Author Archive: Muhammad Zia

Abolishing non-dom status – Preparing for the change

The Government is set to abolish non-dom status over a multiple-year transition period. The aim is to bring non-doms’ tax contributions into the UK system, thus increasing the Treasury’s total tax revenue.

The domicile system will be replaced with a residence-based regime, which will bring foreign earnings into the UK Inheritance Tax (IHT) system.

From 6 April 2025, the concept of domicile will be replaced by long-term residency. Looking back over a 20-year period, if someone is resident for income tax purposes in the UK for 10 out of those 20 years, then they will be treated as being a long-term resident for IHT and taxed accordingly on the value of their worldwide assets.

The Government will also introduce a Temporary Repatriation Facility (TRF). This will enable non-doms with historic (prior to April 2025) untaxed foreign income and gains (FIG) to pay reduced tax as a one-off payment (on some or all the amount), meaning it can be brought into the UK without further income or capital gains liabilities.

While the initial transition period was announced as being April 2025 to April 2027, the Chancellor announced minor changes that are intended to make the process more favourable to non-doms.

If you would benefit from personal advice on the abolition of non-dom status, please get in touch to find out about our tax advisory services.

Capital Gains Tax (CGT) increases by £179 million follow Autumn Budget

December 2024 saw a dramatic increase in CGT, with a total of £335 million in tax receipts – a whopping £179 million more than the £156 million collected in December 2023.

Over the last quarter, CGT hit £808 million, an increase of 60 per cent from last year’s £505 million for the same quarter.

Tax receipts in total also increased, rising to £607.3 billion between April and December – a £19.4 billion rise compared to 2023.

Over £70.1 billion in tax was taken in December – an increase of £5 billion from 2023, but a huge £46.4 billion rise from December 2019. This demonstrates a record tax burden and the effect of fiscal drag.

Inheritance tax (IHT) has also seen a dramatic rise, hitting £620 million. So far this tax year, £6.3 billion has been paid in IHT, up nearly 10 per cent at £600 million.

An effective strategy to mitigate the significant impact of potential IHT and CGT increases, which could combine to a tax rate of 67 per cent for some individuals, is to make regular gifts from surplus income.

By gifting leftover income at the end of each month, individuals can transfer wealth to their loved ones without incurring Inheritance Tax, effectively reducing their tax liability.

Wondering what this means for you and your wealth? Get in touch with our team today for tailored support and guidance.

Tax for small businesses: key changes you need to know about in 2025

Small businesses need to be prepared to adapt to a fast-evolving tax landscape. Here are the key changes you can expect in 2025 and beyond, and how to prepare for them.

Employment tax

From April 2025, the rate of Employer National Insurance Contributions (NIC) will increase from 13.8 per cent to 15 per cent. Additionally, the current salary threshold for Employer NIC – £9,100 – will be reduced to £5,000.

These higher tax obligations will have a significant impact on small businesses. Budget cuts, payroll reviews, and investment reductions must be expected, and businesses must review their current workforce and salary bands.

Utilising alternative staffing methods (such as outsourcing or part-time roles) could lessen taxable liability.

Companies must also calculate the potential impact on financials so that they can adjust budgets and forecast cost cutting measures.

Business Asset Disposal Relief (BADR)

A major change for businesses this year is the rate of relief for BADR. While business owners currently pay tax at 10 per cent on the first £1 million of qualifying gains under BADR, this rate will rise to 14 per cent from 6 April 2025.

For those disposing of a business worth £1 million or more, this could mean an increase of up to £40,000 in tax liability.

The Government has introduced anti-forestalling laws to counter this effect. This means that you could receive alternate compensation when you sell your business, such as a loan note (IOU).

For this to apply, the election must be made before the 12-month anniversary of the Self-Assessment deadline for the year in which the loan note is received.

However, the anti-forestalling rules will apply the BADR rate in application at the time the section 169Q Taxation of Chargeable Gains Act 1992 (TCGA) election is made, not when the loan note was received.

This means that individuals must finalise s169Q elections before the end of the tax year to benefit from the 10 per cent rate. Missing this deadline could mean you face the higher 14 per cent rate.

If you are planning to sell a business over the next 12 to18 months, you may wish to accelerate this transaction to benefit from the current rate.

Business owners should also keep in mind that the BADR rate is set to increase further to 18 per cent from 6 April 2026.

