Useful links

HMRC - www.gov.uk/government/organisations/hm-revenue-customs

ICAEW - www.icaew.com

SPRING BUDGET - MARCH 2024

The Chancellor, Jeremy Hunt, delivered his Spring Statement to Parliament on 6 March 2024.

Some of the key initiatives that may impact you and your business are listed below:

Main rates of Primary Class 1 and Class 4 National Insurance Contributions reduced

• Following a 2-percentage point cut in the Autumn statement, from 6 April 2024, the main rate of National Insurance Contributions (NICs) for employees will be reduced by a further 2p, from 10% to 8%. A one third reduction in the main rate of National Insurance which means the average worker on £35,400 will receive a tax cut of £900 compared to last year..
• For the self-employed, following a one percentage point cut in the Autumn statement, the main rate of Class 4 NICs will decrease from 8% to 6%. This means the average self-employed person earning £28,000 per year will save £650 per annum combined with the removal of the requirement to class 2 NI which was announced in the Autumn statement.

VAT Threshold Increase

• The VAT registration threshold will rise from £85,000 to £90,000 from 1 April 2024.
• The deregistration threshold will also increase from £83,000 to £88,000.
• The expectation is this will remove the need for 28,000 small businesses to pay VAT but is also likely to reduce the number of businesses being able to deregister.

Full expensing extended to leased assets

• The Chancellor announced plans he will publish draft legislation for full expensing to apply to leased assets.

High Income Child Benefit Charge

• The Chancellor is set to reform the High Income Child Benefit Charge (HICBC).
• By April 2026, the assessment will be based on household income rather than individual household earnings.
• Prior to then, from 6 April 2024, the threshold at which you start paying the HICBC will increase by £10,000 to £60,000.
• The amount at which child benefit is fully withdrawn will rise by £20,000 to £80,000.

Capital Gains Tax on residential property

• The higher rate Capital Gains Tax (CGT) on the disposal of residential property will be reduced from 28% to 24% as of 6 April 2024, this change is designed to encourage the sale of more property.

Furnished holiday lets

• The furnished holiday lets (FHL) regime is to be abolished on 6 April 2025.
• The effect of abolishing the rules will be that short term furnished holiday lets and longer-term residential lets are treated the same for tax purposes and individuals will no longer need to report the two income streams separately.

Multiple Dwellings Relief

• From 1 June 2024, the multiple dwellings relief, a bulk purchase relief for Stamp Duty will be abolished.

ISAs and investment in UK companies

• A new British ISA is going to be created, and this will provide an extra £5,000 per year allocation to invest in UK equities, on top of the current annual £20,000 allowance.  
• Additionally, Jermey Hunt revealed that NS&I, the government-backed savings institution responsible for Premium Bonds, is planning to introduce a three-year British savings bond.

Non-dom tax status

• The non-domicile tax regime will be scrapped from 6 April 2025 and replaced with a simpler residence-based scheme.
• Individuals who opt into the regime will not pay UK tax on foreign income and gains for the first 4 years of tax residence.

The Recovery Loan Scheme

• Jeremy Hunt is allocating £200m to extend the Recovery Loan Scheme which is to be rebranded as the Growth Guarantee Scheme. This is designed to help 11,000 small businesses in gaining access to much needed finance.

Fuel and alcohol duty

• The main rates of fuel duty will be frozen again until March 2025 meaning a further extension of the 5p cut that was introduced in 2022. 
• There will be a further 6 month freeze to alcohol duty. The freeze was originally supposed to end in August resulting in the average pint in a pub increasing by 2 pence.
• Maintaining the freeze now pushes this back to February 2025.

Air passenger duty

• There will be a one-off rise to rate of Air Passenger Duty (APD) for non-economy flights from 1 April 2025.

Vape and tobacco levies

• The government will introduce a levy on imports of vaping products and e-cigarettes from October 2026.
• There will also be a one-off increase in tobacco duty which is said to be to ensure that the tax on smoking is greater than vaping tax. 

