Skip to main content

Month: April 2025

Making Tax Digital expands

Written by admin on . Posted in Making Tax Digital, self-assessment, Self-Employed. No Comments on Making Tax Digital expands

Self-employed people and landlords with an income between £20,000 and £30,000 will be required to use Making Tax Digital (MTD) from 6 April 2028. This will bring a further 900,000 low-income taxpayers under the MTD regime.

HMRC previously stated that those with an income between £20,000 and £30,000 would be mandated before the end of this parliament. The specific start date of April 2028 is therefore earlier than expected.

Timing

Taxpayers with an income of more than £50,000 will be mandated from 6 April 2026 for the 2026/27 tax year. The deadline for finalising MTD obligations for this year is not until 31 January 2028, which doesn’t give HMRC much time to sort out any problems before the new cohort of taxpayers join the system in April 2028. At present:

  • Unrepresented taxpayers with an income between £20,000 and £30,000 are going to need software that is either free or low-cost.
  • The availability of such software is quite limited, although more options might become available by April 2028.

The relevant income for meeting the £20,000 threshold will be that for the 2026/27 tax year.

In the future, the MTD threshold might be lowered again as the government has stated there are plans to expand the regime to include those with an income below £20,000.

Self assessment

HMRC has also announced that the year-end self assessment tax return must be submitted using MTD or other suitable software. It was previously thought that taxpayers would be able to use HMRC’s online service, but this is not going to be the case.

When selecting suitable MTD software, it is important to make sure it can also deal with the tax return submission. If the MTD software cannot do this, a different software package will be required to complete the year-end requirement.

HMRC’s list of software that’s compatible with MTD for income tax can be found here.

Photo by marianne bos on Unsplash

Sick Pay and Small Employers’ Relief

Written by admin on . Posted in Employment Tax, Sick Pay. No Comments on Sick Pay and Small Employers’ Relief

Statutory payments can be problematic to administer for smaller employers, but in a rare instance of generosity HMRC compensates for this. Also, from 6 April 2025, the rate of compensation will almost triple from the current 3% to 8.5%.

Employers can usually reclaim 92% of statutory payments for maternity, paternity, adoption, shared parental and parental bereavement (statutory sick pay is no longer recoverable). However, smaller employers can recover 100% of the cost as well as the compensation. So, the total rate of recovery will be 108.5% from 6 April 2025.

Statutory neonatal care pay is being introduced from 6 April 2025, which will be recoverable on the same basis. It will be paid to a parent when their newborn is sick in hospital.

Smaller employers

You are a smaller employer if your total class 1 NIC payments were £45,000 or less for the tax year before the employee’s qualifying week:

  • Both employee and employer contributions are included, but not class 1A or 1B NICs.
  • The employment allowance reduction is ignored.
  • The qualifying week will vary depending on the type of leave. For example, for maternity pay, the qualifying week is the fifteenth week before the baby’s due date.

 The main rate of employee class 1 NIC is lower for 2024/25 than it was for 2023/24, so an employer who was previously just outside of the £45,000 threshold might qualify from 6 April 2025.

An employer can apply to HMRC to be paid in advance if they cannot afford to make statutory payments.

Recovery

Relief, whether at the normal rate or at the smaller employer rate, is claimed on a monthly basis through payroll software using the employer payment summary. Payroll software should do everything automatically, although you may need to select that you are a small employer.

HMRC’s guide to getting financial help with statutory pay can be found here.

Social media suggestion:

Statutory payment relief is increasing from April 2025. Read the finer details for small business owners here #smallbusiness #statutoryrelief #HMRC

Photo by Towfiqu barbhuiya on Unsplash

Side hustles and tax obligations

Written by admin on . Posted in HMRC Investigations, self-assessment. No Comments on Side hustles and tax obligations

HMRC has recently launched their Help for Hustles campaign to help people earning extra income to understand their tax obligations.

Online platforms, such as eBay, are now required to report users’ income to HMRC. Anyone who is selling goods or services online therefore needs to be aware of their tax reporting requirements. Many regular activities that might have been considered a lucrative hobby now fall into the ‘trading’ category:

  • Buying or making things to sell: Activities such as selling things that you have made, upcycling furniture to sell, or buying items with the aim of reselling them at a profit. All count as trading.
  • Side gigs: Even if carried out in your spare time, a side gig such as tutoring or gardening counts as trading. Using an App to pick up work will almost certainly mean trading.
  • Multiple jobs: Working many different side hustles, without having a main source of income, means you are trading.
  • Content creators and influencers: It is likely to be trading if you are paid to make sponsored social media posts for a brand or are earning income from advertisements on your online videos or blog.
  • Property income: This might be from renting out a spare room in your home, a holiday letting, or renting out property using an App such as Airbnb.

