HAPPY NEW YEAR!
We hope you all had an enjoyable festive break.
Some individuals had a very enjoyable Christmas break, the number filing tax returns on Christmas Day has shot up to 4,757 with a 10% hike in taxpayers using the holiday period to complete tax admin. 127 people gave up New Year celebrations and filled in their tax return between midnight and 00:59 on 1 January. New Year's Day overall was another busy day with 23,724 taxpayers taking time out to complete a return from mid-afternoon the most popular time (an excellent way to make a fast recovery from the New Year festivities!).
As Harbour Key enters one of its busiest months of the year with the 31st January filing deadline, together with other client compliance and advisory commitments, we will deal with clients’ tax returns in order of receipt. We have a number of clients who have not provided information, and at this point we can’t guarantee meeting the filing deadline, where information has not been received.
We would also warn our clients to be careful at this time of self-assessment tricksters. A hoax text message claiming to be from HMRC has been doing the rounds saying the recipient is owed £277 from the 2020-21 tax year. The text claiming to be from HMRC encourages the recipient to click a suspicious link to receive the rebate. The text read: “HMRC refund. You have an outstanding tax refund of £276.74 from 2020 to 2021.”It then went on to share a link for access to the funds which will not go to a gov.uk website.
Do not fall for the scam, HMRC will never contact anyone via text message or email regarding a tax rebate, however, they will contact individuals when it is coming towards the self-assessment deadline. HMRC sends emails and texts to taxpayers as reminders but be on your guard. In the 12 months to August 2023, HMRC responded to more than 180,000 referrals of suspicious contact from the public, of which almost 81,000 were scams offering fake tax rebates.
In addition to those filing their tax returns, the politicians have been busy. On Wednesday 27th rumours started again re the current Government scrapping inheritance tax, as the 2024 election year starts to gather pace. Then the following day, The Treasury announced that this year’s Budget will be on 6th March.
FLOOD HIT- COMMUNITIES SUPPORT
Over the last week, the team at Harbour Key have been battling the weather and the floods, with one team member’s home taking a hit! For some businesses, this is the second time they have been hit in three years, with the 2020 floods. Communities (business & individuals) impacted by Storm Henk (2 to 8 January) can now apply government to help them recover. The support will be available to eligible areas in England that have experienced exceptional localised flooding, with funds for:
- flooded households can apply for up to £500 cash to help with immediate costs.
- Households and businesses significantly affected, could be eligible for 100% council tax and business rates relief for at least 3 months.
- Grants to for making properties more flood resistance.
More details can be found at HERE!
Last Saturday a significant number of the population received a small pay raise, with The Chancellor’s cut to national insurance announcement in the Autumn statement taking effect from Saturday 6 January, reducing tax bills in January pay packets. The 2p cut to National Insurance will see the rate for employees cut from 12% to 10%, with the average worker earning £34,963 saving £447.86 in Class 1 contributions over the year. This amounts to £8.61 a week.
NIC contributions for the self-employed are also being reduced from 9% to 8% on profits between £12,570 and £50,270, however only from 6 April 2024. This will impact approximately two million people.
With the freeze on tax thresholds, which is set to stay until 2028, workers will be just £2.68 better off a week, or saving a total of £139.46 over the year, assuming the government had raised thresholds in line with inflation.
HMRC & BANKS!
In last month’s newsletter, we set out the difficulties we are encountering with HMRC, and shortly after our newsletter was released, The Chartered Institute of Taxation wrote to HMRC setting out their concerns with HMRC’s handling of R&D tax relief claims, HMRC not meeting its own standards and commitments under its Charter and how HMRC continues to undermine the policy objectives of R&D tax relief to encourage investment. A copy of the letter can be found HERE.
As promised, this month we have looked at the banks and their extra checks undertaken on opening a bank account, and dealing with them in general, which again is increasing work and delays. More details can be found in our blog.
