Category Archives: Income Tax

If you are required to complete a self-assessment tax return, HMRC may charge penalties if you miss the deadline for making a filing or payment. 

There are also penalties if you fail to register on time for self-assessment. If you register late and do not pay your tax bill by the required deadline, you may receive a ‘failure to notify’ penalty. This is calculated based on the amount of tax still outstanding and is usually issued within 12 months of HMRC receiving your return.

If you submit your tax return after the deadline, you will typically receive an initial £100 penalty. This is followed by daily penalties of £10 per day after three months (up to £900), and further charges at six and twelve months based on a percentage of the tax due or a fixed amount, whichever is higher.

If you pay your tax late, additional penalties of 5% of the unpaid tax may be charged after 30 days, six months and twelve months. In addition, you will also be charged interest on the outstanding balance until it is paid.

Penalties must usually be paid within 30 days of the penalty notice date, and failure to do so may result in further enforcement action. If you believe a penalty has been issued incorrectly, you can appeal where you have a reasonable excuse, and HMRC will consider your circumstances before deciding whether to cancel or reduce penalties charged.

Making Tax Digital (MTD) for Income Tax is being rolled out in stages for sole traders and landlords who complete self-assessment returns. Liability to register depends on the level of “qualifying income”, which includes income from self-employment and property.

Since April 2026, those with qualifying income over £50,000 have been required to maintain digital records and submit quarterly updates of trading or property income and expenses

Further registration for MTD will be required from April 2027, when the threshold will reduce to £30,000, and in April 2028 it will further reduce to £20,000. The thresholds are based on income reported for the previous tax year, meaning your obligation to join MTD is triggered by your most recently submitted self-assessment return.

For example, the £30,000 threshold that applies from 6 April 2027 is linked to your qualifying income for the 2025–26 tax year. If your reported income for that year exceeds £30,000, you will be required to start using MTD from April 2027.

HMRC reviews your self-assessment return each year to determine your qualifying income. If you exceed the relevant threshold, they will normally write to confirm when you must start using the system. However, even if you do not receive a letter, it remains your responsibility to check whether you are required to comply and to prepare in time.

If you believe you fall within the rules but have not been notified, you should check your income against the thresholds and ascertain whether you are required to sign up.

Families claiming Child Benefit should be aware of the High Income Child Benefit Charge (HICBC), which can apply when one member of the household has a higher income.

The charge applies where an individual has adjusted net income of more than £60,000 in a tax year and either they or their partner receives a Child Benefit payment. The amount payable increases gradually as income rises, with the charge set at 1% of the Child Benefit received for every £200 of income above £60,000.

As a result, the impact of the charge is phased in rather than applying all at once. However, once income reaches £80,000, the charge effectively claws back all of the Child Benefit received, removing the direct financial benefit of the payments.

Eligible taxpayers can elect to have the charge collected through their PAYE tax code rather than completing a self-assessment tax return. This measure is intended to reduce the administrative burden for employees whose only reason for filing a self-assessment tax return is to declare the HICBC.

Although some families choose to stop receiving Child Benefit to avoid the charge, it is often worthwhile to continue making a claim. Registering for Child Benefit can help protect entitlement to National Insurance credits for parents or carers and ensures children are automatically issued with a National Insurance number shortly before their 16th birthday.

Taxpayers with income approaching or exceeding £60,000 should review their position regularly to ensure they are complying with the rules and making the most appropriate choice for their circumstances.

A reminder that the tax rules for how online platforms report seller information to HMRC changed on 1 January 2024. Digital platforms such as eBay, Vinted and Airbnb are required to collect and verify certain details about users who sell goods or provide services through their sites. This data is shared with HMRC.

In general, platforms will only report information where sellers have either sold around 30 or more items or earned approximately £1,725 (around €2,000) in a calendar year. If you meet these thresholds, your platform provider will usually notify you that your data has been shared.

Importantly, this reporting requirement does not automatically mean tax is due or that you need to file a tax return. Many people who simply sell personal belongings occasionally will have no tax to pay.

However, you may need to register for self-assessment and pay tax if you are trading rather than casually selling. This includes situations where you buy goods to resell, make items to sell for profit, or regularly provide services through online platforms. A key threshold to be aware of applied if you generate a total income from trading or providing services online of more than £1,000 before deducting expenses in any tax year.

As has always been the case, genuine hobby sellers are not affected, but those running a business through online platforms should ensure they understand their tax obligations and keep accurate records. HMRC also provides guidance and tools to help individuals check whether their income is taxable.

If you receive income from renting out property, it is important to understand your tax obligations and the reliefs that may be available. Rental income is generally taxable, although landlords can deduct certain allowable expenses before calculating the amount of tax due.

For individuals, who personally own rental property, the first £1,000 of rental income each tax year may be covered by the property allowance. Where rental income exceeds this amount, landlords may need to contact HMRC to complete a self-assessment tax return, depending on the level of income and profit generated.

Tax is normally charged on the profit from renting out residential property rather than the gross rent received. Landlords can reduce their taxable profit by claiming allowable expenses such as letting agent fees, insurance, repairs and maintenance, utility bills, service charges, accountancy fees and advertising costs. However, costs that improve or significantly enhance a property are generally treated as capital expenditure and cannot be deducted as day-to-day expenses.

Landlords may also be able to claim Replacement of Domestic Items Relief when replacing items such as beds, carpets, curtains, sofas and white goods provided for tenants.

National Insurance may also be relevant. Landlords whose property activities amount to a business may be eligible to pay voluntary Class 2 National Insurance contributions, while others may be able to make voluntary Class 3 contributions to help maintain their entitlement to the State Pension and certain benefits.

Where multiple properties are owned, rental income and expenses are usually combined to calculate an overall profit or loss. Any losses can usually be carried forward and offset against future profits from the same property business.