Friday 15 March 2024

15th March 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Spring Budget – A budget for long-term growth?
Jeremy Hunt, Chancellor of the Exchequer, delivered his Spring Budget 2024 speech on 6 March 2024. This potentially is the last budget before the next general election, which will need to be held before 28 January 2025. The Budget was designed to emphasise the government’s good achievements as well as to appear to lower taxes and curry favour with voters.

There was a strong emphasis towards making work pay and most headlines have focused on the cuts in National Insurance contributions for both the employed and self-employed. The Chancellor reiterated his view that lower taxes lead to growth and a more vibrant economy.

Efforts were also made to stimulate movement in the housing market with a reduction in capital gains tax for higher earners disposing of residential property. The government hopes that this may incentivise those with second homes and other residential properties to sell them and create additional housing supply for those looking to move home or get on to the property market.

However, it was not all good news for taxpayers and the Budget signalled the end of some long-standing tax reliefs for furnished holiday lettings and those who currently have non-domiciled tax status.

In their appraisal of the Budget, the Office for Budget Responsibility (OBR) has reported that while economic growth has been disappointing since November, they expect a steeper than expected fall in inflation and interest rates to lead to a strong recovery.

The OBR note that the cut in national insurance will be partly recouped through other tax rises. They also note that there is no longer an increase in public services spending and so they feel that the Budget plans allow the Chancellor to meet the government's financial aims on debt, but with only a small margin to spare.

If you are concerned about any aspect of the Budget and how it may affect your situation, please get in touch with us at any time. We will be happy to help!

 
Spring Budget - National insurance cuts – what they mean to you as an employer
The national insurance cuts in the Spring Budget have made most of the Budget-related headlines. So, what is the effect of this on you as an employer?

Your employees benefit

In last year’s autumn statement, employee’s national insurance was cut by 2 percentage points from 12% to 10%. This change went into effect on 6 January 2024.

The Spring Budget extended this further by reducing the employee national insurance contribution by a further 2 percentage points, bringing the rate down to 8% from 6 April 2024.

If you were planning to pay staff bonuses in your March payroll, then there may be some mileage in seeing if staff would like these payments deferred to April so that they benefit from the lower national insurance rate and keep more of the bonus.

No change to employer’s national insurance

This reduction only affects the rate of national insurance paid by employees though. The rate of employer’s national insurance remains unchanged at 13.8% for any wages you pay in excess of £9,100 a year (£175 per week). So for an employer, unfortunately there is no immediate financial benefit from the cut to the employee rate.

Payroll software

As an employer, you will need to be sure that your payroll software is updated for the change in rate prior to 6 April 2024. It is likely that most major providers of payroll software will be ready, but it would be a good idea to check this and that you are running the latest version.
If the payroll is not updated, then you will deduct the wrong amount of national insurance and will need to correct this later, which may not be straightforward.

Employment allowance

As has been the case in recent years, eligible employers can still claim an employment allowance in 2024/25, worth £5,000 per year as a reduction on their total National Insurance liability. Please speak to us if you are not sure how to claim this.

If you need any help with making sure that your payroll software is updated, please feel free to contact us. We will be happy to help you!

 
Spring Budget – National insurance cuts – what they mean to you as a self-employed business
The Spring Budget further extended the national insurance cuts first announced in last year’s Autumn Statement, bringing good news to all self-employed businesses.

The rate of class 4 national insurance, which is added as part of your tax bill at the year end, has been further reduced with effect from 6 April 2024. It will now drop from 9% to 6% for profits between £12,570 and £50,270. The rate for profits over £50,270 will continue to be 2%.

If your trade profits for the 2024/25 tax year were £50,000, this rate reduction would give you a saving of £1,302 compared to the 2023/24 tax year. Of course, you will not necessarily feel this saving until you make your 2024/25 self assessment balancing payment on or before 31 January 2026.

As announced in last year’s Autumn Statement and further confirmed by the Spring Budget, class 2 national insurance will effectively be abolished. This will save £179.40 a year.

You do not need to do anything to benefit from either of these national insurance cuts. The reductions will be automatically applied to the calculation of your tax when your tax return is submitted.

If you are self-employed, your class 2 national insurance payments have been ensuring that 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 national insurance. If your profits are less than £6,725, or you make a loss, you have the option of making class 2 contributions voluntarily, at £3.45 per week, so that you maintain your state benefit entitlement.

The government has announced that it will consult on how it will deliver the final abolition of class 2 national insurance contributions later this year. Once this happens there will likely be a new method or criteria for accruing state benefit entitlements.

If you are unsure how these national insurance changes affect you personally, please feel free to get in touch and we will be happy to run through the changes with you.

 
Spring Budget - Furnished Holiday Lettings regime to be abolished
If you run a holiday let, then you are likely well aware of the useful tax advantages that holiday lets have had for many years. Because furnished holiday lets can be treated as a trade rather than as a rental property, there are more generous deductions against income available. Also, there has been a significant advantage in property capital gains tax when selling a furnished holiday let.

During the Spring Budget, the Chancellor Jeremy Hunt announced that the Furnished Holiday Lettings regime is to be abolished with effect from 6 April 2025.

This means that your holiday let profits will need to be calculated and taxed based on the same tax laws as other rental property profits. Unfortunately, that will mean that if your holiday let income remains the same you are likely to see an increase in the amount of tax payable.

Particularly disappointing is that if you sell your holiday let after 6 April 2025, Business Asset Disposal Relief, with its potentially low 10% capital gains tax rate, will not be available.

While there is another year yet before the abolition happens, there will be measures in place from 6 March 2024 (the day of the Budget announcement) to prevent tax planning steps that may try to manipulate the sale date of a holiday let so that it appears to occur before 6 April 2025.

Detailed legislation covering the change has not been released yet, but if you are thinking about selling your holiday let it may be worth giving some early thought to the timing of the sale so that you do not pay more tax than necessary. Of course, as with all tax planning, you should also consider your overall tax situation, any potential downsides, and your personal priorities.

