Business News

Sometimes, paying your tax bill on time can be difficult when costs are high.

If you miss a payment deadline or think you will miss one because you are unable to pay your tax bill, you must contact HM Revenue & Customs (HMRC) as soon as possible.

You may have the option to set up a ‘Time to Pay’ arrangement – a payment plan agreed with HMRC allowing you to pay your tax over a longer period.

You can do this online through your Government Gateway portal if you meet certain criteria:

• You have filed your latest tax return
• It is within 60 days of the payment deadline
• You owe £30,000 or less
• You do not have any other debts or payment plans with HMRC

You will have to contact HMRC directly if you do not meet these criteria.

You will be asked about your spending and income when you set up the payment plan.

If HMRC thinks you will not be able to make your payments according to the plan, you may be required to pay your bill in full.

Remember, you may be charged a penalty if you are late paying, which can be appealed if you have a ‘reasonable excuse’, such as issues with the online portal, serious illness or bereavement, or software failure.

Keeping track of the deadlines

You will have several other deadlines each year that you need to meet to remain compliant with legislation around Income Tax Self-Assessment (ITSA), including:

• Telling HMRC that you need to submit a tax return by 5 October (if you have not done one before)
• Submit a paper tax return by 31 October (if applicable)
• Submit an online tax return by 31 January
• Pay your tax by 31 January

These deadlines relate to the previous financial year, i.e. online tax returns and payment for the 2023/24 financial year are due by 31 January 2025.

One of the easiest ways to keep track of your Income Tax payments (as well as any other tax liabilities) is with the help of a qualified accountant.

If you need advice on reporting and paying ITSA, speak to one of our experts today.

Directors have the ability to draw income from a business in several ways, including through the extraction of profits from the business, which can create significant opportunities to manage tax liabilities.

Key tax rates and allowances for 2025/26

Here is what directors in England, Wales, and Northern Ireland need to keep in mind for the new tax year starting 6 April 2025:

• Personal Allowance: Stays frozen at £12,570 until April 2028.
• Dividend Allowance: Remains at £500, so anything above this will be taxed.
• Basic Rate Threshold: Frozen at £50,270.
• Additional Rate Threshold: Frozen at £125,140.

These frozen thresholds require you to plan strategically to make the most of your allowances and minimise tax liabilities.

Why you should consider combining salary and dividends

A combination of a small salary and dividends can be one of the most tax-efficient ways for directors to draw income, reducing tax and National Insurance liabilities.

A salary lowers your company’s taxable profits, while dividends are not liable for National Insurance Contributions (NICs), making them cost-effective.

Paying a salary above the NIC threshold also ensures your contributions count towards the state pension, helping with long-term financial planning.

However, one important thing to remember is that dividends can only be paid if your company is profitable, and then only to shareholding directors. If the company has a poor year, you may be limited to drawing just a salary, which could impact your financial stability.

How to structure your income for 2025/26

The two most common approaches for directors, depending on whether you qualify for the National Insurance Employment Allowance (NIEA), are as follows:

Option 1

If you are the sole employee in your company, you are unlikely to qualify for the NIEA, which exempts eligible businesses from paying employer NICs.

In this scenario, setting your salary at the Lower Earnings Limit (LEL) of £6,500 ensures you continue to qualify for National Insurance credits, safeguarding your state pension entitlement while remaining tax efficient.

• Salary: £6,500 per year
• Dividends: Up to £44,475 without exceeding the basic tax rate band

The first £6,070 of dividends (after accounting for your £6,500 salary) is covered by your personal allowance, and an additional £500 dividend allowance applies.

The remaining £37,405 is taxed at 8.75 per cent, resulting in a total tax liability of £3,273.

Option 2:

If your business has additional employees, you may qualify for the NIEA, which increases to £10,500 from April 2025.

This allows you to pay yourself a higher salary while still being tax-efficient.

• Salary: £12,570 per year
• Dividends: Up to £37,700, staying within the basic rate band.

This can be a favourable option as the tax on dividends remains the same as in option 1, and because by paying a higher salary, you will reduce your company’s Corporation Tax liability.

