TAX TIPS & ACCOUNTANCY NEWS

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Q: I’ve started a new business this year selling my hand-made craft items. At this stage it’s only earning me a relatively modest income. Up until now my profits are just £600 but I do have a big order that is set to earn me £3,500 in the next two months. I’m slightly confused about what I should be declaring in a tax return. A: Starting a new business brings many questions and complexities around tax. Although you haven't said it for certain, it sounds like you haven't had to file a Self-Assessment Tax Return before. So, to take you through the essentials, based on the information you have provided, this is what you need to know. If you are earning less than £1,000 in a tax year from self-employment, you don't need to submit a tax return and there is no income tax to pay. However, as it sounds like this is a venture you intend to pursue longer term and to grow into a bigger business, you probably will need to eventually. The Self-Assessment deadline that is just elapsing – i.e. January 31, 2025, covered the tax year 2023-24. If you'd made more than £1,000 in profit from self-employment income between April 2023 and April 2024, you'd have needed to declare this to HMRC by the latest deadline. But as you did not, that is not relevant in your case. It sounds like the £600 you earned came between April 2024 and January 2025. If the money you're expecting does come in before April 2025, that means all of the earnings – a total of £4,100 – would then need to be declared for the 2024/25 tax year. The deadline for filing your tax return for 2024/25 will be 31 January 2026. A key detail that you haven't made clear is how much of the £3,500 you're expecting will be profit. If your overall profits for the 2024/25 tax year period remain below the £1,000 threshold or 'trading allowance', as it's also known, then you won't have to declare it to HMRC in January 2026 either. Of course, it's very important to understand how to file your tax return correctly to fully comply with the rules and avoid any penalties. It's also important to completely understand your expenses and other costs that are part of filing the Self-Assessment forms. It's always wise to consult an accountancy professional, especially when you're doing it for the first time. Please contact our team if you'd like further information on how we can help. Q: I recently tied the knot with my long term partner and we’re now in a civil partnership. A friend mentioned that there’s a possible tax relief my partner and I could take advantage of. She is the higher earner, earning £40,000 per year. I earn £11,500. What’s the position? How much relief, if any, can we benefit from? A: Firstly, congratulations on your good news! You are correct that you and your partner now qualify for a tax relief called Marriage Allowance. Civil partnerships are also included within this – despite the somewhat misleading title in this case. The fact you earn £11,500 puts you below the income tax threshold of £12,570 – otherwise known as the Personal Allowance. This is the amount you're allowed to earn in a tax year before paying income tax. Your partner's income being £40,000, with the same Personal Allowance of £12,570, means she has taxable income of £27,430. So that's the total amount you pay tax on as a couple. When you claim Marriage Allowance you can transfer £1,260 of your unused Personal Allowance to her. Your Personal Allowance becomes £11,310 and your partner gets what's known as a 'tax credit' on £1,260. This means you will now pay tax on £190, but she will only pay tax on £26,170 rather than £27,430. So that's a combined £26,360 of taxable income between you. The result is £1,070 less of your combined earnings is taxed. Without Marriage Allowance, you pay nothing and she pays tax on £27,430 at 20% which amounts to £5,486 of tax owed. With Marriage Allowance, you pay a small sum of tax – just £38 but she pays 20% on £26,170 which means the tax she pays has gone down to £5,234. So, when you put the combined figures together (£38 and £5,234), that's £5,272 owed, rather than £5,486. So, ultimately you save £214 in total as a couple. Q: Last year I earned £4,500 approximately from making interest on my savings. I’ve never come close to earning anywhere near that much previously so I’m not sure about the rules. I realise that there are potential tax implications but I’m not sure exactly what I need to do. Can you please explain? A: There are a few things to mention here for yourself and others who want to understand about the tax implications on interest made from savings. Firstly, there's something called the Starting Rate for savings. But it depends on your circumstances – specifically what you are earning – whether you're eligible for it or not. For those of you who are eligible, you can earn up to £5,000 in savings interest and not have to pay tax on it. In your case, we won't be able to say for sure whether this applies or not as we don't know what you currently earn per year – or if you are still in work or retired. Essentially, the higher your income – be that your salary from a job or a pension or something else, the less you are eligible to claim on the Starting Rate. In