Do you do your own bookkeeping in Xero? – we have something that might save you some time!

Xero have recently added a new feature for posting purchase invoices from your suppliers that we wanted to share with you.

In the ‘bills’ section on Xero, there used to be two main ways of getting data inputted into Xero. You could either manually type out the purchase invoice, or copy it from a previous bill and attach a pdf copy of the bill on Xero, or you could have used something like Hubdoc or Dext which integrates with Xero, which would analyse the purchase invoice for you using AI and post it to Xero for you along with a copy of the pdf.

Using a separate app like Hubdoc, Dext or Autoentry, although was a bit of a speedier way of processing purchases (especially if you had a lot of them), was a bit confusing at times having to go into a separate app. Plus, Dext and Autoentry have a separate subscription cost.

Xero have released a ‘upload bill’ function. When you are in the bills section of Xero, click the green down arrow next to the ‘New Bill’ box, and select ‘upload bills’.

You can then drag and drop pdfs of your purchase invoices into the upload bills box (or select them from a file on your computer). Xero then works its magic, and creates draft bills for you to approve. It will try to automatically populate as many fields as possible, such as the contact, date, total, due date and reference fields. It might not capture everything for every bill, so you’ll need to check it before you press post, but we’ve been impressed by it so far.

If you process a lot of purchases, something like Hubdoc or Dext might still overall be best for you, but if you are only processing a relatively small number of bills each month, we think this is a really good option.

Do get in touch with a member of our business services department if you need further details.

By Emma Green

 

 

Spring Statement March 2025

A balancing act

In her first Budget in October 2024, Rachel Reeves promised that there would only be one ‘fiscal event’ each year – she would not make significant tax changes more frequently. As she repeatedly said during her Spring Statement, the world changes rapidly: economic and political events can disrupt the forecasts that measure her compliance with her self-imposed fiscal rules. The decision to increase defence spending, reductions in expected economic growth, the risk of US tariffs and rising borrowing costs had combined to remove the ‘headroom’ that had allowed her to predict that she would balance the books by 2030. If she was determined to keep to the fiscal rules, she would have to close that gap; but if she raised taxes, she would break the promise of just one fiscal event each year.

The Chancellor announced a range of policies to restore the ‘headroom’, without any significant changes to taxation. There will be cuts to civil service expenditure, to welfare and to foreign aid, making it possible to increase defence spending to 2.5% of GDP by 2027. The welfare reforms are substantial and controversial – for example, the government’s own Impact Assessment on the changes to the Personal Independence Payment (PIP) rules states that 370,000 current recipients are expected to lose their entitlement (when they have an award review) and 430,000 future potential PIP recipients will not receive the PIP they would otherwise have been entitled to. The average loss is £4,500 per year.

Reforms to planning rules are expected by the Office for Budget Responsibility to increase GDP growth, helping the Chancellor to meet her targets. There are several problems with this. As the Chancellor says, the world changes rapidly, and a forecast stretching five years into the future, with a very small margin of ‘headroom’, is likely to need revision again and again to keep meeting the rules. We cannot predict what tax changes might be required in the next Budget in the autumn.

There were a few new tax-related announcements, mainly to do with the administration of tax. The government will ‘invest’ in more compliance officers and pursue more prosecutions – an increase from 500 to 600 a year. If HMRC could collect all the tax that it believes is due, then the Chancellor would have ‘headroom’ to spare.

This document sets out brief summaries of the main changes that are coming in each area, as well as highlighting some things that have not changed. If you would like to discuss what it all means for you, we will be happy to help.

Summary of changes

Because this was not a ‘fiscal event’, the Chancellor did not mention the very significant tax changes that have been announced in the past to come into effect in the future – including some that have been the source of controversy and protest, such as the increases to Employers’ National Insurance Contributions coming in April 2025 and the cuts to Inheritance Tax Agricultural and Business Property Reliefs in April 2026. In order to help keep track of what is happening and when, this document summarises the main changes that we already know about, and explains their impact. The following is a quick reminder, and these points are covered in more detail in the pages that follow. Tax rate tables are included at the end of the document.

Changes from April 2025

  • New residence-based system of taxation for foreign income and gains with abolition of remittance basis for foreign domiciled individuals
  • Scope of IHT depends on long-term residence rather than domicile
  • Increases in company car benefits
  • All new double cab pick-ups to be treated as cars, not vans
  • Increases in Employers’ NICs and Employment Allowance
  • Increases in CGT rates for gains on Business Asset Disposal Relief and Investors’ Relief assets, and on ‘carried interest’ receipts
  • Extension of Agricultural Property Relief to land managed under an environmental management agreement
  • Significant changes to business rates reliefs
  • Changes to Audio-Visual Expenditure Credit (AVEC)
  • Late payment penalties for VAT increased
  • Furnished Holiday Lettings regime ends
  • Stamp Duty Land Tax thresholds lowered
  • Rate of interest on overdue tax and VAT increases by 1.5 percentage points

Later changes

  • ‘Payrolling’ of taxable benefits becomes compulsory – April 2026
  • 100% Agricultural Property Relief and Business Property Relief expected to be restricted to first £1 million of an estate, with 50% relief above that – April 2026
  • Business Property Relief on shares quoted on AIM and similar markets restricted to 50%– April 2026
  • Unused pension pots become liable for Inheritance Tax on death – April 2027
  • Making Tax Digital for Income Tax Self-Assessment becomes compulsory for those with qualifying income above £50,000 – April 2026
  • MTD for ITSA extended to those with income above £30,000 – April 2027 – and £20,000 – April 2028

Personal Income Tax

Tax rates and allowances – 2025/26 (Table A)

The main personal allowance and the 40% threshold will remain at their 2022/23 levels until the end of 2027/28. Price inflation from February 2022 to February 2025 was 17.5% (based on the Consumer Prices Index): if the allowance and threshold had been uprated by the same amount, they would be £14,770 and £59,070 in 2025/26 rather than £12,570 and £50,270.

The income level above which the personal allowance is tapered away remains £100,000; it will be reduced to zero when income is £125,140, which is also the threshold for paying 45% tax. In the tapering band, the loss of tax-free allowance creates an effective marginal rate that is higher – 60% on most income, over 50% on dividends, and more again in Scotland because of the higher tax rates there.

The loss of eligibility for tax-free childcare allowances at this level can make £100,000 an even more expensive ‘cliff edge’.

High Income Child Benefit Charge (HICBC)

The HICBC continues to apply to the higher earner of a couple where one receives Child Benefit and either of them has income of more than a set threshold. For 2024/25, the threshold was raised from £50,000 to £60,000; the clawback is calculated at 1% of the total benefit for every £200 of income between £60,000 and £80,000, so that the whole benefit is lost when income reaches that upper limit. The government is not proceeding with the idea of basing HICBC on combined family income rather than the income of the higher earning partner.

From summer 2025, employed individuals liable to the HICBC will be able to report their family’s Child Benefit payments through a new digital system and will be able to pay the charge through PAYE rather than having to register for self-assessment.

Scottish rates and allowances 2025/26 (Table A)

The Scottish government has the power to set its own income tax rates for Scottish taxpayers for non-savings, non-dividend income. Many Scottish taxpayers now pay a significantly higher amount of income tax than those elsewhere in the UK, although some low earners pay less. Some of the lower thresholds have been raised for 2025/26, but the higher thresholds have been frozen: for example, the 45% rate still starts at £75,000 rather than £125,140, and the Scottish top rate is 48%.

The Welsh government has similar powers for Welsh taxpayers but has not varied the main UK rates.

Dividend income

The dividend allowance exempts some dividend income from tax, although that income still counts towards the higher rate thresholds. For 2024/25, the allowance was reduced to £500 (unchanged for 2025/26). This increases the tax liabilities of those with dividend income above the threshold, and will also require more people to file tax returns to declare tax liabilities that previously would have been covered by the allowance. HMRC receives interest data from banks and building societies, but does not have a system to collect comprehensive information about individual taxpayers’ dividend income.

The tax rates on dividend income over £500 remain unchanged: the ordinary rate, paid by basic rate taxpayers, is 8.75%, the upper rate is 33.75%, and the additional rate is 39.35%. These rates apply across the UK.

The 33.75% rate also applies to tax payable by close companies (broadly, those under the control of five or fewer shareholders) on ‘loans to participators’ that are not repaid to the company within 9 months of the end of the accounting period.

The reduction in the dividend allowance and the previous raising of the tax rates increase the relative attractiveness of holding shares in a tax-free ISA. Dividends arising within an ISA are not taxed and do not count towards the allowance.

Savings income

The savings allowance remains £1,000 for basic rate taxpayers, £500 for 40% taxpayers and nil for 45% taxpayers. The higher interest rates that have been available in recent years are likely to mean that more people will have savings income above these limits and will therefore need to declare it in order to pay tax.

The savings rate band remains at £5,000. Non-savings income is treated as the ‘first slice’ of income, using the tax-free allowance and the savings rate band; if any of the £5,000 band is not used by non-savings income, any savings income falling within that band is taxed at 0%.

