Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
Marriage Allowance
The Marriage Allowance was introduced in the 2015/16 tax year enabling spouses and civil partners the option to transfer part of their unused income tax personal allowance to their spouse or civil partner.
This is different to the Married Couple’s Allowance which is a tax reducer compared to the Marriage Allowance being a transfer of a personal allowance. The married couple’s allowance is only applicable if one of the spouses/civil partners was born before 6th April 1935.
You cannot claim both.
The marriage allowance is often overlooked but could save a couple £252 in any tax year.
You could make a claim:
- During maternity leave
- Where one of you is working part-time or
- Where one of you is receiving a pension below the personal allowance.
10% of a spouse’s or civil partner’s personal allowance can be transferred.
The marriage allowance is set at £1,260 and will remain at this level until 6 April 2028 due to the freezing of the personal allowance.
The claim can be backdated for up to 4 tax years as long as the conditions were met during each of those years potentially resulting in a refund of £1,220.
The transferred allowance is given as a tax credit against tax being paid but the marriage allowance cannot be claimed if you are paying tax at more than the basic rate or in Scotland, the intermediate rate. So, the claimant’s income in Scotland will generally be under £43,662.
Once you are in receipt of the marriage allowance, and if you are in employment or receiving a pension, your tax code should change in line with this. The recipient’s code changes to ‘M’ and the partner who transferred part of the allowance will see their code change to ‘N’.
If you are only married for part of the tax year, the marriage allowance can still be claimed in full.
The same applies if you were to separate from your spouse or civil partner in a tax year provided it was claimed prior to separation.
There is no reduction in the marriage allowance in the year of death.
Jeremy Vine’s Tax Torment
TV host and BBC Radio 2 presenter Jeremy Vine is the latest high-profile media personality to be pursued by HMRC over a breach of IR35 rules.
HMRC is putting the personal services company of Jeremy Vine, Jelly Vine Productions Ltd, under the IR35 microscope, arguing that his services performed over 10 years ago for the BBC should be treated as an employee.
The contract period HMRC is challenging comprises 1 July 2013 to 30 December 2015 and concerns four BBC productions: the Jeremy Vine show, a weekday programme on Radio 2, election coverage, the quiz show Eggheads and Points of View.
Like all such cases, this is liable to rumble on for a few years.
HMRC VAT Registration Estimator tool
HMRC have launched a guidance tool designed for small businesses to assess what registering for VAT could mean.
On the HMRC website, you enter your details and find out whether your turnover could require you to register for VAT and the effect this could have on your profits.
The tool also links to further details about the VAT registration process and provides information for businesses operating below the threshold and considering voluntary registration.
The estimator will not record the details you input for HMRC to see.
Update VAT Registration Details Online Only.
All changes to VAT registration details will have to be made online from August.
HMRC will withdraw from VAT484, except for the digitally excluded.
From 5 August, all changes to clients’ VAT registration details including changes of address and business details must be completed online either by agents via the Agent Services Account (ASA) or, if you want to change your own details, you will have to do this via your own VAT online account. Changes to bank account details and client email addresses can only be submitted by businesses and client companies, not by agents.
The change means that HMRC will not accept any updates sent by letter or using the old form.
Automatic PAYE Refunds
HMRC has stopped posting automatic cheques for tax refunds.
This move is intended to drive online usage and reduce potential fraudulent behaviour.
Under the old system, all employees who received a tax calculation showing a PAYE overpayment, but did not claim the repayment online, would automatically receive a cheque in the post after 21 days.
You therefore need to make a claim to get your refund. You will need to take action to receive your repayment, even though you are entitled to the money due to overpayment of tax.
You can claim your repayments online.
You will need a P800 tax calculation letter to claim the refund as the reference number from the letter is required to submit a claim as well as a national insurance number.
It is also possible to claim a refund through your personal tax account, or the HMRC app.
HMRC Worker Wins Harassment Case
Ms H Toure worked at HMRC as a customer service consultant and administrative officer at HMRC’s Croydon office and had been on sick leave due to work-related stress after COVID-19, but had also experienced repeated instances of harassment during the course of her employment.
The case centred around whether HMRC harassed Toure while she was off sick when she had asked for communications only by email, and ongoing harassment from colleagues and managers, some of which indicated a challenging working environment.
Toure brought a claim to the employment tribunal based on various grounds ranging from harassment to discrimination over a two and a half year period working at HMRC.
The tribunal recognised that at all times Toure had a disability for the purpose of the Equality Act 2010.
Due to her allegations, Toure was transferred to the Canary Wharf office but she was asked to drop her discrimination claim if she wanted to make the move permanent, which she said ‘violated her dignity’.
The tribunal agreed because it gave her the stark choice of leaving her allegation of discrimination uninvestigated and unresolved if she wanted her transfer to be permanent.
The tribunal stated that HMRC’s ‘conduct, in repeatedly contacting the claimant during the early part of her sickness absence, was unwanted. The claimant had asked for correspondence to be kept to a minimum, and to be by email only. HMRC repeatedly telephoned her.
HMRC argued that the explanation for the calls was that they had a duty of care to the claimant and had to check on her welfare.
The tribunal ruled in favour of the complainant on three grounds, complaints of harassment related to race, harassment related to disability, and victimisation.
Chancellor’s National Wealth Fund
Chancellor Rachel Reeves and Business Secretary, Jonathan Reynolds have instructed officials to immediately begin work to create the new National Wealth Fund by bringing together the work of the UK Infrastructure Bank and the British Business Bank to unlock private sector investment to drive growth.
