The Chancellor, Jeremy Hunt, delivered the UK Spring Statement on 6th  March 2024.

What do you need to know about the announcements?

Here is a summary of the key points announced, that are likely to have an imapct for you:

VAT

The VAT registration threshold will increase to £90,000 from 1 April 2024. The deregistration threshold will increase to £88,000.

Employees and self-employed

The expected 2% cut in the main rates of primary Class 1 and Class 4 NI was confirmed. From 6 April 2024, the rates will be as follows:

There are no changes to the rate or threshold applicable to employers.

Child benefit

The way that the high income child benefit charge operates has long been criticised, in particular the discrepancy that means that a family where each parent earns, say, just under the £50,000 withdrawal threshold can keep the full amount, but a single income household will lose the benefit if they earn more than £60,000.

The long-term solution will be to assess eligibility based on household income, but this will not be possible immediately.

In the meantime, from 2024 the withdrawal threshold will be increased to £60,000, and the rate of charge will be lower, at 1% for every £200 of excess income.

This means that full withdrawal won’t occur until adjusted net income is at £80,000.

Capital gains tax (CGT)

The current CGT rates applicable to gains made on disposals of residential property are 18% and 28%, depending on the individual’s level of income and the size of the gain. This compares to rates of 10% and 20% for other assets, e.g. listed shares.

From 6 April 2024, the higher rate will be cut to 24%.

Furnished holiday lets (FHLs)

The FHL rules treat short-term letting businesses in a similar way to trading businesses for the purposes of various tax reliefs (including business asset disposal relief), subject to availability and occupancy conditions being met.

The FHL regime will be abolished from April 2025.

Non-domiciled individuals

Individuals that are UK residents but have a non-UK domicile (non-doms) can currently access a remittance basis which excludes foreign income and gains from the UK tax net unless they are remitted to the UK. Domicile is a general law concept.

From April 2025, the non-dom status for tax purposes will be abolished. Instead, those arriving in the UK for the first time, or following a ten-year period of non-residence, will have a four-year foreign income and gains (FIG) regime, meaning they won’t pay UK tax on overseas income or gains for the first four years. The funds can be brought to the UK with no additional charges. After the end of the FIG period, tax will be paid on worldwide income and gains.

It is also intended that inheritance tax (IHT) will move to a residence-based system from April 2025. Details will be available following a consultation.

Other measures

• A new UK ISA with an allowance of £5,000 per year will be introduced.
• Personal representatives will no longer be required to seek commercial loans to pay IHT before applying for a grant on credit (from 1 April 2024).
• SDLT first time buyers’ relief will be extended to those who purchase new leases under a nominee/bare trust arrangement from 6 March 2024.

Reference

Click here for the full Budget Report 2024 

Or to discuss how the Budget Report 2024 will impact you and your business give us a call on 01737 652 852

HMRC is getting cannier at detecting and penalising people who make extra income but don’t declare it.

And in 2024 they are set to clamp down on sellers flogging their pre-loved items through sites such as Etsy, Depop, eBay and Vinted.

Will this impact you?

• If your trading income does not exceed £1,000 in the tax year, the trading allowance exempts it from tax. This means that you don’t need to report anything to HMRC.
• However if your income exceeds £1,000 then yes, you will need to include this in your self-assessment tax return.

What counts as trading income?

Historically, you may have had to file a tax return if your income exceeded the point where the personal allowance starts to be tapered away.

This has changed for 2023/24 and  a further change will apply from 2024/25.

What’s the full story?

If your tax affairs are relatively straightforward, it can be very frustrating to have to complete a tax return every year.

In the past, HMRC has insisted on issuing returns for the following reasons, irrespective of other circumstances:

• Income exceeds £100,000 (the personal allowance abatement threshold);
• There is a liability to the high income child benefit charge (HICBC);
• The individual is a company director.

HMRC now accepts that being a company director is not a valid reason to issue a tax return in and of itself.

For 2023/24, it was announced that the income threshold would increase to £150,000, meaning you may be able to request your return for this year be withdrawn if the only reason you have been in self-assessment was that your earnings were more than £100,000.

However, the other criteria for self-assessment remain unchanged, so if you have earnings of, say, £120,000 but also have untaxed income of £5,000, you will still need to complete a return.

The 2023 Autumn Statement announced that for 2024/25 the income threshold will be removed altogether.

The government is also intending to allow those liable to the HICBC to pay it via a PAYE coding adjustment, though there is no current timetable for this.

The Chancellor of the Exchequer, Jeremy Hunt, presented his 2023 Autumn Statement to Parliament on 22nd November 2023.

What key changes were announced and how will they impact you?

Income tax

No changes

National Insurance

• The main rate of employee NICs (Class 1) will be cut from 12% to 10% from 6^th January 2024.
• The self-employed will also see Class 4 NIC cut from 9% to 8% from 6^th April 2024.
• No change to Employer’s NIC, which remains at 13.8%

Dividend tax

No changes

Corporation tax

No change to the amount of tax a limited company pays.

Capital Allowances

At the Spring Budget 2023, the government replaced the super deduction regime with ‘full expensing’ for 3 years from 1^st April 2023, allowing businesses to write off the full cost of qualifying plant and machinery investment against their taxable profits.

The government is now making this change permanent with a 100% first year allowance for main rate assets and 50% first year allowance for special rate (including long life) assets.

National Living Wage (NLW)

From 1st April 2024, the NLW will increase to £11.44 an hour for eligible workers aged 21 and over.

