Summer holiday clubs: use your tax-free childcare account

Tax-Free Childcare accounts can be used to pay for approved childcare for children aged 11 or under, or 16 if the child has a disability.  This can include paying for a summer holiday club or childminder.

The account can also be used to pay nursery fees, or to pay for breakfast or after school clubs in term-time, as well as out of school activities.

Opening a Tax-Free Childcare account is quick and easy and can be done at any time of the year. Families who have not yet signed up should check their eligibility and apply online today.

For every £8 paid into an online account they will receive an additional £2 from the government. This means parents and carers can receive up to £500 every 3 months (£2,000 a year for each child), or £1,000 (£4,000 a year for each child) if their child is disabled.

Money can be deposited at any time to be used straight away, or whenever it is needed. Unused money in the account can be withdrawn at any time.

Eligibility

Families could be eligible for Tax-Free Childcare if they:

• have a child or children aged 11 or under. They stop being eligible on 1 September after their child’s 11th birthday. If their child has a disability, they can receive support until 1 September after their child’s 16th birthday;
• earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average;
• each earn no more than £100,000 per annum; and
• do not receive tax credits, Universal Credit or childcare vouchers.

We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

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Super-deduction replaced by “full expensing”

In the Spring Budget the Chancellor announced that “full expensing” – 100% relief for new, eligible plant and machinery – would replace the 130% super-deduction from 1 April 2023 for limited companies. This is in addition to the £1 million annual investment allowance (AIA) and will be available for expenditure incurred up to 31 March 2026.

Unlike with AIA, the equipment must be new and must qualify for inclusion in the capital allowances general pool.  The legislation specifically excludes motor cars and assets for leasing. The items purchased are not pooled with other equipment, and a separate record needs to be kept of each piece of equipment. That is because there is a clawback charge based on the disposal value of the asset.

Where the company’s year end straddles 31 March 2023, the amount of super-deduction is pro-rated. For example, if the company had a year end of 30 September 2023, and incurred expenditure on a new machine before 31 March 2023, there would be 115% relief for that equipment. A new lorry purchased in May 2023 would only qualify for 100% full expensing.

Where a company buys new equipment that would normally be dealt with in the capital allowances special rate pool, such as the installation of air conditioning or central heating, the 50% first year allowance (FYA) continues to apply until 31 March 2026. The balance of expenditure would then be dealt with in the special rate pool with a 6% writing down allowance per annum on a reducing balance basis. Where the £1 million AIA is available it would be more advantageous to claim AIA at 100%, rather than the 50% FYA.

We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

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National Insurance contributions deadline extended

With all of the changes to personal pensions in the Spring Budget, maximising the State Pension entitlement should not be overlooked. The full rate of new State Pension increased to £203.85 per week (£10,600 pa) from 6 April 2023; a 10.1% increase over the 2022/23 rate as a result of the “triple lock” being restored.

At least 10 qualifying years are required to get a UK State Pension, with full State Pension entitlement at 35 qualifying years. Individuals should log into their Government Gateway account to check their contribution record as they may be entitled to credit for missing years, for example if they were on maternity leave or a carer. They can also check how many more qualifying years they need for a full State Pension, and if necessary, make national insurance (NI) contributions for missing years.

Normally it is only possible to make voluntary NI contributions for the past 6 tax years, to top up any missing or partial years.  The Government announced an extended deadline to allow taxpayers to make NI contribution in respect of missing years going back to April 2006.  This opportunity was originally scheduled to end on 5 April 2023 and was then extended to 31 July 2023.  The deadline has now been extended to 5 April 2025.

Class 3 voluntary NI contributions made before 5 April 2025 will be at the Class 3 voluntary NI rates for the 2022/23 tax year of £15.85 per week, or £824.20 for each full year.

We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

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Should director/shareholders tax advantage of this lower rate?

The HMRC rate of interest on beneficial loans looks very attractive compared to the Bank of England Base rate of 4.5% and much higher rates charged by banks for unsecured loans.

Note that where loans are made to participators (broadly shareholders) of a close company there is potentially a special tax charge on the company on any loan still outstanding 9 months after the end of the accounting period. The charge is currently 33.75%, the same as the higher rate of tax on dividend income. This tax charge is only repaid to the company when the loan is repaid or written off.

For example, Fred, the managing director and controlling shareholder of Bloggs Ltd, is loaned £100,000 interest free on 6 April 2023. No repayments are made in the year ended 31 March 2024.Assuming no change in the HMRC official rate of interest the company would show a taxable benefit in kind on Fred’s 2023/24 P11d of £2,250 (2.25%)

If Fred repays the loan in full before 31 December 2024 there would be no special charge on the company although Fred would be assessed on the beneficial loan for the 9 months that the loan was in existence in 2024/25.

Note that there are anti- “bed and breakfast” rules to counteract the situation where the loan is readvanced by the company. The anti-avoidance would not apply where the loan is cleared by crediting a bonus or dividend to Fred’s loan account.

If however only £60,000 was repaid by Fred before 31 December 2024 leaving £40,000 outstanding then there would be a s455 charge on the company of £13,500 (assuming 33.75% continues) which would be payable in addition to the company’s corporation tax liability for year ended 31 March 2024

The company would show a taxable benefit in kind on Fred’s 2024/25 P11d based on the official rate of interest on beneficial loans for 2024/25 (yet to be determined).

If the company then decides to write off or waive the outstanding loan in year ended 31 March 2025 the £13,500 would be refunded. However, Fred would be assessed on the £40,000 as an income distribution (dividend) arising at the date of waiver in 2024/25.

We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

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