Working from Home expenses claim information for 21/22 tax return

For the 21/22 tax year, for employees and Directors, there are 3 options, the simplest being option 1 below:

  1. Claim £6 per week – You’ll get tax relief based on the rate at which you pay tax. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20% of £6). HMRC recognise the ongoing lockdown restrictions that were in place during 21/22 and are accepting a full years claim for employees who are eligible . To be eligible for tax relief you must carry out work which forms all or part of the central duties of your employment and in doing so, you must have additional costs, such as heating, metered water bills or business calls, that are incurred as a direct result of working from home. They don’t include costs that would stay the same whether you worked at home or in an office.

    Please note that after 5/4/22, the relaxed rules will come to an end which means that homeworking arrangements need to be in place between the employer and the employee (usually via the employee’s contract)

  2. Claim a % of actual expenses – HMRC suggests the acceptable costs are:
    • Gas and electricity/heating
    • Metered water
    • Business phone calls
    • Other specific costs incurred such as business insurance, repairs of business equipment, cleaning materials to clean your work area (Covid being the reason)Mortgage Interest, Rent, Rates are not allowable as HMRC say that costs must be ‘wholly and exclusively for business’ and HMRC are unconvinced that employees/directors meet this criteria.

  3. Rent part of your home to your company – To do this you need to create a licence agreement with your company in order to allow it to occupy part of your property. It then pays you rent and you then claim all your expenses under Self-Assessment. This means you will need to complete the property section of the Self-Assessment return as you are effectively becoming a commercial landlord but it means you can recover all relevant overheads and variable costs, mortgage interest ( the relevant %)  would only be eligible for Finance cost allowance and hence may be further restricted.

    Whilst your home is usually exempt for Capital Gains Tax (PRR) your home office once rented out will not be.

View and download the above as a PDF:

Working form home expenses claim information for 2021-2022

Marriage Allowance Claim Information

Download PDF below:

Marriage Allowance Claim Information

 

Marriage Allowance

HMRC link – https://www.gov.uk/marriage-allowance

How it works

Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner.

This reduces their tax by up to £252 in the tax year (6 April to 5 April the next year).

To benefit as a couple, you need to earn less than your partner and have an income of £12,570 or less. Your partner’s income must be between £12,571 and £50,270 (£43,662 in Scotland) for you to be eligible.

You can backdate your claim to include any tax year since 5 April 2018 that you were eligible for Marriage Allowance. If your partner has since died you can still claim – phone the Income Tax helpline.

You can calculate how much tax you could save as a couple. You should call the Income Tax helpline instead if you receive other income such as dividends, savings or benefits from your job. You can also call if you do not know what your taxable income is.

Example

Your income is £11,500 and your Personal Allowance is £12,570, so you do not pay tax.

Your partner’s income is £20,000 and their Personal Allowance is £12,570, so they pay tax on £7,430 (their ‘taxable income’). This means as a couple you are paying Income Tax on £7,430.

When you claim Marriage Allowance you transfer £1,260 of your Personal Allowance to your partner. Your Personal Allowance becomes £11,310 and your partner gets a ‘tax credit’ on £1,260 of their taxable income.

This means you will now pay tax on £190, but your partner will only pay tax on £6,170. As a couple you benefit, as you are only paying Income Tax on £6,360 rather than £7,430, which saves you £214 in tax.

Who can apply

You can benefit from Marriage Allowance if all the following apply:

  • you’re married or in a civil partnership

  • you do not pay Income Tax or your income is below your Personal Allowance (usually

    £12,570)

  • your partner pays Income Tax at the basic rate, which usually means their income is between £12,571 and £50,270 before they receive Marriage Allowance

You cannot claim Marriage Allowance if you’re living together but you’re not married or in a civil partnership.

If you’re in Scotland, your partner must pay the starter, basic or intermediate rate, which usually means their income is between £12,571 and £43,662.

It will not affect your application for Marriage Allowance if you or your partner:

  • are currently receiving a pension

  • live abroad – as long as you get a Personal Allowance.

If you or your partner were born before 6 April 1935, you might benefit more as a couple by applying for Married Couple’s Allowance instead.

You cannot get Marriage Allowance and Married Couple’s Allowance at the same time.

Backdating your claim

You can backdate your claim to include any tax year since 5 April 2018 that you were eligible for Marriage Allowance.

Your partner’s tax bill will be reduced depending on the Personal Allowance rate for the years you’re backdating.

If your partner has died since 5 April 2018 you can still claim – phone the Income Tax helpline. If your partner was the lower earner, the person responsible for managing their tax affairs needs to phone.

Stopping Marriage Allowance

Your Personal Allowance will transfer automatically to your partner every year until you cancel Marriage Allowance – for example if your income changes or your relationship ends.

How to apply

It’s free to apply for Marriage Allowance.
If both of you have no income other than your wages, then the person who earns the least should make the claim.
If either of you gets other income, such as dividends or savings, you may need to work out who should claim. You can call the Income Tax helpline if you’re unsure.
Changes to your Personal Allowances will be backdated to the start of the tax year (6 April) if your application is successful.

