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.

For existing directors, compliance and IDV will take effect over the 12-month period after 18 November 2025: their ID must therefore be verified by next autumn.

For new directors appointed after the rules come into force, verification must be completed within 14 days. Existing companies will be unable to file confirmation statements unless every director’s ID has been verified, thus commercial imperatives will drive compliance.

Acting as a director without being verified once director duties commence will be a criminal offence. The transitional period provides ample opportunity to comply with the requirements and Companies House has indicated that it will support businesses in compliance and adopt a proportionate approach to enforcement.

Thereafter, failure to complete IDV before the deadline will have consequences. Persistent non-compliance could result in fines, potential disqualification as a director, and/or the company being struck off the register.

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.

Major changes to filing for small companies will come into force shortly with compulsory profit and loss accounts and balance sheet disclosures

Companies House will start streamlining the accounts filing options for small and micro-entity companies with the abolition of abridged accounts from 1 April 2027 and new more demanding reporting requirements. 

Micro-entities will be required to file a copy of their balance sheet and profit and loss account at Companies House.

Small companies will be required to file a copy of balance sheet, directors’ report, auditor’s report (unless exempt) and profit and loss account.

The higher level of disclosure will improve transparency as companies will no longer be able to prepare and file abridged accounts, which must contain a simpler balance sheet, along with any notes. Currently, filing using this method has the benefit of not requiring a simpler profit and loss account or a copy of the director’s report.

There will also be a requirement for more information when claiming an audit exemption. In future, any company claiming an audit exemption will need to give an enhanced statement from their directors on the balance sheet. 

It will also clamp down on abuse of dormant company status.

Directors of dormant companies will need to specify which exemption is being claimed and confirm that the company qualifies for the exemption.

This additional statement is intended to act as a deterrent to criminal activity and to provide additional enforcement evidence.

From April 2027, Companies House will also curtail the number of times a company can change accounting reference periods to once in a five-year period.

‘The new framework is part of the Economic Crime and Corporate Transparency Act 2023, (see earlier article above), and the regulations are set out in section 396 Companies Act 2006.

These enhancements are designed to ensure that the companies register is more reliable and accurate, and should give higher standards of disclosure and reduce fraud and error.

A company is ‘small’ if, in a year, it satisfies any two of the following criteria:

• a turnover of £10.2m or less;
• £5.1m or less on its balance sheet; and
• 50 employees or fewer.

A company is a ‘micro-entity’ if, in a year, it satisfies any two of the following criteria:

• a turnover of £632,000 or less;
• £316,000 or less on its balance sheet; and
• 10 employees or fewer.

Chancellor Rachel Reeves has circled the 26 November 2025 as the day she will reveal the government’s tax plans.

The prolonged wait for the Budget, coming a month later than last year’s fiscal event, underlines how consequential this Budget is shaping up to be, but also that ministers are using as much time as possible to pull together their plans. The delay is also partly due to the Chancellor having to give the Office for Budget Responsibility (OBR) at least 10 weeks’ notice to prepare its economic forecast.

The announcement comes only a day after long-term borrowing costs reached their highest level since 1998, further underlining the pressures on the UK’s public finances. 

The Chancellor finds herself in a tricky situation. After the reversals to the planned welfare reforms and the U-turn on the winter fuel allowance, the government finds itself with a hole in the public finances and the prospect of inevitable tax rises in the autumn. 

Last month, the National Institute for Economic and Social Research calculated that the government was staring into a £41.2bn financial black hole if it wanted to meet its fiscal rules, and that number doesn’t even take into account the £9.9bn headroom the Chancellor had previously built into her plans. The think tank concluded that the only levers available to the government are to raise taxes in a moderate but sustained way.

What tax rises are predicted in the November 2025 Budget?

One early idea bandied around at the start of the summer was a new wealth tax. Ministers did little to quell the rumours, and even former Labour leader Neil Kinnock backed the policy, suggesting a 2% tax on assets over £10m, which he claimed would raise more than £10bn.

Other floated ideas during the summer included a new property tax that would replace stamp duty land tax, a mansion tax, an exit tax and national insurance contributions (NICs) on rental income. 

 The government has few options beyond breaking a manifesto promise and raising one of the three main taxes for working people: national insurance, income tax or VAT. The most likely option is an extension of the freeze on income tax bands. 