We can prepare a personalised analysis of how the withdrawal of the furnished holiday letting regime will affect you. Please get in touch and will be happy to talk this through with you.

 
Spring Budget – High-Income Child Benefit Charge changes mean benefits for more
The High Income Child Benefit Charge (HICBC) has attracted a lot of criticism since its introduction because of the way it penalises couples that have a single high earner.

Currently, a couple where the two parents both earn £49,000 each are unaffected by the HICBC. However, another couple where one parent earns £60,000 while the other parent doesn't work lose their entire child benefit amount.

To reduce this unfairness, the Spring Budget increased the ‘high-income’ threshold from £50,000 to £60,000 with effect from 6 April 2024.

Not only that but the HICBC will now be calculated at 1% of the child benefit received for every £200 of income above the threshold. This is a slower rate of clawback than in the 2023/24 tax year and now means that child benefit is only fully clawed back where the income exceeds £80,000, rather than £60,000 in 2023/24.

This change means that many more couples will be able to keep their child benefit.

The Chancellor, Jeremy Hunt, also announced plans to change the HICBC so that it applies to household rather than individual income. This is expected to happen by April 2026.
 
Spring Budget – VAT registration threshold increases
The thresholds for VAT registration and deregistration have remained static for the last 7 years, however an increase in the thresholds was announced in the Spring Budget.

The new registration threshold is now £90,000, increased from £85,000. The deregistration threshold has also increased to £88,000 (from £83,000).
VAT registration becomes compulsory if by the end of any month, your business’s VAT taxable turnover for the previous 12 months goes above the threshold. This needs to be looked at on a rolling monthly basis, and not just at your accounting year end.

It is possible to apply for a registration ‘exception’ if you believe that you are only temporarily going above the threshold, for instance, because of winning a large one-off project. Provided you can show evidence as to why your turnover will be below the deregistration threshold in the next 12 months then HM Revenue and Customs are willing to consider making an exception.

In view of the rate of inflation since the thresholds were last revised, the latest increase seems to be a token gesture. However, it may help you to stay out of VAT and the administrative work that it brings with it.

If you think your business turnover is nearing the threshold amounts, please do get in touch with us. We will be happy to confirm whether you need to register and can help you with the process of getting set up for VAT.

 
Spring Budget – Reduction in capital gains tax higher rate
A couple of changes were made to capital gains tax (CGT) allowances and tax rates in the Spring Budget that will be of particular interest to anyone that owns residential property in addition to their own home.

Annual exemption

Each individual has a CGT annual exemption – an amount of capital gain that you can make without paying any tax on it. This is being reduced for 2024/25 to £3,000 (currently £6,000). This means that anyone selling capital assets, such as property or shares, will pay more tax.

Since we still have a few weeks before the start of the new tax year, if you are currently planning to sell any of your capital assets (and are able to do so before 6 April) then it may be worth giving some thought to the timing of when you do that. Please contact us and we will be happy to give you a personalised recommendation based on your overall tax situation.

Rates

The main rates of CGT remain at 10% if your gains fall into your unused basic rate band, or if you are disposing of a business that qualifies for Business Asset Disposal Relief. It is then 20% in most other cases, with the exception of residential property sales.

If you sell your own private residence then no CGT will be due, however if you sell a residential property that is not your own private residence then increased CGT rates will apply. From 6 April 2024, the residential property CGT rate will remain at 18% for gains falling into your unused basic rate band but will reduce to 24% (from 28%) for any residential property gains that fall outside of an individual’s basic rate tax band.

The government are hoping that this reduction will encourage more activity in the property market, benefiting those looking to move home or get on the property ladder.

If you are wondering how these changes could affect you, please feel free to contact us at any time and we will be pleased to give you a personalised analysis. Remember too that where CGT applies to a property disposal there can be tax payment and reporting requirements that need to be dealt with within 60 days of the completion date. So, please be sure to get advice in plenty of time.

 
Salary sacrifice: Potentially a win-win strategy for your business and your employees
Business and employees are both constantly looking for ways to optimise their financial strategies. One often overlooked strategy in doing this is salary sacrifice.

Salary sacrifice involves an agreement between an employee and their employer to reduce the employee’s salary in exchange for certain non-cash benefits. While it may seem counterintuitive at first glance, salary sacrifice can be a useful tool for saving taxes for both parties involved.

Benefits for the business

For a business, implementing salary sacrifice schemes can lead to good tax savings. For instance, offering non-cash benefits such as pension contributions or cycle-to-work schemes in exchange for salary can reduce employers’ National Insurance contributions. This lowers the overall tax burden for the business.

The benefits to the business are not just confined to the tax savings though. Offering attractive benefits through salary sacrifice can enhance feelings of job satisfaction for employees and improve staff retention.

Benefits for the employee

From an employee perspective, salary sacrifice offers a number of tax-saving opportunities. By opting to receive non-cash benefits instead of additional salary, employees can reduce their taxable income and so reduce the tax they pay.

For instance, contributions to a workplace pension are deducted from the employee’s gross salary before tax is applied. Therefore, if an employee sacrifices some of their salary to make additional pension contributions, the amount of tax they pay will reduce.

Furthermore, salary sacrifice arrangements can enable employees to access valuable benefits that they might not otherwise be able to afford.

Are there any downsides?

While salary sacrifice can be a good tax saving strategy, it is not suitable for every situation.

Many salary sacrifice schemes are caught by tax regulations or have set requirements, so it pays to understand these and make sure a scheme will be suitable for your business. Employees too need to carefully assess their individual financial circumstances and priorities before entering into salary sacrifice agreements.

In conclusion, salary sacrifice can be a win-win for both businesses and employees. Business can use non-cash benefits to reduce their tax liabilities while enhancing employee satisfaction and retention. Meanwhile, employees can enjoy tax savings and access benefits they find valuable and that contribute to their overall well-being. With careful planning and implementation, salary sacrifice can be a powerful tool for businesses and their employees.

