Frequently asked questions
Residency & Domicile
I am moving out of the UK to live abroad, do I still need to pay tax in the UK?
You can live abroad and still be a UK resident for tax, for example if you visit the UK for more than 183 days in a tax year. Your residence position is determined by a statutory residence test.
If you are tax resident in the UK, then you are subject to UK tax on your worldwide income.
If you become non-resident, then you will pay tax on your UK income but will not normally be liable to UK tax on your overseas income.
Say you are employed overseas, you will not pay UK tax in respect of remuneration for duties performed abroad.
You may be non-resident the day after you leave the UK - depends on your situation and how 'split year treatment' applies to you.
You would need to notify HMRC if you're either leaving the UK to live abroad permanently or going to work abroad full-time for at least one full tax year.
If you need advice on your tax residency, please contact Taxbuzz.
What is deemed domicile?
Deemed domicile is relevant for UK income tax, Capital Gains Tax and Inheritance Tax.
It is only possible to have one domicile at a time and under English Law, an individual must always be domiciled somewhere.
With effect from 6 April 2017, under the new rules, an individual who has a non-UK domicile as a matter of common law is deemed to be UK domiciled once he has been UK tax resident for 15 out of the immediately preceding 20 tax years.
The rule also applies to individuals who are domiciled outside the UK, but were born in the UK with a UK domicile of origin. Such individuals are defined as a 'formerly domiciled resident' and are deemed domiciled in the UK during any period when they are subsequently UK tax resident.
Can Taxbuzz help with Research & Development (R&D) Tax Credit claim?
Yes. R&D tax relief is a Corporation Tax relief and can be claimed by a range of companies that seek to research or develop an advance in their field.
If you have carried out a specific project to make an advance in science or technology, you may be able to claim Corporation Tax relief if your project meets the definition of R&D.
If your company is profitable, you can expect about 25% of your R&D costs refunded. For loss making company, you can expect about 33% cashback from HMRC.
no win no fee
service for your R&D tax credit claim.
I have invested in Bitcoin. What are the tax implications?
Anyone buying and selling Bitcoin in an individual capacity is most likely to be subject to Capital Gains Tax (CGT) on any gains made.
However, if you are buying and selling Bitcoin with a high frequency, you may be considered as a trader and Income Tax may be due on the profits as trading income.
You might need to pay CGT when you:
- sell your cryptoassets
- exchange your cryptoasset for a different type of cryptoasset
- use your cyrpto to pay for goods or services
- give away your crypto to another person
You pay CGT when your gains go over the tax free allowance (currently £12,300 for 2021/22 for individuals).
Any cryptoasset you receive from employment or mining count as income and there may be Income Tax and NIC due.
How do I claim back the stamp duty surcharge on buying my second home?
Stamp Duty Land Tax (SDLT) 3% surcharge will apply on purchase of additional residential properties if at the end of the day of the purchase transaction, an individual owns 2 or more properties and has not replaced their main residence.
You can apply for repayment of stamp duty surcharge if you have sold your old main residential property within 3 years of purchasing your new main residence.
HMRC must have your request within 12 months of the sale of that previous main residence, or within 12 months of the filing date of the return relating to the new residence, whichever is later.
I want to give away my home to my children. What are the tax implications I need to be aware of?
You need to be aware of these taxes: Capital Gains Tax (CGT), Stamp Duty Land Tax (SDLT) and Inheritance Tax (IHT).
The gift of property is considered as a disposal for CGT purposes. However, as the property is your main residence, there should be no CGT to pay as you will qualify for Principal Private Residence Relief on the disposal.
If you don't owe any money to your children, then there is normally no SDLT implications on an outright gift of property.
When you give away your home and you are not proposing to move out, this will trigger the 'gift with reservation of benefit' rule and the value of the property will still form part of your estate for IHT purposes.
If you are thinking of gifting an asset and require tax advice, please contact Taxbuzz.
I am working from home. What can I claim?
If your employer requires you to work at home, you can claim for increased costs due to working from home, eg, heating and electricity. The rate is £6 a week from 6 April 2020 and you will not need to keep evidence of your extra costs.
If you have higher increased costs than £6 a week, you can claim more, but you will need to provide evidence such as receipts, bills and be able to apportion these costs specifically to the fact you are working from home.
You’ll get tax relief based on the rate at which you pay tax. For example, you will get £1.20 a week in tax relief if you're a basic 20% rate taxpayer (i.e. 20% of £6) and £2.40 a week for a higher 40% rate taxpayer.
Even if your employer requests you to work from home for just one day in the year, you may be eligible for the whole year's tax relief.
You may also be able to claim tax relief on equipment you’ve bought, such as a laptop, chair or mobile phone.
Taxbuzz can assist you with claiming your job expenses.
What kind of support will I get from Taxbuzz with my accounts and tax?
You will have unlimited support from our dedicated team of chartered certified accountants and chartered tax advisors.
We take care of your compliance matters to ensure they meet deadlines and avoid late filing penalties.
Our proactive tax planning enable you to benefit from better-informed decision making and efficient execution often result in considerable tax savings for you by optimising your tax position.
Can Taxbuzz help with my bookkeeping?
Yes. Accurate, up-to-date bookkeeping is the backbone of any successful business and you can rely on Taxbuzz to look after your books so that you have more time to focus on your business.
I am neither employed or self-employed in this tax year. Can I still make pension contributions and claim tax relief?
If you don't have relevant UK earnings (such as employment income, trading income) for a tax year, then you can still contribute upto £2,880 into your pension and £720 tax relief can be claimed by your pension provider (for relief at source scheme and you are under age 75).
What is the deadline for filing my tax return?
