Accounting FAQs

Each type of tax payment to HM Revenue and Customs (HMRC) in the UK has a different payment reference. Here are the payment references for some common types of tax payments:

 

• VAT payment reference: The reference for VAT payments consists of your VAT registration number.
• Corporation Tax (CT) payment reference: The reference for CT payments consists of your 17-digit Corporation Tax reference number. It’s important to note that this reference number is different from your Company Registration Number (CRN). You can find your CT reference number on any letters or documents you have received from HMRC regarding your corporation tax. Please note the CT payment reference number changes by one digit every financial year.
• PAYE payment reference: The reference for PAYE payments depends on the tax period you’re paying for. Each month has a different tax period, and therefore a different reference. The reference consists of your Employer Reference (ER) number, followed by a three-digit code for the tax period, and then a four-digit number that identifies your payment. For example, if your ER number is 123/AB456 and you’re making a payment for the June 2023 tax period, your reference would be 123AB4560324.
• Self Assessment payment reference: This is your Unique Tax Reference number which is a 10 digit number unique to you and ends with a K.

The PAYE (Pay As You Earn) reference and the PAYE Accounts Office reference are two different identifiers used by HM Revenue and Customs (HMRC) in the UK to track your business’s payroll and National Insurance contributions. Here’s the difference between the two

PAYE reference: The PAYE reference is a unique identifier used by HMRC to identify your business’s payroll scheme. It consists of three parts: a three-digit HMRC office number, a reference number that’s up to 10 characters long, and a letter suffix that identifies the tax year. For example, if your business is registered in Manchester and has a payroll reference of 123/A4567, the PAYE reference would be 123/A4567X.

PAYE Accounts Office reference: The PAYE Accounts Office reference is a unique identifier used by HMRC to track your business’s National Insurance contributions. It consists of two parts: a three-digit HMRC office number and a reference number that’s up to 13 characters long.

It’s important to keep both references safe and secure, as you’ll need to include them on any correspondence with HMRC regarding your payroll and National Insurance.

Your National Insurance (NI) number is a unique personal identifier used by HM Revenue and Customs (HMRC) in the UK to track your tax and National Insurance contributions. If you’re a UK resident, you should have been issued with an NI number when you turned 16.

Here are some ways to find your NI number:

Payslip: Your NI number should be listed on your payslip. If you’re employed, your employer will deduct National Insurance contributions from your salary and pay them to HMRC on your behalf.

P60: Your NI number should be listed on your P60 form, which your employer must provide you with at the end of each tax year.

National Insurance card: If you were issued with a National Insurance card, your NI number should be printed on it. However, the UK government stopped issuing National Insurance cards in 2011, so not everyone will have one.

HMRC letter: If you’ve previously filed a tax return or have been in contact with HMRC, they may have sent you a letter that includes your NI number.

Contact HMRC: If you can’t find your NI number, you can contact HMRC’s helpline and ask for a replacement. You’ll need to provide proof of your identity, such as your passport or driving licence.

It’s important to keep your NI number safe and secure, as it’s used to track your tax and National Insurance contributions throughout your working life.

Your Unique Taxpayer Reference (UTR) is a 10-digit number issued by HM Revenue and Customs (HMRC) in the UK to identify you for tax purposes. If you’re a UK resident and you’ve registered for Self Assessment, you should have been issued with a UTR.

Here are some ways to find your UTR:

HMRC correspondence: Your UTR should be listed on any letters or documents you’ve received from HMRC regarding your tax affairs. For example, if you’ve filed a tax return, your UTR will be listed on the tax return form.

Online: If you’ve registered for a Government Gateway account, you can log in and find your UTR under the Find your UTR number section in Self Assessment.

By phone: You can call HMRC’s Self Assessment helpline on 0300 200 3310 and ask for your UTR. HMRC will not inform you of your UTR number over the telephone. They will send the letter with your National Insurance number in the post.

By post: If you can’t find your UTR using the methods above, you can write to HMRC and request a copy. You’ll need to provide proof of your identity, such as a copy of your passport or driving licence.

It’s important to keep your UTR safe and secure, as it’s used to identify you for tax purposes. You’ll need to include your UTR on any tax returns or other correspondence with HMRC.

