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Autumn Budget 2025

Posted on by Andrew

In one of the most eagerly awaited budgets for many years, the Chancellor finally announced her latest raft of financial and tax measures for 2026 onwards. Below is a summary of some of the main points of interest, but the full statement can be found here.

Personal taxation

The current personal tax and national insurance thresholds will be frozen for a further 3 years from 2028 to 2031.

From April 2026, the ordinary and upper rates of tax on dividend income will increase by 2%, with no change to the dividend additional rate. The basic rate will be 10.75% and the higher rate will be 35.75%.

Then from April 2027, there will be a 2% increase on income tax for savings income and property income. The basic rate will be 22%, the higher rate will be 42%, and the additional rate will be 47%.

From April 2027 the annual ISA cash limit will be reduced to £12,000 for under 65’s, within the overall annual ISA limit of £20,000. Stocks and shares ISA’s are therefore unaffected.

Businesses

The amount people can sacrifice from their salary to avoid paying Employee and Employer NI on pension contributions will be capped at £2,000 a year from 2029.

The minimum wage for over-21s will rise 4.1% in April, from £12.21 to £12.71 per hour, and the wage for 18 to 20-year-olds will rise by 8.5%, from £10 to £10.85 per hour.

Welfare and other announcements

The 2-child benefit cap will be lifted from April 2026.

The triple lock for state pensions will remain in place ensuring an above inflation increase again next year.

There will be a new annual High Value Council Tax Surcharge of between £2,500 to £7,500 on properties in England worth more than £2m.

From 2028, a new tax will be introduced on electric vehicles and plug-in hybrid cars based on annual mileage; 3p/mile for EV’s and 1.5p/mile for hybrids.

Recovering VAT on motoring repairs

Posted on by Andrew

If your business is VAT registered and is not using the flat rate scheme, you may be eligible to recover all of the input VAT on vehicle maintenance and repair costs provided that the vehicle is used some of the time for business journeys. This is true even if the vehicle is also used for personal use.

For self employed people or partnerships, to recover VAT on vehicle maintenance, you just need to be able to evidence business use. This is usually easy if it’s a van or commercial vehicle, but for domestic cars, you will need to have some form of mileage log detailing business journeys.

For limited companies, where the vehicle is owned or leased by the company, any repair costs should be paid for by the company directly and VAT recovered as normal through your accounts.

But where the vehicle is not owned or leased by your limited company, the rules are different and there are a number of conditions that must be met in order to recover VAT on motor repairs:

  • The invoice must be made out to your company and the company must pay the invoice to the supplier directly.
  • The vehicle must be used for business purposes at least some of the time, evidenced by business mileage claims perhaps.
  • The employee must make good the payment to the company of the GROSS amount to avoid a P11d taxable benefit charge on the amount and Class 1A NICs.

If you fail to follow all of the above, there are severe penalties for failing to disclose this and for failing to submit P11d’s.

This may therefore be a bit of a hassle for only a small gain if your motor repairs are small, but it could be worth considering if you incur a large repair bill at some point.

Example

Here is an example of how this works in practice for a limited company where the vehicle is not owned by the company and instead, the company pays the approved 45p per mile for business journeys to the employee/director:

If your company pays £500 plus VAT from the company bank account for a repair, the entries in your accounts would be as follows:

  • Payment of £500 plus input VAT of £100 that will be reclaimed on the VAT return. Allocate this payment to travel and subsistence or motoring (use same code as mileage payments are allocated to).
  • The director then repays £600 into the company bank account and the transaction is recorded as a bank receipt of £600 (NO VAT – or Out of Scope) from the director/employee which should also be allocated to the same code i.e. travel or motoring. You may need to explain it as a Refund in some accounting packages.

The net effect is that the company will recover £100 of input VAT, but will not receive any corporation tax relief for the payment because it is not allowable. It will in fact pay tax on the extra £200 received from the director, but overall the company has gained because the VAT reclaimed is more than the additional corporation tax charge.

