The big tax news story of the month was last week’s Spring Budget. No real changes/help for owner manager businesses, although there was some help for workers with a second cut in national insurance rates (the Prime Minister has set an objective to abolish), and an easing of the rules regarding child benefit. The threshold at which child benefit must be repaid is being increased from 6th April with a review of the confusing rules to take place. However, as there has been no allowances or tax threshold changes, we will all still pay more tax. Our Budget summary can be found at HERE.
There were two big changes that impact specific small groups of taxpayers:
- The current non-domicile regime to be abolished from 6 April 2025, taking with it the remittance basis of taxation. The non-domicile regime will be replaced with a different scheme that runs over four years and is only available to new arrivals. For those impacted by the rule change, more details can be found HERE.
- The tax advantaged Furnished Holiday Letting (“FHL”) regime will be abolished from 6 April 2025. This means that FHL profits will be treated the same as normal buy to let rental profits, losing some very favourable tax benefits. For those impacted by the rule change, more details can be found on our BLOG.
In both cases, the full details of the changes and how they will be implemented are not known yet. In our view, the decision to abolish each of the above tax regimes was made in the last few weeks leading up to the speech, with little time to deal with the detail.
Pre Tax Year End Planning
The end of the 2024 tax year is rapidly approaching. Time is running out to consider any year-end tax planning and check whether you have taken full advantage of the tax reliefs and exemptions that are available.
Our year-end tax planning checklist can be found HERE.
Also don’t forget to check your PAYE coding notices for 2024/25, which are now being issued by HMRC, and should be checked to make sure the correct tax is being deducted at source on your employment income and/or pension.
Please note that our planning checklist which is intended to provide a guide to the opportunities that we believe may be worth considering. There are many tax-saving measures available and steps that can be taken to improve your tax position, without significant effort. We have listed some planning points to consider which may help reduce your taxes for this tax year (ending 5th April) or prepare for the next, if implemented now.
Companies House Changes
We reported in our November newsletter the passing of The Economic Crime and Corporate Transparency Act 2023 (ECCTA) legislation, part of a comprehensive set of reforms designed to combat economic crime and prevent the misuse of corporate structures within the UK.
Our article summarising the rules can be found HERE.
These are the rules that in due course will mean small and medium sized businesses will have to file a profit and loss account, as part of their annual accounts.
The first set of changes as a result of the ECCTA came in on 4 March 2024. These changes include:
Companies House having greater powers to query information and request supporting evidence.
- Stronger checks on company names.
- New rules for registered office addresses. No more PO Box registered office addresses.
- A requirement for all companies to supply a registered email address. All companies will need to supply an email address when they make a filing at Companies House going forward, for example filing your confirmation statement.
- A requirement for all companies to confirm they’re forming the company for a lawful purpose when they incorporate, and to confirm its intended future activities will be lawful on their confirmation statement.
- Companies House having the ability to annotate the register when information appears confusing or misleading.
- Companies House are taking steps to clean up the register, using data matching to identify and remove inaccurate information.
- Companies House will also now have powers to share data with other government departments and law enforcement agencies.
The Companies House changes will cost, and the first increases have been announced taking effect from 1st May, with the fees for registering a new company set to rise significantly for the first time since 2016. Currently, to set up a new limited company, or a limited liability partnership is £12. This is set to increase to £50 and £78 for same day registrations.
Banks!
In our January newsletter we wrote about the difficulties our clients are encountering with banks. For those who missed it, please see our blog.
A recent report by the All-Party Parliamentary Group on Fair Business Banking found that thousands of customers were being debanked or having facilities refused every month. High street banks shut over 140,000 accounts held by small businesses last year, raising concerns about debanking. The closures accounted for 2.7% of the 5.3m business accounts provided by the lenders to SMEs. Eight banks - Barclays, HSBC, Lloyds Banking Group, NatWest, Santander, Metro Bank, TSB, and Handelsbanken - disclosed account closure data to the Commons Treasury Committee after requests for information from MPs. Reasons for closure included failure to provide regulatory information and dormant accounts. UK Finance has noted that a small proportion of accounts are closed due to financial crime, fraud concerns, customer due diligence, or account dormancy. A Treasury spokesperson said: “We are taking action on debanking and remain committed to legislation – forcing banks to explain and delay any decision to close an account under new rules, protecting freedom of expression."
It not just us having difficulties!
Making Tax Digital
We have been reporting and writing for several years of HMRC’s programme to Make Tax Digital (MTD), which has been delayed due to implementation issues, Covid-19 and other reasons. HMRC are now pushing the programme again, and as of April 2026, all businesses and landlords earning over £50,000 will have to join MTD for Income Tax Self-Assessment. This threshold will then fall to £30,000 the following April. We are encouraging all our clients who are not already using a financial management package that is compatible with HMRC systems start looking at this now, and not wait until 2026.
Airbnb Owners
We have reported recently that one of HMRC target activities is Airbnb owners, and for those who operate their business will now have to contend with the Budget announcement regarding the abolishment of the furnished holiday letting rules, and there was also another Government announcement to cause more pain! Those considering operating an Airbnb or similar short-term let property in the future will have to seek planning permission before renting out rooms. From this summer the government will introduce legislation to require owners of new short-term lets in England to secure planning permission to use their properties for short-term rentals. The purpose of the legislation is to allow councils to control the number of licences issued in a particular area. The rules are not retrospective and will not apply to properties already rented on a short-term basis.
The proposed changes would see a new planning use class created for short-term let’s not used as a sole or main home. Existing dedicated short-term let’s will automatically be reclassified into the new use class and will not require a planning application. The scale of the planning fees has not been confirmed; currently a material change of use fee ranges from £120 to £258 depending on the premises.
A mandatory national register will also be set up to detail all short-term lets. It is likely that HMRC and other enforcement agencies would have access to the register.
Tax Investigations
As part of the recent Budget speech the government will invest in HMRC's capacity to collect tax debts, which is forecast to raise over £4.5 billion of tax revenue by 2028-29. Analysis by law firm Pinsent Masons shows that investment in HMRC compliance activity is paying, with it returning to pre-pandemic levels of tax recovery because of investigations into high-net-worth individuals and big business. In total, HMRC has recovered £39bn in the 2022-23 tax year as a result of work by investigators (and its Connected AI IT system), up from £32.2bn in 2021-22. For every £1 spent on investigations into high-net-worth individuals last year, HMRC recovered £30, up from £28 in 2021-22. HMRC’s large business team had the best return on investigations, recovering £58 per £1 spent. The success of the current investigation activity will lead to more targeted campaigns, with ultra-high net worth individuals likely to be in HMRC’s sights. The report backs up Harbour Key experience, as reported in our newsletters with increased enquiry/compliance check work, together with the increased targeted activities, and nudge letter campaigns.
DATES FOR YOUR DIARY
- Key tax dates for the period 1st January 2024 to 30 April 2024 can be found HERE.