fact, you will not be eligible for the Starting Rate if your total income per annum is £17,570 or more. But if it is lower, then the maximum is £5,000. And for every £1 of income above your annual Personal Allowance of £12,570, your Starting Rate goes down by £1. For example, say you earn £15,000 per year in terms of a salary. To calculate what your Starting Rate is you'd subtract the Personal Allowance, giving you £2,430. This is the figure by which you would reduce your Starting Rate. So, the left over amount - £2,570 – is the Starting Rate you qualify for. In your case, therefore, having earned £4,500 in savings interest, you are over the limit. So, you'd have £1,930 in savings interest that you need to pay tax on. However, that is only taking the Starting Rate into account. There's also the Personal Savings Allowance. For basic rate taxpayers that is £1,000. And it can be added to the figure for the Starting Rate for savings. In the scenario outlined above, this extra allowance would reduce the amount of savings interest that you need to pay tax on to £930. As alluded to, we'd need to know more about your personal situation to provide a full and accurate answer on your tax obligations in regard to your question, but please give our team a call and we'd be happy to help.

Newsletter issue – January 2025 Q: I use various online marketplaces to sell my unwanted items - from clothes to old phones and various other things. I'm a bit concerned though by stories I've read in the media that rules are changing and I may have to start filing a tax return. That's not something I've ever had to worry about before. Can you help me understand if my fears are justified? A: There has been a lot written in the papers over the last year or so about this issue and, with the angle that we see often taken in these reports, it's understandable that people like yourself could feel worried about the implications. Millions of people do what you do. It's become an everyday activity to sell second hand things online. However, HMRC has become so concerned itself about what it feels are misleading stories in the press, that it's recently issued a long statement to try to reassure and clarify the matter. The HMRC website stated: 'People selling unwanted items online can continue to do so with confidence and without any new tax obligations.' The reason these concerns have arisen is due to the fact that a new process is taking effect in January. It means online platforms have to share certain sales data with HMRC. These new measures 'generated inaccurate claims that a new tax was being introduced,' officials said, adding that 'absolutely nothing has changed for online sellers'. However, you and others do need to be aware that if you're buying goods for re-sale or make things with the intention of selling for profit and you garner a total income from this activity of over £1,000 in one tax year (before deducting expenses), you may need to register for Self-Assessment and fill out a tax form. HMRC stated: 'Those who sold at least 30 items or earned roughly £1,700 (equivalent to €2,000), or provided a paid-for service, on a website or app in 2024 will be contacted by the digital platform in January to say their sales data and some personal information will be sent to HMRC due to new legal obligations.' Angela MacDonald, HMRC's Second Permanent Secretary and Deputy Chief Executive Officer, had this to say: 'We cannot be clearer - if you are not trading and just occasionally sell unwanted items online - there is no tax due. As has always been the case, some people who are trading through websites or selling services online may need to be paying tax and registering for Self-Assessment.' So, whilst it's worth looking again at the criteria above that may mean you're in need of registering, it sounds as though, as for many people around the country, you don't need to be concerned or change your habits in this regard. Q: I have recently started a business which offers consultancy for building and engineering. I'm running the business side for my new partner, who is the building consultant. So, I'm not the expert in the field and I'm trying to get a fuller understanding of our potential obligations with regard to the Construction Industry Scheme (CIS) and the need for registration. Can you provide any guidance? A: For most people in the building and construction industry, the CIS is a key piece of regulation that is very important to understand and comply with. It is mandatory for constructors to register for the CIS. However, there are a number of exceptions, depending on certain roles and types of function. The work of certain professionals may be excluded, meaning they do not have to be registered for the scheme. However, this is the case 'only if they are acting purely as consultants', according to the HMRC guidelines, which adds: 'Typically, this would include the production of designs, plans, technical assessments and reports relating to construction projects including site testing.' Furthermore, under 'operations excluded', HMRC lists 'professional work of architects, surveyors or consultants in building, engineering, decoration (interior or exterior) or landscaping.' Looking at these guidelines, it would appear your new