Tax Issues Archives - CruseBurke

News,May 2018

What is a Tax Reference Number?

Mia Hamilton22/04/2025tax , Tax Issues

While residing in the UK, everyone knows that they are liable to pay tax to the HMRC. For making timely payments to the HMRC, the residents have to file a tax return against a unique ID assigned to them by the HMRC. This is known as a tax reference number. What is a tax reference, and why is knowing your tax reference important for filing tax returns? Read this article to have an idea. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help about tax reference number. What is a tax reference? A tax reference number is issued as a unique ID by the UK government to every taxpayer for filing tax returns and other payments to the HMRC. The tax reference number is also known as the PAYE reference number. This number consists of letters and numbers in a specific format assigned to employers and occupational pension providers by the HMRC. This number is compulsory for abiding by the rules and payroll taxation regulations of the UK government. In general, this number is formatted as 123/A45678, Consisting of 3 numbers separated by a letter followed by 5 specific numbers. Why Employers Need a Tax Office Reference Number? The tax reference serves as a tax ID for each person. The employers need the tax reference to ensure that accurate tax is paid for each individual and an accurate record is maintained by the HMRC. This number is also imperative for deducting the national insurance contribution of salaried persons. Compliance with Tax Office Reference Number regulations is important for avoiding penalties from the tax office handling the taxation matters, but it is also crucial for keeping efficient payroll management, tracking pension contributions, and effective record-keeping. How is PAYE relevant in this regard? The amount of tax paid by a taxpayer is based on the annual income. The HMRC gives a tax code to the employees. The tax code depends upon the difference in earnings of the employees. Employers of the companies use this code to calculate the amount of tax. The amount of tax is then deducted automatically from the account of the employee through PAYE. The tax code for the current year can be found on the pay slip of the employee or from GOV.UK. There is a limited amount of earnings that is exempt from tax; this is called personal allowance. In the financial year 2025/2026, the personal allowance on the basic tax rate is £12,570. For earnings above £12,570, you are imposed tax depending on the increase in taxable income. This simply implies that the more you earn, the more tax you pay to the HMRC. If the annual earnings of an individual in the UK are £125,140, then the person cannot claim the personal allowance. The HMRC has also set other criteria for personal allowance, such as the Marriage Allowance, the Personal Savings Allowance, and the Dividend Tax Allowance. What is a tax reference in the case of national insurance contributions? What is a tax reference in the case of national insurance contributions? It is the same number of national insurance contributions as well. In the UK, national insurance is a tax paid by the residents, which is used as funds for social security benefits by the UK government, such as state pensions or health benefits. National insurance is paid by all individuals, whether employed in a company or self-employed. The amount of national insurance imposed on an individual depends on the annual income. The HMRC has created classes for this purpose. An individual’s class of national insurance may depend on their employment status. The classes of national nsurance are labelled as 1,2 and 4 contributions. If you’re employed If you are employed, the national insurance is deducted as a Class 1 national contribution from your salary only if you are Below the age limit described by HMRC earning above £242 weekly by doing one job Employers only pay Class 1A and Class 1B national insurance for the benefits they have provided to the employee and the employee’s expenses. If you earn less than £242 a week from one job If an individual is earning less than £242 (between £123 and £242) per week from one job, then he is not liable to pay the national insurance; however, he is still eligible to enjoy certain benefits from the UK government, such as state pension and national health services. If the weekly earnings of an individual are less than £123 a week from one job, he may choose to pay Class 3 contributions of national insurance to cover the gaps in the national insurance record. If you’re self-employed The amount of national insurance contribution to be paid by a self-employed person is based on their annual profit. If you profit £6,725 or above To compensate for any missed National Insurance contributions, Class 2 National Insurance contributions are paid. In case a business is earning more than £12,570 annually, it is liable to pay Class 4 national insurance contributions. If you profit below £6,725 a year In such a case, you are not imposed any class of national insurance; however, you may choose to pay voluntary national insurance to avoid gaps. Directors, Landlords, and Share Fishermen Different national insurance rules are set by HMRC for directors, landlords, and fishermen. Directors are considered as employees in a company, and they must pay national insurance on annual income from salary and bonuses over £12,570. If you are a landlord and rent your property, then a class 2 National Insurance contribution is imposed if you are landlord by profession your multiple properties are rented out you’re buying new properties to rent out A share fisher is classified as self-employed in the UK and must register for national insurance at the HMRC. If you are a share fisher, you are eligible to pay a special rate of Class 2 National Insurance contributions. If the profits you earn as a share fisher are below the …

How Do I Cancel Road Tax?

