For professional photographers operating in the UK, understanding how to effectively manage your expenses and maximize tax deductions is key to enhancing profitability. Whether you are a seasoned photographer or just starting out, it's essential to grasp which expenses are allowable deductions on your UK tax return. This guide, put together with expertise from both US and UK accountants, will walk you through the variety of expenses you can claim, providing practical examples and tips to aid in your tax planning.

Photography by our client, Diego Arroyo

Quick Links

Below are some quick links you can use to jump to the relevant sections

• Equipment Expenses
• Editing Software and Subscriptions
• Travel and Accommodation Expenses
• Home Office Expenses
• Marketing and Advertising Costs
• Professional Fees and Subscriptions
• Education and Training
• Startup Costs
• Clothing and Protective Gear
• Miscellaneous Expenses
• Iternational Considerations

Equipment Expenses

As a photographer, your camera, lenses, tripods, lighting equipment, and other related gear are essential tools of your trade. Fortunately, these items are tax-deductible as capital allowances. You can claim full cost from your taxable profit under the Annual Investment Allowance (AIA).

Example: If you buy a new camera for £2,000 and lighting equipment for £800, you can claim these costs as capital allowances, reducing your taxable income by £2,800.

Editing Software and Subscriptions

Modern photography heavily relies on post-production. Expenses for software like Adobe Photoshop, Lightroom, and other editing tools are fully deductible. Additionally, subscriptions to online services and magazines that keep you updated with the latest photography trends can also be claimed.

Example: An annual subscription to Adobe Creative Cloud costs £120; this is a deductible business expense.

Travel and Accommodation Expenses

Travel expenses incurred for shoots, client meetings, and location scouting are deductible. This includes airfare, mileage (using the approved mileage rate of 45p per mile for the first 10,000 miles and 25p thereafter), train tickets, and hotel stays.

Example: If you travel 200 miles to a wedding venue, you can claim £90 in mileage expenses. If you stay overnight, the hotel expense of £100 is also claimable.

Home Office Expenses

Many photographers use a portion of their home as an office or studio. You can claim a proportion of your heating, electricity, internet, and rent or mortgage interest based on the percentage of your home used for business.

Example: If your home office makes up 15% of your home’s total space, you can claim 15% of your household bills.

Marketing and Advertising Costs

Costs incurred in promoting your business, including website development, online advertising, flyers, and portfolio printing, are fully deductible. These expenses are crucial for attracting new clients and maintaining your business presence.

Example: Spending £500 on a new promotional campaign through social media and traditional flyers is deductible.

Professional Fees and Subscriptions

Membership fees for professional bodies and costs for financial services like accounting and legal advice are deductible. These services not only support your business operations but also ensure compliance with various regulations.

Example: Annual fees of £250 for membership in a professional photography association and £600 for accounting services can be claimed.

Education and Training

Continuous improvement through workshops, courses, and relevant books is essential for staying competitive. The cost of training that improves your skills or knowledge used in the business is deductible.

Example: Attending a digital photography workshop costing £300 is a business expense that can be deducted.

Startup Costs

For photographers just launching their business, initial startup expenses like market research, legal fees for business setup, and initial branding can be deducted. These are seen as capital costs and can be claimed over several years as amortization.

Example: Initial setup costs of £1,000 for legal and branding services can be amortized and deducted over the first few years of business.

Clothing and Protective Gear

Specialist clothing required for shoots in harsh conditions or protective gear is deductible. Note that general clothing, even if purchased for business use, is not deductible.

Example: Buying specialized weather-resistant clothing for £200 for outdoor shoots is claimable.

Miscellaneous Expenses

Other incidental costs like phone bills, postage, and materials for shoots are also deductible. It's important to keep detailed records to substantiate these claims.

Example: If 50% of your phone usage is for business, you can claim 50% of your bill.

Iternational Considerations

For those operating both in the UK and internationally, it's essential to understand how expenses incurred abroad can be claimed. Always maintain thorough records and receipts, and consider consulting a tax professional for international work to ensure compliance and optimization of your tax obligations.

Need More Help?

Understanding what expenses you can claim as a photographer working in the UK is fundamental to effectively managing your finances. By keeping detailed records and utilizing the full extent of allowable deductions, you can significantly reduce your tax liability and retain more of your earnings. Consider consulting with a tax professional to tailor these guidelines to your specific business scenario, ensuring you claim every possible deduction available to you. This approach not only optimizes your financial outcomes but also supports the sustainable growth of your photography business.

The requirements for signing a UK self assessment to the HMRC

This article will take a closer look at the requirements when signing your UK personal tax return. Going into depth on the details of what the HMRC deems an acceptable signature, when signing your tax return is necessary and when it is not.

Below is a list of the questions we will answer in this article. If you have any further questions feel free to contact us.

• Where do I sign on the UK personal tax return?

• Who should sign your UK self-assessment?

• How can you appoint someone to sign on your behalf?

Where do I sign on the UK personal tax return?

To start let us clarify where you would sign your personal tax return if required.

The page on the UK tax return that is often required to be signed is found on page 8 of your self-assessment, titled “Signing your form and sending it back”. Download an example of this page here.

Who should sign your UK self-assessment?

Typically you, “the tax filer”, will be the person to sign your self-assessment. However, we also work with clients who have appointed someone else to sign on their behalf.

There are several reasons why this might be done, for instance, disability or being predisposed. However, the HMRC can sometimes reject returns submitted that are not signed by the individual so it is important to follow the proper process when appointing someone to file on your behalf.

It is important to recognise that the HMRC holds the tax filer legally responsible for their taxes, even when someone else has been appointed. There are however options and circumstances where a power of attorney can be appointed.

How can you appoint someone to sign on your behalf?

There are instances where you can elect someone to sign on your behalf. When we have done this for clients it has had to be done alongside a letter supporting why this was the route chosen. There is more information on the different types of authority you can give others on your tax filings on the HMRC website.

If you are what the HMRC deems as mentally fit and over the age of 18, you can elect someone to be your power of attorney. This means that if you become mentally unfit, your power of attorney/s can help make decisions for you. Find out more here.

Can you eSign the UK personal tax return?

eSignatures in both types and digitally signed forms are deemed as acceptable by the HMRC on personal tax returns. Digital photocopies are also accepted by the Inland Revenue.

AdobeSign and DocuSign are two popular softwares used to eSign tax returns.

When am I not required to sign my UK personal tax return?

With online filing, eSigning is not always necessary. As long as proper approval from the tax filer is given, UK tax returns can normally be filed online without a signature being given. Despite this, it is common practice for accountants to ask clients to sign the tax return for extra reassurance that the client is happy with the filing.

If you have any questions in regards to signing or filing your UK personal tax return contact us.

Understanding Stamp Duty

What it is and how it works

Stamp Duty Land Tax (SDLT) is a tax imposed by the United Kingdom government on property transactions. It is payable when purchasing land, buildings, or interests in land over a certain price threshold. The tax is calculated based on the purchase price or consideration of the property.

SDLT rates are typically tiered, meaning that different rates apply to different portions of the property's value. The rates and thresholds can change over time, so it's essential to refer to the latest government guidance or consult a legal professional or tax advisor for up-to-date information.

There are specific rules and exemptions that may apply in certain circumstances, such as first-time buyers, certain types of property, or transfers within families. Additionally, there may be different rates and rules for residential and non-residential properties.

It's important to note that the information provided here is a general overview, and the specific details and calculations can be complex. If you are involved in a property transaction, it's advisable to seek professional advice from a legal professional or tax advisor who specializes in the UK stamp duty regulations.

The eligibility for first-time buyer stamp duty land tax relief can vary depending on the jurisdiction you are in. In the United Kingdom, for example, the relief is typically available to individuals who are purchasing their first residential property and meet certain criteria. Generally, if you are not listed as an owner on the title deeds and do not have any other property ownership, you may potentially be eligible for first-time buyer relief.

What is the first-time buyer discount and who qualifies?

In the United Kingdom, first-time buyers may be eligible for a Stamp Duty Land Tax (SDLT) relief or discount. The specific eligibility criteria can vary and it's important to refer to the latest government guidance or consult a legal professional or tax advisor for the most accurate and up-to-date information. However, here are some general guidelines:

1. Definition of a first-time buyer: Generally, a first-time buyer is someone who has never owned a freehold or leasehold interest in a property before. This includes both residential and non-residential properties.

2. Purchase price threshold: The relief or discount typically applies to properties below a certain purchase price threshold. The threshold can vary, and it's essential to check the latest information to determine the current limit.

3. Residential property: The relief or discount generally applies to residential properties. Non-residential or mixed-use properties may not qualify.

It's important to note that there may be additional conditions or requirements that must be met to qualify for the first-time buyer relief. For example, the property must be intended as the buyer's main residence, and there may be restrictions on previous property ownership by family members or partners.

To determine your specific eligibility for the first-time buyer discount or relief, it is recommended to consult with a legal professional or tax advisor who can provide personalized advice based on your individual circumstances and the latest regulations.

If I am not named on the Deeds of a property -but I am on the mortgage, can I claim first-time buyer discount?

In general, the eligibility for first-time buyer relief regarding stamp duty land tax is based on property ownership rather than mortgage participation. If your name is not on the title deeds, it may affect your eligibility for the relief, even if you are named on the mortgage.

It's important to note that eligibility criteria can vary depending on the jurisdiction, so it's recommended to consult with a legal professional or tax advisor who is knowledgeable about the specific regulations in your area. They will be able to provide you with accurate and up-to-date information regarding your eligibility for first-time buyer relief in relation to your specific circumstances.

However, it is important to note that specific requirements and regulations can differ between jurisdictions, so it's always a good idea to consult with a legal professional or tax advisor who is familiar with the laws in your specific area. They will be able to provide you with accurate and up-to-date information regarding your eligibility for stamp duty land tax relief as a beneficiary of a property.

If I am married to someone who owns a property can I claim first-time buyer discount

If you are married to someone who has purchased a property, it can potentially affect your eligibility for the first-time buyer discount or relief in the United Kingdom. Generally, if either you or your spouse has previously owned a property, it may disqualify you from claiming first-time buyer benefits.

The eligibility for first-time buyer relief typically requires that neither you nor your spouse has owned a property before. This includes both freehold and leasehold interests in any property. If your spouse already owns a property, it could be seen as joint ownership or shared interest, and it may impact your eligibility.

It's important to note that specific rules and exemptions can vary, and it's crucial to consult with a legal professional or tax advisor who specializes in UK property regulations. They will be able to provide you with accurate and up-to-date advice based on your specific situation and the latest government guidelines.

What are the thresholds for first time buyer discount

As of my knowledge cutoff in September 2021, the thresholds for the first-time buyer discount or relief in the United Kingdom were as follows:

England and Northern Ireland:

• For residential properties, the threshold for first-time buyer relief is £300,000. This means that if the purchase price is £300,000 or below, no Stamp Duty Land Tax (SDLT) is payable. For properties priced between £300,001 and £500,000, a reduced SDLT rate is applicable.

Scotland:

• The first-time buyer relief in Scotland is known as the First-Time Buyer Relief (FTBR). As of September 2021, the threshold was £175,000. If the purchase price is below this threshold, no Land and Buildings Transaction Tax (LBTT) is payable. For properties priced between £175,001 and £250,000, a reduced LBTT rate is applicable.

Wales:

• The first-time buyer relief in Wales is known as the First-Time Buyers Relief (FTBR). As of September 2021, the threshold was £180,000. If the purchase price is below this threshold, no Land Transaction Tax (LTT) is payable. For properties priced between £180,001 and £250,000, a reduced LTT rate is applicable.

Please note that these thresholds are subject to change, and it's essential to refer to the latest government guidance or consult a legal professional or tax advisor for the most up-to-date information regarding the first-time buyer discount thresholds in the specific region you are considering.

