75% rates relief for retail, hospitality and leisure sectors extended

Keith Witchell


March 29, 2024|In KRW Tax news|By Keith Witchell

In welcome news for these struggling sectors, the Chancellor announced today that the current 75% business rates relief for business premises in the retail, hospitality and leisure sectors will be extended for a further year until March 2025.

For more information, please contact me.

Keith Witchell

Director



R&D tax reliefs to be simplified from April 2024

Keith Witchell


March 29, 2024|In KRW Tax news|By Keith Witchell

It was announced today that the current R&D Expenditure Credit (RDEC) and SME schemes for R&D tax relief will be merged from April 2024 into a simpler single system. The scope of the enhanced R&D tax relief for R&D intensive businesses will also be widened, with the intensity threshold lowered from 40% to 30%, and a one-year grace period introduced, also from April 2024.

For more information, please contact me.

Keith Witchell

Director



Full expensing relief for capital purchases made permanent

Keith Witchell


March 29, 2024|In KRW Tax news|By Keith Witchell

Originally unveiled in this year’s Spring Budget as a 3-year temporary measure, Full Expensing Relief allows companies buying new plant and machinery to get (up to) 25% Corporation Tax relief on the amount spent, with no upper cap, and it was announced earlier today that this tax relief will be made permanent. With the Annual Investment Allowance set to reduce from £1m to £200k pa from April 2024, this will greatly benefit businesses and groups spending over £200k pa on new kit.

For more information, please contact me.

Keith Witchell

Director



National living wage increased to £11.44 for over 21’s from April 2024

Keith Witchell


March 29, 2024|In KRW Tax news|By Keith Witchell

Jeremy Hunt announced in his statement that a 9.8% increase will be applied to the National Living Wage, which will go from £10.42 per hour to £11.44 per hour from April 2024. Alongside this the minimum age at which the National Living Wage kicks in will be reduced from 23 to 21 years of age, meaning that the National Living Wage now effectively replaces the National Minimum Wage.

For more information, please contact me.

Keith Witchell

Director



Class 4 nic for the self-employed reduced from 9% to 8% from April 2024

Keith Witchell


March 29, 2024|In KRW Tax news|By Keith Witchell

A further tax cut was announced by Jeremy Hunt for self-employed workers, who will see the Class 4 NIC charge on their annual profits between £12,570 and £50,270 cut from 9% to 8% from April 2024. This equates to a further tax cut of up to £377 per annum (based on profits of £50,270+) in addition to the £179 Class 2 NIC saving mentioned above.

For more information, please contact me.

Keith Witchell

Director



Class 2 nic for the self-employed abolished from April 2024

Keith Witchell


March 29, 2024|In KRW Tax news|By Keith Witchell

Self-employed workers with annual profits over £12,570 currently pay a fixed rate Class 2 NIC charge of £3.45 per week (£179 pa), but the Chancellor announced earlier that Class 2 NIC will be abolished completely next tax year, delivering a useful tax cut to those operating their business as a sole trader, partnership or LLP, without affecting their entitlement to state pension/benefits.

For more information, please contact me.

Keith Witchell

Director



Main rate nic cut from 12% to 10% for employees from January 2024

Keith Witchell


March 29, 2024|In KRW Tax news|By Keith Witchell

Chancellor Jeremy Hunt announced earlier this afternoon that the main rate of National Insurance that applies to salaries between £12,570 and £50,270 per annum will be cut from 12% to 10% from 6 January 2024. This will give employees a boost in net pay of up to £754 per annum. While welcome, for company owners this further erodes the tax saving from taking dividends in place of salary…

For more information, please contact me.

Keith Witchell

Director



Round-up of pre-tax-year-end tax planning tips and tricks

Keith Witchell


March 29, 2024|In KRW Tax Tips|By Keith Witchell

With the end of the current tax year fast approaching, you might be wondering what actions you can take to minimise your tax bills.

OK, so we’ve left this one a bit closer to the wire than intended, but as the end of the current tax year approaches, we wanted to set out some quick and easy tax planning tips for you to consider.

Make Pension Contributions
The annual allowance for pension contributions is now £60,000, following an increase to the previous £40,000 annual allowance in April 2023. This means that you can pay up to £60,000 per annum into a pension and receive tax relief on this. Providing you have a pension in place from the past, you can also make use of carry forward rules to mop up any unused (£40,000) allowances for the previous 3 tax years. For those operating as a limited company, this is a great way to mitigate Corporation Tax as the company can pay into a pension for you and save Corporation Tax on this, while for sole traders, partners and those on high salaries, making a personal pension contribution is a great way to mitigate higher and additional rate tax.

