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New employment protections

The following changes were enacted from 6 April 2024. These changes apply to England, Wales and Scotland. Northern Ireland is not included as employment law is devolved.

The information that follows is reproduced from a post on the House of Commons Library at https://commonslibrary.parliament.uk/what-employment-laws-are-changing-from-april-2024/#:~:text=New%20legislation%20has%20expanded%20rights,effect%20from%206%20April%202024.

Changes to flexible working

Employees can now make two rather than one request a year for flexible working, and the deadline for employers to respond to requests has been reduced from three to two months.

Employers will also have to explain the reasons for denying any request, and employees no longer have to explain the impact of their request. However, the list of reasons employers can use to deny requests is remaining the same, including factors such as cost to the business or impact on quality, performance or ability to meet customer demand.

 

Carer’s leave

Employees are now entitled to take one week of unpaid leave a year if they have caring responsibilities.

 

This applies to any employees who are caring for a spouse, civil partner, child, parent or other dependant who needs care because of a disability, old age or any illness or injury likely to require at least three months of care. The leave entitlement is available from the first day of employment with no qualifying period.

 

Increased protection against redundancy for pregnant employees

Employees taking certain types of parental leave now have protection from redundancy for at least 18 months. This protection means that if their role is made redundant their employer must give them first refusal of any other vacancies; however, they can still be made redundant if no appropriate vacancy is available. Previously, employees only had this protection during their period of maternity, adoption or shared parental leave.

 

Protection now begins on the day the employer is first notified of the employee’s pregnancy and ends 18 months after the date of the child’s birth. These protections also now extend to 18 months after the date of adoption for parents taking adoption leave or 18 months after the child’s birth in cases where a parent is taking at least six weeks of shared parental leave.

 

More flexibility for paternity leave

Employees taking statutory paternity leave (and pay, if they are eligible) can now split their two weeks’ entitlement into two separate one-week blocks, rather than having to take them both together. They can also take their two weeks at any time within the first year after their child’s birth, rather than within only the first eight weeks after birth as previously required.

Employees now have to give employers 28 days’ notice for each week of leave, down from 15-weeks’ notice previously, before taking leave. However, they still need to give notice of their upcoming entitlement 15 weeks before the expected date of birth.

Opening up small company reporting

Companies House are working on detailed changes that will require small and micro sized companies to file information about their turnover and profits at Companies House.

Once filed, this data will be available to anyone searching affected companies’ records at Companies House.

At present, smaller companies can file abridged accounts that do not include a director’s report or a detailed profit and loss account.

What is a “micro” or “small” company?

Companies House define these as:

A company is ‘small’ if, in a year, it satisfies any 2 of the following criteria:

  • a turnover of £10.2 million or less
  • £5.1 million or less on its balance sheet
  • 50 employees or fewer

A company is a ‘micro-entity’ if, in a year, it satisfies any 2 of the following criteria:

  • a turnover of £632,000 or less
  • £316,000 or less on its balance sheet
  • 10 employees or fewer

When will this filing change occur?

The requirement to file the additional information will require secondary legislation. The process has started and could become law at any time in the next two years.

And to be clear, small companies will need to file a profit and loss account and a directors’ report, micro-entities to file a profit and loss account.

The option to file abridged accounts will be removed for both.

At present, there is no definition of the detailed information on trading that will be required. It could be limited to turnover and net profit, or it could include more detailed filing of direct costs and overheads.

 

For everyone’s eyes

The impact for small companies, who are used to protecting their turnover, trading margins and overheads (including salary details) from the public gaze, could be challenging.

For example:

  • competitors could work out your trading margins and undercut you,
  • it may bias buyers (your prospects) towards companies that have a larger, well established trading base,
  • your profit and loss data could be used against you in a trading dispute,
  • for micro companies that are basically “one-person bands” it may be possible to work out how much the business owner is being paid.

Of all the changes Companies House are presently considering, this is the one change that could prejudice the trading position of smaller incorporated businesses.

We await the fine print that will clarify exactly what needs to be filed, and from when as soon as the details secondary legislation is published. Meantime, if you have concerns about this future change in corporate transparency, please call.

Boost for small businesses

In a recent press release, HMRC underlined the benefits to smaller businesses from the increase in the VAT registration threshold and the business rates freeze.

Here’s what they said:

“Small businesses have received a boost as the VAT registration threshold is raised from £85,000 to £90,000, and £4.3 billion of business rates relief comes into force.

“Recognising the inflationary pressures facing small businesses, especially with energy bills, the Chancellor Jeremy Hunt announced a raft of measures to support them at Spring Budget, sticking to its plan to grow the economy and reward hard work. Raising the threshold will take 28,000 businesses out of paying VAT altogether, and ensure the UK has a higher threshold than any EU Member State and joint highest in the Organisation for Economic Co-operation and Development (OECD).