What might affect first time buyer discount?

Several factors can affect your eligibility for first-time buyer discount in the UK. While the specific criteria can vary depending on the region and the type of relief, here are some common factors that may impact your eligibility:

1. Previous property ownership: Generally, if you or your spouse/partner has owned a property before, you may not qualify as a first-time buyer. This includes both freehold and leasehold interests in any property, regardless of whether it was a residential or non-residential property.

2. Shared ownership: If you have already purchased a property through a shared ownership scheme, it might affect your eligibility for first-time buyer relief. Shared ownership typically involves purchasing a portion of the property while renting the remaining share, and it can disqualify you from claiming first-time buyer benefits.

3. Property value: The relief or discount may have a threshold based on the purchase price of the property. If the property you are buying exceeds the specified threshold, you may not be eligible for the full relief or discount, or it may be reduced.

4. Property usage: The relief or discount may only apply to residential properties. Non-residential or mixed-use properties might not qualify.

5. Relationship to the seller: Some schemes or regions have specific rules regarding transactions within families, such as parents selling a property to their child. In such cases, the relationship between the buyer and seller can affect eligibility.

It's crucial to remember that eligibility criteria can change over time, and specific rules can differ depending on the region. It's advisable to consult the latest government guidance or seek advice from a legal professional or tax advisor who specializes in UK property regulations to determine your specific eligibility for first-time buyer relief.

For purposes of first-time buyer discount, what may be regarded as “previous ownership”

In the context of first-time buyer discounts or reliefs, "previous ownership" typically refers to any form of legal ownership of a property, whether it is a freehold or leasehold interest. It generally includes both residential and non-residential properties.

Here are some examples of situations that may be considered as previous ownership:

1. Owning a property outright: If you have previously owned a property as the sole owner or joint owner, whether it was your main residence, a second home, or an investment property, it is likely to be considered as previous ownership.

2. Shared ownership: If you have participated in a shared ownership scheme where you purchased a portion of a property while renting the remaining share, it may be regarded as previous ownership. Shared ownership usually grants you a leasehold interest in the property.

3. Beneficial interest in a property: If you have had a beneficial interest in a property without being named on the title deeds, it can still be considered as previous ownership. For example, if you were a beneficiary of a trust or had a financial stake in a property through a partnership or agreement, it may be deemed as previous ownership.

It's important to note that the specific rules and interpretations of previous ownership can vary based on the jurisdiction and scheme. It's advisable to consult the latest government guidance or seek advice from a legal professional or tax advisor who specializes in UK property regulations to determine how your particular situation might be regarded for the purpose of first-time buyer discounts or reliefs.

For first- time buyer discount purposes, what is regarded as a beneficial interest?

In the context of first-time buyer discount applications, "beneficial interest in a property" refers to having a financial or beneficial stake in a property, even if your name is not listed on the title deeds. It means you have a right to enjoy the benefits or profits derived from the property.

Identifiers of beneficial interest in a property can include, but are not limited to:

1. Trust arrangements: If you are a beneficiary of a trust that owns the property, it indicates a beneficial interest. A trust is a legal arrangement where one party (trustee) holds and manages the property for the benefit of another party (beneficiary). Even if your name is not on the title deeds, being named as a beneficiary of a trust indicates your beneficial interest.

2. Partnership or joint venture agreements: If you are a party to a partnership or joint venture agreement related to a property, it can imply a beneficial interest. This could involve an agreement where you have a financial stake or share of the profits or proceeds from the property.

3. Financial investment or contribution: If you have made financial contributions towards the purchase or improvement of a property, even if you are not listed as an owner, it can establish a beneficial interest. This can include providing funds for the down payment, mortgage payments, or renovations.

It's important to note that the specific requirements and interpretations of beneficial interest can vary depending on the jurisdiction and scheme. To determine the eligibility for first-time buyer discounts or reliefs based on beneficial interest, it is recommended to consult the latest government guidance or seek advice from a legal professional or tax advisor who specializes in UK property regulations. They will be able to assess your specific circumstances and provide accurate information and guidance.

How to know if you legally own a property?

To determine if you legally own a property, you can take the following steps:

1. Check the Land Registry: In the United Kingdom, you can search the Land Registry to confirm the legal ownership of a property. The Land Registry is the official government body responsible for maintaining records of land and property ownership. You can conduct a search online or request an official copy of the title register and title plan for the property in question. These documents will provide information about the current registered owner(s) of the property.

2. Review the title deeds: If you have physical or electronic copies of the title deeds for the property, examine them to determine if your name is listed as the legal owner. Title deeds are legal documents that provide evidence of ownership and may include information about the property's boundaries, restrictions, and rights of access.

3. Consult legal professionals: Seek advice from a legal professional, such as a conveyancer or solicitor, who specializes in property law. They can review the documentation and guide you on the legal ownership of the property. They may also conduct searches and investigations to ensure the property ownership is properly established.

4. Review purchase documents: If you have purchased the property, refer to the purchase documents, such as the sale contract, completion statement, and mortgage agreement. These documents should provide information about the transfer of ownership and your legal position as the owner.

5. Check with mortgage lender: If you have a mortgage on the property, contact your mortgage lender or loan provider. They can provide information about the legal ownership and any encumbrances related to the property.

It's important to consult with legal professionals or experts who specialize in property law to obtain accurate and up-to-date information about the legal ownership of a property. They can provide advice and guidance based on your specific circumstances and the relevant laws and regulations.

Do I have to pay stamp duty if I am added to the property deeds?

Adding a name to the land ownership deeds, such as transferring or adding someone as a co-owner, can potentially trigger a Stamp Duty Land Tax (SDLT) liability in the United Kingdom. The specific circumstances and details of the transaction will determine whether SDLT is payable.

The general rule is that SDLT may be applicable when there is a consideration or payment involved in adding a name to the deeds. Consideration can include monetary payments, assuming a mortgage or other liabilities, or the transfer of a share of the property.

However, there are certain exemptions or reliefs that might apply in specific situations, such as adding a spouse or civil partner's name. It's crucial to consult with a legal professional or tax advisor who specializes in UK property regulations to determine the specific SDLT implications and any available exemptions or reliefs in your particular case.

They will be able to review the details of the transaction, consider any applicable exemptions or reliefs, and provide accurate advice regarding SDLT obligations and any potential tax liability.

If I am added to a parents property deeds, will stamp duty be due?

If you are added to your parents' property deeds, whether or not stamp duty is due will depend on the specific circumstances of the transaction. Here are a few considerations:

1. Purchase consideration: If you are being added to the property deeds without paying any consideration, such as receiving a share as a gift or inheritance, it is less likely that stamp duty will be due. In such cases, the transaction may be considered a transfer of equity rather than a purchase, and stamp duty may not apply.

2. Consideration involved: If there is a monetary payment or other form of consideration involved in adding your name to the property deeds, it could potentially trigger a stamp duty liability. The amount of stamp duty payable would depend on the value of the consideration and the applicable rates and thresholds at the time of the transaction.

3. Available exemptions or reliefs: There may be specific exemptions or reliefs available for certain family transactions, such as the transfer of property between parents and children. These exemptions or reliefs can reduce or eliminate the stamp duty liability. It's important to review the latest government guidance or consult a legal professional or tax advisor who specializes in UK property regulations to determine if any exemptions or reliefs apply in your particular case.

It's important to note that stamp duty rules and regulations can be complex, and they may vary based on factors such as the region and the specific circumstances of the transaction. It is recommended to seek professional advice to determine the stamp duty implications and any potential liability when being added to your parents' property deeds.

Need more help?

If you need any more help regarding all tax matters in the U.K. and U.S. feel free to get in touch!

From England to Scotland:

A Comprehensive Guide to how moving to Scotland from Other UK jurisdictions will change your personal taxes

In this article, we will address a question posed to us by a number of clients: How does moving to Scotland from another UK jurisdiction affects personal taxation matters

As part of the United Kingdom, Scotland follows many of the same taxation rules and procedures as the rest of the UK, with the primary body for taxation being His Majesty's Revenue and Customs (HMRC). However, there are areas of taxation where Scotland has devolved powers to set their own rules, rates, and bands. This is especially relevant in the area of income tax.

Note to reader: We recognise that Scottish independence is a significant topic of discussion and will work to keep this article up to date should any changes occur. Please feel free to send us any questions.

Scotland sets income tax rates for Scottish taxpayers

The Scottish Parliament has the power to set its own rates and thresholds for income tax for Scottish taxpayers. This means that the rates and thresholds for income tax in Scotland can differ from those in England, Wales, and Northern Ireland.

Corporation Tax, VAT and most excise duties are set by UK government

On the other hand, many other forms of taxation, such as Corporation Tax, VAT, and most excise duties, remain reserved to the UK government, which means that they are the same across the whole of the UK, including Scotland. Similarly, National Insurance contributions are set at the UK level.

Land and Building Transactions

Certain other taxes, such as Land and Buildings Transaction Tax (which replaces Stamp Duty Land Tax in Scotland) and Scottish Landfill Tax, are devolved to Scotland and may be different from equivalent taxes in other parts of the UK.

We support clients on their worldwide taxation matters, with a specialism in cross-border taxation. Contact us with any questions.

Scottish Landfill Tax (SLft) vs UK Landfill Tax

The Scottish Landfill Tax (SLfT) and the UK's Landfill Tax are both taxes levied on the disposal of waste to landfill, with the aim to encourage recycling and more environmentally friendly waste disposal methods. However, there are some differences between them due to devolved powers.

In 2015, Scotland implemented its own Scottish Landfill Tax (SLfT) as one of the first taxes to be devolved to Scotland. The SLfT replaced the UK's Landfill Tax in Scotland and is administered by Revenue Scotland rather than HM Revenue and Customs (HMRC).

While both taxes have similar structures, the exact rates can differ. Both taxes apply a lower rate for "inactive" (i.e., less polluting) waste, and a higher rate for all other waste. In April 2022, the standard rate for the UK Landfill Tax was £102.10 per tonne, while the lower rate was £3.25 per tonne. The standard rate for Scottish Landfill Tax is £98.60 and the lower rate is £3.15.

Additionally, the types of waste that qualify for the lower rate, as well as any exemptions or reliefs, vary slightly between the UK and Scotland.

Finally, it's important to note that while these two taxes are similar in many ways, the funds raised from the Scottish Landfill Tax go to the Scottish Government's budget, while funds from the UK Landfill Tax go to the UK budget.

Scottish Air Departure (ADT) Tax vs UK Air Passenger Duty (APD)

Air Departure Tax (ADT) is Scotland's planned replacement for Air Passenger Duty (APD), which is a tax on all eligible passengers leaving UK airports.

Air Passenger Duty (APD) is a tax levied on air travel that is operated by airlines that fly from a UK airport. The tax isn't charged on flights to the UK from overseas. The amount of tax varies depending on the distance of the flight and the class of travel.

The plan to replace the UK-wide Air Passenger Duty (APD) with Scotland's own Air Departure Tax (ADT). The intention was to reduce the tax by 50% with the eventual goal of completely abolishing it. This was part of Scotland's devolved powers granted by the Scotland Act 2016. However, due to a number of issues, including the need to obtain EU approval under state aid rules, the introduction of ADT has been postponed indefinitely.

Currently, APD still applies to flights departing from Scotland and is the same as the rest of the UK. Given the dynamic nature of these changes, it's recommended to check for any updates or consult a tax professional for the most current and accurate information.

Scottish Lands and Building Transaction Tax (LBTT) vs UK Stamp Duty Land Tax (SDLT)

Both the Land and Buildings Transaction Tax (LBTT) in Scotland and the Stamp Duty Land Tax (SDLT) in the rest of the UK are forms of tax applied to transactions involving the purchase of property or land. However, they operate under different rules and rates because the LBTT is a devolved tax specific to Scotland.

