Under the self assessment regime an individual is responsible for ensuring that their tax liability is calculated and any tax owing is paid on time.
Tax returns are issued shortly after the end of the fiscal year. The fiscal year runs from 6 April to the following 5 April, so 2014/15 runs from 6 April 2014 to 5 April 2015. Tax returns are issued to all those whom HMRC are aware need a return including all those who are self employed or company directors. Those individuals who complete returns online are sent a notice advising them that a tax return is due. If a taxpayer is not issued with a tax return but has tax due they should notify HMRC who may then issue a return.
A taxpayer has normally been required to file his tax return by 31 January following the end of the fiscal year. The 2014/15 return must be filed by 31 October 2015 if submitted in 'paper' format. Returns submitted after this date must be filed online otherwise penalties will apply.
Late filing penalties apply for personal tax returns as follows:
* Previously the penalty could not exceed the tax due, however this cap has been removed. This means that the full penalty of £100 will always be due if your return is filed late even if there is no tax outstanding. Generally if filing by ‘paper’ the deadline is 31 October and if filing online the deadline is 31 January.
Additional penalties can be charged as follows:
The taxpayer does have the option to ask HMRC to compute their tax liability in advance of the tax being due in which case the return must be completed and filed by 31 October following the fiscal year. This is also the statutory deadline for making a return where you require HMRC to collect any underpayment of tax, up to £3,000 £through your tax code, known as ‘coding out’. However if you file your return online HMRC will extend this to 30 December. Whether you or HMRC calculate the tax liability there will be only one assessment covering all your tax liabilities for the tax year. Whether you or HMRC calculate the tax liability there will be only one assessment covering all your tax liabilities for the tax year.
HMRC may correct a self assessment within nine months of the return being filed in order to correct any obvious errors or mistakes in the return.
An individual may, by notice to HMRC, amend their self assessment at any time within 12 months of the filing date.
HMRC may enquire into any return by giving written notice. In most cases the time limit for HMRC is within 12 months following the filing date.
If HMRC does not enquire into a return, it will be final and conclusive unless the taxpayer makes an overpayment relief claim or HMRC makes a discovery.
It should be emphasised that HMRC cannot query any entry on a tax return without starting an enquiry. The main purpose of an enquiry is to identify any errors on, or omissions from, a tax return which result in an understatement of tax due. Please note however that the opening of an enquiry does not mean that a return is incorrect.
If there is an enquiry, we will also receive a letter from HMRC which will detail the information regarded as necessary by them to check the return. If such an eventuality arises we will contact you to discuss the contents of the letter.
HMRC wants to ensure that underlying records to the return exist if they decide to enquire into the return.
Records are required of income, expenditure and reliefs claimed. For most types of income this means keeping the documentation given to the taxpayer by the person making the payment. If expenses are claimed records are required to support the claim.
Documents you have signed or which have been provided to you by someone else:
Personal financial records which support any claims based on amounts paid eg certificates of interest paid.
We can prepare your tax return on your behalf and advise on the appropriate tax payments to make.
If there is an enquiry into your tax return, we will assist you in answering any queries HMRC may have. Please do contact us for help.
In recent years, the stock market has had its ups and downs. Add to this the serious loss of public confidence in pension funds as a means of saving for the future and it is not surprising that investors have looked elsewhere.
The UK property market, whilst cyclical, has proved over the long-term to be a very successful investment. This has resulted in a massive expansion in the buy to let sector.
Buy to let involves investing in property with the expectation of capital growth with the rental income from tenants covering the mortgage costs and any outgoings.
However, the gross return from buy to let properties - ie the rent received less costs such as letting fees, maintenance, service charges and insurance - is no longer as attractive as it once was. Investors need to take a view on the likelihood of capital appreciation exceeding inflation.
Investing in a buy to let property is not the same as buying your own home. You may wish to get an agent to advise you of the local market for rented property. Is there a demand for say, two bedroom flats or four bedroom houses or properties close to schools or transport links? An agent will also be able to advise you of the standard of decoration and furnishings which are expected to get a quick let.
