Happy New Tax Year
As we start a new tax year, our thoughts turn to the tax changes that have come in and what proactive tax planning can be started.
If you put money into an ISA each year, no need to wait for the end of the tax year, you can get ahead and top up your ISA giving you one less thing to remember to do later in the year. We have included an update on the new British ISA below.
Key changes we would like to highlight with the new tax year are the changes to the High-income child benefit charge and Basis period reform.
While there were no changes to the tax position on crypto assets, there is currently a consultation taking place and we are seeing more clients with crypto assets. Now is a good time to consider these assets, do you have any, how are they taxed and is there any planning you should be considering?
Our final thoughts for the start of the new tax year are the key deadlines and a reminder that tax returns do not have to wait until January.
Changes to High-Income Child Benefit Charge (HICBC) Threshold
The High-Income Child Benefit Charge (HICBC) has been around for many years with the charge and the thresholds kept at the same level but with changes now in, should you be reviewing your position?
Key Changes:
– Child benefit is now gradually withdrawn at a rate of 1% for every £200 exceeding the £60,000 threshold.
– Full withdrawal occurs once an individual in the household earns over £80,000.
Consider Reapplying for Child Benefit:
Did your household previously opt out of receiving payments? Will the new thresholds change your position?
Previously, if your income was over £60,000, the full amount of the child benefit was withdrawn by the charge. Now the benefit does not start to be withdrawn until £60,000 and is not fully withdrawn until your income is £80,000.
This means, now might be an opportune moment to reconsider claiming child benefits for your household. If you think your income will be below the £80,000, you can go online to restart the child benefit. Remember it is per household and based on the highest earner in the household regardless of who actually receives the child benefit.
Tax Planning Options:
If your household is affected by the charge, don’t rush to opt out just yet. There are various tax planning strategies available to mitigate the impact of the HICBC charge. We’re here to help you explore these options and make informed decisions.
Potential Future Changes:
Following the Budget announcements in March, the government is contemplating a shift towards a system that considers total household income rather than individual earnings. This could further impact your household income and we will keep you updated on any developments in this area.
Crypto Assets
The world of crypto assets, including cryptocurrencies and tokens, is evolving rapidly. While there have been no changes yet, HMRC is currently engaged in a consultation to refine the Crypto-Asset Reporting Framework, aimed at enhancing the taxation and reporting of these assets.
What You Need to Know:
Cryptocurrency and assets are taxable and subject to all the usual forms of tax including income tax, capital gains tax, corporation tax and inheritance tax. The key is making sure you understand which taxes apply to your crypto transactions and when.
Correct reporting of crypto assets is essential to avoid penalties and ensure compliance with tax regulations and just like any other income or assets, proper tax planning can save you money.
Basis Period Reform
Basis period reform, came into effect on April 6, 2023, brings significant changes to how taxable profits are calculated for certain businesses and individuals. You will now start to see the impact this new set of rules has brought with it within your 2024 tax return.
No longer can businesses freely set their accounting year ends, as instead, a standardised tax year from 6 April to 5 April is now in play.
Affected Entities:
Sole traders, partnerships, LLPs, and trusts with business profits subject to income tax are among those affected by the reform. If your business does not have an accounting year end of March 31st or April 5th, these changes are pertinent to you.
Implications for Your Tax Obligations:
Understanding the implications of basis period reform is paramount. It may alter your tax obligations, accounting practices, and cash flow management strategies. For instance, transitional profits and overlap relief considerations could significantly impact your financial planning.
Here are some key considerations and actions to take in light of basis period reform to help you navigate the new rules:
- Understanding the Rules: Take the time to understand the new rules. Collaborate with your tax advisor and accountant to ensure you have a thorough understanding tailored to your business’s specific circumstances, as everyone is different.
- Assessing the Impact: Evaluate how the reform affects your business and personal tax situation. Consider factors such as your accounting year end, transitional profits, and potential changes in tax liabilities.
- Cash Flow Management: HMRC allows individuals to spread transitional profit over a period of up to five years to ease cash flow burdens. Discuss the feasibility and benefits of this option with your tax advisor and what works for one person, might not work for you and your future plans.
- Record Keeping: You need to maintain good records in a timely manner to facilitate prompt accounts preparation for your tax return. Timely and accurate record-keeping is essential to avoid delays and additional professional fees.
Incurring unnecessary additional professional fees may occur if you cannot provide your accounting information in a timely manner, as you will now need accounts that cover two accounting year ends in order to prepare your personal tax return. Additional professional fees may be issued if provisional returns need to be prepared and amended at a later date if accounts are not ready by the tax return filing deadline.
- Tax Planning: Exploring opportunities to minimise your tax liabilities, utilise available reliefs and allowances effectively, and optimise cash flow management strategies may be key going forward. Your tax advisor can provide valuable insights and guidance in this regard.
- Seeking Guidance and Assistance: If you’re uncertain about how basis period reform affects you, don’t hesitate to reach out to your tax advisor.
We’re here to provide expert guidance, discuss the implications on your personal tax position, and assist with cash flow projections.
The British Investment ISA
An exciting update from the 2024 Spring Budget is there is to be an introduction of a brand new ‘British Investment ISA’.
What’s the Buzz?
This shiny new ISA comes with an extra £5,000 annual allowance, on top of the existing £20,000 allowance we all know and love from our current ISA. But here’s the twist, the investment is exclusively earmarked for investing in UK companies.
Why It’s a Big Deal?
On a personal level, maxing out this additional ISA allowance gives a larger amount of your savings growing free from income tax and capital gains.
Keep Dreaming, Keep Saving:
The consultation on how to design and roll out the ISA is ongoing until 6th June 2024, so stay tuned for further updates.
Tax Date Reminders
We know tax dates can sneak up on you, so we’re here to keep you in the loop with some important deadlines to mark in your calendar. Let’s make sure you’re ahead of the game!
31 May 2024 – Send Your Info
Want to trim down your July payment on account?
Now’s the perfect time to pass over your 2023/24 tax return information to your tax advisor.
31 July 2024 – Payment Due
Get ready to settle your second payment on account – it’s due by the end of July. Keep those funds at the ready!
31 August 2024 – Time to Share
Time to share your tax return info with your advisor by this date if you haven’t already. Give them ample time to work their magic and get your tax affairs in order. You never know, a tax refund is maybe waiting for you.
31 October 2024 – Paper Deadline
If you’re still filing on paper, this is your last chance to get your 2023/24 tax return in on time.
1 December 2024 – Priority Alert
No more procrastinating – if your tax return isn’t sorted yet, make it your top priority and get it off your to do list before Christmas!
31 January 2025 – Filing Deadline
Circle this date in red – your 2023/24 tax return must be filed by now, and you might owe some tax too, so you might need to make a tax payment.
Don’t leave it until the last minute!
1 February 2025 – Tax Planning Final Countdown
February and March are prime time for last-minute tax planning. Whether it’s topping up your ISA or making pension contributions, seize the opportunity and we are always here to help!
5 April 2025 – Tax Year End
And just like that, another tax year comes to a close. Take a moment to reflect and consider any last-minute tax planning opportunities before the curtain falls and get thinking about what you want to do in the year ahead.
We’ve got your back every step of the way. If you need assistance or have any questions about your tax affairs, don’t hesitate to reach out. Let’s make this tax year your best one yet!