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.

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.

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.

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.

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.

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

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

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

Easy access business account rates

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

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

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

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

Business notice account

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

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

Fixed term bonds

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

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

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

Contact us

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

Keep National Insurance numbers in Apple wallets now

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

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

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

Is it safe?

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

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

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

Let us help you

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Act now to maximise your pension contributions

The changes to income tax rates are going to benefit all taxpayers from April next year as they get to keep more of the money they have earned. But one knock-on effect is that the amount of tax relief you can get on your pension will be reduced for both 20% and 45% taxpayers, as it is based on your highest marginal rate of tax.

This means that you have just shy of six months to maximise any pension contributions you want to make to ensure you benefit from a slightly larger contribution in tax relief from the Government. For example, anyone earning more than £150,000 this year will be able to get tax relief on pension contributions at 45%. From April 2023, this will fall to 40%.

Will this only apply to higher earners?

While higher earners have the most to lose by not maximising pension contributions before the income tax rates change next year, there is also a fall in the basic rate of income tax from 20% to 19%. So, if you are currently a 20% taxpayer, there is still a benefit to acting before April 2023 to maximise your pension contributions. At present, putting £100 into your pension will cost you £80 as a 20% taxpayer. When this falls to 19%, it will cost you £81 to achieve the same contribution.

Is there anything I need to watch out for?

If you are putting money into your pension, there are some limits you need to be aware of. The most you can put into your pension each year and receive tax relief on is £40,000 – but remember, you cannot claim more tax in a single year than you have paid.

For higher earners, there are a few other things to consider. For example, once you reach an earning level of £240,000, that £40,000 a year allowance is reduced incrementally until you reach £312,000 or more. At this point, the amount you can put into your pension reduces to just £4,000.

Beware of the Lifetime Allowance

The other consideration for everyone – but it is more likely to apply to the highest earners – is the Lifetime Allowance. This is currently set at £1,073,100 and anyone with a combined pension pot that breaches this limit will face additional tax charges on their pension.

So, if you think you may hit or breach this limit, then you need to take advice sooner rather than later to ensure you use the money you have in a different way to save for your retirement. This could, perhaps, include maximising your individual savings account (ISA) allowance of £20,000 per year or making other investments that can be used to generate retirement income.

We can help you

If you want to maximise your pension contributions before the income tax bands change, then please get in touch with us and we will help you to get the most from your money without facing additional tax charges.

Business insolvencies up in August – is your business vulnerable?

Registered company insolvencies in England and Wales rose by 43% in August this year compared to the same period in 2021, and they were 42% higher than in August 2019, the comparable period before the pandemic.

In August this year, there were 1,662 Creditors’ Voluntary Liquidations, 33% more than in August 2021, and 73% higher than in August 2019, according to official figures from the ONS. There were also more than four times as many compulsory liquidations in August 2022 as there were the previous year, with the number of administrations twice as high as a year ago.

Why are these businesses failing?

Trading conditions have become more difficult for many businesses, but the statistics give little indication as to what exactly has caused such a significant rise. What we do know is that as inflation rises, the cost of goods and services is going up, meaning not only is it harder for consumers to buy the goods they were buying previously because wage growth is not keeping pace with inflation, but that companies have higher costs themselves, through increases in energy bills and paying more for services, plus additional taxes that apply for dealing with many EU countries now. The significantly weaker pound will create more pressure for those buying goods or raw materials overseas.

The picture in Scotland and Northern Ireland

While the data is slightly different for Scotland and Northern Ireland, the overall picture is largely the same. For example, in Scotland, company insolvencies were 18% higher in August 2022 than the same month the previous year, and 33% higher than in August 2019.

For Northern Ireland, while there was a 56% rise in the number of company insolvencies in August 2022 compared with the same month the previous year, the number compared to August 2019 was 36% lower.

Let us help you

If you are concerned about the financial pressures on your business, then it is best to get help and guidance sooner rather than later as there is a chance you may be able to fend off an insolvency – or even just more severe money worries – by tackling the problem early. We can help you get the advice you need to ensure your business is on track.

