Accountants Newcastle | London

Tax Tip of The Week🌟: Split Income with Your Spouse or Civil Partner! 💑💷

If you're in business or have investments and your spouse or civil partner is on a lower income, consider redistributing income-producing assets to make full use of both personal allowances and lower tax bands. 📉

By structuring ownership of property, shares, or savings accounts tax-efficiently, you can potentially reduce your household’s overall tax bill. For example:

✅ Transfer rental property into joint ownership to split income

✅ Share dividends from a family company

✅ Make sure the lower earner is using their full personal allowance

(£12,570), savings allowance, and dividend allowance

Important: Ensure any transfers are outright gifts with no strings attached and properly documented to satisfy HMRC. 📑

This is a simple but powerful way to keep more money in your family’s pocket, legally and effectively!

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❓FAQ of the Week: What are the tax implications of letting out residential property in the UK? 🏘️

Letting out property has long been seen as a solid investment, but with rumours of tax changes on the horizon (including CGT hikes), many landlords are re-evaluating their portfolios. Here’s a summary of what you need to know:

🔹 Income Tax

Rental income is taxed at your marginal rate, but not subject to National Insurance. You can deduct allowable revenue expenses (agent fees, repairs, travel, etc.) or opt for a £1,000 property allowance (if no expenses are claimed).

👉 Mortgage interest isn’t fully deductible – instead, you get a 20% tax credit, regardless of your tax band.

⚠️ Full mortgage interest relief for Furnished Holiday Lets (FHLs) ended in April 2025.

🔹 Capital Gains Tax (CGT)

When you sell a rental property, gains are taxed at 18% or 24%, depending on your income. You can deduct purchase/disposal costs and capital improvements.

🏠 If you lived in the property at some point, part of the gain may be exempt under private residence relief.

🔹 Inheritance Tax (IHT)

Rental properties form part of your estate for IHT purposes. Unlike trading businesses, business property relief doesn’t apply to rental portfolios.

💡 Transfers to a spouse are IHT-free, but passing to children could trigger IHT–unless gifted and the owner survives 7 years (though this may incur CGT).

💡 Tip:

If you’ve let property and haven’t declared the income, consider using HMRC’s Let Property Campaign to voluntarily disclose. This typically leads to lower penalties – but get professional advice first.

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This Week’s Tax Tip 🌟: “Use Pension Contributions to Beat the 60% Tax Trap!” 💼📉

If you earn over £100,000 in the UK, you could be paying an effective tax rate of up to 60% on part of your income.

Why? Because your personal allowance (£12,570) is gradually withdrawn once your income exceeds £100,000, it is lost at a rate of £1 for every £2 over the limit. This creates a stealth tax band between £100,000 and £125,140 that stings high earners 😬

💡 The smart fix? Make a personal pension contribution. By doing so, you reduce your adjusted net income, which can help you reclaim some or all of your lost personal allowance. It’s a double win:

✅ Immediate tax relief: 40% or 45%, depending on your marginal rate

✅ Boost your pension pot: building your future while cutting today’s tax

✅ Restored personal allowance: effectively turning that 60% trap into long-term tax-efficient savings

⚠️ Make sure you don’t exceed your annual pension contribution limit, normally £60,000, but lower if you're already drawing on your pension or have a very high income (due to the taper).

This is one of the most powerful tax planning tools for high earners. Plan ahead and make your pension work for both your future and your tax bill today💪📈

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💡 Tax Tip of the Week: Reclaiming VAT on HP & Leased Assets 🚛

Thinking of getting a van, equipment or even a car on finance? If you’re VAT registered, you might be able to reclaim VAT, but the type of agreement and level of private use matter.

🚗 Hire Purchase (HP)

VAT is usually charged in full on day one

▪️If the asset is for 100% business use, you can reclaim all the VAT upfront

▪️If there’s private use (even occasionally), VAT must be apportioned accordingly

👉 E.g. 60% business use? Only reclaim 60% of the VAT

🚐 Leasing (Operating Lease)

▪️VAT is charged on each rental payment

▪️You reclaim the business-use portion of VAT as you go

▪️For cars with any private use, you can generally only reclaim 50% of the VAT on the lease payments

✅ To reclaim VAT:

▪️Keep a valid VAT invoice

▪️Maintain records showing how you’ve calculated business use

▪️If the asset is used across multiple businesses or income streams, you’ll need to allocate accordingly

⚠️ Watch Out:

For company cars on HP with any private use, full VAT recovery is blocked — unless it’s a pool car or has strict no-private-use policy in writing and practice.

Understanding the VAT rules on HP and leases can make a real difference to your cashflow. 💰

Got a vehicle or asset in mind? Let’s make sure you're reclaiming what you’re entitled to 📩 Message me if you’d like to review your setup.

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☀️ FAQ of The Week:💷 Employment Allowance Boost, But......

✅ Increased Allowance: The Employment Allowance has doubled from £5,000 to £10,500, allowing eligible employers to reduce their annual secondary Class 1 National Insurance contributions (NICs) by a greater amount.

✅ Wider Eligibility: The previous restriction disqualifying employers with a secondary Class 1 NIC liability over £100,000 in the prior tax year has been removed, enabling more businesses to benefit from the allowance.

✅ Simplified Compliance: State aid restrictions no longer apply from April 2025, and the state aid declaration requirement will be removed entirely from April 2026.

📉 National Insurance Threshold Adjustments

✅ Lower Secondary Threshold: The point at which employers start paying secondary Class 1 NICs has decreased from £9,100 to £5,000 per year however.

✅Increased Employer NIC Rate: The employer NIC rate has risen from 13.8% to 15%, impacting the overall cost of employment.

These changes are designed to support small businesses by increasing the Employment Allowance, while also adjusting thresholds and rates to balance public finances.

📌 Action Points for Employers:

Review your eligibility for the increased Employment Allowance and ensure claims are submitted promptly.

Update payroll systems to reflect the new NIC thresholds and rates to ensure compliance.

Assess the financial impact of these changes on your business and consider strategies to mitigate increased employment costs.

For detailed guidance and to check your eligibility, visit the official GOV.UK Employment Allowance page.

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💡 Tax Tip of the Week: Set up your Government Gateway account before you need it! :🔐

Whether you’re self-employed, a landlord, or run a limited company, your Government Gateway account is your central hub for managing taxes with HMRC 💻

📬 With your GG account, you can:

✅ File Self-Assessments

✅ Manage VAT

✅ Manage PAYE or CIS

✅ View tax liabilities and payments

✅ Check deadlines and HMRC messages

✅ Authorise your accountant

🔧 Setting it up is simple — you’ll need:

– A UK address

– National Insurance number

– Valid ID (passport or driving licence)

🧠 Think of it as your digital tax HQ, secure, centralised, and essential for staying compliant.

👉 Pro tip: Set up two-step verification and store your login details somewhere safe. You’ll use this account year after year.

Need support setting it up? Just shout 📩

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