October 2023 | DSK Partners LLP

Check if you need to pay someone through PAYE

Posted on October 12, 2023 by

Employers usually have to pay employees through PAYE if they earn £123 or more a week (£533 a month or £6,396 a year). There is no requirement to pay self-employed workers through PAYE.

HMRC’s guidance states that:

As a general rule, someone is:

employed if they work for you and do not have any of the risks associated with running a business; and
self-employed if they run their own business and are responsible for its success or failure.

There are specific rules for temporary or agency workers. Employers need to operate PAYE on temporary workers that they pay directly, as long as they’re classed as an employee. There is not usually a requirement to operate PAYE if a worker is paid by an agency, unless the agency is based abroad and does not have either a trading address or a representative in the UK.

Employers that take on a new employee need to work out which tax code and starter declaration to use in their payroll software. Incorrect tax codes can lead to the new employee paying more tax than is due.

The necessary information can be collected from the employee’s P45 or by asking the new employee to complete HMRC's starter checklist (if they do not have a recent P45 – this checklist replaced the P46).

Source: HM Revenue & Customs Tue, 10 Oct 2023 00:00:00 +0100

Have you downloaded your HMRC app?

Posted on October 12, 2023 by

HMRC’s free tax app is available to download from the App Store for iOS and from the Google Play Store for Android. The latest version of the app includes updated functionality to check your Child Benefit and State Pension, set a reminder to make a Self-Assessment payment and the option to be contacted by HMRC electronically instead of by paper.

The APP can be used to see:

your tax code and National Insurance number;
your income and benefits;
your income from work in the previous 5 years;
how much you will receive in tax credits and when they will be paid;
your Unique Taxpayer Reference (UTR) self-assessment;
how much Self-Assessment tax you owe;
your Child Benefit; and
your State Pension.

The app can also be used to complete a number of tasks that usually require the user to be logged on to a computer. This includes to:

get an estimate of the tax you need to pay;
make a Self-Assessment payment;
set a reminder to make a Self-Assessment payment;
report tax credits changes and complete your renewal;
access your Help to Save account;
use our tax calculator to work out your take home pay after Income Tax and National Insurance deductions;
track forms and letters you have sent to us;
claim a refund if you have paid too much tax;
update your postal address; and
choose to be contacted by HMRC electronically, instead of by letter.

Source: HM Revenue & Customs Tue, 10 Oct 2023 00:00:00 +0100

Cost of Living payments 2023-24 support

Posted on October 12, 2023 by

The Cost of Living support package has been designed to help over 8 million households in receipt of means tested benefits. The details for Cost of Living Payments due in the 2023-24 tax year were published earlier this year and have recently been updated.

Eligible recipients will receive up to 3 Cost of Living Payments of £301, £300 and £299 during the course of the current tax-year. This includes those receiving pension credit, and these payments will be made separately from other benefit payments. The first payment of £301 was made between April-May 2023 and the second payment of £300 was paid during August-September 2023. The third payment of £299 is due to be paid in spring 2024.

An additional one-off payment of £150 or £300 will be paid to pensioners during winter 2023-24. The Winter Fuel Payment is provided by the government to help older people keep warm during winter. The amount a pensioner will receive depends on a number of factors including their age and the age of other people living with them. You can get a Winter Fuel Payment for winter 2023-24 if you were born before 25 September 1957. HMRC is in the process of writing to eligible recipients telling them how much to expect.

Source: Department for Work & Pensions Tue, 10 Oct 2023 00:00:00 +0100

Bank deposits covered by FSCS

Posted on October 9, 2023 by

Your eligible deposits with all High Street bank are covered by the Financial Services Compensation Scheme (FSCS).

The present limit of this FSCS guarantee is £85,000 and this applies to total deposits held at a bank, not per account with a bank.

This will be of interest to Metro Bank account holders as they witness the current difficulties and dramatic drop in share price.

On their website, Metro Bank underline the FSCS guarantee, they say:

“Your eligible deposits with Metro Bank PLC are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit guarantee scheme. Any deposits you hold above the limit are unlikely to be covered. Please visit www.fscs.org.uk for further information.”

The FSCS do extend this guarantee to £1m in certain circumstances. The published details on the FSCS site say:

“If you hold money with a UK-authorised bank, building society or credit union that fails, we will automatically compensate you.

up to £85,000 per eligible person, per bank, building society or credit union.
up to £170,000 for joint accounts.

