There seems little doubt now that the working from home phenomenon has become established.

With a laptop, a phone and an internet connection, many tasks can be performed as adequately at home or elsewhere, as in an office.

While returning to the office is a must for many, the recent rail strikes and surge in fuel prices have shown that this kind of flexibility can keep the wheels of industry in the UK turning when businesses and their staff are disrupted.

Usually, this takes a hybrid form with a few days in the office and a couple working from home, or vice versa.

Although many businesses are already implementing this new way of working, there are things that business owners themselves should consider, especially where they intend to operate a business out of their home.

Get advice before taking the plunge

If you decide to run your business from home, some rules and regulations need to be followed.

• You may need permission from the local council, a landlord or a mortgage provider to run your business
• Health and safety issues will also have to be properly managed
• You may need separate insurance.

Planning permission

If you are planning on making alterations to accommodate your business, you may need permission from the council.

You may also need a licence if your business is likely to cause disruption with deliveries and visitors, or if you want to advertise outside your home.

What tax allowances can you claim?

You can include your business costs in your Self-Assessment tax return if you’re a sole trader or part of a business partnership and you can also claim a proportion of the cost of things like council tax, heating, lighting, phone calls and broadband.

Capital Gains Tax

You may have to pay this on the part of your property you used for your business if you sell your home in future, so be aware.

Business rates

You may have to pay business rates on the part of your property that you use for your business, while you’ll still have to pay Council Tax on the rest of your property.

But you may qualify for small business rate relief if your property has a rateable value of £12,000 or less.

Supporting employees in their own homes

Many employees are also enjoying the benefits of WFH, either full-time or under a hybrid system.

As an employer, you must support them as well. For employees, the work-from-home relief, which many claimed during the pandemic, is still available.

However, from 6 April 2022 onwards it is only open to employees where an employer specifically requires a staff member to work from home – for example, to stop the spread of Covid or because the job had been ‘relocated’ and was now contractually regarded 100 per cent as a home-working role.

For basic-rate taxpayers, the relief is worth 20 per cent of the £6 allowance –  £1.20 a week – while for higher-rate taxpayers they could claim 40 per cent of the £6 – £2.40 a week.

Over the year, this means that employees can reduce their tax bill by between £62.40 and £124.80 respectively.

For some employees, relief may also be available on:

• Reimbursement by employers for additional household expenses
• Provision of office equipment by employers
• Provision of computers for private use by employers
• Travel for necessary attendance.

If you need help and advice on managing your business as it makes further moves to work from home, please seek advice.

Link: Working From Home

More and more people are being drawn into paying Inheritance Tax (IHT), as the price of property soars.

This is because former Chancellor Rishi Sunak froze the nil rate thresholds for paying the tax at £325,000 until 2026, while the value of homes has rocketed, potentially drawing more people into paying the tax.

There are some exceptions, which are listed below, but generally, people are then faced with paying 40 per cent IHT on anything gained over the £325,000 figure.

How much do I have to pay?

IHT is levied at 40 per cent on everything in an individual’s estate at their death above the Nil Rate Band of £325,000.

However, many taxpayers also benefit from the Residence Nil Rate Band, which adds an additional allowance of £175,000 for their main property if it is passed to direct descendants.

If you are married or in a civil partnership these allowances can be passed to a spouse or partner once the other person dies.

According to the Office for National Statistics (ONS), in 2009, the average price of a home in the UK was £227,000. In 2021 that had rocketed to £327,000, £2,000 above the initial Nil-Rate band.

In high-value areas, such as the South East and London, this figure is even higher and it means that more and more taxpayers – and not just the wealthiest members of society – are facing IHT bills on their estates after death.

What is IHT?

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

As mentioned, there is normally no Inheritance Tax to pay if:

• The value of your estate is below the £325,000 threshold
• You leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club
• If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000
• If you are married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die.

This means their threshold can be as much as £1 million!

What are the rates for IHT?

The standard IHT rate is 40 per cent. However, this is only charged on the part of your estate that is above the threshold.

So, if your estate is worth £600,000 and your tax-free threshold is £500,000. The Inheritance Tax charged will be 40 per cent of £100,000 or £40,000.

The estate can pay IHT at a reduced rate of 36 per cent on some assets if you leave 10 per cent or more of the ‘net value’ to charity in your Will.

Are there any ways to save on IHT?

Here are some of the ways that you can cut your IHT bill with careful planning:

Gifting

There’s usually no IHT to pay on small gifts you make out of your normal income, such as Christmas or birthday presents, which are commonly referred to as ‘exempted gifts’.

There is also no IHT to pay on gifts between spouses or civil partners and you can transfer as you like during your lifetime, as long as they live in the UK permanently.

However, other gifts count towards the value of your estate, and you could be charged IHT if you give away more than £325,000 in the seven years before your death.

Gifts include anything that has value, or anything transferred at a loss to a family member, such as the sale of a home to a descendant for less than it is worth.

However, you can give away £3,000 worth of gifts each tax year without them being added to the value of your estate thanks to the ‘annual exemption’.

If you have any unused annual exemption, you can carry it forward to the next year – but only for one year.

Each tax year, you can also give away additional gifts if they relate to special events such as weddings, birthdays or Christmas, or if they support the living costs of another person, such as an elderly relative or a child under 18.

