the relief still exists, it is now only available to landlords who have shared their home with a tenant. Nature of the relief If an individual lives in their home at the same time as a tenant, for example, if they let out a room or several rooms wh...