The Low Incomes Tax Reform Group (LITRG) has urged HMRC to clarify changes in income allowances that will come into force next year to prevent confusion around Self-Assessment registrations.
Law dictates that individuals must notify HMRC of new sources of income, such as rental income or from a trade or business, by 5 October in the tax year following the year the new source of income began.
As new trading and property allowances are expected to be introduced, LITRG expressed concern that this may cause confusion for those who gain new incomes in the 2017/18 tax year.
From 6 April 2017 those with additional incomes below £1,000 will no longer have to report the income to HMRC by the 5 October 2018 deadline or pay tax on it. If the income exceeds £1,000 individuals can choose to either calculate their taxable profit in the usual way or deduct the £1,000 allowance.
LITRG added that lack of awareness around these allowances may lead to people completing a Self-Assessment tax return when it is not needed, or not completing it in instances where it is needed, and incur late penalties.
Further confusion may be created for tax credit and benefits claimants, as this income will be needed to be declared for Universal Credit claims even if it is covered by the new tax allowances.
LITRG chair Anne Fairpo said: “We call on HMRC to be ready to make available very clear guidance on these changes and to publicise them sufficiently. Ideally, there should be worked examples and also an online calculator. It is also crucial that such information is available in hard copy format as well as online to help the substantial numbers of taxpayers who are either digitally excluded or find it difficult to engage with government online.”