Foreign domiciled individuals

Individuals who are classed as ‘not UK domiciled’ (often referred to as ‘non-doms’) have enjoyed a number of tax advantages in relation to foreign income and gains (‘FIG’). If the individual claimed the ‘remittance basis of taxation’, FIG was taxed only if the money was brought to the UK. Some of these advantages have been restricted in recent years, but the system has been fundamentally reformed with effect from 6 April 2025. In future, taxation will be based on residence status rather than domicile.

The new regime

Individuals who have not been UK resident in the last 10 years, who become UK resident on or after 6 April 2025 and opt into the regime, will be exempt from income tax on most of their FIG for the first four years of residence. After that, they will be taxable on the same basis as other UK residents.

Someone who became UK resident (after 10 years of non-residence) in any of the three tax years before 2025/26 will be able to use the new FIG regime to exempt their FIG from UK taxation for any of their first four years of residence that fall after 2024/25.

Opting in to the FIG regime has some drawbacks (e.g. loss of personal allowance), so advice should be taken before doing so.

Where a remittance basis user has accumulated FIG before 6 April 2025, this will continue to be taxed if it is remitted on or after 6 April 2025. However, a Temporary Repatriation Facility (TRF) is available, which will allow such individuals to elect to pay tax at a reduced rate on pre-6 April 2025 FIG that has not yet been remitted.

This FIG must be identified on the tax return for whichever year the TRF is being used. The TRF is available in 2025/26, 2026/27 and 2027/28, with the rates of tax payable being 12% in the first two years and 15% in 2027/28. The FIG identified in this way can then be remitted to the UK in that year or subsequent years without any further tax charges.

Under the current Inheritance Tax (IHT) regime, the extent to which foreign assets fall within the scope of the tax depends on domicile status. For UK-domiciled individuals, their worldwide assets are chargeable, whereas the foreign assets of non-doms are outside the scope.

IHT will also move to a residence-based regime from 6 April 2025. UK IHT will apply to worldwide assets when a person has been resident in the UK for at least 10 of the last 20 tax years (or, for those under 20 years old, if they have been UK-resident for the majority of their life).

A person remains fully within the scope of IHT for between 3 and 10 years after leaving the UK (depending on duration of residence). These are complicated rules, and detailed guidance is to be published on GOV.UK in April. Anyone affected by them should take advice and make sure they understand the opportunities and potential pitfalls.

Employees

Company cars and fuel (Table C)

The basis for taxing company cars and fuel provided for private use is set out in the Table. Annual increases in the rates for use of the car have been announced up to 2029/30. The tax charges will continue to be lower on electric vehicles compared to petrol and diesel vehicles in order to incentivise their take-up, but there will be significant increases in the absolute amounts of those tax charges.

For 2025/26, the percentages to be applied to the list price of the car when calculating the car benefit all rise by 1 percentage point. Although this doesn’t sound much, for electric cars it will represent a 50% increment on the current taxable benefit (2% becomes 3%). By 2029/30, the benefit will be based on 9% of the list price, 4.5 times what it is now.

The figure used to calculate the benefit of free use of business fuel for private journeys increases to £28,200 in 2025/26 from £27,800.

The taxable amounts for the availability of a van for more than incidental private use, and for an employee’s private use of fuel in a company van, normally increase in line with inflation. For 2025/26, the figures become £4,020 and £769 for these benefits. Electric vans remain a tax-free benefit.

Double cab pick-ups (DCPUs)

Vehicles that are classified as ‘vans’ for tax are more favourably treated for taxable benefits on employees who use them, and also for tax deductions for the employer. DCPUs with a payload of 1 tonne or more have traditionally been treated as vans, but following a court decision this is due to change for newly acquired DCPUs from 1 April 2025 (companies) or 6 April 2025 (sole traders and partnerships). If a new DCPU is available for an employee’s private use, the taxable benefit will be calculated in the same way as for a car – based on the vehicle’s list price and emissions rating.

DCPUs that were bought or leased before the change will continue to enjoy the current benefit-in-kind treatment until 5 April 2029.

Official rate of interest

The official rate of interest is used to calculate tax charges on beneficial accommodation and loans provided by employers. For many years, it has been fixed at the beginning of each tax year – the absence of changes during the year has made for simpler and more certain calculations. From 6 April 2025, the rate can change during the year and will be reviewed quarterly. Accommodation benefits will still be calculated using the rate on 6 April, but loan benefits will be affected by in-year changes.

The rate is going up from 2.25% p.a. to 3.75% p.a. on 6 April 2025.

Payrolling benefits: April 2026

For some years, accounting for taxable benefits through the payroll – known as ‘payrolling benefits’ – has been optional: it simplifies year-end PAYE procedures, as payrolled benefits do not have to be reported on a P11D form. From April 2026, payrolling of most benefits will become mandatory. Employers should review their systems in good time to make sure that they are ready.

National Insurance Contributions (NICs)

Class 1 thresholds and rates (Table D)

For paydays on and after 6 April 2025:

  • the rate of secondary 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 PAYE 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 significant extra cost for businesses and, because of the substantial 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 in 2025/26 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). The increases in the National Living Wage (NLW) and National Minimum Wage, that take effect in April, will also have a knock-on effect on employers’ NICs charges.

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 EA is only claimable if 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 for the first time.

Note that other restrictions on claiming EA (e.g. for certain single-director companies and domestic employees such as a nanny) remain unchanged.

It is possible to backdate EA claims for the previous four tax years so, when thinking about eligibility for 2025/26, also consider whether EA could have been claimed for an earlier year.

Class 2 NICs

The self-employed used to establish entitlement to contributory benefits such as the State pension by paying Class 2 NICs. These were compulsory if annual profits exceeded the Small Profits Threshold (£6,845 for 2025/26). Self-employed people with profits above this level now build up entitlement to benefits without paying Class 2 NICs. If profits are below this level, they can do so by paying Class 2 NICs voluntarily at a rate of £3.50 per week (payable annually through self-assessment). This will be cheaper than paying Class 3 voluntary contributions, which are £17.75 per week.

Savings and Pensions

Individual Savings Accounts (ISA)

The investment limits for 2025/26 remain £20,000 for a standard adult ISA (within which £4,000 may be in a Lifetime ISA – unchanged since 2017/18), and £9,000 for a Junior ISA or Child Trust Fund.

These limits have been frozen until April 2030.

Pension contributions (Table B)

Before the 2024 Autumn Budget, there were fears that the Chancellor might reintroduce income tax charges on pension pots above a ‘lifetime allowance’, or limit the amounts that can be drawn tax-free. In the event, no such changes were made; instead, an Inheritance Tax charge on undrawn pensions was announced to be introduced in 2027 (described below under Inheritance Tax). If the Chancellor needs to raise money by the next Budget, there will no doubt be further speculation that this would be somewhere she could impose charges without breaking her manifesto pledges.

The level above which contributions to a registered pension scheme may trigger an Annual Allowance charge remains £60,000.

The maximum amount that can be withdrawn as a tax-free lump sum remains £268,275, unless the person is entitled to ‘protection’ in relation to the original introduction of the Lifetime Allowance or any of the subsequent reductions of the limit.

Capital Gains Tax

Rates and annual exempt amount

With the exception of Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) gains, the rates of CGT for 2025/26 are unchanged at 18% for basic rate taxpayers and 24% for higher rate taxpayers on general assets, and the annual exempt amount is also unchanged at £3,000.

The rates changed on 30 October 2024, the date of the Autumn Budget, which will complicate the calculations for 2024/25 tax returns. For disposals before that, general gains falling within a taxpayer’s basic rate income tax band were taxed at 10%, with a 20% rate applying for higher rate taxpayers. The rates were 18% and 24% for chargeable residential property (such as second homes and rental properties).

Anyone with gains of more than the exempt amount has to report them. If gains are lower than the exempt amount, full details only have to be given in the CGT pages of a tax return if the individual’s total proceeds in the year from chargeable disposals exceed £50,000 (ignoring those disposals fully covered by main residence relief).

BADR/IR

The lifetime limit for gains qualifying for BADR remains £1 million. The rate of CGT on such gains has been 10% for many years; it rises to 14% for 2025/26 and to 18% for 2026/27.

IR has also allowed a 10% tax rate to qualifying investors in qualifying companies where they are neither employees nor directors. The lifetime limit for qualifying gains was cut from £10 million to £1 million from 30 October 2024 and the rate of tax will rise in line with BADR.

There are anti-forestalling rules that may prevent taxpayers benefitting from the previous lower rates, where contracts are entered before the dates of change and do not complete until afterwards.

Carried interest

From 2025/26, the rate of CGT on carried interest receipts of investment managers will increase to a flat rate of 32% for individuals, estates and trusts. From 2026/27, carried interest will be brought within income tax, subject to a multiplier of 72.5% in some cases.

Inheritance Tax

Rates

The IHT nil rate band remains fixed at £325,000 until the end of 2029/30. Holding the threshold at the same amount for 21 years (from 6 April 2009) will bring far more people into the scope of the tax. However, the £175,000 ‘residential nil rate band enhancement’ on death transfers (also fixed until 2029/30) can reduce the impact where it applies.

A married couple may now be able to leave up to £1 million free of IHT to direct descendants or their spouses (£325,000 plus £175,000 from each parent), but the rules are complicated, and the prospect of these nil rate bands being fixed for the next 5 years increases the importance of proper IHT planning.