Pension Advice
Your company can pay for you to get some advice on your pensions without you having to declare it as a Benefit in Kind, providing it costs under £500. If you run a business and have various older pension schemes from past employers that you want to look at combining then why not get your company to pay an IFA for this advice. Our colleagues at KRW Financial Planning would be happy to assist!

Consider Charging Interest on Directors Loans
As mentioned in previous Tax Bulletins, with Corporation Tax rates now higher, if you have an amount owed to you by your company on a Directors Loan then it is well worth considering charging the company interest on your loan. This loan interest will be taxed on you, but usually only at 20%, plus for basic rate taxpayers you have a £1,000 personal savings allowance to offset (assuming not already utilised against other interest received), and in many cases where your only income is a personal allowance level salary and dividends, you will also have a £5,000 starting rate band taxed at 0% as well. This means that for many clients it is possible to be paid up to £6,000 in interest per annum without paying any personal tax. However, the company can offset this cost against its profit and save Corporation Tax, making this significantly more tax efficient than paying dividends. Of course, you need a credit Directors Loan balance to be able to implement this, and as a rule of thumb we tend to advise an interest rate of 7% to 10%. There is also some admin to attend to, as the company needs to deduct 20% tax from any interest it pays to you and pay this over to HMRC using form CT61, but even so this is well worth considering for those clients with a healthy Directors Loan to their company.

Reduce Corporation Tax by making your holding company ‘passive’
With the new higher Corporation Tax rates from April 2023 came the re-introduction of associated company rules, which seek to split the £50k starting rate band on which profits are still taxed at the old Corporation Tax rate of 19%, between associated companies. If you have a group then your holding company will usually be an associated company, but if all it does is receive and pay out dividends, but is otherwise inactive, then it is usually possible to eliminate it from the associated company calculation, by ensuring that the dividends paid into and out of the holding company in the year are equal. This then gives your trading company more of the £50k starting rate band to use, reducing its Corporation Tax bill.

Electric Cars
OK, you might struggle to implement this one before 5th of April! But electric cars remain highly tax efficient for company owners. Many of our clients use part of the funds they withdraw from their companies in salary and dividends to make finance payments on a personally owned car. But with the Benefit in Kind rate still only 2% of list price for electric cars, why not buy an electric car through your company so that your salary and dividends go further. With the higher rate tax threshold frozen at £50,270 for a few years now, while inflation has pushed up the cost of living, we find that many of our clients are now struggling to keep under the higher rate tax threshold. Where that applies, finding things that your company can pay for instead of you, without big tax bills, is well worth considering, and buying an electric car through the company is a great example. There is also a 100% first year capital allowance for the purchase of brand new zero emission (i.e., fully electric) cars which gives a nice front loaded Corporation Tax saving too. This applies whether you buy outright, on hire purchase, or on a PCP. Hybrids are also worth looking at, particularly those with a high electric only range, for which the Benefit in Kind rate can be as low as 5%.

Trivial Benefits
Did you know that you can buy vouchers for your staff with a value of up to £50 without any tax for them to pay on them? This also applies to Directors, although limited to 6 times a year. This means that your company can buy you up to 6 gifts or vouchers every year, each valued at up to £50, and your company saves Corporation Tax on the cost, with no personal tax for you to pay. Care is needed to spread these out over the year (buying 6 x £50 vouchers in one go will not qualify!), but every little helps!

Use Your ISA Allowance
Each tax year you can invest up to £20,000 into an ISA, which offers some key tax benefits compared to other savings and investments. First of all, any interest earned on an ISA is tax-free and doesn’t need to be entered on your Self Assessment Tax Returns. Secondly, any Capital Gains made on stocks and shares ISAs are also free of Capital Gains Tax. There are also Junior ISAs available to children.

Use your Capital Gains Tax Allowance
The CGT annual exemption for 2023/24 is £6,000, but from 6 April 2024 this reduces to £3,000 per annum. If you have any assets, such as stocks and shares, that have small gains you might want to consider selling them before 5 April 2024 to utilise your £6,000 CGT annual exemption for this tax year, and then you can reinvest the proceeds in further shares.

For further advice on any of the points above, please contact your Client Manager.

Keith Witchell

Director



What is the optimum level for directors salaries for 2024/25?

Keith Witchell


March 29, 2024|In KRW Q&A|By Keith Witchell

Every tax year the National Insurance and tax thresholds change, and clients ask us what level of salary they should pay themselves from their companies?

However, this year is different, as the Employee NIC threshold remains aligned with the tax-free personal allowance, both of which remain frozen at £12,570.

The rate of Employees NIC has reduced for salaries over £12,570 from April 2024, to 8% from 10% (previously 12% until January 2024), but for those Directors wishing to be paid at the threshold level, this won’t have any impact.

