Many people have started earning extra income from a part-time profitable activity commonly described as a side hustle. This could be from a variety sources such as, selling online, content creation, income or gains from crypto assets, letting out additional property or a spare room, pet sitting or dog walking etc.

When does this become taxable income?

If your side hustle amounts to you running a business or trade and you are making a profit above your available tax allowances.

You will need to register for Self Assessment if your gross income from additional income is more than £1,000.

What is a trading activity?

HMRC will look at the nine “badges of trade” to see if the side hustle is a trade. The badges of trade are:

• Profit motive: are you buying and selling goods or services to make a profit?
• Frequency and number of transactions: are you selling a number of items or it is just the odd one-off?
• Modification of the asset: are you enhancing the asset in any way for sale?
• Nature of the asset: are the items you are selling, the kind of items typically sold by a business?
• Existence of similar trade: if are an artist, and you sell art, you are most likely trading as an artist. If you then sold a couple of cars, this is unlikely to indicate that you are now a motor dealer.
• Source of finance: are you financing your side-hustle with short-term finance, or ploughing your sales proceeds back into buying more stock for resale?
• Length of ownership: are you selling items that you have owned for a very short time (this indicates you could be buying in stock for resale)?
• The way the sale is carried out: e.g. if you create an online shop that would indicate trading.
• The reason for the acquisition and the sale. e.g. if you are buying goods for resale that indicates trading.

You only need to report to HMRC taxable activities that make a profit, although, you may also want to register for tax to claim a loss.

What other services may be trading?

If you are providing services to others, this income may also be trading income. This includes activities such as:

• Babysitting and nannying.
• Gardening and repairs.
• Hiring out equipment.
• Dog walking.
• Taxi driving.
• Delivering food.

If you receive income from multiple sources you will need to add together your income from all trading sources, if your total income is more than £1,000 you will need to tell HMRC about it.

Information about crypto assets

If you have been buying and selling crypto assets, you may also need to include details of the income and gains on your tax return.

Capital gains tax may be due when you sell or exchange any crypto assets. This includes selling crypto assets for cash, exchanging one type for another, gifting them, or making purchases using crypto assets.

If you receive crypto assets as employment income you may be due to pay income tax and national insurance contributions on these payments.

If you have received any income from a side hustle please get in touch and we will help you navigate your tax obligations.

 

 

From 6 April 2025 (1 April 2025 for companies) income received from Furnished Holiday Letting (FHL) will no longer benefit from the tax advantages available to property owners who met the specific FHL criteria. Instead this income will be taxed along with traditional residential lets.

To read about the changes to FHL direct tax treatment, please see here

VAT Treatment of Furnished Holiday Letting

For VAT purposes, FHLs have always been a taxable supply, however, residential property income is an exempt supply. This treatment for FHL properties is not changing.

Currently the VAT registration threshold is set at £90,000 therefore many landlords will not need to register, particularly if this will be their only taxable supply. If your total taxable income exceeds the VAT registration threshold, all rental income from FHLs is subject to VAT at a rate of 20%. This aligns their tax treatment with hotels and guesthouses.

You may not be aware that you cannot separate different business activities conducted by the same legal entity, even if the different businesses individually are below the VAT registration threshold. For example, if you are a sole trader with taxable income of £70,000 and you also have a furnished holiday property with gross rental income of £25,000, although neither business exceeds the threshold, collectively, you as a taxable person are over the threshold and will therefore be required to register for VAT.

Jointly owned properties

Under the old FHL rules, where properties are jointly owned between spouses, each spouse was taxed on their share of the income from the FHL property business. This could be split based on their involvement with the business. However, now that income from these properties are aligned with other residential properties, the default position is for FHL income to be taxed 50:50. This could lead to an increase in the overall tax liabilities for a couple.

If one spouse had previously run the FHL business in their name only and they were VAT registered, a new registration will be needed for the husband and wife as an FHL business.

Please get in touch with the team, if you have any queries on the tax or VAT treatment of Furnished Holiday Letting.

