Following Labour’s victory in the General Election, Rachel Reeves became the first female Chancellor to deliver a Budget on 30 October 2024. It is the second Budget of 2024 (after Jeremy Hunt’s Budget on 6 March 2024) and was a tax raising Budget. The following is a summary of the main points which affect small businesses (our client base).
Employers National Insurance
The biggest change, and one which will impact many small and medium sized businesses, are to Employers National Insurance (NI).
Firstly, the rate at which Employers NI is charged is going up from 13.8% to 15%.
Secondly, the threshold at which it is charged is dropping from £9,100 to £5,000.
Thirdly, the Employment Allowance (which is a credit to reduce the impact of Employers NI) is increasing from £5,000 to £10,500, which should shelter many smaller employers from the effects of the increase.
All of these changes are effective from 6 April 2025.
Capital Gains Tax
There are currently two sets of Capital Gains Tax (CGT) rates. The CGT rates on residential property are 18% (standard rate taxpayers) and 24% (higher rate taxpayers), whilst the corresponding rates for all other gains are 10% and 20%. These have now been aligned and the new CGT rates for ALL gains are 18% and 24%. This harmonisation is immediately applicable.
In respect of reliefs, the 10% rate for both business asset disposal relief (BADR) and investors’ relief (IR) remains for the rest of this tax year, but will increase to 14% from 6 April 2025 and then to 18% from 6 April 2026.
Stamp Duty Land Tax
There is currently a higher rate of Stamp Duty on the purchase of an additional residential property by an individual of 3%. This will increase from to 5% for transactions with an effective date, usually completion, on or after 31 October 2024. This will also apply to the purchase of a residential property by a company.
Income Tax Thresholds
The current Basic Rate, Higher Rate and Additional rate thresholds for income tax have remained the same since 2021. However, the freeze will be lifted in April 2028 when the thresholds will begin to rise in line with inflation.
Inheritance Tax on Pensions
Personal pension pots are considered outside of the estate for Inheritance Tax (IHT) purposes. This exemption will effectively be abolished with effect from 6 April 2027.
High Income Child Benefit Charge
The thresholds for paying the High Income Child Benefit Charge (HICBC) were increased in the March 2024 Budget; Child Benefit becomes repayable once earnings reach £60,000 and the upper limit will be £80,000. At the time, it was also announced that there would be a radical reform of the mechanism of the HICBC by “moving to a system based on household rather than individual incomes”. However, the Budget confirmed that the Government will not proceed with the reform to base the HICBC on household incomes. Instead, there will be an update to the mechanisms by which the HICBC is collected; employed individuals will be given the opportunity to pay the HICBC through their tax code and the self assessment tax return will be pre-populated with child benefit data.
Double Cab Pickups
The tax treatment of cars and vans differ significantly, for VAT, capital allowances, and benefits-in-kind (BIK) purposes. Following a successful court case for HMRC, the Government announced that it will classify double cab pickups as company cars. This change comes into effect from 1 April 2025 for corporation tax and 6 April 2025 for income tax; existing capital allowances treatment will apply to those who purchase double-cab pickups before April 2025. Also, the transitional BIK arrangements will apply for employers that have purchased, leased or ordered a double-cab pickup before 6 April 2025. In this case, they will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.
NB HMRC tried to make this exact change in February 2024, only for it to be reversed shortly afterwards.
Further information is available here.
N. Goddard
4.11.24
On 6th March 2024, the Chancellor delivered his Budget, probably the last one before the anticipated 2024 General Election. The following is a summary of the main points which affect small businesses (our client base). NB some of the details are still being developed or announced, so not all of the information may be available just yet.
As expected, the main rates of NI were cut. With effect from 6.4.24, this will be 8% for employees and 6% for the self employed (sole traders and partnerships). This follows the NI cuts announced in the Autumn Statement.
NB the rate of employers NI stays the same.
Since it was introduced in 2013, Child Benefit has been repayable if a household has one parent earning over £50,000, and it is all repaybale once earnings reach £60,000. For 2024, these limits have been increased. Child Benefit becomes repayable once earnings reach £60,000 and the upper limit will be £80,000.
The FHL rules treat short-term letting businesses in a similar way to trading businesses for the purposes of various tax reliefs, as longs as availability and occupancy conditions being met. The FHL regime will be abolished from April 2025.
