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Month: May 2024

Landlord update on Renters Reform Bill

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The Renters Reform Bill has finally completed its passage through the House of Commons with important concessions made in favour of landlords. Landlords with leasehold property may also benefit from an annual cap of £250 on ground rents.

Concessions: what’s next?

The Bill has taken nearly a year to clear its first hurdle. Next, it must now proceed through the House of Lords. There is a good chance it will become law, although any subsequent changes are likely to benefit tenants rather than landlords if Labour wins the next election.

The main concessions from the original Bill are:

  • The abolition of Section 21 notices will be delayed for existing tenancies (those which commenced before the Bill comes into force) until the county court system for possession orders is deemed to be functioning properly. Such reforms might take years to complete. A section 21 notice can currently be used by landlords to take possession of a property without providing a reason.
  • Despite fixed term tenancies being abolished, a tenant will now not be able to end a tenancy during the first six months. This is effectively the same as the existing system.
  • The introduction of a tenant’s right to keep a pet will also be linked to improvements in the county court system. In future, a landlord will have to accept a request to keep a pet unless there is a reasonable reason for not doing so. Landlords will, however, be able to require pet insurance.

Leasehold property

While plans to abolish leasehold properties has been scaled back, it looks like a compromise will see ground rents capped at £250 annually for the next 20 years. However, this decision has not yet been formally announced. This will be good news for any landlords who own leasehold flats or apartments which have an escalating ground rent.

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Have you overlooked a changed tax status?

Written by admin on . Posted in Employment Tax, Income Tax, self-assessment, Tax. No Comments on Have you overlooked a changed tax status?

With allowances frozen or cut, you may have underpaid tax for 2023/24.

Your tax position may have changed for the last year without you really noticing. Consider the following:

Tax Year 2021/22 2023/24 2024/25
Personal allowance £12,570 £12,570 £12,570
Dividend allowance £2,000 £1,000 £500
Personal savings allowance £1,000 max* £1,000 max* £1,000 max*
Bank of England base rate Close to 0% Average 4.5% 5.25% May 2024
New State pension £9,339 £10,600 £11,502

*£1,000 for basic and nil rate taxpayers, £500 for higher rate taxpayers, and nil for additional rate taxpayers.

Rising income – for example in the form of pensions, dividends or interest – and frozen or reduced allowances are a recipe for creating more taxpayers and higher tax bills. This is becoming increasingly clear as some people are discovering that they became taxpayers in 2023/24 despite their only income being a State pension (new or old, supplemented by the additional State pension). For those affected, HMRC will issue a simple assessment tax bill as the Department of Work & Pensions provides details of payments made.

If you do not already complete a self assessment tax return, it is your duty to inform HMRC of your income if a new tax liability arises because:

  • Your interest has exceeded your personal savings allowance, and/or:
  • Dividends breached the dividend allowance.

You can inform HMRC of a change of circumstances through your online personal tax account, if you have one, or by trying to call them (good luck with that!). In most circumstances, you will not have to complete a full self assessment return: you can check whether you have to file at the government website. If you do not tell HMRC about your interest receipts, be aware that building societies and banks (including those located offshore) automatically report information to HMRC.

A similar situation applies to greater payments for capital gains tax where the annual exempt amount has fallen from £12,300 in 2021/12 to £6,000 in 2023/24, and just £3,000 in the current tax year.

Careful planning may help you to sidestep HMRC’s growing slice of your income and gains, but, as ever, expert advice is needed to avoid the traps.

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Daily penalties come in for late self assessment returns

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Around 1.1 million taxpayers who failed to submit the self assessment tax return for 2022/23 on 31 January 2024 now face a £10 daily penalty charge by HMRC.

HMRC has imposed a daily penalty of £10, effective from 1 May 2024, on late submissions. The penalty can run for 90 days, reaching a potential fine of £900 and is charged even if nothing is owed to HMRC, or a tax refund is due. Separate penalties, along with interest at the high rate of 7.75%, are charged for paying tax liabilities late.

What to do?

  • Submit an online tax return as soon as possible. This will not avoid penalties up to the date of submission but will prevent further fines accumulating.
  • If there is information missing for 2022/23, submit a provisional return with estimated figures. The return should note which figures are provisional, why accurate figures are not available, and when accurate figures will be provided.
  • HMRC will cancel penalties already charged if they have asked for a 2022/23 tax return in error. For example, if you have ceased self-employment or no longer rent out property.

HMRC can cancel a tax return within two years of the submission deadline, which means there is time to have a return for 2022/23 cancelled by 5 April 2025.

Reasonable excuse

You can appeal against the daily penalty if you can demonstrate a reasonable excuse, such as prolonged ill-health or bereavement. However, work pressure, lack of information or missing reminders from HMRC are unlikely to be accepted.

