We are now within the final two months of the tax year, and for many businesses, the end of the tax year is also the end of the business’s financial year. This can be a good time to review your business tax planning to ensure that you minimise tax.

Assessing profit extraction methods

Particularly for limited companies, profit extraction methods can be a key part of tax planning. Whether it involves salaries, bonuses, dividends, or a combination of these, choosing the right strategy can significantly impact tax liabilities.

Optimising the method and timing of when you extract profits can mitigate tax while ensuring that owners and key staff are compensated fairly.

Dividends

Dividends are a fundamental part of the way any company distributes profit. For an owner-managed company, though, dividends frequently play a key role in the owner’s remuneration strategy.

Particularly as the tax year concludes, it is important to check the timing of your dividend payments. For instance, have you earned more this year than you expected? Might another dividend payment push you into higher rate tax? If so, deferring a dividend may help you.

By aligning dividend payments with tax thresholds and allowances, you may be able to reduce your tax exposure.

Capital allowances

Capital allowances are a tax relief available on many types of capital expenditure. Bringing forward or delaying the purchase of capital items, for example IT equipment or a refurb project, can help you to maximise the allowances available.

For companies whose profit level means they pay at the marginal relief rate, optimising capital allowance claims can also help to reduce the tax rate that a company would otherwise pay.

Naturally, it is always important to avoid letting the tax ‘tail wag the dog,’ but using capital allowances effectively can not only reduce tax liabilities but also help to fund vital investments in business assets.

Research and Development Tax Credits

If your limited company is involved in innovating, research and development (R&D) tax credits can be very worthwhile. However, claiming R&D tax credits requires thorough documentation and there are specific criteria that need to be adhered to.

As the business approaches its year-end, it is a good time to check that records of R&D activity are up-to-date and complete.

R&D tax credits can reduce tax liabilities as well as provide funding for future innovative activities that keep your business on the front foot.

In conclusion, tax planning as the tax year-end approaches is an important part of leveraging the tax incentives available to you, minimising tax liabilities while staying compliant with tax laws.

If you would like help in proactively managing your tax liabilities, please feel free to call us, we will be pleased to help you!

 

With less than a month to go to the self-assessment deadline, HM Revenue and Customs (HMRC) is urging nearly 5.7 million customers to file their tax returns for the 2022 to 2023 tax year.

HMRC data shows almost 6.5 million customers have already beaten the Self Assessment clock by filing their tax return including 49,317 customers who used the New Year holiday to get a head start on their tax obligations:

• 25,593 customers filed their tax return on New Year’s Eve, with the most popular time being between 12:00 and 12:59, when 2,677 customers filed
• 127 customers saw in the New Year by filing their tax return between 00:00 and 00:59 on 1 January
• 23,724 customers filed on New Year’s Day, with the most filing between 15:00 and 15:59, when 2,354 customers filed

The deadline to file a tax return for the 2022 to 2023 tax year and pay any tax owed is 31 January 2024. Customers can submit their tax returns and pay any tax owed online at GOV.UK.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “The clock is ticking for those customers yet to file their tax return. Don’t put it off, kick start the new year by sorting your self-assessment. Go to GOV.UK and search ‘Self Assessment’ to get started start today.”

HMRC has a wide range of resources online including a series of video tutorials on YouTube, help and support on GOV.UK, to support customers in completing their tax return.

The quickest and easiest way customers can pay their tax bill is via HMRC’s app which is free and secure. Information about the different ways to pay can be found on GOV.UK.

Customers who are unable to pay in full can access support and advice on GOV.UK. HMRC may be able to help by arranging an affordable payment plan, known as Time to Pay for those who owe less than £30,000. Customers can arrange this themselves online. Go to GOV.UK and search “HMRC payment plan” for more information.

