Spring 2024 Budget summary

Spring 2024 Budget Statement

Content accurate as of 6 March 2024

On 6 March 2024, Chancellor Jeremy Hunt presented his Spring Budget to Parliament. In the knowledge that the government must hold a general election before 28 January 2025, this was a Budget designed to restore confidence and win voters. But on the heels of Britain entering a recession and downgraded Office for Budget Responsibility (OBR) forecasts, the Chancellor had his work cut out.

Headlines included further cuts in National Insurance Contributions for workers and the self-employed, a slight increase in the VAT registration threshold and an increase in thresholds to reduce the number of people affected by the high-income child benefit charge. There has also been a cut in capital gains tax for higher earners disposing of residential property.

However, income tax rates and thresholds remained static and inheritance tax continues to apply to the largest estates.

Below, we talk more about the Budget and what it means for you.

Income Tax

Please note that ‘tax years’ run to 5 April each year and that, for example, 2024/25 signifies the year to 5 April 2025.

Your personal allowance

Your tax-free personal allowance will remain at £12,570 in 2024/25. The personal allowance is partially withdrawn if your income is over £100,000 and then fully withdrawn if your income is over £125,140.

Income tax rates and allowances

For 2024/25, income tax rates and thresholds remain frozen at their 2023/24 levels. After your tax-free ‘personal allowance’ has been deducted, your remaining income is taxed in bands in 2024/25 as follows.

  ‘Other income’Savings incomeDividend income
Basic rate£1 – £37,70020%20%8.75%
Higher rate£37,701 – £125,14040%40%33.75%
Additional rateOver £125,14045%45%39.35%

‘Other income’ means income other than from savings or dividends. This includes salaries, bonuses, profits made by a sole trader or partner in a business, rental income, pension income and anything else that is not exempt.

So what? Without inflationary increases to the income tax bands, the Chancellor is effectively imposing an income tax increase; as wages and earnings rise and a larger proportion falls into higher tax bands. This is known as ‘fiscal drag’.

Scottish taxpayers

If your main residence is in Scotland or you are otherwise classed as a ‘Scottish taxpayer’, the application of income tax rates and bands applies differently where ‘other income’ is concerned. After the ‘personal allowance’ has been deducted, your ‘other income’ is taxed in bands as follows:

 2024/252023/24
Starter rate£1 – £2,30619%£1 – £2,16219%
Basic rate£2,307 – £13,99120%£2,163 – £13,11820%
Intermediate rate£13,992 – £31,09221%£13,119 – £31,09221%
Higher rate£31,093 – £62,43042%£31,093 – £125,14042%
Advanced rate£62,431 – £125,14045%  
Top rateOver £125,14048%Over £125,14047%

The Scottish Budget was held on 19 December 2023 and made changes including the introduction of the new ‘advanced rate’ of income tax for 2024/25.

Tax on savings income

A savings allowance determines how much savings income you can receive at 0% taxation, instead of the usual tax rates for savings income as shown above. This continues to be set at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.

Further, interest income from an Individual Savings Account (ISA) continues to be exempt from tax.

Tax on dividend income

A dividend allowance determines how much dividend income you can receive at 0% taxation, instead of the usual tax rates for dividend income as shown above.

As expected, this allowance will drop to £500 in 2024/25, down from the £1,000 2023/24 allowance. However, dividend income from a ‘stocks and shares’ ISA continues to be exempt from tax.

Individual Savings Accounts (ISAs)

The limit on how much you can save into ISAs (including cash and stocks and shares ISAs) in 2024/25 remains at £20,000 overall.

The Chancellor did announce that the government will introduce a new ‘UK ISA’ with an additional allowance of £5,000 a year but this is subject to consultation, and we do not yet have a start date.

The high-income child benefit charge

In an effort to reduce unfairness, the thresholds for the high-income child benefit charge (HICBC) will be increased from 2024/25.

You may have to pay the HICBC if you are considered to have ‘high income’ and child benefit is being paid in relation to a child that lives with you, regardless of whether you are a parent of that child.