Making Tax Digital (MTD) for Income Tax

By 2026, individuals with income above £50,000 will need to comply with MTD for Income Tax and Self-Assessment (ITSA). This threshold will drop to those with income above £30,000 by 2027.

Although MTD is a phased extension and transition, taxpayers must start considering it now.

The transition will require significant upgrades in record-keeping, and the task of seamless data integration will fall on taxpayers, with little support from HM Revenue & Customs (HMRC).

Businesses must upgrade their software and educate themselves on MTD to avoid last minute compliance issues.

Inheritance Tax

Businesses should also start preparing for the changes to Inheritance Tax (IHT) set for 2026 and 2027.

For example, a £1 million limit to business property relief (BPR) and agricultural property relief (APR) 100 per cent tax relief (with relief 50 per cent thereafter) will come into effect from 6 April 2026. Pensions will also be brought into IHT from 6 April 2027.

Final thoughts

Small businesses will need to adapt rapidly to ride the wave of tax changes in 2025. Tax professionals can help you to explore tax-efficient strategies and ensure your compliance with the new obligations.

Get in touch with our team for tailored tax advice and support.

Fined for a late tax return? How to appeal your penalty

The deadline for submitting your Self-Assessment tax return (31 January 2025) has passed. More than a million people have missed the deadline this year and may now face a range of consequences.

A late tax return usually results in a penalty from HM Revenue & Customs (HMRC) – a costly payment for you or your business. A successful appeal can prevent the incursion of extra costs.

Find out what the reasonable excuses for a late tax return are and how to appeal your penalty.

What are acceptable excuses for a late tax return?

HMRC lists the following as reasonable excuses for not meeting your tax obligation:

  • Death of a partner or other close relative shortly before the tax return or payment deadline
  • Unexpected stay in hospital
  • Serious or life-threatening illness
  • Computer or software failure
  • Problems with HMRC online services
  • Fire, flood, or theft
  • Postal delays that you could not have predicted
  • Delays related to disability or mental illness
  • Misunderstanding, or not being aware of, your legal obligation
  • Relying on someone else to send the return, and they did not

However, these reasonable excuses will not be taken at face value – you must provide tangible evidence that shows how an incident or condition significantly affected your ability to fulfil your obligation.

It is also important to note that making a mistake on your tax return is not considered a reasonable excuse for late submission.

Other excuses that are not acceptable for a late tax return include:

  • Finding the HMRC online system too difficult to use
  • Your cheque bounced or payment failed due to lack of funds
  • Not receiving a reminder from HMRC

How to appeal a tax penalty

If you’ve identified a reasonable excuse for your late tax return and have sufficient evidence to back it up, you can appeal your tax penalty.

When you receive a penalty, you will typically have 30 days to contact HMRC or make an appeal.

If you’ve appealed against a penalty, are getting a review of a penalty, or made an appeal to the tax tribunal, you will not be required to pay it until the appeal has been settled.

If you have received a letter from HMRC issuing a tax penalty it is important you act quickly. For advice and guidance, please get in touch.

Europe changes rules on VAT taxes for virtual events – what does this mean for UK businesses?

The European Court of Justice (ECJ) has changed the rules on VAT taxes for virtual events in Europe.

Previously, business to consumer (B2C) services for virtual events were taxed according to the location of the service provider.

However, new legislation requires VAT to be charged based on the consumer’s location. This legislation came into effect on 1 January 2025.

What does the change in VAT on virtual events means for UK SMEs

UK SMEs may face additional challenges as a result of these changes. These may include:

  • Double taxation – If your business has customers across the UK and Europe, you may be required to pay both UK and EU tax.
  • Complex administration – Identifying where customers are based and storing this information securely could increase costs.

What to do next

HM Revenue & Customs (HMRC) has yet to respond to the rule changes on VAT taxes for virtual events in the EU. However, there are actions SMEs can take to reduce the impact of these changes.

You can review where your customers are based and then register for VAT in each relevant country individually.

Alternatively, you can use the non-union One Stop Shop (OSS) system to register for VAT through one member state.

If you would like tailored advice on managing VAT for virtual events, please contact our team.

Fur and finance – Tax compliance in animal sales

Fur and finance – Tax compliance in animal sales

If breeding and selling animals has turned into a source of income for you, you need to make sure your earnings are declared correctly to HM Revenue & Customs (HMRC).

You can earn up to £1,000 annually from casual trading or self-employment without needing to report it.

However, once your income exceeds this threshold, you will need to register for Self-Assessment, report your earnings, and pay any tax owed.

