With spring around the corner and hopefully an end to the grey and cold of the winter, the government’s first months in office have had mixed reviews. From the scrapping of the winter fuel allowance for those not otherwise receiving state benefits to increased employer national insurance levels, measures taken to replenish public finances have not been universally popular. More recently, the Autumn Budget introduced a potential change in pensions taxation that will affect those who have structured their estate planning to pass on pension funds in their wills.

This dramatic potential change in pensions legacy rules mean the funds, currently (and until April 2027) exempt from inheritance tax (IHT), will be brought into the IHT net and beneficiaries of pension death benefits could have to pay, in effect, up to 67% in tax. You may need to take a whole different approach to passing on assets, instead funding retirement with your pension rather than money from ISAs or other income, and factoring lifetime gifts into your inheritance strategy.

The winter months are often cheered by planning for holidays in warmer times to come, but for those involved in providing holiday accommodation the new tax year could alter previous operations. Changes in the holiday rental market have been softened with a provision for carrying forward any losses from previous or existing property into the new tax structure for 2025/26. Property owners operating under the previous furnished holiday letting (FHL) rules can bring forward any unused losses and set them against future earnings. From April, however, the previous FHL tax regime will end and such holiday properties will be subject to the same tax rules as buy-to-lets. While this change in legislation has removed the opportunity for most FHL businesses to operate as a trade, some will still qualify, although there is no clear delineation on this point so those on the margins may need advice.

Despite the loud controversy following the Chancellor’s apparent targeting of business owners to fill the funding gap at the Treasury, the October Budget announcement regarding the 110% rise in employment allowance is likely to improve profits for the smallest of employers, covering increases in employer national insurance contributions (NICs). The increase to employment allowance is restricted to companies paying under £100,000 in NICs for the 2023/24 tax year in 2024/25; but in 2025/26 bigger businesses will also be included.

With the shift to the tax year accounting basis from last April, those who have not yet aligned their accounting year to the calendar will find increased administrative burdens. Although the due date for the 2023/24 transition year has passed, you can amend your return for up to a year afterwards.

We discuss these issues and other stories in our latest Spring 2025 newsletter.

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It’s only just over the first 100 days in office, but the new government already feels bedded in with talks of five- and 10-year plans and anticipation of the first Labour Budget in 14 years. Following the surprise announcement at the end of July of the removal of the universal winter fuel allowance for pensioners from this winter, many will be waiting anxiously for what comes next.

The number of taxpayers continues to rise and taxes that would once have only affected those on higher incomes are now kicking in lower down the pay scale. In the latest edition of our newsletter we explore two areas where people have found themselves affected. Basic rate taxpayers with cash savings in higher interest earning accounts may now find themselves tipping past the £1,000 savings allowance (or £500 for higher-rate payers). Where they are not yet filing a self-assessment tax return they may now need to do so. Similarly, the dividend allowance reduction could also catch out small-scale investors who haven’t previously met the dividend threshold for taxation. Now only £500, a quarter of the allowance limit it was two years ago, the number of those expected to face a tax charge for 2024/25 is now double that it was just three years ago.

Preferential tax arrangements were once a hallmark of the rental sector, but in recent years the government has eroded the tax breaks on offer in an attempt to redress the balance between tenant and landlord. The Renters’ Rights Bill is the latest iteration of this process and is designed to give those renting more security in their homes by cancelling the rights of landlords to evict with no reason and extending notice periods for selling the property. At the same time the Bill spells out the terms for landlords to remove problem tenants, which they can instigate at any point in the contract. The erosion of previous tax breaks will have already been enough for some to leave the market, but the introduction of this new Bill is expected to deter more investors from seeing property rental as a viable way to make money.

We discuss these issues plus the coming challenge of VAT on private school fees and the increased number of HMRC investigations of R&D tax relief claims in the latest October/November 2024 edition of our newsletter.

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In presenting Labour’s widely anticipated first Budget in 14 years, the Chancellor was faced with a challenging task. Following her announcement of a “black hole” in the public finances, the need to renew the Treasury’s coffers while maintaining Labour’s manifesto promises seemed a tall order.

In the event Ms Reeves outlined a programme of around £41 billion worth of tax increases over the next five years, alongside plans to rebuild tottering infrastructure, the health service, schools and more. Any idea of a return to austerity was quashed, but how this will be achieved is very much in the detail.

