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Business Companion News – October 2024
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Welcome to our Business Companion Newsletter for October 2024.

Payroll Deadlines
Recently, a few clients have been sending in payroll changes very late in the month, in some cases on the last working day (when we should be submitting to HMRC). 

Please allow us at least three working days prior to the payroll date for all changes as explained in our Terms and Engagement Letters. If this is likely to be difficult in a particular month, please give us advance warning of likely changes so we can plan around them.  We reserve the right to charge extra for unexpected last minute changes.

As always, please email payroll@simpleaccounting.co.uk with your payroll details. 
 

October 2024

• How to Report Capital Gains Tax on UK Property

• Making Tax Digital: jointly owned property

• RTI Reporting Changes Delayed

• Furnished Holiday Lettings regime abolished
How to Report Capital Gains Tax on UK Property
If you have sold a UK property and need to report the Capital Gains Tax we can help you.

Deadline
If you sell a residential property in the UK you must report and pay any Capital Gains Tax due within 60 days of selling the property.  In order to do this you will need to set up a Capital Gains Tax on UK Property Account.  You only need to do this once, even if you sell several properties.  These are the steps.

1. Set up a Personal Tax Account
You will need a Personal Tax Account (not your Business Tax Account) – this is a User ID/ Government Gateway login (12 digits) and your password.  If you haven’t already got one, follow the link from here https://www.gov.uk/personal-tax-account – at bottom of page. It is useful to have a personal tax account set up anyway as you can check things like Self assessment tax due and your state pension.

2. Set up a Capital Gains Tax on UK Property Account
Follow this link and use your Personal Government Gateway Id and password to login:  https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020.  Once set up, the system will issue you with a Capital Gains Tax for UK Property Account Number.

3. Authorise us as your Agent to submit the Return
Once you have your Account Number, pass this on to us (as your accountant).  We will then generate an authorisation link which we email to you.  Simply click on the link and login to your Capital Gains Tax account and you can choose to accept our authorisation.

4. Digitally Excluded?
The procedure explained above is cumbersome and can seem daunting.  In the past HMRC have allowed property sellers who were ‘digitally excluded’ to complete a paper form.  You can access an online form here: https://www.tax.service.gov.uk/guidance/Send-your-Capital-Gains-Tax-on-UK-property-disposal-to-HMRC/start/introduction However we don’t recommend this, as in our experience HMRC have taken a long time (several months) to process the paper forms and payments have got separated causing chaos! Another option is to ring HMRC (tel: 0300 200 3300) who will set up a Capital Gains Tax Account for you and arrange to get us authorised to do the Capital Gains Tax return for you. 

5.  The information we need to complete the CGT Return
In order to file your CGT return for you we will need your Completion Statement from the sale of the property.  We will also need other information including the following. 
  • Did you buy or inherit the property? When was this?
  • What was the Value of property when you acquired it?
  • What were the Acquisition costs?
  • Were there any improvement costs? 
  • Have you ever lived in the property, rented it out? When was this?
If you want us to help with a CGT return please get in touch.
Making Tax Digital: jointly-owned property
RTI Reporting Changes Delayed
From April 2026, sole traders and landlords with qualifying income over £50,000 will have to comply with the Making Tax Digital (MTD) for Income Tax requirements.

Quarterly updates
Mandated taxpayers will need to use third party MTD-compliant software to keep digital records and file quarterly summaries of their income and expenses with HMRC. Where rented property is jointly-owned by two or more individuals, each owner will be required to maintain their own digital records and submit separate quarterly returns to HMRC.

To ease the administrative burden, HMRC has relaxed the quarterly reporting requirement for landlords of jointly-owned property. Those who choose to take this easement will be allowed to report their share of gross income only on the quarterly returns. They will still need to submit full details of their share of income and expenses on the annual return at the end of each year.

Landlords who own some property on their own and some jointly-owned property will still need to report expenses relating to the solely-owned property on their quarterly returns.

Qualifying income
“Qualifying income” is broadly defined as total gross income from trading and property, as reported on the most recent self assessment tax return. To decide which taxpayers will be mandated to join MTD for Income Tax in April 2026, HMRC will look at the 2024-25 tax return, i.e. the one for the current tax year.