HMRC will consider a customer’s reasons for not being able to meet the deadline. Those who provide HMRC with a reasonable excuse may avoid a penalty. The penalties for late tax returns are:

• an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time
• after 3 months, additional daily penalties of £10 per day, up to a maximum of £900
• after 6 months, a further penalty of 5% of the tax due or £300, whichever is greater
• after 12 months, another 5% or £300 charge, whichever is greater

There are also additional penalties for paying late of 5% of the tax unpaid at 30 days, 6 months and 12 months. Interest will also be charged on any tax paid late.

Thanks to their enviable reputation for efficiency and expertise Barter Durgan work with hundreds of businesses, organisations and individuals in Portsmouth, Southsea and across Hampshire. Contact Barter Durgan today on 02392 738311 or go to barterdurgan.co.uk

Chancellor Jeremy Hunt last week unveiled the government’s tax and spending plans in the Autumn Statement. He began his speech by saying that there were 110 measures to “Help grow the British economy”.

Growth is better than expected this year according to the Office for Budget Responsibility (OBR), although they said the impact of the Autumn Statement on output growth will be “modest”.

They added that the economy recovered more fully from the pandemic and weathered the energy shock better than expected, but they expect inflation to remain higher for longer, taking until the second quarter of 2025 to return to the two percent target, more than a year later than forecast in March. More persistent inflation means markets expect interest rates to be more than a full percentage point higher than assumed in March.

The 2% cut in employee National Insurance Contributions (NIC) will be welcomed by most employees but it is worth pointing out that in October the Institute for Fiscal Studies (IFS) stated that this has been the biggest tax-raising parliament since records began, pushing UK tax revenues to historically high levels.

The OBR added: “At the time of the last general election, UK tax revenues amounted to around 33% of national income. By the time of the next election in 2024, on current forecasts, taxes will amount to around 37% of national income – a level not sustained in the post-war period.

Compared with a world in which taxes had stayed at 33% of national income, the UK government will be raising upwards of £100 billion more in tax revenues next year. This is equivalent to around £3,500 more per household, though of course the tax rise will not be shared equally. The government argues the pandemic and the energy shock need to be repaid and hence the higher level of tax.

On the high level of public spending, the Chancellor said that the country needs “a more productive state, not a bigger state” and he set out a new target for the public sector to increase productivity by at least 5% per year. These measures should ensure growth in the public sector is always lower than growth in the economy. He also stated that the government would meet its fiscal rule on borrowing below 3% of growth domestic product within 5 years of the latest OBR forecast.

The key business and taxation points made by the chancellor include:

• A cut in employees National Insurance contributions from 12% to 10% from 6 January 2024.
• Measures to support corporate capital expenditure – the capital expenditure tax break for businesses that allows them to save on corporation tax by investing, has been made permanent.
• A new simplified research and development (R&D) tax relief, combining the existing R&D expenditure credit (RDEC) and SME schemes.
• Business rate relief extended – a freeze on the small business multiplier for a further year.
• The 75% business rates relief for retail, hospitality, and leisure to be extended to 2025.
• A 9.8% increase to the minimum wage to £11.44 per hour from April, which will be expanded to 21 and 22-year olds.
• A consultation on giving pension savers a “legal right to require a new employer to pay pension contributions into their existing pension”.
• Class 2 National Insurance contributions (NIC) for the self-employed will not be required from 6 April 2024.
• A cut in the rate of Class 4 NIC from 9% to 8% on self-employment/partnership profits between £12,570 and £50,270.
• Targeted investments for advanced manufacturing and green energy.
• Further funding of £50M to increase apprenticeships in engineering and other key sectors.
• Additional levelling up and Artificial intelligence funding.
• Extending the financial incentives for Investment Zones and tax reliefs for Freeports from five to 10 years.
• Some of the other key statements made include:
• Welfare recipients will be made to undertake a mandatory work placement if they are still looking for a job after 18 months.
• Universal Credit and disability benefits will increase next year by 6.7%.
• State pensions will increase by 8.5% in April 2024, honouring the “Triple lock” in full.
• Tobacco duty will rise by 10% above the tobacco escalator and alcohol duty is frozen until 1 August 2024.
• The UK will continue to meet its NATO defence spending target of 2% of GDP.
• The local housing allowance will increase with an average increase of £800 for 1.6 million households.
• Plans to speed up planning applications.

