Date	What’s Due
1 September	Corporation tax for year to 30/11/23 unless pay by quarterly instalments
19 September	PAYE & NIC deductions, and CIS return and tax, for month to 5/9/24 (due 22 September if you pay electronically)
1 October	Corporation tax for year to 31/12/23 unless pay by quarterly instalments
5 October	Deadline for notifying HMRC of chargeability for 2023/24 if you are not within Self-Assessment and receive income or gains on which tax is due
19 October	PAYE & NIC deductions, and CIS return and tax, for month to 5/10/24 (due 22 October if you pay electronically)

Anyone who needs to complete a Self Assessment tax return for the first time to cover the 2023 to 2024 tax year, should tell HM Revenue and Customs (HMRC) by October 5th 2024.

There are plenty of myths about who needs to file a Self Assessment return before the 31 January 2025 deadline and HMRC today debunks some of the most common ones.

Myth 1: “HMRC hasn’t been in touch, so I don’t need to file a tax return.”
Reality: It is the individual’s responsibility to determine if they need to complete a tax return for the 2023 to 2024 tax year. There are many reasons why someone might need to register for Self Assessment and file a return, including if they:

• are newly self-employed and have earned gross income over £1,000
• earned below £1,000 and wish to pay Class 2 National Insurance Contributions voluntarily to protect their entitlement to State Pension and certain benefits
• are a new partner in a business partnership
• have received any untaxed income over £2,500
• receive Child Benefit payments and need to pay the High Income Child Benefit Charge because they or their partner earned more than £50,000

More information can be found on GOV.UK and anyone who is unsure if they need to file Self Assessment can use the free online tool on GOV.UK to check. Once registered for Self Assessment, they will receive their Unique Taxpayer Reference, which they will need when completing their return and paying any tax that may be due. Customers will have to reactivate their account if they have registered for Self Assessment previously but did not send a tax return last year.

Myth 2: “I have to pay the tax at the same time as filing my return.”
Reality: False. Even if someone files their return today, the deadline for customers to pay any tax owed for the 2023 to 2024 tax year is 31 January 2025. Customers may also be able to set up a Budget Payment Plan to help spread the cost of their next Self Assessment tax bill, by making weekly or monthly direct debit payments towards it in advance.

Myth 3: “I don’t owe any tax, so I don’t need to file a return.”
Reality: Even if a customer does not owe tax, they may still need to file a Self Assessment return to claim a tax refund, claim tax relief on business expenses, charitable donations, pension contributions, or to pay voluntary Class 2 National Insurance Contributions to protect their entitlement to certain benefits and the State Pension.

Myth 4: “HMRC will take me out of Self Assessment if I no longer need to file a return.”
Reality: It is important customers tell HMRC if they have either stopped being self-employed or they don’t need to fill in a return, particularly if they have received a notice to file. If not, HMRC will keep writing to them to remind them to file their return and we may charge a penalty.

Customers may not need to complete a tax return if they have stopped renting out property, no longer need to pay the High Income Child Benefit Charge, or their income has dropped below the £150,000 threshold and have no other reason to complete a tax return. If customers think they no longer need to complete a tax return for the 2023 to 2024 tax year, they should tell HMRC online as soon as their circumstances change. Customers can watch HMRC’s YouTube videos on stopping Self Assessment to guide them through the process.

Myth 5: “HMRC has launched a crackdown on people selling their possessions online and now I will have to file a Self Assessment return and pay tax on the items I sold after clearing out the attic.”
Reality: Despite speculation online earlier this year, tax rules have not changed in this area. If someone has sold old clothes, books, CDs and other personal items through online marketplaces, they do not need to file a Self Assessment and pay Income Tax on the sales. HMRC’s guidance on selling online and paying taxes can be found on GOV.UK.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “We want to make sure you are clear about your tax responsibilities. These myth busters and our range of resources on GOV.UK can help if you are unsure if Self Assessment applies to you or think you no longer need to file a tax return. Just search ‘Self Assessment’ on GOV.UK to find out more.”

HMRC has a wide range of resources to help customers register for Self Assessment, including video tutorials on YouTube and help and support on GOV.UK.

HMRC urges customers to file their return early to provide peace of mind and to also allow time to consider opportunities to spread the cost of their tax bill, claim refunds earlier and avoid costly errors caused by rushing.

