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Making Tax Digital for Income Tax Self Assessment (MTDfITSA). Are you ready?

Making tax digital for Income Tax Self Assessment

The Government has now pencilled in what they regard as a firm date to implement MTD for ITSA, for all landlords and business owners that have an income above £10,000.

The next accounting period starting on or after 06/04/2023 that meet the above mentioned criteria will need to be compiled & submitted via MTD-compatible software.

If you are self-employed or a landlord with a turnover greater than £10k, how will MTD affect you?

1.  You will need to submit a quarterly summary of your businesses income & expenses to HMRC using MTD-compliant software.  Yes, you read that correctly.  No longer can you do your tax return in one go, with a lot of our customers leaving it to December or even January before they come to see us.  As your tax agents, we would need your business transactions every 3 months, to compile, compute, and submit through to HMRC.

The timing of the quarterly updates is determined by the accounting period of the business but typically the 4 quarters will be:

  • 6 April to 5 July
  • 6 July to 5 October
  • 6 October to 5 January
  • 6 January to 5 April

2.  All your income and expenses will need to be individually logged electronically.  The technical term used is that every business transaction will have an ‘electronic signature’.  These signatures will then be submitted to HMRC every 3 months and you will receive an estimated tax projection for the year based on the information provided.

3.  At the end of the year, any non-business information, foreign income, other income, etc is added to finalise your tax affairs and submitted using the MTD-compatible software.  This replaces the need for a Self Assessment tax return.  You will then have Read more

Making Tax Digital – A New Time Line

Making Tax Digital (‘MTD’) was announced as the new initiative by HMRC to revolutionise and modernise the tax system in the UK.

MTD centres around keeping digital financial records that can then be accessed by software to calculate and submit taxes through to HMRC. The goal is that there will be direct ‘digital link’ between the financial record and the software used to calculate and submit the records and therefore ensuring an accuracy in the figures being generated.

With initial teething problems, MTD for VAT started back in April 2019, and as a result of various delays around Brexit & COVID-19, it still has not sailed out of its ‘soft-landing’ period.

On 21st July 2020 the Treasury published a 10-year plan to modernize the UK’s tax system which outlines a blueprint for the transition of the UK’s tax system into the digital age.

MTD for VAT

Introduced in April 2019, MTD for VAT had a soft-landing period where the rules for this ‘digital-link’ were relaxed.  Prior to COVID-19, April 2020 was the date stipulated where all digital links were to be in place for submissions.

As a direct consequence of COVID-19, it has been now been stated that as of 1st April 2021, the ‘soft-landing’ period comes to an end and all VAT registered businesses submitting VAT returns will need to ensure they have these digital links in place for their submissions.

Furthermore, from April 2022, MTD for VAT will apply to all VAT registered businesses and not just those that have a turnover greater than the VAT threshold.

MTD for Income Tax

The 10-year plan targets 6th April 2023 for self-employed businesses and unincorporated landlords to begin reporting Read more

The Early Bird Gang

HMRC expects people to do tax returns for various reasons;

  • Those that have an income outside of a PAYE scheme (i.e. self-employed)
  • High earners on PAYE schemes, earning above £100K
  • Company Directors & Shareholders
  • Landlords who have rental incomes

The tax returns calculated generally run between the dates 06/04/xx through to 05/04/xy, the calculation, submission, and payment deadline  of taxes owed to HMRC (or you), would need to be submitted at the latest 31/01/xz, before penalties & interest are imposed.

Each year, the Government announces a tax free allowance, which is the amount you can earn before your income starts to get taxed.  The tax free allowance for 2018/19 is £11,850.00.  However, this allowance decreases by £1 for every £2 earned above £100k, meaning by the time your reach £125K, the allowance is £0.

The amount of tax paid on income is also specified by the government & is subject to change with announcements made generally in the Budget statements.  For 2018-19 the rates are as follows;

Tax Rate (Band) Taxable Income Tax Rate
Personal allowance Up to £11,850 0%
Basic rate £11,851 to £46,350 20%
Higher rate £46,351 to £150,000 40%
Additional rate Over £150,000 45%

*For 2019-20 the new rates & tax free allowance can be found HERE.

Since 6th April 2019, you would have been able to calculate & submit your 2018/19 tax return to HMRC, so since then the Tax Agents at Taxfile have been busy filing away for the early birds.   We have been open on Saturdays too, to keep up with the influx of tax returns & CIS returns.

However, the last Saturday that we will be open will be 29th June.  If you would like to join our ‘gang’ of Early Bird & can only come in on Saturdays, you only have a few weekends left.

