Welcome to our March 2025 newsletter/blog.

We have taken an enforced break since our last newsletter last year. Unfortunately, we had an issue with our MailChimp account where unexplained subscribers were added without our knowledge. This led to some GDPR problems and it has taken us a little while to resolve all issues.

We are pleased to say that we are back and hope you have missed our monthly look at what is relevant for our clients and small businesses.
 
GOOD NEWS - Simon has become a grandfather for the first time with the birth of Charlie Sid Lever on 30 September 2024.

In this month's newsletter:
•    Making Tax Digital (MTD) is back!
•    Increase in Employer’s National Insurance
•    Interest – some interesting developments!
•    Payrolling benefits – an update
•    We can help – Just ask us

Making Tax Digital (MTD) is back!
 
Making tax digital has come back onto the horizon with taxpayers being brought into the MTD regime from 2026 onwards.
 
HMRC has published a guidance tool which allows a taxpayer to check if they are required to comply with making tax digital (MTD) income tax self assessment (IT).
 
The tool poses a number of questions and offers guidance on how to answer them. Based on the answers given, the tool will then indicate if the taxpayer is required to use MTD ITSA and if so, from when.  
 
The tool is not designed to be used where there is foreign property income.
 
Also, the tool incorrectly suggests that all company directors are within self assessment. This is not the case although many directors are in self assessment due to other factors, such as their dividend income.  
 
MTD IT applies from:
 
•    April 2026 for those with gross income from self-employment and/or property of more than £50,000 (usually based on figures in the 2024/25 ITSA returns); and
 
•    April 2027 for those with a gross income from those sources combined above £30,000 (usually based on the figures in the 2025/26 returns).
 
There are a number of exemptions from MTD ITSA, including where the person does not have a national insurance number, is a trustee or is a personal representative.  A person may apply for exemption if they are digitally excluded.  
 
The tool also explains the next steps for those who are required to use MTD ITSA.
 
This includes the option to join MTD ITSA now voluntarily, which can be done by following HMRC’s step-by-step guidance.  
 
New tax return requirements for sole traders and directors
 
Some taxpayers will need to provide more information in their tax returns from April 2025.
 
New self employment or partner in a partnership
 
Where a person starts or ceases to trade during a tax year, they must report the date of commencement/cessation in the tax return for that year. This will affect personal tax returns, partnership returns and trustee’s returns.  
 
This question is included on the tax return for 2024/25 and earlier years but answering it is voluntary. It will be mandatory to answer the question in the return for 2025/26 and future returns.
 
Company Directors
 
Existing questions on the tax return ask whether the individual is a company director of a close company. Answering these questions will be made mandatory from 5 April 2025.
 
In addition, a director of a close company must include the following information in their tax return for 2025/26 and future years:
 
•    the name and registered number of the close company;
 
•    the value of dividends received from the close company for the year. The dividends will be declared separately from other UK dividends; and
 
•    their percentage shareholding in the company during the year. If the percentage shareholding changes during the year, the person should record the highest percentage shareholding.
 
In broad terms, a close company is a company that is under the control of its directors or five or fewer participators (eg, shareholders).
 
Increase in Employer’s National Insurance
 
For paydays on and after 6 April 2025:
 
•    the rate of secondary National Insurance Contributions (NICs) paid by employers on an employee’s earnings above the ‘secondary threshold’ will increase from 13.8% to 15%; and
•    the secondary threshold will reduce from £9,100 to £5,000 per annum.
The reduction in the secondary threshold means employers will have an obligation to send the full payment submission (FPS) for employees earning above this threshold (£96 per week/£417 per month). Previously the obligation applied where earnings were above the Lower Earnings Limit (LEL), which is the point at which an employee accrues a right to certain state benefits. The LEL is £125 per week/£542 per month for 2025/26.
 
These changes represent a big extra cost for businesses and, because of the big reduction in the starting threshold, the increase is proportionately greater on lower salaries. For example, the employers’ NICs payable on an annual salary of £12,570 (the level of the tax free personal allowance) increases next year from £479 to £1,136 (i.e. a 137% increase); on a salary of £30,000 p.a., the increase is from £2,884 to £3,750 (i.e. 30% more).
 
Many employers will also have to cope with the increases in the National Living Wage (NLW) and National Minimum Wage that take effect in April, increases that will themselves increase employers’ NICs charges.
 
There are some ways to mitigate the increased employers’ NICs, so make sure you make use of any of the following that could apply to your business.
 
The Employment Allowance
 
For 2025/26 onwards, the annual value of the Employment Allowance (EA), which gives exemption from employers’ Class 1 NICs, is increased from £5,000 to £10,500 per business. This means that a business employing four people full-time on the NLW will not incur employers’ Class 1 NICs on their salaries. The government is also abolishing the rule that you can only claim EA if your total employers’ Class 1 NICs liability is below £100,000 in the tax year before the year of claim. As a result, many businesses will now qualify for EA that didn’t previously.
 
Note that the other restrictions on claiming EA (e.g. for single-director companies and domestic employees (such as a nanny) remain unchanged.
 
