by Acuaccounts | Nov 29, 2023 | accounting, latest news, r&d credits, tax
The Chancellor’s Autumn Financial Statement, released on November 24 November 2023, contained several policies aimed at small companies and the self-employed in the UK. As your trusted small business accountants and financial advisors, we set out below an in-depth analysis of the key measures relevant to your accounting and business.
Increase in National Minimum Wage
Nearly three million workers in the UK will benefit from the upcoming increase in the national living wage that was announced by the Chancellor and is detailed in the table below. Strategic planning is crucial if you employ staff at or slightly above the National Minimum Wage.
A notable change is that 21 to 22-year-olds will no longer have a separate lower minimum wage band; instead, they will be entitled to the full National Minimum Wage rate for those aged 23 and over of £11.44 per hour from the specified date. It’s worth mentioning that the London Living Wage, although not legally binding, stands at £13.15 per hour, reflecting the best available evidence on living standards in the UK, specifically in London.
|
Apprentice |
Under 18 |
18 to 20 |
21 to 22 |
23 and over |
| Apr 2022 – March 2023 |
4.81 £ |
4.81 £ |
6.83 £ |
9.18 £ |
9.50 £ |
| Apr 2023 – March 2024 |
5.28 £ |
5.28 £ |
7.49 £ |
10.18 £ |
10.42 £ |
| Apr 2024 – March 2025 |
6.40 £ |
6.40 £ |
8.60 £ |
11.44 £ |
11.44 £ |
Tax Relief for Reinvesting in Your Business
One of the most welcome announcements was that full expensing of expenditures on equipment, machinery and technology will become a permanent tax break from 2026 rather than a temporary policy. Sole traders and small companies can continue deducting 100% of qualifying capital investments from taxable profits. Even if your business is currently making use of the £1 million Annual Investment Allowance, full expensing from 2026 gives longer-term assurance that reinvesting in productivity gains will lower your tax obligations.
Updates to R&D Tax Credits
The research and development tax credit schemes have been made more generous for smaller companies from April 2024. Most importantly, the minimum threshold of expenditure for the “R&D intensive” relief has been reduced from 40% to 30% of total spending. The enhanced 230% deduction rate will now be achievable for more SMEs investing in pioneering new products, services and processes. Speak to our R&D team to check if your innovation spending qualifies and apply for this valuable relief against tax bills.
Reduced National Insurance Contributions
National Insurance Contributions for employees and the self-employed will be reduced in 2024, which is welcome news for small businesses and sole traders.
- Class 1 Employee NICs: Reduced from 12% to 10% starting January 6, 2024
- Class 4 Self-Employed NICs: Decreased from 9% to 8% effective April 6, 2024
- Class 2 Self-Employed NICs: Reduced to zero and abolished on April 6, 2024
Late Payments Measures
£32.1 billion of unpaid invoices are currently owed to UK businesses, according to research from Simply Business, and 30 per cent of businesses are owed as much as £45,000 at one time. To address this issue, new rules will target larger companies failing to meet timely payment obligations to small business suppliers. Starting in April 2024 companies with a turnover exceeding £5 million will be disqualified from bidding on public sector contracts if they consistently pay invoices after 55 days on average. This limit will progressively tighten to 45 days and then 30 days to align with the Prompt Payment Code standards.
Training Costs Deductibility:
HMRC has agreed to update its guidance on tax deductibility of skills training costs for the self-employed which should give sole traders and independent contractors clearer confirmation of their ability to offset expenses like course fees, software learning packages, or professional seminars.
Continued Support on Business Rates:
Business rates have yet to be reformed. However, in the meantime the business rates small business multiplier in England will be frozen, eliminating the planned CPI inflation increase. Additionally, the 75% discount for retail, leisure, and hospitality SMEs in England has been extended by another year until March 2025.
Easier Access to Cash Basis Accounting:
Starting in April 2024, the £150,000 turnover eligibility threshold for cash-based accounting will be eliminated. Sole traders and partnerships can calculate taxable profits based on cash inflows and outflows instead of invoice dates, providing a smoother income experience and simplifying tax filings. For personalized advice on transitioning to cash-based accounting, contact AcuAccounts.
The Federation of Small Business (FSB) on the Autumn Statement:
Overall, the FSB welcomed the Autumn Statement, which included several policies the FSB had campaigned for on business rates, late payments, and taxes for the self-employed. The FSB praised as a positive step the new public procurement rules to incentivise big companies to pay suppliers promptly.
The Institute of Directors (IoD) on the Autumn Statement:
The IoD welcomed the government’s efforts to boost business investment, including making full expensing of capital expenditures permanent, tax cuts for the self-employed, and establishing investment zones. However, the IoD criticised the lack of action on tackling skills shortages.
Want to find out how the budget will impact your business finances?