Extension of APR: 2025/26

From 6 April 2025, Agricultural Property Relief will be extended to land managed under an environmental management agreement with, or on behalf of, the UK government or other approved responsible bodies.

Restrictions on reliefs: 2026/27

Agricultural Property Relief and Business Property Relief can, at present, provide a 100% deduction from the value of qualifying assets. From 6 April 2026, it is proposed that 100% relief will only apply to the first £1 million of total value of agricultural and business property in an estate. Above that value, the relief will be restricted to 50%. This change has not yet been legislated and may be subject to some revision over the next twelve months, but will have a major impact on IHT planning for agricultural and trading businesses.

The government has recently confirmed that any IHT payable on APR or BPR property as a result of these changes will be eligible to be paid in 10 annual interest-free instalments. That is a useful relaxation, but is unlikely to significantly diminish the protests from farmers and others over the removal of the unlimited 100% relief.

Shares quoted on certain markets of recognised stock exchanges, such as the Alternative Investment Market (AIM) of the London Stock Exchange, have been eligible for 100% relief once they have been owned for two years (provided the company is a qualifying trading business). This relief will be restricted to 50% for any such shares, regardless of total value, from 6 April 2026.

Extension to pension assets: 2027/28

As announced in the Autumn Budget, from 6 April 2027 unused pension funds and death benefits payable from a pension into a person’s estate will become chargeable. The IHT exemption of pension pots has been a significant factor in estate planning for 10 years, and it will be important to review any plans in the two years before the change takes effect.

Business rates

During COVID-19, temporary business rates relief was introduced to support the retail, hospitality and leisure (RHL) sectors. This short-term measure was extended several times, but the current 75% relief is due to end on 31 March 2025.

In the Autumn Budget, the government announced plans to bring in permanently lower business rate multipliers from 2026/27 for RHL properties with rateable values under £500,000. For properties over this rateable value a higher multiplier will apply. This will, for example, affect the majority of large distribution warehouses used by online companies.

To provide support in the interim, business rates relief will be extended from April 2025 but reduced to 40% and capped at £110,000 per business. Many high street businesses, pubs, restaurants and shops may see higher business rates as a result.

The small business multiplier will be frozen for 2025/26 at 49.9p, while the standard multiplier will be uprated by inflation to 55.5p. 

Corporation Tax

Rate of tax

The Corporation Tax rate is unchanged at 25% for companies with profits over £250,000. The ‘small profits rate’ remains 19% for companies with profits of up to £50,000. Between £50,000 and £250,000 there is a tapering calculation that produces an effective marginal rate of 26.5% on profits between these limits, but an average rate on all profits of between 19% and 25%. The limits are divided between companies that have been under common control at any time in the previous 12 months, whether UK resident or not.

The limits and rates will remain fixed until at least 31 March 2027.

Capital allowances for plant and machinery

In 2023, ‘full expensing’ (100% relief for the cost in the year of purchase) was introduced for most new and unused plant and machinery bought by companies. It is not currently available to companies that buy plant to lease out to other businesses and this will not change ‘until fiscal conditions allow’.

100% relief for the purchase of electric cars and EV charging points will continue to be available until 31 March 2026 (companies) or 5 April 2026 (income tax traders).

Film and High-end Television Productions

From 1 April 2025, film and high-end TV productions can claim an enhanced 39% rate of Audio-Visual Expenditure Credit (AVEC) on UK visual effects costs, which will be exempt from AVEC’s 80% cap on qualifying expenditure. This additional credit applies to expenditure incurred on or after 1 January 2025.

Claims require a final certificate from the British Film Institute, so claims can only be made in the accounting period in which the production is completed (or subsequent periods). For interim periods, companies can claim the 34% AVEC rate on qualifying costs, including visual effects.

This measure was announced at Spring Budget 2024.

Double cab pick-ups (DCPUs)

The reclassification of some DCPUs as vans, described above in relation to taxable benefits on employees, will also have an effect on taxation of business profits. They will no longer be eligible for 100% relief in the year of purchase: instead, they will be eligible for the same allowances as other cars (18% or 6% writing down allowances, depending on emissions rating). Where a contract to acquire a DCPU is entered into before 1 April (companies) or 6 April (income tax traders), the ‘old rules’ will continue to apply, as long as the expenditure is actually incurred by 1 October 2025.

DCPUs with an emissions rating of more than 50g/km which are leased after April 2025 will be subject to a disallowance of 15% of the rental charge in the accounts. From 1 October 2025, this will also apply to leases that commenced before April 2025.

Advance clearances

Research & Development expenditure has for some years been eligible for significant tax-based incentives. These have in turn been exploited by some people making unjustified claims, and HMRC has recently introduced a ‘disclosure facility’ for taxpayers to rectify past errors. In the Spring Statement, the government announced a consultation on widening the use of advance clearances for R&D claims to help reduce error and fraud, provide certainty to businesses, and improve ‘the customer experience’.

The government also published a consultation on proposals for a new process to provide increased tax certainty in advance for ‘the very largest and most innovative investment projects, given their scale, complexity and range of tax implications’.

 

Value Added Tax

Registration threshold

The VAT registration and deregistration thresholds remain £90,000 and £88,000.

Late payment penalties

The Spring Statement included the announcement that late payment penalties for VAT will increase from April 2025. Tax that is paid 15 days late will be subject to a 3% surcharge (currently 2%); tax that is paid 30 days late will be subject to a further 3% (currently 2%); and after 30 days, a further late payment penalty will be added at a rate of 10% per annum (currently 4% p.a.).

These penalties are in addition to interest on overdue VAT, which is now charged on any VAT paid late from the due date until payment. The rate of interest will increase in April 2025 from 2.5% above the Bank of England base rate to 4% above the base rate.

Property Taxation

Furnished holiday lettings (FHL)

For many years, income from FHL has been treated as a trade for income tax purposes, enjoying a number of advantages over general property rental. A FHL has had to satisfy a number of conditions about availability for letting, actual periods let during the year and length of stays; if it qualified, the advantages included unlimited relief for finance costs, capital allowances, and CGT business reliefs on disposals.

As announced in the March 2024 Budget, FHL treatment will be abolished from 6 April 2025. Some of the key consequences are as follows:

  • The finance cost restriction rules for residential lettings will apply, so that relief for interest (and other matters such as arrangement fees) incurred to acquire properties will not be deductible as a cost of letting. Relief will be restricted to a tax reducer at the basic rate of income tax. Just as when this measure was introduced for normal residential letting, it may increase significantly the amount of tax paid, unless all income (after adding back finance costs) falls within the basic rate band.

Note that the higher tax liability each year will also impact payments on account under self-assessment, while the adding back of finance costs each year may unexpectedly cause extra tax liabilities too, for example due to:

  • Restriction on personal allowance if income goes above £100,000
  • High-Income Child Benefit Charge if income goes above £60,000.
  • Capital allowances of 100% of expenditure will cease to be available on the first installation of fixtures and fittings (e.g. beds or tables); instead, replacement of existing fixtures and fittings will qualify for relief, but only to the extent that the asset is not enhanced.

As a transitional rule, if any expenditure has not been fully relieved by 5 April 2025, capital allowances can continue to be claimed on the unrelieved expenditure at 18% or 6% of the remaining balance each tax year.

  • Any losses in a FHL business at 6 April 2025 will be able to be carried forward to set against any property income in the future (although UK and overseas property businesses must be kept separate); previously, a FHL business had to be segregated from a normal letting business.
  • CGT reliefs will not be available on disposals of FHLs after 5 April 2025. However, where the FHL business ceased on or before that date, BADR may be available on a disposal of the properties within 3 years. The abolition of FHL status does not count as a cessation of the business for these purposes.

Anti-forestalling rules apply from 6 March 2024 to prevent taxpayers attempting to preserve the effect of the FHL rules on future capital gains by entering into unconditional sale contracts before the change in status that do not complete until after that change.

Stamp Duty Land Tax (SDLT)

A temporary reduction in the normal SDLT rates expires on 31 March 2025. Up to that date, the first £250,000 is charged at nil; from 1 April 2025, the band from £125,001 to £250,000 will once again be charged at 2%. There is also a reduction in the thresholds for first-time buyer relief: from 1 April 2025, the nil rate will apply to the first £300,000 of a property costing up to £500,000, down from the first £425,000 of a property costing up to £625,000.

Annual Tax on Enveloped Dwellings (ATED)

ATED applies to residential property worth above £500,000 that is owned through companies and other corporate structures, unless the situation qualifies for a relief. The rates increase automatically each year with inflation and will do so on 1 April.

 

Other measures

Unincorporated businesses

Two important changes occurred for 2024/25, which will be relevant when filing the tax returns for that and future years.

  1. Businesses are assessed on the profits arising in the tax year, rather than on the profits of an accounting period ending in the tax year. 2023/24 was the transition year from the old to the new basis of assessment; businesses that did not have a 31 March or 5 April year-end may well have generated additional ‘transition’ profits that year because of this change. These are spread equally over 5 years beginning in 2023/24, unless an election is made on the tax return to bring some or all of them into charge in an earlier year.

