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Child Benefit claims can now be made online

Child Benefit claims can now be made online

Any parent that claims Child Benefit will automatically get National Insurance Credits applied to their State Pension. This credit ensures that for the time you are out of work while bringing up your family, a completed year is added to your National Insurance record, so you have a better chance of reaching a full State Pension entitlement when the time comes.

There is no limit to the number of children Child Benefit can be claimed for, and it will be paid to those responsible for bringing up a child under 16, or under 20 if they remain in approved education or training.

HMRC states on Gov.uk: “Education must be full-time (more than an average of 12 hours a week supervised study or course-related work experience) and can include:

  • A levels or similar, for example Pre-U, International Baccalaureate
  • T levels
  • Scottish Highers
  • NVQs and most vocational qualifications up to level 3– not including advanced apprenticeships
  • home education – if it started before your child turned 16 or after 16 if they have special needs
  • traineeships in England

“Your child must be accepted onto the course before they turn 19.”

Source: Gov.uk

You can tell HMRC that your child is staying in approved education or training using the CH297 online form. To apply online, you will need a Government Gateway account, a passport and other proofs of ID. HMRC will then send you an activation code on email, which you can use to apply for Child Benefit online.

Let us help you

If you need any help with accessing Child Benefit, or you want to make sure you are claiming any additional benefits that you are eligible for, then please get in touch and we will be happy to offer you the help and guidance you need.

February 26, 2024

The cost of divorce – what to do if you decide to split up

The cost of divorce – what to do if you decide to split up

More people file for divorce in January than any other month of the year, probably because the stress of being together for an extended period over Christmas and New Year brings any cracks in a relationship bubbling to the surface. Or it could be that people want to start the New Year afresh and were reluctant to start divorce proceedings in the months leading up to Christmas. Either way, January sees a considerable spike in contact with family lawyers and divorce proceedings starting.

However, interestingly this year it seems that a lot of people are delaying their divorce because of the cost-of-living crisis, which is making it hard for them to afford to split. Around 272,000 couples have delayed their decision to divorce this year, according to research from insurer Legal & General. It is little wonder, given nearly half (48%) saw their incomes shrink by an average of 31% in the year following their divorce, leaving people around £9,700 worse off.

The importance of a Clean Break Order

The research also found that just under one third (31%) of couples signed what is known as a Clean Break Order, preventing future claims from their spouse. This means that 69% of couples are open to future claims from their exes, something most people wouldn’t want to contemplate, and which could become costly further down the line.

Paula Llewellyn, Managing Director (Direct), Legal & General Retail: “When people divorce, money is always an important factor especially during the challenges of the cost-of-living crisis. However, as our research shows a separation can have long-term implications for people’s finances. Many couples have not even sorted the necessary paperwork to ensure they have a clean break from their financial obligation to one another. By consulting a financial adviser people increase the likelihood of a divorce being fair and equal. While the number of people seeking out this support has increased in recent years, we need to encourage more couples to take this step.”

All your assets are up for grabs

Remember, it isn’t just your everyday assets that are considered when a couple decides to split. Any pension entitlements you have could be part of the deal too, so if one partner has a much larger pension pot than the other, then that spouse might have to offset that pension pot with another asset, such as the house, or give a share of that pension to their ex-spouse as part of the divorce.

This is something that is often ignored or actively waived by divorcing spouses, according to the Legal & General research, but it could be a considerable part of the settlement if it is taken into consideration.

You need to be open and honest about your assets during any part of the legal proceedings, as hiding assets could lead to problems further down the line. Divorce is a highly emotional time, but if you can try to be amicable about the split, the chances are it will be less painful, less drawn out, and less costly for all involved.

We can help you meet your obligations

If you are unlucky enough to be going through a divorce, or you’re thinking about ending your marriage, then please get in touch with us and we can explain what you need to know.

February 19, 2024

Mortgage lenders start a price war – what this means for you

Mortgage lenders start a price war – what this means for you

Interest rates went up significantly in the last year, to the current Bank of England base rate of 5.25%, but in a change that is welcome for those looking to buy a house or remortgage, some lenders have begun a price war. Halifax and HSBC were two of the first lenders to start bringing their mortgage rates down, but have now been joined by some other lenders, including Nationwide.

The UK’s largest building society has recently brought out a five-year fixed rate deal which is at the top of the best buy tables, at 3.88% on a 60% loan-to-value (LTV) – considerably lower than some of its rivals. The closest five-year fixed rate mortgage offered on the same basis is with Yorkshire Building Society at 3.99%, according to Moneyfactscompare.co.uk.

It is estimated that around 1.6m borrowers will be looking for new deals this year, with many being significantly more expensive than their current deals, which may have been taken out several years ago when the base rate was very low.

What about shorter-term fixed rates?

Perhaps surprisingly, the shorter-term fixed rate deals are more expensive. Nationwide still had the cheapest two-year fixed rate deal on a 60% LTV at the time of writing, at 4.37%, with Yorkshire Building Society again the closest rival, at the slightly higher rate of 4.49%.

For a three-year fix, you can get 4.44% again with Nationwide, and 4.49% again with Yorkshire Building Society, again on a 60% LTV. These are more expensive deals than the longer five-year fixed rates, which means if you are happy to tie yourself into a longer deal, you could be better off. This is because when you are looking at how much your mortgage will cost you overall, you also need to bear in mind that each time you change or rearrange your mortgage, you may have to pay fees on top that could reduce the benefit of the lower interest rate you can qualify for. So, it might pay to go for a longer-term fixed rate at a lower rate. But you would need to take specific mortgage advice to find out what the best solution would be for you.

Can you reduce the risk taken on a mortgage deal?

The difficulty with mortgages is that if you have a deal ending in, say, September, you need to start the process of remortgaging to get a new deal at least two to three months before the other one ends. But there is always a chance that we could see a big change in interest rates between now and then, or even during the period that your mortgage application is being considered. They could go up, or down.

However, depending on when you start the process of arranging your mortgage, you could use the term that the offer is valid for to your advantage. For example, if you know you go onto your lender’s standard variable rate (SVR) in September when your current mortgage deal ends, you should start the process of getting a new mortgage offer sooner rather than later to give you the best options. A broker could be best placed to help you with this, especially if you’re not confident about finding the best mortgage deal for yourself.

The main reason to start sooner is that a lot of mortgage lenders will make you an offer that will be valid for up to six months. This means you can lock in an interest rate in March and be guaranteed to get it should you choose to take up the offer before your current deal ends in September. This protects you from rates rising in the six months from when you get the offer to when you need to accept the offer.

If rates fall though, you can disregard that offer and take up a lower rate with a different lender if it suits you better. To check whether this is a good idea, you need to consider all costs associated with the mortgage offer you got first. You may find that, when all costs are taken into consideration, it isn’t worth changing. But you do have the option by being smart and applying early.

Check the fees carefully

When you apply for a mortgage, you will usually be charged a product fee by the lender, and these can vary considerably. For example, Nationwide’s five-year fixed rate at 3.88% comes with a hefty fee of £999. But its 4.09% five-year fixed rate comes with no fees, so depending on how much you need to borrow, you might find it is cheaper going with a slightly higher rate and no product fee than a lower rate with a meatier fee.

If you want to benefit from the six-month offer, then the lower the fee you pay to get this, the better because if you then choose to change to another mortgage if rates fall, it could result in another fee. So, it is important that you check the fees carefully and work with your accountant or a mortgage broker, to make sure you’re not losing out when you take the fees and the interest due on the mortgage for the period of the deal into account.

We can help you

If you want to find out how to make the most of any new mortgage offer ahead of when your existing mortgage deal runs out, then please get in touch with us and we will be happy to help you.

February 12, 2024

Rumours circulate over HMRC crackdown on eBay and Etsy sales

Rumours circulate over HMRC crackdown on eBay and Etsy sales

Rumours have been circulating online that HMRC is set to crack down on tax avoidance on sales of goods on the likes of eBay and Etsy, but the basic rules haven’t changed, and anyone who was trading on one of these sites should always have been declaring their earnings to the taxman.

What has changed is that from January 1, 2024, these sites are obliged to provide information to HMRC on sellers operating through the site before January 2025. So, if you have been using these sites to sell items and generating income that should have been taxed, you should get in touch with your accountant to find out what you need to do as soon as possible.

Confusion arises because many people will sell items they no longer want or need on eBay, for example, and in most of these cases there is no tax to be paid. But if you buy goods with the intention of selling them, or you make a capital gain on what you’re selling, then there could be tax to pay.

When would you need to pay tax?

In a useful update, HMRC has outlined the various scenarios that you may find yourself in if you are selling items on one of these sites, and when you would be most likely to need to pay tax. For example, if you are selling items that you own – perhaps because you are clearing out a shed or an attic – then this is likely to be a one-off activity, and you will most probably sell the items for the same or less than you bought them for. In this case, you wouldn’t need to pay tax.

However, let’s say you sold some unwanted clothes or other items you had in the house online to either raise money or simply reduce clutter in your home. You find that you are quite good at getting a good price for these items and decide to start buying items at car boot sales or elsewhere, and then sell them online for a profit. The original sale wouldn’t be considered trading, but the later sales would as you’re deliberately buying goods to sell. In this case, you could be liable to pay tax.

You would also be considered trading if you buy and then sell model cars – another HMRC example – or other items, or you import goods to sell online for a profit. You would even be trading if you make homemade gift cards that you sell online regularly with the intention of making a profit from them.

What other ways might you be liable to tax online?

There are other ways you might be selling that could leave you open to a tax charge. One would be if you are selling online services, such as teaching a language over Zoom or Teams, for instance, or if you generate revenue by offering other services online, such as proofreading. This may not be a service you offer through the likes of eBay or Etsy, but you would be liable to pay tax on income you generate from it just the same.

In fact, any online marketplace – which includes a website or a mobile phone app – would be considered as such by HMRC if any kind of transactional trading takes place on it. These online marketplaces will soon be generating copies of your transaction history that you can get hold of to check your liabilities yourself, but that will also be sent to HMRC directly under a wide-ranging set of internationally agreed guidelines. So, make sure you know if you are expected to pay tax on these transactions, and prepare for it accordingly so you don’t have any nasty surprises.

Are there any allowances?

One thing to consider is that there are certain allowances you might be able to benefit from if you are selling goods online. For example, if your total income from selling goods or services online was less than £1,000 before you take off any costs or expenses, then you wouldn’t need to tell HMRC about it or pay any tax on this.

This is because that amount comes under the Trading and Miscellaneous Income Allowance – which also gives you a £1,000 allowance for any property income under the same legislation. But if the amount you generate is above this, then you would need to inform HMRC and pay any tax due.

Remember though, you also have the Personal Allowance, which for the 2023/24 tax year is £12,570 per year. If you don’t have a full-time job, or you earn less than this across all the ways you generate income each year, then you would still have no tax to pay. But you must still register with HMRC and file a self-assessment return each year.

If you don’t know how to do this, or need to register and file a self-assessment return, you can find more information on Gov.uk

Contact us

If you are unsure whether any of your activities could generate a tax liability, then please get in touch with us and we would be delighted to help you understand your tax position.

February 5, 2024

Dealing with a debt hangover from Christmas? Do this.

Dealing with a debt hangover from Christmas? Do this.

The festivities are over, all the food has been eaten, presents exchanged, and you will probably have already taken your Christmas decorations down. But for many people, the lasting legacy of Christmas isn’t just a few extra pounds around the midriff, but a lot of extra pounds in debt. If you are one of the people who had a splurge on the credit cards to fund the festive season, then you will need to look at how you can reduce your debt hangover to a minimum.

Interest rates have gone up considerably in the past 12-18 months as the Bank of England raised the base rate to bring inflation under control. While that measure has been successful – inflation was at a surprisingly low 3.9% in November, having fallen more than expected – these rate rises have resulted in much more expensive borrowing than people have been used to. So, any spending on credit cards will now be more expensive to service if you’re not able to pay it off within the short period where you’re not charged interest on the cards.

This means you could be spending more on interest than you expect, which increases costs and, potentially, means you will take longer to pay off these debts. But there are several things you can do to reduce the impact this debt hangover will have on you.

Reduce credit card debts ASAP

If you have used credit cards to buy some of your gifts or other Christmas goodies this year, then you will be paying more in interest than you would have last year, according to data from UK Finance. In December 2022, the average credit card interest rate was 17.86%. This year, it has risen past 23% to reach the highest level in 30 years.

