29th March 2024 – Hillmans Weekly Update

29th 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 Easter weekend.

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

Shareholder Agreements for limited companies: What you need to know
When there are several shareholders, a new company is being formed, a shareholder wants to pass their shares or pass them to their children, someone is nearing retirement, or the company has borrowed money from a shareholder, issues can easily arise that jeopardise the continued success of a business.

Shareholder agreements are crucial documents that set out the rights and responsibilities of shareholders within a company. These agreements, which are often overlooked, have a significant influence in shaping the trajectory of a business and safeguarding the interests of both shareholders and the company itself.

In this article we look at the areas where a good shareholder agreement can benefit a business and its shareholders.

Defining rights and responsibilities
A good shareholder agreement clearly outlines the rights and responsibilities of each shareholder within the company. This includes details such as voting rights, dividend distribution, and obligations related to financial contributions or management responsibilities.

With these parameters established upfront, shareholder agreements provide clarity and can minimise potential conflicts and disputes among shareholders.

Mechanism for resolving conflicts
While business ventures start with all good intentions, almost inevitably disagreements can arise among shareholders on important business decisions or operational matters. Such disputes can end up paralysing a business and hold it back from reaching its potential.

Shareholder agreements typically include mechanisms for resolving conflicts, such as mediation, arbitration, or predetermined procedures for making decisions. Because there is then a structured framework for dealing with conflict, the agreement helps reduce the risk that a dispute could escalate to the point of disrupting the business.

Protection of minority shareholders
Shareholder agreements often include provisions designed to protect the rights of minority shareholders. Generally, decisions within a company are decided by majority vote. Therefore, if a company has a single or a small group of majority shareholders, they are able to control all decisions made.

This may not be desirable in all scenarios, and actions could be taken that disproportionately benefit majority shareholders.

Therefore, an agreement may include provisions that ensure minority shareholders have a say in certain key decisions, and safeguards against certain actions that could unfairly disadvantage minority shareholders. The agreement can therefore promote fairness and equity within the company.

Keeping the company on track
The stability and direction of a company can be helped by a shareholder agreement. It might be used to establish guidelines for significant corporate actions, such as mergers, acquisitions, or changes in company structure.

The agreement might require certain decisions to be approved by a specified majority of shareholders and so prevent a single individual taking an action that might undermine the company’s strategic objectives or corporate governance.

Succession planning and business continuity
The long-term sustainability of any business relies on changes in ownership or management being well planned for.

Shareholder agreements often address succession planning by outlining procedures for transferring shares, resolving disputes related to a transition in ownership, or specifying how a buyout must happen in the event a shareholder leaves or dies.

With the clarity and certainty these provisions can bring, a business is in a much better place to be able to continue with minimal disruption.

Confidentiality and non-compete clauses
A shareholder may decide to leave the company and set up on their own or move to a competitor. In this circumstance, a shareholder agreement can help to protect the company’s confidential information and prevent shareholders doing something that might harm the business.

The agreement might include clauses that help safeguard the company’s intellectual property, trade secrets, and competitive advantage. These can all help the company keep its market position and reputation.

In summary, a good shareholder agreement can provide a company with a comprehensive framework that helps it remain stable and fair while bringing long-term success to both the business and its shareholders.

Please talk to use if you need help in planning for an agreement. We can help with a list of key areas to consider, as well as with share and company valuations and putting the wishes of the shareholders into an agreement with a local solicitor.
 
Increase to small company thresholds
Thresholds based on a company’s accounts and employee numbers determine whether a company is categorised as small or not. Being able to qualify as a small or medium sized business can cut red tape for a business with the reduced amount of both non-financial and financial reporting a small or medium sized business is required to do.

The Prime Minister, Rishi Sunak, has announced that there will be 50% uplift to the current thresholds that determine a company’s size. The government expects that this will benefit up to 132,000 businesses.