Here's a comparison of the tax rates and bands that were in place previously:

Stamp Duty Land Tax (England and Northern Ireland):

• Up to £125,000: 0%

• £125,001 to £250,000: 2%

• £250,001 to £925,000: 5%

• £925,001 to £1.5 million: 10%

• Over £1.5 million: 12%

First-time buyers can claim a relief that changes these thresholds.

Land and Buildings Transaction Tax (Scotland):

• Up to £145,000: 0%

• £145,001 to £250,000: 2%

• £250,001 to £325,000: 5%

• £325,001 to £750,000: 10%

• Over £750,000: 12%

As you can see, the thresholds and rates differ between the two taxes. Moreover, Scotland has additional reliefs that may apply in certain circumstances, such as the Additional Dwelling Supplement for purchases of additional residential properties, which is similar to the higher rates of SDLT for additional properties in the rest of the UK.

The rates and bands for both LBTT and SDLT have changed over time due to policy changes and temporary measures in response to events such as the COVID-19 pandemic. Therefore, it's important to check for the most up-to-date information or consult a tax advisor.

First-time buyer thresholds vary throughout the UK.

Council tax

How Scotland and Englands tax rates differ

In the tax year 2022-2023, the rest of the UK had three income tax rates:

• The basic rate of 20% on income up to £50,270.

• The higher rate of 40% on income between £50,271 and £150,000.

• The additional rate of 45% on income over £150,000.

In contrast, Scotland had five tax bands:

• The starter rate of 19% on income between £12,571 and £14,667.

• The basic rate of 20% on income between £14,668 and £25,296.

• The intermediate rate of 21% on income between £25,297 and £43,662.

• The higher rate of 41% on income between £43,663 and £150,000.

• The top rate of 46% on income over £150,000.

Generally, when you move from another part of the UK to Scotland and become a Scottish taxpayer, your income tax could be slightly higher or lower than before, depending on your exact income level.

Please note that you generally become a Scottish taxpayer if you move to Scotland and it becomes your main place of residence. Other factors, like where you work or the amount of time you spend in Scotland vs. the rest of the UK, can also play a role. It's a good idea to consult with a tax advisor or the HM Revenue and Customs (HMRC) for more specific guidance.

How to establish if you are under Scottish, English or other UK tax Residency?

Your tax residency in the UK, whether in Scotland or elsewhere in the UK, is determined by where you live, not your nationality.

You will typically be considered a Scottish taxpayer if you meet one of the following conditions:

1. You're a UK resident for tax purposes and spend more days of the tax year in Scotland than in any other part of the UK.

2. You're a UK government employee and you live in Scotland.

You would generally not be a Scottish taxpayer if you don't live in Scotland (or live abroad), even if you are a Scottish national or if you have a home in Scotland but spend more days of the tax year elsewhere in the UK.

These rules can be complex and may change over time, and there can be exceptions for certain groups of people or particular situations. If you're not sure about your tax residency, it's a good idea to consult with a tax advisor or contact HM Revenue and Customs (HMRC) directly. They can provide guidance based on your individual circumstances.

Are the expenses claimable by self-employed professionals the same under Scottish tax law as in other places in the UK?

Yes, the rules for expenses that self-employed professionals can claim are typically set at the UK level and apply equally across the entire United Kingdom, including Scotland. These rules are managed by Her Majesty's Revenue and Customs (HMRC), the UK's tax, payments, and customs authority.

UK self-employed professionals may find this article covering some of the different expenses you can claim interesting.

Contact us for an assessment of the unique tax expenses and reliefs to your profession and tax circumstance

For more advice on Scottish or other UK tax matters get in touch

As one of the fastest-growing accountancy firms in UK and US tax we aim to keep you up-to-date in the latest in tax news. If there are any topics that you want us to cover, do not hesitate to contact us

Below is information regarding the latest mini-budget proposed by the conservative party. The details of the budget have been under much scrutiny and are in a state of constant fluctuation, when changes are made we will update this article to reflect the changes.

To skip to the different sections of the article, click on the link below:

• Mini Budget Summary

• What are the Changes to Income Tax?

• Changes to Corporation Tax

• Stamp Duty Proposed in the Mini Budget

• Changes to Interest Rates

• Mini-Budget Changes to VAT

• National Insurance

• How has the Mini-Budget Affected The British Pound ?

• Does the Mini-Budget Address the Energy Crisis?

• Changes for Self-Employed Professionals

• How does the Mini-Budget Affect Investments

Mini Budget Summary

The ex-chancellor Kwasi Kwarteng announced a new mini-budget in September 2022 to tackle the cost-of-living-crisis - the rising energy bills and inflation. The purpose of the mini-budget was to substantially improve UK economic growth through the cuts and supply side reform. The changes will have an impact both on households and businesses. Prior to mini-budget statement Bank of England voted for a 0.5 percentage points increase in the interest rate, meaning it now stands at 2.25%. It is now estimated that interest rates will have to rise significantly in response to the mini-budget.

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Bank of England

The link below contains the information relating to the Bank of England.

Go to the website page

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Mini Budget Summary Article - Azets

An article on the mini-budget 2022 by Azets has informed us when writing this blog post. You can read their article at the link below:

Go to the website page

What are the changes to Income Tax?

Basic rate income tax cut will fall by 1p from April 2023 which represents a reduction from 20% down to 19%. This means that on all earnings between £12,571 and £50,270 will be subject to 19% income tax, rather than the current 20%. Moreover, this tax cut plan was already introduced by the previous Chancellor Rishi Sunak to come into force in 2024.

The income tax rate of top earners is currently people 45% on all earnings over £150,000. From April 2023 the highest tax rate will go down to 40%. This will affect all earnings over £50,271. However, it is arguewd that such a decision is likely to benefit only the higher earners which making no difference to lower-income households. Approximately 600,000 of the richest earners in the U.K. will recive a £10,000 tax cut due to scraping the 45% tax rate.

A 1p cut to the basic rate would save £124.30 a year for those on a salary of £25,000 and £224.30 a year for workers earning £35,000. This is substantially less thant the £674 and £874 saving for workers with an income of £80,000 and £100,000, respectively. This shows that the tax cut disproportionately affects the countries top-earners.

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Mini-Budget Changes to Corporation Tax

The planned corporation tax increase from 19% to 25% has been scrapped and corporation tax will remain at 19%. This change has been introduced as a tool to increase investment in the UK.

Stamp Duty Tax Proposed in the Mini-Budget

Newly, there is no Stamp Duty Land Tax (SDLT) on the first £250,000 of a property’s value in England and Northern Ireland. This is an increase from original £125,000. Also, first time buyers currently do not pay SDLT on the first £425,000 which is an increase from £300,000. The level at which they can claim relief rises from £500,000 to £625,000.

Changes to Interest Rates

Mortgage borrowers need to prepare for the higher rates as millions of fixed-rate deals set to expire next year. Currently, average five-year and two-year fixes are now above 4% and estimates suggests these mortgages will go as high as 6-7% placing high levels of financial stress on homeowners.

Mini-Budget changes to VAT

The Chancellor has introduced plans to a new VAT-free shopping schemes for non-resident visitors. Non-UK visitors to Great Britain will be able to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage

Mini-Budget Changes to National Insurance (NI)

The increase of 1.25 percentage point from 12.5% to 13.17% will be reversed. A basic rate taxpayer will save approximately £168 per year. These savings increase for higher earners with someone earning £50,000 saving £469 and someone on £80,000 saving £843. As with the income tax changes the benefits of the NI reversal will disproportionately benefit higher earners.

How has the Mini-Budget affected the British Pound?

Since the mini-budget announcement in September the British pound has been in freefall. This means that a weakening British pound makes it more expensive for UK companies to import goods and services from abroad. Weakening currency will likely result in prices increases and therefore contribute to the already high inflation. It is this inflationary pressure that is prompting analysts to predict further interest rate rises that will affect mortgage holders as mentioned previously. Also, British holidaymakers will get less for they money when abroad. The pound recovery can only happen if there is an improvement in the UK economy - attracting foreign investments to increase demand for the pound.

However, as the pound hit an all-time low against dollar the crypto market surges. Despite the broad economic situation, the bitcoin has been stable over the last few weeks, trading between $18,300 and $20,000 before However, as the pound hit an all-time low against dollar the crypto market surges. Despite the broad economic situation, the bitcoin has been stable over the last few weeks, trading between $18,300 and $20,000 before

Does the Mini-Budget address the Energy crisis?

As announced a couple of weeks ago, the Government is to cap household energy bills at an average of £2,500 for two years from 1 October 2022. This cap is said to equate to an average household saving of £1,000 a year.

Changes for Self-Employed Professionals

The mini-budget simplifies so-called IR35 rules which affect self-employed individuals operating through a company. From April 2023, workers across the UK providing their services via an intermediary, such as a personal service company (PSC), will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance (NI). Government costing figures indicate that repealing these changes will cost £1.1 billion in 2023/24, increasing to £2 billion in 2026/27, as a result of a reduction in tax and NI receipts.

How does the Mini-Budget affect Investments?

Investment holders are to benefit from the reversal of the planned dividend tax increases. Rates will now be held at 2022 levels and represents a reduction of 1.25% on all taxable dividends. The £2,000 dividend allowance and the tax-free dividends on ISAs will remain.

Want to know more?

For more information regarging the changes that may affect you personally, do not hesitate to contact us. We offer expert tax advice in all areas of U.K. tax law. If there are any other topics that you would like us to cover, please let us know. You can either use our contact form or you can message us on social media.

What are Non-qualified Stock Options (NSOs)?

Non-qualified stock options (NSOs) allow employees to buy a company’s shares at a fixed price (known as the strike price), once the company releases it on the grant date (the date stock options are given to the employees). 

The stock options will be priced at a fair market value when the grant is issued at that time. This means that once the vesting period is over, the strike price will be the same as the fair market value when the NSO was granted. 

For instance, if the stock is priced for £50 on the grant date, the employee will be able to purchase the stock in the future (with expectations that the value of the stock has increased) at the same price of £50.

However, the rights over the stocks purchased can only be used after the vesting period is over, and therefore, employees would have to wait until you can exercise the options. They also have a deadline for exercising these options.

Here are some ways you can exercise your stock options:

1.     Exercise and Hold (Cash Exercise) – This is purchasing the stock options using cash at the strike price and regaining your cash once you sell your shares.

2.    Sell-to-Cover (Cashless) – The alternative method to using cash. This is immediately selling enough shares to cover the cost of exercising including commissions, applicable taxes, and any other fees. You can then either keep or sell the remaining stock. 

3.    Exercise and Sell (Same Day Sale/Cashless Exercise) - Immediately exercising and selling your shares. You can only receive net proceeds once the cost of exercising, commissions, applicable taxes, and fees have been covered.

Taxation on NSOs

Employees will still have to pay income tax on the difference with the fair market share price and the exercise price (profit made); subject to federal, state, and local income taxes as well as payroll taxes. After acquiring the options, the employee would have the freedom to either sell the shares or keep them.­­­­­

However, when proceeding with the ‘Exercise and Hold’ method, if you sell after holding the shares for one year or less; you will be taxed on the difference between the fair market price and exercise price, and the sale price will be taxed as a short-term capital gain (or loss) 

When you sell the stock options after holding for a year or more, you will be taxed on the difference between the fair market price and exercise price, and the sale price will be taxed as a long-term capital gain (or loss). This will also be applicable for the ‘Sell-to-Cover’ method.

 Glossary

Here’s a glossary to help you gain a better understanding of the keywords we’ve used throughout the article

Stock Option: The right to buy a specific number of shares of a company’s stock in the future, at a contractually specified price (Strike Price).

Strike Price: The price of your stock options that you can purchase, specified in your stock option grant.

