Year End Tax Planning February 2024 DMO Accountants

Year End Tax Planning February 2024

It is a good opportunity to organize households and business funds in the best way as possible for the end of the tax year on April 5, 2024.

With many tax rates and taxation standard freezing, the government's tax burden has been increasing, but there are still many useful ways to efficiently implement taxation.

For example, if you have discretion for the time to earn income, you can determine when it is best to get that income, that is, this year or next year. Therefore, if you make a review before April 5, 2024, it may have a significant impact on your tax position. This is especially true for Scottish taxpayers who apply higher tax rates and excitement.

Every year, there are tax issues, but this year is no exception. The Autumn Statement 2023 has a few dramatic announcements, but there are many important changes that will soon come into effect ahead of this. For many people, it is worth considering as part of the end of the year, and includes the following:

Further reduction of annual ta x-exempt amount of capital gain tax
Further reduction of dividend deduction
Introduction of basic period reforms for unoranted businesses

As an accountant, we can comprehensively grasp and influence the status of the customer.

This briefing uses the tax rate and allowance for FY2023/24. Please note that the word spouse contains the registered Sibil Partner.

Tax rates and allowances

The income tax rate and tax rates for FY2023/24 determine which area you live in and what income you have.

Tax rate and tax rate Type UK, Wales, North Ireland Taxpayers 2023/24

Taxable income	No n-savings and savings income tax rates	Dividend tax rate
0 pounds to 37, 700 pounds	20%	8. 75%
37, 701 pound s-125, 140 pounds	40%	33. 75%
125, 140 or more	45%	39. 35%

Taxable income refers to income that exceeds the personal deduction. No n-saving income refers to a wide range of income, pension, transaction profit, and real estate income.

Tax rate and tax rates Scottish taxpayers 2023/24

Taxable income (no n-savings income)	tax rate	tax rate
0 pounds to 2, 162 pounds	starter	19%
2, 163 pounds to 13, 118 pounds	basic	20%
13, 119 pounds to 31, 092 pounds	Intermediate level	twenty one%
31, 093 pound s-125, 140 pounds	High	42%
125, 140 or more	Top position	47%

Scotland taxpayers will continue to pay taxes for savings and dividend income using the UK tax rate and tax rates.

Looking at the future, Scottorand's taxpayers will change, as revealed in the budget for the Skotland budget in 2024/25. If this is passed, the threshold of the starter tax rate and basic tax rate of taxpayers who have the right to receive standard personal deductions will be raised to 14, 876 pounds and £ 26, 561, respectively. Starter tax rates, basic tax rates, interlaiding tax rates, and high tax rates are deferred, and the high tax rates and the threshold of the top tax rates are also deferred.

Since April 6, 2024, 45%of the hig h-level tax rates applied to more than £ 75, 000 income will be new, with Scottish income taxes in six tax rates. Finally, the maximum tax rate is raised to 48%for more than 125, 140 pounds.

The personal allowance

In principle, everyone has the right to receive basic deductions before paying income tax. In other words, many people do not pay income tax for the first £ 12, 570. If you are eligible for a blind allowance, your personal allowance will be higher. If you have a lot of income, it will be reduced. If the pure income after adjustment exceeds 100, 000 pounds, the personal allowance will be reduced. If the income exceeds 100, 000 pounds, the personal allowance will be reduced, the income will be reduced by one pound by 2 pounds, and if the income is 125, 140 pounds or more, all individual benefits will be lost. However, planning in a timely manner may delay the point of this, or in some cases, the allowance is maintained.

Tip: Can you retain the personal allowance?

After adjustment, pure income is roughly, deducted deductions such as pension bases and gift aids, including the total taxable income before personal deduction. If your income falls from £ 100, 000 to £ 125, 140, you can maintain a personal income deduction by adding a pension contribution or a GIFT AID payment.

The Savings and Dividend allowances

Depending on the situation, you can receive savings allowance, and your savings income within the allowance will be taxed at 0%. The amount of savings allowance depends on your limit tax rate (that is, the highest tax rate you are levied). The basic taxpayer savings allowance is £ 1, 000. Hig h-rate taxpayers' savings allowances are £ 500. Additional taxpayers cannot receive a savings deduction. Distribution allowances can be used by all taxpayers, regardless of the limit tax rate. As a result, the first pound of the dividend is taxed at 0%.

The tax rate shown in the table is imposed on deposits and dividends that exceed these deductions. Savings and dividends within the range of savings and dividend deductions are included in the individual tax rate and hig h-rate tax rates. Therefore, it can affect the tax rate for income beyond the allowance.