Letting property can be very time consuming and inconvenient. Tenants will expect a quick solution if the central heating breaks down over the bank holiday weekend! Also do you want to advertise the property yourself and show around prospective tenants? An agent will be able to deal with all of this for you.
This important document will ensure that the legal position is clear.
When buying to let, taxation aspects must be considered.
Income tax will be payable on the rents received after deducting allowable expenses. Currently allowable expenses include mortgage interest, repairs, agent’s letting fees and an allowance for furnishings. Changes were announced in the Summer Budget which impact on the allowable expenses for landlords. These changes are not yet law but are detailed below..
The government proposes to restrict the amount of income tax relief landlords can get on residential property finance costs to the basic rate of income tax. Finance costs include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan.
Landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for their finance costs. To give landlords time to adjust, the government will introduce this change gradually from April 2017, over four years. The restriction in the relief will be phased in as follows:
This restriction will not apply to landlords of furnished holiday lettings.
From April 2016 the government proposes to replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings. Capital allowances will continue to apply for landlords of furnished holiday lets.
Capital gains tax (CGT) will be payable on the eventual sale of the property. The tax will be charged on the disposal proceeds less the original cost of the property, certain legal costs and any capital improvements made to the property. This gain may be further reduced by any annual exemption available and is then taxed at either 18% or 28% or a combination of the two rates. CGT is payable on 31 January after the end of the tax year in which the gain is made.
Buy to let may make sense if you have children at college or university. It is important that the arrangement is structured correctly. The student should purchase the property (with the parent acting as guarantor on the mortgage). There are several advantages to this arrangement.
This is a cost effective way of providing your child with somewhere decent to live.
Rental income on letting spare rooms to other students should be sufficient to cover the mortgage repayments from a cash flow perspective.
As long as the property is the child’s only property it should be exempt from CGT on its eventual sale as it will be regarded as their main residence.
The amount of rental income chargeable to income tax is reduced by a deduction known as ‘rent a room relief’. This is currently £4,250 per annum and is expected to increase to £7,500 from 6 April 2016. In this situation no expenses are tax deductible. Alternatively expenses can be deducted from income under normal letting rules where this is more beneficial.
Furnished holiday letting (FHL) is another type of investment that could be considered. This form of letting is short holiday lets as opposed to letting for the residential market.
The favourable tax regime for furnished holiday letting accommodation includes qualifying property located anywhere in the European Economic Area (EEA). In order to qualify for FHL treatment certain conditions have to be met. These include the property being available for letting for at least 210 days in each tax year and being actually be let for 105 days. Provided that there is a genuine intention to meet the actual letting requirement it will be possible to make an election to keep the property as qualifying for up to two years even though the condition may not be satisfied in those years. This will be particularly important to preserve the special CGT treatment of any gain as qualifying for the lower CGT rate of 10% where the conditions for Entrepreneurs’ Relief are satisfied.
Losses arising in an FHL business cannot be set against other income of the taxpayer. Separate claims would need to be made for UK losses and EEA losses. Each can only be offset against profits of the same or future years in each relevant sector.
FHL property has some advantages but it has other disadvantages which should also be considered.
You will be able to take a holiday in your own property, or make it available some of the time to your family or friends. However, care would need to be taken to adjust the level of expenses claimed to reflect this private use.
Generally however the rules for allowable expenditure are more generous.
Holiday letting will have higher agent’s fees, advertising costs, and maintenance fees (for example more regular cleaning).
Owning a holiday property may be more time consuming than you think and you may find yourself spending your precious holiday sorting out problems.
If you would like any further advice in this area please get in touch.
Whilst some generalisations can be made about buy to let properties it is always necessary to tailor any advice to your personal situation. Any plan must take into account your circumstances and aspirations.
Whilst a successful buy to let cannot be guaranteed, professional advice can help to sort out some of the potential problems and structure the investment correctly.
We would be happy to discuss buy to let further with you. Please contact us for more detailed advice.