 

  1. From 2024/25, ‘cash basis’ is the default method of calculating trading profits, with traders able to opt to use the accruals basis instead. Calculating taxable profits on the cash basis involves comparing income received and expenditure paid, rather than invoiced or accrued.

Up to 2023/24, using the cash basis meant that a number of special rules applied for trading businesses (e.g. a maximum deduction of £500 for interest and losses only being able to be carried forward). These special rules were abolished for 2024/25, so that trading businesses using the cash basis have the same reliefs available as those using the accruals basis.

Note that certain businesses are not permitted to use the cash basis, including those using profit averaging (which may be available to, for example, farmers and creative artists).

Most unincorporated property businesses also use the cash basis, unless they opt out of it. The key difference to the rules for trading businesses is that the entry and exit turnover thresholds are both £150,000; above this, the accruals basis must be used.

MTD ITSA: from April 2026

Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) will involve digital quarterly reporting of results to HMRC, together with an end of year finalisation process. This is potentially a great deal more onerous than simply submitting an annual tax return.

The date on which a person will have to comply with MTD ITSA depends on the level of ‘qualifying income’, which includes the gross turnover before deducting expenses from sole trader business income, UK property rental income, and overseas property income if it is taxable in the UK. It does not include employment income taxed under PAYE, pension income, savings and dividend income or capital gains. Partnership income is excluded for the moment, but partnerships will be brought into MTD ITSA in due course.

As previously announced, individuals will need to follow the requirements if they are self-employed or a landlord from:

  • 6 April 2026, where qualifying income exceeds £50,000; or
  • 6 April 2027, where qualifying income exceeds £30,000.

One of the few tax announcements in the March 2025 statement added those with qualifying income of £20,000 to MTD ITSA from 6 April 2028. The Budget forecasts assume that this will raise a further £120 million in tax in 2029/30, which is based on the assumption that the new system will reduce errors that the government believes are currently predominantly made in the taxpayer’s favour.

HMRC has confirmed how it will work out whether the threshold for registering under MTD ITSA has been breached. To decide when an individual needs to register for MTD for a tax year, HMRC will look at the tax return that should have been submitted in the January before the tax year being considered.

For 2026/27, HMRC will look at the 2024/25 tax return (which should be submitted by 31 January 2026) to check if qualifying income exceeds £50,000.

For 2027/28, HMRC will look at the 2025/26 tax return (which should be submitted by 31 January 2027) to check if qualifying income exceeds £30,000.

MTD late payment penalties

The late payment penalties described above under VAT will also apply to late payments of income tax under MTD ITSA, once a taxpayer has been brought within that system.

Filing requirement

For 2023/24, taxpayers with incomes over £150,000 were automatically required to file a self-assessment tax return. The 2023 Autumn Statement included an announcement that those whose tax is all paid under PAYE will be removed from this requirement from 2024/25, and HMRC may have sent letters to taxpayers informing them that no further tax returns are required under self-assessment. However, as mentioned above, increases in interest rates on savings and reductions in both the CGT annual exempt amount and the dividend allowance are likely to have the opposite effect – more people will have non-PAYE tax liabilities that have to be reported to HMRC. It is the taxpayer’s responsibility to realise that HMRC’s letter does not remove their obligation to report taxable income.

Interest on unpaid tax

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’).

HMRC currently charges interest at 7% p.a. on tax that is paid late and credits a taxpayer with 3.5% p.a. on repayments of tax (as the base rate is 4.5%). The late payment interest rate is intended to encourage prompt payment.

As announced at the Autumn Budget, to further incentivise timely payment, 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.

Compliance action

The Spring Statement included an announcement of ‘investment’ in HMRC’s debt management and compliance capacity – extra staff to chase unpaid tax and to look for undeclared tax. This is forecast to bring in an extra £3 billion in tax over the next five years.

The government is also proposing other measures to crack down on non-payment and evasion of tax, including increasing the number of prosecutions for tax fraud, the introduction of a much more generous reward scheme for tax ‘whistleblowers’, and measures to tackle ‘phoenixism’ – companies become insolvent owing tax, and then reappearing under a different guise shortly afterwards.

National Minimum/Living Wage (NMW/NLW)

From 1 April 2025, the NLW will rise from £11.44 per hour to £12.21, with comparable increases to the other rates that apply to younger workers and apprentices.

Vehicle Excise Duty

It was announced a year ago that, from 1 April 2025, registered keepers of electric, hybrid and low-emission cars will have to pay Vehicle Excise Duty in the same way as keepers of petrol and diesel cars. There are different rates depending on the age and type of vehicle, but the standard charge of £195 will apply to many cars which previously were not liable for duty.

 

 

 

Changes in company size criteria confirmed

The changes in company size thresholds will come into force on 6 April 2025. This will mean some companies will fall out of the compulsory audit regime, and no longer must prepare strategic reports and cash flow statements. More companies will be able to prepare their accounts using the simpler, disclosure-minimal micro-entity reporting standards (FRS 105).

Note, there are no changes to the employee number thresholds. Only the monetary thresholds are changing.

When does the change take place?

The changes come into effect for accounting periods starting from 6 April 2025, so the first full year-ends impacted will be those with a year-end of 30 April 2026.

What are the changes?

The size thresholds will be as follows:

Threshold Micro Small Medium Large
Prepare accounts under: FRS 105 FRS 102 (Section 1A) FRS 102 FRS 102
Audit? Not required Not required Compulsory Compulsory
Turnover Up to £1m (previously £632,000) Up to £15m (previously £10.2m) Up to £36m (no change) Over £36m (no change)
Gross Assets Up to £500,000 (previously £316,000) Up to £7.5m (previously £5.1m) Up to £18m (no change) Over £18m (no change)
Employee Numbers Up to 10 (no change) Up to 50 (no change) Up to 250 (no change) Over 250 (no change)

In order to ascertain what accounting standards companies are able to prepare their accounts under, companies have to meet two out of the three size thresholds in two consecutive years. There is a transitional provision that allows preparers to assume that the new thresholds have been applicable in the previous financial year, when ‘looking back’ to determine company size.

Please be aware, there are complexities with companies within groups, who need to consider the size of the group as a whole, as well as the stand-alone company size to determine audit requirements.

Changes to FRS 102

Please be aware, that there are significant changes to how leases are accounted for under FRS 102 for periods beginning on or after 1 January 2026. This will stop the distinction between operating leases and finance leases, and bring many leased assets onto the balance sheet, where previously there were simply expensed. Only short-term and low value assets will remain ‘off balance sheet’. This will increase the gross assets for many small and medium sized entities, and could therefore impact the accounting standards available to them. Please read our blog on the topic here.

There are no changes for lease accounting for micro-entities.

Should I still have an audit if it is no longer required?

If you are one of the company’s that will be moving out of the audit regime, company’s can still voluntarily have an audit of their financial statements.

Get in touch

For more information on the changes to company size thresholds, or to discuss the benefits of an audit, please contact one of our directors at info@wtca.co.uk.

Our team of accountants is also available to assist with compliance, tax planning, and audit requirements, ensuring your business is fully prepared for the upcoming changes.

 

How to be tax efficient as a company director in 2025/26

How to be tax efficient as a company director in 2025/26

With the changes announced in the Chancellor’s Autumn 2024 budget now coming into effect, it is important for businesses and individuals to plan their tax affairs in a tax efficient way. Tax planning has become even more crucial in an environment where tax thresholds are constantly shifting and the political landscape ever changing. One key area of focus for owner-managed businesses and SMEs will be determining the most tax efficient directors’ salaries to optimise both the director’s and company’s tax position. The Chancellor announced several changes last Autumn that will affect limited company directors in the upcoming 2025/26 tax year. This blog will provide ways to navigate these new legislative changes.

Key Changes

The 2024 Autumn Budget introduced the following changes:

  • The employer’s national insurance contribution (NIC) rate will increase from 13.8% to 15% from April 2025.
  • The threshold for employer’s NICs (the secondary threshold) will be reduced from £9,100 to £5,000 from April 2025.
  • The employment allowance will increase to £10,500, up from £5,000, from April 2025. This means eligible employers will be able to reduce their annual NIC liability by up to £10,500. To be eligible for the employment allowance, the company must have employer’s class 1 NICs less than £100,000 in the prior tax year. The employment allowance isn’t available for sole director only payrolls, so the payroll must be run for either one non-director, or at least two employees if one of them is a director, who earn more than the secondary threshold. The restrictions around the employment allowance only being available for one company in a group (also known as connected companies) still applies.

What is the most tax efficient salary?

For the tax year ending 5 April 2026, the tax efficient salary topped up with dividends approach continues to be tax efficient. The optimum level of salary and dividends will depend on the company’s and director’s personal circumstances. The most common circumstances are given below.

Scenario 1a: Sole director with no employees

This scenario will mean that the company is not eligible for the employment allowance.

Here an annual salary of £5,000 is paid; as the company will not qualify for the employment allowance, this salary is set at the second threshold. No income tax or national insurance liabilities will arise but, as the salary is below the Lower Earnings Limit of £6,500 this will not be a qualifying year for state pension purposes for the director.