If you are living with another person in a marriage, civil-partnership or long-term relationship, you will only be liable to HICBC if you are the higher earner of the two of you.

 2024/252023/24
Child benefit ‘high-income’ threshold£60,000£50,000
Income level at which child benefit is fully clawed back£80,000£60,000

From 2024/25, the HICBC will be calculated at 1% of the child benefit received for every £200 of income above the threshold. This is a slower rate of claw back than in 2023/24 and now means that child benefit is only fully clawed back where income exceeds £80,000, rather than £60,000 in 2023/24.

The HICBC does not apply if the child benefit claimant opts out from receiving the payments. The Chancellor also announced plans to administer the HICBC on the basis of total household income, rather than the income of the highest earner in the household, by April 2026.

So what? Disregarding for this purpose the other changes announced in the Budget, if we take a couple claiming child benefit in respect of two children and the higher earner earns £70,000, the household will be £1,106 better off than if the threshold had not been increased.

If the higher earner instead earns £60,000, the household will be £2,212 better off in 2024/25 and the higher earner will not be required to submit a self-assessment tax return in respect of the HICBC.

Employment taxes

For employees

As announced in Autumn Statement 2023 and in effect since 6 January 2024, the main rate of Class 1 National Insurance Contributions (NICs) has already reduced from 12% to 10%. In the Budget, the Chancellor cut this by a further 2 percentage points to 8%, taking effect from 6 April 2024.

For 2024/25, this combined 4% reduction will apply to your annual earnings between £12,570 and £50,270. The NIC rate on your earnings above £50,270 a year remains at 2%.

So what? This combined NIC reduction means that someone with employment income of, say, £50,000 will pay £1,497 less NICs in 2024/25 than if the rate had remained at 12%. Or, to look at it another way, their monthly pay packet will increase by almost £125.

For employers

There have been no changes to the rate or thresholds for employer’s Class 1 NICs, which remains at 13.8% for wages paid in excess of £9,100 a year (£175 per week). For eligible employers, the employment allowance remains at £5,000 per year, reducing their total employer’s NIC liability by this sum.

Benefits in kind

Employees are required to pay income tax on certain non-cash benefits. For example, the provision of a company car constitutes a taxable ‘benefit in kind’. Employers also pay Class 1A NIC at 13.8% on the value of benefits.

The set percentages used to calculate company car benefits are fixed until 5 April 2026 before slight increases apply to most car types, including electronic and ultra-low emission, from 6 April 2026.

The figures used to calculate benefits-in-kind on employer-provided vans, van fuel (for private journeys in company vans), and car fuel (for private journeys in company cars) remain fixed at their 2023/24 levels in 2024/25.

These are:

  • Van benefit £3,960
  • Van fuel benefit £757
  • Car fuel benefit multiplier £27,800

National minimum wage (NMW)

Employers must pay their employees at least the national living wage (for workers aged over 21) / national minimum wage. The minimum hourly rates change on 1 April each year and depend on the worker’s age and if they are an apprentice.

 1 April 2024 – 31 March 20251 April 2023 – 31 March 2024
Age 23 and over £10.42
Age 21 and over£11.44 
21-22 year old rate £10.18
18-20 year old rate£8.60£7.49
16-17 year old rate£6.40£5.28
Apprentice rate£6.40£5.28

These increases are not insubstantial, and the affordability of the rates will need to be carefully considered by employers when planning their headcount for the year ahead.

National Insurance for the self-employed

Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4. Two key changes come into effect from 6 April 2024, as previously announced in

Autumn Statement 2023 and further extended in this Budget:

  • The main rate of Class 4 NICs will be cut from 9% to 6% in 2024/25. Class 4 NICs will continue to be calculated at 2% on profits over £50,270.
  • Class 2 NICs will effectively be abolished, saving £179.40 per annum.

So what? This NIC reduction means that a sole trader with, say, trade profits of £50,000 will pay £1,302 less NICs in 2024/25 than will be due for the 2023/24 tax year. Just be aware that this saving may not be felt until the 2024/25 self-assessment balancing payment is made on or before 31 January 2026.