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We count ourselves lucky that our election cycles in the UK, although perhaps feeling lengthened by the run up to them, only actually run for six weeks. The swift transfer of power on 5 July following Keir Starmer’s Labour victory felt like a re-set after the last few years and the Prime Minister and his new Chancellor, Rachel Reeves, have lost no time in getting going over the last few weeks. Time is short to achieve much ahead of the summer recess, swiftly followed by the conference season in September. The Chancellor has, however, commissioned a ‘spending audit’ from the Treasury ahead of announcing a Budget date.

Given the challenges across a swathe of spending priorities, tax rises are expected later in the autumn. With their manifesto promises not to raise income tax, national insurance or the VAT rate, most commentators’ attention is focused elsewhere. In the latest edition of our newsletter, we feature a discussion of the key areas to look out for as the government sets out its programme. While continuing frozen thresholds on income tax until April 2028 means more people will come into the higher and additional tax brackets, that’s about the only certainty. There have been rumours around capital gains tax (CGT), some inheritance tax reliefs and offshore trust arrangements and of course the promise to bring private schools into the VAT regime. Businesses can expect policies within the next six months designed to underpin an avowed purpose to ‘drive investment for growth’.

The day to day business of managing the tax burden goes on regardless. One area that can cause confusion is around what counts towards adjusted net income and how some allowances affect what tax you actually pay. Income covered by both the personal savings allowance and dividend allowance counts towards your adjusted net income and even a small amount can have a significant impact on your tax position. Understanding some key income thresholds could make the difference. You need to report accurate figures to HMRC, either on a self-assessment return or using your personal tax account. Moving savings or dividend income into an ISA or increasing your pension contributions can mitigate the impact.

While CGT may come under scrutiny in the autumn Budget, Labour has already guaranteed they will not extend tax to the sale of a main residence. It’s not always clear, however, what qualifies as a main residence throughout a period of ownership or whether periods of absence will affect the status of a sale. If you own more than one property or have been away from your property for a period of time, understanding the rules around nominating a main residence and how reoccupation could benefit your CGT position is crucial. HMRC will make a nomination for you if none is made.

We discuss these issues and other stories in our latest July/August 2024 newsletter.

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If the pundits and polls are to be believed, the Chancellor delivered what may turn out to be the government’s final Budget in early March. The headline NIC cuts and adjustments to the higher income child benefit charge will please many, alongside changes that affect the self-employed. The shifting of the £85,000 VAT threshold to £90,000 should give more headroom to small businesses. There were raised eyebrows, however, at the Office for Budget Responsibility which unpicked some of the realities unpinning the Chancellor’s numbers.

The new tax year has brought more than just the latest Budget changes but also some key adjustments already announced in previous years. The cuts to the dividend allowance – now down to £500 following last year’s initial cut to £1,000 – and the capital gains exempt amount – halved again to £3,000 from its 2023/24 level – as well as the frozen personal allowance and cut to the additional rate threshold mean that many more people may find themselves tipping into higher tax brackets. As we outline in the latest edition of our newsletter, while year end tax planning is often emphasised, making an early new tax year start with an understanding of your position is a worthwhile exercise.

Those involved with property are faced with particular hurdles. The squeeze on property and housing shortfall has prompted a number of measures. While there is ongoing controversy around legislation going through parliament on renter’s rights, the tax system just got harsher. Despite the cut to the higher rate of capital gains tax for residential disposals from 28% to 24% that took effect from 6 April, other key tax reliefs are being removed. From 1 June relief on the purchase of multiple dwellings in England and Northern Ireland will end. Ostensibly meant to curb dubious claims around ‘granny annexes’, those with genuine claims could face SDLT bills up to double the previous level. From April 2025, furnished holiday lettings also saw relief abolished and will be treated the same as buy-to-let property for tax purposes. All of which make property investment a less than straightforward option in years to come.

While some have chosen to rely on property income in lieu of a pension, at the other end of the scale, a recent report revealed that around three-quarters of self-employed individuals are not contributing to a pension. With all the demands on running your own business, it can feel that setting aside income for the future isn’t a priority. But relying on the State pension alone is unlikely to make for a comfortable retirement. The tax incentives involved in building up a pension fund shouldn’t be forgotten.

The new tax year also sees two new allowances to replace the previous pensions lifetime allowances. The lifetime lump sum allowance and the lump sum and death benefit allowance will now limit the tax-free cash benefits on retirement and death.

