BoE base rate rises – has your business account kept up?

The Bank of England (BoE) has raised rates 13 times in a row to June this year, with the base rate reaching 5% – a level not seen since 2008 at the height of the financial crisis. Mortgage rates and loan rates have risen alongside the base rate, but savings rates have tended to lag behind.

The base rate rises are designed to rein in inflation, which was still stubbornly high at 7.9% in June, significantly higher than the 2% target for the BoE. Experts at Schroders predict even more rate rises, with the base rate potentially reaching as high as 6.5% by the end of the year, which is bad news for borrowers, but good news for savers.

Easy access business account rates

While personal savings accounts have seen rate rises, the same applies for business account savings rates. So, if your business has excess cash sitting in a business bank account earning little or no interest, then consider opening a separate savings account and allowing that money to work for you.

The rate you can get for your business savings varies depending on how quickly you want to access that money. If you want to be able to make unlimited withdrawals at any time, then you would need an easy access, also known as an instant access, account. But you are likely to get slightly less in interest than you could get if you can give some notice before making a withdrawal.

At the moment, one of the best rates you can get for an easy access account is around 4.65% Annual Equivalent Rate (AER) – this is the actual amount you would receive in interest depending on how often the rate is calculated and then compounded over an entire year. For example, the monthly gross interest rate on this account is 4.65%. But if there is a compounding effect – where interest is calculated and applied more often than annually, meaning the next amount of interest paid is based on the original deposit plus the previous interest added – it could take the overall interest paid in a year to a higher rate.

Usually there will be a minimum deposit amount to open the account, so check any terms and conditions you need to comply with to get the advertised rate. You also should check whether the interest is a fixed or variable rate. If the former, you know what you will receive for the period the rate is fixed for. If that latter, the rate can change at any time, so keep an eye on it and be prepared to move to a better paying account if the rate drops.

Business notice account

If you can keep some money in an account where you give notice before making a withdrawal, it will boost the amount of interest you can earn. The current leading rates for notice accounts are paying around 5.35% AER if you are prepared to tie your money up for three months before making a withdrawal.

Again, watch for any terms and conditions and minimum deposits you might need to make. As you have to give notice before you make a withdrawal, you may face a penalty if you access the account before the notice period has been completed. This is often a reduction in interest, but check the terms to be sure you are able to comply with them before signing up.

Fixed term bonds

If you can afford to tie some of your company’s money up for longer, then you might want to consider a fixed rate bond. These will be offered over various periods, usually one year or more, and again you will not be able to access the money for the agreed term without a penalty.

The benefit for this is a higher rate of interest paid on your deposit. For example, one of the top rates for a one-year fixed rate bond for business customers is currently paying 6.13% AER. But you may find you need to put more money into the bond than some of the other accounts, which could be prohibitive for smaller businesses.

However, if you can keep some money in a product for a longer period of time, this might be worth considering.

Contact us

Using business savings accounts, particularly when interest rates are rising, is a good way of making your money work harder for you. If you need help in finding out the right account for you, then please get in touch and we will be happy to assist you.

Keep National Insurance numbers in Apple wallets now

Do you struggle to remember – or find – your National Insurance number when you’re asked for it? If so, you’re not alone. So, it will be a relief to many that HMRC has now created a way for iPhones to store someone’s National Insurance number in their Apple Wallet either online or through the HMRC App.

It means you can now check, share, and print your NI number in minutes, instead of having to wait up to 15 days for an NI number confirmation letter to arrive. It can also be saved to be used in future.

While this may seem high-tech, the taxman is keen to reassure employers that “this is genuine and should be accepted in the same way a letter would be”.

Is it safe?

If a fraudster had access to your NI number, it could cause you numerous problems. So, the safety of holding it in your Apple Wallet is a valid question. But given it is where we already hold our credit and debit cards so we can pay with our smart devices, there is no reason to think the NI number would be any less safe. You need a fingerprint, facial recognition, or a passcode to open the Apple Wallet, and this type of biometric security is highly effective.

If you have an employee showing you their NI number on their phone, then check their name corresponds correctly with the number you’re being shown. So you can keep a record of it, ask them to send you a screenshot with the details.

At the moment, this facility is only available on an iPhone, which means Android users will need to struggle on with their memory, their NI cards, or bits of paper for a little while longer. But an Android version is in the pipeline.