The current thresholds were set by the EU, who recently uplifted its thresholds by 25%. However, following Brexit, the UK has greater freedom to set its own thresholds and so is opting for a larger increase.

It is intended that the new thresholds will apply to financial years that start on or after 1 October 2024.

The new thresholds mean that a company with less than £632,000 turnover will now qualify as a micro-entity. A small company will be one with turnover less than £15m, and the upper medium threshold will increase to £54m. Companies with a turnover above £54m will be classified as large.

See: https://www.gov.uk/government/news/prime-minister-to-announce-major-reform-package-to-boost-apprenticeships-and-cut-red-tape-for-thousands-of-small-businesses#:~:text=This%20includes%20increasing%20the%20number,and%20non%2Dfinancial%20reporting%20requirements.
 
Employers – Are you ready for the new tax year?
The new tax year begins on 6^th April and for employers running monthly payrolls, the March pay run will be the last of the 2023/24 tax year.

Some things you will need to make sure you do and when you need to do them are listed below:

• Send your final payroll report of the year to HM Revenue & Customs (HMRC). You may need to mark in your payroll software that this is the final submission for the tax year.
• Update your employee records before 6^th April. This may include new tax code notices. If your software automatically updates tax code notices, then check these to make sure they are accurate.
• Update your payroll software. If you use a desktop application to run your payroll then it will need updating from 6^th April or whenever your software provider tells you to do so. If you use browser-based software to run your payroll then it is unlikely that you will need to run an update, but you should check.
• Give your employees a P60 by 31^st May at the latest.
• Report employee expenses and benefits by 6^th July at the latest.

If you need any help with your end of year payroll procedures or would like help or advice on preparing your report of employees expenses and benefits, please get in touch with us and we will be happy to help you.

See: https://www.gov.uk/payroll-annual-reporting
 
Major reforms to apprenticeships announced
The Prime Minister, Rishi Sunak, has announced reforms to apprenticeships that will enable up to 20,000 more apprenticeships and could be especially welcome news to small businesses.

With effect from April 1^st, the government will pay the full cost of training for anyone up to the age of 21.

If you are a small employer this will mean that you no longer need to meet some of the training costs and may mean that taking on an apprentice becomes more viable.

Education providers will also benefit as they currently need to source funding both from businesses and the government.

Gillian Keegan, Education Secretary, commenting on the reforms said: “Apprenticeships are a fantastic way for businesses to develop the skills they need, and these new measures will help more businesses and young people benefit from them.”

See: https://www.gov.uk/government/news/prime-minister-to-announce-major-reform-package-to-boost-apprenticeships-and-cut-red-tape-for-thousands-of-small-businesses
 
Have we heard the death knell for national insurance contributions?
The original concept for national insurance contributions (NICs) was as a part of social welfare reforms implemented by the government in the early 20^th century. The idea being to establish a social insurance that provides financial protection and assistance to individuals and families when sick or unemployed, or in old age.

The National Insurance Act of 1911 required workers and their employees to start making contributions to a national insurance fund, which was to be used to finance various benefits.

The national insurance system has been further expanded and refined since then, but now in 2024 national insurance contributions could well be on their way out.

NICs was the hot topic of last year’s Autumn Statement and this year’s Spring Budget, with the rates for employee NICs and those charged on self-employed profits significantly cut. Class 2 NICs – a set rate of contribution paid by all self-employed businesses with profits above a certain threshold – has also effectively been abolished.

In the Spring Budget, the Chancellor, Jeremy Hunt, identified NICs on the earnings of the self-employed and employees as paying tax twice. He indicated that, when possible, the government would continue to cut national insurance.

This thought was further emphasised in a speech the Prime Minister, Rishi Sunak, gave last week at the 2024 Business Connect Conference. He said: “[The government’s] long-term ambition is to simplify the system and end the double tax on work, by abolishing NICs.”