Michael runs an online retail company which has a high volume of sales being processed through his website so needs to ensure the whole process is running seamlessly. He was having issues with the link between the  ecommerce software and his bookkeeping software package meaning that he often had to waste time manually posting corrections to ensure the data integrity. He decided that it was time to move to a cloud based product to resolve the linking issues, make better use of available application add ons and so that his data was always accessible in real time.

We discussed the available options, weighing up the pro’s and con’s and decided that Xero would be a perfect fit for this thriving business.

We spent time with the client deciding exactly how much of the historic data they wanted to transfer to the new system, set up the customers and suppliers for them, linked the bank, entered the opening balances and provided some training on the new software.

Michael was extremely happy with how smoothly the whole process was implemented and his business is going from strength to strength now he can invest his time in growing and developing the business rather than wasting it fixing erroneous transactions.

If you’d like to upgrade your business software but aren’t sure exactly how to go about please get in touch to see how we can help!

Savings Income

Despite interest rates increasing, tax-free allowances are not, therefore more people will find that they have tax to pay on savings and investments income.

Most people can earn some interest without paying tax on it.

• Basic rate taxpayers can earn £1,000 of interest on savings in a year without paying any tax
• Higher rate taxpayers can earn £500 of interest on savings in a year without paying any tax
• Additional rate taxpayers do not get a personal savings allowance.

Also, if you are a non-taxpayer you may be able to earn as much as £18,570 in savings interest tax-free. This will depend on how much income you have from other sources, i.e. pension etc.

If you earn interest in excess of these amount, the total interest earned will need to be reported to HMRC.

Dividend Income

If you own shares you can receive dividend income up to £500 without paying any tax. Any dividends received over this amount will be taxed based on your income tax bands:

• 75% for basic rate taxpayers
• 75% for higher rate taxpayers
• 35% for additional rate taxpayers.

How to report savings and investment income to HMRC

If you are employed or receive an occupational or private pension and your total savings and investment income is between £1,000 and £10,000. HMRC will usually adjust your PAYE code to collect the tax due from your salary or pension. Whilst HMRC will automatically receive details of the interest earned from various providers, it is your responsibility to ensure they have collated information of all of the interest earned. If you receive dividends between £1,000 and £10,000, you will need to tell HMRC the amounts to include.

If you earn more than £10,000 in savings or investment income you will need to register for self-assessment and complete tax returns which include details of your total income for the year. For income earned in 2024/25 you should register for self-assessment by 5 October 2025. If you require assistance with your tax return, please get in touch.

If you already complete self-assessment tax returns, the amounts of interest and dividends received will need to be included in your tax return.

If neither of the above apply, you should be contacted by HMRC to let you know what tax is due on your savings interest. Again, you will need to tell HMRC about any dividend income you receive during the year.

Capital Gains on sale of shares or other investments

You can dispose of capital assets and make gains tax free gains up to £3,000 per year. For amounts in excess of this you may need to pay capital gains tax when you dispose of shares or other investments.

If you would like help reporting these to HMRC, please get in touch.

 

 

 

 

 

The end of the current tax year is fast approaching. To avoid an automatic late filing penalty, you should submit your 2024/25 tax return between 6 April 2025 to 31 January 2026. What are the benefits or early submission?

 

1. If you need to register to file a Self Assessment, bear in mind that this takes time

 

2. Peace of mind and avoid the stress of doing it at the last-minute.

 

3. You’ll know what you owe, which will help you to budget for the year. You can pay your tax bill in instalments if you need to – you can also get help if you find you can’t pay.

 

4. If you are due a refund, you’ll get it sooner too.

 

5. If you are applying for a mortgage or loan, or if you want to claim benefits, filing early provides proof of income which you may need.

 

6. Avoid the January rush, by getting your tax return in earlier, you will reduce the likelihood of errors.

 

7. HMRC phone lines get busy in the run-up to the Self Assessment deadline in January.

 

8. Get more time to look at tax planning strategies.

 

9. If you need to request information from providers, starting early will give you the breathing space you need.

 

10. Give yourself time to find the right accountant who will provide the support you need.

Meet Sam, she runs a business which has achieved significant growth over the last few years. She needs to make large investments in infrastructure and onboarding new staff to keep up with the demands of her growing business. Sam wanted to have a handle on the finances but she’s incredibly busy with the day to day operational side of the business so decided to rely on us to manage the finance side of the business.