Mia Hamilton20/04/2025tax , Tax Issues

How do I cancel road tax? The asset you own in the United Kingdom brings you tax liability that needs to be paid at the end of the tax year to the HMRC. The assets included in the tax range are houses, land, or vehicles that you own. Among other taxes on assets, you need to pay tax if you drive the vehicle/vehicles you own. This tax is called road tax or, formally, vehicle excise duty (VED). However, this tax can be cancelled if certain conditions are met. If you are not updated about the recent road tax changes made by the UK Govt, and how do I cancel road tax, this article will provide all the required details. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help on how do I cancel road tax. Understanding of Road Tax Cancellation How do I cancel road tax? Road tax, commonly known as vehicle excise tax, constitutes a significant proportion of revenue for the UK government. While in the UK, it is essential to pay tax to the HMRC, even if no road tax is applicable; this tax is important for vehicle registration. The tax can be paid to the HMRC through debit or credit cards. The amount of road tax varies according to the region and vehicle type, involving the legal framework regarding vehicle taxation in the UK. Why Does Road Tax Need to be Paid? The road tax is regulated by the DVLA in the UK and was introduced in 1937. The road tax is used by the government to complete local projects, thus upgrading the transport infrastructure in the country. This helps provide better services for the public and improves traffic flow on the highways. In the UK, every car owner is imposed a road tax for driving on public roads and highways. If a person is caught driving an untaxed vehicle, they will be fined £80 by the DVLA, which is reduced to £40 if paid within 28 days of the fine imposition. This fine can increase up to £1000 if a person is caught driving an untaxed vehicle in a public area; in the worst-case scenario, the car may be seized as well. Reasons for Cancelling Road Tax The road tax imposed by the DVLA can be cancelled if the following conditions are met: If you have sold the car or transferred it to someone else. If you are not using a car on the road and declare it as an off-road vehicle (SORN). If the car is damaged and it is unsafe to drive it, the insurance company write off such vehicles. The repair cost of such a vehicle is more than its actual cost, which is totally uneconomical. If the car is stripped of its parts in other vehicles. The car has been stolen. If the car you own is exempt from road tax. You have exported the car to another country. How Do I Cancel Road Tax? The following steps need to be followed while applying for road tax cancellation: You will need a logbook for your vehicle (V5C). From the logbook, you will need the 11-digit number mentioned in the yellow section labelled as “Sell, transfer or part-exchange your vehicle to the motor trade” in the logbook. You may also need the 16-digit number mentioned on your V11 reminder form. Your vehicle registration number, name, and address. The road tax cancellation process is made easier by DVLA’s online service. You can select the scenario from the list provided and then follow the prompts that appear on your screen. There are different conditions for the options you choose, which may be: If the car is sold or transferred to someone else, you need to give the details of the new owner and other necessary paperwork to the DVLA. You need to declare the Car an off-road vehicle and update the DVLA. The DVLA should be updated if the car is scrapped. If the car is stolen, you should call the police about the theft, and the police will update the DVLA. The insurance should also be updated about the theft. The road tax can also be cancelled by other conventional ways, such as post or phone. Refund Eligibility and Process Below are the eligibility criteria for the road tax refund The amount of the refund will be calculated by the DVLA from the date you apply to cancel your road tax. This process is done automatically and does not need anything else from you. The road tax is paid annually in advance to the DVLA in the UK. The refund amounts will be for the remaining months of the year after you have applied for the tax cancellation. For example, if you apply for a road tax cancellation after six months in a year, you will get the refund for the remaining six months. The DVLA will not refund the charges paid, such as credit or debit card fees. If the tax is paid by direct debit, the DVLA cancels your regular payment. If the refund is requested on the first annual tax payment, the DVLA will calculate the difference between the first and second road tax payments and refund whichever is lower. Tax Refund Payment The amount of tax refund is paid by cheque by the DVLA. The tax refund will be sent to the name and address provided by the V5C logbook of your vehicle. The refund amount is received within 6 to 8 weeks of your request. If the name or address on the cheque is wrong, you can correct it by sending it back to the following address: Refund Section, DVLA, Swansea, SA99 1AL If the refund amount is not received within the mentioned period, you must inform the DVLA. Conclusion The road tax imposed by the DVLA is the tax that is paid by the car owner for the car that is used for driving. The amount of tax differs …

What is Taxable Pay on Payslip?

Mia Hamilton18/04/2025tax , Tax Issues

Every employee requires knowledge about what is taxable pay on payslip as understanding taxable pay on a payslip enables you to determine which portion of your earnings are taxed plus the reasons behind specific deductions. Most workers review their payslips monthly but fail to interpret the listed information properly. Hence, what is taxable pay on a payslip? This article helps you to know about it, along with major differences from other terms mentioned on the payslip. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help about what is taxable pay on the payslip. What is Taxable Pay on a Payslip? Taxable pay includes workers’ wages that workers must surrender to the Income Tax authority and National Insurance for government revenue. Tax condition depends on the level of income that exceeds the Personal Allowance and spans through each tax band. Several kinds of income possess tax-exempt status, which prevents them from being counted as taxable pay. During the tax year running from April 6th 2024, to April 5th 2025, the Personal Allowance stands at £12,570. Individuals who earn beyond £100,000 must experience a reduction of £1 in their Personal Allowance for every £2 they surpass this amount. The Personal Allowance is not provided at all to individuals with income exceeding £125,140. People who meet Blind Person’s Allowance qualification criteria are able to raise their amount of tax-free earnings. The total sum that employers subtract from your gross pay to determine your taxable income is taxable pay. Numerous approved payments, together with specified deductions, determine the amount that constitutes your taxable pay. These deductions include: Payment to a Revenue-approved pension Scheme leads to gross pay deduction before the tax computation process begins. Your taxable income decreases when you make approved income protection scheme payments through the Permanent Health Benefit (Income Continuance) Scheme. Employees choose to exchange parts of their gross salary for employer-provided cars or enhanced pension arrangements through Salary Sacrifice Arrangements. Taxable pay decreases because employees choose salary sacrifice arrangements to reduce their income amounts. Employees who make contributions to their Personal Retirement Savings Account experience tax deductions prior to the calculation of tax amounts. A Retirement Annuity Contract (RAC) receives a deduction from gross pay before tax applies to the remaining amount. Your taxable income decreases when you make these deductions; therefore, your income tax obligations also decrease. Income Tax Rates and How Tax Is Calculated? People pay taxes according to the following breakdown after their Personal Allowance has been deducted. Up to £12,570 – No tax (0%) £12,571 to £50,270 – Taxed at 20% (Basic Rate) £50,271 to £125,140 – Taxed at 40% (Higher Rate) Over £125,140 – Taxed at 45% (Additional Rate) What is Gross Pay? Before any tax or pension deductions, gross pay represents the entire wages an employee receives. Employers must provide employees with their complete wages and salary amounts before taxes, pension contributions or deductions occur. Gross pay includes: Notional Pay describes all employer-contributed employee perks that extend beyond cash benefits, such as health insurance, together with company cars and additional non-cash benefits. The compensation package includes presents made through shares or stock options. The foundation of employee compensation exists in full wages, together with salaries that do not include salary deductions or pension payments. Before any reductions are applied, the employee’s complete earnings can be found in gross pay. Not all the money received under gross pay deductions falls into taxable income categories. Gross Pay vs. Taxable Pay: What’s the Difference? Different terminology relating to your earnings appears on your payslip. The important payment terms in payslips are Gross Pay and Taxable Pay. The two figures share some similarities but operate differently to determine the tax amount. The distinction between gross pay and taxable pay demands your immediate attention since it shows exactly how much tax your salary triggers. The system enables you to comprehend the added value of making pension scheme contributions and other authorised deductions. Financial planning becomes easier because this knowledge shows you what amount of pay remains after taxes and other deductions. A review of your payslip shows both gross pay and taxable pay amounts, so you can understand the calculation methods and salary administration. Taxable Pay Gross Pay After specified deductions, your gross pay produces the taxable amount, which becomes subject to taxation. Before all deductions take place, employees receive their full gross earnings as their total compensation It includes: A government-approved pension plan The approved Permanent Health Benefit (Income Continuance) plan maintains participation status with the tax authority. A Salary Sacrifice Arrangement A Personal Retirement Savings Account functions as a PRSA. A Retirement Annuity Contract (RAC) It includes: The employer provides non-cash benefits, which make up notional pay. Share-based payments (like company stock options) The full salary before any pension contributions or salary sacrifice deductions Income vs. Capital: Understanding the Difference The distinction of evaluating between income and capital receipts serves to determine whether the amount falls under Income Tax regulations or Capital Gains Tax rules. The way an amount appears provides no assurance on its tax classification because tax laws determine how it should be classified as income or capital. Types of Taxable Income Different types of earnings fall under tax law categories that must be taxed according to the Income Tax regulation. Employment income (wages, salaries, bonuses) Pension income Certain welfare benefits Trading income (self-employment profits) Property income (rental earnings) Savings and investment income Miscellaneous income Some types of payment cannot be easily assigned to either employment or capital receipts classifications. Compensation payments, together with grants, may fall within the scope of taxable income according to specific circumstances. Capital gains taxation through tax rate schemes exists for the following types of payments, which classify as capital income receipts: Receipts from the sale of an asset Receipts for the destruction of an asset Receipts for restrictive covenants Single payments are treated as capital by the majority, yet this status may not always hold true. All payments that substitute …

