28th February 2025 – 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

MAKING TAX DIGITAL FOR INCOME TAX
With just over a year to go before Making Tax Digital for Income Tax (MTD for IT) is mandated, now is the time to consider whether your business will be required to comply with the new requirements from 6 April 2026.

If you are a sole trader or run an unincorporated property business, and your ‘qualifying income’ (generally turnover from a sole trade or property business) is £50,000 or more in the 2024/25 tax year, you will be mandated into MTD for IT from 6 April 2026. It’s too early to know your 2024/25 income until your accounts or tax return have been prepared for the tax year, but your 2023/24 self assessment tax return should give you an indication as to whether or not you’ll be mandated. If your qualifying income in 2023/24 was above or nearing £50,000, and you expect it to stay at around that level or increase for 2024/25, then there’s a good chance that you’ll be mandated.

HMRC are taking this approach. They have said that they’ll use 2023/24 returns (the deadline for which was 31 January 2025) to identify which taxpayers are likely to be mandated from 6 April 2026. They’ll be sending those taxpayers a letter in the coming months, advising them that they’re likely to be mandated and explaining why.

If you receive such a letter, or if you’d like to know more about preparing for MTD for IT, please let us know. MTD for IT will involve keeping your detailed accounting records in compatible software and sending quarterly digital reports to HMRC. This might be a big change for some, but it could actually benefit you. We can help you choose the most suitable software and implement the required processes in a way that adds value to your business.

TIMING OF DISPOSALS AND ELECTIONS FOR CAPITAL GAINS TAX
2024 saw an increase in the main rates of Capital Gains Tax (CGT) for disposals taking place on or after 30 October 2024 (now 18% and 24%). It was also announced that the rate of CGT on Business Asset Disposal Relief (BADR) gains would increase from 10% to 14% from 6 April 2025, with a further increase to 18% planned from 6 April 2026. The upcoming change means that getting the timing of BADR-qualifying disposals wrong could mean you paying more CGT.

As a general rule, the disposal date for CGT purposes, for unconditional contracts, is when the contract is entered into, rather than the time that it is completed. New rules prevent using unconditional contracts to secure the lower rates of CGT. There are also new rules that prevent using elections to lock in the lower rate of CGT when share exchanges or reorganisations take place. If you are planning to make a BADR-qualifying disposal, please speak to us so that we can help you avoid any pitfalls!

LOAN CHARGE REVIEW – HAVE YOUR SAY!
The loan charge was brought in to curtail the use of specific tax avoidance schemes that sought to avoid Income Tax and National Insurance by disguising remuneration as loans. There are complex and long-standing problems with HMRC’s policy and settlement concerning loan charge liabilities, with a considerable number of taxpayers experiencing undue hardship.
 
An independent review of the loan charge is taking place, which will focus on cases where tax liabilities have not been resolved. If you were affected and would like to submit evidence, please speak to us.

ARE YOU TRADING?
2024 was the first year for which digital platforms such as Amazon and eBay were required to send information about vendors to HMRC. The reporting requirements apply unless the vendor made fewer than 30 sales in a year and received less than €2,000 (approximately £1,700) for those sales.

The new rules merely strengthen HMRC’s data collection powers and do not create any new tax obligations for individuals. It does however mean that if an online trader has not been declaring their income, HMRC are more likely to find out about it!

There has been a lot of misinformation online and on social media surrounding the new rules, leading people to believe that they’ll have to pay tax on their sales from having a clear-out and selling their unwanted possessions! This isn’t necessarily the case. In a recent educational campaign, HMRC set out the circumstances in which tax would be due. They say, “Selling stuff for some extra money might just feel like a fun hobby you do on the side, but it could also count as something HMRC calls ‘trading’”. The definition of trading is complex, but generally it means that the activity is pursued with a view to making a profit. HMRC go on to say. “Just casually selling some unwanted personal belongings from time to time? It’s unlikely you’ll need to pay any tax on this.”

The campaign also addresses the £1,000 trading allowance.  If a person’s sales income from trading is £1,000 or less in a tax year, that trading income does not need to be declared; if sales from trading exceed £1,000, then that trade needs to be declared on a self assessment tax return.

ATED
Annual Tax on Enveloped Dwellings (ATED) is payable by ‘non-natural persons’, such as companies, that hold an interest in UK residential property valued at over £500,000. The ATED charge is based on the value of the property and applies unless an available relief is claimed.

One such available relief is for dwellings that are let to a third party on a commercial basis and are not, at any time, occupied, or available for occupation, by anyone connected with the owner. If this relief applies, it should be claimed in an ATED return.

ATED is payable for a chargeable period ending on 31 March each year. Returns must be filed within 30 days of the period commencing, so returns for the period 1 April 2025 to 31 March 2026 must be filed on or after 1 April 2025, and no later than 30 April 2025.