After outlining the recent cuts, he concluded by saying: “We’re not done yet. We’ll make more progress towards abolition, in the next Parliament.”
NICs therefore seem likely to be an ongoing topic in the run up to a general election, likely to be held in the autumn. This is perhaps the death knell for NICs, but also raises questions about how tax will be levied to offset a reduction to NICs.

If you need help optimising your tax strategies so that you pay the minimum of tax or national insurance, please talk to us. We will be happy to help you!
 
HMRC announces and then halts changes to helpline services
Last week, HM Revenue and Customs (HMRC) announced changes to its helpline services that will encourage people to go online first.
However, in a fast about turn, the very next day they halted these changes while they consider how best to help taxpayers make more use of online services.

The changes HMRC are proposing apply to Self Assessment, PAYE and VAT services. Feedback though suggests that there is still a significant number of people who are reluctant to deal with their tax affairs online.

HMRC are keen to pursue online services because of the cost savings they bring. They revealed that last year they received more than three million calls on queries that could have been carried out online, including on questions such as resetting an online password, getting a tax code, or finding out a National Insurance number.

The changes they are proposing include:

• Closing the Self Assessment helpline between April and September and directing callers to self-serve using online services.
• Opening the Self Assessment helpline between October and March for priority queries. Straightforward queries will still be directed to HMRC’s online services.
• Opening the VAT helpline for 5 days each month ahead of the deadline for filing VAT returns. At other times, callers will be directed to use online services.
• The PAYE helpline no longer taking calls on refunds.
• Having HMRC advisers continue to be available to support those who cannot use online services or need additional support because of their health or personal circumstances.

Jim Harra, HMRC Chief Executive, said: “Making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity. … However the pace of this change needs to match the public appetite for managing their tax affairs online.”

If you need any help in dealing with HMRC, please feel free to get in touch and we will be pleased to help you.

See: https://www.gov.uk/government/news/hmrc-helpline-changes-halted
 
New fining guidance published by the Information Commissioner’s Office
The Information Commissioner's Office (ICO) has released some new data protection fining guidance showing how it decides to issue penalties and calculate fines.

A consultation on the guidance took place last year and the new guidance provides greater transparency on how the ICO uses its power to fine.

The sections about penalty notices in the ICO Regulatory Action Policy are replaced by the new guidance.

The guidance sets out the infringements for which the ICO can impose a fine as well as the factors that the ICO will take into account when deciding whether to issue a penalty notice and in determining the amount.

It also sets out the five steps that the ICO take in calculating the amount of a fine. These are:

Step 1 - Assess the seriousness of the infringement
Infringements with a high degree of seriousness will have a starting point of 20% and 100% of the legal maximum. A medium degree of seriousness will start between 10% and 20%, and a lower degree of seriousness will have a starting point between 0% and 10%.

Step 2 - Account for turnover
Since the statutory maximum fine amounts apply to all organisations regardless of size, the ICO will consider the turnover of the organisation in question to see whether the starting point should be adjusted. The guidance sets out what adjustments would be made for varying levels of turnover.

Step 3 - Calculate the starting point
Based on the outcome of the first two steps, the ICO will then calculate what the starting point for the fine will be. The guidance provides a table of indicative ranges.

Step 4 - Consider aggravating and mitigating factors
The ICO will then consider if there are any aggravating or mitigating factors that would warrant an increase or decrease in the level of fine that has been calculated.

Step 5 - Any adjustments to ensure the fine is effective, proportionate and dissuasive
Finally, the ICO would consider the circumstances of the case to assess whether the figure arrived at is effective, proportionate and dissuasive as well as no more than the statutory maximum amount. An adjustment to the fine amount may be made as a result.

To review the guidance, please see: https://ico.org.uk/about-the-ico/our-information/policies-and-procedures/data-protection-fining-guidance/
 
Bank of Japan increases base rate for the first time in 17 years
Last week, the Bank of Japan raised its key interest rate to a range of 0.0%-0.1% from -0.1%. The move comes after increases in consumer prices have led to wage rises.

