Self assessment taxpayers get more time as Covid-19 pressures continue

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HM Revenue and Customs (HMRC) has announced it is waiving late filing and late payment penalties for self assessment taxpayers for one month.

The move will give them extra time, if they need it, to complete their 2020 to 2021 tax return and pay any tax due.

It says it has made the decision to give the extra time because it recognises the pressure taxpayers and their agents are facing.

Normally, late filing penalties are applied to all returns due on, but filed after, the January 31, 2022, deadline.

Those penalties are cancelled if the taxpayer has a reasonable excuse for filing late.

However, this year, like last year, HMRC is not charging late filing penalties for a month to help taxpayers and agents who are unable to meet the deadline.

The move means that late filing penalties will not be charged for online tax returns received by February 28, 2022.

The payment deadline for self assessment is January 31 and interest will be charged from February 1 on any amounts outstanding.

Normally a five per cent late payment penalty is charged on any unpaid tax that is still outstanding on March 3.

However, this year, like last year, HMRC is giving taxpayers more time to pay or set up a payment plan.

Self assessment taxpayers will not be charged the five per cent late payment penalty if they pay their tax or set up a payment plan by midnight on April 1, 2022.

They can pay their tax bill or set up a Time to Pay arrangement online at GOV.UK.

As interest will be payable from February 1, as usual, it is still better to pay on time if possible.

HMRC has revealed that of the 12.2 million taxpayers who need to submit their tax return by January 31, almost 6.5 million have already done so.

Angela MacDonald, HMRC’s deputy chief executive and second permanent secretary, said: “We know the pressures individuals and businesses are again facing this year, due to the impacts of Covid-19.

“Our decision to waive penalties for one month for self assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.”

The existing ‘Time to Pay’ service allows any individual or business who needs it the option to spread their tax payments over time.

Self assessment taxpayers with up to £30,000 of tax debt can do this online once they have filed their return.    

The 2020- 2021 tax return covers earnings and payments during the pandemic.

Taxpayers need to declare if they received any grants or payments from the Covid-19 support schemes up to April 5, 2021, as these are taxable.

They include:

• Self-Employment Income Support Scheme
• Coronavirus Job Retention Scheme
• Other Covid-19 grants and support payments such as self-isolation payments, local authority grants and those for the Eat Out to Help Out scheme

The £500 one-off payment for working households receiving tax credits should not be reported in self assessment.

Since April last year, more than 30,000 taxpayers have used the self-serve Time to Pay service, which is done online with no need to call HMRC, to manage their self assessment liabilities, totalling around £75 million.

Taxpayers who are required to make Payments on Account, and know their bill is going to be lower than the previous tax year, for example due to loss of earnings because of Covid-19, can reduce their Payments on Account.

Visit GOV.UK to find out more about Payments on Account and how to reduce them.

Self-employed taxpayers who need to claim certain contributory benefits soon after January 31, 2022, need to ensure their annual Class 2 National Insurance contributions (NICs) are paid on time.

This is to make sure their claims are unaffected. Class 2 NICs are included in the 2020 to 2021 Balancing Payment that is due to be paid by January 31.

• To discuss any tax issues you may have please contact us on 01772 430000

More support announced as Omicron impacts on business

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Additional support will be available for businesses who have been impacted by the Omicron variant of Covid, the chancellor Rishi Sunak has announced.

Businesses in the hospitality and leisure sectors in England will now be eligible for one-off grants of up to £6,000 per premises.

And more than £100 million discretionary funding will be made available for local authorities to support other businesses

The government will also cover the cost of Statutory Sick Pay for Covid-related absences for small and medium-sized employers.

At what is often their most profitable time of year, many pubs and restaurants have seen cancellations and reduced footfall as people have responded to the rise in cases ahead of Christmas.

Trade body Hospitality UK has reported that many businesses have lost 40-60 per cent of their December trade.

Around 200,000 businesses will be eligible for business grants which will be administered by local authorities and will be available in the coming weeks.

Announcing the moves, Rishi Sunak said: “We recognise that the spread of the Omicron variant means businesses in the hospitality and leisure sectors are facing huge uncertainty, at a crucial time.”