Other announcements

• Business rates – including extending the current 75% business rates relief for eligible retail, hospitality and leisure properties for one year in 2024/25 and freezing the small business rates multiplier for business in 2024/25.
• Freeports – extending the duration of tax reliefs available from five to ten years.
• Investment zones – extending the programme from five to ten years.
• Alcohol duties – freezes alcohol duties until 1 August 2024 and delays the annual uprating decision to the 2024 Spring Budget.
• A package of welfare reforms, including a strengthening of work search requirements for some, designed to increase employment.
• Local housing allowance – rates will be increased to equal the 30th percentile of an area’s market rents in 2024/25. Rates will then be maintained in cash terms in subsequent years.
• Planning – including plans for accelerated planning decision dates for major developments in England to be guaranteed in exchange for a fee.

Reference

For the full Autumn Statement 2023 policy documents visit  Budget documents.

HMRC has launched an online application process for VAT time to pay arrangements.

Is this option available for your business?

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Eligible businesses no longer need to call HMRC and plead for, or justify, an extension to their VAT payment deadline.  Instead you can submit an online time to pay request using this link – https://www.gov.uk/difficulties-paying-hmrc/pay-in-instalments

However, it is necessary to take action swiftly, if you are struggling to pay.

A business can set up its VAT payment plan online if:

• the latest VAT return has been filed
• less than £20,000 is outstanding
• the request is made within 28 days of the payment deadline
• it does not have any other payment plans or debts with HMRC; and
• it plans to pay off its debt within six months.

Ineligible businesses can still contact HMRC to agree a payment plan, but will likely need to justify the need to do so.

Note that late payment interest will still be charged, and, as interest rates are increasing, paying sooner rather than later is recommended wherever possible.

HMRC telephone lines are being closed, due to staff shortages.

How will this imact you?  And what can you do if you have queries?

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Self-Assessment

HMRC’s self-assessment helpline (0300 200 3310) will be unavailable from 12th June until 4th September 2023.

The agent dedicated line is available, but calls are very rarely answered.

VAT

The VAT registration helpline was closed recently, with no indication of if / when this will reopen.

Industrial Action

These recent telephone line closures follow a month of strikes by HMRC workers, which has seen very little movement on tax rebates, VAT or PAYE registrations and other outstanding queries.

Under Pressure

We understand that HMRC are under huge pressure, due to staff shortages, and whilst the summer is typically a quieter time for tax return filing etc the turnaround times are the longest we’ve ever seen.

How to get help

With the phone lines closed the only way to get help currently is by writing to HMRC (expect at least a 6-week response time) or you can use the online Web Chat service (but brace yourself for a long wait).

We are aware that these HMRC service issues have a knock on effect to the service we are able to offer our clients, and we are sorry for any inconvenience this may cause.

Unfortunately, HMRC made this announcement without any prior consultation with the accounting regulators and there is lobbying of Parliament underway, to overturn this decision

Sadly there isn’t much we can do, but if you have any concerns that you want to discuss we are very willing to listen.

You may experience difficulty or severe delays contacting HMRC’s helplines over the next few weeks, with several strikes planned.

What are the scheduled dates, and how else might you resolve queries?

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HMRC helplines are already under huge pressure. One of the most common complaints is the long wait times experienced, which can increase costs and eat into time that could be better spent elsewhere in your business.

Unfortunately, the next three weeks are set to be significantly worse, as strike action will mean over 400 workers walk out in disputes over pay, job security and pensions.

This is likely to affect you if you need to contact HMRC about self-assessment, PAYE, NI, or the construction industry scheme.

The strike dates are:

• May – 15, 16, 17, 18, 19, 22, 23, 24, 25, 26, 29, 30, 31
• June – 1, 2

Remember that a lot of information can be obtained via your personal tax or business tax account.  Otherwise, HMRC has a number of other methods of contact that can help.

Rates and Thresholds in 2023/24

The tax year runs from 6th April 2023 to 5th April 2024 and as always there have been some tweaks to the bands and thresholds.

What impact will it have on you?

National Insurance (NI)

Income Tax

The table below shows the income tax rates and band thresholds for 2023/24 in England, Wales, and Northern Ireland.

Be aware that Scotland uses different tax bands and thresholds!

Corporation Tax

From April 2023 Corporation Tax rates are changing.

• There will be a small companies tax rate of 19% for profits under £50,000.
• Profits above £250,000 will be taxed at 25%
• In between there will then be an effective rate of tax of 26.5% (profits between £50,001 and £250,000)

Why is the effective rate of 26.5% higher than the main rate of 25%?

This is to ensure that when profits exceed £250,000 that 25% is charged on the full amount, for example:

• Profits of £250,000 taxed at 25% = £62,500
• First £50,000 taxed at 19% = £9,500
• Next £200,000 taxed at 26.5% =£53,000
• £9,500 + £53,000 = £62,500

Estimating your Corporation Tax liability within the year will be more complex from April 2023 and therefore we urge you to save as much as you can towards this liability.

The final Corporation Tax bill will be confirmed when your annual accounts and tax returns are prepared at the end of your Company’s financial year.

Dividend Tax

The amount of tax you pay on dividends depends on your total income, and how much of that income is specifically from dividend payments.

The good news is that you don’t pay NI on dividends!

You can use allowances to reduce the amount of tax paid on your dividends.  The first is any unused personal allowance (in 2023/24 this is £12,570) and then there is the dividend allowance.  Up until recently this was £2,000, however in 2023/24 this drops to £1,000 (and then in 2024/25 it drops again to an allowance of just £500!)

The table below shows the tax rates for dividends for each tax bracket:

Remember that dividends can only be paid out to shareholders where there are company profits.

It’s important not to withdraw more money than is available as you could be hit with an additional Corporation Tax charge (S445 @ 33.75%).

To discuss the above, or any aspect of your accounting affairs, call us on 01737 652 852.

What steps should you be taking to achieve this?

For more tips and advice speak to a member of the a4c team today by calling on 01737 652 852.