Alert over 'very confusing' October tax deadline
The October tax deadline that contractors with a new source of income have just this month met could become “very confusing” next year.
Issuing this alert, the Low Incomes Tax Reform Group (LITRG) said that only very clear guidance from HMRC, coupled with a publicity campaign, could head off the confusion.
It all stems from the introduction of new trading and property allowances for individuals who start working for themselves or rent out a property in the 2017/18 tax year.
Specifically, people with rental, trading or ‘miscellaneous’ income below a new £1,000 threshold will no longer have to notify HMRC about it by October 5th 2018, or pay tax on it.
But if the trading or property income exceeds the allowance, taxpayers will need to notify HMRC, although they can opt to calculate their taxable profit in the usual way or simply deduct the £1,000 allowance.
“Some taxpayers may register for Self-Assessment and complete a tax return when they do not need to do so," LITRG warned.
“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.”
Without clear guidance from HMRC including “worked examples” -- both in hard copy and on its website, and the extra help of an online calculator, “things could get very confusing” for affected taxpayers, warned LITRG chair Anne Fairpo.