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.

When it comes to tax deductions, understanding how to make the most of your education expenses can save you money on both sides of the Atlantic. The IRS and HMRC allow for the deduction of qualified educational and training memberships, but the rules can be complex.

Credits: Envato, Yoga Training Course

In this guide, we'll navigate the intricacies of claiming education expenses on your tax return in the US and UK, providing valuable insights for individuals in various professional roles. Our expertise spans both U.K. and U.S. tax jurisdictions, enabling us to take a collaborative and integrative approach to your tax filings. We aim to maximise your tax savings and minimise the risk of penalties or audits.

Eligibility Based on Individual Factors

The IRS and HMRC evaluate the eligibility of training and educational memberships individually. Your eligibility may depend on factors such as your profession, industry, and employment status. For instance, while a software engineer may not be able to claim a cooking course, a chef is likely to be able to claim in both countries. 

Self-Employed Deductions

Self-employed individuals can typically claim education memberships on their tax returns in both the UK and US. In the US, this would go on Schedule C, while UK self-employed professionals include it under "Business Expenses" in their self-assessment. For the U.K. tax return self-employed professionals will usually include the education expense under the “Business Expense” section of the self-assessment. 

Variations in the US and UK treatment of the education expense for employed professionals

Many employers in the US and UK will cover any education and training costs for their employees. When this is done by your employer it will not be subject to tax, however, it will appear on your P11D which is later subject to taxation on the self-assessment. 

Before 2018, employees could deduct unreimbursed work expenses, such as education and training costs, as miscellaneous itemized deductions according to the IRS. However, the Tax Cuts and Jobs Act of 2017 has suspended this deduction, with a possibility of reassessment in 2025. This being said, individuals falling into specific categories, including Armed Forces reservists, qualified performing artists, fee-based state or local government officials, and disabled individuals with impairment-related education expenses, may still be eligible for deductions based on specific criteria. 

There is extremely limited scope under the UK tax system when claiming professional memberships against employed income. Training that has not been reimbursed by your employer is often claimable. It is generally easier to claim tax relief on the training if it has been recommended or approved by your employer or is a statutory requirement. If you are not required to file a UK self-assessment these expenses can often be claimed on the P87. 

The US and UK require the training to necessary and relevant

To qualify for a claim on training and education expenses, HMRC mandates that the expense must be "wholly and exclusively" for your professional development and business. Meanwhile, the IRS evaluates claimable expenses based on whether they are "Ordinary and Necessary" for the business or trade.

Examples of training and education expenses we see on US and UK tax returns

For context, I have included a few expenses I have had clients claim for in terms of training and education: 

• Relevant courses on platforms such as Coursera, Udemy, Code Academy, 

• Short courses relating directly to individuals' professions i.e. a therapist claiming a short course from a university. 

• A range of workshops i.e. we have had an actor claim a voice coaching workshop and a yoga teacher claim a mindfulness training course.

• Financial Advisors claiming courses from CIFA, LIBF etc.

There are countless other examples and cases available- contact us with any questions

Book a call with one of our expert US UK accountants

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.

As a self-employed individual in the United Kingdom, managing your tax obligations efficiently can significantly impact your financial well-being. One essential aspect of this is minimizing your payments on account to HMRC (Her Majesty's Revenue and Customs). These payments are advance contributions toward your tax bill for the current tax year, typically paid in two installments. The challenge lies in accurately estimating your tax liability and navigating the tax code to ensure you're not overpaying.

In this overview, we discuss proven strategies for reducing your payments on account while staying within the bounds of tax regulations. From accurate income projections and allowable expense deductions to often-overlooked aspects of tax planning, we'll equip you with the knowledge and tools needed to optimize your tax situation. By the end, you'll be better prepared to take control of your finances.

Accurate Income Projections

Make precise income projections for the upcoming tax year, estimating self-employment income, rental income, and other earnings. Consider factors that may impact your income positively or negatively. By accurately projecting your income you can not only make sure that you have saved enough for your tax bill, but also, the process of forecasting your income will aid you in identifying your differing income streams and the associated expenses with those streams of income.

Deduct Allowable Expenses

This may be an obvious point but, make sure to claim all allowable business expenses when calculating taxable income. This includes office supplies, travel expenses, equipment costs, marketing expenses, and home office expenses. Keep detailed records and receipts. To understand what classifies as an allowable expense it is worth researching online or consulting with a tax professional.

Utilize Tax Reliefs and Allowances

Familiarize yourself with available tax reliefs and allowances for self-employed individuals. Examples include the Annual Investment Allowance (AIA) and other relevant deductions that can reduce your tax liability.

Offset Losses

If your self-employment activities resulted in losses during the tax year, you can offset these against your overall income. Keep thorough records of these losses for tax purposes. This can be a complex process, thus, we recommend you consult a tax professional before you do this alone.

Check Pension Contributions

Alongside ensuring your financial stability in future, making pension contributions are a proven way to save money on your tax liability. These contributions can be deducted from your taxable income, effectively reducing your tax liability.

