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.
Many wealthy individuals are apparently passing on substantial amounts of their wealth in anticipation of possible changes to inheritance tax (IHT) in Labour’s first Budget on 30 October. This allegedly includes a number of high-profile individuals such as TV presenter Anne Robinson who confirmed that she had passed on £50 million to her children and grandchildren. Should you consider doing the same?
Firstly, you need to check with us the value of your estate and potential IHT exposure under the current rules. Currently each individual receives a nil rate band of £325,000 and potentially up to a further £175,000 against the value of the family home, provided it, or assets to its value, is left to direct descendants on death. This additional £175,000 allowance is referred to as the residence nil rate band (RNRB).
There is currently an unlimited exemption where assets are transferred during lifetime or on death to the surviving spouse or civil partner. If the deceased spouse’s nil rate bands are unused then they are available to the survivor, potentially increasing the tax-free amount on the death of the second spouse to £1 million. Unfortunately, it’s not quite that simple as where the estate exceeds £2 million the RNRB is reduced by £1 for every £2 that the estate exceeds £2 million. Consequently, for wealthy couples the RNRB reduces to nil where the value of the estate exceeds £2.7 million leaving just the combined nil rate bands of £650,000. Note that the current rate of IHT on the death estate is 40% once the nil rate band has been used.
There is currently 100% relief from IHT where business and farming assets are transferred during lifetime and on death and it is hoped that these reliefs will continue so that survivors do not need to sell off assets to pay the tax. However, those generous reliefs may not continue under the new government.
Transfers during lifetime
Under the current rules there is no IHT payable where the donor survives for at least 7 years following the date that assets are transferred. Such transfers are referred to as potentially exempt transfers (PETs) and IHT is payable should the donor die within 7 years. Note that the transfer needs to be an outright gift with no continued use or enjoyment of the asset by the donor. Hence giving away the family home but continuing to live there will generally be ineffective unless other conditions, such as paying market rent, are satisfied.
There may also be capital gains tax (CGT) consequences of a lifetime gift, although it may be possible to hold over the gain so that no CGT is payable on the increase in value from when the asset was acquired. Holdover relief is currently available in the case of business assets and on transfers of assets into trust.
Please get in touch with us if you have concerns about IHT and want to consider taking action before Budget Day.
| Date | What’s Due |
| 01/08 | Corporation tax payment for year to 31/10/23 (unless quarterly instalments apply) |
| 19/08 | PAYE & NIC deductions, and CIS return and tax, for month to 5/08/24 (due 22/08/24 if you pay electronically) |
| 01/09 | Corporation tax for year to 30/11/23 (unless quarterly instalments apply) |
| 19/09 | PAYE & NIC deductions, and CIS return and tax, for month to 5/9/24 (due 22/09 if you pay electronically) |
On 29 July 2024, the Chancellor announced that as of 1 January 2025, all education services and vocational training supplied by a private school, or a connected person, for a charge will be subject to VAT at the standard rate of 20%. Boarding services provided by a private school, or a connected person, will also be subject to VAT at 20%.
Draft legislation issued on 29 July 2024 also provides that fees invoiced or paid on or after 29 July 2024 and before 30 October 2024 are to be treated for the purposes of the charge to VAT as a supply taking place on the later of—
(a) 1 January 2025, and
(b) the first day of that term.
School fees paid before 29 July 2024 will follow the VAT treatment in force at the time of the normal tax point for these supplies, where the fee rate for the relevant term has been set and was known at the time of payment.
If any of the above issues affect you, please speak to us – we may be able to help you plan for some of the potential changes. Of course, more detail will be available after the budget, and we will keep you informed then.
The government has now issued the draft legislation to abolish the special tax treatment of furnished holiday lettings (FHL) with effect from 6 April 2025 for individuals (1 April 2025 for corporation tax). This change will remove the tax advantages that current FHL landlords have received over other property businesses in 4 key areas by:
After repeal, former furnished holiday let properties will form part of the person’s UK or overseas property business and be subject to the same rules as residential property businesses.
Transitional rules
Where an existing FHL business has an ongoing capital allowances pool of expenditure, they can continue to claim writing-down allowances on that pool — any new expenditure incurred on or after the operative date must be considered under the property business rules
After the changes, former FHL properties will be part of the person’s UK or overseas property business as appropriate. That property business will then include the amalgamated profits and losses of all the properties in that business
Losses generated from a person’s FHL business will be permitted to be carried forward and be available for set off against future years’ profits of either the UK or overseas property business as appropriate.
Eligibility for CGT roll-over relief, business asset disposal relief, gift relief, relief for loans to traders, and exemptions for disposals by companies with substantial shareholdings will cease with effect from 6 (1) April 2025.
In relation to CGT business asset disposal relief, where the FHL conditions are satisfied in relation to a business that ceased prior to 6 April 2025, relief may continue to apply to a disposal that occurs within the normal 3-year period following cessation.
There is also an anti-forestalling rule which is intended to prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules, effective from 6 March 2024.
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.
Tax-Free Childcare accounts can be used to pay for approved childcare for children aged 11 or under, or 16 if the child has a disability. This can include paying for a summer holiday club or childminder.
The account can also be used to pay nursery fees, to pay for breakfast or after school clubs in term-time, as well as out of school activities.
Opening a Tax-Free Childcare account is quick and easy and can be done at any time of the year. Families who have not yet signed up should check their eligibility and apply online today.
For every £8 paid into an online account they will receive an additional £2 from the government. This means parents and carers can receive up to £500 every 3 months (£2,000 a year for each child), or £1,000 (£4,000 a year for each child) if their child is disabled.
Money can be deposited at any time to be used straight away, or whenever it is needed. Unused money in the account can be withdrawn at any time.
Eligibility
Families could be eligible for Tax-Free Childcare if they:
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 claw back 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.
| Date | What’s Due |
| 01/07 | Corporation tax payment for year to 30/9/23 (unless quarterly instalments apply) |
| 05/07 | Last date for agreeing PAYE settlement agreements for 2023/24 employee benefits |
| 05/07 | Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2023/24 |
| 06/07 | Deadline for forms P11D and P11D(b) for 2023/24 tax year. Also, deadline for notifying HMRC of shares and options awarded to employees |
| 19/07 | PAYE & NIC deductions, and CIS return and tax, for month to 5/07/24 (due 22/07/24 if you pay electronically) |
| 31/07 | 50% payment on account of 2024/25 self-assessment tax liability due |
| 01/08 | Corporation tax payment for year to 31/10/23 (unless quarterly instalments apply) |
| 19/08 | PAYE & NIC deductions, and CIS return and tax, for month to 5/08/24 (due 22/08/24 if you pay electronically) |
