Archives for 2024

Date	What’s Due
1 October	Corporation tax for year to 31/12/23 unless you pay by quarterly instalments.
5 October	Deadline for notifying HMRC of chargeability for 2023/24 if not within Self-Assessment and receive income or gains on which tax is due. i.e. to register for Self-Assessment.
19 October	PAYE & NIC deductions, and CIS return and tax, for month to 5/10/24 (due 22 October if you pay electronically).
1 November	Corporation tax for year to 31/01/2024, unless quarterly instalments apply.
19 November	PAYE & NIC deductions, and CIS return and tax, for month to 5/11/24 (due 22/11 if you pay electronically).

HMRC have recently increased their use of “one to many” or “nudge” letters to taxpayers which suggest that there may be errors or omissions in tax returns or accounts information.  HMRC argue that these letters are a key tool in their compliance strategy but this is essentially a “fishing” expedition more akin to direct mailing and this may alarm many taxpayers who are completely innocent.  Please get in touch with us if you receive such a letter and we can deal with the matter on your behalf.

The current State Pension is £11,502 and is due to rise to around £12,000 a year for 2025/26. At current annuity rates it would cost over £300,000 to receive an index-linked annuity starting at £12,000 a year, so it’s important to maximise your entitlement.

In order to receive a full State Pension you need 35 qualifying years, but is it worth topping up voluntary Class 3 National Insurance contributions in respect of missing years? This is a financial decision but there is a short breakeven period. It is around 3 years for employees and even shorter for the self-employed who can pay Class 2 contributions for missing years. You can also get credit for missing years if you were not working because of bringing up children.

Employees need to make Class 3 contributions of £824.20 or £907.40 a year for extra years which yields £302.86 a year in additional annual state pension.  Self-employed individuals can pay Class 2 contributions at the rate of £179.40 for each missing year to yield £302.86 per annum.

Normally you can only go back six years to make up missing contributions but there is currently an opportunity to fill up missing years going back to 2006/07 – note that the deadline for the extended carry back is 5 April 2025.

Changes to pension tax relief seems to be top of the list of possible changes in the Budget and could yield more tax revenues than changes to CGT and IHT combined. As recently as 6 April 2023, we saw the abolition of the lifetime allowance charge and a significant increase in the pension annual allowance to £60,000 a year, which Rachel Reeves commented were too generous, so we may see those changes reversed or curtailed.

Possible changes to pensions to listen out for include:

• Limiting pension tax relief for individuals to basic rate or possibly a 30% flat rate;
• Further limiting (or abolishing) the 25% tax free lump sum;
• Freezing or reducing the £1,073,100 lump sum and death benefit allowance;
• Making the undrawn pension fund subject to inheritance tax; and
• Limiting the amount of employer pension contributions that can be paid by way of a salary sacrifice.

Pension changes normally take effect from the start of the tax year on 6 April, however there have been mid-year changes in the past. Taxpayers should therefore consider bringing forward pension planning just in case changes are effective from the date of the announcement.

Many over 55’s can withdraw 25% of their pension fund tax-free

Under current pension rules, many pension funds allow pension scheme members to withdraw up to 25% of their pension savings tax-free. Finance Act 2023 limited the tax-free amount to £268,275 unless the individual had applied for protection at a higher amount. There are rumours that the tax-free amount may be further limited, with an amount of £100,000 suggested, and this has resulted in significant withdrawals from pension funds in recent weeks. It should be noted that there are anti-avoidance rules that limit the amount that can be reinvested in the pension fund within a 12 month period.

Pension lump sum “recycling” is countered by anti-avoidance rules where the lump sum withdrawn is more than £7,500 during a one year period and subsequent pension contributions are increased by more than 30% of the lump sum.  A breach of this rule will mean that the lump sum is an unauthorised payment and will be taxed at 40%.

