The UK has a well-established taxation and state pension system. In theory, if you have verifiable contribution records, there should be no errors when calculating and receiving your pension. However, due to constant changes in state pension policies and related benefits, occasional mistakes may be inevitable. Recently, the Department for Work and Pensions (DWP) issued a new statement announcing that, due to historic state pension errors, over 130,000 individuals have received a total of approximately £800 million in backdated state pension payments. State pension errors - Why were pensions underpaid? According to British media reports, the large-scale underpayment issue stemmed from longstanding administrative errors and systemic flaws. To rectify these, the DWP launched a large-scale pension correction exercise in 2021, which is expected to continue until 2027. As of data compiled up to 31 March 2025, the review uncovered 130,948 cases of underpayment, with back payments totalling £804.7 million. Who was affected by the pension underpayment? So, who was affected by this pension error? The affected groups mainly include: Married women: Those receiving low state pensions that should have automatically increased after their spouse’s retirement, but were not adjusted accordingly. Widows: Whose pensions should have been recalculated following their spouse’s death but were not. Individuals aged 80 and above: Whose pension entitlements should have increased upon turning 80, but were not adjusted. According to DWP data, the average back payment issued so far is as follows: Married women (Category BL): £5,553 Widows: £11,725 Over-80s (Category D): £2,203 The DWP added that some claimants may fall into more than one category due to overlapping errors. HRP errors  In addition, the DWP is also conducting a separate correction programme to address historic record-keeping errors related to Home Responsibilities Protection (HRP).  HRP was a policy designed to protect the state pension rights of parents (primarily mothers) who stopped working to raise children prior to 2000. As of September 2024, HMRC had sent notification letters to over 370,000 individuals, informing them that missing HRP records may have affected their pension entitlements. Among 11,700 cases reviewed by the DWP, 5,344 were found to be underpaid, with a total reimbursement amounting to approximately £42 million. How can I check if I’m affected?  The DWP has stated that they will proactively contact some eligible women. However, if you are a widow or over 80 years old, you should check whether you qualify even if you have not received a letter. Pension consultancy firm LCP (Lane Clark & Peacock) has been commissioned to develop a dedicated pension underpayment calculator to help individuals assess whether they might be affected. Some Advice from TB Accountants Whether or not you fall into one of the affected categories, it is highly recommended that you proactively check your state pension records to ensure your rights are protected.  If you suspect you may be affected, you may contact the Pension Service directly to understand how to claim any owed amounts, or speak to a dedicated tax advisor to discuss further.   For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

On 18 March 2025, the UK welfare system reached a turning point. Liz Kendall, Secretary of State for Work and Pensions, firmly announced in Parliament a ‘surgical’ reform of the social security system, aiming to strip £5 billion annually from public welfare spending. The sweeping reforms targets 34 different benefits, from disability allowances to chronic illness support. Unlike the incremental tweaks of previous governments, this plan strikes at the system’s foundation: stricter eligibility for Jobseeker’s Allowance, a complete overhaul of the Universal Credit calculation model, and a ‘sunset’ clause for long-term sickness benefits. These proposals were cemented in the Spring Budget on 26 March, where the Chancellor reiterated Labour’s identity as a ‘party of work’, aiming to reduce reliance on benefits and encourage self-sufficiency through employment. On 26 March 2025, the Chancellor unveiled the controversial welfare reforms in the Spring Budget. Major overhaul plans Starting April 2025, Universal Credit will undergo major reforms: New claimants' health-related benefit top-ups will be cut by 50%, Existing payments will be frozen, no longer adjusted for inflation. According to the Treasury Select Committee, by the 2030 fiscal year, affected households will lose £1,720 annually in basic support—equivalent to 83% of a typical family’s yearly food budget. UK Welfare System: Disability support PIP (Personal Independence Payment), the UK’s main disability benefit for those with physical or mental health conditions, is at the heart of the reforms. Before the Budget: PIP applied to individuals aged 16 to State Pension Age, Eligibility was not income-dependent, It included two components: ① Daily Living (for help with eating, washing, dressing, communication), ② Mobility (for those unable to walk or needing special transport), Each component had two payment levels—standard and enhanced. As a result of the changes: Means testing won’t be introduced, Voucher schemes proposed by the Tories are scrapped, Eligibility thresholds will rise—applicants must now score at least 4 points per activity, making PIP significantly harder to claim, The government aims to save £5 billion by 2030 through PIP reforms. These changes will result in: 370,000 current claimants losing their benefits, 430,000 potential applicants excluded entirely. For these 800,000 people, the loss of £4,500 a year (or £375 per month) equates to 120 hours of care—the median cost of in-home support in the UK.   The hidden cost? Advocacy group Fair Britain estimates an additional 250,000 people will fall into relative poverty by 2030—including 50,000 children who may rely on food vouchers instead of school uniforms. Most alarming is that families with chronic illnesses are expected to lose 21% of disposable income—a devastating blow given NHS wait times of up to 18 months. With inflation soaring, many will be unable to afford food, let alone medical care.   Countering the impact? To counter public backlash, the government announced a £1 billion job transition fund, promising tailored skills training for long-term benefit claimants. However, simulations by the University of Manchester show that at best, the programme could only transition 120,000–150,000 people per year, less than 5% of those affected by the cuts. Worse still, automation is eliminating 86,000 entry-level jobs annually in the UK. In this climate, even healthy and able individuals face employment challenges—what hope is left for disabled citizens? The Economist has dubbed the reform ‘Thatcher 2.0’ — questioning the core of modern welfare states. When budgetary balance tilts toward efficiency, do lives deemed of low economic value become acceptable sacrifices? The answer Parliament gives could redefine the UK's 21st-century social contract. Britain’s welfare crisis: a wake-up call If you or your loved ones live in the UK, this 2025 welfare revolution is not a distant debate—it’s a tangible threat to your safety net. As PIP criteria tighten like a noose, thousands dependent on daily care stipends will face financial collapse. With Universal Credit restructured, the last cushion for the jobless is vanishing. At the same time, the government’s wage increases are overshadowed by surging inflation and increased employer national insurance—potentially freezing job growth and making the pay rise a mirage.   Anatomy of a systemic shift: from dependence to coercion 1. A new welfare doctrine Applicants for the top-tier £108/week Daily Living Allowance must now submit intrusive evidence—medical imaging, surveillance footage—proving continuous loss of function in basic survival tasks like eating or bathing. More controversially, in 2028 the long-standing Work Capability Assessment will be abolished and replaced with stricter PIP criteria. This could instantly disqualify 700,000 moderately disabled recipients. The core goal? Reduce benefits to force people into work.   2. The endless reassessment cycle Except for those deemed terminally ill or permanently incapacitated, all claimants will enter a 6–18 month reassessment cycle led by third-party contractors using standardised questionnaires and AI-based behaviour analysis. In 2027 alone, 370,000 people may lose eligibility. Under 22s will also be permanently barred from receiving the £419/month health stipend.   