We protect certain qualifying temporary high balances up to £1 million for 6 months from when the amount was first deposited.”

If you are concerned about deposits you feel may be at risk, you can check your money is protected using the bank and savings protection checker at https://www.fscs.org.uk/check/check-your-money-is-protected/

Source: Other Mon, 09 Oct 2023 00:00:00 +0100

Reforms to powers of attorney

Posted on October 9, 2023 by

These legal agreements enable a person to grant decision making powers about their care, treatment or financial affairs to another person if they lose mental capacity.

The Powers of Attorney Act fires the starting gun on bringing the existing paper-based process online for the first time. The changes, when introduced, will make the system quicker, easier to access and more secure for the thousands of people who make and rely on a lasting power of attorney every year.

The legislation, which was introduced by Stephen Metcalfe MP and supported by the government, will also strengthen existing fraud protection by allowing checks on the identity of those applying for a lasting power of attorney.

The new online system and the additional safeguards are now being developed by the Office of the Public Guardian. Extensive testing will need to be conducted to ensure the process is simple to use, works as intended and is secure. More information on when it will be available will be published in the coming months.

The number of registered lasting power of attorneys has increased drastically in recent years to more than 6 million but the process of making one retains many paper-based features that are over 30 years old. Every year, the Office of the Public Guardian handles more than 19 million pieces of paper as a result of their offline system.

The digitalisation will speed up registration time by picking up errors earlier and allowing them to be fixed online rather than having to wait for documents to be posted back and forth between the applicant and the Office of the Public Guardian as currently happens.

Source: Other Mon, 09 Oct 2023 00:00:00 +0100

Income Tax in Scotland if you have more than one home

Posted on October 5, 2023 by

There is an interesting anomaly that can affect taxpayers with homes in Scotland and other parts of the UK. Where this is the case, the question arises as to whether or not the taxpayer is liable to pay Income Tax in Scotland or elsewhere.

As a general rule, the Scottish rate of Income Tax (SRIT) is payable on the non-savings and non-dividend income of those defined as Scottish taxpayers. The definition of a Scottish taxpayer generally focusses on the question of whether the taxpayer has a 'close connection' with Scotland or elsewhere in the UK. The liability to SRIT is not based on nationalist identity, location of work or the source of a person’s income, e.g., receiving a salary from a Scottish business.

Where a taxpayer has a home in Scotland and also elsewhere in the UK, they need to ascertain which is their main home based on published guidance and the facts of the case.

HMRC’s guidance on the issue states the following:

Your main home is usually where you live and spend most of your time. It does not matter whether you own it, rent it or live in it for free. Your main home may be the home where you spend less time if that’s where:

most of your possessions are;
your family lives if you are married or in a civil partnership;
you are registered for matters such as your bank account, GP or car insurance; or
you are a member of clubs or societies.

It is also possible to change which home counts as your main home if there has been a material change in the underlying facts. Scottish taxpayer status applies for a whole tax year. It is not possible to be a Scottish taxpayer for part of a tax year.

Source: The Scottish Government Tue, 03 Oct 2023 00:00:00 +0100

Reporting self-employed profits 2023-24

Posted on October 5, 2023 by

The basis of assessment reforms will change the way trading income is allocated to tax years. The changes will affect sole traders and partnerships that use an accounting date between 6 April and 30 March. There is no change to the rule for companies.

The reforms will change the basis period from a ‘current year basis’ to a ‘tax year basis’.

Under the current rules there can be overlapping basis periods. When this occurs, tax may be charged on profits twice and generate ‘overlap relief’. This overlap relief can be used on the cessation of a business or when an accounting date is changed. The new method of using a ‘tax year basis’ will remove the basis period rules and prevents the creation of further overlap relief.

The new rules will come into effect in the 2024-25 tax year and the current 2023-24 tax year is known as the ‘transition year’. During the transitional year, all businesses’ basis periods will be aligned to the tax year and all outstanding overlap relief can be used against profits for that tax year.

Affected businesses in 2023-24 will be assessed on the tax for profits for the:

12 month accounting period they have previously been using; and
for the rest of the 2023-24 tax year.

Any excess profit covering more than 12 months, is known as ‘transition profit’. This can be reduced by overlap relief and the remaining profit will be spread over the next 5 tax years until 2027-28.