Parents of teens reminded to go online to extend their Child Benefit claim

Posted on by Andrew

If you have children, aged between 16 and 19 years old, make sure you don’t miss out on up to £1,354 a year in Child Benefit.

Parents must confirm to HMRC if their teens are staying in full time education, or training, before the deadline of 31 August 2025.

This requirement recurs every year, so if you have children at or reaching this age in the coming years, make sure you remember to do this.

How to extend Child Benefit claims

You can make sure you get the payments you’re entitled to by remembering to extend your Child Benefit claim online or through the HMRC app.

You should also be sent a letter which contains a handy QR code which takes you straight to the digital service on GOV.UK or you can search ‘extend Child Benefit’ and sign into your online account.

If parents do not tell HMRC by 31 August 2025 that their child is staying in full time non-advanced education or approved training after age 16, their Child Benefit will stop. Parents can check eligibility on GOV.UK.

Child Benefit Charge for High Income parents

If you or your partner have opted out of getting Child Benefit payments because of your income, you still need to extend your claim. Note also that the amount parents can earn before they need to pay the High Income Child Benefit Charge has now increased to between £60,000 and £80,000.

Minimum Wage Changes 2025

Posted on by Andrew

From 1 April 2025, the National Living Wage and National Minimum Wage rates will increase. The new rates will be as follows:

  • Aged 21 and over: £12.21 per hour
  • Aged 18 to 20: £10.00 per hour
  • Aged 16 to 17: £7.55 per hour
  • Apprentices: £7.55 per hour

Apprentices

Apprentices are entitled to the apprentice rate if they’re either:

  • aged under 19
  • aged 19 or over and in the first year of their apprenticeship

Apprentices are entitled to the minimum wage for their age if they both:

  • are aged 19 or over
  • have completed the first year of their apprenticeship

Salaried employees

Employers will need to check if the above changes affect any employees who are paid a fixed salary, rather than variable hours. The salary must be no lower than the equivalent hourly rate calculated by reference to their normal contracted hours.

Non-payrolled employees

If you don’t currently operate a payroll scheme because your employees earn less than the Lower Earnings Limit (LEL), you will need to check whether this increase affects you. From April, the LEL will rise to £125 per week, above which employees’ wages must be reported on a payroll scheme. However, the Secondary Threshold for employer’s NIC’s is now only £5,000 per year, so it’s now likely that any employee earning over £96 per week will also now need to be reported on a payroll scheme.

National Minimum Wage Pitfalls

Employers should also make sure any calculations of minimum wage levels take account of other circumstances that might occur in the workplace. This previous article provides some examples here.

Spring Statement 2025

Posted on by Andrew

Yesterday the Chancellor delivered her Spring Statement to the nation. As promised, there were no further changes to taxes at this time, so the statement focussed on the economic outlook and proposed government spending.

Economic Overview

  • Inflation: The OBR now expects it to average 3.2% this year, before falling in 2026 and stabilising around 2% thereafter.
  • Growth Forecast: The OBR has cut the growth forecast for 2025 from 2% to 1%, citing economic pressures and global instability.
  • Government Borrowing: Revised figures show a higher short-term deficit, but a surplus of £9.9bn is forecast for 2029-30—restoring the Chancellor’s fiscal headroom.

Public Spending and Welfare

  • Welfare Reform: The health element of Universal Credit will be cut by 50% for new claimants and then frozen. The overall welfare budget is expected to be cut by £4.8bn.
  • Day-to-day government spending will still grow, but more slowly—1.2% a year above inflation instead of 1.3% as previously planned.
  • Defence spending will rise by £2.2bn next year, reaching 2.5% of GDP by 2027 with an ambition to increase this to 3%.

Planning and Growth Initiatives

  • The government will protect capital spending, increasing it by £2bn annually.
  • New planning reforms are forecast by the OBR to increase GDP by 0.2% by 2029/30 and 0.4% within 10 years, the largest forecasted GDP uplift the OBR has ever made from a single policy.
  • Additional growth measures include support for a third runway at Heathrow and pension reforms to boost investment.