Over the coming months, HMRC will be sending ‘One-to-Many’ letters to companies that own one or more dwellings valued at over £500,000, declared no profits in their Corporation Tax returns between 2017 and 2020 and either filed no ATED returns or claimed the relief outlined above. The letter explains that as the company’s tax returns show that it did not make a taxable profit, it may not have been run on a commercial basis, with a view to a profit. In such cases, the ATED relief will not apply.

The letter asks companies to review their ATED position and respond within 40 days, either providing further information, making a disclosure or filing any outstanding returns. If HMRC do not receive a response within the set time, they may raise a discovery assessment and penalties may apply.

21st February 2025 – 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

Should you be paying tax on your side hustle?
Conventional approaches to work and earning an income are changing and with the cost of living ever rising, many now use various ways to make some extra cash outside of their main job. If that’s true of you then you may wonder whether you need to pay tax on those earnings.

HM Revenue & Customs (HMRC) have launched a new campaign aimed at demystifying whether you need to tell them about your side hustle earnings so you can avoid any nasty surprises.

The guidance looks at five different types of hustle. Here we briefly review them and what you need to know.

1. I’m buying or making things to sell
If you sell things you make (including digital creative products), upcycle furniture to sell, or buy items to resell at a higher price, then HMRC would consider you to be trading.

2. I’ve got a side gig
Side gigs vary but might include providing car repairs, making deliveries, dog walking, gardening or tutoring.
Although this work may be done in your spare time, if it’s regular and carries on for a few months, HMRC would consider it to be trading.

3. I work for myself doing multiple jobs
If you’re earning a living from doing several different jobs then you could be trading and need to register as a sole trader.

4. I’m a content creator or influencer
What may have started as a hobby could have become an earner for you. For instance, if you get paid to do sponsored social posts for a brand, or you get ad income from your online videos or blog, then HMRC will consider you to be trading.

How much can you earn from trading before you need to tell HMRC?
If you earn £1,000 or less in a tax year then you won’t pay any tax on it. However, if you earn more than £1,000 you need to tell HMRC and may need to pay tax.

Note that this £1,000 limit is a single allowance that applies to your combined trading income. You don’t unfortunately get an allowance for each type of income.

Some may suggest that if you sell less than 30 items a year you do not need to pay tax, however this is incorrect. Online platforms have to share some information with HMRC if you sell more than 30 items in a year, but that doesn’t mean you necessarily need to pay tax. You may also be due to pay tax if you sell less than 30 items. The key question is whether you have earned more than £1,000.

However, if you casually sell some unwanted belongings from time to time, then it’s unlikely you will need to pay any tax on this.

There is one other type of side hustle income that you might need to tell HMRC about, but this has some different rules to consider.

5. I rent out my property
It could be that you run a holiday let, rent a spare room, or rent out a property through an app.

For renting out spare rooms, then that may be covered by the £7,500 rent a room scheme allowance.

If it’s a property that you don’t live in that you rent out, then you also have a property allowance of £1,000. If the income you receive is more than that then you may need to pay tax on it.

It’s worth noting that you can use the £1,000 trading allowance as well as the rent a room scheme and property allowance.

If you need help working out whether you need to pay tax on your side hustle, please give us a call. We would be happy to help you!

For more information on HMRC’s tax help for hustles, see: https://taxhelpforhustles.campaign.gov.uk
 
Extra flexibility for apprenticeships
The Department for Education have released details of additional flexibility coming to apprenticeships.

When adult learners over the age of 19 start their apprenticeship course, businesses will now be able to decide whether they need to complete a level 2 English and Maths qualification (equivalent to a GCSE) in order to pass the course.

The Department for Education stressed that apprentices will still be assessed on the core English and Maths skills that are relevant to the work they do.
However, they will be able to focus more on their paid work.

The minimum duration of an apprenticeship is also being reduced from the current 12 month minimum to 8 months. This change will come into effect from August 2025. However, the changes to English and Maths requirements have taken immediate effect.

It is estimated that these changes could lead to up to 10,000 more apprentices a year being able to complete their apprenticeship, as well as helping learners qualify more quickly in high-demand sectors such as healthcare, social care and construction.

See: https://www.gov.uk/government/news/10000-more-apprentices-as-government-slashes-red-tape-to-boost-growth
 
Reforms to homebuying coming
The government announced major plans last week to modernise the house buying and selling process. The reforms centre on digitalising and making property and identity data available electronically. This will allow mortgage companies and surveyors to have information within easy reach.

It is thought that these changes will help to avoid surprises being encountered late in the process, with the waste of time and money that goes with that.
In Norway, property transactions complete in around one month and the reforms take account of learning about how this has been achieved.

HM Land Registry (HMLR) is involved in the changes and the next step is a 12-week project to identify the design and implementation of agreed rules so that the data can be easily shared. HMLR will also be working with councils over coming months on how to open up more of their data and make it digital.

For estate agents and surveyors these reforms could make a big difference to the amount of time and money lost in sales falling through.