To support other businesses impacted by Omicron – such as those who supply the hospitality and leisure sectors – the government is also giving a more than £100m boost to the Additional Restrictions Grant (ARG) fund for local authorities in England.

They will have discretion to allocate this funding to businesses most in need. The ARG top up will be prioritised for those local authorities that have distributed the most of their existing allocation. This is on top of the £250m of previously allocated funding that remains with local authorities.

As increasing numbers of Covid-19 cases means more workers taking time off work, the government is also reintroducing the Statutory Sick Pay Rebate Scheme (SSPRS).

The SSPRS will help small and medium-sized employers – those with fewer than 250 employees – by reimbursing them for the cost of Statutory Sick Pay for Covid-related absences, for up to two weeks per employee.

Firms are now eligible, and they will be able to make claims retrospectively from mid-January.

The Treasury says the additional measures will reinforce the existing package of business support.

That includes business rates relief meaning that most businesses in the hospitality and leisure sectors will see a 75 per cent reduction in their business rates bill across the entire financial year and a new 50 per cent capped business rates relief next financial year.

There is also a 12.5 per cent reduced rate of VAT for hospitality and tourism to support the cash flow and viability of around 150,000 businesses which will continue until the end of March.

The £1.5bn Covid Additional Relief Fund exists for businesses that have not previously had business rates support.

And businesses will be protected from eviction if they are behind on rent on their premises, thanks to the moratorium that remains in place until March.

There is also access to finance for SMEs through the Recovery Loan Scheme to June.

And Bounce Back Loan repayment flexibility means borrowers having the option to take a six-month repayment holiday, three six-month interest-only periods or extend their loan to 10 years, which almost halves the monthly payment.

HMRC also stands ready to support any business impacted by the coronavirus pandemic through its Time to Pay arrangement.

The chancellor has asked HMRC to offer businesses in the hospitality and leisure sectors in particular the option of a short delay, and payment in instalments, on a case-by-case basis, as part of this.

It has also been announced that £30m further will be made available through the Culture Recovery Fund, enabling more cultural organisations in England to apply for support during the winter.

Government levels playing field for SMEs

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The government says it is intent on giving smaller businesses better access to the £50billion of public contracts tendered each year.

Those contracts can include anything from supplying hospital equipment to providing public sector pensions.

It has now published a ‘Selling To Government Guide’, which it says will give small and medium-sized enterprises (SMEs) essential information on how to bid for and win government contracts.

It includes advice on where business owners can look online for government contract opportunities.

The guide includes tips on how SMEs can make sure they are showcasing their strengths during the bidding process. This will be backed up by online webinar sessions for small businesses.

And the new publication also gives guidance on how businesses can secure work through supply chains by working with larger companies to help deliver things such as long-running IT or catering projects.

It even goes one step further, advising how the government considers Social Value when choosing suppliers.

It says this will then allow “agile, smaller enterprises” to highlight the work they do in their communities and ultimately offer them a better chance of winning government contracts.

Cabinet Office minister Lord Agnew said: “In the most recent figures, SMEs won more than £15billion in government contracts.

“But we want it to be easier for them to work with government and this guide will help small businesses navigate what can be a complex world of public procurement.

“That’s why we’re also bringing in sweeping procurement rules changes, to make it easier and more flexible for SMEs to win government work”.

The Cabinet Office has previously announced other measures which aim to level the playing field for SMEs in the ‘Transforming Public Procurement green paper’.

The government says the changes contained in the paper “will completely overhaul current EU rules”, removing barriers for smaller suppliers by getting rid of unnecessarily complicated regulations.

It adds that bureaucratic rules can put SMEs off bidding for contracts so the new reforms will open the door to public procurement for small and medium-sized companies.

The bidding process is being simplified to make it easier for SMEs to secure contracts by creating one single central platform which suppliers have to register on, so they only have to submit their data once to qualify for any public sector procurement.

To get a copy of the guide visit: https://www.gov.uk/government/publications/smes-a-guide-to-working-with-government

Redundancy payments: financial help is available

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With the government’s job protection furlough scheme at an end there are fears that there may be more job losses on the horizon.

Employers facing tough decisions may not be aware that there is a government scheme in place that can help when it comes to making statutory redundancy payments.