venture would fall outside of the requirements of the CIS and you and your partner would not need to register. However, it is wise to be cautious because the guidelines also state the following: 'Any work that goes beyond a consultative or advisory role and becomes the supervision of labour or the co-ordination of construction work using that labour is not excluded from the scheme.' So, if your partner feels their work is broader, at any time or to any extent, than simply consultancy, it's certainly worth seeking more detailed advice. Please give our team a call if you'd like to explore the regulations and compliance more deeply. And for anyone else in a similar position, it's worth noting that there are a few other examples of exceptions in the CIS where you do not have to register if you only do certain jobs. These include: architecture and surveying scaffolding hire (with no labour) making materials used in construction including plant and machinery delivering materials carpet fitting work on construction sites that's clearly not construction - for example, running a canteen Q: I'm in the process of starting a new business and want to ensure I'm fully prepared for upcoming compliance changes. I'm aware requirements for reporting benefits in kind (BiKs) are changing, but how will it affect small businesses like mine? Specifically, do I need to report loans or accommodation benefits immediately? A: There was some news around this topic at the beginning of 2024, with the Government releasing proposals to make it compulsory to do this type of reporting by using software. The announcement at that time stated employers will be required to report and pay Income Tax and Class 1A NICs on most BiKs in real-time on the 'Full Payment Submission'. However, don't fret; it's not immediate. The intention was to begin in April 2026, giving everyone some breathing space. But an update from the new Government means that it now looks like there should be a further cushion before compliance becomes strictly enforced. The mandatory use of payroll software will now be phased in from April 2026. And, pertinent to your question on loans, you won't have to payroll loans and accommodation at that stage. For those who want to on a voluntary basis, you'll be able to report employment-related loans and accommodation through payroll software from April 2026. As to when payrolling loans becomes mandatory, HMRC had this to say in a December bulletin: 'no decision has been made as to when we will mandate the reporting of loans and accommodation through payroll software - careful consideration will be given to make sure sufficient notice of any change will be provided.' In the meantime, if employers do not wish to payroll these, there will be a modified P11D and P11D(b) available. There is likely to be further news in the new year, with officials promising information on plans to publish draft legislation and technical specifications.

Q: I earn £62,000 and have been offered a bonus that would increase my total income to £95,000. How will this affect my tax, and are there any higher tax bands I should be aware of? Am I right that bonuses are taxed more than normal income A: No, bonuses are taxed just like your regular salary. It's not taxed at a higher rate but neither is there an exemption for them. So, if you get a bonus, it's added to your total income and taxed at the same rates. When your income rises to £95,000, here's how it will affect your tax: You'll pay no tax on the first £12,570 due to the personal allowance. You'll then pay 20% tax on the next £37,700 (the portion of income between £12,570 and £50,270). Any amount between £50,270 and £95,000 will be taxed at 40%. Since your income is under £100,000, you won't lose any of your personal allowance. If your income were to exceed £100,000, you would start losing your personal allowance, thereby increasing your effective tax rate. The additional 45% tax rate applies only to income over £125,140. Q: I'm a long-term non-domiciled resident in the UK - how will the 2025 changes impact my tax status? A: Firstly, you're right to say there are changes coming next year that will affect you and any others who are classified as non-domiciled. The issue of 'non-doms' - referring to a person's tax status, not nationality, citizenship or resident status - has been highlighted politically for several years. Former Chancellor Jeremy Hunt surprisingly announced changes at the Budget earlier this year, in an attempt to steal Labour's thunder after they had signalled they would scrap the status. The new Government is going ahead with the plans Mr Hunt laid out, with a few changes. The existing system will be replaced by a new 4-year foreign income and gains (FIG) regime for individuals who become UK tax resident after a period of 10 tax years of non-UK residence. The rule changes set for April 2025 will significantly alter your tax situation. Currently, you may be taxed only on UK income and any foreign income you bring into the UK (remittance basis). However, from 2025, you will only be able to use this remittance basis for the first four years of UK residence. After that, all your worldwide income will be taxed, regardless of whether it's remitted to the UK. This will likely