Making Tax Digital (MTD) for Income Tax has now begun, years after it was first announced and when it was due to take effect.
Making Tax Digital has started – Are you ready for the first submission?
Uncategorized
Top 10 myths of running a limited company
Are you thinking of running a limited company? You may be aware that this comes with a lot of rules and responsibilities, but also a fair few myths.
Today, we are going to debunk the top 10 myths so you can run your business with confidence.
Myth 1 – Setting up a limited company is complicated and expensive
Registering for a limited company is actually pretty simple and usually only costs around £50 for an online application. All you need to do is register directly with Companies House and the process usually takes 24 hours.
When you register you will need to provide your company name, a registered office address, any details of directors and secretaries and information about shareholders and shareholdings.
Myth 2 – You must have a physical office
You do not need a shopfront or an office space to run your limited company. All that is required of you is a registered office address in the UK. This can be your home address, a PO box or a virtual address provided by an accountant or solicitor.
Myth 3 – You will pay more tax
Many people may assume that running a limited company means higher tax bills, but they are often more tax efficient. Directors will usually take a smaller salary and the rest as dividends, which can help reduce their National Insurance and overall tax.
Myth 4 – You don’t need a separate business bank account
While it is not legally required, having a separate business bank account is often a good choice. It can help keep your finances separate and simplify your bookkeeping by keeping everything all in one place.
Myth 5 – You are personally liable for company debts
One of the biggest benefits of running a limited company is limited liability. This means your personal assets are protected if the business is struggling, unless you have signed personal guarantees or acted improperly.
Myth 6 – You don’t need to file anything if your company is not trading
Even if your company is not trading, you still have responsibilities. You must continue to file a confirmation statement and dormant accounts with Companies House each year. The good news is that these filings are simple and inexpensive.
Myth 7 – You can’t run a limited company on your own
This is not true. A limited company can be run by just one person. You can be the sole director and the sole shareholder and have full control over the business. However, you must become a separate legal entity from the business and keep your personal finances separate.
Myth 8 – You cannot change your company name
You can, in fact, change your company name when you become a limited company, but there are requirements you must meet. You must have majority shareholder approval, check the name is available and file this with Companies House. Once they approve it and send you a certificate, you are good to go.
Myth 9 – You don’t need to worry about VAT till later on
If you can see that your taxable turnover is going to cross £90,000 in a 12-month period, you must register 30 days before this happens. If it happens unexpectedly, you will have to register within 30 days of the end of the month when it happened.
You might want to consider voluntary registration but double-check with a professional that it will benefit your business first.
Myth 10 – All your personal and financial details are public
Some of your companies’ information will be made public, but that does not mean everything else has to be. Your name and the month or year of your date of birth are visible, but your home address can remain private if you use a registered office or service address.
There you have it! Running a limited company can be more flexible and tax-efficient than you thought. If you want any further tips or guidance that is personal to your business, contact our team today.
What you need to know about VAT – FAQ
As of March 2025, ONS reported that there were 2.73 million Value Added Tax (VAT) registered businesses in the UK. Despite this, many business owners are still unsure of their VAT obligations.
To help reduce the risk of non-compliance, we have created this VAT fact sheet to answer some of the most frequently asked questions.
What is VAT?
VAT is a tax charged on most goods and services in the UK, but not all. VAT rules can be complex and even well-intended businesses can make mistakes.
For Business-to-Consumer (B2C) transactions, VAT is usually included in the advertised price.
For Business-to-Business (B2B) transactions, VAT is typically shown separately, as businesses account for VAT differently than individuals.
VAT is most commonly charged at the rate of 20 per cent on applicable goods and services.
However, a reduced rate of five per cent applies to certain items such as home energy and children’s car seats.
Other goods and services must be carefully assessed so that the correct VAT is applied.
There is also a zero-rate VAT, which applies to items such as food and children’s clothing. Although no VAT is charged on these items, it may still be possible to reclaim input VAT on related costs.
When does a business need to register for VAT?
A business’s VAT obligations will depend on its taxable turnover.
