NEWS and information

At the 2024 Autumn Budget, changes surrounding employers' national insurance were announced.  For most employers this will lead to additional tax due.

- The increase in employers NI is from 13.8% to 15%.

-The reduction of the threshold of when employers NI starts to be paid is now £5,000, down from the previous threshold of £9,100. This creates a minimum tax charge of £615 on all employees.

We have all heard the saying that it's 'Tax Deductible' and that payment will reduce your tax bill. How does that work for your business, say a Limited company?

1) The deduction needs to be related to the trade, or as HMRC puts it. 'Wholly, exclusively, and necessarily for business.  

2) Evey £ spent on expenses will reduce your tax bill by between 19% and 25% depending on business size. For example, £1,000 spent on advertising will save you between £190 and £250 in tax. 

3. Some expenses can be beneficial to this formula such as pension contributions, directors' salary, and electric / hybrid car purchases.

There has been increased scrutiny from Tax Inspectors who are using Artificial Intelligence tools when reviewing submitted tax returns. Therefore, it is particularly important that tax returns are completed correctly.

There is lots of online guidance and help available but better still seek out professional advice to help fill out your return correctly. Please see the content section.

If you have gaps in your National Insurance record from 2006-07 onwards, you may have extra time to fill them and boost your state pension. But you need to act soon - if you request a callback from the DWP before 5 April 2025, you can still take advantage of this extension. After that date, you'll only be able to backfill contributions for up to six years. 

Employers will need to consider wage increases to both the National Living wage and the National Minimum wage.

From 1 April 2025, the National Living Wage will increase to £12.21 for employees aged twenty-one and above.

At the same time, the National Minimum wage rate will increase to:

1. £10 for employees aged 18-20.
2. £7.55 for employees who are under eighteen.
3. £7.55 for apprentices.

It all comes down to your cashflow forecast and whether your sales revenue will flow in as anticipated. If you need guidance on creating a cashflow forecast or recommendations for software to help with regular forecasts, we're here to assist. 

In April 2025, the new State Pension will rise by 4.1% to £230.25 per week, thanks to the triple lock, but what is the triple lock?

It's a pledge which states that the new State Pension, which applies to those who reach pensionable age after 2016, must rise by the highest of the three following factors - average earnings growth between May and July the previous year, the Consumer Prices Index (CPI) rate of inflation from the previous September, or by 2.5%.

This commitment has been in place since 2011 and it protects the new state pension, making sure it pays enough for pensioners to live off when they stop working.

The Labour government has committed to keeping the triple lock in place for the whole of this parliament.

As an employee, an individual’s salary is subject to PAYE – their employer deducts income tax and Class 1 National Insurance contributions (NIC) so taxpayers need not worry about anything. However, once they become self- employed there is no employer, so they need to account for income tax and NIC themselves.

The individual must complete a Form SA1 or register for self-assessment online via the Government Gateway and is given a Unique Tax Reference (UTR) number which is required when a tax return is submitted.

As well as having to account for income tax, they must do the same with NIC. As an employee they were paying Class 1 NIC through PAYE, their employer paying it too. However, as a sole trader Class 4 NIC must be paid through the tax return.

Prior to April 2024, Class 2 NIC, a fixed rate of £3.45 (for 2024–25) was payable per week (also through the tax return); however, after this date, Class 2 is optional for those whose income is below the small profits threshold (£6,725 for 2024–25) in order to fulfil the necessary years for state benefits entitlement.

Companies House has taken the first major step towards mandatory identity verification for directors/people of significant control (PSCs) and anyone filing on behalf of a company with the release of the voluntary identity verification (IDV).

The voluntary period of IDV was rolled out on 8 April 2025 and comes weeks after Companies House launched the registration process for authorised corporate service providers (ACSP). 

The new service is driven by the need for individuals to verify their identity directly with Companies House through the gov.uk One Login or via their ACSP – a third-party representative such as an accountant.

This is the first step in Companies House’s efforts to tackle the misuse of the companies register, culminating in mandatory identity verification from autumn 2025, where more than six million directors will need to comply. 

The introduction of IDV is one of the key changes coming into force under the Economic Crime and Corporate Transparency Act 2023, which has given Companies House enhanced powers to stamp down on economic crime.

High interest rates and frozen personal savings allowance means that more than a million extra savers may have to pay tax.

HMRC has been writing to taxpayers to tell them their savings will incur tax, which is an annual activity and is part of their mission to get people to pay the right amount of tax.