Customers need to keep records to fill in their tax return correctly and they may be asked for documents if HMRC checks their return. Penalties may be issued if records are not accurate, complete and readable. Self-employed workers must also keep records for their business income, outgoings and make sure they are registered with HMRC as self-employed. More information can be found on GOV.UK.

People should be cautious of potential scams and never share their HMRC login information with anyone, even a tax agent if they have one. HMRC’s scam advice can be found on GOV.UK.

It has recently been reported over half a million taxpayers paid a marginal income tax rate of 60% in 2022/23, up by 23% from the number in 2021/22.

This marginal rate applies where an individual’s adjusted net income falls between £100,000 and £125,140, where every £2 income over £100,000 reduces the £12,570 personal allowance by £1, such that it is fully eroded at £125,140.

Planning to mitigate the problem
The definition of “adjusted net income” is the individual’s total taxable income less personal pension payments and charitable payments under Gift Aid. Such payments can effectively save income tax at 60%. For example, an £80 payment to charity under gift aid is grossed up to £100 and the taxpayer’s income is reduced by £100, thus saving £60 tax where the individual’s income is  between £100,000 and £125,140. If an individual’s total income is projected to be £105,000 for 2024/25 they could consider making an additional pension contribution of £4,000 before 5 April 2025 as that would reduce their income to £100,000, thereby restoring their £12,570 personal allowance.

Such planning is also effective for those caught by the high-income child benefit clawback charge (HICBC). That charge claws back child benefit by 1% for every £200 adjusted net income between £60,000 and £80,000.

Salary sacrifice arrangements can also be effective 
Another way to mitigate the effects of the personal allowance restriction and the HICBC would be to agree with your employer to forgo some of your salary, pay rise, or bonus for an additional employer pension contribution or an electric company car. For example, an employee on £96,000 a year might be entitled to a £10,000 bonus. They could agree with their employer to have £6,000 of the bonus paid into their pension (tax-free, provided the £60,000 pension annual allowance isn’t exceeded) with the remainder of the bonus just keeping them at £100,000 and retaining their personal allowance.

Sacrificing salary for an electric company car isn’t quite as tax efficient, as the employee would currently be taxed on 2% of the list price instead of the salary foregone. On a £50,000 electric car that would just be a £1,000 taxable benefit in kind, which for a 40% taxpayer would mean £400 income tax.

The employing company would obtain a tax deduction for the cost of providing the benefit and would also save on employers’ national insurance. So, it’s win, win.

Employers may meet the cost of certain social events for staff without creating a tax liability.

This used to be a concession but is now a statutory exemption provided certain conditions apply.

The exemption applies to an “annual party or similar function” provided it is available to all employees or available generally to those at a particular location. During the Covid-19 pandemic HMRC confirmed that a ‘function’ could include a virtual party, where employers were unable to host a traditional party at which employees would have been physically present.

A key condition is that the cost per head of the party or function must not exceed £150, inclusive of VAT. If an event costs more than £150 then it is taxable in full, not just on the excess over £150.

If you have already held a Christmas Party for staff it may be possible to have another event, and for that to also be exempt from tax, provided the combined cost per head is no more than £150 a year.

If the combined cost exceeds £150 for the year the employer can designate which ones should be taken into account to make best use of the exemption. If, for example, the cost per head of the Christmas party was £100, and the Summer event was £70, the employer can nominate the Christmas party to be covered by the exemption, but
the £70 Summer Event would be taxable (not just the excess £20).

Rather than the employee being taxed on the £70 the employer can deal with the tax and national insurance on the employees’ behalf by way of a PAYE settlement agreement.

HM Revenue & Customs have released a new tool designed to help businesses find out what VAT registration would mean for their business.

VAT registration becomes mandatory if:

• your total taxable turnover exceeds £90,000 over the previous 12 months.
• you expect your taxable turnover to go over £90,000 in the next 30 days.
• you’re based outside the UK and supply goods and services to the UK.

Taxable turnover refers to the total value of everything you sell except for anything that is exempt from VAT.

It is also possible to register for VAT voluntarily even if your annual taxable turnover is below £90,000.

If the majority of customers for your business are VAT registered then there is no increase in costs for them, and so voluntary VAT registration can be worthwhile so that you can claim VAT back on the purchases you make.

The new HMRC tool can help you to estimate what VAT might be owed or reclaimed by your business if you were to register for VAT. You are free to use the tool to explore multiple ‘what-if’ scenarios so that you can compare various situations and how you might be affected.