As such, reducing the amount you are paying on your credit card interest is a priority as we move into January. You will typically get around 56 days after a purchase where your card supplier won’t charge you interest, so if you are able to pay off that balance within this time, you won’t face any additional interest charges.

However, after this, you will start to pay interest on the balance, and it can become painful. Every card will give you a minimum balance that you need to pay each month, but if you are able to pay significantly more than this, then you will reduce your debt much more quickly. If not, then you could face long and drawn-out debt payments.

The other problem with credit card debt is that if you pay the minimum amount the bank asks for each month, it will take much longer to repay the amount you owe. This is because the interest due on the balance is cleared first, and then any additional money from the payment you have made is used to reduce the balance itself. This means you could be paying less than you think on the balance outstanding. So, you should pay off as much as you can each month without putting your wider finances under stress.

Could you switch to a 0% balance transfer card?

There is another way to reduce the amount of interest you pay on your credit card debt, and that’s by switching the debt to a card which is offering 0% on balance transfers. These offers typically last for between 12 and 18 months, and you would need to have a decent credit rating to be able to access them.

At the time of writing, the best 0% balance transfer deal on offer was with M&S Bank Credit Card Transfer Plus Offer Mastercard, which is offering a 0% balance transfer for 28 months, according to Moneyfactscompare.co.uk. There is a balance transfer fee of 3.49%, or £5, whichever is greater, which you would also need to bear in mind.

If you had a £5,000 debt that was transferred to this card and you paid £185 per month, then you would pay off the entire debt within that 28-month period without incurring any interest, according to calculations from Moneyfactscompare.co.uk.

This is one of the best ways to keep your credit card debt interest-free if you can. If you’re not sure whether your credit rating is good enough to qualify for these deals, then you can check with one of the credit ratings agencies, such as ClearScore or Experian. Some comparison websites will also do a ‘soft’ credit check for you which doesn’t leave a footprint on your credit record. This is important, as if you apply for a few credit cards in succession and you are turned down, then it will negatively impact your credit score.

Don’t use a balance transfer card for new purchases

One thing not to do is use a 0% balance transfer card to pay for new purchases, as these will face interest charges, and can impact how quickly your original debt is reduced. Most banks will apply the payments you make to the debt that is being charged at the highest rate of interest first, and if you create a chargeable balance because you buy something else, this will be first to be paid off. Ideally, use another card for this – if you can get a 0% on purchases card, then you will reduce your costs even more.

If you don’t think you will clear your debt before the end of the 0% period, there is nothing stopping you moving any remainder to another 0% card if you wish, but bear in mind you will be charged a balance transfer fee in most cases.

The other option you have, if you think you will need to keep moving your debt or you may not qualify for a 0% card, is to take out a personal loan at a lower rate of interest than your credit card is charging and reduce your costs that way. It can also help to extend your payments over a longer period for a lower interest amount than you would pay your credit card company.

Your payments will be fixed, so you know how much will have to go out each month, and you will also know exactly when your payments will end, as the loan will have a fixed term. The lowest personal loan rate at the time of writing was with Novuna Personal Finance, which is part of Mitsubishi HC Capital UK, at 7.9% APR. If you had a £5,000 balance and you wanted to pay this over 60 months, you would pay £100.49 per month, according to Moneyfactscompare.co.uk.

If you want to be sure you don’t have a similar Christmas debt hangover next year, then you could look at reducing the amount you spend on the festivities. More than half (57%) of adults in the UK said they reduced their Christmas spending in 2023 by shopping at cheaper supermarkets and limiting the amount they were spending on presents for their friends and family, according to research from the Liberal Democrats. Or you could put away some money each month to build up a Christmas fund for 2024, to limit the amount you need to borrow for the Christmas you really want.

Contact us

If you are struggling to deal with a Christmas debt, then please get in touch with us and we would be delighted to help you reduce your costs as much as possible.

January 3, 2024

Big plans for private and State Pensions

Big plans for private and State Pensions

Pensions are set to have one of the biggest overhauls in recent memory, as the Chancellor also announced a consultation on plans that would bring significant changes to pensions in the UK. The biggest change would be a Lifetime Pension, more colloquially known as a ‘pot for life’ – where someone would choose the pension plan that suits them best, and every employer would then pay into that plan rather than the employee being put into the employer’s scheme.

The obvious benefit is that you are less likely to lose this pension, as it will be the only one that you need to have during your working life. The downside, according to experts, is that it will increase the employers’ costs of providing pensions to employees, as they would need to pay into multiple pensions for different members of their workforce. Paying into a single scheme, which is the current system, is much simpler for employers as they have one block payment to make each month. However, these pensions often get forgotten about by employees as they move from job-to-job.

Triple lock stays, with State Pension up 8.5%

There was concern before the Autumn Statement that the triple lock, which uprates State Pensions each year by the highest of average earnings growth, inflation, or 2.5%, might disappear given the high levels of inflation we have seen in recent months in the UK.

However, Jeremy Hunt chose to keep the triple lock, and the State Pension will be increased by 8.5% from April 6, 2024, meaning someone on the new State Pension will see their weekly income rise from £203.85 to £221.20. Anyone who reached State Pension age before 2016 will see their pension rise from £156.20 to £169.50 per week.

This is one of the largest State Pension increases in cash terms and will go some way to helping pensioners who have been struggling with the cost-of-living crisis.

Tax on pensions passed on after death to be scrapped

The Government has also had a change of heart when it comes to pensions passed on after death. The Chancellor announced that pensions passed to beneficiaries if someone dies before they reach age 75 will not be taxed.

The original plan, announced by HMRC in the summer, was to tax any income taken from a pension pot through drawdown – where an income is taken from the underlying fund over a period of time – or from an annuity, would be taxable. This announcement reverses that decision, and HMRC has now confirmed these payments will continue to be tax free from April 6, 2024.

Under the current rules, a defined contribution pension pot can be transferred to beneficiaries tax-free if the original owner of the pension dies before they reach 75.

The Chancellor also re-confirmed that the Lifetime Allowance – which limited the amount of money you could build up in your pension over your lifetime, including all contributions and investment returns to £1,073,100 – will be removed from April 6, 2024.

We can help you meet your obligations

Pensions are complex and whether you are an employer, employee or self-employed, you should know what you can do to maximise your retirement savings. If you would like more information on this, then please get in touch and we will explain what you need to know.

December 20, 2023

Chancellor announces tax cuts and business boosts

Chancellor announces tax cuts and business boosts

Chancellor Jeremy Hunt announced several tax breaks for individuals and businesses in this year’s Autumn Statement ahead of the General Election next year. While they will help to put a little more money back into our pockets, other decisions made over many years on areas such as the freezing of tax thresholds make them less favourable than they first appear, according to many commentators.

Cuts in National Insurance Contributions (NICs) and major changes for pensions were just some of the big announcements, in the Autumn Statement on November 22, and there is also a freeze on alcohol duty until August next year, which is good news for those who have a favourite tipple.

What were the big announcements?

The NICs cuts were some of the most significant changes – with Class 2 NICs being abolished completely for the self-employed, and Class 4 NICs to fall from 9% to 8% in the next tax year. For employees, Class 1 NICs will also fall from 12% to 10%.

Pension changes are also in the offing too, with the biggest change set to be allowing everyone to have a single pension that they choose for themselves, and they keep for their lifetime, with each employer paying into that pension pot no matter how often they change employers. The real benefit of this is there would be less chance of it getting lost or forgotten about over time.

The State Pension will also rise by more than many commentators had expected, as the Chancellor confirmed the triple lock will remain in place. So, the State Pension will rise by 8.5% – the amount wages rose by in September.

For businesses, the biggest announcement was that full capital expensing which was a measure introduced in the Budget in March and was originally intended to last three years, will now become permanent.

This is just a very small number of the 110 measures the Chancellor announced on November 22. If you want to find out more details about what Jeremy Hunt had to say, you can read his Autumn Statement online, and you can find other supporting documents – which is where the finer details are outlined – at Gov.uk.

ISAs get much needed flexibility

Individual Savings Accounts (ISAs) were given a welcome boost from next April, as the rules will become more flexible, allowing multiple ISAs of the same type to be opened in a single tax year. It will also be possible to make partial transfers of ISAs opened in the current tax year, which gives far greater flexibility to ISA savers than they have previously enjoyed.

One of the main benefits of this change is that savers in Cash ISAs will have the option to benefit more easily from better savings rates as they appear throughout the tax year. Although you can transfer your ISA currently, it is much more restricted, and you would need to move all the money in one go.

It will also be possible to invest in ‘fractional shares’ – where you invest in part of a share in a business, rather than owning a whole share – something that to this point has not been available through an ISA.

However, the ISA limits remain the same – at £20,000 for adult ISAs and £9,000 for Junior ISAs – something many commentators are unhappy about.

IR35 and National Minimum Wage updates

IR35 has been one of the most hotly contested pieces of legislation HMRC has produced, and many people have ended up with huge tax bills after it was applied retrospectively. IR35 is used to determine whether a worker should be considered an employee and therefore under the PAYE tax regime, or whether they can be considered self-employed.

Most often, this question relates to contractors who may be working under their own limited company structure, but if they are working more for one employer than any other, then HMRC believes they should be an employee of that company instead. It has resulted in many high-profile court cases, including for Eamonn Holmes and Gary Lineker.

While the contentious legislation will remain in place, one major change that will be legislated for in the Finance Bill 2023 is to allow organisations who have incorrectly categorised off-payroll workers under IR35 rules, to reduce their additional PAYE liability. This will be done by offsetting Income Tax and Corporation Tax already paid by the worker or their intermediary, where they have been found to not comply with the IR35 rules. These changes will come into effect on April 6, 2024, and typically apply to higher earners.

However, those earning at the other end of the scale got benefits too in the Autumn Statement. Anyone being paid the National Minimum and Living Wage will see their pay increase by 9.88% to £11.44 across the UK for those aged 21 and over, from April 1, 2024. Young people and apprentices will see their wages rise to £6.40 per hour.

Contact us

If you need to find out more about IR35, ISA changes, or any of the other parts of the Autumn Statement that might affect you, please get in touch with us and we would be delighted to help you make sure you are benefiting as much as possible from the changes.

December 18, 2023

Christmas party with a gift of tax breaks

Christmas party with a gift of tax breaks

Yes, it’s that time of year again! Christmas is on the horizon, and the office Christmas party planning will be in full swing for many companies across the UK. So, if you are planning a shindig for your employees, you should maximise the tax breaks available from HMRC, and make sure you don’t fall foul of the rules and fail to pay what could be due to the taxman.

If you want to have a party that can benefit from tax breaks, then there are a few rules you need to follow. The party needs to cost less than £150 per head – providing you haven’t had any other parties during the same tax year. The exemption of £150 per person applies across the year, so if you have had a summer barbeque for example, which cost £60 a head, then you only have £90 per person left to spend on the Christmas party.

The party must be open to all

The parties must be annual – like the Christmas party – and must be open to all employees, otherwise they will not be considered exempt by HMRC.

If you happen to have various offices around the UK, then it is fine to have different parties in different places, as long as all members of staff are able to attend one of them. If this is the case, then you will still benefit from the tax exemption.

One other thing to consider is that if you have staff who are on Salary Sacrifice arrangements within your business, then you need to inform them of how much each social occasion is worth to comply with the rules.

Remember, if any of the events you have put on for staff throughout the year don’t count as being exempt, then you must report all costs to HMRC and you will be liable for National Insurance payments on those amounts.

Each employee will need to have the cost reported to them on their P11D form, and the employer will need to pay Class 1A NICs on the amounts.

You can find out more about your obligations on the Gov.uk website, which is the best way to ensure you don’t end up with a financial hangover.

Let us help you

If you want to know what you can and can’t do in terms of the cost of your Christmas party, then please get in touch and we will be happy to offer you the help and guidance you need.

December 11, 2023

Autumn Statement NICs changes in detail

Autumn Statement NICs changes in detail

The biggest tax cuts announced by the Chancellor in his Autumn Statement were in NICs, where self-employed people will no longer pay Class 2 NICs at all from April 6, 2024. Class 4 NICs will be reduced from 9% to 8% from the same date. Class 1 employee NICs – which apply to employees working under PAYE – falls from 12% to 10% from January 6, 2024.