Many commentators are suggesting that the rate of CGT might be aligned with the rates of income tax, a return to the regime that applied when Gordon Brown was chancellor. Rachel Reeves is known to be a disciple of Gordon, so maybe we will see a return to taper relief as well! One would hope that Business Asset Disposal Relief (BADR), or something similar, is retained to encourage entrepreneurship and growth. She might even reintroduce Business Asset Taper, one of Gordon’s ideas, to reduce the effective CGT rate to 10% after 10 years’ ownership? If some form of CGT relief to encourage entrepreneurs is retained then maybe the conditions for obtaining the relief will be tightened still further?

Other possible changes to CGT to listen out for include further restrictions to private residence relief and changes to hold over relief for transfers into and out of trust. A more controversial change would be the removal of the CGT free uplift to probate value on death, with beneficiaries inheriting the deceased’s CGT base cost of their assets, as suggested by the now abolished Office of Tax Simplification (OTS).

Should we bring forward asset disposals before budget day?
CGT changes normally take effect from 6 April, but there have been mid-year changes in the past. This possibility has caused many taxpayers to bring forward disposals to take advantage of the current rates. The disposal date for CGT is the date of unconditional exchange of contracts and there is likely to be anti-forestalling legislation to counteract attempts to artificially bring forward the disposal date. There is still time to sell listed investments before 30 October but other assets such as a business or property typically take a lot longer to sell unless a buyer is already lined up.

Beware “bed and breakfast” anti-avoidance
Many investors may be looking to realise capital gains on their investments at the current rates, just in case there is an increase with effect from 30 October 2024. They may then wish to repurchase those investments after the change in rates to retain the balance of investments in their portfolio. Where the same shares and securities are bought back within 30 days of the date of disposal, the shares bought back would be matched with those sold and the desired capital gain and increase in base cost may be negated.

For example, if 1000 shares in A plc were bought for £2 a share several years ago and are sold on 29 October 2024 for £4.50 a share there would be an apparent £2,500 capital gain, potentially tax free if the £3,000 2024/25 CGT annual exemption is unused. However, if the same class of shares in A plc are purchased on say 5 November 2024 for £4.45 a share there would be a £50 capital loss instead of the desired capital gain and the base cost would remain at £2 a share. This is because the repurchase is within 30 days.

An alternative strategy would be for the taxpayer’s spouse to repurchase the shares (“bed and spousing”) or to repurchase the shares in the taxpayer’s ISA or pension fund.

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)

HM Revenue and Customs (HMRC) have issued a press release debunking some common myths about whether or not someone needs to register to complete a self-assessment tax return.

 

The basic requirement is that anyone who needs to complete a self-assessment return for the first time to cover the 2023-24 tax year, needs to tell HMRC by 5 October 2024.

 

Here are the myths and the realities highlighted by HMRC:

 

Myth: I don’t need to file a return because HMRC hasn’t been in touch.

The reality is that it is each taxpayer’s responsibility to determine whether or not they need to complete a tax return.

You may need to register and complete a tax return if you:

• have started to be self-employed and earned gross income of more than £1,000.
• earned below £1,000 but want to pay voluntary Class 2 National Insurance contributions to protect your pension and benefit entitlements.
• have become a new partner in a partnership.
• have received untaxed income above £2,500.
• need to pay the High Income Child Benefit Charge because you receive Child Benefit and you or your partner earned more than £50,000.

Myth: Tax has to be paid at the same time as the return is filed

The deadline for paying tax for the 2023-24 tax year is 31 January 2025. Tax can be paid any time before this date, it does not need to be paid at the same time the return is filed.

 

Myth: I don’t need to file a return because I don’t owe any tax

Tax returns need to be completed to claim tax refunds and to claim tax relief on business expenses, charitable donations, and pension contributions. A return also needs to be completed to be able to pay voluntary Class 2 National Insurance Contributions if you want to protect your pension and benefit entitlements.

 

Myth: HMRC won’t expect a return from me if I don’t need to file one

Taxpayers need to tell HMRC if they no longer need to file a tax return, perhaps because they’ve stopped being self-employed or stopped renting out a property. Especially if HMRC have sent you a notice to file a tax return they will expect one and keep reminding you and may charge a penalty if they don’t receive it.

