Category: Tax

HMRC has flagged an issue affecting some Self Assessment taxpayers for the 2024/25 tax year in relation to Class 2 National Insurance contributions (NICs).

Some self-employed taxpayers with profits above £12,570 have incorrectly had a Class 2 NICs charge of £358.80 added to their accounts — in some cases, the incorrect amount may be lower.

What HMRC is doing about it

• HMRC says it has already corrected the figures where its records allow and has notified affected taxpayers directly.

• For others, corrections will be made once the issue is fully resolved, with taxpayers receiving confirmation and a new SA302 tax calculation.

Why it’s happened

This problem appears to stem from the NICs reforms introduced in 2024/25. From this tax year:

• Self-employed taxpayers and partnership members no longer have to physically pay Class 2 NICs.

• If profits are over the small profits threshold (£6,725 for 2024/25), Class 2 NIC is treated as “paid” automatically for benefit entitlement purposes.

What you should do

If you think you’ve been charged Class 2 NICs incorrectly, keep an eye out for communication from HMRC. If you’ve already filed your 2024/25 return and spotted this issue, you may wish to flag it to your accountant so it can be monitored.

At A&C Chartered Accountants, we’re tracking these HMRC updates and will ensure any affected clients have their tax records corrected promptly.

If you’re unsure whether this applies to you, get in touch and we can check your Self Assessment account for you.

One of the most common questions we’re asked at A&C Chartered Accountants is:

“What’s the most tax-efficient way to take money out of my limited company?”

For directors and owners of small businesses, understanding how to extract profits from your company without paying more tax than necessary is essential. While the classic advice used to be “take a small salary and the rest as dividends”, the truth is – it’s no longer that simple.

Why is profit extraction more complicated now?

Due to changes in tax legislation and individual circumstances, there’s no longer a one-size-fits-all strategy. What works for one business owner may not work for another.

The most accurate answer we can give – without running the numbers – is:

It depends.

To work out the best approach, you’ll need to consider your company’s financial position and your personal tax situation.

Key Factors That Affect Profit Extraction Strategy

Here are the main things to think about when deciding how to take money out of your limited company:

1. Company Profit Levels and Corporation Tax

How much profit your company makes will determine its corporation tax rate. Higher profits may mean a higher tax rate, which affects how much you can take out and how best to structure it.

2. Number of Director/Shareholders

If you’re not the only person involved, your extraction strategy needs to account for others – and how dividends or salaries are shared between director/shareholders.

3. Distributable Reserves

You can only pay dividends from distributable profits – so checking your company’s retained earnings is essential.

4. Other Personal Income

Your personal tax band is affected by any other income you receive (e.g. rental income, part-time work, investments). This will influence how much you can take out without pushing yourself into a higher tax bracket.

5. Your Age

If you’re aged 66 or over, you no longer pay Employees’ National Insurance on salary – which can affect the optimal mix of salary and dividends.

6. Employment Allowance (EA)

Some companies can claim up to £10,500 per year to offset Employer’s National Insurance. But your company might not qualify, or the allowance might already be used by other employees’ wages.

7. National Minimum Wage and Living Wage Rules

If you’re taking a salary through PAYE, you may need to comply with National Minimum or Living Wage requirements, particularly if you have employment contracts in place.

How Much Should I Take Out of My Company?

It might be tempting to extract all available profits, but this could lead to a higher tax bill than necessary.

Instead, consider what you actually need for your personal expenses and leave the rest in the company if you don’t need it immediately. This can be more tax-efficient in the long term.

Some directors also choose to retain funds with a view to:

• Investing back into the business

• Selling or winding up the company in the future

In these cases, profits may be subject to Capital Gains Tax (CGT) rather than income tax, and could qualify for Business Asset Disposal Relief (BADR) – formerly Entrepreneurs’ Relief – which offers a 14% tax rate on qualifying gains.

Typical Strategy: Salary + Dividends

Many small business owners still benefit from the classic method of:

• Taking a salary up to the personal allowance (£12,570)

• Topping up with dividends to meet living costs

This works well in many cases, but it’s not guaranteed to be the best option for everyone – especially if you’re applying for a mortgage, making pension contributions, or planning to sell the business soon.

Get Personalised Advice from A&C Chartered Accountants

At A&C Chartered Accountants, we work with hundreds of owner-managed businesses across the UK. We know how important it is to get this right.

Whether you’re a sole director or part of a larger shareholder group, our team can help you:
✅ Maximise tax efficiency
✅ Avoid unexpected liabilities
✅ Plan for the future with confidence

📞 Ready to optimise your profit extraction strategy?

Get in touch today to speak to one of our experienced advisors.