Grant Date: Initial date that NSOs are given to you

Stock Option Grant: Specifies the maximum number of shares that you can purchase

Vesting Schedule: A waiting period until you obtain full rights of the asset and can exercise your stock options.

Expiration Date: If the stock options have not been exercised by the specified deadline, you lose all the stock options. (This is normally around 10 years)

Fair Market Price: The cost that an asset would put up for sale on the open market.

Calculating the prospective value of NSOs

You can also calculate the potential net value of your stock options by using the equation below.

Number of Shares x (Company Share Price – Exercise Price) = Net Value of Option

Advantages and disadvantages of NSOs

Advantages

• Increased income - it allows you to buy stocks at a lower price than the fair market value and allow you to gain profit from it.

• Flexibility - You have full control over how to exercise your stock options once the vesting period is over

• Cashless - You may not need cash to purchase stocks as there are alternative cashless methods

• Post-employment – The stock options can still be exercised even after you leave the company if you haven’t surpassed the expiration date

Disadvantages

• High Tax - tax incurred from the profit made once exercised could be steep as it is considered as annual income. Also, you will be taxed as soon as you exercise and sell it

• Risk – It is not guaranteed that the stock prices will increase and that you will gain profit from it

• Limitations with exercise methods – Cashless exercise could also mean losing significant profits for lower-income employees; having to sell stock options immediately. With cash exercise, having cash upfront may not be affordable for some.

Summary

• Non-qualified Stock Options (NSOs) is equity compensation method used by businesses

• You have the freedom to exercise the stock options however they want

• You will be taxed at exercise and sale

• If stock options are held for a year or less, the NSOs will be taxed as short-term capital gain

• If the stock options are held for a year or more, the NSOs will be taxed as long-term capital gain, with the rates ranging from 0 – 20%

• There is a time frame on when you could start exercising your options, and once the vesting period is over, options must be exercised before the specified deadline.  

We hope that article has been informative, if you seek any further advice, please do not hesitate to contact us. To stay up-to-date and informed on the latest in UK tax advice, subscribe to our newsletter.

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Museum And Galleries Tax Relief Doubled: What Does That Mean?

As part of the government’s Autumn Budget 2021, the Cultural Relief Rate has been temporarily doubled until April 2023. This includes the Museums and Galleries Exhibition Tax Relief (MGETR). 

In this article, we will be breaking down the rate changes implemented and guiding you whether you meet the requirements to claim the MGETR. 

What is the Museums and Galleries Exhibition Tax Relief (MGETR)? 

MGETR scheme is aimed to provide support for museums and galleries, allowing them to develop new exhibitions and display collections to reach a wider audience and benefit the public. 

The value of the relief:

There are two rates available for the MGETR. For the non-touring exhibitions, the qualifying expenditure has been increased to 45%, capped at £80,000 per exhibition. Whereas for the touring exhibition, it has been increased to 50% (available for both PPC and SPC*), and capped at £100,000 per exhibition, per venue.

The plan for the following years is to increase the MGTER rates for the next two years and eventually go back to the current rates by 2024: 

What are the qualifying expenditures?

It needs to be taken into consideration that the qualifying expenditures applicable for the MGETR need to meet the following conditions:

• Expenditure incurred must be made within the European Economic Area (EEA), with a minimum of 25% sped within the EEA

• Expenditure must have been paid or subject of an unconditional obligation pay

• Expenditure incurred for producing and uninstalling the exhibition at each venue are claimable

Who qualifies?

To qualify for the MGTER, you must be an Exhibition Production Company (EPC). 

This means you are: 

• A charitable company that maintains a museum or gallery

• Wholly owned by a:

• the charity which maintains a museum or gallery

• the local authority which maintains a museum or gallery

• a charity formally recognized by the HMR

• Identify as the Primary Production Company (PPC) or the Secondary Production Company (SPC)

*Primary Production Company (PPC) and Secondary Production Company (SPC): What’s the difference?

Primary Production Company (PPC) 

If you are a Primary Production Company (PPC), you are responsible for organizing an exhibition at the first venue (touring) or only venue (non-touring). 

The responsibilities would include:

• Creative and Technical decisions

• Contractual Agreements

• Producing and running the exhibition

• Uninstalling and closing the exhibition

Secondary Production Company (SPC)

 If you are a Secondary Production Company (SPC), you are responsible for organizing an exhibition at the second or any following venues for a touring exhibition.

The responsibilities would include:

• Production and running the exhibition of the venue

• Deinstalling the exhibition at that venue

You cannot be both a PPC and an SPC for the same exhibition.

What exhibitions qualify?

The exhibition must be accessible and open to the public to qualify for the MGETR. However, it does not matter if there are any admission fees or not. 

A qualifying exhibition must meet the following criteria:

• It is an arranged public display or organized collection of objects and works considered to be scientific, historic, artistic, or of cultural interest

• It can be a single object

• It must be at least 25% of core expenditure spent on goods/services that are provided within the European Economic Area (EEA)

(Core expenditure to be spent on either producing the exhibition or uninstalling and closing the exhibition, if open for a year or less)

A qualifying touring exhibition must meet the following criteria:

• The exhibition is held at more than one venue

• At least 25% of objects or works displayed must also be exhibited at every following venue

• No more than 6 months

• ' gap between uninstalling at one venue and installing at the next.

• There must be a Primary Production Company (PPC) within the charge of Corporation Tax, for the exhibition

• The PPC was be involved in the planning stage that the exhibition will be touring

What exhibitions are excluded from MGETR?

An exhibition will fail to meet the criteria for claiming relief if it is

• Organized in association with a competition

• Intention and main purpose are selling the displayed objects or works

• Any part of the display is alive

• Includes a live performance

• Less than 25% of ‘core’ expenditure incurred is EEA expenditure

How to apply?

Museums and Galleries Exhibition Tax Relief can be claimed under the Company Tax Return. You would have to calculate:

• Additional deduction due to your company

• Any payable credit due

You will also need to provide:

• Statements of the total core expenditure (EEA and non-EEA expenditure separated)

• Breakdown of expenditure by category

It needs to be taken into consideration that the rate increase is only applicable for production activities that begin on or after 27 October 2021.

A Guide for authors on handling their finances

1 ) Organising Your Paperwork

It seems self explanatory but finding a filing system that works for you is vital. If you don’t you will risk the chaos of sifting through all your incomings and receipts when it comes time to file your tax return.

Some steps you could take to keep organised include:

• Keep your books up to date - Note down your incomings and their associated outgoings

• Note down your expenses and organise their relevant receipts (there are mobile apps that can help you with this now)

• Keep a folder of relevant documents such as claim forms if you are claiming benefits

This will not only save you time and energy but also a great deal of stress when it comes time to file your tax return!

If you have an accountant (or looking to hire one) organising your paperwork will also make the process more seamless enabling them to spend more time on finding ways to reduce your tax liability.

2) Keeping a Record of Your Expenses

We referred to this above but it is worth reiterating - organise your expenses!

The scene is set, you are the majority of the way through the filing process, the end is nigh! But wait, the HMRC are asking you to calculate and enter your expenses. You plant the palm of your hand firmly on your forehead; you have realised that the contents of that dust ridden bin bag positioned in a forgotten corner of the room contains all of your relevant receipts! Now you have to pour all of these receipts out of the bin bag and trawl through them, hoping you can make sense of when they were from and what they were for.

You may laugh (hopefully you have as it signals you are at least more organised than this), but believe me, as deadline day approaches situations like this are occurring throughout the country.

Whether or not writing is your main source of income or not – it is a great edition either way to create a record sheet or document for your expenses. It would help you to see how much you’re spending whether it’s weekly, monthly, or even annually. 

By being self-employed, you would arguably have to be careful with your expenses. A good way to do so would be by signing up to an accounting tool such as Quickbooks Online or Xero, this will help ensure that you’ve kept a record of all items purchased as well as how to run your self-employed job as a corporate would with their business. 

3) Separating Your Bank Accounts

It might seem like an obvious one – or maybe not, either way it’s a good idea to keep separate accounts, with one allocated account with a sole purpose of saving for your tax payment. This will allow you the peace of mind that you have a calculated amount set aside for your taxes, it’ll keep everything nice and clear for you. A bonus tip involves saving for your taxes from your first yearly payment, this will most likely make you over save for your taxes thus allowing you to give yourself a well deserved bonus once your tax return is done. All from your own pocket!

4) Learn About The Deductible Expenses You May Be Missing

Being aware of what you can and cannot claim on your expenses as a self-employed individual is vital when it comes time to file your tax return. Common claimable expenses include:

• Stationery

• Theatre and Cinema Tickets if for the purpose of research and are within the authors relevant genre

• Courses and Conferences

• Repairs and Maintenance relevant to the tools that a writer may use

• Accountancy and Professional Fees

• Reference books, CDs, journals and Newspapers if relevant

These are just a few of the expenses you may be able to claim.

It is worth noting that all expenses must be relevant to your profession. If you are unsure about a particular expense you are going to claim, our advice would be do not claim it. Instead seek the help of a professional tax advisor. You can receive very hefty fines if the HMRC find that you have claimed expenses that they deem as unacceptable.

5) Hiring an Accountant

As a self-employed individual taxes can be complex, and overwhelming. The easiest and most efficient way to file your taxes is to hire a tax professional. Not only will you save yourself a great deal of time and stress but a professional tax advisor will know every area that could be saving on your tax liability thus saving you money.

We offer affordable fees for authors, do not hesitate to Contact Us

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The 2021 budget has announced a lot of ways they plan to help people all across the UK, introducing different schemes and budgets for different industries, but what does this year’s budget mean for corporates? There are some new schemes that have been introduced, that could possibly become a problem for larger companies, and not affect smaller companies at all. On the other hand, there could be advantages for both large and small companies. All in all, there are a lot of ways corporates could benefit from this year’s budgets.

In this article, we will cover a few of the different schemes and regulations provided by the Government, how they work, and how the Government aims to help corporates. Some of these include the Super Deduction Scheme, VAT reduction, a £3000 loan to taking on apprentices, a ‘Recovery Loan Scheme’ all across the UK, and a change in the annual corporate tax payments.

Super Deduction Scheme

Starting from April, a ‘Super Deduction’ scheme will start to take place for companies. For every pound, a company invests in new equipment, their tax bill will be cut by 25%. It’s expected to incite around £25 billion in business investments all across the UK – benefiting businesses such as manufacturers in particular. “These measures will be welcomed by businesses and will encourage an immediate acceleration of investment, instead of holding off. However, care will need to be taken in relation to certain assets, such as vehicles and leased plant and machinery, which may be subject to restrictions.”

This scheme aims to encourage firms to invest in “productivity-enhancing plant and machinery assets that will help them grow, and to make those investments now.” – which you can read more about in this article.

VAT cut to 5%

An extension to the Value Added Tax will cut to 5% for things such as hospitality, accommodations, and site attractions until the end of September, all across the UK, which will shortly be followed by a 12.5% rather for another six months that will end on the 31 st of March, in 2022.

The VAT was originally 20%, which is a good amount of reduction – making it all the easier for restaurants, cafes, hotels, amusement parks, concerts, etc to regain the money that wasn’t being made during most of the pandemic.

This will ensure the safety of supporting 150,000 businesses in the tourism and hospitality sectors and protect the 2.4 million jobs across the UK.

£3000 for taking on apprentices

An extension has been decided to the hiring incentive in England, to take on those looking to do apprenticeships which will go on until September.

This is a great advantage for those who are looking to do apprenticeships straight after finishing secondary, as an alternative to university. The more apprenticeships that are held, the easier it will be for young adults who are not keen on going to University. It’s beneficial to corporates too, as the more people they can get on board with their company, the better.