So, what is the optimum salary level for you? In almost all cases the answer to that question is still £12,570 per annum. This means that your gross and net salary will be £12,570 per annum (£1,047.50 per month).

The reason we are recommending £12,570 per annum, is that this is both the tax-free personal allowance, and the employees NIC threshold for the 2024/25 tax year, just as it was in the 2023/24 tax year.

This level of salary will incur some employers National Insurance because the secondary threshold above which that kicks in is £9,100 per annum. The rate of employers NIC for salary over £9,100 per annum remains at 13.8%, which means that if you pay yourself a salary of £12,570, the employers NIC for the year for the company to pay will be £478.86. This is also unchanged from the 2023/24 tax year.

However, with Corporation Tax being at least 19% (and in many cases as high as 26.5% where annual company profits are between £50,000 and £250,000) we advise paying the salary of £12,570 as the Corporation Tax saving of the salary over and above £9,100 comfortably exceeds the employers NIC cost.

Furthermore, all companies with at least two people on the payroll earning at or over the NIC threshold receive the Employment Allowance which covers the first £5,000 of employers NIC per annum. For smaller businesses this is likely to cover the NIC owed on your salary, meaning no NIC to pay.

For businesses that are already fully utilising the Employment Allowance against the employers NIC for their employees, we still advise paying the £12,570 salary, due to the Corporation Tax saving exceeding the employers NIC cost, as set out above.

Are there any exceptions to the optimum salary level of £12,570? Yes, but these are rare. In fact, pretty much the only time we would recommend a lower salary for a business owner, is where the company is making less than £50k per annum profit, you are the sole employee on the payroll, and you have other sources of income that utilise part/all of your tax-free personal allowance. Or if the company is loss making, or has profits under £9k per annum. In these cases we would recommend a salary of £9,100 per annum.

Key Facts

  • Employees NIC threshold remains aligned with tax-free personal allowance @ £12,570 pa
  • As a result £12,570 is still the optimum salary amount from April 2024 for most of our clients
  • Employers NIC kicks in @ £9,100 pa, but may be covered by the Employment Allowance
  • Even where the employers NIC is payable, the Corporation Tax saving should be higher
  • The optimum salary for those with other sources of income and low profit companies is £9,100 pa

For further advice on this matter, please contact your Client Manager or one of our payroll team.

Keith Witchell

Director



Companies house announce new filing fees from 1 May 2024

Keith Witchell


March 29, 2024|In KRW Insight|By Keith Witchell

Companies House have recently carried out a review of their filing charges, based upon which they are going to increase the annual Confirmation Statement filing fees.

For most limited companies, the amounts payable to Companies House each year are very straightforward, with just an annual fee for filing their Confirmation Statement, which is currently set at £13.

For the vast majority of our limited company clients, we help with the preparation and filing of the Confirmation Statement, and we pay this fee on your behalf, as we cover it in the fees you pay us.

However, from 1 May 2024, the Companies House filing fee will increase from £13 to £34, an increase of £21 per annum, which we will need to pass on to our clients.

There are also changes to other Companies House fees, such as incorporation fees for new companies, name change fees etc, and we will therefore also have to revise the fees we charge for these ad hoc services. Similarly, each time there is a change in shareholdings, we have to file an additional Confirmation Statement, and our charges for making such changes will also need to increase to cover the higher filing fee payable to Companies House on your behalf.

Alongside the changes to filing fees, Companies House also now have new powers based on the Economic Crime and Corporate Transparency Act 2023 which came into effect on 4 March 2024. Under the act there is now a requirement for every company to supply a registered email address to Companies House, which they will use to send official notices. This email address will not appear on the public record, but must be carefully monitored, to ensure that notices are read and actioned.

Where we provide Company Secretarial services for clients already, we believe the best way to address this new requirement is for us to provide a registered email address to Companies House which we will monitor on your behalf.

We are therefore having to implement an increase of £4+VAT per month to the fees of all limited company clients that we provide Company Secretarial services to, which will cover both the increased annual Confirmation Statement filing fee, and the cost of us maintaining the registered email address on your behalf.

So, please keep your eyes peeled for a notification from Ignition (our client engagement and payment platform) or your Client Manager of this change to your monthly fees from May onwards.

Please also be reassured that the charges we make for Company Secretarial services are still significantly less than our competitors, and we are still the only firm we know of that don’t make any charge for the use of our Registered Office address either!

Key Facts

  • Companies House filing fees set to increase from 1 May 2024
  • The Confirmation Statement filing fee will increase from £13 to £34
  • There is also a new requirement to provide Companies House with a registered email address
  • We’re having to increase our fees by £4+VAT per month to cover both of these changes

For more information on the forthcoming changes, please contact our Company Secretarial Clerk Laura Brown.

Keith Witchell

Director