The government has increased the late payment penalties for taxpayers within its ‘Make Tax Digital’ (MTD) regime.

The rises, which cover VAT and income tax, came into effect this month, or whenever an individual or business joins the MTD regime in question.

And they come as figures reveal HMRC collected a quarter of a billion pounds in late penalties in just two years between 2021 and 2023.

The new rates are:
• Three per cent of the tax outstanding where tax is overdue by 15 days
• An additional three per cent where tax is overdue by 30 days
• Plus 10 per cent per annum where tax is overdue by more than 30 days

Also from this month, the late payment interest rate charged by HMRC will rise by 1.5 percentage points. It means most paying at the Bank of England rate plus four per cent.
And HMRC has revealed it is looking at the penalty framework that applies when a taxpayer makes a mistake in their tax return or other tax document or omits to reveal a circumstance that affects their liability.

More than a million taxpayers failed to meet the most recent self-assessment deadline on January 31, almost double the number in the previous year.

A HMRC spokesperson told the ‘This is Money’ website: “Our aim is to support taxpayers to get their tax right and avoid fines altogether, with the overwhelming majority of customers filing on time.

“We charge penalties to encourage customers to meet their obligations, while acting as a sanction for those who don’t.”

• To discuss any tax issues and any of the points raised in this article please contact me on 01772 430000

A new mandatory system for income tax reporting is set to affect how hundreds of thousands of landlords and sole traders report their income to HMRC in the future.

The initiative is called ‘Making Tax Digital for Income Tax’ or ‘MTD for IT’ and the government says it is being introduced to reduce losses to Treasury coffers by improving record keeping and tax accuracy.

With 12 months to go until the new system is introduced, now is the time to start preparing.

If you are a sole trader or a landlord, or both, and have gross income of more than £50,000 in the 2024/25 tax year, the changes will affect you from April 2026.

From April 2027 it will be rolled out those with qualifying income of more than £30,000. And the government announced in its Spring Statement that it has plans to extend MTD for IT to sole traders and landlords with income over £20,000 from April 2028.

It means that instead of filing one Self Assessment tax return annually you have to keep digital records on a compatible piece of software and submit quarterly returns to HMRC.

There will also be final declaration once those four quarters have been submitted.

If affected, what does it mean for you?

MTD for IT is part of the overall digitalisation of UK tax which is being rolled out. You will be required by law to use what is termed ‘compatible software’ to:

• Keep and retain transaction-level (income and expenses) digital records for each self-employment and/or property business.
• Submit quarterly update reports of your year-to-date transactions for each self-employment and/or property business to HMRC.
• Finalise your end-of-year position by providing details of your other personal income sources, making adjustments, claiming reliefs and submitting your digital tax return to HMRC.

Starting with the 2026/27 tax year, this process will replace your annual self-assessment tax return. There will be no changes to your income tax payment dates but failure to comply with the new rules will result in financial penalties.

The MTD for IT rules are being applied to everyone within the set criteria, regardless of how good their current records are.

If affected, you need to make sure you are using an appropriate digital record-keeping system from April 6, 2026 and are ready to submit the first quarterly update report for the 2026/27 tax year, due on August 7, 2026.

HMRC will not be providing software, but the new requirements may not necessarily require a change in the systems that you are currently using. And if changes are needed to ensure your systems are compliant, various types of MTD-compatible software will be available.

This could be a good opportunity to review your current processes to identify any advantages that can be achieved through the use of ‘compatible software’. Cloud record keeping, for example helps with strategic planning due to real-time data.

What happens next?

HMRC may contact you over the coming weeks and months to inform you of the planned changes. That letter is for information purposes and you do not need to respond to it directly.

Depending on your current record-keeping system and VAT status, there may be more work involved.

WNJ can help in that. If you contact us now, we will have plenty of time to prepare, explore options and find a solution that works for you.

We are well experienced in handling HMRC digitalisation and supported many of our clients when a similar regime was introduced for VAT.

We work with our clients to find the best possible solution that brings as much value to them and their business as possible.

We can do it all for you – sign you up for MTD for IT, provide the compatible Making Tax Digital software, prepare and submit the bookkeeping for the four quarterly returns and also prepare and submit your final declaration.