The removal of Class 2 NICs means anyone who is self-employed and has profits above £12,570 will no longer need to pay Class 2 NICs, but they will still receive access to the contributory benefits associated with these payments in the past, such as the State Pension. Benefits will also still be accessed for those self-employed people with profits between £6,725 and £12,570 through a National Insurance Credit. Those who have profits below £6,725 can still make voluntary NICs if they want to.

What is happening for PAYE earners with NICs?

Employees aren’t being left out of the Chancellor’s largesse either – Class 1 NICs is being cut from 12% to 10% from January 6, 2024. The NICs cuts overall will cost the Treasury around £9 billion and put an extra bit of cash into the pockets of around 29m workers in the UK.

Those earning £20,000 a year will keep an extra £149 per year if they are employed, or £254 per year if they are self-employed. This rises to £754 and £556 respectively, when both the employed and self-employed reach £60,000 according to expert calculations.

However, the effect of freezing tax thresholds more than wipes out the benefit from the cuts announced, as the overall tax take has risen to its highest level for 70 years. The cut to the additional rate threshold to £125,140 at the start of the current tax year, will earn £29.3 billion for the Treasury by 2027/28, according to the Office for Budget Responsibility – the equivalent of increasing the basic rate of income tax by 4p. So, it is a little like giving with one hand while taking with the other.

Veterans NICs relief for companies extended

However, employers who hire Armed Forces veterans will be able to continue to claim relief for longer than expected on the secondary Class 1 NICs due on the wages of veterans for the first 12 months of their civilian employment.

HMRC said: “The relief applies to earnings up to the Veterans Upper Secondary threshold, which is £967 per week.”

To qualify for the employers’ relief, the veteran being employed must have been in the UK regular Armed Forces. The relief is available until April 5, 2025.

Rising costs hit Brits hard

Despite these welcome cuts to NICs providing some benefit to workers, the rising cost of living is outpacing the benefits, based on calculations from the Office for Budget Responsibility which shows how much we will each be paying to cover ongoing debts, especially our mortgage debts.

The OBR forecasts that the cost of servicing household debt will rise from £73 billion in 2023 to £151 billion in 2026. This is higher than the peak of 2008, when the debt figure was £98.3 billion. The Liberal Democrats have calculated that the typical household will soon be spending £5,350 per year to “service” their debts, including mortgages which have seen rates rise significantly along with the Bank of England base rate over the past year.

Liberal Democrat Treasury Spokesperson Sarah Olney MP said: “This is a horror show for Brits. There is no end in sight to the mortgage nightmare faced by millions. Not only have household finances been clobbered by a barrage of tax rises, but now they face household debts not seen since the financial crisis.

“The blunt truth is that any tax cut before the election will be more than cancelled out by the mortgage bombshell.”

We can help you

If you want to find out whether you are going to be better or worse off with the NICs changes, or you need some help or guidance to deal with rising mortgage costs, then please get in touch with us and we will be happy to help you.

December 4, 2023

How to spot tax avoidance schemes

How to spot tax avoidance schemes

Thousands of people found themselves caught up in the IR35 tax avoidance problems, where freelancers who were earning through a limited company set up to deal with their income were deemed – retrospectively – by HMRC to have been involved in tax avoidance. In short, if most of or all their income came from a single organisation, then HMRC argued they should have been directly employed by that organisation, and not allowed to pay themselves through their own business in dividends, as they would have paid less tax than someone directly employed.

While the fallout from IR35 continues – many are paying back huge sums to the taxman, while some have seen marriages fall apart and have even taken their own lives because of the pressure they have been under – there are many other tax avoidance schemes that HMRC has already shutdown.

Now, HMRC is running a campaign designed to help you spot a tax avoidance scheme to help prevent you getting into similar difficulties.

Is HMRC really trying to be helpful?

The campaign is specifically asking if you think you might be involved in a tax avoidance scheme, and is offering you the option of getting in touch directly with HMRC by email if you feel you might be.

The taxman goes on to say: “We’ll support you. We can help you get out of the scheme and settle your tax affairs. Ignoring the problem is not the answer. The longer you leave it the bigger the tax bill.

Our aim is to get you back on the right track. No judgement. Simply offer you the support you need. And if you can’t afford to pay everything in one go, we may be able to offer you an instalment arrangement.”

If you are paid by a single employer through PAYE, then you are probably not in a tax avoidance scheme, but check the money put into your account is the same as the net amount on your payslip. If there is any difference, then question this and find out exactly why it has happened.

You should also check if you receive any additional payments, such as untaxed loans or capital advances. This could potentially be another red flag.

Is there a list of schemes I should avoid?

HMRC does produce a list of schemes it has identified as tax avoidance schemes, but makes clear this list is not a full list of the schemes in operation.

You may think only higher earners are in these schemes, but you would be wrong. Even though some of the biggest names that have been involved in tribunals with HMRC include the likes of Gary Lineker and Eamonn Holmes, everyone from doctors, nurses, and teachers have been touched by the IR35 net. So, it is best not to be complacent.

What is an umbrella company and how do they work?

If you do temporary or contract work through a recruitment agency, you may find yourself working for what is known as an ‘umbrella company’. Usually, this is a company that employs you to do the work for clients you’re connected with through the recruitment agency.

The umbrella company will be your ‘employer’, even though the work you do will be carried out for a client of the agency that sourced the work for you. Typically, you will sign up with the agency, contracted to work for the umbrella company, and then do the work for the recruitment agency’s client. In this arrangement, you must receive at least the national minimum wage and holiday allowance in this arrangement.

You will send your work sheet to the recruitment agency, which charges the client for the hours you have worked, and this money is paid to the umbrella company which then pays you. The structure is quite complex. Remember to always check that any payments made into your account match the net pay on your payslip, and if there is any difference – higher or lower – then you should query this with the recruitment agency.

Not every umbrella company is a tax avoidance scheme, but HMRC says it could be a tax avoidance scheme if you get:

  • A separate payment which you are told is not taxable, such as a loan.
  • More money paid into your bank account than is shown on your payslip.
  • A payment from someone other than your umbrella company, which has not been taxed.
  • Asked to sign another agreement in addition to your employment contract.

Source: HMRC

If you aren’t sure whether you are working for an umbrella company or not, then you can use the online risk checker tool to get more information.

We can help you

If you want to be sure you are staying on the right side of the law when it comes to your tax affairs, then please get in touch with us and we will be happy to help you.

November 28, 2023

Advance Valuation Rulings on imported goods

Advance Valuation Rulings on imported goods

Importers of goods to the UK from overseas no longer need a business tax account to get an Advance Valuation Ruling for their goods. The rulings, which last for up to three years, mean traders and agents can act with legal certainty on the value of the goods they are importing for customs calculations.

By getting the valuation of the goods you are importing in advance, you can also be sure you’re using the correct method to work out the customs value. So, when you bring them into the UK, your customs declaration is correct.

It also helps you to have a legally backed decision for your valuation method, because if it is scrutinised at a later date, you know there should be no problem.

Who can apply for the valuation?

Traders using their own EORI number, starting with the letters ‘GB’ or an agent acting on their behalf can use the new service. But if you want an agent to apply for you, you must add them to your business tax account, or give them a ‘Letter of Authority’ to act on your behalf.

You must make the application before your customs procedures have been completed, because no valuations will be made retrospectively. You need your Government Gateway ID, and you must have identified the method of valuation you think works best for your goods. You can find out more information about the options you have here.

HMRC can refuse an application if you:

  • Are not planning to import the goods.
  • Are unable to supply all the necessary information about your goods.
  • Have already cleared your goods through Customs Import Procedures.

Source: HMRC

You will also need supporting documents relevant to the goods you are importing, which could include commercial invoices from your overseas suppliers, copies of previous import entries, and any commercial agreement you have with suppliers. Any commercially sensitive information included as part of the application must be marked as such before you upload any of these documents.

Let us help you

If you need help to import your goods in the most tax-efficient way while also complying with all relevant laws, then please get in touch and we will be happy to offer you the help and guidance you need.

November 13, 2023

Could you have money sitting in lost or forgotten accounts?

Could you have money sitting in lost or forgotten accounts?

The cost-of-living crisis is hitting many of us hard, no matter how well off we might be. But there are many people who have money sitting in lost bank or building society accounts, pensions or investments who could reclaim it to help them meet their financial demands.

In fact, Gretel, one of the services that helps to reunite this money with its rightful owners, estimates that as much as £78 billion could be sitting unclaimed in lost, forgotten, or dormant accounts that could instead be in your pocket. The lion’s share of this is in unclaimed pensions, with this money alone estimated at between £27 billion and £65 billion.

If you think you could be one of the estimated 21m people in the UK with forgotten or lost money waiting to be claimed, then you should take action to recover that money.

How can people ‘lose’ this money?

It may seem odd that people can just lose their funds, but whenever you move house or changes jobs, if you don’t keep all the relevant organisations informed of these changes, there is a chance that you will no longer be contacted about accounts you may have and can lose track.

For example, you may have had a pension with a company you worked for when you first left school but may not have realised it. Or now you are automatically enrolled in a pension when you join a new business unless you opt out, you may have pensions you’ve forgotten about because you didn’t need to make any active decisions to join them.

No matter how these funds get lost or forgotten, you need to make sure you have this money working for you rather than sitting with the banks, building societies or fund managers.

How to find your lost accounts

No matter how you choose to find lost accounts, investments, pensions, or life insurance policies, remember one thing – you don’t have to pay to do this. There are various ways you can do this for free. If you know the type of product you have lost, then you can go directly to an organisation that deals with that. A good example is the Government’s Pension Tracing Service for anyone who believes they have a pension sitting somewhere that they have not yet claimed.

If you think you have investment funds that you have lost or forgotten, then you can contact the Investment Association and it will check for unclaimed assets. This can cover everything from funds you may have lost, to bank accounts and even forgotten shares.

Is there one place where I can search for everything?

If you prefer to find everything in one place, then you can use the free service offered by Gretel – which is also responsible for running some of the other services in the background.

Using Gretel, you can find everything from pensions, lost bank and building society accounts, lost life insurance policies, forgotten shares, lost investment funds, and lost Child Trust Funds (CTFs). With the average balance of a CTF at £2,175, it is well worth any 18-year-old who has one making sure they lay their hands on the money.

Remember too that while you can search for your own lost or forgotten accounts, it is also possible for executors of a will, for example, to do a search in case any part of the deceased’s estate was not completed because funds had been missed. This is especially useful for life insurance policies that may be outstanding and can be given to the beneficiaries.

Contact us

If you think you have any money sitting in accounts, investment funds or insurance policies that you would like to access, then we are always happy to help point you in the right direction and offer advice.

November 6, 2023

Redundancies expected to rise this year – what you need to know

Redundancies expected to rise this year – what you need to know

The latest official figures show that redundancies are on the rise this year. Expected redundancies are up from 22,525 in June to 23,975 in July, based on the number of HR1 forms filed to HMRC. While this data lags behind real-world figures because of the way it is collated, many big companies have already announced redundancies.

The biggest so far includes Wilko. Its collapse has put around 12,500 jobs at risk. But it is far from alone in making layoffs. Deloitte is expected to lose around 800 of its UK staff, while even behemoths like Google, Amazon, Yahoo and Meta have made redundancies this year. As early as February, the Retail Gazette highlighted that 15,000 jobs in retail had been cut by the time this story was published.

Employees can do little to avoid the cull, but the least you can do is understand what you can expect from your employer. If you’re an employer, then you also need to understand your legal obligations.

Responsibilities of an employer

Let’s start with the employer’s responsibilities. To make a person or people redundant, their job or jobs must no longer exist. If this isn’t the case, it won’t be considered a genuine redundancy. Then you must choose who to make redundant.

This must be carefully considered, especially if you are making compulsory redundancies, as the people you choose must be chosen fairly. For example, under the Government’s fair selection criteria, you can consider:

  • skills, qualifications and aptitude,
  • standard of work and/or performance,
  • attendance,
  • disciplinary record.

Source: Gov.uk

You can use the ‘last in, first out’ approach legally too, providing it doesn’t unfairly impact one group over another. However, you cannot choose people based on:

  • pregnancy, including all reasons relating to maternity,
  • family, including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependants,
  • acting as an employee representative,
  • acting as a trade union representative,
  • joining or not joining a trade union,
  • being a part-time or fixed-term employee,
  • age, disability, gender reassignment, marriage and civil partnership, race, religion or belief, sex and sexual orientation,
  • pay and working hours, including the Working Time Regulations, annual leave and the National Minimum Wage.

