News

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.

As the Government seeks to plug certain gaps in the public purse, we are unlikely to see any change in Income Tax thresholds – despite wages and the State Pension rising.

Under the previous Government, tax thresholds were frozen until March 2028, and it remains to be seen whether this will change under the Labour Party.

This means that more people are set to be pulled into paying Income Tax on their income for the first time or pulled into a higher tax bracket – known as fiscal drag.

How does fiscal drag impact you?

The major effect of fiscal drag is that it reduces the financial benefit of any wage increase because more of your income will be subject to tax.

This leaves many individuals, whether they are employees, self-employed or company directors, no better off than if they had not received a pay increase.

It is sometimes known as a “stealth tax” because no changes are actually being made to taxation rates or thresholds.

Mitigating the impact of fiscal drag

How can you plan around fiscal drag? If you have the flexibility to restructure your income, you may consider:

• Dividends – Regardless of which tax band you are in, Dividends are taxed at a lower rate than Income Tax paid on your salary.
• Salary sacrifice – Many businesses allow employees (including directors) to sacrifice a portion of their salary in exchange for a benefit (a company car, private healthcare, etc.), effectively reducing taxable income.
• Investing in an ISA – Income or interest from an ISA is tax-free, helping you to save money for the future and minimising your tax liabilities.
• Pay into your pension – You may choose to pay more money into your pension, either to reduce your taxable income or minimise future tax liabilities, with a yearly tax-free limit of £60,000 or 100 per cent of your income, whichever is lower.
• Marriage allowance – If you or your spouse earn less than the Personal Allowance, you may be eligible to transfer £1,260 of the allowance to your partner, potentially saving up to £252 in tax.

In addition to the marriage allowance, you should ensure you are utilising all available tax reliefs, such as the personal savings allowance.

This prevents you paying tax on savings interest depending on your Income Tax band:

• Basic rate – £1,000
• Higher rate – £500

Unfortunately, there is no personal savings allowance for those in the Additional rate tax band.

Make sure to use your tax-free Personal Allowance of £12,570 before considering another tax-efficient way of receiving income.

High earners

You should also watch out if you are a Higher or Additional rate taxpayer, i.e. you earn between £50,271 and £125,140, or over £125,140 respectively.

Wage increases could pull you into a higher tax band and begin to erode your Personal Allowance if you choose to take the majority of your earnings as salary, or your business cannot pay dividends.

Remember that your Personal Allowance decreases by £1 for every £2 you earn over £100,000 – meaning that you effectively have no Personal Allowance if you earn £125,140 per year or more.

You will also be taxed at either 33.75 per cent (Higher) or 39.35 per cent (Additional) on any dividends you receive.

As a high earner, you could be significantly impacted by fiscal drag, so it is particularly important to plan ahead to avoid paying more tax than you need to.

Please contact our team today to find out how to reduce the effect of fiscal drag on your income.

For business owners and directors, dividends may form a critical element of your salary strategy and tax planning, keeping your tax liabilities to a minimum.

To extract profit tax-efficiently from your business, you may use a combination of:

• Salary – Typically set at or around the Personal Allowance of £12,570 to minimise Income Tax and National Insurance Contributions (NICs).
• Dividends – Paid to owner/director-shareholders and not subject to NICs.
• Pension contributions – You can claim tax relief on private pension contributions of up to 100 per cent of your yearly earnings.
• Director’s loans – You or a close family member receives money from your company, which may be tax-free for you as an individual, depending on how it is repaid.

Dividends can be an excellent choice for business owners because they are taxed at a lower rate than earnings subject to Income Tax.

The tax is levied depending on your Income Tax band:

• 8.75 per cent for those in the Basic rate tax band
• 33.75 per cent for those in the Higher rate tax band
• 39.35 per cent for those in the Additional rate tax band

For this reason, many business owners choose to take a relatively low salary in addition to dividends, to stay in the Basic rate band and minimise tax on dividend payments.

Could dividend taxes change?

Dividends have been a growing target for HMRC in recent years, with the tax-free allowance falling steadily from £5,000 in 2016/17 to £500 in 2024/25.

Having pledged to avoid raising taxes on income, the Government may seek to levy further tax on wealth in the Autumn Budget instead, which could incorporate dividends.

The Government has various options, including:

• Removing the tax-free dividend allowance
• Raising the rates of tax on dividends.

Should you change your strategy?

If you have a typical tax-efficient profit extraction strategy, with a low salary and dividends, then this is likely to remain the best approach to optimising your tax liabilities – but this is highly dependent on whether tax rates on dividends remain the same.

If tax rates remain unchanged, any dividends will still be subject to a lower rate of tax than if they were taken as salary, even without a tax-free allowance.

However, a rise in rates could result in a significantly higher tax liability.

In this situation, you may consider another method of profit extraction, such as making additional pension contributions if you have not used your full tax-free pension allowance.

For advice on managing profit extraction, salary and dividends, please contact our team today.

As the Autumn Budget approaches, the Government has pledged that it will “make the tax system fairer” and avoid raising taxes on working people and certain businesses.

The Government has said that it will not raise:

• Income Tax
• National Insurance (NI)
• Corporation Tax
• VAT

While Corporation Tax is not levied on individuals, the fact that the Government is not changing it may be good news for consumers.

Freezing VAT and Corporation Tax should keep a handle on price rises as businesses will not need to pass on additional costs to clients or customers.

This is a significant announcement, given that the Government seeks to make up a substantial shortfall in public finances.

What does this mean for businesses?

The budget is likely to be good news for businesses, particularly regarding VAT and Corporation Tax.

With no additional taxes to be paid in these areas, businesses may have more room to reinvest in growth – a priority for the Government, particularly in sectors such as sustainable technology.

However, some business owners may still call for the 2023/24 reductions in NI to be extended to employer NI contributions, which seems unlikely under the current Government.

How will this impact individuals?

The pledge will come as a relief to individuals who pay only Income Tax and NI, which includes most workers whose only income source is a regular salary or hourly pay.

However, individuals with additional assets such as property, private pensions, dividends or investments may reap less of a benefit.

With the Government seeking to levy additional income through taxes, these individuals will likely face an increased tax burden on their wealth through a rise in Capital Gains Tax (CGT), for example.

It is, therefore, important for those with high-value assets to engage promptly with proactive tax planning.

Want to optimise tax liabilities on your assets? Contact us today.

Taxpayers have a fundamental right to reclaim input tax, also referred to as input VAT.

However, HMRC has the authority to refuse this right under certain conditions if they can demonstrate that the taxpayer was aware, or should have been aware, that their transactions were linked to fraud.

There has been a noticeable rise in businesses from various sectors over the last year receiving notifications from HMRC denying the recovery of input tax based on these grounds.

For businesses, the risks linked to Kittel VAT include denied VAT recovery, hefty fines, reputational damage, and increased scrutiny from tax authorities.

To protect your business, here are key strategies to avoid such risks:

1. Conduct due diligence – Always verify the VAT registration and reputation of suppliers and partners to ensure they are legitimate.
2. Monitor transactions – Regularly review transactions for irregularities or signs of fraud to catch issues early.
3. Educate your team – Train your finance and procurement teams on the risks of VAT fraud, ensuring they can spot warning signs.
4. Maintain clear records – Keep thorough documentation of all transactions as evidence of your due diligence.
5. Consult professionals – Seek advice from VAT specialists to navigate complex regulations and strengthen your compliance.

By implementing these steps, your business can avoid costly fines, penalties, and reputational damage.

For tailored guidance, please contact our team.