Do You Pay Taxes on Stocks?

Mia Hamilton10/04/2025tax , Tax Issues

Do you pay taxes on stocks? Buying shares or stocks is a type of investment that most people are interested in. This is a potential side hustle that can generate lots of money or give you a huge loss. If you are interested in buying shares, then you must be aware of the taxation rules regarding buying shares and how they are taxed in the UK. This article will be helpful to you in learning do you pay taxes on stocks. Talk to our best accountants and bookkeepers in Croydon at CruseBurke. You will get instant help whether do you pay taxes on stocks. Do You Pay Taxes on Stocks in the UK? Do you pay taxes on stocks? Stocks, also commonly known as equity, represent that you are the owner of a fraction of the company you are buying stock from. Parts of stocks are called shares, which ensures that you are entitled to be the owner of a fraction of the company’s assets and profits equal to the number of shares you have. Companies sell their stocks on the stock exchange market and form the basis of many investors’ portfolios who are working individually in the field. The stock trade industry must comply with the rules set by the UK government. When are shares likely to be taxed? Stocks and shares you own are taxed in the UK. They are taxed at five different points, which are When you buy stocks or shares When the stocks start generating income When you come to sell the stocks When you give away your stocks When you pass them to your next generation The amount of tax charged on the shares depends on how they were purchased or held and the amount of income they are generating. What You Pay It On You are liable to pay capital gains tax if you are making a profit from the stocks you own and when you sell them or other investments. The taxable shares or investments include Shares that are not in an ISA or PEP units in a unit trust certain bonds (not including Premium Bonds and Qualifying Corporate Bonds) You need to work out your gain from selling the shares and if your gain comes under the capital gains tax allowance. If your gains are above the capital gains tax allowance, then you are eligible to pay the tax to the HMRC at the end of the financial year. If you are selling the shares of someone who has passed away, you have to mention this when reporting the shares to the HMRC. When You Do Not Pay It? You do not pay any tax on the stocks or shares you own if you gift it to your spouse, civil partner or a charity. There are other scenarios when you are exempt from capital gains tax, which are mentioned below: Shares you have declared as an ISA or PEP shares in employer Share Incentive Plans (SIPs) UK government gilts (including Premium Bonds) Qualifying Corporate Bonds employee shareholder shares – depending on when you got them Work Out Your Gain Like other tax scenarios, you will need to work out your gain on selling the stocks or shares. You will need to estimate your gain to know whether you need to pay capital gains tax or not. The gain on any asset so usually the difference between the actual price of the asset and the price at which it’s sold. Market Value If you are not about the gain on your shares, you should use the market value. Possible scenarios of using market value are: You gave these shares as a gift to your husband, wife, civil partner or a charity. You sold your shares for less than their actual value to help the buyer You inherited the shares, and you do not know their actual worth You owned your shares before April 1982 You got the shares through the schemes of your company, such as an employee share scheme If the shares you have were given or sold by someone who claimed gift holdover relief in the past, you should use the amount that person paid for the shares to calculate your gain on the shares. If you paid less than the giant turned out, use the amount you paid for the shares. Selling in Special Circumstances There are certain rules that you have to follow if you sell your shares under these circumstances: You bought shares at different prices and at different times in the company You bought shares through an investment club Shares came into your part after a company merger or takeover Shares you got through employee share schemes Jointly Owned Shares and Investments If you are dealing with shares that you own jointly with other people, then work out the gain for the portion you own instead of the whole value, as you are only liable to pay tax on your part. There are different rules of the UK government for share investment clubs. Deduct Costs After working out the gain, you should deduct the costs of buying or selling shares from your gain. These include fees, for example, stockbrokers’ fees Stamp Duty Reserve Tax (SDRT) when you bought the shares You should contact HMRC if you’re not sure whether you can deduct a certain cost. You may be able to reduce or delay paying Capital Gains Tax if you’re eligible for tax relief. Work Out If You Need to Pay Once you have finalised the gain amount then you should assess whether you need to pay the capital gains tax or not. You can calculate the amount yourself or use your tax calculator for help. You can use the calculator if you sold the shares that were the same type, acquired in the same company on the same date sold at the same time Conclusion Do you pay taxes on stocks? Well, shares or stocks are taxable assets. The amount of tax charged on the shares depends on the type of shares or the gain that …

What is a Negative Income Tax?

