Recent Developments in Business and Regulatory Matters

Welcome to our roundup of the latest business news for our clients. Please get in touch with us to discuss how these updates affect your business. We’re here to support you!

Spring Budget – A budget for long-term growth?

Jeremy Hunt, Chancellor of the Exchequer, delivered his Spring Budget 2024 speech on 6 March 2024. This marks the last Budget before the next general election, which must be held before 28 January 2025. The Budget was crafted to highlight the government’s accomplishments and present tax reductions to appeal to voters.

There was a notable focus on ensuring work is financially rewarding, with much attention drawn to the cuts in National Insurance contributions for employees and the self-employed. The Chancellor reiterated his belief that lower taxes spur growth and foster a more dynamic economy.

Efforts were also made to invigorate activity in the housing market by reducing capital gains tax for higher earners disposing of residential property. The government hopes this move may encourage individuals with second homes and other residential properties to sell, thereby increasing the housing supply for those seeking to move or enter the property market.

However, the Budget also brought some less favourable news for taxpayers, signalling the end of certain longstanding tax reliefs for furnished holiday lettings and individuals with non-domiciled tax status.

In its evaluation of the Budget, the Office for Budget Responsibility (OBR) reported that while economic growth has been underwhelming since November, it anticipates a more pronounced drop in inflation and interest rates, leading to a robust recovery.

The OBR notes that other tax increases will partly offset the reduction in national insurance contributions. They also observe no longer a rise in public services spending, suggesting that the Budget plans enable the Chancellor to meet the government’s financial goals on debt, albeit with only a small margin to spare.

If you’re worried about any aspect of the Budget and its potential impact on your circumstances, book a free consultation with us anytime. We’re here to assist you!

Spring Budget – National Insurance Cuts – What They Mean to You as an Employer

The national insurance cuts announced in the Spring Budget have dominated the headlines. So, what is their impact on you as an employer?

Your Employees Benefit

In last year’s autumn statement, employee national insurance was reduced by two percentage points, from 12% to 10%, effective 6 January 2024. The Spring Budget extended this reduction by lowering the employee national insurance contribution by an additional two percentage points, bringing the rate down to 8% from 6 April 2024.

Suppose you were planning to issue staff bonuses in your March payroll. In that case, it may be worth considering deferring these payments to April so that employees can benefit from the lower national insurance rate and retain more of the bonus.

No Change to Employer’s National Insurance

It’s important to note that this reduction only affects the national insurance rate paid by employees. The employer’s national insurance rate remains unchanged at 13.8% for any wages paid in excess of £9,100 per year (£175 per week). Unfortunately, for employers, there is no immediate financial benefit from the cut to the employee rate.

Payroll Software

As an employer, it’s crucial to ensure that your payroll software is updated for the change in rate before 6 April 2024. While most major providers of payroll software are likely to be prepared, it’s advisable to double-check and ensure you are running the latest version. Failure to update the payroll software may result in incorrect national insurance deductions, necessitating corrections later, which could prove challenging.

Employment Allowance

As in recent years, eligible employers can still claim an employment allowance in 2024/25, worth £5,000 per year, as a reduction on their total National Insurance liability. If you’re unsure how to claim this, please don’t hesitate to book a free meeting with us. If you need help updating your payroll software, please contact us. We’re here to help!

Spring Budget – National Insurance Cuts – What They Mean to You as a Self-Employed Business

The Spring Budget has extended the national insurance cuts initially announced in last year’s Autumn Statement, bringing positive news to all self-employed businesses.

The class 4 national insurance rate, included as part of your tax bill at the year-end, has been further reduced since 6 April 2024. It will now decrease from 9% to 6% for profits between £12,570 and £50,270. The rate for profits over £50,270 will remain at 2%.

For instance, if your 2024/25 tax year trade profits were £50,000, this rate reduction would result in a saving of £1,302 compared to the 2023/24 tax year. However, you may not feel this saving until you make your 2024/25 self-assessment balancing payment on or before 31 January 2026.

As announced in last year’s Autumn Statement and further confirmed by the Spring Budget, class 2 national insurance will effectively be abolished. This will save you £179.40 a year.

You do not need to take action to benefit from these national insurance cuts. The reductions will be automatically applied to the calculation of your tax when your tax return is submitted.