We prepare quarterly management accounts, give her the headline figures and then have regular Teams calls to discuss any planning points. With this increased level of information Sam was able to continually grow the business whilst also plan pension contributions, fully utilising her carried forward allowance

The statutory accounts are prepared a month after year end, we then finalise the budgets for the coming year, though there is rarely any changes as we’ve prepared the management accounts each quarter and has ongoing discussions with Sam throughout the year.

If you think your business could benefit from regular management accounts please get in touch.

Whilst listening to the Spring Statement it seemed like there were no major tax announcements, Rachel Reeves focus was much more about spending. However, once you delve into the detail there were a few changes revealed, mostly focusing on tax management, compliance and administration.

Making Tax Digital for Income Tax (MTD for IT)

As we get closer to Making Tax Digital for Income Tax rolling out, there have been a few more tweaks to the system.

• MTD for IT will start from 6 April 2026 for sole traders and landlords with gross qualifying income over £50,000. This is based on actual income on the 2024/25 tax return.

 

• From 6 April 2027 this will extend to sole traders and landlords with gross qualifying income over £30,000. This is based on actual income on the 2025/26 tax return.

 

• From 6 April 2028 this will extend again to include sole traders and landlords with gross qualifying income over £20,000. This is based on actual income on the 2026/27 tax return.

 

• Exceptions have now been granted for certain groups of taxpayers:
  • Taxpayers with a Power of Attorney
  • Non-UK resident entertainers and sportspeople with no other income relevant to MTD
  • taxpayers to whom HMRC cannot provide a digital service

 

• The following groups will not be required to operate MTD for IT during this parliament. (until 2029)
  • ministers of religion
  • Lloyd’s underwriters
  • recipients of the Married Couple’s Allowance or Blind Person’s Allowance.

 

• There will be a one-year deferral, from April 2026 to April 2027, for taxpayers who are required to submit information on SA109 (residence and domicile pages).

 

• HMRC will now have the power to cancel penalty points and financial penalties

 

Information from Third Parties

HMRC are aiming to use the information collected under current powers to close the tax gap. We have already seen an increased in “nudge letters” as HMRC gather the information from various third parties. It is expected that they will pre-populate tax return data to reduce the burden on taxpayers and help them to get their tax right. Expect many organisations to start collecting tax identifiers to improve the information sent – NI numbers for individuals, company numbers, and VAT numbers for businesses.

Tax Debt Collection

Additional funding to increase third party debt collection agencies to increase collection of overdue tax debt.

Funding for an additional 600 HMRC debt management staff, building on the 1,800 debt management staff announced in the Autumn Budget 2024.

Investment to recruit an additional 500 HMRC compliance staff to expand their work to tackle non-compliance and increase tax revenue.

Tax Related Consultations

A number of consultations were announced in the Spring Statement concentrating on closing the tax gap and improved compliance. Here are a few of the consultations:

• Advanced clearances for the Research and Development tax reliefs, with the aims of reducing error and fraud, increasing certainty for customers and improving customer experience.

 

• Modernising how HMRC acquires and uses third-party data to make it easier for taxpayers to get tax right first time.

 

• Options to improve the financial penalties that apply when inaccuracies are found in returns and documents submitted to HMRC and where taxpayers do not meet their obligations to notify HMRC of circumstances that affect their tax liability.

 

• Options to enhance HMRC’s powers and sanctions to take swifter and stronger action against tax advisers who facilitate non-compliance.

Other announcements

Taxpayers who join Making Tax Digital from 6 April 2025 will be subject to increased late payment penalties for VAT and IT. The new rates will be 3% of the tax outstanding where tax is overdue by 15 days; plus 3% where tax is overdue by 30 days; plus 10% per annum where tax is overdue by 31 days or more.

As ever, if you would like more information about any of these announcements, please get in touch.

 

There were no tax changes announced in the Spring statement 2025.