We have tools that can help you calculate the tax consequences and any potential savings from salary sacrifice arrangements involving company cars, pensions, and bikes. Please feel free to get in touch and we will be happy to help you!

 
Construction industry steps up efforts to combat work-related stress
The Health and Safety Executive (HSE) sponsored Working Minds campaign has announced six new partners from the construction industry.

The Contract Flooring Association (CFA), the Chartered Institute of Plumbing and Heating Engineering (CIPHE), Asbestos Removal Contractors Association (ARCA), the National Federation of Demolition Contractors (NFDC), the Electrical Contractors’ Association (ECA) and the National Federation of Roofing Contractors (NFRC) have all committed to the campaign.

Stress in the construction industry can be considerable, with long hours and tight deadlines a normal part of working life. Working Minds provides free online learning to help employers in preventing stress and supporting good mental health. The learning tool usually takes less than an hour to complete and helps employers understand what the law requires and how they can comply.

Working Minds has five simple risk assessment based steps, which are:

  • Reach out and have conversations,
  • Recognise the signs and cause of stress,
  • Respond to any risks that have been identified,
  • Reflect on actions that have been agreed and taken, and
  • Routine – to make it the norm to talk about stress and how people are feeling and coping on site.
Employers are legally required to protect workers from stress at work by carrying out and acting on a stress risk assessment. The Working Minds online learning can help employers understand and meet this requirement.

The Working Minds website, which includes sector-specific advice for the construction industry and other sectors, can be found here: https://workright.campaign.gov.uk/campaigns/working-minds-sectors/
 
In a mental health emergency – can you share staff data?
New guidance has been published by the Information Commissioner’s Office (ICO) to help employers with whether they can share staff data if they have a mental health emergency.

An employer may become aware that an employee, because of their mental health, is at risk of causing serious harm to others or themselves. In this situation, the ICO advises that they should feel able to share information with the relevant and appropriate emergency services or health professionals without delay.

The guidance helps employers to identify what a mental health emergency is and what they should do, as well as what they could do, in that situation without running the risk of getting into trouble for sharing data.

Since a mental health emergency can happen at any time, the guidance also sets out steps employers can take in advance so that they are prepared.

See the guidance at: https://ico.org.uk/for-organisations/uk-gdpr-guidance-and-resources/employment/information-sharing-in-mental-health-emergencies-at-work/
 
Charities given new guidance on decisions about donations
The Charity Commission has published new guidance designed to help charities when they face decisions over whether to refuse or return a donation.
Generally, the starting point for a charity is to accept donations given to the charity. However, they are certain circumstances where they must refuse a donation and the new guidelines help to make this clearer.

The guidelines set out the type of donations that legally must be refused or returned. These include donations received from illegal sources or come with illegal conditions. An example would be where the donation has come from terrorist or other criminal activity.

Other situations where there is a legal obligation to refuse or return a donation include where the donation:
  • has come from someone who does not have the mental ability to decide to donate.
  • cannot legally be given to the charity. This might happen if the donor does not actually own what they are donating.
  • has terms requiring its return. For instance, a donation might have a term that it must be used within a certain period of time, which would require any unused funds to be returned at that time.

There are, though, other reasons why a charity might be likely to need to refuse or return a donation, and these are discussed in the guidance. The guidance also reviews steps that a charity might be able to take so that it can accept the donation.

The guidelines are available to review here: https://www.gov.uk/guidance/accepting-refusing-and-returning-donations-to-your-charity#what-we-mean-by-a-donation
 
New Companies House powers come into force
New powers for Companies House based on the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) finally came into force last week.

The new measures allow Companies House to combat the criminal acts and money laundering being carried by criminals abusing the company registration system.

The powers include being able to query information and request supporting evidence, make stronger checks on company names, and tackle and remove factually inaccurate information.

It will no longer be possible for a company to use a PO Box as their registered office address, and Companies House now have the ability to share data with other government departments and law enforcement agencies.

The new measures are accompanied by new criminal offences and civil penalties to help with their enforcement.

It is hoped that the new measures will not cause too much additional hassle for genuine businesses.

The ECCT Act also introduces other measures, including identity verification and accounts reform, but these will not be introduced until a later date.

See: https://www.gov.uk/government/news/companies-house-begins-phased-roll-out-of-new-powers-to-tackle-fraud
 
Spring Update –Multiple Dwellings Relief axed from 1 June 2024
Multiple Dwellings Relief (MDR) is a stamp duty land tax (SDLT) relief that is currently available if you buy two or more residential properties in a single transaction or a series of linked transactions.

It allows the rate of tax to be calculated based on the average value of the properties purchased rather than the aggregate value, which saves SDLT on the overall purchase.

The relief was originally intended to promote investment in residential property and increase the amount of private rented houses available. However, an external review initiated by the government has concluded that the relief has not really helped with these aims.

Therefore, the Spring Budget announced that MDR will be abolished with effect from 1 June 2024.

Provided the contracts on a purchase you might be currently undertaking were exchanged before 6 March 2024 (Budget Day), and there’s no change in the contracts afterwards, then MDR can be claimed regardless of when the purchase is completed.

Obviously, MDR can also apply to any purchases where the contracts have not yet exchanged but the transaction will complete before 1 June 2024.

If you need help working out whether MDR can apply to your purchase please feel free to get in touch. We will be happy to help you.

Friday 8 March 2024

8th March 2024 – Hillmans Weekly Update: Budget 2024

I hope you are keeping well.

8th March 2024 – Hillmans Weekly Update: Budget 2024

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

BUDGET 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.

For the Basic rate, applicable to incomes from £1 to £37,700:

  • • 'Other income' is taxed at 20%.
  • • Savings income is taxed at 20%.
  • • Dividend income is taxed at 8.75%.

For the Higher rate, applicable to incomes from £37,701 to £125,140:

  • • 'Other income' is taxed at 40%.
  • • Savings income is taxed at 40%.
  • • Dividend income is taxed at 33.75%.

