The calm before the storm
After the multiple fiscal statements in 2022, which often reversed changes that had only recently been announced, the last few months have been relatively
tranquil on the tax front. The Budget contained high-profile announcements of changes to childcare and pensions, but the former only begin being phased in
next year and the latter only affect a small minority of taxpayers. Since April, most companies are paying significantly higher corporation tax rates, but this
was legislated two years in advance.
Tax freezes and national insurance allowance
Most income tax and National Insurance allowances and thresholds are now frozen until 2028, which will bring many more people into paying tax (or paying it
at higher rates) as salaries increase, particularly in an era of high inflation. The next Budget is likely to be the last before a general election so, despite
the difficult economic background, it will be surprising if Jeremy Hunt, like Chancellors before him, doesn’t find some money for tax cuts and, possibly,
extra spending on electorally sensitive areas such as the NHS or schools. Whichever party is in power after the next General Election, it is likely that major
tax reform will be high on the agenda, so we may look back fondly on this period of relative calm.
There is, though, much to be considering currently on the tax front, particularly if you run your own business. We are in the middle of the P11D
reporting season and, in this newsletter, we remind you of some of the compliance issues in this area. With so many people struggling financially at the
moment due to the ‘cost of living crisis’, borrowing money from your company may be an option (to help out yourself or family members), so we also discuss a
number of the many tax implications of doing this.
Capital gains tax
Capital gains tax (CGT) bills will be higher this year for anyone making gains when disposing of assets, as the annual exempt amount for 2023/24 has been
reduced to £6,000, less than half its previous figure. With interest rates soaring, many people with buy-to-let properties or second homes are thinking of selling
them to reduce their borrowings. We remind you of the compliance in this area, which (perhaps bizarrely) usually requires two separate reports of the disposal. The initial report has a very tight 60-day deadline, which is also when the CGT is due for payment.
There have been a number of changes to the rules for tax relief (‘capital allowances’) on plant and machinery (P&M) this year, although these mainly
impact larger businesses. However, smaller businesses can still write off fully for tax purposes up to £1 million of P&M expenditure. Note though that most
cars get much slower tax relief than this (with a few exceptions, such as dual control driving instructor cars). Buying electric vehicles for your business is
still very tax-efficient, however, with 100% tax relief on the cost of new vehicles (or ex-demonstrator ones) and relatively low benefit charges for the staff who
Transfer of assests
One thing is certain: tax has become more complicated in recent years. This trend is likely to continue, so it is very important that you consider tax at an early
stage in your decision-making process, whether to do with business matters or personal ones (e.g. deciding to cash in investments or to transfer assets to
family members). We are here to help you negotiate this tax minefield, so please speak to us if you are planning any major transactions soon. Tax planning can
often save a lot of money in the long run.
Please get in touch with us if you have questions on any of the above matters.