At a 25 per cent Corporation Tax rate, the additional salary could result in tax savings of around £1,800 or more.

Choosing the best option

The best approach depends on your company’s setup and your financial goals, as there is no one-size-fits-all solution.

A lower salary typically suits sole directors who want to keep things simple, while a higher salary benefits those eligible for the NIEA by offering additional corporation tax savings.

Speak with our expert accountants to review your circumstances and tailor a strategy that works best for you.

If you are a sole trader or small business owner using a double cab pickup (DCPU) for your work, now is the time to consider your options.

The Budget revealed a tax change for DCPUs that could have significant financial implications for both you and your business.

Whether you are looking to expand your fleet or replace an ageing vehicle, acting now could save you money.

What is a DCPU?

A DCPU is a type of vehicle that features a front passenger cab with a second row of seats for up to four passengers, four independently opening doors, a payload capacity of one tonne or more, and an uncovered pickup area behind the cab.

These vehicles are typically popular among landscapers, builders, and other tradespeople due to their versatility and practicality.

What is changing?

Today, DCPUs benefit from the favourable tax treatment typically applied to commercial vehicles.

This includes lower Benefit-in-Kind (BIK) charges for personal use, making them a cost-effective option for employees.

Additionally, businesses can take advantage of generous capital allowances, which allow them to claim up to 100 per cent of the vehicle’s purchase cost in the first year.

However, from 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax, all DCPUs will be treated as cars for tax purposes, including capital allowances, BIK, and certain deductions from business profits.

This change will have significant financial impacts, including:

• Employees using a DCPU for personal mileage will receive higher company car tax bills. A pickup that currently costs a higher-rate taxpayer around £1,800 per year in BIK could jump to over £10,000, depending on the vehicle’s CO2 emissions and list price.
• Businesses will no longer be able to write off the full cost of a DCPU in the year of purchase. Instead, these vehicles will be subject to capital allowance rates as low as six per cent per year, drastically reducing upfront tax relief.

If you purchase or lease a DCPU before April 2025, you will still be able to lock in and benefit from the current tax rules until at least 2029.

Planning your next move

So, the answer to our original question is yes. If you do not want to face the increased financial liabilities, purchasing or leasing your DCPU before April 2025 is the smart move.

Here is what you should consider:

Firstly, you should review whether any of your current vehicles need replacing or if expanding your fleet could make financial sense under the current tax regime.

Think carefully about whether it will be more financially beneficial to purchase the vehicle outright or lease one.

If you do decide to lease, try to avoid contracts extending beyond April 2029, as the new rules will eventually apply.

To minimise BIK charges, ensure any DCPU is strictly limited to work use.

For cars, the definition of private use is stricter, requiring robust controls like vehicle storage and insurance exclusions, which may not be practical for many businesses.

Want to know how buying or leasing a DCPU could affect your tax bill? Get in touch today!

With Christmas right around the corner, many of you might be looking into ways to spread the holiday cheer among your employees.

Maybe you want to give a box of chocolates to your executive assistant or a bottle of wine to your line managers – small gestures that brighten up the workplace.

Unfortunately, it is not as straightforward as simply heading to the shops and picking up presents for your team as these thoughtful gestures can have implications for your tax and National Insurance Contributions (NICs).

However, this does not mean you should shy away from offering such gifts.

If made correctly, they can remain tax-efficient while significantly boosting morale and fostering a positive workplace culture.

What are trivial benefits in kind?

Trivial benefits are small, non-cash gifts or perks given to employees.

For them to qualify as “trivial” in the eyes of HMRC, they must meet specific criteria:

• Each gift must cost £50 or less.
• The benefit cannot be cash or a cash equivalent (like gift cards exchangeable for cash).
• It must not be a reward for work or performance.
• The gift must not be part of an employee’s contractual benefits and cannot replace salary or bonuses.

Examples of trivial benefits include flowers, a theatre outing, or small seasonal gifts like hampers or wine.

