Archive: 20th February 2025

Employment & Payroll

Business mileage with your own vehicle

Feb 20, 2025 by Terry Harris 0 Comments

Understanding the nuances of tax relief for using your personal vehicle for work can lead to significant savings. By familiarising yourself with HMRC's approved mileage rates you can ensure you are adequately reimbursed and compliant with current regulations.

If you are an employee you may qualify for tax relief if you use your own vehicle, whether it's a car, van, motorcycle, or bike. As a general rule, tax relief is not available for ordinary commuting to and from your regular workplace. However, different rules apply to temporary workplaces, where the expense is typically allowed, as well as for business-related mileage when using your own vehicle.

Employers typically reimburse employees based on a set rate per mile, depending on the mode of transportation. HMRC publishes approved mileage rates for vehicles used on business trips. When employers use these approved rates, the payments made are not considered to be taxable benefits.

If your employer reimburses you at a rate lower than the approved mileage rates, you can claim tax relief for the shortfall using mileage allowance relief. For cars, the approved mileage allowance payment is 45p per mile for the first 10,000 business miles, and 25p per mile for every additional business mile. The approved rates for other modes of transport are 20p per mile for bicycles and 24p per mile for motorcycles.

Additionally, you may receive an extra payment of 5p per passenger per business mile from your employer if you transport colleagues in your vehicle for work-related journeys.

Source:HM Revenue & Customs | 17-02-2025
Business Support

E-invoicing consultation

Feb 20, 2025 by Terry Harris 0 Comments

HMRC together with the Department for Business and Trade (DBT) have launched a new consultation on e-invoicing to encourage its broader adoption among UK businesses and government departments. The consultation will run for 12-weeks and aims to cut paperwork for businesses and help improve productivity.

This is the first time that UK businesses have been invited to have their say on the government’s electronic invoicing (e-invoicing) proposals.

E-invoicing is the digital exchange of invoice information directly between buyers and suppliers. It could help businesses get their tax right first time, reduce invoicing and data errors, improve the accuracy of VAT returns, help close the tax gap and save time and money. It usually results in faster business to business payments, leading to improved cash flow and less paperwork.

HMRC provided the following example of where e-invoicing has improved cash flow. A UK NHS trust where e-invoices are ready for processing within 24 hours, compared to 10 days under paper invoicing. Their e-invoices are typically paid almost twice as quickly than paper invoices, with supplier queries reduced by an average of 15%.

Topics that the government is interested in exploring as part of the consultation include:

  • different models of e-invoicing;
  • whether to take a mandated or voluntary approach to e-invoicing, and what scope of mandate might be most appropriate in the UK and for businesses; and
  • whether e-invoicing should be complemented by real time digital reporting.

With potential benefits like faster payments and fewer errors, e-invoicing could help UK businesses save time and money. If you are interested in sharing your thoughts, the consultation is open until 7 May 2025.

Source:Department for Business and Trade | 17-02-2025
Employment & Payroll

Claiming tax relief for job expenses

Feb 20, 2025 by Terry Harris 0 Comments

Employees working from home may be eligible to claim a tax deduction for certain job-related expenses. If your employer does not cover these costs or allowances, you have the option to claim tax relief directly from HMRC.

You may qualify for tax relief if you are required to work from home. This could apply if your job necessitates living far from the office or if your employer does not have an office. However, tax relief is generally not available if you opt to work from home, even if your employment contract permits it or if your office is occasionally full.

You can claim tax relief for £6 per week (or £26 per month if paid monthly) to cover additional costs associated with working from home, without the need to maintain specific records. The amount of tax relief you receive depends on your highest tax rate. For example, if you pay the basic rate of 20% tax, you will receive £1.20 per week in tax relief (20% of £6). Alternatively, you can claim the actual amount of additional costs incurred, but you must provide evidence to HMRC. HMRC accepts backdated claims for up to four tax years.

You may also be entitled to claim tax relief for using your personal vehicle, whether it is a car, van, motorcycle, or bike. Generally, tax relief is not available for regular commuting to and from your usual workplace. However, the rules are different for temporary workplaces, where such expenses are usually allowable, or if you use your vehicle for other business-related travel. Additionally, you may be able to claim tax relief on equipment purchased for work, such as a laptop, chair, or mobile phone.

Should your employer not cover these expenses or allowances, you can claim tax relief directly from HMRC.

Source:HM Revenue & Customs | 17-02-2025
Inheritance Tax

Probate waiting times halved

Feb 20, 2025 by Terry Harris 0 Comments

The Ministry of Justice (MOJ), together with HM Courts & Tribunals Service (HMCTS) and the Minister for Courts and Legal Services, has announced significant improvements in probate waiting times. Probate is a legal process through which a deceased person’s will is validated and is the starting point for the distribution of funds to beneficiaries.

According to newly published data, the average waiting time for probate in December 2024 was just over four weeks. This represents a sharp reduction from 12 weeks at the close of 2023 and more than eight weeks at the end of June 2024. This achievement is part of a plan to address the backlog of cases that accumulated as a result of the Covid-19 pandemic by recruiting additional staff.