If your taxable turnover exceeds £90,000 in any 12-month period, you must register for VAT. You should also register if you expect to exceed this threshold in the near future.
If you expect to cross the threshold within the next 30 days, you must register immediately. If you exceed the threshold unexpectedly, you must register within 20 days of the end of the month in which this occurred.
Failure to register on time could put you at risk of penalties from HMRC.
Any business can choose to register voluntarily, often to reclaim VAT on purchases or in anticipation of future growth.
Once registered, you will receive a unique VAT number, which should be kept secure.
Can a business deregister for VAT?
A business must deregister for VAT within 30 days if it stops trading, unless it continues as a going concern.
It may also be possible to deregister if taxable turnover falls. The deregistration threshold is £88,000 of annual taxable turnover and creates a buffer to prevent frequent switching between VAT registration and deregistration.
How is VAT managed?
Once registered, VAT is managed through Making Tax Digital (MTD) for VAT. This allows you to access VAT filings and your VAT registration certificate online.
You will also be able to see when VAT is due and how much is payable after submitting a return.
VAT returns are typically completed quarterly and submitted using MTD-compatible software or bridging software that links spreadsheets to HMRC. For businesses in a refund position, applying for monthly VAT returns may be beneficial to improve cashflow.
How do I calculate VAT?
Adding VAT to the cost of any product or service is straightforward.
For supplies subject to the standard VAT rate, all you need to do is take the price without VAT and multiply it by 1.2 and you will get the figure with 20 per cent VAT added on.
To work out the reduced VAT rate, take the price without VAT and multiply it by 1.05 and you will get the figure with the 5 per cent VAT added on.
If you are unsure of how your VAT is calculated, you should seek financial advice so your calculations are accurate.
How do VAT penalties work?
Failing to meet VAT obligations can result in penalties for several reasons.
These include:
- Failing to register VAT on time
- Late submission of VAT returns
- Late payment of VAT liabilities
Penalties will often depend on how the issue is handled.
Genuine mistakes are still penalised, but less severe than deliberate non-compliance.
Late registration penalties are based on the length of the delay and are calculated as a percentage of VAT owed.
For delays up to nine months, the penalty is five per cent.
This increases to 10 per cent for delays between nine and 18 months and 15 per cent for longer delays.
Late submissions can result in penalty points.
Once the threshold is reached, a £200 penalty applies for each late return.
The current threshold is:
- Monthly threshold: Five points
- Quarterly threshold: Four points
- Annual threshold: Two points
Penalty points do expire after two years if limits are not exceeded. If the threshold is reached, points only expire after your outstanding returns are submitted and compliance is maintained for a set period.
Late payments will incur interest and may even attract surcharges. Although there is a 15-day grace period before penalties apply.
Time to Pay arrangements can also be set up, but interest will still be charged.
Any payments between 16 and 30 days will incur a three per cent penalty.
After 30 days, an additional three per cent penalty applies, plus a daily penalty calculated at 10 per cent every year until the balance is paid.
Can VAT be reclaimed?
VAT can generally be reclaimed on goods and services used solely for business purposes when making taxable supplies. Some exceptions can apply, including business entertainment and most vehicle costs.
VAT cannot be reclaimed on items used exclusively for personal purposes. The ability to reclaim VAT is one of the main reasons why many businesses voluntarily register below the threshold.
Businesses with minimal VAT-incurring expenses may choose to deregister when possible. In these cases, the Flat Rate VAT scheme may be more suitable.
Every business is different and seeking professional advice can help you assess your VAT obligations.
Can I get support with VAT?
VAT is detailed and often complex and many industry experts continue to call for reform. Until these changes are made, it is essential to understand your responsibilities.
Our experienced team can support you with all your queries on VAT and help you stay compliant.
If you are close to the registration or deregistration thresholds, we can help assess what is best for your business.
900,000 sole traders pulled into MTD for ITSA
The Government has confirmed that Making Tax Digital (MTD) for Income Tax will apply to sole traders and landlords earning over £20,000 a year.
