Category Archives: Latest News

Are you prepared for the end of the tax year?

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With the end of the tax year fast approaching on 5 April 2023, there is only a little time left to get your affairs in order and make the most of the tax reliefs and allowances that are available to you.

 

With many changes on the horizon, our experienced tax team at Benson wood has compiled the following checklist of the key investment and tax planning ideas that you should be considering now.

 

Dividend taxation: Have you utilised the zero per cent Dividend Tax Band of £2,000? Don’t forget that this relief is being reduced from April 2023 to £1,000, before falling again in April 2024 to just £500.

 

Corporation Tax: The rate of Corporation Tax is currently 19 per cent. However, this will increase from April 2023 for companies with profits of more than £50,000 to as much as 25 per cent for businesses with profits exceeding £250,000. Businesses with profits between these thresholds will benefit from marginal rate relief to reduce their effective rate of Corporation Tax.

 

Carry Forward: Given the changes, you may also want to carry forward losses into the new tax year to reduce your overall levels of profitability. If you face a higher rate of tax, you could, for example, increase your pension contributions or fund the purchase of a company car so that your profits remain below £50,000. You may also wish to consider whether it will still be tax-efficient to run your business as a corporate body.

 

Accounting dates: Did you know if your accounting year is different to the tax year you will need to transition next year which will most likely result in additional tax. Are you ready? you can offset your overlap profit and it may be worth considering any planned expenditure in the transitional year 2023/24.

 

Capital Gains: Have you used your annual exemption for 2022-23 of £12,300? Be aware that the annual exemption is being more than halved to £6,000 from April 2023, and then reduced further to £ 3,000 from April 2024.

 

Capital Allowances: Have you purchased any required items before your business year-end to ensure these allowances are available a year earlier? The Annual Investment Allowance will now remain at £1 million, so you should make sure you make use of this and the other capital allowance schemes.

 

It might be worth deferring eligible expenditure into the next tax year, so you can reduce taxable profits after the Corporation Tax rates increase in April 2023.

 

Super Deduction: The Super Deduction allows companies to benefit from 130 per cent first-year relief on qualifying main rate plant and machinery investments made by 31 March 2023.

 

Have you fully utilised this tax allowance in the current tax year? This means that investments in assets such as certain commercial vehicles, office furniture or solar panels will allow businesses to deduct the value of the investment, plus 30 per cent from their taxable profits.

 

Be aware, however, that if your year-end spans 31 March 2023 transitional rules will apply and you must apportion the additional 30 per cent uplift on the number of days in the company’s accounting period before 1 April 2023.

 

Research & Development tax credits: Have you claimed for all your eligible R&D projects to take advantage of the significant benefits available?

 

Under the SME scheme, HMRC will allow an extra 130 per cent of identified costs to be written off against taxable profits on projects that have led to the creation of new products, processes or services or modifying an existing product, process or service.

 

Claims can even be made against innovations that resulted in a loss. Be aware that from April 2023, the additional R&D tax reduction will be reduced to 86 per cent, while the tax credit for loss-making companies will also be reduced from 14.5 per cent to 10 per cent. It might, therefore, be beneficial to bring eligible R&D expenditure forward.

 

Directors Loans: Have you used the tax-free interest amount on any loans to your business? Depending on your income level, you could save up to £1,000. Take note that the interest allowance is reduced from £1,000 to £500 in 2023.

 

Personal Tax Brackets: Do you know which income tax bracket you earnings sit within? If you have a standard Personal Allowance of £12,570, the table displays the Income Tax rates you will be charged in each band for the period of 2022 to 2023 in Scotland.

 


Taxable income		 Scottish tax rate
Personal Allowance Up to £12,570 0 per cent
Starter rate £12,571 to £14,732 19 per cent
Basic rate £14,733 to £25,688 20 per cent
Intermediate rate £25,689 to £43,662 21 per cent
Higher rate £43,663 to £150,000 41 per cent
Top rate over £150,000 46 per cent

 

Remember, you are not entitled to the Personal Allowance if you earn more than £125,140 a year.

 

Inheritance Tax (IHT): This must be paid on the value of any estate above £325,000. However certain assets including business and agricultural as well as shares in private trading companies may qualify for 100 per cent relief from IHT.

 

The Resident Nil Rate Band (RNRB) was introduced in 2017 and applies to a residence passed, on death, to a direct descendant. It was introduced in stages – £150,000 initially, rising to £175,000 (2020). There is now a nil rate band of £325,000 plus RNRB of £175,000, – which, in total, provides an IHT allowance of £500,000 per person, so a married couple could have a £1 million allowance, where any unused allowance is passed to the surviving spouse.