Entitlement to state benefits, including the state pension

If you are self-employed, your Class 2 NIC payments have ensured you accrue entitlement to a range of state benefits, including the state pension.

If your profits exceed £6,725 in 2024/25 you will continue to accrue entitlement to state benefits despite not paying Class 2 NICs. If your profits are less than £6,725, or you make a loss, you may need to pay Class 2 NICs on a voluntary basis to maintain your state benefit entitlement.

VAT

From 1 April 2024, the VAT registration threshold and deregistration thresholds will each increase by £5,000 to £90,000 and £88,000 respectively.

The thresholds had previously been frozen at £85,000 and £83,000 since 1 April 2017. There have been no changes to the rates of VAT and the standard rate continues to be set at 20%.

Corporate Taxes

Rates from 1 April 2024

Corporation tax rates and thresholds remain at the levels used in the year to 31 March 2024 as follows:

Financial year to 31 March 2025
Main rate25%
Small profits rate19%
Lower threshold£50,000
Upper threshold£250,000
Marginal relief fraction3/200
Effective marginal relief rate26.5%

Companies with profits between the lower and upper thresholds will qualify for marginal relief, which means they pay tax at 19% up to the lower threshold and at 26.5% on the remainder of the profits.

The thresholds must be equally shared between companies in a group and those controlled by the same person or persons. It has been confirmed in the Budget that the same rates and thresholds will also apply in the year to 31 March 2026.

Research & Development (R&D) reliefs

For company accounting periods commencing on or after 1 April 2024, a new R&D scheme will come into effect, merging the current R&D Expenditure Credit (RDEC) scheme (for larger companies) with the Small and Medium Enterprise (SME) scheme.

There will also be a second new R&D scheme for ‘R&D intensive SMEs’ along with other amendments as part of a government campaign to tackle fraud and abuse of the scheme. These are significant changes and come on top of a raft of changes already seen in 2023.

Any company claiming (or considering claiming) R&D reliefs will need enhanced support to adopt the new rules and framework and make successful claims.

Please do get in touch if we can assist you with this.

Annual Tax on Enveloped Dwellings (ATED)

Companies and some other entities may need to file ATED returns or pay ATED if they hold residential property. The rates of ATED will increase from 1 April 2024 so please contact us if you require any support with this.

Business Tax

Tax relief for expenditure on plant and machinery

By way of a £1million Annual Investment Allowance (AIA) and, for companies only, unlimited ‘full expensing’, your business is likely to be able to claim 100% tax relief on qualifying equipment purchases.

Conditions may apply and, in some cases, the rate of tax relief in the year of purchase can be 50% or less. In particular, some connected or group businesses need to share their £1million AIA limit between them and this is something that HMRC are currently focusing on so please do talk to us if you have any concerns.

Motor vehicles

While vans and commercial vehicles will often qualify for 100% tax relief when purchased, the rate of tax relief for a car will be less, unless it is both brand-new and electric. The cost of buying other cars is tax relieved by way of an 18% or 6% annual writing down allowance, based on whether the car has carbon dioxide emissions of up to or more than 50g/km respectively.

HMRC had planned to update their guidance so that double-cab pick-ups with a payload of 1 tonne or more were reclassified from commercial goods vehicles to cars from 1 July 2024. This would have significantly hindered the tax reliefs available. However, in February they backtracked and committed to retaining the commercial vehicle tax treatment.

Although it was not part of the Budget speech, legislation will soon follow to cement the commercial vehicle approach. This applies for both capital allowances and benefit-in-kind purposes (above).

Making Tax Digital (MTD)

Under the government’s MTD initiative, businesses will keep digital records and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software.

These requirements will be phased in from April 2026, starting with income tax paying sole traders and property landlords with gross income over £50,000.

HMRC is re-launching its optional beta testing, with eligible businesses able to opt-in from April 2024.

Please talk to us if you’d like to know more.

Using the cash basis to compute business profits

As first announced at last year’s Autumn Statement, it should be remembered that most unincorporated businesses will default onto the ‘cash basis’ of calculating taxable profits for the 2024/25 tax year and onwards.