Approximately 80% of grant applications are now processed online, with digital submissions typically taking just over two weeks to complete. For applicants who submit their documents without complications, probate can often be granted in under a week. Meanwhile, the processing time for paper applications has been reduced from more than 22 weeks to just under 15 weeks.

The Minister for Courts and Legal Services remarked:

'We know that handling probate can be tough for families at a difficult period in their lives. That is why so we’ve worked hard to reduce delays and make the process easier. 

By cutting wait times and going digital, we’re ensuring people receive the support they need quickly at what can be a challenging time.

We’re getting public services back on their feet again as part of this Government’s Plan for Change.'

Source:Ministry of Justice | 17-02-2025
Income Tax

Is your extra income taxable?

Feb 20, 2025 by Terry Harris 0 Comments

HMRC has launched a new "Help for Hustlers" campaign to help people who are earning extra income, figure out if they need to pay tax on the additional earnings. The campaign runs until the end of March and focuses on five key areas where tax might apply:

  1. I’m buying or making things to sell.
  2. I’ve got a side gig.
  3. I work for myself with multiple jobs.
  4. I’m a content creator or influencer.
  5. I rent out my property.

The good news is there are two £1,000 tax allowances — one for property income and one for trading income. If you have both types of income, you can claim £1,000 for each.

  • Trading Allowance: If you make up to £1,000 from self-employment, casual services (like babysitting or gardening), or renting out personal equipment (such as power tools), this income is tax-free and does not need to be declared.
  • Property Allowance: If you earn £1,000 or less from property-related activities (like renting out a driveway), you do not need to report it to HMRC or include it in your tax return.

These allowances cover all relevant income before expenses. If your income is under £1,000, it’s tax-free. If you earn more than £1,000, you can choose to either deduct the £1,000 allowance from your income or list your actual expenses when calculating your taxable profit.

However, if your side hustle income goes over £1,000 in a tax year, you may need to complete a self-assessment tax return. Keep in mind this only applies if you are actively trading or selling services. If you are just clearing out some old stuff and selling it, there is usually no need to worry about tax.

Source:HM Revenue & Customs | 17-02-2025
Business Support

Should you incorporate your business?

Feb 17, 2025 by Terry Harris 0 Comments

Deciding whether to incorporate your business in the UK involves evaluating several key factors:

Limited Liability Protection

Incorporating as a limited company creates a separate legal entity, safeguarding your personal assets from business debts and liabilities. This means your personal finances remain protected if the business faces financial difficulties.

Tax Implications

Operating as a limited company can offer tax advantages. Companies pay Corporation Tax on all trading profits at a maximum rate of 25%; for smaller companies, this rate can be as low as 19%. Additionally, dividends distributed to shareholders are not subject to National Insurance, potentially providing a more tax-efficient method of remuneration.

Administrative Responsibilities

Incorporation brings increased administrative duties, including:

  • Regulatory Compliance: Registering with Companies House, filing annual accounts, and submitting confirmation statements are mandatory.
  • Record Keeping: Maintaining detailed financial records is essential to meet legal obligations.
  • Costs: Expenses include registration fees and potential professional services for compliance.

Professional Image and Credibility

A limited company structure can enhance your business's credibility, potentially attracting more clients and investors. This formal structure often instils greater confidence among stakeholders.

Business Growth and Investment

Incorporation facilitates business expansion by allowing:

  • Equity Sharing: Issuing shares to raise capital from investors.
  • Succession Planning: Simplifying ownership transfer, ensuring business continuity.

Conclusion

Incorporating your business offers benefits like limited liability and potential tax efficiencies but comes with added administrative responsibilities. It's crucial to assess your specific circumstances, financial goals, and the current economic environment. Please call if you need help considering your options.

Source:Other | 16-02-2025
National Insurance

Exploring National Insurance Credits

Feb 17, 2025 by Terry Harris 0 Comments

Even if you have never been employed, you might have been eligible for NI credits without realising it. For example, if you have been a carer for a sick or disabled person for more than 20 hours a week, you could have claimed Carer's Credit. Similarly, if you have been receiving certain benefits, such as Jobseeker's Allowance or Employment and Support Allowance, you might have automatically received NI credits.

It's a good idea to review your personal history to see if there are any periods where you might have been eligible for NI credits. If you identify such periods, you can contact the HM Revenue and Customs (HMRC) to see if your NI record can be updated accordingly.

Paying Voluntary Contributions

If you are below the State Pension age and have gaps in your NI record, you can choose to pay voluntary contributions to boost your State Pension entitlement. This can be particularly beneficial if you have some qualifying years but not enough to reach the 10-year minimum.

Before deciding to pay voluntary contributions, it's important to:

  • Check Your National Insurance Record: This will show you any gaps in your contributions and how they affect your State Pension forecast.
  • Evaluate the Cost: Voluntary contributions come at a cost, so you'll need to assess whether the potential increase in your State Pension is worth the expense.
  • Consider Your Health and Life Expectancy: If you're in poor health, it might not be financially beneficial to make voluntary contributions.