Keep Records Updated

Maintain up-to-date financial records throughout the year, including income statements, receipts, invoices, and bank statements. These records are crucial for claiming deductions, credits, and accurate tax estimates.

Review Previous Payments on Account

When preparing your Self Assessment tax return, review previous payments on account. If you believe they were too high compared to your actual tax liability, request a reduction. HMRC may adjust based on your new estimate.

Plan for Capital Gains Tax

If you have capital gains from investments or asset sales, consider their impact on your overall tax liability. Plan accordingly and explore any applicable exemptions or reliefs.

Commonly Overlooked Items

Don't forget to account for smaller expenses like bank charges, professional fees (e.g., accounting or legal services), and business-related insurance costs. Accurately track income from various sources, including side gigs, freelance work, or investments, as this can affect your overall tax liability. Monitor and manage your payments on account for the upcoming year to ensure they align with your income projections, preventing overpayment.

Implementing these strategies and paying attention to commonly overlooked aspects can help reduce payments on account and optimize your tax situation as a self-employed individual in the UK. Always consult with a tax professional for personalized guidance and to ensure compliance with tax regulations.

Seek Professional Advice

Consult a tax professional or accountant experienced in self-employment tax. They provide personalized advice, identify overlooked deductions, and ensure compliance with tax laws.

In the evolving world of cryptocurrencies, one of the concepts that has grown in prominence is "staking." This process involves the locking up of cryptocurrency tokens to support network operations, such as transaction validation, security, and more. Through staking, participants may earn additional tokens as rewards. However, the UK tax implications of these rewards remain a gray area for many individuals.

For a general overview of the tax implications of cryptocurrency, we have written an article on the topic which you can find here.

What is Staking?

Staking involves 'staking' or locking up a certain amount of cryptocurrency tokens to help support the operations of a blockchain network. Some consensus algorithms require the staking of tokens, which can influence the entitlement to newly minted or "forged" tokens. The more you stake, typically, the higher the potential reward.

Is Staking Taxable in the UK?

The tax implications of staking in the cryptocurrency world have been a topic of debate and confusion. According to CRYPTO21200 - Cryptoassets for individuals: Income Tax, the taxability of staking activities depends on various factors:

1. Degree of Activity: How actively is the individual participating in staking or related activities?

2. Organisation: Is the staking done in an organized manner or more sporadic?

3. Risk: What level of risk is involved in the staking activities?

4. Commerciality: Is the staking done with a commercial motive or just as a hobby?

Based on these factors, staking could either be considered:

• A taxable trade, with the tokens received as trade receipts.

• Or, if not considered a trade, the tokens awarded through staking are valued in pound sterling (at the time of receipt) and are taxable as miscellaneous income. Relevant expenses can then be deducted to reduce the amount chargeable. This miscellaneous income is detailed further in BIM100000.

Staking Rewards and Capital Gains Tax

For those who retain their awarded assets from staking, another layer of tax consideration comes into play. When you eventually sell or dispose of these assets, you might be subjected to Capital Gains Tax. This tax is calculated based on the difference between the value of the asset when received and its value at the time of disposal.

For instance, if you received a staking reward valued at £100 and later sold it for £150, you might have to pay tax on the £50 gain.

Key Takeaways

• Staking involves the holding of cryptocurrency tokens to support blockchain network functions.

• Tax implications for staking rewards depend on the nature of the activity, the level of organization, risks involved, and commercial intent.

• Rewards can be treated as trade receipts or miscellaneous income based on specific criteria.

• Holding onto staking rewards and selling them later may incur Capital Gains Tax.

Need More Help?

The realm of cryptocurrencies is intricate, and as it continues to mature, so do the associated tax regulations. While platforms like Kraken facilitate staking, it's essential for individuals to be aware of potential tax obligations. We recommend consulting an accountant or tax professional familiar with cryptocurrency regulations to ensure complete compliance and to navigate the complexities of staking rewards and their tax implications.

Navigating Seafarers' Finances and Taxes: A Guide for UK Taxpayers

Whether you've just embarked on your seafaring journey or you’re an experienced sailor navigating the vast oceans on superyachts, understanding the intricacies of seafarers’ finances can seem as complex as reading the tides. Here's your go-to guide, simplifying those taxing questions.

Do Seafarers Pay Taxes?

Contrary to popular belief, seafarers don't always have to part with their hard-earned money for taxes. Thanks to the Seafarers Earning Deduction (SED), qualifying sailors can claim 100% tax relief on their sea earnings. However, like the shifting seas, there are criteria to navigate.

National Insurance for Seafarers: What You Need to Know

Yes, as a seafarer, you'll contribute to national insurance. The amount depends on factors like your residency, your vessel's registration, your employer's location, and even the vessel owner's locale. Furthermore, your duty location – inside or outside UK waters – plays a role, and any existing agreements between the UK and other nations can influence this.

Delving into the Seafarers Earnings Deduction (SED)

Introduced in 2012 after rigorous negotiations between trade unions and HMRC, the SED is a beacon of hope for seafarers. Since their work keeps them away from land for extended periods, they often don't avail services like NHS or education, which income tax supports. However, despite the advantages, a significant number of sailors remain unaware of the SED and miss out on potential earnings.