See: https://www.gov.uk/government/news/home-buying-and-selling-to-become-quicker-and-cheaper
 
AI: The good and the bad
Artificial intelligence (AI) continues to make headlines as businesses work out how to make effective use of it.

The government is continuing to push for growth in the AI industry. Last week, it opened bidding so that local authorities can submit proposals to become the next AI Growth Zone. It expects thousands of jobs to be created as a result and that it could rejuvenate local communities in various parts of the UK.

Last week saw the Artificial Intelligence Action Summit take place in Paris. Representatives from 80 countries that include world leaders, tech bosses and academics discussed the current progress of AI and future goals.

The emergence of DeepSeek, the Chinese AI service, has caused a lot of discussion in the AI world. Partly due to fears over security concern – Australia has banned it on government devices as a result. And partly because it appears to be have been developed on a much lower budget than has been the case with other AI services.

On the other hand, the BBC published a report on their own research saying that AI chatbots are unable to accurately summarise news. In their study of ChatGPT, Copilot, Gemini and Perplexity, they found that 51% of all AI answers to their questions about the news were deemed to have significant issues of some sort. 19% of AI answers that cited BBC content contained factual errors such as incorrect statements, numbers and dates.

The BBC also found that the chatbots “struggled to differentiate between opinion and fact, editorialised, and often failed to include essential context.” Their report raises concerns about whether an AI generated headline or news summary might lead to harm.

The international law firm, Hill Dickinson, has decided to reign in the use of AI by its staff and has blocked general access. It found that there has been a significant increase in AI usage by its staff and that much of the usage was not in line with its AI policy. Access is now dealt with under a request process.

Commenting on this, the Information Commissioner’s Office felt that there is a danger in firms outlawing the use of AI but staff continuing to use it under the radar.

As the use of AI continues, it seems likely that we will continue to see a mixture of stories as businesses across the world work out how to safely and effectively use AI.

In the meantime, it seems clear that AI tools should not be used on a ‘set and forget’ basis. Use of AI and the reasons for it given by staff need to be understood. And the output of AI needs to be challenged, such as by being carefully reviewed by someone who understands the subject under review.
 
Data protection fees to increase by 29.8%
Following a consultation in 2024, the fees payable by data controllers to the Information Commissioner’s Office (ICO) will be increased by 29.8%.
The new fees will be as follows: Tier 1 Current Fee £40, New Fee £52. Tier 2 Current Fee £60, New Fee £78. Tier 3 Current Fee £2,900, New Fee £3,763.

There is a £5 discount for direct debit payments and any organisations that are currently exempt from paying the fee will continue to be exempt.

See: https://www.gov.uk/government/consultations/data-protection-fee-regime-proposed-changes/outcome/data-protection-fee-regime-government-response
 
HMRC late payment interest rates to be cut
Following the reduction in the Bank of England base rate, HM Revenue & Customs (HMRC) have confirmed that their interest rates will be reduced accordingly.

Late payment interest will reduce to 7% from 7.25%. Repayment interest – paid on tax repayments – will be reduced to 3.5%.

The change will come into effect from:

• 17 February 2025 for quarterly instalment payments.
• 25 February 2025 for non-quarterly instalments payments.

See: https://www.gov.uk/government/news/hmrc-late-payment-interest-rates-to-be-revised-after-bank-of-england-lowers-base-rate--2
 
Crackdown on illegal working in the UK: Key highlights & takeaways
The UK government has intensified its crackdown on illegal working, with January 2025 seeing record enforcement activity. Home Secretary Yvette Cooper announced these efforts as the Border Security, Asylum, and Immigration Bill returned to Parliament last week.

Key highlights
Here are some key highlights of the recent activity:

• 828 premises were raided in January (+48% on the previous January), which led to a total of 609 arrests (+73%).  
• Visits show that restaurants, nail bars, and car washes are seen as high-risk sectors.  
• Since 5 July 2024, illegal working visits and arrests have increased by 38% compared with the previous year, with 1,090 civil penalty notices being issued by the Home Office in that time.

What are the takeaways for businesses?
Ensuring your employees have the legal right to work is more critical than ever. Employers can use the Home Office’s guidance on checking a job applicant’s right to work. A proactive approach to vetting staff can save significant headaches down the line.

Now is a good time to review your recruitment processes and make sure you are complying with immigration laws. It’s particularly important to be wary of informal hiring or failing to conduct due diligence, since it’s clear that the authorities are ramping up enforcement.

Ethical employment practices are not just a legal necessity but also a business advantage. Businesses that treat their workers fairly and operate within the law enhance their reputation and contribute to a fairer marketplace. In contrast, those who cut corners risk financial penalties and long-term reputational damage.

In view of the increased enforcement activity, being compliant with the immigration laws will help to protect your business and its reputation.

See: https://www.gov.uk/government/news/uk-wide-blitz-on-illegal-working-to-strengthen-border-security
 
Director fined for using unlicensed security operatives
The Security Industry Authority (SIA) has reported that a director for a Manchester-based security company has been fined for failing to comply with an investigation into the use of unlicensed security operatives.