3. Mental health Claimants with mental health issues (depression, anxiety) will no longer be exempt from work requirements. Instead, they must undergo a compulsory Work Trial Scheme —combining Cognitive Behavioural Therapy (CBT) with 20 hours/week of adaptive employment. If they fail due to health relapse, they must appeal in court to regain benefits. Rights groups are sounding alarms over the use of an AI system to score fraud risk based on NHS records, spending habits, and even social media. Over 123,000 people have already lost their benefits without a hearing. If you’re affected, it’s crucial to check the latest PIP assessment rules, and prepare relevant documentation promptly. If you are likely to lose eligibility, begin planning alternative support immediately. For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Prime Minister says government 'will look at' scrapping two-child benefits limit UK Prime Minister Keir Starmer has said his cabinet will consider scrapping two-child benefits limit—his clearest signal yet that he may change his position on the issue. The Two-Child Benefit Cap was introduced by the Conservative government in 2017 to control public spending and encourage family planning. Under this policy, for children born after April 2017, families can only claim Child Tax Credit and Universal Credit for the first two children. Any third or subsequent children are not eligible for these benefits. Starmer had clearly stated in 2023 that he would not remove the cap. However, after the Labour Party came to power last year, he expressed a desire to scrap the cap if financial conditions allowed. But he later reaffirmed his opposition to removing it, and shortly after taking office following the general election, he suspended seven Labour MPs who voted with the Scottish National Party (SNP) in support of lifting the cap. Sources say Starmer has now asked the Treasury to assess funding options for removing the cap. This marks the Labour government’s second major U-turn on welfare policy, following last week’s surprise decision to relax cuts to the Winter Fuel Payment. The Winter Fuel Payment is a tax-free, one-off payment from the UK government to help older residents cover heating costs during winter. The payment: Is made once a year Usually paid between November and December Ranges from £250 to £600 (for the 2024–2025 winter, including the “Cost of Living Payment”) For the 2024–2025 financial year, the Labour government introduced partial reforms: limiting eligibility to low-income pensioners who receive Pension Credit. Regular retirees who don’t claim Pension Credit were no longer automatically eligible. Now, the benefit will be extended to "more pensioners,” though specific eligibility criteria and timing have not yet been announced. Read more... Labour plots ‘family bathtime tax’ on water bills According to UK media reports, due to one of the driest springs in nearly 70 years in England and increasing pressure on water resources, the UK government is considering implementing a “bath tax” to support water companies in piloting a new “progressive” water pricing system. Under this system, the more water a household uses, the higher the price per litre. The aim is to encourage water conservation and shift more costs onto high-usage households. This means larger households, those with gardens or swimming pools, and families with children would face higher water bills. Water Minister Emma Hardy said last month in a parliamentary session: “This government supports the innovative new charging methods currently being piloted, aiming to make water bills fairer and more affordable.” She plans for all water companies to complete trials of this pricing mechanism by 2030. If successful, it could be rolled out to more customers. Thames Water is one of the water providers leading the push for the progressive pricing system. It plans to pilot the system starting in 2027, initially implementing a three-tiered charging structure along with an “excess water surcharge.” Additional revenues will be used to subsidize water bills for the poorest households. However, the water industry notes that large-scale implementation depends on the widespread adoption of smart water meters. According to government data, only about 12% of households in England currently have smart meters installed, while 60% still use traditional meters. In response, industry representatives are urging the government to legislate mandatory installation of smart meters to enable real-time monitoring of water usage. However, a government spokesperson has denied any plans for legislation on smart meters or “advanced water pricing.” Read More... Reeves outlines plan for £25bn pension 'megafunds' Following the announcement of the “megafunds plan” in November 2024, the UK government has recently unveiled detailed pension reform proposals and plans to push legislation through the Pension Schemes Bill. The reforms are expected to provide retirement savings for the majority of British workers in two main ways. This initiative will not only unlock over £50 billion in investments flowing into infrastructure, new housing, and domestic businesses but will also significantly boost retirement incomes for millions of UK workers. First, the UK has 86 different local government pension schemes covering the retirement security of over 6 million people, most of whom are low-income women. The reform primarily targets two types of pension systems: Defined Benefit (DB) Pensions   Currently, these pensions hold total assets of £392 billion. The government plans to consolidate them into six asset pools by March 2026. With defined benefit plans, workers contribute to their pension accounts and receive a predetermined amount based on their salary and years of service. For the first time, “local investment targets” will be set to ensure part of the funds supports local economic development. Defined Contribution (DC) Pensions Covering millions of employees in both private and public sectors nationwide, these pensions hold assets totaling £800 billion. Unlike DB pensions, returns depend on investment performance. The government aims to promote consolidation, increasing the number of large pension funds with assets over £25 billion from the current 10 to more than 20 by 2030. In the Mansion House Agreement signed earlier this May, 17 of the UK’s largest pension institutions committed to allocating at least 10% of their assets to unlisted sectors such as infrastructure, housing development, and startups in emerging industries; of this, 5% will be invested specifically in UK-based assets. This move aims to address the long-standing “underinvestment” issue affecting the UK economy. The Treasury states that the new scheme will bring over £50 billion in additional investment into UK infrastructure, new homes, and businesses. It is expected that workers with average incomes could see their defined contribution pension accounts increase by up to £6,000. The UK’s pension reform draws inspiration from large pension investment models in Australia and Canada, aiming to treat pensions not only as retirement security tools but also as “long-term capital engines” to drive national economic growth. Although there remains some debate within the pension industry about government intervention in investment direction, Chancellor Rishi Sunak said: “This is a crucial step towards making pensions more sustainable and more rewarding. Our goal is to deliver better returns for workers while ensuring funds support Britain’s future.” Read More... For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Tax rise warning after higher-than-expected UK borrowing in April The latest data shows that the UK’s inflation rate jumped to 3.5% in April, exceeding expectations and reaching the highest level in more than a year. The main drivers of this surge were steep increases in household bills such as water charges, energy costs, and council tax. In addition, a rise in employer National Insurance contributions and an increase in the national minimum wage also prompted businesses to raise prices. Water and sewage treatment fees saw their fastest increase since