If you’re a self-employed individual or have income that’s not taxed at source, you may need to make payments on account towards your annual tax bill. Payments on account are advance payments towards your tax bill, which are made twice a year – in January and July.

• In January and July, you’ll need to make payments on account equal to 50% of your previous year’s tax bill. So, if your tax bill for the previous year was £10,000, you’ll need to make payments on account of £5,000 in January and £5,000 in July.
• When you submit your tax return for the current year, you’ll calculate your actual tax bill for the year. If your payments on account were more than your actual tax bill, you’ll get a refund. If your payments on account were less than your actual tax bill, you’ll need to pay the difference.
• In addition to the payments on account, you’ll also need to make a balancing payment by 31 January of the following year. This is the amount of tax liability that’s due for the current year, minus the payments on account that you’ve already made in January and July.

It’s important to note that if your tax bill for the current year is less than £1,000, you won’t need to make payments on account. Additionally, if you know that your tax bill for the current year will be significantly less than the previous year, you can apply to have your payments on account reduced. However please note, HMRC will charge interest on the underpaid payments on account if it turns out that the actual tax liability for the year is more than the reduced payments on account.

If you’re having trouble meeting the payments on account or need more information about how they work, you can contact HM Revenue and Customs (HMRC) for assistance. They may be able to offer you a payment plan or other solutions to help you manage your tax payments.

In the UK, if you miss the deadline for submitting your Self Assessment tax return, you may be subject to penalties. The penalties for late submissions for Self Assessment are as follows:

Initial penalty: If you miss the deadline for submitting your tax return, you will be charged an initial penalty of £100, even if you have no tax to pay or have already paid all the tax you owe. This penalty will be due even if you submit the tax return just one day late.

Daily penalty: If you don’t submit your tax return within three months of the deadline, you will be charged a daily penalty of £10 per day, up to a maximum of £900. This penalty is in addition to the initial penalty of £100.

Further penalties: If you still haven’t submitted your tax return after six months, you will be charged a further penalty of 5% of the tax due or £300 (whichever is greater). If you still haven’t submitted your tax return after 12 months, you will be charged an additional 5% of the tax due or £300 (whichever is greater).

It’s important to note that if you miss the deadline for paying your tax bill, you may also be subject to penalties and interest charges on the outstanding amount.

If you’re having trouble meeting the deadlines for submitting your tax return or paying your tax bill, you can contact HM Revenue and Customs (HMRC) to discuss your options. They may be able to offer you a payment plan or other solutions to help you avoid penalties. For tailored support and proactive tax planning our self assesment tax advice will help you manage deadlines and reduce your overall tax burden.

In the UK, the difference between a tax resident and non-resident is important because it affects how you’re taxed on your income and gains. Here’s a brief explanation of each:

Tax resident: A tax resident is someone who spends a certain amount of time in the UK, or has ties to the UK, and is therefore liable to pay UK tax on their worldwide income and gains. The exact rules for determining tax residency can be complex, but in general, you’ll be considered a tax resident if:

• You spend 183 days or more in the UK in a tax year (6 April to 5 April)
• Your only home is in the UK
• You work full-time in the UK for 365 days or more with no significant breaks
• You have ties to the UK, such as family tie, accommodation tie, work tie, country tie.

If you’re a tax resident, you may need to file a Self Assessment tax return each year and pay Income Tax on your world wide income and potentially Capital Gains Tax on your worldwide gains.

Non-resident: A non-resident is someone who doesn’t meet the criteria for tax residency in the UK and is therefore only liable to pay UK tax on their UK income and gains. Non-residents may still need to file a tax return if they have UK income or gains that are subject to UK tax, such as rental income from UK property or capital gains from the sale of UK assets. Read more in our blog post on UK Tax Residency Accounting.

Use our comprehensive flow chart to confirm whether someone is a UK tax resident.

The main difference between a sole trader and a company is the legal structure and ownership of the business. Here’s a brief explanation of each:

Sole trader: A sole trader is a self-employed individual who runs a business on their own. They have complete control over the business and are personally responsible for all aspects of the business, including any debts or liabilities. As a sole trader, you’ll need to register with HM Revenue and Customs (HMRC) and file a Self Assessment tax return each year. You’ll also be responsible for paying Income Tax and National Insurance contributions on your profits.