Mini-Budget wreaks havoc on markets and the pound – but will you benefit?

New chancellor Kwasi Kwarteng delivered his first mini-Budget, officially labelled ‘The Growth Plan 2022’, on September 23, and while it largely consisted of tax giveaways, it was not well received by markets.

The FTSE 100 fell sharply on the day from 7,221 on September 22 to 6,986 on September 23, breaching the psychologically important 7,000 barrier before recovering some ground in the following days. The pound reached a record low against the US dollar briefly on September 26 at US$1.0327, as the biggest programme of tax cuts for 50 years was digested by economists and investors.

The market shocks have prompted the Bank of England to state it would not hesitate to raise rates if needed to help bolster the UK markets, and there are already rumours that the BoE base rate – which is currently 2.25% – could rise as high as 6% next year. Some mortgage lenders have temporarily pulled products from their offering as a result.

What are the tax cuts?

Despite the poor reaction to the mini-Budget, the Chancellor’s tax cuts will mean we all have a little more money in our pockets. The highest rate of tax – the 45% band for those earning more than £150,000 per year – is set to be scrapped completely from April 2023. In addition, the current 20% starting rate of income tax will fall to 19% from April 2023 rather than the previous planned introduction date of April 2024.

There have also been changes to National Insurance, with the 1.25% Health and Social Care Levy which was introduced in July being scrapped from November 6 this year, and the plan for this to come into force as a separate tax from April 2023 is also scrapped. The statement on the reversal of the Health and Social Care Levy stated: “This tax cut reduces over 920,000 businesses’ tax liabilities by £9,600 on average in 2023-24…It means 28 million people across the UK will keep an extra £330 a year on average in 2023-24.”

Stamp Duty Land Tax Changes

Stamp Duty Land Tax – the tax you pay when you buy a property in England and Wales – also changed with immediate effect on September 23, with the threshold at which you start to pay SDLT doubling from £125,000 to £250,000. This means no SDLT is payable on any property worth less than £250,000. The Government stated that this measure should save homebuyers an average of £2,500 in SDLT.

For first-time buyers, the threshold at which SDLT is charged rose from £300,000 to £425,000 on the same day. This now applies to properties worth up to £625,000 rather than the previous £500,000 limit. The Government stated this should save first-time buyers an average of £8,750 in SDLT.

Planned rise in Corporation Tax cancelled

The current rate of Corporation Tax was also due to rise in April 2023 from its current level of 19% to 25% for companies making more than £250,000 in profit. But this move has been cancelled by the Chancellor in his statement.

Companies that were making profits of between £50,000 and £250,000 were also expecting to see an incremental increase in the amount of Corporation Tax they would pay from April next year, but this has also been cancelled. So, all companies will pay 19% Corporation Tax on profits no matter how much profit they make in a single year.

Why have markets reacted so badly to the mini-Budget?

There has been widespread alarm about the changes made and planned for the tax system, as the tax cuts are seen as a way primarily to help the wealthier members of society, while giving less assistance to those who may need it more. For example, top earners will see a 5% reduction in their highest marginal tax rate, while the lower paid will see just a 1% reduction.

The theory behind this is something called ‘Trickle-down economics’ where cutting the tax burden of the highest earners should encourage them to spend more and those further down the economic chain should see the benefit of this as more money goes into their own pockets. But this is a theory that is yet to work in practice.

The other reason for the poor market reaction is because these tax cuts are going to be paid for by increasing Government borrowing. Borrowing more money to fund these cuts – especially when we are in an economic environment where interest rates are rising – is not considered by many to be a good plan.

However, we will have to wait and see what the result of all these changes are to discover whether it will benefit the UK.

Contact us

To find out how you can benefit from the measures announced in The Growth Plan 2022, please get in touch with us and we can give you any assistance and support you need.

End of the summer holidays – are you claiming all the benefits available for your children?