As a simplification measure for some, it will mean that your annual profits are calculated based on when you receive payments from customers and make payments to suppliers. Adjustments for stock and amounts owing by or to you will not be possible.

Some small businesses are already using the cash basis voluntarily and won’t be affected by the change.

It is possible to ‘opt-out’ of the cash basis and instead use traditional ‘accruals’ accounts (with adjustments for stock etc.) for tax purposes. The decision will affect the timing of your tax liabilities and will ultimately be based on your personal circumstances.

Please talk to us for more information and to plan the approach for your business.

Tax relief for training costs

Alongside the Budget, HMRC has published updated guidance on tax deductions available to sole traders and self-employed individuals. Amid the AI revolution, the guidance clarifies that tax relief can be claimed on training costs relating to updating existing skills, maintaining pace with technological advancements, or changes in industry practices.

Capital Gains Tax

Annual exemption

The capital gains tax (CGT) annual exemption will drop to £3,000 in 2024/25, down from £6,000 in 2023/24. This change will mean that those selling capital assets such as property or shares will pay more tax.

Rates

The main rates of CGT remain at 10% for basic rate taxpayers (or those disposing of a business that qualifies for Business Asset Disposal Relief) and then 20% in most other cases.

However, increased rates apply when the asset being sold is a residential property that is not your private residence. From 6 April 2024, the residential property CGT rate will remain at 18% for basic rate taxpayers but will reduce from 28% to 24% for those with residential property gains falling outside of their basic rate band.

This measure is intended to generate more transactions in the property market, benefiting those looking to move home or get on the property ladder.

Remember, for property disposals that give rise to CGT, tax payment and reporting obligations can arise just 60 days after your completion date so make sure you take advice in good time.

Tax regime for furnished holiday lets

If you let out residential or commercial property, the profits are taxed as part of your ‘other income’. If you sell property that has been rented out, capital gains tax is likely to apply. Generally, rental business activity attracts fewer tax reliefs than trading ventures. However, if a residential property meets the strict definition of a ‘furnished holiday let’ (FHL), enhanced tax relief rules are currently available.

It has been announced in the Budget that, from 6 April 2025, the concept of FHLs and their beneficial tax treatment will be abolished. Going forward, profits from FHLs will be taxed in the same way as any other rental property profits. If you own FHLs this will be disappointing, especially the loss of your possible claim to ‘Business Asset Disposal Relief’ on any future sale.

While the abolition won’t happen until 6 April 2025, it should be noted that there will be measures in place from Budget Day (6 March 2024) to prevent tax planning steps that artificially accelerate the disposal date of an FHL to a date before 6 April 2025.

Inheritance tax

Rates and thresholds

The main rate of inheritance tax remains at 40%, reduced to 36% for estates where 10% or more is left to charity.

The inheritance tax nil rate band continues to be frozen at £325,000. The residence nil rate band will also remain at £175,000 and the residence nil rate band taper will continue to start at £2million.

Agricultural property and woodlands relief

From 6 April 2024 the scope of agricultural property and woodlands relief will be limited to property in the UK. Property located in the European Economic Area (EEA), the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK.

Payment of inheritance tax before probate

From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a ‘grant on credit’ from HMRC. This is a welcome relaxation.

UK residency and domicile

Significant tax changes have been announced for individuals resident in the UK but not permanently settled here (known as non-domiciled).

While individuals resident and domiciled in the UK must pay UK taxes on their worldwide income and capital gains, it is possible for UK resident but non-domiciled individuals to claim a ‘remittance basis’ of taxation for overseas income and capital gains. In return for paying a remittance basis charge of up to £60,000 a year, non-domiciled individuals are able to shelter their overseas income and capital gains from UK taxation, as long as they do not bring (remit) those monies to the UK.

The remittance basis of taxation will be abolished from 6 April 2025. It will be replaced with a simpler residence-based regime and new arrivals to the UK will not pay UK tax on their overseas income and gains for their first 4 years of UK residence.