Mia Hamilton19/08/2024tax , Tax Issues , Tax Saving Tips

What is a negative income tax? This radical approach to Negative Income Tax and welfare has the potential to transform the lives of millions. But what exactly is NIT, and how does it work? In essence, NIT is a system where individuals and families receive a subsidy from the government to top up their income. This approach flips the traditional tax system on its head, providing support to those who need it most, rather than solely relying on taxation to fund public services. In this discussion, we’ll delve into the world of NIT. Exploring its definition, benefits, criticisms, and potential for implementation in the UK. To understand whether this bold idea can help create a more equitable and prosperous society for all. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly to the reporting in the UK. Contact us now. What is a Negative Income Tax? A Negative Income Tax is a revolutionary tax system that flips the traditional concept of taxation on its head. This approach aims to simplify the tax system, reduce poverty, and encourage work. In a NIT system, individuals and families are guaranteed a minimum income level, regardless of employment status. The subsidy is usually paid regularly. Like monthly or annually, and is calculated based on the individual’s or family’s circumstances. Key Features of NIT include the following. Guaranteed Minimum Income: A safety net to ensure everyone has a basic level of income Subsidy Payment: Regular payments to top up income if it falls below the threshold Simplified Tax System: Combines multiple benefits and tax credits into one payment Encourages Work: Rewards employment by increasing the subsidy as income rises Unlike traditional taxation, where individuals pay taxes on their income, NIT provides a subsidy to those who need it most. This approach helps reduce poverty, income inequality, and the tax system’s complexity. What are the Benefits of Negative Income Tax in the UK? Here is an explanation of the benefits of NIT. Simplification of the Tax System NIT streamlines the complex web of tax credits, benefits, and allowances, replacing them with a single, straightforward payment. This simplification reduces bureaucracy, minimises errors, and saves administrative costs. Individuals and families no longer need to navigate a maze of forms and eligibility criteria, making it easier for them to access support. Reducing Poverty and Income Inequality NIT provides a safety net for the most vulnerable members of society, ensuring everyone has access to a basic level of income. By topping up low incomes, NIT helps reduce poverty, income inequality, and the associated social and economic problems. This, in turn, leads to improved health outcomes, increased social mobility, and a more cohesive society. Encouraging Work and Economic Growth NIT rewards employment by increasing the subsidy as income rises, creating a financial incentive for people to work. This approach helps to: Increase Employment Rates: By making work more financially attractive Boost Economic Growth: As more people contribute to the economy Reduce Benefits Dependency: By encouraging self-sufficiency and personal responsibility Improved Mental and Physical Health The financial security provided by NIT reduces stress, anxiety, and depression, leading to improved mental health outcomes. Additionally, NIT enables individuals to afford necessities, such as healthy food, warm housing, and medical care, resulting in better physical health. Increased Financial Security and Stability NIT provides a predictable and reliable source of income, allowing individuals and families to: Budget and Plan for the Future: With confidence and stability Avoid Debt and Financial Crises: By having a safety net to fall back on Invest in Education and Training: To improve their employability and career prospects Support for Caregivers and Vulnerable Groups NIT recognises the value of unpaid care work and provides support for caregivers, enabling them to continue their vital role. Additionally, NIT offers a lifeline to vulnerable groups, such as the disabled, elderly, and those experiencing homelessness, helping to ensure their basic needs are met. What are the Challenges of Negative Income Tax in the UK? Here is an explanation of the challenges of NIT in the UK. Cost and Funding Implications One of the primary concerns surrounding NIT is its cost and funding. Leading to increased taxes, national debt, or reduced public spending. Work Disincentives and Dependency Some critics worry that NIT could create disincentives to work, particularly among low-income individuals. If the subsidy is too generous, some people might choose not to work, relying on the government stipend instead. This could lead to a culture of dependency, undermining the system’s goal of encouraging employment and self-sufficiency. Administrative Complexity and Implementation Challenges While NIT aims to simplify the tax system, its implementation would require significant changes to existing infrastructure, processes, and bureaucracy. This could lead to administrative headaches, errors, and delays, potentially disenfranchising those who need support most. Targeting and Eligibility Issues NIT’s effectiveness depends on accurately targeting those who need support. However, determining eligibility and calculating subsidies can be complex, potentially leading to: Inaccurate Payments: Over- or under-payments due to incorrect assessments Gaming the System: Individuals exploiting loopholes or manipulating circumstances to maximise benefits Effectiveness and Efficiency Questions Some critics question whether NIT would be an effective solution to poverty and income inequality. They argue that: Other Solutions Might Be More Effective: Alternative approaches, such as education and training programs, might be more successful in addressing the root causes of poverty NIT Might Not Address Systemic Issues: Failing to tackle underlying structural problems, such as affordable housing, healthcare, and education Balancing NIT with Other Benefits and Tax Credits NIT would need to be carefully integrated with existing benefits and tax credits to avoid: Overlapping Support: Duplicate payments or conflicting systems Gaps in Support: Individuals falling through the cracks due to inconsistent eligibility criteria What is the Current Status and Future Developments of Negative Income Tax in the UK? The UK currently has a system of tax credits and benefits, including Universal Credit. This provides a safety net for low-income individuals and families. While …

Do You Pay Council Tax on Vacant Property?