Autumn Budget 2024

Posted on by Andrew

Following lots of pre-budget announcements, the Chancellor today delivered an eagerly awaited autumn budget statement, with a number of tax rises aimed at plugging the “Black Hole”. There is a lot to highlight this year, but below is a summary of some of the main points of interest, and the full statement can be found here.

Business taxes and wages

The Employer National Insurance rate will increase to 15% from 13.8% from April 2025, whilst the threshold at which they are taxed will decrease to £5,000 from £9,100 per employee. Together this would mean an additional £806 payable on an employee salary of £25,000 per annum.

However, to offset this for the smallest businesses, the Employment Allowance will increase to £10,500 from £5,000. The Employment Allowance allows employers to reduce their total national insurance liability by up to this amount, so overall most of the smallest businesses will not be as worse off as first thought, and some may actually be better off. But one person director owned companies with no other employees might be badly affected by the above changes because currently they cannot access the Employment Allowance (unless this changes).

The National Minimum Wage will rise to £12.21 per hour from April (£10 for 18 to 20 year olds), with a phased increase towards a single adult rate.

Hidden in the budget were details that the government will start treating double cab pick-up vehicles with a payload of one tonne or more as cars for certain tax purposes from April 2025, including for benefits in kind, and deductions from profits. Transitional benefit in kind arrangements will apply though until 2019 for employers that have purchased, leased, or ordered a vehicle before 6 April 2025, but this will be a substantial increase in the benefit in kind tax charge. We await more details about this.

There will be no increase to corporation tax at this time.

Personal taxes

There will be no rise in income tax or National Insurance for private individuals, but the freeze on the annual thresholds will remain until April 2028, at which point they will increase in line with inflation. The freeze on the allowances effectively means more tax is payable if your income rises by inflation though in the meantime.

Capital gains tax rates will increase to 18% (basic rate) and 24% (higher rate) for all types of asset disposals, to match those currently paid on residential property. This is with immediate effect from 30 October 2024.

Capital gains tax rates for Business Asset Disposal Relief and Investors’ Relief will rise gradually from 10% to 14% from April 2025 and match the main lower rate of 18% from April 2026, to allow business owners time to adjust to the changes.

Non-dom tax status will be abolished from April 2025, replaced by a residence-based regime.

Property

The Higher Rates for Additional Dwellings in Stamp Duty Land Tax on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property, will increase from 3% to 5% with immediate effect from 31 October 2024.

Inheritance tax

The current inheritance tax thresholds will remain frozen until April 2030.

Agricultural property relief and business property relief will be reformed from April 2026. The 100% rate of relief will continue for the first £1 million of combined agricultural and business assets to help protect family farms and businesses, and will be 50% thereafter.

Minimum Wage Changes 2024

Posted on by Andrew

From 1 April 2024, the National Living Wage and National Minimum Wage rates will increase. The new rates will be as follows:

  • Aged 21 and over: £11.44 per hour
  • Aged 18 to 20: £8.60 per hour
  • Aged 16 to 17: £6.40 per hour
  • Apprentices: £6.40 per hour

Apprentices

Apprentices are entitled to the apprentice rate if they’re either:

  • aged under 19
  • aged 19 or over and in the first year of their apprenticeship

Apprentices are entitled to the minimum wage for their age if they both:

  • are aged 19 or over
  • have completed the first year of their apprenticeship

Salaried employees

Employers will need to check if the above changes affect any employees who are paid a fixed salary, rather than variable hours. The salary must be no lower than the equivalent hourly rate calculated by reference to their normal contracted hours.

Non-payrolled employees

If you don’t currently operate a payroll scheme because your employees earn less than the Lower Earnings Limit (LEL), you will need to check whether this increase affects you. From April, the LEL will remain at £123 per week, above which employees’ wages must be reported on a payroll scheme.