In addition, inheritance tax rules apply to the worldwide assets of a UK-domiciled individual but, broadly, just to the UK assets of a non UK-domiciled individual. The non-domicile rules for inheritance tax are also likely to move to a residence-based regime from 6 April 2025 but the government plans to consult on options.

Stamp Duty

England and Northern Ireland – thresholds

The £250,000 0% threshold for Stamp Duty Land Tax (SDLT), applicable in England and Northern Ireland, remains unchanged until 31 March 2025. The same is true of the £425,000 0% threshold for first-time buyers.

These thresholds are set to revert to £125,000 and £300,000 respectively from 1 April 2025 and while there were rumours that the increased thresholds would be extended beyond 2025, no mention was made of this in the Budget.

England and Northern Ireland – Multiple Dwellings Relief

Multiple Dwellings Relief (MDR) is a relief currently available when buying two or more dwellings in a single transaction or series of linked transactions.

MDR is to be abolished for purchases of residential property in England and Northern Ireland with an effective date on or after 1 June 2024. Transitional rules apply to the abolition, so that MDR can still be claimed in some situations where contracts were exchanged on or before 6 March 2024, regardless of when completion takes place.

First-time Buyers’ Relief: leases and nominees

Following the Budget, the definition of a ‘First-time Buyer’ has been amended. Anyone who leases a residential property via a nominee or bare trust with an effective date (usually the completion date) on or after 6 March 2024 will potentially be eligible for First-time Buyers’ Relief, in the same way as any other qualifying first-time buyer. Transitional rules may apply where contracts were exchanged prior to 6 March but completed or substantially performed afterwards.

Scotland and Wales

Property purchasers in Scotland and Wales do not pay SDLT. Rather, if you buy a property in Scotland you pay Land and Buildings Transaction Tax, and in Wales you pay Land Transaction Tax. No amendments to these transaction taxes have been announced.

Alcohol and fuel rates

In Budget news, the government has confirmed that alcohol duty will remain frozen until 1 February 2025 and that the previous 5p per litre cut in fuel duty will remain in place until March 2025.

Charities and gift aid

In anticipation of enhanced protections for consumers who take out subscription contracts, the government will soon introduce rules to ensure that charities which operate subscription models can continue to claim Gift Aid on those subscriptions.

In conclusion

As we move into 2024/25, there are a lot of tax changes on the horizon, with more likely to come alongside the general election. Where the government gives with one hand (e.g. NIC cuts for workers) they make take with the other hand (e.g. frozen income tax thresholds) and it can be hard to keep up.

We are here to work alongside you and help you prosper so please do get in touch at any time.

Disclaimer: This newsletter covers the key news headlines from Budget 2024. The authors take great care in its production, but it is not exhaustive and should not be read as a full fiscal summary. The content displayed is correct as of 6 March 2024. We cannot take responsibility for any action taken or not taken from this document alone. Please contact us for personalised advice.

Spring Statement Update 2022

Spring Statement Update March 2022

On Wednesday 23 March 2022, The Chancellor of the Exchequer, Rishi Sunak, delivered his Spring Statement.

The update as to how these announcements will impact you and your business in a simple non-jargon summary is below.

National insurance contribution (NICs) increases

National insurance contributions paid by employees, employers and the self-employed are increasing by 1.25% from April 2022.

This is to provide additional funds for health and social care.

National insurance threshold increases 

It’s not all bad news though…some new measures have been announced in an attempt to reduce the effect of the increase, at least partially and that’s the increase in the starting NIC threshold for individuals.

The annual level at which employees and the self-employed start to pay NICs was due to increase from £9,568 to £9,880 from 6 April 2022. This increase will go ahead but be further uplifted to £12,570 from 6 July 2022, effectively aligning the point at which an individual starts to pay NICs with the £12,570 income tax personal allowance.

In the tax year to 5 April 2023, this is a NIC cut worth £267 for most employees and £207 for most self-employed individuals.