Mia Hamilton15/08/2024tax , Tax Issues , Tax Saving Tips , Taxation

If you’re a property owner in the UK, you’re likely familiar with council tax. This is a mandatory payment that funds local services like waste management, policing, and education. But what happens when a property is left vacant? Do you still need to pay council tax? The answer isn’t always straightforward. With various exemptions, discounts, and special cases to navigate, understanding council tax on vacant property can be a daunting task. Even if you’re a landlord dealing with a gap between tenants, a homeowner who’s inherited a property, or simply someone who’s renovating a property. It’s essential to grasp the rules surrounding council tax on vacant properties. In this discussion, we’ll delve into the ins and outs of council tax on vacant properties in the UK. You are exploring the standard rules, exemptions, discounts, and special cases that may apply. By the end of it, you’ll be equipped with the knowledge to manage your council tax obligations with confidence, even when dealing with vacant properties. So, let’s dive in and uncover the intricacies of council tax on vacant properties in the UK. If you seek professional help to learn more about the council tax on vacant property, why wander somewhere else when you have our young and clever team of professionals at CruseBurke? Do You Pay Council Tax on Vacant Property? When a property in the UK is left vacant, the rules surrounding council tax can be complex and confusing. In general, council tax is still payable on a vacant property, but there are some important exceptions and discounts to be aware of. If a property is left empty, the owner is usually liable for council tax, but the amount payable may vary depending on the circumstances. What are Exemptions and Discounts in this Regard? Exemptions apply to certain types of vacant properties, including: Properties undergoing major repairs or renovation work Properties left empty by someone who has gone into care Properties left empty due to bereavement or divorce Properties that are empty because they’re impossible to occupy Properties that are empty and owned by a charity If your vacant property doesn’t qualify for an exemption, you may still be eligible for a discount on your council tax bill. Discounts vary depending on the local authority, but here are some common ones: Furnished but unoccupied properties: 10-50% off the standard rate Unfurnished but unoccupied properties: 0-50% off the standard rate Properties occupied by students or members of the armed forces: 10-50% off the standard rate If a property is furnished but unoccupied because the owner is living in care or is severely mentally impaired, you may be eligible for a Class C discount. This discount is usually 50% off the standard rate. If you own a vacant property that’s not your main home, you may be eligible for a second home discount. This discount varies by authority but is usually around 10-50% off the standard rate. To apply for an exemption or discount, you’ll need to contact your local authority and provide evidence to support your claim. This may include documents like renovation plans, care home contracts, or proof of ownership. Don’t assume you’re eligible. Always check with your local authority to see what exemptions and discounts are available. What are the Charges for Long-Term Vacant Properties? If you own a property in the UK that’s been vacant for an extended period, you may be charged a “long-term empty premium” or “empty homes premium”. This is a surcharge on top of the standard council tax rate. It’s designed to encourage property owners to bring their properties back into use. The definition of “long-term” varies depending on the local authority, but it’s usually considered to be: Over 2 years (for most authorities) Over 5 years (for some authorities) The long-term empty premium is usually calculated as a percentage of the standard council tax rate. The rate varies depending on the authority, but common rates include: 50% of the standard rate (for properties empty over 2 years) 100% of the standard rate (for properties empty over 5 years) 200% of the standard rate (for properties empty over 10 years) The premium is calculated based on the banding of the property (A-H). For example, if the standard council tax rate for a Band D property is £1,500, the long-term empty premium might be: £750 (50% of £1,500) if the property has been empty over 2 years £1,500 (100% of £1,500) if the property has been empty over 5 years Some properties may be exempt from the long-term empty premium, including: Properties undergoing major repairs or renovation work Properties left empty by someone who has gone into care Properties left empty due to bereavement or divorce To avoid paying the long-term empty premium, you can: Bring the property back into use Apply for an exemption or discount Sell the property Always check with your local authority for specific rules and rates regarding long-term empty properties. Are There any Special Cases? Here is an explanation of special cases in this regard. Military and Diplomatic Exemptions If you’re a member of the armed forces or a diplomat, you may be exempt from paying council tax on a vacant property. This includes: Properties left empty by service personnel on active duty Properties left empty by diplomats or foreign nationals with diplomatic immunity Deaths and Bereavement In the event of a death, you may be eligible for a council tax exemption or discount on a vacant property. This includes: Properties left empty by someone who has passed away Properties left empty by someone who has inherited a property and is dealing with probate Tenancy and Rental Exemptions Certain types of tenancies or rentals may also be exempt from council tax on a vacant property. This includes: Properties rented out to students or members of the armed forces Properties rented out under an assured shorthold tenancy (AST) Care and Disability Exemptions If you or a family member require care or have a disability, you may be exempt from …

How Can I Get Council Tax Reduction?