You will not normally be treated as trading if you are just selling off some unwanted personal possessions online after clearing out your loft or garage.

Exemptions

If you are trading, no tax will be due if your income is £1,000 or less for the tax year:

  • If income exceeds £1,000, you will need to inform HMRC and complete a self-assessment tax return.
  • Although everyone with income of less than £100,000 is entitled to a personal allowance of £12,570, this allowance is particularly relevant for those with multiple jobs, but no main source of income.

Those renting out a spare room can benefit from a tax-break of up to £7,500 a year. Other property income doesn’t need to be reported to HMRC if less than £1,000 for the tax year.

Details of HMRC’s side hustles campaign can be found here.

Photo by Justin Veenema on Unsplash

Making Tax Digital Expands

Written by admin on . Posted in Landlord, Making Tax Digital, MTD, self-assessment. No Comments on Making Tax Digital Expands

Self-employed people and landlords with an income between £20,000 and £30,000 will be required to use Making Tax Digital (MTD) from 6 April 2028. This will bring a further 900,000 low-income taxpayers under the MTD regime.

HMRC previously stated that those with an income between £20,000 and £30,000 would be mandated before the end of this parliament. The specific start date of April 2028 is therefore earlier than expected.

Timing

Taxpayers with an income of more than £50,000 will be mandated from 6 April 2026 for the 2026/27 tax year. The deadline for finalising MTD obligations for this year is not until 31 January 2028, which doesn’t give HMRC much time to sort out any problems before the new cohort of taxpayers join the system in April 2028. At present:

  • Unrepresented taxpayers with an income between £20,000 and £30,000 are going to need software that is either free or low-cost.
  • The availability of such software is quite limited, although more options might become available by April 2028.

The relevant income for meeting the £20,000 threshold will be that for the 2026/27 tax year.

In the future, the MTD threshold might be lowered again as the government has stated there are plans to expand the regime to include those with an income below £20,000.

Self assessment

HMRC has also announced that the year-end self assessment tax return must be submitted using MTD or other suitable software. It was previously thought that taxpayers would be able to use HMRC’s online service, but this is not going to be the case.

When selecting suitable MTD software, it is important to make sure it can also deal with the tax return submission. If the MTD software cannot do this, a different software package will be required to complete the year-end requirement.

HMRC’s list of software that’s compatible with MTD for income tax can be found here.

Photo by Mo on Unsplash

Spring Statement: The Magic of £9.9 billion

Written by admin on . Posted in Budget. No Comments on Spring Statement: The Magic of £9.9 billion

There were no tax increases in the Chancellor’s Spring Statement (upgraded from an initial Spring Forecast), but that might just be pain deferred.

Before becoming Chancellor, Rachel Reeves set out a new goal for the public finances, now badged the ‘Stability Rule’. In simple terms, this requires the Government should at least match its day-to-day expenditure with what it receives in tax and other revenue. In 2024/25, the Office for Budget Responsibility (OBR) projects there will be a shortfall under this rule (technically a current budget account deficit) of £60.7 billion. Following past government tradition of fiscal targets, the Chancellor has set a five-year goal taking us to 2029/30.

When Rachel Reeves presented her Budget last October, the OBR projected that she would meet her Stability Rule with £9.9 billion to spare. However five months later, the OBR recalculated the margin (often called headroom) in preparation for the Spring Statement and concluded that, with no changes, the Rule would be missed by £4.1 billion – a £14 billion reversal.

Given that the margin of £9.9 billion (about 0.7% of total government expenditure) proved inadequate last time, it is surprising that the new headroom figure is also £9.9 billion. This is despite the raft of Spring Statement measures – mostly spending cuts. The apparent circularity of the Spring Statement process has prompted speculation that the large cuts to welfare benefits were tailored to fit the Stability Rule, rather than wholly founded in encouraging more people into work.

The problem with maintaining a small £9.9 billion headroom is that when the OBR’s next assessment arrives in the autumn, there is a similar risk of missing the Stability Rule once again. The OBR’s judgement day will coincide with the Chancellor’s one ‘fiscal event’ of the year – the Autumn Budget. A second miss would probably see Reeves turn to tax increases rather than more spending cuts to recover the situation.

There were already signs of preparation for such a move in the Spring Statement. For example, hidden in the main document was a comment about reviewing the balance between cash and shares in Individual Savings Accounts (ISAs). Reducing the amount that could be placed in cash ISAs would yield extra revenue, because it would mean less tax relief being given.

It seems likely that, as happened in 2024, speculation about tax rises will get underway before summer begins. Taking time to focus on your financial planning over the next few months could be more important than ever. You have been warned.

Photo by Frames For Your Heart on Unsplash