Skip to main content

Author: admin

From new year to year end – time to keep a tax-planning resolution?

Written by admin on . Posted in Capital Gains Tax, High Income Child Benefit Charge, Inheritance Tax. No Comments on From new year to year end – time to keep a tax-planning resolution?

As 2025 gets under way, it is once again the time of year to start considering your tax year-end planning.

The early months of the year are the time to undertake year-end tax planning. Unsurprisingly, the traditional drivers have been the tax year-end (Saturday 5 April 2025) and the Spring Budget. On this occasion, after last October’s blockbuster, there is no Spring Budget, although Rachel Reeves will deliver a Spring Forecast in late March. In the wake of that Autumn Budget, there is plenty to consider:

  • Pension contributions: The Budget announcement that pensions will fall within the scope of inheritance tax (IHT) from 2027/28 makes the review of pension contributions slightly different from previous years. For most people, pensions remain a highly tax-efficient way of saving for retirement, but for the wealthy few unconcerned about retirement income, they are no longer the estate-planning tool of choice.
  • Capital gains tax (CGT): Capital gains tax rates increased in the Budget to 24% for higher and additional rate taxpayers and 18% for other taxpayers. If you have not used your annual exemption – now just £3,000 of gains – you should consider doing so after what has been a generally good year on the world’s stock markets.
  • IHT: Now is the time to use your annual exempt amount (£3,000 per tax year) for 2024/25 if you have not already done so. If you did not use your full exemption from 2023/24, you can also gift the unused element after you have exhausted this year’s exemption.
  • Marriage allowances: If you or your spouse/civil partner had income below the personal allowance in 2020/21 (£12,500), you have until 5 April 2025 to claim the marriage allowance for that year (£1,250), which could produce a tax saving of up to £250. A claim can only be made if the other partner was a basic rate taxpayer (starter, basic or intermediate rate in Scotland) in that tax year. The same principle applies (with an allowance of £1,260) for 2021/22 and subsequent years onwards.
  • Threshold planning: The long-term freezes that have applied to income tax allowances and many thresholds may mean you move into a higher tax band in the coming tax year. Equally you could find yourself crossing the unchanged £60,000 threshold for the high-income child benefit charge or the £100,000 threshold for personal allowance taper and loss of tax-free childcare. Among the strategies to beat the unmoving thresholds, you could bring forward income into 2024/25 (e.g., by closing an interest-paying account) or move some income-generating investments across to your (lower income) spouse or civil partner by 5 April.

It is best to seek advice before taking any action – in tax, errors can be costly and difficult to unwind.

Photo by Glenn Carstens-Peters on Unsplash

The consequences of higher employer’s national insurance contributions

Written by admin on . Posted in Employment Tax, National Insurance Contributions. No Comments on The consequences of higher employer’s national insurance contributions

The impact of the Budget’s increases in national insurance contributions (NICs) are not limited to employers.

There were three main changes to employer’s NICs announced in the Budget, all of which will take effect from April 2025:

  • The secondary threshold – the starting point for payment of employers’ NICs – will be cut from £9,100 to £5,000. The employee’s starting point remains at £12,570.
  • The employer’s NICs rate will rise from 13.8% to 15.0%.
  • The employment allowance, effectively an employer’s NIC credit, will be increased from £5,000 to £10,500.

The cut in the secondary threshold is the biggest revenue raiser and the change provoking the most complaints from businesses in the retail, leisure and hospitality sectors. It is easy to see why. The NICs cost of employing a part-timer earning £175 a week goes up from nil to £11.85 a week. That is before the 6.7% increase in the national living wage kicks in (or the double-digit increases for under-21s on the national minimum wage).

The Office for Budget Responsibility (OBR) anticipates that employers will react in a variety of ways, including restricting future pay rises, reducing hours and cutting back on recruitment. There may also be a rise in self-employment (where the maximum total NICs rate is now 6%) and individuals working through one-person companies, although this is a contentious area. The line between a contractor and an employee has seen plenty of legislation and litigation over recent years.