Mia Hamilton07/08/2024tax , Tax Issues , Tax Saving Tips , Taxation

How can I get a council tax reduction? Council tax can be a significant expense, especially for those on a low income or with limited financial resources. Millions of pounds go unclaimed each year due to a lack of awareness or understanding of the application process. This discussion aims to demystify the world of council tax reductions, providing you with clear guidance on how to navigate the system and potentially save hundreds of pounds on your annual bill. If you’re a student, pensioner, or simply someone looking to ease the financial strain, this conversation will walk you through the eligibility criteria. As well as types of reductions available, and step-by-step application process. By the end of this discussion, you’ll be empowered with the knowledge to take control of your council tax payments and potentially enjoy a more affordable future. So, let’s dive in and explore how you can get a council tax reduction in the UK. Get in touch with our young, clever, and tech-driven professionals if you want to choose the best guide on getting council tax reduction. How Can I Get Council Tax Reduction? Generally, you may qualify if you’re on a low income, receiving benefits like Universal Credit, Income Support, or Pension Credit, or if you’re a pensioner. Students, including full-time and part-time students, may also be eligible, especially if they’re receiving a grant or bursary. Even if you don’t think you’ll qualify, it’s worth contacting your local council to discuss your situation and see if you can get a reduction. You might be surprised at the help available. What are the Types of Council Tax Reduction? In the UK, there are several types of council tax reductions available to help make your bill more affordable. One type is Council Tax Support, which replaced the old Council Tax Benefit scheme and is now run by local councils. Offering a discount based on your income and circumstances. Another type is the Second Adult Rebate, which can help if you share your home with someone who isn’t your partner. Like a friend or family member, and they’re on a low income. If you or someone in your household is severely mentally impaired, you might qualify for a Disabled Person’s Reduction, which can reduce your bill by up to 50%. Students, including full-time and part-time students, can apply for a student exemption, which means they won’t have to pay council tax at all. Some properties are also exempt from council tax, like annexes and granny flats. Or homes that are empty because the owner has moved into a care home. Additionally, some local councils offer discretionary reductions. like hardship relief or local council tax support schemes, which can provide extra help if you’re struggling to pay. Lastly, if you’re receiving certain benefits, like Pension Credit or Income Support, you might automatically qualify for a council tax reduction. Understanding the different types of reductions available can be a bit confusing. But your local council can help you navigate the system and find the support that’s right for you. How to Apply Council Tax Reduction in the UK? First, contact your local council to ask about their application process and what documents you’ll need to provide. Typically, you’ll need to supply proof of your income, such as payslips, benefit letters, or P60 forms. As well as identification like a passport or driving license. Be sure to apply as soon as possible, as any reduction you’re eligible for will usually only start from the date you apply. When you apply, you’ll need to provide details about your household, including who lives with you and their income and circumstances. The council will then assess your application and let you know how much reduction you’re entitled to. If you’re eligible, the reduction will be applied to your council tax bill, and you’ll be notified of the new amount you need to pay. Keep in mind to reapply each year, as your circumstances may have changed, and the council will need to reassess your eligibility. How to Make a Successful Application? To ensure a successful application for a council tax reduction in the UK, follow these tips. First, make sure you apply as soon as possible, as any reduction will usually only start from the date you apply. Be accurate and thorough when filling out the application form, providing all the required documents and information to avoid delays. Double-check your calculations and ensure you’re reporting your income and expenses correctly. If you’re unsure about anything, don’t hesitate to ask for help from a benefits advisor or the council’s helpline. Keep records of your application, including copies of documents and correspondence with the council, in case you need to refer back to them. Be honest and transparent about your circumstances, as providing false information can lead to your application being rejected or even prosecuted. If you’re receiving benefits, inform the council of any changes to your claim, as this can affect your eligibility. Finally, if your application is rejected, don’t be afraid to appeal the decision if you believe it’s incorrect. The Bottom Line In conclusion, how can I get a council tax reduction, getting a council tax reduction in the UK is a valuable opportunity to lower your bills and ease financial pressure. By understanding the eligibility criteria, types of reductions available, and application process, you can take the first step towards saving money. Keep in mind to apply promptly, provide accurate information, and seek help when needed. Don’t assume you’re not eligible as many people are surprised to find they qualify for a reduction. If you’re struggling to pay your council tax, don’t hesitate to reach out to your local council for support. They’re there to help, and with the right guidance, you can navigate the system and get the reduction you deserve. By taking advantage of council tax reductions, you can enjoy a lighter financial burden and focus on what matters most. Reach out to our intelligent and clever-minded guys to get the …

How Much is Tax on Bonus?

