NI state pension top-up deadline looms

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People looking to maximise their state pension by plugging gaps in their National Insurance record have contributed to a total of 68,673 years, worth £35 million, since April last year.

HMRC’s analysis of the digital service available to fill gaps has shown that more than 37,000 online payments have been made.

The average online top-up payment is £1,835 and the largest weekly State Pension increase is £113.76.

HMRC and Department for Work and Pensions (DWP) are now reminding people they only have until April 5to check their National Insurance record and fill any gaps from 6 April 2006 onwards.

From April 6, 2025, people will only be able to make voluntary National Insurance contributions for the previous six tax years, in line with normal time limits.

The ‘Check your State Pension’ forecast service on GOV.UK is the quickest and easiest way people can check what their pension will be in retirement and take action if they need to. They can also use the HMRC app to check their forecast.

Angela MacDonald, HMRC’s second permanent secretary and deputy chief executive, said: “There are just weeks left to check and fill any gaps in your National Insurance record from 2006 onwards to boost your state pension entitlement.

“Don’t delay – it is quick and easy to check your National Insurance record on GOV.UK and it could help your finances in retirement.”

Since the launch of the enhanced digital service in April last year, more than 4.3million people have used it to check their state pension forecast.

The end-to-end service means customers can also use it to check and view gaps in their National Insurance record, calculate the difference any payment will make to their state pension and then make one payment for however many years they need to top up.

Men born after April 6,1951 or women born after April 6, 1953 are eligible to make voluntary National Insurance contributions to boost their new state pension.

It is important that people look carefully at their situation and their options. Many taxpayers will have sufficient National Insurance to qualify for a full state pension without the need to pay more.

Under the new system, which was introduced in April 2016, you typically need a 35-year National Insurance contribution record to qualify for the full amount of state pension.

• To discuss any issues raised by this article please contact me on 01772 430000

Holiday lets tax advantage to end

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April will see the government’s decision to abolish the Furnished Holiday Lettings (FHL) regime put into force.

The move removes a longstanding tax advantage that treated qualifying holiday lets as trading rather than investment properties.

From April 6 2025, 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.

In a statement following the announcement HMRC said: “The distinction for a furnished holiday let was introduced in 1984 and provided different and more beneficial tax treatment for short-term lettings within the property investment sector.

“Repealing the beneficial tax treatment for furnished holiday lettings promotes fairness by removing the tax advantages that furnished holiday let landlords have over other residential property landlords.”

The removal of FHL will have a number of impacts. Mortgage interest on FHLs is currently treated as a deduction from rental income for income tax purposes.

From April 2025, relief will instead be given as a 20 per cent tax credit for higher and additional rate taxpayers. This means a reduction in tax relief for individuals from 40 per cent and 45 per cent respectively.

Also, FHL profits will no longer be treated as relevant earnings for the purpose of claiming tax relief on pension contributions or for Class 2 and voluntary Class 3 NIC purposes.

People currently claiming capital allowances will need to review their position, though transitional provisions protect existing allowances.

The changes particularly affect owners who had planned to claim Business Asset Disposal Relief on eventual sale.

From April 2025, the normal residential property CGT tax rate – currently 24 per cent – will apply.

The Country Land and Business Association (CLA) has condemned the move to remove FHL tax support, saying it will “punish local economies”.

Its president Victoria Vyvyan said: “For many farmers and landowners, diversification into the holiday lettings market is a business necessity.

“The short-term rental and holiday let sector contributes billions to the wider economy, supporting local shops and restaurants and creating tens of thousands of jobs.

“Abolishing the Furnished Holiday Lets regime will only punish people who are helping to grow local economies.

“It is far from a tax loophole, providing a crucial support mechanism, strengthening the resilience and viability of many rural businesses that in turn enables them to invest in their work looking after the environment and feeding the nation.

“By converting unused or underutilised properties, that may not be suitable as homes in the private rented sector, into high-quality holiday accommodations, property owners contribute to the local community’s economic vitality.”

• To discuss any issues raised by this article please contact me on 01772 430000

‘Call time on NIC hike’ say hospitality businesses

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Looming April cost increases could force 70 per cent of hospitality businesses to cut staff, new research has revealed.

