Toy house with a key



The government is currently consulting on important changes to private residence relief that are likely to be introduced from 6 April 2020.

The two possible changes, announced in the Autumn 2018 Budget are:

  • Firstly to limit to just 9 months the period prior to disposal that counts as a period of deemed occupation.
  • The second is to limit “letting relief” to periods where the taxpayer is in shared occupation with the tenant.

Final period exemption to be reduced

The final period exemption was for many years three years and was always intended cover situations where the taxpayer was “bridging” and waiting to sell their previous residence. However, 36 months was felt to be too generous and was allegedly being abused by a strategy known as “second home flipping”. As a result the final period relief was restricted to the current 18 month period of deemed occupation a couple of years ago. The latest proposal is to restrict still further to 9 months although it will remain at 36 months for those with a disability, and those in or moving into care.

Possible Lettings Relief Changes

Lettings relief currently provides a further exemption for capital gains of up to £40,000 per property owner. The additional relief was introduced in 1980 to ensure people could let out spare rooms within their property on a casual basis without losing the benefit of PRR, for example where there are a number of lodgers sharing the property with the owner.

In practice lettings relief extends much further than the original policy intention and also benefits those who let out a whole dwelling that has at some stage been their main residence. It is those situations that the government appear to be attacking under the proposed changes.

Note that those who are renting their property temporarily whilst working elsewhere in the UK or working abroad are unlikely to be affected by this change as there are alternative reliefs available under those circumstances.

Toy house and hands



Last year HMRC carried out a review of rent a room relief and it was proposed that the availability of this generous relief would be restricted to situations where the taxpayer was resident for at least part of the time when the “lodger” was paying rent. The scheme currently exempts from tax gross rents up to £7,500 where rooms within the taxpayers’ main residence are rented out.

HMRC were concerned that the relief was being “abused” by letting out the entire property using websites such as Airbnb and living elsewhere temporarily whilst the tenants were in the property. An example would be renting out a house in south London during Wimbledon fortnight and potentially receiving up to £7,500 tax free.

Note that the Autumn Budget announced that the proposed restriction was not now being introduced.

April Showers

1 Accounts April Update

April Update

With the start of a new tax year, lots of bank holidays and new starters 1 Accounts have well and truly stepped into spring!

Start of the Tax Year

The 6th of April marked the beginning of the next tax year. With this brought some changes to personal allowance, minimum wage, student loans and auto-enrolment. To find out more about these changes please read our blog ‘Happy New Year’.

Automation, Automation, Automation

This year we have introduced client checklists. All our clients will notice that they have received a checklist from Jade to complete their self assessment tax return. These are sent automatically via Karbon so that we can spend more time helping our clients. We will also be automating emails on company year ends to request accounts information in order for us to get accounts completed as soon as we can. We love this new level of automation as we can provide a higher level of service.

A proper family business

We now have all the Donno’s onboard! Katie has now joined us to help us with our sales. Anyone who knows Katie will know that she can sell ice to eskimos and will look great doing it! We now have Paul, Jenni, Jade and Katie (the whole family) working for 1 Accounts. Paul won’t know what’s hit him!

Happy Birthday James

James turned 20! We all went out for a lunch at Nine Jars to celebrate his birthday. We also decorated the office especially! No birthday gets missed here at 1 Accounts!!

Paul went to prison

After Jade went to the prison last month, Paul decided he wanted to go. Unfortunately they let him out too. Paul spoke to the offenders about starting & running their own business. He was given lots of questions that he was happy to answer. He also gave them all a copy of his book, which they asked him to sign. We are not sure Paul’s head fit out of the prison doors on the way out!


If a client refers us we always send a gift to say thank you! We asked one of our clients for their home address to send our special thank you gift. They asked for us to donate to charity instead, which is an amazing gesture. We donated to Little People UK as it is a charity close to the company’s heart.  We love how amazing our clients are!!

Family eating a picnic in a clearing in the woods

Extracting Profit From Your Family Company


The start of the new tax year means that shareholder/ directors may want to review the salary and dividend mix for 2019/20. The £3,000 employment allowance continues to be available to set against the employers national insurance contribution (NIC) liability which means that where the company has not used this allowance it may be set against the employers NIC on directors’ salaries.

Thus, where the only employees are husband and wife there would generally be no PAYE or employers NIC on a salary up to the £12,500 personal allowance.

There would however still be employees NIC at 12% on the excess over £8,632 (£166 per week) which would be £464 on a £12,500 salary, leaving £12,036 net.

Taxation of Dividend Payments in 2019/20

Traditional advice would then be to extract any additional profits from the company in the form of dividends. Where dividends fall within the basic rate band (now £37,500) the rate continues to be 7.5% after the £2,000 dividend allowance has been used. Thus where husband and wife are 50:50 shareholders they would each pay £2,663 tax on dividends of £37,500 assuming they have no income other than a £12,500 salary, leaving £34,837 net of tax.

So a combination of £12,500 salary and £37,500 in dividends would result in £46,873 (93.7%) net of income tax and NICs.

Ensure dividend payments are legal

The Companies Act requires that companies may only pay dividends out of distributable profits. This means that in the absence of brought forward reserves the company would need to provide for 19% corporation tax in order to pay the dividends and thus there would need to be profits of £92,593 in order to pay dividends of £75,000 (after providing corporation tax of £17,593).

Overall the combination of salary and dividends suggested above would result in net of tax take home cash of £93,746 for the couple out of profits before salaries and corporation tax of £117,593 (20.3% overall tax). This still compares very favorably with the amount of tax and NIC payable if the couple were trading as a partnership.

Our Advice

Make sure that your SageOne or Xero is up to date so that we can assess your distributable reserves and complete your Dividend vouchers and board minutes.

Where we complete your payroll we will have changed your payroll to suit your business and maximise your tax reliefs.