The current CGT rates applicable to gains made on disposals of residential property are 18% and 28%. From 6 April 2024, the higher rate will be cut to 24%.
The VAT registration threshold will increase to £90,000 from 1 April 2024. The deregistration threshold will increase to £88,000.
Further information is available here.
N. Goddard
7.3.24
On 23rd September 2022 Kwasi Kwarteng, the new Chancellor, delivered a ‘mini’ Budget with some quite significant changes to the tax system. There have been a lot of changes in respect of tax increases announced by the previous Chancellor (& Prime Minister). The following is a summary of the changes which impact small business.
As was announced the previous day, the 1.25% increase in National Insurance (NI) will be reversed from 6 November 2022. Also, the Health and Social Care Levy was going to be introduced from 6 April 2023, but this will now not happen.
The increase in dividend tax rate followed the increase in NI, but the drop back to previous rates won’t take place until 6 April 2023. Therefore, the dividend tax rate for normal rate taxpayers for 2022/23 will be 8.75% and 33.75% for higher rate taxpayers.
The basic rate of tax is 20% and this was due to drop to 19% from 2024. However, this reduction has been accelerated by a year, and will take place from 6 April 2023.
The drop in the rate of income tax will have a detrimental effect on charities, as donations will attract a lower amount of Gift Aid. In order to support charities, the reduction will be phased in over 4 years.
The additional rate band of income tax, payable on income over £150,000 (at a rate of 45%), will be abolished from 6 April 2023.
From April 2023, the main rate of corporation tax was due to increase to 25%. This has now been scrapped.
Currently, tax relief of 100% under the Annual Investment Allowance is available in respect of the first £1m of capital expenditure, and this level was due to drop to £200k from 1 April 2023. However, the £1m limit has been made permanent.
The changes announced over the last 5 years to IR35 in respect of the public sector (2017) and the private sector (2021) will be repealed from April 2023.
Further details on the Mini Budget can be found here.
GBM Accounts
26.9.22
On 3rd March 2021, the Chancellor Rishi Sunak delivered the 2021 Budget, which had the task of balancing potential tax hikes to pay for the massive cost of support during the Coronavirus pandemic with helping to kick start a fragile economy coming out of lockdown.
There were some interesting announcements, some which will be helpful for business, some of which may be aimed at future tax increases when conditions allow, and certainly no intention of making the tax legislation any simpler in the immediate future. The 2021 Budget was not aiming for simplification!
The following is a summary of the main points which affect small businesses (our client base). NB some of the details are still being developed or announced, so not all of the information may be available just yet.
The Coronavirus Job Retention Scheme (CJRS) has been extended to the end of September 2021. It will continue to operate in its current form until June 2021 which means:
However, employers will start to contribute to the 80% of employer pay on a tapered basis.
In addition, employees who started after 30 October 2020, were employed on 2 March 2021 and have had earnings reported to HMRC under RTI between 20 March 2020 and 2 March 2021 are now able to be furloughed and claimed for with effect from May 2021 onwards.
The big news here is that the additional SEISS grants will be available for individuals who started self employment after 6th April 2019, who were excluded from the first 3 SEISS grants.
Sole traders and partnerships will be able claim a fourth SEISS grant from late April and a fifth SEISS grant in late July 2021, but extra conditions will apply. The new grants will be worth up to a maximum of £7,500 for taxpayers who have filed their 2019/20 SA tax return by midnight on 2 March 2021. HMRC will then calculate average trading profits for the four tax years to 2019/20. The fifth SEISS grant will be payable for the three months to 31 July 2021 and will be subject to a turnover test that determines the impact of the pandemic on the taxpayer to award a proportional sum.
The main conditions for eligibility for the grant continue to be:
The turnover test for the 5th grant will give payments as follows:
The tax-free Personal Allowance and Standard Rate Band increase by a modest amount each year in line with the Consumer Price Index. For the tax year ended 5 April 2022, it had already been announced that these would increase to £12,570 and £37,700 respectively. The Chancellor confirmed these figures, but announced that the Personal Allowance and Standard Rate Band will now be maintained at these 2021/22 levels until 5 April 2026. This means that higher rate tax starts at £50,270.