The end of the summer holidays is upon us and not only does this mean the children going back to school, but also a return to more normal work and family life as we head into the autumn. With prices going up at seemingly ever faster levels, are you getting all the benefits you can claim in relation to your children?

For example, if you and your partner are earning up to £100,000 between you, then you may still qualify for Child Benefit and also Tax-free Childcare if you need it.

What is Tax-Free Childcare?

The Government’s Tax-Free Childcare provides up to £500 every three months for childcare, which amounts to as much as £2,000 a year. If your child is disabled, this rises to up to £1,000 every three months, giving up to £4,000 a year.

The money can be used to fund nursery places, nannies or childminders, and after school or play schemes. If you also qualify for the 30 hours of free childcare, then this is available alongside the Tax-Free Childcare scheme.

To get the benefit, you would need to set up a childcare account, and for every £8 you put into this account, the Government will add £2 up to the limits outlined above. You can get the benefit if you are working, on sick or annual leave or on maternity or paternity leave, adoption leave or shared parental leave.

You would also need to be earning at least the National Minimum Wage for at least the next three months, which is equivalent to £1,967 for those over 23.

How old must your child be?

This benefit is available to any child up until they reach age 11, and they will stop being eligible on September 1 after their 11^th birthday. For disabled children, this rises to 17 but your child must get Disability Living Allowance, the Personal Independence Payment, Armed Forces Independent Payment, or the Child Disability Payment in Scotland or the Adult Disability Payment in Scotland, according to Gov.uk. They would also qualify if they are certified as blind or severely sight-impaired.

Child Benefit can be claimed for children up to the age of 16 – or up to 20 if they remain in approved education or training, which would include A Levels, T Levels, Scottish Highers, NVQs and certain traineeships. But if either you or your partner earns more than £50,000 a year, you may be taxed on the benefit. So, check whether you are better off claiming it or not if you are reaching these thresholds.

Let us help you

If you want to know more about these benefits or any other benefits you may be able to access, then please get in touch and we will explain exactly what you can claim and any other benefits you may also not realise you are entitled to.

Business borrowing – how to access money if you are not eligible for grants

If your business does not qualify for a grant but you still need to get some capital to boost your business, then you may want to consider a business loan. There are many ways to access loan funding and your business bank is likely to be your first port of call.

However, there are alternatives, like getting investors to buy into your company in return for equity, plus crowdfunding propositions such as those offered by Crowdfunder, Kickstarter and Funding Circle. Whether or not these are the right choice for your business depends very much on what type of funding you need, what your business does and what you may have to offer someone who donates to your campaign. But let’s take these in order.

Traditional business loans

The traditional way for a business to access loan funding is through a business bank. Often your own bank will be best placed to help you with a loan, but it may result in you paying more than necessary in interest. So, as always, shopping around is a good idea.

There are numerous sites that can provide business loan comparisons, which allow you to see just what might be available to you. Some can give you a loan within as little as a few days, and you can choose the length of time you want to pay the loan back. You can simply search on the internet for ‘business loan comparison’ to get an idea of how much these loans would cost you. Remember though, your own bank could still be the cheapest, so check there too.

The downside of the loan is that you will pay interest on the amount you borrow, and you also have to pay the capital back over time. It can help you in the short-term to get over a cashflow issue if that is the problem, however, you do not want to put your business in a hole, so make sure you can pay the loan back if you get one.

Getting investment

Investors can boost a business’s ability to grow not just by providing a much-needed cash injection, but with the right partner you may benefit from business expertise too. How much of your business you would need to give away to make an investor interested will depend on what you are offering and how big a risk they are taking. One thing is for sure – the more you are asking for, the less of your company you will own once a deal is done.

Getting investment into a business can be game-changing, and it could provide the accelerated growth your company needs. You must make sure the terms of any investment deal are right, so speak to your accountant and make sure he or she is closely involved in any discussions before you sign any paperwork. They will also help you to offer the right amount of equity in the business at the right price.