If you are already self-employed, then on purely tax grounds, the appeal of incorporating has been reduced by the rise in NICs. It had already been weakened by increased tax on dividends, which are now in many instances a more costly way for an owner-director to draw profits out of a company rather than taking a bonus.

If you are an employee, then one indirect benefit you may see because of the NICs rise is the introduction (or improvement) of salary sacrifice schemes for pension contributions and, possibly, electric company cars. Both can save the employer NICs, part of which is often passed on to the employee.

More detail on the change to employer’s NICs can be found here.

Photo by Priscilla Du Preez ???????? on Unsplash

For better or worse? The corporate tax roadmap

Written by admin on . Posted in Budget, Corporation Tax, R&D. No Comments on For better or worse? The corporate tax roadmap

As part of the October Budget, the government published a ‘corporate tax roadmap’, outlining a commitment to maintaining corporate tax rates for the duration of this parliament. This provides businesses with welcome certainty going forward, although the existing increased rates of corporation tax introduced in 2023 remain a source of disquiet.

The government’s intention with publishing the corporate tax roadmap is that a stable and predictable tax environment will help to provide the confidence companies need to invest, innovate and grow over the long term.

Main commitment

The government has left itself the option of cutting the main rate of corporation tax should this be necessary to keep the UK’s tax regime competitive. This includes:

  • Rate of corporation tax: The main rate will be capped at 25%, with the small profits rate and marginal relief kept at their current rates and thresholds.
  • Capital allowances: The system of 100% and 50% first-year allowances on new plant and machinery expenditure will be maintained, as will the £1 million annual investment allowance threshold and the structures and buildings allowance.
  • R&D reliefs: The current rates for both the merged research and development (R&D) expenditure credit scheme and enhanced R&D intensive support for small- to medium-sized enterprises (SMEs) will be maintained.
  • Loss reliefs: The current loss reliefs for both standalone companies and groups will remain in place.

Potential improvements

The roadmap also highlights areas of corporate tax where the government will explore possible improvements. One particular area of concern is the tax treatment of predevelopment costs. A recent Upper Tribunal decision was that the cost of preliminary studies performed prior to the installation of wind turbines did not qualify for capital allowances.

Not surprisingly, this decision has caused uncertainty for investors and a follow-up consultation will be launched in the coming months. The Upper Tribunal’s decision does not match the government’s aim of encouraging investment in renewable energy.

The full text of the government’s corporate tax roadmap can be found here.

Photo by Karsten Würth on Unsplash

Long freeze on individual savings accounts

Written by admin on . Posted in Budget, Wealth. No Comments on Long freeze on individual savings accounts

Hidden away in the October Budget announcements was the freezing of individual savings accounts (ISA) annual subscription limits until 5 April 2030. Good news that there is no intention to remove this valuable tax-free savings option, but bad news given the fiscal drag involved.

The main £20,000 ISA allowance has been in place since 6 April 2017 and will remain unchanged for a further five tax years.

Other subscription limits

The following annual subscription limits are also going to be frozen until 5 April 2030:

  Subscription limit
Lifetime ISAs £4,000
Junior ISAs £9,000
Child trust funds (CTFs) £9,000

The subscription limit of £20,000 applies across the four main adult ISAs each tax year – the cash ISA, the stocks and shares ISA, the innovative finance ISA and the Lifetime ISA. Although the Lifetime ISA has a £4,000 subscription limit, this is still part of the overall £20,000 allowance.

There were concerns that the Chancellor was going to impose an overall limit on the amount of ISA saving, but the mooted lifetime cap of £500,000 did not materialise. There are currently over 4,000 ISA savers with ISA pots worth more than £1 million.

There were plans to introduce a UK ISA (or British ISA) with an additional £5,000 allowance, but the Chancellor has announced this idea will not proceed.

Fractional interests

Despite previously saying the complete opposite, HMRC have confirmed that fractional interests – commonly known as fractional shares – can be held within a stocks or shares ISA or a CTF invested in shares:

  • The shares of some US tech companies – such as Apple and Microsoft – can cost £100s. The availability of fractional interests will help regular savers acquire such shares.
  • The change will not come in immediately, but, subject to complying with the new regulations, existing fractional interests may be retained.

