Changes to the amount of Corporation Tax (CT) businesses pay came into effect on 1 April.

From that date, the main rate of CT rose from 19 per cent to 25 per cent for the most profitable companies.

Companies whose year-end is 31 March will pay 19 per cent CT for the whole of the 2022/23 period, and then 25 per cent for the whole of the 2023/24 period.

Hybrid rate

However, for companies whose accounting period straddles 1 April, it will be necessary to apportion profits between those that arose up to 31 March and those that arose after 1 April.

Generally, the effective amount of Corporation Tax due will, however, rely on the taxable profits your company makes as follows:

• Small companies with profits of up to £50,000 will pay CT at 19 per cent
• Companies with profits of £250,000 and over will pay CT at 25 per cent
• Companies with profits over £50,000 but under £250,000 will pay on a sliding scale of between 19 per cent and 25 per cent.

Where companies have taxable profits between these two thresholds it is more complex as the rate of tax they pay will depend on their level of profit.

This is due to Marginal Rate Relief (MRR). This is a tapered relief, which increases in line with a company’s profits.

The basic method used by HM Revenue & Customs (HMRC) to calculate this relief is quite complex, so seek advice from your professional adviser.

Need advice on the rise in Corporation Tax and related matters? Contact us.

The Government has announced there will be greater scrutiny on the reporting of all crypto transactions, including for cryptocurrencies and non-fungible tokens (NFTs).

HM Revenue & Customs (HMRC) will now require cryptoasset reporting in Self-Assessment tax returns by requiring separate reporting of gains and income.

The changes will be introduced on the forms for the 2024-25 tax year.

Greater security

The heightened scrutiny of cryptoasset holders becomes more of an issue for taxpayers as a result of the reduction in the tax-free Capital Gains Tax (CGT) Annual Exempt Amount.

After a turbulent year, interest seems to have been renewed in digital currency after major problems in the traditional banking sector.

This saw the bailout of U.S. lenders Silvergate Bank, Silicon Valley Bank and Signature Bank, to be followed by Credit Suisse in Switzerland.

Crypto markets have bounced back in 2023, with a particular enthusiasm for AI crypto tokens and projects.

Tax relief

It is now crucial for investors to make sure they are reporting their crypto correctly, to get their tax right or to take advantage of valuable tax relief on any losses.

Investing in,  mining, creating or actively trading cryptoassets means you are likely to be generating taxable income or gains.

The new requirements will allow HMRC to check annual tax reporting against data they receive directly, for example from crypto exchanges and other trading platforms.

Crypto exchanges like Coinbase, Binance or Kraken have provided contact details of those trading in crypto assets for HMRC in recent years.

Disclose data

Under UK regulations, to have UK customers, these exchanges are expected to disclose user data to HMRC.

The rule change also affects crypto investors who have not accessed their cryptoassets.

HMRC says its view is that crypto is situated where the holder is a resident. This means that the remittance basis of taxation will generally not protect crypto gains or income.

Need advice with cryptocurrency and Self-Assessment? Contact us.

Chancellor Jeremy Hunt has announced a partial replacement for the Super Deduction that allows companies to write off 100 per cent of the cost of investment in one go.

The Full Expensing scheme was announced in the March Budget. Businesses that invest in IT equipment and machinery will be able to claim back the cost by writing it off against tax on their profits, the Chancellor announced.

100 per cent claim

It will allow businesses to claim up to 100 per cent of the cost of the investment.

To further encourage investment after the pandemic, the Government first introduced the super-deduction in 2021.

Full Expensing came into effect in April 2023 and will be in place until at least March 2026.

Less generous

For every pound a company invests, they can get up to 25p in tax relief. This measure is designed to make the UK’s capital allowances system among the best in the world.

It is less generous than the Super Deduction, which allows firms to claim back 130 per cent on investment in areas such as machines for manufacturing.

Although the measure is due to last only three years, with the possibility of renewal, it is expected to cost the Government £10.7 billion a year by 2025.