 

Estates worth over £2 million will start to lose the RNRB, with it being withdrawn at a rate of £1 for every £2 over £2 million.

 

Charitable and personal gifts: If you leave at least 10 per cent of your net estate to charity a reduced rate of 36 per cent rather than 40 per cent applies and could save your family money. Gifts to a spouse can be made now to use up his or her nil rate band and could help you to reduce the value of the part of your estate above the £325,000 band.

 

You can also make regular gifts out of your income which is tax-free if they are used for normal expenditure, which could include, for example, paying for a grandchild’s school fees. Other gifts may be free of IHT, but it is important to seek advice first.

 

Need help with tax planning?

 

Don’t let the tax season catch you off guard! Get ahead of the game and secure your financial future by taking advantage of our tax planning services before the year-end deadline on 5 April.

 

Whether you’re an individual or a business owner, our expert advisors are here to guide you through the complexities of the tax code and help you make informed decisions that will save you money in the long run.

 

So why wait? Contact us today and let’s start planning for a brighter financial future together!

Avoid stress and prepare for payroll year-end

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It is that stressful time of year again with the payroll year-end fast approaching.

Payroll year-end ties in with the tax year-end, which is 5 April. The deadline for submitting details to HM Revenue & Customs (HMRC) is 31 May.

Important dates around payroll year-end include:

  • 5 April – End of the 2022/23 tax year
  • 6 April – Beginning of the new tax year (2023/24)
  • 19 April – Deadline for the final submission of the 2022/23 tax year
  • By 31 May – Employees need to receive their P60s

The late filing of payroll information could attract penalties. To make sure the process is as smooth as possible, check the following has been dealt with:

  • Staff details: Are all staff details correct and up to date on your payroll software?
  • Pay details: Have you submitted details showing how you have reported all your staff’s pay correctly?
  • The final pay run: Process your last pay run that falls on or before 5 April 2023 and check you are happy with your employees’ year-to-date figures.
  • Process leavers:Have you processed any leavers before you do your final submission, so this information is recorded in the correct tax year?
  • Extra payroll week(s): If you run a weekly payroll (including fortnightly or four-weekly) then you may have to complete an extra pay run.
  • Final submission: This allows HMRC to finalise the figures for this tax year for each employee. If you didn’t pay anyone in the last period before 5 April, then you will need to submit an employer payment summary (EPS).
  • Process employee P60s: This is important as every employee is legally entitled to this document.

Please check and double-check your payroll reporting as getting this wrong can cause financial problems for both your business and its employees.

Make voluntary National Insurance contributions to ensure pension entitlement

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People planning to claim the UK state pension have been advised to check their National Insurance (NI) record to identify any shortfalls in their payment history.

NI contributions, or lack of them, can affect a person’s entitlement to the state pension in later life.

A temporary window which allows people to voluntarily top up NI contributions for tax years dating as far back as 2006, will now close on 31 July 2023 to give taxpayers more time to fill gaps in their National Insurance record and help increase the amount they receive in State Pension.

This gives additional time on top of the original 5 April deadline for individuals to make the additional contributions required.

HMRC has confirmed that “where the rates of voluntary National Insurance contributions were due to go to up from 6 April 2023, payments made by 31 July 2023 will be paid at the lower rate.”

Filling payment gaps

To ensure people were able to claim their full pension, the Government had put a temporary extension in place enabling people to fill any gaps in their NIC history.

However, from 31 July 2023, the timeframe for making voluntary contributions will revert to the normal six years.

This means that in the 2023/24 tax year, it will be possible to make contributions going back to the 2017/18 tax year only.

Part payment

To qualify for the new maximum state pension, you must have at least 35 years of qualifying NI contributions.

You may only receive a part payment if you don’t qualify for a full state pension, and you need a minimum of 10 qualifying years to receive a partial state pension.

Individuals should therefore take the opportunity to check their NI record to identify any shortfalls in their NI history.

HMRC is advising taxpayers to take the following action before 31 July 2023:

  • Check your NI record
  • Identify any discrepancies between NI contributions paid and those showing on HMRC’s system
  • Identify any NI credits that are missing from periods in which they should have been received (eg, on receipt of universal credit or child benefit)
  • Identify any shortfalls in contributions
  • Contact HMRC if you think there are any errors
  • Decide whether to make voluntary NI contributions

R&D tax reliefs are changing in April – Are you ready?

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Chancellor Jeremy Hunt announced many R&D tax changes in his Autumn Budget, including how the funding is allocated, which will be implemented in April.

He announced changes to the rates paid by the Research and Development Expenditure Credit (RDEC) for larger firms and the small and medium enterprises (SME) R&D relief scheme.

