June 2024 - J&P Accountants

There's a continuous stream of fresh accounting insights, ranging from updated regulations and new laws to latest guidelines and financial updates. Stay informed with our regularly updated, information-rich articles, ensuring you always stay ahead of the curve.
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Understanding Taxable Income in the UK

11 June 2024
The Chancellor recently hinted at the possibility of further National Insurance cuts, as preparations for the general election continue.


This crucial information will impact everyone working and living in the UK, with expectations of reducing the tax burden.


The UK Parliament stated that further cuts to National Insurance would save taxpayers hundreds of pounds.

Wages and Salaries

In the UK, wages and salaries paid by employers are subject to income tax.


This includes basic pay, bonuses, allowances, and more.


Employers typically deduct tax through the PAYE (Pay As You Earn) system.


If you have additional income or complex circumstances, you may need to file a self-assessment tax return.

Self-Employment Income

All income earned by self-employed individuals is taxable, including income from clients or customers.


As a self-employed person, you need to submit a self-assessment tax return and pay income tax and National Insurance contributions.


Some expenses can be exempt from tax, so ask our team for a detailed assessment.


This ensures you comply with all tax regulations and avoid future penalties and interest.

Rental Income

If you rent out property, rental income is taxable.


After deducting allowable expenses, you need to report your net income.


If your total income exceeds a certain threshold, you will need to register for self-assessment.


With proper tax planning, you can legally reduce your taxable rental income.

Investment Income

Investment income includes dividends, interest, and capital gains.


Dividends and interest income are taxable if they exceed certain limits, while capital gains tax applies when you sell assets (such as stocks or property).


If your gains exceed the annual exemption, you will need to pay capital gains tax.


Investors should regularly review their portfolios to maximise after-tax returns.

Pension Income

Income from private pensions, workplace pensions, and the State Pension is usually taxable.


When you receive your pension, you may need to pay tax based on your personal income tax rate.


Retirees should understand the tax implications of different pension sources to ensure financial stability in retirement.

Other Income

Other types of income, such as gambling winnings, inheritance, and overseas income, may also need to be reported depending on specific circumstances.


Overseas landlords must be aware of their obligation to pay tax on rental income in the UK.


Non-residents must report their overseas income to HMRC and pay tax accordingly.


For detailed advice, please consult our team.

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Weekly News – J&P Accountants

6 June 2024
Child Benefit Payment Delays

Cost of Living Support

HMRC Reminds Landlords of Tax Changes

Reform UK Proposes “Employer Immigration Tax”

Child Benefit Payment Delays

This week, due to HMRC technical issues, nearly half a million people were unable to receive their Child Benefit payments.


HMRC has advised affected customers not to contact them and will provide updates online.


The relevant department has stated that the specific time of payment remains uncertain.


Currently, it is advised that users wait patiently and check their account balances frequently.

Cost of Living Support

This summer, several family support funds are being expanded, amounting to over £2,000.


Families in certain areas can receive up to £500 for daily expenses.


Leeds will provide £100, Stockport has £315 available, South Ribble offers £350, and Lancashire will provide £250.


East Riding £200, Shropshire £400, and Waverley has £550 available.

HMRC Reminds Landlords of Tax Changes

If you rent out your property on Airbnb or other rental platforms, please note the changes in UK tax policies.


The UK will abolish tax relief for furnished holiday lettings.


This means that affected landlords will need to pay more income tax and consider the cost implications.


HMRC urges all landlords to closely monitor rental property tax policies and ensure tax compliance.

Reform UK Proposes “Employer Immigration Tax”

Recently, the UK Reform Party proposed the introduction of an “Employer Immigration Tax” to encourage UK businesses to reduce their reliance on “cheap labour”.


The plan requires most employers to pay an additional 20% National Insurance when hiring overseas labour.


Healthcare workers, caregivers, and employers with fewer than five employees will be exempt.


The proposal has sparked significant public debate, although it has not yet been adopted or scheduled for consideration.

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Tax Investigation Triggers

4 June 2024
The UK general election is scheduled for 4th July, and post-election, various political parties are expected to intensify tax investigations.


Both the Labour Party and the Tory Party have proposed plans to increase tax investigations.


Additionally, there will be increased funding for HMRC to recruit tax investigators and expand the scope of investigations.

Which Businesses or Individuals Are Likely to Be Investigated?

Self-Employed

Currently, a significant proportion of tax investigations in the UK target the self-employed.


Unlike other businesses, the self-employed must report their annual financial status through self-assessment tax returns.


Typically, they do not have a dedicated accounting team, meaning discrepancies may arise between their tax returns and HMRC’s records.


Furthermore, late payments or random checks can increase the likelihood of the self-employed being investigated.

High Cash Flow Businesses

High cash flow businesses, such as restaurants, pubs, and retail stores, frequently handle large amounts of cash transactions.


Cash transactions are often difficult to track and record, which can lead to underreporting income.


HMRC has historically preferred to initiate random tax investigations in high cash flow industries.


If you operate one of these types of businesses, ensure that you retain all financial records for at least six years.

Multinational Companies

Multinational companies, often with operations in other countries, have become a primary focus for HMRC in recent years.


HMRC currently has a substantial team dedicated to international tax issues for multinational corporations, despite longer investigation periods.


Due to their presence in multiple jurisdictions, these companies can allocate financial expenditures across different countries, reducing taxable income in the UK.


As a result, multinational companies are more likely to trigger UK tax investigations.

Businesses with Frequent Changes in Registration Information

Businesses that frequently change financial personnel or registration information may be seen as attempting to evade tax responsibilities.


Such changes can lead to instability in financial records and reporting, thereby increasing the risk of being investigated.


HMRC might view these changes as efforts to conceal financial and tax issues, prompting a tax investigation.

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