The Redundancy Payments Service (RPS) operates a loans scheme. Its aim is to protect retained jobs that could also be at risk because of the expense of redundancies.

Employers can apply to the RPS, to make redundancy payments directly to their employees. They must demonstrate that they have exhausted all other funding options available before applying. Written evidence that they have done so is required.

As the employer, you are financially liable for payments to your employees. If the RPS makes the payments to your employees, it will create a debt to it and it may take enforcement action if it is not repaid.

What you must pay when making employees redundant

Most employees who have worked continuously for a business for two or more years will be entitled to statutory redundancy pay.

The amount each employee is entitled to is calculated based on their age, length of employment, and weekly rate of pay. If you make an application, a completed copy of this redundancy calculation is required.

Redundant employees may also be entitled to other payments, such as notice pay, and holiday pay. The RPS cannot make these payments – unless the company enters formal insolvency.

Who can apply:

Any employer not subject to formal insolvency proceedings can apply. This includes businesses that:

• are still trading
• have stopped trading but not entered formal insolvency
• are going to stop trading soon, but are not expecting to enter formal insolvency

Redundancy payments made by the RPS are subject to statutory limits. These include a maximum of 20 years redundancy and there is a cap on the weekly rate of pay.

If approved, statutory redundancy payments will go directly to the redundant employees. If an employer makes redundancy payments directly to the employees, they cannot be included in the application.

The RPS is not able to pay statutory redundancy payments to an employer. And it may require employees to apply to the employment tribunal before making any payments.

For more details about the RPS scheme visit www.gov.uk/insolvency-service or email redundancypaymentsonline@insolvency.gov.uk.

Under the Enterprise Act 2002, businesses may be able to use other, more appropriate sources of aid to help recover from financial distress. Further information is available from the Advisory, Conciliation and Arbitration (www.acas.org.uk) or Business Debtline (www.businessdebtline.org).

As a business in financial difficulty, it is your responsibility to consider whether it remains appropriate to continue trading and to seek professional advice if you are unsure.

• To discuss any issues raised by this article and for help and advice please contact me on 01772 430000.

R&D tax credit: Could you benefit?

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The importance placed on R&D in boosting the nation’s economy was once again underlined by Rishi Sunak in his Autumn Budget.

Declaring that the government’s ambition is to make the UK “a science and technology superpower”, the chancellor announced changes to the R&D tax credit system.

The qualifying expenditure will be expanded to include data and cloud costs. Other changes will refocus support towards innovation in the UK rather than overseas.

Figures just published by HMRC reveal a strong increase in the number of businesses claiming R&D tax credit, highlighting its value to businesses.

The estimated number of claims for the year ending March 2020 was 85,900, an increase of 16 per cent from the previous year. And that rise was driven by claims from SMEs, according to the figures.

The estimated total amount of R&D tax relief support claimed over the period was £7.4bn, up 19 per cent from the previous year.

The information and communication, manufacturing, and professional, scientific and technical sectors continued to have the greatest volume of claims.

However, the relief is open to businesses from any industry and while there is a perception that the credits are just for young companies at the start of their development, that is certainly NOT the case.

And it is also worth stressing that your business may be entitled to a valuable R&D tax credit even if it doesn’t make a taxable profit.

The SME R&D relief currently available provides an enhanced deduction for tax purposes of an additional 130 per cent of qualifying revenue expenditure on qualifying R&D, in addition to the 100 per cent deduction already available for revenue expenditure under the normal tax rules.

Where the SME is loss making, alternatively, the SME may claim a tax credit up to 14.5 per cent of the surrenderable loss.

So, who is eligible for R&D tax relief under the present system? HMRC has set out some clear rules and guidelines.

It says your company can only claim for R&D tax relief if a “project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty” – and not simply an “advance in its own state of knowledge or capability”.

The project must relate to your company’s trade – either an existing one, or one that you intend to start up based on the results of the R&D.

And if your company or organisation is claiming tax relief under the SME scheme it must own any intellectual property that might arise from the project.

It is not enough to say that a product is commercially innovative. You can’t claim in respect of projects to develop innovative business products or services if they don’t incorporate any advance in science or technology.

You can’t claim R&D tax relief under the SME Scheme if you’ve been subcontracted to do the work on behalf of somebody else.