Source: Gov.uk

For voluntary redundancies, you must be clear about how you are going to choose people, and ensure they understand you may not give them redundancy just because they applied for it. Another way to reduce staff numbers voluntarily is to offer people incentives to take early retirement. This must be offered across the entire workforce to comply with legislation. But you can’t force someone to retire early.

At all times, good communication between employers and employees is paramount, so everyone knows where they stand, and trust is maintained.

What employees need to know

Employees want to know they are being treated properly, and there are different rules employers must follow depending on how many redundancies they’re making. If it is less than 20, there are no hard and fast rules, but you should still be fully consulted on plans and kept informed of what is about to happen.

If more than 20 people will be made redundant within the same ‘establishment’ as the Government puts it, within a 90-day period, then the company must go through a ‘collective consultation’. Staff or union representatives should be informed initially if they are in your workplace, or the company must speak directly to the staff.

The consultation period must last for at least 30 days if 20-99 people are being made redundant, or 45 days if it is 100 or more. Once this is done, then you will be given notice of your redundancy. At the very least this should include:

  • the reasons for redundancies,
  • the numbers and categories of employees involved,
  • the numbers of employees in each category,
  • how you plan to select employees for redundancy,
  • how you’ll carry out redundancies,
  • how you’ll work out redundancy payments.

Source: Gov.uk

How is redundancy pay worked out?

How much redundancy pay you will get depends on a variety of factors, but there are rules around the minimum statutory redundancy pay that should be offered. For example, anyone not under an employment contract, those with the company less than two years, and those who have taken early retirement won’t get statutory redundancy pay. Your employer may still pay you, but it is not compulsory.

Any employee receiving redundancy pay should be told exactly how it has been worked out in a written statement. The statutory redundancy pay rules allow for amounts equivalent to:

  • 5 weeks’ pay for each full year of employment after your 41st birthday,
  • one weeks’ pay for each full year of employment after your 22nd birthday,
  • half a weeks’ pay for each full year of your employment up to your 22nd

Source: Gov.uk

The length of service is capped at 20 years under these rules, and the amount you will receive is based on the average of the amount you earned in the previous 12 weeks prior to you being made redundant. Even so, weekly pay is capped at £643 per week, and the total statutory redundancy payout is capped at £19,290. But remember, your employer can decide to pay you more, or you may be able to negotiate more.

This payment should be made when you are made redundant, but if not, or your employer doesn’t agree with the amount, you have up to three months to claim the payment due from an employment tribunal. So, even though this might be an emotional time, keep your eye on the calendar to make sure you don’t miss out. The good news is that even if you miss this deadline, the tribunal would have up to six months to decide whether you should receive the money.

We can help you

If your business needs to make redundancies, or you’re an employee about to be made redundant, please get in touch with us and we will help to either make sure you are complying with all of the relevant regulations, or receiving what you expect.

October 23, 2023

New UK Internal Market Scheme launches

New UK Internal Market Scheme launches

A new UK Internal Market Scheme (UKIMS) has been launched to replace the old UK Trader Scheme, which will enable any registered traders to move ‘not at risk’ of entering the EU goods into Northern Ireland. The legislation, which came into force on September 30, is needed following the UK’s exit from the European Union.

The good news is that from October 2024, these ‘not at risk’ items will also be free to move without any unnecessary paperwork, checks or duties, only the existing commercial information will be needed from then onwards.

What are the changes and what do they mean?

There are three main changes under the UKIMS rules compared with the old scheme. The first is that all companies established in the UK will be able to use the scheme, instead of only those companies with a physical premises in Northern Ireland.

The second is that the turnover threshold below which companies involved in processing can move goods has risen from £500,000 up to £2m, making the scheme more widely available. The third is that even if a business is above this £2m threshold, they will still be eligible to move goods under the scheme if they are for use in healthcare, construction, animal feed or not-for-profit sectors.

All traders operating under the old scheme should have received information on how to become authorised for the new scheme. There are some additional pieces of information that need to be supplied for HMRC to complete the enrolment of these traders into the new scheme. You can get more information and guidance on what these are by clicking here.

Let us help you

If you need or want to move goods into Northern Ireland, then please get in touch with us and we will work with you to ensure you have all the relevant permissions under the new scheme.

October 16, 2023

Back to work means it’s time for business development

Back to work means it’s time for business development

For most people the summer holidays will be firmly in the rearview mirror by now and they will be starting to focus on the year ahead. One way to make sure next year will be one to remember is by putting some effort into business development now, so you can start 2024 in good shape.

The EY Item Club said earlier this summer that it expects the UK economy to grow by just 0.8% in 2024, so the sooner you start working on how you can connect more effectively with your customers, whether your business is B2B or B2C, the more chance you have of boosting your profits.

Autumn is a great time for business development, as the months ahead of Christmas are key for many businesses because they plan their budgets and allocate finances to projects the following year. Getting in front of the right people now could give you a better chance of securing a piece of the pie.

Where’s the best place to start?

Most businesses will be doing some form of business development on a regular basis – and if yours isn’t, then this is something to address. Becoming complacent and relying on your current client base to keep your business afloat is a risky strategy.

If you’re new to this, then one of the best places to start is by identifying what your customer looks like. Literally. This may sound extreme, but considering who your customer is, what they are interested in and what they are going to want to spend their money on is the ideal way to target the people or businesses you want to work with.

For example, is your business selling primarily to people or other businesses locally? Could you expand your reach online? Are your customers UK-based, or can you sell your products or services globally? Once you know the answers to these initial questions, you can begin to establish who your customers are.

Where do I find them?

The next step is talking to them. This could be through advertising locally, or perhaps you could harness the power of social media to spread the word about your business. For example, LinkedIn is a great place to do some networking whether your business is B2B or B2C, or both.

Other social media sites, such as X, formerly known as Twitter, Instagram, Facebook, TikTok, Threads and so on, can be just as useful. But you will need to create regular content for them to be effective. This can take time, although there are now some useful AI tools that can do some of the heavy lifting for you. For image creation, you could check out Midjourney, or if you already use Hootsuite to manage your social media channels, then check out its AI content creator OwlyWriter AI.

AI tools aren’t perfect, but they can help take away some of the difficulties that come from starting with a blank page and give you some content to work with. You can even use AI tools to run ads for you now, just be sure you keep a keen eye on how well they are working. This is your brand we are talking about here.

I don’t like social media, what else can I do?

If you’re not a fan of social media, there are plenty of other ways to meet and greet potential new partners and customers. Check out any local trade fairs that are happening and see what it costs to go as a delegate or to exhibit. The latter will usually cost more, so do your research carefully to see who will be there so you know your efforts and money won’t be wasted.

Other business development can be done through business associations, such as the local Chamber of Commerce, or through networking at more social events, such as during a round of golf or at a tennis club.

Once you get into the swing of your business development, use a customer relationship management (CRM) system to keep on top of those conversations and important contacts. This will help you track and action anything you need to so those opportunities don’t get left to wither on the vine. Different CRMs have various pros and cons, so again do your research carefully.

Contact us

If you are considering spending money on your business development, then get in touch with us first and we will help to make sure you are getting the right tools for the job.

October 9, 2023

Deed of assignments won’t be treated as nominations for income tax

Deed of assignments won’t be treated as nominations for income tax

The ability to legally assign an income tax repayment, or the right to an income tax repayment, to a third party has been removed by HMRC from March 15 this year, meaning any repayment will remain the legal property of the taxpayer in question.

The change affects those who may have used a business, an accountancy firm, or a tax agent to facilitate their access to a repayment, along with any company involved in helping individuals in this way.

Why has this happened?

HMRC has made this ruling in a bid to protect taxpayers from unscrupulous operators in this sector, and to make the tax rebate system fairer and simpler for all. The Government wants to maintain trust in the sector, and to ensure that when taxpayers are entitled to claim a tax repayment, they can do so “easily and freely”.

There have also been some concerns around consumer protection issues in the “repayment agent” market, according to Gov.uk.

What are people being protected from?

There are contracts that many repayment agents ask their clients to sign which transfer the legal entitlement to the income tax repayment to them. What many people don’t understand is that to revoke this assignment, both parties must agree – it cannot be done by one side alone. Under these contracts, rogue agents can charge excessive fees to their clients and at times the client won’t benefit from other payments that they may not be aware of.

The bottom line is that you should either make the income tax repayment yourself, or work with an accountant you know and trust. In any case, at the very least, you should make sure you understand the implications of any piece of paper you’re signing.

We can help you meet your obligations

If you think you are due an income tax rebate, then we are happy to help advise you on the best way to get this sorted.

September 25, 2023

ECL now open online for registrations and returns

ECL now open online for registrations and returns

Any regulated businesses that need to sign up for the Economic Crime (Anti-Money Laundering) Levy (ECL) can now both register and make returns via the online service. Registrations and returns cannot be made by tax agents, so every affected business must sign up and make their returns directly.

To file a return online, businesses must have registered with the ECL and have requested their access code. Once they have both they can file their returns.

The ECL online service is accessible via GOV.UK and if your business needs to register, you will need:

  • information about its UK revenue for the last financial year;
  • the date when the organisation started anti-money laundering regulated activities;
  • the contact details of a responsible person in their organisation, including all the following:
    • name;
    • role;
    • email address;
    • telephone number;
    • the business sector the organisation operates in.

Source: Gov.uk.

How often you file and pay depends on your collection authority

Depending on who your relevant collection authority is, you may need to file a return and pay a fee every year. It will be one of the Financial Conduct Authority, the Gambling Commission, or HMRC. You can find out background information on ECL at GOV.UK.

If your collection authority is HMRC, for example, then affected customer will only register for the ECL once but must submit a return and pay the ECL every year your UK revenue exceeds the threshold. This must be done by September 30 each year, so the payment for April 1, 2022, to March 31, 2023, is due on September 30, 2023.

Let us help you

If you think you may need to sign up to the ECL or have already signed up and need help with filing your returns, please get in touch and we will help guide you through the process.

September 18, 2023

Alcohol duty changes – what it means for pubs, stores and small brewers

Alcohol duty changes – what it means for pubs, stores and small brewers

Up to 38,000 pubs and bars which have seen cuts in the tax they pay on the draught products they serve will be better off thanks to changes to the way that Alcohol Duty is calculated from August 1, 2023.

The cuts will make pints and other products sold on tap 11p cheaper than supermarket equivalents, in a bid to help the hospitality industry. It means they can finally compete on a level playing field with supermarkets and continue to be a key part of their local communities, according to the Government.

What are the new duty rates?

The changes are designed to modernise and simplify the Alcohol Duty system which has been in place for the last 140 years – changes the Government claims are only possible to make now the UK has left the EU.

The key changes are:

  • all products taxed in line with alcohol by volume (ABV) strength, rather than different duty structures for different drinks;
  • fewer main duty rates, from fifteen to six, to make it easier for businesses to grow and operate;
  • there will be lower taxes on lower alcohol products – those below 3.5% alcohol by volume (ABV) in strength – a huge growth area in the drinks industry;
  • all drinks above 8.5% ABV will pay the same rate regardless of product type.

Source: Gov.uk

This means Irish cream will fall by 3p, cans of 5% ABV ready-to-drink spirit mixers will be 6p cheaper, Prosecco will fall by 61p and 500ml of 3.4% pale ale will cost 20p less per bottle, according to Government data.

However, it also means other drinks with more than 8.5% ABV will become more expensive. For example, those partial to a port or sherry will see their favourite tipple rise by £1.30 and 97p per 75cl bottle respectively, according to the Wine and Spirits Trade Association (WSTA). Vodka will also go up 76p per 70cl bottle, and a typical 12% ABV bottle of red wine will go up by 44p.

New tax relief for small drinks producers to increase innovation

There is also new relief for small producers to help them increase innovation and add to the growth in the UK alcoholic drinks market, which is up 6% year-on-year and is now worth just under £50 billion. Booze sales are forecast to reach £60.9 billion in 2026.

So, the Small Producer Relief extends the Small Brewers Relief scheme and now allows businesses producing alcoholic products with an ABV lower than 8.5% to benefit from reduced rates of alcohol duty on qualifying products. This should help them experiment and innovate in new types of drink production, and also benefit from the increased trend towards lower alcohol drinks.

