Analysis of the projected outcomes of the government’s tax policies show an expected increase to the number of higher rate personal taxpayers, with the corporate tax yield expected to grow substantially.
Income tax
The default policy for income tax has generally been to increase thresholds in line with inflation. This is currently not happening, in particular for the personal allowance and the basic rate band, which are frozen at 2021/22 levels until 2027/28. The latest costing of these two threshold measures will mean:
·     Additional tax receipts of £13.1 billion for 2023/24, with over £20 billion in additional receipts for each of the four following years.
·     Some 2.2 million taxpayers having to pay tax for 2023/24 who would not otherwise have had to do so, with an extra 1.3 million having to pay higher rate tax.

The exception to the frozen rule is the additional rate threshold, which was cut from 2023/24, pushing more taxpayers into that higher bracket. Not surprisingly, income tax now accounts for 28% of the government’s tax take, up 2% from a few years ago.

VAT registration
The VAT registration threshold has stayed at £85,000 since April 2017, so it should come as no surprise that there are now around 300,000 registrations annually, although a disproportionate number of traders are avoiding registration by keeping turnover just below £85,000.

Corporation tax
The government’s yield from corporation tax was just over 8% in 2021/22, but the new main rate of 25% means this is expected to increase to about 10%. In actual figures, this is an increase from £68 billion to £112 billion.
Although there are around 1.5 million SMEs, they only contribute 45% of the total collected corporation tax. The other 55% comes from 18,000 large companies.

By 2027/28, the tax burden is forecast to reach a post-war high of 37.7% of GDP, with the highest ratio of corporation tax receipts to GDP since this tax was introduced nearly 60 years ago. Keeping on top of tax planning and how businesses and individuals can minimise their tax burden is more important than ever.
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The Office for Budget Responsibility’s detailed economic and fiscal outlook can be found here.

If you are self-employed, the new tax year may be longer than you think.
If you are self-employed, until 2023/24, you have normally been taxed on the profits made in the accounting year that ends in the tax year. For example, if your accounting year ran to 30 April, then in the last tax year, 2022/23, you are taxed on the profits for your accounting year ending on 30 April 2022 – a few weeks after the start of the tax year.

Some while ago, the government decided that it would speed matters up by forcing all the self-employed (including partners in partnerships) to pay tax on the profits earned in the tax year. As is obvious from the example above, moving from the accounting year system to a tax year one implies a catch-up exercise that theoretically results in more than 12 months’ profits being taxed in a single tax year.

Unless your accounting year ends on 31 March or 5 April, that is what will start happening in this tax year. Taking the 30 April year end again, in 2023/24 the default position will be that your taxable profits are:
·     The “normal” calculation of profits for the accounting year ending 30 April 2023, plus
·     One fifth of a catch-up element equal to:

• Your profits from 1 May 2023 to 5 April 2024 (341/366ths of the profits in your account year ending 30 April 2024), less
• Any overlap relief because of double taxation that occurred earlier (typically when you started trading).

In the following four tax years (during which the personal allowance and higher rate threshold are frozen), your taxable profits will be those earned across the 12 months of the tax year (with pro-rated calculations, if necessary), plus that one fifth catch-up element. As an alternative, you can opt for any amount more than a fifth up to the full catch-up element to be taxed in 2023/24 with corresponding adjustments for later years.
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If your head is hurting, you are not alone. At least you have the remainder of the tax year to consider the implications and prepare for what is likely to be a larger tax bill (as more income is being taxed) come January 2025. Make sure you take advice about the planning opportunities that arise – 2023/24 could be the right time to make a large pension contribution.   

A recent investigation into Child Trust Funds (CTFs) by the National Audit Office (NAO) has revealed that, disturbingly, nearly £400 million in matured CTFs remain unclaimed.
CTFs were opened for some 6.3 million children born between 1 September 2002 and
2 January 2011 into which the government paid £2 billion.

Unclaimed funds
The first CTFs began maturing from 1 September 2020 onwards as children reached 18. By
5 April 2021, some 175,000 18-year-olds had either withdrawn or reinvested the funds from their matured CFTs, but 145,000 (45%) matured CTFs went unclaimed. A more up-to-date estimate shows the situation improving, but 27% of CTFs maturing at least one year earlier are still unclaimed.
There are various reasons for this:
·     28% of CTFs – 1.7 million accounts – were set up by HMRC when parents did not do so. Without parental involvement, it is no surprise that account holders may be unaware of a CTF’s existence.
·     The number of CTF providers has shrunk to 55, compared to 74 in 2011. Some have merged, with others exiting the CTF market. This means many CTFs will now have a different provider to when the account was set up.
·     Although HMRC has begun publicising the fact that a child might have a CTF, such as writing to 15-year-olds with their National Insurance number, the NAO is generally unimpressed with HMRC’s performance. Much of HMRC’s statistical data is incomplete, with several active CTF providers not providing annual return data.

Tracing lost accounts
As a result of government contributions, every CTF has between £100 and £500 invested, even if no family contributions have been made. So, it is worthwhile tracking down lost accounts.
·     If the provider is known, then they should be contacted directly.
·     If the provider is not known, HMRC provides a tracing service for parents and guardians, or for those aged at least 16 and looking after their own CTF. There is an online form that can be used, although details can also be requested by post.

HMRC will usually respond with details of the CTF provider within three weeks.
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The starting point for HMRC’s CTF tracing service can be found here.

The second ever Tax Administration and Maintenance Day (Tax Day) took place on 27 April, with the government publishing a range of technical proposals and consultations.
The Tax Day announcements were grouped around simplification and modernisation of the tax system, tackling the tax gap and general policy and administrative issues. A total of 23 technical tax updates were published, although only a few of them will be directly relevant to the average taxpayer.
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Definite changes
National insurance credits: Some parents will not have received credits if they have not been claiming child benefit, mainly because of the impact of the High Income Child Benefit Charge. This affects future entitlement to the state pension, so the government is going to correct the problem on a retrospective basis.
Repayment agents: Some businesses specialising in making repayment claims from HMRC have been criticised due to the speculative nature of claims being made. From 2 August 2023, repayment agents must be registered with HMRC.
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Consultations
A range of consultations were also announced on Tax Day, including:
·     How the Help to Save scheme might be simplified. The scheme, which offers a 50% government bonus for low-income savers, is set to run in its current form until April 2025. The government wants to encourage take-up in the target group.
·     Non-compliance with the off-payroll working rules can result in tax and national insurance contributions being paid twice on the same income – by the deemed employer and also by the personal service company. The government is looking at a potential change so that the tax paid by the personal service company can be set off against the duplicate liability payable by the deemed employer.
·     Umbrella companies are coming under further scrutiny, with initial replies to a 2021 consultation to be published shortly, alongside calls for options for additional regulation to tackle non-compliance.
·     Even though the Construction Industry Scheme has been reformed several times since its inception, some further changes are being considered. In particular, VAT could be added to the list of taxes to be taken into account when deciding whether a company qualifies for gross payment status.

A summary of the Tax Day announcements, along with links to the related consultations, can be found here.