How your Personal Allowances change

HM Revenue and Customs (HMRC) will give your partner the allowance you have transferred to them either:

  • by changing their tax code – this can take up to 2 months

  • when they send their Self Assessment tax return

If your new Personal Allowance is lower than your income after you’ve made a claim, you might have to pay some income tax. However, you might still benefit as a couple.

How your tax code will change

You and your partner will get new tax codes that reflect the transferred allowance. Your tax code will end with:

  • ‘M’ if you are receiving the allowance

  • ‘N’ if you are transferring the allowance

Your tax code will also change if you’re employed or get a pension.

Before you apply

You need your National Insurance number and your partner’s.

If you have come to the UK and you do not plan to work or study, you cannot get a National Insurance number. Phone the Income Tax helpline to apply for Marriage Allowance.

You also need a way to prove your identity. You can use any 2 of the following:

  • your P60

  • one of your 3 most recent payslips

  • your UK passport details

  • information held on your credit file (such as loans, credit cards or mortgages)

  • details from your Self Assessment tax return (in the last 3 years)

  • your Northern Ireland driving licence

Apply online

The quickest way to apply for Marriage Allowance is online. You’ll get an email confirming your application within 24 hours.

Other ways to apply for Marriage Allowance

You can apply for Marriage Allowance through your personal account , under ‘services you might need’.

You can also call HM Revenue and Customs (HMRC) to make an application.

You will need to know you and your partner’s National Insurance number.

You can call HMRC on:

Telephone: 0300 200 3300
8am to 8pm, Monday to Friday
8am to 4pm, Saturday. Closed Sundays and bank holidays.
Phone lines are less busy before 10am, Monday to Friday.

Spring Budget 2017

The Chancellor’s 2017 Budget contained some important announcements and confirmed a number of changes planned for the new tax year.

There was both good and bad news for sole traders and small businesses in today’s Budget. Following this, we have put together a review which contains the latest tax and financial information, which we trust you will find useful. Please click here to download.

For more information on how the changes in the Budget may affect you, please contact us

In Brief:

Class 4 NICs will increase from 9% to 10% in April 2018, and then to 11% in April 2019 for those earning more than £8,060. Employees currently pay 12%. Class 2 contributions – as previously announced – will be abolished from April 2018. This will affect you if you are self-employed.

In addition, Hammond announced that the tax-free dividend allowance – introduced last year – will be reduced from £5,000 to £2,000 from April 2018. This will affect you if you trade as a Limited Company.

As plans for Making Tax Digital (MTD), continue apace, Hammond also announced that for businesses with turnover below the VAT registration threshold this will be delayed by one year to April 2019 to allow more time to prepare for the changes.

Businesses that have an annual turnover below the VAT registration threshold will have an extra year before they are required to keep records digitally and send HMRC quarterly updates.

Those businesses trading above the VAT threshold will still be required to keep digital records and send HMRC quarterly updates from April 2018.

The exemption threshold for MTD remains at £10,000.

At Liric, we are working on ensuring all our clients have the systems they will need to ensure they comply and there will be much more about this in future newsletters.

 

Changes to Flat Rate VAT scheme

Following last years Autumn Statement, the government have issued their draft legislation detailing the changes to the Flat Rate Scheme (FRS). These will come into effect on 1 April 2017.

If you are using the Flat Rate scheme for calculating your VAT it’s really important that you read the following information.  We will also be contacting you directly if our records indicate that you may be affected by these significant changes.

If your business is classed as a “Low or Limited cost trade”, which will probably catch any consultancy based businesses, the flat rate will increase to 16% from 1 April.

So for example:
If your sales are £5,000 the VAT is £1,000, total £6,000 x 16.5% = £990 VAT payable. So HMRC let you keep £10.

Compare to the 14% rate and the VAT payable would have been £840, allowing you to keep £160.

Please click here for our full factsheet on this important subject and do get in touch with us if you are affected.

Paying your self assessment tax – deadline 31 January 2016

HMRC will not be issuing paper statements and payslips to self-assessment taxpayers to remind them of the 31 January 2016 filing and payment date unless the taxpayer has filed their 2014/15 tax return by 31 December 2015, and has not opted for digital only communications from HMRC.

HMRC will not be issuing paper SA reminders and payslips for taxpayers who file their 2014/15 tax returns in January 2016 or for those taxpayers who have opted for digital-only SA communications from HMRC. Payment options available without a payslip are by debit/credit card, CHAPS/BACS, direct debit or via online or telephone banking.

Payment by cheque through the post is available but only with a paying in slip. If you do not have a paying in slip you can print a payslip but this cannot be used to pay over the counter at a bank, building society or Post Office.

Further details on how to pay can be found on the HMRC website – GOV.UK at: https://www.gov.uk/pay-self-assessment-tax-bill

Have you heard of the new Personal Savings Allowance (PSA)?

From April 2016 the new Personal Savings Allowance (PSA) will start.

The PSA will apply to all non-ISA cash savings and current accounts, and will allow some savers to receive a generous portion of their interest totally free of tax.

