Category Archives: Business News

Four great reasons to file your tax return early

We often find that clients begin to show signs of stress when the Self-Assessment tax return deadline approaches.

This is just one of the reasons we recommend you file your return early, but there are numerous other benefits.

Here are four key reasons to consider submitting your tax return sooner rather than later:

  1. Avoid last-minute stress

As mentioned above, filing your tax return early can significantly reduce the stress associated with meeting the deadline.

Rushing to compile and submit your financial information at the last minute also increases the likelihood of errors and omissions, which can lead to penalties and additional scrutiny from HM Revenue & Customs (HMRC).

By completing your tax return early, you allow yourself ample time to review your documentation, ensure accuracy, and seek professional advice from your accountant.

This preparation time can be invaluable, particularly if your financial situation is complex or if you encounter unexpected issues.

  1. Better financial planning

Submitting your tax return early provides a clearer picture of your financial situation for the year.

This information is crucial for effective financial planning and decision-making. Knowing your tax liabilities well in advance enables you to manage your cash flow and make better-informed decisions about investments, savings, and expenses.

Early filing also allows you to identify potential tax savings opportunities, such as allowable deductions and reliefs, that you might otherwise overlook in a rushed preparation.

  1. Quicker refunds and reduced penalties

If you are due a tax refund, filing your return early ensures you receive it sooner, further improving your cash flow.

Timely refunds can be particularly beneficial for reinvesting in your business or managing personal finances.

Conversely, if you owe tax, early filing gives you more time to create a payment arrangement with HMRC, helping you avoid late payment penalties and interest charges.

Early filing also reduces the risk of missing the deadline and incurring automatic late filing penalties, which can add unnecessary financial strain. Penalties and interest charges can quickly accumulate.

  1. Tax codes

The timing of your tax return has a major bearing on your assigned tax code, and therefore your eligibility for certain tax benefits.

Tax returns filed before 30 December have the option, in most cases, of having an underpayment of under £3,000 ‘coded out’ – meaning the underpaid tax can be collected over the course of the following financial year from your regular pay, as opposed to being collected all at once.

Filing a tax return also triggers HMRC to issue an amended tax code which can result in an underpayment less likely to arise.

The bottom line

To take full advantage of the above-mentioned benefits, you should speak to your accountant about preparing your tax return well in advance of the deadline.

For help with any aspect of your tax return, please get in touch with one of our team. 

New advisory fuel rates for electric company cars

HM Revenue & Customs (HMRC) has recently announced new Advisory Fuel Rates (AFRs) that will take effect from 1 June 2024.

These changes include a reduction in the Advisory Electric Rate (AER) for electric vehicles – which can be highly tax efficient.

Many businesses have invested in electric fleets, which presents a slight problem for business owners.

Should you reduce your rates in line with the AER or stick with your current rates? Here’s everything you need to know.

Key changes in the AFRs

Below is a breakdown of the key changes made to the rates – these are advisory, however, so you have no obligation to follow them to the letter.

  • Electric vehicles: The AER has been reduced from 9 pence per mile (ppm) to 8ppm. This rate is intended to cover the cost of electricity used for business travel by electric company car drivers.
  • Petrol: Rates have increased by 1ppm for engine sizes up to 2,000cc, and by 2ppm for engines over 2,000cc.
  • Diesel: Rates have increased by 1ppm across all engine sizes.
  • LPG vehicles: Rates remain unchanged across all engine sizes.

How does the AER calculation work

In essence, the AER is derived from data on electricity costs and vehicle consumption rates.

The Department for Energy Security and Net Zero (DESNZ) provides the annual “pence per kilowatt hour” cost, which is then adjusted quarterly by the Office for National Statistics (ONS) Consumer Prices Index for electricity.

This data is combined with vehicle-specific electricity consumption rates and business car sales data to calculate a weighted average cost per mile for fully electric cars.

The Association of Fleet Professionals (AFP) suggests having different rates based on access to home charging and vehicle type (cars versus vans) which could provide a more accurate reflection of actual costs and improve fairness among employees (this is yet to be implemented).

Responding to the changes

You’ll want to review how the new AER compares to the actual costs incurred by your employees for charging their electric vehicles.