Do You Qualify for the SED?

To be eligible:

1. Work Beyond UK Waters: You should have worked outside the UK for a continuous period of 365 days. Beware of the 'half-day rule' and 183-day stipulation which can impact your claim.

2. Foreign Voyages are a Must: At least one voyage starting or ending at a foreign port should be part of your employment every tax year.

3. Shipboard Duties: You should be working on a ship. Certain offshore installations and floating platforms don't qualify.

Clarifying the UK Boundaries for SED

For SED claims, HMRC usually regards being outside the 12-mile limit as being beyond the UK. Specific scenarios can influence this, especially if your vessel moves between UK ports.

International Seafarers and SED Claims

If you hail from an EEA State (but not the UK), you might still qualify for the SED. Non-UK, non-EEA seafarers taxed by HMRC can also explore claiming tax back.

Factors Potentially Influencing Your SED Claim

1. Dry-Docking of a Vessel: Vessels in dry docks can sometimes be excluded from being categorized as 'ships' for tax purposes, especially if the hull is breached.

2. Vacation Days: Your holiday duration isn't a concern. The focus remains on the days spent outside the UK.

3. SED Claim Deadlines**: Claims have specific deadlines based on tax years. For instance, the 2019/20 claim deadline is 5th April 2024.

The Seafarer’s Self-Assessment Tax Return Demystified

It's one of HMRC's systems to collect income tax. If self-employed, your annual tax return will detail what you owe. Ensure your documents, including air tickets, hotel bills, and freeboard logs, are in order. Need help? Use the HS205 form available on the government website.

Penalties to Watch Out For

Missing deadlines can lead to hefty fines. Submitting three months late? That’s a £100 penalty. If you continue to delay, fines increase progressively. For instance, a 90-day delay can add an extra £900 bill!

Why Consider a Tax Specialist?

Don't let the waters of finance and taxation pull you under. With intricate details to consider, seeking an expert like Flying Fish can ensure you don’t miss out on earnings or incur unnecessary penalties.

FAQs

• What is the Seafarers Earnings Deduction?

  • It’s a tax exemption introduced in 2012, allowing qualifying seafarers to claim 100% tax relief on their earnings.

• How is the UK boundary defined for SED?

  • Typically, being outside the 12-mile limit is considered outside the UK for SED claims.

• What penalties exist for late tax return submissions?

  • A delay of up to three months incurs a £100 penalty, with additional costs accruing the longer the delay.

Closing Thoughts

Navigating the realm of seafarers' taxes might be intricate, but with the right guidance, it doesn't have to be daunting. Arm yourself with knowledge, keep abreast of changing regulations, and when in doubt, consult an expert.

Claiming Disability Living Allowance (DLA) on Your UK Tax Return

The UK government offers several financial support programs for disabled individuals, with the Disability Living Allowance (DLA) being one such initiative. Primarily replaced by the Personal Independence Payment (PIP), DLA aims to assist those struggling with mobility or requiring help with personal care. An understanding of DLA's relation to tax returns is important, especially for those who are self-employed.

DLA and Your Tax Return

Disability Living Allowance (DLA) is classified as a tax-free benefit. As such, recipients aren't required to declare it on their UK tax return. This tax-exempt status applies to all types of income, including earnings from self-employment. Therefore, even if you're self-employed, DLA payments remain tax-free and don't need to be declared on your tax return.

Reporting Self-Employed Income

When completing your Self Assessment tax return, only your self-employed income and related expenses should be reported. This process should be carried out with meticulous accuracy, ensuring all relevant income and deductions related to your self-employment are considered. It's crucial to remember that DLA payments are exempt from these calculations.

Seeking Professional Advice

For any questions or concerns about your tax return or reporting your self-employed income, professional consultation is recommended. A qualified accountant or financial advisor can provide personalized advice, ensuring your tax returns are correctly completed.

In Summary

In conclusion, DLA is a tax-free benefit aimed at assisting disabled individuals, particularly children under 16 years of age. This allowance doesn't need to be declared on UK tax returns, regardless of the recipient's employment status. With the transition from DLA to PIP for individuals aged 16 to 64, an understanding of the eligibility and application process for PIP becomes crucial.

Need More Help?

If you find yourself still needing more assistance, do not hesitate to contact us. Our team of expert accountants are here to help you.

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!

Understanding Hmrc Payments on account

Your Comprehensive Guide to Smoother Tax Management

Have you ever found yourself puzzled by HMRC's 'Payments on Account'? Allow us to demystify the process and guide you through the whys, whens, and hows of this vital part of the Self Assessment system.

The essence of Payments on Account is quite straightforward – they’re a way to help you break down the cost of your next tax bill. They rely on a simple prediction: that your income this year will be similar to last year. Thus, each payment is half of your previous year's tax bill, split into two convenient payments on January 31 and July 31.