Crowdfunding is another option

If you prefer not to have to pay back the money you have been given, then you also have the option of crowdfunding. How and what you offer to those people prepared to buy into your business in return for their cash will depend on what your business does and how it works.

For example, if you are a designer or a small marketing agency, you may want to offer an exclusive design or a day’s marketing support in return. With crowdfunding you can be very creative in the way you raise funds. But you need to work within the rules of the platform you choose, so make sure you are clear about what you can and cannot do before you sign up.

We can help you

If you are unsure about the best way to get new funding for your business, then speak to us and we will help you through the process, so you get the funding that is right for you.

How your business can fight inflation

Inflation is a word on many of our lips at the moment as the cost-of-living crisis continues unabated. While the headline rate of inflation – which hit 9.4% in June this year – relates to the average inflation rate suffered by individuals living in the UK, the actual rate of inflation different people feel in their pocket could be higher. Businesses are affected by rocketing prices too, so now is the time to think about what you can do to reduce any costs your business incurs to improve your bottom line.

If your business was one of those badly hit by the pandemic, then you could be facing a double whammy now inflation has reached levels not seen in more than 40 years. Restaurants, hotels and other leisure businesses are often seen as luxuries when people are tightening their belts, and the knock-on effect could be severe.

However, every business should look at how it can reduce its outgoings at times like this, and there are many ways to do this.

Cut your energy costs

If you own your office or your building, then you will have had to choose which energy company you get your light and heat from. So, it might be worth shopping around for an alternative to see if you can get a cheaper deal – after all, things are likely to get worse rather than better in the winter.

For those companies working from leased offices, changing your supplier may not be an option. So, instead you need to think about how to be more cost-efficient in your use of energy. For example, you could install motion-sensor lighting into your washrooms, so the lights are only burning when someone is in there. You could also encourage staff to turn off their computers and any other energy-guzzling appliances when they are not in the office. It all adds up.

Not only will this mean they are doing their bit to help the business cut costs, they will also be helping the environment, something that most people would agree is necessary.

Work from home

Many of your employees may be working from home more often now than they were before, and if it suits your business then it might be time to consider increasing the number of staff that are offered hybrid or fully remote working.

Not only does this help to reduce your office overheads, for many people it improves their work-life balance. It has been shown to increase productivity too – the opposite of what some bosses may think if people have the choice to work flexibly most or all of the time.

The other benefit for your employees is that they will spend less on fuel or trains if they are commuting into work, giving them more money in their own pockets to help with the cost-of-living crisis without the need for a pay rise.

Make sure your employees know what they can claim

Anyone who incurs work-related costs that are not reimbursed directly by the company is entitled to claim these from HMRC. So, if you go down this route, make sure your employees are getting any tax deductions they are entitled to. It all helps to deal with the current high prices in the UK.

If you are unsure how this works, then your accountant will be able to help you, and may also help your employees with their tax returns too.

Let us help you

Helping your business and your employees to deal with the cost-of-living crisis in one hit can never be a bad idea. If you want to know more about how to make this work, and what other measures you may want to consider to boost your bottom line while giving your employees more available cash, then please get in touch and we can explain more about what measures you can take.

Payroll a pain heading into summer? Here’s what to do

We have all been there. The rising number of employees off over the summer months – especially now the kids have finished school until September – means some departments will be lacking in numbers and some work could get left behind.

One area you cannot afford to let this happen in is the back office, and especially payroll. Employees will forgive a lot of things, but not having their wage hit their accounts at the right time is not one of them. Not only would it mean many people missing mortgage or rent payments for that month, it would also create a mistrust between employees and management. Once trust is lost, it is not easy to get back.

Ensuring you have enough staff to cover all areas is difficult during these months, and with sick leave and particularly Covid continuing to be an issue with staff needing to take time off, you really need a back-up plan.

Emergency cover

While you may never need to use it, you should ensure you have some emergency cover in place just in case you are facing a crisis at short notice. You can do this by training staff to do a different job within the office so they can step in if needed, or you can speak to your accountant and find out if they could give you the assistance you need for the short term if things went wrong.