The remaining remuneration from the company will then be in the form of dividends. The director could take £45,270 in the year to take their level of income up to £50,270, being the top of the basic rate band. This assumes that the director has no other taxable income.

Scenario 1b: Sole director with no employees

In this scenario a salary of £6,500 is paid. Whilst a small employer’s NIC liability of £225 arises, no income tax or national insurance liabilities arise for the employee and the director will earn a qualifying year for state pension purposes.

As in scenario 1b, the remainder of the director’s remuneration can then be paid as dividends.

Scenario 2: More than one director or employee

Depending on the particular circumstances, if the company has multiple directors or employees, the company may then be eligible for the employment allowance.

In this instance a salary of £12,570 is paid. No income tax or national insurance will be payable by the employee or employer (on the basis that the employment allowance covers the employer’s NICs). This will also be a qualifying year for state pension purposes and the higher salary means greater corporation tax relief for the company.

The balance of the director’s remuneration can then again be paid in dividends.

Next Steps

To prepare for these changes, you should consider:

  • Checking your payroll and tax status – If you are employed, check how the national insurances changes will impact your salary and how you will be affected.
  • Plan for long-term effects – In the long run, these increases and changes could impact the company’s and your personal finances. Planning ahead will give a clearer picture of what to expect.
  • Contact Wellden Turnbull today – We have a dedicated team of tax advisers and accountants who can assist all your business’s needs, especially with regards to these changes. Whether you’re a business owner or an individual, our team is committed to helping you navigate complex financial landscapes and achieve long-term financial success.

Summary

Overall, the most tax efficient directors’ salary is very much dependent on your company’s circumstances.  The particular level of salary and dividends will be dependent on the number of directors/employees as well as other factors such as whether the company is entitled to the employment allowance and what rate of corporation tax the company pays.

Get in touch

If you need further guidance on the changes and how they will impact your business, please contact us at: info@wtca.co.uk

Goodbye P11ds!

The transition from P11D reporting to Payrolled Benefits in Kind

The landscape of tax reporting has seen significant changes since the introduction of the P11D form in the 1960s. To modernise the reporting and payment of taxes on employment benefits such as private healthcare, HMRC introduced the voluntary payrolling of Benefits in Kind (BIKs) in April 2016. This system allows employers to process BIKs through the payroll, eliminating the need for employees to pay taxes on these benefits in arrears.

As confirmed in the 2024 Autumn Budget, HMRC will be mandating the payrolling of all BIKs, effectively removing the need for P11D forms entirely from April 2026. This significant shift is set to impact approximately four million employees, streamlining the collection of income tax and eliminating the delays caused by the current system.

Under the new approach, taxes on BIKs will be collected in real time, alongside regular pay.

How Payrolling BIKs works

Under the new framework, BIKs will be reported through the Full Payment Submission (FPS), which is submitted to HMRC on or before each pay date. Currently, the FPS includes two fields related to BIKs:

  • Value of benefits taxed via payroll in the pay period
  • Value of benefits taxed via payroll year-to-date

However, with the full transition to mandatory payrolling in 2026, it is expected that additional fields will be introduced to the FPS to capture a more detailed breakdown of BIKs. This change will require employers to maintain detailed and separate records of each benefit to ensure an accurate audit trail.

How we can help

This transition may pose challenges for many businesses, particularly those without a dedicated payroll department. Graeme Witt MCIPP dip, manager of our payroll department, is available to help businesses navigate these changes. With over 20 years of experience in payroll services, Graeme and his team are well-equipped to guide your business through the complexities of payrolling BIKs and ensure compliance with all new regulations. If you would like to learn more or need assistance with the upcoming changes, feel free to reach out to Graeme for expert advice and support.

Still to do your tax return?

As we welcome 2025, there are still 5.4m taxpayers who have yet to file their 2023/24 self assessment returns, compared to 5.7m who were yet to file at the start of 2024.

This year, 300,000 more people have ticked this task off their to-do list before entering the New Year, with many opting to submit their return during the Christmas break.

However, the clock is ticking for those who still need to file, as the 31 January deadline approaches. Despite the festive filers, millions remain at risk of leaving it until the last minute.

Getting ahead during Christmas 

More taxpayers wanted to get their self assessment done and dusted before heading into 2025, with many using the week during Christmas to get organised.

HMRC has reported that 40,072 tax returns were filed over Christmas Eve, Christmas Day and Boxing Day – 14,303 more than the same period last year.

This increase can be down to Christmas Eve falling on a weekday. With many choosing work over last-minute shopping, 23,731 tax returns were filed on 24 December, compared to just 8,876 filed the previous year. More people were therefore able to enjoy the festivities without tax looming over their Christmas dinners.

On Christmas Day itself, 4,409 returns were submitted followed by 11,932 filed on Boxing Day.

A strong finish to the year 

Taxpayers clearly felt more organised this year, with New Year’s Eve and New Year’s Day seeing more returns filed than the year before.

HMRC revealed that 38,000 had squeezed theirs in before the bells rang on 31 December, which was 12,407 more returns filed than last year. A total of 310 submitted their return in the nick of time, filing between 23:00 and 23:59.

Changes to lease accounting

Amendments to FRS 102 which come into effect for periods commencing on or after 1 January 2026, will have a considerable impact on how leases are accounted for lessees. The accounting for lessors is unchanged.

Currently, leases are split between operating leases and finance leases, with operating lease payments taken straight to the P&L, and finance leases capitalised.

This distinction is being removed, meaning far more leases will be recognised in the balance sheet of companies, like they currently are with finance leases. A right-of-use asset is recognised and depreciated, and a corresponding lease liability is recognised and interest charged over the lease term.

There are a couple of exemptions, namely low-value assets (not leases) or short-term leases (12 months or less). So leased laptops, phones and small items of furniture are likely to still be expensed, but 12 month+ car hire agreements and property rentals are all required to be capitalised going forward.

There are no changes to lease accounting for micro-entities under FRS 105.

 What does this mean?

The recognition of right-of-use assets will increase many companies’ gross assets. This could move some entities from being small to medium and could impact their audit requirement.

Rent expenses will be replaced with depreciation of the right-of-use asset, and there will be increased interest expenditure from the unwinding of the lease liability.

Overall the expense will still be the same over the life of the lease, but it’s likely that more expenditure will be recognised in earlier periods as the finance liability is unwound.

What should can we do to prepare?

Firstly, you should look at what leases your company has and split them into exempt leases and non-exempt leases. For the non-exempt leases that now must be capitalised, consider the information required to account for the changes:

  1. The valuation of the right-of-use asset will be needed, for something like a car. This is relatively straightforward, but for something like a property, this might be something you will need to consult an expert on.
  2. The interest rate applied on the lease liability should be that implicit in the lease (i.e. implied interest that makes the present value of the lease payments equal to the fair value of the asset), or if that cannot readily be determined, then the lessee’s incremental borrowing or obtainable borrowing rate should be used.

Will I need to restate comparatives?

No, FRS 102 does not allow the restatement of comparatives, so adjustments will be taken to reserves at the beginning of the first year under the new standard. This is practically a bit easier, but will mean a lack of comparability between say the 2026 and 2025 figures, where one will have a right-of-use asset and the other will not.

Get in touch

If you need further guidance on the changes and how they will impact your business, please contact one of our directors: info@wtca.co.uk

Changes expected to company size criteria

The changes in company size thresholds first introduced by the Conservative government are expected to come into force on 6 April 2025. This will mean some companies will fall out of the compulsory audit regime, and no longer must prepare strategic reports and cash flow statements. More companies will be able to prepare their accounts using the simpler, disclosure-minimal micro-entity reporting standards (FRS 105).

Note, there are no changes to the employee number thresholds. Only the monetary thresholds are changing.

What are the changes?

The size thresholds are expected to be as follows:

Threshold Micro Small Medium Large
Prepare accounts under: FRS 105 FRS 102 (Section 1A) FRS 102 FRS 102
Audit? Not required Not required Compulsory Compulsory
Turnover Up to £1m (previously £632,000) Up to £15m (previously £10.2m) Up to £36m (no change) Over £36m (no change)
Gross Assets Up to £500,000 (previously £316,000) Up to £7.5m (previously £5.1m) Up to £18m (no change) Over £18m (no change)
Employee Numbers Up to 10 (no change) Up to 50 (no change) Up to 250 (no change) Over 250 (no change)

In order to ascertain what accounting standards companies are able to prepare their accounts under, companies have to meet two out of the three size thresholds in two consecutive years.

Please be aware, there are complexities with companies within groups, who need to consider the size of the group as a whole, as well as the stand-alone company size to determine audit requirements.

Changes to FRS 102

Please be aware, that there are significant changes to how leases are accounted for under FRS 102 for periods beginning on or after 1 January 2026. This will stop the distinction between operating leases and finance leases, and bring many leased assets onto the balance sheet, where previously there were simply expensed. Only short-term and low value assets will remain ‘off balance sheet’. This will increase the gross assets for many small and medium sized entities, and could therefore impact the accounting standards available to them.

There are no changes for lease accounting for micro-entities.

Should I still have an audit if it is no longer required?

If you are one of the company’s that will be moving out of the audit regime, company’s can still voluntarily have an audit of their financial statements.