Barry Watts, Head of Policy and Public Affairs, Society of Independent Brewers, said: “[This] is the culmination of five years of consultation on the future of Small Breweries’ Relief – a scheme that has made the huge growth of craft breweries possible over the past twenty years. These changes will finally address the ‘cliff edge’ which was a barrier to small breweries growing and build on the scheme’s success by applying it to other alcoholic products below 8.5%.”

The Brexit Pubs Guarantee

Along with these changes to alcohol duty, the Government has also promised that the price of alcohol in pubs will always be less than retailers – something known as the Brexit Pubs Guarantee.

Prime Minister Rishi Sunak said: “I want to support the drinks and hospitality industries that are helping to grow the economy, and the consumers who enjoy the end result.

“Not only will today’s changes mean that that the price of your pint in the pub is protected, but it will also benefit thousands of businesses across the country.

“We have taken advantage of Brexit to simplify the duty system, to reduce the price of a pint, and to back British pubs.”

We can help you

If you need help with calculating the duty you need to pay for your business, please get in touch with us and we will help you understand what you need to do.

September 11, 2023

Pension tax overpayments – £56m returned in Q2 2023 alone, so here’s how to claim

Pension tax overpayments – £56m returned in Q2 2023 alone, so here’s how to claim

People making the most of flexible pension withdrawals have been facing tax overpayments due to miscalculations by HMRC. In Q2 2023 alone, the taxman repaid £56,243,842 to people who had been taxed more that they should on their pension withdrawals. This amounts to an average of £3,551 per person.

The figure is up nearly £8m on the amount overpaid in the first quarter of the year and is nearly double the £33.7m collected in the same period last year. As the cost-of-living crisis continues to wreak havoc on people’s wallets, this is money that would be better being with the people who need it most.

How do you know if you have overpaid?

The people affected by the tax overpayment are those who are starting to access their pension, and it is because of an oddity within the PAYE system, according to Jon Greer, head of retirement policy at Quilter.

He added: “This emergency tax situation can be particularly frustrating for people trying to access their funds quickly. It arises due to an oddity within the PAYE system when people start to take money from their pension as they are not taxed using the correct tax code.”

The problem with emergency tax codes is that you will often end up being charged more in tax than you should be, so reclaiming the overpayment is essential. To do this you would need to use form P55 if you have flexibly accessed part of your pension, form P50Z if you have emptied your pension pot, or P53Z if you have received a serious ill-health lump sum or have accessed your pension while you are still working or receiving benefits.

However, you should always check the tax code that is being applied to any income you receive to make sure you are not paying too much tax.

How many people are reclaiming tax?

It seems plenty of people are putting in their tax claims to make sure they are getting the money they are due. For example, just in Q2 2023, HMRC said it has processed 11,232 P55 forms, 2,987 P53Z forms, and 1,620 P50Z forms, suggesting people are accessing their pensions more readily to help cope with the cost-of-living crisis.

Even though inflation has dropped slightly in the last month, wage growth means we could see additional base rate rises implemented by the Bank of England before the end of the year, according to some experts.

Flexible pension access is a way of increasing your income

If you are over 55 and want to access your pension – the minimum age can depend on the scheme rules for your employer or the insurance company that provides your pension plan – then you can begin to make withdrawals.

The first 25% of your pension can be taken tax-free, and this is easy to calculate if you take your pension pot as whole. But if you choose to take your pension out in a flexible way – which means taking a bit at a time – then you will need to pay the relevant amount of tax on that income.

It becomes more complicated if you are still working and have additional income to take into consideration for tax. This is where the tax overpayments are typically happening. One way around this is to work with a tax professional who can help make sure your tax code is correct, and that you are not going to be paying more than you need to the taxman.

This helps to reduce the risk of overpaying your tax in the first place, allowing you to keep the money in your pocket rather than having to wait for the taxman to give it back to you, which can take some time.

Contact us

If you are considering accessing your pension soon, or you have already accessed it but don’t know whether your tax code is correct, then please get in touch and we will check that you are not overpaying tax or that you have any tax rebates due from HMRC.

September 4, 2023

Why you must keep Companies House data up-to-date

Why you must keep Companies House data up-to-date

When your business was registered at Companies House, you would have provided lots of detail about the business and the people who run it – including who are your directors, company secretary, the breakdown of share capital, and the type of business your company does. But failing to keep this information up-to-date could land you in hot water with the authorities.

Each year, you are required to file your Confirmation Statement to inform Companies House about any changes that have been made to your company in the previous year. Failing to do this within the allotted time will lead to sanctions, which could include your company being struck off the register if you continually fail to comply.

You must tell companies house about any changes, such as the adding or removal of directors of the business, a change of business or personal address, and any changes to the business sectors your business operates in.

Articles of Association and Memorandum of Association

You also need to sign up to an ‘Articles of Association’ and ‘Memorandum of Association’ when your business is formed, which you can choose to write yourself or you can use the model version from Companies House.

The Articles of Association is a longer document which sets out your company’s constitution, so even if you do use a model version of these, you need to check it carefully to ensure it meets the needs of your business, especially if this changes over time. You can amend these to keep them current.

The Memorandum of Association is a single page document which outlines each person who is going to be a part of the company at the start. This cannot be changed even if the people within the business come and go. It is a historical record of how your company was formed at the time, and by whom.

Even if you think everything has been correctly filed at Companies House, it is always worth checking periodically to make sure, as you might be surprised what may have been done incorrectly without your knowledge.

Let us help you

If you think you may need to amend any details held by Companies House about your business, then please get in touch and discuss this and we will do what we can to help you.

August 16, 2023

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

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.

July 31, 2023

Keep National Insurance numbers in Apple wallets now

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.

July 24, 2023

Can hybrid working boost your business?

Can hybrid working boost your business?

The pandemic brought a lot of changes to our businesses, some good and some bad. One that has continued to be a topic of conversation is the desire for more people to be able to work some, or all, of the time from home.

If your business requires people to be onsite – such as a coffee shop, a factory, or a dental practice, for instance – your staff would have little choice about where they are working. But for administrative roles, or those that could be done from anywhere in the world with a phone, a computer and an internet connection, the argument for getting people to come into the office is a harder one to win.

Employers reluctant to allow workers free rein

Some employers are reluctant to allow their employees to work from home, perhaps because they fear they will get less done there than they would in the office. But various pieces of research show that allowing employees more freedom about where and when they work increases productivity rather than decreasing it.

There are fewer distractions when employees work from home compared to the office, and the ability to work as and when it suits them often results in people being more productive than when they are being forced to work specific hours.

A recent report from the ACCA – UK Talent Trends in Finance 2023 – found that the UK is leading the way when it comes to hybrid and remote working.

Jamie Lyon, head of Skills, Sectors and Technology at ACCA, said: “Only one-fifth of respondents in the UK identified as fully office based, with the remaining 80% either adopting a hybrid approach to work or being fully remote. However, globally, the picture is notably different, with over half of respondents being fully office based. And 77% of respondents in the UK feel they are more productive when working remotely.”

Could hybrid working be good for your employees?

Many companies are already allowing some staff to work from home at least part of the time. But if your business isn’t one of them, you may want to consider adding this as an option.

It can provide various benefits, including:

  • Being more inclusive for employees who find it difficult to juggle their home and work life around specific office hours.
  • Greater productivity.
  • Improved employee wellbeing because they have more control over their working and home life.
  • Greater flexibility in allowing employees to change their approach based on what the business needs at a particular time.

However, not every employee is keen to work from home. Some people prefer to be in the office full time as they thrive in this more social environment. So, bear this in mind when you are creating hybrid working policies.

Are there other benefits to your business?

One other major benefit to the business could be the reduced amount of office space needed. If your company owns its office building, you may be able to let out part of that building to another business to benefit from additional income. Alternatively, if you use rented office space such as WeWork, you may be able to reduce the size of the office you need there and cut your monthly outgoings.

You may also consider offering employees a one-off payment to set up their home office to ensure they don’t end up with work-related injuries, such as repetitive strain injury (RSI) from having a poor posture at work because they are using the wrong type of chair or desk and so on. Any saving you can make on office space could be used to offset this payment, and remember it would also be tax deductible.

We can help you

If you are considering hybrid working as part of your business strategy, then please get in touch with us and we can help you understand the benefits and costs that could be involved.

June 19, 2023

How you can benefit from salary sacrifice

How you can benefit from salary sacrifice

Salary sacrifice is something you may have come across before but not fully understood. After all, why would anyone want to voluntarily give up some of their salary? The reality is that, in some instances, using salary sacrifice to get alternative benefits can reduce your tax bill considerably and make buying the things you would buy anyway much cheaper.

Employers have the ability to arrange large discounts if they know a number of employees will take up a specific benefit, because the provider will be able to sell a larger number in one go if the product or service is being paid for through a company payroll.

What can it be used for?

There are many things employers can offer to their employees through a salary sacrifice scheme. Bicycles, bus passes or other transport payments, gym membership and even car parking or laptops can all be offered via salary sacrifice. People can also make pension payments this way.

The main benefit is that by purchasing goods and services through the payroll, the payment is taken from your salary at source which means you don’t pay tax or National Insurance on the amount of money used to pay for these items. For example, a higher-rate taxpayer would save 40% and 2% NI on the amount of money they sacrifice to make the purchase, while a basic rate taxpayer would save 20% and 12% on NI.

If you are keen to get an electric vehicle, using salary sacrifice can be one of the most cost-effective ways to achieve this. Although this is seen as a ‘benefit in kind’, the value applied to electric cars is just 2%, while for petrol and diesel cars it can be as much as 37%.

As the salary isn’t being ‘paid’ to the employee, employers will be able to reduce their NI contributions too, making it a win-win for all.

We can help you meet your obligations

If you are interested in offering salary sacrifice for your employees, or approaching your employer to see if it will offer you a salary sacrifice scheme, then please discuss this with us and we will advise you on how to do this.

June 12, 2023

Deadline to catch up on National Insurance contributions extended

Deadline to catch up on National Insurance contributions extended

Anyone with an incomplete National Insurance contributions (NICs) record between April 2006 and April 2016 now has until July 31 to add to their NICs to qualify for a full State Pension after HMRC extended the deadline.

Thousands of taxpayers have incomplete years in their NICs record who could get a higher State Pension if they make voluntary payments to top up incomplete or missing years, according to the Treasury.

The original deadline for voluntary payments to fill any gaps was April 5, 2023, but this was extended after members of the public voiced concerns that this did not give them enough time.

Victoria Atkins, the Financial Secretary to the Treasury, said: “We’ve listened to concerned members of the public and have acted. We recognise how important State Pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their National Insurance record to help bolster their entitlement.”

How would I know if I’m affected?

The easiest way to find out if you have any missing NICs years is to ask for a Pensions Forecast from the Department for Work and Pensions (DWP). The relevant information to get a State Pension forecast, and to decide if making a voluntary National Insurance contribution is the best course of action for you, plus how to make a payment, is available on GOV.UK.

You can also check your National Insurance record, via the HMRC app or your Personal Tax Account. If you aren’t sure how to do this, your accountant will be able to help you. If you choose to make additional voluntary payments, these would be at the existing rates for 2022/23.

NICs to qualify for a full State Pension

To get the full State Pension, you will need to have paid 35 full years of NICs. To get any State Pension, you will need to have paid 10 full years of NICs. If you have paid between 10 and 35 full years of NICs, you will get a proportion of the full State Pension.

This is why it’s important to find out how many full years of contributions you have made. The full State Pension amount is currently £203.85 per week. So, if you had 25 full qualifying years, you would divide £203.85 by 35 and then multiply by 25 to see what you would get. In this example, you would receive £145.61 per week at the current rate.

Remember, you should get advice to see if it is worth making additional voluntary contributions to complete your NICs record. So, speak to your accountant before you make any payments.

Let us help you

Pensions – and especially the State Pension – can be complex to navigate. If you are concerned you haven’t got enough qualifying years for your full State Pension, then please get in touch with us and we will advise you on the best course of action.

June 5, 2023

Base rate rises again – what it means for business

Base rate rises again – what it means for business

The cost-of-living crisis is taking its toll across all areas of our lives now. While inflation has fallen very slightly this month to 8.7%, food prices remain stubbornly high, and the Bank of England (BoE) is expected to continue with its base rate rises until later this year.

The last rate rise in early May took the base rate to 4.5%, but analysts predict that the BoE could still push forwards with additional rate rises in the coming months and expect the base rate to hit 5% by the end of the year.

What is happening to business borrowing?