Is your tax situation becoming more complex as your income grows? No need to worry! Our experienced team can help you navigate the complexities of your tax responsibilities and guide you towards optimal decisions.

What if this year is different?

Life isn't always predictable, and neither is your income. Significant income fluctuations, an increase in allowances, or more tax-free income, such as investments, may change your tax scenario. Fortunately, HMRC understands this. If your income takes a dip or rockets to new heights, you can request to reduce your Payments on Account. Here's a handy step-by-step guide:

1. Access your online account (Personal tax account or Business tax account).

2. Choose "Self Assessment account".

3. Opt for "More Self Assessment details".

4. Select "Reduce payments on account".

5. Follow the on-screen instructions.

The keyword here is accuracy. Overestimating your reduction can lead to penalties. And remember, we're here to help. With us on your side, you won't need to navigate these murky waters alone.

What if you miss a payment?

We all lose track of time occasionally. If you fail to meet the January 31 and July 31 deadlines, HMRC may charge interest and penalties. It's like a late fee on a rental – the longer the delay, the higher the cost. However, fear not! HMRC is open to setting up payment plans.

The crux of the matter is: accurate predictions and prompt payments save money. That's where we come in. By leveraging our expertise, we can help you avoid the pitfalls of underpayments and late penalties.

How much should you pay?

Curious about the amount of your Payment on Account? Each instalment is usually half of your last year's tax bill. To find out, simply check your previous year's tax bill or look at HMRC's calculations when you submit your Self Assessment tax return. Alternatively, you can always log in to your HMRC online account to view your tax bill.

Let's wrap it up

All said and done, Payments on Account are essentially an estimate of what's to come, based on what's been before. If you expect significant changes in your income, remember to adjust your Payments on Account accordingly – and we're here to help you do just that.

Whether it's getting you up to speed with Payments on Account, ensuring you don't pay a penny more than you owe, or safeguarding you from penalties, we're committed to offering you the very best in tax advisory and accounting services. Our expertise is your peace of mind. Let us handle the numbers while you focus on what you do best.

Because your success is our success. Let's make tax a less taxing affair together!

For any queries related to your tax situation, do not hesitate to contact us.

Navigating the world of taxation can be daunting, particularly when it comes to Value Added Tax (VAT). Whether you're a small business owner, self-employed, or an individual taxpayer, understanding VAT returns is crucial. This article aims to demystify VAT for UK taxpayers, outlining who needs to file, how to go about it, and the common pitfalls to avoid. We'll delve into the specifics of VAT thresholds, deadlines, and the process of filing returns, providing you with the essential knowledge to navigate VAT responsibilities confidently and efficiently.

What is a VAT tax return?

A VAT (Value Added Tax) tax return is a formal statement that UK businesses must submit to HM Revenue and Customs (HMRC), typically every three months. It provides a summary of the VAT a business has charged on its sales (output VAT), against the VAT it has paid on eligible purchases (input VAT). If the business has charged more VAT than it has paid, it owes the difference to HMRC. Conversely, if it has paid more VAT than it has charged, it can claim a refund. The VAT return thus helps maintain a balance in the VAT system.

Who has to file a VAT tax return?

In the UK, the following are the criteria for VAT registration:

• Mandatory VAT registration: You must register for VAT if any of the following apply:

  • Your VAT taxable turnover is more than £85,000 (the 'threshold') in a 12 month period.

  • You expect to go over the threshold in a single 30 day period.

  • You take over an existing VAT-registered business as a going concern.

• Distance selling into the UK: If you sell goods into the UK from another EU country, you must register for VAT if your goods' total value is more than £70,000 in a calendar year.

• Non-established taxable persons: If you supply any goods and services to the UK and you have no establishment in the UK or in the EU, you must register for VAT regardless of your turnover.

• Acquisitions: If you receive goods from other EU countries in the UK, you must register if total acquisitions are more than £85,000 a year.

• Voluntary VAT registration:You can register voluntarily if your turnover is less than £85,000, unless everything you sell is exempt. This can be beneficial if you sell to other VAT-registered businesses and want to reclaim the VAT.

Are self-employed professionals required to file a VAT tax return?

Self-employed individuals in the UK are required to file a VAT tax return if their VAT taxable turnover (i.e., the total value of everything you sell that isn’t exempt from VAT) is more than the current VAT threshold in a 12-month period.

It's also important to note that you can voluntarily register for VAT even if your turnover is below the threshold. This might be beneficial in certain situations, such as if you want to reclaim VAT on your purchases.

Is rental income considered when evaluating whether you need to file a VAT tax return?

In the United Kingdom, rental income from properties is subject to income tax rather than Value Added Tax (VAT).

Income tax is applicable on the rental income earned from letting out a property in the UK. The amount of tax owed is determined by various factors, including the level of rental income received, allowable expenses, and the individual's overall income tax bracket. Landlords are required to report their rental income and expenses on a self-assessment tax return.

VAT, on the other hand, is a separate tax that is generally levied on the sale of goods and services. It is not directly applicable to rental income from properties in the UK.

What documents to do you need to prepare a VAT tax return?