From 6 April 2026 HMRC will bring in new rules for individuals with gross income from self employment and letting property over £50,000. From 6 April 2027 these rules will affect individuals with gross income from self employment and letting property over £30,000. The new rules will require individuals to keep digital records, transfer any data by digital links and complete quarterly updates to HMRC.

What information do we have to keep?

The digital records will have to record the amount, category and date of income and expenses related to your self employment and/or property business. This information can be kept in specialist software or on spreadsheets.

How do we transfer digital records?

Once the information has been created in software or spreadsheets any transfer of this information needs to be made digitally. This includes submitting quarterly updates, making any corrections and filing the end of year submission, along with the transfer of business records from you to any bookkeeper or accountant you engage.

What are digital links?

Transfers by email, importing data and using memory sticks are all permitted digital transfer methods.

What do we have to send to HMRC?

From these digital records you will be required to submit your business income and expenses to HMRC every quarter. The quarterly updates will show details of your self employment and/or property business only. Each trade or property business should be submitted separately.

What is a quarterly submission?

Each quarter you will send cumulative updates of your income and expenses. There will be no requirement to make any accounting or tax adjustments. You only need to send details relating to self employment and property.

I have both self employment and property can I send everything to HMRC together?

Unfortunately, no.  A separate submission will be needed for a trade, a UK property business and a foreign property business. This could mean that you need to send 8 or more updates each year.

What if I make a mistake?

As the submissions relate to cumulative data, if you discover you have made an error in a previous submission, it can be corrected in the next submission. You should also ensure the underlying records are corrected too.

When do I have to send updates?

Quarterly updates will need to be made based on the tax year dates. Reports will be required for the following periods:

	Period Covered	Filing Deadline
Quarterly update 1	6 April to 5 July	7 August
Quarterly update 2	6 April to 5 October	7 November
Quarterly update 3	6 April to 5 January	7 February
Quarterly update 4	6 April to 5 April	7 May

Alternatively, a “calendar quarters election” can be made. This will not alter the filing deadline but may be simpler for businesses who prepare their accounts to the month end.

	Period Covered	Filing Deadline
Quarterly update 1	1 April to 30 June	7 August
Quarterly update 2	1 April to 30 September	7 November
Quarterly update 3	1 April to 31 December	7 February
Quarterly update 4	1 April to 31 March	7 May

To enable calendar quarter updates, you must make the election before the first update is made for the year. This will continue until it is cancelled. To return to standard quarters the change must be made before the first update for the year.

What happens if I don’t submit updates on time?

Once moved on to MTD taxpayers will be subject to a points based penalty system, similar to the rules for VAT.

Each time a submission deadline (quarterly updated and year end submission) is missed taxpayers will receive a penalty point. Once you reach the points threshold a £200 penalty will be issued. Any additional late submissions will also result in a £200 penalty.

To clear the penalty position, you will need to have submitted all returns required for the previous 24 months and achieve a level of compliance (4 quarterly updates or 2 updates and an end of year return.

What happens at the end of the year?

After the quarter 4 update is submitted you will be able to complete a “digital tax return” or “end of year submission”. This will be similar to the current self assessment tax return, however this return will be pre-populated with the income and expenses shown on the quarterly submissions. You will then need to make any accounts and tax adjustments required. Any non-business income sources, i.e. salaries, pensions, investment income etc will need to be added, along with any claims for tax reliefs for the year. This will need to be submitted to HMRC by the usual self assessment deadline of 31 January following the tax year.

What software is available?

Whilst HMRC will not be providing any compatible software themselves they have published a list of compatible software. HMRC MTD Software We have experience working with a wide range of software, please get in touch if you would like help choosing what would be a good fit for you.

Do I have to use software?

Submissions to HMRC will need to be made using software, but not all software is the same. Some software will send quarterly updates only, some is designed for landlords only. Bridging software can allow you to continue using your current spreadsheet or accounting software and will connect them to MTD compliant software. To help you navigate this, please get in touch to see what will work for you.

Will HMRC tell me if I need to register?

From April 2025, it is expected that HMRC will start writing to all taxpayers where the qualifying income on their 2023/24 tax return would meet the criteria to report through MTD in the future. This is on the assumption that their income will remain at a similar level in 2024/25.

