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.

 

Kier Starmer’s 2024 Tax Return

Downing Street has published tax summaries for Keir Starmer, Rachel Reeves and Angela Rayner which details the salaries of each of the Labour Party members and any additional income.

Starmer’s income was £152,255, split between his regular MP employment income of £81,390, the additional salary for being leader of the opposition which equated to £49,193, and further benefits totalling £16,000.

On top of this the Prime Minister earned £498 from self-employment, as well as earning £5,174 in bank interest from his savings account. In total the Prime Minister paid £54,718 in income tax for the year end 5 April 2024.

Rishi Sunak, paid £508,308 in taxes on a total income of £2.2m.

Deputy Prime Minister Angela Rayner’s tax return summary paid £21,514 on her total income of £85,205. Her base salary for her position was £76,955 and she received an additional £8,250 in ‘other benefits’ received from third parties.

Reeves’s salary is the same as Rayners but earning £12,372 from self-employment and £2,367 from other benefits. The self-employment income came from book royalties and advance payments, and audiobook fees.

 

HMRC One Login

One Login is the Government’s digital identity system used for access to HMRC etc,

The Government Digital Service (GDS) was warned that the system had “serious data protection failings” and “significant shortcomings” that could increase the risk of data breaches and identity theft.

One Login is the government’s flagship system for securely accessing online public services and underpins the Gov.uk digital wallet and the digital driving licence launched by technology secretary Peter Kyle in January this year as part of his new government digital strategy.

Apparently, development work on One Login had been offshored to Romania, without appropriate approvals.

 

MTD Penalties Increase

It was announced in the Spring Statement that there was to be an increase in late payment penalties for VAT and income tax taxpayers as they join Making Tax Digital from this month onwards. The new rates have increased from 2% to 3% on outstanding tax owed after 15 days.

Additionally, a further 3% will be imposed where tax is overdue by 30 days, plus 10% per annum (charged on a daily basis) where tax is overdue by 31 days or more. The original rates for these late payment penalties were 2% and 4%.

The introduction of the new rates for penalties comes as HMRC expands the testing of Making Tax Digital for income tax (MTD IT) to include a larger population of taxpayers.

However, the Revenue will not inflict late-filing penalties for testers if they fail to file any of the quarterly updates on time before the first mandation date in April 2026.

Once a taxpayer is mandated to file under MTD IT, they will be within the new MTD IT penalty regime, which works in the same way as the MTD for VAT penalty system.

The points system allows for one penalty-free late submission in a 24-month period. Each quarterly return submitted after the deadline will incur one penalty point.

The quarterly filing deadlines are one month and two days after the end of each quarter.

If no further late submissions occur within 24 months, HMRC will automatically remove the penalty point.

If the taxpayer makes a second late submission of a quarterly return before the first point has been removed, they will reach the penalty point threshold of two points and a £200 penalty will be charged. They will then remain at the threshold and incur further £200 penalties for each annual return submitted late until they complete a period of compliance, which will result in the points being reset to zero.

To complete a period of compliance, the taxpayer must make all submissions on time. For annual submissions during the testing phase, the compliance period will be 24 months, so to reset the points to

It was also announced that late payment penalties under the new penalty regime for both MTD IT and MTD for VAT would be increasing.

The new penalties were increased from 1 April 2025.

 

Disqualified Covid Directors

Covid loan fraudsters are frequently being disqualified for abusing the support system set up during the pandemic, so much so that the list of disqualified directors grew to an all-time high. 736 of the 1,036 directors struck off have been linked to Covid loan fraud.

The average length of ban across the total number of disqualified directors was eight years, while the maximum length of time to be disqualified is 15 years, and many also receive orders to carry out unpaid work.

As well as securing Covid bounce back loans when they are not entitled to them, some of these directors have been banned for not paying the right amount of tax or VAT and also failing to file their accounts.

As a disqualified director they cannot have anything to do with setting up new company in the UK, or abroad if it has ties to the UK. They are not allowed to promote a company and also cannot be involved at all with the forming of one even if their name is not attached to it.

 

Marriage Allowance

This was introduced in the 2015-16 tax year, and has enabled spouses and civil partners the option to transfer part of their income tax personal allowance to their spouse or civil partner.

The married couple’s allowance is a tax reducer and allows couples to reduce their tax bill by between £427 and £1,108 but is only applicable if one of the spouses/civil partners were born before 6 April 1935.

You cannot claim both.

The marriage allowance can save a couple £252 in tax per annum.

It can be used anytime including if one is on maternity or is working part time and therefore not utilising all of their personal allowance.

The legislation permits up to 10% of a spouse’s or civil partner’s unused personal allowance to 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.

While 10% of a personal allowance does not give rise to a substantial amount of tax relief, this can be backdated for up to four tax years if the conditions are met during these years. This could be worth £1220.

You cannot transfer the allowance to anyone who is liable to tax at a rate other than the basic rate

If they are employed, then once one spouse or civil partner is in receipt of the marriage allowance, their PAYE tax code should change to ‘M’ and the partner who transferred part of the allowance will see their code change to ‘N’

The allowance can still be claimed in full in the year of marriage. It is also available in full in the year of separation.

There is also no reduction in the marriage allowance in the year of death.

 

When Does Trading Commence

When did it start?

This is an important question in the tax world. It affects when you become liable to pay tax, what allowances you can claim and when, as well as when your reporting requirements commence.

You would think it was quite obvious but there are numerous cases in the courts and before tax tribunals that have dealt with this potentially thorny subject. Most of the time, it is fairly obvious but not always.

It was established many years ago that activities in preparing to commence business was not commencing the business. So, buying raw materials, preparing premises etc are all pre-trading. Purchasing machinery and plant for carrying on the business or entered into agreements for the purchase of products is just getting ready.

But if you begin to take the raw materials and to turn out a product then you have commenced business. The case when this was decided was during the First World War and involved a manufacturer of sausages.

So, if you stock your shop, you commence trading when you turn the sign on the door to open. If you are a manufacturer, it is when you take the materials from the warehouse to make product to sell.

In another more recent case, it was put like this:

“It seems to me that a trade commences when the taxpayer, having a specific idea in mind of his intended profit making activities, and having set up his business, begins operational activities—and by operational activities I mean dealings with third parties immediately and directly related to the supplies to be made which it is hoped will give rise to the expected profits, and which involve the trader putting money at risk: the acquisition of the goods to sell or to turn into items to be sold, the provision of services, or the entering into a contract to provide goods or services: the kind of activities which contribute to the gross (rather than the net) profit of the enterprise.”

Operational activities do not necessarily require sales; but they do involve dealing with third parties immediately and directly in relation to the supplies to be made and which would hopefully give rise to the expected profits (i.e., the kind of activities which contribute to the gross profit rather than the net profit of the enterprise).

On top of this there are a host or special rules about what you can claim and when regarding pre-trading expenditure, and even here it can depend upon whether you are self-employed or a company. So, nothing in life is simple.

 

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.