For the Additional rate, applicable to incomes over £125,140:

  • • 'Other income' is taxed at 45%.
  • • Savings income is taxed at 45%.
  • • Dividend income is taxed at 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:

For the tax year 2024/25:

  • • Starter rate: Incomes from £1 to £2,306 are taxed at 19%.
  • • Basic rate: Incomes from £2,307 to £13,991 are taxed at 20%.
  • • Intermediate rate: Incomes from £13,992 to £31,092 are taxed at 21%.
  • • Higher rate: Incomes from £31,093 to £62,430 are taxed at 42%.
  • • Advanced rate: Incomes from £62,431 to £125,140 are taxed at 45%.
  • • Top rate: Incomes over £125,140 are taxed at 48%.

For the tax year 2023/24:

  • • Starter rate: Incomes from £1 to £2,162 are taxed at 19%.
  • • Basic rate: Incomes from £2,163 to £13,118 are taxed at 20%.
  • • Intermediate rate: Incomes from £13,119 to £31,092 are taxed at 21%.
  • • Higher rate: Incomes from £31,093 to £125,140 are taxed at 42%.
  • • Top rate: Incomes over £125,140 are taxed at 47%.

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.

For the tax year 2024/25:

The 'high-income' threshold for Child Benefit is £60,000.

The income level at which Child Benefit is fully clawed back is £80,000.

For the tax year 2023/24:

The 'high-income' threshold for Child Benefit is £50,000.

The income level at which Child Benefit is fully clawed back is £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. 

For the period 1 April 2024 – 31 March 2025:

  • • Age 23 and over: £11.44 per hour
  • • Age 21 and over (21-22 year old rate): £8.60 per hour
  • • Age 18-20 year old rate: £6.40 per hour
  • • Age 16-17 year old rate: £6.40 per hour
  • • Apprentice rate: £6.40 per hour

For the period 1 April 2023 – 31 March 2024:

  • • Age 23 and over: £10.42 per hour
  • • Age 21 and over (21-22 year old rate): £10.18 per hour
  • • Age 18-20 year old rate: £7.49 per hour
  • • Age 16-17 year old rate: £5.28 per hour
  • • Apprentice rate: £5.28 per hour

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:

  1. 1. 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. 
  2. 2. 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 rate: 25%

Small profits rate: 19%

Lower threshold: £50,000

Upper threshold: £250,000

Marginal relief fraction: 3/200

Effective marginal relief rate: 26.5%

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, benefitting 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. 

Please get in touch for a more detailed analysis of how the withdrawal of the FHL status will affect you.

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.

If you are not domiciled in the UK, please talk to us about how the new rules and the transition to them will affect you.

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 DUTIES

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 may 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. 

Friday 1 March 2024

1st March 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Companies House fees to increase from 1 May 2024

Companies House have reviewed the fees they charge and have released details of the new charges that will apply from 1 May 2024.

Companies House work on a cost recovery basis, so the fees are set to cover their costs rather than to make a profit. Due to the measures introduced by the Economic Crime and Corporate Transparency (ECCT) Bill, costs for Companies House are increasing and so the fees are being adjusted in part to cover this.

The increases are quite significant. For instance, the fee for an annual confirmation statement, if submitted digitally, will rise to £34. The cost is currently £13. Depending on your current filing date, it may be worth filing early to pay the lower fee one last time.

For a full list of the prices from 1 May 2024, see: https://changestoukcompanylaw.campaign.gov.uk/changes-to-companies-house-fees/

The twin-cab pickup makes a U-turn: What happened?

In an announcement made on 19 February, the government confirmed that twin-cab pickup vehicles with payloads of 1 tonne or more will continue to be treated as goods vehicles for both capital allowances and benefit-in-kind purposes.

This is an example of what has become known as a ‘U-turn’. On 12 February, HM Revenue & Customs (HMRC) had updated its guidance on the tax treatment of twin-cab pickups following a 2020 Court of Appeal judgment. The guidance had confirmed that, from 1 July 2024, twin-cab pickups with a payload of one tonne or more would be treated as cars rather than goods vehicles for both capital allowances and benefit-in-kind purposes.

The updated treatment was extremely unpopular because goods vehicles attract more beneficial tax treatment than cars. For example, a business buying a goods vehicle is able to claim more tax relief, in the form of capital allowances, than if it were to buy a car. Similarly, if an employee were provided with an employer-owned vehicle, the income tax and employer’s National Insurance charge on the benefit-in-kind would be lower on a goods vehicle than on a car.

The government says that it has listened to carefully to views from the farming and motoring industries and has U-turned because the 12 February guidance update “could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses”.

The U-turn means that that the capital allowances and benefit-in-kind tax treatment of twin-cab pickups with payloads of 1 tonne or more will continue to be aligned with the VAT treatment. For more information, see: Update on HMRC Double Cab Pick Up Guidance - GOV.UK (www.gov.uk) 

Update expected to the Code of Practice on requests for flexible working

The Advisory, Conciliation and Arbitration Service (ACAS) has released a final draft of a new Code of Practice on requests for flexible working. The draft Code received consultation in 2023 and is now awaiting parliamentary approval. If it is approved, then the new Code is expected to come into force in April 2024.

Flexible working refers to any working arrangement that meets the needs of the employee and employer on where, when, and how an employee works. This would include part-time work, homeworking, hybrid working, job sharing, compressed hours, term-time working and so on.

Employers and employees can make informal arrangements, but if an employee makes a statutory request for flexible working, then the Code must be followed.

The new Code introduces a number of new changes. These include:

Right to request

An employee will now have a statutory right to request flexible working from the first day of their employment. Currently they cannot do so until they have given 26 weeks of employment service.

Currently there is a limit of one request that an employee can make in any 12 month period. However, under the new Code they will be able to make two statutory requests in any 12-month period, with a maximum of one live at any one time.