Please note, on Saturdays, all our agents see clients by appointment only, and can not generally deal with walk-in clients.  So please book in advance by either calling 020 8761 8000 or booking online HERE.

So get our professional help at Taxfile & we’ll make filling in and filing your tax return a breeze.

See our Newsletter HERE

Holiday lettings: tax guide for landlords with furnished lets in the UK/EU

A Tax Guide for Landlords with Holiday Lets

Holiday lettings: tax guide for landlords with furnished lets in the UK/EU

Do you have a holiday cottage, flat or apartment that you rent out to holidaymakers? If so, our handy ‘Holiday lettings’ guide for landlords could be very useful to you — and it could save you money. It’s packed full of useful information and tax tips that will help you to make the most of your holiday property, at the same time as keeping on the right side of the tax man.

The Pros

We’ve written a section all about the tax breaks that apply to qualifying holiday lets. These include capital allowances for things you pay for when fitting out your holiday property, the tax treatment of expenses, the ability to pay pension contributions on your profits, several types of relief (some of which may affect your exposure to Capital Gains Tax) and small business rate relief.

The Cons

There’s also a section in the guide that covers some of the downsides to tax on holiday lettings. These include the need to get your VAT Registration status and charges right (where applicable) and also the tax treatment of any trading losses.

Qualifying Conditions

Lastly, there’s a section that outlines the qualifying conditions that apply if you want to treat your property as a holiday let rather than as an ordinary rental property. That’s important because different tax rules apply to each category and you could miss out on some excellent tax breaks if you don’t get it right. For example, the holiday rental property must be fully furnished and allow for self-catering holidays. Also, the property must be available for a particular number of days per year and be rented out in a particular way. It should not be occupied by the same tenant(s) for more than Read more

Letting a room through Airbnb? HMRC tracks your income & data!

Letting a Room through Airbnb? HMRC Tracks your Income!

Letting a room through Airbnb? HMRC tracks your income & data!

Back in late 2015, we forewarned that HMRC was planning to force on-line companies like Airbnb to share customer income data with them. That plan has come to fruition and HMRC is now receiving detailed information from Airbnb and other online providers. The data will tell HMRC about lettings income that may have been previously falling under their radar.

Airbnb is an on-line marketplace where people can rent out rooms, cottages, apartments and suchlike to those looking for short-term accommodation, city breaks, holidays or lower cost alternatives to hotels and overnight business stays.

We understand that various on-line providers, including Airbnb, are now exchanging information with HMRC. HMRC then uses their analytical tool “Connect” to track and monitor income from such sources. This powerful application was developed by BAE Systems and is the most advanced data gathering tool HMRC has at its disposal.

So, if you let property or a room on Airbnb, you can expect detailed information to be passed to the Revenue about your letting activities and the income it generates. While you may currently be able to earn up to £7,500* per year tax-free for furnished accommodation under the Government’s ‘Rent a Room Scheme‘, care needs to be taken to submit a tax return and pay tax on any income received once you have gone over that limit. Higher rate taxpayers also need to take care if their rental income pushes them into a higher tax bracket.

In order to qualify under the Rent a Room Scheme:

  • The room must be furnished;
  • The relief cannot be used if you let your home whilst living abroad;
  • The accommodation provided cannot be office space or business space.

Changes arriving in 2019:

HMRC recently held a consultation with relevant professionals and the public about whether the scheme should continue in its present form. Following this, they have announced that the scheme will be more restricted; landlords who do not live in their “main residence” at the same time as their tenants will probably no longer be able to claim “rent a room relief” from 6 April 2019.

Tax Help & Advice for Lettings Income

If you need our help handling your lettings tax needs, Taxfile is here to assist you. We’re tax experts and can guide you through the maze of rules and regulations concerning lettings, renting out accommodation, tax thresholds, knowing when it’s appropriate to work under the Rent a Room Scheme, whether you can claim expenses and so on. Book an appointment at your nearest Taxfile office: for Tulse Hill in London SE21 book an appointment on-line here; book here for Dulwich in SE21; for Battersea in SW8 book your appointment here or for Exeter and the South West, book your appointment here. We also have tax advisers who are available in other UK locations including Poole in Dorset, Carlisle, Yorkshire and Plymouth. Alternatively, simply call 0208 761 8000 or send us an email here and we’ll be happy to help to get you on the right track.

Learn more about our services to landlords and those earning an income from property lettings here.