The challenge with appealing against the daily penalty is providing HMRC with a credible excuse running from the original filing date (31 January) through to the issue of penalties (from 1 May).

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Employment Tax: Deductibility of training costs

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HMRC has recently published guidance to provide greater clarity about the tax deductibility of training costs for the self-employed. Apart from updating current skills, costs are also deductible if they provide new skills or knowledge to support the business.

What costs count?

Training costs must relate to the existing business, including:

  • Keeping pace with technological advances and changes in industry practice; and
  • Training which is ancillary to a person’s main trade, such as digital skills or bookkeeping.

HMRC has provided various examples, such as a potter who takes courses on e-commerce and website development with the aim of making online sales. Although the courses have nothing to do with pottery, the costs should be deductible as they are helping a move into online selling.

Similarly deductible would be the costs for a writer who takes a course on drawing illustrations with the aim of illustrating his or her own books. Again, the new skills will be used to improve an existing business.

Despite the changes, the training costs deductibility rules for the self-employed are still stricter than they are for employers.

What costs don’t count?

There is no deduction for training costs that allow a person to start a new business or to expand into a new, unrelated, area of business. For example:

  • A make-up artist takes tattooing courses with the aim of opening their own tattoo studio. The training costs are unrelated to the make-up business, so they are not deductible.
  • An unemployed person completes a course to become an approved driving instructor. There is no deduction for the training costs as new skills are being acquired that will help the person start a business which does not already exist.

The changes date back to a 2018 consultation, so don’t expect further relaxation of the rules anytime soon.

The full list of examples provided by HMRC can be found on the government website.

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Employment Law: Request flexible working rights from day one

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From 6 April, employees now have the right to request flexible working from their first day at work. However, the right is still only to make a request and employers are under no obligation to approve it.

Flexible working is not just limited to working from home. For example, an older employee may request to gradually reduce their hours as they approach retirement, or those with child or elder care responsibilities may request to vary their hours.

What the changes mean:

The changes that have come in from 6 April 2024 include:

  • Day one request: flexible working can be requested from the first day in a new job (previously 26 weeks employment was required);
  • Two requests: flexible working requests can be made twice within a 12-month period (previously it was one request a year);
  • Two-month decision: employers must decide whether or not to approve a request within two months of receiving a request (previously three months); and
  • No employee statement: employees are no longer required to state the impact of their flexible working request upon the business (previously this was a difficult requirement for new employees).

Unless the employer agrees with the request for flexible working, they must consult with the employee before making a decision. The meeting can be used to explore alternatives or variations to the original request, and maybe consider whether there should be an initial trial period to see how the new arrangements pan out.

Rejecting a request

No changes have been made to the reasons that employers can give to turn down a flexible working request, although a valid business reason is required. Some of those reasons could be, for example:

  • unacceptable additional costs due to a request;
  • it’s not possible to re-organise work among other employees;
  • detrimental impact on performance while working from home; or
  • insufficient work to accommodate a change in an employee’s working pattern.

The latest Acas code of practice on requests for flexible working can be found on their website: https://www.acas.org.uk/acas-code-of-practice-on-flexible-working-requests/html

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The end of multiple dwellings relief

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From 1 June 2024, the abolition of multiple dwellings relief under stamp duty land tax (SDLT) will stop disputes about what qualifies as a separate dwelling (e.g. a granny annex). However, the scrapped tax will impact English and Northern Irish buyers who purchase two or more properties in a single, or linked, transaction.

At the moment, multiple dwellings relief reduces the overall SDLT rate when buying two or more properties in a single, or linked, transaction. The buyer pays SDLT based on the average price of each dwelling and benefits from two or more lower SDLT bands.

Relief abolished

The government has abolished the relief due to questionable claims, particularly relating to granny annexes. Unfortunately, genuine claims will now lose their relief, for example, buyers of a country home with a cottage in the grounds, or a town house with a self-contained basement flat. From 1 June, the amount of SDLT payable on a property costing £750,000 containing a qualifying annexe will double from £12,500 to £25,000.

Many buyers have been contacted by companies offering to help them claim back SDLT for a commission, but these refunds are often based on questionable entitlement to multiple dwellings relief.

While the removal of multiple dwellings relief will not affect the majority of properties, you should be aware that:

  • Relief is still available for a contract that was entered into on or before 6 March 2024, regardless of when completion takes place.
  • Otherwise, relief will only be available if a purchase is completed (or substantially performed) before 1 June 2024.

Six or more properties

Where six or more properties are purchased in the same transaction, non-residential SDLT rates can be applied. This means a maximum rate of 5% compared to a top residential rate of 12%; or 15% for a buy-to-let purchase. In the absence of multiple dwellings relief in future, buyers using this option will have to take care to structure such transactions to ensure all properties come under a single contract.

You can find out more about HMRC’s guide to SDLT on the government website.

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