Preparing a VAT return in the UK requires the following documents and records:

Sales and Income Records: You'll need a record of all sales and income, including the VAT charged. This might be in the form of sales invoices or till receipts.

Purchase and Expense Records: You'll need detailed records of business purchases and expenses, including the VAT paid. This can include purchase invoices, receipts, and expense claims.

Import and Export Records: If applicable, you'll need to keep copies of all import and export documents, including those related to goods received from EU countries.

Credit Notes Issued and Received: If you've issued credit notes to customers or received them from suppliers, these will need to be included.

Records of Goods Removed from the Business: If you've taken any goods out of the business for personal use, these must be recorded.

Zero-Rated, Reduced, and Exempt Sales: If you make any zero-rated, reduced-rate, or exempt sales, these need to be recorded separately.

VAT Account: A VAT account is a summary of your output VAT and input VAT in a given period, which will be used to complete the VAT return.

Remember, it's important to keep all these records for at least six years (or ten years if you use the VAT MOSS service). If you're unsure about how to prepare a VAT return or what records you need to keep, it might be worth seeking advice from a tax professional or HMRC.

When do VAT tax returns need to be filed?

In the UK, VAT (Value Added Tax) returns are typically due one month and seven days after the end of the VAT accounting period. The VAT accounting period, often referred to as the 'tax period', is usually set to cover three months.

For example, if your VAT quarter ended on 31st March, then your VAT return would need to be submitted and the VAT due paid by 7th May.

It's crucial to note that these deadlines apply for both submitting the VAT return and paying the VAT due. If a deadline falls on a weekend or bank holiday, the VAT return and payment should arrive by the last working day before.

How to find out when your next VAT return is due?

In the UK, you can find out when your next VAT Return is due by checking your VAT online account, also known as the Government Gateway account. Here's how:

1. Go to the HM Revenue and Customs (HMRC) website.

2. Sign in to your VAT online account (Government Gateway account).

3. Once you are logged in, you should be able to view the details of your next VAT Return and when it's due.

Remember that VAT returns are typically due one month and seven days after the end of an accounting period. The accounting period is usually a three-month period that you chose when you registered for VAT. The end date of each quarter is when the VAT period finishes.

The HMRC's online system will show you when your next VAT return is due. They also usually send out an email reminder a month before your VAT Return is due if you've signed up for email reminders.

Always ensure that you file your VAT return and make any necessary payments by the due date to avoid any penalties for late submission or payment. If you have any uncertainties or issues, consider contacting HMRC directly or seeking advice from a tax professional.

As specialist accountants in VAT if we are authorised as your agent we are able to check your filing periods and ensure all is kept up to date with filing deadlines

For support filing your VAT tax return contact us

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

With the rise of work-from-home culture in the work place, there are more and more people entitled to claim expenses related to working from home. This article aims to help you through this process. If you just want a quick calculation, why not see our U.K. home-office expenses calculator.

If you would like to know more about how to calculate your work-from-home related expenses, get in touch!

If you work from home, there are a number of expenses you may be entitled to. Every day we speak with tax filers who are not making the most of their claimable home expenses. 

Read on to find out more about the home expenses you may be able to claim on your tax return this year. 

For a quick calculation of the amount you maybe be able to claim, use our U.K. home-office expenses calculator. 

For a review and tailored advice on how to maximise your expenses book a call with one of our expense optimisation accountants.

Working from home allowance is claimable by self-employed professionals. Home expenses can also be claimed by companies. Those who are employed only can often discuss claiming with their employer to ensure maximum tax savings. 

Only the portion of the expense that exists solely for work purposes can be claimed. Therefore as home expenses are nearly always used for part-personal reasons, the expense is only part-claimable.

Home expenses that can be claimed include, but are not limited to:

• Heating

• Electricity

• Council tax

• Mortgage interest or rent

• Internet and telephone use.

Calculating your claimable home expenses 

One method for calculating how much you can claim is to divide the number of rooms used for your business by the total number of rooms in your home.

SIMPLIFIED EXPENSES

It is also possible to claim allowable expenses without requiring time-consuming calculations and record-keeping. This method of claiming deductions is based upon a flat-rate method rather than calculating each expense. 

Flat-rates for working from home 

Allowable expenses can be calculated by using a flat rate based on the hours you work from home each month. 

It is important to note that the flat-rate method does not include telephone or internet expenses and these need to be calculated separately. 

You can claim the business proportion of these bills by working out the actual costs. 

You can only claim work-from-home expenditure if you work for 25 hours or more a month from home.

• 25 to 50 Hours:  £10 flat rate per month

• 51 to 100:  £18 flat rate per month

• 101 and more:  £26 flat rate per month

Flat rates for living on your business premises You can also use simplified expenses if you use your business premises as your home. An example of this scenario would be businesses such as bed and breakfasts, guesthouses, or small care homes whereby you reside on the site of your business. Instead of working out the split between private and business expenditures regarding the use of the premises, a simplified expense rate can be applied. To calculate the claimable spending, you must first calculate the total expenses for the premises and then apply the flat rate to subtract for your personal use.

