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Tax Tips and News
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Tax Tips and News
TAX TIPS
Rent-a-Room Scheme.
September 2024
This allows you to earn up to £7,500 tax-free from letting furnished accommodation in your home for the 2024/25 tax year. For example: You rent out a room for £9,000, the first £7,500 of this income will be tax-free. The remaining £1,500 will be subject to income tax based on your marginal tax rate. The tax exemption for this type of income under £7,500 is automatic, so you don't need to do anything. But when it goes over £7,500, you must inform HMRC and choose whether to opt into the scheme by submitting a tax return. Or alternatively, you can choose to be taxed on the rental profit (total income minus allowable expenses) if that results in a lower tax liability.
It's also worth noting that the £7,500 tax-free allowance is halved if you share the income with your partner or someone else. You're also eligible to opt into the scheme if you run a bed and breakfast or a guest house, but you can't
use it for homes converted into separate flats.
NEWS
UK & ECUADOR ANNOUNCED TAX TREATY
September 2024
The Government has published details of a new tax treaty with Ecuador. The UK and Ecuador signed their first comprehensive double tax treaty on 6 August. Once ratified, it will affect taxation on income and gains between the two countries. It will mainly cover UK income tax, corporation tax and capital gains tax and is primarily based on the OECD Model Tax Convention (MTC), bar a few deviations.
The treaty document, published by HMRC states: “The Convention shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their taxation laws.”
DIGITAL PLATFORM REPORTING RULES
September 2024
In four months' time, the first reports are due for compliance with the new Digital Platform Reporting rules. The regime, introduced on 1 January this year, requires UK digital platforms to collect and report income information for sellers using their platforms. The first reports must be submitted before the end of January 2025. It's all connected to the fact that the UK has signed up to the Organisation for Economic Development (OECD) Model Reporting Rules for Digital Platforms.
In recent weeks, HMRC published guidance for the rules around online marketplaces. It has clarified that, for example, if you only sell on a platform, the rules are not applicable to you. That's also the case for sole traders managing a platform or if you sell your goods or services directly through your own website or app.
According to HMRC: "If you manage or work within a digital platform in the UK, you may need to: collect and check information about sellers on the platform; report details about sellers to HMRC. If you need to report to HMRC, you'll need to use the digital platform reporting service." In terms of explaining what counts as a 'digital platform', below is the verbatim definition from HMRC: "Your app or website is a platform if both these apply: it connects sellers to customers to supply goods or services you know or can easily find out the amount paid to sellers for goods or services." Among the examples of services that HMRC lists includes taxi and private hire; food delivery and finding freelance work.