It is also worth pointing out that your project doesn’t have to be a success to qualify for the relief. The fact that it failed can be used to show that its work was genuinely pioneering.

However, if your company receives a subsidy or grant for an R&D project, it may affect how much tax relief you can claim.

Gaining this support can be an important part of a business’ decision whether to make an investment that can see very real benefits for its future.

The requirements of the scheme are broad. It can include creating new products, processes or services or changing or modifying existing ones.

• To discuss if your business may be eligible R&D tax relief contact me on 01772 430000

One-year delay to basis period reform

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Reforms to the taxation of unincorporated businesses will go ahead as planned, although they have been pushed back by the government to 2024.

Despite calls for a move away from the ‘basis period rules’ to be scrapped, the Autumn Budget announcement confirmed it will still go ahead, though a year later than previously planned.

The change means that sole traders and partnerships will be subject to income tax on profits arising in a given tax year.

For businesses with an accounting year end between March 31 and April 5, this will mean no change.

However, for other businesses, the change is likely to bring forward the date on which taxable income will need to be calculated and tax will need to be paid.

The Institute of Chartered Accountants in England and Wales (ICAEW) says the move will require estimates to be made of the profits generated in the latter part of a tax year, unless a business reverts to an accounting year that corresponds with the tax year.

The new method of calculating taxable profit will apply from the tax year 2024/25, rather than 2023/24 as previously planned.

The ICAEW says a mechanism will be required for existing businesses to transition from the old to the new regime, so special rules will apply in 2023/24.

In this tax year, some businesses will experience double taxation, as they will be taxed not only on 12 months of profits from the end of the basis period for 2022/23, but there will also be transitional profit based on the period from the end of those 12 months to April 5, 2024.

If the business has any ‘overlap relief’ it will be able to use this against the additional profits arising in the transitional tax year, to mitigate the enhanced tax charge arising.

ICAEW also understands that there will be more flexibility to use this overlap relief than was set out in draft legislation published in July.

Where additional taxable profits remain even after the deduction of overlap relief, business owners will have the option to spread that additional profit over five years.

There have been concerns that this additional profit could have a knock-on effect for other tax purposes in those years, such as the impact on personal allowances and allowances for the purposes of contributions to registered pension schemes.

• To discuss any issues raised by this article please contact me on 01772 430000.

Beware sending ‘nuisance messages’

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The Information Commissioner’s Office (ICO) has announced fines totalling £495,000 to well-known companies that between them sent more than 354 million ‘nuisance messages.’

We Buy Any Car was fined £200,000 for sending more than 191 million emails. The firm also sent 3.6 million nuisance texts.

Saga Services Ltd and Saga Personal Finance were fined £150,000 and £75,000 respectively for instigating more than 157 million emails between them. Sports Direct has been fined £70,000 for sending 2.5 million emails.

None of the companies had permission from people to send them marketing emails or texts. And as the ICO stressed, it is against the law.

The ICO is also warning that it is not just large businesses that will face action when it comes to unsolicited marketing. It stresses that the law equally covers the activities of SMEs.

Andy Curry, ICO head of investigations, said: “Getting a ping on your phone or constant unwanted messages on your laptop from a company you don’t want to hear from is frustrating and intrusive.

“These companies should have known better. The fines show the ICO will tackle unsolicited marketing, irrespective of whether the messages have been orchestrated by a small business or organisation, or a leading household name.

The law remains the same and we hope the action sends out a deterrent message that members of the public must have their choices and privacy respected.”

He added: “Companies that want to send direct marketing messages must first have people’s consent.

“And people must understand what they are consenting to when they hand over their personal information.

“The same rules apply even when companies use third parties to send messages on their behalf.”

The ICO says its investigations into the companies were sparked by complaints from the public.

It says We Buy any Car sent emails to people who had requested an online valuation of their vehicles. The Information Commissioner found that the initial emails, sent after a valuation request, were made within the law.

However, subsequent emails which also promoted the We Buy Any Car service were unlawful because they contained marketing as well as being sent without consent. The company sent more than 191 million emails between April 2019 and April 2020, plus 3.6 million text messages. It has been fined £200,000.