Also, depending on the taxpayer, the savings start tax rate may be applied. This tax rate is taxed at 0%for 5, 000 pound interest income. This tax rate is not applied if income other than savings exceeds £ 5, 000.

Tip: Dividend Allowance is more generous before April 2024

Distribution deductions fall to 500 pounds from April 6, 2024, but until then it is £ 1, 000. If you pay a dividend before April 6, 2024, the higher limit will be applied in 2023/24.

Tax and the family

Make full use of bands and allowances

The income between the couple and the Civil partner is taxed separately. The spouse or partner has individual deductions. Furthermore, if one of the couples was born before April 6, 1935, a couple allowance can be used. In addition, there is a transferable allowance called "marriage allowance", and under certain situations, the other may be able to use 1, 260 pounds of personal allowance. Usually, in order to use this system, the gifts must be less than personal deductions.

If each party is in a different tax band, the key is to properly distribute income. Ideally, the personal deduction of a lo w-income spouse should be fully used to make the most of access to the low tax rate. For that purpose, it may be useful to transfer assets that generate income, such as real estate, shares, and bank accounts. It is always important to make sure that the transfer is a complete gift, that the gifts are no longer dominated by the assets, or that they are not profitable from their assets. Such evidence is required. In addition, please contact us in advance so that the tax avoidance prevention law is not applied.

Children are treated independently for tax. Children have individual deduction, annual capital gain tax (CGT) exemption, basic tax rate taxation and savings zone.

Tip: who should help?

From a tax perspective, it is usually more efficient for grandparents, not parents, to provide investment funds to minors. < SPAN> The tax rate shown in the table is imposed on deposits and dividends that exceed these deductions. Savings and dividends within the scope of savings and dividend deductions are included in the basic tax rates and hig h-rate tax rates. Therefore, it can affect the tax rate for income beyond the allowance.

Involve family in the business

Tip: pension planning in family companies

Distribution deductions fall to 500 pounds from April 6, 2024, but until then it is £ 1, 000. If you pay a dividend before April 6, 2024, the higher limit will be applied in 2023/24.

Note new CGT rules for separating couples

Watch for Child Benefit charge

Children are treated independently for tax. Children have individual deduction, annual capital gain tax (CGT) exemption, basic tax rate taxation and savings zone.

From a tax perspective, it is usually more efficient for grandparents, not parents, to provide investment funds to minors. The tax rate shown in the table is imposed on deposits and dividends that exceed these deductions. Savings and dividends within the range of savings and dividend deductions are included in the individual tax rate and hig h-rate tax rates. Therefore, it can affect the tax rate for income beyond the allowance.

Family companies: assess profit extraction strategy

Distribution deductions fall to 500 pounds from April 6, 2024, but until then it is £ 1, 000. If you pay a dividend before April 6, 2024, the higher limit will be applied in 2023/24.

Corporation tax

Tax efficient remuneration

Children are treated independently for tax. Children have individual deduction, annual capital gain tax (CGT) exemption, basic tax rate taxation and savings zone.

From a tax perspective, it is usually more efficient for grandparents, not parents, to provide investment funds to minors.

For family-owned or unincorporated companies, involving family members and remunerating them appropriately is usually very beneficial. It can be a good way to increase the chances of extracting profits before the higher tax rates, for example if your spouse or children are unlikely to use personal allowances. However, the involvement must be realistic and commercial, and you must be able to prove that your family members are genuinely engaged in the business. Remuneration must be incurred wholly and exclusively for business purposes and can be challenged if HMRC considers it excessive.

Pension contributions remain a very efficient way for director shareholders to extract profits. Also, if the spouse is employed by the company, the company can make reasonable pension contributions on behalf of the spouse. Also, if the spouse is employed by the company, the company can make reasonable contributions on behalf of the spouse. As long as the remuneration package is justified, the company should be able to claim these tax allowances.

Transfers of assets between spouses can usually be made on a no gain no loss basis for CGT purposes. However, if the spouses are living separately, the rules are different. Until recently, the period during which such transfers could be made was up to the end of the tax year of separation. After that, it was treated as a normal disposal for CGT purposes.

This has now changed, and transfers made after 6 April 2023 can now be made without gain or loss for up to three years from the tax year in which the spouses cease to live together. There are also special rules that apply when selling a former family home after separation if you have an economic interest in that home.

Consider how to deal with directors’ loans

The High Income Child Benefit (HICBC) is a scheme that many people don't know about. It applies when one partner in a couple receives Child Benefit and one or both partners have an adjusted net income of over £50, 000. Partners here include spouses and civil partners, as well as people living together as if they were married. If both partners are above the income threshold, the higher earner pays.