increase your tax liability substantially, so it's important to review your financial arrangements now. It's also worth noting that the previous Government's plan offered a 50% reduction in foreign income subject to tax for individuals who lose access to the remittance basis in the first year of the new regime. But the new Government has axed that element. And for any UK resident individuals ineligible for the new scheme or who choose not to make a claim for a tax year will be 'subject to Capital Gains Tax (CGT) on foreign gains in the normal way', the Government has said. Q: My company is considering paying me in cryptocurrency. What are the tax implications for me? A: If your employer pays you in cryptocurrency, it's treated as taxable income by HMRC. This means you'll owe Income Tax and National Insurance Contributions (NICs) just as you would for regular salary payments. However, the type of cryptocurrency is important because it can be either classified as a 'readily convertible asset' (RCA) or not. It will be deemed RCA if the crypto can be easily exchanged for cash. In this case, it will be subject to Income Tax and National Insurance Contributions (NICs) via PAYE, just like regular salary. The value of the cryptocurrency at the time of payment will be calculated in GBP, and tax will be deducted via PAYE. However, if the cryptocurrency is not considered an RCA, the responsibility to report and pay the appropriate tax to HMRC may fall to you rather than your employer. PAYE deductions might not apply. So, tax is still owed, it's just a question of how and when it is paid. It's a question of the method of collection (PAYE vs. self-reporting) that differs. Later, if you decide to sell or convert the cryptocurrency, you may also be liable for Capital Gains Tax (CGT) if its value has increased. Cryptocurrency's volatility means it's important to carefully consider how these tax liabilities may fluctuate before agreeing to be paid this way.

Q: I earn £62,000 and have been offered a bonus that would increase my total income to £95,000. How will this affect my tax, and are there any higher tax bands I should be aware of? Am I right that bonuses are taxed more than normal income A: No, bonuses are taxed just like your regular salary. It's not taxed at a higher rate but neither is there an exemption for them. So, if you get a bonus, it's added to your total income and taxed at the same rates. When your income rises to £95,000, here's how it will affect your tax: You'll pay no tax on the first £12,570 due to the personal allowance. You'll then pay 20% tax on the next £37,700 (the portion of income between £12,570 and £50,270). Any amount between £50,270 and £95,000 will be taxed at 40%. Since your income is under £100,000, you won't lose any of your personal allowance. If your income were to exceed £100,000, you would start losing your personal allowance, thereby increasing your effective tax rate. The additional 45% tax rate applies only to income over £125,140. Q: I'm a long-term non-domiciled resident in the UK - how will the 2025 changes impact my tax status? A: Firstly, you're right to say there are changes coming next year that will affect you and any others who are classified as non-domiciled. The issue of 'non-doms' - referring to a person's tax status, not nationality, citizenship or resident status - has been highlighted politically for several years. Former Chancellor Jeremy Hunt surprisingly announced changes at the Budget earlier this year, in an attempt to steal Labour's thunder after they had signalled they would scrap the status. The new Government is going ahead with the plans Mr Hunt laid out, with a few changes. The existing system will be replaced by a new 4-year foreign income and gains (FIG) regime for individuals who become UK tax resident after a period of 10 tax years of non-UK residence. The rule changes set for April 2025 will significantly alter your tax situation. Currently, you may be taxed only on UK income and any foreign income you bring into the UK (remittance basis). However, from 2025, you will only be able to use this remittance basis for the first four years of UK residence. After that, all your worldwide income will be taxed, regardless of whether it's remitted to the UK. This will likely increase your tax liability substantially, so it's important to review your financial arrangements now. It's also worth noting that the previous Government's plan offered a 50% reduction in foreign income subject to tax for individuals who lose access to the remittance basis in the first year of the new regime. But the new Government has axed that element. And for any UK resident individuals ineligible for the new scheme or who choose not to make a claim for a tax year will be 'subject to Capital Gains Tax (CGT) on foreign gains in the normal way', the Government has said. Q: My company is considering paying me in cryptocurrency. What are the tax implications for me? A: If your employer pays you in cryptocurrency, it's treated as taxable income by HMRC. This means you'll owe Income Tax and National Insurance Contributions (NICs) just as you would for regular salary payments. However, the type of cryptocurrency is important because it can be either classified as a 'readily