The law requires security operatives working under contract to hold and display a valid SIA licence. Merseyside Police reported to the SIA that unlicensed security operatives had been used at a venue in Liverpool.

The SIA sent two requests for information before inviting the director to attend an interview under caution. The director failed to respond or attend and so the SIA initiated prosecution proceedings.

Manchester Magistrates Court sentenced the director and ordered them to pay a total of £3,540 in fines and costs.

See: https://www.gov.uk/government/news/security-boss-convicted-of-obstructing-regulators-investigation
 
Proposals on new energy saving requirements for landlords
The UK government is consulting on changes that will require private landlords in England and Wales to meet higher energy performance ratings by 2030.

Currently, 48% of all private rented homes have an Energy Performance Certificate (EPC) of C or above. However, under new plans the government is proposing that by 2030 all privately let properties will need to meet a minimum EPC C. Currently the minimum level required is EPC E.

The government estimates the average cost to landlords to comply with the proposals by 2030 would be between £6,100 and £6,800.

The consultation is looking for views from landlords and tenants on the proposals, including:

• Whether landlords should be required to meet a fabric standard through installing measures such as loft insulation, cavity wall insulation or double glazing, before moving onto other options including batteries, solar panels and smart meters.
• A maximum cap of £15,000 per property for landlords, with support schemes such as the Boiler Upgrade Scheme and Warm Homes: Local Grant.
• An affordability exemption that lowers the cost cap to £10,000.
• All landlords being required to meet the new standard by 2030 at the latest.

The consultation closes on 2 May 2025. If you are a landlord and wish to take part, the details can be found here.

In view of the potential costs involved, landlords will be following these proposals with interest.

See: https://www.gov.uk/government/news/warm-homes-and-cheaper-bills-as-government-accelerates-plan-for-change
 
4 new road schemes to be funded
Road schemes affecting Wiltshire, Leeds, Essex and Buckinghamshire were given approval last week following the grant of £90 million of government funding.

The improvement in infrastructure these schemes will bring is expected to help businesses be able to transfer goods more easily and generate growth in the economy.

The 4 schemes involve:

• A350 Chippenham Bypass in Wiltshire.
• A647 Dawsons Corner and Stanningley Bypass in Leeds.
• South East Aylesbury Link Road (SEALR) in Aylesbury, Buckinghamshire.
• A127/A130 Fairglen Interchange in Essex.

See: https://www.gov.uk/government/news/millions-to-see-faster-journeys-as-government-green-lights-90-million-for-4-essential-road-schemes-across-england

14th February 2025 – 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

Are you thinking about starting a new business?
Starting a business in the UK is an exciting venture, but it comes with financial, tax, and accounting responsibilities that you must navigate effectively.

Understanding what you will need to do from the outset will help make sure that you don’t miss anything, avoid unnecessary costs, and position your new business for success.

Here are some key areas to focus on:

1. Choosing the Right Business Structure
One of the first decisions you need to make is selecting which is the right legal structure for your business. The three main options in the UK are:

• Sole Trader – Simple to set up but comes with unlimited personal liability. 
• Limited Company – Offers limited liability protection but involves more administrative work. 
• Partnership – Suitable for businesses with multiple owners but requires a clear agreement on profit sharing and responsibilities.

Each structure has different tax and legal implications, so it pays to take enough time to make sure you make the best choice for you.

2. Registering with HMRC and paying tax
All businesses must register with HM Revenue & Customs (HMRC). Sole traders and partnerships need to register for Self Assessment, while limited companies must be registered with Companies House and will have additional tax obligations, including Corporation Tax.

Considering tax is critical to business planning and no one wants to pay too much! Key taxes include Income tax, Corporation tax, VAT, and PAYE and national insurance.

3. Setting up a business bank account
For limited companies, having a separate business bank account is a legal requirement.

Sole traders are not required to have a separate account, but we strongly advise that you keep your business and personal finances separate as it simplifies your bookkeeping and tax reporting.

4. Bookkeeping and claiming expenses
Keeping accurate financial records will be crucial for you in managing your business and staying compliant with tax rules. This means considering whether you should invest in using accounting software and how you will make sure you keep records of your income, expenses and invoices for the time period that HMRC require.

You will be able to reduce your taxable profits by claiming allowable business expenses. These may include office costs (e.g., rent, utilities, equipment); travel expenses (e.g., fuel, train fares, accommodation); staff wages and subcontractor costs; and marketing and advertising costs.

It’s essential that you keep receipts and documentation to support any claims.

5. Planning for growth
Growing your business will likely take good planning and funding.

Financial forecasting and budgeting can help you keep your finger on the main financial drivers for your business so that you can grow your business effectively and sustainably.

There are many potential funding options that could help you expand your business. Bank loans, grants, and venture capital should all be assessed.