If you offer private tuition as a sole trader or small business, you might assume it’s VAT-exempt – but the rules are more specific than many people realise.

A recent First Tier Tribunal case (Rushby Dance & Fitness Centre v HMRC) has provided a helpful reminder of how the exemption works and why not all tuition qualifies.

What the legislation says

Under the Value Added Tax Act 1994 (Schedule 9, Group 6, Item 2), private tuition is exempt from VAT if two key conditions are met:

1. The tuition is provided by an individual teacher acting independently of an employer; and

2. The subject being taught is one that is ordinarily taught in a school or university.

While the first point is relatively straightforward, the second is where many cases become less clear.

What happened in the tribunal?

In this case, the tutors were providing classes in ballroom dancing, Latin dancing, sequence dancing, and a hybrid of dance and aerobics referred to as ‘dancercise’. They argued that these activities should qualify as VAT-exempt private tuition. However, the tribunal disagreed, ruling that these subjects are not ordinarily taught in schools or universities and therefore do not qualify for the exemption.

Examples of subjects that may or may not qualify

There have been a number of previous tribunal decisions on this issue. For example:

• Subjects that have been accepted as ordinarily taught include horse riding and golf.

• Subjects that have not qualified include yoga, belly dancing, and transcendental meditation.

The distinction depends not on whether a subject can be taught in a school or university, but whether it is commonly part of the mainstream curriculum.

Business structure also matters

It’s important to note that even if a subject qualifies, the VAT exemption only applies when the tuition is provided by an individual, such as a sole trader or partner in a partnership. If the tuition is delivered by an employee or through a limited company, the exemption does not apply.

Why it matters

Incorrectly treating tuition as VAT-exempt could result in backdated VAT liabilities and penalties. If you’re unsure whether your tuition services qualify for the exemption, or how your business structure affects VAT, it’s best to seek professional advice.

At A&C Chartered Accountants, we work with tutors, education providers, and small business owners to ensure VAT is handled correctly and efficiently. If you have any questions about this area, we’re here to help.

If you’re a landlord or sole trader earning over £50,000 from your trade and property combined, Making Tax Digital for Income Tax (MTD ITSA) is heading your way — with mandatory reporting starting from 6 April 2026.

While we’ve covered the general MTD rules in previous updates, this time we’re focusing on how it applies to income from jointly held property, which can have a few unique quirks.

🧾 What does MTD mean for joint property owners?

Under MTD, you’ll need to keep digital records and submit Quarterly Updates to HMRC. For landlords with jointly owned property, that means your software or spreadsheet needs to:

• Track each income and expense item using HMRC’s prescribed categories

• Submit year-to-date totals for each category, every quarter

✅ Two helpful easements for simpler reporting

HMRC has introduced a couple of easements that can really simplify things for landlords with jointly held property income:

1. Turnover under £90,000?
   You don’t need to break things down into detailed categories — it’s enough to record each item as either ‘income’ or ‘expense’.

2. Jointly held property?
   You can submit just one income total per quarter, and one annual total expense figure (submitted in Quarter 4).

💡 And yes — if you qualify for both, you can combine them. That means just one quarterly income figure and one yearly expense figure. Much simpler!

What should you do next?

• Review your income for 2024/25 to see if you’ll hit the £50,000 threshold

• Check whether your property is jointly owned and how income is recorded

• Start looking into MTD-compatible software that suits your needs

• Ask us to review your current setup and help you prepare in good time

At A&C Chartered Accountants, we’re already supporting landlords and small businesses to get MTD-ready — without the overwhelm. If you’ve got questions about how these rules apply to you or want help choosing the right software, just get in touch.

📞 Let’s make MTD simple.

Looking for a smart way to boost pension contributions while cutting National Insurance costs? A salary sacrifice scheme might be the answer – but it’s not without its complexities.

How it works

When an employee joins a salary sacrifice scheme for pension contributions, they agree to reduce their gross salary. In return, their employer increases its pension contributions by the same amount. The overall pension pot stays the same — but here’s the clever bit:
✔️ Both the employee and employer save on National Insurance Contributions (NICs)
✔️ The pension contributions made by the employer are exempt from NICs and not caught by salary sacrifice restrictions

This can result in significant savings, particularly for employers, who may choose to pass on some (or all) of their NIC savings by boosting staff pension contributions even further.

Things to consider before setting up a scheme

While the tax and NI savings are attractive, there are a few important considerations:

• Minimum Wage compliance – You’ll need to make sure the employee’s reduced salary doesn’t dip below the National Minimum Wage

• Auto Enrolment rules – Salary sacrifice must be carefully structured to avoid falling foul of pension auto enrolment obligations

• Extra admin – There will be contractual changes and ongoing payroll implications to manage

• Impact on staff benefits – A lower gross salary may affect entitlement to statutory payments (like sick pay or maternity) and even bonuses or mortgage applications

Communication is key

To make a salary sacrifice scheme successful, it’s essential to communicate clearly with your team. Employees need to understand how it affects their take-home pay, pensions, and any pay-related entitlements.

