Guest Editor: Things to consider for your Tax Return 2020/21

This month’s guest blog post comes from Lucy Orrow, Senior Tax Manager at Lambert Chapman LLP

Lucy has compiled a list of things to think about when collating your tax return information this extraordinary year.

While the content for Self Assessment and Tax Returns might not be relevant to the majority of clients it may well be for friends and family.

FOR THOSE STILL EMPLOYED:

If you have been asked to work from home in the last year, then you are entitled to claim £6 per week as a tax-free allowance (if your employer has not included it in your pay-packet).  HMRC will allow a blanket claim for the 12 months.

‘Do you have a company car or van which is normally declared on a P11d?’

If you have been on furlough or shielding, can you prove that the car/van has not been used?  Did you return the vehicle or key to your employer?  Do you have a mileage tracker or logbook that can prove no miles have been driven?  If you can answer ‘Yes’, then it may be possible to reduce or cancel the benefit in kind for 2020/21.

FOR THE SELF EMPLOYED:

The Self Employment Income Support Scheme (SEISS) was introduced in July 2020 and there have been 3 payments in 2020/21, with the 4^th and 5^th grant payments being announced on 3 March 2021 for reporting in 2021/22.

These payments are to be reported as taxable income in the year of receipt and there will be a separate box on the tax return.  It is highly likely that HMRC will use the box, when not completed, to interrogate self-employed individuals for enquiry purposes.  The expectation is that most self-employed individuals will have taken at least the 1^st grant payment, when no work was possible.

FOR BUSINESS OWNERS:

Many business owners may have received Small Business Grant Fund (SBGF) or Retail, Hospitality and Leisure Grant Fund (RHLGF) payments.  These are classed as business income and should be included in your accounts.

Entries relating to any Coronavirus Business Interruption Loan Scheme (CBILS) are not taxable income, as they are a loan which is expected to be repaid.  They should be included in your accounts as a repayable loan.

Have you had employees on furlough?  If you have then you will have been making claims under the Coronavirus Job Retention Scheme (CJRS).  This income should be reported in your accounts as ‘other income’ as it is a Government Grant.  It may mean that the normal ratios you had traditionally reported will be different for the 2020 and 2021 accounts depending upon your year end.

Do you own a furnished holiday let property?  It will have been hard to reach the required day count this year for lettings.  HMRC allow a ‘period of grace’ election for up to two years, which means the property can continue as a furnished holiday let.

PERSONAL TAX:

Were you made redundant during the year?  Your employer will have paid your salary and any holiday due in your last pay-packet, but you may also have received other payments.  Sometimes these are not taxable but should still be reported on your tax return.

If you have not been working and income has dropped significantly, it may give you the opportunity to pass some of your married couples allowance to your spouse, if they are a basic rate taxpayer.  This claim can be done online and can save up to £250 in tax.

If your income has dropped below £50,000 you can choose to opt back into the child benefit allowance.

What have you been doing with your spare time during lockdown?  We are finding a number of clients who have been speculating in Bitcoin.  With the fluctuating markets and low interest rates, Bitcoin has been the ‘new thing’ to invest in.  Any transactions in Bitcoin or similar currency are taxable, either as trading income and liable to income tax or as a disposal liable to capital gains tax.

NON RESIDENT INDIVIDUALS:

With travel restrictions being in place around the World, it has made travelling for work difficult and for many they have ended up stranded in countries which are not their home or workplace.

HMRC allow for a period residence for exceptional circumstances, which covered things like the dust cloud a few years back and short-term hospitalisation but many have found themselves stuck in the UK since March 2020.

This means that they will be caught as a UK resident for 2020/21 because they will have breached the maximum days of 183.

The Tax Team at Lambert Chapman LLP are happy to assist with any queries, so please contact [email protected]