Tax E-News – July 2025

Welcome to the July 2025 edition of Tax E-News. We hope that you find this informative. Please contact us if you wish to discuss any matters in more detail.

July 2025

EXTRACTING FUNDS FROM AN OWNER-MANAGED COMPANY

“What’s the most tax-efficient way to take funds out of my company?” is perhaps the most common question put to accountants by their owner-managed company clients. The answer used to be simple: “Take a salary up to the level of the personal allowance and take the rest as a dividend”. Unfortunately, we are no longer able to give such a straightforward, one-size-fits-all answer. Put simply, the most honest answer we can give without performing individualised calculations is “It depends”!

If the director(s) need to take a market rate salary for commercial reasons (including obtaining finance in their own name or for making personal pension contributions), this should be a priority.[…]

CHILDCARE ACCOUNTS CAN SUBSIDISE SUMMER CHILDCARE COSTS

If you have children under 12 who attend a nursery, after school club, playscheme or childminder, or you are considering sending them to a summer camp, you should think about setting up a tax-free childcare account. The government adds 25% to the amounts that you save in the account – up to £2,000 for each child – so £8,000 is topped up to £10,000 (a higher amount applies for disabled children).
The account is then used to pay Ofsted registered childcare providers. […]

SALARY SACRIFICE FOR PENSION CONTRIBUTIONS

Employees who join their employer’s pensions salary sacrifice scheme stop paying pension contributions and instead sacrifice part of their gross salary in return for higher employer pension contributions. This means that both employers’ and employees’ National Insurance Contributions (NICs) are saved whilst maintaining the same amount of pensions savings. This is because employers’ pension contributions are exempt benefits and they are not caught by the salary sacrifice rules.
The employers’ NICs saving is the main benefit of such schemes. The employer can choose to use all or none of the saving to invest in the employees’ pensions. […]

MTD FOR INCOME TAX: INCOME FROM JOINTLY HELD PROPERTY

If you are a sole trader or landlord with combined turnover from trade and property exceeding £50,000 in 2024/25, you’re likely to be mandated into Making Tax Digital (MTD) from 6 April 2026. Individuals with lower income will be mandated at later dates. We have covered the general MTD requirements in previous newsletters, but it’s time to focus on how MTD will apply to those with income from property that is jointly owned by more than one person.
The MTD legislation prescribes the various categories that should be used to record each individual item of income and expenditure. Any MTD-compatible software package or spreadsheet should enable you to categorise income and expenditure according to the prescribed categories for jointly held property income. Each quarter, year-to-date totals for each category will be totalled and submitted to HMRC in a Quarterly Update. […]

VAT ON PRIVATE TUITION

A recent First Tier Tribunal case gave us a useful reminder of the rules governing the VAT treatment of private tuition. In Rushby Dance & Fitness Centre v HMRC (TC09534), the lead appellant and three other dance tutors unsuccessfully argued that their dance classes qualified as VAT-exempt private tuition.

The exemption for private tuition is contained in the Value Added Tax Act 1994 (Schedule 9, Group 6, Item 2): “The supply of private tuition, in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer.”

In order to qualify for the exemption, two main tests must be met:
• The teacher must be acting independently of an employer – this would generally apply to a sole trader or partner providing tuition in their own name. Any tuition carried out by an employee of a sole trader or partnership would not qualify, nor would any private tuition provided by a limited company.
• The subject being taught must be one that is ordinarily taught in a school or university – this is the issue that was considered by the tribunal. The subjects under consideration were ballroom dancing, Latin dancing, sequence dancing and ‘dancercise’ – a hybrid of dance and aerobics. The First Tier Tribunal found that none of the subjects were ‘ordinarily’ taught in schools or universities. […]

DIARY OF MAIN TAX EVENTS

JULY  / AUGUST 2025