With the recent surge (and fall) in the value of crypto currencies, it is important to bear in mind HMRC view these currencies as assets and individual investors may have to pay capital gains tax on any gains made from their activates. At certain levels Income tax and Class 4 National Insurance may be payable instead.

To begin with the price paid for these currencies and any other expenses incurred to acquire them must be recorded accurately to calculate future gains correctly.

Tax on gains over the annual tax-free allowance of £11,300 (for individuals) for tax year 2017/18 is charged at 10% or 20% depending on the individual’s circumstances.

Gains must be reported via the self-assessment system on tax returns by 31 January following the end of the tax year in which the disposal occurs to avoid any penalties from HMRC.

If up to four times the rate of the annual tax-free allowance of £11,300 of i.e. £45,200 of crypto assets are sold even if the net gains are not more than the annual tax-free allowance, then the sale must be reported to HMRC.

Married individuals could gift some of their assets to their spouses prior to disposal to utilize their tax-free allowance resulting in a combined tax-free gain of £22,600 per tax year.
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If the frequency of and time spent buying and selling crypto currencies is sufficient then HMRC may consider it a trade and then rather than the profits being chargeable to capital gains tax they will be chargeable to income tax at 20%, 40% or 45% and National Insurance at 9% and 2%. This would result in a higher tax charge and so care must be taken to get your disclosure to HMRC correct.

​​For further information please contact us on [email protected].

Changes to Income Tax 
Personal allowance is now set at £11,000.
The basic rate threshold is now set at £32,000 which means earnings in excess of the personal allowance up to this threshold are taxed at 20%.
Earnings between £32,001 and £150,000 are taxed at 40% and Income over £150,000 would fall into the additional tax rate which is taxed at 45%.
Personal allowance will be reduce on income over £100.000 at rate of £1 for every £2 on income, which means at £120,000 personal allowance is wiped out. The £20,000 earned over £100,000 is effectively taxed at 60%.

Dividends
The new dividends regime is now in place. Under the new regime the first £5,000 is tax free, after that the basic rate tax is set at 7.5%. Dividends at higher rate are taxed at 32.5% and 38.1% at additional rate tax.

Capital Gains Tax (CGT)
Capital gains tax was reduced from 18% to 10% at the basic rate, from 28% to 20% above basic rate of earning, although this reduction does not apply to residential property which will continue to be taxed at the previous higher rates.

VAT
VAT compulsory registration threshold is set at £83,000 in any 12 months period.
If you receive goods worth more than £83,000 from the EU in the UK then you must register for VAT.
You must register within 30 days of your business turnover exceeding the threshold however you may wish to register voluntarily if your turnover is below the threshold of £83,000 or if its advantageous to your business, perhaps you sell mostly to UK vat registered businesses?

​For further information please contact us on [email protected].

​Investing in a buy-to-let can be a good idea but there are a few things from tax perspectives that you need to take into account before deciding to invest.
 
You need to consider that you will probably pay tax when you purchase the property, you will pay tax on the rental earnings and when you decide to sell the property.
 
Stamp Duty Land Tax (SDLT)
More commonly known as stamp duty, SDLT is tax you pay when you purchase any property.
Current rates of SDLT are;

• Properties worth up to £125,000 are exempt
• Properties worth between £125,001 and £250,000 are taxed at 1%
• Properties worth between £250,001 and £500,000 are taxed at 3%
• Properties worth between £500,001 and £1m are taxed at 4%
• Properties worth between more than £1m and £2m are taxed at 5%
• Properties worth more than £2m are taxed at 7%

 
Form April 2016 the government has decided to add an additional 3% above the current SDLT rates for purchases of second home or buy-to-let properties.
 
Income Tax on Rental Earnings
 
Profits form rental income are subject to tax in the same way as other earnings.
 
To calculate your profit you take all rental earning and take away any “allowable expenses” which we discussed in December 2015, to read about “allowable expenses” click here.
 
Capital Gains Tax (CGT)
 
When you dispose of an asset you need to pay CGT on the gains.
 
Every year you have an annual tax free allowance, for the tax year 2015/16 this allowance is £11,100 which means gains of up to this threshold are tax free.
 
Any gains over the annual tax free allowance are subject to tax at 18% for basic rate taxpayers, and 28% for those in higher tax bracket.
 
You could reduce your CGT bill by offsetting some of your expenses against it, as follows:

• Solicitor’s fees
• Estate Agents fees
• Advertising fees
• Stamp duty
• Any expenses incurred when improving the property
• Any qualifying period for Private Residential Relief (PRR) and Letting Relief

 
You don’t pay CGT on your main place of residence, so if for any period you own the property and lived in it as your only home, this period could qualify for Private Residential Relief (PRR).
 
Example of Calculating CGT

If you own a property for 10 years (120 months), live in the property as your main residence for 2 years (24 months) then use the property as second home for 4 years (48 months) and  rent the property for last 4 years (48 months) you can claim both private residence (PRR) and Letting Relief.

​Assume the profit made is £50,000. The amount of PRR you can claim is 24 months, plus 18 months for the final period of ownership, equaling 42 months which equates to 35% of the total period of ownership.
 
You can claim Letting Relief on the 30 months, this is 48 months minus the 18 months of PRR. This equates to another 25% of the total period.
 
Total Gains                                          £50,000
Less PRR                                                £17,500
Less Letting Relief                               £12,500
Less 2015/16 Allowance                     £11,100          
Total Gain Subject to CGT Charge    £8,900
 
The £8,900 is subject to capital gains tax charge at either 18% or 28% depending on the total income of the tax payer in that year.
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For further information please contact us on [email protected].