The fees associated with incorporating and maintaining a company will rise from 1 May 2024, due to an increase in charges from Companies House.
Companies House has explained that fees are set on a cost recovery basis – meaning that the increases are intended to solely cover the cost of the services they deliver without making a profit. Incorporation Currently, the cost of registering a company with Companies House ranges from £10 to £40, depending on the channel used. With fees increasing across-the-board from registration to exit, increased costs include:
Many people set up a new company through a company formation agent. Their most basic offerings only add a small margin to the Companies House charge. This means the fees charged by agents are going to see similar increases come 1 May. Confirmation statements Every company, including dormant companies, must file a confirmation statement at least once a year. The cost is currently £13 and rising to £34. This fee, at least, covers a 12-month period. It’s paid with the first filing during the period with no further charge for any subsequent filings during the same period. For a full list of Companies House’s current fees visit the government website and for an update on price increases. There’s no respite for HMRC with inheritance tax (IHT) accounts, undeclared dividend income and gains from share disposals to scrutinise.
HMRC is currently busy with several ongoing checks. They are looking at IHT accounts, targeting undeclared dividend income, and making sure any gains from share disposals have been correctly declared. Inheritance tax accounts The complexities of IHT can catch out even seasoned observers and there are many pitfalls, including:
Dividend income HMRC is writing to company owners who may have undeclared dividend income. Its approach is to compare a company’s reported profits with the movement in reserves. Where a difference is identified, this could be an indication of dividends being paid to shareholders. Anyone receiving a letter should contact HMRC within 30 days of its receipt, even if there is no dividend income to declare, or risk facing a compliance check. Share disposals Letters are also being sent to taxpayers who have disposed of shares but are suspected of omitting the details from their tax returns. HMRC has looked for discrepancies by checking the information it has on share disposals against details declared on self-assessment tax returns. Anyone receiving a letter will have 60 days to amend their return. If no capital gains tax is due on the disposal identified by HMRC, the taxpayer needs to explain why in writing. HMRC’s guide to valuing an estate for IHT purposes can be found here. The introduction of a £500 income exemption from 6 April 2024 will impact many trusts. It comes with various complications, especially as income within the £500 exemption will still be taxable in the hands of beneficiaries.
The exemption is on an all-or-nothing basis. A trust with an income of £501 will find the whole amount is taxable; not just the excess over £500. A further complication is that, in some circumstances, the £500 exemption is shared between trusts created by the same person. When the £500 exemption was first proposed, it appeared relatively generous for savings income given the bank rate was 0.75%. However, it does not appear as beneficial now that the current bank rate sits at 5.25%. Interest in possession (IIP) trusts IIP trusts pay income tax at 20%, except for dividend income which is taxed at 8.75%. The £500 exemption will mean that smaller IIP trusts no longer have to file returns or pay tax, but this income will now be received gross by beneficiaries without any associated tax credit. This is good news for non-tax paying beneficiaries as they will no longer need to make repayment claims. However, basic rate taxpayers will now have to account for tax on trust income, a liability previously met by the tax credit. There will be no change for either the trust or the beneficiaries where trust income exceeds £500. Discretionary trusts Discretionary trusts pay tax at 45%, except for dividend income which is at 39.35% – the same rates paid by an additional rate individual taxpayer. Previously, there was a £1,000 standard rate band on which lower rates applied. The £500 income exemption has replaced the standard rate band. The complication for discretionary trusts is that any distributions to beneficiaries carry a 45% tax credit, even if the exemption applies. Therefore, the trust will still have to pay sufficient tax to cover the tax credit, which can mean complex calculations. The beneficiaries of discretionary trusts will not see any change to their tax treatment given that trust income will continue to have a 45% tax credit attached. What was almost certainly the last Budget before the election was a serving of the widely expected, sprinkled with a handful of small surprises.
The Chancellor of the Exchequer, Jeremy Hunt, delivered the Spring Budget 2024 on 6 March. As anticipated, it was a typical pre-election event focused on tax relief measures – including further national insurance contributions (NICs) cuts – and the promise of a new savings bond from National Savings. With little fiscal wriggle room, Mr Hunt was unable to give away as much as some of his backbenchers may have wanted, yet managed to hit some political targets, including co-opting Labour’s flagship scrapping of non-domicile rules. Key announcements The main headlines and changes to grapple with are:
These Budget changes may affect you personally or your business. For more information on any aspect of the implications of the Budget, please contact us. There are many benefits to moving to Scotland for work or retirement, especially the stunning scenery. However, anyone contemplating a move should consider the tax cost of relocating from elsewhere in the UK.