Never underestimate the importance of admin staff

There is no getting away from the fact that your back-office and admin staff are key to running your business efficiently. Without them, all sorts of problems would arise that could create some costly errors for the company as a whole.

So, make sure they have all the back-up they need as you come into a period where many staff are off on their holidays and the workload becomes a bigger burden for those left behind.

We can help you meet your obligations

If you think you may have difficulties covering all of your admin and back-office roles over the summer, then please get in touch and we can help to suggest solutions for you.

Business grants – do you know what your business is entitled to?

Many businesses benefited from grants during the pandemic, but how many realise there are other grants they may be able to access at any time to help their business grow and thrive?

In fact, there are a large number of grants available across the UK to help businesses with everything from reducing carbon emissions right the way through to developing space-based services.

Finding a grant

Finding a grant for your business could be easier than you think, especially as many of them are listed on the gov.uk website. You can go to this site and choose ‘grants’ as the option, and it will provide you with a list of funds that could be available for your business.

Some will be area specific and only available to businesses in certain places, such as Derbyshire, the South West or Leeds, for instance. But there are also grants open for businesses that will increase their workforce and create new jobs in the local area.

What does it mean if I get a grant?

The difference between a grant and a loan or an investor taking an equity stake is that the grant will not need to be paid back. A loan would be paid back with interest, while an equity stake would mean an investor owning part of your business in return for their investment and expecting a return on their money along with the original capital back at a future date.

So, if you are able to benefit from a grant, it is well worth considering it as the money will be yours to use to improve your business and also to expand your reach and potentially workforce.

What’s the catch?

However, depending on the reason for the grant being made, there may be conditions attached to how you are able to use that money. For example, if the grant is specifically to help you buy some plant or machinery, you would not be able to use it to fund wages. You may think no-one will check, and you may be right. But it is not worth taking the chance.

You should always check the fine print of any grant your business is applying for to make sure you can fulfil any conditions or rules that apply, otherwise you could find yourself failing to secure the grant or, which could be worse, possibly having to return the money after you have spent it.

Check locally and elsewhere too

While there are a number of national grant schemes, it is also worth checking locally with your council, any business support organisations – chambers of commerce of business hubs – and associations that are relevant to your business. It may be that you run a company dealing with the arts or is looking to increase the benefits to the local economy. All these aspects could open up a range of funding that you had not previously considered.

Contact us

If you have a business that would benefit from grant funding, then contact us and we will give you all the help, support and information you need.

Where is the best place to hold your tax money?

Putting aside the tax money due each time you have an invoice paid is sensible planning, but is that money working as hard for you as it could be?

Many current accounts are paying no interest whatsoever, and when it comes to savings accounts, you would still be struggling to get anything meaty when it comes to interest payments. Businesses, in particular, will often leave this money sitting in an account that is paying nothing or next to nothing on the money building up.

However, when these amounts run into tens of thousands of pounds – if not hundreds of thousands of pounds depending on your personal or business status – not having this money work for you is a big opportunity to miss.

So, if you are currently using a separate current account paying no interest, or worse leaving the money in your existing business account without separating it out, then it would be sensible to look at what you can do to boost your returns.

Business easy access accounts

Let’s say you have around £250,000 sitting in your tax account waiting to be paid to the taxman. If you were to put it into an easy access account for businesses, you could currently get 1% interest on this, according to financial statisticians Moneyfacts at the time of writing. Over the year, that would give you £2,500 extra to play with for no effort on your part.

Business notice accounts

However, if you are prepared to give some notice before you make a withdrawal – which would mean not being able to access it whenever you wanted – you would be able to get more in interest. For example, by agreeing to give 95 days’ notice, you could get 1.3% at the time of writing. So, you would increase the amount you could earn from that same £250,000 to £3,250.

Remember, this is money you do nothing to get other than spend a bit of time on paperwork to open the account. For the time that takes, it is a return worth having.