This latest extension means that an additional 900,000 sole traders must adopt digital record-keeping and quarterly tax submissions by this deadline.
Who is affected and when?
Mandating digital record-keeping allows HMRC to enhance compliance and streamline reporting for taxpayers and the tax authority, reducing errors and improving efficiency.
Over the next few years, more sole traders will be brought into the MTD system.
Here is when different income thresholds will come into effect:
- From April 2026 – Sole traders and landlords with income over £50,000 must comply.
- From April 2027 – The threshold reduces to £30,000.
- From April 2028 – Those earning over £20,000 will also be required to join.
You will need to plan ahead to ensure your business is ready for these changes before they are enforced.
How should you prepare?
Sole traders should take the following steps to ensure compliance before the deadline:
- Adopt digital record-keeping – Research and select HMRC-approved accounting software that best fits your needs.
- Understand quarterly reporting – Rather than submitting a single annual return, you must provide tax updates every three months, followed by a final declaration. Keeping up-to-date financial records will help to avoid errors and late submissions.
- Seek professional guidance – An accountant can clarify compliance and help optimise tax efficiency. Their expertise can make the transition less stressful.
- Stay informed – HMRC may refine its requirements, so signing up for relevant updates and attending webinars will ensure you remain prepared.
Taking proactive steps now to prepare for mandatory digital record-keeping will make your transition to MTD smoother.
Are you ready for MTD? Get in touch for tailored support.
Spring Statement 2025
Chancellor Rachel Reeves today delivered her Spring Statement, outlining the Labour Government’s economic priorities and reaffirming a commitment to fiscal discipline and long-term investment.
Billed as the start of a “decade of national renewal,” the Statement acknowledged global uncertainty but marked a clear shift towards stability and responsibility at home.
While less headline-grabbing than last year’s Autumn Budget, the absence of major announcements is telling.
“No further tax changes” may sound reassuring, but it also signals no new relief in sight for businesses and their owners.
Beneath the surface, the Statement includes several important developments worth noting:
- “No further tax increases” – and no support for businesses!
- The UK’s economic outlook in “a changing world”
- Labour’s tax evasion crackdown
- Changes to MTD for ITSA: Quietly announced, massively important
- Reeves reminds us of changes made last year
- Minor issues – still noteworthy
- The real impact of the Spring Statement
“No further tax increases” – and no support for businesses!
Despite stating that “this Labour Government was elected to bring change to our country”, the Chancellor has declined this opportunity to alter tax policy.
When Reeves confirmed there would be “no further tax increases” beyond those introduced in the Autumn Budget, it was met with jeers in the Commons.
While a freeze on tax rises might sound like welcome news for individuals concerned about their personal liabilities, the reality for business owners is more disappointing.
In practice, no tax changes means no new support for businesses already feeling the pressure.
There are no fresh reliefs, no easing of existing burdens, and no incentives to spur investment, innovation, or growth.
Businesses that had hoped for reform to Corporation Tax, cuts to National Insurance, or enhanced allowances for capital expenditure and R&D will find no comfort in this Statement.
At a time when many enterprises are still recovering from rising employment costs, interest rates, and ongoing uncertainty, the absence of tax-based support could dampen confidence.
Stability is welcome – but stagnation is not. For businesses looking for signals of a pro-growth agenda, this silence may speak volumes.
The UK’s economic outlook in “a changing world”
The Chancellor repeatedly referred to “a changing world” in her speech, citing the war in Ukraine as a driving factor (though avoiding comment on President Trump’s tariff-heavy policy).
Due to economic uncertainty, the Labour Party’s priority will be on stability, national investment and defence spending (more on this below).
Despite this, Reeves announced that the OBR has upgraded its GDP growth forecasts for each year from 2026 to 2029, with the economy now expected to be larger by the end of the forecast period than previously predicted in the Autumn Budget.
The specific figures she outlined include GDP growth of:
- 1.9 per cent in 2026
- 1.8 per cent in 2027
- 1.7 per cent in 2028
- 1.8 per cent in 2029
The hope for many businesses upon hearing this news must be that of optimism.