There’s much to consider already in 2024/25. Add to that increased charges from Companies House on a range of business administration costs, and the advice to start planning early comes into sharp focus. Find out more about these and other stories in our latest Summer 2024 newsletter.

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Many of the announcements made by the Chancellor will have a significant impact on our personal finances. The additional cut to class 1 national insurance contribution (NIC) rates to 8% will see take home pay go up, while the self-employed class 4 rate also sees a reduction. For families hit by the high income child benefit charge, reforms to the regime see the threshold before they become liable go up by £10,000 to £60,000. Businesses see the VAT registration limit increased by £5,000 to £90,000.

Many key allowances and thresholds, however, remain frozen, so understanding the effects of existing tax levels and new measures announced for 2024/25 is key to your planning.

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Last November’s Autumn Statement included some positive news for workers. a 2% cut to class 1 national insurance contributions (NIC) has been granted to all employees from January 2024, giving everyone a bit more back from their pay packets for the new year. Meanwhile the self-employed have also had a percentage point taken off class 4 NICs, and class 2 NICs have been abolished except on a voluntary basis. Alongside this financial boost, simplified accounting processes will allow all businesses to use the cash basis for accounting, regardless of size.

Further changes to business accounting practices have arrived in the form of making the cash basis the default accounting system for sole traders and partnerships, replacing accruals. Smaller businesses are no longer required to use the accruals system if they are over a certain size, streamlining accounting processes and also removing limits on interest costs. Making Tax Digital, the government’s strategy for automating business tax reporting for all businesses, has also slowed down. Now only self-employed workers with pay over £50,000 will join the scheme in 2026, and workers earning less than £30,000 will have their needs reviewed before any requirement to join is scheduled.

Larger, incorporated businesses also have improved reliefs coming their way, alongside the headline-winning commitment to making full expensing permanent. The government is also clarifying the rules around R&D claims, which are being merged with SME relief to simplify the claiming procedure.

All these changes however do nothing to improve the position of those paying the most tax on their income. The effect of ‘fiscal drag’ has increasingly hit higher earners the hardest, penalised with lost reliefs and allowances. Since the introduction of frozen tax thresholds and allowances those who pay the most tax have found their share of the overall tax burden increasing the most. Those with incomes near the £50,270 and £125,140 thresholds could pay extra into their pensions to bring their incomes down, but this solution will not work for everyone, and there may be other factors to consider.

All savers and investors however will be able to benefit from the new relaxed ISA legislation coming in from April which has had the conditions around fund allocation relaxed. The ISA allowance will be transferrable between multiple accounts for the first time, making the best deals and rates more accessible.

Find out more about these and other stories in our latest Spring 2024 newsletter.

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As the calendar year closes, the strain on finances for many individuals and businesses has not entirely abated. Higher tax bills and continuing high interest rates and inflation have become a fact of life. Even those with money to set aside in savings have found their higher returns courtesy of increased interest rates affected by tax changes.

For example, the National Savings & Investments (NS&I) one-year savings bond currently offers a fixed rate of 6.2%, the highest rate on offer since the bond’s launch. However, higher rate taxpayers will use up their £500 savings allowance if they invest more than £8,000 in this bond. A £25,000 investment could leave them with over £1,000 of taxable savings income. This is a significant change from ten years ago, when higher rate taxpayers could invest up to £100,000 before incurring any tax liability. There are other options for tax-efficient investing that may be a better use of available funds.

Inheritance tax (IHT) is another area where taxpayers are facing challenges. Higher property values and a frozen IHT nil rate band are pushing more estates into the IHT net. Even though property prices have fallen recently, the average price of a detached house is still over £450,000. Meanwhile, the IHT nil rate band has been frozen at £325,000 since 2009, despite a significant increase in average property prices. With the complexities of submitting estates for probate, increasing numbers are also incurring penalties, adding to the pressures.

Business owners will also need to consider tax efficiency when deciding whether to pay themselves a bonus or a dividend this year. Tax and pension changes have altered the calculation from last year.

Meanwhile newer developments bring their own taxing concerns. Clean air initiatives involving car charges have been in the headlines, but less so the tax implications. For business journeys, these additional tax charges are largely tax-deductible. On the other hand, social media influencers are becoming increasingly popular, but may not be aware that their earnings may be taxable. Understanding your position before embarking on a potentially lucrative influencer career should mean you avoid HMRC scrutiny.

Find out more about these and other stories in our latest December newsletter.

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