Child benefit is levied at the rate of 1% for every £100 of income between £50, 000 and £60, 000. Once income reaches £60, 000, child benefit is withdrawn in full.

Keep up to date with pension planning opportunities

The government has stated that it intends to change the way HICBC is administered and collected, allowing payers to pay through the PAYE tax code. However, as things stand, taxpayers must register for self-assessment and are expected to proactively notify HMRC of their liability. There is an obligation to notify when adjusted net income exceeds £50, 000. In some cases, HMRC may contact you or send you a reminder letter if they believe you owe money, but this is not automatic.

The outlook for family company director shareholders is changing. Recent developments such as changes to dividend allowances, National Insurance Contributions (NICs) rates and a possible increase in corporation tax rates all mean that reconsideration is needed. It is becoming increasingly important to check the figures against your own circumstances.
The head corporation tax rate is 25% for businesses with profits over £250, 000. A small profits tax rate of 19% applies to profits under £50, 000. For profits between these two, corporation tax is paid at the head rate minus a marginal allowance. This results in a gradual increase in the effective rate of corporation tax. Overall, the higher corporation tax rates and marginal allowances could mean new options for profit extraction.
The traditional remuneration strategy is to pay a small salary and withdraw the remaining profits as dividends.
Salary: this is usually set at a level sufficient to entitle you to state benefits (especially state pension entitlements), but adjusted so as not to incur NICs. Salary is a deductible business expense for corporation tax purposes, as are employer NICs.
You do not have to pay the minimum hourly wage unless you have an employment contract which means your directors are "workers".
For 2023/24, a salary of £12, 570 is often recommended, with the standard personal allowance in full. Directors' NICs are calculated on the annual income period of salary and bonus. Employer NICs start at £9, 100, while employee NICs arise on earnings over £12, 570, with a further 2% levied above the earnings cap of £50, 270. We can help you consider what the appropriate salary level is for your circumstances.
Dividends Dividend allowances continue to fall, but tax rates on dividend income are rising. This means that it has become more expensive to collect profits through dividend payments. In many cases, it may still be more advantageous tax-wise to take profits as dividends rather than as salary, but the decision is becoming more nuanced.

Bonuses: In some cases, it may be more efficient to withdraw profits as bonuses, such as when there are insufficient retained earnings to pay the required level of dividends or when corporation tax is paid at full rate.

As with salary, bonuses are subject to income tax and NICs, directors are subject to income tax and NICs and companies are subject to employer NICs. From 6 January 2024, bonus payments will become cheaper as employee class 1 NICs will be reduced from 12% to 10%. The reduction will take effect from 6 April 2024. In 2023/24, directors will pay "blended" NICs at 11. 5% per annum.

Unincorporated businesses: plan for major change

Basis period reform

Timing rules can sometimes be used to your advantage. For corporation tax purposes, bonuses can be determined after the end of the fiscal year when the final accounts are known, if there is a liability at the end of the fiscal year. In that case, if paid within nine months, they can still be deducted in that year. For income tax, depending on how and when the bonus is declared, tax can be deferred to a later tax year or included in the current tax year. Getting the timing and procedures right is key.

It is common for director shareholders of family companies to have loan accounts in the company. Most family companies are technically called "closed companies" and therefore fall within the scope of the "loans to participants" provisions. For this reason, if a director's loan account is still outstanding nine months after the end of the accounting period, corporation tax may be levied. For loans made after 6 April 2022, a rate of 33. 75% is levied.

Tip: planning to minimise impact

We'd love to talk to you about how to handle director loans in your situation.

This year has been a year of big change for pensions, with developments that will particularly affect higher earners and workers over 50.

Invest tax efficiently

Individual Savings Accounts: act by 5 April

From 6 April 2023, the annual allowance (AA) has increased from £40, 000 to £60, 000. The AA is the maximum amount that can be saved into a pension each year tax-free.

Changed the limit of tapered AA after April 6, 2023, the adjustment income (a broad sense of pure income + employment pension insertion) exceeded £ 260, 000 (increased from £ 240, 000), threshold income (pure pension from pure income from a broad sense of pure income) If the contribution amount is subtracted), the tapered AA is applied when the amount exceeds £ 200, 000. Each time the afte r-adjustment income exceeds £ 260, 000, AA is reduced by £ 1 and reduced to a certain lower limit.

