The exemption for paying Capital Gains Tax (CGT) is changing.

The CGT annual exemption will fall from £12,300 to £6,000 from April 2023, before being cut in half again to £3,000 from April 2024.

CGT is what you pay on any gains that you make when you come to sell an asset, such as a second home or shares.

However, the annual CGT exemption allows you to make a certain value of gains before you pay tax on any additional gains.

Higher-rate or additional-rate taxpayers pay 28 per cent on gains from residential property and 20 per cent on gains from other chargeable assets.

If you are a basic-rate taxpayer, you will be charged 18 per cent on residential property and 10 per cent on other gains.

Steps that could reduce your CGT liabilities include:

• Ensuring you use your allowance for the current year as soon as possible.
• If you are married or in a civil partnership, you can utilise your partner’s unused allowance. You can transfer your assets into joint names if you are married or in a civil partnership without triggering a tax event. This doubles your £12,300 allowance to £24,600 in one year.
• Utilise tax-efficient investments such as the Enterprise Investment Scheme and Venture Capital Trusts.
• Using Business Asset Disposal Relief when selling a business.

Now is a great time for investors to review their portfolios and decide whether they should transfer or dispose of certain assets before these changes take place.

If you want to take advantage of the current CGT tax rate it is best to seek advice from a qualified tax adviser.

Inflation is described as paying £15 for that £10 haircut you used to get for £5 when you had hair.

It is soaring at the moment and leaves business owners facing real problems. 

If they increase their prices, they risk losing customers, but if owners peg prices, they put their profits and potentially their business at risk.

Inflation hits just about everything, from raw materials to higher fuel and energy costs to customer confidence.

The hope is that it will be short-term, but with borrowing costs spiralling as interest rates rise, businesses should look at practical savings and decide:

• Are you paying for services you no longer use regularly?
• What measures can you adopt to cut energy bills?
• Can you achieve discounts with bulk ordering or cut costs by reducing excessive orders?
• Are you making efficient use of your staff?

Maximise technology use

Accounting and financial technology can give instant information on sales, costs and products and allows cloud-based apps to reduce the time needed for vital but time-consuming tasks.

Invoicing systems can tell you what has been paid, and other apps that help you keep track of your cash flow.

Examine your products and workforce

• Can you abandon or suspend certain products which deliver weak margins? At the same time, can a best seller withstand a price increase and boost profitability?
• Are you overstaffing shifts?
• Do you have lengthy processes with unnecessary steps?
• Do you need those temporary workers?

Stay competitive and prioritise customers

Check out the local and national competition to see what they charge for similar products and services.
This can often depend on different areas of the country and levels of relative prosperity. Can less well-off consumers withstand price increases?

Utilise your accountant

Accountants offer a wide range of services, including strategic advice and money-saving and revenue-boosting ideas, including:

• Advising on business strategy
• Addressing your cash flow
• Debt management and credit control

If your business needs help during these difficult times, having a trusted advisor in your arsenal can guide you through the challenges. Arrange a free consultation to discuss your circumstances with us today.

Link: Effect of inflation on business

The festive season of goodwill is upon us as Christmas fast approaches.

It is a time of year when employers look to reward their staff for their efforts over the past 12 months.

But they should be aware that particular tax, National Insurance and reporting obligations apply.

We want to ensure that you enjoy the festive season just as much as your team, so we’ve put together our top tips to ensure that you stay on the right side of the taxman this Christmas.

What about staff parties?

According to HMRC, the total cost must not exceed £150 per employee, covering each staff member and additional guests.  

The total must include VAT and other costs, such as transport and accommodation.

All staff must also get an invite. If you spend more than £150 per person, the entire amount is a ‘benefit’ and must get declared on the P11D, and tax will be due.

Getting gifts right

Trivial benefits are items of value given to an employee that does not count towards taxable income or National Insurance Contributions (NICs).

The gift must meet ALL of the following conditions to qualify

• The gift is not part of the employee’s contract
• It is below the value of £50
• It isn’t a performance-linked reward
• It isn’t cash or a cash voucher

Trivial benefits might include a Christmas lunch, a small present, or a wedding day gift. 

If the gift does not meet the criteria, it must get reported to HM Revenue & Customs (HMRC) as a benefit in kind and taxes paid.

What about incidental expenses?

Described by HMRC as expenses “incurred by an employee while travelling overnight on business”, incidental expenses can include purchasing newspapers, dry cleaning bills or hotel telephone use.

These incidental expenses must not exceed £5 per night for UK travel and £10 per night if overseas.

Unsure of what expenses you can claim? Let us help you give workplace gifts tax-free by getting in touch.

Link: Tax on trivial benefits

The status of IR35 or off-payroll working has recently caused more confusion once the repeals to reforms announcement by Kwasi Kwarteng were scrapped by new Chancellor Jeremy Hunt.