END OF TAX YEAR PLANNING 2024

The Tax Year is drawing to a close.

Contact us at Windmill Accounts Ltd to ensure that you have taken advantage of all the tax opportunities available to both you personally and your business?

INDIVIDUALS

INCOME TAX RATES AND ALLOWANCES

Have you utilised your personal allowance in the 2023/24 tax year?

Have you made gift aid donations and pension contributions to mitigate the impact of higher tax rates and tapering of the personal allowance?

• The first £12,570 of a taxpayer’s income is generally tax free by virtue of the personal allowance.
• It is important to make use of the personal allowance each tax year because it cannot be carried forward.
• The personal allowance is reduced by £1 for every £2 of income above £100,000. There is therefore no personal allowance at all where income exceeds £125,140.

Considerations:

• If you are a family business, consider employing a spouse or child to utilise personal allowances and provide an NIC record for state pension purposes. The level of salary paid must be commensurate with the duties performed and must meet National Minimum Wage requirements.
• There are no limits to the amount of gift aid donations you can make as long as it is not more than four times the size of your tax bill for the year. Keep a record of the payments to ensure you claim the tax relief to which you are entitled.
• Make use of your £60,000 pension allowance where possible to mitigate the impact of higher tax rates and tapering of the personal allowance.
• Is it worth considering tax efficient alternatives to a bonus or salary increase?

MARRIED COUPLE ALLOWANCE

Are you a basic rate tax payer and your spouse/civil partner does not utilise their personal allowance?

• Where you are a basic rate taxpayer and your spouse/civil partner does not pay any tax, it is possible to elect to transfer 10% of their unused personal allowance to you.
• Tax relief is given via a tax reduction of 20% of the transferred amount, £1,260 for 2023/24, which represents a £252 tax saving.
• In addition to this year’s allowance, couple can backdate their claim by up to four tax years, meaning they could receive an extra lump sum worth up to £1,004 for those years.

Considerations:

• If the marriage allowance, applies to you contact us at and Windmill Accounts Ltd as we can assist you with the election and the management of it.

DIVIDEND NIL RATE BAND

Have you utilised your £1,000 tax free dividend allowance before it falls to £500 from April 2024?

• The first £1,000 reducing to £500 from April 2024 of dividend income received in the tax year is FREE OF INCOME TAX. It is a use it or lose it policy.
• Dividends received over and above the £1,000 tax free allowance are subject to their own tax rate bands as detailed above.

Considerations:

• If you own shares in a family company, you may wish to consider who else in your family could have shares. Especially those who are not utilising their basic rate band for the current tax year.  It is possible to have different shares with different rights (e.g. dividend only shares).  Careful planning is required to ensure you do not fall foul of the HMRC anti avoidance regulations.

PERSONAL SAVINGS ALLOWANCE

Are both you and your spouse/civil partner utilising the savings rate band?

• For basic rate taxpayers, there is a savings nil rate band of £1,000, which means the first £1,000 of savings income is taxed at 0%.
• For higher rate taxpayers, the savings rate band is £500, and for additional rate taxpayers (i.e. taxable income over £125,140 it is withdrawn altogether.
• The savings nil rate band is not transferable between spouses.

Considerations:

• Consider making use of your spouse’s Personal Savings Allowance by electing to transfer savings held in your own name to your spouse. 

PENSIONS AND INVESTMENTS

Have you utilised your annual pension allowance?

• Contributing to a pension scheme can be a very tax efficient way to save for your future.
• You can invest up to £60,000 this year into a pension scheme tax free. This can be a combination of employer, employee and personal contributions.
• Unused allowances from the last 3 years can be used if you were a member of a qualifying pension scheme.
• The £60,000 allowance is reduced by £1 for every £2 of an individual’s total income over £260,000 – down to a minimum of £10,000, although this usually applies to those with a total income of £312,000 or more.
• The lifetime allowance is the amount of money you can hold in pension schemes without facing penalty charges when you take pension benefits. For 2023/24 the figure is £1,073,100.
• On top of your pension contribution allowances, money can be put aside into someone else’s savings, including your children. The benefit of this is children are still entitled to tax relief on the contribution, even if they are non-tax payers.
• Investing £3,600 a year, the maximum allowed, on behalf of a child will cost you only £2,880. A top up of £720 from the taxman is added to your contribution.

