14 May 2018
Barrister accounts FAQs: Guidance for pupils and new barristers
As part of our series of Barrister FAQs, we’ve looked at a range of accounting issues that are specific to Barrister accounts. This time we focus on pupils and new Barristers.
We understand that when you are new to the Bar, accounting options can be daunting and decisions you make in your early career can have significant implications later on, such as choosing your year end. Our specialist barrister team can talk you through your options.
In the past, pupillage awards were considered to be scholarships and as such exempt from tax. Since so many chambers now pay pupillage awards, HMRC now consider them to be taxable.
There are two methods of bringing pupillage awards into tax, namely:
1. The award for the 1st Six Months (1st Six) is exempt from tax but that for the 2nd Six is taxable as an ordinary trading income.
2. Both 1st Six and 2nd Six awards are taxable in the tax year of receipt.
Therefore it would seem sensible to choose option 1.
It is important to choose your year end carefully as the first year’s income can be taxed more than once. If the pupillage award falls into this period then it too can be taxed more than once.
Good to remember:
- Payment of tax is on account for first year of personal tax return, therefore there is an initial tax holiday with potentially 150% due in the first January payment, which will probably still leave some tax unpaid.
- To account for student loan repayment which is added to income tax payments.
For more information about Barrister accounts, download our helpful guide.
Are you a new Barrister looking for help with your accounts and financial planning?
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