Let us help you

If you cannot find or remember your NI number, or you have employees who are struggling to find their NI details, then please get in touch with us and we will do what we can to help you.

New tax regime for sole traders and partnerships starts

HMRC is changing the way sole traders and partnerships need to calculate profits for their self-assessment returns. The Revenue will require the profits to be declared for the tax year in question, rather than the accounting year as is currently the case.

Any sole traders or partnerships with an accounting year ending at any point other than March 31 or April 5 will be affected by these changes and will need to amend the way they calculate and pay the tax due on their profits. These changes are not influenced by delays to the Making Tax Digital regime.

What do the changes mean?

This tax year – 2023/24 – is a transition year, so sole trader and partnership businesses must declare their profits for two accounting periods – their existing accounting period and any additional time that would take their trading activity to the end of the tax year.

HMRC states: “Businesses will need to declare the total profits from the end of the last accounting date in tax year 2022 to 2023 up to and including April 5, 2024. This means that profits generated over a longer period will be taxable in the transition year.”

However, from April 2024 to 2025 and any future years, the amount of profit made in each of the relevant periods where the accounting period may straddle the tax year will need to be allocated correctly.

Sounds complicated, how does it work?

It may be complicated initially while businesses get used to working out their profits and tax in a new way, but HMRC is working on an online form to make the returns easier. For now, sole traders and partnerships should rely on their accountant to help if they are unsure what to do.

Take an example – if your accounting date is December 31, 2023, then as a sole trader or partnership you need to declare profits from January 1, 2023, to April 5, 2024. This will give you a period for this return of 15 months rather than the usual 12 for the 2023/24 tax year. This must be filed and any tax due paid on or before January 31, 2025.

Some businesses may need to use provisional figures for this period, and they would have the usual amount of time to amend these to final figures on their tax return.

One benefit businesses will have if they need to make this change in the 2022/23 tax year is the ability to use any overlap relief due. Some may change their accounting dates to coincide with the tax year to make life easier. If this is done in the 2023/24 tax year, then the current change of accounting rules will apply.

HMRC stated: “In tax year 2023 to 2024, businesses can use any overlap relief resulting from overlap profit when the business first started. By default, any remaining additional profit can be spread over five years.”

If a business changes their accounting date from 2023/24 onwards, then these rules won’t apply. Also, any future changes can be made no matter what changes have been made in the past.

Get previous overlap relief figures from HMRC

HMRC should be able to provide you with overlap relief figures for any accounting date changes in the 2021/22 tax if you request them, provided they are recorded on its systems.

More staff are currently being trained to deal with these overlap relief queries and eventually HMRC will have a specific form to use to make these overlap relief requests more streamlined. In the meantime, if you want to get overlap relief data, HMRC is asking you to provide as much information as possible from the following list:

• Taxpayer name.
• National Insurance number or Unique Taxpayer Reference.
• Name and description of business.
• Whether the business is self-employment or part of a partnership.
• If the business is part of a partnership, the partnership’s Unique Taxpayer Reference.
• Date of commencement of the self-employment business, or date of commencement as a partner in partnership.
• The most recent period of account or basis period the business used.

Those sole traders or partnerships looking to change accounting dates in 2022/23 and 2023/24 will need to wait for additional information on the “provision of overlap relief figures for these tax years” said HMRC.

There is some additional background information in the ‘Basis period reform’ policy paper.

Contact us

These changes may create additional complications for your business in the short term, and you need to be sure you’re keeping on top of what you need to file to HMRC, and by when. If you need assistance with this, please just get in touch with us and we will support you.

Self-assessment thresholds change for PAYE workers

The threshold for people taxed through PAYE who are required to file a self-assessment return has increased from £100,000 to £150,000. Those affected should be contacted by HMRC if they need to change anything. That said, there have been times in the past where HMRC hasn’t always been spot on with its own paperwork, so you would be wise to keep on top of this yourself if you think this could be an issue for you.

The threshold rises for this tax year, 2023/24, so those filing returns for 2022/23 will still have to file self-assessments if they earn £100,000 or more. If they have income between £100,000 and £150,000 that is taxed through PAYE in their 2022/23 return, HMRC will send a Self-Assessment exit letter. Then those earning above £150,000 through PAYE would need to continue filing self-assessment returns until their position changes. The exception to this would be if those earning below the £150,000 mark meet any of the other criteria which would require them – or would benefit them – to file a self-assessment return.

