On 23 September, Kwasi Kwarteng implemented significant changes for Stamp Duty Land Tax (SDLT) thresholds, all of which have been retained by the new Chancellor, Jeremy Hunt.

Thresholds for first-time buyers have increased from £300,000 to £425,000 on property worth up to £625,000. While for everyone else, the threshold has doubled from £125,000 to £250,000.

What this means for you depends on whether you are a first-time buyer, a home-mover, or a second-home buyer or investor.

First-time buyers

The changes mean first-time buyers will only pay SDLT on homes purchased for more than £625,000. Previously, the cap stood at £500,000.

At the same time, the threshold for first-time buyers to pay SDLT has increased from £300,000 to £425,000.

According to HM Treasury, a first-time buyer purchasing a home for £400,000 will now pay £5,000 in SDLT, rather than the £10,000 they would have been liable for under the previous regime.

Meanwhile, a first-time buyer purchasing a property for £600,000 will now pay £8,750 in SDLT rather than the previous £17,500.

Crucially, where homes are jointly purchased, both parties must be first-time buyers to qualify for relief.

Home movers

Home movers do not benefit from the same levels of relief as first-time buyers but will see savings of up to £2,500.

A home mover buying a property valued at £200,000 will now pay no SDLT but would previously have paid £1,500.

Buying a property at £400,000 would see the SDLT charge fall from £10,000 to £7,500 – a saving of £2,500.

Buyers of properties worth £600,000 will benefit from the same saving, with the SDLT charge falling from £20,000 to £17,500.

Second-home buyers, landlords, and investors

Although landlords and investors benefit similarly to home movers, they will continue to pay an additional 3% on the total property purchase price if they own another home.

There is an additional 2% surcharge if the individual is considered an overseas investor.

Although rising interest rates have added additional costs to mortgages, the changes to SDLT still offer an opportunity for many individuals to acquire new properties at a lower cost.

Do you require professional advice after the former Chancellor’s cut to Stamp Duty Land Tax? Contact Pauline Hudd today.

Link: Stamp Duty Land Tax

On 23 September, the markets experienced considerable volatility due to the ‘Growth Plan’ delivered by the former Chancellor, Kwasi Kwarteng.

That made regaining economic confidence an urgent task for the newly appointed Chancellor, Jeremy Hunt, who has delivered a reversal of many of the key tax measures announced in the mini-Budget in a new fiscal statement.

The only measures to survive were changes to Stamp Duty Land Tax (SDLT) thresholds and the cut to National Insurance due on 6 November.

The new announcements at a glance:

Changed

Income Tax

As previously announced, the additional rate of income tax will remain in effect.

The Chancellor also cancelled the one penny-in-a-pound cut to the Basic rate, initially brought forward by Kwarteng from April 2024 to April 2023. It will now remain at 20% indefinitely.

Dividend Tax

The 1.25 percentage point increase taking effect from April 2022 will no longer be reversed from April 2023. The current rates of dividend tax will instead remain in effect.

Corporation Tax

As announced by the Prime Minister on Friday, Corporation Tax will not remain at 19% for all companies and instead be levied at 25% for those with profits of more than £250,000 from April 2023.

Those with profits below £50,000 will continue to pay at 19%, while marginal relief will be available to those with profits between £50,000 and £250,000.

Energy Price Guarantee

Originally announced to last for two years, the Energy Price Guarantee for households will now remain in effect until April 2023. A review of The Energy Bill Relief Scheme for businesses will occur before April 2023.

HM Treasury will review these policies to reduce the cost of the measure and make business support more targeted.

IR35/Off-payroll Working Rules

The planned reversal of the 2017 and 2021 reforms to the IR35/Off-payroll Working Rules in public and private sectors from April 2023 is no longer taking place.

It will remain for employers to determine whether a contractor falls within the scope of the rules and should be taxed similarly to an employee.

Alcohol Duty

The planned freeze in Alcohol Duty rates from 1 February 2023 is now cancelled.

Unchanged:

National Insurance/ Social Care Levy

The cancellation of the increase in National Insurance from 6 November and the Social Care Levy from April 2023 remains in effect.

Stamp Duty Land Tax (SDLT)

The changes to the Stamp Duty Land Tax (SDLT) thresholds taking effect immediately after the mini-Budget remain in place.