The current regime for taxing employer provided cars (commonly referred to as company cars) is intended:
We set out below the main areas of importance. Please do not hesitate to contact us if you require further information.
Employer provided cars are taxed by reference to the list price of the car but graduated according to the level of its carbon dioxide (CO2) emissions.
CO2 emissions (gm/km)(round down to nearest 5gm/km for values above 95) |
% of car's price taxed |
0 - 50 |
5 |
51 – 75 |
9 |
76 - 94 |
13 |
95 |
14 |
100 |
15 |
105 |
16 |
110 |
17 |
115 |
18 |
For every additional 5g thereafter add 1% |
- |
210 and above |
37 (max) |
Diesel cars emit less CO2 than petrol cars and so would be taxed on a lower percentage of the list price than an equivalent petrol car. However, diesel cars emit greater quantities of air pollutants than petrol cars and therefore a supplement of 3% of the list price generally applies to diesel cars. For example, a diesel car that would give rise to a 22% charge on the basis of its CO2 emissions will instead be charged at 25%. The maximum charge for diesel is capped at 37%.
The diesel supplement will be removed from 6 April 2016.
The Vehicle Certification Agency produces a free guide to the fuel consumption and emissions figures of all new cars. It is available on the internet at http://carfueldata.direct.gov.uk. These figures are not however necessarily the definitive figures for a particular car. The definitive CO2 emissions figure for a particular vehicle is recorded on the Vehicle Registration Document (V5).
The benefit chargeable to tax on the employee is also used to compute the employer’s liability to Class 1A (the rate is currently 13.8%).
Some cars registered after 1 January 1998 may have no approved CO2 emissions figure, perhaps if they were imported from outside the EC. They too are taxed according to engine size.
Engine size (cc) |
% of list price charged to tax |
0 - 1400 |
15% |
1401 - 2000 |
25% |
Over 2000 |
35% |
There is a further tax charge where a company car user is supplied with or allowed to claim reimbursement for fuel for private journeys.
The fuel scale charge is based on the same percentage used to calculate the car benefit. This is applied to a set figure which is £22,100 for 2015/16. As with the car benefit, the fuel benefit chargeable to tax on the employee is used to compute the employer's liability to Class 1A. The combined effect of the charges makes the provision of free fuel a tax inefficient means of remuneration unless there is high private mileage.
The benefit is proportionately reduced if private fuel is not provided for part of the year. So taking action now to stop providing free fuel will have an immediate impact on the fuel benefit chargeable to tax and NIC.
Please note that if free fuel is provided later in the same tax year there will be a full year’s charge.
No charge applies where the employee is solely reimbursed for fuel for business travel.
HMRC have published guidelines on fuel only mileage rates for employer provided cars. The advisory rates are not binding and an employer may be able to agree higher rates with HMRC via a dispensation, perhaps where employees need to use particular types of car such as 4x4s to cover rough terrain. Employers can adopt the rates in the following table but may pay lower rates if they choose.
Engine size |
Petrol |
1400cc or less |
12p |
1401cc - 2000cc |
14p |
Over 2000cc |
21p |
Engine size |
Diesel |
1600cc or less |
10p |
1601cc - 2000cc |
12p |
Over 2000cc |
14p |
Engine size |
LPG |
1400cc or less |
8p |
1401cc - 2000cc |
9p |
Over 2000cc |
14p |
HMRC update these rates on a quarterly basis in March, June, September and December. These rates can be found at https://www.gov.uk/government/publications/advisory-fuel-rates
There is also a statutory system of tax and NIC free mileage rates for business journeys in employees’ own vehicles.
The statutory rates are:
|
Rate per mile |
Up to 10,000 miles |
45p |
Over 10,000 miles |
25p |
Employers can pay up to the statutory amount without generating a tax or NIC charge. Payments made by employers are referred to as ‘mileage allowance payments’. Where employers pay less than the
statutory rate (or make no payment at all) employees can claim tax relief on the difference between any payment received and the statutory rate.
We can provide advice on such matters as:
Please contact us for more detailed advice.
For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.