From April 6, 2023, the minimum is £ 10, 000, not £ 4, 000.
Since April 6, 2023, the annual deduction of money per chess will be £ 4, 000 to £ 10, 000. If you use a defined contribution pension flexibly, this low annual deduction will be applied.
The LifeTime Allowance (LTA) was abolished on April 6, 2023, and the LTA itself will be abolished in April 2024. LTA had an upper limit on the total amount accumulated in tax saved pension savings. Until April 5, 2023, most of the time was £ 1, 073, 100, but with the protection of LTA, a higher limit was applied.
Increase the income tax rate is applied to the overturn than LTA, rather than 55 %.

Pension Community Lump SUM (ta x-exempt limit at the start of pensions) was set to £ 268, 275, except that protection is applied.

Rules and changes

Although it is a welcome news, it is recommended that you review it individually because the tax position of hig h-income earners is continuing to be complicated. It goes without saying that Scottorand taxpayers' pension plans are more important with the change in Scotland's income tax rates and tax rates expected from April 6, 2024.

Pension contribution is one of the most ta x-efficient investment methods for the future. Please feel free to consult in this field, such as officers, shareholders, sel f-employed, and partners.

After April 6, 2024, the method of allocating business income to the taxation year will be changed under the Income Tax Law. This means that companies are taxed on the profit generated in the tax year, not the fiscal year. It only affects business that has not been incorporated, that is, business that does not adopt the financial results on March 31 or April 5 among them. It does not affect the company.

In the long term, this change intends to provide a better digital experience with the MAKING TAX DIGITAL program for income tax. In the short term, the time of tax payment will be faster for many companies. The tax calculation of companies that are not settled on March 31 or April 5 in fiscal 2023/24 will be longer than usual, that is, the profit up to the end of the normal accounting period, and from the end of the fiscal year to April 5, 2024. It is performed based on the proportion of profits. There is a provision to minimize the impact by using the overlap reduction measure (when available) to distribute "additional" profits into five years. However, this change is likely to increase the tax amount for four years since FY2023/24. In addition, changes related to the annual financial results and the creation of tax returns are required.

For some companies, changing the end of the fiscal year to March 31 will be a solution, but this is not an option for all companies. It may not be possible for businesses with international business requirements such as seasonal business and larg e-scale professional partnerships.

The impact of the reference period reform depends on the customer's situation. We will help you understand the current situation, such as the impact on cash flow, checking the possibility of increasing income tax, and advice on reducing damage to damage.

Tip: Act by 5 April

Personal savings accounts (ISA) do not require income tax and capital gain tax and do not affect the available amount of savings or dividend deductions. This year, the limit of the ISA was not raised, but the tax benefits continue to be attractive.

Consider the venture capital schemes

There are four types of ISA:

Cash ISA

Stock ISA

Innovative finance ISA

Take stock of capital gains tax rules and changes

Life Time ISA.

Maximise potential of annual exemption

Life ISA can be used for the first time to buy a house and save for life afterwards. The funds are added by the government, and a 25 % bonus is added to up to £ 1, 000 per year. After the age of 50, you will not be able to pay to ISA, and the government will not be able to add. If you buy the first house, if you are over 60, or if your life expectancy is less than 12 months due to terminal diseases, you can withdraw funds. Otherwise, a 25 % withdrawal fee will be charged. < SPAN> In the long term, this change intends to provide a better digital experience with the MAKING TAX DIGITAL program for income tax. In the short term, the time of tax payment will be faster for many companies. The tax calculation of companies that are not settled on March 31 or April 5 in fiscal 2023/24 will be longer than usual, that is, the profit up to the end of the normal accounting period, and from the end of the fiscal year to April 5, 2024. It is performed based on the proportion of profits. There is a provision to minimize the impact by using the overlap reduction measure (when available) to distribute "additional" profits into five years. However, this change is likely to increase the tax amount for four years since FY2023/24. In addition, changes related to the annual financial results and the creation of tax returns are required.

Review position for family home

There are four types of ISA:

Cash ISA

Tip: More than one home?

Stock ISA

Be aware of rules on cryptoassets

Innovative finance ISA

Life Time ISA.

Latest developments

Life ISA can be used for the first time to buy a house and save for life afterwards. The funds are added by the government, and a 25 % bonus is added to up to £ 1, 000 per year. After the age of 50, you will not be able to pay to ISA, and the government will not be able to add. If you buy the first house, if you are over 60, or if your life expectancy is less than 12 months due to terminal diseases, you can withdraw funds. Otherwise, a 25 % withdrawal fee will be charged. In the long term, this change intends to provide a better digital experience with the MAKING TAX DIGITAL program for income tax. In the short term, the time of tax payment will be faster for many companies. The tax calculation of companies that are not settled on March 31 or April 5 in fiscal 2023/24 will be longer than usual, that is, the profit up to the end of the normal accounting period, and from the end of the fiscal year to April 5, 2024. It is performed based on the proportion of profits. There is a provision to minimize the impact by using the overlap reduction measure (when available) to distribute "additional" profits into five years. However, this change is likely to increase the tax amount for four years since FY2023/24. In addition, changes related to the annual financial results and the creation of tax returns are required.