Official figures in Japan show that the core consumer inflation remained at the bank’s target of 2% for January. However, due to rising cost of living, the biggest companies in Japan agreed to a 5.28% salary increase earlier this month. This move triggered the bank’s decision to raise the base rate.

Whether the increase will directly affect your business will likely depend on whether it trades with Japan. However, interest rate changes can have an indirect effect on all businesses to the extent that they affect global economic conditions and so influence demand or shifts in consumer behaviour.

At this stage it is interesting to note that Japan was the last country to still have a negative interest rate - a negative base rate means that people have to pay to deposit money in a bank and so encourages people to spend their money instead. This indicates that nowhere in the world is immune to rising costs and inflation, and suggests that businesses need to continue to plan for rising costs in order to stay profitable.

See: https://www.bbc.co.uk/news/business-68594141
 
Car finance complaints being assessed by FCA
The Financial Conduct Authority (FCA) have said that they are assessing the extent of a pre-2021 problem with some car finance arrangements.
Prior to January 2021, some brokers were permitted by lenders to adjust the interest rates on the car finance they arranged for customers.

The rates were linked to the amount of commission that the broker received, and so typically a higher interest rate would mean a higher amount of commission for the broker. This was called a discretionary commission arrangement and naturally led brokers to increase the amount people were charged on their car loan.

The FCA banned this practice in 2021, however there has been a high number of complaints since then about loans that were arranged before 2021.

The FCA report that lenders and brokers are generally rejecting complaints and so they are now examining the issue.

They have also paused the 8-week response deadline that providers have to respond to complaints within. Providers will have until 25 September 2024, at the earliest, to respond.

This is because borrowing of this type is not covered by the Financial Services Compensation Scheme and due to the high number of possible complaints there is a risk of providers going out of business and complainants not getting back any of the money they are owed. Dealing with complaints in an orderly way should minimise this risk.

As a result, the FCA have also lengthened the time available to take a complaint to the Financial Ombudsman from 6 months up to 15 months.

For more details and what your next steps should be if you think you might be owed compensation, please see:  https://www.fca.org.uk/consumers/car-finance-complaints
 
Farmers and land managers to benefit from payment rate increases for woodlands
The Department for Environment, Food & Rural Affairs (Defra) and the Forestry Commission have announced a significant uplift in England Woodland Creation Offer (EWCO) payments.

The uplift is intended to promote an increase in tree-planting across the country. It takes effect immediately and offers more tailored tree-planting incentives to farmers and land managers, while also protecting food production farmland.

Currently the maximum rate per hectare available from additional contributions is £8,000. This will increase to £11,600 – a 45% increase.

Further new measures include a new Low Sensitivity Land Payment of £1,100 per hectare. This can be stacked onto the above payment if applicable to give a total of £12,700 per hectare.

To encourage planting or the natural colonisation of highly biodiverse woodlands next to ancient woodland, a new ‘Nature Recovery – Premium’ option of £3,300 per hectare is being added to the Nature Recovery Additional Contribution.

Other additional contributions, such as those relating to riparian buffers and flood mitigation and access, have also seen uplifts. As has the annual maintenance payments, which have been increased to £400 per hectare, per year, for 15 years.

As expert accountants for the farming and land management industry, please feel free to talk to us at any time for advice that could help your business be more profitable.

Details of the new rates can be found here:   https://www.gov.uk/government/news/payment-rates-increased-to-benefit-farmers-land-managers-trees

22nd 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

Redundancies – what factors should be considered?
In times of economic uncertainty or because of operational challenges, you may find your business is facing tough decisions, including the possibility of redundancies. While such situations can be daunting and emotionally challenging, careful consideration and planning can help reduce the impact on both employees and the business as a whole.

In this article we discuss some key factors that a business should consider when contemplating redundancies.