18-year-old Martha McKeown signed up to become an apprentice for 18 months at a charity that helps people with learning difficulties and have mental health problems. She talked about how the apprenticeship gave her the confidence that she needed. As well as having something where she can learn different skills, she can also earn the London Living wage which enables her to save up money to give her a head start of saving for her own place.

The government claims that the boost for apprenticeships will ultimately help the IFA sector. Evidence shows that more than 700,000 people have lost their jobs due to the Coronavirus. They believe that greater incentives for apprentices and employers will enable apprentices to continue to work in a certain profession. Therefore, it will attract fresh and diverse talent – including those from BAME backgrounds, LGBTQA+, and women.

UK-wide Recovery Loan Scheme

This scheme aims to make loans available starting from £25,001 to £10 million and account finance between £1,000 and £10 million. This is aimed to help both large and small corporates proceed to the next stage of recovery post-pandemic.

The scheme will be a boost to help a lot of companies to continue to take out loans, this would also give corporates confidence in continuing with their business – for example, if they’re a start-up on a small corporate, as they may have been badly affected during the pandemic.

Yearly Corporate Tax

As part of the yearly tax that corporates pay which was originally 19%, it was announced that it will be increased to 25%, but only for companies that are earning more than £250,000. This of course is a disadvantage to big corporates that earn that amount or more as they will now have to start paying quite a bit more tax than they originally were. For smaller companies who don’t earn anywhere near as much as £250,000, there is no disadvantage to them, but also no beneficial factor that they could gain from. Although this will not start straight away as the chancellor has announced that it will be increased starting from 2023.

Contact Us for any of your tax needs. We specialize in taxation for corporate enterprises.

How the 2021 Budget Will Help Equality and Diversity

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Written by Alistail Bambridge
Partner & Founder
About Alistair

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The economy has taken a huge hit as a result of the Coronavirus pandemic, with very few jobs being offered to those job hunting and others losing the jobs that they had. Nevertheless, the new 2021 budget that has recently been introduced by the government plans to pave people’s ways back into the working world. 

There’s still the question of how it might help minorities, such as people from BAME backgrounds, or anyone a part of the LGBTQA+ community, and women in general. They actually stated that they make recommendations for investments and policies to promote gender equality for women in all their diversity in the recovery from Covid-19. 

This article will cover some of the different government legislations that could benefit equality and diversity. We have also covered the following 2021 Budget topics:

What Self-Employed Professionals Need to Know About the Budget

Prospective Buyers Guide to the 2021 Budget 

How will the 2021 Buget affect High-Net Worth Individuals?

What the 2021 Budget means for Corporates 

How the 2021 Budget Will Affect Investments and the Stock Market  

What the 2021 Budget means for the creative industry

Although there is no substantial legislation for those with disabilities, BAME or LGBTQA+ communities, there are several budget changes that could improve equality and diversity. Most prominently, there are many ways that businesses may be able to employ Budget to work towards improved equality and diversity standards. For example, 35 of the UK's major environmental organisations collaborate on an employment scheme to diversify the sector further. The increased funding for apprenticeships announced could be used to support these efforts further.

 

Stamp duty holiday extended and 5% mortgages

Evidence has shown that Black families struggle more to get on the property market, this is due to a number of issues that extend far beyond getting a deposit together. However, the Stamp Duty Holiday and 5% mortgages could indeed assist those who already have savings or who are on income that will allow them to afford a 5% deposit before the end of June.

The extent to which this will really help can be disputed, the stamp duty holiday has sent property prices through the roof meaning that an above-average income and larger deposit is still required.

For more on the 2021 budget and what it means for those buying a property in our "Prospective Homeowners Guide to the 2021 Budget"

Helping BAME businesses recover from Covid-19

Evidence shows BAME businesses have been incredibly hard by the coronavirus pandemic. This is thought to be due to the higher sickness and mortality rates Covid-19 has had on the BAME communities. There is a demand for increased grants to help such businesses get back on their feet and grow. 

Again, although there is no legislation specific to BAME businesses there have been a number of grants and exemptions made available to businesses in the 2021 Budget.

Some of the opportunities include the Kickstart Scheme, which allows corporates to hire people that they would only have the pay minimum wage, but is a beneficial factor for both them and the employee, as they’re able to give those struggling to find a job because of the pandemic, a chance to put get the foot into the career path they’re looking to get into. BAME business will also be giving those from a BAME background more equal opportunities.

Chancellor Rishi Sunak also confirmed the Government’s decision to boost incentive payments for businesses to hire apprentices of any age. He also said the Government would invest £126 million “to triple the number of traineeships.” Meaning that BAME businesses will be able to hire more people.

 

Equal opportunities for employment in 16-24

There has also been a kick-starter scheme that has been introduced that aims to help those ages 16-24 to avoid long-term unemployment. It works by offering a person between the ages of 16-24 to work as an employee and be paid minimum wage, allowing them to work during the pandemic. This scheme is probably the one that has been a great advantage for people between that age gap across the UK as unemployment has been a huge problem for the country, especially for those trying to find their way into the working world. 

It creates an equal opportunity for those between 16-24 because when you're competing with new graduates, people with a few years' experience who lost their jobs during the pandemic and even people with 10+ years' experience, it can be extremely overwhelming and difficult to find a job. The scheme introduces a new way of giving people a chance to learn without needing a certain amount of experience but gives them a chance to land a permanent position at the end of the scheme. Many companies have hopped on board to open positions for those who are actively looking to be employed to avoid long-term unemployment. 

Although it’s an amazing opportunity for those between 16-24, training providers are concerned that the new scheme will replace apprenticeships for young people – stating that those who take part in the Kickstart Scheme will not be able to be apprentices, claiming that “those furthest from the jobs market, are at risk of never entering it”.

Equality for women and the 2021 budget

In a speech by the Minister for Women and Equalities, Liz Truss, set out the Government's latest approach to tackling the inequality between men and women across the UK, held on the 17th of December. The speech, which was called the 'New Fight for Fairness,' explained the current problem with the debates around equality in the UK. She went on to explain why "now is the time to root the equality debate in the real concerns people face."  For women, one of the briefings includes a budget for women and employment. Research shows that women are the majority of employees’ industries with some of the highest Covid-19 job losses, including retail, accommodation and food services. Therefore, women have outweighed men by being furloughed all across the UK; it's taken a huge impact on young females, especially, who are new graduates or even just finished secondary school. 

Rishi Sunak has extended the self-employment income support scheme (SEISS) to the end of September, benefiting self-employed females. As well the extension of the self-employment income, he announced the furlough scheme would also be extended until September.

 

Support for those with Disabilities

The Departments for Work and Pensions (DWP) confirmed that the State Pension will rise by 2.5% this year, and benefits by 0.5% starting from April. This includes Disability Living Allowance (DLA) – the highest being £89.60 (from £89.15) and the lowest being £23.70 (from £23.60).

As for work grants, people with disabilities are able to get a grant. A work grant helps to motivate and help a disabled person to stay at work, or to start working. They also have the option of talking to their employers about changes they must make in the workplace that could make it easier for them if they have a physical disability for example. They can then apply for a work grant via gov.uk

To apply for one, the person applying needs to be a resident in the UK, have a disability or long-term health condition, or mental health condition and are aged 16 and over.

Contact us for bespoke business, tax and accounting advice for self-employed professionals

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How the 2021 Budget Will Affect Investments and the Stock Market

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Written by Alistair Bambridge
Partner & Founder
About Alistair

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Chancellor Rishi Sunak’s new 2021 Budget’s main aim is to restart the UK’s economy after lockdown. The new Budget has a lot more detail relating to personal finance and investing than last year’s budget. This article outlines how some of the key measures will affect your investments and the stock market.

Other areas we are covering:

What Self-Employed Professionals Need to Know About the Budget

Prospective Buyers Guide to the 2021 Budget 

How will the 2021 Buget affect High-Net Worth Individuals?

What the 2021 Budget means for Corporates 

Areas of the 2021 Budget that are aimed at supporting minorities  

What the 2021 Budget means for the creative industry

Tax Changes For Investments

The chancellor has set out a plan to raise corporation tax to 25% from 1 April 2023, which will only apply to company profits above £250,000. Multiple reports suggest that the rate will be gradually lifted across the course of the parliamentary term, which is therefore somewhat higher than investors might have been expecting.

Companies who have profits below £50,000 will remain at the current 19% rate, with a taper introduced up to £250,000. According to the Chancellor, this means that 70% of companies will remain ‘completely unaffected.’

These tax increases will have clear consequences for investors in domestic UK stocks since corporate earnings are declared after the deduction of tax. Therefore, the rise in taxes will reduce profit expectations from 2023 onwards, reducing companies’ capacity for buybacks, dividends, and debt repayments.

The revision in tax forecasts can also hurt the net present value of assets as a higher discount is placed on the future value of cash flows. The Chancellor’s most interesting announcements, especially for corporate boards, is what he has called the ‘super deduction tax. This will enable finance officers to offset the total cost of capital investments plus an additional 30%, against their tax bills.

This tax which will be in place for the next two years is a huge incentive for companies to spend their way out of the crisis and it seems to be designed to cushion the blow for companies’ future spending plans and cash flow management, brought on by the corporation tax increase.

Furthermore, it is not immediately clear whether investments will extend to intangible or other hard-to-value assets. But overall, this can be a large incentive for growth-focused UK stocks, with the OBR suggesting that these measures can lead to a 10% boost in investments, which is equivalent to more than £20 billion a year.

ISAS and Pensions

As well as holding basic and higher tax thresholds until April 2026, the Capital Gains tax allowance was forecasted to be cut as a part of a wider wealth tax’ on investors, but like the other allowances, it has been frozen at £12,300 until April 2026. ISA allowances have also been frozen at £20,000 for adult ISAs and at £9,000 for junior ISAs.

The Pension Lifetime Allowance (LTA) will also be frozen at £1.07 million, for the same period. There is some criticism on the move being a ‘tax on good investment decisions’ and the head of pensions products at Fidelity International, James Carter, says there needs to be a full review on pensions and tax. According to Carter, there are already significant savings gap and uncertainty in the pension’s taxation regime can damage people’s engagement in planning for retirement.

According to the chief executive of Wealth Club, Alex Davies, the LTA freeze is a huge blow to more wealthy pension savers which means that people will need to look beyond pensions in order to build large retirement pots. He also states that this is likely to motivate more sophisticated investors towards Venture Capital Trusts and Enterprise Investment Schemes, which have not been affected by the latest Budget changes.

UK Stock and Green Bonds

The Budget also demonstrates how the UK government is hoping to cash in on the demand for sustainable savings with the launch of a green savings bond through NS&I. The green bonds offer a winning combination of helping investors support green projects and at the same time protecting them with the strength of the NS&I name.

The green bonds come with 100% government backing, which should help the UK hit the target of being net-zero for carbon emissions by 2050 and creating green jobs. Although at the current moment it is unknown what the green bonds will run for or what rate they will pay, there is hope that the NS&I will take this opportunity to offer something very lucrative to investors. The government expects to issue £15 billion in green bonds this financial year, further details to follow in June.

The Chancellor also mentioned a review on UK share listings that will have an impact on retail investors. This is known as the ‘Hill Review’ and the changes within it are designed “to make the UK the best place for high-growth, innovative businesses to publicly list”. It could make changes to how many shares in a company are available to the public and lead to smaller companies to list. The chief executive of Stanhope capital, Daniel Pinto, says that the current listing rules are stuck in the past and leave London on the back foot against other financial centres. He said the “City should no longer be synonymous with big banks and FTSE 100 companies. It should become the financial centre of choice for SMEs and fast-growing businesses”.

Contact Us For expert tax, accounting and business advice for Investors

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What Does the 2021 Budget Mean for High Net Worth Individual's: The 5 Year Freeze

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Written by Alistair Bambridge
Partner & Founder
About Alistair

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This article will cover some of the main areas of the 2021 Budget that may affect High-Net-Worth individuals, resident in the UK.