If you are self-employed, your class 2 national insurance payments have ensured you accrue entitlement to a range of state benefits, including the state pension. If your profits exceed £6,725 in 2024/25, you will continue to accrue entitlement to state benefits despite not paying class 2 national insurance. If your profits are less than £6,725, or you make a loss, you can make class 2 contributions voluntarily, at £3.45 per week, to maintain your state benefit entitlement.

The government has announced that it will consult on how to deliver the final abolition of class 2 national insurance contributions later this year. Once this occurs, a new method or criteria for accruing state benefit entitlements will likely occur.

If you are unsure how these national insurance changes affect you personally, please feel free to book a free consultation, and we will be happy to explain the changes to you.

Spring Budget – Abolition of Furnished Holiday Lettings Regime

If you operate a holiday let, you’re likely familiar with the advantageous tax benefits that holiday lets have enjoyed for many years. Because furnished holiday lets are treated as a trade rather than a rental property, there have been more generous deductions against income available. Additionally, there has been a notable advantage in property capital gains tax when selling a furnished holiday let.

Chancellor Jeremy Hunt announced during the Spring Budget that the Furnished Holiday Lettings regime will be abolished, effective 6 April 2025.

This means that your holiday let profits will need to be calculated and taxed according to the same tax laws as other rental property profits.

Unfortunately, this change will likely increase the tax payable amount if your holiday income remains the same.

Particularly disappointing is that if you sell your holiday left after 6 April 2025, Business Asset Disposal Relief will not be available with its potentially low 10% capital gains tax rate.

While the abolition still takes effect a year from now, measures will be implemented from 6 Ma6 2024 (the day of the Budget announcement) to prevent tax planning steps that may attempt to manipulate the sale date of a holiday to occur before 6 Apri6025.

Although detailed legislation covering the change has yet to be released, if you’re considering selling your holiday let, it may be wise to consider the timing of the sale to avoid paying more tax than necessary. Of course, as with all tax planning, you should also consider your overall tax situation, potential downsides, and priorities.

Spring Budget – Changes to High-Income Child Benefit Charge Bring Benefits to More

The High Income Child Benefit Charge (HICBC) has faced considerable criticism since its inception due to its treatment of couples with a single high earner.

A couple with both parents earning £49,000 each are not affected by the HICBC. However, another couple, where one parent earns £60,000 while the other does not work, lose their entire child benefit amount.

The Spring Budget increased the ‘high-income’ threshold from £50,000 to £60,000 to address this unfairness, effective 6 April 2024.

Moreover, the HICBC will now be calculated at 1% of the child benefit received for every £200 of income above the threshold. This clawback rate is slower than in the 2023/24 tax year, meaning child benefit is only fully clawed back when income exceeds £80,000, compared to £60,000 in 2023/24.

This change signifies that many more couples can retain their child benefit.

Chancellor Jeremy Hunt also announced plans to alter the HICBC to apply to household rather than individual income. This adjustment is expected to take effect by April 2026.

Spring Budget – Increase in VAT Registration Thresholds

The thresholds for VAT registration and deregistration have remained unchanged for the past seven years; however, an increase was announced in the Spring Budget.

The new registration threshold is now £90,000, up from £85,000, while the deregistration threshold has risen to £88,000 from £83,000.

VAT registration becomes mandatory if your business’s VAT-taxable turnover for the previous 12 months exceeds the threshold by the end of any month. This should be assessed on a rolling monthly basis, not just at your accounting year-end.

You can apply for VAT a registration ‘exception’ if you believe you temporarily exceed the threshold due to, for example, winning a large one-off project.

HM Revenue and Customs will consider making an exception if you provide evidence demonstrating that your turnover will fall below the deregistration threshold in the next 12 months.

Considering the inflation rate since the thresholds were last revised, the latest increase may seem like a nominal gesture. However, it could help you avoid VAT and the associated administrative burden.

If you believe your business turnover is approaching the threshold amounts, please don’t hesitate to book a free meeting. We will gladly confirm whether you need to register and assist with the VAT registration process.

Spring Budget – Reduction in Capital Gains Tax Higher Rate

The Spring Budget introduced some changes to capital gains tax (CGT) allowances and tax rates, particularly relevant to individuals who own residential property in addition to their primary residence.