Get in touch

For more information on the changes to company size thresholds, or to discuss the benefits of an audit, please contact one of our directors at info@wtca.co.uk.

Our team of tax investigation accountants is also available to assist with compliance, tax planning, and audit requirements, ensuring your business is fully prepared for the upcoming changes.

 

HMRC late payment interest changes

In the October 2024 Budget, the UK government announced an increase in HMRC’s late payment interest rates.

Starting from 6 April 2025, the rate will rise by 1.5 percentage points, pushing the interest on overdue tax to the Bank of England base rate plus 4%.

With current base rates around 5%, this would translate to an approximate 9% interest on late payments.

This change reflects the government’s push for tax compliance and efficient payment collection amidst efforts to address the tax gap and strengthen public finances.

With the increase in the interest, it is even more important we receive your tax returns and accounts information as soon as possible, so we can advise of any liabilities due.

 

Autumn Budget 30.10.24 Tax Rates

Tax Rates 2024/25

Tax Cards

Welcome to the 2024-25 Tax Rates

Income Tax

Allowances 2024/25 2023/24
Personal Allowance (PA)* £12,570 £12,570
Marriage Allowance† 1,260 1,260
Blind Person’s Allowance 3,070 2,870
Rent a room relief** 7,500 7,500
Trading income** 1,000 1,000
Property income** 1,000 1,000

*PA is withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There is no allowance given above £125,140.

†The part of the PA that is transferable to a spouse or civil partner who is not a higher or additional rate taxpayer.

** If gross income exceeds this, the limit may be deducted instead of actual expenses.

Rate bands 2024/25 2023/24
Basic Rate Band (BRB) £37,700 £37,700
Higher Rate Band (HRB) 37,701 – 125,140 37,701 – 125,140
Additional rate over 125,140 over 125,140
Personal Savings Allowance (PSA)
– Basic rate taxpayer 1,000 1,000
– Higher rate taxpayer 500 500
Dividend Allowance (DA) 500 1,000

BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.

Tax rates 2024/25 2023/24
Rates differ for General/Savings/Dividend income
G S D G S D
Basic rate % 20 20 8.75 20 20 8.75
Higher rate % 40 40 33.75 40 40 33.75
Additional rate % 45 45 39.35 45 45 39.35

General income (salary, pensions, business profits, rent) usually uses personal allowance, basic rate and higher rate bands before savings income (mainly interest). Scottish taxpayers are taxed at different rates on general income (see below).

To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%.

The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%.

Dividends are normally taxed as the ‘top slice’ of income. The DA taxes the first £500 (2023/24 £1,000) of dividend income at nil, rather than the rate that would otherwise apply.

Income tax – Scotland   2024/25 2023/24
Starter rate 19%(19%) £2,306 £2,162
Basic rate 20%(20%) 2,307 – 13,991 2,163 – 13,118
Intermediate rate 21%(21%) 13,992 – 31,092 13,119 – 31,092
Higher rate 42%(42%) 31,093 – 62,430 31,093 – 125,140
Advanced rate 45%(N/A) 62,431 – 125,140 N/A
Top rate 48%(47%) over 125,140 125,140

Savings and dividend income are taxed at normal UK rates.

High Income Child Benefit Charge (HICBC)

1% of child benefit for each £200 (2023/24: £100) of adjusted net income between £60,000 and £80,000 (2023/24: £50,000 and £60,000).

Remittance basis charge 2024/25 2023/24
For non-UK domiciled individuals who have been
UK resident in at least:
7 of the preceding 9 tax years £30,000 £30,000
12 of the preceding 14 tax years 60,000 60,000
15 of the preceding 20 tax years Deemed to be UK domiciled

Pensions

Registered Pensions 2024/25 2023/24
Annual Allowance (AA)* £60,000 £60,000

Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.

*Usually tapered down, to a minimum of £10,000, when adjusted income exceeds £260,000.

The maximum tax-free pension lump sum is £268,275, unless a higher amount is “protected”.

State pension (per week) 2024/25 2023/24
Old state pension £169.50 £156.20
New state pension 221.20 203.85

 Annual investment limits

  2024/25 2023/24
Individual Savings Account (ISA)
– Overall limit £20,000 £20,000
– Lifetime ISA 4,000 4,000
Junior ISA 9,000 9,000
EIS – 30% relief 2,000,000 2,000,000
Seed EIS (SEIS) – 50% relief 200,000 200,000
Venture Capital Trust (VCT) – 30% relief 200,000 200,000

 

National Insurance Contributions

Class 1 (Employees)

Employee Employer
Main NIC rate 8% 13.8%
No NIC on first £242pw £175pw
Main rate charged up to* £967pw no limit
2% rate on earnings above £967pw N/A
Employment allowance per business** N/A £5,000

*Nil rate of employer NIC on earnings up to £967pw for employees aged under 21, apprentices aged under 25 and ex-armed forces personnel in their first twelve months of civilian employment.

**Some businesses do not qualify, including certain sole director companies and employers who have an employer’s Class 1 NIC liability of £100,000 or more for 2023/24.

Employer contributions (at 13.8%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).

Class 2 (Self employed)

Flat rate per week if profits below £6,725 (voluntary) £3.45

Class 3 (Voluntary)

Class3: Flat rate per week £17.45

Class 4 (Self employed)

On profits £12,570 – £50,270 6%
On profits over £50,270 2%

Employees with earnings above £123pw and the self-employed with profits over £6,725 (or who pay voluntary Class 2 contributions) can access entitlement to contributory benefits.

Vehicle benefits

Cars

Taxable benefit: List price of car multiplied by chargeable percentage.

2024/25 & 2023/24
CO2
g/km
Electric Range
miles
All Cars
%
0 N/A 2
1-50 >130 2
1-50 70 – 129 5
1-50 40 – 69 8
1-50 30 – 39 12
1-50 <30 14
51-54 N/A 15

Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%.

Diesel cars that are not RDE2 standard suffer a 4% supplement on the above figures but are still capped at 37%.

Vans

Chargeable value of £3,960 (2023/24: £3,960) if private use is more than home-to-work. Zero-emission vans charged at £Nil (2023/24: £Nil)

Fuel

Employer provides fuel for private motoring in an employer-owned:

Car: CO2-based percentage from above table multiplied by £27,800 (2023/24: £27,800).

Van: £757 (2023/24: £757).

Employee contributions do not reduce taxable figure unless all private fuel is paid for by the employee (in which case there is no benefit charge).

 

Tax-free mileage allowances

Employee’s own transport per business mile
Cars first 10,000 miles 45p
Cars over 10,000 miles 25p
Business passengers 5p
Motorcycles 24p
Bicycles 20p

 

 Capital Gains Tax

  2024/25 2023/24
Annual exemption amount
Individuals, estates £3,000 £6,000
Most trusts 1,500 3,000
Tax rate – Disposals Up to 30.10.24 From 31.10.24
Individual up to Basic Rate Limit (BRL)
– Residential property and carried interest 18% 18% 18%
– Other assets 10% 18% 10%
Individual above BRL, trusts and estates
– Residential property 24% 24% 28%
– Carried interest 28% 28% 28%
– Other assets 20% 24% 20%
Business Asset Disposal Relief (BADR)** 10% 10% 10%

*BADR is available on qualifying gains up to a lifetime limit of £1 million.

 Corporation Tax

Year to 31.3.2025 31.3.2024
Main rate (profits above £250,000) 25% 25%
Small profits rate (profits up to £50,000) 19% 19%
Marginal relief band (MRB) £50k – £250k £50k – £250k
Fraction in MRB (effective marginal rate) 3/200 (26.5%) 3/200 (26.5%)

 

Research and development relief
Accounting periods beginning on or after 1.4.2024
R&D Expenditure Credit (RDEC) scheme* 20%
R&D-intensive SMEs enhanced expenditure scheme** 86%

*Taxable expenditure credit for qualifying R&D.

**Additional deduction for qualifying R&D

R&D-intensive companies are those that have R&D expenditure constituting at least 30% of total tax-deductible P&L expenses plus capitalised R&D costs. Loss-making R&D intensive companies can claim a payable credit rate of 14.5% from HMRC in exchange for their losses (capped at £20,000 plus 3 x [PAYE & NIC]).

Previously, most SMEs used the enhanced expenditure scheme, but with a payable tax credit rate for losses of 10% (or 14.5%, from 1 April 2023, for those with R&D expenditure constituting at least 40% of total expenditure).

 

Main capital allowances

Plant and machinery allowances Year to
31.3.25
Year to
31.3.24
Companies only
– First-year allowance (main pool) 100% 100%
– First-year allowance (special rate pool) 50% 50%
Annual Investment Allowance (AIA)
– expenditure up to £1m 100% 100%
New electric vans 100% 100%
Writing down allowance: main pool 18% 18%
Writing down allowance: special rate pool 6% 6%

 

Motor cars purchased
  From 1.4.21
CO2 (g/km)
Allowance
New cars only Nil 100%
In general pool up to 50 18%
In special rate pool above 50 6%

 

Structures and buildings allowance  
Fixed deduction per annum 3%

 

 Property taxes

Annual Tax on Enveloped Dwellings (ATED)

ATED applies to ‘high value’ residential properties owned via a corporate structure, unless the property is used for a qualifying purpose. The tax applies to properties valued at more than £500,000.