The changes do not affect sole traders and partnerships who draw up annual accounts to a date between 31 March and 5 April. These businesses will continue to file as usual for the 2023-24 accounting year.

Source: HM Revenue & Customs Tue, 03 Oct 2023 00:00:00 +0100

Transferring IHT unused nil rate band

Posted on October 5, 2023 by

The Inheritance Tax residence nil rate band (RNRB) is a transferable allowance for married couples and civil partners (per person) when their main residence is passed down to a direct descendent, such as children or grandchildren, after their death.

The allowance increased to the present maximum level of £175,000 from 6 April 2020. Any unused portion of the RNRB can be transferred to a surviving spouse or partner. The RNRB is in addition to the existing £325,000 Inheritance Tax nil-rate band.

Taken together with the current Inheritance Tax limit of £325,000, this means that married couples and civil partners can pass on property worth up to £1 million free of Inheritance Tax to their direct descendants.

The transfer does not happen automatically and must be claimed from HMRC when the second spouse or civil partner dies. This is usually done by the executor making a claim to transfer the unused RNRB from the estate of the spouse or civil partner that died first. This transfer can also happen even if the first spouse or civil partner died before the RNRB was introduced on 6 April 2017.

There is a tapering of the RNRB for estates worth more than £2 million even where the family home is left to direct descendants. The additional threshold will be reduced by £1 for every £2 that the estate is worth more than the £2 million taper threshold. This can result in the full amount of the RNRB being tapered away.

The RNRB maximum rate of £175,000 and the taper threshold are currently frozen until at least April 2028.

Source: HM Revenue & Customs Tue, 03 Oct 2023 00:00:00 +0100

CIS contractors monthly tax chores

Posted on October 5, 2023 by

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme.

Under the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Monthly returns must be submitted online. The monthly return relates to each tax month (i.e., running from the 6th of one month to the 5th of the next). The deadline for submission is 14 days after the end of the tax month. Even if no subcontractors have been paid during a month, contractors still have to make a nil return. All contractors are obliged to file monthly returns even if they are entitled to pay their PAYE quarterly. The returns can be filed using the HMRC CIS online service or approved commercial CIS software. There are penalties for late returns.

Contractors who have not paid subcontractors in a particular month are required to submit a 'CIS nil return' or notify HMRC that no return is due. If this is likely to be a longer term ‘nil return’, the contractor can contact HMRC to make an inactivity request stating they have temporarily stopped using subcontractors. This request lasts for 6 months. You must notify HMRC if you start using subcontractors again during this period.

Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction during a year in the 12 months since they made their first payment.

Source: HM Revenue & Customs Tue, 03 Oct 2023 00:00:00 +0100

When you can and cannot use the Rent-a-Room Scheme

Posted on October 5, 2023 by

The rent-a-room scheme is a set of special rules designed to help homeowners who rent-a-room in their home. If you are using this scheme, you should ensure that rents received from lodgers during the current tax year do not exceed £7,500. The tax exemption is automatic if you earn less than £7,500 ;there are no specific tax reporting requirements. If required, homeowners can opt out of the scheme and record property income and expenses as usual.

You can use the scheme if:

you let a furnished room to a lodger; or
your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning.

You cannot use the scheme if the accommodation is:

not part of your main home when you let it;
not furnished;
used as an office or for any business — you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities; or
in your UK home and is let while you live abroad.

The relief also simplifies the tax and administrative burden for those with rent-a-room income up to £7,500. The limit is reduced by half if the income from letting accommodation in the same property is shared by a joint owner of the property.

The rent-a-room limit includes any amounts received for meals, goods and services provided, such as cleaning or laundry. If gross receipts are more than the limit taxpayers can choose between paying tax on the actual profit (gross rents minus actual expenses and capital allowances) or the gross receipts (and any balancing charges) minus the allowance – with no deduction for expenses or capital allowances.

Source: HM Revenue & Customs Tue, 03 Oct 2023 00:00:00 +0100

Month: October 2023

Check if you need to pay someone through PAYE

Have you downloaded your HMRC app?

Cost of Living payments 2023-24 support

Bank deposits covered by FSCS

Reforms to powers of attorney

Income Tax in Scotland if you have more than one home

Reporting self-employed profits 2023-24

Transferring IHT unused nil rate band

CIS contractors monthly tax chores

When you can and cannot use the Rent-a-Room Scheme

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