Business concierge

There are even companies that provide services for businesses to help them boost the returns on their business income by finding the best accounts for their funds. In short, a specialist will manage these accounts for you, to maximise the returns you can make.

One firm that offers this type of service highlighted that if a company failed to move £903,000 in cash accounts to the best-paying accounts over five years, this could result in a loss of income of as much as £41,538 over that period. This would be enough to hire an additional part-time member of staff for most businesses.

These companies should never hold your money in their own accounts, they should simply be working under your direction to move funds to the best-paying bank accounts and you pay a fee for this service. This ensures you are still covered by the Financial Services Compensation Scheme (FSCS).

We can help you

As your accountant, we are likely to have services that will help you to increase the returns you can make on the money you hold in your business accounts. So, please contact us for details on how we can help you make your money work harder for your business.

Currency exchange – why it can pay to not rely on your bank

International trading is something many businesses are involved in, whether it’s because you are selling your good or services abroad or buying raw materials in from overseas to help with manufacturing.

Either way, exposing yourself and your business to currency risk is a reality for many businesses, and how you reduce that risk as much as possible is something to think seriously about. For most businesses, the default option is to simply transfer money from your business bank account to the account of the company you are working with abroad. It’s easy, yes, but you could be paying more than you need to and cutting your profit margins as a result.

How much do you transfer abroad each year?

The best way for you to make your international money transfers depends very much on how much, and how often, you transfer overseas. If you make a one-off payment each year, then you will most likely need to take a different approach to a company making regular payments abroad every month.

So, the first thing to do is look at how and when your company is transferring money overseas. By checking through your bank statements, assuming you are using your business bank to make the transfers currently as many businesses do, you should also be able to get a sense of what the exchange rates you have been getting are, and how much you are paying in fees per transaction.

How much does it cost to send money internationally?

The problem you have is that when it comes to sending money internationally, pinning down the costs involved is not easy. This is because different companies will charge different amounts and will give you different exchange rates depending not just on how much you are transferring at a time, but also, they will each take a ‘margin’ on the exchange rate. This is a way of increasing the amount of money they can make on the international transfer.

For example, let’s say you want to transfer £100,000 to a company in Germany. Your transfer will go from sterling to euros and your bank may charge you, say, £25 to make that payment if you use telephone banking to make the transfer. It could be lower, say, £15 if you make the transaction online.

The company receiving the money may also be charged by their bank, which could add another, say, £6 to the cost of the transaction. So, without taking any currency exchange values into account, you and your receiving party could already be paying up to £31 just to move money overseas.

Exchange rates and other products

Then, you need to take into account the exchange rates you are going to pay. These can vary considerably from company to company. Banks will typically offer worse rates than international money transfer specialists, who do nothing other than currency transfers day in, day out.

Let’s say you are moving money from sterling to euros. If you want to send £100,000 then the Barclays rate at the time of writing was €1.1234. This would give you €112,340 in euros. Remember, you would need to pay the additional fees on top of this.

Compare that with a money transfer specialist such as OFX, and you would receive €1.1778 for the same transaction at the time of writing. This would give you €117,780 – an extra €5,440. Plus, you would not need to pay the extra fees charged by most banks.

The foreign exchange specialists also have a variety of products that will help you save more money, especially if you make regular payments overseas. There is something called a ‘forward contract’ that allows you to fix the exchange rate you will get for a period of time, taking the guesswork out of exchange rates and can help businesses set their budgets more effectively.

There are other products that can help you mitigate risks and boost the chances of getting a better exchange rate for the transfers your business needs to make. Remember, these products are also available to individuals if you need to make regular transfers to deal with bills associated with an overseas property, for example.

Let us help you

If you want to learn more about how you can reduce the risk you take when making currency transfers, then please contact us for more details.

Get a business health check at the start of the tax year

Using up personal allowances is not the only reason you should see your accountant at the start of the tax year, it is also the best time to get a health and wealth check for your business too.

The end of the tax year is the busiest time for your business and your accountant, meaning devoting time and effort to checking whether your business is on track is sadly lacking.