Trade bodies are now calling on the government to work with them and delay employer National Insurance Contributions (NICs) threshold changes so that hospitality can continue to contribute to economic growth.

Chancellor Rachel Reeves announced in October’s budget that government would raise employer NICs to 15 per cent in April, while also lowering the threshold at which contributions are due to £5,000 from £9,100.

In addition, the national minimum wage will rise by 6.7 per cent to £12.21 an hour from April.

Businesses are warning they will be forced to make painful decisions to weather the new costs. 

A joint survey by leading hospitality trade associations has revealed how the sector fears it will be drastically affected by new employment costs and the reduction in rates relief come April.

The report reveals that 70 per cent will reduce their employment levels, risking job losses and lost income for workers.

The survey of pubs, bars, restaurants and hotels found 60 per cent looking to cancel planned investment as a result of the increased expenses while 29 per cent will reduce trading hours.

A quarter of them say they have no cash reserves left and 15 per cent believe they will have to close at least one site.

The British Beer and Pub Association, the British Institute of Innkeeping, Hospitality Ulster and UKHospitality are highlighting the strong record the sector has in delivering economic growth.

Hospitality was one of the top contributors to GDP growth in November and December 2024.

They say a delay to the changes to the employer NICs threshold would avoid the immediate impact on jobs and investment revealed in the survey. Instead, it would allow hospitality to deliver economic growth further and faster.

When asked how the government could support the sector, businesses cited a reversal of employer NIC changes as the second biggest priority after a lower rate of VAT for hospitality.

In a joint statement, the trade bodies said: “These figures should serve as a clear warning that pubs, brewers and hospitality venues will be forced to make painful decisions to weather these new costs, which will have damaging impacts on businesses, jobs and communities.

“At a time when hospitality has been one of the top contributors to economic growth, the last thing the government should be doing is piling on costs that will impact employment and cut off our ability to grow.

“We want to work with government so we can continue to vitally boost the economy, which is why we urge them to delay the changes to the employer NICs threshold. This would help save jobs and allow the sector to continue on its growth path.

“If it doesn’t act then businesses are clear that the impact on communities, employees and supply chains will be significant.

“They have warned about potential lost earnings, lost jobs, reduced trading hours and, in some cases, business failure. This would mean the loss of essential community hubs that would otherwise drive the local economy and create jobs.

“Our message to government is to delay its changes to the employer NICs threshold and allow hospitality to continue to deliver economic growth, regenerate our high streets and support local communities.”

Nearly 300 pubs closed across England and Wales in 2024 – an equivalent of six a week – according to latest figures from the British Beer and Pub Association (BBPA)

• To discuss any issues raised by this article please contact me on 01772 430000

HMRC set to end overtaxing pension issue

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HM Revenue and Customs (HMRC) is changing its systems to end emergency taxing pensioners on their retirement savings.

It has announced plans to improve tax code processing for people as they start to receive their private pension.

The changes, starting in April, aim to ensure people pay the correct amount of tax right from the beginning of their payments.

When pension freedoms were introduced in 2015, people with defined contribution (DC) pensions were permitted to take their cash out in chunks rather than having to buy an income for life.

At that time HMRC chose to apply emergency tax codes to those withdrawals, meaning that people often ended up paying more tax than they should have and then had to claim it back.

According to reports, more than 470,000 claims have been made for refunds totalling £1.37bn through the HMRC system.

Now it has announced that it will move more quickly to replace emergency tax codes with regular ones which will make sure the correct amount of tax is deducted in real time.

An HMRC spokesperson said: “From April 2025 we are improving how tax code information is used for those people who are new to receiving a private pension, so they pay the right amount of tax from the outset.

“We will automatically update the tax code for customers who are on a temporary tax code and would benefit from being on a cumulative code — this means they’ll avoid an overpayment or underpayment at the end of the year.

“There is no need to contact HMRC and once a tax code has been changed, we’ll inform customers by letter or digitally if they’ve signed up for paperless in the HMRC app or online.”

The spokesperson added: “This small change is part of our wider commitment towards improving our customer service experience.”

• To discuss any issues raised by this article please contact me on 01772 430000

Finance experts offer support

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Business owners and entrepreneurs in Lancashire are being urged to make the most of a service giving them access to a team of finance experts to help them become investment-ready, source and secure growth finance.

