KRW team update: introducing our latest recruits!
Keith Witchell
We’ve been busy recruiting at KRW HQ, and we’re pleased to introduce you to the latest additions to our ever-growing team.
Over the past couple of months, we’ve bid farewell to three members of the team as Amie, Sophie and Sam, all left for pastures new, and we’ve welcomed five newbies to the KRW crew, as follows:
George Marlow – who is working for us part time, alongside studying for his final year of an accountancy degree. George completed some work experience with us in the summer and impressed the team with his enthusiasm, as well as already being AAT qualified, so we were pleased to be able to offer him a part-time role, assisting with payrolls and bookkeeping.
Elizabeth Chartres – some of you may recognise the surname as Elizabeth’s sister Isabella used to work for us. Elizabeth replaces Sophie and works alongside Eliza on reception, and as part of our administration team.
Denise Murphy – a new addition to our payroll team. Denise previously worked in the payroll department of a large accountancy practice, so is well versed in all things payroll and has experience of managing multiple client payrolls. She now works alongside Rachael and has helped to free up Adrienne to take on more bookkeeping work.
Hattie Griffith – who joins us from an accountancy firm that specialise in agricultural clients. Hattie is AAT qualified, and she has taken over most of Amie Harrold’s portfolio of clients.
Claire Paul – who joins us as an Accounts Associate. Claire is both AAT and ATT qualified and will look after many of our sole trade, partnership and personal tax return clients. Claire previously worked for a local accountancy firm for many years and has a wealth of experience. She will also manage our MTD for Income Tax service, which starts to be phased in from April 2026.
It’s fair to say that our new offices are quickly filling up with new faces, and we are delighted to keep adding great people to our team. Watch this space for news of more newbies on the way next month too!
Key Facts
- George Marlow has taken on a part-time bookkeeping and payroll role, alongside university.
- Elizabeth Chartres joined our reception/admin team, replacing Sophie.
- Denise Murphy joined our payroll team, adding further capacity and freeing up Adrienne.
- Hattie Griffith joined us as Client Manager.
- Claire Paul took the role of Accounts Associate.
We’re all doomed: what to expect in next month’s budget
Keith Witchell
With the next Labour Budget fast approaching, and lots of talk of tax rises in the press, there is a feeling of impending doom among many business owners.
Let’s start with the backdrop: Rachel Reeves said in last year’s Budget that Labour would not be coming back with more tax increases…but has recently said that the world has changed, and we are not immune to that change…whilst also referring to the “big black hole” in public finances.
Increasing income tax would go back on Labour’s election manifesto so is seen as unlikely, but what other changes might be unveiled next month? Here’s a roundup of potential announcements, currently in the press:
Property Taxes
- The replacement of Stamp Duty Land Tax, which is payable when you buy a house, with an annual national property tax on high-value homes, which could apply to homes worth £500k+, and start once a property has been purchased. However, the current 5% second property Stamp Duty Land Tax surcharge, would most likely remain in place;
- The introduction of a “Mansion Tax” which effectively removes the Capital Gains Tax exemption that applies when you sell your own home, to properties worth £1.5m+;
- The introduction of Stamp Duty Land Tax to shares in property companies, which are currently subject to stamp duty on shares at only 0.5%.
National Insurance
- This could be levied on rental profits for the first time;
- The possibility of introducing Employers NIC on partnership profits has also been suggested.
Income Tax
- The current personal allowance and higher rate band thresholds could be further frozen beyond 2028/29 – effectively a stealth tax on inflation, as more and more people are pushed into higher rate tax.
Dividend Tax
- The higher and additional rates of tax on dividends could be increased from their current levels of 33.75% and 39.35% respectively;
- The £500 dividend allowance may be removed.
Capital Gains Tax
- Further increases in CGT rates are widely anticipated, to bring them closer to income tax rates;
- The annual exemption of £3,000 could be further reduced, or removed altogether;
- Changes to the long-standing CGT-free uplift on death have also been rumoured.
Pensions
- Many were expecting the 25% tax-free lump sum to be withdrawn or reduced at last year’s Budget, and some still anticipate changes to be announced next month;
- Employers NIC could be applied to Employer pension contributions.
Inheritance Tax
- A lifetime cap on gifts that are free of Inheritance Tax after 7 years have passed may be introduced;
- The possibility of increasing the 7 year period for potentially exempt transfers to 10 years has also been suggested.
VAT
- The VAT registration may be reduced from the current level of £90,000.
Key Facts
- Many are fearing the next Labour Budget on 26 November, as tax increases are expected.
- Changes to Stamp Duty Land Tax and the CGT exemption for higher value homes are anticipated.
- Capital Gains Tax rates may be further increased to bring them closer to income tax rates.
- The 25% pensions tax-free lump sum might go, & NIC could be applied to Employer contributions.
- A cap on lifetime gifting for Inheritance Tax is possible, as is increasing the 7 year rule to 10 years.
For more information, please contact me.
75% rates relief for retail, hospitality and leisure sectors extended
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.
R&D tax reliefs to be simplified from April 2024
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.
Full expensing relief for capital purchases made permanent
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.
National living wage increased to £11.44 for over 21’s from April 2024
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.
Class 4 nic for the self-employed reduced from 9% to 8% from April 2024
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.
Class 2 nic for the self-employed abolished from April 2024
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.
Main rate nic cut from 12% to 10% for employees from January 2024
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.
Round-up of pre-tax-year-end tax planning tips and tricks
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.