Thinking of setting up a pension salary sacrifice scheme for your business?
At A&C Chartered Accountants, we can walk you through the pros, cons, and practical steps to help you implement it smoothly — and compliantly.

👉 Get in touch to find out if it’s the right fit for your business.

If you’re an employer providing benefits in kind or reimbursing expenses to employees or directors, there’s an important deadline fast approaching. P11D forms for the 2024/25 tax year need to be submitted by 6 July 2025, and there are a few key changes and reminders to be aware of this year.

What Is a P11D?

A P11D is a form used to report benefits in kind – anything extra you give your employees or directors that isn’t part of their salary but still has value. Think company cars, private medical insurance, or reimbursed expenses.

These forms help HMRC understand what additional taxable benefits your team has received – and it’s your responsibility as an employer to report them correctly.

What’s Changed This Year?

1. No More Paper Forms
   HMRC now requires all P11Ds to be submitted online. You can file them through your PAYE Online account or via compatible commercial payroll software.

2. Reimbursed Expenses Don’t Always Need Reporting
   If an expense was wholly, exclusively and necessarily incurred in the course of the employee’s duties, it usually doesn’t need to be included on a P11D. There’s also no need to apply for a dispensation anymore.

   However, HMRC expects you to have robust internal controls in place. So it’s worth reviewing your expense policies and processes before filing.

3. Trivial Benefits – Keep It Simple
   Small non-cash benefits that cost £50 or less don’t need to be reported – as long as they’re not:

   • A reward for services

   • Part of a contractual agreement

   • Cash or a cash voucher

   Think birthday gifts, festive bottles of wine, or lunch out with the team – they’re all fine under the trivial benefits rule. Just keep a record of what was given and why.

What Should You Do Now?

✅ Review your benefits and expense records
✅ Check your reporting requirements
✅ Ensure you’re set up to file online
✅ Keep documentation for trivial benefits

HMRC has published its latest advisory fuel rates for company cars, which apply from 1 June 2025. These rates are used to calculate mileage reimbursements for employees using a company car for business journeys – and help ensure that those payments remain tax-free.

Here’s what’s changed and what you need to know.

Advisory Fuel Rates: Company Cars

If your business provides company cars but doesn’t pay for fuel, these are the new suggested reimbursement rates for business mileage.

Previous rates are shown in brackets. You can continue to use the old rates for up to one month from the date the new ones take effect.

Electric and Hybrid Cars

For fully electric vehicles, the reimbursement rate remains at 7p per mile.
If your company car is a hybrid, you’ll need to use the petrol or diesel rate, depending on how the car is fuelled.

Own Vehicle Use: Mileage Allowance Payments (AMAP)

If your employees use their own car for work, the tax-free mileage rate remains:

• 45p per mile for the first 10,000 business miles

• 25p per mile thereafter

• Plus 5p per mile for each passenger also travelling for work

For National Insurance purposes, employers can continue to reimburse at 45p per mile without applying the 10,000-mile threshold.

VAT on Fuel Reimbursements

If you’re reimbursing fuel costs for company car use, you may be able to reclaim input VAT on the fuel portion. For example, if you’re reimbursing an employee at 23p per mile for a 2500cc petrol car, 3.83p per mile can be reclaimed as VAT (23p × 1/6), as long as you have a VAT receipt from the filling station.

Need Help with Mileage Policies or VAT Claims?

Mileage reimbursements might seem small, but they can add up — and getting them wrong can lead to tax headaches. If you need help putting clear policies in place or working out your VAT recovery on fuel, just get in touch.

At A&C Chartered Accountants, we make sure your business travel expenses are managed efficiently and compliantly.

If your business has issued shares, share options or other securities to employees or directors during the 2024/25 tax year, don’t forget — you’ll need to report these to HMRC by 6 July 2025.

This deadline applies whether the shares were part of a tax-advantaged scheme or not, and it’s the same date as the deadline for submitting P11D forms for employee benefits.

What needs to be reported?

If you’ve given or transferred shares, securities or options to employees or directors — including under any formal employee share schemes — you’ll need to complete an Employment-Related Securities (ERS) return.

You’ll also need to report any relevant events such as:

• Granting share options

• Share acquisitions or disposals

• Exercises of share options

• Restricted or convertible shares

Which schemes are included?