However, if you prefer to carry some of these tasks yourself our team is here to review and help.

If you’d like more information and to discuss your individual needs we’re here and ready to help answer any questions. Please contact me at kim.holt@wnj.co.uk or call 01772 430000 to discuss.

As 2024 comes to a close it’s time to look ahead to the new year. Here are some key dates for your new diary. And don’t forget we’re here at WNJ to help you with any advice or support you may need in the next 12 months. Call us on 01772 430000.

January
January 1
Energy Price Cap
Ofgem is increasing the energy price cap from £1,717 to £1,738.
This is less severe than some of the increases seen in the previous year, but you may still find that your business is impacted by the additional costs.

Private school fees
Fees fees for terms starting on or after January 1 2025 will generally now be subject to UK standard-rated VAT, instead of being VAT exempt. This will also cover many deposits and prepayments made in 2024 or before, for 2025 and onwards school terms.

January 31
Self Assessment Tax Returns
This is the final deadline for electronic submission for individual, partnership and trust self assessment tax returns for the 2023/24 tax year. Anyone who has not yet paid the balance of their self assessment tax bill for 2023/24 will need to pay it by this date. The first payment on account for the 2024/25 tax year is also due.

March
March 2
Rail fare increases
Regulated train fares are set to increase by 4.6 per cent. The increase will apply to season tickets covering most commuter routes, some off-peak return tickets on long distance journeys and flexible tickets for travel in and around some major cities.
Train companies can set unregulated fares but they usually increase these by a similar amount. It is the lowest absolute increase in three years but will still add to travelling costs

April
April 1
National Minimum Wage
The National Living Wage, which applies to anyone aged 21 and over, increases to £12.21. This is a 6.7 per cent rise.
The rate paid to 18-20-year-olds will rise to £10, a 16.3 per cent increase. And 16-17-year-olds and apprentices will receive £7.55, an 18 per cent increase.

Stamp duty land tax
The government has confirmed that the temporary increase to stamp duty land tax (SDLT) free thresholds will end. The threshold for first time buyers reduces to £300,000. For everyone else the nil rate SDLT threshold reduces to £125,000.

Business rates
The standard multiplier for business rates increases to 55.5p. However, the small business multiplier – which applies to properties with a rateable value of less than £51,000 will stay frozen at 49.9p

Furnished Holiday Lettings (FHL) regime
The abolition of the FHL regime removes a longstanding tax advantage that treated qualifying holiday lets as trading rather than investment properties.
Holiday let owners will see their properties aligned with standard residential lettings for tax purposes. Profits will be treated as property income rather than trading income, restricting loss relief and changing the calculation of capital gains tax.
Those currently claiming capital allowances will need to review their position, though transitional provisions protect existing allowances. The changes particularly affect owners who planned to claim Business Asset Disposal Relief on eventual sale, as this 10 per cent rate will no longer be available.

April 6 – New tax year begins
Employers National Insurance
The Employers National Insurance (NI) rate increases to 15 per cent from 13.8 per cent for the new tax year. The Secondary Threshold – the threshold at which employer NI contributions begin to be paid – also reduces to £5,000 a year.
If you run your own payroll check that its software has been updated to take into account these changes.
The maximum Employment Allowance will go up from £5,000 to £10,500. In addition, the restriction that prevents employers that have paid more than £100,000 in employers NICs in the previous tax year from claiming has been removed.
It means all eligible businesses will now be able to claim the reduction, regardless of how much employer’s NICs they paid in 2024/25.

Dividend allowance
There is no change to the dividend allowance – it stays at £500 for the tax year.

Capital gains tax
The rate on gains subject to business asset disposal relief and investors relief will go up to 14 per cent from 10 per cent. The rate will increase to 18 per cent from April 6 2026. People considering selling their business or retiring will need to factor this into their plans.
The capital gains tax rate for carried interest for both basic and higher payers is increased to 32 per cent. The intention is for this to be brought within the Income Tax Framework from the 2026/27 tax year.

Residence based regime for foreign income and gains
The concept of domicile in tax regulations ends and a new residence-based regime begins. A Temporary Repatriation Facility (TRF) will be available for three years to taxpayers who previously used the remittance basis.
Individuals can elect to pay tax at the TRF rate of 12 per cent in the 2025/26 tax year on offshore funds they designate. The designated funds will not then be taxed on remittance to the UK.