You can read the Autumn Statement in full here: Autumn Statement 2023 (publishing.service.gov.uk)

So, are there any tax planning opportunities ahead of the new tax year?

The new tax year starts 6 April 2024, so you have four months to consider your planning options. Once we pass this date, the majority of the tax planning options for Income Tax and Capital Gains Tax purposes will cease unless actioned.

Do you fall into any of these categories?

• You have or are thinking about a change in your personal status (single, married, separating, joining, or dissolving a civil partnership);
• You are thinking about selling a capital asset, such as shares or a property;
• You or your child’s other parent claims Child Benefit and the income of either parent is likely to exceed £50,000 for the first time during tax year 2023-24;
• Your annual income is approaching or above £100,000;
• You have not yet topped up your pension contributions for tax year 2023-24;
• You are self-employed with a 31 March 2024 year-end;
• You are thinking about the purchase of equipment or vehicles; or
• You are the director and/or shareholder of a limited company and have not yet considered voting dividends or bonuses for 2023-24.

If you do, we can help you discuss your options ahead of the April 2024 deadline.

The above list is not comprehensive, and we specialise in helping clients with all taxes, including PAYE so please contact us and find out how we at Barter Durgan can help 🙂

Self Assessment customers are urged to be on the lookout for scam texts, emails and phone calls from fraudsters.

This warning comes as HM Revenue and Customs (HMRC) received more than 130,000 reports about tax scams in the 12 months to September 2023, of which 58,000 were offering fake tax rebates.

With around 12 million people expected to submit a Self Assessment tax return for the 2022 to 2023 tax year before the 31 January 2024 deadline, fraudsters will prey on customers by impersonating HMRC.

The scams take different approaches. Some offer a rebate; others tell customers that they need to update their tax details or threaten immediate arrest for tax evasion.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said:  “HMRC is reminding customers to be wary of approaches by fraudsters in the run up to the Self Assessment deadline. Criminals are great pretenders who try and dupe people by sending emails, phone calls and texts which mimic government messages to make them appear authentic. Unexpected contacts like these should set alarm bells ringing, so take your time and check HMRC scams advice on GOV.UK.”

Customers can report any suspicious communications to HMRC:

• forward suspicious texts claiming to be from HMRC to 60599
• forward emails to phishing@hmrc.gov.uk.
• report tax scam phone calls to HMRC on GOV.UK.

HMRC works to protect the public from scammers. In the 12 months to September 2023, HMRC has responded to 60,000 reports of phone scams alone and got 25,000 malicious web pages taken down.

Customers do not need to wait until 31 January before filing their tax return, they can submit it before then but do not have to pay until the deadline, unless they choose to. Filing earlier allows them to find out what they owe sooner or if they are owed money, get their refund.

Help and support is available on GOV.UK to help customers complete their return, there is no need to call us. HMRC has a wide range of online resources to help customers file a tax return including a series of video tutorials on YouTube and help and support guidance on GOV.UK alongside HMRC digital assistant, HMRC app, community forums and the help and support email service.

Taxpayers who need to submit a tax return for the tax year to April 5th 2023 have less than a month to register for self-assessment.

The deadline is October 5th 2023 and people who no longer need to file a tax return should also contact HMRC to have their notice to file withdrawn.

The deadline for submitting a tax return in respect of the year April 6th 2022 to April 5th 2023 is January 31st 2024 if they are submitting online, and October 31st 2023 if submitting by post.

People who need to submit a tax return for the first time will need to notify HMRC that they need to submit a tax return.