convertible asset' (RCA) or not. It will be deemed RCA if the crypto can be easily exchanged for cash. In this case, it will be subject to Income Tax and National Insurance Contributions (NICs) via PAYE, just like regular salary. The value of the cryptocurrency at the time of payment will be calculated in GBP, and tax will be deducted via PAYE. However, if the cryptocurrency is not considered an RCA, the responsibility to report and pay the appropriate tax to HMRC may fall to you rather than your employer. PAYE deductions might not apply. So, tax is still owed, it's just a question of how and when it is paid. It's a question of the method of collection (PAYE vs. self-reporting) that differs. Later, if you decide to sell or convert the cryptocurrency, you may also be liable for Capital Gains Tax (CGT) if its value has increased. Cryptocurrency's volatility means it's important to carefully consider how these tax liabilities may fluctuate before agreeing to be paid this way.

Q: I earn £62,000 and have been offered a bonus that would increase my total income to £95,000. How will this affect my tax, and are there any higher tax bands I should be aware of? Am I right that bonuses are taxed more than normal income A: No, bonuses are taxed just like your regular salary. It's not taxed at a higher rate but neither is there an exemption for them. So, if you get a bonus, it's added to your total income and taxed at the same rates. When your income rises to £95,000, here's how it will affect your tax: You'll pay no tax on the first £12,570 due to the personal allowance. You'll then pay 20% tax on the next £37,700 (the portion of income between £12,570 and £50,270). Any amount between £50,270 and £95,000 will be taxed at 40%. Since your income is under £100,000, you won't lose any of your personal allowance. If your income were to exceed £100,000, you would start losing your personal allowance, thereby increasing your effective tax rate. The additional 45% tax rate applies only to income over £125,140. Q: I'm a long-term non-domiciled resident in the UK - how will the 2025 changes impact my tax status? A: Firstly, you're right to say there are changes coming next year that will affect you and any others who are classified as non-domiciled. The issue of 'non-doms' - referring to a person's tax status, not nationality, citizenship or resident status - has been highlighted politically for several years. Former Chancellor Jeremy Hunt surprisingly announced changes at the Budget earlier this year, in an attempt to steal Labour's thunder after they had signalled they would scrap the status. The new Government is going ahead with the plans Mr Hunt laid out, with a few changes. The existing system will be replaced by a new 4-year foreign income and gains (FIG) regime for individuals who become UK tax resident after a period of 10 tax years of non-UK residence. The rule changes set for April 2025 will significantly alter your tax situation. Currently, you may be taxed only on UK income and any foreign income you bring into the UK (remittance basis). However, from 2025, you will only be able to use this remittance basis for the first four years of UK residence. After that, all your worldwide income will be taxed, regardless of whether it's remitted to the UK. This will likely increase your tax liability substantially, so it's important to review your financial arrangements now. It's also worth noting that the previous Government's plan offered a 50% reduction in foreign income subject to tax for individuals who lose access to the remittance basis in the first year of the new regime. But the new Government has axed that element. And for any UK resident individuals ineligible for the new scheme or who choose not to make a claim for a tax year will be 'subject to Capital Gains Tax (CGT) on foreign gains in the normal way', the Government has said. Q: My company is considering paying me in cryptocurrency. What are the tax implications for me? A: If your employer pays you in cryptocurrency, it's treated as taxable income by HMRC. This means you'll owe Income Tax and National Insurance Contributions (NICs) just as you would for regular salary payments. However, the type of cryptocurrency is important because it can be either classified as a 'readily convertible asset' (RCA) or not. It will be deemed RCA if the crypto can be easily exchanged for cash. In this case, it will be subject to Income Tax and National Insurance Contributions (NICs) via PAYE, just like regular salary. The value of the cryptocurrency at the time of payment will be calculated in GBP, and tax will be deducted via PAYE. However, if the cryptocurrency is not considered an RCA, the responsibility to report and pay the appropriate tax to HMRC may fall to you rather than your employer. PAYE deductions might not apply. So, tax is still owed, it's just a question of how and when it is paid. It's a question of the method of collection (PAYE vs. self-reporting) that differs. Later, if you decide to sell or convert the cryptocurrency, you may also be liable for Capital Gains Tax (CGT) if its value has increased. Cryptocurrency's volatility means it's important to carefully consider how these tax liabilities may fluctuate before agreeing to be paid this way.