There are specific HMRC spreadsheet templates for each of the four tax-advantaged employee share schemes:

• Company Share Option Plan (CSOP)

• Enterprise Management Incentives (EMI)

• Save As You Earn (SAYE)

• Share Incentive Plans (SIP)

You’ll also need to use a separate template to report any non-tax-advantaged arrangements, such as one-off share awards or bespoke schemes.

Templates must be completed and submitted online via the HMRC ERS service. If nothing has happened during the year, a nil return may still be required for registered schemes.

How we can help

At A&C Chartered Accountants, we can support you with:

• Preparing and submitting your ERS annual return

• Understanding your reporting obligations

• Valuing the securities issued, where needed

• Ensuring compliance with HMRC guidelines

We know this area can be complex — especially for start-ups or growing businesses using share schemes to reward and retain talent. We’re here to make the process straightforward and stress-free.

Don’t leave it to the last minute

The deadline might seem a while away, but getting your ERS reporting sorted early helps avoid errors and penalties — and gives you peace of mind.

If you’d like help pulling your return together, just get in touch with your client manager or drop us a message.

Let’s get it done right, on time.

The Government released a number of tax updates and consultations on 28 April 2025 that will affect employers, business owners and self-employed individuals across the UK. Here’s a summary of the key announcements we think you should be aware of.

Payrolling of benefits in kind delayed until April 2027

The mandatory requirement to payroll most benefits in kind (BIKs), originally due to start in April 2026, has been pushed back by one year. The new start date is now 6 April 2027. This gives more time for employers, payroll software providers and tax agents to get systems in place.

From April 2027, most BIKs will need to be reported through payroll in real time, which can help reduce the need for P11D forms. However, two benefits – employment-related loans and accommodation – will remain voluntary for payrolling even after that date.

Update to the Check Employment Status for Tax (CEST) tool

HMRC has updated its CEST digital tool, which is used to help determine if a worker should be classed as employed or self-employed for tax purposes. The revised version, launched on 30 April 2025, is designed to be easier to use and clearer in its guidance.

HMRC has also confirmed it will stand by the result the tool gives, provided it has been used correctly. This provides some reassurance for businesses engaging contractors or freelancers.

NIC refunds process to be improved

The Government has announced a review of the process for refunding overpaid National Insurance Contributions (NICs) under the annual maximum rules.

If you have multiple jobs or a combination of employment and self-employment, you might end up paying more NICs than required across the year. Currently, a refund must be claimed manually from HMRC. The proposed review aims to simplify and speed up this process.

Proposed changes to the VAT Capital Goods Scheme

Changes have been proposed to the Capital Goods Scheme (CGS), which is a mandatory VAT adjustment mechanism for certain capital assets used over time.

The proposals include removing computers from the scheme altogether and increasing the threshold for land and buildings within the CGS from £250,000 to £600,000. This means fewer property purchases would fall under the scheme. No date has been announced for these changes yet.

VAT consultation on business donations to charity

A consultation has been launched to explore new VAT reliefs for goods donated by businesses to charities. Currently, goods donated for resale may be eligible for relief, but the Government is seeking views on whether the same treatment should apply to goods donated for use by the charity or distribution to those in need.

This could be a welcome move for businesses regularly supporting charities through donated stock or supplies.

Need support?

As always, we’re here to help. If you’ve got questions about how these updates might affect your payroll, VAT, employment arrangements or NICs, speak to your client manager or get in touch with the team at A&C Chartered Accountants.

We’ll guide you through the changes and make sure you’re always one step ahead.

HMRC is stepping into the future with a raft of changes aimed at making things more efficient, more digital, and (hopefully) more straightforward for taxpayers. Here’s a rundown of what’s coming.

🖥️ Going Digital – The Big Picture

As part of the government’s ‘Plan for Change’, HMRC is working to become a digital-first organisation. The goal is to improve value for money, support economic growth and streamline services by embracing new technology. A full ‘HMRC transformation roadmap’ is due this summer, but here’s what we know so far:

🧾 New PAYE Portal Coming April 2025

From April next year, HMRC is launching a brand new PAYE portal designed for employees and pensioners. It’ll be a simpler way for you to:

• View employment and pension details HMRC holds

• Report any changes

• Understand how changes impact your tax code

This is a welcome move toward making PAYE more transparent and user-friendly.

🤖 Customer Service Gets an AI Boost

HMRC is testing the use of generative AI on GOV.UK to help taxpayers find the guidance they need faster. They’re also looking at rolling out voice recognition as a quicker way to get through security when contacting HMRC.

We’ll be keeping an eye on how these tools roll out in practice – and whether they actually improve the experience or just add to the noise!