Rising base rates impact all types of borrowing – with mortgage borrowers on variable or tracker rate mortgages hit first as lenders are quick to pass these rises on. But businesses are affected too in a variety of ways, because it is also more expensive for them to buy goods and services to keep the business going. Many of these costs would ordinarily need to be passed onto consumers. But as they are already struggling with rising energy bills and mortgages, among other things, the amount that can be passed on without losing customers altogether is minimal.

So, businesses are being squeezed in the middle of these rising costs and many are taking out business loans to cover their outgoings in the short, and sometimes even longer term. The latest official figures from the BoE show that net business borrowing by UK non-financial businesses in March was £2.5 billion in bank and building society loans, including overdrafts.

Large non-financial businesses borrowed £3.2 billion net in March, while small and medium non-financial businesses actually repaid a net of £0.7 billion in March.

This compares with £4.5 billion, £3.7 billion and £0.6 billion of net repayments respectively in February. Borrowing by large businesses rose from 3.1% in February to 3.3% in March, while it fell by 4% in March for SMEs.

Interest rates on business loans have fallen back very slightly, but they are still much higher than they were in December 2021 when the BoE rate rises began. The average cost of new borrowing from banks for non-financial businesses was 5.76% in March, well above the 2.03% average back in December 2021.

For SMEs specifically, the average rate was even higher at 6.36% in March, when in December 2021 it was just 2.51%. But remember, the BoE base rate has risen twice since these figures were collated, so the likelihood is these loans will be even more expensive now.

Reassessing your business needs

These increases in borrowing and the reduction in spending by consumers will put additional pressure on many businesses, prompting them to run leaner and cut costs wherever possible and sensible to do so.

For example, if you hold a lot of stock within your business, you may want to free up some of your cash by either sending that stock back, if it is on sale or return, or putting it into a sale. Your profit margins on that stock may be reduced, but that freed-up cash can be used to plug potential holes elsewhere in the balance sheet.

You may also need to consider reducing staff numbers if you are not as busy as usual. But be careful about doing this because if your service standards reduce, it could drive customers away. Customers are the lifeblood of any business, so prioritise them no matter what is going on in the background.

Get advice on business borrowing

However, if you have cut your costs to the bone and made as many changes to your business as you dare, you may still need to raise funds to get you through a rough patch. You can do this in a variety of ways:

  • Borrowing directly from your bank
  • Raising money through a fundraiser from investors
  • Remortgaging a property you own

The way you choose could depend on how quickly you need the money and what options are available to you. Borrowing directly from your bank would be the simplest and fastest option if your bank is prepared to lend to you. Speak to your accountant to find out what amount you would realistically need to get you through your difficulties based on your income and outgoings.

You don’t want to ask for too little because you will need to raise money again too soon. But you also don’t want too much because you will be paying interest on money you don’t really need.

Raising money from investors can be a good way to get additional investment but will involve parting with a proportion of your business in most cases. This is something to think about carefully, especially if it would involve losing the controlling stake in your business.

Remortgaging a property you own should be a last resort, especially if it is your home. The danger is that if your business ultimately goes under, you could lose your livelihood and your home at the same time. The ultimate double whammy. If things are so bad that the company might fail without remortgaging your home, then think seriously about whether letting the business fail is the best option, no matter how hard that decision might be.

Contact us

There are many ways to reduce the overheads in your business or to increase the amount of money you have available to boost cashflow, buy machinery or stock, or to hire new employees. If you need to achieve any of these things or want to find out if there is a better way to manage the cashflow in your business, we are here to help. Please just get in touch with us and we will support you.

May 31, 2023

Could you benefit from a free Government midlife MOT?

Could you benefit from a free Government midlife MOT?

Our cars go through MOTs each year once they reach a certain age, but have you ever thought of giving yourself an MOT? The Government is offering a free midlife MOT for those in their 40s, 50s and 60s to help them make the right financial decisions for retirement.

The midlife MOT provides free online support to those in the private sector, and can be done face-to-face with Department for Work and Pensions staff in job centres for those looking for work. The aim is to ensure you are giving sufficient thought to your money, work and wellbeing as you head into the later stages of your life.

What’s involved?

The online midlife MOT provides a series of prompts to make you think more carefully about what you may need to do as you get older. For example, will you be able to continue in your current job as you get older? Or will you need to learn new skills to continue to provide for yourself and your family?

You are also prompted to consider whether you have enough money to live on to maintain your current lifestyle? Or whether you might need to examine your pension saving and put some extra aside to enjoy your retirement more comfortably.

The specific questions on the midlife MOT site are:

My work: Am I confident I can continue in my current job, or do I need to protect myself by reskilling? Will caring responsibilities or other priorities mean I need to work more flexibly?

My health: Am I taking the right steps to maintain or improve my health? Would workplace adjustments make it easier for me to stay in my job for longer?

My money: Do I have enough savings to maintain my current lifestyle? I’m confused about pensions, what are my options?

My work and skills: As your situation changes as you get older, you may find that flexible working arrangements can make a difference.

Source: https://www.yourpension.gov.uk/mid-life-mot/

Is this relevant to employers or just individuals?

There is a specific section of the website that highlights what employers can do to help their staff access the midlife MOT for their workplace. There are details on how this could work for both larger companies and smaller employers and you can also download toolkits to use within your business for relevant staff.

There are also a number of useful links within the YourPension.gov.uk/mid-life-mot/ webpage to help people navigate to the relevant information they need to check all aspects of their life are on track as they reach this point in their life.

Let us help you

Do you feel like you need a midlife MOT but would rather talk things through with someone than simply navigate this on your own? If so, then we can help you understand whether you are financially ready for the next chapter of your life. Just contact us and we will guide you through everything you need to know.

May 15, 2023

Check your PAYE code is correct for this tax year

Check your PAYE code is correct for this tax year

Every employee working for a company has a Pay-As-You-Earn (PAYE) code which denotes how much tax you will pay in a year. If this code is incorrect, it could mean you are paying more or less tax than you should be, and may need to reclaim that money, or pay more. Neither is a good option, so spending a little time at the start of the tax year checking you have the right code could save a lot of hassle later on.

Why your tax code could be wrong

If you have changed jobs recently, got a pay rise, or gone on maternity leave, you could find your tax code hasn’t kept up with the changes in your life.

Your employer and HMRC are not responsible for ensuring you have the right tax code, and while they do their best to ensure you are paying the right tax, ultimately it is your responsibility to make sure your code is correct. They are computer generated by HMRC, so failing to check could mean you have the wrong tax code for an entire year or more.

The question is, how do you check? Helpfully, you can find out what the different parts of your tax code mean online. There are a few things to look for. For example, most people – with the exception of very high earners who have their personal allowance reduced once they reach annual earnings of £100,000 – can earn £12,570 this year before they need to pay any tax at all.

If you don’t have any benefits in kind from your employer, such as a company car, or a season-ticket loan, then you will most likely have the tax code 1257L. The ‘L’ in this code simply means you are entitled to the normal personal allowance.

However, let’s say you have transferred 10% of your personal allowance to your spouse under the Marriage Allowance transfer. In this case, you will have an ‘M’ at the end of your tax code.

A full list of tax code information and what you should expect to see can be found on the Gov.uk website. If you aren’t sure what your tax code should be, then discuss this with your employer or, if you work for a larger company, you can speak to your HR department.

We can help you meet your obligations

If you are still struggling with your PAYE code and want to be sure you are paying the right amount of tax, then contact us and we will go through this for you to make sure everything is correct.

May 8, 2023

Make the most of the new tax year by acting now

Make the most of the new tax year by acting now

The new tax year started on April 6 and while many people will wait until the last minute to maximise the tax benefits available to them, there is a lot to be said for starting your tax housekeeping sooner rather than later.

There are many ways we can benefit from the tax breaks available each tax year. But trying to cram everything into the month before the tax year ends means you are likely to miss out on some of them. Planning ahead from the start of the tax year means you can mop up any allowances you can access.

Use your ISA allowance early

One of the most beneficial allowances to start using early in the tax year is your Individual Savings Account (ISA) allowance. Each tax year – which runs from April 6 to April 5 – we all have the option of putting up to £20,000 into an ISA. You can put as much as you want into any type of ISA, providing you don’t breach the £20,000 threshold in a single tax year. The money grows free of Capital Gains Tax and Income Tax, plus in a cash ISA you will not pay any tax on savings interest.

Using your ISA allowance at the beginning of the year can generate significant benefits, even if you can’t put the whole £20,000 in at once. For example, if you calculate the difference in the value of an ISA with just £3,000 invested at the beginning of every tax year since 1999 compared with the same amount invested on the last day of the tax year over the same period, the early birds will have more than £9,000 extra in their pot based on the performance of the average global equity fund.

If you and your spouse have both used up your £20,000 allowance and you have children, you can also put up to £9,000 for each child into a Junior ISA. This is a perfect way to put money aside throughout their childhood to pay for school fees, university or even to build a deposit to help them buy their first home.

Use your Capital Gains Tax allowance

This tax year – 2023/24 – the Capital Gains Tax allowance has been more than halved, from £12,300 in 2022/23 to just £6,000. So, anyone crystallising gains of more than £6,000 in this tax year will need to pay CGT on any amount above this limit. The rate you pay will depend on your marginal rate of income tax and what type of asset the gain has been crystallised on.

As we all have the same CGT allowance, it is possible for spouses to shelter up to £12,000 from CGT this year, but that will take some planning. So, speak to your accountant to make sure you are making the right decisions at the right time.

Maximise your Inheritance Tax planning by using your annual allowances

Inheritance tax (IHT) is often considered to be a tax just for the rich. But as house prices have risen and the threshold for paying this tax has remained static at £325,000 since 2009, and is likely to remain at this level until 2028, more people than ever are paying IHT. In fact, the latest figures released by HMRC show IHT receipts have soared by £1 billion to £7.1 billion from April 2022 to March 2023, largely due to house price increases, especially in the South East of England.

So, if you own your home, you may want to think about how you can use the annual allowances to reduce your liability when you pass away.

Any amount you have in your estate at death above this Nil Rate Band – which includes all your assets such as your home, cars, antiques, jewellery, collections and so on – will be taxed at 40%. There is an additional allowance of £175,000 per person, called the Residence Nil Rate Band, if you are passing your home to a direct descendant, such as a child or grandchild. But this is not available to those without children.

Spouses or civil partners passing assets between them on death will not be subject to IHT. So, any unused allowance remaining can be used by the second spouse or civil partner on their death, giving a maximum threshold of £1m if none of the Nil Rate Band or RNRB was used on the first death. The allowance can be passed automatically, you would just need to let the executor of the estate on the second death know this as they would need to make the claim when they apply for probate. So, a letter with your will would be a good way to do this, or by discussing this with the person who writes your will with you.

If your estate would still exceed this level, then you can legally reduce your estate’s value each year by making gifts to loved ones. For example, you can make gifts of up to £3,000 each year which will be free of IHT when you die.

You can also make other gifts of any amount you like, and providing you survive those by seven years, they will no longer be within your estate for IHT purposes. But the rules can be complex, so get advice from your accountant if you think you could be affected by IHT.

Contact us

These are just a few of the ways you can reduce your tax bills this tax year. We can help you make the most of these and other allowances before you lose them. So, please get in touch with us and we will help you make the right financial decisions for you and your family.

May 3, 2023

Pension changes make retirement saving more attractive

Pension changes make retirement saving more attractive

Pensions got a major overhaul in the Chancellor’s Budget announcements, with an increase in the amount you can put into your pension each year and an effective removal of the limit that your pension can reach before facing significant penalties of as much as 55%.

Rise in Annual Allowances

From April, the Annual Allowance – the amount you can put into your pension each year and receive tax relief, providing you have paid enough in tax in a year to warrant it, as the taxman will not give you more in relief than you have paid – will rise from £40,000 to £60,000.

There is also a rise in the Money Purchase Annual Allowance, which is the amount you can pay into a money purchase pension each year once you have vested part of it. This rises from £4,000 to £10,000 for the 2023/24 tax year – taking it back to its previous level.

The Tapered Annual Allowance is also going up from £4,000 back to its original level of £10,000. This taper kicked in at an ‘adjusted income’ level of £240,000, but this also rises to £260,000 for the 2023/24 tax year.