Get in touch at info@acuaccounts.com and book a consultation with our team. You can also call us directly on 0203 907 9027.
by Acuaccounts | Dec 21, 2022 | accounting, latest news, r&d credits, self assessment, selfemployed, tax return
The 2022 Autumn Statement by chancellor Jeremy Hunt reversed several policies introduced with the previous mini-budget by his predecessor Kwasi Kwarteng, as well as changing several thresholds that apply to businesses and the self-employed.
The autumn budget freezes the VAT threshold for businesses at £85,000, which with the current price rises will likely make VAT registration mandatory for more small businesses. Similarly, the personal tax allowance freeze at £12,570 was extended from 2026 to 2028, which with rising wages will move more people into higher tax brackets.
Reduced thresholds and allowances in 2023, 2024 and beyond
Two annual tax-free allowances that frequently apply to company owners and directors will be reduced in 2023-24: the dividend allowance and capital gains tax allowance.
The dividend allowance applies to directors paying themselves partially or entirely in dividends. The tax-free amount will be cut from £2,000 to £1,000 in 2023-24, then to £500 in 2024-25. The capital gains tax allowance, that applies for example, for sales of business assets will be cut from £12,300 to £6,000 in 2023-24, then to £3,000 in 2024-25.
Changes to business rates and energy bills for businesses
From 1 April 2023, business rates will be updated to reflect changes in property values since the previous evaluation in 2017. To support changes in business rates, the UK government has disclosed a targeted support package worth £13.6 billion over five years.
Furthermore, the Energy Bill Relief Scheme for businesses will remain in place until 31 March 2023. The government will introduce more targeted support on energy bills for the most vulnerable businesses from April 2023.
Increase in national living wage and reduction in research and development tax relief
The government has announced that the national living wage will increase from 1 April 2023, from the current rate of £9.50 per hour to £10.42 per hour for employees aged 23 and over. The UK minimum hourly wage for employees aged 21 to 22 will increase from £9.18 to £10.18, and the rate for employees aged 18 to 20 will increase from £6.83 to £7.49.
Research and development tax relief supports companies carrying out R&D projects related to their trade or business sector. However, in an effort to reduce fraud, the rate for small businesses will be reduced to 86 per cent, and the credit rate will be reduced to 10 per cent. The rate of the separate research and development expenditure credit will increase from 13 per cent to 20 per cent.
How to file your self-assessment correctly in 2023
With the self-assessment deadline less than a month and a half away, we review who needs to file for self-assessment and how it works.
You need to file for self-assessment in the UK in 2023 if any of the following apply:
- you have earned more than £1,000 from self-employment income
- you have earned from than £2,500 from renting property
- you have earned more than £2,500 in untaxed income like tips or commissions
- you have earned more than £10,000 from savings or investments
- you are a company director
- your taxable income was over £100,000
- you have earned income abroad that you need to pay tax on, or you live abroad but have an income in the UK
- you owe capital gains tax on profits from selling things like shares or a second home
- additional conditions as outlined on the government website
You can find the full list of conditions for self-assessment and check if you need to file a self-assessment tax return at https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return
To file a self-assessment tax return, you will need to gather the following information:
- your National Insurance Number and your ten-digit Unique Taxpayer Reference (UTR)
- detailed information about any untaxed income from the tax year, including your income from self-employment, dividends and interest on shares
- records of any expenses relating to your self-employment
- any contributions to charity or pensions eligible for tax relief
- your P60 or any other records showing any income you received and have already paid tax on
For any questions on how to prepare the information about your untaxed income, what can and cannot be expensed, or to book a full self-assessment service feel free to get in touch with our team at info@acuaccounts.com or on 0203 907 9027.
Keep track of your monthly and yearly tax and payment deadlines in 2023
In the UK, there are several important tax deadlines for businesses throughout the year.
Here are some of the key deadlines for the calendar year 2023:
- Self-Assessment Tax Return deadline: 31 January 2023 for the tax year that started on 6 April 2021 and ended on the 5 April 2022
- VAT Return deadline: Every 7th of the month following the end of the VAT period
- Corporation Tax Return deadline: 9 months and 1 day after the end of the company accounting period
- Payroll deadlines: Real Time Information (RTI) submissions must be made to HMRC on or before the date that payment is made to the employee
Review the monthly and quarterly tax deadlines in 2023:
Monthly Tax Deadlines
- On the 1st of the month: Corporation Tax payment for the tax year ending nine months prior (for example on January 1 2023 the Corporation Tax payment for tax year ending 31 March 2022 will be due)
- Every 7th of the month: VAT return submission and payment (online) if your business payment cycle is month-end
- Every 21st of the month: PAYE, NIC and CIS payment (electronic) for month-end 5 January 2022 and quarter-end 5 January 2022
Quarterly Tax Deadlines
- Due on the 21st of every three months: PAYE, NIC and CIS payment (electronic) if your company pays quarterly
Do you have questions about the recent updates and changes from the Autumn Statement? Any concerns about how to manage your taxes and business in 2023 or do you need help to submit your self assessment tax return?