Use Gift Aid effectively

Use Gift Aid to reduce taxable income

Personal savings accounts (ISA) do not require income tax and capital gain tax and do not affect the available amount of savings or dividend deductions. This year, the limit of the ISA was not raised, but the tax benefits continue to be attractive.
There are four types of ISA:
Cash ISA
Stock ISA

Innovative finance ISA

Use flexibility on timing of relief

Life Time ISA.

Tip: paying tax at more than basic rate?

Take advantage of higher rate relief

The total amount that can be invested in any tax year is determined by the government. The junior ISA limit is £ 9, 000, and the adult limit remains £ 20, 000. The overall limit can be assigned to various types of ISA that can be used.

At present, only one ISA of each type can be joined each year, but after April 6, 2024, it will be possible to join the same type of ISA every year under the condition of £ 20, 000. The exception is Life Time ISA. The upper limit in this case is 4, 000 pounds.

Take stock of new restriction

The Autumn Statement 2023 also announced a change in detail aimed at expanding the investment targeted in the Innovative Finance ISA. These are also applied from April 6, 2024.

Here to help

Any over 18 years old in the UK can open ISA. In the case of Life Time ISA, the applicant must be under 40. Imperial public servants who do not live in the UK and their spouses are also eligible. Junior ISA is available to children under the age of 18.

Year end checklist

Until April 6, 2024, cash ISA can be opened from the age of 16. This has changed after April 6, 2024, and the applicant must be 18 years old.

ISA cannot be owned with no n-spouse: There is no joint ISA function for the spouse. You and your spouse have an individual subscription limit, that is, up to 40, 000 pounds as a household. You cannot hold ISA on behalf of others, but you can open and manage ISA for those who are mentally weak. This is possible by applying for a financial agent order to the protection court. In the case of Scotland, apply to Office of the Public Guardian in Scotland.

We recommend that you understand your situation by April 5, 2024. The ISA limit cannot be carried over after the following year, and if it is not used in that year, it will expire.

ISA's tax treatment is provided to give preliminary treatments for individual investors investing in young and risky companies that are not listed. < SPAN> The total amount that can be invested in any tax year is determined by the government. The junior ISA limit is £ 9, 000, and the adult limit remains £ 20, 000. The overall limit can be assigned to various types of ISA that can be used.

The Autumn Statement 2023 also announced a change in detail aimed at expanding the investment targeted in the Innovative Finance ISA. These are also applied from April 6, 2024.

Until April 6, 2024, cash ISA can be opened from the age of 16. This has changed after April 6, 2024, and the applicant must be 18 years old.

Working with you

We recommend that you understand your situation by April 5, 2024. The ISA limit cannot be carried over after the following year, and if it is not used in that year, it will expire.

ISA's tax treatment is provided to give preliminary treatments for individual investors investing in young and risky companies that are not listed. The total amount that can be invested in any tax year is determined by the government. The junior ISA limit is £ 9, 000, and the adult limit remains £ 20, 000. The overall limit can be assigned to various types of ISA that can be used.

Spring Budget 2024

The Autumn Statement 2023 also announced a change in detail aimed at expanding the investment targeted in the Innovative Finance ISA. These are also applied from April 6, 2024.

Any over 18 years old living in the UK can open ISA. In the case of Life Time ISA, the applicant must be under 40. Imperial public servants who do not live in the UK and their spouses are also eligible. Junior ISA is available to children under the age of 18.

Until April 6, 2024, cash ISA can be opened from the age of 16. This has changed after April 6, 2024, and the applicant must be 18 years old.