Other areas we are covering:

What Self-Employed Professionals Need to Know About the Budget

Prospective Buyers Guide to the 2021 Budget 

What the 2021 Budget means for Corporates 

Areas of the 2021 Budget that are aimed at supporting minorities  

How the Budget will affect mutual funds and the stock market

What the 2021 Budget means for the creative industry

In the Chancellor’s speech, Sunak confirmed that there will be freezes in income tax thresholds, as well as freezes in the pension lifetime allowance, capital gains tax (CGT) and inheritance tax (IHT), utilising the ‘fiscal drag’ method. This is a deflationary effect; as wages rise, a higher proportion of income is paid in tax.

While the majority of HNW individuals have a gross income in excess of £125,000, therefore unaffected by the five-year freeze in the personal allowance, the freeze in tax thresholds will see their income tax liability rise over the period. As HNW individual’s income rise with inflation, a higher proportion of their income will be taxed at the upper and additional rate band, increasing their tax burden on the 31st of January.

A simple way for HNW individuals to reduce their tax is through pension contributions (extending basic rate and upper rate tax thresholds). However, on Wednesday the Chancellor confirmed that the lifetime allowance for pensions would be frozen at £1,073,100 until April 2026 (reversing the original plan to increase the allowance with inflation). Where HNW’s have to pension savings above this, extra tax penalties are incurred, either 55% or 25%.

Although the majority of HNW individuals have their personal allowance reduced to zero, the freeze in the CGT allowance will have an impact on High-Net-Worth investors. As individuals are limited to £20,000 annual Individual Savings Account (ISA) allowance per year, many HNW’s have investments outside of tax shelters. As share and property prices rise in the next five years (with inflation), High-Net-Worth’s will therefore be exposed to a further 20% / 28% tax on their gains, increasing their tax liability in ‘real terms’.

Finally, the Inheritance tax threshold will also stay frozen at £325,000 per person. This has not changed since 2009. Each individual has a tax-free allowance – ‘nil-rate band’ – of £325,000. If they are giving away their private residence to a direct descendant, there is an additional allowance for ‘the residence nil-rate band’ of £175,000. However, for HNW individuals with an estate over £2m, this is tapered by £1 for every £2 over. With yet another 5-year freeze (taking us to 2026), HNW individuals estate’s will be subject to a further 40% tax, as house prices and wealth levels rise. Legal inheritance rax planning is one of the easiest and most beneficial ways to lessen the tax bill caused by the new stealth tax (taxation levied in a covert or indirect manner) which has been introduced.

Contact us for more expert tax, accounting and business advice for high net worth individuals. We are a chartered, personal tax accountants specialist in private wealth and HNW matters

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Prospective Homeowners Guide to the 2021 Budget

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Written by Alistair Bambridge
Partner & Founder
About Alistair

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The 2021 Budget is out, and we are covering all areas. This article will be covering the need-to-know facts for prospective homeowners and landlords.

Other areas we are covering:

What Self-Employed Professionals Need to Know About the Budget

How the 2021 Budget will affect High-Net worth individuals 

What the 2021 Budget means for Corporates 

Areas of the 2021 Budget that are aimed at supporting minorities  

How the Budget will affect mutual funds and the stock market

What the 2021 Budget means for the creative industry

WHAT THE 2021 BUDGET MEANS FOR THE PROPERTY MARKET

STAMP DUTY HOLIDAY EXTENDED.

The stamp duty holiday has been extended for housebuyers up until the end of June. The stamp duty holiday has saved homebuyers around £5billion collectively in stamp duty so far. This tax break helped drive a boom in property prices last year, and clients' comments lead us to believe the incentive will lead to continued interest.

One of our clients, a self-employed musician, commented:

"I wanted to buy last year, but I couldn't find the right property. Because I knew stamp duty holiday was coming to an end, I was going to renew my rental agreement- however, now I have more time, I will be getting back to looking for a property."

This will be welcomed by many who are currently on the hunt for a property.

The Stamp Duty crystallises- therefore, home sales must go through before the end of June to be eligible for the tax holiday.

Is it all good?

One of the key concerns with the Stamp Duty Holiday and corresponding stamp duty holiday extension is that although it has boosted the property market and the economy generally, it has also created an artificial bubble that has seen house prices rise 8.5%. This means that first time buyers have to save more to come up with the deposit.

There is also a risk that prices have been artificially inflated and will go down when the holiday ends. This means that those who brought during the stamp duty holiday period may find they have overpaid, potentially negating any savings made from not paying stamp duty.

GOVERNMENT-BACKED 5% DEPOSIT MORTGAGES

Government-backed mortgages with deposits of just 5% have been announced. This is a huge win for many first time buyers who previously have been required to save between 10- 25% of a properties value to acquire a mortgage.

This will help counteract the effect of increasing property prices.

The government is set to guarantee loans, enabling lenders to offer mortgages worth up to 95% of a properties value work up to £600,000. This means that 86% of properties currently listed on Rightmove should be eligible for the mortgages.

Is it all good?

One thing to look out for with these new mortgages is the interest-rates. We don't know yet what terms banks will be offering; however, higher interest rates than typical can be expected. Although the government is offering a shoulder to hold the majority of risk associated with low-deposit mortgages, banks will still be liable for some of it. Therefore banks are likely to offset the risk by making borrowers pay higher interest rates.

UNIVERSAL CREDIT UPLIFT

An extension to the temporary £20 per week increase to Universal Credit standard allowance for a further six months. This applies to all new and existing claimants and will maintain the higher surplus earnings threshold of £2,500 for Universal Credit Claimants for a further year until the end of the 2021-22 tax year (April 2022).

Landlords argue that this does not tackle the fundamental issues that make Universal Credit inadequate for both tenants and landlords in the Private Rental Sector (PRS). One of our landlord's clients has argued it would be better if tenants had a choice to elect whether the housing element of their Universal Credit is paid directly to their landlords.

Another argument is that all claimants should choose how regularly the Universal Credit is paid to help with budgeting.

Contact Us for expert property tax, accounting and business advice for landlords and prospective buyers.

FILE YOUR 2020-21 PERSONAL TAX RETURN WITH US IN EARLY APRIL TO RECEIVE OUR "EARLY UK TAX FILERS" DISCOUNT. WE SPECIALISE IN BOTH UK AND US TAX AND ACCOUNTING MATTERS.

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What does the 2021 Budget means for the creative industry?

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Written by Alistair Bambridge
Partner & Founder
About Alistair

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Following on from our article "what self-employed professionals should know about the 2021 budget", we will be delving into what the budget means for the Creative Industry and Creative Freelancers. As an accountant specialising in creatives, how the 2021 Budget will support creative industry professionals back to the full prosperity of pre-covid years was highly anticipated.

This article will cover some of the main areas of the 2021 Budget announcement that creative industry professionals and businesses should know about.

We are also covering several other areas of the budget in the articles below:

What Self-Employed Professionals Need to Know About the Budget

How the 2021 Budget will affect High-Net worth individuals 

What the 2021 Budget means for Corporates 

Areas of the 2021 Budget that are aimed at supporting minorities  

How the Budget will affect mutual funds and the stock market

The 2021 Budget and the Property Market

How is the Budget going to help the creative industry?

The creative industry was one of the worst-hit by covid-19, with around £74billion and 2.7 jobs in 2020. Therefore many have been waiting for the 2021 Budget to lay out how it will pave the creative industry back to health.

£300million to be injected into the Cultural Recovery Fund

£300million is to be added to the £1.7billion Cultural Recovery Fund.

The Cultural Recovery Fund will provide financial support for music venues, museums, independent cinemas, galleries, theatres and heritage sites throughout the UK.

The Culture Secretary, Oliver Dowden, said

"It's a relief we can look ahead now, so this funding is not just about survival, but planning and preparing for reopening theatres, galleries and gigs."

Although many are happy with the creative industry cash injection- there is a large call out from the community for the fund to be extended to freelancers.

£90million injected into National Museums

An additional £90million to be invested into national museums to support them until their reopening in mid-late May.

£18.8 million to be injected into community projects

£18.8million to be invested in cultural community projects.

These projects include £5million to transform part of Wakefield High Street into a community library, museum and gallery space.

Scotland, Wales and Northern Ireland will receive an additional £77million to provide cultural groups with similar support.

Film and TV Production Restart Scheme extended.

The Film and TV Production Restart Scheme have been extended until December 2021. With a £500million fund, it has accepted 160 qualifying productions to date, and according to the government, saved 20,000 jobs.

"Elite Point-Based Visa" and Reform of the Global Talent Visa

Research has shown that the Creative Industries' gaps are more likely to be in higher-level occupations' such as architects and graphic designers. Part of the reason being is thought to be due to inadequacies in the current immigration system.

The 2021 Budget announced an elite points-based visa and a reform of the Global Talent Visa. These policies aim to attract and retain "the most highly skilled globally mobile talent". Depending on how these reforms are designed, they may support the creative industries demand for change.

Creative industry listed in Levelling-Up Fund

Creative Industry included in Levelling-Up Fund.

Maintaining and expanding the UK's world-leading portfolio of cultural and heritage assets included as a priority.

Details of plans:

• Upgrading and creating new cultural and creative spaces such as sports or athletics facilities, museums, art venues, theatres, libraries, film facilities, prominent landmarks or historical buildings, parks or gardens.
• New, upgraded or protected community hubs, spaces and assets (and associated green spaces)
• Acquiring and refurbishing key cultural and heritage sites, including hotels and historic buildings

The Recovery loan scheme

The Recovery Loan Scheme will be available to creative industry businesses. The new loan scheme is designed to support UK business access to finance as they grow and recover from the disruption of Covid-19.

The Towns Fun extended to a further 45 Areas.

£1billion to be invested in 45 towns to help the country recover from Covid-19. The fund will be dedicated to cultural and infrastructure projects.

For further information on support available to freelancers, the 2021 Budget for Self Employed article

No Government-backed Insurance Scheme announced yet.

A Government-backed insurance scheme is yet to be announced.

Without which many creative companies will not be able to stage events due to the risk of losses from cancellations as a result of Covid-19

Contact Us for expert tax, accounting and business advice for creative industry businesses and professionals.

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What Self Employed Professionals Should Know About the 2021 Budget

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Written by Alistair Bambridge
Partner & Founder
About Alistair

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Chancellor Rishi Sunak has now announced the much-awaited 2021 Budget. Setting out the governments tax and spending plan for the year ahead.

This is without a doubt one of the most anticipated budgets yet due to the Covid-19 pandemic, resulting in higher demand than ever for government measures to help businesses and jobs recover.

This article will cover the main areas of the budget self-employed professionals need to be aware of. Below is a list of all the articles we have released to cover the 2021 Budget. Feel free to get in touch with any specific questions.

What the 2021 Budget means for the creative industry

How the 2021 Budget will affect High-Net worth individuals 

What the 2021 Budget means for Corporates 

Areas of the 2021 Budget that are aimed at supporting minorities  

How the Budget will affect mutual funds and the stock market

The 2021 Budget and the Property Market

Highlights of the 2021 Budget for self-employed professionals

As expected, the Chancellor's 2021 Budget's core focus is on continued support as the UK moves towards what hopefully will be the end of the Covid-19 Pandemic this year. The Self-Employed were and are one of the worst-hit by the pandemic. As a result, the budget outlines several measures that will be of particular benefit for self-employed professionals, contractors and freelancers.

The self-employed furlough scheme (SEISS) extended to the new freelancers.

The self-employed furlough scheme (SEISS) has been extended to new freelancers and contractors who filed their first tax return for the 2019/20 tax year. Therefore over 600,000 people can now claim a SEISS grant. This is the 4th self-employment grant announced and will be followed by a 5th SEISS 5.