If you would like assistance with your new business venture, why not give us a call and ask us for a copy of our New Business Kit? We can help you make sense of all your financial, tax and accounting needs. We will be happy to help you lay a strong foundation for your business so you can focus on its growth.
 
Base rate cut to 4.5%
The Bank of England reduced their base rate to 4.5% last week, as had been widely expected in the days leading up to the decision.

The decision was made by a 7-2 majority. The minority of two members were looking for the rate to be reduced to 4.25%.

In announcing their decision, the Monetary Policy Committee (MPC) outlined their thoughts on the economy. Here are some highlights.

Inflation forecasts
The Consumer Price Index (CPI) was 2.5% for the last quarter of 2024. The Bank expects CPI inflation to increase to 3.7% by autumn 2025 due to higher global energy costs and regulated price changes.

However, the MPC also feel that pressures on inflation at a domestic level are moderating and will wane further as 2025 progresses. So, they expect CPI inflation to fall back to 2% from the end of 2025.

Growth forecasts
The Bank expects GDP growth to pick up from the middle of this year. They believe that the economy’s ability to produce goods and services has grown more slowly than previously estimated. So, while they’ve noted a slowdown in demand, they judge that only a small amount of unused capacity has been created in the economy.

These and other factors led the MPC to reduce the rate to 4.5%.

Will there be future rate cuts?
Looking forward to future potential rate cuts, the MPC has said “a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate.” They stressed that there are ongoing uncertainties around demand and supply in the economy.

The MPC also highlighted the global economic uncertainty and a pickup in financial market volatility due to the recent announcements in the US on trade tariffs and subsequent retaliatory measures. This is something they continue to monitor.

To review the Monetary Policy Summary in full, see: https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2025/february-2025
 
Would you benefit from a top up contribution to your State Pension?
HM Revenue and Customs (HMRC) have revealed that 37,000 people have plugged gaps in their National Insurance (NI) record since last April, boosting the amount of State Pension they will receive when they reach retirement age.

The amount of State Pension you will receive is based on how many completed years you have in your NI record. Currently it is possible to review your record going back to 2006, and where there is a gap, you can contribute to plug the gap and ensure that you maximise the amount of State Pension that will be available to you.

There is limited time to be able to do this though. From 6 April 2025, you will only be able to make voluntary NI contributions for the previous 6 tax years. This means there is now less than two months left to be able to plug any gaps that go back to 2006.

HMRC have an online service that allows you to check and view any gaps in your NI record, calculate the difference any payment will make to your State Pension and then make a payment for the years you would like to top up.

If you would like any help in finding out whether you have any missing years and how much benefit you could get from a top up, please contact us and we would be happy to help you!

See: https://www.gov.uk/government/news/35-million-added-to-state-pension-pots
 
How do you make sure data cannot be recovered from storage media?
When it comes to disposing of computer equipment, how do you make sure that any storage media – hard drives, SSDs, flash drives and so forth – can’t be read by unauthorised users or have the data recovered?

These days practically every electronic item contains some form of electronic storage media. The National Cyber Security Centre (NCSC) reports that there have even been examples where several gigabytes of sensitive documents were retrieved from decommissioned photocopiers and printers.

The NCSC has reviewed and republished guidance on sanitising and disposing of storage media. Here’s a brief review of some of the key points.

Sanitising storage media
The NCSC recommends that any media that has stored data that’s sensitive to your business should be sanitised before it is disposed of. Just pressing ‘delete’ on your computer is not enough.

If the storage media isn’t sanitised there are risks that any sensitive data on it could be recovered by competitors or used for criminal activities.

Selling or disposing of the equipment would be situations you might automatically think of. NCSC advises that sanitising storage media is also needed when reallocating equipment to a different user or being returned to a supplier for repair.

Before sanitising
NCSC advise that it is best to understand your data and know which items of equipment contain what data. This will help you identify any potentially more sensitive items of equipment.

Having a re-use and disposals policy in place is important and NCSC provides a sample policy that you can use. It is useful to understand what the eventual sanitisation requirements will be as part of your decision-making process for buying equipment.

Is the data encrypted?
Where the device has an encryption option, that has been activated, this can make life simpler. For example, Bitlocker is available on Windows and FileVault on macOS. These usually have a ‘factory reset’ option that deletes the encryption keys and makes the data unreadable. Once this has been done, NCSC says there is then minimal risk to sensitive data.

This does not mean that the reset procedure can guarantee that all user data has been rendered unreadable. However, NCSC advises that a ‘factory reset’ on an encrypted device will provide a satisfactory level of assurance.

If the data is not encrypted, then there is a need to overwrite and verify the overwrite. There are commercial tools available that can do this.

Where it cannot be assured that storage media has been wiped, or there is a residual risk that a skilled, well-funded laboratory could recover data, then it may
be necessary to physically destroy the media. NCSC advises destroying the media to particles of 6mm or less.

For further information, please see the guidance.
 