This includes people who have started self-employment or as a partner during the 2022/23 tax year. People who started to receive other taxable income during the year, such as rental or investment income, may also need to register.

Increased income levels can be another trigger for individuals to register for self-assessment. People with income exceeding £100,000 for the tax year also need to submit a tax return, although this threshold is increasing to £150,000 from the 2023/24 tax year.

People with adjusted net income over £50,000, where they or their partner continue to receive child benefit payments, also need to register.

Taxpayers should register by 5 October 2023, otherwise failure to notify penalties may be applied.

By contrast, some individuals may no longer fit within HMRC’s criteria for when a self-assessment return is required, owing to changes in their circumstances or changes to HMRC’s criteria.

For example, HMRC no longer requires “no income other than PAYE” directors to register for self-assessment. However, if HMRC has issued a notice to file a self-assessment return for 2022/23, the return must be filed unless HMRC can be persuaded to withdraw the notice.

Thanks to their enviable reputation for efficiency and expertise Barter Durgan work with hundreds of businesses, organisations and individuals in Portsmouth, Southsea and across Hampshire. Contact Barter Durgan today 02392 738311 or go to barterdurgan.co.uk

Barter Durgan has two new partners – Chelzea Kerr and Emma Zeqo.

Chelzea has worked at the firm for 13 years, having initially been at the firm on a summer placement She went on to graduate from university and joined Barter Durgan as a trainee accountant, later qualifying as a Chartered Accountant.

Emma has been at the firm for seven years, joining Barter Durgan after moving from another local company. Emma has more than 20 years of experience working in accounts. She initially obtained her AAT qualification and then later went on to qualify as a Chartered Accountant.

Senior Partner Keith Green said: “We are delighted to announce the appointment of Chelzea Kerr and Emma Zeqo as new partners at Barter Durgan. Their commitment and hard work over many years have been important to our continued success.

“Both have experience dealing with small and medium-sized firms from all business sectors and clients appreciate their friendly and professional approach.

“I know how thrilled Chelzea and Emma are to have been given this opportunity and look forward to helping move the business forward. We have a great team, with dedicated and talented colleagues, who all strive to give our clients the best possible service. The future is very exciting.”

 

 

Taxpayers earning between £100,000 and £150,000 whose only income is taxed under PAYE will be removed from self-assessment from the 2023/24 tax year onwards, which could result in those affected paying more tax.

That’s because from tax year 2023 to 2024 onwards, the Self Assessment threshold for customers taxed through PAYE only, will change from £100,000 to £150,000.

Affected customers do not need to do anything now as the Self Assessment threshold for 2022 to 2023 tax returns remains at £100,000.? They will receive a Self-Assessment exit letter if they submit a 2022 to 2023 return showing income between £100,000 and £150,000 taxed through PAYE and they do not meet any of the other criteria for submitting a Self Assessment return.

For the 2023 to 2024 tax year onward customers will still need to submit a tax return if their income taxed through PAYE is below £150,000 but they meet one of the other criteria for submitting a Self Assessment return, such as:

• receipt of any untaxed income
• partner in a business partnership
• liability to the High Income Child Benefit Charge
• self-employed individual and with gross income of over £1,000

It is thought that the change may lead to some people overpaying tax. Accountingweb.co.uk said: “Reader kevinringer said he attended a Teams meeting with HMRC and reported that these taxpayers will still be required to notify HMRC of any tax payable but not through the self assessment system. He said this means phoning or writing to HMRC instead.

“I would have thought HMRC would prefer these clients to be in self assessment (SA) because surely it requires less HMRC resources to process an SA return (especially if submitted online) than having to process a letter or phone call,” said kevinringer.”

The team at Barter Durgan can advise on all tax and accountancy matters.

HM Revenue and Customs has closed its Self-Assesment helpline for three months.

The helpline closed last week with just five days’ notice.