Although many are relieved to hear they will be receiving support, there is a lot of concern around the date to which the grant will be released: "Late April". One of our clients, a self-employed Yoga Teacher, has stated that the "delayed date is a massive blow and shock. It will be a real struggle financially making it to the end of April- hopefully, something changes".

Minimum Income Floor Removed for Self-Employed on Universal Credit

The minimum income floor for Self-Employed individuals on universal credit has been removed. This will be in place until late August.

The minimum income floor is a controversial system used to calculate Universal Credit Payments for Self-Employed Professionals.

Many will welcome the continued removal of the minimum income floor, as those who are not entitled to the Governments financial support scheme can instead receive Universal Credit.

Income tax thresholds frozen

The Income Tax Thresholds will be frozen until 2026. Over raising income tax, Sunak has favoured the method of "fiscal drag". This is a deflationary effect; as wages rise, a higher proportion of income is paid in tax.

Below is a great explanation of fiscal drag for those wanting to understand the topic further

The UK 2020/21 tax filing period will begin in April. Contact Us to receive our April filing discount. We are chartered UK tax advisers and accountants for self-employed professionals.

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Mutual Funds and how they are taxed in the UK

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Written by Alistair Bambridge
Partner & Founder
About Alistair

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Mutual funds are a very popular choice for investors. There are around 12,000 mutuals funds in the UK alone, as a result making decisions as a prospective investor can be extremely overwhelming. This article will break down the basics of what a mutual fund is, how they work and the different types. At the end of the article, we will also be covering the UK tax implications of holding mutual funds.

What are mutual funds?

Mutual funds are pools of money collected from various investors, usually for the purpose of investing in stocks, bonds, and other securities. They are typically managed by professionals and owned by a group of investors. That is to say, a mutual fund is a collection of securities owned by a group of investors which are managed by a fund manager.

How they work

When you purchase a mutual fund, you are ultimately pooling your money with that of other investors. Therefore, the money that is pooled together by you and the other investors is managed by the fund manager who invests in different financial assets and manages it on a daily basis.

Different types

1. Equity Funds
   Equity funds invest in stocks and the different types specialise in different areas, such as, value stocks, growth stocks, small-cap stocks, mid-cap stocks, and large-cap stocks, or a combination of all these.
2. Money Market Funds Money market funds invest in short-term fixed-income securities. Such as, Treasury bills, government bonds, commercial paper, and certificates of deposits. These types of investment have lower risk, but also a lower potential return than other mutual funds.
3. Fixed Income Funds
   Fixed income funds buy investments which pay a fixed rate of return by focusing on getting returns coming into the fund primarily through interest.
4. Index Funds
   Index funds aim to track the performance of a specific index. For example, the S&P, or the FTSE 100 index. Therefore, the movements of index funds move as the index moves, when the index goes up the index funds go up and vice versa. These funds tend to be popular as they require lower management fees compared to some of the other funds, due to the managers not needing to do as much research.
5. Balanced Funds
   Balanced funds invest in a mix of equities and fixed-income securities- usually a 40% equity 60% fixed income ratio. These funds aim to generate higher returns while mitigating risk through fixed-income securities.

Benefits

Mutual funds are managed by a professional who is constantly monitoring the fund’s portfolio. As well as, the manager of the fund can devote more time to selecting investments than a retail investor would. They also allow for investment diversification by the funds investing in various asset classes and not just a single stock or bond. Furthermore, mutual funds possess high liquidity. In other words, you are able to sell your mutual funds within a short period of time if needed.

Disadvantages

Mutual funds usually charge high management fees and operating expenses (MER), which can lower your overall return. In other words, if the fund posted a 1-year return of 10%, the MER would lower this return. Due to mutual funds being managed by a manager, there can be said to be a loss of control. When you invest in a mutual fund you are ultimately giving someone else your money and they are managing it for you. Furthermore, mutual funds do not guarantee returns. In fact, a vast majority of mutual funds fail to beat major market indexes like the FTSE 100 or S&P 500. Lastly, mutual funds are not insured against losses.

Largest Mutual Funds – Globally

1. Black Rock Funds
2. Vanguard
3. Charles Schwab
4. Barclays
5. Fidelity Investments
6. State Street Global Advisors
7. JP Morgan
8. Capital Group
9. Amundi Asset Management
10. PIMCO

Source: Mutual Fund Directory

Mutual Funds and Tax in the UK?

Everyone, including children, have an annual capital gains tax (CGT) exemption, which amounts to £12,300 (in the 2020-2021 tax year. This means that any gains realized within this amount incur no tax. Gains over the annual exemption are charged at 10%-20%, depending on all your income.

You can offset any losses against gains. That is, losses and gains that are realized in the same tax year have to be offset with each other, and this will reduce the amount of gain that is subject to tax. Furthermore, if you incur more losses than gains, these can be carried forward to offset against gains in the future, provided you register those losses with HMRC.

Since your rate of CGT is dependent on your income tax band, reducing your income tax rate can have a knock-on benefit on your CGT. Some simple ways to reduce your taxable income are through pension contributions or charitable donations.

The current ISA yearly allowance is £20,000 and all those personal capital gains are tax-free on ISA investments. Using this as a form to relieve some of the tax on capital gains from your investments in a Mutual Fund.

When you invest your money in a multi-asset fund, you are not personally liable for any gains made when the fund itself sells holdings, since this is the fund trading rather than you. However, you may be liable to CGT on any gains when you sell your shares, after taking annual allowances into account.

Something else to think about is that it is possible that over time you to build up capital gains that are in excess of your annual CGT exemption. In order to reduce this risk, you may use your annual allowance to sell at least part of the holding at the end of the tax year and then buy it back. By doing so, you basically reset the cost of your holding at a higher level and therefore reduce the potential profit against which your future CGT liabilities will be calculated.

However, tax rules mean that you have to wait 30 days before you are able to buy the same holding back. Therefore, if you are not comfortable with this ‘out-of-market risk, you could also consider investing in an exchange-traded fund (ETF) that offers similar exposure in the interim.

Contact us for expert tax advice for Social Security Benefits

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Sangram Majumdar

Our last article covered some of the potential financial risk a higher capital gains tax might bring to landlords. This wouldn’t be the first time that landlords have been faced with higher taxes and detrimental tax legislation.

 Sustained growth in the Private Rental Sector 

The Private Rental Sector (PRS) has demonstrated remarkable growth over the last 20-years. According to HMRC, the number of landlords has risen by 27% from 1.97million in 2010 to 2.5million in 2019. This growth has led to increased government interest in the PRS and in turn higher taxes and increased regulation.

Independent landlords’ income

The amount of profit a landlord makes depends on a number of variables. Primarily, how many properties the landlord has. But also, where the properties are located and to what standard the properties are maintained.

The average landlord in Britain makes £15,000 a year before tax and deductions. The amount of tax exemptions and deductions landlords are entitled to have somewhat decreased in the past 10 years, this, therefore, means the amount a landlord can now takehome after expenses are slightly less.

How do landlords make a profit?

There are many costs involved with becoming and being a landlord. The cost of a mortgage and the deposit that goes with it for one; alongside stamp duty surcharge.

Landlords, of course, make a profit through rent; assuming that the rent amount covers the related expenses of the property. The money can be used as immediate income. However, many landlords opt to reinvest a portion back into paying the property off or making alterations to the property to increase its value. This way the landlord eventually owns the property outright; which they can continue to let at increased immediate income or cash in for a lump sum.

Rental property appreciating in long-term value is a major route of landlord profit. On average house prices have gone up 4.5% every year since 1975. In 2020, property prices climbed 7.5% in value- the highest amount of growth seen in six years. This was also the first time property prices has increased substantially during a recession in modern history. Professional landlords will take into account investment, there are some locations that are expected to rise in property value faster than others. Landlords will nearly always consider this to increase the amount of profit they might generate in property appreciation.  

Declaring paper loss

This is an area that is increasing in limitations to profit from for landlords. Prior deductions such as the wear and tear allowance and mortgage interest tax relief; allowed landlords to claim large sums against tax on their income. Although these deductions have been discontinued, there are many that are still available for landlords to claim, which can, in turn, increase their money taken home after tax i.e. ACTUAL wear and tear costs, insurance, property taxes and much more. For expert tax advice on the different ways’ landlords can minimise their tax owed contact us.

What has lost landlords money in recent years

As accountants to the PRS sector, we work with landlords with all ranges of portfolio sizes. None of our clients have been left totally unaffected by the changes in regulations in recent years. We have seen a rise in costs for landlords of 7%, despite the wear and tear allowance being removed in 2016. Many of these expenses have been incurred due to the stricter regulations on property standards and increased agent fees.

An increasing amount of landlords have also been selling their properties in recent years. The reason for this is to release capital; but also due to a decreased level of profit made from letting due to the increasing costs and tax on the industry. Many have also reported that it has become much more time consuming due to increased regulations or because letting agents have become more expensive. What for many is a second source of income has become much more demanding than ever before.

2020 was an extremely hard year for landlords due to the coronavirus pandemic. The eviction ban led to half of landlords losing rental income during the pandemic. With coronavirus still very much present in 2021, we can expect landlords rental income to continue to be affected throughout the year.  

What outgoings does a landlord have?

From our personal experience with landlords- outgoings can fluctuate massively each tax-year, with some years requiring much higher maintenance and property improvement expense than others.

As a landlord you have to be extremely aware of the numbers, it is very easy for your rental arrangement to end up lacking profit if you overspend. However, with rent set at an all-time high in the UK, this is not a usual issue.

To find out all of the different expenses a landlord has read our ‘The cost of being a landlord’ article

Conclusion

Although there has been a lot of increased legislation and regulation, buy-to-let definitely still work out profitable when done right in the long run. All of our clients have had great successes as landlords over the years. However, it is important to consider the route in which you want to make your profit, whether that be through monthly income or through a one-off lump sum through increased property value, in accordance with current and suggested upcoming legislation. For instance, rises in capital gains tax may reduce the extent to which one can profit from the sale of a property.  Another example is the kind of mortgage the landlord takes on, as mortgage interest is no longer claimable it may be better to choose a lower interest mortgage.

For more expert tax and accounting advice for landlords contact us

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Kathryn Lynch

When considering becoming a landlord it is extremely important to consider the costs it will demand, both monetary and in time. This will allow you to way up the benefits and setbacks, to see if the potential income after expense (profit) is worth it. We have summarised the main monetary expenses all landlords will most likely entail.

Income Tax                       

Varies depending on income and expenses

Income Tax must be paid on any profit made by a landlord. There is however expenses and reliefs that can be claimed to minimise the tax owed. Contact us for advice on minimising tax owed as a landlord.

Letting management fees

Varies case by case

62% of landlords surveyed report that they find management fees too high and 48% have opted out of using a management company as a result. Letting Agent Management companies typically take between 8-14% of rental income.

For example, if a property was rent out for £832.25 per month, at an 11% a management company would take £1098.57 per month. This is of course claimable against tax.

Mortgage interest

Varies case by case

Depending on the mortgage agreement, there are different levels of interest rates a landlord must claim. As of April 2020, landlords have not been allowed to deduct any mortgage expenses from their tax owed. Instead, landlords can only receive a tax credit, based on 20% of mortgage interest payments.

Utility Bills

Rare

Generally, tenants are responsible for paying bills. However, some offer to offer to pay bills as part of the deal. The cost of this is typically included in the rent.

Maintenance and Repairs

Varies year on year

The cost of maintenance and repairs varies massively year on year. If excessive damage is done to the property by a tenant this is usually paid by the tenant. Some landlords also opt to claim repairs on insurance.

Costs of repairs and maintenance incurred are claimable against tax. Contact us for expert tax advice on what can be claimed against tax. We are an expert accountant for landlords and property developers.

Landlords insurance

Varies case by case

Landlord building insurance is not legally mandatory, however, is often regarded as extremely important. The legal coverage often included can cover the costs of eviction.

