338,000 Less tax returns for HMRC

338,000 Less Tax Returns for HMRC

One drive of successive Governments has been to free up HM Revenue & Customs’ (HMRC) time to focus on compliance matters.  A main feature of this drive has been to reduce the number of Self Assessment Tax Returns (“Tax Returns”) being requested and the latest change in this area has been to stop automatically requesting Tax Returns from individuals who only have PAYE salaried income of less than £150k for the 2023/24 tax year. From the 2024/25 tax year, this threshold will be removed entirely, meaning that all PAYE taxpayers will not be issued with Tax Returns if that is their only source of income, regardless of the level of income.

There is a strong note of caution to all taxpayers in this position that now places a greater emphasis on the “Self” part of Self Assessment: just because HMRC has not issued a Tax Return, it does not mean that one is not due.

There is now a greater onus on a taxpayer to be aware of the Tax Return filing criteria – broadly, if there is an untaxed source of income or a gain a Tax Return will be required.

HMRC’s own criteria are that Tax Returns need to be filed for a year when any of the following apply:
• Receipt of gross rents from rental property over £10,000 or over £2,500 of profits;
• Investment income (i.e. bank interest and dividends) of more than £10,000*;
• they are a partner in a business partnership;
• pay the high income child benefit charge (HICBC);
• are self-employed with gross business income over £1,000;
• asset disposals are made generating a gain of more than the annual exemption, which for 2023/24, was £6,000 (or proceeds in excess of £24,000 regardless of the level of gain).

*It should not be assumed that HMRC have this information. HMRC’s view is that any investment income can be collected via the PAYE code if it is up to £10,000 but this still requires the taxpayer to let HMRC know the amount. It is often the case that it is easier to provide this information to HMRC on a Tax Return rather than relying on more informal means of communication such as letters, phone calls and using the Personal Tax Account.

It should be noted that there has been some recent case law whereby a letter to HMRC to advise that a taxpayer had to do a Tax Return was held to be insufficient notification of the requirement to do the Tax Return. In this case, once HMRC caught up on their post (the first letter was sent in 2018 and it was only picked up by HMRC in 2022 – after four tax years had passed! Tax Returns were issued and late notification penalties were levied by HMRC on top of the tax and interest owed for late payment).

Aside from the liability items above, a Tax Return can be used to claim reliefs such as pension contributions, gift aid, EIS and SEIS investments etc.

The above is a salutary reminder of how the tax system works in the UK – taxpayers should be making active decisions to consider whether they need to file a Tax Return each year, rather than relying on HMRC to tell them if they need to…the risk is all at the taxpayer’s expense!

High Income Child Benefit charge – Threshold Changes

After much lobbying, the Chancellor announced an increase to the level beyond which the child benefit needs to be paid back and the band across which this applies.

Before 6 April 2024, child benefit claims in a household where the higher earner had more than £50,000 of income had to be paid back as a tax charge (HICBC) on a sliding scale, topping out at £60,000 where the HICBC was the full amount of the child benefit claimed.

From 6 April 2024, the abatement starts at £60,000 and tops out at £80,000 – a welcome change. This means that there will be some people who have become eligible for the first time. It should still be noted that whilst there are proposals to introduce a National Insurance credit claim system from April 2026, there is still requirement for a child benefit claim to be made in order to preserve the National Insurance contributions record (and therefore a future state pension claim) for any non-working child benefit claimant in the household.

Another change slated to come in from April 2026, is to move to a household income assessment for the purposes of considering whether the abatement applies. There have been a number of commentators who have suggested that this will be tricky to implement so it will be interesting to see if this timetable slips.

If you would have any questions or would like further information on any of the topics covered in this piece, please contact us on 020 7870 9050 or email us at helo@rpgcc.co.uk