: I'm interested in investing in a startup and I’ve heard about the Seed Enterprise Investment Scheme. I'm considering investing £30,000 in a company that qualifies this tax year. What tax relief can I expect? A: You're right in identifying that The Seed Enterprise Investment Scheme (SEIS) may be helpful in what you're looking to do, offering as it does, some tax relief. For the 2024/25 tax year, you can claim income tax relief of 50% on eligible investments up to £200,000. That means, for your £30,000 investment, you could receive £15,000 in income tax relief. Additionally, there are two reliefs related to Capital Gains Tax that may apply. Firstly, disposal relief. If this is due, and your SEIS shares are held for at least three years and the company qualifies, any capital gains from their will be exempt from CGT. Secondly, there's reinvestment relief, where a gain coming from the 2023/24 tax year on disposing an asset is reinvested in shares in a company on which you get SEIS Income Tax Relief. Q: I'm planning to rent out a room in my home for £9,000 this year. Am I right in thinking that some of this income will be tax-free? If so, what are the rules? A: For anyone in your position it's worth knowing about the Rent-a-Room Scheme. This allows you to earn up to £7,500 tax-free from letting furnished accommodation in your home for the 2024/25 tax year. Since you're planning to rent out a room for £9,000, the first £7,500 of this income will be tax-free. The remaining £1,500 will be subject to income tax based on your marginal tax rate. The tax exemption for this type of income under £7,500 is automatic, so you don't need to do anything. But when it goes over £7,500, you must inform HMRC and choose whether to opt into the scheme by submitting a tax return. Or alternatively, you can choose to be taxed on the rental profit (total income minus allowable expenses) if that results in a lower tax liability. It's also worth noting that the £7,500 tax-free allowance is halved if you share the income with your partner or someone else. You're also eligible to opt into the scheme if you run a bed and breakfast or a guest house, but you can't use it for homes converted into separate flats. If you'd like more information about tax issues relating to property and rental income, do get in touch. Q: I run a small business. Due to a cashflow issue, we're struggling to pay our next VAT bill in full and we've only got 20 days until payment is due. What are our options? A: It can be difficult for any business when something like this arises. However, there is a possibility that you can come to an agreement with HMRC to set up a phased payments plan. Since the start of the year if a business that pays VAT proposes a plan to pay in instalments within 15 days of the payment being due, and HMRC agrees it, it would not get charged a late payment penalty. That is, of course, dependent on sticking to the conditions of the agreed plan. HMRC might cancel it if you don't. So, although you're running out of time, you could be eligible for this support, but it's vital you contact HMRC as quickly as possible. Otherwise, you could face penalties. Late payments attract interest charges and they're applicable from day one it's overdue. This is what HMRC says: "If HMRC agree a Time to Pay arrangement with you, it can mean lower, or no, late payment penalties. It can cover all outstanding amounts due, including penalties and interest." Get in touch with the Payment Support Service to discuss your finances and the amount you can pay off each month of your outstanding VAT bill. If you need any further assistance understanding VAT rules, payments and penalties, please contact our team.