Have a look at our services and feel free to get in touch with us. You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Sep 21, 2021 | accounting, eis, r&d credits, seis, tax, tax return
Research and Development (R&D) are essential drivers of economic growth. A vibrant economy relies on sustainable global competitiveness and support for businesses investing time and funds into R&D.
R&D tax credits, SEIS, and EIS are three ways the UK government supports business innovation.
What are R&D tax credits and how do they work?
R&D tax credits can today be claimed by a range of companies seeking to research or develop an advance in their field. Even for unsuccessful projects.
Research and Development tax credits are a UK government incentive launched to reward UK companies for funding innovation. The tax credits can be a precious source of funds for businesses to invest in expediting their R&D, hiring new personnel and ultimately scaling up their business.
Businesses in every sector of the economy, which have invested or are investing funds to develop new products, processes or services; or enhancing existing ones, may qualify for R&D tax relief.
An R&D tax credit can be claimed in the form of a payment and/or Corporation Tax reduction. Businesses claiming for the first time can typically claim R&D tax relief on their previous two completed accounting periods.
What kind of projects can claim R&D tax credits?
The work qualifying for R&D relief must be part of a specific project aimed at advancements in science or technology. Progress within social sciences or theoretical fields does not qualify.
The project needs to relate to the company’s business – either to an existing trade, or a trade intended to launch based on the results of the R&D.
To qualify for R&D relief, the project needs to meet the following criteria:
- looked for an advance in science and technology
- tried to or succeeded in overcoming uncertainty
- could not be easily worked out by a professional in the field
Advances in the field must relate to the overall industry and field of work, not just the business.
In addition, the project requires a level of complexity which a professional in the field could not have worked out with ease.
To prove scientific and/or technological uncertainty businesses need to show the uncertainty of experts at the beginning as well as the research, testing and analysis required for development. For example, in a description of the successes and failures during the project.
What types of R&D relief are available in the UK?
Different types of R&D relief are available, depending on company size and whether the project has been subcontracted or not.
SME R&D Relief
Companies can claim SME R&D relief if they operate with:
- less than 500 employees
- a turnover of under 100 million euros or a balance sheet total under 86 million euros
SME R&D relief allows companies to:
- deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, for a total deduction of 230%
- claim a tax credit if the company is loss-making, worth up to 14.5% of the surrenderable loss
Research and Development Expenditure Credit
Large businesses can claim a Research and Development Expenditure Credit (RDEC) for their R&D projects.
SMEs and large companies who have been subcontracted for R&D work by a large organisation can also claim RDEC.
The RDEC is a tax credit at 11% of qualifying R&D expenditure up to 31 December 2017.
It has since been increased to:
- 12% from 1 January 2018 to 31 March 2020
- 13% from 1 April 2020
What else do I need to know about R&D relief?
While the number of companies filing for R&D tax credits is growing rapidly, with over 50,000 R&D claims made by SMEs last year, not all companies realise that they may be eligible to claim that R&D cash back.
R&D relief cannot just be claimed by traditional tech companies or laboratories. The company needs to demonstrate that some of that work in developing a product or project, was done with the aim of making an advance in science or technology.
The main eligible costs for R&D relief are employee costs, subcontractor costs, software, consumable items, prototyping and clinical trials volunteers.
In addition costs of subcontractors can be claimed, even if they are not in the UK.
Many companies are unaware that the project does not have to achieve commercial success to be eligible for the R&D credit. The aim of the tax incentive is after all to de-risk innovation.
What is SEIS, and EIS?
The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are two UK government initiatives granting private investors a significant tax break when investing in early-stage, ‘high-risk’ companies.
SEIS is focused on very early-stage companies, while EIS focuses on medium-sized startups.
SEIS allows for a 50% tax break in return for an individual investing up to £100,000 per tax year. EIS allows individual investors to invest up to £1 million per tax year, receiving a 30% tax break in return.
Most trades qualify for SEIS and EIS funding, but a number are excluded entirely, for example, those dealing in land or commodities, trades involved with banking, insurance or money-lending and more.
Funds raised must be used for qualifying business activity and solely to promote the growth and development of the company, like hiring new employees, developing the product or marketing activities.
Companies can raise up to £150,000 in SEIS funding and no more than £12 million in EIS funding. Individual investors under SEIS or EIS are not allowed to hold more than 30% of the company’s overall shares.
Do you have questions about how to claim an R&D tax credit for your business? Are you interested in SEIS and EIS funding for your business? Have a look at our services and feel free to get in touch with us.
You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
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