If the new rate falls short, consider whether this might lead to dissatisfaction or financial strain for your employees.

It’s important to remember that although HMRC sets the advisory rates, businesses can set their own reimbursement rates.

So, if the new AER does not cover the true costs, you might want to consider offering a higher reimbursement rate to ensure employees are not out of pocket.

We can provide tailored advice to ensure your reimbursement policies meet both regulatory requirements and the needs of your employees.

For more information, or guidance based on your unique circumstances, please get in touch

The increase to Companies House fees: What you need to know

As of 1st May 2024, Companies House has implemented revised fees, marking a significant change in the cost structure for various services.

This adjustment stems from the Economic Crime and Corporate Transparency (ECCT) Act, introducing measures that inevitably increase operational costs for Companies House.

Understanding the impact

The fee revisions encompass a range of services, each carrying its own implications for businesses.

Notably, the fee for an annual confirmation statement, when submitted digitally, has surged to £34, compared to the previous rate of £13.

This increase represents a substantial adjustment and demands careful consideration from businesses, especially those accustomed to the previous fee structure.

Strategic considerations

Given the recent changes, businesses are urged to assess their filing schedules and plan accordingly.

For a comprehensive breakdown of the prices that have taken effect from 1 May 2024, businesses can refer to the official source provided by Companies House: Changes to Companies House Fees.

This resource serves as a valuable reference point for understanding the specific fee adjustments and their implications for businesses of varying sizes and industries.

Seeking expert guidance

Navigating these fee adjustments and the broader implications of the ECCT requires a nuanced understanding of company law and compliance obligations.

As such, businesses are encouraged to seek professional advice and support to navigate these changes seamlessly.

Our company secretarial experts are ready to assist businesses in adapting to the revised fee structure and ensuring continued compliance with regulatory requirements, so speak to us.

Using an iPhone? Keep an eye out for tax refund scammers

HM Revenue & Customs (HMRC) has warned that a new wave of fraudulent text messages is targeting taxpayers using iPhones, claiming that recipients are owed tax refunds and must supply personal information to receive them.

Some recipients are also being asked to follow a link to access their refund, which is disguised to appear legitimate.

This latest incident comes as HMRC-related scam messages rise sharply, growing by 36 per cent per annum between January 2022 and January 2023.

Recognising an incident

HMRC is aware of the issue and is working to tackle it. It has urged taxpayers to be cautious and be on the lookout for any fraudulent communications purporting to be from HMRC.

This includes text messages, as well as emails, phone calls, social media and WhatsApp messages, both on Apple and other devices.

HMRC has also warned recipients of these messages to exercise caution when asked to act quickly or send personal details via text message – as these are common warning signs of fraudulent activity.

Finally, it has confirmed that it avoids using methods of communication commonly used by fraudsters, particularly steering clear of requesting personal details via text message.

If you are concerned about communications relating to a tax refund, contact your accountant for advice.

Reporting an attack

The issue that many taxpayers are facing with this new campaign of scam messages is that it is difficult to report and block the number.

Fraudsters are using legitimate business phone numbers or Apple accounts to send messages, meaning they often cannot be blocked by the recipient.

Many recipients are also facing issues in reporting scam messages to Ofcom’s designated anti-spam line because they are often sent from legitimate business numbers.

For further advice on tax, tax refunds and staying safe as a taxpayer, please contact our team today.

Changing your VAT details? Remain vigilant over latest fraud activity

HM Revenue & Customs (HMRC) has issued a warning to businesses over fraudulent attempts to access VAT repayments via postal form VAT484.

What’s happening?

The form, used by business owners to change VAT registration details with HMRC if unable to do so online, has been targeted by fraudsters looking to access sensitive information, including contact information and bank details.

In particular, HMRC has been working to resolve an issue allowing VAT484 forms to be submitted with fraudulent bank details in place of legitimate ones.

This releases VAT repayments into the new account, meaning businesses miss out on vital funds.

HMRC has confirmed it is working to resolve the issue with VAT484, while issuing letters to businesses to confirm that details have been updated and providing the opportunity to review any new information attached to your VAT account.

This should not affect compliance with Making Tax Digital (MTD) for VAT, although you should always ensure that HMRC hold the correct VAT details for you.

How can I protect my business?