Considerations:

• If you are a higher-rate or additional-rate taxpayer, do not forget to claim the full amount of pensions tax relief, and you could be able to get an extra 20% or 25% in relief respectively.
• When you contribute personally to your pension pot vie employee or personal contributions, the gross value of the contribution has the effect of extending your basic rate tax band. This means the rate of capital gains and dividend tax you pay could be lower if it means you are no longer a high-rate tax payer.
• If you have only just tipped over into the next tax band, a small pension contribution could bring you under the threshold, leading to a significant saving.
• If your company has profits in excess of £50,000, and corporation tax to pay at 25%, employer pension contributions are a tax efficient way of reducing the corporation tax bill and without causing additional personal income tax until the pension is drawn.

CHILD BENEFIT

Are you a parent claiming child benefit?

Have you checked your levels of income against the child benefit rules?

• Parents must watch out for the high income child benefit charge, as they currently lose the child benefit payments when they earn over £60,000.
• Anyone earning between £50,000 and £60,000 has to pay back a portion of the money in the form of extra income tax.
• The good news is that the chancellor announced in his Spring Budget that the income threshold will be raised from £50,000 to £60,000 from 6 April, meaning parents who earn less than £60,000 can keep all of their child benefit. 
• The top of the taper at which the benefit is withdrawn completely will increase from £60,000 to £80,000.

Considerations:

• If you earn slightly above £60,000 you may be able to reduce your taxable income and keep more of your child benefit.
• For instance, putting money into a workplace pension or using employer salary sacrifice schemes can lower your taxable income without losing money.

PAYE NOTICES OF CODING

Have you reviewed your current tax year code notice and future tax year coding notice?

• It is always worth checking your PAYE Notice of Coding to ensure your allowances are correctly stated. This includes relief for pension contributions, charitable donations and any other tax reliefs.
• If your PAYE coding is incorrect HMRC must be notified of any required changes.
• HMRC’s coding system has, in our experience, led to many incorrect coding notices. If the coding is wrong, many taxpayers could end up with an unwanted, and unexpected, tax bill after the end of the tax year.

Considerations:

• If you’re in any doubt of your tax code then Windmill Accounts Ltd can review your PAYE Notice of Coding to ensure it is reasonable and in line with your income. We can notify HMRC of any changes.

INDIVIDUAL SAVINGS ACCOUNTS (ISAs)

Have you used your £20,000 ISA allowance?

• Individual savings accounts (ISAs) are tax efficient investments available to individuals.
• There are different types of ISAs, the main ones being cash ISAs, stocks and shares ISAs and lifetime ISAs.
• For adults, you can save up to £20,000 in an ISA during a tax year – and any earnings on that amount will be free of income, capital gains and /or dividend tax. This is a use it or lose it policy.
• You can also invest up to £9,000 for any children under 18.
• If you’re aged 18-39 you can open a lifetime ISA and put in up to £4,000 per annum until you are 50. The government will add a 25% tax free bonus to these savings, up to a maximum of £1,000 per year. This £4,000 counts towards your £20,0000 annual ISA limit.

Considerations:

• If you are interested in knowing more about ISAs and opening one, please contact us and we can provide you details of a financial planner who can assist you further.

CAPITAL GAINS TAX (CGT)

Have you used your full capital gains tax free allowance of £6,000 before it falls to £3,000 from 6 April 2024?