1. Assess the situation
Before making any decisions, conduct a thorough assessment of your business’ financial health, operational needs and long-term viability. You will want to look at trends in your business’ revenue as well as market conditions so that you can make some accurate forecasts. It is important to make sure that you are working with the facts of your business’ situation. ‘Gut feeling’ can be affected by a distorted impression of the finances, and you may be surprised at how a situation looks more reasonable once all the figures have been identified.

2. Explore alternatives
Redundancies should be considered as a last resort. Are there alternative measures that could also achieve the needed financial or operational relief? For instance, reducing working hours, implementing temporary lay-offs, or renegotiating contracts with suppliers could minimise the need for job cuts.

3. Consult legal requirements
Familiarise yourself with the employment laws that apply to redundancies. Selection criteria, statutory notice periods, requirements for consultation and redundancy pay obligations are all areas where it is important to avoid potential legal repercussions. It may be best to get expert legal advice to make sure nothing is missed.

4. Communicate transparently
Open and honest communication with employees is crucial throughout the redundancy process. Clearly explain the reasons behind the decision, the criteria for selection, and the support available to affected employees. By providing regular updates and opportunities for feedback you can help alleviate the anxiety and uncertainty your staff will be feeling.

5. Offer support and Assistance
Redundancy can have significant financial and emotional implications for affected employees. Do what you can to provide support services such as career counselling, job search assistance, or access to training opportunities to help them find new employment.

6. Maintain Employee Morale
Redundancies can have a ripple effect on employee morale and productivity. Take proactive measures to maintain morale and motivation among your remaining staff, such as acknowledging their contributions, fostering a supportive work environment, and providing opportunities for career development.
While navigating redundancies can be challenging, approaching the process with empathy, transparency, and diligence can help you mitigate the impact and emerge stronger in the long run.

If you want to talk about whether your business’ finances mean redundancies may be needed or want to know how much statutory redundancy pay an employee may be entitled to, please get in touch with us. We have the tools and would be happy to help you.
 
New Companies House powers come into force
New powers for Companies House based on the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) came into force on 4 March 2024.
The new measures allow Companies House to combat the criminal acts and money laundering being carried by criminals abusing the company registration system. These abuses have been well documented in the news, with many examples of individuals and businesses receiving correspondence and demands addressed to companies that they have no knowledge of.

Annual confirmation statements affected
One of the new measures requires those setting up new companies to confirm the lawful purpose of forming a company during the incorporation process.
However, the annual confirmation statement will also now require confirmation each year that the company’s intended future activities will be lawful.

Where you complete your own confirmation statement, you will see this option included now.

Where we complete the confirmation statement on your behalf, then this will be something that the directors will first need to confirm to us before we complete the return.

All companies will now need to provide a Registered Email Address when incorporating or as part of their next confirmation statement, whichever comes first.

Greater information powers
The new powers include being able to query information and request supporting evidence. Companies House will be able to make stronger checks on company names and will have greater ability to tackle and remove factually inaccurate information.

No more use of PO Boxes
Under the new measures, it will no longer be possible for a company to use a PO Box as their registered office address.

It should be noted that Companies House will be actively checking Registered Offices on an ongoing basis and failure to respond quickly to their enquiries could result in fines or suspension from the register. If you are concerned at all about communication you receive from Companies House, please contact us as soon as possible to advise you.

Sharing of data
The ECCT Act now allows Companies House the ability to share data with other government departments and law enforcement agencies, which will help them in combating criminal activity.

As a result of the additional work that the new measures involve, Companies House are increasing their fees with effect from 1 May 2024. A table showing the new fees can be found at:  https://changestoukcompanylaw.campaign.gov.uk/changes-to-companies-house-fees/

The new measures are accompanied by new criminal offences and civil penalties to help with their enforcement. The ECCT Act also introduces other measures, including identity verification and accounts reform, but these will not be introduced until a later date.