“The small business multiplier for business rates will also be frozen from today for a fourth consecutive year, protecting over a million ratepayers from a 6.6% increase in their bills. The measure is part of the £4.3 billion business rates support package announced at Autumn Statement that includes the 12-month extension of the 75% relief for 230,000 Retail, Hospitality and Leisure (RHL) properties…”.

In summary, the changes will result in:

  • 28,000 small businesses freed from paying VAT, encouraging them to invest and grow as the threshold is raised from £85,000 to £90,000; and
  • over one million properties protected from higher bills by freezing the small business rates multiplier for a fourth consecutive year.

Tax on savings interest

If you have taxable income of less than £17,570 in 2024-25 you will have no tax to pay on interest received. This figure is calculated by adding the £5,000 starting rate limit for savings (where 0% of the interest is taxable) to the current £12,570 personal allowance. In addition, there is a Personal Savings Allowance (PSA). This allowance ensures that for basic-rate taxpayers the first £1,000 interest on savings income is tax-free (effectively allowing qualifying basic-rate taxpayers to receive up to £18,570 in tax-free interest per year). For higher-rate taxpayers the tax-free personal savings allowance is £500. Taxpayers paying the additional rate of tax on taxable income over £125,140 cannot benefit from the PSA.

It is important to note that if your total non-savings income exceeds £17,570 then the starting rate limit for savings is unavailable. There is a tapered relief available if your non-savings income is between £12,570 and £17,570 whereby every £1 of non-savings income above a taxpayer’s personal allowance reduces their starting rate for savings by £1.

Interest from savings products such as ISA’s and premium bond wins do not count towards the limit. Taxpayers with tax-free accounts and higher savings can still continue to benefit from the relevant PSA limits.

Banks and building societies no longer deduct tax from bank account interest as a matter of course. Taxpayers who need to pay tax on savings income are required to declare this as part of their annual self-assessment tax return.

Taxpayers that have overpaid tax on savings interest can submit a claim to have the tax repaid. Claims can be backdated for up to four years from the end of the current tax year. This means that claims can still be made for overpaid interest dating back as far as the 2020-21 tax year. The deadline for making claims for the 2020-21 tax year is 5 April 2025.

Register for the Marriage Allowance

The marriage allowance applies to married couples and those in a civil partnership where a spouse or civil partner does not pay tax or does not pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2024-25).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) does not pay more than the basic 20% rate of income tax. This would usually mean that their income is between £12,571 and £50,270 during 2024-25.

For those living in Scotland this would usually mean income currently between £12,571 and £43,662.

Using the allowance, the lower earning partner can transfer up to £1,260 of their unused personal tax-free allowance to a spouse or civil partner. This could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year.

If you meet the eligibility requirements and have not yet claimed the allowance, then you can backdate your claim as far back as 6 April 2020. This could result in a total tax break of up to £1,256 if you can claim for 2020-21, 2021-22, 2022-23, 2023-24 as well as the current 2024-25 tax year. If you claim now, you can backdate your claim for four years (if eligible) as well as for the current tax year.

HMRC’s online Marriage Allowance calculator can be used by couples to find out if they are eligible for the relief. An application can then be made online at GOV.UK.

A new acronym

Most readers of our posts will recognise the acronym CGT or IHT -Capital Gains Tax or Inheritance Tax. And the myriad of other taxes that affect most UK taxpayers in or out of business:

  • IT – Income Tax
  • NIC – National Insurance
  • VAT – Value Added Tax

But what about MTD?

What is MTD?

MTD will be recognisable by most business owners who are registered for VAT.

It stands for Making Tax Digital.

MTD for VAT purposes was introduced for businesses with a taxable turnover above the VAT registration threshold in April 2019, and since then all businesses registered for VAT are required to file their returns to HMRC using approved digital methods. In fact, all of the reputable bookkeeping software providers include the facility to file VAT returns to HMRC using the approved MTD links.

And this is the crux of the movement by HMRC to have all tax information filed electronically including personal self-assessment and corporation tax.

Eventually, pretty well all of the information presently submitted to HMRC on a formal tax return will be delivered automatically by software direct to HMRC servers.

MTD for ITSA

Which introduces yet another acronym – Making Tax Digital for Income Tax Self -Assessment (MTD for ITSA).

The introduction of this filing process has been delayed for a number of years and is now due to commence for self-employed persons and landlords with an income of more than £50,000 from April 2026.

Those with income between £30,000 and £50,000 will be required to join MTD for ITSA from April 2027.

At present there is no date by which the self-employed and landlords with income under £30,000 will be drawn into this scheme.

MTD for ITSA deadlines

Before the relevant deadlines, affected traders and individuals will need to keep their records in an approved electronic format that will automatically send their returns (previously submitted on a tax return) directly from their computer to HMRC.

And this will have to be done quarterly, not annually as at present!

We are presently working our way through client lists to ensure that all affected self-employed and landlord clients are converted to using approved software in time to meet the 2026 or 2027 deadlines.