The Scottish Parliament has set income tax rates and bands since April 2017, with the result that most Scottish taxpayers have generally faced a higher tax burden than other UK taxpayers. This cost is set to get even wider from April 2024. Tax rates The main difference between Scottish tax rates and those applicable to the rest of the UK is going to be Scotland’s new advanced rate of 45% which, from April 2024, will apply on income between £75,000 and £125,140. This is 5% higher than is payable on equivalent income in other parts of the UK. Given that the personal allowance is tapered away where income is between £100,000 and £125,140, this will mean a marginal rate of 67.5% on this band of income: it is 60% in other parts of the UK. Once income hits £125,140, the Scottish top rate is 48% compared to the rest of the UK's 45% additional rate. Comparison The Scottish tax system generally hits harder at the higher end of the pay scale. Someone moving to Scotland after April with an income of £40,000 will see their annual tax bill go up by just over £110. However, it is nearly £3,350 more with an income of £100,000, and almost £6,000 where income is £150,000. At the lower end of the scale, a pensioner moving to Scotland with an income of, say, £25,000, will actually see a modest reduction in their tax liability. Scottish taxpayers Having one home in Scotland and living there will make you a Scottish taxpayer, but also if:
The government has published a guide to income tax in Scotland on its website. Companies House is introducing wide-ranging reforms – subject to new legislation being in place – from 4 March 2024. Directors need to get ready for the first tranche of measures.
The reforms are being introduced with the aim of clamping down on financial crime and improving corporate transparency and form part of the recently enacted Economic Crime and Corporate Transparency (ECCT) Act. The changes will particularly impact when incorporating a new company, but existing companies are also affected. Registered office The use of a PO box as a registered office will no longer be permitted. A registered office must be an address where the receipt of documents can be recorded by an acknowledgement of delivery. This means that a third-party agent’s address should still be suitable. Directors should make sure that any existing company using a PO box as a registered address has made a change by 4 March 2024. This can be done online at the Companies House website. Any company without an appropriate registered office address risks being struck off the Companies House register. Email address When a company is incorporated from 4 March 2024, it will be a requirement to provide a registered email address for Companies House. The same email address can be used for more than one company:
Lawful purpose In future, the subscribers (shareholders) will need to confirm they are forming a new company for a lawful purpose. For existing companies, confirmation statements filed from 4 March 2024 will include a declaration that a company’s future activities will be lawful. Companies House may take action if it receives information that a company is not operating lawfully. Other changes are in the pipeline, in particular, mandatory identity checks for company officers will be introduced later in 2024. Details of the changes being introduced by The ECCT Act can be found on the government website. Having already paid out over £1 billion in equal pay claims, and now facing claims for further millions, Birmingham City Council’s financial crisis is a stark reminder of why it is so important to get equal pay right.
All employers will undoubtably know the basic principle that men and women must receive equal pay for doing equal work. However, it is possible for employers to be caught out by some complications of the rules:
Equal work Where equal pay rules become less black and white is in the arena of equal work. This is where Birmingham City Council came unstuck. The original dispute in 2012 arose because bonuses given to staff in traditionally male-dominated roles discriminated against female workers working in roles such as cleaners, teaching assistants and catering staff. Comparisons are not necessarily on an exact like-for-like basis. It might be that the level of skill, responsibility and effort needed to do work are equivalent, or work might simply be of equal value, even if the roles seem different, such as comparing warehouse and clerical jobs. Differences in pay Although differences in pay terms and conditions are permitted, this must have nothing to do with gender identity. For example, someone in a similar role could be paid more if they are better qualified or are employed in a location where recruitment is difficult. One way for employers to avoid equal pay disputes is to be transparent in regard to pay and grading systems. Job descriptions should be up-to-date and accurate. The Advisory, Conciliation and Arbitration Service (Acas) has published guidance for employers on equal pay on its website. For employees, the national insurance cut announced in the Autumn Statement took effect on 6 January.