Access to Finance; which is part of Boost; Lancashire’s Business Growth Hub, offers fully funded, one-to-one support to ambitious companies.

It has put together a team of five advisers who will work with them to improve their financial planning, advise on the most appropriate type of growth finance, prepare funding applications and liaise directly with investors and lenders through the application process.

The team includes former bank managers, business owners, and equity advisers with a combined experience of more than 140 years across the business finance industry.

Boost’s current programme, which is funded by Lancashire County Council alongside the UK Shared Prosperity Fund (UKSPF) allocations of 10 local authorities, is currently due to end in March and businesses are being reminded to make the most of the service to support their growth ambitions.

Mark Gibbons, lead adviser at Access to Finance, said: “Recent analysis from the British Business Bank shows that external finance is on the rise among businesses both regionally and across the UK.

“We are seeing an increase in demand for finance support which is why we have invested in our team in recent months. We have five experts who can advise businesses across the full range of finance options, making sure they receive the best possible support every time they contact Boost.

“Our specialist team can help businesses of all sizes to ensure you have the correct finance in place. Get in touch to understand how our experts can support your growth ambitions.”

Access to Finance is managed by Lancashire County Council as part of Boost. Boost is funded by Lancashire County Council, the Department for Business & Trade (DBT), and UK Shared Prosperity Fund (UKSPF) allocations from ten Lancashire partner local authorities.

Businesses in Boost’s local authority partner districts can access the Access to Finance service: Blackburn with Darwen Council, Burnley, Chorley, Fylde, Hyndburn Pendle, Preston, South Ribble, West Lancashire and Wyre.

The team has expertise in supporting businesses on a range of growth strategies including gaining equity investment, supporting an acquisition, trading internationally, expanding physical space, or developing a new product or service.

In addition to one-to-one support, the service operates an Investment Academy programme, which is delivered by the Access to Finance team alongside private sector partners.

The programme is designed to help businesses understand the process of an equity raise. Expressions of interest can be accessed via the Access to Finance website.

• To discuss how we can help your business on its finance planning and scale-up journey please contact me on 01772 430000

No tax changes for online sellers

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People selling unwanted items online can continue to do so “with confidence” and without any new tax obligations, HM Revenue and Customs (HMRC) has confirmed.

Its reminder came as online platforms started sharing sales data with HMRC from January – a new process that, when announced last year, generated inaccurate claims that a new tax was being introduced.

But whether selling last year’s festive jumper, getting some money back for a child’s outgrown baby clothes, or quietly offloading an unwanted Christmas present or two – absolutely nothing has changed for online sellers.

Angela MacDonald, 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.

“As has always been the case, some people who are trading through websites or selling services online may need to be paying tax and registering for self assessment.”

The new reporting requirements for digital platforms came into effect at the start of 2024. It is not a new tax and whether people are selling personal items on eBay, renting homes out on Airbnb or delivering takeaways through Just Eat – no tax rules have changed.

Those who sold at least 30 items or earned roughly £1,700 (equivalent to €2,000), or provided a paid-for service, on a website or app in 2024 were contacted by the digital platform in January to say their sales data and some personal information will be sent to HMRC due to new legal obligations.

The sharing of sales data does not automatically mean the individual needs to complete a tax return. However, those who may need to register for self assessment and pay tax, include those who:

• buy goods for resale or make goods with the intention of selling them for a profit
• offer a service through a digital platform – such as being a delivery driver or letting out a holiday home through a website
• AND generate a total income from trading or providing services online of more than £1,000 before deducting expenses in any tax year

HMRC says it is working alongside online platforms to ensure sellers receive clear guidance on their tax responsibilities.

Anyone who is unsure if their additional income could be taxable can search ‘online platform income’ on GOV.UK. To discuss any tax issues please contact me on 01772 430000

Support needed for small businesses

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The government is being urged to make good on its statements that growth is its number one priority and to think again about its inheritance tax plans.

The Federation of Small Businesses (FSB) says support for small firms must be at the core of the three strategies which will be unveiled this spring: the Industrial Strategy, the Small Business Strategy and the Trade Strategy.

And it has warned that nine out of ten small firms are concerned about changes to employment rights.