privatization, rising by 26.1%. At the same time, the Vehicle Excise Duty also saw a significant jump. Together, these factors pushed the Consumer Prices Index (CPI) to its highest point since January of last year. Because the inflation rate exceeded financial market expectations, the Bank of England is likely to resist calls to accelerate or deepen interest rate cuts. Monica George Michail, an economist at the National Institute of Economic and Social Research, stated that inflation may remain elevated in the coming months, which could force the central bank to delay rate cuts. The Bank of England is now only expected to cut rates once more this year. The British Chambers of Commerce also noted, “Although the April inflation surge was anticipated, the increase to 3.5% is still concerning. Research shows that 55% of businesses expect to raise prices in the coming months.” Meanwhile, UK government borrowing in April exceeded expectations. According to the Office for National Statistics (ONS), public sector net borrowing rose to £20.2 billion in April, an increase of £1 billion compared to the same period last year. Economists in the City of London had previously forecast borrowing to be £17.9 billion. However, rising wages and inflation have increased the government’s operating costs, and the “triple lock” mechanism on state pensions has further driven up welfare spending. Central government spending rose by £4.2 billion year-on-year to £93.3 billion in April, highlighting the challenges Chancellor Rachel Reeves faces in balancing the restoration of public services with economic growth. The higher-than-expected government borrowing data increases the likelihood that Chancellor Reeves will raise taxes this autumn. Ruth Gregory, Deputy Chief UK Economist at Capital Economics, said the “poor start” to the fiscal year makes further tax hikes “look increasingly inevitable.” Matt Swannell, Chief Economic Adviser at EY Item Club, also stated: “The Prime Minister’s partial reversal of cuts to the winter fuel allowance and the potential for increased defense spending will further heighten the pressure to raise taxes.” Read more... Trump threatens 50% tariffs on EU and 25% on iPhones U.S. President Donald Trump has announced that he is proposing a 50% tariff on all goods imported from the European Union. In a social media post last week, he wrote: "Our negotiations with the EU are going nowhere!" and stated that the new tariffs would take effect on June 1. This announcement marks an escalation in the trade war between Trump and the EU. He initially proposed a 20% tariff on most EU goods, later reduced it to 10%, and postponed implementation to July 8 to allow time for negotiations. Trump also threatened to impose an import tax of "at least 25%" on iPhones not manufactured in the U.S. He said: "I’ve already told Apple CEO Tim Cook that I want all iPhones sold in the U.S. to be made here in America, not in India or anywhere else. If that’s not the case, Apple must pay at least a 25% tariff to the U.S." Analysts note that it remains to be seen whether these threats will materialize. Following these remarks, the EU has yet to comment on the latest tariff threats. Meanwhile, Apple’s stock opened more than 2% lower. Since returning to the White House, Trump has either imposed or threatened tariffs on goods from multiple countries, viewing it as a way to boost U.S. manufacturing, protect jobs, and fend off foreign competition. However, the prospect of higher tariffs on imports has unsettled many industries, as it would make selling products in the U.S.—the world’s largest economy—more costly and challenging. Read More... HMRC issues 'minimum tax bill' of nearly £100,000 UK homes UK households are facing tax bills of nearly £100,000 from HM Revenue & Customs (HMRC). A new analysis of Financial Conduct Authority (FCA) data shows that between October 2023 and March 2024, 292 individuals withdrew pension pots worth £250,000 or more—triggering substantial tax liabilities. During this period, 292 people fully withdrew pensions of at least £250,000, each incurring a minimum tax bill of £98,700. Additionally, 1,593 people fully withdrew pensions valued between £100,000 and £249,000—an increase of 56 people compared to the previous year. According to the Birmingham Mail, individuals withdrawing pensions within this range face starting tax charges of £27,400. Those withdrawing £174,500 in pensions, for example, would owe at least £64,700 in tax. Mike Ambery, Retirement Savings Director at Standard Life, stated: “A large number of people are paying disproportionately high taxes just to access their pension pots.” He noted that withdrawing large sums as a lump sum almost always results in a significant tax bill, and recommended considering alternatives such as flexible drawdown or annuities instead. Standard Life advises that it's important to first understand that most people can withdraw 25% of their pension tax-free, while the remaining 75% is subject to income tax. The current tax-free limit across all pension accounts is £268,275, unless the individual holds specific tax protection measures. Most accountants also stress the importance of managing one’s personal tax allowances wisely. They recommend using Individual Savings Accounts (ISAs) or a combination of tax-free and taxable withdrawals to minimize tax liability. Ambery added: “The simplest way to avoid overpaying tax is to only withdraw the amount of pension you actually need. Taking smaller, regular withdrawals helps keep your tax burden under control.” Read More... For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Following the fiscal changes outlined in the Spring Budget Statement, the UK is set to make reforms to the immigration visa system. One of the key proposals under consideration is reforming the Graduate Visa (also known as the ‘PSW’ visa). The UK Home Office previously indicated that international students wishing to stay in the UK must secure a graduate-level job – with a salary exceeding £30,000 – to be eligible for a PSW visa. While current discussions have focused primarily on the Graduate Visa, it is clear that the Labour government will face various challenges and policy adjustments once the new net migration figures are released. Although no specific target has been set, it is expected that annual net migration will be brought under several hundred thousand. Reforming work visas and skills-based policies will thus be key strategies in achieving this goal. With salary thresholds for work visas rising and potential reforms to the Graduate Visa, the idea of setting up a company to obtain a work visa has gained traction, drawing interest from entrepreneurs and highly skilled professionals alike. But is it really that simple? What exactly is a self-sponsorship visa, and what are the requirements for setting up a company? UK immigration visas - what is a ‘self-sponsorship visa’? The so-called Self-Sponsorship Skilled Worker Visa is not an official, standalone visa category. Rather, it is a strategy based on the existing Skilled Worker Visa route. This pathway allows applicants to establish or own a business in the UK, secure a sponsor licence for the company, and then sponsor themselves in a qualifying role within that business – essentially sponsoring themselves. While this removes reliance on a third-party UK employer, the regulatory standards are equally, if not more, stringent, with a particular focus on authenticity and legitimacy. Basic requirements for a self-sponsorship visa With increased salary thresholds and shifting immigration policies, the self-sponsorship route has become attractive to skilled professionals with technical or management experience, entrepreneurs seeking to expand overseas, and former Innovator Founder applicants who may not meet investment or innovation criteria. To apply for a self-sponsorship visa, the following basic conditions must be met: Be at least 18 years old Own a registered and operational UK company The company must hold a valid Sponsor Licence for Skilled Workers The job role created for yourself must be genuine, match an eligible occupation code (SOC 2020), and meet skill level requirements The role must meet or exceed both the minimum salary threshold and industry-standard rates English language proficiency at CEFR level B1 or equivalent (e.g. IELTS 4.0) Proof of sufficient funds to support yourself in the UK (typically at least £1,270 in your bank account) If applicable, provide a police clearance certificate and tuberculosis test results In short, once you meet the age and language requirements, the process involves four key steps: Set up a UK company Apply for a Sponsor Licence Issue a Certificate of Sponsorship Apply for a Skilled Worker Visa   What are the requirements for registering a UK company? The first step is registering a company in the UK. There is no requirement for directors to be UK residents or citizens. Most applicants choose to set up a Private Limited Company (Ltd), which offers a clear legal structure, limited liability, and better credibility when applying for a Sponsor Licence. When registering a UK private limited company, you will need the following: 1. Choose a Company Name The name must comply with Companies House regulations. It must not duplicate existing company names or include restricted terms. You can check name availability on the Companies House website. 