The freeze was supposed to run until April 2028. The headline figure in HMRC’s report and annual accounts was £875.9bn in total tax revenues and one of the main drivers for the record increase in tax revenues – representing a £23.2bn increase – was the increase in income tax revenue, which was as a result of the frozen tax bands.

Other key tax changes could include extending national insurance to rental homes, raising the rate of NIC on self-employed income, and  lowering the top rate of income tax to £100,000. There could also be a  lowering of the VAT threshold to below the current £90,000 and reforms to property-related taxes. 

As the Treasury stays tight lipped about potential tax rises in the Budget, officials are busy briefing behind the scenes about a 1p increase in income tax, potentially breaking Labour’s big three tax pledge

Despite pledges in the Labour party manifesto last year not to raise the big three taxes of income tax, national insurance and VAT, reports are now emerging that the chancellor, Rachel Reeves, is looking at a possible 1% rise in the basic rate of income tax, which would see a 21% base rate.

This would be the first change in the 20% standard rate income tax since April 2008 when Gordon Brown, Labour chancellor at the time, cut the rate from 22% to 20% and came in for huge criticism for removing the 10% starting rate band.  

If Reeves were to go ahead with the 1% rise, everyone earning over £12,570 faces a bigger tax bill, with PAYE employees having yet more tax carved out of their pay each month. But this measure would raise at least £8bn a year in extra tax. In the 12 months October 2024 to September 2025 income tax receipts totalled £315bn and are shooting up with fiscal drag, up from £287bn in the same 12-month period the year previous.

It would be effective in the sense it would also hit a much wider audience than the alternative of an increase in employee national insurance contributions (NIC) as landlords, pensioners and the self employed would all be caught in the net.

The other option under review is to increase higher rate tax to 41% and the additional rate to 46% but this would raise only a negligible amount of tax in comparison to any move on the basic rate.

The Treasury will not comment on any Budget plans before the key ‘fiscal announcement’ on 26 November 2025.

The cost of incorporating a business on Companies House is set to double from next year as digital filing fee shoots up from 1 February 2026.

Companies House plans to increase fees for incorporation to £100 from the current £50, and confirmation statements to £50 from £34, affecting both companies and limited liability partnerships (LLPs) filing digitally while the paper fee will also shoot up. The higher fees will come into effect from 1 February 2026, although the fee for a voluntary strike-off filing is being reduced.

The latest fee rises will increase costs for all entities registered, including private limited companies, LLPs, charitable companies and overseas entities. It is part of a broader initiative to clean up the company register and stamp out fraudulent companies.

The new fee list has been published and there are significant increases across many of the categories, including for digital and paper filing costs.

Fees were last hiked in May 2024 when the digital incorporation fee was increased from a negligible £12, but that was the first change in fees for nearly a decade. UK registration fees still remain low by international standards.

These are the key Companies House fee changes:

• incorporation digital filing fee will go up from £50 to £100 
• confirmation statement digital filing fee will go up from £34 to £50 
• voluntary strike off digital filing fee will be reduced from £33 to £13 

The increase in fees will help fund investment in upgrades to technology, as well as investigations and enforcement activity by the Insolvency Service.

For many small business owners and company directors, pensions still feel like something far off, important in theory, but not really part of their day-to-day decisions. Dividends, on the other hand, sound far more appealing: immediate, simple, and tangible. You can spend a dividend. A pension feels like a promise.

However, instead of paying themselves a dividend and watching a chunk go to HMRC, they can pay that same money into their pension and keep it all working for their own future. It’s not about losing access to the money; it’s about choosing who benefits from it first.

With dividends, you share your profits with the taxman. With a pension, you keep the whole lot, just for a later date.

An example of the numbers behind the decision:

For many company directors, the dividend vs. pension question becomes clearer once you crunch the numbers:

£60,000 profit as a dividend

• Corporation tax (19 percent) = £11,400
• Net dividend = £48,600
• Dividend tax (33.75 percent) = approx. £16,400
• Final amount in hand = ~£32,200

£60,000 profit as a pension contribution

• Full amount counts as a business expense
• Saves £11,400 in corporation tax
• Entire £60,000 goes into the pension
• No personal tax or National Insurance
• At retirement: 25 percent tax-free, rest taxed as income (Assuming here a higher rate taxpayer).
• Net amount = ~£42,000 (plus potential investment growth)

Once directors see the figures, pensions stop feeling like a someday plan and start looking like a smart, tax-efficient way to build long-term wealth.