💰 Tougher Stance on Tax Avoidance and Non-Compliance

HMRC is tightening up its approach to close the ‘tax gap’. Here’s what’s changing:

• New legislation is on the way to crack down harder on tax avoidance schemes.

• More focus on offshore non-compliance by wealthy individuals.

• AI and data analytics will be used to spot hidden funds.

• A consultation is under way to explore stronger powers to deal with tax avoidance scheme promoters.

• Another consultation is exploring how to deal with rogue tax advisers enabling non-compliance.

If you’ve ever been targeted by schemes that seem “too good to be true”, now’s the time to tread carefully and get proper advice. As always, A&C Chartered Accountants stands firmly against any unethical or contrived tax planning.

📞 Reporting Tax Fraud – HMRC Introduces Reward Scheme

Later this year, HMRC plans to introduce a reward scheme to encourage whistleblowers to report serious tax fraud. The scheme will target large corporates, wealthy individuals and offshore tax dodging.

🕵️ More Compliance Activity and Data Sharing

HMRC is being given more budget to recruit compliance officers and debt collectors. But beyond that, they’re investing in AI to make their investigations more effective and precise.

They’re also stepping up work with financial institutions to improve the quality of data they receive – such as interest income from banks. This means:

• More pre-populated tax returns in future

• More accurate PAYE codes

• Less admin for you – if your records are accurate in the first place

⚠️ Changes to Penalties – Especially for MTD Users

Late payment penalties are increasing from April 2025 for those under Making Tax Digital (MTD) for VAT and Income Tax. Here’s the breakdown:

• 3% penalty if tax is 15 days late

• Another 3% at 30 days

• Ongoing interest at 10% annually from day 31

On top of that, the entire HMRC penalty system is under review. The plan is to keep distinguishing between honest mistakes and deliberate fraud – but expect the framework to be stronger and simpler across the board.

📈 Higher Interest on Unpaid Tax

From 6 April 2025, the interest rate HMRC charges on late tax payments is increasing by 1.5 percentage points. That brings it to Base Rate + 4% – a significant cost if you fall behind on payments.

💡 Our Take: Stay Proactive, Stay Compliant

It’s clear HMRC is modernising at pace, and enforcement is going to be tighter – especially for those not keeping on top of their records or tax planning.

At A&C Chartered Accountants, we’re here to make sure you’re always one step ahead. Whether it’s preparing for MTD, reviewing your PAYE codes, or helping you understand what these changes mean for your business, we’re in your corner.

✅ Need Help Dealing with HMRC?

We can support you with:

• PAYE and payroll reviews

• Self-assessment preparation

• Navigating Making Tax Digital

• Communication and negotiations with HMRC

• ‘Time to pay’ arrangements if you’re struggling with a tax bill

Get in touch with your client manager or drop us a message – we’re always happy to help.

As of 6 April 2025, the Furnished Holiday Lettings (FHL) tax regime has officially been abolished.

If you own a holiday let, this means the special tax treatment that once applied to FHLs no longer exists. Whether you plan to keep letting your property or are considering selling, there are some important things to be aware of.

🧾 What’s Changed?

Up until now, properties that met the FHL criteria benefited from a range of tax advantages, including:

• Capital allowances on furniture, fittings and equipment

• Business Asset Disposal Relief (BADR) eligibility on sale

• Access to pension contributions based on FHL profits

• More generous treatment of losses

As of 6 April 2025, these tax benefits no longer apply. FHLs are now treated the same as any other residential rental property for tax purposes.

🔁 What If You’re Still Letting the Property?

You can absolutely continue to rent your property as a short-term holiday let – but your tax position has now changed. From 6 April 2025 onwards:

• You can’t claim capital allowances on new fixtures or equipment

• Your income is taxed under the standard property income rules

• Any future sale may not qualify for Business Asset Disposal Relief

If you weren’t able to take action before the deadline, don’t worry – there are still ways to plan smartly and avoid unexpected tax bills.

💡 What If You Ceased Trading Before 6 April 2025?

If you formally ceased your FHL trade before the deadline, you may still be eligible to claim Business Asset Disposal Relief (BADR) when selling your property – as long as you sell within three years of stopping.

This relief could reduce your Capital Gains Tax to just 10% – a significant saving if you’re planning to exit the holiday let market.

If you didn’t formally cease trading before the deadline, we’d recommend reviewing your options with us, as there may still be strategic planning opportunities.

🛠️ Capital Allowances – Now Closed for New Claims

If you made any qualifying capital investments in your FHL before 6 April 2025, you may still be able to claim capital allowances on that spend – but no new allowances can be claimed going forward.

If you’re unsure what qualifies or want to double-check you’ve claimed everything you’re entitled to, we’re here to help review that with you.