Both Saga Services Ltd (SSL) and Saga Personal Finance (SPF) instigated emails using partner companies and their affiliates, the ICO says.

These companies used data lists of people who had not given the companies permission to contact them. SSL instigated more than 128 million emails between November 2018 and May 2019 and SPF more than 28 million over the same period.

The companies say they relied on indirect consent, however the ICO stresses that the laws around electronic messages are stricter as they are more intrusive, and this form of consent is “not adequate”.

SSL has been fined £150,000 and SPF £75,000. Both companies have also been issued with enforcement notices ordering them to stop any illegal direct marketing within 30 days or face court action.

The ICO says Sports Direct sent 2.5 million emails as part of a re-engagement campaign between December 2019 and February 2020 with people it had not contacted for some time.

It was unable to show any evidence of consent to contact the recipients. The company has been fined £70,000.

The ICO has issued 17 fines totalling more than £1.7million so far this year (2021/22) for breaches of direct marketing laws.

Under the Data Protection Act 2018 organisations processing personal information are required to pay a data protection fee unless they are exempt.

They need to renew the data protection fee each year or tell the ICO if their registration is no longer required. If they fail to do so, the ICO can issue a monetary penalty of up to £4,000 on top of the fee.

It is the law to pay the fee, which funds the ICO’s work, but it also makes good business sense because whether or not you have paid could have an impact on your reputation.
To find out if you need to pay visit https://ico.org.uk/for-organisations/data-protection-fee/self-assessment/

Giving youngsters a Kickstart in work

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If you are an employer looking to create jobs for young people, you can now apply online for funding as part of the Kickstart Scheme.

Employers of all sizes can apply for the grant to create jobs for 16-to-24-year-olds on Universal Credit.

The government funding covers 100 per cent of the National Minimum Wage or the National Living Wage – depending on the age of the participant – for 25 hours per week for a total of six months.

It also covers associated employer national insurance contributions and minimum automatic enrolment pension contributions.

Employers can spread the job start dates up until December 31, 2021. They will get funding until June 30, 2022, if a young person starts their job on December 31, 2021.

Further funding is available to provide support so that young people on the scheme can get a job in the future.

Thousands of employers, across the private, public and not-for-profit sectors, have already applied for funding.

You can apply for a Kickstart Scheme grant by either applying online yourself or through a Kickstart ‘gateway’ who is already working with the scheme.

A Kickstart gateway can be any type of organisation, such as a local authority, charity or trade body.

They will act as an intermediary and apply for funding on your behalf. They may also provide employability support to the young people in the job.

The jobs created with Kickstart Scheme funding must be new jobs. They must not:

• replace existing or planned vacancies
• cause existing employees, apprentices or contractors to lose work or reduce their working hours

The jobs must:

• be a minimum of 25 hours per week, for six months
• pay at least the National Minimum Wage or the National Living Wage for the employee’s age group
• only require basic training

For each job you must help the young person become more employable. This could include:

• looking for long-term work, including career advice and setting goals
• support with curriculum vitae (CV) and interview preparations
• developing their skills in the workplace

For more information visit: www.gov.uk/guidance/kickstart-scheme-for-employers or http://ow.ly/TPpi50GelVE

Government delays digital tax reforms

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Businesses will have an extra year to prepare for the digitalisation of Income Tax, HM Revenue and Customs (HMRC) has announced.

The government says the delay is a recognition of the challenges faced by many UK businesses as the country emerges from the pandemic and it has “listened to stakeholder feedback”.

As a result, it will introduce Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.

It says that later start for MTD for ITSA gives those required to join more time to prepare and for HMRC to deliver “a robust service”, with additional time for customer testing in the pilot.

The MTD programme was scheduled to make 4.3 million self-employed people and small businesses keep digital records and report their income to HM Revenue & Customs every quarter rather than annually from April 2023.

Announcing the delay, Lucy Frazer, financial secretary to the Treasury, said: The digital tax system we are building will be more efficient, make it easier for customers to get tax right, and bring wider benefits in increased productivity.

“But we recognise that, as we emerge from the pandemic, it’s critical that everyone has enough time to prepare for the change, which is why we’re giving people an extra year to do so.

“We remain firmly committed to Making Tax Digital and building a tax system fit for the 21st century.”