Annual Investment Allowance

This tax relief on plant and machinery will be permanently retained at £1 million, as outlined in the mini-Budget.

Tax-advantageous investment schemes

The Seed Enterprise Investment Scheme and the Company Share Options Plan will also continue to support business investment having been expanded upon in the mini-Budget.

The Chancellor’s announcements may have significant tax planning implications. Contact us for advice about your circumstances and growth plans.

The Prime Minister has announced that the Corporation Tax increase declared by the previous administration and then cancelled by the former Chancellor Kwasi Kwarteng will take place in April 2023.

What does the announcement mean?

Companies with profits of £250,000 or more

For companies with profits of £250,000 or more, the upper profits limit, the rate of Corporation Tax will rise from 19% to 25%.  

Companies with profits of £50,000 or less

For companies with profits of £50,000 or less, the ‘lower profits limit’, Corporation Tax will continue to be charged at 19%.

Companies with profits between £50,000 and £250,000

Companies with profits between £50,000 and £250,000 will receive marginal relief so that the rate of Corporation Tax will incrementally rise until it reaches 25%.

Companies with accounting periods of less than 12 months

The upper and lower profits limits will be reduced accordingly for companies with accounting periods of less than 12 months.

Groups and associated companies

Companies within groups or with associated companies will also see reductions in the upper and lower profits limits.

What should I do now?

The announcement by the Prime Minister means that the Corporation Tax rises scheduled for April 2023 will take place as planned.

If you had already planned for the tax rise and have not changed your plans since the mini-Budget in September, you can stick with your existing plans.

If you have not planned for a tax rise, you should consider how you spread investments in your business over the coming years to maximise your tax efficiency.

Tax planning is complicated and comes with a vast array of permutations. Speak with our tax team for professional advice on the Corporation Tax rising in April 2023.

In his mini-Budget, the former Chancellor Kwasi Kwarteng announced plans for Tax-Free Investment Zones across England.

The Government says these new economic zones will drive growth by lowering taxes and freeing up planning to encourage development and business investment.

What are the benefits of Tax-Free Investment Zones?

These zones will offer several advantages to the businesses that choose to operate in them, including:

• Companies within the zones will receive 100 per cent relief on business rates for newly occupied premises. The same will apply to existing businesses if they expand within the zone.
• Full Stamp Duty Land Tax (SDLT) relief will apply for land and property bought for commercial use or development, or new residential developments.
• Employer National Insurance contributions will be rated at zero for new employees earning up to £50,270 per year.
• There will be a 100 per cent first-year enhanced capital allowance relief for plant and machinery to incentivise investment.

Partnership with local authorities

The scheme will involve agreeing with 38 Upper Tier Local Authorities and Mayoral Combined Authorities in England to develop dozens of Investment Zones and, be delivered in partnership with devolved administrations and local partners in Scotland, Wales and Northern Ireland.

The Government says it will set out further detail on Investment Zones in due course. However, a full list of local authorities working with the Government can be found here.

Link: Tax-Free Investment Zones

Research & Development (R&D) tax reliefs have supported thousands of businesses to invest in innovation by cutting the tax they pay.

However, from 1 April 2023, there will be several changes to the rules surrounding R&D, which could affect how much relief you can claim.

Expand eligible expenditure to data sets, cloud computing and pure mathematics

Businesses can include the costs of purchasing data for R&D projects or using cloud computing services.

Businesses that pay licence fees to rent cloud computer storage space or pay for data costs to pursue R&D can build this expenditure into their claims.

These areas will now come under the R&D qualifying expenditure umbrella, and R&D for tax purposes will also include pure mathematics.

Many businesses will benefit from this change, particularly in the technology and media fields, which could help to mitigate losses from the restrictions on overseas R&D costs.

Restrictions on overseas claims

R&D reliefs will focus on the UK from 1 April 2023. Therefore, subcontracted R&D work and costs for externally provided workers (EPWs) are limited to work undertaken in the UK.

The Government has indicated that it does not want to introduce a rule that discriminates against businesses that cannot practically carry out research in the UK.

A list of exemptions is tied to environmental, geographical, legal or regulatory reasons that would prevent R&D from taking place in the UK.

There may also be an exemption for specific specialist skills, such as consulting world-leading experts in a particular field.