Tax legislation designed to stop a form of tax avoidance known as disguised remuneration; IR35 is a set of rules applicable to individuals who avoid paying Income Tax and National Insurance Contributions (NICs) by providing services through an intermediary, such as a Personal Service Company (PSC).

Engagers now responsible

Recent IR35 reforms in the private sector exist to ensure that any individual delivers their services via a PSC. If the individual would be classed as an employee if they worked directly with the end client, IR35 rules ensure that the worker pays income tax and NICs as any “regular” employee would.

Under this legislation, all medium and large-sized private sector end clients are responsible for deciding an individual working through a PSC’s employment status.
Previous rules allowed freelancers to determine their employment status themselves.
The official guidelines for businesses affected by these rules are as follows:

• • Give your determination and reasoning to the worker and the person or organisation you contract with
  • Make sure you keep detailed records of your employment status determinations, including the reason and paid fees
  • Have processes to deal with any disagreements that arise from your determination

If the determination results in a contractor being within the IR35 rules, it is your responsibility to deduct and pay tax and National Insurance contributions to HM Revenue & Customs via PAYE.

Where an employer incorrectly identifies a disguised employment scheme, the worker’s tax and National Insurance Contributions become their responsibility.

What businesses does IR35 apply to?

According to the Companies Act 2006, a business is defined as ‘medium’ or ‘large’ if it meets two of the following criteria:

• The company has a turnover of £10.2 million or more
• The company has a balance sheet total of £5.1 million or more
• The company has 50 employees or more.

If you need any advice surrounding IR35 compliance or determining employment status, speak with one of our employment tax experts today.

Link: Understanding off-payroll working

Card payments rocketed during the pandemic with no sight of slowing down.

According to figures from the British Retail Consortium (BRC), card payments account for four of every five payments made.

But as consumers switch, the soaring cost of accepting card payments is hitting retailers and adding to business costs.  

According to the Institute of Chartered Accountants in England and Wales (ICAEW), in October last year, Visa and Mastercard raised their cross-border interchange fees on purchases made by UK consumers to European businesses from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit card transactions.

Move to improve services

Meanwhile, transaction fees on digital wallets are also rising. In November 2021, PayPal increased fees for payments between businesses in the UK and Europe from 0.5% to 1.29%.

Following the Payments System Regulator (PSR) review, the Government watchdog announced new rules in October for helping businesses switch to more cost-effective services.

From January 2023, card-acquiring service providers must remind businesses at the end of their contract term that they should compare prices to get a better deal.

In addition:

• Providers must provide information to businesses about their charges and give an initial online quotation tool for main fees to help business owners make a choice
• Following concerns that businesses are locked into lengthy contracts for card readers, the regulator is limiting point-of-sale (POS) terminal contracts to 18 months

Link: Mitigating card payment costs

If you are an owner of a limited company, taking dividends from your business is a mainstay of effective tax planning. When taking money in the form of a salary, you can make the most of an additional £2,000 annual allowance and lower rates.

However, there are restrictions on the circumstances in which a limited company can pay dividends. Crucially, the company must have sufficient profits from the current and previous financial years to cover the dividend payment.

The company will also need to pay a dividend to all eligible shareholders, so you must factor this into any calculations.

Dividends must be declared by the directors and minutes of the meeting must be kept, even if there is only one director.

A dividend voucher will need to be prepared, including the date, the company name, the names of the shareholders receiving the dividend and the amount.

Copies must be given to the shareholders receiving the dividend and retained on the company’s records.

If you have questions about taking dividends from your business and maintaining your obligations as director, contact us.

Link: Running a limited company: Your responsibilities

Do you invest in property? Are you rethinking your property portfolio?

Property investment can provide strong returns. However, you must plan carefully to achieve the best outcomes.

Just buying new properties without a clear strategy would be risky.
Although interest rates and costs incurred by landlords are increasing, the correct approach to property investment can deliver a successful income source.

Mortgages

Many landlords enter the market by purchasing their property using a buy-to-let mortgage.

Previously, but-to-let mortgages provided a competitive way to purchase new houses with minimal deposits.

For many landlords, opting for interest-only buy-to-let mortgages over paying off their mortgages has minimised monthly outgoings to enjoy a greater overall return.

However, with the Bank of England steadily increasing the base rate, many lenders are also increasing their interest rates, driving up the cost of debt.

For those on fixed-rate mortgage deals, their current rate should not change until their current offer ends. However, for those on tracked and variable rates, which increase alongside the base rate, the costs of their mortgages could wipe out any profits.

Lenders are unlikely to offer new fixed deals at lower rates for some time.

So, what can you do to cut mortgage costs?

One option to consider if you already have multiple buy-to-let mortgages is consolidation.
Consolidating multiple debts into a single property loan could help you reduce the amount paid overall.
If you have a wide variety of rates on each previous loan, consolidating your debts could help to reduce the overall cost of your lending.

Are you considering further growth and have multiple mortgages? You might want to look at a buy-to-let portfolio mortgage.