The starting NIC threshold for the self-employed and company directors is computed on an annual basis and so will be set at a pro-rata sum of £11,908 for sole directors [£992.33 per month] for the whole of the tax year to 5 April 2023, before increasing to £12,570 in the tax year to 5 April 2024. 

Class 2 NIC liabilities of the self-employed

For the self-employed, some individuals will find that they no longer need to pay Class 2 NICs from April 2022. The small profits threshold will be set at £6,725 as planned, but the requirement to pay Class 2 NIC will only apply to those with self-employed profits over £11,908.

This will benefit approximately 500,000 self-employed individuals by saving them £165 a year.

What about employers?

  • Employers’ NIC – No changes have been made to the annual level at which employers’ NIC start to apply; namely £9,100 for most employees in the tax year to 5 April 2023.
  • However, the Employment Allowance, which allows eligible businesses to reduce their employer NIC cost, will increase from £4,000 to £5,000 for the tax year to 5 April 2023. It is expected that 495,000 businesses will benefit from this increase, with most saving £150 in the tax year to 5 April 2023.
  • Capital Gains Tax – no changes to rates, no major changes to allowances/exemptions.  Annual exemption frozen.
  • Inheritance Tax – no changes to rates, no major changes to allowances/exemptions.  Nil Rate Bands frozen.
  • Value Added Tax – no changes to rate or registration/de-registration

Dividend tax rates are changing

From April 2021 the dividend tax rates are increasing by 1.25% in line with the increase to national insurance contributions.

Your first £2,000 of dividends remain tax-free.

Dividends under the basic rate threshold of £50,270 will be taxed at 8.75%.

Dividends within the higher rate threshold of between £50,271 and £150,000 will be taxed at 33.75%.

Dividends over the additional rate threshold of £150,001 will be taxed at 39.35%.

Income Tax

The Chancellor has committed to reduce the basic rate of income tax from 20% to 19%, but not until 6 April 2024.

It is estimated that this will save 30 million individuals an average of £175 per year.

Corporation Tax

The main rate rises to 25% from 19% from April 2023 – so a 6% increase.  Businesses with profits below £50k will still pay 19% and there will be a taper for businesses with profits between £50k and £250k.

VAT registration threshold

No changes to the VAT registration threshold. You must register for VAT if your sales go over the current registration threshold in a rolling 12-month period. This is not a fixed period like the tax year or the calendar year – it could be any period, for example, the start of June to the end of May.

National Minimum/Living Wage increases

The NLW and NMW rates from 1 April 2022 are:

Rate from April 2022 Current rate (April 2021 to March 2022) Increase
National Living Wage £9.50 £8.91 6.6%
21-22 Year Old Rate £9.18 £8.36 9.8%
18-20 Year Old Rate £6.83 £6.56 4.1%
16-17 Year Old Rate £4.81 £4.62 4.1%
Apprentice Rate £4.81 £4.30 11.9%
Accommodation Offset £8.70 £8.36 4.1%

Business Tax Relief for Capital Investment

In preparation for the 130% ‘super-deduction’ for companies coming to an end on 31 March 2023, other alternatives are being considered in an attempt to continue encouraging investment from April 2023.

In the meantime, the reliefs potentially available (to companies and non-corporates) for expenditure on plant and machinery includes:

  • A £1million annual investment allowance;
  • 130% and 50% super-deductions;
  • 100% first-year allowances (including on electric cars); and
  • 18% and 6% writing down allowances.

The date of acquisition of capital assets can make a difference to the tax relief you can claim so do speak to us before your next sizeable investment but remember we will automatically review any reliefs for capital investments as part of the work we do on your accounts.

Fuel Duty

Fuel duty has been cut by 5p per litre for 12 months from 6pm on 23 March 2022.

The Treasury report that this will save the average car driver £100 a year and the average van driver £200 a year.

Gift Aid Your Donations to Help Ukraine

For individuals and businesses wanting to donate money to help to support those suffering in Ukraine, there are a number of charities providing humanitarian relief. Ideally, this should be done via the Disasters Emergency Committee (DEC) Appeal at www.dec.org.uk/.

