Tax E-News – May 2025

Welcome to the May 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.

May 2025

MTD for Income Tax – FAQs

Making Tax Digital for Income Tax (MTD for IT) will be introduced from 6 April 2026. Below are some frequently asked questions and answers.
Who will be affected by MTD for IT, and when?
Individuals with self employment and/or income from property will need to comply with MTD for IT once they are mandated. The commencement date for MTD for IT is 6 April 2026, but a phasing-in program will mean that some individuals are not immediately within the regime. MTD for IT applies from:
• 6 April 2026 for sole traders and landlords with qualifying income over £50,000 in 2024/25.
• 6 April 2027 for those with qualifying income over £30,000 in 2025/26.
• 6 April 2028 for those with qualifying income over £20,000 in 2026/27.
If an individual’s qualifying income exceeds the threshold in a tax year, HMRC will notify them that they are mandated to comply with the MTD for IT rules. […]

What is ‘qualifying income’? […]

Does qualifying income include VAT? […]

What do I need to do if I am mandated? […]

Will I need to make quarterly payments to HMRC? […]

I’ve heard that there’s an easement for .. […]

I already submit quarterly VAT returns. How will this work .. […]

What will happen if I don’t comply with the new rules? […]

CHANGES TO THE TAXATION OF NON-UK DOMICILED INDIVIDUALS

From 6 April 2025, a new regime for the taxation of UK resident non-domiciled individuals came into effect. HMRC have published a brand-new manual on the regime which can be viewed here.
Until 5 April 2025, special tax rules applied to individuals who were resident in the UK but whose domicile (i.e. their permanent home, usually determined by their father’s permanent home at the time the individual was born) was outside the UK. Such individuals could choose to either pay UK tax on their foreign income and gains as they arose or, alternatively, they could claim the remittance basis, which meant only foreign income and gains remitted to the UK were taxed. […]

HOLIDAY LETTINGS AND PROPERTY

The Furnished Holiday Lettings (FHLs) regime was abolished on 6 April 2025. What does the abolition mean for your holiday letting property?
The property will become part of either your main UK or overseas property business. This means that some of the beneficial tax rules that previously applied will no longer apply, such as:
• Tax relief for dwelling-related loan interest will be restricted to basic rate (20%).
• New capital expenditure will generally not qualify for capital allowances, Instead, the replacement of domestic items relief may apply.
• Capital Gains Tax reliefs for trading business assets (such as Business Asset Disposal Relief, Gift Relief and Rollover Relief) will no longer be available.
• Income from the property will no longer be included in ‘relevant UK earnings’ for the purposes of calculating maximum pension relief. […]

VAT: ‘FOOD’ OR ‘CONFECTIONERY’?

Group 1 of Schedule 8 VAT Act 1994 specifically makes ‘food’ zero-rated, although there is a long list of ‘excepted items’ which do not qualify for the zero-rating and are therefore standard-rated. Excepted item No. 2 is “Confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance”.
Note 5 expands on the meaning of ‘confectionery’, saying that it “includes chocolates, sweets and biscuits; drained, glace or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers”.
Over the years, there have been numerous court and tribunal cases that have considered whether or not a food item meets the definition of ‘confectionery’. The most recent case has concerned ‘Mega Marshmallows’; the kind usually toasted on a skewer over outdoor fires and barbecues. […]

DIARY OF MAIN TAX EVENTS

MAY  / JUNE 2025