If you need help with a company incorporation or any company secretarial tasks, please do not hesitate to contact us. We will be very happy to help you!
See: https://www.gov.uk/government/news/companies-house-begins-phased-roll-out-of-new-powers-to-tackle-fraud
 
Are you or your employees making good use of Tax-Free Childcare?
Tax-Free Childcare is available to working families to help them save on their childcare costs. However, many may not be making use of this provision and with the Easter break soon upon us, HM Revenue & Customs (HMRC) is encouraging families who have not yet signed up to consider doing so.

Tax-Free Childcare can be worth up to £2,000 annually per child, or £4,000 if the child is disabled. It can be used to help pay for approved childcare for children aged 11 and under, or 16 and under if they have a disability.

The way it works is that the parents first apply for a childcare account. Once the account is opened, the parents can deposit money that will be used to pay for childcare. Where eligible, for every £8 paid into the account, the government will pay in £2 to use to pay the childcare provider.

To be eligible for Tax-Free Childcare a family has to:

• Have a child aged 11 or under, or 16 and under if they have a disability.
• Be earning at least the National Minimum Wage for 16 hours a week, on average.
• Each earn no more than £100,000 a year.
• Not be receiving tax credits, Universal Credit or childcare.

Employed, self-employed, and directors can all apply, and HMRC set out what details parents need to provide to confirm eligibility.

From April 2024, there is also the possibility for eligible working parents to access 15 hours free childcare for 38 weeks a year that can be used flexibly with one or more providers.

This scheme will be further expanded in September 2024 and again in September 2024 so that ultimately 30 free hours of childcare could be available for working parents with children between nine months old and school age.

To apply for Tax-Free Childcare, please see:  https://www.gov.uk/apply-for-tax-free-childcare

To register for childcare support, please see: https://www.childcarechoices.gov.uk/
 
Consultation on fairer food labelling is launched
A consultation was launched last week to look at ways to make food labelling fairer and clearer. This is part of an initiative looking at how to give shoppers more information about how and where the food they buy is produced, and to give the products of British farmers better recognition.

The proposals should help shoppers to make decisions that align with their values. As an example, imported pork may be cured into bacon in the UK and feature a Union Jack on the packaging. It should be obvious to consumers that the pig was reared abroad, which might be achieved by giving greater prominence to the country of origin.

A ’method of production’ labelling system is also proposed for pork, chicken, and eggs. This will help shoppers identify whether the animals were kept in conditions that fall below, meet or exceed UK animal welfare regulations.

The Environment Secretary, Steve Barclay, first announced the consultation at the Oxford Farming Conference in January. He commended British farmers for their hard work and noted: “British consumers want to buy their produce, but too often products made to lower standards abroad aren’t clearly labelled to tell them apart. That is why I want to make labelling showing where and how food is produced fairer and easier to understand – empowering consumers to make informed choices and rewarding our British farmers for producing high-quality, high-welfare food.”

The consultation is now open and will close on 7 May 2024.

Further information and the online survey can be accessed here: https://consult.defra.gov.uk/transforming-farm-animal-health-and-welfare-team/consultation-on-fairer-food-labelling/
 
2024 – The year of the SME
2024 seems to be a good year to be a small business. The UK Government is doubling down on its commitment to the nation’s 5.5 million small businesses by announcing the launch of a new Small Business Council.

Small businesses are the backbone of the UK economy, comprising 99.9% of all businesses and supporting a staggering 27 million jobs across the country, with an annual turnover of £4.5 trillion. Recognising their pivotal role in the UK economy, the government has declared 2024 as the year of the SME.

The Small Business Council is tasked with working alongside the Prime Minister’s Business Council to tackle key issues facing small businesses. The Council will provide an opportunity for small business leaders to have direct access to the government.

The Council will include organisations dedicated to helping small businesses, such as Small Business Britain, the Federation of Small Businesses and Family Business UK, as well as representatives from SMEs themselves.