Individual UK taxpayers should make sure to tick the Gift Aid box as that will increase their donation by 25%. It should also be remembered that, like pension contributions, higher and additional rate taxpayers are able to obtain even more tax relief. For example, a £40 donation only costs £30 after higher rate tax relief.

Household Support Fund

The Household Support Fund will be doubled to £1billion from April 2022. The Fund will help households with the cost of essentials such as food, clothing and utilities.

Green Technology

Green technology, including solar panels and heat pumps, will be exempt from business rates in England from April 2022, a year earlier than originally planned.

VAT on Energy Saving Materials (ESMs) installed in residential accommodation will be reduced from 5% to 0% from this April in Great Britain. The 0% rate will apply until 31 March 2027.

A 100% relief for eligible low-carbon heat networks which have their own rates bill will also be available.

VAT Rates in the Leisure and Hospitality Sector

No extension has been granted to the leisure and hospitality sector for use of the reduced 12.5% VAT rate on eligible supplies including food, non-alcoholic beverages and hotel and holiday accommodation. The VAT rate applied to these supplies will revert to 20% from 1 April 2022 as planned.

Research and Development (R&D)

The R&D tax relief schemes for companies will be enhanced from April 2023 but we have to wait until this summer for more details.

We do know the reform is set to boost sectors where the UK is a world-leader, including artificial intelligence, robotics, manufacturing, and design.

Capital Gains Tax

No changes to rates, no major changes to allowances/exemptions. Annual exemption frozen.

Inheritance Tax

No changes to rates, no major changes to allowances/exemptions. Nil Rate Bands frozen.

Allowances you can claim

Here are a few of the allowances you can claim to help reduce your tax:

  • The first £2,000 of dividends are tax free
  • The first £1,000 of interest is tax free (if you are a low-rate tax payer)
  • The first £12,300 of capital gains you make are tax free
  • You may be able to claim a trading allowance of £1,000 if you are self employed
  • You may be able to claim a rental allowance of £1,000 if you rent property
  • Your income tax allowance is £12,570
  • You can claim rent a room allowance of £7,500
  • Marriage allowance  £1,260.

A Beginner’s Guide To Personal Tax Return’s

Self-assessment tax returns occur once a year and are known to cause a lot of aggravation amongst business owners, entrepreneurs and the self-employed. Below will tell you all about self-assessment tax returns and whether or not you need to file one. 

Self-assessment tax returns exist to make sure that individuals report their annual earnings and their sources to HMRC. In turn, this allows HMRC to be able to calculate how much tax you are liable to pay in the applicable tax year. It is the individual’s responsibility so you must understand if, how and when to file the paperwork.

Who must complete a tax return?

In the UK, a tax deduction system known as PAYE is used if you are an employee of a company. This type of system allows your employer to deduct a percentage of your wage depending on your tax code. If this method is used, it is not required of you to fill in a self-assessment unless you have a second income, such as running a personal business on the side.  

Self-assessment tax returns are frequently used by self-employed people, freelance contractors, small business owners and entrepreneurs being the main culprits. Furthermore, if you live in the UK but are developing money from abroad, additionally if you live abroad but are generating money from the UK tax must be paid. If you want to be entirely sure this applies to you, you can check online on the government website

You should provide the following information to the best of your ability: 

  • National insurance and employee reference number
  • P60 forms
  • P11D forms
  • A review of any personal profit or investments
  • Capital gain summaries
  • A list of taxable benefits received via your employer or the government

You must remember to meet the deadlines as you could face paying severe penalties. These are:

Day 1- £100

Upto 3 months- £10 a day, with a maximum of £900

Upto 6 months- £300 or 5% of the tax due, whichever is the higher amount.

If you are a UK resident submitting a self-employed self-assessment, it can be deferred by either post or online. However, if you are a non-resident, you cannot submit online it has to be by post, or you can get an accountant to do this on your behalf.

Is An Accountant Required To Submit Your Tax Return?