Mia Hamilton02/08/2024tax , Tax Issues , Tax News and Tips

Wondering how much is tax on bonuses in the UK? Receiving a bonus can be a thrilling experience, but it’s essential to understand the tax implications that come with it. This includes your income tax band, the type of bonus, and the tax-free allowance. We’ll break down the complexities of bonus tax into easy-to-understand language. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly to the reporting in the UK. Contact us now. Understanding Bonus Taxation in the UK Bonuses can be paid for various reasons, such as performance-related achievements, contractual obligations, or discretionary rewards. Types of Bonuses and Their Tax Treatment There are three main types of bonuses: Contractual Bonuses: These are bonuses that are part of an employee’s employment contract, such as a guaranteed annual bonus. Discretionary Bonuses: These are bonuses that are paid at the employer’s discretion, such as a one-off payment for exceptional performance. Performance-Related Bonuses: These are bonuses that are paid based on specific performance targets or achievements. Employees may also need to report bonus income on their Self-Assessment tax return. Key points to remember in this regard include the following. Bonuses are considered taxable income All bonuses are subject to income tax and NICs, unless exempt Employers must deduct tax and NICs through PAYE Employees may need to report bonus income on their Self-Assessment tax return How Much Tax Will I Pay on my Bonus UK? In the UK, bonuses are taxed as supplemental income, and the tax rate depends on the individual’s income tax band. There are three main income tax bands: Basic Rate, Higher Rate, and Additional Rate. Basic Rate (20%) If your total income, including the bonus, is below £50,000, you’ll pay a 20% tax on your bonus. This is the most common tax rate for bonuses. Higher Rate (40%) If your total income, including the bonus, is between £50,001 and £150,000, you’ll pay a 40% tax on the amount above £50,000. Additional Rate (45%) If your total income, including the bonus, is above £150,000, you’ll pay a 45% tax on the amount above £150,000. Let’s say you earn a £10,000 bonus: 1- If your total income is £30,000, you’ll pay 20% tax (£2,000) 2- If your total income is £60,000, you’ll pay a 40% tax on £10,000 (£4,000) 3- If your total income is £180,000, you’ll pay 45% tax on £30,000 (£13,500) National Insurance Contributions (NICs) on Bonuses in the UK In the UK, National Insurance Contributions (NICs) are payable on bonuses, just like regular earnings. NICs fund various benefits, including state pension, jobseeker’s allowance, and employment and support allowance. Employee NICs on Bonuses Employees pay NICs on bonuses at a rate of: 12% on earnings between £166 and £962 per week 2% on earnings above £962 per week Bonus Example Let’s say you earn a £10,000 bonus: If your weekly earnings are £500, you’ll pay 12% NICs on the bonus (£1,200) If your weekly earnings are £1,500, you’ll pay 2% NICs on the bonus (£200) Employer NICs on Bonuses Employers also pay NICs on bonuses at a rate of: 13.8% on earnings above £166 per week Tax-Free Bonus Allowances in the UK In the UK, there is a tax-free bonus allowance that allows employees to receive a certain amount of bonus payment without paying income tax. This allowance was introduced in 2016 to help employees benefit from bonuses without the burden of additional tax. £1,000 Tax-Free Bonus Allowance The tax-free bonus allowance is £1,000 per year. This means that if an employee receives a bonus of £1,000 or less, they will not pay income tax on it. However, if the bonus exceeds £1,000, income tax will be payable on the amount above £1,000. Conditions for Eligibility To be eligible for the tax-free bonus allowance, the bonus must meet certain conditions: The bonus must be a non-contractual payment (i.e., not part of the employee’s regular salary or wages) The bonus must be paid in addition to the employee’s regular earnings The bonus must not be a termination payment or a payment instead of notice Example of Tax-Free Bonus Allowance Let’s say an employee receives a bonus of £1,500: The first £1,000 is tax-free The remaining £500 is subject to income tax Key points to remember in this regard include the following. Tax-free bonus allowance is £1,000 per year Applies to non-contractual bonus payments Bonus must be paid in addition to regular earnings Does not apply to termination payments or payments instead of notice The tax-free bonus allowance provides a welcome relief for employees receiving bonuses. Allowing them to benefit from their hard work without the burden of additional tax. Other Tax Implications on Bonuses in the UK Bonuses are subject to PAYE tax, which means employers must deduct income tax and NICs from bonus payments. Employers must report bonus payments to HMRC and pay any tax due through the PAYE system. Self-Assessment Tax Returns and Bonus Tax Employees who receive bonuses may need to complete a Self-Assessment tax return if: Their bonus takes them into a higher tax band They have other income not taxed through PAYE They need to claim expenses or relief Capital Gains Tax (CGT) and Bonus Tax If a bonus is paid in the form of shares or securities, Capital Gains Tax may apply when the shares are sold. CGT is a separate tax from income tax and has its rates and allowances. Benefit-in-Kind Tax and Bonus Tax If a bonus is paid in the form of benefits (e.g., company cars, private medical insurance), Benefit-in-Kind tax may apply. This tax is payable on the value of the benefit, not the bonus itself. Pension Contributions and Bonus Tax Bonuses can affect pension contributions, particularly if the bonus takes the employee’s earnings above the pension contribution threshold. Employees may need to adjust their pension contributions to avoid exceeding the annual allowance. Key points to remember in this regard include the following. PAYE tax applies to …

inheritance tax when a second parent dies

How Much is Inheritance Tax When Second Parent Dies?

Mia Hamilton20/06/2024Accounting , tax , Tax Issues , Taxation

Are you looking for an inheritance tax when a second parent dies? The rules and regulations surrounding inheritance tax can be complex and confusing. Especially when it comes to the “second death tax charge” that applies when the second parent passes away. Inheritance tax in the UK can be a complex and emotional matter. Especially when dealing with the loss of a loved one. When the second parent passes away, the inheritance tax implications can be significant. The UK government grants an inheritance tax exemption, known as the “nil rate band”. However, this exemption is not automatically doubled for married couples or civil partners. Instead, the surviving spouse or civil partner can inherit the unused portion of the nil rate band from the deceased partner. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly to the reporting in the UK. Contact us now. How Does the Inheritance Tax Change When the Second Parent Dies? The tax is usually paid in instalments over several months. Each person has a tax-free allowance, known as the nil-rate band, which is currently set at £325,000. This means that if the estate is worth less than £325,000, there is no inheritance tax to pay. If the estate is worth more than £325,000, the standard rate of inheritance tax applies. This is currently set at 40% of the value of the estate above the nil-rate band. If the surviving spouse then dies, the nil-rate band may be reduced, depending on the value of the estate. What is The Impact of the Second Parent’s Death? When the second parent passes away, their estate is subject to inheritance tax. This can significantly reduce the amount inherited by their beneficiaries. Increased Tax Liability The death of the second parent can trigger a higher tax liability due to the transfer of assets to the next generation. This is because the nil-rate band, which is the tax-free allowance, is not transferable between generations. Loss of Spouse Exemption When the first parent dies, their estate can pass to their spouse tax-free. However, when the second parent dies, this exemption no longer applies, and the estate is subject to inheritance tax. Reduced Nil-Rate Band This can result in a significantly reduced inheritance for beneficiaries. Impact on Beneficiaries The second death tax charge can have a significant impact on beneficiaries, including children and grandchildren, who may receive a reduced inheritance or even be pushed into inheritance tax liability themselves. Families need to plan and mitigate the impact of the second death tax charge through strategies such as gifting, trusts, and estate planning to minimise the tax liability and ensure that their loved ones receive the maximum inheritance possible. How Much is Inheritance Tax When Second Parent Dies? The UK has an inheritance tax threshold of £325,000 for individuals. This means that if the estate is worth less than £325,000, there is no inheritance tax to pay. For married couples and civil partners, the threshold is £650,000, as any unused allowance from the first deceased partner can be transferred to the surviving partner. Example The inheritance tax threshold for the couple was £650,000, and the estate is worth £750,000, so the excess is £100,000. The inheritance tax to pay would be 40% of £100,000, which is £40,000. Knowing the threshold, tax rate, and available allowances and reliefs can help you minimise the tax liability. What are Planning and Mitigation Strategies in this regard? Planning is crucial to minimise inheritance tax liability. Start by estimating the value of your estate and considering how you want to distribute your assets. Make a Will Having a valid Will is essential to ensure your wishes are carried out. A Will can also help reduce inheritance tax by specifying gifts to charity or setting up trusts. Use the Nil-Rate Band Make the most of the tax-free allowance (nil-rate band) by using it wisely. Consider gifting assets or setting up trusts to use up the allowance. Life Insurance Consider taking out life insurance to provide a tax-free payout for your beneficiaries. This can help cover inheritance tax liabilities. Charitable Donations Leaving a legacy to charity can reduce inheritance tax liability, as charitable donations are exempt from tax. The Bottom Line In conclusion, inheritance tax when a second parent dies in the UK can have a significant impact on the estate of the second parent to pass away. The “second death tax charge” can result in a higher tax liability, reducing the amount inherited by beneficiaries. If you get to know the rules and regulations surrounding inheritance tax, including the nil-rate band, spouse exemption, and gifting rules, individuals can make informed decisions. Be aware of the potential impact of inheritance tax and by taking proactive steps, you can ensure that your legacy is passed on to future generations with minimal tax liability. Reach out to one of our professionals to get to know about inheritance tax when a second parent dies. Get in touch and you will be provided instant professional help! Disclaimer: The general information provided in this blog about inheritance tax when a second parent dies includes text and graphics. It does not intend to disregard any of the professional advice in the future as well.