There are also separate rules for Directors of a company. This allowance can be used multiple times throughout the tax year, but it’s crucial to ensure that the total value of all benefits does not exceed £300. Eligible benefits can range from gift vouchers and hampers to meals and team-building events, offering a varied and enjoyable selection of perks.

These benefits are exempt from both income tax and National Insurance Contributions (NICs), which enhances their appeal. To comply with HM Revenue and Customs (HMRC) rules, it’s important that these benefits are given on an occasional basis, as gestures of goodwill, and are not tied to the Director’s contractual duties.

Directors must keep detailed records of the benefits provided, including their cost, the date, and the reason, to ensure all conditions of the allowance are met.

Tax liabilities of trivial gifting

One of the most significant advantages of trivial benefits is their tax efficiency.

If these gifts meet the conditions set by HMRC, they are completely exempt from tax and NICs.

You will also not be required to report these qualifying gifts to HMRC, meaning there is no need to file a P11D form.

However, if a gift or benefit does not meet the criteria for trivial benefits, you must declare it to HMRC via the P11D process and pay any tax or NICs owed. If you are paying tax on employee benefits through your payroll, filing P11D forms is not required. However, you will still need to submit a P11D(b) to pay any Class 1A NICs due.

How to account for trivial benefits in your business

To maintain compliance, it is important to keep track of your trivial benefits.

You should document the details of each benefit including the date, who it went to, what it was, and how much it cost. This will make it easier to ensure you do not exceed the £50 limit.

It can also be beneficial to create a separate expense category for trivial benefits in your accounting system. This way, you can easily distinguish these gifts from other employee-related expenses and keep everything organised.

To incorporate tax-efficient gifting into your business strategy, please get in touch with our team.

Capital Gains Tax (CGT) was a significant target for the Chancellor in the Autumn Budget – with an immediate rise put in place for both the basic and higher rate of CGT.

The basic rate paid by basic rate taxpayers rose immediately to 18 per cent – up from 10 per cent.

Meanwhile, the higher rate has risen to 24 per cent from 20 per cent.

The existing rates of CGT for residential property sales remain unchanged.

This means that you will see a rise in the tax you pay on qualifying gains when you sell most assets – including business shares.

What about business reliefs?

Business owners who sell their businesses have typically benefitted from Business Asset Disposal Relief (BADR) – formerly known as Entrepreneurs’ Relief – allowing you to pay CGT at a rate of 10 per cent on qualifying gains regardless of the individuals ‘marginal rate of tax.

The Budget left BADR in place for now, but the relief provided will be reduced when rates rise from 10 per cent to 14 per cent in April 2025, and to 18 per cent in April 2026.

Can I plan around CGT increases?

The Chancellor introduced the changes to CGT rates with immediate effect, giving people little time to plan if they wish to sell personal assets.

However, those business owners considering an exit may want to bring their business sale forward to take advantage of better BADR rates.

We recommend that you speak to an experienced accountant before beginning the sales process.

Looking to accelerate the sale or disposal of a business? Speak to our experienced team today.

In Chancellor Rachel Reeves’ 2024 Autumn Budget, she announced over £40 billion of tax increases, as the Government attempts to fill a £22 billion gap in public finances.

The headline measure was a rise in employer National Insurance Contributions (NICs), from 13.8 per cent (where applicable) to 15 per cent.

The Chancellor also reduced the threshold at which employers need to start paying NICs, from £9,100 to £5,000 per year. Both changes will apply from 6 April 2025.

An increase in Employment Allowance to £10,500, and the removal of the £100,000 threshold, offers support to around 865,000 of the smallest businesses – but other employers may be facing a perfect storm of rising costs.

The cost of employment

Alongside the rise in NICs for employers, the Chancellor announced a rise in the National Living Wage (NLW) from April 2025 to £12.21, a 6.7 per cent increase from the current rate of £11.44.

This equates to pay worth an additional £1,400 per year for a full-time worker over the age of 21.

Coupled with the cost of increased NICs, businesses are set to see a significant increase in employment costs.

Sectors with a high proportion of casual and flexible workers, such as hospitality, retail and leisure, will be disproportionately affected.