It is possible to backdate employment allowance claims for the previous four tax years so, when thinking about eligibility for 2025/26, also consider if the employment allowance could have been claimed for an earlier year.
 
Employing veterans
 
There is exemption from employers’ Class 1 NICs when employing an armed forces veteran in their first twelve months of employment after leaving the armed services. This exemption applies up to a salary of £967 per week (£4,189 per month or £50,570 p.a.).
 
The same exemption and thresholds apply when employing those aged under 21 and certain apprentices aged under 25.
 
Employees in Freeports and Investment Zones
 
(Maybe not such a relevant one!) The last government introduced numerous Freeports and Investment Zones, within which businesses get various tax breaks. One of these is exemption from employers’ Class 1 NICs for ‘new’ employees. This exemption is on earnings of up to £481 per week (£2,083 per month or £25,000 p.a.) and applies for a maximum of 36 months from the date first employed.
 
For an employer to be eligible:
•    the employee must be newly employed; and
•    they must spend at least 60% of that employment in a single Freeport or Investment Zone; and
•    the employer must have business premises in that tax site.
 
Contrary to many expectations, the Labour Government is keeping Freeports and Investment Zones, at least for the time being. If your business is based in one, make sure you take advantage of this employers’ NICs break.
 
Please contact us if you need any help in planning for the increased employer NICs costs that are coming in April, particularly if you think your business is eligible for one of the reliefs above.
 
Interest – some interesting developments!
 
Late payment interest
 
HMRC interest rates are set in legislation and are linked to the Bank of England base rate. There are 2 rates:
 
•    late payment interest, set at base rate plus 2.5%; and
 
•    repayment interest, set at base rate minus 1%, with a lower limit of 0.5% (known as the ‘minimum floor’).
 The late payment interest rate encourages prompt payment.
 
As you can see, there is a built-in ‘turn’ for HMRC of 3.5% in the legislation. HMRC currently charges interest at 7.25% p.a. on tax that is paid late and credits a taxpayer with 3.75% p.a. on repayments of tax (as the base rate is 4.75% - this will change shortly due to the recent reduction in interest rates on 7 February 2025).
 
As announced at the Budget, the rate of interest on late payments will increase by 1.5 percentage points from 6 April 2025 to base rate plus 4%. There is no such increase in the repayment interest rate, so this is a straightforward increase in HMRC’s turn to 5%.
 
If you have any outstanding tax bills, try to pay them as quickly as possible, to avoid the higher interest charges coming in and reduce the likelihood of late payment penalties. Speak to us if you are having trouble paying your tax bills.
 
Official Rate of Interest (ORI)
 
The ORI (which is currently 2.25% p.a.) is used in the calculation of:
 
•    Accommodation benefit, which always uses the ORI at the start of each tax year; and
 
•     Loan benefit, which uses the ORI in place during the tax year.
 
Twenty five years ago, the Inland Revenue (the predecessor of HMRC) gave a commitment that, going forward, the ORI would not change within a tax year. However, this is about to change; from 6 April 2025, the ORI can increase during the tax year and will be reviewed quarterly. This will potentially make the calculation of loan benefits more complicated than in recent times.
 
Please contact us if you are unsure how the change in the ORI will affect benefits that you or your employees have.
 
Payrolling benefits – an update
 
Several years ago, HMRC introduced ‘payrolling’ of benefits on a voluntary basis. Where this is done, the benefit is accounted for throughout the year and compliance at the end of the year is simplified, as the amount does not need to appear on a P11D. HMRC has recently confirmed plans to mandate the reporting of benefits via payroll software from April 2026. Class 1A NICs on benefits will be reported at the same time and paid each month through the PAYE system.
 
However, payrolling of accommodation or loan benefits will be optional from April 2026 and mandated later. Modified P11D and P11D(b) forms will be available to report loan and accommodation benefits if employer does not wish to payroll them.
 
HMRC says it has not decided when it will mandate the reporting of loans and accommodation through payroll software and ‘careful consideration will be given to make sure sufficient notice of any change will be provided’.
 
An end-of-year process will be introduced to amend the taxable values of any benefits that cannot be determined during the tax year, but HMRC expects the taxable values
of most benefits to be reported as accurately as possible during the tax year.
 
The requirement to submit P46 (car) forms will be removed, as functionality will be provided to report the data required through payroll software in real time.
 
A more detailed e-mail about this is planned to be sent to our payroll clients separately.
 
Please speak to us if you are concerned about how these changes will affect your PAYE obligations.
 
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. The newsletter has also suffered form the problem with our MailChimp account and will be reinstated shortly.
 
 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 ....

It's great to be back and to be giving you you the information you need for your business.

If you appreciate receiving these e-mails then let us know. If you don't, then let me know what additional content would improve the newsletter.

Keep an eye out for the refreshed proerty newsletter coming towards the middle fo the month.



If you have any queries you can book a free 15 minute zoom meeting with me.
 
Finally, don’t forget to make time for yourself and do not let your business run you, you should run your business.