Landlord License

£500 every 5 years

The Selective Landlord Licencing scheme was introduced to address the impact of poor quality private landlords and reduce levels of antisocial behaviour.

Tenant Acquisition

 £50- 8% of annual rental income

Most landlords will endure the initial cost of acquiring a tenant. This is the cost online letting agents and high street agents charge to find a tenant for the property.

The cost will only occur when you have to change tenant- typically once a year.

Empty/Void Periods

 It can be an expensive having periods where tenants are not living in a property, as the landlord has to cover all of the ongoing costs that a tenants rent will typically cover.

EPC (Energy Performance Certificate) 

£65 every 10 years.

In 2018, the government introduced minimum energy efficiency standards legislation that said property cannot be let-out unless it qualifies to a set standard on the EPC. So although this is only £65 every ten years- there could potentially be some initially resulting expenses to increase the energy rating of a property.

Electrical Safety Inspection/ Report

£199 every 5 years

In 2020, the government made it mandatory for all landlords to get an Electrical Installation Condition Report (EICR) in order to ensure a national standard for electrical safety is met. Again, although this is only £199 every 5 years, there could potentially be some resulting expenses initially to ensure the property reached national standards.

Gas Safety Certificate

£45 per year

If the property being let out has any gas appliances it must pass Gas safety checks each year.

Smoke and Carbon Monoxide Alarms

£30 on average every 10 years

In October 2015 it became mandatory for Carbon Monoxide (CO) Detectors and Smoke alarms to be installed on each floor of a property (for CO detectors they only have to be fitted on a floor where there is a solid-fuel burning appliance).

Smoke and Carbon Monoxide alarms are relatively inexpensive, the average property will cost £30 for 2 smoke alarms and 1 CO detector. A smoke alarm will usually need to be replaced every 10 years, alongside standard inexpensive maintenance steps. A CO detector typically lasts between 5 and 7 years.

Boiler Servicing

£50 a year

It is recommended that boilers are serviced once a year. This is to avoid larger costs in the long-term and ensure optimum standards and efficiency throughout the flat

Electrics Servicing

£50 every 5 years

It is recommended that electrics are serviced every 5 years. This is to avoid larger costs in the long-term and ensure optimum standards and efficiency throughout the flat.

ICO Registration

£40 per year

Under the Data Protection Act, individual and organisations that process personal information need to register with the Information Commissioner’s Office.

Leaseholds

Varies case by case

Leaseholds are particularly common in flats. However, leasehold does come with both short-term and long-term costs such as service charge and the eventual charge to extend a lease (depending on how long the initial leasehold term is).

Capital Gains Tax

Capital Gains Tax is paid on the value an asset gains in value over time. When landlords sell a property that has accrued in value a capital tax payment must be paid on the gained value. The capital gains tax percentages for the relevant tax year is also important to consider if when selling a property. The lower the Capital Tax Rate the more profit a landlord will make when selling a property.

Other areas that influence expenses for landlords

Size of property

Larger properties cost much more to run. There is more to break, the expense of running while a tenant is not in the property is higher and generally higher charges for everything

The age of the property

Generally speaking, older properties cost more to maintain and restore. For instance, if old systems have been installed boilers, heating systems and electrics may need to be replaced. These are all some of the most expensive costs that can be incurred to maintain a property.

Furnished properties

Furnished properties generally rent out for more than unfurnished properties, however, this increase in gross income often does not cover the cost to maintain and replace the furniture that is damaged by tenants. This cost can be claimed against tax, but also can take more time to manage.

Pets

With the UK pet population growing every year, letting tenants have pets is a definite consideration for landlords. Pets can occasionally cause damage to property. However, landlords often limit against this by charging an additional rent for pets.

Smokers

A controversial topic, however, many landlords do report letting to smokers can add to repair costs. Smoke can cause damage to furniture and the cost of redecorating overall.

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As expert accountants and advisors to landlords, it is our job to stay on top of all of the latest changes in tax reform and regulations for the PRS. This article will be continuously updated with all the latest changes in tax and regulations for landlords.

October 2014- Mandatory redress scheme

All letting agents were required to join one of three government redressed schemes.

The redress schemes were introduced to provide consumers with free and impartial advice, with the aim of reaching independent resolutions between consumers and property agents.

May 2015- Compulsory fee disclosure

The Compulsory Fee Disclosure made it a legal requirement for letting agents to prominently display a list of fees at their offices and on their website. This was introduced to increase transparency with consumers.

October 2015- Carbon Monoxide detectors and smoke alarms

It became law for Smoke alarms to be installed on each floor of a property and for Carbon Monoxide detectors to be installed on every floor where there is a solid fuel-burning appliance. This increased safety for tenants.

February 2016- Right to Rent

It became a legal requirement for all. Landlords to do due diligence and ensure that all prospective tenants have the legal right to rent in the UK.

April 2016- Stamp duty surcharge

A 3% Stamp Duty on the purchase of second homes and buy to let properties was introduced. This means that landlords and prospective landlords have to pay a 3% charge on top of the existing stamp duty rates.

April 2016- Wear and Tear Allowance discontinued

Prior to April 2016, landlords were allowed to write off 10% of rental profits for notional wear and tear each year. This allowance was discontinued and replaced with a system where landlords could only claim actual wear and tear costs as they occurred.

January 2017- Tightening of buy-to-let mortgage criteria

The Bank of England Regulation Authority introduced a stress test that requires borrowers to show they could meet payments if the base interest increased significantly. This made it more difficult for landlords to gain mortgages.

April 2017- Buy-to-let Mortgage interest tax relief reduced

Buy-to-let mortgage interest tax relief was reduced to 25% until it reaches the basic rate of income tax (20%) in the 2020/21 tax year.

April 2018- Introduction of banning orders

In an effort to crack down on rogue agents, the government introduced banning orders for agents operating illegally. This means that the agents subject to banning order cannot earn income renting out housing or engaging in letting agency or property management work.

April 2018- Minimum Energy Efficiency Standards

Legislation to ensure no new tenancy is granted unless a property has a minimum Energy Performance Certificate rating of E

October 2018- Extended HMO landlord licensing

Expansion of mandatory HMO licencing scheme across England means that all Houses in Multiple Occupation (HMOs) occupied by five or more people have to be licensed throughout England.

October 2018- Introduction of minimum bedroom sizes 

Below are the minimum room sizes for HMO’s as introduced in October 2018.

·      One person aged over 10 years – room must be not less than 6.51 sqm

·      Two persons over 10 years – room must be not less than 10.22 sqm

·      One person aged under 10 years – room must be not less than 4.64 sqm

April 2019- Mandatory Client Money Protection scheme membership

It became mandatory for all property agents in England to be members of a client money protection scheme. This acts to ensure renters are protected should an agent use their client funds.

June 2019- Ban on upfront letting fees

A ban on fees for most private tenants, covering shorthold tenants, student lettings and lodgers living with a private landlord.

June 2019- Cap on Security and holding deposits

The Tenant Fees Act 2019 limits the amount a tenant can be charged for a holding or security deposit and defines what a tenant can be charged in addition to rent.

·     Holding deposits are capped at one week's rent

·     Security deposits are capped at 5 weeks rent where annual rent is less than £50,000.

·     For properties where annual rent exceeds £50,000 the Security deposit is capped at 6 weeks rent.

April 2019- Landlord Tax Relief

Landlords tax relief reduced to 25% interest under the old system and 20% tax credit under the new system (down from 50% for the 2018-19 tax year).

April 2020- CGT Rules Change for Buy-to-let landlords

Private Residence Relief (PRR) provides an exemption on Capital Gains Tax (CGT). Landlords could previously claim PPR for all the time they had lived in their property before letting it out to tenants, plus an extra 18 month after moving out. In April 2020, this time was reduced to the time the landlord lived in the property + 9 months only. Therefore, landlords have lost 9 months’ worth of CGT relief that they can claim when they come to sell.

March 2020- Evictions banned (COVID-19)

Due to the outbreak of Covid-19, the court service suspended all ongoing house possession actions.

June 2020- New Tenant Fee Ban

The TFB is extended to all tenancies in existence. Any term in the agreement that requires a prohibited payment is not binding. This applies equally to the first tenancies and renewal tenancies.

June 2020- Eviction suspension extended

Due to the Covid-19 outbreak, the eviction bill was extended until 23rd April 2020.

July 2020- Stamp duty Holiday for landlords

Stamp duty was removed from properties up to a value of £500,000 until 31st March 2021.

July 2020- Planning Rules relaxed for Landlords and developers

The usual requirement of full planning permission applications will no longer be required to demolish and rebuild unused buildings as home.

September 2020- Green Home Grant

Residential landlords can apply for a Green Grant voucher towards the cost of installing energy-efficient improvements to homes.

August 2020- Possession Claims Suspension Extended

The suspension on housing possession proceedings was further extended to 20th September 2020.

October 2020- New Light and Space PDRs for Landlords

New homes delivered through permitted development rights must meet minimum light and space standards.

November 2020- Evictions suspended until January 2021

Due to the Covid-19 outbreak, the eviction bill was extended until 11th January 2021.

January 2021- Leasehold reform

Leaseholders will be given the right to extend their lease by a maximum of 990 years at zero ground rent.

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RSUs and Stock Options - How Do They Compare?

Author: Uk Tax Associate Molly Smith

Many companies offer stock-based incentives and compensation to their employees, in the form of Restricted Stock Units (RSUs). It is a simple way to increase morale, while also incentivizing employees to put maximum effort into their work, and see the stocks they have accrued, appreciate in-value. Simply put, these workers own a small part of the business, thus giving them a vested interest in the business’ success. But what are the pros and cons of this kind of incentive? Not to worry, keep reading and you are sure to find out.

Restricted Stock Units

RSUs are company shares given to employees by their employer as a form of compensation or incentive. RSUs come at no initial cost to yourself, they do, however, need to be left to vest over a certain period. For example, if your company offers you 500 Shares on an RSU basis over 5 years, once that 5-year period is over, you will acquire the shares at no cost.

Problems may arise if you wish to leave the company before the designated 5 year period has ended. If you did decide to do this you could lose your entitlement completely to the RSUs. This is not the only condition placed on the shares fully vesting and you may have to also meet other conditions. They could be locked-behind performance-based targets and any other perceivable parameter that said company decides.

Another common misconception is the wrongful understanding of no Initial cost. While it is correct, you are not paying for these shares, you will not receive all the proceeds from these shares. For example, if your company is giving you 100 shares after 2 years and they are valued at £20, the misconception is that you will receive £2,000. This is incorrect as RSUs, once vested, are subject to income tax and must be declared, so a portion of your shares will have been sold before you have seen the proceeds at all.

Stock Options

Stock Options, much like their counterpart, are also a form of compensation or incentive to employees. A stock option is a window of time that employers will grant to employees, to purchase stocks at a reduced price. The goal being, the company to grow so that the market price is greater than the employee accessible price agreed upon. For example, an employee may have the option to purchase shares at £20 per share for 6 months, in that time, if the market price of these shares rises to £25, the employee can take advantage of this. However, if the price remains the same, or falls below the employee accessible price, the stock option is rendered useless. The employee could also wait too long, letting the stock option expire, leaving them unable to purchase at the given price.

Summary

You have two incentivizing strategies, both with benefits and drawbacks. Both are used to drive productivity and work toward a higher share price. Your choice between the two may be determined by your future plans and your financial position. Either way, both options give an opportunity for returns and should be considered, given that they are offered.

Any Questions

You have two incentivizing strategies, both with benefits and drawbacks. Both are used to drive productivity and work toward a higher share price. Your choice between the two may be determined by your future plans and your financial position. Either way, both options give an opportunity for returns and should be considered, given that they are offered. Contact Us

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