Why would you still file a return for income below £150k?

If your income is taxed under PAYE for the 2023/24 tax year, and is below £150,000, then you would not need to file a self-assessment return, unless you are also:

• In receipt of any other untaxed income.
• A partner in a business partnership.
• Have a tax liability to the High-Income Child Benefit Charge.
• Or you are a self-employed individual and with gross income of over £1,000.

You can also find out online via Gov.uk if there are any other circumstances under which you would need to send a Self Assessment tax return.

What if I need to reclaim some allowances?

Self-assessment isn’t all about paying tax. If you have some items you need to reclaim tax relief on, then filing a self-assessment return would be the way to do this. There is no reason for you to pay tax unnecessarily, so make ensure you’re claiming any income tax reliefs due.

These could include items you need to buy out of your own pocket to do your PAYE job that are not reimbursed via expenses, such as membership of professional associations, courses that provide continuing professional development, work uniforms that aren’t supplied by your employer, or textbooks you need for your work. You may also need to pay for professional indemnity insurance to cover your work.

Is there anything else I would need to claim for?

If you are a 40% or 45% taxpayer, then any pension contributions you make may only be given tax relief at source of 20% – the basic rate of tax. It will depend on the scheme you are paying into, but many people will need to reclaim the additional 20-25% tax relief due on your pension contributions if your marginal rate of tax is higher than the basic rate.

You can also reclaim additional tax relief on charity contributions, maintenance payments and for any time you have spent working on a ship.

There are various rules to comply with to get maintenance payments relief, but the main one is that you or the person you are paying maintenance payments to must be born before April 6, 1935. So, there are likely to be fewer of these people qualifying as each year passes.

If you think there are any payments you should be able to get tax relief on, then speak to HMRC directly or to your accountant who will help you navigate the self-assessment maze.

We can help you

If you need help to determine whether you should file a self-assessment return to pay additional tax owing or to reclaim tax relief, then please get in touch with us and we can help you understand what you need to do.

P11D and P11D(b) forms must be filed online by July 6

P11D and P11D(b) forms from April 6, 2023, now need to be filed online by July 6 following a rule change from HMRC. If employers need to make amendments to any returns that have already been filed, these should also be made online through a new form via the expenses and benefits for employers page.

If any employer now files their P11D and P11D(b) returns on paper, they will be rejected as not having been submitted correctly. This notification will include details about how to file the forms correctly going forwards. This can take time and cause delays for a business, so it is better to use the correct method in the first place.

If you fail to file the P11D or P11D(b) return by the July 6 deadline, you could face a penalty.

File Class 1A National Insurance Contributions info by July 6 too

Any Class 1A National Insurance Contributions (NICs) will also need to be flagged by employers to HMRC by July 6, and any payments due must reach the tax office on or before July 22 this year.

So your payment is correctly allocated, HMRC advises companies to use their 13-character accounts office reference number without spaces, followed by 2313.

HMRC stated: “Adding 2313 is important because 23 tells us the payment is for the tax year ended 5 April 2023, and 13 lets us know the payment is for Class 1A National Insurance contributions.”

You can find more information about how to pay employers’ Class 1A National Insurance at Gov.uk.

How you submit your P11D and P11D(b) electronically

To file either of these returns online, you can use commercial payroll software or HMRC’s PAYE Online service. You must submit all your P11D and P11D(b) forms online at the same time in a single submission. You can find more information online at Gov.uk relating to expenses and benefits for employers.

Employers must submit a P11D for every employee who gets any benefits or non-tax-exempt expenses, unless the employer registered that they would be taxed on these benefits through payroll before April 6, 2022. Any benefits not dealt with through the payroll for any reason need to be included on a P11D.

Any employer who wants to avoid dealing with P11Ds can register for all benefits to be payrolled for the 2024/2025 tax year.

We can help you meet your obligations

If you are unsure whether dealing with all benefits-in-kind through your payroll or through the filing of P11D and P11D(b) forms is best for your business and your employees, then please get in touch with us and we will advise you on the best course of action.