Welcome to our February 2024 newsletter/blog

Looking at some of what has happened since December 2023 and a few items that come into place in the near future which I hope is of interest to our clients and contacts.

Please get in touch us if you want to talk about how these updates affect you and your business. We are here to support you!

There was no newsletter in January as we took a break to ensure your tax returns were submitted on time. For 2024 it would be very helpful if you could let us have your information earlier in the tax year so that we can have a break over the Christmas holiday period.

How generative AI is already changing how we work

AI is already impacting business, employees and the wider economy.

The advent of generative artificial intelligence (AI) has ushered in a new era of efficiency and innovation, fundamentally altering the landscape of how we work. This powerful technology, exemplified by offerings such as Chat GPT, has already begun to revolutionise various industries, reshaping workflows, decision-making processes, and creative endeavours.

One of the most prominent ways generative AI is transforming work is through automation. Mundane, repetitive tasks that once consumed valuable time are now being seamlessly handled by AI algorithms. From data entry to routine customer queries, automation frees up human resources to focus on more complex and strategic aspects of their roles. This not only enhances productivity but also allows for a more strategic allocation of human skills, fostering a work environment that emphasises creativity, problem-solving, and innovation.

Generative AI's impact extends beyond automation, touching the realms of marketing and decision support. Businesses are leveraging AI for marketing purposes including data analysis and targeting new potential customers.

In decision support, generative AI can act as a powerful tool, processing vast amounts of data to provide insights and recommendations. It can help professionals make more informed decisions by analysing trends, predicting outcomes, and identifying potential risks. As a result, businesses can adapt quickly to changing conditions, mitigate risks, and capitalise on opportunities in real-time.

Collaboration is another facet of work that has been significantly influenced by generative AI. Tools powered by these technologies facilitate seamless communication and collaboration among team members, irrespective of geographical locations. Virtual assistants can schedule meetings, draft emails, and manage routine administrative tasks, enhancing overall team efficiency and enabling a more focused approach to complex projects.

However, it's crucial to acknowledge the ethical considerations and challenges associated with the widespread adoption of generative AI in the workplace. As AI continues to evolve, addressing issues related to bias, privacy, and accountability will be imperative to ensure a fair and responsible integration into our work environments. There is also the question of quality − AI doesn’t get it right every time.

In this month’s round up:

National Minimum Wage (NMW)
Salary or dividend best in 2023/24?

Registered e-mail address for companies
Charging electric cars at home

Messages from Government Gateway requesting email address confirmation
Payrolling employer-provided benefits to be mandated from 2026

New Year Tax Planning

National Minimum Wage (NMW)

The biggest ever increase to the National Living Wage has been announced, with the government fully accepting the recommendations made by the Low Pay Commission. Eligibility for the National Living Wage will also be extended by reducing the age threshold to 21-year-olds for the first time. It was previously for those aged 23 and over only. From 1 April 2024 the minimum pay rates will be as follows:

National Living Wage (age 21 and over) 11.44 1.02 9.8

18-20 year old rate 8.60 1.11 14.8
16-17 year old rate 6.40 1.12 21.2
Apprentice rate 6.40 1.12 21.2

Registered e-mail address for companies

As part of the new changes for companies coming in at Companies House is a requirement for companies to have a registered e-mail address for official company correspondence, in a similar way that companies have a registered office.

Over the coming year we will be adding these e-mail addresses to Companies House for clients and will also be using them to send details of information held at Companies House when the confirmation statement is due.

If you have a particular e-mail address that you wish to register, then please confirm this to us. If we do not receive an e-mail address to use from the company, we will use the one we most commonly use to contact the company. This could be a director’s personal e-mail address.

We suggest that a generic e-mail address (mail@…, info@..., admin@... etc) should be used rather than an individual address.

We will remind the company to register an e-mail address when sending out confirmation statement reminders but suggest that e-mail addresses be put in place sooner rather than later.

Messages from Government Gateway requesting email address confirmation

There have been reports of emails being received purporting to come from the Government Gateway with a confirmation code to confirm an email address. If such requests are received, these should be reported to HMRC.

HMRC advises that anyone who has received an email they haven’t requested, to verify a change to their online account, should ignore it. Taxpayers and agents should also ignore any follow-up emails asking them to click a link.

HMRC says, “These emails, which we are aware have been received by some customers (sic), are a tactic by scammers to direct people to a phishing site and steal personal details. HMRC systems have not been compromised − but criminals have attempted to create fake customer accounts or to access existing accounts using personal data obtained through a variety of routes, including breaching other organisations’ security.”

Anyone who has received such a message is encouraged to report it to HMRC at phishing@hmrc.gov.uk.
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New Year Tax Planning

As we move into the New Year we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5th April.

An obvious tax planning point would be to maximise your ISA allowances for the 2023/24 tax year (currently £20,000 each). You might also want to consider increasing your pension savings before 5 April 2024, as the unused annual pension allowance from 2020/21 lapses after three years.

Many of us get together with the family at the end of the year and that prompts us to think about making or updating our Will.

