WELCOME TO HARBOUR KEY'S APRIL 2025 E-NEWSLETTER
HAPPY NEW TAX YEAR!
6 April marks the start of the 2025/2026 tax year (1 April for companies), and is the day on which tax rates, allowances and thresholds change. As the changes taking place have been announced over series of Budgets, including some by the previous Government, we have summarised the key changes, which can be found HERE.
As a gentle reminder, don’t forget to check your coding notice, which have now been issued by HMRC and should be checked to make sure the correct tax is being deducted at source on your employment income and/or pension.
The pace of work did not change going into the tax year-end. The team completing pre-year planning meetings, and chats with clients, in addition to completing eight transactions to meet the tax year-end deadline, before the business asset disposal relief rate increased from 10% to 14%. (The Chancellor has already announced the 14% rate will increase to 18% from 5 April 2026).
One of the interesting points that has arisen from a number of these transactions, is the number of clients who have referred to the level of work undertaken dealing with the buyer’s due diligence (where the buyers take a look at every aspect of the business, including the soap brand used in the bathroom). As we advised in March’s newsletter, no one expected the level of due diligence undertaken by buyers and the work it involved, some running up to the night before completion. We even had a case, where two days before completion, one of our client sellers, had a customer who threatened legal action, delaying the completion by four days, adding to the stress of the process.
SPRING STATEMENT
The Chancellor made her Spring Statement at the end of March. As anticipated, there were limited tax changes announced, and there was no rolling back on the potentially significant changes to inheritance tax and Employers National Insurance, which were announced in the Autumn Budget. A summary of the tax announcements can be found HERE!
One change that was announced in the Spring Statement, is the increase in late payment penalties for VAT and Income Tax (as they join MTD from April 2025 onwards), to encourage taxpayers to pay on time. The new rates will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more. No longer is it cheaper to borrow from HMRC, by not paying your tax. We have warned our persistent late payers of the change!
SMALL BUSINESSES TO PASS ON INCREASED TAX COST
Research shows that 71% of small medium enterprises plan to pass rising employment costs (increase in national minimum wage and employers national insurance, which in turn means increase in workplace pension contribution) onto customers. Seven in ten businesses plan to reduce or freeze hiring in the next six months. Despite concerns over rising costs, 85% of SMEs are optimistic about their revenue growth over the next six months.
We have had several enquiries from clients looking at ways to mitigate the employment tax increases, and these are limited. We have previously flagged salary sacrifice read our full blog. A review of the payroll should also be undertaken, as certain apprentice wages are exempt Employers NIC.
However, we are also seeing several aggressive mitigation/avoidance schemes being marketed, and we would flag that the majority of these are disguised employment arrangements, which HMRC has a number of anti-avoidance measures in place to challenge and prevent. A number of these are highlighted at their spotlights section of their website.
WHISTLE BLOWERS
Whistleblower (someone who calls HMRC, advising they know someone who is avoiding tax) payouts have almost doubled over the last tax year to £978,256, as HMRC comes under increased pressure to close the tax gap.
This is the highest amount paid out to over 151,000 people who tipped HMRC off about tax fraudsters, but in terms of the number of anonymous tips, there were almost 6,000 less than in the 2023/24 tax year. This was the largest amount paid out for at least seven years, with only £290,250 paid out in 2018/19 to 140,020 whistleblowers.
Many whistleblowers are employees of the business they are making reports about, and they could be making a report, just to air a grievance, but resulting in a full blown tax enquiry for the employer. There is little that can be done to protect the business against such an activity, but with the growth in social media, it is easy for an employee to make a quick buck!
BOOSTING SMALL BUSINESSES IN DEFENCE
Boosting small businesses in defence - The Ministry of Defence (MoD) is launching a new hub aimed at enhancing access for small and medium-sized enterprises (SMEs) to defence contracts. This initiative follows the Prime Minister's commitment to increase defence spending to 2.5% of the UK's economic output by 2027. The MoD anticipates that around 12,000 SMEs could benefit from these plans, which aim to ensure that increased defence spending translates into economic growth across the UK. More details can be found HERE.
DATES FOR YOUR DIARY
- 30 April 2025 - ATED Return, required to be completed where your company owns a dwelling in the UK that is valued at more than £500,000 have to be submitted online to HMRC between 1 April and 30 April 2020. There are several reliefs available to mitigate the tax, such as renting the property or development for onward sale, however there is still a requirement to file a nil return and failure to do so results in penalties, even though no tax is due.
- Key Tax dates for the period 1 February 2025 to 31 December 2025.
Should you wish to speak with us about a specific matter, or just to be a sounding board or for a chat, please do not hesitate to give us a call on 01452 713277