Measures announced

ISA cannot be owned with no n-spouse: There is no joint ISA function for the spouse. You and your spouse have an individual subscription limit, that is, up to 40, 000 pounds as a household. You cannot hold ISA on behalf of others, but you can open and manage ISA for those who are mentally weak. This is possible by applying for a financial agent order to the protection court. In the case of Scotland, apply to Office of the Public Guardian in Scotland.
We recommend that you understand your situation by April 5, 2024. The limit of the ISA cannot be carried over after the following year, and if it is not used in the tax year, it will expire.
ISA's tax treatment is provided to give preliminary treatments for individual investors investing in young and risky companies that are not listed.
These are investments through the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs). The EIS and VCT rules contained sunset clauses that limited tax relief on shares issued before 6 April 2025, but recent legislation has extended the operation of this scheme. This means that income tax and capital gains tax relief will continue to be available for investors in new shares issued before 6 April 2035.
The potential for tax relief is substantial. For example, in the case of SEIS, a qualifying investor can invest up to £200, 000 in a qualifying company in any financial year and receive income tax relief of up to 50% of the amount invested. If the shares are sold more than three years after the date of issue, the resulting gains are also exempt from CGT. In the case of EIS and VCTs, income tax relief of 30% is currently available on the subscription of shares. There are also preferential treatment on capital gains.
Of course, this is a high-level overview and close attention should be paid to the finer details of the rules. Please contact us for more details.
Capital gains tax (CGT) is levied at 10% for UK basic rate taxpayers (18% for residential property) and 20% for UK higher and premium rate taxpayers (28% for residential property). Scottish taxpayers pay CGT based on UK tax rates and rate bands, so they should assess their position based on UK tax rates.
As announced in the 2022 Autumn Statement, the annual CGT exemption is due to fall to its lowest level this year. From 6 April 2024, the exemption will fall from £6, 000 to £3, 000. According to government figures, more than 250, 000 individuals and trusts will be subject to CGT for the first time by 2024/25. This change makes tax efficiency even more important.
Since each individual has an annual exemption amount, it makes sense for married couples to ensure that each person makes full use of this exemption amount. In some circumstances, this can be achieved by transferring assets between spouses. Spouses (except cohabiting couples) can generally transfer assets with no gain or loss for capital gains purposes. For example, if one spouse is a higher rate taxpayer and the other has not fully utilized the basic rate band, a transfer of assets may allow them to take advantage of the 10% tax rate instead of the 20% rate. Please consult with us in advance to ensure that the transfer is valid for tax purposes.

Now Reading

If you sell a home that has always been your main or only residence during your ownership, the gain on the sale is subject to CGT Private Residence Relief (PRR). There are conditions for the PRR to apply, broadly including that the home is not being rented out, no part of the home is being used exclusively for business purposes, the land including all buildings does not exceed 5, 000 square metres in total, and it was not purchased to make a profit.

Non-dom regime reforms

However, the position is not always straightforward. For example, if a delayed sale results in you renting out a property and buying another before disposing of the first, your capital gains position can quickly become complicated.

Reforms in recent years have reduced what is known as the "last period exemption". For properties sold before 6 April 2020, it covered the last 18 months of ownership. Now it is only the last 9 months of ownership. There are separate provisions for disabled people and long-term residents, where the PRR applies up to the last 36 months of ownership.

The current rules

Finally, it is good to know that HMRC may challenge the availability of the PRR. "Place of residence" is not defined in the law. HMRC is not simply looking at how long the property has been occupied. HMRC requires "some degree of permanence, continuity or expectation of continuity" to prove that the dwelling is used as a residence. This extends to elements such as sitting down to eat, doing laundry and spending leisure time.

For married couples, only one property can count as the main residence for CGT purposes. This can be problematic if both partners are homeowners. In these cases, it is possible to decide which of the two properties is the main residence and notify HMRC of it. We can advise you further.

The changes

HMRC is increasing its scrutiny of income and gains from crypto assets. In the 2023 Spring Budget, it announced that it would be redesigning its self-assessment form to reflect this. From 2024/25, the capital gains tax page will specifically ask for information about income and gains from crypto asset trading.

Buying and selling crypto assets is typically treated as a personal investment and subject to the CGT regime. With the annual CGT exemption being reduced, it will be even more important to monitor your crypto transactions.

First four years

HMRC recently launched a new service that allows people to voluntarily disclose the amount of tax due on income and gains from crypto assets, including exchange tokens such as Bitcoin, non-fungal tokens and utility tokens. This service is basically designed to bring a person's affairs up to date if the transactions giving rise to capital gains were made in the past rather than in the current tax year. It is always advisable to seek professional advice before using such HMRC disclosure services.

Subsequent years

As well as benefiting charities and community amateur sports clubs (CASCs), donations under the Gift Aid scheme can be a useful planning tool for donors.