The main Corporation tax rate will increase to 25% from 1 April 2023 on profits over £250,000. The rate for small profits under £50,000 will remain at 19%.
Where a company’s profits fall between £50,000 and £250,000, the lower and upper limits, it will be able to claim an amount of marginal relief providing a gradual increase in the corporation tax rate. The lower and upper limits will be proportionately reduced for short accounting periods and where there are associated companies.
A “super-deduction” will be introduced from 1 April 2021 until 31 March 2023 allowing companies to benefit from a 130% first-year allowance for capital expenditure on qualifying new plant and machinery assets. The super-deduction will apply to expenditure on new main pool plant and machinery that ordinarily qualifies for the 18% main pool rate of writing down allowances.
The measures announced will not apply to qualifying expenditure on “second hand” or “used” plant and machinery and will not apply to expenditure incurred in respect of a contract entered into prior to 3 March 2021. Any companies that have already contracted for the provision of plant and machinery will only be able to claim capital allowances at the normal standard rates.
Companies and unincorporated businesses can normally set their trading losses against profits of the current or the previous 12-month period, or else carry them forward against future profits. Where a business has made a large loss because of the pandemic, or makes losses in two successive periods, the 12-month carry back may not be enough to relieve the whole amount. The Budget has extended the normal 12-month carry-back to three years, for both unincorporated businesses and companies, for trading losses of 2020/21 and 2021/22. For example, a loss of 2020/21 can be carried back against pre-pandemic profits of 2019/20, 2018/19 and 2017/18; without the extension, the claim could only have been made against 2019/20. There is a limit on the total amount to be carried back to the second and third earlier year of £2 million in each year of loss for unincorporated businesses and companies.
A new loan scheme will replace CBILS and BBLS which all end on 31 March. The new version will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10m. The scheme may be used for “any legitimate business purpose, including growth and investment” and will remain open until 31 December (subject to change). Businesses throughout the UK can take advantage of the initiative, including those that already received support under the existing Covid guaranteed loan schemes.
Several VAT changes were announced. Firstly, the existing reduced rate of 5% VAT applied to certain supplies relating to hospitality, and hotel and holiday accommodation was due to end on 31 March 2021. This is being extended until 30 September 2021. A new reduced rate of VAT of 12.5% will then be introduced from 1 October 2021 until 31 March 2022 after which the standard rate of VAT (20%) will apply.
Secondly, the Chancellor has announced that the VAT registration threshold will remain at £85,000 until at least 31 March 2024. The deregistration threshold will remain at £83,000 for the same period.
Thirdly, in respect of the VAT Deferral New Payment Scheme, HMRC will levy a penalty of 5% of the amount of deferred VAT outstanding if businesses have not paid in full, opted into the New Payment Scheme, or made an alternative arrangement to pay by 30 June 2021. See here for more details.
Fourthly, HMRC has announced that from April 2022, a new points-based penalty regime will be introduced to harmonise penalties and interest for taxpayers who fail to submit their VAT returns on time and pay the VAT due to HMRC. Details can be found here.
Finally, the existing Making Tax Digital (MTD) regime remains. However, for VAT periods starting on or after 1 April 2022, all remaining VAT registered businesses, including the self-employed and landlords, will be required to keep their VAT records digitally and provide their VAT return information to HMRC through MTD compatible software.
Rates and allowance can be found here.
GBM Accounts - the 2021 Budget
4.3.21
The Chancellor Rishi Sunak delivered his first Budget on 11th March 2020. It was against the backdrop of the development of the Coronavirus, which has turned into a pandemic and is potentially going to have a huge impact on the fabric of society over the coming months. For this reason, there were some business friendly announcements (and the Budget followed a cut in the Bank of England base rate, from 0.75% to 0.25%). The following are the main points which affect small businesses.
Employment Allowance
The Employment Allowance is currently £3,000 that reduces an employer’s National Insurance Contributions. This will increase to £4,000 from 1 April 2020.
Statutory Sick Pay
A number of measures have been introduced to Statutory Sick Pay (SSP) which are effective from 6 April 2020. The measures include:
The current rate of SSP is £94.25 per week, rising to £95.85 from 6 April 2020.