• 1 person:  £350

• 2 people:  £500

• 3+ people: £650

For example, you and your partner run a bed and breakfast and live there the entire year. Your overall business premises expenses are £15,000.

Flat rate: 12 months x £500 per month = £6,000

You can claim: £15,000 - £6,000 = £9,000

If someone lives at your business premises for part of the year, you can deduct only the applicable flat rate for the months they live there. For example, you and your partner run a bed and breakfast and live there the entire year. Your child is at university for 9 months a year but comes back to live at home for 3 months in the summer.

Flat rate: 9 months x £500 per month = £4,500

Flat rate: 3 months x £650 per month = £1,950

Total = £6,450

You can claim: £15,000 - £6,450 = £8,550

USE OUR CALCULATOR

You can calculate your potential home office expenses with our U.K. home office expense calculator

NEED MORE HELP?

Working out your expenses can be a tricky task, especially if you run your own business. We offer expert tax advice for professionals across the UK. For more information bespoke to you, do not hesitate to contact us

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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iNews

The article and figures present in this paragraph have been informed this article, you can read it at the link below.

Go to the website page

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.

Need to know facts about VAT record keeping

VAT-Registered businesses must create and keep business records either by bookkeeping or using computer systems. These records must be complete and up to date to allow you to calculate the correct amount of VAT that you need to pay or can claim from HMRC.

VAT Records

• Copies of all invoices issued

• All invoices received (originals/electronics)

• Self-billing agreements

• Name, address, and VAT numbers of any self-billing suppliers

• Debit/credit notes

• Import and export records

• Records of items that cannot reclaim VAT on

• Records of any good you give away/take from stock for your private use

• Records of all the zero-rated, reduced or VAT exempt items you buy or sell

• A VAT account

In addition to all of this, bank statements, cash books, cheque stubs, paying-in slips, and till rolls must also be kept.

 Making Tax Digital (MTD)

From April 2019 onwards, all VAT registered businesses with a taxable turnover of £85,000 must follow rules for ‘Making Tax Digital (MTD) for VAT’, as the government aims to make the collection of VAT all digital.

* From 1 April 2022 onwards, all VAT registered businesses must sign up to MTD regardless of how much they earn.

Digital Links

This is essential when complying with the MTD system. Businesses would need a ‘compatible software package’ that can link with HMRC

• Qualifying digital links should be:

• Transferable electronically between programs, products, or applications

• The process of transfer should be automated.

• Some ways you can link your software include:

• Using formulas to link cells in spreadsheets

• Emailing records

• Records on a portable device

• Importing and Exporting XML and CSV files

• Downloading and uploading files

• API transfer

*You must have links between the software you use by your first VAT period after 1 April 2021.

VAT Records (MTD)

Here are the records you would have to keep digitally:

• Business name, address, and VAT registration number

• Any VAT accounting schemes you use

• VAT on goods and services you supply

• VAT on goods and services you receive

• Any adjustments you make to a return

• ‘Time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

• Rate of VAT charged on goods and services you supply

• Reverse charge transactions

• Total daily gross takings if you use a retail scheme

• Items you can reclaim VAT on if you use the Flat Rate Scheme

• Total sales, and the VAT on those sales

Exemptions

This means keeping some records digitally unless:

•  Your business uses VAT GIANT service – part of a government department/NHS trust

•  Apply for exemption

• Automatically exempt if

•  Taxable turnover has not exceeded £85,000 since April 2019

•  Already exempt from filing VAT Returns online

•  You or the business are subject to an insolvency procedure

Apply for an exemption due to:

• Age/disability/where you live

• Object to using computers on religious grounds

• Any other reasons why it’s not reasonable/practical

*From 1 April onwards, all VAT registered businesses must sign up regardless of how much they earn through tax.

VAT account

A separate record of all the VAT charges you have charged and paid on purchases. This includes:

• Total VAT sales

• Total VAT purchases

• VAT owed to HMRC

• VAT you can reclaim from HMRC

• Flat rate percentage and turnover from VAT Flat Rate Scheme (if applicable)

VAT Bad Debt Account

If an invoice is written off as bad debt, a separate record must also be kept for 4 years. The debt will have to be older than 6 months and you must show:

• Total amount of VAT involved

• Amount written off/payments received

• VAT you are claiming on the debt

• VAT period(s) you paid the VAT and claimed the relief

• Invoices details (incl. date, customer name)

Errors

Any mistakes made when submitting your VAT return must be reported to HMRC, and shown in the VAT account. This includes: 

• Date the error is discovered

• Details regarding the error, how it happened, and how it has been amended.

For 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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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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The VAT reverse charge is a major change in how VAT will be collected, especially in the Construction and building industry. The reverse charge came into effect on 1 March 2021 and will, in many instances, require customers receiving building and construction services to pay the VAT due directly to HMRC, instead of paying the supplier.

Background

The reverse charge is intended to prevent the avoidance of VAT by suppliers who charge and collect VAT from the recipient of a supply but fail to account for that VAT to HMRC (missing trader fraud). The reverse charge shifts the VAT accounting responsibility from the supplier to the recipient. This means those supplying construction services to a VAT registered customer do not have to account for VAT.