Under these changes, from 1 April, the RDEC rate will be increased to 20 per cent from 13 per cent.

Meanwhile, the SME deduction rate on qualifying expenditure will be reduced to 86 per cent from 130 per cent, and the SME credit rate decreased to 10 per cent from 14.5 per cent.

Changes also announced by the Chancellor in November, included new eligibility criteria from 1 April 2023.

Overseas R&D

Subcontracted R&D expenditure from outside the UK will no longer be eligible for inclusion in R&D claims from April 2024.

The aim of this is to bring more R&D activity to the UK and incentivise companies to move operations into the UK.

Cloud costs will now be eligible

Currently, costs relating to cloud-based technology can’t be included in an R&D claim.

From April 2023, cloud-based computing costs such as AWS will be eligible for inclusion.

Other changes in April include:

  • Claims must be submitted digitally
  • Claims must include additional information
  • Claims must be supported by a named officer of the company
  • Claims must include details of any associated agents

Pre-notification

From 1 April 2023, new rules for R&D Tax Relief claims will also require businesses to submit a pre-notification of their claim to HMRC digitally.

This applies if a business:

  • is a new claimant; or
  • has not claimed in the last three financial periods.

The requirement to pre-notify HMRC will affect any business that conducts research and development if they are eligible to claim under either the R&D Expenditure Credit (RDEC) or the SME R&D relief schemes.

Looking ahead, HM Treasury also launched an eight-week consultation on the design of a single, simplified R&D tax relief scheme earlier this year, merging the existing RDEC and SME R&D relief. If implemented, the new scheme is expected to be in place from 1 April 2024.

Businesses must be prepared for imminent changes to Corporation Tax

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Businesses should be planning for the rise in Corporation Tax (CT), which comes into force from 1 April 2023, and sees the top rate of tax rising from 19 per cent to 25 per cent.

The tax applies to all profitable limited companies – both from trading income and from the sale of investments or assets.

The new approach to Corporation Tax

After 1 April, small companies with profits of up to £50,000 will continue to pay CT at 19 per cent thanks to the small profits rate. However, companies with profits of £250,000 and over will pay CT at 25 per cent.

Those companies between this upper and lower threshold will pay CT at the top rate of 25 per cent but benefit from marginal rate relief that reduces their effective rate of tax on a sliding scale depending on their level of profitability.

To calculate this, all profits between £50,001 and £250,000 are effectively taxed at a rate of 26.5 per cent.

As an example, if a company enjoyed profits of £150,000 the first £50,000 would be taxed at 19 per cent and the remaining £100,000 at 26.5 per cent.

As a result, the company would receive a tax bill of £36,000, which means that the actual tax rate that applies is 24 per cent.

Associated Companies for Corporation Tax rules have been newly reintroduced and they will apply from 1 April 2023 in the context of the small companies rate of CT.

It applies to clients who own or control more than one company. Where two or more companies are “associated” with each other, the Corporation Tax limits are divided by the number of companies concerned.

Like all taxes, CT can be complicated and there are a variety of ways to plan for and mitigate these changes with the right professional advice.

Employers brace for uplift to the National Minimum Wage

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Workers across the UK will get a pay rise from April as higher National Minimum Wage (NMW) rates are introduced.

According to the Government, around two million of the UK’s lowest-paid workers will benefit from the rise in the National Living Wage (NLW) and NMW rates.

From April 2023, the NLW will increase by 92 pence per hour, or 9.7 per cent, to £10.42 whilst the NMW rates for younger workers will also increase.

Currently, the National Living Wage applies to those 23 and over, the age having been lowered from 25 in April 2021.

Those aged 21-22 will earn £10.18 an hour, a £1 rise, whilst 18–20-year-olds will receive £7.49 an hour, an increase of 66p.

Apprentices and 16 and 17-year-olds will receive £5.28 an hour, a 47p increase.

These rates are for the National Living Wage (for those aged 23 and over) and the National Minimum Wage (for those of at least school-leaving age).

The new rates are:

23 and over 21 to 22 18 to 20 Under 18 Apprentice
April 2022 (current rate) £9.50 £9.18 £6.83 £4.81 £4.81
April 2023 £10.42 £10.18 £7.49 £5.28 £5.28

 

The Low Pay Commission estimates that there were two million workers paid at or below the minimum wage in April 2019, around seven per cent of all UK workers.