Company car tax
The appropriate percentage for all company car users – assuming no change in vehicle – increases by one per cent.

Statutory family-related pay increase
Statutory maternity, paternity, adoption, shared parental leave and parental bereavement leave pay rates will increase from £184.03 to £187.18 a week for periods of leave from April 6.

Statutory Sick Pay (SSP)
Statutory Sick Pay increases from £116.75 per week to £118.75 per week for periods of sick leave from April 2025. Where a worker is on sick leave for less than a week, or a fraction of a week, the weekly statutory SSP rate is paid on a pro-rata basis.
Workers must earn at least the Lower Earnings Limit – which is £123 per week until April 2025 – to be entitled to SSP.
Additionally, SSP is only payable after the three-day waiting period that the worker is off sick; unless the worker previously received SSP within the last eight weeks.

Payroll
Update employee payroll records for the new tax year

April 7
State pension increase
The State Pension is set to rise 4.1 per cent in accordance with the triple-lock approach. This will take a full state pension to £230.25 per week.

April 19
Payroll
Submit your final Full Payment Summary and Employer payment summary for the year ended 5 April 2023 and pay any tax/NIC due for the year.

May
May 31
Each employee who was employed as at April 5 must be issued with a P60 form, on paper or electronically.

July
July 6
This is the deadline for submitting the 2024/25 tax year P11D forms to HMRC. It is also the deadline for submitting the return of Employment Related Securities.

July 19
Payment of Class 1A NICs by post: July 22, 2025 if paid electronically.

July 31
Payment on account deadline
This is the payment deadline for self-employed people who need to make a second payment on account towards their self assessment tax bill for the 2025/26 tax year.

October
October 5
Self assessment registration
This is the deadline for taxpayers to tell HMRC if they need to complete a self assessment tax return for the 2024/25 tax year and have not sent one before.
If you’re in a partnership and a new partner has joined you in the 2024/25 tax year, you should notify HMRC by this date as well.

October 31
Self assessment tax return
Anyone who wants to submit a paper self assessment tax return needs to submit it by midnight October 31.

December
December 30
Those self assessment taxpayers who wish HMRC to collect any tax due via their PAYE tax code should file their 2024/25 self assessment return by this date.

Other dates to be aware of
Corporation tax and company accounts
The deadlines for filing company accounts and corporation tax returns, as well as making corporation tax payments, are linked to a company’s accounting period end.
Companies with standard accounting periods need to pay corporation tax nine months and one day after their accounting period ends. The corporation tax return is due 12 months after the accounting period ends.
A copy of the statutory accounts also needs to be filed at Companies House. Accounts must be filed nine months after the company’s financial year ends. In addition, the annual confirmation statement must be completed every 12 months.

VAT returns and payments
VAT payment deadlines are usually one month and seven days following the end of the VAT accounting period, with the VAT return being due on the same date.

PAYE
For employers, PAYE deductions must be paid to HMRC by the 19th of each month or 22nd if the payment is made electronically.

Capital gains tax
For those who sell a second property in the UK, any Capital Gains Tax due must be paid and the gain reported within 60 days of completion.

The rise in employers’ National Insurance Contributions (NICs) unveiled in the Budget is undoubtedly a blow to some businesses and, indirectly, to employees.

Combined with the increases in the National Minimum Wage and potential costs associated with recent reforms in employment law, this raft of new measures will stretch employer wage budgets.

And that will potentially lead to slower growth in some employee wages or higher costs for consumers. It may also have an effect on business growth plans.

Businesses need to be aware of any impact these changes will have. Now is the time to take another look at your forecasts and assess what the new rates will mean to your projected figures – both in the short and longer term.

It is also good time to revisit business plans and see what effect the increased overheads may have. Open discussions are needed to find the best ways of managing any increased costs. As always, cashflow will be a vital part of all those discussions.

The chancellor said the rise in National Insurance hike was “difficult”, but the right choice in order to fund public services.

From April 6, 2025 the employers’ NICs rate will rise from 13.8 per cent to 15 per cent.

Added to that is a significant reduction in the threshold at which businesses start paying NI on a workers’ earnings – from £9,100 to £5,000.