ISA managers will be required to remove any currently held fractional interests that are not eligible under the new regulations. HMRC’s basic guide to ISAs can be found here.

Photo by Diane Helentjaris on Unsplash

Umbrella companies back in the spotlight

Written by admin on . Posted in Employment Tax, IR35, PAYE. No Comments on Umbrella companies back in the spotlight

Umbrella companies are often used to employ workers on behalf of recruitment agencies and end clients. However, HMRC is making changes from April 2026 to deal with umbrella companies who don’t comply with their tax obligations.

HMRC analysis shows that around 40% of umbrella companies engaging workers for 2022/23 failed to comply with their tax obligations.

It is relatively easy to create an umbrella company, so the individuals behind non-compliant businesses can quickly establish new companies and relaunch them into the umbrella company market.

Change in responsibility

From April 2026, responsibility for accounting for PAYE and national insurance contributions (NICs; including employer NICs) will move from the umbrella company to the recruitment agency that supplies the worker to the end client. Where there is no agency in a labour supply chain, responsibility will sit with the end client:

  • Recruitment agencies and end clients will still be able to contract with umbrella companies exactly the same as they do now.
  • However, if the umbrella company fails to remit the correct amount of tax and NICs to HMRC, the recruiter or the end client will in future be liable for any shortfall.
  • Workers should benefit, since, by avoiding being a party to non-compliant tax arrangements, they will not end up facing large, unexpected tax bills.

The logic behind the change in responsibility is that recruitment agencies and end clients can generally choose who they want to work with, so in future they will be careful not to deal with illegitimate operators.

Going forward

Smaller employment agencies will probably want to continue outsourcing the payroll function to umbrella companies. Given the potential cost of using a non-compliant company, agencies – and maybe end clients – should be more careful than ever in undertaking due diligence checks and/or having legal indemnities in place.

While the changes won’t take place until April 2026, it is advisable for updated systems should be in place well before then. Contracts will need to be scrutinised and fee arrangements re-evaluated.

HMRC’s policy paper explaining how it will tackle non-compliance in the umbrella company market can be found here.

New company size thresholds from April 2025

Written by admin on . Posted in Companies House, Company Director, Incorporation. No Comments on New company size thresholds from April 2025

Thresholds defining company sizes have not changed since 2016, but revised thresholds are now set to be introduced from 6 April 2025. Companies House intends to roll out their new identity verification requirements for directors and people with significant control (PSCs) by late 2025.

Static reporting thresholds, along with a couple of years of relatively high inflation, will have drawn more companies into reporting requirements that may not be appropriate for them.

Threshold sizes

The company size thresholds are expected to increase by approximately 50%, although there will be no change for the average number of employees. The new thresholds – with current thresholds bracketed – will be:

  Micro-entity Small company Medium-sized company
Turnover £1 million (£632,000) £15 million (£10.2 million) £54 million (£36 million)
Balance Sheet £500,000 (£316,000) £7.5 million (£5.1 million) £27 million (£18 million)
Average number of employees 10 50 500

To qualify as a micro-entity, small or medium-sized company, a company must normally not exceed two of the three relevant criteria above.

As a result of the redefinition exercise:

  • The increased thresholds will see more than 100,000 small companies reclassified as micro-entities.
  • Micro-entities benefit from reduced reporting requirements, although lenders may require more detailed information in order to assess a company’s creditworthiness.
  • Small companies may qualify for audit exemption; companies that were in danger of moving to a medium-sized classification might now retain this exemption.

Growing companies may find it preferable to maintain their current reporting requirements, even if increased thresholds hold out the offer of a temporary step down to a lower regime. This is to avoid disrupting their current reporting systems for a change taking place over one or two years.

Identity verification

The plan is that by autumn 2025, directors and PSCs will have to verify their identities at the point a new company is incorporated. Verification for existing companies will then take place over the following 12 months when a company’s confirmation statement is filed. This transition could be quite burdensome for many companies.