Take the time while you have the time

However, the complete opposite is the case at the start of the tax year, so now is the time to make the most of the chance to review your business strategy, cashflow and plans for the coming year to ensure your company has the best chance of success.

What can your accountant help you with?

Your accountant is perfectly placed to help you put an effective plan in place to give your business the boost it needs at the start of the tax year. He or she can help you with everything from saving tax and paying the right amount of tax, right the way through to helping you comply with relevant regulations and improving your cashflow.

Accessing funding

A good accountant can also help you access relevant funding – whether that is a grant that your business would qualify for or an investor that would help your business to grow.

Setting out an effective business plan at the beginning of your financial year is like creating a road map for the coming months, allowing you to follow that map to achieve your goals.

We can help your business run smoothly

When things get tough, your accountant is there to help you with everything from advice to reality checks so your business can continue to run smoothly.

If you want help to set your business on the right path for this tax year, then please get in touch and find out how we can help you.

Strong Customer Authentication (SCA) rules – what they mean for businesses and consumers

You may have already noticed when you are buying things online that you are now being asked to confirm your purchase in more than one way to improve security, and this is the result of the new Strong Customer Authentication (SCA) regulations which came into effect on 14 March 2022.

What are the SCA regulations?

The SCA regulations create an additional layer of security for card payments which involve a second method of identification. This could be a text message with a code that needs to be added to a purchase, a phone call to a landline, or via a card reader or smartphone app. The aim is to reduce the amount of fraud and make customer transactions safer.

The effect on businesses

There is, of course, an impact on customers directly. But all companies who sell directly to consumers via card purchases have had to make some changes to their technology too. Retailers should have already upgraded their payment gateways and payment services providers have been working towards helping achieve this.

Declined transactions

From 14 March 2022, any transaction that is not SCA compliant will be declined, which would be costly to retailers. If you are still having problems with this for your business, then you urgently need some help.

Find out how we can help you

If you want to know more about SCA or have any problems implementing it, then please get in touch and we will do what we can to help you.

Bank of England (BoE) base rate rises to 0.75% – what it means for consumers and businesses

The Bank of England (BoE) base rate rose to 0.75% in March in response to Consumer Prices Index (CPI) inflation rising to 5.5% – almost triple the BoE’s target of 2%. Inflation is set to continue rising throughout the year (see Spring Statement round-up) with the Russian invasion of Ukraine creating increased pressure on already rising prices.

What does it mean for you?

Any rise in the base rate has an impact on borrowing rates for businesses and individuals, and on savings rates. Each is likely to rise – great news for savers, not such great news for borrowers.

How will borrowers be affected?

Any loan you have that does not have a fixed rate – such as some mortgages, personal loans or credit card debt, for example – could face a rise in interest rates if the company providing this chooses to pass this rate on. And many will.

However, if you have a fixed-rate mortgage, unsecured personal loan or other loan, for example, then you will not see these rates change until you reach the end of the offer term or until the loan is paid off.

How are savers affected?

If you have savings in a fixed-rate account, these will not rise either. But if your savings are in a non-fixed interest rate account, then you could see the interest you are paid on this rise.

If you see a better rate than you are being paid elsewhere, then it is worth considering moving your savings to the better-paying account. But bear in mind if you are in a fixed-rate account, you could face a penalty for doing this which could negate the benefit of moving. So, check with an expert before taking any action.

Safety net

You also need to consider how much of your money is in each institution. The Financial Services Compensation Scheme (FSCS) covers your money on deposit with a single institution up to £85,000. But you need to be aware that various brands come under one institution – such as Halifax and TSB coming under the Lloyds Banking Group.

You would be covered up to £85,000 across all these accounts, not in each. It only becomes relevant if one of the banks goes bust, but we know from experience that however unlikely, this can happen. So, it is something to bear in mind.

Find out how we can help you

If you are unsure about whether your money is working as hard for you as it could, then please feel free to get in touch and we will help you in any way we can.