There are different types of capital allowances available, including the Annual Investment Allowance (AIA), Writing Down Allowances (WDAs), First-Year Allowances (FYAs), and Structures and Buildings Allowances (SBAs).

For help and advice with full expensing and capital allowances, contact us today.

The abolition of the pensions Lifetime Allowance, (LTA) which was announced in the Spring Budget, releases people to save as much as they like into their schemes.

Chancellor Jeremy Hunt abolished the allowance, which is the limit on how much people can build up in their pension pots over their lifetime while still benefiting from key tax incentives. The previous threshold was £1,073,100 and anything over that was subject to a tax charge of up to 55 per cent.

Necessary change

The Government had argued that the LTA change was necessary because too many highly paid professionals, including NHS consultants and GPs take early retirement, and there have been predictions that more and more older public and private sector employees would change their behaviour or retire early to avoid being hit by penalties.

The Chancellor also increased the Annual Allowance (AA), which is the total amount paid into your pension plans each year from all sources, before you have to pay additional tax charges, from £40,000 to £60,000. He has also increased the Money Purchase Annual Allowance (MPAA) and Tapered Annual Allowance (TAA) from £4,000 to £10,000, and the Adjusted Income for TAA from £240,000 to £260,000.

MPAA changes

Previously, if you accessed any taxable money from your pension plan you would see your allowance reduce from £40,000 to £4,000. This is a limit on how much people over 55 could pay into a defined contribution pension with tax reliefs, once they start drawing an income from their retirement pot.

The Chancellor has increased this from £4,000 to £10,000, which might be useful for anyone who dipped into their pension plan to help top up their income during the pandemic or while living costs are so high.

TAA changes

The TAA applies where an individual has a threshold income of £200,000 and adjusted income of £240,000 (adjusted income includes all pension contributions, while threshold income excludes pension contributions).

Where the TAA applies, an individual’s AA is reduced by 50p for every £1 over the adjusted income threshold, down to the minimum level. The minimum level has now been increased to £10,000.

Need help with understanding pension tax liabilities? Contact us.

Chancellor Jeremy Hunt announced a partial reversal to the SME Research & Development (R&D) tax credit cuts in the recent Spring Budget after facing months of pressure.

Startups had warned that the cuts, first announced last November in the Autumn Statement, would hinder growth for early-stage and research-intensive tech companies.

The R&D tax credits and relief scheme was already attracting criticism because of suspected fraud and general abuse of the initiative.

The autumn reforms to the R&D scheme became effective from April 2023. The key points include:

• R&D costs which can be claimed are reduced from 230 per cent to 186 per cent of qualifying expenditure.
• The available cash credit rate, which is for R&D tax losses that are offset against a cash rebate, is reduced to 10 per cent from 14.5 per cent.

For larger businesses, the Research and Development Expenditure Credit (RDEC) rate was actually increased from 13 per cent to 20 per cent.

Top up

The previously announced reduction will remain in place, but loss-making “R&D-intensive” startups will receive a top-up. Those that spend 40 per cent or more of their total outgoings on R&D will be able to claim a tax credit of 27 per cent, or £27 for every £100 spent.

The inclusion of some overseas expenditure in R&D tax relief claims is deferred for a year until 1 April 2024, to allow the Government to consider the interaction of this with a potential merged R&D relief scheme.

Two new categories of qualifying R&D expenditure will be created, for data licences and cloud computing services.

It has also been announced that all R&D claims from 1 August 2023 will need to be filed using the new digital forms, regardless of the accounting period concerned.

How to claim R&D relief

You can claim the relief up to two years after the accounting period it relates to, by treating it as a deduction from the company’s profits for the accounting period. The claim must be made in the company tax return or an amendment to the return.

You must send:

• A full Company Tax Return form (CT600)
• A completed tax computation
• Add the form CT600L, if claiming a payable tax credit or Research and Development Expenditure Credit.

Need help with claiming R&D tax credits? Contact us today.

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.

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