✅ How A&C Chartered Accountants Can Support You

Whether you’ve continued letting your property or are planning a future sale, we can help you:

• Review your current tax position

• Plan for any potential CGT liabilities

• Maximise any reliefs still available

• Understand your new reporting obligations

📞 Need Advice on Your Holiday Let? Let’s Talk.

This change marks the end of a long-standing tax regime, and for many property owners, it raises new questions.

If you’d like tailored advice on your options now that the FHL rules have been abolished, get in touch with your client manager at A&C Chartered Accountants. We’re here to help you navigate the changes with clarity and confidence.

From 6 April 2025, significant changes are coming to Employer National Insurance Contributions (NICs) – and it’s important to be aware of how these updates could affect your payroll costs.

Here’s a clear breakdown of what’s changing:

1. Increase in Employer NIC Rate

The rate will rise from 13.8% to 15%. This means for every £1,000 of gross salary you pay above the threshold, you’ll now pay £150 instead of £138 in NICs.

2. Lower Threshold for NICs

Currently, employers start paying NICs on employees’ earnings above £9,100 per year. From April 2025, this threshold drops to £5,000, meaning NICs will apply to a larger portion of employee salaries.

Note: For employees under 21 or apprentices under 25, the threshold remains at £50,270. Other exceptions may apply.

3. Employment Allowance Doubles

The Employment Allowance is increasing from £5,000 to £10,500. This allowance can be used to reduce your total employer NIC bill, potentially offsetting the increased rate and lower threshold.

4. More Employers Can Now Claim the Allowance

Previously, only businesses with an employer NIC liability of less than £100,000 in the prior year could claim. From April 2025, this limit is removed – meaning more small and mid-sized businesses may qualify.

However, some restrictions still apply – such as only one allowance per group of connected businesses.

What This Means for You as a Small Business Owner

These changes mean higher NIC costs for most employers – but also greater opportunities to save through the increased and more accessible employment allowance.

If you’re unsure whether your business is eligible, or how these changes will affect your payroll, it’s worth reviewing your position before the new tax year starts.

Need Support?

If you’d like to talk through how the upcoming NIC changes might affect your business, or want hands-on support preparing for April 2025, we’re here to help.

Selling your business or planning to restructure your assets? With CGT rates rising over the next two tax years, the timing of your decisions could make a big difference to your final tax bill.

What’s changing:

• From April 2025, CGT for higher-rate taxpayers increases to 24% (up from 20%)

• Business Asset Disposal Relief (BADR) will rise from 10% to 14% in April 2025, and then to 18% in April 2026

If you’re eligible for BADR, acting before the changes could save you thousands. Now’s the time to review your plans and speak to your accountant about options like structuring a sale, transferring assets, or bringing forward your exit strategy.

At A&C Chartered Accountants, we’re helping business owners look ahead and make smart decisions now, rather than waiting until the higher rates bite.

2024 marked the first year that digital platforms like Amazon, eBay, and Etsy were required to report seller information to HMRC. These reporting rules apply unless a seller made fewer than 30 sales in a year and earned less than €2,000 (approximately £1,700) from those sales.

Does This Mean You Owe Tax?

The new rules don’t introduce any new tax obligations, but they do increase HMRC’s ability to track undeclared income. If you’re selling online as a side hustle and haven’t been reporting your earnings, HMRC is now more likely to find out.

However, there has been a lot of misinformation circulating online, with some people mistakenly believing they now have to pay tax just for selling old clothes or unwanted items. That’s not necessarily true.

What Counts as Trading?

In a recent campaign, HMRC clarified:

• Selling unwanted personal belongings from time to time? You’re unlikely to need to pay tax.
• Regularly buying and selling with the aim of making a profit? That could count as trading, and tax may be due.

The £1,000 Trading Allowance

If your total sales income from trading is:

• £1,000 or less per tax year – No need to declare it.
• More than £1,000 per tax year – You must declare it on a Self Assessment tax return.

If you’re unsure whether you need to declare your sales, speak to our team today, and we’ll help you stay compliant while making the most of available allowances.

Changes to Capital Gains Tax (CGT) rates in 2024 mean that timing your disposals correctly is more important than ever.

From 30 October 2024, the main CGT rates increased to 18% and 24%. Additionally, the rate of CGT on Business Asset Disposal Relief (BADR) gains will rise:

• From 10% to 14% on 6 April 2025
• Then to 18% from 6 April 2026

Getting the timing wrong on BADR-qualifying disposals could mean paying significantly more tax.

Key Considerations

• Disposal Date Matters: For CGT purposes, the relevant date is when an unconditional contract is entered into, not when the sale completes.
• New Anti-Avoidance Rules: You can no longer use unconditional contracts to secure lower CGT rates artificially. Similarly, share exchanges and reorganisations can no longer use elections to lock in previous CGT rates.