It is effectively an extension of the Construction Industry Scheme (CIS) and only applies to transactions that are reported under the CIS and between contractors and sub-contractors.

Services that are affected by the reverse charge

The reverse charge will affect standard-rated supplies of building and construction services - note; not zero-rated supplies - that also fall within the ambit of the Construction Industry Scheme (CIS). Broadly, these services include:

• constructing, altering, repairing, extending, demolishing, and dismantling buildings and structures.

• constructing, altering, repairing, extending, demolishing, and dismantling works forming part of the land.

• pipelines, reservoirs, water mains, sewers, coast protection, or defence.

• installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, or fire protection; and

• painting or decorating the internal or external surfaces of any building or structure

Other services not on the list above which are supplied at the same time as these construction services can also be subject to the reverse charge, where those non-construction services are ancillary to the construction services or if the parties elect for the reverse charge to apply to those non-construction services.

What does this mean for companies?

Every construction company needs to ensure that its invoicing and accounting systems are up to speed with the new legislation so they can process supplies covered by the VAT reverse charge. As the VAT amount still needs to be shown on invoices, we expect that many suppliers will mistakenly account for the VAT to HMRC. 

Sub-contractors must understand whether they are working for a VAT-registered company and whether they are working for a business within CIS that is not an end client (developer, landlord, tenant, etc).

Some sub-contractors may suffer in cashflow terms if they have been using the VAT from customers as working capital. Our advice is to calculate what the new rules mean to you and then to adjust your procedures and payment terms to mitigate the loss in revenue.

There are some important steps that every construction business should take before they send out their March invoices:

• Determine which jobs for VAT-registered companies will fall under the VAT reverse charge from 1 March 2021

• Where necessary, gain written confirmation from customers their VAT and CIS status and whether or not they are end clients

• Review and update accounting procedures

• Calculate the loss of cash flow and review payment terms

• If possible, move to monthly VAT returns 

• If you fall under the VAT reverse charge, come off the Cash Accounting Scheme

• If you’re on the flat-rate scheme, check that it is still right for your business

• Consider asking suppliers to purchase materials on jobs covered by the VAT reverse charge to lower your exposure to VAT payments.

Working Example

Your company is VAT registered and supplies services to a construction firm (VAT registered) that is building a new housing development for a property developer (VAT registered) who is the customer/end-user.

Under the old VAT rules, you would invoice the construction firm for £60,000 (£50,000 bill for materials and labour plus £10,000 VAT).

From March 1, 2021, your invoice now says £50,000 and states that the VAT reverse charge applies. The construction firm pays him the net £50,000 fee and then accounts for output and input VAT of £10,000 on their VAT return.

Because you do not account for output VAT in your accounts, you receive £10,000 less under the new system. However, you do not have to account to HMRC for any output tax on the transaction.

So although your cash flow has reduced, the construction firm has gained as they do not have to pay you £10,000. However, at the end of its VAT quarter, it cannot reclaim the £10,000 as it is accounting for the reverse charge and the output VAT offsets the input VAT.

How to claim

The reverse charge will not apply where the customer is an end-user; a person who will use the construction services received for its business purposes who has notified the supplier of its status as such.

Businesses that rely on VAT collected from customers as working capital may suffer cash flow problems once the reverse charge is implemented since they will no longer be collecting VAT and be able to use that as a cash buffer until accounting for it to HMRC.

Where the reverse charge does apply, suppliers will now be required to make a note on their VAT invoices that it is their customer that is required to account for the VAT to HMRC.

If the VAT treatment adopted by the parties is later found to be incorrect - for example, because the customer is an end-user but parties nonetheless apply the reverse charge incorrectly - HMRC will expect the customer to notify the supplier that it is an end-user and request a corrected invoice.

We understand that HMRC will not be prepared to offset amounts accounted to it by the wrong parties so, if the reverse charge is not applied where it should be, the customer will have to account for the VAT to HMRC despite having already paid it to the supplier, and will then be required to separately pursue the supplier for a refund.

However, if the property developer sells the partly-constructed property to an investor - with the investor also engaging the property developer to complete the construction of the shed - the property developer will cease to be an end-user and the reverse charge will start to apply to all future payments made by the property developer to its builder.

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.

How does or will the IR35 affect actors' taxes?

In this article, we will talk you through what IR35 is, the changes that have been implemented this year, and how these changes are beneficial for the actors.

What is IR35?

IR35, also known as off-pay working rules, is an employment status test for tax. 

Check employment Status for Tax (CEST) is a tool used by intermediary companies to determine whether a worker is 'self-employed’ who are ‘in business on their own account’ or they must be paid through payroll. 

What are the changes happening?

From April 2021, all public authorities, medium to large-sized clients outside the public sector are given the responsibility to determine whether an individual is self-employed or not.

If the worker is providing services to a small client outside the public sector, the intermediary (e.g. talent agency) is responsible for determining their employment status.