Annual Exemption

Each individual is entitled to a CGT annual exemption – an amount of capital gain that can be made without tax. For 2024/25, this exemption is reduced to £3,000 (currently £6,000). Consequently, individuals selling capital assets, such as property or shares, will face higher tax liabilities.

As we still have a few weeks before the start of the new tax year, if you’re considering selling any of your capital assets (and can do so before 6 April), consider the timing of such transactions. Please get in touch with us, and we’ll be pleased to provide you with a personalised recommendation based on your overall tax situation.

Rates

The central rates of CGT remain at 10% if your gains fall within your unused basic rate band or if you’re disposing of a business eligible for Business Asset Disposal Relief. The rate is 20% in other cases, except for residential property sales.

No CGT is due when selling your primary residence. However, increased CGT rates apply if you sell a residential property that is not your primary residence. From 6 April 2024, the residential property CGT rate will remain 18% for gains within your unused basic rate band but will decrease to 24% (from 28%) for gains exceeding an individual’s basic rate tax band.

With this reduction, the government aims to stimulate activity in the property market, benefiting those seeking to move home or enter the market.

If you’re unsure how these changes might affect you, please book a free consultation with us anytime, and we’ll be happy to provide you with a personalised analysis. Additionally, remember that CGT on property disposals may entail tax payment and reporting obligations to be addressed within 60 days of the completion date. Hence, it’s essential to seek advice well in advance.

Salary Sacrifice: A Potentially Beneficial Strategy for Your Business and Your Employees

Businesses and employees are constantly seeking ways to optimise their financial strategies, and one often overlooked approach is salary sacrifice.

Salary sacrifice entails an agreement between an employee and employer to reduce the employee’s salary in exchange for certain non-cash benefits. While it may seem counterintuitive initially, salary sacrifice can be a valuable tool for tax savings for both parties involved.

Benefits for the Business

Implementing salary sacrifice schemes can lead to significant tax savings for businesses. Offering non-cash benefits like pension contributions or cycle-to-work schemes in exchange for salary can reduce employers’ National Insurance contributions, lowering the overall tax burden.

Additionally, offering attractive benefits through salary sacrifice can boost employee job satisfaction and improve staff retention.

Benefits for the Employee

From the employee’s perspective, salary sacrifice presents numerous tax-saving opportunities. By opting for non-cash benefits instead of additional salary, employees can reduce their taxable income and subsequently decrease the tax they pay.

For instance, contributions to a workplace pension are deducted from the employee’s gross salary before tax, resulting in a reduction in the amount of tax paid by the employee.

Furthermore, salary sacrifice arrangements can enable employees to access valuable benefits they might not otherwise afford.

Are There Any Downsides?

While salary sacrifice can be an effective tax-saving strategy, it may only suit some situations. Many salary sacrifice schemes are subject to tax regulations or have specific requirements, necessitating a thorough understanding before implementation. Employees must also carefully evaluate their financial circumstances and priorities before entering into salary sacrifice agreements.

In Conclusion

Salary sacrifice can be a win-win for both businesses and employees. Businesses can use non-cash benefits to lower tax liabilities while enhancing employee satisfaction and retention. Meanwhile, employees can enjoy tax savings and access valuable benefits that contribute to their overall well-being.

With careful planning and implementation, salary sacrifice can be a powerful tool for businesses and their employees.

We have tools to help you calculate the tax consequences and potential savings from salary sacrifice arrangements involving company cars, pensions, and bikes. Please feel free to book a free consultation with us; we’ll be happy to assist you!

Construction Industry Steps Up Efforts to Combat Work-Related Stress

The Health and Safety Executive (HSE) sponsored the Working Minds campaign, which welcomed six new partners from the construction industry.

The Contract Flooring Association (CFA), the Chartered Institute of Plumbing and Heating Engineering (CIPHE), the Asbestos Removal Contractors Association (ARCA), the National Federation of Demolition Contractors (NFDC), the Electrical Contractors Association (ECA), and the National Federation of Roofing Contractors (NFRC) have all pledged their support to the campaign.

Stress in the construction industry can be significant, with long hours and tight deadlines commonplace. Working Minds offers free online learning aimed at assisting employers in preventing stress and promoting good mental health. The learning tool typically takes less than an hour to complete and helps employers understand legal requirements and compliance methods.