Handling a request

Currently, employers are required to consider a request and can reject it on the basis of a business reason that is set out in the Employment Rights Act 1996. The new Code is more positive and specifically states: “Employers must agree to a flexible working request unless there is a genuine business reason not to”. The business reasons for rejecting a request continue to be those set out in the legislation.

The new Code introduces requirements to prevent discrimination where a request is because an employee is seeking a reasonable adjustment because of a disability.

While the current Code encourages a discussion with the employee, particularly where the employer rejects or wants to modify the request, the new code specifies that unless the employer decides to agree to the employee’s written request in full, they must now consult the employee. The new Code provides guidance on how the meeting should be held and its content.

The new Code requires that a request be decided on within a statutory two-month period including any appeal. Currently three months are allowed.

The new Code also now specifies that the decision is communicated in writing and what this should contain. It also sets out appeal procedures.

Until the new Code receives parliamentary approach, then any statutory requests you receive can still be handled in accordance with the current Code of Practice (https://www.acas.org.uk/acas-code-of-practice-on-flexible-working-requests/html)

However, with parliamentary approval expected by April, it would be well to be prepared with your policies.

To review the new Code of Practice, please see: https://www.acas.org.uk/acas-code-of-practice-on-flexible-working-requests/2024

Are you getting minimum wage payments right?

Last Tuesday, the government named and shamed 524 businesses for failing to pay the minimum wage to their staff.

These failures amounted to a total of nearly £16 million that had not been paid to their workers. Each of the employers named has had to repay their staff for the shortfall and have also faced financial penalties of up to 200% of their underpayment.

The list includes businesses of all sizes, including some major high street brands. For instance, Estee Lauder, Easyjet, Greggs, Moss Bros, Currys, and NHS Highland all appear on the list.

It is clear that the government will take enforcement action against employers that do not pay their staff correctly. Since it can be easy to unintentionally underpay a worker, such as when they hit 18 or 21 when there is a mandatory increase, it is a good idea to regularly review your payment rates.

This is especially important as we come to the start of a new tax year on 6th April as the rates of pay are increasing as set out in the table below.

For the fiscal year 2023/24, the rates are as follows:

The National Living Wage for those aged 21 and over (previously for those 23 and over) is £10.42.

For individuals aged 18 to 20, the rate is £7.49.

For those under 18, the rate is £5.28.

The Apprentice rate is also £5.28.

The Accommodation Offset rate is £9.10.

For the fiscal year 2024/25, the rates will be:

 

The National Living Wage for those aged 21 and over increases to £11.44.

For individuals aged 18 to 20, the rate will be £8.60.

For those under 18, the rate will increase to £6.40.

The Apprentice rate will also be £6.40.

The Accommodation Offset rate will be £9.99. 

If you need any help with your payroll or reviewing whether your wage payments are correct please feel free to contact us we would be happy to help you!

See: https://www.gov.uk/government/news/over-500-companies-named-for-not-paying-minimum-wage

The Body Shop goes into administration

The latest casualty of the difficulties hitting the high street is The Body Shop, which entered administration on 13 February 2024.

Administration can be a worrying time for employees as well as customers and suppliers. However, administration is not as serious as when a company immediately goes into liquidation. Let us explain.

When a company goes into administration, it essentially means that it is placed under the management of licensed insolvency practitioners. These insolvency practitioners, known as administrators, help salvage the business or its assets. This process is typically started when a company is struggling financially and cannot pay its bills or other financial obligations.

During administration, the administrators take control of all the company’s operations, finances and assets. Their goal is to maximise the returns for creditors. This might involve restructuring the business, selling off parts of the business, or seeking new investment that will stabilise the company’s financial position.

Going into administration provides the company with protection from legal action by creditors, giving it breathing space to weigh up its options and find a solution. It can also help to preserve jobs. And because it allows for a more orderly resolution of the financial difficulties the company is facing, it helps to keep more value for the various stakeholders in the business.

Ultimately, the aim of administration is either to rehabilitate the company and return it to a solvent trading position, or to achieve a better outcome for creditors than would be possible through an immediate liquidation.

If you have any concerns about your company’s financial position, please contact us at your convenience. We will be happy to talk and guide you through the options available to you.

See: https://www.gov.uk/government/news/the-body-shop-in-administration-information-for-employees-and-creditors 

Cuts to National Insurance: Reminders about changes

In November 2023’s Autumn Statement, the government announced some National Insurance (NI) changes. Some of these changes went into effect in January 2024, whereas others will come into effect on 6 April 2024. Here is a reminder of the changes.

Cut to the main rate of Class 1 employee NI contributions from 12% to 10%

This reduction received the most headlines. This change went into effect from 6 January 2024, and you have likely already made this adjustment.

In some cases, employers were not able to make the change in time due to software not being ready. If that is the case for you then an incorrect amount of NI will have been deducted from your employees and this will need correcting. Details on how to do so are here: https://www.gov.uk/payroll-errors/correcting-your-fps-or-eps But, please feel free to contact us if you need any help.

HM Revenue and Customs (HMRC) have recently confirmed that the 2% cut also applies to the married woman’s reduced rate of NI contributions, where the rate has dropped from 5.85% to 3.85%. The married woman’s reduced rate of NI contributions applies to married women who opted in before the scheme ended in April 1977.

Cut to the main rate of Class 4 self-employed NI contributions from 9% to 8%

Class 4 NI applies to the taxable profits of a self-employed business. It is calculated when your self-assessment tax return is prepared and collected as part of your income tax bill.

This cut comes into effect for profits earned from 6 April 2024 onwards. There is nothing you need to do to benefit from this cut, it will be automatically applied when your tax bill is calculated.

Removal of liability to pay Class 2 self-employed NI

Sometimes known as the self-employed ‘stamp’, Class 2 NI has been a feature for self-employed taxpayers for many years. It is quoted by HMRC as a weekly rate (£3.45 per week for the 2023/24 tax year) and is usually collected as part of your self-assessment tax bill.