The HMRC says it is piloting a new seasonal model for the Self Assessment helpline, to prioritise helping those with urgent queries.

The trial will last for three months and will see self-assessment from the helpline to the department’s digital services, including its online guidance, digital assistant and webchat.

It says the move will free up 350 advisers to take urgent calls on other lines and answer customer correspondence. If focused on urgent calls, it says these advisers will answer around 6,600 each day, ensuring more customers who really need to speak to an adviser can do so.

The vast majority of SA customers use HMRC’s online services, with 97% filing online. The helpline will re-open on September 4th 2023 so customers can receive support in the five months running up to the self-assessment deadline on 31 January 2024.

Angela MacDonald, Deputy CEO and Second Permanent Secretary at HMRC, said: “We continually review our services to see how they can best serve the public and we are taking steps to improve them.

“A seasonal SA helpline will make more of our expert advisers available where they are most needed during the summer months,” she said.

“Our online services, including the HMRC app, are quick and easy to use and have been significantly improved. I urge customers to explore these fully before deciding to wait to speak to us on the phone.”

The HMRC says the helpline receives far fewer calls over the summer, with calls around 50% higher between January and April compared with June to August.

it says around two-thirds of all SA calls can be resolved by customers themselves online while HMRC will increase the advisers available on webchat, the Online Service Helpline and the Extra Support Team Helpline.

The decision to close the helpline has been criticised with This Is Money columnist Heather Roger saying: “When taxpayers have a concern regarding their affairs, or in relation to correspondence they have received, especially if they think it’s wrong, they want to speak to a person, not be fobbed off with a digital chatbot.

“I note HMRC want to transfer advisers to deal with correspondence, which they need to do, as we are waiting for responses to letters that are over 12 months old.

“However, all this will do is frustrate taxpayers and further add to the mountain of correspondence HMRC need to deal with, as customers turn to paper to try and resolve their issue.”

Taxpayers now have until April 5th 2025 to fill gaps in their National Insurance record, the government has announced.

Extending the voluntary National Insurance contributions deadline until 2025 means that people have more time to properly consider whether paying voluntary contributions is right for them and ensures no-one need miss out on the possibility of boosting their State Pension entitlements.

The original deadline was extended to July 31st 2023 earlier this year, and tens of thousands of people have taken advantage to pay voluntary contributions to HM Revenue and Customs (HMRC) since then. The revised deadline is expected to enable tens of thousands more to do the same.

Victoria Atkins, Financial Secretary to the Treasury, said: “People who have worked hard all their lives deserve to receive their State Pension entitlement, and filling gaps in National Insurance records can make a real difference. With the deadline extended, there is no immediate rush for people to complete gaps in their record and they will have more time to spread the cost.”

Laura Trott, Minister for Pensions, Department for Work and Pensions, said: “I am pleased to see so many people taking steps to review their State Pension, which is why we have extended the deadline for customers to add extra years to their National Insurance record. This extension means thousands more people will have time to check their entitlement, and in many cases increase the amount they receive when they retire.”

The extension means that taxpayers have a longer period to enable them to afford to fill any gaps if they choose to do so. All relevant voluntary National Insurance contributions payments will be accepted at the rates applicable in 2022 to 2023 until April 5th 2025.

Individuals who are planning for their retirement could benefit from the opportunity to complete gaps in their National Insurance record. Other people who may benefit include those who may have been:

• employed but with low earnings
• unemployed and not claiming benefits
• self-employed who did not pay contributions because of small profits
• living or working outside of the UK

Paying voluntary contributions does not always increase your State Pension. Before starting the process, eligible individuals with gaps in their National Insurance record from April 2006 onwards should check whether they would benefit from filling those gaps.

They can find out how to check their National Insurance record, obtain a State Pension forecast, decide if making a voluntary National Insurance contribution is worthwhile for them and their pension, and how to make a payment on GOV.UK. Taxpayers can check their National Insurance record through their Personal Tax Account.