Economic development could support stronger investment, hiring and growth before the end of the decade.
Therefore, regardless of Reeves’ consistent referrals to economic uncertainty, GDP is expected to outperform previous Budget predictions – a positive takeaway for all.
Labour’s tax evasion crackdown
The Chancellor announced a further crackdown on tax evasion, aiming to increase prosecutions of tax fraud by 20 per cent and take total revenue raised from reducing tax evasion to £7.5 billion.
She emphasised fairness, stating that it is wrong for some to avoid taxes while working people pay their share.
For businesses, stronger enforcement helps level the playing field, ensuring competitors are not gaining an unfair advantage by dodging their obligations.
For individuals, it reinforces trust in the tax system and ensures public services are funded without raising taxes.
The extra revenue could also reduce pressure for future tax increases, supporting broader economic stability.
Changes to MTD for ITSA: Quietly announced, massively important
One of the most significant updates in the wider Spring Statement document (but, interestingly, not included in Reeves’ speech), was the confirmation of the phased rollout of Making Tax Digital for Income Tax Self-Assessment (ITSA).
From April 2026, the scheme will apply to sole traders and landlords earning over £50,000 and for those earning over £30,000 in 2027. Now, this is expanding to those with income above £20,000 by 2028.
This gradual lowering of the threshold means around 900,000 sole traders will be brought into the MTD regime by 2028.
As part of this scheme, HMRC will be cracking down on late payments of both VAT and Self-Assessments.
Previously taxpayers would incur a penalty of two per cent of the tax owed if the outstanding tax was not paid within 15 days and four per cent if the tax was not repaid within 30 days.
Now, taxpayers within the MTD scheme will face a 3 per cent charge on any outstanding tax if it remains unpaid after 15 days, with a further 3 per cent added if the amount is still overdue at 30 days.
In addition, the annualised interest rate applied to late payments will more than double – rising from the current 4 per cent to 10 per cent.
Those who are yet to react to MTD for ITSA due to the small scale of their business operation will now need to act quickly to avoid being caught outside of the scheme in the years to come.
Reeves reminds us of changes made last year
One of the key aspects to note was the reminder of previous tax changes made by the Government in the Autumn Budget.
Whilst Reeves noted the fact that these changes provided a foundation of a stronger economy, it’s worth remembering exactly where this “strength” comes from.
- An increase in the lower and higher rates of Capital Gains Tax to 18 per cent and 24 per cent respectively.
- An increased Employers National Insurance rate to 15 per cent from 13.8 per cent and a reduction of the threshold from £9,100 to £5,000.
- Abolishing the UK’s non-domicile regime and introducing policies to tax non-doms on their worldwide income.
- An increase in Stamp Duty Land Tax from three per cent to five per cent and a reduction in thresholds for first-time buyers.
- The introduction of VAT charges to private school fees.
- Changes to Business Asset Disposal Relief (BADR) that will take effect in the coming years. The current 10 per cent rate will remain until 6 April 2025, after which it will increase to 14 per cent, and then to 18 per cent from 6 April 2026.
Reeves made no attempt to roll back the previous changes – confirming that these increases are still going ahead.
Her Statement should serve as a timely reminder for business owners and individuals to revisit their tax planning strategies.
Just because today’s announcements lacked major surprises does not mean it is time to be complacent.
Minor issues – still noteworthy!
Whilst seemingly unrelated to the broader impact on businesses that this Spring Statement holds, there were minor points raised in Reeves’ announcement that deserve your attention.
For example:
- Individual households £500 better off: Reeves told the Commons that the OBR now expects real household disposable income to grow at nearly twice the rate forecast last autumn, with households set to be £500 better off on average under this Government. This could lead to increased consumer spending and boost demand for goods and services – which is good for businesses.
- Labour sticks to housebuilding promise: The Chancellor stated that Labour policies would “lead to housebuilding reaching a 40-year high” which is good news for a construction sector already crumbling under pressure.