Charity Commission warns charities about fraud prevention
The Charity Commission has issued a warning reminder to large, incorporated charities about changes to the law on preventing fraud. A new failure to prevent fraud offence will come into force on 1 September 2025 for all large organisations, including charities.

Who does this apply to?
This new offence is introduced by the Economic Crime and Corporate Transparency Act 2023 and will affect large, incorporated charities that meet two of the following three criteria:

• More than 250 employees.
• More than £36m of income.
• More than £18m in total assets.

What is the change?
Where an employee, agent, subsidiary, or other “associated person”, commits fraud that intends to benefit the organisation (or its clients) and the organisation did not have reasonable fraud measures in place, the organisation may be criminally liable under the new law.

Guidance has been published on the new offence, which can be read here. This guidance has been published by the Home Office after consulting with the Scottish Government and Department of Justice in Northern Ireland.

If you would like any help with reviewing your approach to fraud prevention, please get in touch. We would be happy to help you!

See: https://www.gov.uk/government/news/failure-to-prevent-fraud-offence-regulatory-alert
 
Boost in funding for flood defences
Following the recent run of storms and wet weather, the government has announced that £2.65 billion will be spent over the next two years to build, maintain and repair flood defences.

Extreme weather events are increasing in frequency, so flood defences are becoming increasingly important in protecting both homes and businesses. The funding will also help protect farmland, which has also suffered in the recent storms.

Environment Agency Chair Alan Lovell said: “The impact of flooding on our communities will only become greater as climate change brings more extreme weather, like Storms Bert, Conall and Eowyn.” He also expressed his commitment to delivering on the vital projects that are needed across the country.

According to the press release, up to 1,000 projects are set to receive a share of the funding. These include flood defence projects at Bridgwater in Somerset and Derby. Projects in the West Midlands, Dorset, Leicestershire and Nottinghamshire will also receive support. In addition, essential maintenance will be carried out at the Stallingborough Sea Defences along the Humber estuary and to improve protection in Pevensey Bay.

See: https://www.gov.uk/government/news/record-investment-to-protect-thousands-of-uk-homes-and-businesses
 
Rises to national minimum wage confirmed
Legislation was laid before Parliament last week confirming that the new National Living Wage and new Minimum Wage rates will take effect from 1 April 2025.

While many businesses are feeling and have expressed concern about the increases, the sight of the legislation suggests that no reprieve is in sight.
As a reminder, the National Living Wage will increase to £12.21 from 1 April. This is a 6.7% increase and will be worth £1,400 a year to an eligible full-time worker.

The National Minimum Wage for 18-20 year olds will increase to £10.00 an hour. For an eligible full-time worker, this will work out to an extra £2,500 a year.

An impact assessment published on the same day the legislation was laid indicates that these increases will put around £1.8 billion into the pockets of workers over the next six years.

While these measures will benefit many workers, you may be concerned about the anticipated cost of this increase causing problems for your business.

If you need help costing out what the increases will cost you and advice on the potential strategies you have to manage these costs, please get in touch and we would be happy to help you!

See: https://www.gov.uk/government/news/april-pay-rise-set-to-boost-pockets-of-over-3-million-workers
 
Duty changes for the alcohol industry
February saw changes for the alcohol industry come into force that particularly affected winemakers.

A temporary easement has been in place for wine that has treated wines with an alcohol by volume (abv) between 11.5% and 14.5% as if their abv was 12.5%. It was announced in the 2024 Autumn Budget that the easement would end on 1 February 2025.

There have been calls to make the easement permanent, however the government has confirmed that the easement would end as planned.

This means that the wine duty for all wine will now be based on its alcoholic strength. The duty rate changes at each 0.5% abv, meaning that there are now 30 different payable amounts replacing the single rate under the easement. Wines with an abv below 11.5% and above 14.5% were already being taxed by strength and this will continue.

In addition to this change, duty rates on all non-draught alcohol products rose in line with the Retail Price Index (RPI) from February 2025.

Small producers of non-draught products have seen an increase in their cash discount to bring them in line with the relief for draught products.

There has also been a 1p duty cut for draught pints.

These changes mean that there could be benefits for businesses in the hospitality trade from using small producers. Higher strength wines will become more expensive and so businesses will need to be alert to ensure that costs are passed on appropriately.

See: https://www.gov.uk/government/publications/changes-to-the-rates-of-alcohol-duty
 
Company fined over health and safety negligence
Pemberton Timber Frame Ltd from Kent has been fined and ordered to pay costs following an avoidable injury to one of its workers.

The company manufactures timber frame structures for the construction industry. One of its workers was operating a panel saw and was asked to perform a rip cut on a length of timber, i.e. cut down its thickness. This meant he tried to pass the timber through the panel saw multiple times because the timber was thicker than the blade could cut in one pass.

He successfully managed the first cut, but on the second attempt his right hand made contact with the blade and unfortunately had three fingers instantly amputated.

The Health and Safety Executive (HSE) found that the employee had been asked to complete a task that wasn’t suitable for the machine he was using and that he had not received sufficient training or instruction on how to use the panel saw safely.