Gift Aid payments affect the calculation of your taxable income, meaning they can bring your income below important thresholds:

High Income Child Benefit (HICBC). For HICBC, a clawback on Child Benefit payments starts when either spouse earns more than £50, 000.
Personal Allowance Reduction. If your adjusted net income is over £100, 000, your personal allowance is reduced at the rate of £1 for every £2 over £100, 000. If your adjusted net income is over £125, 140, your personal allowance is zero.
Additional rate thresholds in England, Wales and Northern Ireland: Additional rates are charged on income over £125, 140.
Top rate threshold in Scotland: The top rate is charged on income over £125, 140. From 6 April 2024, Scotland will also have a higher rate of tax on income between £75, 000 and £125, 140.
If your income is close to these limit, donation by gift aid has a very ta x-saving effect.
Gift aid donations are treated as the previous year. This is valid, for example, if your income is unlimited or when you pay a high tax rate in the previous year. However, there is a strict deadline and procedure. The claim must be made by the date of submitting the previous year's tax return, and it must be made by January 31, the year when the gift is given at the latest. The claim must be stated in the tax return, and it is not possible with a revised tax return. In other words, once you submit a tax return, you will lose the opportunity to select a return.

Transitional rules

Did you know that if you pay more than the basic tax rate, gift aid payments will lead to tax refunds? This is because the tax rate can be reduced by the maximum tax rate for donations. In other words, you can receive the difference between the basic tax rate paid to the donation and the high tax rate tax on the donation.

Many donors have applied for the hig h-rate reduction tax rate. The repayment request is made through sel f-reported (Self Assessment Tax Return) or by requesting HMRC to fix the tax code.

To make a claim, it is necessary to file a valid gift aid for all gifts. Appropriate records must be saved to support the declaration. These records must include the date, the amount of each gift, and the name of the charity.

As part of the reorganization after Brexit, the government announced in the spring budget of 2023 that tax reduction exemption measures against charitable organizations will be limited to British philanthropy and CASC. However, charitable organizations in the EU and European Economic Area (EEA) have been registered in HMRC at that time, have received tax reduction measures, and have a transitional period that can continue to be reduced and exempt. This will end on April 5, 2024. This transition means that the funds from the British taxpayers are used only to support British charitable organizations. If you have supported the EU or EEA charity, or if you have provided funds to such a charity, you may need to review your position.

The tax incentives for charitable donations are complicated. Especially if the carr y-back selection is useful, we will give you advice.

Maximize the tax rate, tax rate, and tax deduction

Inheritance tax

Evaluation of allowance that the whole family can use

Review the profit extraction strategy of the family company

Employee and self-employed NICs

National Insurance Contributions – A Further Cut for Workers

Prepare for the cash flow impact of base period reform (unincorporated businesses)

Take advantage of 2023/24 ISA allowances

Claim higher rate repayments under Gift Aid

Review your pension plan

Update your will and/or estate plan if necessary

Speak to us before 5 April 2024.

Real Estate Taxation

Abolition of Multiple Dwellings Relief for SDLT

This guide will help you identify areas that could have a significant impact on your overall tax position, but advice tailored to your own circumstances is always recommended.

Contact us before 5 April 2024 to make the most of the options available to you. We are committed to providing the best accounting services and making our services more accessible to your business.

Abolition of Furnished Holiday Lettings regime

The biggest surprise in the Spring Budget was probably the stormy reaction of the House of Commons to a fairly modest set of tax proposals.

The non-tax allowance reform and the reduction in NICs stood out as important changes, but they were well-reported in the press and therefore not surprising. The Deputy Speaker had to repeatedly instruct the chamber to "shout quieter".

Whatever the cause, MPs were on high alert when the Chancellor announced the measures. As well as the non-domestic changes and the reduction in NICs, the Chancellor also announced measures such as an extension to Energy Profits Tax and a reduction in Capital Gains Tax on residential property sales. There were also the usual "crowd-pleasers" of saving £2 on duty on a pint of beer and freezing fuel duty. Was this the start of an election? Judging by MPs' reactions to the Budget, it looks certain to be an election.

Capital gains tax rate for residential property reduced to 24%

Non-Dom Reform

Employee and Self-Employed NICs Property Tax

Business taxation

Full expensing sought to be extended to leased assets

Business Tax

VAT registration threshold increased to £90,000

Energy Profits Tax

RIF

Offshore Asset Transfers

ESG Measures

Energy Profits Levy

Other Notable Measures

Previous Chapter Top Next Chapter One of the most notable announcements was the abolition of the current tax regime for non-domestic individuals ("Non-Doms") in the UK, which will come into effect from 6 April 2025 if the Conservatives win the next general election.

However, there is no guarantee that similar changes would not occur if the Labour Party wins the next general election. As many people know, there has long been speculation that a Labour government would repeal or replace the Non-Dom rules.

RIF

Introduction of new fund vehicle – the Reserved Investor Fund

Very loosely speaking, the Non-Dom regime is for UK residents who have "permanent residence" (that's a confusing term) overseas. Non-Doms are currently resident in the UK and can only pay tax on their income or gains if they are UK-sourced or "remitted" to the UK. Non-Doms also have inheritance tax benefits and generally do not pay inheritance tax on their worldwide assets.

