0 Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
Time is Running Out
There is a range of tax-free allowances to use before the end of the tax year on 5 April.
The first £12,570 of income is covered by your personal allowance unless your total income exceeds £100,000.)
A further £1,000 of dividend income is covered by a dividend allowance.
Basic rate and higher rate taxpayers can also benefit from the personal savings allowance, which means the first £1,000 (basic rate or £500 (higher rate) of interest is tax free.
It’s probably a bit late but you should consider using the capital gains tax £6000 annual exempt amount. This will reduce to £3,000 per annum from April 2024.’
A useful way of making investments is to make full use of the annual limits for contributions to your ISAs, as any growth, income and gains within these are completely tax-free. You can invest up to £20,000 in an ISA.
Children up to the age of 18 can have a Junior ISA with a maximum of £9,000.
Pensions are another useful way to reduce tax liability.
You can use up your annual allowance for personal pension contributions but you may be able to use up unused allowances from the previous 3 years.. You can make pension contributions of up to £3,600 (gross) in the year without any restrictions. The annual allowance is £60,000.
Maybe you should consider planning a bit earlier next year.
Basis Period Reform and Student Loan Payments
Student loan repayments for self-employed taxpayers are based on the profits reported in each tax year. For the tax years 2023/24 to 2027/28 this will be your normal profit plus the portion of the transitional profits you decide to bring into that year. The additional profit could cause a dramatic increase in your student loan repayments in one or all of the five years.
Happy and Sociable
Are accountants the happiest workers in the UK and ‘cool’?
A recent survey of different industry sectors made a comparison of workers across various sectors. It found that the accounting profession scored highest closely followed by healthcare and the legal profession.
Does this mean that the old stereotype of a profession which is boring or nerdy is now out of date?
The authors observed that the fundamentals of accountancy have not changed dramatically, in that it still requires skill, intelligence and hard work. But the relationship between accountants and clients has become closer, more sociable and more rewarding for those involved in the profession. Do we feel we now have a purpose, a reason to exist separate from just working with the numbers?
The profession is now perceived by the new generation as “cool” with real and valuable purpose in life and business.
The survey found that the worst jobs had a lack of flexibility and working hours or where compensation or quality of senior leadership were lacking.
Funerals and VAT
Benjamin Franklin once said that nothing in life is certain except death and taxes.
In recent years there has been a move to livestream funeral services to help those who for whatever reason could not attend. Sometimes these live streams are viewed on the other side of the world.
Various items in connection with funerals are exempt from VAT including:
- the disposal of the remains of the dead
- the making of arrangements for, or in connection with, the disposal of the remains of the dead
But the provision of other goods or services do not fall within the exemption and are standard rated such as the provision of flowers at the place of worship, etc.
HMRC has now updated its guidance by adding the supply of live web streaming to the existing list of exempt services.
It appears that this may be a change to HMRC’s interpretation of the legislation so that if VAT has been charged in the past, it can now be amended. This is unlikely to be done in most cases.
The exemption is for undertakes providing the service. If the relatives source a third party to undertake the streaming, this does not fall within the exemption because it is not “directly related” to the provision of funeral services.
UK Company Thresholds to Increase
Legislation is planned to be laid this summer to increase the size thresholds that determine the size of a company by 50%.
It should be remembered that small companies and micro-entities are going to be subject to changes to their filing requirements in due course through secondary legislation issued as part of the Economic Crime and Corporate Transparency Act 202.
Planned size thresholds:
The size of your company is set if you exceed 2 out of 3 of the following:
| : | Micro | Small | Medium | Large | ||||
| New | New | New | Old | New | ||||
| Annual turnover | Not more than £1m | Not more than £15m | Not more than £54m | £36m+ | £54m+ | |||
| Balance sheet total | Not more than £500k | Not more than £7.5m | Not more than £27m | £18m+ | £27m+ | |||
| Average number | Not more than 10 | Not more than 50 | Not more than 250 | 251+ | ||||
Various other changes are planned.
The government intends that companies will be able to benefit from these changes for financial years commencing on or after 1 October 2024.
Interest Rate at 5.25%
Interest rates set by the Bank of England will stay at 5.25% this month.
The Bank is concerned about labour market activity, global risk, supply chain disruption and high levels of pay rises in the private sector.
They feel that monetary policy needs to be restrictive for an extended period of time to minimise the risk of inflation becoming embedded in the economy at above the 2% target.
They have also said that the fiscal measures announced in the Budget earlier this month would increase GDP by a nominal 0.25%. They have had to revise their CPI inflation target, now saying that it is projected to fall to slightly below the 2% target by June 2024, but expects inflation to rise in the second half of the year as a result of higher energy prices.
Inflation falls to 3.4%
A drop in food prices has brought inflation down to 3.4%.
The February figure was down from 10.4% a year ago and from January’s 4%.
The UK still has the highest inflation compared with the EU27 at 2.8% and the US at 2.2%, reflecting a long-term trend where the UK lags behind the EU and US on tackling inflation.
It appears that food prices were the main driver of the fall, with prices almost unchanged this year compared to a large rise last year, while restaurant and cafe prices also slowed.’
Overall prices for electricity, gas and other fuels fell by 18.2% year on year, compared with a fall of 18.4% in January.
Services inflation is expected to take longer to normalise.
Questions?
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.