If you think you don’t need to complete a return it is best to tell HMRC as soon as your circumstances change.

 

Myth: I have to file a tax return and pay tax on things I sold after clearing out the attic

Although there has been speculation on this, the tax rules are that selling old clothes, books, CDs and other personal items through online marketplaces do not trigger a requirement to file a return or pay income tax on the sales.

 

If you are not sure whether you need to file a tax return for the 2023-24 tax year, please just get in touch with us. We’ll be happy to let you know what you need to do and to contact HMRC on your behalf.

See: https://www.gov.uk/government/news/need-to-register-for-self-assessment-top-5-myths-debunked

 

The table below sets out the HMRC advisory fuel rates from 1 September 2024. These are the suggested reimbursement rates for employees’ private mileage using their company car.

 

Engine Size	Petrol	Diesel	LPG
1400cc or less	13p (14p)		11p (11p)
1600cc or less		12p (13p)
1401cc to 2000cc	15p (16p)		13p (13p)
1601 to 2000cc		14p (15p)
Over 2000cc	24p (26p))	18p (20p)	21p (21p)

 

Where there has been a change the previous rate is shown in brackets.

You can also continue to use the previous rates for up to 1 month from the date the new rates apply.

Note that for hybrid cars you must use the petrol or diesel rate.

For fully electric vehicles the rate is 7p (9p) per mile.

 

Where the employer does not pay for any fuel for the company car these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.

 

Input VAT

Within the 45p/25p payments the amounts in the above table represent the fuel element. The employer is able to reclaim 20/120 of the amount as input VAT provided the claim is supported by a VAT invoice from the filling station. For a 2000cc diesel-engine car, 3 pence per mile can be reclaimed as input VAT (18p x 1/6)

 

Employees using their own cars

For employees using their own cars for business purposes the Advisory Mileage Allowance Payment (AMAP) tax-free reimbursement rate continues to be 45 pence per mile (plus 5p per passenger) for the first 10,000 business miles, reducing to 25 pence a mile thereafter.  Note that for National Insurance contribution purposes the employer can continue to reimburse at the 45p rate as the 10,000 threshold does not apply.

It was originally proposed that from 2025/26, employers would be required to provide more detailed information on employee hours worked via real time information (RTI) PAYE reporting. It has now been announced that this additional information will not now need to be reported until 2026/27 at the earliest.

With the ever-increasing costs of childcare, a very attractive benefit provided by more and more employers is a creche or nursery for employees’ children. If correctly structured, this is a tax-free benefit and will help employers attract and retain staff. Larger employers may provide an on-site nursery but for smaller employers it is more common to enter into partnership with a local nursery provider.

Two key elements of the partnership requirements for tax exemption are:

Responsibility for financing – Employers must take real responsibility for the financing of the childcare provision – for example by committing to fund an agreed proportion of the total costs, and by bearing their share of any losses. Employers simply paying a fixed cost per employee’s child are unlikely to meet this test.

Responsibility for management – Employers should be closely involved in the management of the childcare provision – for example, having close involvement in appointing and managing nursery staff, and in allocating places. Employers occasionally giving advice or ‘rubber stamping’ decisions are unlikely to meet this test. If an employer representative is appointed to the management board of a nursery, there must be evidence that they actively represent the employer in the running of the nursery.

HMRC have recently been checking these arrangements to ensure that the conditions for tax exemption are met. They have identified that some intermediaries promote schemes encouraging employers to offer childcare provisions to their employees, often under salary-sacrifice arrangements.

Those promoting the scheme often deal with all the necessary arrangements, meaning that the employer has very little involvement in providing the childcare and potentially fails the tests for tax exemption. Please contact us if you have any concerns over whether your childcare arrangements satisfy the conditions for tax exemption.

For the self-employed and those working for an organization that does not provide nursery facilities, the alternative is to set up a government tax-free childcare account.