You can find more information on paying voluntary NI contributions on the GOV.UK website.

Source:Other | 16-02-2025
Construction Industry Scheme

CIS monthly returns obligations

Feb 13, 2025 by Terry Harris 0 Comments

The Construction Industry Scheme (CIS) requires contractors to deduct tax from subcontractor payments and file monthly returns with HMRC. Even if no payments are made, nil returns must be submitted to avoid penalties.

The CIS is a specialised set of rules governing tax and national insurance for individuals working within the construction industry. This scheme specifically applies to businesses operating as 'contractors' and 'subcontractors' within the construction sector. Under the provisions of the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

One of the primary responsibilities for contractors under the CIS is the submission of monthly returns, which must be completed and filed online. These returns correspond to each tax month, which runs from the 6th day of one month to the 5th day of the following month. The deadline for submitting these returns is 14 days after the conclusion of each tax month.

It is important to note that even if no subcontractors have been paid during a particular tax month, contractors are still required to file a 'nil return.' The necessity to submit returns must be met regardless of whether the contractor typically submits PAYE returns on a quarterly basis. Contractors can file their monthly returns using the HMRC CIS online service or through commercial CIS software. Failure to submit the required returns on time may result in penalties and interest charges.

In cases where a contractor has not made any payments to subcontractors during a given tax month, they are still obligated to submit a 'CIS nil return' or inform HMRC that no return is necessary. Should this 'nil return' situation become a long-term occurrence, contractors have the option to request a period of inactivity from HMRC. This request indicates that the contractor has temporarily ceased employing subcontractors and lasts for a period of six months. It is important to notify HMRC if subcontractor payments resume within this time frame, as this could affect the contractor’s obligations under the scheme.

Contractors are defined as those who make payments to subcontractors for construction work or who have spent more than £3 million on construction in the 12 months following their first payment under the scheme.

Source:HM Revenue & Customs | 10-02-2025
Employee Benefits

Check or update company car tax details

Feb 13, 2025 by Terry Harris 0 Comments

If you use a company car for private travel, it's taxed as a Benefit in Kind (BIK). The tax rate depends on the car’s list price and CO2 emissions—low-emission vehicles get tax breaks. Use HMRC’s online tool to check and update your company car tax details.

If you are provided with a company car that has private use (including commuting), it is considered a "benefit in kind" (BIK) and is subject to taxation. This means that the employee or director using the car must pay tax on the value of the benefit they receive from the car’s private use.

The amount of tax payable is based on the car’s list price, including optional extras and VAT. It also takes into account the CO2 emissions of the car, as cars with lower emissions usually have a lower benefit-in-kind (BIK) tax rate. The more polluting the car, the higher the tax rate will be, and conversely electric and low-emission cars are taxed more favourably.

HMRC’s ‘Check or update your company car tax’ service can be used to:

  • check your company car’s details
  • tell HMRC about any changes to your car since 6 April
  • update your fuel benefit, if your employer pays for fuel

In order to use this service, you will need to know:

  • the car’s list price (including VAT and accessories)
  • to check if your diesel car meets Euro 6d standard
  • CO2 emissions information
  • the zero emission mileage figure or ‘electric range’ – if your hybrid car has a CO2 emission figure of 1 to 50g/km

The service is not available if:

  • you’re part of a car averaging or car sharing scheme
  • your employer is managing benefits and expenses through the company payroll (known as ‘payrolling’)
  • you want to make updates for a company commercial vehicle, such as a van
Source:HM Revenue & Customs | 10-02-2025
Income Tax

Jointly owned property – no partnership

Feb 13, 2025 by Terry Harris 0 Comments

Tax on rental income from jointly owned property depends on ownership shares, unless part of a partnership. Married couples default to a 50/50 split unless they notify HMRC of a different income allocation based on actual ownership proportions.

When property is jointly owned with one or more individuals, the taxation of rental income depends on whether the rental activity is considered a partnership. Simply owning property together does not automatically qualify the arrangement as a partnership.

If the jointly owned property is not part of a partnership, the allocation of any profit or loss from the jointly owned property is typically based on each person's ownership share in the property. However, the co-owners can agree to divide the profits and losses differently than their ownership proportions, so it’s possible for one person to receive a larger or smaller share of the profits or losses than their share in the property itself. For tax purposes, the profit and loss share must reflect the actual agreement made by the owners.

In cases where the joint owners are married or in a civil partnership, the profits and losses are generally treated as being divided equally between them, unless:

  • The entitlement to the income and the ownership of the property are split unequally between the spouses or civil partners, and
  • Both parties must inform HMRC that they wish the division of profits and losses to align with their respective ownership shares in the property.

If these conditions are met, the profit and loss distribution will follow the agreed-upon ownership percentages, rather than the default equal split for married couples or civil partners.

Source:HM Revenue & Customs | 10-02-2025