For jointly-owned property, each individual’s share of the income from that property will count towards their qualifying income, not the total rental income for the property.

Generally “gross income” is taken to mean income before deductions. However some landlords benefit from an existing concession whereby if a property is jointly owned and the taxpayer receives notice of their share of property income with expenses deducted, they can report the net amount on the self assessment return.

HMRC has confirmed that qualifying income only looks at what is reported on the self assessment return, so those joint property owners who are able to benefit from this concession may have a lower qualifying income for MTD purposes.
If you or someone you know is a landlord with qualifying income of £50,000 or more, contact us without delay so we can help get the business MTD-ready.

 
Following opposition to an increasing number of requirements on employers, HMRC has delayed planned changes to Real-Time Information (RTI) reporting of employee hours worked.

Draft legislation was published in May aimed at improving the range of data collected by HMRC. The proposed changes will require businesses to provide more detailed information to HMRC via self assessment (SA) and PAYE RTI returns in three main areas:
•    start and end dates of self-employment;
•    dividend income received by shareholders in owner-managed businesses; and
•    employee hours worked.

Some employers currently populate the RTI return with a broad estimate of employee hours worked according to bands. Under the new rules, they will be required to report the actual number of hours worked by each employee where the employee is paid an hourly rate. Where the employee is paid based on a number of hours specified in the employment contract, the employer will need to report the contracted number of hours on the RTI return.

HMRC has announced that the requirement to report detailed employee hours through RTI will be pushed back until at least April 2026, so giving themselves time to react to the criticism they have received.

The additional SA reporting requirements are still expected to take effect from April 2025 for self-employed taxpayers and company owner-managers.

If you are self-employed you will need to provide the start and end dates of your self-employment on your SA returns from 6 April 2025.

If you carry on your personal business through a company and remunerate yourself by way of dividends, these will need to be declared on your SA return separately from other dividends received. The percentage share you hold in your own company must also be disclosed on your SA return.
Furnished Holiday Lettings regime abolished
HMRC has published draft legislation explaining how the abolition of the special tax rules for furnished holiday lettings (FHLs) will work.

From 6 April 2025 for sole traders and partnerships, or 1 April 2025 for companies, properties currently classed as FHLs will no longer benefit from tax reliefs not available to ordinary property letting businesses. Instead, income and gains from an FHL will be treated in line with all other property income and gains, meaning that:
•    finance cost relief will be restricted to basic rate for income tax;
•    profits from FHLs will not be included in relevant UK earnings when calculating maximum pension relief;
•    special reliefs from Capital Gains Tax including roll-over relief, business asset disposal relief (BADR) and gift relief will no longer be available; and
•    the capital allowances rules for new furniture and equipment expenditure will be removed and relief will be available instead for replacement of domestic items in certain circumstances.

Maximising Annual Investment Allowance (AIA)
Until 6th April 2025, owners of properties that qualify as FHLs might want to consider increasing their expenditure on equipment such as furniture and televisions. This is because the 100% AIA remains available until this date.  Investing in these items now can help maximise efficiency under the current rules. 
.
Under the existing regime, losses from FHLs can only be offset against future FHL profits. Transitional rules will allow these losses to be carried forward and offset against future profits from the taxpayer’s overall UK or overseas property business.

Joint owners of property will no longer be able to choose how to split the profits from an FHL business. Instead, they will be required to report the profits on a 50:50 basis in line with the rules applicable to property rental businesses. It may be possible to alter this split in certain circumstances, for example if you can prove that your beneficial ownership is unequal (the Form 17 procedure)

Selling Up
If this applies to you ask us about the many Budget measures related to property aim to encourage the sale of second properties.  The window before the abolition of FHL status allows owners to reflect and still take advantage of CGT breaks.

If the changes prompt cessation of the business, then ask us about getting Business Asset Disposal Relief (BADR) for you. For unincorporated businesses, cessation triggers BADR.  The business assets (properties) can then be sold and qualified as associated disposals within three years.

If you own an FHL, contact us to discuss what these changes will mean for you.calculated rules.
Need Help?
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Please contact us if we can help you with these or any other tax or accounts matters.

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About Us
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Xero.

‘All clients using these software packages can benefit from our support. Visit our website www.simpleaccounting.co.uk for a look at the resources on offer.’
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