To use the tool, please see: https://www.gov.uk/guidance/check-what-registering-for-vat-may-mean-for-your-business

 

Shawbrook Bank recently conducted research that indicated that half of small business owners have had to raid their savings to fund their businesses.

Its survey found that small businesses applying for finance from lenders over the last year said that it didn’t meet their needs. So, they were using savings and credit cards to provide the necessary funds to grow their business.

For small businesses, the path of growth is often obstructed by financial constraints. Whether it’s investing in new equipment, expanding operations, or hiring more staff, accessing the right funding is crucial.

What are some viable options available to small businesses?

• Traditional bank loans: Perhaps the most common form of financing, bank loans provide businesses with a lump sum that is repaid over a predetermined period with interest. While they offer stability and structured repayment plans, securing a bank loan can be challenging due to stringent eligibility criteria and lengthy approval processes.
• Government Schemes: The government has introduced schemes to facilitate access to finance. For instance, the Growth Guarantee Scheme, which is the successor to the Recovery Loan Scheme, will launch with accredited lenders on 1 July 2024. The scheme provides lenders with a 70% government backed guarantee, thereby reducing the risk associated with lending to small businesses and making finance easier to obtain. (See: https://www.british-business-bank.co.uk/finance-options/debt-finance/growth-guarantee-scheme)
• Alternative Lenders: With the rise of fintech, alternative lending platforms have emerged as a viable alternative to traditional banks. Known as marketplace lending, peer-to-peer lending, or P2P lending, alternative lending typically takes place through online platforms that bring borrowers and loan investors together.
• Angel Investors and Venture Capitalists: For businesses with high growth potential, seeking investment from angel investors or venture capitalists can provide the necessary capital injection. In exchange for equity ownership, investors offer funding along with their own strategic guidance and industry connections.
• Crowdfunding: Crowdfunding platforms have gained popularity as a means of raising capital by pooling small contributions from a large number of individuals or investors. These platforms offer businesses the opportunity to showcase their ideas and garner support from the crowd.
• Grants and Subsidies: Various government grants and subsidies are available to small businesses across different sectors. These can range from grants for research and development projects to subsidies for hiring apprentices or investing in energy-efficient technologies. While it can be competitive trying to obtain one, securing a grant can provide businesses with non-repayable funds to fuel growth.
• Asset-Based Financing: Asset-based financing allows businesses to leverage their assets, such as inventory, equipment, or property, to secure funding. Options like asset-based lending and sale-and-leaseback arrangements enable businesses to unlock the value of their assets without relinquishing ownership.
• Revolving Credit Facilities: A revolving credit facility provides businesses with access to a pre-approved line of credit that can be drawn upon as needed. Unlike a traditional loan, where funds are disbursed in a lump sum, revolving credit offers flexibility and allows businesses to manage cash flow fluctuations effectively.
• Personal Savings and Friends/Family Loans: Coming back to where this article started, of course personal savings and friends/family loans are often a practical option in the early stages of business growth. While this option may lack the formality of traditional financing, it can provide a quick source of capital without the need for extensive paperwork or collateral.

In conclusion, obtaining finance isn’t always straightforward or easy as a small business. However, there are options out there and by carefully assessing your funding needs and being open minded about the options, you can find the right financing solution to fuel your growth ambitions.

HM Revenue & Customs (HMRC) have released figures showing that 295,250 Self-assessment tax returns were filed in the first week of the new tax year. Almost 70,000 were filed on the first day – April 6^th.

This seems to suggest an increasing trend for filing tax returns early. Last year, 246,210 returns were filed in the opening week.

Tax returns do not need to be filed until 31 January 2025, however filing early does bring advantages. You get more time to budget and plan for paying your tax bill as well as peace of mind from knowing an essential task has been ticked off your to-do list.

However, it is especially good if you have overpaid tax since tax refunds will be paid as soon as the return has been processed, Therefore, the earlier the tax return is filed, the earlier a refund can be received.

You may need to complete a tax return for the 2023 to 2024 tax year if:

• You are self-employed with an income over £1,000.
• You received any untaxed income in the year over £2,500.
• You rent out one or more properties.
• You claim Child Benefit but you or your partner’s income is above £50,000.
• You are a partner in a partnership business.
• Your taxable income from savings and investments is more than £10,000.
• Your taxable income earned from dividends is more than £10,000.
• You have paid Capital Gains Tax on assets sold for a profit above the Capital Gains threshold.