You can update your VAT registration information via an online account if you have one.

If you don’t have one, you should consider setting one up – with support if necessary.

This is the most secure way of submitting new VAT registration details to HMRC.

You should also make sure to check any VAT repayments for discrepancies or missing funds and review any letters you receive from HMRC to ensure that they contain the correct details for your business.

Need additional support with VAT? Contact our team today to discuss your needs.  

SME recovery continues as sustainability and growth take centre stage

In its latest research into the UK’s SME economy, NatWest Group has identified an encouraging trend among the country’s independent operators, as SME growth continues for the fifth consecutive month.

Two sectors led the charge, as the service industry continues to be a significant driver of growth, while the manufacturing sector enjoyed expansion after a period of stagnation.

Summarising its overview of the SME economy, the Group employs its NatWest SME PMI Business Activity Index to quantify SME growth, with a reading of 50 or above signalling a general expansion among UK SMEs.

Recorded at 52.6 in the first quarter of 2024, the Index reveals sustained growth for SMEs that prioritise long-term success over short-term figures.

However, individual sectors were not the focus of this latest research – that title goes to the potential for future sustainability and investment.

Investing in sustainability

It may come as little surprise that the latest report found investment in energy efficiency and green working practices to be a major priority for 36 per cent of SMEs in the coming year.

With 18 per cent planning to invest within the next 12 months, and a further 41 per cent set to invest within five years.

It seems that the benefits to SMEs of sustainable processes are becoming more widely acknowledged and accepted.

From a financial perspective, the long-term benefits of sustainability are considerable, including access to additional tax relief and funding.

Additionally, adopting cutting-edge working practices to support sustainability inevitably has a positive impact on overall efficiency as businesses seek a return on investment beyond ESG objectives.

Planning cash flow for growth

It is evident from the report’s findings that SMEs are going to need sufficient access to funds to facilitate growth in the coming years if this pattern is going to continue.

Central to this is going to be cash flow planning, particularly if costs continue to rise and SMEs face accompanying financial challenges.

We typically recommend that SMEs create a healthy cash flow through:

  • Forecasting future cash flow to support long-term plans for investment
  • Maintaining liquidity reserves to cover unexpected expenses
  • Utilising financing options such as bank loans, lines of credit, or even trade credit
  • Regularly reviewing and managing costs through automation or new supplier contracts, for example

For support with making sustainable investments or growing your business, contact a member of our team to discuss your needs.

P11D – Remember to report before the July deadline!

With the 6 July deadline nearing, it is essential to understand the updated reporting requirements for Class 1 National Insurance Contributions (NICs) on benefits in kind (BIKs).

Employers offering benefits, such as private healthcare, living accommodation, travel expenses, and company cars must report additional NICs through the payroll process or on a P11D form.

Significant changes are coming, however, that will simplify reporting BIKs through P11D forms for each employee receiving taxable benefits.

Employers currently have the option to manage BIKs directly through their payroll, a method known as ‘payrolling’, which must be set up before the tax year begins.

Otherwise, P11D forms need to be submitted online by 6 July following the tax year end.

Employers must also report the amount of Class 1A NICs via the P11D(b) form and ensure payments are made to HMRC by the 22 July deadline.

Late submissions can result in penalties of £100 per 50 employees for each month the forms are overdue.

All taxable benefits, excluding exempt expenses like business travel, business entertainment, and uniforms under specific conditions, need to be reported.

Certain trivial benefits are not taxable and thus exempt from reporting.

Remember from April 2026, it will become mandatory to report and pay Income Tax and Class 1A NICs on BIKs through payroll software, reducing administrative burdens due to the P11D and simplifying compliance.

If you have any queries about P11D reporting or any other payroll processes, please get in touch.  

High-income earners need to re-register for child benefit

Child benefit supports parents or guardians of children under 16, or under 20 if in approved education, by contributing towards the costs of raising them.

Since January 2013, the High Income Child Benefit Charge (HICBC) affects those earning above a specific threshold but this was revised in the Spring Budget 2024.

Initially, families with one parent earning over £50,000 saw a phased reduction in Child Benefit, ceasing at £60,000.

However, from 6 April, the HICBC threshold has increased to £60,000, with a new tapered charge between £60,000 and £80,000, reducing the benefit by one per cent for every £200 earned over £60,000.

