HMRC urged to publish guidance on planned self-assessment allowances
HMRC must make clear proposedchanges toincome allowances that could create confusion over what business owners must declare in self-assessment tax returns, according to a lobby group.
Due to tabled income allowance changes in the upcoming Finance Bill, the Low Incomes Tax Reform Group (LITRG) has raised concerns that new sole traders and self-employed business owners could be registering for self-assessment and submitting tax returns when they are not required to.
Legally, people running a business must notify HMRC of new sources of income, such as receipts from a trade or business, by 5 October in the tax year following when those earnings began. For example, if a person began trading within the April 2016 to April 2017 tax year, then they must have registered with HMRC by 5 October 2017.
However, as of 6 April 2017, those with income below 1, 000 will not have to declareit income to HMRC by 5 October 2018, or pay tax on it. The proposed measure introduces a pair of annual self-assessment allowances of 1, 000 each one for trading and one for property income.
According to LITRG, new income allowances could cause confusion for people starting to trade or rent properties in the 2017/18 tax year. The group warned that new traders could potentially register for self-assessment unnecessarily, while those above the new threshold may be unaware and run the risk of penalties for late submissions.
Commenting on the calls to clarify self-assessment changes, LITRG chair Anne Fairpo said HMRC could go further in guiding small business owners through the tax system.
we call on HMRC to be ready to make available very clear guidance on these changes and to publicise them sufficiently, she said.
Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.
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