MTD for Income Tax will now be mandated for businesses and landlords with a business income over £10,000 per annum in the tax year beginning in April 2024.

General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025, while the date other types of partnerships will be required to join will be confirmed in the future.

In March 2021, the government announced a new, fairer system of penalties for the late filing and late payment of tax for ITSA.

The new penalty system for those who are mandated for MTD for ITSA will now come into effect in the tax year beginning in April 2024, and in the tax year beginning in April 2025 for all other ITSA taxpayers.

HMRC says that for many businesses, MTD is a “natural extension” of the way they already operate. In a statement it added: “Evidence shows that many businesses currently operating MTD are already experiencing wider benefits and reductions in input errors.

“Eligible businesses and landlords will have the opportunity to gain the benefits of MTD early by signing up to the pilot, which is already underway and will be gradually expanded during the 2022 to 2023 tax year, ready for larger scale testing in the 2023 to 2024 tax year.”

HMRC ads it will continue to work in close partnership with business and accountancy representative bodies and software developers to ensure taxpayers are well supported as they adopt MTD for ITSA.

MTD first launched for those with taxable turnover above the VAT threshold (£85,000 per annum) in April 2019.

Since MTD for VAT was launched in April 2019, more than 1.5 million businesses have signed up, including a number of VAT-registered businesses that have joined voluntarily.

VAT-registered businesses with taxable turnover below the threshold need to have joined MTD for their first tax return from April 2022. More than 30 per cent have already signed up voluntarily, HMRC says.

As part of the 2020 announcement, the government set out that it would be extending MTD to businesses and landlords with business and/or property income over £10,000 per annum that are liable for Income Tax from April 2023.

To align with the introduction of MTD for Income Tax in 2024, reformed penalties are being introduced for Income Tax taxpayers required to use MTD in the tax year beginning in April 2024.

For all other Income Tax taxpayers, the new penalty regime will be introduced in the tax year beginning in April 2025.

• To discuss any aspects of MTD or any tax issues please contact me on 01772 430000

1.8 million couples benefit from extra tax relief

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Almost 1.8 million married couples and those in civil partnerships are using Marriage Allowance to save up to £252 a year in Income Tax, HM Revenue and Customs (HMRC) has announced.

Newly married couples or those in civil partnerships could be eligible for the tax saving. And even if they have been married for years, a change in circumstances could also mean they are newly eligible.

Marriage Allowance allows married couples or those in civil partnerships to share their personal tax allowances if one partner earns an income under their Personal Allowance threshold of £12,570 and the other is a basic rate taxpayer.

They can transfer 10 per cent of their tax-free allowance to their partner, which is £1,260 in 2021/22. It means couples can reduce the tax they pay by up to £252 a year.

Couples can backdate their claims for any of the four previous tax years, which could be worth up to a total of £1,220.

It is free to apply for Marriage Allowance and the easiest way for taxpayers to check eligibility and make a claim to receive 100 per cent of the relief they are entitled to is via GOV.UK.

Announcing the latest figures Angela MacDonald, HMRC’s deputy chief executive and second permanent secretary, said: “Marriage Allowance lets eligible couples share their Personal Allowances and reduce their tax by up to £252 a year.

“Nearly 1.8 million couples are already using the service – it is free, quick and easy to apply, just search ‘marriage allowance’ on GOV.UK.”

Married couples may have experienced a change in their circumstances which could now mean they are eligible for Marriage Allowance, including:

• A recent marriage or civil partnership
• One partner has retired and the other remains working
• A change in employment due to Covid-19
• A reduction in working hours which means their earnings fall below their Personal Allowance
• Unpaid leave or a career break
• One partner is studying or in education and not earning above their Personal Allowance

Marriage Allowance is 10 per cent of an individuals’ tax-free personal allowance. The maximum amount that can be transferred to their husband, wife or civil partner is dependent on the Personal Allowance for that tax year.

If a spouse or civil partner has died since April 5, 2017, the surviving person can still claim by contacting the Income Tax helpline.

Marriage Allowance claims are automatically renewed every year. However, couples should notify HMRC if their circumstances change.

• To discuss the issues raised in this article or any tax issues please contact me on 01772 430000