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Top 10 Tips
1. Making Tax Digital for income tax
The main rate for corporation tax will increase from 19% to 25% for companies with profits over £250,000 from 1st April 2023.
- From the 1st of April 2026 HMRC will require all individuals who are subject to tax on their profits from a trade or property business to keep their records in a digital format and submit quarterly returns to HMRC with a final end of period statement to be submitted after the end of the tax year. At present this change will affect individuals and landlords with gross income of over £10,000 in a year.
- It is then proposed that this scheme will be extended to general partnerships the following year.
- We are here to help guide you through this transition – please take a moment to view our Making Tax Digital page for further information on how we can assist you.
- In conjunction with the implementation of Making Tax Digital for income tax, HMRC have announced that they will be reforming the basis period rules.
- For businesses that do not have a 5th April/31st March year end currently, this will mean that there will be an acceleration of tax payment as in order to transition reporting on a 5th April/31st March basis, the period to be reported in the 2023/24 tax year will need to be extended to 5th April/31st March 2024.
- If you have suffered a downturn in trading due to covid then it may be worth considering voluntarily amending your accounting year end to the 5th April earlier than the 23/24 tax year in order to reduce the likelihood that profits in more prosperous years are taxed in the same tax year.
- We are in the process of reviewing whether early adoption of a change in accounting period will be beneficial for our clients on a case-by-case basis but please do contact us if you wish to discuss this.
- Limited companies who purchase new and unused qualifying plant and machinery during the period 1st April 2021 – 31st March 2023 can benefit from an enhanced capital allowances claim of 130% in the year of purchase.
- Vans are included in the definition of qualifying plant and machinery however cars, including electric vehicles, are not.
- HMRC’s factsheet on the super deductions can be found here: Super_deduction_factsheet.pdf (publishing.service.gov.uk)
- Please note that if the assets purchased, and on which the super deduction has been claimed, are sold before 31st March 2023 then there will be a claw back of the relief given.
The main rate for corporation tax will increase from 19% to 25% for companies with profits over £250,000 from 1st April 2023.
- Companies with profits falling between £50,000 and £250,000 will pay tax at the main rate of 25% reduced by a marginal relief providing a gradual increase in the effective rate of corporation tax as profits increase towards £250,000.
- Companies with profits below £50,000 will continue to pay corporation tax at the small companies’ rate of 19%, with the exception of close investment holding companies who will continue to pay tax at the main rate.
- If you are concerned about the increase of corporation tax and the impact of your business structure on the thresholds to determine the rates of corporation tax applicable, then please don’t hesitate to contact us.
You can claim a flat rate per week for use of home as office as a deduction from your taxable profits, dependant on how many hours you work.
Keep in contact with your accountant throughout the year. We encourage our clients to contact us during the year for updates on their business at no extra cost. This enables us to support them and help them to make business decisions in the most tax effective way.
- Alternatively, you can claim a deduction based on a percentage of your actual home costs such as electric, gas, mortgage interest, water rates and council tax.
- Employees can also make a claim if they are required to work from home by their employer or because of the lockdown restrictions due to the Covid 19 pandemic if their employer required them to work at home at all during the 2020/21 and 2021/22 tax years only – If employees continue to voluntarily work at home after the 2021/22 tax year, they will no longer be eligible to claim this expense
- Many businesses are entitled to an annual employment allowance of £5,000 to reduce their liability for class 1 secondary national insurance contributions. This will be delivered through standard payroll software and Real Time Information (RTI).
- However, the allowance is not available to companies where the sole employee paying national insurance contributions is the director.
- In order to help battle the increased costs of living the government announced an increase in the national insurance threshold for employee national insurance contributions to take effect from 6th July 2022.
- For owner/directors who draw a salary from their limited company this may mean that the salary element of the remuneration package can be increased from July 2022 without incurring an additional national insurance liability, however as the threshold for employers’ contributions has not increased this may not be suitable for all companies, especially those who do not qualify for the employers’ allowance (see section 6 above) as this will result in Employers National Insurance becoming payable.
- From April 2021 any disposals on UK residential property that result in a liability to capital gains tax need to be reported to HMRC using their online portal, the estimated capital gains tax calculated and the return submitted and tax paid within 60 days of the completion date.
- We are able to provide this service so please get in touch if you are thinking of selling a residential property that has not always been your primary residence
- If you or your spouse has income below the personal allowance threshold of £12,570 and your spouse or yourself are a basic rate tax payer, i.e. earning below £50,270 then you can elect to transfer up to £1,260 of the personal allowance to your higher earning spouse which would save tax of up to £252 per year.
- You can backdate the claim for marriage allowance to cover any tax year since 5th April 2018 that you were eligible to claim the allowance. Details on how to apply can be found atwww.gov.uk/marriage-allowance-guide/how-it-works
- As an employer you can provide your employees with any number trivial benefits throughout the year which do not incur an income tax liability for the employee or an employer’s class 1A national insurance liability.
- In order to qualify as a trivial benefit, the benefit must meet all of the following conditions:
- The value of the benefit must not exceed £50.00
- The benefit is not cash or a cash voucher (a cash voucher is one that can be exchanged for cash – store vouchers do not meet these criteria and so a £50.00 amazon gift card would meet this condition)
- The benefit cannot be given in exchange for services performed or as a reward for their work or performance and isn’t in the terms of their employment contract.
- If the employee is also a director of the company, then they are restricted to receiving only 6 trivial benefits per year.
Keep in contact with your accountant throughout the year. We encourage our clients to contact us during the year for updates on their business at no extra cost. This enables us to support them and help them to make business decisions in the most tax effective way.