Property value Annual charge to
  31.3.2025 31.3.2024
£0.5m – £1m £4,400 £4,150
£1m – £2m 9,000 8,450
£2m – £5m 30,550 28,650
£5m – £10m 71,500 67,050
£10m – £20m 143,550 134,550
Over £20m 287,500 269,450

Stamp Duty Land Tax (SDLT), Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT)

Residential property (1st property only)
SDLT – England & NI
£000
Rate LBTT – Scotland
£000
Rate LTT – Wales
£000
Rate
Up to 250 Nil Up to 145 Nil Up to 225 Nil
250 – 925 5% 145 – 250 2% 225 – 400 6.0%
925 – 1,500 10% 250 – 325 5% 400 – 750 7.5%
Over 1,500 12% 325 – 750 10% 750 – 1,500 10.0%
Over 750 12% Over 1,500 12.0%

A supplement applies for all three taxes where an additional residential property interest is purchased for more than £40,000 (unless replacing a main residence). It is also payable by all corporate purchasers. For SDLT, up to 30.10.24 the supplement is 3% of total purchase price; from 31.10.24 it is 5%. For LBTT it is 6%. LTT has specific higher rates in bandings: up to 180k: 4%, 180 – 250k: 7.5%, 250 – 400k: 9%, 400 – 750k: 11.5%, 750-1,500k: 14%, >1,500k: 16%.

For SDLT:

– First-time buyers purchasing a property of up to £625,000 pay a nil rate on the first £425,000 of the purchase price.

– A 2% supplement applies where the property is bought by certain non-UK residents.

– A rate of 17% (pre 31.10.24: 1%) may apply to the total purchase price, where the property is valued above £500,000 and purchased by a ‘non-natural person’ (e.g. a company).

For LBTT, first-time buyer relief increases the nil rate band to £175,000.

Non-residential or mixed use property
SDLT – England & NI
£000
Rate LBTT – Scotland
£000
Rate LTT – Wales
£000
Rate
Up to 150 Nil Up to 150 Nil Up to 225 Nil
150 – 250 2% 150 – 250 1% 225 – 250 1%
Over 250 5% Over 250 5% 250 – 1,000 5%
Over 1,000 6%

 Value Added Tax

Standard rate (1/6 of VAT-inclusive price) 20%
From 1.4.2024 Pre 1.4.2024
Registration level – Taxable turnover £90,000 p.a. £85,000 p.a.
Deregistration level – Taxable turnover 88,000 p.a. 83,000 p.a.

Flat Rate Scheme (FRS)

Annual taxable turnover to enter scheme Up to £150,000
Must leave scheme if annual gross turnover Exceeds £230,000

If using FRS, the VAT paid by the business is a fixed percentage (based on business category) of ‘FRS turnover’ rather than the net of output tax over input tax. Input tax is usually not recoverable.

Cash accounting and Annual accounting schemes

Annual taxable turnover to enter scheme Up to £1.35m
Must leave scheme if annual taxable turnover Exceeds £1.60m

Inheritance Tax

2024/25 2023/24
Nil rate band (NRB)* £325,000 £325,000
NRB Residential enhancement (RNRB)†* 175,000 175,000
Tax rate on death** 40% 40%
Tax rate on lifetime transfers to most trusts 20% 20%

*Up to 100% of the proportion of a deceased spouse’s/civil partner’s unused NRB and RNRB band may be claimed to increment the current NRB and RNRB when the survivor dies.

†RNRB is available for transfers on death of a main residence to (broadly) direct descendents. It tapers away at the rate of £1 for every £2 of estate value above £2m.

**Rate reduced to 36% if at least 10% of the relevant estate is left to charity. Unlimited exemption for transfers between spouses/civil partners, except if UK domiciled transferor and foreign domiciled transferee, where maximum exemption £325,000.

100% Business Property Relief (BPR) for all shareholdings in qualifying unquoted trading companies, qualifying unincorporated trading businesses and certain farmland/buildings.

Reduced tax charge on gifts within 7 years before death

Years before death 0-3 3-4 4-5 5-6 6-7
% of full death tax charge payable 100 80 60 40 20

Annual exemptions for lifetime gifts include £3,000 per donor and £250 per recipient.

 Key dates and deadlines

Payment dates
Self assessment 2024/25 2023/24
1st payment on account 31 January 2025 2024
2nd payment on account 31 July 2025 2024
Balancing payment 31 January 2026 2025
Capital Gains Tax* 31 January 2026 2025

 

Other payment dates
Class 1A NIC 19 July 2025 2024
Class 1B NIC 19 October 2025 2024

Corporation tax is due 9 months and 1 day from the end of the accounting period, unless a ‘large’ company paying by quarterly instalments.

2023/24 Filing deadlines
Issue P60s to employees 31 May 2024
P11D, P11D(b) 6 July 2024
Self Assessment Tax Return (SATR) paper version 31 October 2024
Online SATR if outstanding tax to be included in 2025/26 PAYE code (if under £3,000) 30 December 2024
Online SATR 31 January 2025

*A CGT return is due within 60 days of completion of sale of UK land and buildings by a non-resident and of sale of UK residential property with a tax liability by a UK resident. Any CGT payable is also due within 60 days.

 National Minimum Wage

Rate per hour From
1.04.24
From
1.04.23
Aged 21* and over (National Living Wage) £11.44 £10.42
Aged 21 – 22 N/A 10.18
Aged 18 – 20 8.60 7.49
Aged 16 – 17 6.40 5.28
Apprentices 6.40 5.28

*In 2023/24, the National Living Wage applied to those aged 23 and above.

 

You are advised to consult us before acting on any information contained herein.

Employee Mileage Claims

In most businesses an element of business travel is involved, employees and employers can be confused about how to reimburse employees (or even themselves) for the fuel they use to travel for business purposes.  The guidance I am outlining below only applies to employees using their own cars – company cars have different rules.  We are also only dealing with fossil-fuelled cars here (including hybrids) rather than purely electric vehicles (which include electric cars with a small petrol motor to charge the battery to get you home such as the BMW i3).

Wellden Turnbull Limited is a professional firm of accountants in Surrey.  We specialise in Small and medium-sized businesses and have a number of specialities including Tax planning, Statutory compliance, and day-to-day business assistance.   If you require assistance with this or any other subject area please contact either me or one of my team for tailored advice.

Corporate Tax Deductions

This is a tax-deductible expense, which makes (I will use a Limited Company for my examples) up part of the taxable profit at the end of a year – importantly this means that you do not need to make any claims to HMRC in order to get the tax deductions.

In order to get the corporate tax deduction, HMRC requires you to use the official mileage rates. The way to do this is a simple formula:

<miles travelled> x <mileage rate> = <amount to reimburse to employee>.

For example, if I travel 100 miles in a car, I would claim 45 per mile which would mean I would be reimbursed £45 and the company would get a taxable deduction of £45.

Most people who are office-based will find that the above example will apply.  Some people, such as mobile workers, or salespeople may travel significant distances every tax year (6 April – 5 April).  If it is the case that they travel over 10,000 miles then every mile over 10,000 must be reclaimed at 25p per mile rather than the higher 45p per mile.

VAT and Mileage Reclaims

If your company is VAT registered then you may be able (there are certain conditions which mean you cannot reclaim the VAT) to reclaim the VAT on the mileage reclaim.  In order to reclaim VAT, in most circumstances, a VAT receipt for fuel will be required alongside the claim.

You will not be entering this VAT receipt into your accounting records, nor will you reclaim the VAT detailed on that receipt.  This is evidence that the fuel used has been purchased ‘VAT paid’.

Frustratingly, the VAT element is not as simple as the Corporate tax deduction. HMRC says that only a certain element of the 45p (being the fuel element, as the whole amount is a combined fuel and wear and tear allowance) is within the scope of VAT – meaning you can claim it back in your VAT return.

You, again, will need a different set of VAT mileage rates from HMRC (https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-from-1-march-2016)

This is to calculate the VAT element of the mileage reclaim – 45p/25p is considered the Gross (or total including VAT) amount of the reclaim.

Furthermore, you will need more information about your car, specifically the cylinder size (usually the engine size but be careful as manufacturers can sometimes round 1,990cc to 2l when advertising) and fuel type (Petrol/Diesel/LPG).

I will use 2 examples here: one petrol and one diesel.

Petrol Car – 1.4l (1,390cc)

If I travel 100 miles in this car, I apply for (with a VAT receipt) and receive my reimbursement of £45 – nothing more to do from an employee/director side here.

The company records this a little differently:

  1. we need to work out the VAT element of the gross amount :
    <number of miles> x <VAT fuel rate> = deemed fuel gross amount inclusive of VAT;
    100 x 11p = £11.
  2. We need the VAT element of this:
    <Gross amount> x ( <VAT rate in whole numbers>/ <VAT rate in whole numbers + 100>) = VAT element
    £11 x (20/120) = £1.833333 (round up to the nearest penny for VAT)so £1.84.
  3. split the original £45 into Net (pre-VAT total) and VAT:
    Net = £45 – £1.84 = £43.16
    VAT = £1.84
    Gross = £45.
    You should include these on the respective parts of your VAT return by recording the VAT/Net split appropriately in your accounting software.