It’s expected that 95% of savings will no longer be taxed.

Basic rate taxpayers will receive £1,000 in savings income tax free, higher rate taxpayers get a band of £500 and additional rate tax payers get nothing.

From April 2016 banks and building societies will stop automatically taking 20% in income tax from the interest earned on your non-ISA savings.

personal tax

Limited company or sole trader?

What is a Limited Company?

A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

What is a Sole Trader?

If you start working for yourself, you’re classed as a self-employed sole trader – even if you’ve not yet told HM Revenue and Customs (HMRC).

As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them.

You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone.

You’re personally responsible for any losses your business makes.

The key Advantages and Disadvantages of Companies are shown below:

Advantages Disadvantages
Credibility – be seen as a serious business Reporting – annual return, statutory accounts and corporation tax return
Tax – normally you will pay less tax by having a company IR35 – are you a disguised employee
Reduced risk – you are protected from personal liability Directors – obigations under the Companies Act
Flexible – shares can be created and transferred Advice – professional help and advice reqiured to maximise benefits

How do you form a Limited Company?

You can form your company directly with Companies House for £15, it normally takes 24 hours. We can form it for you, ensuring the optimum share structure is in place and we than also deal with any VAT or payroll registrations required with HMRC.

You’ll need:

  • the company’s name and registered address
  • names and addresses of directors (and company secretary if you have one)
  • details of shareholders and share capital

What are the next steps?

Once your company has been formed you need to:

  1. Open a bank account for the Company, this can often take a couple of weeks
  2. Register for Corporation Tax
  3. Register for other taxes (if they apply to your business) – VAT, PAYE, CIS
  4. Set up your accounting software
  5. Create shareholder agreements, contracts and other legal documents (if required)

Starting a new business, whether sole trader or Limited, needs careful consideration, a business plan and some start up capital to name but a few things.  We do recommend you come and talk to us right at the beginning so things are set up in the best way that works for you. What may be the optimum route for one person is not necessarily the same for another – we offer bespoke advice.

 

fee protection

RENEWALS BASIS IS BACK FOR BUY TO LET LANDLORDS

Following the restriction of tax relief for mortgage interest and the 3% increase in Stamp Duty Land Tax all is not doom and gloom for buy to let landlords. Following on from the consultation this summer the draft Finance Bill 2016 includes the legislation to reintroduce tax relief for the replacement of furnishings in buy to let properties from 6 April 2016.

 

This will apply to both furnished and unfurnished lettings and will mean that the cost of replacing items such as cookers and washing machines will again qualify for relief following the withdrawal of a concession from 6 April 2013.

Note that the alternative, and simpler, 10% wear and tear allowance will be withdrawn from 6 April 2016 for those letting properties fully furnished.

Those letting properties under the more stringent furnished holiday letting rules will continue to be able to claim the Annual Investment Allowance which provides 100% tax relief for the initial furnishing as well as renewal of furniture in holiday properties.

Auto Enrolment pensions

Pension Automatic Enrolment is with us and the staging dates for smaller companies are on the horizon. Between 2015 and 2017, over 1 million companies will be staging, which is a staggering 51,134 companies per month.

There is a wealth of information available on the Pension Regulators website www.thepensionsregulator.gov.uk but we have summarised the key facts for you. LIRIC-Auto-Enrolment-guide.pdf

Don’t leave this until the last minute, or think “it doesn’t affect me” because any business with a PAYE reference has a duty to comply and there are serious fines for non-compliance.

If you have the correct company pension structure in place, that’s great, but if you don’t it is important that you read on.

Whether you have an existing pension scheme or not, you absolutely must ensure that you comply with the government’s pension reform regulations. Not just any old pension scheme will do… it has to follow the new rules.

Following the rules not only means that your company pension scheme has to be in line with the regulations the government have put in place, but it also means that you have a duty to explain all changes to your staff so that they are aware of the situation!

The good thing is that we are here to help with this.

If in doubt give then contact us:

NEW RULES FOR DIVIDENDS FROM 2016/17

In the Summer Budget Newsletter we outlined the new rules for the taxation of dividends that will apply from 6 April 2016. Further guidance has now been published by HMRC setting out how the new rules will operate and it seems the rules don’t work as many people expected.  As previously reported, there will be no 10% credit against the tax on dividends which means there will be a 7½ % increase in the rate of tax on dividends once the £5,000 dividend allowance has been used up. Currently dividends falling into the basic rate band are effectively tax free.

However the £5,000 allowance needs to be taken into consideration in determining the rate of tax on your dividends. For example if you have salary and other non- dividend income of £40,000 next year and £9,000 in dividends, the £4,000 of taxable dividends are taxed at 32.5%, not £3,000 at 7.5% then £1,000 at 32.5%. This is because the £5,000 is added to the £40,000 income pushing the taxable dividends into the higher rate band.

If you own your own company it may be beneficial to bring forward dividend payments from next year to save the additional 7½ %. However, it would be important to consider all of the tax implications of such actions so come and talk to us to discuss your options.