Lifetime Allowance effectively removed from April 2023

One of the most eye-catching measures in the Budget was the effective removal of the Lifetime Allowance, which limited the amount a pension fund could grow to £1,0731,000 before charges of up to 55% were applied on the additional amounts unless someone had a ‘protected pension’.

From April 6, these penalties will no longer apply, meaning there is no longer a penalty for passing this limit. This renders the Lifetime Allowance irrelevant as there will not be a penalty for breaching it. But it will take separate legislation to remove the Lifetime Allowance itself completely.

This is something that will be valuable particularly for some senior NHS doctors, as there has been a rising trend in them leaving the profession through early retirement, in part at least to prevent their pension going over the Lifetime Allowance.

Limit on the tax-free lump sum

However, there is a cap on the amount that someone can take from their pension as a 25% tax-free lump sum, thanks to the removal of the penalties being removed for breaching the Lifetime Allowance.

From April 6, you will only be able to take a maximum of £268,275 tax-free from your pension, which is the same as the maximum you could take under the Lifetime Allowance.

These measures combined are expected to cost the Treasury around £4 billion over the next five years.

We can help you

These pension changes are wide ranging and could significantly change your retirement planning, so if you want to know more about how you can make the most of these changes, then please get in touch and we will be happy to help.

April 24, 2023

Childcare benefits with a sting in the tail for high earners

Childcare benefits with a sting in the tail for high earners

Up to 30 hours of free childcare per week will become available for any child older than nine months from 2024, when there is a staggered introduction starting at 15 hours in April 2024, rising to 30 hours in September 2025. This will be a welcome boost for parents struggling to manage what for some is a monthly bill higher than their mortgage. But there is a sting in the tail for higher earners.

However, it may not even be as beneficial as it first seems even for those on more nominal salaries as each local authority calculates the hourly funding rate it will allocate in a different way. So, the Government’s hourly funding rate for children aged two at £5.83, which could save parents an average of £6,646 per year on childcare, could be less depending on where you live in the country, creating something of a postcode lottery for this benefit. Parents would need to make up any shortfall for nursery care from their own pocket.

Also, free childcare only runs during term-time, so any additional childcare would need to be paid for directly themselves. But there is an additional £2,000 of tax-free childcare offered to those who are eligible.

The scheme extension means childcare for two children

The scheme has been extended to allow two children of pre-school age to get access to free childcare under the Budget announcements, which in London could mean an annual saving of around £23,300 for parents under the 30-hours of free care scheme when it finally kicks in.

Add in the additional £2,000 of tax-free care per child and the amount saved rises to £27,300 – but there is a precipitous drop once income reaches £100,000 per year. At this point, all of these benefits are lost, and you would have to pay all of the childcare from your own pocket.

To achieve this and be no worse off, it would mean you need to earn £156,279 before you achieved the same disposable income you had while earning up to £100,000 and benefitting from these childcare schemes in London.

For the rest of England, the average is slightly lower – with the childcare support worth £21,718 and the threshold to achieve the same disposable income once breaching the £100,000 earnings limit also being slightly lower at £146,114. But it is still a real hit to the pocket. It means parents are actually worse off if they are earning between £100,000 and £156,000 according to data from AJ Bell.

Can I do anything about this?

For any parent facing this cliff-edge change in circumstances, there is some good news. The £100,000 threshold is your income minus any pension contributions you make, so it would be wise to consider moving any additional income into your pension to take you back under the £100,000 income threshold.

This has been made significantly easier and more attractive once the penalties for breaching the Lifetime Allowance have been removed, and the other annual allowances are also increased.

Let us help you

If you are likely to find yourself in the position where your earnings will exceed £100,000 and you will benefit from the additional free childcare, then please get in touch and we will help you to maximise the benefits you can receive.

April 17, 2023

Highest rate of tax will be paid by more people after the top threshold is reduced in the Budget

Highest rate of tax will be paid by more people after the top threshold is reduced in the Budget

Higher earners have been dealt a blow after the Chancellor changed the level at which the 45% additional rate of tax applies from £150,000 to £125,140.

The move takes effect in the 2023/24 tax year and brings the threshold in line with the point at which the personal allowance, which is frozen at £12,570 for 2023/24, is removed entirely. For those earning more than £100,000 a year, the personal allowance is reduced by £1 for every £2 earned above this limit.

More than £1,000 due in extra tax

The measure will cost an extra £1,243 a year in tax, said Steven Cameron, pensions director at Aegon, while Kwasi Kwarteng’s short-lived mini-Budget would have removed this additional rate completely.

However, once again it may make it more appealing for higher earners to put money into their pension schemes. Mr Cameron said: “While the freeze on thresholds for basic and higher rate income tax will create more tax take ‘by stealth’, there’s nothing stealthy about the cut in the additional rate threshold which rather than being frozen is being reduced from £150,000 to £125,140.

“But in current conditions, it’s not surprising that those who can afford to shoulder a greater part of the burden of tax increases are being asked to do so.

“Note that the existing gradual phasing out of the personal allowance once individuals earn over £100,000 means earnings between £100,000 and £125,140 are already effectively taxed at 60%. It now means thereafter, the marginal rate will be 45%.

“Together, these higher rates of income tax make paying personal contributions to pensions, which get relief at full marginal rate, particularly appealing.”

We can help you meet your obligations

If this change will affect you, then please get in touch and we will help you to maximise your tax life and work with you to perfect your pension planning.

April 10, 2023

Budget round-up – what’s changed and how it might affect you

Budget round-up – what’s changed and how it might affect you

The latest Budget on March 15 was a mix of wins and losses for people and companies around the country, with some considerable changes for pensions and the highest rate taxpayers thrown in.

The personal allowances for the 2023/24 tax year were largely frozen once again, which creates what is known as ‘fiscal drag’ where more people are brought into higher tax brackets as a result when they receive pay rises. The one exception was the very highest rate of income tax at 45%, where the amount earned before hitting this level was reduced from £150,000 to £125,140 from April 6.

Help with energy bills extended

The Chancellor extended the Energy Price Guarantee to help keep households sheltered from some of the worst of the energy price rises we have seen in recent months. The guarantee has been kept at £2,500 and extended through April, May and June – taking us to the warmer summer months.

Despite energy prices being around 50% of the level forecast back in October, this measure is still worth around £160 to the typical household. The £2,500 cap is not the maximum an energy bill will hit, but it does cap the amount a typical energy bill will reach.

Prime Minister Rishi Sunak said: “We know people are worried about their bills rising in April, so to give people some peace of mind, we’re keeping the Energy Price Guarantee at its current level until the summer when gas prices are expected to fall.

“Continuing to hold down energy bills is part of our plan to help hardworking families with the cost of living and halve inflation this year.”

As Rishi Sunak said, the move has the double benefit of helping to drive down inflation, which was still in double figures in the 12 months to February at 10.4%, slightly up on the 10.1% we saw over the equivalent period in January. Economists had expected inflation to fall in February, so it came as something of a shock.

ISA Allowance frozen for 2023/24 but SEIS investment access rises

The annual Individual Savings Account (ISA) allowance was also frozen again for the 2023/24 tax year, leaving it at £20,000 for each person.

However, the amount that companies can access, and use, of the Seed Enterprise Investment Scheme (SEIS) is rising. The company investment limit will go from £150,000 to £250,000, while the limit at the date of share issue on a company’s gross assets will rise from £200,000 to £350,000. In addition, the limit of a company’s ‘new qualifying trade’ will go from two to three years for the 2023/24 tax year.

For investors, the annual limits on how much individuals can claim Capital Gains Tax and Income Tax re-investment reliefs will rise from £100,000 to £200,000.

There are also changes to Real Estate Investment Trusts (REITs), which are designed to make them more competitive. For example, REITs have needed to hold at least three properties, but where one commercial property is worth more than £20m within the REIT, this requirement is removed from April. There is also a rule change for properties within REITs that are sold within three years of significant development. These properties have been seen as outside of the property rental business, but this rule is being amended, as are the rules for deducting tax from income distributions generated by a REIT property when they are paid to partnerships.

If you want to find out more about what other measures were introduced, removed or changed in the Budget, you can see details on the Gov.uk website.

Contact us

There are numerous changes that may affect you and your business in the Budget, so if you want to be sure you are maximising the benefits and minimising the losses, then please get in touch with us and we will help you make the right financial decisions.

April 3, 2023

The cost of divorce – how the pain can be more than emotional

The cost of divorce – how the pain can be more than emotional

January has earned the dubious distinction of being the month when more couples decide they want to get divorced than any other. The reasons are likely to be myriad, but the likelihood is that they either mark Christmas or New Year as a line in the sand for changing their lives, or simply that spending so much time together during the festive season helps them realise they are no longer compatible.

One law firm has seen an increase of 150% in divorce enquiries this January compared to the surrounding months, possibly boosted by the fact that couples can now have a ‘no fault’ divorce in England and Wales – it was already available in Scotland – after new legislation came into force last April. But the emotional turmoil that divorce brings is only one source of pain, as the financial cost is also considerable.

What does divorce have to do with the taxman?

Splitting assets between couples who have had their lives intertwined for decades is a complicated business. Add into this the emotion involved in such splits and it becomes very difficult to deal with these issues amicably.

However, when it comes to splitting assets, there may be a tax implication depending on what you do and how you do it. For example, if a couple splits a pension pot – which is taken into account as part of the assets held by one or both spouses depending on their financial position – the way this is done could potentially be a benefit for one or both of you. If the pension itself is likely to breach the £1,073,100 Lifetime Allowance threshold, then splitting this could mean both parties are able to add more to their pension without breaching this limit.

However, pensions are often not split in this way. So, often there is an offset of other assets – one spouse may get the family home, for instance, and the other spouse may keep the pension intact. It all depends on the financial agreements you make in the divorce.

What else should divorcing couples consider?

The pension conundrum is definitely not the only issue for divorcing couples to consider when it comes to their finances. There could be Capital Gains Tax (CGT) charges to think about as assets are split between the two parties.

To be sure there is no CGT to pay on the transfer of assets between you, it would be best to transfer assets before you formally separate – as long as you lived together at some point within the current tax year, which runs from April 6 to April 5 the following year, you shouldn’t have a CGT liability on giving assets to the other spouse.

If you split assets after you have been separated and the divorce has been finalised, then there could be a CGT liability. You can find out more on Gov.uk and by speaking to your accountant.

There are other areas to consider too. For example, if you pay spousal maintenance after your divorce, you may be able to claim tax relief on this. Also, if you had a High-Income Child Benefit Charge while you were with your spouse, you may now be able to claim full Child Benefit. Again, more information is available or you can speak to your accountant.

Contact us

If you are separating from your spouse or civil partner, then please get in touch with us and we can help you make the right financial decisions to keep your costs to a minimum.

March 6, 2023

Rateable property values change from April 2023 – find out what this means for you

Rateable property values change from April 2023 – find out what this means for you

Working out rateable property values may feel like something of a dark art to those not in the know, and the news that these values are set to change again from April 1 next year could strike fear into the hearts of some.

The Valuation Office Agency (VOA), which is part of HMRC, is making the changes and you will need to check on the VOA website to find out if and how the rateable value of your property is changing. Remember this does not apply to residential properties, only commercial properties.

What can I expect?

It will be a case of checking your property on the site individually to see what the new valuation will be, but the rateable values from April 1, 2017 to March 31, 2023 are based on the market rental value of the property in 2015. But from April 1, 2023, the rateable value will be based on the market rental value from 2021.

Changes to self-catering holiday lets

Self-catering holiday lets which are assessed for non-domestic rates – any properties considered domestic are subject to council tax – currently only need to be available for short-term lets for 140 days a year, and there is no minimum number of days the property needs to be let to qualify as a commercial holiday let.

However, from April 1, 2023, the criteria will change and to be defined as a commercial holiday let it will need to have been let for 140 days or more in the previous year and let commercially for 70 days or more in the last 12 months, if the property is in England.

If the property is in Wales, then it will need to have been available to let commercially for short lets for 252 days in the previous and current year, and actually let for 182 days or more in the previous or current 12 months, according to Gov.uk.

Remember, if you are a small business, then you may qualify for the Small Business Rates Relief Scheme or perhaps one of the other rates relief schemes. This is definitely worth checking as it could significantly reduce your bill, or you may not have to pay anything at all.

We can help you meet your obligations

Speak to your accountant now and ask him or her to help you get the right information so you understand how your rates may change and whether you need to make a change to the status of your self-catering holiday let from April 2023.