• Capital gains tax (CGT) is a tax on profit you make when you sell an asset that has increased in value.
• The annual exemption is a use it or lose it exemption. It does not roll over.
• Married couple and civil partners each have a £6,000 exemption, with gains above this usually taxed at a rate depending on their income levels and type of asset.
• Similarly, if you jointly own an asset with another person, you can use both of your allowances to double the exempt amount available (£12,000) before capitals gain tax is due.
• The CGT rates currently remain at 18% and 28% for residential property and 10% and 20% for all other capital disposals.

Considerations:

• If you have shares and other assets to sell, where possible, it may be beneficial to realise gains before the 6 April 2024.
• To utilise the spouse annual exemption, should you put an asset into your joint names before selling it?
• Do you have any other assets that you can use to reduce your gains by creating a capital loss?

INHERITANCE TAX (IHT) – SHORT TERM

Have you made use of the £3,000 IHT gift allowance?

• Annual allowance - You are entitled to give cash gifts of up to £3,000 each tax year without an IHT impact. If this amount is unused it carries forward for one year.
• As a couple, each person gets the same £3,000 allowance, potentially doubling the IHT reduction you can make.
• Small gifts exemption - £250 can be gifted to each person each tax year, provided you have not already given a gift to the same person using your £3,000 exemption.
• Marriage exemption – This applies when gifting for a marriage or civil partnership. The allowance can vary depending on the relationship of the transferor and the individual getting married.
• The various amounts are as follows:
  • To your child - £5,000
  • To your grandchild £2,500
  • Any other case - £1,000
• If you want to give a larger lump sum to your children, for example, to put towards a property deposit or for any other purpose, this money may be exempt from IHT provided you live for at least seven years after making the gift.

Considerations:

• If you have spare cash, it may be worth considering making gifts.
• It is important to keep good records of these transactions.
• If you require any further assistance in long term IHT planning please contact us and we will provide you with an Inheritance tax expert who can help you further.

SELF ASSESSMENT REPORTING CHANGES FOR SELF EMPLOYED AND PARTNERSHIPS

Does your accounting year not match the tax year?

• If you are self employed or in a trading partnership and your accounting year does not match the tax year (April to March) new annual self-assessment reporting changes will impact you from this tax year.
• Previously, you were required to report the profits as declared in the accounting year end which fell during the tax year.
• From the 2023/24 tax year you will need to amend this and report the proportional profits that actually occurred during the tax year.
• Because this will likely result in a higher than usual tax bill, HMRC is providing ‘Overlap Relief’ which covers the period beyond the usual 12-month window for profits. The overlap relief will mean tax on additional profits is spread over additional self-assessment returns up to the 27/28 tax year.
• These changes only apply to self-employed individuals or those in a trading partnership whereby the accounting year end does not match the tax year (April to March).

Considerations:

• If you’re unsure or would like us to calculate the proportional profits on your behalf, please contact us at Windmill Accounts Ltd today.

CORPORATION TAX

INCREASE IN RATES OF CORPORATION TAX

Have you reviewed how the change in the corporation tax rate increase will impact you and your business?

• From 1 April 2023, the corporation tax rate increased from 19% to 25% for companies whose profits exceed the ‘upper profits limit’, set at £250,000.
• Companies whose profits do not exceed the ‘lower profits limit’, set at £50,000, pay corporation tax at the ‘small profits rate’ which remains at the current corporation tax rate of 19%.
• Companies whose profits fall between the lower and upper profits limits will now pay corporation tax at the main rate as reduced by marginal relief.

Considerations:

• • Proactive corporate tax planning can help you minimise the impact of the corporation tax rise.
  • If you are due a director’s bonus, have you accrued it in the annual accounts as a deductible cost, as long as they are paid within nine months of the company year -end and the entitlement to the bonus is established before the accounting date.?
  • Have you paid any employer pension contributions? These must be paid before the year-end to get tax relief in the accounting period.
  • Are you paying a member of your family a salary? Salaries can be paid to family members as long as they are justifiable and at commercial rates.
  • Have you considered tax-efficient ways of extracting profits, such as dividends, pension contributions and benefits-in-kind?