National Minimum Wage Pitfalls

Employers should also make sure any calculations of minimum wage levels take account of other circumstances that might occur in the workplace. This previous article provides some examples here.

High Income Child Benefit Charge threshold increased

Posted on by Andrew

As a result of the changes to the High Income Child Benefit Charge (HICBC) announced in the Spring Budget, some individuals may need to review whether they should restart their Child Benefit claims from April 2024.

Previously, the HICBC affected anyone where they or their partner had adjusted net income in excess of £50,000 and they or their partner were in receipt of Child Benefit. But from 6 April 2024, this threshold has now been raised to £60,000 along with a change to the rate of clawback.

If either partner has adjusted net income above £60,000, the HICBC requires the highest earner in the relationship to repay any Child Benefit received in the tax year at the rate of 1% for every £200 of net income in excess of £60,000. This means that all the Child Benefit is repaid if the highest earner’s income is £80,000 or more.

However, previously the rate of clawback was 1% for every £100 of net income in excess of £50,000 which meant that all the Child Benefit was repaid if the highest earner’s income was only £60,000 or more.

As a result of these changes, many eligible parents may now need to consider if they should restart their Child Benefit claims if they had previously stopped them. If this applies to you, an online claim form can be submitted on HMRC’s website here.

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.

VAT on gifts, benefits and entertaining

Posted on by Andrew

Trivial Benefits

Many business owners are now making use of the trivial benefits exemption which was introduced a number of years back. Trivial benefits are an allowable business cost and you don’t have to pay tax or National Insurance on a benefit for an employee/director if all of the following apply:

  • it cost you £50 or less to provide (per occurrence)
  • it isn’t cash or a cash voucher
  • it isn’t a reward for their work or performance
  • it isn’t in the terms of their contract

However, directors of a company run by 5 or fewer shareholders can’t receive trivial benefits worth more than £300 per person in a tax year.

Examples of trivial benefits may include a birthday or Christmas gift, a bunch of flowers for a bereavement, or a staff meal out etc. Trivial benefits are in addition to the annual staff party exemption of £150 per head.

But what is the VAT position?

Gifts of goods

Input VAT incurred on the purchase of business gifts can be recovered, but you may also have to account for the output VAT on the cost i.e. effectively pay back the VAT to HMRC, unless the total cost of all the gifts given to the same person does not exceed £50, excluding VAT, in any 12-month period.

In simple terms, to avoid this problem, this means that you should not reclaim input VAT on gifts, where the total of all gifts to the same person in a 12-month period will exceed £50, excluding VAT. This rule applies to gifts to all persons, including directors, employees, customers and suppliers etc.

Staff parties and outings

Where an employer provides entertainment for the benefit of employees, for example to maintain staff morale, it does so wholly for business purposes. Therefore, the input VAT paid on costs such as staff parties, team building exercises, staff outings and similar events is recoverable.

However, there are two exceptions to the general rule. These are where:

  • entertainment is provided ONLY to directors, partners or sole proprietors of the business, or
  • employees act as hosts to non-employees.

Therefore, unless other employees, other than the owners or directors of the business, attend the event, you cannot reclaim the input VAT incurred. But if other employees attend, all the input VAT is recoverable.

Strictly speaking therefore, if you are a one-person business or a company consisting only of directors, you should not reclaim the input VAT on staff entertaining.

Entertaining others

Entertaining non-employees is not a tax deductible business expense, although it is perfectly acceptable for the business to pay for the cost; it just won’t save you any tax. Therefore, neither can you reclaim input VAT on non-staff entertaining.

If there is a mixture of staff and non-staff at an event, you can apportion the input VAT and reclaim the appropriate proportion. However, if the attendance of non-staff is for the sole purpose of entertaining a non-employee, the input VAT is not recoverable at all.

Further information

More information about theses topics can be found here:

Business promotions (VAT Notice 700/7)

Business entertainment (VAT Notice 700/65)