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Category: Tax and NI

Spring Budget 2024

Posted on by Andrew

Today the Chancellor delivered his Spring Budget, most of which had already been announced in the Press. Below is a summary of some of the main points of interest, but the full statement can be found here.

National Insurance Cuts

Following on from the previous cuts in January, and to further level up the tax system for workers, Employee National Insurance Contributions will reduce from 10% to 8% from April. The self employed will also see a similar cut from 8% to 6%.

VAT

Having been frozen for a long time now, the VAT registration threshold will increase from £85,000 to £90,000 from April.

Child Benefit Charge

From April 2024, the high income child benefit charge will now start at £60,000 (instead of £50,000), and the rate at which it’s charged will halve, with the full taper now only taking effect at £80,000 (instead of £60,000). Longer term, the charge is to be moved to be based on household income from April 2026.

Property Taxes

In a bid to free up more housing, the beneficial reliefs currently available for holiday lets will be abolished from April 2025. And to encourage more landlords to sell their properties, the higher rate of property Capital Gains Tax will be reduced from 28% to 24%.

ISA’s

A new British ISA, will allow an additional £5,000 allowance for investment in British equities.

Annual Staff Parties

Posted on by Andrew

Entertaining employees (including directors) is an allowable trading expense, provided it is not excessive and is wholly and exclusively for the purposes of your trade, and not just incidental to the entertaining of customers. However, to ensure that the employees are not taxed on the benefit, the event must:

  • be an annual occurrence eg Christmas party or summer barbeque,
  • not cost more than £150 per head (including VAT), and
  • be open to all employees (not just directors), unless the company consists only of directors.

However, confusion can occur over the rules so things to watch out for include:

  • If the cost per head is over £150 then the whole amount is a taxable benefit on the employees, not just the excess.
  • If you have more than one event per year, the exempt amount is reduced proportionately.
  • The exempt amount is not a flat rate that you can claim. You must actually incur an expense and keep receipts, so if the event costs £50 per head, that’s all you can claim.
  • The exempt amount includes all expenses incurred (not just food and drink) eg room hire, travel etc.

Directors are eligible employees, so a company consisting solely of directors can have a tax free and tax deductible annual bash. However, self employed people cannot. Subcontractors are not employees and so are not eligible for the exemption. Also this would be business entertaining and would not be an allowable trading expense either.

If there are employees’ partners or friends at the party, then these individuals count as part of the number of people present when you’re working out the amount.

If your business is VAT registered, you should also consider the VAT implications. More information about when VAT is recoverable can be found here. 

Autumn Statement 2023

Posted on by Andrew

Today the Chancellor, delivered his Autumn Statement, which as a result of the drop in inflation, tax cuts were the main topic of discussion. Below is a summary of some of the main points of interest, but the full statement can be found here.

National Insurance Cuts

Employee National Insurance is to be cut by 2% to 10% with effect from 6 January 2024.

Class 4 National Insurance for self employed will be cut by 1% to 8% from April 2024.

And Class 2 National Insurance, also paid by self employed, is to be abolished entirely, although those who need to make voluntary contributions towards their state pension record, will still be able to do so.

National Living Wage

From April 2024, the National Living Wage will rise from £10.42 per hour to £11.44 per hour. This will now apply to anyone over the age of 21.

Business Rates

The small business multiple is to be frozen for another year, and the 75% discount for retail, hospitality and leisure businesses is to be extended too.

Capital Allowances

Full expensing for capital expenditure will be made permanent, meaning companies will be able to get tax relief on the full cost of new plant and machinery in the year of purchase, in addition to the Annual Investment Allowance threshold.

Check Your National Insurance Record

Posted on by Andrew

The government is giving taxpayers more time to fill gaps in their national insurance contribution (NIC) record, and so maximise the amount of state pension they will be eligible to receive. You now have until 5 April 2025 to buy back any missing national insurance years from 2006 to 2016.

Normally you can only buy back up to six years, but when the new state pension was introduced, transitional arrangements were put in place to allow people to go back further.

Many people don’t realise that they have years for which they didn’t pay NIC for the full 52 weeks, and so have a gap in their NIC record. If that’s the case for you, then you won’t be entitled to the full state pension.

Individuals who reach state pension age on or after 6 April 2016 need 35 full years of NIC in order to receive the maximum state retirement pension.

How to check your record

You can check your NIC record in your online personal tax account. This will also provide an estimate of the state retirement pension you should receive.

If you have any gaps, first check if HMRC’s records are correct, then consider if it will be worth making Class 3 voluntary NICs to make good missing years.