The chancellor also announced a widening of availability and an increase in the amount of the ‘employment allowance’, which eligible employers can offset against their employers’ Class 1 NICs liability, from £5,000 to £10,500.

The employment allowance has only been available to businesses who have incurred an employers’ Class 1 NICs liability of less than £100,000 in the previous tax year but that restriction will be removed for 2025/26.

The announcement has not gone down well. Some of Britain’s biggest retailers have warned the chancellor her Budget will stoke inflation in the economy and spark job losses saying that tax hikes add nearly £2.5bn to the industry’s annual tax bill.

Sky News obtained the draft of a letter coordinated by the British Retail Consortium (BRC) to Rachel Reeves in which it produces a stark analysis of the impact of her statement.

It said: “The sheer scale of new costs in the Autumn Budget and the speed with which they occur, together with costs from a raft of other regulation, create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

The BRC’s members consist of the major supermarkets, including Asda and Tesco, as well as hundreds of other well-known chains, including B&Q’s parent, Kingfisher.

The reaction from manufacturers has also been far from positive. Neil Evans, managing director of Burnley manufacturer VEKA, issued a statement which said: “The rise in minimum wage, employer National Insurance rate and threshold reduction are not insignificant for businesses like ours – a large family-owned business, and key employers in the region.  The NI decision alone takes around £500,000 from our bottom line.”

He added: “It raises questions as to how this will be managed and what impact it will have on the wider supply chain and pricing. Inevitably and sensibly, increases are passed on through price rises for goods and services, ultimately affecting the consumer market and the money in people’s pockets.” 

Analysis by UKHospitality has revealed that the employment tax measures will increase the cost of employing a full-time staff member by at least £2,500.

However, Tina McKenzie, policy chair at the Federation of Small Businesses (FSB) pointed out some positives. She said: “Increasing the employment allowance for small businesses by a record amount is a very welcome move and we’re pleased the chancellor has heard us loud and clear.

“More than doubling it, from £5,000 to £10,500, will shield the smallest employers from the jobs tax, therefore is a pro-jobs prioritisation in a tough Budget.

“The decision to protect small businesses from an inflationary hike in business rates – by freezing the small business multiplier – will help small firms with premises across all sectors.

“Meanwhile, extending business rates relief, albeit at a lower level, for small firms in retail, hospitality and leisure will mitigate a potential cliff-edge tax hike for those in some of the toughest sectors.

“The true test of the Budget will be whether small businesses can grow and end the economic stagnation the UK has been stuck in.”

• To discuss any issues raised in this article or any Budget questions please contact me on 01772 430000

As predicted Rachel Reeves hiked Capital Gains Tax (CGT) – however the changes she announced were less drastic than many had feared.

CGT is tax on any profits or gains you make when you dispose of an asset. Assets not only apply to the sale or exit of business but can also apply to the sale of items such as offices and trademarks. Even the goodwill built up by your company could ultimately be taxable.

The chancellor announced that the lower capital gains tax rate will be increased to 18 per cent from 10 per cent, while the higher rate will climb to 24 per cent from 20 per cent. The changes are expected to bring in £2.5billion for the Treasury.

However, she maintained the £1m lifetime limit on capital gains from the sale of all or part of a company under business asset disposal relief (BADR).

BADR will remain at 10 per cent this year, before rising to 14 per cent in April 2025, and to 18 per cent from 2026/27

The chancellor stressed that this still represented a “significant gap compared to the higher rate of capital gains tax.”

There were pre-Budget fears that hiking the rate would deter investment, not only in large businesses but in SMEs. Tech entrepreneurs were also worried about the future of BADR.

The Federation of Small Businesses (FSB) was among those that campaigned hard to retain entrepreneurs’ relief, which was under significant threat.

Many commentators called for it to be scrapped, which would have resulted in entrepreneurs paying the full rate of CGT.

In a post-Budget statement, the FSB said: Although the rate will gradually rise, it’s welcome that FSB’s campaigning has led to a discounted rate being kept, with a clear differential.

“This is really important for small business owners who have been planning to sell their businesses for their retirement in place of a pension.”

• To discuss any issues raised by this article or by any of the Budget announcements, please contact me on 01772 430000