Q: What is the Patent Box regime and what are the benefits for businesses in the 2024/25 tax year? A: The Patent Box regime allows UK companies to pay a reduced corporation tax rate on profits earned from patented inventions. In the 2024/25 tax year, the effective tax rate is 10%. According to HMRC, the regime is designed to "encourage companies to keep and commercialise intellectual property in the UK". If your company earns £100,000 in profits from patented products, the tax liability would be £10,000 under the Patent Box, compared to £25,000 at the standard 25% rate. To qualify, the company must own or exclusively license the patents and actively develop them. Plus, they must make a profit from them. Furthermore, the company must have undertaken qualifying development on the patents. Incidentally, to give an idea of how widely this scheme is used, the most recent figures, published by the Government last year, showed in the tax year 2021 to 2022, an estimated 1,510 companies elected into Patent Box. If you'd like to delve into the details of the regime and how your business can benefit, please contact our team. Q: Dividends: I am set to earn £39,570 for my basic salary in the current tax year. On top of that, I’m due to receive for the first time some dividend payments from shares I own in a company – around £5,000. What are the tax implications for me this year? A: The first thing to mention here is that you have a Dividend Allowance each year. Unfortunately for you and other dividend beneficiaries that has decreased for the 2024/25 tax year. It was £1,000 but it is now just £500. What it means is that you won’t have to pay tax on the first £500 of the £5,000 you’re set to earn from dividends. For the remainder of that sum – the £4,500 of dividends – the amount of tax you pay comes down to the Income Tax Band that you fall in. Helpfully, you've mentioned your basic salary. So, we can see you're in the basic rate (20%) Income Tax Band category. For the dividends, that means you must pay a rate of 8.75% on your £4,500 sum. Hence, you will pay £393.75 in tax on your dividends. For anyone else reading this with dividends, it's worth noting that you would need to pay 33.75% on your dividends if your income puts you in the Higher Rate Income Tax Band or 39.35% if you're in the Additional Rate category. If you only earn up to £500 in Dividends (this tax year's allowance), and you don't already file a Self-Assessment Tax Return there's no requirement to inform HMRC or take any other action. Those who earn between £500 or £10,000 from dividends and who don't already normally fill out a Self-Assessment Tax Return need to tell HMRC about it. You can call their helpline, and there are two options for payment of tax. Firstly, via filling out a Self-Assessment Tax Return. Or, by having HMRC adjust your tax code to automatically take it from your salary or pension. For Dividends over £10,000 you must complete a tax return. For more help on understanding Dividends, please contact our team. Q: My company has missed the deadline to pay our employers’ PAYE bill. We owe £23,000 but the debt is only for the last year. What can we do? A: In cases like this, there is something called a Time to Pay arrangement, which HMRC may allow you to make use of. This gives businesses extra time to settle their bill by paying back in monthly instalments that are more affordable. The rules governing this have been made less stringent in recent times, widening the eligibility. Looking at the list of criteria, it would seem your business should qualify for this particular support – and you can set it up online. But that is predicated on checking the points below. The Time to Pay arrangement is open for companies that pay via PAYE if they have missed the deadline to pay an employers' PAYE bill, as in your case. You must owe £50,000 or less and have debts that are 5 years old or less – both of which in your case, is correct). However, you also must be registered for digital services and not have any other payment plans or debts with HMRC. Lastly, to qualify, you must have sent any outstanding employers' PAYE submissions and Construction Industry Scheme returns that are still due.