The days of delivering records in a shoe box once a year are coming to an end.

Call us now…

Digitisation of your record keeping will not only facilitate these compliance obligations, but it will also have positive benefits enabling you to better manage your finances.

If you are self-employed or an unincorporated landlord and still keep your records manually or on a spreadsheet, please get in touch. We can help you identify a cost effective software solution to have you ready and waiting for the MTD for ITSA conversion deadlines.

Check your National Insurance record

There is an online service available on HMRC to check your National Insurance Contributions (NIC) record online. The service is available at https://www.gov.uk/check-national-insurance-record

In order to use this service, you will need to have a Government Gateway account. If you do not have an account, you can apply to set one up online.

By signing in to the ‘Check your National Insurance record’ service you will also activate your personal tax account if you have not already done so. HMRC’s personal tax account can also be used to complete a variety of tasks in real time such as claiming a tax refund, updating your address and completing your self-assessment return.

Your National Insurance record online will let you see:

  • What you have paid, up to the start of the current tax year (6 April 2024).
  • Any National Insurance credits you have received.
  • If gaps in contributions or credits mean some years do not count towards your State Pension (they are not ‘qualifying years’)
  • If you can pay voluntary contributions to fill any gaps and how much this will cost

In some circumstances it may be beneficial, after reviewing your records, to make voluntary NIC contributions to fill gaps in your contributions record to increase your entitlement to benefits, including the State or New State Pension. If you would like to discuss this further, please do not hesitate to be in touch.

HMRC helpline changes on hold

HMRC has been forced into an embarrassing climbdown on plans to close the Self-Assessment, VAT and PAYE helplines from early April until September this year. HMRC has now confirmed that these helpline changes have been abandoned following feedback from many concerned stakeholders, including MPs, accountants and members of the public. This means that the helplines will remain open as usual for the time being.

However, these moves indicate that a significant shift towards online self-service options will become the norm in the longer term. HMRC has also said that they will continue encouraging customers to self-serve where possible and access the information they need more quickly and easily by going online or to the HMRC app, which is available 24/7.

HMRC’s Chief Executive said:

‘Making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity.

Our helpline and webchat advisers will always be there for those taxpayers who need support because they are vulnerable, digitally excluded or have complex affairs.

However, the pace of this change needs to match the public appetite for managing their tax affairs online.

We’ve listened to the feedback and we’re halting the helpline changes as we recognise more needs to be done to ensure all taxpayers’ needs are met, whilst also encouraging them to transition to online services.’

Tax Diary April/May 2024

1 April 2024 – Due date for corporation tax due for the year ended 30 June 2023.

19 April 2024 – PAYE and NIC deductions due for month ended 5 April 2024. (If you pay your tax electronically the due date is 22 April 2024).

19 April 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2024.

19 April 2024 – CIS tax deducted for the month ended 5 April 2024 is payable by today.

30 April 2024 – 2022-23 tax returns filed after this date will be subject to an additional £10 per day late filing penalty for a maximum of 90 days.

1 May 2024 – Due date for corporation tax due for the year ended 30 July 2023.

19 May 2024 – PAYE and NIC deductions due for month ended 5 May 2024. (If you pay your tax electronically the due date is 22 May 2024).

19 May 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2024.

19 May 2024 – CIS tax deducted for the month ended 5 May 2024 is payable by today.

31 May 2024 – Ensure all employees have been given their P60s for the 2023/24 tax year.

Underlining planning options for FHL owners

If you read our post of last week, Property Tax Changes, you will be aware that the Chancellor recently confirmed – as part of his Spring Budget – that the present tax advantages that owners of Furnished Holiday Let (FHL) property enjoy will be abolished from April 2025.

While a deadline in a year’s time may seem a long time away, taking action to mitigate future taxes or undertaking changes during the 2024-25 tax year will require “what-if” analysis.

Start considering your options now

The following planning ideas may or may not benefit you personally and do not action any of these suggestions without first contacting us to undertake the necessary research for you.

Possible options for FHL owners before 6 April 2025:

  • As past profits from FHL activities count towards earnings for pension purposes, could you pay a sizeable top-up to your pension pot during 2024-25?
  • Is there a way to facilitate, and fund, a disposal of FHL property that triggers the Capital Gains Business Assets Disposal Relief, so that you effectively pay 10% tax on any chargeable gain, and re-establish a base cost for CGT at current market value?
  • Are there options of involving your spouse, civil partner or adult children in a CGT planning exercise?
  • What are the advantages and disadvantages of incorporating your FHL business?

Change is always a challenge

It is possible that when HMRC publish the fine print of their changes to the tax treatment of FHL businesses, some or all of the above ideas may prove to be dead ducks. However, it pays to stay ahead of the planning curve.

Initially, we suggest that FHL owners that want to explore their options get in touch to start the planning process, and then as more detailed information becomes available you will be best placed to shift from planning into action.