January 23, 2023

New Extended Producer Responsibility rules come into effect on January 1, 2023 – is your business ready?

New Extended Producer Responsibility rules come into effect on January 1, 2023 – is your business ready?

New Extended Producer Responsibility (EPR) come into effect at the very start of 2023, and companies need to be aware of their responsibilities when it comes to every type of packaging from wood, plastic, paper, glass and ‘other’ as determined by the new rules.

Businesses selling, importing or handling packaged goods will need to comply with the new regulations, which mean data will have to be collected from the beginning of January by those businesses affected.

Who do the new rules apply to?

The EPR rules will apply to a wider number of companies than the Plastic Packaging Tax did, and some expect the cost to be much higher than the Plastic Packaging Tax has been. The wider ranging rules will hit companies, according to Gov.uk, who:

  • Are an individual business, subsidiary or group – but not a charity.
  • Have an annual turnover of more than £1m, based on the most recent annual accounts.
  • Are responsible for over 25 tonnes of packaging in a calendar year – running from January to December.
  • You carry out any of the packaging activities.

These packaging activities, again according to Gov.uk, include doing any of the following items:

  • Supply packaged goods to the UK market under your own brand.
  • Place goods into packaging that’s unbranded when it’s supplied.
  • Use ‘transit packaging’ to protect goods during transport so they can be sold to UK consumers.
  • Import products in packaging.
  • Own an online marketplace.
  • Hire or loan out reusable packaging.
  • Supply empty packaging.

What data will your business need to collect?

The data your business needs to collect will depend on whether you are defined as a small or large business under the rules. Small businesses are considered to be those with a turnover between £1m to £2m a year and that supply more than 25 tonnes of packaging or packaged goods in the UK market, says Gov.uk, or turnover £1m a year and supply between 25 tonnes and 50 tonnes of the above per year.

A large business is considered to be one with a turnover of more than £2m a year and handles or supplies more than 50 tonnes of packaging or packaged goods in the UK.

Both large and small businesses must start collating data about how much packaging weight they deal with each year from January 1, 2023. Small businesses will need to create an account and file returns annually from January 2024, while large businesses need to register by July 2023 and file returns every six months.

There is more detail involved in complying with these new rules than it is possible to relay in this article, so if you need more information go to Gov.uk or speak to your accountant to make sure you address what you need to do in time.

Let us help you

If you think you will be negatively affected by this change, or you simply want to know if it affects your business or not, then please get in touch with us and we can go through the various options you have.

January 9, 2023

Autumn Statement – what you need to know about upcoming changes.

Autumn Statement – what you need to know about upcoming changes.

You could be forgiven for thinking Budget statements are a bit like buses lately – we don’t have one for ages, and then three come along almost at once. While the latest financial proclamation from the Government is known as the Autumn Statement, it is a Budget just the same, and there are some changes you need to be aware of that will be implemented in the coming tax year, which begins on April 6, 2023.

Not only has the highest income tax bracket of 45% remained in place, but the point at which you start paying the 45% tax will be lowered from £150,000 to £125,140 from next April, bringing thousands more people into this highest tax bracket. Estimates suggest it could be as many as 250,000 more hitting the 45% level for the first time. The Chancellor also announced that he is freezing all income tax thresholds until 2027/28 which means more people will be pulled into the higher tax bands and will end up paying more tax. This is known as ‘fiscal drag’ and is a way for the Government to increase its tax take without increasing the rates of income tax.

What about the help with energy bills?

Help with energy bills remains in place, but the Chancellor changed his approach by extending the term of the support to March 2024. But this additional support is less generous and is capped at £3,000 which means many people will pay more than the £2,500 which is in place until April 2023.

Those on means-tested benefits will receive an additional £900 to help pay their energy bills, while pensioners will receive £300 as a one-off payment, and those on some means-tested disability benefits will receive £150.

What else will change?

There were numerous other changes to tax allowances announced, as the Chancellor looks to increase the Government’s tax take to plug a £55 billion spending black hole. For example, the Capital Gains Tax allowance which currently stands at £12,300 will fall to £6,000 next year and then £3,000 in 2024. This will affect anyone crystallising portfolio gains outside of an Individual Savings Account (ISA) and landlords who are selling buy-to-let properties.

The dividend allowance, that will also reduce from the current £2,000 to £1,000 in 2023 and then £500 in 2024, means anyone being paid dividends either through their own business or as part of an investment portfolio, will see those using the full allowance £590 worse off in 2024.

Inheritance tax band frozen

The inheritance tax nil-rate band has also been frozen at £325,000 for the next five years until at least April 2028. HMRC received £4.1 billion in IHT receipts between April and October this year, £500m more than the same period the previous year, and we are likely to see even more money heading to the Treasury coffers via this route in the coming years.

There are many ways to mitigate IHT, so if you are likely to be affected by this tax – and remember, it is no longer just a tax for the rich given the price of the average UK house is now £292,598, according to the data from Halifax – then please get in touch and we can advise you on how to legally reduce this bill.

Some good news for pensioners

However, there was some good news for pensioners as the Chancellor confirmed that the Government would continue to maintain its manifesto pledge to keep the ‘triple lock’ on the State Pension. This means that the State Pension will rise each year in line with September’s inflation figure – which this September was 10.1%, earnings or 2.5% – whichever is highest.

So, pensioners will see their State Pension rise by 10.1% from April, which should take it to £203.85 per week from the current level of £185.15.

Contact us

There are many announcements each time there is an Autumn Statement or Budget and it can be difficult to know what the changes are, and how they affect you or your business. So, if you want any assistance to keep up with what is going on and how to protect your own or your business’s finances, please contact us and we will give you all the help, support, and information you need.

December 1, 2022

The Plastic Packaging Tax – what you need to know

The Plastic Packaging Tax – what you need to know

The Plastic Packaging Tax came into effect in April this year, and if your business deals with any kind of plastic packaging in relation to your products, you may need to be registered for this.

Anyone importing or manufacturing more than 10 tonnes of plastic packaging each year to the UK will be subject to this tax. Those businesses below this threshold are exempt, but if you breach this threshold, there are a number of things you need to know. For example, if the plastic you manufacture or import has at least 30% of recycled plastic by weight, you will also be exempt from this tax. The tax is designed to encourage manufacturers both here and abroad to use more recycled plastic in their processes.

When do I need to notify HMRC?

If your business has imported or produced more than 10 tonnes of plastic since April 1 this year, you need to register within 30 days of breaching this limit. If you have already missed this deadline, then get in touch with your accountant or HMRC as soon as possible. Around 20,000 businesses are estimated to be affected by this, with an additional £400,000 as an annual cost burden on these businesses, mostly for the additional administrative requirements of this tax.

The fee charged is £200 per metric tonne used or manufactured, but what is considered ‘plastic’ is a moot point and there is more information in the HMRC guidance. There are other things to consider too, such as the plastics that qualify are those which are considered single use by the end consumer, or those used in the supply chain. For example, if plastic punnets of strawberries are imported, then the punnets themselves may be subject to this tax.

This is a complex area, so get some help

However, it is a very complex tax, and you will need specialist guidance to navigate it. You can find out more information on Gov.uk, or by speaking to your accountant who can help you.

If you need to register, you can do this online with some exceptions – or again, speak to your accountant and ask him or her to deal with this for you.

We can help you meet your obligations

If you think you need to register for the Plastic Packaging Tax, please get in touch with us and we can help you navigate this incredibly complex area.

November 21, 2022

How to protect your business in a recession

How to protect your business in a recession

The UK’s GDP fell by 0.3% in August according to official figures, and if GDP falls for two quarters in a row, that is the definition of a recession. Experts at the EY ITEM Club predict the UK will be in recession for three quarters, which would take us up to the middle of 2023, so businesses need to start thinking about how they can protect themselves before the downturn comes.

Your accountant is the best source of information for you in relation to your business specifically, but here we go through a number of things you can consider doing to protect your business in preparation for the expected recession.

Get your cashflow sorted and deal with any debt

Cashflow is the lifeblood of any business and when there is not enough money coming in on a regular basis, there is no chance of the business surviving in even the most beneficial conditions. But if a recession on the horizon, then focusing on cashflow is essential.

By keeping on top of invoices, chasing payments that are slow to be paid or even using invoice factoring if you need to – where you sell your invoice to a company that will pay you, say, 80-90% of the value of that invoice and they will then chase the debtor for the full payment themselves – you will make sure the business has enough money flowing to pay all necessary overheads.

Where possible, you should also look to reduce the amount of debt you have in the business. Paying interest on loans during a downturn is not a good idea if you can avoid it, as that is a cost that could be removed in advance if conditions are right. Also, if your business has reduced its debts, then when the recession ends and you come out of the other side, your business would be in a better position to access additional borrowing if you need it.

Insulate your business by cutting costs where you can

Preparing for a recession is never going to be easy, but one thing is for sure – your business needs to start looking at where costs can be cut before profits start being hit. This could mean, for example, reducing production costs, limiting overtime payments, or reducing the number of hours staff work. One of the biggest expenses for many businesses are employees and it may be necessary to reduce your overall headcount for the business to survive. This is never an easy decision, especially during a cost-of-living crisis when people are relying on their incomes more than ever. But it should be considered as a last resort, if necessary, especially if you know you have areas within your business that could be leaner.

Laying people off is never comfortable, and it may not be necessary for your business specifically. But if you do need to do this, make the move sooner rather than later. You must ensure you are working within all employment rules and giving people the requisite amount of notice and redundancy payments. If you are not sure how to do this, then speak to a human resources specialist and get advice to make sure you do not fall foul of any rules.

Let us help you

If you need to consider ways to prepare your business for an upcoming recession, please get in touch with us and we can go through the various options with you.

November 14, 2022

What does the market volatility mean for you?

What does the market volatility mean for you?

The market volatility resulting from the ill-fated mini-Budget on September 23 has created real concern for investors. Most of the measures announced that day were reversed just weeks later, but the fallout has left markets in a state of turmoil.

The FTSE 100 was at 7,237.6 on September 21, two days before the mini-Budget. Soon after on September 29, it had dropped to 6,881.6 but it had recovered to more than 7,000 at the time of writing.

This level of volatility within such a short period of time is concerning for anyone, but there are things that can be done if you want to insulate yourself from the ups and downs of the markets.

Drip-feed investments

One of the best ways to even out the peaks and troughs of volatile markets is to invest any money you want to put into the markets over time. Making regular monthly contributions as opposed to a one-off investment allows you to make the most of the dips when the market falls.

Putting money in at different times allows you to spread the risk of your investment because you are not making a single investment when the market may be at its peak. Instead, you are buying no matter what the value of the market is, meaning you get more when it is in a dip, and slightly less for your investment when it is at a peak. When your investments rise in value, the units will rise accordingly, and the relative difference in price will be smoothed out.

Diversify your portfolio

It is also important to diversify your investments to cope with any downturn. Diversification can be done in a variety of ways – by sector such as energy, healthcare and so on; by geographical location as in the UK, US, and Asia; or by theme such as environmental, social and governance (ESG) investing. Or a combination of all of these.

Making sure your portfolio is balanced and diversified is not easy to do alone unless you are an expert, so you would be wise to get professional help to achieve this. It must also be done within your own risk profile, and in a way that meets your short-term and long-term investment goals.

You need to monitor your portfolio’s performance and balance over time. When different areas of your portfolio rise and fall, the balance of that portfolio can become skewed. It should be revisited at least once a year, and more often if there is a change in your circumstances or a major change in an area you are investing in. Remember, this applies to your pension funds too, not just your investment portfolio. You need to consider everything together.

Above all, don’t panic when the markets fall

The worst thing you can do if you see markets fall is panic. Any knee-jerk reactions you make to market falls are likely to result in bad decisions being made. Besides, the very worst thing you can do is sell assets when they have fallen in value. It is far better to stay invested and wait for the recovery to come. The key thing to remember is that while seeing your portfolio value fall on a screen, unless you crystallise that loss by selling, it is merely a paper loss. Bide your time and the markets should recover.

This is where a good accountant can help you. Whether you are investing for your business or personally, the same rule would apply. It can be worrying when you see markets falling, or your investments worth less than they were. But if you have concerns, contact your accountant. He or she will be able to advise you on the best course of action, which in many cases is to do nothing at all.

We can help you

If you have concerns about your portfolio or your current investment mix, speak to us and we will work with you to make any necessary changes to help rebalance your portfolio.

November 7, 2022