How Do I Find Out My Tax Code?

Mia Hamilton29/05/2024tax , Tax Issues , Tax News and Tips

Are you wondering what those mysterious numbers on your payslip mean? Do you want to make sure you’re paying the right amount of tax? Look no further! Your tax code is a unique set of numbers and letters that determines how much tax you pay. It’s essential to understand what it means and how do I find out my tax code. In this discussion, we’ll take you through the simple steps to discover your tax code, from checking your payslip to contacting HMRC. We’ll also cover what to do if you need to update your tax code and provide tips and resources to help you navigate the process with ease. If you’re a taxpayer, an employer, or just starting in the world of work, understanding your tax code is crucial for managing your finances and avoiding any potential tax headaches. Our team of professional members loves to hear out your problems and find out the possible and suitable solutions quickly for small businesses’ accounting problems. Call us or email us today. How Do I Find Out My Tax Code? Here’s how you can find your tax code in the UK: Check Your Payslip Your tax code should be printed on your payslip. If you’re unable to find your tax code on your payslip, you can try the following options. Tax Code Notice Letter If you receive a ‘Tax Code Notice’ letter from HMRC, your tax code should be printed on the letter. Contact HMRC If you’re unable to find your tax code, you can contact HMRC for assistance. There are several options to contact HMRC: Phone 0300 200 3300 (Monday to Friday, 8 am to 6 pm) Post Pay As You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom Online You can also use the ‘Check your Income Tax’ service online to find your tax code. You will need to sign into your tax account to access this service. Types of Emergency Tax Codes There are two types of emergency tax codes: 0T (zero T): This code is used when you’ve started a new job, and your employer doesn’t have your correct tax details. W1 or M1: These codes are used if you’ve had a change in your circumstances, like a new job or a change in your income. To get off an emergency tax code, you’ll need to: Fill in a ‘Starting a new job’ form (P46) and give it to your employer. Register for a personal tax account online and update your details. Contact HMRC and provide them with your correct tax details. Emergency tax codes are temporary, and you should be taken off them once HMRC has the correct information. If you’re still on an emergency tax code after a few months, contact HMRC to check what’s going on. Keep in mind that emergency tax codes can affect your take-home pay. So it’s essential to sort it out as soon as possible to avoid overpaying tax. Why Your Tax Code Might Change? Your tax code might change if there’s a change in your income, such as: Starting a new job or leaving an old one Getting a promotion or a pay rise Starting to receive a pension or other income Having a change in your benefits, like a company car or medical insurance Changes in Your Circumstances Your tax code might change if there’s a change in your circumstances, such as: Getting married or divorced Having children or other dependents Buying or selling a home Having a change in your student loan repayments Changes in Tax Allowances or Reliefs Your tax code might change if there’s a change in tax allowances or reliefs, such as: Changes to the personal allowance or income tax rates Changes to tax reliefs, like the blind person’s allowance or marriage allowance Changes to tax deductions, like student loan repayments or pension contributions Errors or Corrections Your tax code might change if there’s an error or correction, such as: HMRC discovers an error in your tax code or tax calculations You correct an error in your tax return or tax account HMRC updates your tax code to reflect a change in your tax situation Other Reasons Your tax code might change for other reasons, such as: You start or stop receiving taxable benefits, like a company car or private medical insurance You start or stop receiving tax-free income, like a pension or income from savings HMRC updates your tax code to reflect a change in tax law or policy If your tax code changes, HMRC will usually send you a letter or email to explain the change and how it affects your tax. If you’re unsure or have questions, you can always contact HMRC for help. How to Update Your Tax Code? First, check your current tax code on your payslip or P60. If you think it’s wrong, you’ll need to update it. Gather Information Gather the necessary information to update your tax code, including: Your National Insurance number Your employer’s name and address Your income and tax details Any changes to your circumstances, like a new job or benefits Contact HMRC to update your tax code: Phone: 0300 200 3300 (Monday to Friday, 8 am to 6 pm) Fill in the Right Forms Fill in the correct forms to update your tax code: P46: ‘Starting a new job’ form P45: ‘Leaving a job’ form P6: ‘Tax code notification’ form Provide Evidence Provide evidence to support your tax code update, such as: P60 or P45 forms Payslips Letters from your employer or pension provider Wait for Confirmation Wait for confirmation from HMRC that your tax code has been updated. This may take a few weeks. Check Your Payslip Check your next payslip to ensure your tax code has been updated correctly. The Bottom Line We’ve covered everything you need to know about how do I find out my …