From 6 April 2024 the liability to pay this has been removed. For 2024/25, if your trade profits are above £6,725, you will accrue entitlement to state benefits without paying Class 2 NICs so the charge effectively becomes £nil. However, if your trade profits are below £6,725 and you wish to continue accruing entitlement to state benefits, you’ll need to pay class 2 NICs on a voluntary basis.

If you have any concerns or questions about the NI you are paying, please contact us, we will be happy to help you! 

Resources on learning to export

The Department for Business & Trade has made available learning resources for businesses to help with what is involved with exporting. These resources are designed both for new and experienced exporters.

The resources cover:

·         Learning how to identify opportunities abroad and find the best target markets;

·         Preparing to sell into a new country, such as how to find customers and win bids;

·         Understanding international rules and how to get your goods to their destination; and

·         Learning how to raise funds, get paid and manage exchange rates.

There is an opportunity to sign up and gain some additional benefits.

Exporting can also involve additional Customs and VAT requirements. If you need any help with this or would like to discuss your plans, please feel free to contact us!

For more about this resource, please see: https://www.great.gov.uk/learn/categories/

Friday 23 February 2024

23rd February 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Navigating recession: Key considerations for your business
The Office of National Statistics released official figures last week showing the UK is now officially in recession.

Gross domestic product (GDP) for the October to December 2023 quarter dropped by 0.3%. This followed a fall in the July to September 2023 quarter of 0.1%. A fall in GDP in two or more consecutive quarters constitutes a recession.

Experts will generally assess the health of an economy on a number of factors, rather than solely look at the headline GDP rates. However, the “recession” word quickly takes hold in news headlines and brings apprehension and uncertainty with it.

While it may be a time for concern, proactive measures can mitigate its impact and even present opportunities for growth. Here are some key things for businesses to look at when navigating the onset of a recession.

Financial resilience:

Assess how your business’s finances currently look. Where possible, look to strengthen cash reserves and reduce unnecessary expenses.

Are there ways you could diversify your income sources so as to avoid being overly reliant on 1 or 2 major customers?

Prepare cashflow forecasts and see if you can predict where a potential downturn in income might come. Based on this, you may be able to make some contingency plans or time payments on essential expenditure so you don’t leave yourself short at the wrong time.

Analyse your customers’ behaviour:

During economic downturns, spending behaviours generally often change. Priorities are put on essential purchases while what is seen as non-essential or non-urgent is put on the back burner. How will this affect how your customers buy from you? Could you tailor your marketing strategy or the products or services you offer your customers so that they appeal to their current needs and price sensitivities?

Review your supply chain:

It’s a good time to evaluate the resilience of your supply chain. Do you have key suppliers that may struggle with a down-turn? It could be that exploring alternatives would be wise. On the other hand, if you are in a relatively strong financial position, it could be a good time to support a trusted supplier, perhaps ensuring reduced pricing or longer-term loyalty.

Strengthening your relationships with key suppliers and maintaining open communication with them can also help you to anticipate and address potential challenges.

Nurture staff morale:

Continue to invest in and nurture staff morale. Staff can also become anxious in an economic downturn, and this can easily affect morale and productivity. Consider cost-effective strategies that will help you retain talented staff. For instance, flexible work arrangements, skill development programs and performance incentives can help to keep staff incentivised.

Your staff may also have good ideas that will help your business to adapt. Spending time talking with them and giving them the authority to contribute innovative solutions can provide you with a very valuable resource.

Strategic investments:

While there are uncertainties in an economic downturn, there are usually also opportunities. It can be well worth exploring investment opportunities if you are in a position to do so.

Look for undervalued assets or potential mergers or acquisitions that can be done for a reduced price. You may be able to capitalise on the downturn to buy assets at a favourable price and position your business for long-term growth.

Government assistance:

There are many government assistance programs available, and additional ones may be added to support business continuity through a recession. Policy changes, tax relief measures, funding schemes, and loan financing assistance are all possibilities that your business could take advantage of. Stay informed about what is available, as these programs can provide much needed support.

Long-term vision and a positive attitude:

Maintain a long-term perspective, as it will help prevent you getting caught up in negative thinking that can stifle your ability to successfully adapt to change. A recession is a technical marker of the UK-wide economic landscape, but it is not necessarily an indicator for how your business can perform. Keeping a positive attitude will allow you to see the opportunities you have available to you and give you the drive to see them through.

In conclusion, navigating a recession takes good planning and adaptability. But by taking proactive steps, like those we have mentioned, your business can not only weather the economic downturn but also emerge stronger and more competitive in the long run.

We are here to support you during tough times, why not ask us about our Tough Times Action Pack that is designed to provide you with useful guidance and support.

 
Customer satisfaction index drops: how can you avoid the same in your business?
The Institute of Customer Service published its latest UK Customer Satisfaction Index (UKCSI) figures for January 2024. The Index has fallen by 1.7 points since last January to 76.0 (out of 100) - https://www.instituteofcustomerservice.com/research-insight/ukcsi/

Each of the 13 UKCSI sectors showed lower customer satisfaction than a year ago, with Utilities, Transport, Insurance and Service declining by more than 2 points. The highest rated organisations are Ocado (85.7), first direct (85.3) and John Lewis (85.1).

Looking at an index update like this can provide a good opportunity to reflect on the customer satisfaction of your own customers. Good customer service is characterised by several key elements that prioritise and promote positive experiences for customers.

Effective communication

Clear and concise communication that demonstrates an understanding of customers’ inquiries and addresses them promptly is key. This needs to be true wherever the interaction happens, whether through in-person interactions, phone calls, emails, or live chat support.

Empathy

Empathy is essential for demonstrating that you understand a customer’s needs, emotions and concerns. Empathetic customer service will allow your customers to feel a rapport with you that builds trust.

Responsiveness

Customers expect their needs and any issues they have to be dealt with in a timely manner. Prompt response times tell a customer that they are important to you and build loyalty.