2. Registered Office Address The company must have a UK-based registered office address for receiving official correspondence such as tax notices, court documents, and Companies House filings. If you don’t have a physical office, you may use an agent address service. 3. Director and Shareholder Details At least one director is required. You must provide the full name, address, nationality, and date of birth. Shareholders’ full names and share percentages must be disclosed (they may be individuals or companies). Valid ID (passport or ID card) and proof of address (e.g. bank statement or utility bill) are required for all parties. 4. Memorandum and Articles of Association Memorandum of Association: Confirms the shareholders' agreement to form the company. Articles of Association: Sets out the rules for running the company, such as director responsibilities and shareholder rights. A standard template can be used, or you may customise your own. 5. Share Capital Information State the amount and value of issued shares (typically £1 per share).If a corporate entity is a shareholder, its company details must also be provided. 6. Business Activities – SIC Code Clearly define the industry in which the company will operate, aligning with the job role you will sponsor. Sponsor licence approval Registering a company is only the first step. The Home Office evaluates whether the business is genuinely operational when reviewing Sponsor Licence applications. Common indicators include: Having a UK business bank account Signed commercial contracts or client relationships Business website Records of employing staff (not mandatory, but advantageous) Office or service address Business plan, HMRC registration, VAT returns, etc. Proper documentation will strengthen your Sponsor Licence application and support your self-sponsored job role as a legitimate position.   Key tax filings for companies It is essential to maintain accurate accounting records and ensure timely submission to HMRC to remain compliant. These include: Confirmation Statement (annual) Annual Accounts Corporation Tax Return PAYE and National Insurance contributions VAT Returns (if registered) Note that while most of these are annual, VAT can require monthly or quarterly submissions. Companies may also be eligible for various tax reliefs. If you are unsure about deadlines, requirements, or tax relief opportunities, it is highly advisable to consult a professional accountant or tax advisor.   Some advice from TB Accountants The self-sponsorship visa route offers a feasible pathway for those looking to establish a long-term presence in the UK through entrepreneurship. However, it involves complex legal and compliance procedures, particularly around company registration and legitimate operations. Under the UK’s revised immigration rules effective 9 April 2025, new regulations have been introduced to tighten oversight of self-sponsorship under the Skilled Worker Visa. Notably, SW 14.2A now clarifies that certain payments can no longer count towards meeting salary requirements.  This includes: Salary deductions Loan repayments Investment contributions This means applicants must ensure their basic salary, after excluding the above items, still meets the required threshold. This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

If you have opened a personal pension account and are currently making fixed monthly contributions, you’ll want to read ahead.  In this article, we’ll provide some general information on how contributions work and how to maximise your returns on withdrawal. Generally speaking, unless you choose to withdraw all the funds from your pension pot at once, there will be some money left in the pot.  How should this money be utilised? In the UK, there are several options for ‘cashing in’ (withdrawing) – the two main options are a life annuity, or a pension drawdown. When you purchase a life annuity, your savings are converted into annual pension payments, providing you with either a lifetime or fixed-term income. If you opt for a pension drawdown, you can withdraw funds from your pension pot and invest the remaining portion. A pension drawdown may seem more flexible, as if investments perform well, there is significant potential for growth in the remaining funds, which could provide you with substantial income. However, this also comes with risks. We’ll explain how it works, and why you may want to choose one. 1. What is a pension drawdown? A pension drawdown is a way of withdrawing funds directly from your pension while allowing your pension fund to continue to grow.    You can withdraw some money from your pension savings pool, reinvest the remainder and earn a regular income. Typically, this comes from a defined contribution pension, such as a personal or workplace pension. Before pension drawdown was first introduced in the UK in 1995, pension holders had fewer options.    It was only possible to purchase an annuity before the age of 75 to ensure a stable retirement pension. The Pension Taxation Act 2014 introduced two types of pension drawdown – capped drawdown and flexible drawdown. Capped withdrawals mean there is a ‘cap’ on the income that can be received from the pension pool. With a flexible withdrawal, after you withdraw the available tax-free amount, the remainder can be used to provide regular income and/or temporary lump sum payments, with no limit on the amount. After 6 April 2015, it is no longer possible to initiate a capped drawdown.   However, any drawdown initiated on 5 April 2015 or before can still be maintained. 2. How does a pension drawdown work? After 6 April 2015, the upper limit withdrawal was cancelled, and the flexible withdrawal method was officially renamed to ‘flexi-access drawdown’. Therefore, in this article, we mainly introduce Flexi-access Drawdown and its operating rules. From the age of 55, pension holders can withdraw up to 25% of their funds from their pension savings pool tax-free, and the rest of the funds (up to 75%) will be automatically moved to a drawdown account.  The 25% tax-free withdrawal can be withdrawn at once, or in increments. When the remaining funds enter the drawdown account, you can then decide how to invest the money and receive a regular taxable income.  You can also talk to a financial advisor who can assist with how to best manage these funds, and what investment options are available. There is no limit to how much income you can withdraw from your remaining pension savings.  It can be taken all at once, or via regular withdrawals (e.g. monthly or yearly). After 6 April 2015, the flexi-access drawdown scheme allows you to withdraw unlimited amounts. 3. Some examples: Example 1: You are aged 60, and want to use your pension savings to pay off debts and for some emergency home repairs You have a total of £100,000 in your pension pot You can withdraw up to £25,000 tax-free (25%) You can invest the remaining £75,000 In this case, the investment of £75,000 will be taxed at withdrawal.  However, since the investment has a chance to appreciate (or depreciate), there is a chance that the final withdrawal amount may be higher or lower after tax. Example 2: You are aged 60 You have a total of £50,000 in your pension pot You can withdraw up to £12,500 tax-free (25%) You have £37,500 remaining which can be invested and/or withdrawn as regular income You decide to withdraw £2000 per year from the remaining amount as income In this case, you can change the withdrawal amount of £2000 whenever you prefer, or you can stop making withdrawals entirely.  