This adjustment exempts about 170,000 individuals from the full charge and could affect you if your income is within this range as you are now eligible to claim.

In essence, the Government raised the threshold to ease the financial strain on middle-income families and encourage more parents to claim Child Benefit, avoiding the previous steep penalties for higher earnings.

Moreover, the Government plans to consult on a shift to a household-based assessment system by April 2026, aiming for a fairer approach by considering total household income.

If your earnings exceed £50,000 and you now need to register or adjust your Child Benefit, you likely fall into two categories:

  • New claims: You can register for a child not previously claimed for, with benefits backdated up to three months or from the child’s birthdate.
  • Existing claimants: Adjust your HICBC via Self-Assessment if your income falls within the new threshold.

If you require any other guidance relating to the HICBC, contact our team of experts. 

The rise of the higher rate taxpayer

The Government continues to freeze both the personal allowance and the higher-rate income tax thresholds – leading to an increase in the number of higher-rate taxpayers this year.

The result of ‘fiscal drag’ – a phenomenon where tax thresholds fail to keep up with inflation or wage growth – the freeze will continue to increase the number of higher-rate taxpayers until it is due to end in 2028.

This freeze not only impacts numerous taxpayers but will also have broader economic implications by increasing the tax burden on a larger segment of the population – potentially influencing consumer spending and savings habits.

By not adjusting the thresholds for inflation, the Government has effectively increased tax revenue without the need to formally raise tax rates.

Taxpayers must consider this in the context of the Government’s long-term fiscal strategies and align it with their personal tax planning.

Future policy adjustments will likely be influenced by broader economic conditions and political change, underscoring the importance of staying informed and discussing the issue with us.

We often recommend a few simple ways to reduce your tax liability and manage your marginal rate, including:

  • Income splitting: This strategy involves distributing income among family members to keep individual earnings below the higher tax thresholds, thus reducing overall tax liability.
  • Tax-efficient investments: Leveraging tax-free savings accounts and pensions can significantly reduce taxable income, providing long-term financial benefits.
  • Year-end tax planning: Regularly review your financial situation as the tax year draws to a close, making any necessary adjustments to income and deductions to optimise tax outcomes.

Being proactive in managing your tax position is crucial, especially with the thresholds remaining static and fiscal drag likely to impact more taxpayers.

For those seeking more comprehensive guidance or specific information, reaching out to a specialist is advisable. 

Preparing for the second payment on account – and what happens when you can’t pay?

If you are a Self-Assessment taxpayer, it is almost time to make your second ‘payment on account’ – advance payments towards your tax bill.

Those who submit a Self-Assessment tax return and owe £1,000 or more will be required to make their second payment on account by midnight on 31 July 2024.

How do payments on account work?

‘Payments on account’ are a way of paying Income Tax for Self-Assessment (ITSA) for business owners, sole traders and other taxpayers that spread out the expected cost of an upcoming tax bill.

There are two payments on account each year – one payable on 31 January and the other on 31 July during the tax year.

Each payment is typically half of the previous year’s tax bill, including Class 4 National Insurance Contributions.

The expectation is that, when you file ITSA, you will not need to have a major cash reserve to pay your entire bill at once.

What if my income is lower this year?

Payments on account work for many taxpayers because they assume that they will owe a similar amount or more tax than in a previous year.

If you expect your income to be substantially lower this year than in the previous year, you can apply to HM Revenue & Customs (HMRC) to reduce the payments on your account.

When you submit your tax return, if it turns out that you have overpaid, this will be refunded or offset against future tax liabilities.

What happens if I can’t pay?

If you cannot pay your upcoming payment on account, it is important to contact HMRC as soon as possible.

Missing the deadline without explanation can mean that interest will be charged to your account, and you could end up owing much more than your original bill.

You may be able to set up a ‘Time to Pay’ agreement with HMRC, which is a formal payment plan. If you:

  • Have filed your latest tax return
  • Owe £30,000 or less
  • Are within 60 days of the payment deadline
  • Do not have any other payment plans or debts with HMRC

You can set up a Time to Pay agreement online through your account with HMRC.

For support with compliance and managing the cost of your tax bill, contact us.