If you’re planning a BADR-qualifying disposal, it’s crucial to get advice early. Speak to A&C Chartered Accountants today to ensure you’re making the most tax-efficient decisions.

Annual Tax on Enveloped Dwellings (ATED) – What You Need to Know

ATED applies to companies and other ‘non-natural persons’ that own UK residential properties valued at over £500,000. The tax is based on the property’s value unless an available relief is claimed.

Who Can Claim Relief?

One key relief applies to properties that are let to third parties on a commercial basis and are not occupied or available for occupation by anyone connected to the owner. If this relief applies, it must be claimed in an ATED return.

Filing and Payment Deadlines

ATED is payable for a chargeable period ending on 31 March each year, with returns due within 30 days of the new period starting. This means:
📌 For the 2025/26 period (1 April 2025 – 31 March 2026), returns must be filed between 1 April and 30 April 2025.

HMRC Compliance Checks

Over the coming months, HMRC will be contacting companies that:

• Own UK residential properties worth over £500,000
• Declared no profits in Corporation Tax returns between 2017 and 2020
• Either did not file an ATED return or claimed the commercial letting relief

HMRC is questioning whether these companies were truly operating on a commercial basis. If they believe a company was not run for profit, the ATED relief will not apply.

How to Respond

If your company receives one of these letters, you must review your ATED position and respond within 40 days. You may need to:
✔ Provide further information
✔ Make a disclosure
✔ File any outstanding returns

Failure to respond could result in a discovery assessment and potential penalties.

If you need guidance on your ATED obligations, speak to our property tax accountants today to ensure compliance and avoid unnecessary tax charges.

Claiming Tax Relief on Employment Expenses: What You Need to Know

If you’re an employee who incurs work-related expenses that haven’t been reimbursed by your employer, you could be eligible for Income Tax relief. Understanding what you can claim and how to do it correctly can help you reduce your tax bill and get back the money you’re entitled to.

How to Claim Employment Expenses Tax Relief

If you file a Self-Assessment tax return, employment expenses should be included on the employment pages of your return. However, for employees who do not file a Self-Assessment, the claim can be made using HMRC’s online P87 form.

HMRC had temporarily suspended the P87 online form due to a surge in ineligible claims, but it is now available again. When making a claim, you must provide evidence of the expenses incurred.

What Expenses Can You Claim Tax Relief On?

You can claim tax relief on the following work-related expenses:

• Working from home costs – If your employment contract requires you to work from home, you can claim for additional costs incurred. Read our guide to tax relief for working from home.
• Repairing or replacing a uniform or small tools – If you’re required to wear a uniform or use specific tools for work, the cost of maintaining or replacing them may be eligible for tax relief.
• Travel for business journeys – This applies to work-related travel but not commuting to and from your regular place of work.
• Professional fees and subscriptions – If you’re required to be a member of a professional body for work, the fees you pay could be tax-deductible.

How Much Can You Claim?

The amount of relief you can claim depends on the type of expense and your tax rate. You will typically receive tax relief at your marginal tax rate, meaning:

• Basic rate taxpayers (20%) get 20p back for every £1 spent on eligible expenses.
• Higher rate taxpayers (40%) get 40p back for every £1 spent.

Key Deadlines for Claims

You can backdate your claim up to four years, so if you’ve overlooked eligible expenses in previous tax years, you may still be able to claim relief.

Why You Should Act Now

With tax laws and HMRC’s processes constantly evolving, ensuring that you claim the right expenses correctly is crucial. Submitting accurate claims with supporting evidence helps avoid delays or rejections from HMRC.

Need Help With Your Tax Relief Claim?

Navigating employment expense claims can be complex, but A&C Chartered Accountants can help ensure you maximise your tax relief while staying compliant with HMRC rules. Contact us today for expert guidance on making your claim effectively.

The VAT classification of food and drink has long been a contentious issue, and legal cases continue to shape HMRC’s approach. In 2024, several cases examined VAT treatment, and this trend is set to continue into 2025. One significant case—Global By Nature Ltd v HMRC (TC09396)—marks the first time a tribunal has examined VAT law concerning sports drinks.

Understanding VAT on Food and Drink

Under VAT legislation, most food and drink items are zero-rated, except for specific products that are taxed at 20%. One of these exceptions includes:

• “Sports drinks that are advertised or marketed as products designed to enhance physical performance, accelerate recovery after exercise, or build bulk.”
• This also applies to powders or syrups used to make such drinks.