As in the above example, the remaining amount that is not withdrawn is invested, and the amount can appreciate or depreciate. 4. Benefits and risks There are many advantages to using a pension drawdown as part of your retirement plan, but there are also some limitations and potential risks. Advantage 1: Flexibility Pension Drawdown gives you the flexibility to arrange how you want to use your pension to suit your retirement plans and circumstances. Advantage 2: Control of Taxes You’re usually entitled to a 25% tax-free lump sum, and any withdrawals above this are taxed at your marginal tax rate. However, you have control and can time your withdrawals. For example, if you are currently a high-rate taxpayer but will soon become a basic-rate taxpayer, you can wait before making any further withdrawals. Advantage 3: Investments Investing remaining funds makes it possible for your funds to continue to grow. Risk 1: Market volatility Your remaining pension in a drawdown account will continue to fluctuate in value, depending on your investments and market conditions. If you withdraw funds faster than your investments grow, your remaining funds will decrease in value and may not be sufficient to maintain the level of income you wish to withdraw. Risk 2: Money Purchase Annual Allowance (MPAA) The amount you can contribute to a pension each year is £60,000. However, if you draw down your pension (more than the 25% tax-free cash lump sum), your annual allowance will be reduced to £10,000. If you want to semi-retire but continue to contribute to your pension, this could significantly impact your long-term retirement plans. Risk 3: Persistence While you have its flexibility and options, it’s your responsibility to ensure that your money can live as long as you do. Many of us underestimate how long we are likely to live, so judging how much money to withdraw sustainably can be difficult. 5. Tax rules  The first 25% of your pension is tax-free. After, any subsequent earnings you withdraw from the drawdown account pool will be subject to personal income tax (at the time of writing, 2023-24 rates): If you have no income from any other source, the first £12,570 is tax-free. You pay tax at 20% on the next £37,700 above this. You pay 40% tax on all income over £50,270 (£12,570 + £37,700) You pay 45% tax on everything above £125,140. So if you took out £50,270 and had no other income from private pensions and state pensions, your tax bill would be £7540, after taking into account your tax-free allowance of £12,570. These income tax rates apply to England, Wales and Northern Ireland. There are different income tax rates in Scotland. 6. How do I pick the best option for myself? TB Accountants recommends that you should always seek professional advice to determine whether a pension drawdown is the right choice for your needs. If you do decide to use a pension drawdown, you will also need to decide how much to leave in your drawdown account. It is best to seek professional advice regarding the relevant tax rules for withdrawing the remainder, and see how best to maximise the benefits.  Any investment strategy must be best suited for your investment purposes.  If you are still unsure how to proceed, contact TB Accountants for more advice. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

Sometimes, we may find ourselves using our own funds in order to purchase things that are necessary for our work, such as buying a computer.  We may even sometimes need to use a personal vehicle for work, or hire professional services such as uniform cleaning.  We also know that employers do not always reimburse these expenses. Did you know that you could reduce the tax you pay on these expenses? So, what sort of expenses qualify for tax relief? If you are using personal funds to purchase goods and/or services that used solely for work purposes, you can claim tax relief for your job expenses.  This includes: Cleaning, replacing, or repairing your uniform/professional attire. Here, uniform refers to attire that indicates your profession, such as nurse or police uniforms, safety boots Repairing or replacing small tools, such as drills or scissors Professional subscription fees or expenses Travel and living expenses related to work, but typically not expenses related to ordinary commuting. Ordinary commuting refers to the round-trip expenses from home to the workplace, and only itinerant workers or those traveling to temporary workplaces can apply for tax refunds If you use a private vehicle for work, you can apply for tax relief for ‘mileage used’ Additional expenses incurred when working from home, such as extra gas and electricity costs for the workplace. However, this usually applies only if you are required to work from home – it cannot be a voluntary arrangement Business telephone expenses You must be also paying taxes in the tax year you are applying for, so you will receive tax relief for these expenses based on your tax rate. For example, if you spend £60 and are taxed at a rate of 20% that year, the tax relief you can apply for is £12 (£60 at 20%). 1. How far back can I claim tax relief? Employees can apply for tax relief for the current tax year, as well as the previous four tax years. This means you have a window of four years to apply for tax relief. Since we are in the 2023/24 tax year, it is possible to backdate tax relief to the 6th April 2019 (tax year 2019/2020) to make your claim. If you fail to apply within the deadline, you may lose any potential entitlement to a tax refund because the tax year has been closed and is no longer eligible for reclaim. Therefore, you should compile a list of all expenses for each job you had during the tax relief period. Try to locate any receipts or bank statements to substantiate these expenditures, in case HMRC requests them for review. If you are eligible for flat-rate relief (e.g. the £6 per week allowance for working from home), you do not need to supply evidence. Please note that HMRC typically processes tax refund applications on a ‘pay now, check later’ basis. This means they may pay out the tax refund upon receiving your application, even if you are not eligible for the refund. However, if they later determine that your application is ineligible, they can request repayment. 2. Check if your expenses qualify: Expenses must be incurred ‘wholly, exclusively and necessarily’ – it must be necessary for work purposes Expenses must be solely for work purposes; if the goods/services purchased is not only for work but also for personal use, it will not be allowed unless the work and personal usage can be separated, and the work proportion calculable and expensed accordingly Additionally, HMRC’s definition of ‘necessary’ is that the expenses must be applicable to all employees engaged in the same job, not for the specific employee making a claim. If your employer does reimburse any expenses, you can only claim tax relief if you have not received a full reimbursement. 3. How is the tax relief calculated? When you submit an application for tax relief, you will not receive the full amount of your expenses from the tax authority.  Instead, you’ll only receive tax relief based on your tax rate. For example, if you’re applying for a standard tax-free amount of £60 for cleaning uniforms at home, and your tax rate is 20%, you’ll receive £12 in tax relief (20% of £60). As mentioned above, since you can go backdate up to four tax years, an employee with a 20% tax rate might receive a cheque worth £48 (£12 for each tax year) for previous years, and adjustments to their tax code for the current and future years. If your tax refund application is for the current tax year, the tax authority will adjust your tax code, and you should automatically receive the tax relief in your payslip. If your application is for a previous tax year, the tax authority will adjust your tax code accordingly, or provide you with a direct refund by cheque. You should regularly check your PAYE tax code to see whether any tax relief previously applied is still effective.  For example, if you applied for the work from home tax relief allowance in the 2021/22 and 2022/23 tax years, and you discover that you are no longer eligible in the 2023/24 tax year, you should contact HMRC to ensure that the tax code is changed accordingly. 