The allowances for tax on Furnished Holiday Lets have been changed for the new tax year starting 6th April 2025.

In previous tax years owners of Furnished Holiday Lets were given a generous package of allowable expenses. In the tax year 2025-2026 HMRC have tightened up. Furnished Holiday Let allowances are now more in line with the allowances for normal letting.

HMRC have clear guidelines for what qualifies as a holiday let. For example your furnished holiday let needs to have occupancy for a set proportion of the year in order to qualify. For more details go to http://www.hmrc.gov.uk/

Furnished Holiday Lets are becoming very popular in the UK. In 2022 there were 110,000 in the UK, 2/3rds were owned by landlords renting one property. https://researchbriefings.files.parliament.uk/documents/CDP-2024-0088/CDP-2024-0088.pdf#:~:text=In%202022%2C%20the%20OTS%20said%20that%20tax%20return,figures%20appear%20to%20have%20been%20published%20since%20then.

Barnowl Bookkeeping helping you with your Furnished Holiday Let www.barnowl-bookkeeping.co.uk . Covering King’s Lynn, Wisbech, North Norfolk Coast, Swaffham and Downham market.

Self Employed

Tax Cuts for the Self Employed have figured in the last two budgets. Let’s look at what the tax cuts mean to the self employed entrepreneur.

National Insurance contributions are the chosen vehicle for tax cuts. In the Autumn Statement the government reduced Class 4 NICs from 9% to 8%. In addition they stopped the requirement to pay class 2 NICs. These changes come into effect in April 2024.

Yesterday Jeremy Hunt went on to further reduce Class 4 to NICs from 8% to 6%.

So what does this mean? Class 2 NICs are the method the government has used for the self employed to have entitlement to state pension, employment and support allowance and other contribution based benefits. When self employed profits passed the threshold of £6,725 Class 2 NICs became payable. Added to this self employed with a profit below this threshold could pay voluntarily to gain access to the benefits.

Fortunately, although Class 2 NICS are no longer, the self employed will still to have access to these benefits.

National Insurance: introduction: What National Insurance is for – GOV.UK (www.gov.uk)

Giving a like for like comparison of the deductions for NICs before and after the Autumn and Spring NIC cuts:

So how much extra money in your pocket : almost £700.

If you make a self employed profit of £30,000

Make sure you’re not paying too much tax! Barnowl Bookkeeping is here to help with self assessment, VAT, CIS and payroll. Located near King’s Lynn near to Wisbech, Downham Market, Swaffham, Fakenham and the North Norfolk Coast. Click the link for more information.

Self Employed – www.barnowl-bookkeeping.co.uk

By December 2024 HMRC plans to reduce access to both its call centres and helpline advisers at its contact centres by 30%.  To achieve these targets people will be forced to move to digital services for help with tax.

Jim Harra, head of HMRC, told MPs that in the last year the number of phone calls had risen three million to 38m and volume of post had also grown significantly. The number of tax payers overall has grown. The number of taxpayers involved in more complex areas of tax has grown.

This growth is putting increased pressure on HMRC.  Sadly HMRC budgets have been cut and staffing costs means that recruitment is not an option.

The self assessment helpline closure during the summer was seen as a trial for these new plans. HMRC deemed it a success although customer satisfaction levels dropped from 29% to 24%.

With thanks to Sara White, Accountancy Daily.

Umbrella companies can be helpful for contract workers with multiple employers (which is very common for short term contractors). The umbrella company takes on the administrative burden of payroll from the contractor. It charges fees for its work

This is how it works:   

• A worker is engaged to work for a contractor
• Worker signs an employment contract with the umbrella company
• Umbrella company bills the contractor for work done (by the worker)
• Umbrella company pays the worker

This is great for anyone working for lots of different contracts.

Unfortunately there are some unscrupulous umbrella companies. They are attracting workers with schemes that enable their workers to have higher pay. Very often these schemes are illegal.

Some examples of illegal payments:

• Money on the pay slip which is not taxed (eg a loan)
• The worker is paid more money than shown on the payslip

Eventually the worker faces a large tax bill with extra penalties and interest.

Just remember :

If it sounds too good to be true – it is!

Here is a link with further information: https://www.gov.uk/guidance/working-through-an-umbrella-company#how-an-umbrella-company-works

There are £26.6 billion of pensions in the UK which remain unclaimed by 2.8 million savers. That’s an average of £9,500 per saver (ref. Pensions Policy Institute Autumn 22).

The last time I moved house I had 4 different pensions which needed contact details updating, it wasn’t great fun but I got it done.

It’s not a much of a stretch to see that anyone in poor health or not so hot on admin may have forgotten to do this amidst the upheaval.

Keep your pension details up to date, make sure your employees know that they are personally responsible for keeping their pension details up to date and help your nearest and dearest keep theirs up to date to.

So is it still worth paying dividends or just pay a bonus?

I’m really interested in this, so I’ve been thinking about this, had a dig and thought I’d share with you what I’ve found.

This is an important question for those of you who are company directors or have employees with shares. Historically dividends were generally seen as a tax efficient way of employee shareholders (including directors)  taking money out of a company.

HMRC have made changes to both corporation tax and personal tax which are narrowing the gap. If you company is going to make a profit is it more tax efficient to have a bonus in your pay packet or issue dividends?

If you have a bonus:

There could be a combination of additional personal tax and NI and employers NI (depending on your gross salary). The personal tax allowance is frozen for 23-24 at £12,570.

The company does not pay corporation tax on the bonus.

If you take dividends:

The dividend you take will be net of corporation tax.

HMRC have increased the corporation tax rate from 19% for profits over 50k to 25% with marginal relief up to £250k (so there effectively is a sliding scale of CT rates between 50K and 250K profits).

For the tax year 23/24 HMRC have reduced the tax allowance on dividends to £1000. For a basic rate tax payer (£12,750 to £50,270) the tax on dividends is 8.75%. Higher rate tax is at 33.75% (£50,271 to £125,140) and additional rate at 39.35%.  

The wonderful Stephen Relf at Croner-I has done some work on this and has produced a very useful sample calculation. I won’t bore you with the details, here is the summary:

Company Profit £500K (before bonus paid)

Bonus / Dividend Available £40K (before CT / Employers NI)

For someone falling in the Higher Rate tax band he calculated:

23/24 the dividend route gave a tax advantage of £173.

22/23 the dividend route gave a tax advantage of £2138.

In conclusion Stephen Relf states that much depends on individual circumstances but there are broad principals in mind, that dividends are more likely to be tax efficient where the company continues to pay CT at 19% or where the recipient is a basic tax payer.   

For further reading please refer to Croner-I Extracting Profits, Paying and Receiving Dividends.