Compliance activity against those who have failed to verify their identity is expected to commence by the end of 2026.

Companies House accounts guidance can be found here.

Photo by @Chrissy Langston on Unsplash

What is a Validation Order (And What Does It Have To Do With a Winding Up Petition)?

Written by admin on . Posted in Bankruptcy, Company Insolvency, Insolvency, Restructuring & Insolvency. No Comments on What is a Validation Order (And What Does It Have To Do With a Winding Up Petition)?

The word ‘Validation’ means different things depending on its usage. The dictionary lists: ‘acceptance’, ‘affirmation’, ‘authorisation’, ‘corroboration’, endorsement, proof, ‘recognition’, ‘verification’.

In the context of insolvency (both bankruptcy and company),  a validation order is a special court order that allows a company to continue using its bank account or carry out specific transactions after a winding up petition has been issued against it.

A winding up petition is a legal step taken by creditors who believe that a company is unable to pay its debts. If granted by the court, the petition can lead to the company’s closure (also known as liquidation), and its assets sold to repay creditors.

Once a winding up petition is filed, the company’s bank accounts are usually frozen to protect the creditors’ interests. However, this can severely disrupt the company’s ability to operate, even if it plans to challenge the petition. This is where a validation order becomes essential.

A validation order allows the company to continue certain financial activities—like paying employees or making crucial payments—while the petition is being dealt with.

Consequences of Advertising a Winding Up Petition in the London Gazette

When a winding up petition is advertised in the London Gazette, it becomes public knowledge. This can have serious consequences for the company:

  • Frozen Bank Accounts: Once the petition is advertised, banks often freeze the company’s accounts to prevent money from being moved around.
  • Damaged Reputation: The advertisement can harm the company’s reputation, scaring away customers, suppliers, and investors.
  • Increased Pressure from Creditors: Other creditors may join in to demand payment, increasing the financial strain on the company.

To prevent these issues, a company can apply for a validation order, which could unfreeze accounts and keep essential parts of the business running.

Need Help with a Winding Up Petition?

If your company has received a winding up petition, it’s important to act quickly. Contact Femi Ogunshakin to discuss how to apply for a validation order from the insolvency courts. Femi offers a free 30-minute consultation to help you explore your options and protect your business. Reach out on 07867 795 439 or email femi@femiogunshakin.com or femi.ogunshakin@nexa.law

Photo by Mathew Schwartz on Unsplash

Employment expenses pushed to paper

Written by admin on . Posted in Employment Tax, PAYE, self-assessment. No Comments on Employment expenses pushed to paper

Despite its digital ambitions, HMRC has recently reverted to paper-based claims for employees who want to make a claim for employment expenses. The change from an online basis has been made to reduce fraud.

Reports suggest that businesses are claiming expenses even when there is little, or no, business relevance in an attempt to counteract increasingly onerous tax burdens. Given HMRC’s move to paper-based claims for employment expenses, it seems as if some employees may have adopted a similar attitude. Tax refund companies have also misused the expenses system in order to obtain inflated tax repayments.

Form P87

Employees can claim tax relief for expenses through PAYE if they have not been reimbursed by their employer. From 14 October this year, claims must be made using a paper form P87 which is then posted to HMRC. Claims have to be supported by appropriate evidence. For example:

  • Professional subscriptions: receipt copy showing how much was paid.
  • Mileage allowance: mileage log copy, giving the reason for each journey; with start and finish points.
  • Subsistence: hotel or restaurant receipts copies.
  • Working from home: proof that an employee is required to work from home, such as a copy of the employment contract. An employee who simply chooses to work from home is not eligible for a claim.

Despite the change, online claims can still be made for flat rate expenses (uniform, work clothing and tools). HMRC expects the digital claim route to be available again from next April.

Self-assessment

An alternative to claiming via PAYE is to claim for employment expenses when submitting a self-assessment tax return. If employment expenses for the year exceed £2,500, this is the only permitted route.