At present, the draft legislation does not change the ability to claim for expenditure incurred by an overseas branch of a UK company.

Cracking down on abuse

HMRC has voiced concern over particular R&D claims and has allocated an additional 100 inspectors to deliver greater scrutiny.

It has also introduced tougher rules, which include:

• Claims must be made digitally
• Categories of qualifying expenditure incurred must get disclosed, and brief details of the R&D activities provided
• A senior company officer must endorse the claims
• Claims must include details of any agent who advises the company
• Companies must inform HMRC in advance of their intention to make a claim within six months of the end of the accounting period to which the claim relates.

On this final point, the ICAEW has raised concerns that, in some circumstances, it might prevent businesses from making valid claims.

This is because it shortens the timeframe companies need to determine whether they have a valid claim.

However, in an exception to this rule, if a company has made an R&D claim in one of the preceding three periods, it will not need to pre-notify.

We can advise businesses whether their business has any areas that could qualify for R&D tax relief. Contact us to arrange a consultation with our tax team to find out more. 

Link: Research and Development Tax Relief reform

From 11 October, the interest rates on late tax payments rise again in line with the Bank of England’s (BoE) latest base rate increase.

The BoE increased the base rate by 0.5% to 2.25% in September due to inflation.

Due to this, the late payment and repayment interest rates applied to tax debts will rise to:

• Late payment interest rate 4.75%
• Repayment interest rate 1.25%

HMRC-set interest rates are linked directly in legislation to the base rate: so the latest rise has been automatically triggered by these changes.

The late payment rate last increased to 4.25 per cent on 23 August – the highest rate since January 2009.

This interest is due on late tax bills for:

• Income Tax
• National Insurance Contributions
• Capital Gains Tax
• Stamp Duty Land Tax

The file and pay rate for Corporation Tax increases to 4.75% effective 11 October.

Meanwhile, the interest charged on underpaid quarterly instalment payments increases to 3.25%, whilst the interest paid on overpaid quarterly instalment payments and early payments of Corporation Tax not due by instalments rose to 2% from 3 October 2022.

You should be aware that any further increases in the BoE base rate could further drive-up these rates and increase the cost of tax debts.

Get in touch if you need help managing your finances.

Link: HMRC interest rates for late and early payments

The Pound Sterling’s fall to close to parity with the dollar means that the cost of investing in UK businesses is lower than ever. In particular, for organisations and individuals based in the United States or otherwise primarily trading in dollars.

Simply put, their dollars are now worth more pounds, meaning they get more bang for their (literal) buck!

For UK businesses and their owners seeking investors or buyers, this is potentially good news because it means they may have the opportunity to seek a higher price than they would previously have been able to command. If you are setting up a business in the UK, you can download our free introductory guide here.

It could also open the door for new groups of prospective buyers who might not previously have considered international investments or purchases.

Marketing your business for sale or seeking investment is not straightforward and needs to be approached strategically.

That means you must be clear in advance on what you want to achieve, what you feasibly can achieve, and the steps you can take to obtain the best deal.

The precise timing of marketing your business and securing a deal for sale or investment is a tactical consideration that needs to fit within this broader framework.

It is neither feasible nor desirable to seek an immediate sale to, or investment from, dollar-based businesses or individuals.

However, with the pound currently at historically low levels and few experts expecting any significant upward swing, now is a crucial time to consider the strategic process needed to underpin selling your business.

Contact us today for a free consultation.

The UK has seen a boom in the ownership of Furnished Holiday Lets thanks to the increase in staycations.

As the summer holidays draw to a close many of us may be considering purchasing a holiday let to boost our income, but there are some very specific tax reliefs to consider when doing so.

What is a Furnished Holiday Let?

These types of properties are considered separate from other residential and commercial properties by HM Revenue & Customs (HMRC) and are classified as trading businesses.

To qualify for the tax benefits that come with this, your holiday let must be actively promoted and let commercially, be furnished for normal occupation and be operated with the intent of making a profit.

It must also:

• Be available for commercial holiday letting to guests and holidaymakers for at least 210 days (30 weeks) per year; and
• Not be rented out by the same person for more than 31 days: and
• There shouldn’t be more than 155 days (+22 weeks) of this type of ‘long-term’ occupation per year; and
• It must be rented out as holiday accommodation to the public for at least 105 days (15 weeks) of the 210 days you have made it available.