Even worse, the HSE discovered that the company did have appropriate machines that would have allowed the task to be carried out safely, but the employee didn’t know this because of his lack of training.

HSE provides clear guidance on the safe use of panel saws to carry out rip cuts. A panel saw with a circular blade must not be used unless the saw blade, at all times, projects through the upper surface of the material being cut.

Ross Carter, the principal inspector for HSE, said: “Those in control of work have a responsibility to devise safe methods of working and to provide the necessary information, instruction and training to their workers.”

The case serves as a reminder of the need to make sure safe systems of work are in place for all work tasks.

See: https://press.hse.gov.uk/2025/01/15/fine-for-kent-timber-firm-after-worker-loses-three-fingers

7th February 2025 – 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

HMRC SCAM ALERT - STAY VIGILANT! 

We want to alert you to a scam currently targeting businesses by impersonating HM Revenue and Customs (HMRC). Fraudsters are sending convincing emails and letters that claim to conduct compliance checks or verify financial information. These communications often request sensitive documents such as bank statements, VAT returns, and identification copies, using official-looking HMRC branding and fake email addresses like companies-review@hmrc-taxchecks.org to appear legitimate.

Key Indicators of the Scam:

• Unfamiliar Email Addresses: Legitimate HMRC emails will always end with @hmrc.gov.uk. Be cautious of any communication from addresses that deviate from this standard.

• Requests for Sensitive Information: HMRC will never ask for personal or financial information via email or text. They typically communicate through official letters or their secure online portal.

• Unexpected Correspondence: If you receive unsolicited communications claiming to be from HMRC, especially those requesting sensitive information, treat them with suspicion.

Recommended Actions:

• Do Not Respond: Avoid engaging with or providing any information to suspicious emails or letters.

• Report Suspicious Communications: Forward any dubious emails to HMRC at phishing@hmrc.gov.uk. Suspicious texts can be sent to 60599. 

• Verify Authenticity: If you’re uncertain about the legitimacy of a communication, contact HMRC directly using official contact details available on the GOV.UK website.

Staying vigilant and following these guidelines can help protect your business from fraudulent activities. If you have any concerns or need further assistance, please don’t hesitate to reach out to us.

THERE’S STILL TIME FOR SOME YEAR END TAX PLANNING!
With the tax/financial year end approaching, now is a good time to check that you’re making the most of the available reliefs and allowances available to you. Please talk to us if you think any of the issues affect you.

Savings
If you have some spare cash, an obvious tax planning point might be to maximise your ISA allowances for the 2024/25 tax year (currently £20,000 per person). If you are 18 or over, but under 40, you can open a Lifetime ISA to save for your first home or retirement. You can put in up to £4,000 each year, until you’re 50, but you must make your first payment into your ISA before you’re 40. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. The £4,000 Lifetime ISA limit counts towards the £20,000 ISA allowance.

Pension planning
You might also want to consider increasing your pension savings before 5 April 2025.

Under the current rules, the government adds to your pension contributions at the 20% basic rate. For instance, if you save £4,000 in a personal pension, the government tops this up to £5,000. If you are a higher rate taxpayer there is a further £1,000 tax relief when your tax liability is calculated, reducing the net cost to £3,000.

If you have income in excess of £100,000, your £12,570 personal allowance may be tapered. For every £2 of income in excess of £100,000, the personal allowance is reduced by £1, reducing to nil where net income is £125,140 or more. Additional pension contributions can be even more effective if your income is between £100,000 and £125,140; the gross pension contribution reduces net income for the purposes of calculating the reduction in the personal allowance. This is effectively a 60% tax saving.

Capital Allowances
Unless the business year end is 31 March or 5 April, the end of the tax year is not a significant date as far as capital allowances are concerned. In order for new equipment to attract capital allowances, the expenditure must be incurred on or before the end of the accounting period.

Limited companies and unincorporated businesses are entitled to a 100% write-off for the first £1 million spent on new and used equipment in a 12 month period. This “Annual Investment Allowance” (AIA) does not apply to motor cars, but there is a special 100% tax relief if you buy a new zero-emissions motor car.

In addition to the AIA, limited companies buying new (not second hand) equipment are entitled to fully expense the cost of most acquisitions against business profits. There is no financial limit on expenditure qualifying for this “full expensing” relief.

Where equipment is bought under a hire purchase contract, the capital allowances outlined above are available on the full cost of the asset provided it has been brought into use by the end of the accounting period. This is despite the fact that the payments may be spread over a number of months.

Capital Gains Tax (CGT) planning
You might wish to consider bringing forward capital gains to before 6 April 2025 if you haven’t used your £3,000 CGT annual exemption for 2024/25.
 