* Correct for tax years 2016-17 and 2017-18. For tax year 2015-16 the threshold was only £4,250. Also note that the current year’s threshold reduces to £3,750 if someone else, for example a joint owner, receives lettings income in the same property.

Overseas assests - requirement to correct

Undeclared Overseas Assets? Beware the ‘Requirement to Correct’ Deadline!

Overseas assests - requirement to correct

What does this mean for me?

If you are a taxpayer with overseas assets which are undeclared as regards income tax, capital gains tax or inheritance tax, you have an obligation to sort things out by 30 September 2018.

People who ignore this requirement and whose income or assets subsequently come to light will face much, much higher penalties and sanctions after the deadline.

Why bother now?

The United Kingdom has signed up for information exchange with a whole host of other countries. The information it receives from them will be input into its intelligence system known as Connect. This increases the likelihood of undeclared sources coming to light.

What if I do nothing?

After the deadline date, if your undeclared sources of income or gains come to light, you will face potential penalties as follows:

  • A tax geared penalty of between 100% and 200% of the tax due;
  • A potential asset based penalty of up to 10% of the asset value where the relevant tax at stake is over £25,000 in any one tax year;
  • Adverse publicity from being publicly named as a tax cheat where the tax is over £25,000;
  • A further potential penalty of 50% of the standard penalty if the Revenue show that assets or funds have been moved in an attempt to avoid the requirement to correct.

If you have a reasonable excuse for failing to correct your tax position, such as failing health for example, then penalties may be reduced or not charged in exceptional circumstances.

Get Started:

If you think you might be affected or are in any doubt, we suggest you act now to avoid any problems before the deadline.

Call Taxfile on 0208 761 8000 for a no-obligation discussion if you want to put things right. Alternatively, book an appointment here. We have a wealth of experience in dealing with voluntary disclosures and negotiating settlements with HMRC, so can definitely help you. We offer tax advice and accountancy services from our offices in Tulse Hill, Dulwich and Battersea in South and South West London along with tax experts in Exeter, Plymouth, Poole, Dorset, Devon, Yorkshire and Carlisle.

Capital Gains Tax Rule Changes for 2nd properties and property rentals

Second Property & Rented Property ‘Tax Trap’ for the Unwary

New Capital Gains Tax rules for 2nd properties and property rentals

Owners of second properties and let properties need to be aware that HMRC is planning to introduce new rules from 6 April 2020 to require payment of Capital Gains Tax much, much earlier! The window of payment will be reduced from 31 January following the year of the gain to a mere 30 days from the date of the sale.

Effectively, ‘in year’ reporting of the estimated gains – and payment of the tax – is mandatory under the new rules. Failure to report the gains and pay the tax will lead to penalties for landlords and second home owners.

You will only be able to offset losses accrued at the time of the disposal, so losses later in the year will not be available against the payment on account.

Summing Up:

  • If you make a capital gain in 2018/19 (before the new rules kick in) you will pay the capital gains tax on or by 31 January 2020.
  • For the sale of a house that is let, or a second property, with exchange of contracts occurring on, say, 15 April 2020 with completion happening on 15 May 2020, the Capital Gains Tax (CGT) has to be paid by 14 June 2020. This accelerates the payment of the tax to the Exchequer by 7 months.
  • So, perversely, the later year requires the Capital Gains Tax payment before the earlier year, as you can see above!

The other difficulty is knowing what rate to apply because a higher rate taxpayer has to pay 28% on a gain but a basic rate taxpayer has to pay tax at 18% up to the limit of the basic rate band that is unused. This is, of course, one situation where Taxfile can help to work out the tax implications for its customers. Tax calculations are what we do best and we’re here to help you!

Note that Scottish tax rates may vary.

HMRC is currently assessing feedback on their consultation, which closed on 6 June 2018.

If you believe this change of rules is wrong, one option is to write to your MP to complain.

Professional Help with Tax & Accountancy – for Landlords & More

For help with accountancy and tax for any property, lettings or any capital gains situation you may find yourself in, contact your nearest branch of Taxfile. We have London offices in Tulse Hill (SE21), Dulwich, Battersea (SW8) and another in the Exeter in the South West along with additional tax consultants in Carlisle in the North of England, Yorkshire in the North East, Poole/Dorset and Plymouth in the West Country. Call 0208 761 8000 for an introductory chat or appointment, contact us here or click the bold links for more information. We’ll be happy to help and to get your tax affairs in order.