For completeness, here is the same example with Diesel cars:

Diesel Car – 2.2l (2,100 cc)

If I travel 100 miles in this car, I apply for (with a VAT receipt) and receive my reimbursement of £45 – nothing more to do from an employee/director side here.

The company records this a little differently:

  1. we need to work out the VAT element of the gross amount:
    <number of miles> x <VAT fuel rate> = deemed fuel gross amount inclusive of VAT;
    100 x 12p = £12.
  2. We need the VAT element of this:
    <Gross amount> x ( <VAT rate in whole numbers>/ <VAT rate in whole numbers + 100>) = VAT element
    £12 x (20/120) = £2.
  3. split the original £45 into Net (pre-VAT total) and VAT:
    Net = £45 – £2 = £43
    VAT = £2.00
    Gross = £45.
    You should include these on the respective parts of your VAT return by recording the VAT/Net split appropriately in your accounting software.

Understanding HMRC’s Mileage Reimbursement Guidelines

  • As a matter of course, employees should keep a mileage log – you can only claim for business mileage – this does not include a commute to a permanent place of work.   Here our employees tend to go out to client sites for a week or so, so would record each day trip on their expense claim detailing the start and end point of their trip and the miles they are claiming.  It would be wise to assume anyone checking your mileage claims will sense check them against Google Maps or an online route planner.
  • Mobile workers may want to keep a mileage log diary in their car – a photocopy of the appropriate page attached to a monthly mileage claim is sufficient.
  • If you start your journey from home you MUST remove the miles you would usually do to get to work.  For business mileage claims, you should assume your starting point is your main place of work.  If you are visiting a site that is closer to home than your office is then there is no mileage claim to be made.
  • When checking against a route planner, it does not take precedence over the miles travelled.  A standard route calculated by a computer, after the event, will not take into account diversions or traffic.  But remember that a reasonable route from Heathrow Airport to Gatwick Airport by car would not include a stopover in Glasgow. That doesn’t mean to say that if you were called to Glasgow halfway on your way to Gatwick that you wouldn’t include the additional diversionary miles in your now new mileage claim to Scotland, which google maps wouldn’t reproduce in a route plan.
  • Always document your expense claims – they make up part of your statutory accounting records and every tax-deductible expense must have reasonable supporting documentation – any expense that doesn’t may be reclassified as personal expenditure or loans by the tax man.
  • If you are reclaiming the VAT, get a VAT receipt for fuel, and make sure it is current.  you are trying to support the purchase of the fuel you have used, so a receipt from 2 years ago will not be considered appropriate evidence.
  • You cannot mix and match company fuel allowances and employee mileage claims.  They are mutually exclusive.  If you have a company car with a fuel allowance, you cannot reclaim anything and the tax is dealt with differently.  If your company car is unavailable and you need to use a privately owned car, then in that instance this guidance applies to you – you must not reclaim petrol receipts as you may do with your company car.
  • Don’t forget that using a car for business purposes falls into a different insurance category – if you only have Social, Domestic, Pleasure and Commuting cover then you are not covered for business travel and are effectively driving around uninsured.
  • The mileage allowance covers an element of wear and tear – not just fuel.  This is a contribution towards tyre/brake wear, servicing costs, insurance etc.

HMRC have outlined what they consider to be acceptable tax deductions for mileage reimbursements.  That does not mean you cannot pay whatever rate you choose (if you pay less then you may have an issue with staff going forward, so I would recommend you consider these to be the minimum rates).  You can pay more generous rates, however, you will only get a tax deduction on the proportion of those rates as detailed above.  depending on the number of miles and additional generosity, you and your employees may have other tax issues to consider.

The general guidance above is given without prejudice, and should not be taken as advice that applies to your circumstances.  Every company/business is different and there are complexities in the rules that I have not covered.  Wellden Turnbull Limited accepts no responsibility as to how you use or apply the information above.

All of the points I have outlined above are for guidance on the principles only, the rates used were up to date on the day of writing but you should refer to official sources for up-to-date rates.  The advice given is based on the tax rules at the date of writing and may not be updated.

If you want to share my guidance, please feel free to do so using the original link to my website and give me credit for the work.

24/10/2017 – Oli Spevack FCCA ACA, Partner

Wellden Turnbull Limited,
Munro House,
Portsmouth Road, Cobham,
Surrey KT11 1PP

E: o.spevack@wtca.co.uk
D: 01932 584 439
T: 01932 868 444

Autumn Statement Tax Tables 2024/25

Autumn Statement Tax Tables 2024/25

Income Tax Rates and Allowances (Table A)

Main allowances 2024/25 2023/24
Personal Allowance (PA)*† £12,570 £12,570
Blind Person’s Allowance 3,070 2, 870
Rent a room relief § 7,500 7,500
Trading income § 1,000 1,000
Property income § 1,000 1,000

*PA will be withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There will therefore be no allowance given if adjusted income is £125,140 or more.

†£1,260 of the PA can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer, where both spouses were born after 5 April 1935.

§If gross income exceeds this, the limit may be deducted instead of actual expenses.

 

Rate Bands

2024/25

2023/24

Basic Rate Band (BRB) £37,700 £37,700
Higher Rate Band (HRB) 37,701-125,140 37,701-125,140
Additional rate over 125,140 over 125,140
Personal Savings Allowance (PSA)
– Basic rate taxpayer 1,000 1,000
– Higher rate taxpayer 500 500
Dividend Allowance (DA) 500 1,000

BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.

Rate Bands

2024/25 2023/24
Rates differ for General, Savings and Dividend income within each band:
G S D G S D
% % % % % %
Basic 20 20 8.75 20 20 8.75
Higher 40 40 33.75 40 40 33.75
Additional 45 45 39.35 45 45 39.35

General income (salary, pensions, business profits, rent) usually uses personal allowance, basic rate and higher rate bands before savings income (mainly interest). To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%.

The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%.

Dividends are normally taxed as the ‘top slice’ of income. The DA taxes the first £500 (2023/24 £1,000) of dividend income at nil, rather than the rate that would otherwise apply.

High Income Child Benefit Charge (HICBC)

1% of child benefit for each £100 of adjusted net income between £50,000 and £60,000.

Income Tax – Scotland Rate 2023/24
Starter Rate 19% £2,162
Basic Rate 20% 2,163 – 13,118
Intermediate Rate 21% 13,119 – 31,092
Higher Rate 42% 31,093 – 125,140
Top Rate 47% over 125,140

The Scottish rates and bands do not apply for savings and dividend income, which are taxed at normal UK rates.  The Scottish rates for 2024/25 have not yet been announced.

 

Remittance basis charge 2024/25 2023/24
For non-UK domiciled individuals who have been UK resident in at least:
7 of the preceding 9 tax years £30,000 £30,000
12 of the preceding 14 tax years 60,000 60,000
15 of the preceding 20 tax years Deemed to be UK domiciled for tax purposes

 

Registered Pensions (Table B)

  2024/25 2023/24
Annual Allowance (AA) £60,000 £60,000

Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.

The AA is usually reduced by £1 for every £2 by which relevant income exceeds £260,000, down to a minimum AA of £10,000.

The AA can also be reduced by £10,000, where certain pension drawings have been made.

For 2023/24 and 2024/25, there is no Lifetime Allowance (LTA) charge on high pensions savings.

The maximum tax-free pension lump sum is £268,275 (25% of £1,073,100), unless a higher amount is “protected”.

 

Car and Fuel Benefits (Table C)

Cars

Taxable benefit: List price multiplied by chargeable percentage.

2024/25 and 2023/24
CO2 emissions
g/km
Electric range
Miles
All cars
%
0 N/A 2
1-50 >130 2
1-50 70 – 129 5
1-50 40 – 69 8
1-50 30 – 39 12
1-50 <30 14
51-54 N/A 15

Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%.

Diesel cars that are not RDE2 standard suffer a 4% supplement on the above figures but are still capped at 37%.

Car Fuel

Where employer provides fuel for private motoring in an employer-owned car, CO2-based percentage from above table multiplied by £27,800.

National Insurance Contributions 2024/25 (Table D)

Class 1 (Employees)

Employee

Employer

Main NIC rate 10% 13.8%
No NIC on first £242pw £175pw
Main rate charged up to * £967pw no limit
2% rate on earnings above £967pw N/A
Employment allowance per qualifying business N/A £5,000

*Nil rate of employer NIC on earnings up to £967pw for employees aged under 21, apprentices aged under 25 and ex-armed forces personnel in their first twelve months of civilian employment.

Employer contributions (at 13.8%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).

Class 2 (Self-employed)

From 6 April 2024, self-employed people with profits above £6,725 are no longer required to pay Class 2 NICs, but will continue to receive access to contributory benefits, including the State Pension.

Those with profits under £6,725 can pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension. The amount is £3.45 per week.

Class 3 (Voluntary)

Flat rate per week £17.45

Class 4 (Self-employed)

On profits £12,570 – £50,270 8%
On profits over £50,270 2%