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Tax relief for losses – Coronavirus concession

Those businesses that have struggled through the pandemic may find that when they come to do their accounts where usually there is a profit, the business made a loss. Whether and how that loss can be utilised depends on whether the accounts are prepared using the ‘cash basis’ (recording revenue when cash is received, expenses when they are paid) or the ‘accrual basis’ (recording revenue when earned and expenses when incurred).

The ‘cash basis’ is how many businesses with turnover of less than £150,000 prepare their accounts. This method…

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Let property – Claiming the full amount of mortgage interest tax relief

Personal landlords with mortgages or loans on residential lets will be aware of the restriction on the amount of tax credit relief that can be claimed on interest paid. Usually, this amount is 20% of the interest paid in any one year. However, there are circumstances where a further restriction (a ‘cap’) may apply. The ‘cap’ is 20% of the lower of the:

– interest claimable in the tax year
– profits of the business for the tax year; and
– the landlord’s adjusted total income (after losses…

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‘Higher earner’- should you claim child benefit?

The ‘High Income Child Benefit Charge’ applies to an individual with income over £50,000 where either they or their partner received child benefit in the tax year or someone else received the benefit for a child living with them and they contributed at least an equal amount towards the child’s upkeep. Where both partners together have income greater than £50,000, the charge is levied on the higher earner; if their income is the same, the person who receives the child benefit pays the charge. ‘Partner’ does not have…

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PAYE Tax Coding – is your Code right?

Many employed taxpayers receive their wage slips at the end of every week/month and assume that the figures are correct – that the Code being used is correct. As a result, taxpayers may not realize that the amount of tax deducted by the end of the tax year is wrong. If that code is 1257L for 2022/23 then that is probably right – any other code needs further investigation.

Under the PAYE ‘Real-Time Information’ scheme employers report to HMRC electronically before making any salary or wage payments using Code…

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Latest news round-up

New Class 2 NIC rules – make sure you don’t miss out on your state pension

One of the more welcome measures in the Chancellor’s Spring Budget was the alignment of the National Insurance Contributions (NIC) thresholds for individuals with the personal income tax allowance. For 2022/23, self-employed individuals will be required to pay class 2 and class 4 NIC on profits above £11,908; from 2023/24 both class 2 and 4 NIC will be payable on profits above £12,570 per year.

However, this change brings a conundrum for those self-employed…

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Is the QCB deferral worthwhile?

When a company is sold, it is often partly for consideration which is deferred in one way or another. Sometimes this will take the form of a debt, such as loan notes. Effectively, the vendor is lending the purchaser the balance of the consideration. If certain conditions (set out in s.117 TGCA 1992) are met, the loan notes will be "qualifying corporate bonds". There are specific considerations that need to be made in such cases.

Where shares are exchanged for QCBs s.116(10) TCGA 1992 applies automatically such that, any…

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Election to be treated as UK-domiciled for IHT purposes

Inheritance tax is possibly the least popular of the main taxes. However, in most cases, no IHT is payable on transfers made to a spouse or civil partner – regardless of whether this takes place during the lifetime of the person making the gift, or via the will following death.

However, this exemption is restricted if the person receiving the gift is not UK-domiciled. There is good reason for this. Non-domiciled individuals are not subject to UK IHT on their worldwide estate, instead it only the value of UK-situs…

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Transitional rules for Capital Allowances

The annual investment allowance (AIA) has been at a temporary increased amount of £1 million since January 2019. This was supposed to revert to £200,000 after 31 December 2021 but has been extended for various reasons until 31 March 2023. As we are now in the final twelve months of the increase (subject to any further extension), it’s a good time to look at how the transitional rules work for accounting periods that straddle 31 March 2023.

The super deduction is also available until 31 March 2023, however this…

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Latest news round-up

Penalty reprieve ends and interest rate hike

Any taxpayer that was relying on the relaxation of the late payment penalty rules must have either paid their tax bill or agreed a time to pay arrangement before 1 April. Unless there is a reasonable excuse, a 5% penalty will shortly be levied.

Additionally, from 5 April the penalty interest rate on late payments of tax will increase to 3.25%, following the latest rise in the Bank of England base rate. This applies even where a payment arrangement is agreed.

The official rate…

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Trading losses and CGT

In most cases, it is beneficial to offset trading losses against income – whether that means sideways loss relief against general income or carrying forward to offset future profits of the same trade. However, sometimes the trader’s circumstances mean that the loss is effectively wasted.


Sara starts a new business in 2021/22. In her first accounting period, she records a loss of £8,000. She expects to make a profit in 2022/23, of approximately £15,000. Assuming Sara has no other income in 2021/22 (or 2020/21) to offset the loss against,…

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