Stamp Duty Land Tax – why this will increase as house prices rise and what you can do to reduce it

Stamp Duty Land Tax (SDLT) receipts were somewhat skewed in the last year as the SDLT holiday for properties worth up to £500,000 was phased out on June 30, 2021, and the holiday for properties worth between £125,000 and £250,000 ended on September 30.

These two deadlines resulted in a flurry of activity as people tried to complete purchases under the wire and avoid having to pay SDLT on their purchases. The result, according to Government data, was that transactions in October to December last year were 10% lower than the previous quarter, and 13% lower than Q4 2020.

Total receipts up in Q4 2021

However, despite this, total receipts in Q4 2021 were 22% higher than Q3 2021, and 55% higher than Q4 2020. This change in receipts will have largely been impacted by the lower residential nil-rate band of £125,000 for Q4 last year compared to £250,000 for Q3 2021 and £500,000 for Q4 2020.

House prices continue to rise, and while the thresholds stay the same, the receipts are likely to increase if property sales continue at the same pace.

2% SDLT surcharge for non-residents

One additional consideration is the application of additional taxes on properties bought by people who are non-resident in the UK. These purchases have faced a 2% SDLT surcharge since April last year. To the end of Q4 last year, this had resulted in 8,500 transactions paying £86m.

Possible ways to reduce SDLT

There are a few things you can do to mitigate your SDLT, including buying a property in a lower price bracket or negotiating a different price with the seller that brings you below a threshold. But beware, HMRC would be likely to take a dim view of any price cuts that mean you are buying a property for what would not be considered the full market value.

If you bought a second home and paid the additional 3% SDLT as a result, then if you sell your main residence within three years of completing on the second property, you may be able to reclaim a refund of the 3% surcharge amount. This could be a substantial sum and is worth considering if you plan to sell your main home soon after buying a second home.

You can also negotiate a price for removable fixtures and fittings that the seller is prepared to leave behind, as you only pay SDLT on the property purchase itself. This could reduce the price to drop you into a lower tax band, but HMRC insists this is done on a “just and reasonable basis” so you would need to make sure you get legal advice on how to do this properly.

First-time buyers also currently do not pay SDLT on properties worth up to £300,000 so providing you buy a property below this level, you will not pay SDLT.

You can also build your own property if that is something that appeals to you. You would pay the SDLT purely on the cost of the land purchased, which is likely to be considerably lower than buying a property already on the land. Extreme, yes, but an option for the right person.

Find out how we can help you

If you have a query about SDLT and how you can deal with tax, then please give us a call and we can guide you through what you can and cannot do to mitigate this tax.

Businesses must prepare as wider creditor action protections end in March

Companies with debts outside of their rental arrears face the removal of protection against creditor actions from March 31, 2022.

Other debts outside rental arrears affected

Currently, rent arrears built up because of forced closures as a result of COVID-19 are excluded from these measures, as they are covered by other legislation

Any debts outside of rent arrears, must reach a £10,000 threshold before a winding-up petition can be filed. Before the filing, the creditor must have given the debtor a notice – called a Schedule 10 Notice – which states that if a proposal for payment of the debt has not been made within 21 days of the notice, then the creditor intends to file a winding-up petition.

Firms must prepare to deal with possible litigation from April 2022

However, these restrictions end on March 31, so any business with debts of more than £10,000 that are not related to rent arrears needs to be sure it is prepared for these protections to be removed, unless more legislation is passed before that date.

Challenges could be made for as little as £750 owed

Law firm Freshfields Bruckhaus Deringer highlighted that the Government has not changed the threshold to serve a statutory demand for winding-up from £750. So, while the current legislation is in place there are two thresholds in place for the compulsory winding-up process. But once Schedule 10 notices are repealed, the lower level of £750 remains.

Find out how we can help you

If you have debts outside of rental arrears that have built up due to difficult trading conditions during the pandemic, or because of forced closures, then please contact us to find out how we can help you manage this most effectively for your business.