If you want to fill in a paper tax return, you must submit it by 31 October (following the tax year for which you need to send a tax return).
If you miss the paper deadline, then you must submit the return online by 31 January (following 31 October paper return deadline). This 31 January is also the deadline to pay any tax or national insurance due to HMRC.
If you want HMRC to use your tax code to collect any tax you owe through your wages or pension, you must file online by 30 December (following the tax year for which you need to send a tax return).
There is an automatic late filing penalty of £100 if you miss 31 January deadline even if you do not owe any tax.
Do I need to file tax return if I receive self-employment income support scheme (SEISS) grant?
Yes, SEISS grant is subject to Income Tax and National Insurance Contributions and therefore you would need to report it on your tax return.
My gift aid payments were made after the tax year, but I have tax due for this tax year.
Gift aid payments you made after the tax year can be treated as made in the tax year so that you can get tax relief earlier.
Do I pay National Insurance Contributions (NICs) on my pension income?
No. You don't pay NICs on payments you receive from a pension scheme including an annuity, but you may be liable to income tax on these payments.
What is an authorised agent?
As an authorised agent, Taxbuzz can deal with HMRC on your behalf for your tax matters.
Should I trade as a sole trader or a limited company?
You may want to consider starting as a sole trader if you have just started your first own business and expecting to make losses or low profit for first few years. When your business has grown, you can then look into incorporating your business.
Please find below some comparison between the two business structure.
A sole trader is the simplest business structure. It is easy to set up, greater privacy and relatively little paperwork, i.e. you just need to register for self-assessment to file tax return.
However, as a sole trader, you have unlimited liability, i.e. you will be held personally liable in respect of any outstanding debts if sole trade fails.
A limited company has the benefit of limited liability, as incorporation forms a legal distinction between the business owner and the business. Therefore, you only stand to lose what you put into your company, and your personal assets aren't exposed.
There are legal responsibilities - you need to file company accounts and company tax returns as well as annual return (confirmation statement).
Information regarding your company is available to public via Companies House.
Tax on profits
A sole trader pays Class 2 & 4 National Insurance and Income Tax on taxable business profits. Income Tax rates are higher (i.e. 40%, 45%) (PS: tax rates are different for Scotland).
A company pays Corporation Tax on its taxable profits. Company tax rates (19% for 2021/22) are lower than higher rates of Income Tax.
As a sole trader, you can offset trading losses against your other income (PS: the loss relief claim is subject to a cap).
Company can only offset trading losses against its other income, but not against your income as an individual.
What are the rules for 'Making Tax Digital for VAT' ?
Currently, VAT registered businesses with taxable turnover above the VAT threshold must follow the rules by keeping VAT records digitally.
From 1 April 2022, all VAT registered businesses will be required to follow the rules whatever they earn.
To keep digital records, you need to use a compatible software package (like QuickBooks) that connect to HMRC systems.
Can Taxbuzz help with VAT registration?
Yes! If your business turnover exceeds the VAT registration threshold, you are legally required to register for VAT.
When you register, you will be sent a VAT registration certificate confirming your VAT number and the effective date of registration.
In some cases, it can be beneficial to register for VAT before your turnover reaches the threshold.
We can advise you as to when you should register and will handle the registration on your behalf for no extra charge.
You can reclaim VAT paid before VAT registration.
But there is a time limit for backdating claims. It is 4 years for goods you still have and 6 months for services.
We can assist you with reclaiming them.
Why my company is required to pay Section 455 tax and how can I claim it back?
When a director (or any other participator in a close company) is made a loan that is left outstanding for more than 9 months after the company's accounting period end, the company will be required to pay S455 tax at 32.5% of the oustanding loan balance.
S455 tax also applies where a loan is made by a close company to a partnership in which one of the partners is a participator or an associate of a participator, or a trust of which a participator or associate is an actual or potential beneficiary.
There is an
exclusion from S455 tax charge for loans of no more than £15,000 made to a full-time director or employee, who does not have a material interest in the company.
If the loan is interest free and exceeds £10,000, a
taxable benefit will arise on the loan and is levied on the director. The benefit will need to be reported on form P11D and will be taxed under the earning rules.
To avoid the loan benefit tax implication, the company will have to charge interest on the loan based on HMRC official interest rate.
S455 tax can be
reclaimed once the loan has been repaid or written off. However, the repayment cannot be claimed until nine months and one day after the end of the accounting period in which the loan was repaid. This is the normal corporation tax payment date for the accounting period in which the loan was repaid.
The company can reclaim the S455 tax via HMRC online service or by post.
Please note that there are
anti-avoidance provisions for the S455 tax repayment: 1)
30-day rule and 2)
Intentions and arrangements rule.
The 30-day rule applies if within a period of 30 days of making a loan repayment of £5,000 or more, the director re-borrows £5,000 or more new loans from the company. In this situation the repayments will be treated as repaying those new loans (rather than any earlier loans) to the extent that the repayment does not exceed the new loan.
The ‘intention and arrangements’ rule applies where the balance of the loan outstanding immediately before the repayment is at least £15,000, and at the time a loan repayment is made there are arrangements or an intention to subsequently borrow at least £5,000. If this rule applies, S455 tax repayment will be denied. This rule applies even where the new borrowing is outside 30 days. The rule does not apply to funds extracted by way of a dividend or bonus as these are within the charge to income tax.
It is recommended to charge loan interest based on HMRC official rate and to plan loan repayments carefully to avoid falling foul of the anti-avoidance provisions.
What is a close company?
A close company is a company which is resident in the UK and is controlled by either : 1) five or fewer participators (shareholders) or 2) any number of directors who are also shareholders.
Consequently, in the UK, most private companies are close companies.