For advice on managing your business costs and planning around Budget measures, please contact our team.

As we approach the end of the year, one trend has become increasingly concerning for UK businesses – debts are on the rise.

According to a recent report, small to medium-sized enterprises (SMEs) have seen the value of bad debt surge by 127 per cent over the past six months.

This figure is alarmingly high, raising important questions about what is driving this increase and how you can take proactive steps to mitigate its impact.

Bad debts refer to money owed to a business that is deemed uncollectible, often resulting from customers’ inability or unwillingness to pay, which can negatively impact cash flow and profitability.

While many businesses and individuals have seemingly moved on from the pandemic, the economy is still suffering from its lasting effects.

Some SMEs are still struggling to recover, facing cash flow issues and fluctuating demand, all of which have been exacerbated by political instability and uncertainties surrounding the recent Budget.

Additionally, with the cost of living still so high, many individuals and companies are prioritising their essential expenses, leaving bills and invoices further down the list.

This situation poses significant challenges for SMEs, which typically do not have the same financial buffers as larger corporations.

Solutions to crack down on bad debts

If your business is facing bad debts and you are neglecting them, you are exposing yourself to cashflow issues, a poor credit rating and possible bankruptcy or liquidation.

To avoid such outcomes, there are a number of solutions you can utilise, including:

• Strengthening your credit policies – Regularly review credit policies to align with current market conditions. Conduct thorough credit checks on new clients and periodically reassess credit limits for existing ones.
• Setting clear payment expectations – Establish upfront payment terms to ensure clarity around due dates and any late fees. This proactive approach helps reduce misunderstandings and payment delays.
• Optimising invoicing processes – Adopt digital invoicing tools for efficient billing, ensuring prompt invoicing and automated reminders to improve timely payments.
• Fostering client relationships – Strong client relationships help manage payment issues. If a client faces financial difficulty, open discussions about payment plans can lead to better outcomes than escalation.

For businesses facing bad debt challenges, we strongly suggest you discuss the issue with an experienced accountant who can provide strategic solutions to you and your team.

With bad debts on the rise, you cannot afford to take a reactive approach – it is time to crack down.

For expert assistance and customised solutions for handling debt, contact our accounting team today.

Recent research by Three Business indicates that tech-enabled SMEs could add an impressive £79 billion to the UK economy over the next year.

Technology is clearly a key driver and enabler of growth for businesses.

Despite this, their research also revealed a notable 42 per cent of SMEs worry that the complexities of adopting new technologies could hold back their growth. A further 55 per cent express concerns about the costs involved.

The benefits of using technology

There are endless advantages to investing in technology, not least the time it frees up to focus on more strategic initiatives by automating repetitive tasks.

Additional benefits include:

• Enhanced productivity and employee morale.
• Improved customer service using customer relationship management (CRM) systems to help personalise interactions.
• Advanced analytics and data management tools that provide valuable insights into your business operations and market trends.
• Smoother growth experience as tech solutions are designed to adapt to your growing needs without significant changes to your infrastructure.
• Cost reductions in the long run, for instance, cloud computing can lower infrastructure costs, while automation can reduce labour expenses.

Therefore, by effectively leveraging technology, you position yourself as a leader in innovation within your industry.

However, if you fail to utilise the tools at your disposal, you risk falling behind your competitors.

The good news is that there is a growing recognition of the need to invest in technology.

The Government’s recent Industrial Strategy highlights the importance of supporting businesses that can stimulate growth in the tech sector, as well as encouraging the adoption of technologies that enhance productivity.

Using tax reliefs to invest in technology

Investing in new technology does not have to put you in a vulnerable financial situation, as there are various Corporation Tax incentives available for businesses, including:

• Enhanced Capital Allowances (ECAs)
• Research and Development (R&D) tax credits
• Full Expensing
• Other Capital Allowances.

With ECAs, you can claim back 100 per cent of the investment in environmentally friendly technologies on your tax return.

If your business undertakes eligible R&D activities, you could receive a tax credit for your qualifying expenditure – check with your accountant to see if you are eligible.