Many lenders offer this product, allowing you to combine your borrowing under a single web of loans and use the equity within the portfolio to cover deposits for new homes.

Incorporation of a property portfolio

If you currently operate as a sole trader, it might be worth considering incorporating your portfolio into a limited company.

The advantages of incorporating your portfolio

• Limited companies currently pay Corporation Tax at 19%, lower than income tax on profits if you are a higher-rate taxpayer, which is paid at 45%.
• You can still enjoy a 100% tax relief on the mortgage interest your limited company pays. If you hold properties personally, this is restricted to 20%
• It is easier to transfer limited company shares to beneficiaries or others than privately held property.

While incorporation has its benefits, it also comes with the additional Companies House administration. You have to pay Stamp Duty Land Tax when transferring your portfolio into a limited company, which could be costly.

Selling a property portfolio

Given the current situation, some landlords might look to dispose of some or all of their property portfolio.
If this is the case, they need to consider the tax implications of doing so.
When selling the main home, there is usually no Capital Gains Tax (CGT) due, thanks to Principal Private Residence Relief. Although, you may owe tax on any gains made on a second home or investment property.

Higher and additional rate taxpayers pay CGT on property disposals at a rate of 28%. Basic rate taxpayers may pay tax on some of their chargeable gains at a rate of 18%.
Tax is only charged on the gains made on a property, not the total value of the sale, and most taxpayers benefit from an annual CGT tax-free allowance of £12,300 (2022/23).
Any CGT due on UK residential property disposals made by UK residents must be reported and paid within 60 days of completion.

Whether you are looking to grow or sell your portfolio, it is crucial to have a plan in place and seek professional advice to make the most of your assets. Our property tax and stamp taxes advisors are on hand to guide you through setting up or rethinking your property portfolio. Arrange a consultation to discuss your property portfolio today.

On Monday, 23 October 1972, Robert Coe and Ian Wilder first opened the doors to Wilder Coe Chartered Accountants in Grosvenor Place. Having known each other since school, Robert and Ian took different routes into the accounting world, but their paths crossed again at a small city firm in the late sixties, where they decided to go their own way and set up a practice together.

After several office moves and many entertaining stories later, Wilder Coe established its renowned West End home on Old Marylebone Road in 1987 where the firm eagerly flourished for another 30 years, including an expansion into Hertfordshire in 1997 by our outsourced bookkeeping team. Having settled into our present offices in Fenchurch Street, London, and the Business & Technology Centre, Stevenage, in 1998, Wilder Coe continues to go from strength to strength.

This is thanks to our incredible team’s continued support, professionalism, and expertise. We are grateful for everyone’s hard work and dedication over the past five decades. Of our current team members, at least a third have been a part of Wilder Coe for over ten years! We are immensely proud of the close-family atmosphere we have developed, and our team are an asset to our firm.

Jitendra Pattani, Managing Partner, comments that “running a professional practice is essentially a simple art requiring focus on two key matters: developing and nurturing strong client relations centred on loyalty and trust; and building a strong, loyal, and dedicated team to help our clients professionally and efficiently. Providing this allows the Wilder Coe name to prevail for many years, and I’m confident we have a bright future ahead.”

Now that we have reached this spectacular milestone, we must also thank all our clients, connections, and suppliers for your continuous goodwill, support, and guidance. For some of our clients, we have remained a trusted advisor from generation to generation within their families. Over the many years of working together, we appreciate all the opportunities you have given us and the relationships we have formed.

If you would like to share good wishes in celebration of Wilder Coe turning 50, you can contact us here.

Organisations have less than half a year left to use the opportunities available to incorporate businesses under the super-deduction capital allowance.

This Corporation Tax relief operates similarly to previous capital allowance schemes, helping companies to invest in new qualifying plants and machinery, but is perhaps more generous than any other scheme that has come before.

Available since 1 April 2021, the super-deduction and associated first-year allowance (FYA) is an excellent incentive for investment, but companies need to act quickly to take advantage of it.

Using this new measure, companies can claim a super-deduction providing an allowance of 130% on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances.

They can also use the first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances.

There is not an exhaustive list of plant and machinery assets. The kind of assets which may qualify for either the super-deduction or the 50% FYA include, but are not limited to:

• Solar panels
• Computer equipment and servers
• Tractors, lorries, vans
• Ladders, drills, cranes
• Office chairs and desks,
• Electric vehicle charge points
• Refrigeration units
• Compressors

Assets purchased must be new, not second-hand or refurbished equipment, to benefit from the relief.

The relief is only available to limited companies. Unincorporated businesses can continue to benefit from the Annual Investment Allowance (AIA), which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million.

The AIA also remains available alongside the super-deduction for incorporated businesses, so businesses must review how they use these schemes to maximise the tax relief available.

Contact our tax team for more advice on available tax reliefs for your business.

Links: Super-deduction