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Tax tips

Each month we share our top tax tips to help you and your business operate in the most tax efficient manner.

2024

Don’t forget to claim tax relief for £5/night to cover incidental expenses.

It’s P11D reporting season to declare any benefits in kind that you receive from your company.

Certain benefits are tax free, such as use of a company bike, use of a company mobile phone, use of a company laptop or other IT equipment.

Try to buy these items within the company to get tax relief on them. 

It may be more tax efficient to assign the bond out to a beneficiary before cashing it in, so that the chargeable event gain is taxed at the beneficiaries’ tax rate, and not at the Trust tax rate.

If the beneificiary pays tax at a lower rate than the Trust’s 45% rate then this could save significant amounts of tax.

Additionally the beneficiary will get the benefit of the top slicing relief.

If you hold bonds in a Trust and want to know more then please get in touch.

From April 2024 Class 2 NIC will not have to be paid if your self employed profits are in excess of £6,725.

You will automatically accrue a qualifying year for state pension purposes.

If your profits are under £6,725 then you will have to voluntarily pay to get a qualifying year for your state pension. The annual cost for Class 2 NIC for 2024/25 is £179.40. 

You can move 10% of it over to you to save around £250 each year, and this can be claimed going back 5 tax years.

Speak to us to find out more on 01244 343504 or at info@ellis-uk.com

2023

This means that if your company invests in new Plant & Machinery, tax relief can be obtained for the whole cost.

Under the old rules the tax relief was restricted to £1M through the ‘annual investment allowance’.

This is good news for companies making large investments.

If the costs related to trading while the business was VAT registered then you can still recover the VAT even after you’ve deregistered.

You simply need to make the claim on a VAT427 form.

The main residence exemption is lost (even historically) the moment that the garden stops being a garden.

This means that to ‘bank’ any historic exemption it may be worthwhile to create a disposal of the land into another legal entity before the building work starts. This may save considerable tax in future. 

This is a simplification of VAT for smaller businesses with turnover up to £150,000.

Instead of paying VAT on all sales, and recovering VAT on all purchases, you can instead simply pay a fixed % of your turnover to HMRC. The % varies depending on industry sector, but can often create VAT savings.

Speak to us to find out more.

HMRC accept that you have to feed yourself and allow fixed rates expenses for meals away from home. 

Your employer can choose to pay you a tax free sum of £5 for up to 5 hours away, £10 for up to 10 hours away, and £15 for up to 15 hours away. In addition if you are away beyond 8pm you can claim an additional £10. 

Speak to us to find out more.

Secure a lower rate of capital gains tax on a property sale by converting it into a holiday let for at least 2 years prior to the sale.

Speak to us to find out more.

Do you have more than one job and are paying at the full rate of National Insurance contributions on both salaries?

You could be overpaying National Insurance and entitled to a repayment.

You could also be missing out on a deferment certificate to remove one employment from charge.

Speak to us to find out more.

Have you transferred a property into a company, and as a consequence you now have a balance owed to you on your director’s loan account?

If so, you could claim relief on your personal tax return for any interest you pay on personal loans and mortgages up to the balance owed to you on your director’s loan account balance.

Speak to us to find out more.

Do you or your employees have to make any overseas work trips?

If so, you can claim tax free expense payments from the company for each night overseas. HMRC publish overnight & meal rates for each country that you can claim even without any receipts.

The amounts for each country can be found here.  

The tax relief on R&D expenditure is reducing from 1 April 2023.

Incur the expenditure prior to 01/04/23 to get a better rate of relief.

Avoid late payment surcharges by ensuring any personal tax balance for 2021/22 is paid by 28 February 2023.

If you can’t make that deadline then contact HMRC beforehand otherwise a penalty of 5% applies.

Reduce your capital gains tax by transferring a share of the asset to your spouse before you sell it. This makes use of 2 tax free annual exemptions, and 2 basic rate tax bands. It could save capital gains tax of up to £7,200 on property sales, or up to £6,200 on other assets. Speak to us to find out more.

2022

The OTT does not carry over to the buyer without formally claiming it with HMRC.

It’s a common misconception that if an owner opts to tax a commercial property and sells it, that the option to tax carries over to the new owner. It doesn’t – each new owner has to decide to opt to tax and then notify HMRC.

Monies borrowed from your company, via your director’s loan account, must be repaid to the company within 9 months after the company’s year end date.

Failure to repay incurs a s455 tax charge for the company.

The rate of s455 tax has increased to 33.75% for monies borrowed from 6 April 2022.

A repayment is not valid if the monies are drawn back out within 30 days before or after the repayment.

HMRC interest rates are creeping up. Late payment interest is now at 4.75% which means that delaying paying tax liabilities is suddenly becoming costly.

We highly recommend you pay these promptly to avoid costly interest fees. 

Have you loaned money to your limited company? You could pay yourself interest on the loan balance. For basic rate taxpayers £1,000 of interest is tax free (£500 for higher rate taxpayers).

Additionally, using the 0% savings band could enable even more tax free interest to be paid in certain circumstances.

Paying yourself interest can be a very tax effective way to extract money from your company.

Make use of each year’s capital gains annual exemption by selling shareholdings each year. Provided that you don’t re-buy within 30 days then the gain is “banked”.

If you’re worried about value fluctuations after selling, then you can re-buy immediately through a stocks & shares ISA, or via your spouse.

Don’t forget to report the capital gain to HMRC within 60 days. Many people are still not aware of the new reporting regime for property sales.

Speak to Ellis & Co if you need help with this.

If your income is just over £50,000 you could avoid re-paying your child benefit by making a pension contribution. This reduces your “net adjusted income” upon which the HICBC is assessed. Speak to us to find out more.

If they are on HMRC “list 3” then you can claim tax relief for them.

Speak to us to find out more.

Do you jointly own a rental property with one spouse a higher rate taxpayer, and the other spouse not?

You can do an election to move the profits into the spouse with the lower rate of tax. Speak to us to find out more.

Got a BTL property with no/low mortgage?

You may be able to get a reduction to your tax bill of 20% of your main home mortgage interest.

Are you receiving less than 45p/mile from your employer when you do business trips in your own car? You can claim a tax deduction for the difference. Speak to us to find out more.

You can claim a laundry allowance income tax deduction of £60 each year. 

For further information on this or any other tax matter please contact Melanie Tomkins, tax manager at Ellis & Co Chartered Accountants.