Q: I'm a business owner. I've recently purchased new equipment for my business costing £74,000. Specifically, could you explain how the Annual Investment Allowance (AIA) works for the 2024/25 tax year and how I can claim it for these purchases? A: Businesses can claim capital allowances for things that they buy and intend to keep to use for the purposes of the business. Officially described by HMRC as ‘plant and machinery’, in most cases you can deduct the full costs of these items from your profits. That is thanks to the Annual Investment Allowance (AIA) that you have correctly identified as the key tax relief here. It’s designed to encourage businesses to invest in their operations. So, the latest rules for the 2024/25 tax year give businesses an AIA limit of £1,000,000. This means you can invest up to £1,000,000 in qualifying assets and receive 100% tax relief on this expenditure. So your £74,000 outlay is well within the limits and you can deduct that entire amount from your profits. By utilizing the AIA, your Corporation Tax will be lower. Just be sure what you’ve bought counts as ‘plant and machinery’. HMRC says it needs to be “items that you keep to use in your business” and can include parts of a building considered ‘integral’. It can also be the costs for demolishing plant and machinery and commercial vehicles (excluding cars). An example of what would not count is something used for entertainment such as a yacht or karaoke machine. Items you lease also do not count, unless you have a hire purchase contract. To claim the AIA, you need to add it to your company’s tax return (CT600) for the relevant accounting period. So, we advise to keep detailed records of the expenditure and the assets purchased. If you need any further information or help regarding future capital allowances, please do get in touch with our team. Q: I’m self-employed and have heard about the benefits of using the Simplified Expenses system for calculating some of my business expenses. Could you explain how this works for the 2024/25 tax year and what kind of expenses I can claim. A: The Simplified Expenses scheme, run by HMRC, boils down to this: it allows self-employed individuals to calculate certain business expenses using flat rates rather than actual costs. Both sole traders and business partnerships without companies as partners can take advantage. It can be advantageous in saving time, cutting down on keeping records and make some expense calculations more straightforward. Flat rates can be used for business use of your home (working from home), costs for some vehicles used in your business, and living on your business premises. You record these on your Self-Assessment Tax Return. If you work from home, you can use a flat rate based on the number of hours you work there each month: 25 to 50 hours: £10 per month. 51 to 100 hours: £18 per month. 101 or more hours: £26 per month. So, for example, if you work 60 hours per month from home, that would mean calculating £18 per month x 12 months - totalling £216 per year that you can claim as a business expense on your tax return. If you use your personal vehicle for business purposes, you can claim a flat rate per mile. For cars and vans, it’s 45p per mile for the first 10,000 miles, then 25p per mile. And for motorcycles, it’s 24p per mile. Simplified Expenses can not be used for all types of expenses. Other business costs must still be calculated using actual costs. For example, these might include buying equipment or advertising. The scheme is optional, so you can use actual costs for all of the above, if you prefer. Q: Our company has previously claimed R&D tax relief under the Research and Development Expenditure Credit (RDEC) scheme but I’m aware that there have been changes for the 2024/25 tax year. Can you please summarise what we should be aware of and how this might affect our next claim? A: You’re correct in saying there have been some changes – arguably quite significant ones for the new tax year in the area of Research and Development (R&D) tax relief. That’s because we now have a new system combining the Research and Development Expenditure Credit (RDEC) and the small or medium enterprise (SME) R&D relief. The merged scheme is designed to simplify and improve things, with a single set of qualifying rules for most businesses. The scheme “establishes an above-the-line credit that allows companies to claim for their qualifying R&D costs, including contracted out R&D, and incorporates the more generous SME scheme PAYE and National insurance contributions cap,” HMRC states. For businesses like yours using the old RDEC system, the new system is quite a bit more generous compared to the past. Before April 2023, the RDEC rate was 13%. Now, there is a single rate of 20% above the line credit for the new RDEC scheme. The new regime for claims comes into effect for accounting periods starting after 1 April 2024. For a deeper understanding of how your business could benefit from R&D tax reliefs, do drop us a line and our team can guide you through in more detail. The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own (or paste your own from a different source). To control the color or size of this text, please change the global colors or text size under the Design section from the left menu of the editor.