For many years, successive governments have been happy for the public to vaguely believe that national insurance contributions (NICs) are building up in some national benefit fund, rather than representing just another tax on income. While something called the National Insurance Fund does exist, as a House of Commons Library briefing noted back in 2019, “The Fund operates on a ‘pay as you go’ basis; broadly speaking, this year’s contributions pay for this year’s benefits.” For politicians, the perceived difference between NICs and income tax made it possible to grab the headlines by reducing the basic rate of tax while receiving much less attention for maintaining or even increasing revenue by raising NICs. Last November, the Chancellor appeared to have finally given up on the distinction-without-a-difference approach by proclaiming that his cuts to NICs for employees and the self-employed were tax cuts. The changes If you are an employee (but not a director, to whom special rules apply), the cut means your main NIC rate (on annual earnings between £12,570 and £50,270) fell from 12% to 10% from 6 January 2024. The extra amount in your pay packet is broadly the same as if a 2p cut had been made to basic rate tax (which covers the same £37,700 band of income). However, from the Chancellor’s viewpoint, the NICs cut was cheaper, as there was no ‘tax cut’ on pension or investment income, both of which are NIC-free. The employer’s NIC rate did not change, remaining at 13.8% on all earnings above £9,100. If your earnings are below £50,270, the theoretical advantage of using salary sacrifice to pay pension contributions has been marginally reduced but remains attractive, as shown in the table below, based on a £1,000 sacrifice. If you are among the growing band of higher or additional rate taxpayers, the financial advantage of salary sacrifice is unaltered. Either way, if you are not using salary sacrifice to pay pension contributions, it is still worth taking advice about the option. It is beneficial in most circumstances, but there are drawbacks to be aware of. The media storm surrounding HMRC taxing eBay and other online sellers from the start of 2024 was, in fact, itself counterfeit goods.
A crop of stories across social and traditional media swirled across the start of the new year about HMRC cracking down on ‘side hustle’ tax from 1 January, leaving sellers using sites like eBay and Vinted feeling uncertain. Coming after an early December announcement that HMRC had effectively closed its main self-assessment helpline until 1 February 2024, the story only fuelled the outrage directed at the Revenue. Except that it was not fresh news or, even, news at all. There was no new ‘side hustle’ tax. HMRC was starting the first year in which digital platforms, such as eBay, would be required to automatically report details of sellers who in a calendar year:
Contrary to fears raised online in the New Year, neither HMRC nor the OECD have any interest in the sale of personal items no longer required, whether clothing or mobile phones. The new reporting requirements are for people who are trading – buying and selling goods with the aim of making a profit, something that has always been taxable. It is worth bearing in mind that there is also a little-known trading allowance, which exempts from tax £1,000 of trading income (before expenses) in a tax year. A similar £1,000 allowance applies to property income (also before expenses), which matters here because Airbnb falls within the scope of the reporting regime. There are a couple of lessons to learn from this saga of the ‘side hustle’ tax. The first is that tax is rarely simple and media information – especially social media – can be misinformation. The second is that HMRC’s ability to gain insight into your sources of income is ever-expanding. You have been warned… The government has published information on who may be affected by the advent of reporting rules for digital platforms, With tax bands and other thresholds frozen, taxpayers should be aware of the implications of their income increasing. Increased income can mean more than facing a higher tax bill.
Higher rate taxpayers need to look at which allowances, reliefs or benefits are no longer claimable and those which are now worth claiming. Lost reliefs
Pension contributions are more attractive once relief is at a higher rate than just the 20% basic rate. Contributions make even more sense if entitlement to marriage allowance, child benefit or childcare is preserved. Given that the personal allowance starts to be tapered away at the same point that tax-free childcare is lost, the overall cost of pension contributions where income just exceeds £100,000 can be negligible. Tax trap Aside from the increased rate of tax when income crosses a threshold, the savings allowance is cut in half to £500 for higher rate taxpayers. This is lost altogether once income reaches £125,140. Tax on savings can therefore increase despite the amount of savings income not changing. Investing in Individual Savings Accounts (ISAs) can mitigate the problem, as can pension contributions particularly if income is above the £50,270 threshold. There are different childcare schemes in Scotland, Wales and Northern Ireland, and Scottish tax rates and thresholds differ. For information on tax relief for private pension contributions visit the government website. |
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