Penalties for failing to meet statutory wage rates

If an employer is found by HM Revenue & Customs (HMRC) to have failed to pay the minimum wage, the actions that can be taken against them include:

  • Requiring payment of the outstanding amount owed, going back up to six years, through the issuance of a notice
  • Imposing a fine of no less than £100 per employee or worker affected, and up to £20,000, regardless of the amount of underpayment
  • Pursuing legal action, including criminal proceedings
  • Providing the names of businesses and employers to the Department for Business, Energy and Industrial Strategy (BEIS), which may choose to list them publicly.

If you are unsure of how these changes affect your workforce and existing employment practices, you should seek professional advice.

Fuel rate boost for electric car drivers, but other advisory fuel rates cut

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Company car drivers will see changes to the amount they can claim back for fuel costs from their employer from 1 March.

HM Revenue & Customs (HMRC) has also confirmed that the way the advisory electricity rate (AER) is calculated has been changed to better reflect energy prices, particularly with soaring electricity costs, when it is reviewed quarterly.

Previously it has been based solely on an annual figure published by the Department for Business, Energy & Industrial Strategy (BEIS), and the electrical energy consumption values for each car model, provided by the Department for Transport (DfT).

Quarterly index

HMRC will continue to use the BEIS and DfT data but will now also incorporate figures published in the Office for National Statistics (ONS) quarterly index for domestic electricity.

The new rates include a 1 pence per mile (ppm) increase in the advisory electricity rate (AER) used to reimburse drivers of electric company cars.

In contrast, and to reflect falling fuel prices, petrol, diesel and LPG advisory fuel rates (AFRs) have been reduced from 1 March.

Rates cut for petrol and diesel

The rates for petrol company cars have all been cut, with the AFR for petrol vehicles up to 1,400cc now 13 ppm.

Vehicles powered by 1,401-2,000cc engines see a decrease of 2 ppm, to 15 ppm. For engines larger than 2,000cc the AFR sees the biggest reduction of 3 ppm, to 23 ppm.

For diesel, cars up to 1,600cc there is a reduction of 1 ppm, to 13 ppm, and engines from 1,601-2,000cc see a reduction of 2 ppm to 15 ppm. The 2,000cc rate is cut by 2 ppm to 20 ppm.

For LPG vehicles up to 1,400cc, the rate remains the same at 10 ppm but has been cut by 1ppm to 11ppm for vehicles with an engine size of 1,401-2,000cc. For engines greater than 2,000cc, there is also a reduction of 1 ppm to 17 ppm.

Hybrid cars are treated as either petrol or diesel cars for AFR purposes.

Spring Budget 2023

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Just a few days short of the third anniversary of the first Covid lockdown, Chancellor Jeremy Hunt rose to the Despatch Box to deliver the first full Budget to have taken place in 504 days and the first unaffected by the immediate impact of the pandemic since October 2018.

Of course, in that time, we have had several fiscal statements and mini-Budgets, but never a full Budget Statement.

In contrast to the last full Budget, gone is the financial emergency of the Covid lockdowns, gone is the immediate fallout from the ill-fated Truss-Kwarteng mini-Budget of last Autumn, and gone is the immediate threat of a winter with households and businesses crippled by astronomical fuel bills.

Against a background of Brexit, Covid and domestic political instability, Jeremy Hunt will doubtless have been hoping that the first full Budget post-Covid would mark a return to a more normal footing for politics and the economy.

However, there was still plenty for the Chancellor to deal with. Inflation, exceptionally high fuel bills, stagnant growth, economic inactivity and the post-Covid damage to the public finances have not gone away.

Those were the areas the Chancellor was expected to set his sights on as he rose to his feet.

OBR Forecasts and the Public Finances

The Chancellor began by describing his speech as a “Budget for Growth”, saying he would deliver on an aim to make the UK one of the most prosperous countries in the world by removing barriers to investment, tackling labour shortages, breaking down barriers to work and harnessing British ingenuity.

He said the Office for Budget Responsibility (OBR) expects inflation to fall from a high of 10.7 per cent in the final quarter of 2022 to 2.9 per cent by the end of 2023, achieving the Government’s aim of halving inflation.

The OBR no longer expects the economy to enter a technical recession, with the economy expected to shrink by 0.2 per cent during 2023, before growing by 1.8 per cent in 2024, 2.5 per cent in 2025, 2.1 per cent in 2026 and 1.9 per cent in 2027.

Moving to the public finances, the Chancellor said that public sector net debt is currently 100.6 per cent of GDP but is expected to fall to 94.6 per cent of GDP by 2027-28.

“Back to Work” Measures

The Chancellor said that there are currently one million vacancies in the economy and seven million adults of working age who are not currently employed. He said that encouraging more people from this group into the labour market would be vital for growing the economy.

