Spring Budget 2024

With the cut in national insurance rates from April 2024, consider whether it is advantageous delaying paying a bonus until after 5^th April 2024. However, if you are a Scottish resident taxpayer, despite the national insurance cut, you may want consider, if going down the bonus route, paying it prior to 6^th April 2024 as the Scottish income tax rates and rate bands as regards earned income are changing from that date.

If you have more than one employment you may pay too much employees’ national insurance. HM Revenue & Customs can request the second employer to operate a lower rate to ensure the correct amount is paid. Refunds may be possible if national insurance has been overpaid in earlier years.

If you are a sole trader or property landlord and your turnover (pre expenses) exceeds £50,000 during the 2024/25 tax year you may need to be Making Tax Digital for Income Tax (MTD) compliant from April 2026 which will require quarterly reporting. If you are both a sole trader and a property landlord then you aggregate the two turnovers together when applying the £50,000 threshold. Are you ready for this? If not we can help.

Options to consider to avoid having to be MTD compliant might be creating a partnership or incorporating the business.

If you are self-employed and your taxable profits are below £6,725 for the year, you may want to consider paying voluntary Class 2 NI as opposed to voluntary Class 3 NI as it will be considerably cheaper and will enable you to continue to have access to contributory benefits, including the state pension.  

If you are self-employed and your accounts year does not end between 31^st March – 5^th April. Up to and including 2022/23 tax year you will have been taxed on the profits per the accounts which ended in that particular tax year. From the 2023/ 2024 tax year (the transitional year) onwards you will be taxed on the profits per the tax year itself. Is it worthwhile changing your accounts year to tie in with the tax year?

Is it worth considering incorporating so that you can continue to be taxed on the profits per the accounting period rather than on a tax year basis.

If you do not intend to move your accounting year to coincide with the tax year end, the excess profit that arises under the new rules in the transitional 2023/24 tax year can be spread and taxed over 5 tax years. However it may be worth considering electing to bring forward some or all of those excess profits to be taxed in an earlier tax year. For example your total income in later years may take you into a higher tax bracket or the Government of the day may increase the tax rates.

Are you going to receive shares from your employer as a result of your employment? Subject to the way those shares are provided, you could be liable to an immediate income tax charge (in some cases national insurance as well), based upon the actual market value (AMV) of the shares at the time. You and your employer may want to elect, within 14 days of receiving the shares, to be taxed on the unrestricted market value (UMV) instead. More tax is likely to be paid upfront but it may result in considerable overall tax savings further down the line.

If you are a director/shareholder resident is Scotland, as the tax  rates on Non-Savings and Non Dividend income is noticeably higher than in the rest of the UK you may find it tax efficient to pay out more in dividend than in salary.

With the dividend zero rate threshold falling from £1,000 (2023/24) to £500 (2024/25), is it worthwhile transferring some shares to a spouse/civil partner to maximise it. Do you have control over when a dividend can be paid out? If so have you made use of the £1,000 zero rate threshold for this tax year?

Depending upon what is in the legislation, this could result in a large increase in your overall tax liability. It would make sense, at some point pre April 2025, to carry out a rental property review  to look at legitimate ways to either mitigate the tax bill or increase the net rental yield.

Before you sell an asset, such as shares or property for example, come and speak to us, as there may be planning that can be carried out prior to the sale to mitigate the capital gains tax hit?

Remember, if you are a UK resident taxpayer and sell a UK residential property, which could trigger off a gain liable to capital gains tax (CGT), to avoid penalties from arising, you need to complete a CGT Return within 60 days of completion and pay the tax over within the same time frame.

If the gain is liable to be taxed at the higher CGT rate, bearing in mind the reduction in the CGT rate from April 2024, you may want to consider delaying (if possible) the exchange of contracts  date (not the completion date) until after 5^th April 2024. However this has to be balanced against the impact of the reduction in the CGT annual exemption from £6,000 to £3,000.  Seek advice before making that decision.

If you have a child under the age of 12 and register for child benefit you will automatically receive a parent’s state pension credit for each year. If you have a family member who helps you with childcare support whilst you are at work and has a gap in their own national insurance records, you may be able to elect to transfer your state pension credit to them. You can claim from 2011/12 tax year onwards.

If you have separated from your spouse or partner, with the intention for it to be a permanent separation, or if                                             you divorce, then it is important to revisit the child benefit claim. Failure to do so could result in you being hit for the HICBC  even though the child may not be living with you.

Did you claim child benefit (CB) before May 2000? The Government have recently admitted that CB claimants before May 2000 may have lost out on some of their state pension entitlement. This could affect those already in receipt of state pension, deceased estates and those yet to reach state pension age. Each year of error could cost the individual up to £325 per annum in lost state pension entitlement. You may want to check to see if it affects you or your loved ones.

If you are a single parent or divorced or widowed and a new partner subsequently moves in with you, depending upon their level of income, you may find that they may get hit for high income child benefit charge. You may want to forewarn them about that.