4. How do I apply? To obtain tax relief, you must submit an application to HMRC. If you don’t usually need to fill in a tax return, you can apply using Form P87 either online or by post (print version). You will need detailed information about your employer, including their name, type of business, address, and employer reference number (e.g., 123/AB456 – you can find this on your payslip or P60). If you don’t have an ‘employer industry’ or ‘employee number’, you can write ‘N/A’ or ‘unknown’. The print-version P87 has space for 5 different tax years/employment positions.  You cannot combine expenses for different jobs within the same tax year. Therefore, if you want to apply for tax relief for the current year and the past four tax years and have been working in the same job throughout, you can fill out all the details on one form.  If you want to claim expenses for two different jobs from the past two tax years, you can fill out all the details on one form. However, if you have expenses for two different jobs that need to be claimed, but need to backdate all four tax years, one form will not have enough space, and you’ll need to fill out an additional form. 5. Receiving your refund HMRC will usually issue a refund via cheque, or adjust your PAYE taxpayer code. More information about employment expenses incurred by employees and tax relief/reimbursements can be found on GOV.UK . For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

To most people, a shopping centre represents high volume business trade.  Naturally, a shopping centre would be expected to be valued much higher than any ordinary household property. Despite this, a commercial shopping centre in South Wales was recently sold for only £615,000, down £400,000 from the initial guide price. Not to mention, the average price of residential property in England is currently actually £685,200! So, how could this have happened? 1. Initial upfront investment costs From a macroeconomic perspective, British business has suffered significantly, particularly after Brexit and the coronavirus pandemic. In addition to this, inflation has created huge pressures for businesses and consumers alike, and the response by the Bank of England in raising interest rates has placed further pressure on the wider economy. Jemma McAndrew from Cushman & Wakefield has observed that in the current retail market, any decision to operate a shopping centre and attracting tenants would require a significant capital injection. The cost of operating retail property, particularly one as large as a shopping centre, represents significant upfront costs for any prospective buyer.  This resulted in the price being pushed down much lower than originally expected. 2. A sluggish retail industry The low sale price may reflect a wider industry trend – that the retail industry is experiencing sluggish growth.  Alongside an increase in operating costs, rising energy prices and higher store rent and taxes, the Bank of England’s decision to raise interest rates has further increased the cost of running a business. You may be aware of Wilko, a well-known high-street chain that recently declared bankruptcy.  PwC have been appointed as administrators to seek a purchaser to take over the business.  Wilko is symbolic of the difficulties faced by the wider retail industry. Any collapse of a retail business then results in further unemployment, eventually supressing consumer demand, forming a ‘vicious cycle’.  The rise of e-commerce has further placed pressure on the traditional retail industry. The low sale price of the shopping centre can be attributed to these issues. What type of property produces higher return rates? Despite the low initial purchase price, a commercial property may not necessarily be a better investment than residential property. Commercial properties may have greater scope for appreciation, but any price changes are subject to significantly more factors.  Besides wider retail industry concerns outlined in the previous section, there is also a need to attract corporate tenants in order to make the investment worthwhile. When examining shopping centre asset transactions (e.g. commercial rentals), only £521m worth of transactions was conducted in the first half of 2023, compared to £919m in the first half of 2022. On the other hand, the average rate of return for shopping centres remained relatively stable during the first half of 2023, despite the decreased transaction rate. More recently, there has been an uptick of commercial property purchases made by owner-occupiers, existing stakeholders and local authorities seeking to manage their city-centres.  These properties are then transformed from traditional retail to other forms of operation in an attempt to boost footfall. If you’re planning on buying or selling commercial property in the UK, be aware of the tax implications – stamp duty, capital gains tax and VAT are all applicable!  Contact TB Accountants for more advice. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

A restaurant owner in Knaresborough was recently fined for committing tax evasion for more than 3 years, with unpaid Value-Added-Tax (VAT) of over £51,700. The owner Razaul Karim applied for a VAT registration for his restaurant in 2013, subsequently cancelling his registration in 2015 after declaring that the annual turnover was below the registration threshold.  However, records show that in August 2019, the restaurant had a turnover of almost £130,000, well over the registration threshold of £85,000. This case brings to our attention how important it is for takeaway and restaurant businesses to be aware of how VAT is calculated, especially since HMRC has very specific rules for how different foods and drinks are taxed.  Many other business owners have been caught out for accidental tax avoidance and evasion because of this. We’ve created a guide to help you understand the basics, so that you can avoid making any costly mistakes. 1. What is Value-Added-Tax (VAT)? VAT is a basic consumption tax levied at the point of sale for most goods and services, is collected by suppliers and remitted to HMRC.  Assuming your business is based in the UK, you only need to register for VAT if your annual turnover reaches £85,000. Our guide will assume that you’ve already registered for VAT. 2. How is VAT calculated for food? Most foods will either be zero-rated or charged at the normal rate of VAT (20%). Generally, the following foods fall into the zero-rated category: Raw meat and fish Vegetables and fruits Grains, nuts and legumes Culinary herbs Other foods that fall under the standard rate include catering foods, alcoholic beverages, sweets, crisps, salty snacks, hot food, sports drinks, hot takeaways, ice cream, soft drinks and mineral water. If you are running a restaurant or catering service, you cannot simply judge based on the VAT rate of the food itself.  You need to consider three important factors: Is the food itself zero-rated, or subject to the standard rate? Is the food served on the premises, or for takeout? Is the food hot or cold? 3. Which rate of VAT do I apply to sales? It’s important to distinguish between the sale of food itself, and food sold ‘in the course of catering’. Even if the underlying food is zero-rated based on the explanation above, if it is sold ‘in the course of catering’, the standard rate will still apply. How is this determined? HMRC has provided some official guidance: Food and beverages prepared on the premises (excluding cold takeaway food) Providing cooked/ready-to-eat food/meals, regardless of whether cutlery is included Providing food and beverages as a third-party (i.e. catering service) Cooking or preparing food at the client’s premises (e.g. chef rental service) On the other hand, the following situations are usually zero-rated: Providing chilled takeaway food Grocery store sales Sale of food and beverages that require further preparation by the customer Besides from this, you also need consider whether you are selling hot food: Food that is heated and eaten hot Food that stays hot after heating Advertising/marketing the food as hot Food that is heated on request Food that is provided with packaging for heat retention Hot food is always standard-rated, whilst cold food can be zero-rated. 