If you or your family use the property this doesn’t count towards this total.

How are Furnished Holiday Lets taxed?

They are taxed in the same way as any other trading business and offer several tax benefits as a result, including being taxed on profits rather than an individual income, when set up as a limited company.

This can allow owners to enjoy a lower rate of Corporation Tax and mean that income is treated as tax-free earnings for pension purposes.

Capital Gains Tax (CGT) reliefs can also be applied when a property is sold or transferred, including:

• Rollover Relief
• Gift Relief
• Business Asset Disposal Relief

Owners of Furnished Holiday Lets can also benefit from some capital allowances, such as the Annual Investment Allowance, on certain assets used and fixtures inherent in the property, such as heating, lighting, ventilation, data and power installations.

This expenditure can be deducted from the profits of the business for Corporation Tax purposes.

Owners can also benefit from profit sharing and no National Insurance contributions on income from their Furnished Holiday Let.

Links: Furnished Holiday Lettings

The Government could move to crack down on anyone providing accountancy services who is not professionally qualified.

As the law stands there is no requirement for these individuals, who can set up and start advising clients, to have professional qualifications.

High profile campaigns

A survey by the Association of Accounting Technicians (AAT) and conducted by YouGov shows that eight out of 10 MPs agree that anyone employed to deliver tax and accountancy services should be professionally qualified.

It follows HM Revenue & Customs (HMRC) research published last year which revealed that 82 per cent of unregulated and unaffiliated tax agents are not qualified.

The AAT has previously run high-profile campaigns calling on the Government to make it compulsory for anyone offering tax and accountancy services to be a member of a professional body.

Fears of tax evasion and money laundering

It says those without relevant qualifications are jeopardising the delivery of services such as budgeting, tax returns and payroll for their customers or employers.

HMRC says two-thirds of agent-related complaints to them are about the one-third of agents who are unregulated with a consequent cost to the taxpayer.

This is not just because of poor advice but also due to tax evasion, egregious avoidance and money laundering.

There were stunning figures released in a new survey about business start-ups recently.

Data from small business lender iwoca showed that 93 new businesses were created every hour.

Despite economic headwinds, rising inflation and rocketing energy costs, the number jumped by 18 per cent year on year.

Data from Companies House show over 402,000 businesses were also registered between January and June 2022.

However, despite this surge in new businesses and demand for funding, many still struggle to secure the finance they need.

Lenders want security for loans

Commercial lenders want to know their money will be secure when they lend to a new business.

They want to be sure that the borrower can repay, or have their assets liquidated should they default.

Securing financing for a start-up is especially challenging, as it is inherently riskier than financing an existing business.

There are many ways of raising finance, including alternative methods, outside of traditional loans, such as angel investors, peer-to-peer platforms, crowdfunding or credit unions.

How can businesses improve their chances?

Measures that might persuade lenders to provide finance include:

• Having a strong, concise and clear business plan – Show the potential lender you have done your research, know your market and have the expertise and systems in place to execute your plan.
• Improving credit rating – Run your personal and commercial credit score before applying for a loan. If it is low, spend a couple of months working to improve it.
• Finding the right type of loan – Make sure the funding fits your needs, like an instalment loan, short-term loan or simpler line of credit.
• Provide collateral for the loan – Some lenders may ask for a guarantee before lending to you, such as business premises if owned by you, or assets such as plant machinery, which may make a lender willing to offer a secured loan. Some lenders may even ask you to put personal assets forward, such as your home.

Before trying to secure finance from a bank, it’s a smart move to speak to an accountant.

Rejected? Then start again

Find out why your application was rejected. Get as many specifics as possible for the rejection, so an updated plan can be presented.

Ask for recommendations from other potential lenders who might specialise in your field and then re-apply.

However, be careful not to make too many applications, as this could affect your credit score.

The march of the digital age and the effects of the pandemic have led to a Government institution closing its physical doors.

After two years of closure due to the pandemic, Companies House has confirmed that it will permanently close its office in London with all filing being transferred online.

It has also permanently shut the public counters in Cardiff, Belfast and Edinburgh.

Online services will be available 24 hours a day, seven days a week.