- Taking aim at defence spending: Reeves confirmed a £2.2 billion boost in defence spending, with at least 10 per cent of the equipment budget going towards advanced technologies like drones and AI. The investment will support manufacturing hubs in areas such as Glasgow, Derby, Newport, and Barrow, creating thousands of skilled jobs and new business opportunities.
- Chancellor insists that inflation targets are achievable: Reeves said inflation, which peaked at 11 per cent under the previous Government, is on track to reach the 2 per cent target by 2027. This should offer greater price stability, helping businesses plan, invest, and manage costs with more confidence.
- Unexpected freeze to benefit claimants: Reeves confirmed a £4.8 billion cut to welfare, including a 50 per cent reduction and freeze of the Universal Credit health element for new claimants – an unexpected move not signalled last week.
- ISA reform on the horizon: Though not mentioned in the Chancellor’s speech, the larger document released at the same time hints at potential reforms to Individual Savings Accounts (ISAs) to “get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission.” This could mean a decrease in the tax-free allowance currently offered by these savings vehicles.
While not the headline announcements, these points could still have meaningful implications for both individuals and businesses.
One might see these as hints at broader economic shifts – and opportunities – that are worth keeping an eye on.
The real impact of the Spring Statement
While this Spring Statement may have lacked headline-grabbing reforms, its message was clear: stability first, change later.
For individuals, there are small signs of progress – rising household incomes, a firmer grip on inflation, and continued investment in defence and infrastructure.
For businesses, however, the Statement brings more caution than comfort.
There is no rollback of last year’s tax rises, no fresh reliefs, and no new incentives to drive growth or innovation.
Yet amidst the silence, there are signals – economic forecasts are improving, consumer spending may rise, and targeted investment could support job creation and local economies.
If the Autumn Budget was about making bold moves, the Spring Statement is about holding the line.
Now is the time for business owners and individuals to assess their position and review their tax planning strategies with their accountant.
To read the full Spring Statement released by the Government, please click here.
Will Trump’s tariffs impact your business?
President Trump’s tariff proposals are creating uncertainty in global markets.
While the UK has not been directly targeted yet, British businesses could still feel the impact of U.S. trade policies.
Trump’s latest proposal to impose reciprocal tariffs on countries with value-added tax (VAT) systems, including the UK, could result in a 20 per cent tax on British exports to the U.S., primarily affecting industries like automotive, pharmaceuticals, and food and drink.
If you export goods to the U.S., it is time to review your relationships with your U.S. partners.
Consider renegotiating contracts or terms and assess how tariffs might impact pricing and demand for your products.
The UK’s strong ties with the EU mean that tariffs on European goods could also indirectly raise raw material and component costs for British businesses.
As supply chains become more unpredictable, UK companies may face inflationary pressures and operational challenges.
To mitigate these risks, consider sourcing materials from UK manufacturers or regions less likely to be affected by Trump’s tariffs.
This can reduce your reliance on European and U.S. suppliers, where disruptions and cost increases are anticipated.
Uncertainty around Trump’s trade policies has already led some businesses to delay investments and rethink their global business strategies.
Given that many details about potential tariffs remain unclear, staying updated on U.S. trade policies and adjusting your strategy to minimise the impact is crucial.
It is recommended that you develop contingency plans to protect your business in case tariffs are levied in future.
Contact us if you are concerned about how global trade disruptions could impact your business.
What are the real dangers relating to AI?
With businesses across the UK adopting Artificial Intelligence (AI) into their business in some form or another, it’s time to take a look at the genuine dangers of using it that warrant careful consideration.
Everything you need to know about Patent Box
One of the main ways that the Government encourages the use and commercialisation of innovative intellectual property is through tax relief.
Time is running out to check your National Insurance record
Are you planning on claiming the UK state pension? You must check your National Insurance (NI) record before 5 April 2023.
What do you need to know about annual accounts?
Are you a business owner who wants to gain a more depth insight into annual accounts? These accounts are often known as business accounts and are important in order to ensure our business runs successfully.