Paying Voluntary National Insurance Contributions
A retiring person needs to have 35 ‘qualifying years’ in order to claim the full state pension. For those with gaps in their record, usually due to not paying sufficient National Insurance Contributions (NICs), it is possible to ‘plug’ those gaps by paying Class 3 (Voluntary) NICs at £17.45 per week (£17.75 in 2025/26). Usually, it is only possible to pay Class 3 NICs in respect of the past six tax years, but there is currently an easement in place that allows taxpayers to pay Class 3 in respect of tax years going as far back as 2006. This easement expires on 5 April 2025, so it is worth considering making Class 3 payments before the opportunity is lost.

Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) applies to purchases of property in England and Northern Ireland. The following SDLT nil-rate thresholds are set to revert to their previous levels from 1 April 2025, so if possible, accelerating a completion date could be worthwhile in order to make a saving!
 
For first-time buyers of residential property:
Threshold to 31 March 2025: £425,000
Threshold from 1 April 2025: £300,000
 
Single residential property:
Threshold to 31 March 2025: £250,000
Threshold from 1 April 2025: £125,000
 
Furnished Holiday Lettings
As covered in previous editions of this newsletter, Furnished Holiday Letting (FHL) status will be abolished from 6 April 2025. This will mean an end to the beneficial tax treatment that has been enjoyed by FHL owners up to now. If you own an FHL property, it may be worth considering the cessation of your FHL trade prior to 6 April 2025, so that your ability to claim Business Asset Disposal Relief in the normal period of three years post cessation can be preserved.

If you wish to continue operating your property as a holiday let, and are considering making any renovations to the property, it’s worth remembering that you can still claim capital allowances for expenditure on a qualifying FHL prior to 6 April 2025, so you may wish to accelerate such expenditure.

AVOID ANY DOUBLE CAB ‘HICCUPS’!
HMRC has published new guidance regarding a change in the interpretation of how Double-Cab Pickup (DCPU) vehicles should be classified for car benefit, capital allowances and some deductions from business profits purposes.  Previously, HMRC accepted that if the payload of a DCPU was 1 tonne or more, it was a goods vehicle, not a car, and therefore qualified for beneficial capital allowances and benefit in kind treatment.

Following the government’s announcement in Autumn Budget 2024, from April 2025 (1^st for companies, 6^th for individuals), HMRC will no longer apply the payload test and instead consider the vehicle’s primary suitability when it was constructed. As DCPUs are ‘dual-purpose’ they are not primarily suited to carrying goods or burden and so will be classed as cars.

Transitional arrangements are in place, so if you are considering purchasing a DCPU, bear in mind that ordering a DCPU prior to 6 April 2025 could ensure that the more attractive benefit in kind tax treatment that applies to goods vehicles is available for a few more years. For capital allowances purposes, entering into a contract to purchase a DCPU prior to 1/6 April 2025 will secure the beneficial capital allowances treatment for goods vehicles, provided the date the obligation to pay for the DCPU is before 1 October 2025.

EMPLOYMENT EXPENSES
It is possible to claim Income Tax relief on eligible employment expenses that have not been reimbursed by your employer. If you file a self assessment tax return, relief must be claimed on the employment pages, but for employees who do not file a self assessment, it is possible to claim tax relief using an online form (P87). This follows a period during which HMRC had temporarily suspended the online form process due to a high number of ineligible claims being made. When making a claim it will be necessary to provide evidence of the expenses incurred.

Expenses on which tax relief can be claimed include:

• Working from home (if your employment contract requires you to do so).
• Repairing or replacing a uniform or small tools.
• Travel for business journeys (not journeys to or from work).
• Professional fees and subscriptions.

VAT ON FOOD AND DRINK
In 2024 we saw a lot of legal cases that examined the VAT rating of food and drink and it appears this trend is continuing into 2025! The VAT rating of food and drink has always been a contentious topic but in the case of Global By Nature Ltd v HMRC (TC09396) we can see the first time that a tribunal or court has examined the VAT law covering ‘sports drinks’.

VAT legislation allows food and drink (other than catering) to be zero-rated but there is quite a long list of foods and drinks that are exceptions to the zero-rating and so are subject to VAT at 20%. One such exception is “Sports drinks that are advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk” and this includes powders or syrups that are used to make such drinks.

In the Tribunal, HMRC argued that the above legal wording provides a definition of ‘sports drinks’, in that they are drinks that are “advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk”. They said that Global By Nature Ltd’s drink powders were sports drinks, they were marketed as such, and were standard rated.

Global by Nature Ltd (GBN) argued that their powders, whilst intended to be consumed as a drink, were not ‘sports drinks’ and, even if they were, they were not marketed as such.

The Tribunal agreed with GBN in that two tests should be used to determine whether a product met the conditions in the legislation:

• Is the product a sports drink?
• If so, is it advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise or build bulk?

‘Sports drink’ is not defined anywhere in law, so after examining various dictionary definitions and uses of the phrase, the tribunal decided that GBN’s powders did not contain enough carbohydrate to be considered sports drinks. As they were not sports drinks, how they were advertised or marketed did not need to be considered – they did not fall within the exception and could be zero rated.