4. What are the different rules for eat-in and takeaway? Additionally, you’ll also need to consider where the food is consumed. Regardless of the underlying VAT rate, if your customer is consuming food or beverages on the premises, you’ll still need to charge the standard rate of VAT. ‘Premises’ is defined as an area occupied by a food retailer or set aside specifically for the consumption of purchased food or beverages, including any spaces shared with other food retailers. If you’re operating a takeaway, the underlying VAT rate and hot/food distinction outlined above will also still apply.  The standard rate of VAT will apply if: The food itself falls under the standard rate The food is classified as hot food The food is consumed on the premises (if you are selling takeout but offer an optional seating area) Takeout food is zero-rated if: The food itself is zero-rated The food is classified as cold food The food is consumed off-premises 5. Some advice from TB Accountants So, let’s look at an example. If you run a coffee shop and you sell raw coffee beans in a container for customers to take with them, the coffee beans are zero-rated.  If you then use those coffee beans to produce hot coffee to sell to customers, the standard rate of 20% will apply. This is the case whether they are taking the coffee away or sitting down at your premises. Still confused? Many business owners are.  TB Accountants is here to provide you with expert support.  Get in touch with us and we’ll see how we can help you. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

On the 6th March 2024, the chancellor Jeremy Hunt announced the Government’s new Spring Budget, which outlines the Government’s fiscal policies for the new financial year. So, what has changed? We’ve focused on the key points that are likely to affect your personal finances and business operations. 1. National Insurance The headline change announced in the Spring Budget is another 2% cut to National Insurance (NI) contributions, from 10% down to 8%.  The chancellor had previously already announced a 2% cut last year (from 12% to 10%). With this additional reduction, the overall NI contribution rate has been reduced by one third.  The chancellor stated that this decision was aimed at boosting economic growth by ensuring that workers are better off, and therefore able to spend more. It is estimated that up to 27 million employees will benefit from an average of a £900 gain per year as a result of the additional cut.  In addition, up to 2 million employees are estimated to gain around £650 per year. 2. Property Taxes Capital Gains Tax (CGT) for residential properties will be reduced from 28% to 24%.   The government expects the lower tax rate to stimulate the rate of property transactions in the market. The Furnished Holiday Lettings Scheme will be abolished – it will become more expensive for landlords to rent out property for short-term holiday lets. The Multiple Dwellings Relief Scheme will also be abolished.  This scheme was originally designed to reduce the amount of stamp duty paid when purchasing multiple properties in a single transaction.  Any transactions completed or substantially completed by the 1st June 2024 will no longer be eligible for the scheme.  3. VAT registration threshold increase The VAT registration threshold will be increased from £85,000 to £90,000.  Government estimates suggest that this means an additional 28,000 small businesses will not need to pay VAT. 4. Abolition of the ‘non-dom’ tax regime The chancellor announced that the non-domiciled tax status will be phased out. The non-domiciled tax status is an arrangement where UK residents can declare a permanent home outside the UK for tax purposes, which could be then be used to avoid paying UK tax on overseas earnings. The status will be replaced by a new scheme that is due to be announced later. TB Accountants will provide further guidance once the announcement has been made. 5. New UK ISAs A new ‘UK ISA’ will be introduced to provide an additional £5,000 ISA allowance for investments in UK businesses. The new ISA allowance is in addition to the existing £20,000 general ISA allowance. What happens next? Of course, many other policies were also announced by the chancellor as part of the Spring Budget which we haven’t outlined here.  You can get in touch with us for further details. If you’re not sure how the changes announced by the Spring Budget affect you, or you need further advice, TB Accountants is here to provide tailored support. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

I’m sure many of us have dreamed of living in fancy mansion, or next-door to a celebrity.  Have you ever taken a look at how much it might cost? Let’s take a look together. 1. Location, location, location There is one street in Wales prized for its prime location and comfortable living prices, meaning that despite not being in the financial centre of the UK, sale prices are still often over £1 million. However, once we zoom out and look across the UK, we still find that the ten most expensive streets are all concentrated in London. According to Zoopla, properties on these 10 streets have purchase prices starting in the seven figures – millions of pounds – for a total value of £45.23 billion. 2. Living next door to David Beckham? In their ranking, the most noteworthy and also the most expensive street is Kensington Palace Gardens, also known as the ‘Billionaires’ Row’. Not only does it boast residents like Prince William and David Beckham, but it has also held the title of the most expensive residential street in the UK for 12 consecutive years, with the average house price reaching £35 million! According to Zoopla’s data, the average price of a mansion in Kensington Palace Gardens is £30 million, compared to the average UK house price in the UK of just £250,000. This means that properties here cost 140 times as much! But why live here? Kensington Palace Gardens is located in the affluent area of Kensington and Chelsea, adjacent to Hyde Park, and boasts beautiful natural surroundings. Kensington Palace, where the Duke and Duchess of Cambridge reside is also located on this street. Many embassies or ambassadorial residences of countries such as France, Russia, Japan, and India are also situated here. Not only does it offer a comfortable living environment, but it also boasts a very prime social circle. To be part of the social circle, many celebrities have also purchased properties here, including football superstar David Beckham, the popstar Madonna, the renowned talent show judge Simon Cowell, British-Indian steel magnate Lakshmi Mittal, Chinese tycoon Wang Jianlin, amongst many others. Owning a property in Kensington Palace Gardens means being neighbours with some of the wealthiest and most powerful celebrities and political figures in the world. It serves as a stepping stone for breaking into high society. 3. ‘The Jewel on the Hill’  Ranked second is Courtenay Avenue, located in the Haringey area of Northwest London, home to the famous Alexandra Palace. British media once referred to Courtenay Avenue in Haringey as one of London’s top three upscale neighbourhoods, alongside Westminster and Kensington & Chelsea, earning it the nickname “The Jewel on the Hill.” The houses here exhibit diverse architectural styles, ranging from classic English-style cottages to modern villas with sleek glass constructions, surrounded by the beautiful natural scenery. 4. How about a Grade-II listed building? The third place goes to Grosvenor Crescent in Belgravia, a wealthy area in central London. This street is predominantly lined with terraced houses and features a curved crescent shape, hence its name Grosvenor Crescent.  It was developed by the Grosvenor family, British real estate magnates, during the 19th century when they built Belgravia. It’s worth mentioning that numbers 1-10 on this street were built in 1836 and are designated as Grade-II listed buildings by the British government! Living here really gives you a feeling of residing in a historical landmark, filled with rich cultural heritage.  Additionally, the Belgian Embassy, established in 1860, is also located on Grosvenor Crescent. 5. When purchasing a luxury property, what should you pay attention to? Great question! Opportunities in life are unpredictable. You never know when you might have the chance to live next door to Prince William and David Beckham, right? Luxury homes represent not only lavish living environments, but are also symbols of vastly different social circles. Property prices not only signify the value of the buildings themselves, but also encompass the hidden wealth and social connections that come with owning such properties. When purchasing a luxury home, you can choose a suitable property based on your specific needs. Of course, remember not to forget to pay the corresponding taxes and fees! If you’re unsure about anything, contact TB Accounts for more advice. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