Following 31 January 2026, HMRC will write to those taxpayers who have met the criteria to register for MTD for IT from April 2026.

Will I be automatically registered for MTD?

HMRC will not automatically register taxpayers for MTD. If you exceed the threshold it is your responsibility to register.

Can I choose not to be included in MTD?

If you meet the income threshold for MTD you must register to make quarterly submissions.

There are a few instances where you can get exemption, please follow this link for further details. Exemption from MTD You must apply for exemption ahead of time if this applies to you.

I have income from joint property, what do I need to include in my submission?

You only need to keep digital records and submit updates for your share of the income and expenses. You can choose to keep line-by-line details of your share, or you can report your share of the income each quarter and your share of the expenses annually.

Will you still prepare my accounts and year end tax return?

Don’t worry we will still be here to prepare your accounts for the year and submit your tax return as usual. You will need to decide how to do the quarterly bookkeeping and submissions required by HMRC. Either do the work yourself, engage a separate bookkeeper, or let us take care of all of your reporting requirements.

Can you do all the quarterly reporting for me?

If you would like us to complete all of your reporting requirements, please get in touch to get a quote.

Can I start early to get in the swing of it?

For 2025/26 HMRC are running a pilot system to enable you to test how things work. HMRC have a dedicated support team for taxpayers and agents to get any additional help required. During this testing phase no penalties will be due for late submission. If you would like to be involved in this test, please let us know and we will check your eligibility to join the pilot.

Claiming Tax Relief on your Employment Expenses

If you have used your own money to pay for things you must buy for your employment, you may be able to claim tax relief on these amounts. To qualify for tax relief, you must use these things for your work only.

You cannot claim tax relief if your employer gives you all of the money back or if your employer provides an alternative item but you choose to use a specific model.

If your employer reimburses some of the expenses incurred, you can only claim tax relief on the extra amounts you have spent.

You have four years from the end of the tax year to make a claim, therefore to claim for the tax year ended 5 April 2021 HMRC must receive the claim by 5 April 2025.

What expenses can you claim tax relief on?

To be able to claim tax relief on employment expenses, they must have been incurred wholly, exclusively and necessarily in the performance of the duties of your employment. You must also ensure that you keep records and evidence of any expenditure incurred.

Working from Home

You can claim tax relief if you have to work from home because your job requires you to live far away from your office or your employer does not have an office.

You can either claim tax relief of £6 per week or the exact amount that you have spent on things to do for work such as business calls and gas and electricity for your work area. If you want to claim on the exact amount spent you must provide copies of receipts or bills to support the claim.

Uniforms, Work Clothing and Tools

For certain industries you can claim tax relief on the cost of repairing and replacing small tools that you need to do your job and cleaning, repairing or replacing a uniform or specialist clothing.

You can either claim the flat rate relevant for your industry, or you can claim the exact amount you paid. If you want to claim on the exact amount spent you must provide copies of receipts or bills to support the claim.

Vehicles you Use for Work

When using your own car, van, motorcycle or bicycle, you can claim flat rate mileage expenses based on the number of business miles you have travelled during the year.

How much you can claim will depend on the type of vehicle you are using and whether it is your own vehicle (bought or leased) or a company vehicle.

You will need to keep a mileage log which will need to be sent to HMRC. This log should detail the reason for each journey, the type of vehicle used, and the postcodes for the start and end point of each journey. Business mileage will not include traveling to and from your work, unless this is a temporary workplace.

You will need to deduct any amounts reimbursed by your employer to cover your costs.

Professional Fees and Subscriptions

If you must pay membership fees to a professional body to be able to do your job, you can claim tax relief of the costs incurred. If any amounts are paid by your employer then these must be deducted from the amount claimed.

Travel and Overnight Expenses

If you need to travel for business purposes you can claim the cost of hotel accommodation, meals and business calls. No amounts can be claimed for newspapers, bar bills, personal phone calls or laundry. If any amounts are paid by your employer then these must be deducted from the amount claimed.

Other expenses

If you have incurred any other expenditure in the course of doing your job there may be tax relief on this.

If you would like us to prepare a claim for tax relief on your employment expenses, please get in touch and we would be happy to help.