Working Minds advocates five simple risk assessment-based steps:

1. Reach out and engage in conversations.
2. Recognise the signs and causes of stress.
3. Respond to identified risks promptly.
4. Reflect on agreed-upon actions taken.
5. Establish a routine to encourage discussion about stress and individuals’ feelings and coping mechanisms on-site.

Employers are legally obligated to safeguard workers from stress by conducting and acting upon a stress risk assessment. The Working Minds online learning can aid employers in understanding and fulfilling this requirement.

For more information, including sector-specific advice for the construction industry and other sectors, please visit the Working Minds website: Working Minds Sectors

In a Mental Health Emergency – Can You Share Staff Data?

The Information Commissioner’s Office (ICO) has recently published new guidance to assist employers in determining whether they can share staff data during a mental health emergency.

Employers may find themselves in a situation where they become aware that an employee, due to their mental health, is at risk of causing severe harm to themselves or others. In such circumstances, the ICO advises employers to feel empowered to share information promptly with the appropriate emergency services or health professionals.

This guidance aids employers in recognising what constitutes a mental health emergency. It outlines the actions they should take and those they could take without risking repercussions for data sharing.

Given that a mental health emergency can arise unexpectedly, the guidance also outlines proactive steps employers can take to ensure preparedness.

For more detailed information, please refer to the ICO’s guidance on Information Sharing in Mental Health Emergencies at Work.

Charities Given New Guidance on Decisions About Donations

The Charity Commission has released new guidance aimed at assisting charities when they encounter decisions regarding whether to decline or return a donation.

Typically, charities are inclined to accept donations given to them. However, certain circumstances require them to refuse a donation, and the new guidelines aim to provide clarity in these situations.

The guidelines outline the types of donations that must be refused or returned by law. These include donations received from illegal sources or accompanied by illegal conditions, such as those originating from terrorist or criminal activities.

Other instances where there is a legal obligation to refuse or return a donation include cases where the donation:

• It originates from an individual lacking the mental capacity to decide to donate.
• It cannot legally be transferred to the charity, for example, if the donor does not own the donated asset.
• It is subject to terms necessitating its return, such as donations with stipulations requiring their utilisation within a specified timeframe, leading to any unused funds being returned.

However, there are additional reasons why a charity may find it necessary to refuse or return a donation, detailed in the guidance. Furthermore, the guidance explores potential steps that a charity can take to facilitate the acceptance of the donation.

For further information, the guidelines can be accessed and reviewed here: Accepting, Refusing, and Returning Donations to Your Charity.

New Companies House Powers Come Into Force

New powers granted to Companies House under the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) finally came into effect last week.

These new measures empower Companies House to combat criminal activities and money laundering perpetrated by individuals exploiting the company registration system.

The powers include the ability to query information and request supporting evidence, conduct more robust checks on company names, and address and remove factually inaccurate information.

Furthermore, companies can no longer utilise a PO Box as their registered office address, and Companies House now possesses the capability to share data with other government departments and law enforcement agencies.

These new measures are complemented by introducing new criminal offences and civil penalties to enhance enforcement efforts.

While these measures are hoped not unduly to burden legitimate businesses, they represent significant steps in combating fraudulent activities.

Additionally, the ECCT Act introduces other measures, such as identity verification and accounts reform, which will be implemented later.

For further details, please refer to: Companies House Begins Phased Roll-Out of New Powers to Tackle Fraud.

Spring Update –Multiple Dwellings Relief axed from 1 June 2024

Multiple Dwellings Relief (MDR) is a stamp duty land tax (SDLT) relief currently available if you buy two or more residential properties in a single transaction or a series of linked transactions.

It allows the tax rate to be calculated based on the average value of the properties purchased rather than the aggregate value, saving SDLT on the overall purchase.

The relief was initially intended to promote investment in residential property and increase the amount of private rented houses available. However, an external review initiated by the government has concluded that the relief has yet to help with these aims.

Therefore, the Spring Budget announced that MDR will be abolished from 1 June 2024.

If the contracts on a purchase you might be undertaking were exchanged before 6 March 2024 (Budget Day), and there’s no change in the contracts afterwards, then MDR can be claimed regardless of when the purchase is completed.

MDR can also apply to purchases where the contracts have not been exchanged, but the transaction will be completed before 1 June 2024.

If you need help determining whether MDR can be applied to your purchase, please feel free to contact us. We will be happy to assist you.