For Inheritance Tax (IHT) the current nil rate band of £325,000 continues to be frozen and it is unlikely that it will increase in the next few years. With rising values of property and other assets more estates are now falling into the level at which IHT is becoming payable.

When considering a will there are a number of matters which might prompt a change to the way things are being left. If you want to pass on the family home the additional nil rate band is something to consider.

If you leave at least 10% of your estate to charity then the remainder is taxed at 36% instead of 40%.

Regular gifts out of income can save IHT. Where there are regular payments, such as a standing order to pay school fees or pension contributions on behalf of children or grandchildren then these are exempt from IHT. HMRC will require proof that the payments are paid out of post-tax income and do not limit the donor’s normal lifestyle. Detailed records are required, and we can help you with a suitable spreadsheet.

Salary or dividend best in 2023/24?

In recent years many accountants have advised their director/shareholder clients that the most tax efficient method of extracting profit from their family company was to pay themselves a low salary, at or around the £12,570 personal allowance, with the balance in dividends.

This strategy may need to be revisited with the introduction of higher corporation tax rates from 1 April 2023 as company profits in excess of £50,000 are taxed at an effective 26.5% rate. Where company profits exceed £50,000 it may be more tax efficient to increase the salary or put a bonus through the company accounts.

Other things to consider would be for the company to pay more into your pension or provide you with an electric company car, both of which can be tax efficient.

There are lots of factors to take into account, including the level of profit and how much you need to draw out of the company to live on. We would suggest that we set up a meeting with you a couple of months before the company year end so that we can give you the best advice.

Charging electric cars at home

HMRC have recently clarified their view of the tax treatment of the reimbursement of electricity costs where employees charge their electric company cars at home. HMRC now accepts that reimbursing part of a domestic energy bill, which is used to charge a company car or van, is exempt from income tax. Their previous view was that such reimbursements were taxable.

Note that the exemption will only apply provided it can be demonstrated that the electricity was used to charge the company car or van, which may be difficult to determine in practice. Employers will need to make sure that any reimbursement made towards the cost of electricity relates solely to the charging of their company car or van.

It should be remembered that where the employee uses workplace charging facilities there is no taxable benefit.

It should be noted that HMRC have still not revised their view on reclaiming VAT in respect of business miles driven by an employee who has changed their car at home.

Regardless of whether the vehicle is a company car or the employee’s own, the employer cannot reclaim the VAT because the supply of electricity is made to the employee, not the employer.

Payrolling employer-provided benefits to be mandated from 2026

HMRC has announced that payrolling benefits and paying class 1A NIC on Benefits in Kind (BIK) via payroll will be mandatory from April 2026. The aim is to reduce administrative burdens by simplifying and digitising reporting and paying tax on all employment benefits, removing the need for four million P11D returns and forms P11D(b).

Although this is supposed to reduce the burden on businesses there are some benefits which it will be difficult to predict and include on a monthly basis. There are many complexities which can occur.

For example, although payrolling BIK removes the need for employers to submit forms P11D for these BIK, class 1A NIC currently still needs to be reported and paid separately to HMRC using form P11D(b). The news that class 1A NIC will be payable via payroll software is potentially welcome from an administrative viewpoint, but it is currently unknown whether the due date for paying class 1A NIC will change.

Some employers currently choose to payroll some, but not all, benefits. This is because some BIK are easier to calculate on a pay period basis. We hope that the government takes the opportunity to consult properly with stakeholders to establish how underlying BIK calculations − in particular beneficial loans and accommodation, and emergency vehicles − and payments by employees, (eg, for private use, etc), might be simplified before mandating payrolling all BIK.

It is understood that draft legislation will be published later this year.

A start date of April 2026 does not leave much time for HMRC to draft a full specification for software development and testing before implementation.

Do it from April 2024?

Payrolling benefits has been an option for many years. If you wish to consider payrolling benefits instead of producing forms P11d after the year end, then now is the time to consider it for 2024/25. If you wish to payroll benefits then you have to apply to do so before the start of the tax year. Speak to us now if you wish to consider this.

Stewart & Partners Property Group

The Stewart & Partners Property Group is for clients who have an interest in the property sector, be it buy to let, property investment or construction.

Our web site pages give an overview of the property industry including buy to let, property investment and property development.

The major resource for all our property clients and contacts are the many helpsheets we have produced which give initial advice an many areas where clients need help. Check out the pages for yourself.

We also produce a monthly newsletter dedicated to the property industry. If you are interested then sign up to receive the newsletter.

How to Grow your Business

We have written a booklet titled How to Grow Your Business which offers ten strategies you can use to take your business to the next level.

We can help − Just ask us

Are you considering starting a new arm to your business or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

We have a broad range of experience that goes far beyond just preparing accounts and tax returns. We also have access to a broad range of tools that will help with providing answers. Get in touch as we will probably have an answer to help you with your challenges.

Even if you just want help planning for the future with all the proposed tax changes, we are here for you.

And finally….

We wish King Charles and Kate a speedy recovery from their current ailments. I reminds us that your health is more importantt han anything and you should always look after yourself.

If you have any queries you can book a free 15 minute zoom meeting with me.

Don’t forget to make time for yourself and do not let your business run you, you should run your business.