He announced various measures designed to get people back to work, including reforms to disability and out-of-work benefits intended to remove certain constraints and disincentives to work.

He also noted that there are now three million working age people over the age of 50 who are not in work – a figure that has increased by more than 300,000 since the pandemic. To tackle this, he announced further career support for the over-50s and a dedicated program of apprenticeships to be known as “Returnerships”.

Meanwhile, the Chancellor said that five occupations in the construction sector will be added to the Shortage Occupation List, making it easier for employers to employ skilled workers from outside the UK.

Cost of Living, Childcare and Fuel Bills

Following an announcement earlier in the day, the Chancellor confirmed that the Government’s Energy Price Guarantee, which caps per-unit household energy bills, will remain in place for a further three months from April to June 2023.

The Chancellor said that this effectively continues to cap a typical household bill at £2,500 a year.

At the same time, he said that fuel duty will remain frozen and the existing temporary 5p cut will be retained for an additional year.

He also confirmed another significant measure that had been announced ahead of the Budget in the form of a commitment to extend the provision for 30 hours’ free childcare for the children of working parents to the parents of all pre-school children aged from nine months. These reforms will be phased in gradually from April 2024 to September 2025.

There will also be changes to staff-to-child ratios in nurseries and incentives for new childminders to encourage an increase in provision in the sector.

Business Taxation

The Chancellor announced two significant changes for businesses – the introduction of a new “Full Expensing” scheme to help mitigate the impact of April’s increase in the main rate of Corporation Tax, which he confirmed will go ahead, and further reforms to Research and Development (R&D) Tax Relief.

Full Expensing will be introduced from 1 April 2023, replacing the Super Deduction. It will allow companies to write off the full cost of qualifying plant and machinery investments in the year of the investment. The measure initially applies for three years but the Chancellor said he hoped to make it permanent “when fiscal conditions allow”.

The Chancellor announced a significant increase in the relief available to loss-making R&D intensive SMEs, which will now receive £27 from HM Revenue & Customs (HMRC) for every £100 of R&D investment.

The move has been prompted by reforms previously announced that will take effect from April 2023 that will reduce the rate of tax relief and tax credits available to some SMEs.

Additionally, the Chancellor announced the creation of 12 investment zones across the UK. Those in England will have access to funds worth £80 million over five years, with a five year tax offer equivalent to that available to Freeports.

The zones will be located in the East Midlands, Manchester, Liverpool, the North East, South Yorkshire, Tees Valley, the West Midlands and West Yorkshire, as well as in each of Wales, Scotland and Northern Ireland.

Pensions

Few Budgets come to pass without some sort of rabbit-out-of-the-hat moment and this one was no exception.

While it had been trailed that there would be a significant increase in the Pensions Lifetime Allowance from its current level of £1 million, in a surprise move the Chancellor announced that the Pensions Lifetime Allowance would be scrapped entirely from April 2023.

At the same time, he also increased the Pensions Annual Allowance from its current level of £40,000 up to £60,000 from April 2023.

Conclusion

This was in many ways a return to normality for a Budget following the upheavals of recent years.

Reforms to Pension Allowances in particular may mean that business owners and senior professionals will need to revisit their tax planning to take advantage of the increased ability to save into their pension pots.

Link: Spring Budget 2023

We are expanding!

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Come and see us at our new and improved office in Bellshill!

We have been supporting businesses and individuals across the region for many years – now we are taking the next big step in our story.

Our new, larger office will be located in a Central Lanarkshire position, with links just off M8, M73, M80 and M74 motorways.

This means plenty of parking and great amenities for all of you who visit our office, as well as access to the latest technology to support you as you grow your business in new and exciting ways.

With large, modern and innovative board and meeting rooms, we can continue to keep in touch and share the latest insights with you.

There will be no disruption to the services and support you receive whilst we move. We will be holding an open night for you to come and see the new premises in the near future.

We appreciate that you may have questions about our move, so please feel free to contact us.

 

Think about the support you need for your business

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Your business may be sailing along quite nicely, or it may be struggling with the effects of shortages, rising prices and an energy crisis.

In both cases could be time to step back and reflect on where you are, develop what has worked and abandon methods that don’t.

It is time to plan out a strategy for the long term. It could be a one-year or five-year plan that considers:

  • Where the company is heading
  • What you hope to achieve
  • The challenges you anticipate along the way
  • What investment will be necessary
  • The people, technology and skills required to achieve your goals.

Within this plan, you will need to consider commercial guidance and tailored business planning, including funding, financial management, advice on succession planning, your business structure and strategy and of course financial reporting.

You make take pride in how you run your business, but it makes sense to enlist professional support. That advice can save you money and help plan for future growth.