In the UK around 45 million people regularly play the lottery. Although the vast majority of them have never won anything, there are still some lucky ones who have won big prizes. One lottery player won a £195 million lottery jackpot, breaking the record for the highest lottery prize ever won. What can £195 million buy? This amount of money could buy 11 Boeing 747 airplanes, 23 Pisces-VI submarines, or even multiple luxury townhouses near Southampton Football Club or London’s Mayfair! 1. How have winners spent their money? Colin and Chris Weir from Largs, North Ayrshire, broke records in July 2011 by becoming the largest lottery winners in the UK at that time. Colin invested £2.5 million in his beloved Partick Thistle Football Club, naming one of the stands at the stadium after himself. He later acquired a 55% stake in the club, which was eventually transferred to the local community after his passing. The couple also established the Weir Charitable Trust in 2013 and donated £1 million for the Scottish independence referendum in 2014. Adrian and Gillian Bayford won €190 million in the EuroMillions lottery draw in August 2012, amounting to just over £148 million. According to the Mirror, the couple purchased a Grade-II listed property in Cambridgeshire, complete with a luxury cinema and snooker room, but it was sold a few years after their divorce. Former social worker and teacher Frances and her husband established two charitable foundations after winning nearly £115 million on New Year’s Day in 2019. It has been reported that she has donated £60 million to charitable causes as well as to friends and family. 2. Do taxes need to be paid on lottery winnings? The answer is quite simple, no. In the UK, lottery winnings are not considered taxable income.  However, income tax must be paid. Once you deposit the money into the bank, it will inevitably start accruing interest. Since this interest is not part of the original windfall, income tax is paid on the interest – this is personal income tax. Although questions have been raised over whether the interest earned is simply part of the original earnings, HMRC has never provided a definitive answer. Additionally, inheritance tax must also be paid. In the UK, if the value of an estate exceeds £325,000, inheritance tax is due. So, if the winnings are passed down as inheritance, then the inheritance tax rate of 40% is applicable. What if the winner gifts the money to someone before their death? It is possible to gift up to £3,000 per year to others tax-free, and this amount is not added to the estate. Moreover, if the previous year’s tax-free allowance hasn’t been used, it can be carried forward for one year, allowing a total tax-free allowance of £6,000 for the next year. Furthermore, HMRC stipulates that when money or assets are gifted, they remain part of the estate for seven years after the gift is made. This means if the winner gifts the money to a relative or friend and passes away within seven years, the money will still be considered part of the estate, and the recipient will be liable to pay tax on the gifted amount. For example, let’s say A wins a lottery and wishes to gift £50,000 to his son. Since A has a tax-free allowance of £6,000 (not gifted to anyone in the previous year), £44,000 remains part of A’s estate in the year A gifts the money to his son. If A unfortunately passes away two years later, his son would need to pay inheritance tax on the £44,000.  However, if A passes away after ten years, the gift has surpassed the seven-year period and is no longer part of A’s estate, so his son wouldn’t need to pay any tax on it. 3. When is inheritance tax due? HMRC stipulates that the executors of an estate must pay within six months after the individual’s death. If payment is not made within this timeframe, HMRC will begin to charge interest. Additionally, executors can opt to pay tax on certain assets, such as property, in instalments over ten years. However, any unpaid tax will still accrue interest. If any assets are sold before all personal income tax is paid, executors must ensure that all instalments and interest are paid at that time. If your estate incurs personal income tax, it’s advisable for the executors to make partial payments within the first six months after death, even if they haven’t completed the valuation of the estate. This will help reduce the interest the estate may generate. If the executors or administrators pay tax from their own accounts, they can reclaim it from the estate. If personal income tax is overpaid during the probate process, HMRC will refund the estate. Remember, if appointed as an executor or administrator of an estate, it’s necessary to complete and submit an estate account within one year after the deceased’s death to avoid penalties. 4. Planning ahead Perhaps you haven’t won the lottery, but you may have other assets you would like to pass on.  What is the most tax-efficient way to do this? Giving Gifts While Alive Gifts during one’s lifetime can reduce some expenses: Annual exemption – Each person can gift up to £3,000 worth of gifts in each tax year without it being added to your estate’s value. If you haven’t used last year’s exemption, it carries over to this year, making your annual exemption total £6,000 Wedding or civil ceremony gifts – In addition to the annual exemption, you can leave wedding or civil ceremony gifts of up to £1,000 per person. If it’s for grandchildren or great-grandchildren, this amount increases to £2,500; if it’s for children, it’s £5,000 Small gifts exemption – Provided you haven’t used any other exemption on the same person, you can also give gifts worth up to £250 to any number of people in each tax year Taking this into consideration when drafting a will is crucial. If your estate’s value exceeds £325,000, giving money while you’re alive may be more tax-efficient. However, it’s essential that gifts are made outright, or they may not achieve the intended tax effect. For example, if you transfer property to your children but continue to live there and benefit from it, the gift may not qualify for exemption. Leaving Money to Charity in a Will Anything left to a charity is exempt from inheritance tax. If you leave an estate worth £350,000, including a £30,000 charitable donation, no inheritance tax is due. This is because your taxable estate value would be calculated as £320,000 (£350,000 minus £30,000), which is below the £325,000 inheritance tax threshold. Furthermore, you can also reduce your inheritance tax rate by leaving over 10% of your net estate to charity. Putting Pensions and Life Insurance Policies into Trusts Pensions and life insurance policies can be great ways to minimise tax bills. Trusts may be needed for both types of policies, often meaning any payouts won’t form part of your estate but will go directly to your beneficiaries, without incurring inheritance tax. Leaving Everything to Your Spouse If you’re married or in a civil partnership and your partner is domiciled in the UK, regardless of the value of your estate, they won’t have to pay inheritance tax on what you leave them. Married couples and civil partners can also pass on their unused exemptions to their partners, significantly increasing their partner’s exemption allowance. Leaving the House to Your Children In April 2017, a ‘main residence’ nil-rate band was created. If homeowners leave their homes to children, stepchildren, or grandchildren—or their spouses or civil partners—they can get an additional £175,000 of the nil-rate band allowance. If you have any questions about inheritance tax, contact TB Accountants. Our professional accountants can discuss and help you plan ahead for inheritance tax. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .