Cryptocurrencies changes

In the future, cryptocurrency platforms will have to provide customer data to HMRC. Investors in cryptocurrencies will find it significantly harder to avoid paying capital gains tax on cryptocurrency profits, as global tax authorities will be exchanging data. This means that cryptocurrency platforms and cryptocurrency service providers, known as RCASPs, will have to provide tax authorities with data about investors. Subsequently, this data will be used to identify cases of non-compliance. In the case of reporting procedures, RCASPs will need to obtain self-certification from individual cryptocurrency users, which requires detailed information about the user, including, but not limited to, their legal name and jurisdiction. If the self-certification fails, for example due to inconsistencies with other information that the RCASP holds about the user, RCASPs must obtain a valid self-certification or justification and documentation before providing services facilitating transactions for the cryptocurrency user.The government proposes a CARF reporting deadline of May 31 for the previous calendar year to align with CRS. The rules will come into effect no earlier than 2026 for data exchange in 2027. The government proposes a penalty system for non-compliance of up to £5,000 and subsequent daily fines of £600 for persistent breaches of regulations.

TAX YEAR 2024/25

In this article, we present the most significant tax changes for the year 2024/25:

• From April 6, 2024, the main rate for National Insurance Class 4 contributions for self-employed individuals will be reduced from 9% to 6%. Combined with the abolition of Class 2 contributions, this means an average saving of £650 per year for a self-employed individual earning around £28,000 annually.
• The Chancellor will also reduce the employee’s National Insurance contribution by 2%, from 10% to 8%, starting from the new tax year 24/25.
• In a move to support the housing market, the government has lowered the Capital Gains Tax on the sale of second homes and additional residential properties from 28% to 24%. The lower rate will remain at 18% for gains falling within the basic rate band for individuals.
• From April 1, 2024, the current VAT threshold has been raised from £85,000 to £90,000 (calculated over the last 12 months).
• Additionally, the Chancellor will increase the threshold for the child benefit charge for high-income individuals from £50,000 to £60,000.
• From April 6, 2025, there will be a new tax system for NOM-DON individuals based on residency, where individuals will not pay tax in the UK on any foreign income and gains arising in their first four years of tax residence, provided they have not been taxpayers for the last 10 years.

VAT Registration

HMRC is ending the use of paper forms to register for VAT from November’23.

In future, all VAT registrations will have to be submitted online unless the taxpayer has a particular exemption. Anyone who requires a paper form will have to contact HMRC by phone to request a form which will then be posted to them for completion. Paper applications take up to 40 days to process. From mid-November, taxpayers will have to register for VAT through the online VAT Registration Service using their Government Gateway account.

However, some types of business will not be able to use the online service:

• businesses applying for a ‘registration exception’;

• businesses joining the agricultural flat rate scheme;
• overseas partnerships; and
• entities (other than UK partnerships or non-established taxable persons) without a unique tax reference (UTR) number.

In this case taxpayers will have to ask for a VAT1 form by calling the VAT Helpline on 0300 200 3700 and they will have to justify why they are unable to register online.

VAT payments

HMRC has confirmed that businesses can now set up a payment plan online if they owe less than £20,000 in unpaid VATAs of 31 May 2023, VAT-registered businesses that owe less than £20,000 of VAT can set up a payment plan online as long as they agree to pay off the VAT within six months. These payment plans are usually described as time to pay agreements by HMRC.The measure is part of HMRC’s wider programme to digitise tax reporting and payments, reducing the pressure of HMRC advisers.‘Providing customers the ability to set up online payment arrangements will reduce the contact needed with HMRC, saving on both time and resource for Debt Management Operations,’ HMRC said.The service is not available to businesses that use the VAT cash accounting or annual accounting schemes or those that make VAT payments on account.Eligible VAT-registered business can set up a VAT payment plan online via the Government Gateway if:filed their latest VAT return;owe £20,000 or less;their bill is due within 28 days of the payment deadline;do not have any other payment plans or debts with HMRC; andplan to pay off the debt within six months.The service will be available for sole traders, directors, landlords, partnerships, IR35 personal service companies, farmers and haulage companies, as well as international companies.

Dividends update

DIVIDENDS – changes from 2025From April 2025, there will be new rules on dividend disclosure. Anyone involved with an owner managed business will need to use their self assessment tax return to split out the amount of dividend income received from their own companies from other dividend income, and the percentage share they hold in their own companies.HMRC will request specific information on the SA102 form related to the value of dividends and percentage shareholding in a close company of which the individual is a director.There will be a penalty of £60 for failure to comply with the legislation.

BTL Loan interest

The tax burden on buy to let landlords has increased significantly from removal of interest relief to higher capital gains tax. Higher rate tax relief for buy to let loan interest has been gradually removed over a transitional period.Tax year P&L deduction of interest:

2016–17: 100%

2017–18: 75%

2018–19: 50%

2019–20: 25%

2020–21: 0%

Landlords now only receive a basic rate tax credit to reduce their income tax bill, relating to the buy to let loan interest that they have paid within a particular fiscal year.

Example: Bob lets out a fully furnished home. The rent is £1,500 a month. The tenants meet the cost of utility bills and council tax. Bob plans to replace the sofa, an armchair, curtains, a freezer and a washing machine in the near future. He anticipates that the replacements will cost £2,900.He will be able to claim a deduction of £2,900 for the actual cost of the above replacements under this relief.

Tax relief is given on the cost of the replacement item, plus the cost of disposing of the old item, less any sum received when the old item is sold. The replacement asset must be substantially the same as the item it is replacing.It must be capital expenditure incurred wholly and exclusively for the purposes of the property business.If the new item is an improvement, example:The landlord replaces a sofa with a sofabed. He can only claim a deduction for the cost of buying an item the same as the original, ie, a replacement new sofa costs £500 but a sofabed costs £650. He can only claim relief for £500.

A new item will be termed as an improvement when it is not the same as the old item, or its functionality has changed, or you upgrade the quality of the item.However, if the replacement is a reasonable modern equivalent, then the full cost of the replacement will be allowable.

BTL Property

Three-quarters of landlords who intend to purchase a new rental property in the next year will use a limited company structure to reduce tax bill. The sharp rise in the switch to buying through a company rather than as a standalone land-lord has been driven by changes to the tax system and the rising costs of running a rental portfolio, which has been exacerbated by soaring interest rates.Buying via a limited company structure offers a number of tax benefits. The main advantage is that limited companies can deduct mortgage interest from company income and pay tax at corporation tax rates, rather than an individual landlord’s personal income tax rate. De-pending on profits corporation tax rate is 19% for those with profits under £50,000, rising to a standard rate of 25%.Limited company ownership can also offer more favourable mortgage financing options. Most lenders set interest coverage ratios at 145% for higher rate taxpayers, whereas limited company applications require a ratio of 125%. Additionally, limited company landlords can typically secure higher loan amounts, further driving the adoption of this approach.

HMRC expects the scheme to be up and running by the end of April.

HMRC expects the scheme to be up and running by the end of April.

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. We expect the scheme to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).

Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.

To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.

Claims can be backdated until the 1 March if applicable.

Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

More details:

https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme?utm_source=e5c5e96a-22e4-4437-b9be-5e771d15378e&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme?utm_source=7835fc20-12dd-44de-ba10-c24b96232b47&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

IR35 – what is it?