HMRC’s Position on Sports Drinks

In the tribunal, HMRC argued that the above legal wording provides a clear definition of sports drinks—i.e., drinks that are advertised or marketed to enhance performance, aid recovery, or build bulk. On this basis, HMRC contended that Global By Nature Ltd’s (GBN) drink powders qualified as sports drinks and should be standard-rated at 20% VAT.

The Tribunal’s Decision

GBN disputed HMRC’s classification, arguing:

• Their powders were not sports drinks.
• Even if they were, they were not advertised or marketed as such.

The Tribunal ruled in favour of GBN, introducing a two-part test to determine if a product falls under the VAT exception:

1. Is the product a sports drink?
2. If yes, is it marketed as enhancing performance, aiding recovery, or building bulk?

Since ‘sports drink’ is not legally defined, the tribunal relied on dictionary definitions and industry standards. They concluded that GBN’s powders did not contain enough carbohydrates to be classified as sports drinks. As a result, the tribunal zero-rated the product, meaning no VAT applied.

Why This Matters for Businesses

This ruling sets a new precedent for how HMRC determines VAT treatment on food and drink products. Businesses should review their products to ensure they are correctly classified. Key takeaways include:

• If a product is not clearly a sports drink, it may be zero-rated.
• Marketing claims matter—positioning a drink as performance-enhancing could push it into the VAT exception category.
• Future challenges—HMRC may appeal or adjust guidance, so staying updated is essential.

Get Expert VAT Guidance

Navigating VAT classifications can be complex, and getting it wrong could mean unexpected tax liabilities. At A&C Chartered Accountants, we help businesses ensure compliance and optimise tax efficiency. Contact us today for expert VAT advice tailored to your industry.

Scam attempts on the increase

HM Revenue and Customs (HMRC) have issued a reminder to be careful about scam attempts that target people filing Self Assessment tax returns. In the last year, nearly 150,000 scam attempts were referred to HMRC, a 16.7% increase on last year. With the 31 January 2025 filing deadline approaching, fraudsters are likely to step up their activities.

HMRC reports that around half of all scam reports in the last year were fake tax rebate claims. Fraudsters are usually aiming to get hold of personal information and banking details.

If you receive an email, text or phone call from someone claiming to be from HMRC that asks you for personal information or offers you a tax rebate, there is a useful checklist here that can help you identify a scam.

It is helpful to know that HMRC will never leave voicemails threatening legal action or arrest. Neither will they ask for personal or financial information over text message.

HMRC also will not contact you by email, text, or phone to announce a refund or ask you to request one.

If you have been contacted by someone claiming to be from HMRC and feel unsure whether it is a scam, or you would like to check whether you are due a tax refund, call us at any time and we would be happy to help you.

New changes come into effect from January 2025 where online platforms, such as eBay and Airbnb, will start sharing some user sales and personal data with HM Revenue and Customs (HMRC).

Although these reporting requirements have caused concern, HMRC have confirmed that there are no changes to the tax rules for someone selling unwanted possessions online.

Angie MacDonald, who is HMRC’s Second Permanent Secretary and Deputy Chief Executive Officer, said: “We cannot be clearer – if you are not trading and just occasionally sell unwanted items online – there is no tax due.”

HMRC have advised that anyone who sold at least 30 items or earned roughly £1,700, or provided a paid-for service, on a website or app in 2024 will be contacted by the digital platform they used in January to say their sales data and some personal information will be sent to HMRC due to new legal obligations.

This does not mean that an individual automatically needs to complete a tax return. However, if the following applies then you would likely need to register for Self Assessment (if you are not already registered) and pay tax.

• Buying goods for resale or making goods with the intention of selling them at a profit.

• Offering a service through a digital platform – such as delivery driving or letting out a holiday home.

• And you generate a total income before deducting expenses of more than £1,000.

If you are concerned about whether you are likely to need to register for self-assessment or pay tax, give us a call and we will be happy to help you.

HMRC have developed an app that can help people prepare for their retirement.  Individuals can use the app to check their State Pension Forecast, allowing them to:

• see their State Pension age;
• view their forecast State Pension amounts based on potential contributions; and
• view how much their State Pension would currently be worth, based on National Insurance contributions to date.

The app can also be used to check National Insurance contribution (NIC) years, and view any gaps in your record, including how many weeks you have paid and how much you need to pay for it to become a full qualifying year.  If you have any NIC ‘gap years’, you may be able to make voluntary payments online or through the HMRC app.  Note that you have until 5 April 2025 to make up any gap years since 2006/07. Contributions made prior to 5 April 2025 will be at the Class 3 voluntary NI rate of £15.85 per week (£824.20 p.a.) which will provide an additional £342.86 a year State pension – a pretty good return! From 6 April 2025 it will only be possible to go back 6 years.