All these allowances can further offset your taxable profits, reducing your Corporation Tax liabilities and leaving you with more cash to reinvest in your business.

Our expert accountants can help you identify the right technology to support your business goals, including cloud accounting tools that can streamline your financial processes, enhance collaboration, and provide real-time insights into your financial performance.

To make the best use of the tax reliefs related to the investment in technology and innovation, please get in touch.

In this year’s Autumn Budget, Chancellor Rachel Reeves announced that the majority of unspent pension funds will form part of an estate from April 2027

This move is expected to affect around eight per cent of estates each year.

In practice, this means when an individual dies, they will still be able to pass on their assets, but the remainder of their pension pot will be added to property and shares as part of a potentially chargeable estate.

For an individual affected by this change, this could mean that an unspent pension fund of £800,000 could be taxed at 40 per cent (depending on their circumstances and use of other allowances and reliefs) leading to an IHT bill on their pension alone of £320,000.

A significant cost for their beneficiaries if they were to pass away after 6 April 2027.

The good news is that if you plan to leave your pension to your spouse or civil partner, this inheritance will remain tax-free, but it will then be included in their estate when they pass away meaning other beneficiaries may still be affected.

However, if you do not have this option or prefer a different strategy, it may be wise to re-evaluate your retirement and estate plans in light of these changes.

Potential strategies to consider

To mitigate the IHT impact, you could:

• Consider using pension funds sooner for personal spending.
• Withdraw and gift a portion of your pension to loved ones at least seven years ahead of your passing.
• Explore alternative estate planning that may better suit your goals and avoid unnecessary tax liabilities.

If you are planning to gift from your pension, be cautious not to leave yourself short of funds for a comfortable retirement.

Taxpayers should also maintain their existing pension plans, and contributions to private and employer pension schemes still remain a tax-efficient means of reducing your Income Tax bill.

Who will be affected the most?

While this change predominantly affects wealthier individuals, many families may now find themselves liable for IHT.

Thousands more estates will exceed the current £325,000 threshold (£500,000 if you utilise the Residence Nil-Rate Band), adding financial strain to an already challenging time of grief.

Even where these allowances are passed to a spouse to offer up to £1 million of relief, many estates may find themselves subject to IHT as a result of this change.

Please be aware that within the Budget documents, it was also confirmed that the nil-rate bands would remain frozen beyond 2028 until 2030, which means extra care needs to be taken.

With the latest announcement, we advise you to revisit your retirement plan with your accountant to assess any necessary adjustments before 2027.

Early planning will help ensure you are prepared well in advance and minimise any unintended tax burdens.

If you are concerned about how this change may affect your estate, please contact our team for advice tailored to your unique situation.

The Government estimates that new obligations placed on employers under the Employment Rights Bill could result in substantial compliance costs – totalling around £5 billion.

The Bill will introduce a ban on many zero-hour contracts and extend day one employment rights across several areas, such as protection from unfair dismissal and parental leave.

For employers, this will represent a significant shift in their current practices. Sectors such as hospitality, care and retail will be disproportionately affected due to the widespread use of zero-hour contracts to manage fluctuating demand.

Breaking down the costs

Compliance costs are likely to be the biggest hit faced by businesses and their cash reserves.

These may include:

• Training on new legislation
• Administration
• Loss of flexibility afforded by zero-hours contracts
• The costs associated with leave, such as temporary recruitment

For example, it is estimated that enhanced sick pay alone could cost employers around £400 million per year, while workforce planning could represent a cost of around £200 million.

Staying ahead of the curve

To offset potential expenses, you might want to prioritise:

• Efficiency – New processes, while potentially costly, are an opportunity to make work more efficient and reduce the overall time and cost associated with employment admin.
• Delaying investment – Many costs associated with compliance will taper off over time, so businesses may need to delay investment to maintain a healthy cash flow.
• Planning the transition – Starting early and covering staffing requirements without paying for unneeded hours can help to keep costs to a minimum.

While certain expenses are inevitable, careful spending and budgeting can help you reduce the pressure on your cash reserves.

For advice on managing the cost of the new employment rights, please contact our team today.