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

If there is IHT to pay, it’s charged at 40 per cent on gifts given in the three years before you die. Gifts made three to seven years before your death are taxed on a sliding scale known as ‘taper relief’. After seven years the gift will be IHT-free.

Business Property Relief or Agricultural Property Relief

Certain assets receive relief from IHT, these include Business Property, Agricultural Property and Heritage Assets.

These reliefs can reduce or eliminate the value of an asset being included within an estate, but they often rely on certain conditions being met.

However, not every interest in a business will qualify for these specialist reliefs so it is worth seeking specialist professional advice when managing your estate.

Charity

Anything left to charity in your Will won’t count towards the total taxable value of your estate. Known as a ‘charitable legacy’, this will also reduce the IHT rate on the rest of your estate from 40 per cent to 36 per cent, as long as you leave at least 10 per cent to charity.

Trusts

Trusts can play a role in reducing a family’s exposure to IHT so that more can be passed on to future generations, but they say they can also help look after family assets and provide for family members who are too young or vulnerable to deal with financial matters.

A trust is a legal arrangement where you gift cash, property or investments to a separate entity (the trust). One who gifts assets is the Settlor, the trustees then oversee the management of the assets for the benefit of a third party or parties.

One of the main benefits of a trust is that, should you elect to act as the trustee, you would continue to maintain control over the assets gifted whilst your estate’s exposure to IHT is reduced as, after seven years, the gift is out of the Settlor’s estate completely.

Assets transferred into a trust are no longer considered as belonging to the Settlor, so they are taxed according to the rules governing the trustee.

Many people would prefer to provide for a beneficiary through a trust as opposed to passing assets to them outright. This could involve a source of income for a beneficiary for life, or providing education for children but not allowing them to access funds until they are older.

A company has lost an £11 million dispute with the taxman over whether contract construction workers were entitled to claim travel costs tax-free.

As many as 600,000 temporary workers in the UK are thought to be employed by umbrella companies, used by recruitment agencies and companies to cut temporary payroll costs.

Exchequer Solutions Limited (ESL) is an umbrella company that supplies workers to the building trade and the dispute with HM Revenue & Customs (HMRC) was over whether their workplace was permanent or temporary.

The dispute

The issue revolved around whether ESL employed the workers under the umbrella contract of employment continuously while working on various projects, or whether there was a series of separate contracts, with gaps between the employment, where a worker might be temporarily employed elsewhere.

The appeal against HMRC at the First-Tier Tribunal raised the question of whether workers should be reimbursed for travel and subsistence expenses, without being subject to tax or National Insurance contributions (NIC).

What is an overarching contract?

If there is an overarching or umbrella contract of employment, each place of work is a temporary workplace, and the expenses can be paid tax-free.

However, if there is a separate employment contract for each assignment, the workplace is a permanent workplace, and any payments came within the scope of tax and possibly NIC.

HMRC argued that there was no overarching contract of employment so the payments relating to expenses were subject to PAYE income tax and NIC.

The relevant tax years were 2013/14 through to 2016/17 and HMRC issued determinations amounting to a total of £11 million in unpaid taxes and NICs.

ESL claimed there was an overarching or umbrella contract and appealed against the Regulation 80 Determinations and the NIC Notice of Decision.

Following detailed arguments from both, the judge ruled against ESL’s argument.

In conclusion, the Judge determined that the two parties, ESL and HMRC, should agree on the amount of any liability to income tax and NIC based on the amount of the travel and subsistence expenses paid by ESL to its employees.

Deadline set for full hearing

A deadline of 30 November 2022 was set for agreement to be reached at which time a hearing would be organised to finalise the amount of any liabilities.

Link: Umbrella company loses £11m tax dispute over expenses

Thousands of Britons facing a cost-of-living crunch have been withdrawing funds from their Lifetime ISA (LISA) accounts and getting hit with significant penalty charges.

According to HM Revenue & Customs (HMRC), a record 77,500 LISA savers were issued over £33 million worth of early withdrawal charges in 2021/22.

Early withdrawal from LISAs attracts a 25 per cent penalty. During the pandemic, the Treasury cut the early withdrawal charge from 25 per cent to 20 per cent to ensure those accessing their LISA, while facing serious hardship, were not unfairly penalised. However, this has now ended.

What are LISAs?

• You can use a LISA to buy your first home or save for later life. You must be 18 or over but under 40 to open one.
• You can put in up to £4,000 each year until you’re 50. You must make your first payment into your ISA before you’re 40.
• The Government will add a 25 per cent bonus to your savings, up to a maximum of £1,000 per year.
• The Lifetime ISA limit of £4,000 counts towards your annual ISA limit. This is £20,000 for the 2022/23 tax year.
• You can hold cash or stocks and shares in your Lifetime ISA or have a combination of both.

Although the benefits of leaving LISAs untouched are considerable, they can be accessed in an emergency.

As inflation approached double figures in April, around 9,000 savers decided to accept the penalties to take their money out early.

In total, LISA savers made unauthorised withdrawals worth over £14 million, the highest figures for the year.

If you’re a first-time buyer or think you might be in the future or want to save for retirement, a LISA isn’t a straightforward savings account, and may not be right for everyone.