Concern at impact of planned
allowances on Self Assessment
THE Low Incomes Tax Reform Group (LITRG)
is urging HMRC to be ready to publicise new income allowances when they come
into force to prevent confusion as to who is supposed to register for
Self Assessment this time next year (2018).
By law, people have to notify HMRC of a new source of income, such as receipts
from a trade or business, or rental income, by 5 October, in the Tax year
following that in which the new source began.
According to LITRG, things could get very confusing for those who start work or
rent property in the 2017/18 Tax year due to the likely introduction of the new
trading and property allowances. From 6 April 2017 those with rental and/or
trading income (or miscellaneous income) below ₤1,000 will no longer have to
tell HMRC about the income by the 5 October 2018 deadline or pay Tax on it. If
the trading or property income exceeds the allowance, they will need to notify
HMRC and can choose whether to calculate their Taxable profit in the usual way
or by simply deducting the ₤1,000 allowance.
LITRG is concerned that, without appropriate publicity or guidance, some
Taxpayers may register for Self-Assessment and complete a Tax return when they
do not need to do so. Others with trading and/or property income above ₤1,000
may not realise that they need to register and complete a Self Assessment Tax
return, which could subsequently result in significant penalties for late
notification and filing.
LITRG Chair Anne Fairpo said:- "We call on HMRC to be ready to make
available very clear guidance on these changes and to publicise them
sufficiently. Ideally, there should be worked examples and also an online
calculator. It is also crucial that such information is available in hard copy
format as well as online to help the substantial numbers of Taxpayers who are
either digitally excluded or find it difficult to engage with Government
LITRG is also concerned that these new allowances will cause further confusion
for Tax Credit and other benefit claimants. For example, this income will have
to be declared for Universal Credit claims, even if it is fully covered by the
new Tax allowances. The group recommends that all benefits claimants who can use
these new allowances check whether they still need to declare this income as
part of their claim.