Martin McTague, who chairs the national organisation, said: “With two-thirds saying they are preparing to hire fewer staff, the Bill risks dampening growth, and harming the economy by reducing employment levels and deterring expansion.”

He added: “The forthcoming Spending Review must be used by the government as an opportunity to look at how to support small businesses.

“Small business owners, limited company directors, and the self-employed should be shielded from future tax rises, as it is small and medium-sized businesses who are the ones with the greatest potential to grow, if given the right conditions.”

Meanwhile, UK wealth managers have warned chancellor Rachel Reeves over plans to levy inheritance tax (IHT) on pensions.

The changes announced in the autumn Budget, aim to raise £1.5bn annually for the Treasury by 2030 by making pension funds part of inherited estates.

However, chief executives from major UK wealth managers, including Interactive Investor, Quilter and AJ Bell, have written directly to the chancellor sharing their concerns.

The business leaders have described the proposals as “flawed and potentially damaging”. And they warned: “The complexity of the proposed approach, namely bringing all pensions into estates for IHT, will lead to substantial delays paying money to beneficiaries on death and cause distress for bereaved families.”

They are calling on government to “work with the pensions industry to agree a simpler method of achieving the policy aim”.

The government estimates its proposals will bring approximately 1.5 per cent more estates within the scope of death duties by 2027-28.

Latest figures have revealed that IHT brought in more than £6bn for Treasury coffers. In the nine months to December were up £600m compared with the same period in 2023, according to HM Revenue and Customs figures.

The changes to the IHT regime prove a good starting point when it comes to turning your attention to estate planning.

Now it’s a good time to ensure it is up to date and is fit for purpose. It should meet all your wishes when it comes to the distribution of your assets through your family.

• To discuss any issues raised by this article please contact me on 01772 430000

A tough Budget for business

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Keir Starmer warned the Budget was “going to be tough”. He wasn’t wrong when it comes to the impact on business.

As widely predicted, employers’ National Insurance contributions were high on chancellor Rachel Reeves target list. And she did not hold back with measures to raise £25bn a year for government coffers.

The rise from 13.8 per cent to 15 per cent is high enough but the significant reduction in the threshold at which businesses start paying NI on a workers’ earnings – from £9,100 to £5,000 – delivers a heavy blow to already under pressure employers.

There was also confirmation that the basic rate of Capital Gains Tax will rise from 10 per cent to 18 per cent, while the higher rate will increase from 20 per cent to 24 per cent.

The chancellor told the Commons her mission was growth and said: “The only way to drive economic growth is to invest, invest, invest.”

However, the tax rises, coupled with increases in the National Living Wage that also came with the Budget, will have many business owners asking themselves if they should or could invest in their growth.

The chancellor has been at pains to stress there would be no tax rises for ‘working people’. The fact is that the measures she has announced will have an impact on them in the real world when it comes to creating jobs and investment by their employers in their futures.

There was some good news for the hard-pressed retail, hospitality and leisure sectors with a 40 per cent relief on business rates to help the high street.

The small business tax multiplier, which applies to properties with a rateable value of less than £51,000, will also be frozen next year.

And a cut in the duty on draft alcohol by 1.7 percentage points meant1p off the price of a pint.

The freeze on fuel duty will also remain in place, which is some comfort for businesses operating transport fleets.

As with all Budgets, the devil is in the detail, however, overall, the negatives for business owners would seem to far outweigh the positives. ‘Tough’ just about sums it up.

The bottom line of the Budget announcements is, it you are an employer or business owner, it may be necessary to re-group and update your business plans for 2025 and onwards.

• To discuss any issues raised in this article and the Budget please contact me on 01772 43000

SME R&D tax credit claims fall

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The number of small and medium-sized firms claiming research and development tax credits fell sharply last year, according to new figures.

The provisional estimated total number of research and development tax credit claims for the tax year 2022-2023 was 65,690, a fall of 21 per cent, according to HM Revenue and Customs (HRMC).

And although the total relief support claimed rose by one per cent to £7.5billion, the number of claims dropped by 23 per cent in the small and medium-sized enterprise scheme.

Revealing the figures HMRC said: “The large fall in the number of R&D claims for the tax year ending March 2023, in particular for the SME scheme, follows the implementation of the additional information form (AIF).