Company: A company is a separate legal entity that’s owned by one or more shareholders. The company’s profits and losses belong to the company itself, not the shareholders, and the shareholders are only liable for the amount of money they’ve invested in the company. As a company, you’ll need to register with Companies House and comply with various legal and financial requirements, such as filing annual accounts and corporation tax returns with HMRC. You’ll also need to pay Corporation Tax on your profits. A company also has to file annual Confirmation Statements at Companies House. This is separate to filing the annual accounts at Companies House.

It’s important to carefully consider the advantages and disadvantages of each structure before deciding which one is right for you. You may want to seek self assessment tax return advice from us to help you make the best decision for your circumstances.

There are different advantages and disadvantages to owning property personally or through a company. Here’s a brief explanation of each:

Property owned personally: If you own property personally, you have full control over the property and the income it generates. You’ll be personally responsible for any debts or liabilities associated with the property. The income from the property will be subject to Income Tax and potentially Capital Gains Tax (CGT) if you sell the property at a profit. One advantage of owning property personally is that you may be eligible for certain tax breaks, such as the Personal Allowance and the Capital Gains Tax allowance.

Property owned through a company: If you own property through a company, the company is responsible for the property and any debts or liabilities associated with it. The income from the property will be subject to Corporation Tax, and you may be able to claim tax deductions for certain expenses, such as repairs and maintenance. If you sell the property, the company will be subject to Corporation Tax on any profits. One advantage of owning property through a company is that you may be able to minimise your personal tax liability by retaining profits in the company rather than taking them as income.

It’s important to carefully consider the advantages and disadvantages of each option and seek property tax advice from a qualified professional like our accountants here at Passman Leonard before making a decision.

If you sell a property that’s not your primary residence, you may be liable to pay Capital Gains Tax (CGT) on any profit you make from the sale. Here are the circumstances when you may need to pay CGT on the sale of a property:

You’ve sold a buy-to-let property or a second home: If you sell a property that’s not your primary residence, you’ll need to pay CGT on any gain you make from the sale. This includes buy-to-let properties, holiday homes, and any other properties that you don’t live in as your main home

You’ve sold a property that’s been gifted to you: If you’ve inherited a property or received it as a gift, you’ll need to pay CGT on any gain you make from the sale. The CGT will be based on the difference between the sale price and the market value of the property at the time you received it.

You’ve sold a property that’s part of a business: If you sell a property that’s part of a business, such as a shop or office, you’ll need to pay CGT on any gain you make from the sale.

You’ve sold a property that’s located outside of the UK: If you’re a UK resident and you sell a property that’s located outside of the UK, you’ll need to pay CGT on any gain you make from the sale.

It’s important to note that you’ll only need to pay CGT on any gain you make above the tax-free allowance (amounts are different based on the tax year when the asset was sold), . Additionally, if you’re selling a property in the UK, you’ll need to report and pay any CGT due within 60 days of the sale completion (30 days of completion if the property was sold before 26th October 2021). You can report and pay your CGT using HMRC’s online service.

To make sure you meet the deadlines and claim all available reliefs, Passman Leonard offers expert property tax advice. Find out more about How you declare Capital Gains Tax on the sale of a residential property in the UK.

If you’re registered for Value Added Tax (VAT) in the UK and you miss the deadline for submitting your VAT return or paying your VAT bill, you will be subject to penalties. HMRC will record 1 point on your account each time you miss a deadline for filing in your VAT Return i.e. whether you have to submit VAT returns annually, quarterly or monthly.

Once you have reached a penalty point threshold you will be charged a penalty of £200. If you continue to miss deadlines after your first penalty charge, HMRC will apply a further penalty.

The penalty limits are:

2 points – Annual VAT returns
4 points – Quarterly returns
5 points – Monthly returns

Some VAT returns are excluded from the penalty points like the first late VAT return after VAT registration and the final VAT return when deregistering for VAT. Penalty points will stay on your HMRC record for a set period until you start to submit your returns on time.

It’s important to note that if you’re having trouble meeting the deadlines for submitting your VAT return or paying your VAT bill, you can contact HMRC to discuss your options. They may be able to offer you a payment plan or other solutions to help you avoid penalties.

If you need expert guidance on managing your VAT or wider tax obligations, our tax advice services will help you stay compliant and plan more efficiently. Find out more in our blog: Penalty for late filing of VAT return and late payment of VAT.