Mid December the devolved parliaments (Scotland and Wales) had their own Budgets, with announcements in those areas where they have devolved tax powers. The most notable being Scotland, who have the most significant devolved tax powers. Higher earners in Scotland will face a tax increase as the Scottish Government seeks to reduce cuts to public services and fund a council tax freeze. A new 45p tax band for those earning above £75,000 will be introduced, with the top rate for those earning above £125,140 rising from 47% to 48%.
Sounds all very dodgy, however we reported last year that platforms such as eBay, Airbnb and Etsy will now have to report the income of their sellers direct to HMRC as part of measures aimed at clamping down on tax evasion. HMRC was already able to request information from online firms based in the UK, but now digital platforms will have to report financial details of sellers directly to the taxman, the first reports being made for the 2024 calendar year. Bank account details and the number of transactions made by each user will be required to be reported, with large fines and other penalties for online companies that fail to comply. Following the HMRC announcement, the amount of people searching for information about ‘side hustle tax’ has increased by 1,415% due to concerns over HMRC online platform reporting rules. These figures show just how many individuals are worried about whether they are complying with the long-standing tax rules, where earnings from selling goods which exceed £1,000 are taxable as the seller becomes a ‘trader’ under tax rules. Some press have reported that the tax is a new tax, but this is not the case and there is no change to the obligations for paying income tax on profits made from online sales for those who earn over the £1,000 threshold. There will now just be more data shared between the online platforms and HMRC to track those who do earn over the £1,000 cap, who are failing to report profits and pay income tax.
INCREASED VAT INVESTIGATIONS BRING IN £11.4BN
Increased tax compliance measures (tax return checks & enquiries) have yielded £11.4bn in unpaid tax, with HMRC increasing the number of investigations into wealthy individuals and mid-size businesses. For example, the tax office opened 23% more enquiries regarding VAT, resulting in 109,400 unpaid VAT cases in the last financial year compared to 88,700 the year before. Cases opened into individuals and small businesses were up 22%, while investigations into large businesses rose 17%. The biggest increase from VAT compliance investigations came from the large businesses sector, with an additional £5bn pulled in. The gap between what HMRC estimates it is owed in VAT and what it collected stood at £8.8bn in the 2022/23 tax year, up from £7.6bn in 2021/22. As we have reported previously, in addition to more enquires and checks, HMRC are taking a more harsh attitude to penalties.
BUSINESS EXIT STRAGEGY
Two in three UK business owners are currently considering an exit strategy as fears grow about higher taxes depending on the result of a 2024 general election, according to a report by Evelyn Partners. A potential change in government and changes to tax rules have been cited as the top factors prompting business owners to accelerate their exit plans. The report shows nearly a quarter (23%) of business owners have already expedited their exit plans, with two in five (40%) businesses with turnover in excess of £5m planning to exit within the next year. However, 36% said they had postponed their exit plans. Exit plans have been fast tracked, with nearly a quarter (23%) of business owners having accelerated their plans to sell or wind down their business in the past 12 months. Although the political landscape was the primary motivator for the decision to sell up, it is not the only one according to the report:
- Challenges accessing capital and long-term investment were another problem area. One in four (25%) business owners have been encouraged to sell due to ongoing challenges accessing long-term capital, while 18% cited the rising cost of capital as a key motivation to sell. A similar number (19%) said the withdrawal of a key investor was behind their decision.
- Personal factors are also at play, with 25% of business owners hoping to unlock the equity tied up in their business to deal with current personal finance challenges.
A sale to a third party is the preferred option, but currently the market is slow with buyers being cautious with the economic position, cost of borrowing etc. However, a third-party sale is not the only option, a sale to interested motivated managers, or to the employees as a whole can be considered. At Harbour Key we are still continuing to advise and support on sale transactions of a mix of types and funding structures.
DATES FOR YOUR DIARY
- 31 January 2024 – Self-Assessment filing deadline, and personal tax payments to be made.
- Key tax dates for the period 1 January 2024 to 30 April 2024 can be found HERE!