If you are new to self-assessment and think you might need to complete a return, you can use HMRC’s online tool to check your situation.

If you would like help in completing your tax return, please do not hesitate to contact us at any time. We will be happy to help you!

 

The deadline – 6 July – for reporting expenses and benefits to HM Revenue & Customs (HMRC) is rapidly approaching. It’s important for all employers to understand their responsibilities regarding this crucial tax form. Whether you’re a seasoned business owner or new to the world of employment taxes, we’re here to guide you through the essentials.

What is a Benefit in Kind?

A benefit in kind (BIK) refers to any non-cash benefit provided to employees that holds monetary value. These benefits are additional perks that go beyond regular salary and wages. Common examples include company cars, private health insurance, interest-free loans, and gym memberships. While these perks can boost employee satisfaction, they are considered taxable benefits by HMRC.

Why is the P11D form required?

The P11D form is required by HMRC to report these benefits in kind. Employers must complete a P11D for each employee who has received any taxable benefits or expenses during the tax year. This ensures that the correct amount of tax is paid on these benefits.

Types of benefits to include on the P11D

This is not an exhaustive list, but some common benefits provided by employers might include the following:

1. Company Cars and Fuel: If you’ve provided a company car to an employee, this must be reported, along with any fuel provided for personal use.

2. Health Insurance: Private medical insurance paid for employees should be included.

3. Interest-Free or Low-Interest Loans: Any loans provided to employees exceeding £10,000 must be reported.

4. Living Accommodation: If you provide housing for employees, the value must be included.

5. Gym Memberships: If you offer free or subsidised gym memberships, these are taxable benefits.

Deadline for P11D submission

As mentioned, the deadline for submitting this year’s P11D forms is 6 July 2024. It’s crucial to meet this deadline to avoid penalties. If you are late in submitting, you’ll get a penalty of £100 per 50 employees for each month or part month your P11D is late.

You will also be charged penalties and interest if you’re late paying HMRC. Which brings us to …

Paying Class 1A National Insurance

Many benefits require a payment by the employer of Class 1A national insurance. This is basically a substitute for the employer’s national insurance that would have been paid if the employee had received the same monetary value through payroll rather than as a benefit.

This payment has to be made by 22^nd July (or 19^th July if paid by cheque) and, as mentioned, penalties and interest can apply if you’re late paying.

Of course, if you are already ‘payrolling’ your expenses and benefits then you may have already paid all or most of the amount due.

Completing the P11D Form

Completing the P11D form involves the following steps:

1. Gather Information: Collect details of all benefits provided to each employee during the tax year.

2. Use the Correct Forms: Ensure you’re using the correct version of the P11D form for the relevant tax year.

3. Accurate Valuation: Accurately determine the cash equivalent of each benefit provided. HMRC provides guidance on how to value different types of benefits.

4. Class 1A National Insurance: Calculate and report Class 1A National Insurance contributions on these benefits using the P11D(b) form.

5. Submission: Submit the completed P11D forms to HMRC by 6 July. Provide employees with a copy of their individual P11D by the same date.

By staying informed and organised, you can ensure that your P11D forms are completed correctly and submitted on time.

If you need assistance or have any questions, don’t hesitate to contact our team. We’re here to help you navigate the complexities of tax compliance, allowing you to focus on running your business.

As accountants, we are often asked about the financial and tax implications of buying a second home. Sometimes the pull of a country or seaside retreat might inspire you to think about having a second home. Or maybe you have spare cash or income and are wondering if a second home could be a good investment.

Whatever the reason, before you take the plunge, what are some things you might want to consider?

What are the costs of buying a second home?

It will sound obvious to say, but outside of the purchase price there are a number of other costs to think about that may impact on your decision.

• Stamp Duty Land Tax (SDLT): This is one of the significant costs to consider. For second homes, there’s an additional 3% surcharge on top of the normal SDLT rates.
• Council Tax: Second homeowners in England should also be aware of potential increases in council tax. From April 2025, under the Levelling Up and Regeneration Act 2023, councils will have the discretion to charge up to 100% more in council tax on furnished homes not used as main residences. This means you could end up paying double the usual amount.
• Insurance: Because they’re often unoccupied for periods, insurance premiums are sometimes increased for second homes.

How will you pay for it?

Unless you have cash available to buy a second home outright, you’ll likely want to think about how you will finance your purchase. With this, there are essentially two options.