Consistency

A high service level in one area of the business can be compromised if other areas of the business do not maintain the same standard. For instance, a high standard in pre-sales support will be undermined if after-sales support is lacking. Consistency across all touchpoints and interactions with customers is therefore important. It gives your customers confidence in your business and contributes to you winning repeat business.

Flexibility

Each customer is unique, so being able to accommodate customers’ preferences and resolve unique situations or challenges is an important part of being able to keep your customers happy. Being willing to go the extra mile, and to tailor solutions to individual customer needs, can significantly enhance satisfaction and loyalty in your customers.

Continuous improvement

Regularly collecting feedback from customers and implementing the insights that it gives you will allow you to adapt and evolve your customer service practices to meet their changing needs and preferences.

Good business systems

Having good business systems in place helps staff in their quest to provide excellent, consistent customer service. Good systems mean that staff know who is responsible for what, and where or who to get information and authorisations from when they need it.

Why not talk to us about how we can help you with improving your business systems for growth? We would be happy to help you!

 
Inflation stays flat
Official figures were released last week showing that inflation remains at 4% in the year to January.

Energy prices have increased due to the new energy price cap, and the price for second-hand cars also rose by 1.5%. However, food prices fell for the first time in two years by 0.4%. Discounts offered by retailers for furniture and household goods in the January sales have also exerted a downward push on inflation.

Of course, inflation staying flat does not mean that prices are not increasing. A 4% inflation rate means that prices are still going up at double the rate targeted by the Bank of England.

The Office of National Statistics (ONS) have also released figures showing that pay, excluding bonuses, grew by 6.2% in the last quarter of 2023. While this and the number of job vacancies have reduced since the summer, pay growth still exceeds inflation. The former deputy governor of the Bank of England said that he would be surprised to see the Bank lowering the base rate until this changes.

Businesses therefore continue to face increased prices for supplies and pressure to increase staff wages to meet their costs of living, while trying to balance what can be passed on to customers.

However, Chancellor Jeremy Hunt took the news as a positive, saying: “Inflation never falls in a perfect straight line, but the plan is working.”

See: https://www.bbc.co.uk/news/business-68285819

Some self-catering holiday let owners being asked to provide trade information

The Valuation Office Agency (VOA) is contacting the owners of some self-catering holiday lets. The lets in question are ones that are currently being assessed for business rates.

The VOA are looking for additional information about the income and expenditure of these properties. This will assist in calculating the rateable value of the property.

This enquiry follows an exercise undertaken by the VOA last year to contact self-catering holiday let owners. The information requested at that time enabled the VOA to decide whether the properties should be assessed for business rates or Council Tax.

The rateable values of self-catering holiday lets must be updated by the VOA every three years, and the information being requested helps them to revalue properties correctly.

Forms will be sent out between February and August. If you receive one, then it must be returned within 56 days to avoid paying a penalty.

If you receive a form and need any help with completing it, please contact us and we will be happy to help. If you are expecting a form and do not receive one, or otherwise believe that the rateable value for your holiday let is incorrect, let us know and we’ll be pleased to help.

For more information on how properties are valued, see: https://valuationoffice.blog.gov.uk/2023/02/20/how-we-value-self-catering-holiday-homes/

See: https://www.gov.uk/government/news/providing-trade-information-for-self-catering-holiday-lets
 
Violence and abuse towards shop workers increases to 1,300 incidents a day
A crime survey carried out by the British Retail Consortium (BRC) shows a 50% increase in levels of violence and abuse towards shop workers. During 2022/23 there were 1,300 incidents a day compared with 870 a day in the previous year.

The abuse includes racial abuse, sexual harassment, physical assault and threats with weapons, and is on a par with the levels of abuse retail workers experienced during the pandemic when safety measures frustrated many.

Theft costs have increased to £1.8 billion from £953 million the year before, with 45,000 incidents a day.

These increases are all despite retailers investing £1.2 billion (compared with £722 million in the previous year) on CCTV, increased security personnel, body worn cameras and other security measures.

The survey also indicated a high level of dissatisfaction with the police, 60% of respondents describing police response as ‘poor’ or ‘very poor’.

Katy Bourne OBE, Sussex Police & Crime Commissioner and APCC Lead for Business Crime, has described the levels of retail crime as revealing “an unprecedented level of selfish lawlessness.” She has urged greater police focus on the problem.

Calls are being made for a standalone offence to be introduced for assaulting, threatening, or abusing a retail worker in the hope that this will help deter offenders. Retail workers in Scotland already benefit from such a law, where this offence was introduced in 2021.
Retail business owners continue to need to assess the risks and consider what measures they can take to effectively protect their staff and business.

See: https://brc.org.uk/news/corporate-affairs/retail-crime-a-crisis-that-demands-action/
 
HMRC warns about an increase in tax refund scams
HM Revenue and Customs (HMRC) are warning that fraudsters could focus on Self Assessment taxpayers.
With the tax return filing deadline having just passed at the end of January, an email, phone call or text message that offers a tax rebate may appear more believable than usual.

HMRC say that they have responded to 207,800 referrals in the year to January, with more than 79,000 relating to fake tax rebates. The total number of referrals has increased by 14% over the previous year, suggesting fraudsters are increasing their efforts.

Scammers are looking to get personal details that they can sell on to criminals, or to gain access to bank accounts and phish for these details using emails, phone calls or texts that appear to mimic an HMRC message.

To protect yourself, avoid rushing into anything and always protect your personal information.

HMRC have confirmed that they will not email, text or phone a customer to tell them that they are due a refund, or to ask them to request a refund. Repayments will be made automatically into the account chosen when filing the tax return. Alternatively repayment amounts can be seen and payment requested in your online HMRC account or in the HMRC app.

If you receive contact that you are suspicious of, you are encouraged to report it to HMRC. You can:

  • Forward emails to phishing@hmrc.gov.uk;
  • Report tax scam phone calls to HMRC on GOV.UK; or
  • Forward suspicious texts claiming to be from HMRC to 60599.
If you are in any doubt whether contact you have received is genuinely from HMRC, please do not hesitate to contact us and we will be pleased to help you!