In addition to establishing the Small Business Council, the government has revamped the Help to Grow campaign and website to provide a comprehensive resource hub for small businesses. This ‘one-stop shop’ aims to simplify access to vital information such as funding opportunities, webinars and guidance on setting up and scaling a business.

A 12 week programme, called the Help to Grow: Management Course, is also available and is designed to help with learning leadership and management skills. An additional course, Help to Grow: Management Essentials, will launch in April 2024. This will cater for micro-businesses and those that want a condensed version of the leadership course.

The government have also expressed a commitment to tackling the ongoing problem of late payments and providing financial support through schemes like the start-up loan scheme and business rates relief. Accessing finance and dealing with large businesses who do not pay in a timely way can be significant issues for small businesses, so this support will be most welcome.

The Help to Grow website can be found here: https://helptogrow.campaign.gov.uk/
 
Charity ordered to stop sending spam texts
Penny Appeal, a charity based in Wakefield, have been ordered to stop sending unsolicited marketing texts by the Information Commissioner’s Office (ICO).

The charity sent more than 460,000 unsolicited texts over a ten-day period to 52,000 people who had either not provided consent or had clearly opted out.

The texts were sent at the time of Ramadan in April and May 2022 to encourage people on a daily basis to donate.

354 complaints were made, including the complaints that texts were often received late at night. The ICO’s investigation found that the charity had worked from a new database where opt out requests were not recorded and the messages were sent to anyone that had interacted with the charity over the last five years.

The ICO has now issued an Enforcement Notice to order Penny Appeal to stop sending marketing communications within 30 days.

It is important for all charities to be aware of the legal duties they have when contacting the public. The ICO have shared the following advice to help charities remain compliant with the law:

• Charities should only email or text someone if they have specifically consented to receiving them, such as by ticking an ‘opt-in’ box.
• Consent has to be freely given and be fully informed. Therefore it is unlawful to make consent a condition of subscribing to a service.
• An ‘opt-out’ option must be provided, and when received must be acted on promptly.
• A clear ‘do not contact’ list should be kept of anyone who opts out or unsubscribes from communications. This list should be screened against each time the charity sends an email or text message.

See: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/03/ico-warns-charities-about-direct-marketing-rules-as-it-orders-penny-appeal-to-stop-sending-spam-texts/
 
Information Commissioner’s Office calls for views on “consent or pay” cookie usage model
When you browse to a website it is now commonplace to have to interact with a cookie notice where you give permission or not to the use of advertising cookies.

Website cookies are small text files that websites store on a user's computer or device. These files contain information about the user's interactions with the website, such as login credentials, preferences, browsing history, and shopping cart items. Cookies serve various purposes, some of which can be useful, but others that track website usage and enable targeted advertising can make many website users uncomfortable.

Data protection law therefore requires people to be given a fair choice about whether or not cookies are stored on their computer or device. The Information Commissioner’s Office (ICO) enforces data protection law and are developing digital tools that will enable them to continue evaluating website cookie compliance.

If your business has a website, then it is important to check that you are complying with the law. The ICO has the ability to take enforcement action where an organisation is ignoring the law.

Of course, much in the same way as TV has been largely funded by advertising, much of the internet and its content relies on advertising income.
Therefore, different ideas about how this can continue while respecting people’s privacy are being considered.

Once of the options being proposed is a “consent or pay” model. This would give people the choice to use a website for free, but only if they consent to their personal information being used for personalised advertising. Alternatively, they could pay a fee and not be tracked.

The ICO advises that, in principle, data protection law does not prohibit a “consent or pay” model. However, there are issues that an organisation would need to consider and businesses naturally want to have certainty when it comes to regulations.

In view of this, the ICO is consulting on what its regulatory approach to “consent or pay” models ought to be and it has opened a call for views on this business model.

To take part and find further information about this subject, please see: https://ico.org.uk/about-the-ico/ico-and-stakeholder-consultations/call-for-views-on-consent-or-pay-business-models/

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.

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.