The changes provide guidance and clarity for intermediaries as the new IR34 recognizes the distinctive aspects that entail being a performer, such as being an ‘itinerant pattern of work’ mentioned in the Employment Status Manual.

Employment Status Manual

The HMRC has published Employment Status Manual ESM4121 to help clarify what is indicative of self-employment: 

1. The performer has an itinerary pattern of work:

· Several engagements which may be consecutive or concurrent.

· Several different engagers

· May have periods of unemployment between engagements. During these periods the individual may be undertaking activities relevant to the occupation such as learning lines, updating skills, preparing for auditions, networking, and so on.

2. The performer takes steps to build a business, incurring the costs of maintaining a business structure, beyond attending rehearsals and performance

3. The performer has a high degree of control over the work performed. In the context of performers

4. Performers may incur substantial costs in preparing and attending multiple auditions; or in purchasing professional self-taping equipment or services, without any guarantee of obtaining additional work.

5. if the performer has an unfettered right to send a substitute or deputy in their place at short notice, who is booked and paid by the performer this is indicative of self-employment

6. The performer provides their equipment, which is both significant and fundamental to their role.

 (Source: https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm4121)

How will the changes in IR35 affect actors’ taxes?

Intermediary companies had difficulties in using CEST as it was harder to determine the employment status of certain performer roles, as well as the options available, were restricted. 

This resulted in many of the production companies placing performers on PAYE contracts. As a result, actors were incurring the same amount of Income Tax and National Insurance as an employee would, despite the majority being self-employed.

The 2021 IR35 change clarifies that most actors and performers are considered self-employed for tax purposes and resolving the tax disputes that were often happening before the changes.

It needs to be taken into account that an actor may steel be considered as an employee if they do not meet the majority of the indicative factors stated in Employment Status Manual ESM4121.

For more Help

We have been offering industry leading tax advice to actors and creatives for over 15 years. If you need any further help for any and all things UK tax, do not hesitate to contact us

How to notify HMRC of a name change

If you have changed your name, you would have to contact HM Revenue and Customs (HMRC) to update it on the system.

There are two different ways to notify HMRC and this depends if:

• You only pay tax through Self Assessment

• You are a tax agent

You will need to log in to the Government Gateway in order to do so. A Government Gateway user ID and password would be required, and you would have to create an account if you do not have an ID.

If you have submitted a Self Assessment tax return as well, the details will automatically be updated for both.

If you change gender, this will be updated automatically in the syste

Once this has been completed, HMRC will update your personal records, this includes:

• Income Tax 

• National Insurance

• Tax Credits and Benefits

• Services such as the Pension Service

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.

This article has been written with the intention to act as a resource for actors when preparing their personal tax returns each year. 

For more in depth and tailored advice  on expenses and reliefs you may be able to claim as an actor Book a consultation and speak to one of our specialist accountants.

Alternatively contact us via email or telephone.

If you work as a full-time actor or actress, there are a number of expenses that can be claimed on your annual tax return.  

The core expenses you can claim as an Actor

 Clothing, Makeup and Props

 Clothing, Makeup and Props that exist “wholly and exclusively” for the purpose of work can be claimed on your personal tax return. Many actors will find they incur these expenses for work such as rehearsals and auditions.

You can claim this expense under Business Expenses

Travelling for research

 Travel is a common method of research for many actors. Whether it be for an existing role or a potential role, travel expenses that have been made for the purpose of work can be claimed either fully or partially on your self assessment. 

You can claim them under Deductible Travel Expenses

Computer and other devices costs

 Computers, iPads, Mobiles are  all essential for most professions in today's world. As an actor, if you have to use a device to research a role or obtain work, the cost of the computer and laptop is claimable against tax. In order for the cost to be fully claimable to the computer should be used for work purposes only. 

 For these reasons, it’s possible to claim a deduction for a percentage of the purchase for the laptop. This will also apply for the price of any software used, such as Word, and computer hardware such as printers, iPads, and flash-drives.

You can claim this expense under Capital Expenses.

Household bills

 Your household bills could be deductible if you use your home as an office. The amount you claim will have to be apportioned appropriately. 

Go to our home as an office calculator to work out how much you can claim on your personal tax return.

 You can claim this expense under Home Office Deductions.

PPE and other safety equipment

PPE and any other equipment that is necessary for keeping your workplace safe are claimable against tax.

You can claim this expense under Business Expenses

Education and Accreditations 

Training courses and accreditations needed to conduct and improve work are claimable against tax

You can claim this expense under Business Expenses

Subscriptions and memberships

Memberships to software such as Microsoft and Adobe, as well as to organisations such as Director UK or Spotlight are claimable against tax.

You can claim this expense under Business Expenses

Agent fees

Agent fees that exist to gain or improve your work are claimable against tax. Many of our clients' agents will send their expenses directly to us, so that we can add them in immediately!

You can claim this expense under Business Expenses

We specialise in tax of creative industry professionals

We have over 15 years of experience dealing in tax for the creative industries. If you need any help at all do not hesitate to contact us