See: https://www.gov.uk/government/news/warning-to-self-assessment-customers-as-scam-referrals-exceed-200000
 
New trade and investment partnership with Nigeria
Last week the UK signed an Enhanced Trade and Investment Partnership with Nigeria to boost trade and investment between the two countries.

In the year to September 2023, trade between the two countries totalled £7 billion. UK exports to Nigeria were £4 billion in that year, which represented a 3% increase in current prices over the previous year.

The partnership will allow for additional opportunities in the financial and legal services sector, the film and media industry and for UK education providers to offer education in Nigeria.

Lawyers in both the UK and Nigeria will benefit from the agreement that facilitates them practising foreign and international law in each other’s country.

Nigeria’s economy is the biggest in Africa and is predicted to be in the world’s top 20 by GDP by 2035.

See: https://www.gov.uk/government/news/uk-signs-landmark-economic-partnership-with-nigeria
 
What’s your policy on scanning QR codes?
Since the COVID lockdowns, QR codes have become increasingly commonplace as a quick way to direct people to websites, to log into online video services on smart TVs and TV boxes, or to order or pay for goods and services.

But is your business protected from the risks that may come from criminals using malicious QR codes? Do you have a policy for your staff in place? What issues do you need to consider?

The National Cyber Security Centre (NCSC) have provided some guidance on the subject in a recent blog post.

They advise that QR code related scams are relatively small compared to other types of cyber fraud. The majority of QR code-related fraud usually happens in stations, car parks or other open spaces and often feature an element of social engineering, such as a criminal posing as a bank employee calling to continue the deception.

QR codes are increasingly being used in phishing emails, sometimes called ‘quishing’. This is because people are more suspicious of links in emails and so QR codes may more easily disguise a link to a malicious website. Also, security tools that detect phishing emails may not scan images and so let a QR code through.

Criminals are also aware that a person is likely to use their personal phone to scan a QR code. Personal devices don’t usually have the same security protections as an employer-provided computer.

NCSC make the following recommendations that could be used as the basis for a work policy on use of QR codes:
  • QR codes used in pubs and restaurants are likely to be safe.
  • Scanning QR codes in stations, car parks and other open spaces is likely to be riskier. Whenever you are being asked to provide what feels like too much information you should be suspicious.
  • Exercise caution about scanning a QR code in an email. These types of quishing attacks are on the increase.
  • Use the QR scanner that comes with your phone rather than using an app downloaded from an app store.

See: https://www.ncsc.gov.uk/blog-post/qr-codes-whats-real-risk
 
A reminder for businesses on waste recycling responsibilities
A Buckinghamshire-based company has recently made the news, not for their innovative products or services, but for their failure to adhere to regulations on recycling waste packaging.

Hi-Tech Coatings International Limited, located in Aylesbury, found themselves in hot water for neglecting their obligations under the Producer Responsibility Obligations (Packaging Waste) Regulations 2007. As a result of their oversight, the company has had to make a significant financial contribution of nearly £21,000 to a local charity, in addition to covering Environment Agency costs.

The company were proactive in making amends and showing how they will comply with the law in the future. The Environment Agency were willing to accept the company’s offer and did not proceed to prosecution in this case.

Berks, Bucks and Oxon Wildlife Trust are the beneficiaries of the company’s contribution. The money will be used to help protect local wildlife habitats and wetland areas in Buckinghamshire.

The regulations are designed to ensure that businesses take responsibility for the recycling of packaging waste. A senior technical officer for the Environment Agency, Jake Richardson, has said: “Any company handling more than 50 tonnes of packaging a year, and with turnover in excess of £2 million, must register with the Environment Agency or a packaging compliance scheme, and meet their responsibilities for recycling waste packaging.”

This financial penalty serves as a stark reminder of the importance for businesses to stay aware of their environmental responsibilities, particularly when it comes to waste management and recycling. By fulfilling their responsibilities for recycling waste packaging, companies not only mitigate financial and legal risks but also contribute to the preservation of natural ecosystems and the well-being of future generations.

See: https://www.gov.uk/government/news/buckinghamshire-firm-pays-heavily-for-packaging-oversight
 
Sustainable Farming Incentive receives thousands of applications
The Department for Environment, Food & Rural Affairs (Defra) has announced that more than 10,000 farmers across England have applied for the improved Sustainable Farming Incentive since it opened for applications in September.

The Sustainable Farming Incentive provides financial help to farmers for taking actions that support food production, farm productivity and resilience, while protecting and enhancing the environment.

Based on feedback received from farmers, the Incentive has been expanded and improved to include around 50 new actions that farmers can be paid for. The application process has also been made more straightforward and farmers have more flexibility now to choose which actions work best for them.

Farmers are being encouraged to apply now, and Defra are holding webinars in February and March, as well as a presence at upcoming agricultural shows throughout England.

For more information and to apply, see: https://farming.campaign.gov.uk/
 
Nature benefits from new legal requirement for developers
All major housing developments in England are now required to deliver at least a 10% benefit for nature. This Biodiversity Net Gain requirement, which was introduced in the Environment Act, is now a legal requirement for all new planning applications.

Biodiversity Net Gain means that a development needs to avoid harming nature, or if that is unavoidable, new habitats need to be created or existing ones enhanced so that the net result is more nature after a development than before. The gain is preferably to be made within the new site itself, but the requirements can also be satisfied by investing in nature sites elsewhere.

Measures are included in the new requirements to ensure that the Biodiversity Net Gain provides a lasting benefit to the environment over the long term. For instance, significant on-site and off-site gains will need a legal agreement with a responsible body or local authority to monitor the habitat improvements.

Many developers already work to improve nature in their developments, but the new requirements have been welcomed as a positive move in bringing nature back into towns and cities.

See: https://www.gov.uk/government/news/new-housing-developments-to-deliver-nature-boost-in-landmark-move