“This form requires companies to provide additional information to support an R&D claim and was made mandatory for all R&D claimants for claims submitted to HMRC from 8th August 2023.

“This requirement was brought in alongside other administrative changes to the schemes in order to improve levels of compliance in the R&D reliefs.”

The Information and Communication, manufacturing, and professional, scientific and technical sectors continued to have the greatest volume of claims, making up 67 per cent of that total and 70 per cent of the amount claimed for the tax year.

In the 2022 Autumn Statement widespread changes to R&D relief rates were announced, taking effect from April 1, 2023 onwards.

There were warnings that tens of thousands of innovative small firms would scale back investment if the then Conservative government pressed ahead with plans to “slash” R&D tax support for SMEs.

HMRC says the impact of the changes that were made “are not yet fully reflected in the statistics”.

To discuss if your business is eligible for R&D tax relief please get in touch on 01772 430000.

Strategy goes for growth in key sectors

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Eight sectors have been selected as the focus of the new government’s ‘modern’ industrial strategy which has been widely welcomed by business leaders.

The aim is to create a “pro-business environment” and play to the UK’s strengths, with the focus on growth driving sectors including creative industries and financial services.

Business secretary Jonathan Reynolds has pledged an end to instability, declaring “our modern Industrial Strategy will hardwire stability for investors and give industry the confidence to plan for the next 10 years and beyond.”

The key sectors the strategy will concentrate on are: advanced manufacturing; clean energy industries, creative industries; defence; digital and technologies; financial services; life sciences and professional and business services.

The government says “ambitious and targeted sector plans will be designed in partnership with business, devolved governments, regions, experts, and other stakeholders, through bespoke arrangements tailored to each sector.”

It has also been announced that Clare Barclay, chief executive of Microsoft UK, will chair government’s new Industrial Strategy Advisory Council.

The council is being set up to inform the development of the strategy through its expertise and latest evidence, working with business, trade unions, devolved governments, local leaders and academia.

The government is also asking business to help shape the strategy after publishing a green paper to kickstart its delivery earlier this month.

Views are being sought from business, international investors, unions and any other interested parties, on the overall vision, approach to growth sectors and the policy levers needed to drive investment.

The approach has been widely welcomed. Stephen Phipson, chief executive of Make UK, said: “We live in a world which is massively different to a decade ago and simply leaving the economy and, industrial strategy, to the free market is an ideology which is long past its sell by date.

“This is a welcome first step in addressing the Achilles heel of the economy which has left the UK an outlier among advanced countries.

“It sets out a clarity of vision for how the resources of government and, in particular, each department can be convened towards a single objective of long-term growth across all regions.”

Dr Roger Barker, director of policy at the Institute of Directors, added: “The government’s green paper is a necessary first step in the development of an industrial strategy which provides a more stable and predictable framework for business investment.

“It is important that time is taken to get it right, so that policy commitments are shielded from short-term political pressures, facilitating the willingness of the private sector to make long-term investment decisions.”

Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), said: “This is a refreshingly thoughtful approach for UK industrial policy. If it’s coupled with a clear pro-small business agenda at the Budget, there will be renewed optimism that the Government can get its growth mission right.

“It will be crucial that the developing strategy is responsive to the needs of the whole supplier base, particularly where the interests of suppliers and their big customers don’t align, and that policy levers are selected that have the reach needed to give a positive business platform for small firms.

“Small businesses need a renewed focus on economic growth and it’s encouraging that this consultation emphasises the need to drive investment and provide opportunities across our economy and through our international trading relationships.

“This is so much more than having an industrial strategy ‘document’. We agree that partnership will be key to creating a nurturing environment for small firms to thrive in.

“It’s crucial the strategy works for small firms, as well as big, and addresses the issues that SMEs deal within these sectors and areas – and we look forward to working with government to provide the small business voice as the strategy moves forward.

“Small firms are keen to innovate and take on new technology, yet are often held back by a lack of time and funding. We hope that this strategy will place a renewed emphasis on enabling small firms to use new ideas and tech, increasing their adoption further, boosting R&D support and increasing the UK’s productivity.”

The industrial strategy and growth-driving sector plans will be published alongside the Spending Review in spring 2025.