SSP is currently payable to employees with earnings over £6,136 (£6,420 per annum from 6 April 2020). For employees below this threshold, as well as the self-employed, the Government has announced additional measures that include:
Business Rates Relief
To help businesses cope with the commercial impact of Coronavirus, business rates reliefs for businesses in England have been confirmed and extended. As a result, some businesses will have a reduced business rates liability or no liability at all, for the year to 31 March 2021.
It had previously been announced that there would be an increase in rates relief to 50% for the year to 31 March 2021 for those retailers in England with a rateable value below £51,000. This was expected to apply to up to 90% of independent shops, pubs and restaurants. The relief has now been increased to 100% and the scope of the relief has been expanded to include cinemas, music venues and leisure and hospitality businesses. This means that qualifying businesses will have no liability to business rates for the year to 31 March 2021.
Pubs in England with a rateable value below £100,000 will receive a rates discount of £5,000, (increased from £1,000), for the year to 31 March 2021.
One-Off Grant for Small Businesses
If a business currently qualifies for the Small Business Rates Relief, the Government is to provide a £3,000 grant. Businesses that think they may be eligible should contact their local authority.
Income Tax
The personal allowance and the income tax bands have been maintained at the same level for the 2020-21 tax year as for the previous year, 2019-20:
Personal allowance £12,500
Basic rate band £37,500
Higher rate band £37,501 to £150,000
Additional rate Income over £150,000
National Insurance
The tax threshold for National Insurance Contributions will rise, from ££8,632 to £9,500.
Capital Gains Tax
In respect of your home, there is usually no Capital Gains Tax (CGT) to pay on disposal. If you let out your home (as well as live there yourself), then you may be subject to CGT. Effective from April 2020, there are 2 changes to the current rules in respect of this:
Also, before the Budget, there was a lot of speculation in respect of whether Entrepreneur’s Relief (a relief available to business owners which limits CGT payable on disposal of the business) may be scrapped. The announcement was that it was being retained, but the lifetime allowance for the relief would reduce from £10m to £1m.
Small businesses, employers and buy to let landlords have been hit with a raft of changes over the last few years which have either made their jobs harder or increased the tax they pay. These include workplace pensions, restrictions on tax relief for landlords, the removal of tax relief on goodwill on incorporation, the National Living Wage, digital tax accounts, and the dividend tax. On Wednesday 16 March 2016, the Chancellor George Osborne delivered his Budget and did not add to this burden – too much! We have reviewed the announcements and identified the following which will affect our core client base, namely small businesses.
Income Tax
The personal allowance threshold is due to increase to £11,000 from 6 April 2016 and will then increase to £11,500 from April 2017. Also, the 40% tax rate is reached in the 2016-17 tax year when income is £43,000, this is due to increase to £45,000 for 2017-18.
Corporation Tax
The current rate of corporation tax is 20%. This will fall to 19% from 1 April 2017 and to 17% from 1 April 2020.
Small Business Rates
The annual threshold for small business rates relief is to be raised from £6,000 to a maximum of £15,000, which means that thousands of small businesses will no longer pay any business rates at all. This is a permanent cut and replaces the temporary rates relief.
National Insurance
Class 2 National Insurance (NI) will be abolished from April 2018. Class 2 NI is currently £2.80 p/w and is paid by the self employed. There is a contributory element which counts towards the State Pension and other benefits, and this will be transferred to a reformed class 4 NI.
VAT
The VAT registration threshold will increase from £82,000 to £83,000 from April 2016.
Capital Gains Tax
The current rates of Capital Gains Tax are 18% for a basic rate taxpayer and 28% for a higher rate taxpayer. From 6 April 2016, the 18% and 28% rates will be reduced to 10% and 20% respectively. However, gains on the sale of residential property will specifically be excluded from the new reduced rates.
Commercial Stamp Duty
Commercial stamp duty will be overhauled with the introduction of a 0% rate on purchases up to £150k, a 2% rate on the next £100k and a 5% top rate above £250k.
Loans to Participators
The rate of tax payable by a close company when it makes a loan to a participator on or after 6 April 2016 will increase from 25% to 32.5%. This reflects the 7.5% dividend tax which is effective from the same date.
And finally…
HMRC
HMRC is to offer support seven days a week in a bid to improve customer service. The tax office will extend its telephone opening hours and recruit 800 new call centre staff by 2017 in a bid to reduce call waiting times.
