As we are in the middle of wedding season, it’s worth reminding everyone about marriage allowance. This extra bit of tax relief could be especially helpful to people now during the cost of living crisis.
What is marriage allowance?
Marriage allowance lets you transfer 10% of your unused personal tax allowance to your husband, wife, or civil partner. This will then reduce their tax bill by that amount. It could be worth up to £252 a year!
Am I eligible?
To be eligible to marriage allowance you need to be;
- Married or in a civil partnership
- one partner earning below the personal tax threshold of £12,570 per year
- The other partner earning below the higher rate tax threshold of £50,000 per year
Unfortunately you can’t claim marriage allowance if you are only co-habiting and not married or in a civil partnership.
How do I claim marriage allowance?
If you are a client of ours, mention that you would like to apply for marriage allowance when we complete your tax return. We can then help you sort this out.
You can also apply yourself by phoning the income tax helpline on 0300 200 3300 or by applying online. You will need your partner’s national insurance number for the claim.
There are some online firms that will charge you a commission for claiming through them, our advice is to stay away from these and to either claim yourself by contacting HMRC or through your accountant. We do not charge our clients extra for this. This will ensure you get 100% of what you are owed!
Can I backdate my claim?
When applying for marriage allowance you can backdate your claim to 5th April 2018! So if you have been eligible for marriage allowance since then, these tax years will be included in your claim and you could receive more money back.
If you are married and not already taking advantage of the marriage allowance then what are you waiting for! Make sure you apply to receive your tax refund.
Working from home relief = FREE CASH
Due to the current pandemic, many businesses have been working from home this year (ours included). It looks like those who can work from home will be until March 2021 at the earliest.
We have also seen a change in attitude towards flexible working. It has become the ‘new normal’ and many employees may continue working from home in the future.
What many businesses haven’t realised is that they can get free cash from HMRC for working from home. WOW!
So what is working from home relief?
From 6 April 2020 employers have been able to pay employees up to £6 a week tax-free to cover additional costs if they have had to work from home. Employees who have not received the working from home expenses payment direct from their employer can apply to receive tax relief from HMRC.
Find out full details here – www.gov.uk/government/news/54800-customers-claim-tax-relief-for-working-from-home.
In a very interesting twist Martin Lewis has reported that even if you work from home for just one week, you can still claim a whole years relief. This is a very public statement from Martin Lewis and we are certain that he has proof from HMRC. However there may be a caveat when HMRC realise what they have said.
Read his article here – https://blog.moneysavingexpert.com/2020/04/martin-lewis–working-from-home-due-to-coronavirus–claim-p6-wk-/
Our advice for employees
If your employer is not paying the allowance, which they are not obliged to, log into the HMRC portal and make your claim. For basic rate tax payers this is worth £62.40 and higher rate tax payers it is worth £124.80. For 10 minutes of your time, it is worth doing!
Our advice for employers
You do not have to pay the allowance. However as we are coming into the festive season, why not incorporate the £6 per week into a Christmas Bonus? There are no PAYE or NIC deductions for the employer or employee making it a great treat for the end of this turbulent year.
Have you received HMRC’s ‘love letter’?
Have you declared your rental income?
Lately we have seen an increase in HMRC asking people if they have received rental income. This comes in the form of a ‘love letter’ from HMRC and results in more and more people having to declare their rental income.
The reason for receiving this ‘love letter’ is HMRC’s computer system “connect”. Connect draws data from all departments and connects you to every government system. It also looks at our digital footprint, snooping on our social medias, Ebay accounts and even Airbnb bookings. Using Artificial Intelligence (AI) the computer will asses our profiles and see if we could afford rental properties by cross referencing with your declared income on your HMRC tax account.
The ‘love letters’ we refer to are a direct result of HMRC’s Connect talking to its mates at the Land Registry. From this data they form a list of people that have sold property. If it is not listed as your main residence HMRC will put two and two together and ask if you have sold a second home and/or rental property. This will then be subject to capital gains tax and more!
Have you declared?
If the sold property was used as a rental property, HMRC will then look to see if you have declared the rental income. In a lot of cases this has not been done and can go back many years. In a recent case of ours, we had to declare 10 years of rental income for a Husband and Wife.
‘My Mate Down The Pub’
Getting tax advice down the pub is not always a good idea. In a few cases, taxpayers have been under the impression that because the mortgage payments covered the rental income they didn’t have to declare the rental income. In reality only the interest is deductible. For higher earners being able to offset the basic rate relief is being phased out, turning rental income into profit and therefore tax payable.
Beeng moved into her partner’s flat several years ago, and decided to rent out her own property rather than sell it. Being didn’t think she was making a profit which needed to be taxed, because the rental income just covered the mortgage payments.
When working out her rental profit. Being needs to be aware that the only allowable expense for her mortgage is the interest amount of her mortgage repayment.
The interest amount of mortgage payments is restricted to the basic rate of income tax, irrespective of which income tax rate Being normally pays for other income she may have
Take a look at HMRC’s website for more examples.
If you have a rental property and need a ‘health check’ we would be happy to discuss and give you the options to declare the income and profit that you have been missing off of your tax returns. Declaring the error before the ‘love letter’ arrives will help your negotiations with HMRC and reduce any high penalties.