TAX HELP! Your 1-stop tax shop

Taxfile: Your One-Stop Tax & Accountancy Shop

TAX HELP! Your 1-stop tax shop

Taxfile has over 100 years of combined tax and accounting experience. It’s incredible to think that the key personnel have administered over 30,000 tax submissions in the past 20 years! Beginning way back in 1994 (and continuing as Guy Bridger Limited from 1997), we originally started business offering only CIS sub-contractor returns but quickly developed the service to help the self-employed, local businesses and higher rate taxpayers with their tax computations. Along the way we added tax and accounting services for taxi drivers, cab drivers, landlords and more. We also offer Capital Gains tax expertise and tax investigation help and, more recently, professional help with disclosures, written tax advice and tax planning for things like inheritance.

We have exceptional accounting experience in all key tax and accounting areas including:

Taxfile helps individuals as well as businesses. Our customers are very varied, turning over anything from £10,000 to over £1 million a year. A few are high wealth individuals who no longer need to work but still need to account for their taxes etc. Some customers have retired, others operate small businesses and some don’t even live in the UK but may have assets here. So, whatever your income, assets or situation, the message is that if you need ANY tax-related help, you’ve found the right place in Taxfile.

Taxfile also has the back-up and expertise of professional bodies on tap (so nothing is too complicated for us) and also has excellent relations with the tax authorities — we’re very well trusted by HMRC. Guy even helps in the local employment zone, which aims to improve business in the Tulse Hill and West Norwood area. So, Taxfile is very much part of the local community, particularly in South London (but expanding to other areas too — keep an eye on this blog for forthcoming information about that in the very near future).

Whatever help you need with tax and accountancy-related matters, call Taxfile on 0208 761 8000 and we’ll be delighted to help you. Alternatively, Read more

New tax planning & tax advice service from Taxfile

New: Tax Advice & Planning Service

New tax planning & tax advice service from Taxfile

You can now get tax planning and tax advice from Taxfile. We have highly experienced senior accounting staff who can give you the right tax advice when you need it most — for example, when your circumstances are changing, if you’ve had trouble keeping on top of your tax commitments and need to bring things up to date, or perhaps a friend or relative simply needs a bit of reassurance with regard to their tax situation. Perhaps you have assets or income abroad as well as income in the UK and want to make sense of your tax position. Or, perhaps you have recently made a tidy profit trading crypto coins like Bitcoin and want to know where you are from the standpoint of Capital Gains or Income Tax. Maybe you need to disclose income from property rental that you have previously not told HMRC about (more about that in a later post). Those are all examples of typical situations where our new Professional Tax Advice and Tax Planning services can help you to see the wood from the trees.

A Free Telephone Consultation

In the first instance, we are inviting clients to speak for just 15 minutes with one of our resident tax planning experts. This will be in the form of a free, introductory telephone call, perhaps in February or March if it suits you. We can then see what’s needed and take it from there. We can, of course, discuss any costs with you before you commit to anything further, and there is no obligation.

Whether it’s about labour taxes, investment taxes, business taxes, disclosures to HMRC or even professional help to support you during an HMRC tax investigation, we can make sense of all the options for you and — in a fair and ethical way — help to make sure you are paying no more tax than you should do. With decades of experience in accountancy and tax planning, we know exactly what’s what when it comes to tax, so can definitely help you. Call 0208 761 8000 to arrange your free 15 minute telephone appointment with a tax expert, at a mutually convenient time. Alternatively, Read more

Taxfile Autumn 2017 Newsletter

Taxfile’s Autumn 2017 Newsletter

Taxfile Autumn 2017 Newsletter

The Autumn 2017 edition of Taxfile’s newsletter is now out and it’s packed full of useful information, tips, recommendations and key dates in the tax and accounting calendar, including some things you need to act on right away if you want to save time and money. Here is a quick overview of the articles:

Page 1:

  • Self-Assessment Tax Return Deadline Approaches – Act Now!
  • Late with your Tax Return & Tax Payment for a Previous Year?
  • Taxfile Now Open Saturdays by Appointment
  • Deadlines & Key Dates
  • The Future is Digital

Page 2:

  • Accounting for VAT
  • Have you made a Capital Gain?
  • Assets Overseas? Non-Resident Landlord? Read This!
  • Do you Employ People?
  • C.I.S. Sub-Contractors: Claim your Tax Refund for Christmas!
  • Tip!

Page 3:

  • The Benefits of Using Taxfile
  • All Your Tax & Accounting Needs Taken Care of
  • Tax Affairs in a Mess?
  • Who Works at Taxfile?
  • Thank You

If you haven’t already received a copy by email, then view the newsletter online here or Read more