• Mortgages: Meeting the conditions to get a mortgage on a second home can be challenging. For instance, a higher deposit is often required than would be the case for your main home. An interest-only mortgage could help to keep the costs down, but over the long term you’ll still need a repayment plan.
• Equity release: Your main home may have equity that you could release to fund your purchase. You might be able to borrow on the value of this equity using an equity release scheme. These have risks though, so you should get expert advice if you are considering this as an option.

Are there any tax implications to think about?

Besides the SDLT we discussed before, tax implications will depend on how you plan to use your second home and what your future plans are for selling it.

• Tax on rental income: Some second homeowners rent the home out for a period or use it as a holiday let. These can be good ways of helping to cover your costs if you don’t plan to live in the property yourself. However, any rental income you make will need to be declared on your tax return. On the plus side, some of the costs of running a rental property can be offset against the income.
• Selling your second home: When you sell your second home, any profit will be subject to Capital Gains Tax (CGT). The gain is calculated as the difference between the purchase price and the selling price, minus any allowable expenses and reliefs. This is different to the situation where you sell your main home, which is usually tax-free. If you plan to permanently move to your second home at some point in the future, then any gain you make from that point onwards could be tax-free.

Given the complexities of tax regulations around second homes, it’s essential to get expert advice. As your accountants, we can help you navigate these rules and make informed decisions. Please get in touch and we’ll be happy to provide you with personalised advice.

Whether you’re considering buying a second home for personal use or as an investment, understanding the financial and tax implications will help you manage the costs effectively, avoid any surprises, and enjoy the benefits that come from your new place with peace of mind.

Picture this: your business is booming, and it’s time to invest in some new equipment or a company vehicle. But with so many financing options out there, how do you decide which one of them is right for you? Let’s break down three popular choices – leasing, contract hire, and hire purchase – so you can make an informed decision without getting lost in financial jargon.

Lease

Leasing means renting an asset (such as machinery, vehicle or computer) from a finance company for a set period. After the lease term ends, you usually return the asset, although sometimes there is an option to be able to buy it.

Short-term rentals where the payments cover the asset’s use, rather than its full value, are known as operating leases. At the end of the lease, you return the item and can lease a newer model.

Longer-term rentals where the payments cover the full value of the asset over time are known as finance leases. The leasing company legally owns the item, but you use it as if is yours.

Here’s why leases can be good:

• Better cashflow: Low upfront costs and spread-out payments help keep your cash in hand.
• Stay updated: Easily upgrade to newer equipment or vehicles.

Here are some things to think about with leases:

• No ownership: You don’t own ever own the asset.
• Higher long-term cost: Over many years, leasing can be more expensive than buying.

Contract Hire

Contract hire is often used for vehicles. Contract hire is like leasing, but usually includes maintenance and servicing in the monthly payments.

Here’s why contract hire can be good:

• Fixed costs: You’ll know exactly what you’ll pay each month, including upkeep.
• Cash flow friendly: Like leasing, it spreads out the cost.

Here are some things to think about with contract hire:

• Mileage limits on vehicles: Exceeding agreed mileage can cost extra.
• No ownership: You can’t keep or modify the vehicle.

Hire purchase

With hire purchase, you buy the asset over time. You make a deposit and then regular payments. Once all payments are made, you own the asset.

Here’s why hire purchase can be good:

• You own it: At the end, the asset is yours.
• Predictable payments: Fixed monthly payments make budgeting easier.

Here are some things to think about with hire purchase:

• Bigger upfront cost: Requires a higher initial deposit compared to leasing.
• Maintenance responsibility: You’re in charge of upkeep and repairs.
• Cash flow impact: Higher monthly payments can strain cash flow initially.

Making the decision

To choose the best option for you, you may want to consider the following points:

• Cash flow: How much can you afford each month? Leasing and contract hire usually have lower monthly payments.
• How long you’ll use it: If you need the asset short-term or it becomes outdated quickly, leasing or contract hire might be best.
• Ownership needs: If owning the asset is crucial, hire purchase is the way to go.
• Financial impact: Leasing keeps liabilities off your balance sheet, while hire purchase adds both an asset and a liability.

Conclusion

Choosing how to finance your new asset doesn’t have to be complicated. By considering your businesses cash flow, how long you’ll need the asset, and whether ownership matters, you can pick the best option for you.

Tax can also be a factor in the decision. For personalised advice, please feel free to contact us at any time. Our team of experts is ready to help you navigate the complexities of asset financing and find the best solution for your business.