This status can be applied for for up to 14 years (although taxes may be levied after 7 years). It is generally regarded as a fairly generous regime by international standards.

The Chancellor has announced plans to scrap the Non-Dom regime entirely and replace it with another regime based on residence.

From 6 April 2025, individuals who become UK resident after 10 years of non-UK residence will be taxed as follows:

For the first four years, individuals who fall under the new regime will not be subject to UK tax on foreign income and gains ("FIG") or distributions from non-resident trusts, even if they bring those foreign income and assets into the UK (the "FIG regime").

After four years, they will pay UK tax on the same basis as other UK residents.

The details are bound to be numerous, but here's what we know so far:

Transfer of Assets Abroad

There are transitional arrangements (see below for more details);

Individuals must claim the tax basis for each of the four years if they wish to apply the regime for all four years;

No personal allowances or CGT exemptions apply when an individual claims FIG tax;

Treaty residence, non-residence and split years are ignored;

ESG Measures

The overseas working relief regime will also be reformed, but will broadly remain available for the first three years of tax residence when claiming under the new FIG regime.

Individuals who have been UK resident for less than four years as of 6 April 2025 (but who have been non-UK resident for 10 years prior to that) will be able to claim FIG tax for the remaining four years.

What is the tax treatment of non-residents who cannot claim the new regime?

Individuals who previously applied the remittance threshold but cannot claim to be taxed under the new FIG regime (for example because they have been UK tax resident for the past 10 years) will pay tax on only 50% of their foreign income in the 2025/26 tax year (but this reduced rate does not apply to taxable profits abroad). From 6 April 2026, these individuals will be taxed like other UK residents.

That is, UK tax will be levied on worldwide income.

Other measures of interest

UK ISA

Yes, but there are conditions. Individuals who are UK resident (or deemed resident) and apply the remittance threshold can choose to rebase their "personally held foreign assets" held on 5 April 2019. Further conditions are to be introduced before the rules come into force.

Temporary Repatriation Regime

Finally, individuals who were taxed on a remittance basis can elect to pay tax at the new 12% rate if (i) the amount was personally accrued when they were taxed on a remittance basis (i. e. before 6 April 2025) and (ii) the amount was brought into the UK in the 2025/26 and 2026/27 financial years.

The government has not announced any further details about the changes to inheritance tax law other than that it will be a new residence-based regime and that it will be subject to consultation. These changes are also due to come into effect on 6 April 2025. These changes are sure to have far-reaching implications for many of our clients, particularly but not limited to our international wealth management clients. If you have any questions about the above, please feel free to contact us.

High Income Child Benefit Charge (HICBC)

In perhaps the best kept secret of this budget, the government announced a second cut in the rates of National Insurance Contributions (NICs) for employees and the self-employed this year. From 6 April 2024, the headline rate of Class 1 employee NICs on annual earnings between £12, 570 and £50, 270 will be reduced from 10% to 8%. Combined with a 2% reduction implemented earlier in the year, this will reduce the previous 12% rate by a third. The measures are expected to cost the government more than £10 billion a year between 2024-25. Employers have equal reason to celebrate, however, as the rate of Class 1 employee NICs on earnings over £9, 100 a year will remain at 13. 8%.

The headline rate of self-employed Class 4 NICs, which applies to annual profits between £12, 750 and £50, 270, will also be reduced by 2%. This rate was already set to be reduced to 8% from next year, but the Budget announcement means that from 6 April 2024, the effective rate of Class 4 NICs will be 6%.

The measures announced in the Autumn Statement mean that the obligation to pay Class 2 NICs, currently levied at £3. 45 per week, will effectively be abolished from 6 April 2024. This is because self-employed people making profits above the £12, 570 threshold will no longer have to pay NICs, but will be able to continue to receive contributory benefits (including state pensions). People who voluntarily pay Class 2 NICs, including those who have emigrated overseas, can continue to pay NICs in order to maintain their entitlement to such benefits. However, the government has announced that it will open a consultation later this year on the complete abolition of Class 2 NICs, which may affect individuals who make such voluntary contributions in future.

Elim Poon - Journalist, Creative Writer

Last modified: 27.08.2024

Talking about your tax planning is incredibly important. Book a tax-planning session to help you plan out your tax liabilities and keep the business in a. Chapter 2 sets out our forecasts for the economy over a five-year horizon. We cover our latest forecast changes in light of recent developments and the effect. cash flows and financial state at the end of the financial year. deadlines described in the DHSC Group Annual Report and Accounts Planning.

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