Now that the 2023-24 tax year is closed with self-assessment finalised, HMRC has been reviewing the savings tax liability situation. HMRC receives data from banks and building societies detailing the amount of interest paid to their individual account holders. 

Nearly 300,000 people filed their tax return in the first week of the new tax year, almost 10 months ahead of the 2024-25 deadline.

Anyone who thinks they may need to complete a tax return for the 2024 to 2025 tax year can use the checker tool on gov.uk to find out. New entrants to self- assessment must register to receive their unique taxpayer reference (UTR). This can only be done online or by letter as of 6 May 2025.

 Early filing makes sense, giving peace of mind to focus on the business in hand. Please contact us for further help and advice.

Tougher rules for company directors under ECCTA 2023 will start to bite from autumn 2025 onwards with radical accounts reform also planned.

On accounting reform, however, there is as yet no timetable for the move to require all companies, regardless of size, to file a balance sheet and profit and loss account. This will be a major change for small businesses so it is likely that there will be a reasonable lead time before this in introduced as a mandatory requirement in the Economic Crime and Corporate Transparency Act 2023.

By autumn 2025:

• identity verification will be made a compulsory part of incorporation and new appointments for new directors and personal service companies (PSCs).

• begin the 12-month transition phase to require more than seven million existing directors and PSCs to verify their identity - the identity verification will happen as part of the annual confirmation statement filing.

By spring 2026:

• make identity verification of the presenters a compulsory part of filing any document.

• require third party agents filing on behalf of companies to be registered as an authorised corporate service provider (ACSP) including accountancy and law firms.

• reject documents delivered by disqualified directors as they will be prohibited from doing so, unless they are delivered by an ACSP for specified filings permitted by law.

By the end of 2026:

• require all limited partnerships to submit more information, providing greater transparency for users of the register.

• complete the transition period for all individuals on the register requiring identity verification and start compliance activity against those who have failed to verify their identity.

• facilitate greater cross-checking of information and data between Companies House and other public and private sector bodies.

Those earning extra income alongside their day jobs may need to check if they have earnt over the threshold. That means they will need to file a self-assessment tax return warns HMRC.

Once you earn over £1,000 through a side hustle you will need to register with HMRC so they you can file a self-assessment tax return before the end of January 2026.

A side hustle can come in many forms, from dog walking, selling products via online platforms like Ebay, and property rental.

HMRC predicts that up to 65% of side hustlers are unaware that they should be registered for tax, and if done early anything owed can be spread across a number of months.

The increase in employers’ National Insurance contributions is beginning to show as over the last three months businesses have paid £5bn more than last year.

The overall tax takes increased by £11.76bn between April and June 2025, soaring to £209.6bn in just three months. Almost £5bn of this increase has come directly from employers’ NICs.

Income tax, capital gains tax and NICs have accounted for £120.5bn of the total tax take so far this year, £9.4bn higher than last year. From April this year employers’ NICs rose to 15% from 13.8% while the threshold was also reduced to £5,000 from £9,100 on the same day which is heavily impacting the amount paid by businesses. (See first article above).

HMRC is sending around four million tax refund letters between June and August 2025. You might be due a P800 letter in the post if you’ve overpaid Income Tax.

As well as employees who are paid by PAYE, this could also impact pensioners who have paid too much tax. There are lots of reasons why people end up paying too much tax - the biggest reason is that you could be on the wrong tax code.

The most common code for the current tax year is 1257L for people who have one job or pension. This means you can earn £12,570 in one tax year before being taxed, as this is the current personal allowance.

But this tax code doesn't apply to everyone. For example, if you have a second job, this will have a BR, D0 or D1 tax code, or if you have no personal allowance, you may have an 0T tax code.

You can find your tax code on your latest payslip, on your P45 if you have recently quit your job, or on GOV.UK if you have a Government Gateway ID. This is a 12-digit number that is free to sign up for, and it allows you to access UK government services online.

If you're due a refund, HMRC will either send you a text, or you'll be asked to claim it online. The correct link is always an official GOV.UK page.

You'll need the reference number on your P800 letter and your National Insurance number. If your tax code has been wrong for a while, you can claim back up to four additional years.

HMRC may pay back further than four tax years under certain circumstances - for example, if it was their fault that you overpaid tax. If it turns out you've not paid enough tax due to an incorrect tax code, then you will have to pay this back.

Don't let this put you off - it is better to sort this out sooner rather than later to avoid being hit with a bigger bill. You can try and get the tax written off if it was not your fault that you underpaid - but this is not a guarantee.