Although there is no initial requirement to provide evidence when claiming employment expenses this way, HMRC will be extending the number of compliance checks on the eligibility of expense claims made. In such cases, they may request further evidence.

HMRC guidance on claiming tax relief for employment expenses can be found here.

Photo by Toa Heftiba on Unsplash

Business rates worth the relief?

Written by admin on . Posted in Budget, Business Rates. No Comments on Business rates worth the relief?

Business rates relief has been extended for the retail, hospitality and leisure sector but, with the rate of discount cut from 75% to 40%, many English businesses will face a near doubling of their rates bill for 2025/26.

Next year’s changes for 2025/26

Retail, hospitality and leisure properties not qualifying for small business rates relief currently receive a 75% business rates discount, subject to a cap of £110,000 per business. This relief is to continue for 2025/26, but with the rate of discount cut to 40%:

  • A business rates bill consists of a property’s rateable value multiplied by a multiplier.
  • For 2025/26, the small business multiplier (rateable value below £51,000) is again frozen at 49.9p. This covers over a million properties in England.
  • The standard multiplier (rateable value £51,000 or more) is being uprated from 54.6p to 55.5p.

On the one hand, businesses will be relieved that the business rates discount will not cease altogether on 31 March 2025. However, on the other, they will be disappointed with the level of replacement discount.

Property will typically qualify for the 40% discount if the business is mainly being used as a shop; restaurant, café, bar or pub; cinema or music venue; or gym, spa or hotel.

2026/27 onwards

With the aim of implementing a fairer system of business rates, permanently lower multipliers will be introduced for retail, hospitality and leisure properties with a rateable value below £500,000:

  • This reduction will be funded by a new higher multiplier for properties with a rateable value of £500,000 or higher.
  • The higher multiplier will include most large distribution warehouses, including those used by online retailers.

The Government will also be consulting on other areas for reform. For example, where the presence of cliff-edges in the system acts as a disincentive to expand.

There are currently no details yet of any discounts for property in Scotland, Wales or Northern Ireland, nor have multipliers been announced. Welsh retail, hospitality and leisure property currently benefits from a 40% discount.

Details of the business rates reliefs currently available in England can be found here.

Photo by Aarón Blanco Tejedor on Unsplash

What is a Winding Up Petition?

Written by admin on . Posted in Bankruptcy, Company Insolvency, Insolvency, Restructuring & Insolvency. No Comments on What is a Winding Up Petition?

A winding up petition is legal action taken by a creditor ie HM Revenue and Customs (HMRC) to force a company into closure because it cannot pay its debts.

Essentially, a winding up petition is a request to the court to wind up (or close) the company so its assets can be sold off to repay the money owed. If granted, the company may be placed in compulsory liquidation, meaning it will cease trading, and the creditors will receive payment from the sale of its assets.

How to Avoid a Winding Up Petition

Receiving a winding up petition can be very serious for any business, but there are steps you can take to avoid it:

  1. Pay your bills on time – Ensure that you manage your cash flow well and make regular payments to creditors. This shows that your company is financially healthy.
  2. Communicate with creditors – If you’re struggling to make payments, talk to your creditors. Many creditors are open to discussing repayment plans or negotiating terms rather than going to court. If you’re lucky, you might even get a time to pay arrangement agreed!
  3. Seek professional advice early – If your business is in financial difficulty, it’s important to get expert advice as soon as possible. They can help you restructure debts or explore other options to avoid legal action.
  4. Keep accurate financial records – Monitoring your company’s financial health is crucial. Regularly review your accounts and keep up-to-date records to spot any potential cash flow issues before they become serious.

Free Consultation

If your company is facing financial difficulties or you’re concerned about the possibility of a winding up petition, it’s important to seek advice quickly. Contact me for a free 30-minute consultation to discuss your situation and explore possible solutions. You can reach me on 07867 795 439 or email either femi@femiogunshakin.com or femi.ogunshakin@nexa.law

Photo by Towfiqu barbhuiya on Unsplash