Under the plans, the National Wealth Fund will bring together key institutions and will target investors in a bid to ‘mobilise billions more in private investment and generate a return for taxpayers.
An additional £7.3bn of funding will also be allocated through the UK Infrastructure Ban.
The government will bring forward new legislation when parliamentary time allows to put the National Wealth Fund into statute, making it a permanent institution.
Reduce Capital Gains Tax Risk
The Labour government has not ruled out changes to CGT but with finances under pressure, this could be an area Chancellor Rachel Reeves decides to target.
Capital gains tax has effectively already gone up because of the reduced annual allowance and the freezing of rate bands. The tax-free threshold has been reduced to £3,000 from £12,300.
Planning ahead for capital disposals is therefore becoming more important. You might want to delay disposals until your other income reduces and accelerate disposals if your other income will rise in order to benefit from lower rates of tax.
The annual allowance is now only £3,000 but can you plan to use this each year over several years? By this means you may be able to make significant tax savings.
Offsetting losses made during the tax year can also help. If you make a loss but don’t have a gain to set it against, record it on your tax return and don’t forget to offset the loss carried forward against future gains.
Another option is stocks and shares ISAs as by moving investments into an ISA, CGT is completely avoided. This will save tax when cashing out as well as when buying and selling within your portfolio each year.
With an ISA you don’t have to worry about either dividend tax or CGT on these investments at any point.
Being married or in a civil partnership can also be an effective way to save on CGT. Assets can be transferred between you to make use of an additional annual allowance going forward.
Tax Rises to Come
Income tax, national insurance and VAT will not rise, but where can the new government raise more cash?
The manifesto announced tax plans to raise around £8.5bn in taxes mainly through increased tax compliance and closure of so-called non-dom loopholes but put this into context considering that HMRC collects almost £1 trillion each year.
The watch list includes:
Capital gains tax
Expect an increase to the headline rates of 20% (24% for residential property) perhaps aligning them with income tax rates, but which set of rates, the UK or Scotland?
Could there be new or enhanced reliefs to offset these rates for longer-term investments, such as when disposing of a business?
Pensions
They could introduce a flat rate of tax relief on pension contributions, thereby ending the advantage that higher and additional rate taxpayers enjoy.
Could measures be introduced to impose IHT on uncrystallised pension funds? Could uncrystallised pension funds of a certain size be liable to income tax and CGT on investment income and gains?
Both measures would discourage the warehousing of wealth in pension funds which currently enjoy a tax exemption on income and gains and are outside of one’s estate for IHT.
Non-doms
Much has been said about the desire to close so-called non-dom loopholes and Labour will continue with the Foreign Income & Gains (FIG) regime from 2025-26 but they are likely to go further.
Inheritance tax
The Office for Tax Simplification, now disbanded, has previously recommended the abolition of the capital gains uplift on death either in respect of assets which qualified for relief from IHT or more widely on all the assets of the estate.
ISAs
Could there be a reduction in the contribution limit for ISAs – currently £20,000?
Rachel Reeves 1st female Chancellor
She is the first woman chancellor since the role was first instated in the 16th century.
Rachel Reeves is MP for Leeds West and shadow Chancellor since 2021. She started her economic and political career studying politics and economics A-levels at sixth form college, then going on to study philosophy, politics, and economics (PPE) at the University of Oxford. She is now the 109th Chancellor in history and the first woman to hold the position.
Before being elected as an MP in 2010, the year of the coalition, Reeves worked at the Bank of England as an economist in the international economic analysis division in 2000, moving to the British Embassy in Washington DC from 2002-03. She worked for the second secretary economic division here until 2003.
She then went on to complete a master’s degree at the London School of Economics, finishing this in 2004. Prior to this, she returned to the Bank of England in the structural analysis economic division.
Before going into politics Reeves also worked for the Bank of Scotland as an economist.
Reeves first joined the shadow cabinet in 2010 and was appointed to shadow minister for work and pensions and then shadow chief secretary to the Treasury in 2011.
She is married to Nick Joicey, second permanent secretary at the Department for Environment, Food, and Rural Affairs (DEFRA).
Additionally, Ellie Reeves, sister of Rachel, is serving as the MP for Lewisham West and East Dulwich. She also joined the shadow cabinet, as deputy national campaign coordinator in 2023.
Labour Proposals for Employment Law
Published proposals include:
- Making flexible working the default from day one for all workers and only allowing it to be refused where it is not reasonably feasible.
- Ban ‘one-sided’ flexibility in zero-hours contracts and give the right to these workers to compensation for cancelled shifts as well as the right to a regular contract to reflect the hours they have worked.
- Replace the recently published Code of Practice on fire and re-hire practices (which is set to come into force from 18 July) with a tougher version.
- The right not to be unfairly dismissed, sick pay and parental leave will all be in place on the first day of employment.
- Removing the current distinction between employees and workers.
- Strengthen the existing protections for whistleblowers and workers subject to TUPE processes.
- Replace the rate of statutory sick pay with a ‘fair earnings replacement’,
- Remove the national minimum wage age bandings,
- Ban certain unpaid internships
- Create Fair Pay Agreements in adult social care to regulate pay across the sector.
- Give workers the power to decide how tips are allocated.
- Review the implementation of carer’s leave and examine the benefits of introducing paid carer’s leave.
- Introducing a new right to bereavement leave, which is currently only available to parents of children who have died under the age of 18.
- The right to switch off from work outside of working hours.
- Introducing a new single enforcement body responsible for ensuring employment rights are upheld
- Increase the time limit within which employees are able to make an employment claim from three months to six months.
Questions?
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.