Most often, it is fair to say that most business owners are not confident when it comes to deciding which aspects of their tax duties they can deal with themselves and when they can be at an advantage from calling in a professional. Some would argue that giving the job to an accountant is a much easier option. However, there is now clever technology that can boost your confidence when organising your taxes on your own. 

How does self tax assessment work?

Self-assessment tax returns declare how much taxable income you have earned in that financial year and determines any expenses you may be qualified to claim. 

The digital tax initiative, which is slowly being introduced, means that annual returns will be replaced with quarterly reports. 

Tax returns depend upon close attention to detail, making sure to provide exact dates, figures and details of any marital and special relief privileges you might be eligible for. Business owners should always be willing to support their claims with sufficient evidence such as invoices or receipts if requested to do so. If you submit false information you may be charged with a hefty penalty, this would be the same if you were to miss a filing deadline. The longer you take to amend the complication, the more your fine is likely to grow. 

Other tax filing options

Sadly, some small businesses simply do not have the money to spare to hire an accountant; however, it’s essential to keep your returns free from errors. Human error is a genuine but leading issue in incorrect returns, and if they were to make a mistake, your business would be liable. Many people shy away from completing their tax returns due to the added pressure it brings.

An alternative method is to invest in a tax software (for example Quickbooks) that keeps track of your income and expenses throughout the financial year. Providing you input your figures carefully, the calculations should be error-free! On the other hand, spreadsheets, calculators and good book-keeping can help you be your own accountant. Although it may not be as simple as tax software, it is undoubtedly attainable if you have a good head for numbers!

How can a tax account be useful? 

Business accountants deal with numbers daily, therefore, are ideal for protecting your figures. More so, they know the conduct; what you are and are not entitled to claim and how you can cut your liabilities. Employing an accountant not only saves bundles of stress but also a lot of time, it is typically around £150 for a reputable firm, often a little less if you only require a basic service. The price may seem quite reasonable to a business who may on average spend several hours completing their own tax return. 

If you feel like you could benefit from having an accountant, don’t hesitate to get in contact!

An Introduction to VAT

VAT can be a confusing concept to grasp if you have never needed to pay VAT before. Nonetheless, being VAT registered can bring with it lots of advantages concerning your finances. Here is a brief introduction on VAT with some answers to questions you may have on the subject.

VAT is a tax which is added to the majority of services and goods. It is something you must pay if you are a business or merely an individual. You pay it on a range of things from bills to clothes. For companies who make over £85,000 a year, they will need to add VAT to their goods and services’ costs. Businesses must register for VAT if they turn over more than this.

Once registered, a business will need to charge VAT on the goods and services which they sell and offer. Companies will also need to fill in a return every three months. This will include information like how much VAT their business has charged as well as how much their business has paid.

Businesses will have to pay outstanding amounts of VAT if they have charged more than they have paid. In contrast, companies are able to claim back VAT money from HMRC if they have paid too much VAT than they have charged.

VAT rates in the UK are 20%. That is the standard rate. Mobility aids and children’s car seats are 5%, and most food, male razors, children’s clothing and books are 0%. Health, financial insurance and most sports services are exempt from VAT too. Find out more about on different types of VAT.

Sole traders and freelancers must also pay VAT if their turnover annually will exceed the £85,000 threshold. The VAT will be registered in their name unlike businesses, and they must ensure always to keep records of the VAT they are charging customers.

There are a few VAT schemes to consider when applying for VAT, so it is important to do your research to discover which one is right for you. There is standard accounting, which is the common one, the Flat Rate for businesses which turnover less than £150,000 per year, as well as Annual Accounting for a turnover of less than £1.35 million and cash accounting which is the same threshold but for small businesses.

Advantages of VAT are that you can reclaim VAT that is paid on top of things bought for your business, such as phones, laptops and office equipment. You can register for VAT even if you do not earn the £85,000 per year yet. This will mean you won’t have to bother looking out for the threshold when you hit that sum and owe HMRC a large lump sum.

To register for VAT, you will need to go to the gov.uk site. You will need things like a tax reference, bank details of your business and company number/address. After this, you will gain your VAT certificate with details of your VAT.