What happens if HMRC suspects undeclared income?

HMRC may send out a One to Many (OTM) letter, urging individuals to review their tax affairs.

Ignoring these letters can lead to penalties or an investigation.

Making a voluntary disclosure

HMRC’s online disclosure service allows you to report any undeclared income and settle your tax bill.

Once you notify HMRC of your intention to disclose, you will have 90 days to provide the necessary details and pay any outstanding tax.

If you have already received a letter from HMRC, your disclosure will be treated as ‘prompted,’ which may result in higher penalties than if you make a voluntary disclosure.

Registering for Self-Assessment

If your income from animal sales regularly exceeds £1,000, you will need to register for Self-Assessment.

This means filing an annual tax return and reporting all your earnings, including income from animal sales.

Responding to an HMRC letter

Receiving correspondence from HMRC can be intimidating, but ignoring it is not an option.

If HMRC does not receive an adequate response, they could launch an inquiry into your tax affairs, leading to penalties or, in severe cases, criminal charges if fraud is suspected.

If you believe you may have inadvertently committed tax fraud, it is essential you speak with a tax adviser at the earliest opportunity.

Need help with your tax obligations when selling animals? Contact us today.

Optimising your credit control policies to deal with chronic late payers

Despite repeated calls for reform, the Government has shown little support for tackling chronic late payments, leaving businesses to fend for themselves.

One effective solution is to tighten your credit control policies to manage the issue.

Strengthening credit control

A solid credit control system helps you keep payments on track.

Here are some ideas on how you can improve yours:

  • Run credit checks before offering payment terms.
  • Issue invoices as early as possible, ensuring they are clear and detailed – you do not want to leave any chance for confusion or dispute.
  • Automate reminders to chase up payments before they become overdue.

If a customer repeatedly pays late and ignores your attempts to contact them about these payments, it could be worth pursuing legal action or alternative methods to solve the issue.

You may also have to consider removing them as a client.

Reviewing your payment terms

Many overlook the importance of having clear payment terms. Make sure yours:

  • Set out payment deadlines and penalties for late payments.
  • Define accepted payment methods and any upfront deposit requirements.
  • Are reviewed regularly to keep up with changes in business and law.

Being upfront about these terms from the start helps avoid disputes and makes expectations clear.

The risk of doing nothing

If you fail to address the chronic late payment issue, it will damage your business’s reputation.

Suppliers and partners might start doubting your reliability, and if you are waiting on payments, you might struggle to pay your own bills on time.

This kind of domino effect can create serious financial problems, potentially leading to you needing to close your business.

With little Government support, you need to be proactive.

If you are facing cash flow issues due to persistent late payments and would like guidance on improving your credit control, please speak to our team.

Budgeting for the unknown – Contingency strategies and tips for businesses

Budgeting for the unknown – Contingency strategies and tips for businesses

No matter how well-prepared you may think you are, things will not always go to plan.

It could be a sudden shift in the market, supply chain disruptions, unexpected repairs to your office or equipment, or even a personal emergency.

That is why having a budget that accounts for the unknown is essential.

How to budget effectively

Here are some of the strategies to help you build a budget that is proactive:

  • Build a contingency fund – Set aside some of your income for those unplanned moments. The amount you save will depend on your business’s expenses and profits. If you are unsure how much to put aside, speak to an accountant.
  • Review your budget regularly – Make it a habit to periodically review your income, expenses, and savings goals to ensure you are on track. This allows you to adjust for any changes without derailing your entire plan.
  • Categorise your costs – Sort your costs into categories like operational expenses, marketing, payroll, and overheads. This will help you quickly spot areas where you may be overspending or where savings could be redirected into more critical areas.
  • Avoid unnecessary spending – It can be tempting to buy new gadgets or upgrades but do not let these purchases compromise your financial security.

While you cannot always predict what lies ahead, that does not mean that you cannot prepare for it.

By budgeting effectively, you can ensure your business remains resilient in the face of uncertainty and proceeds to grow with confidence.

Contact our expert accountants now to secure a budget that prepares you for anything.

How to capitalise on the Government’s AI push

How to capitalise on the Government’s AI push

In January, the Government unveiled its Artificial Intelligence (AI) Opportunities Plan, outlining how the UK hopes to shape the AI trajectory by driving economic growth, enhancing public services, and creating new job opportunities while ensuring AI benefits society.

While there is still a lot we do not know about the full capabilities of AI, we do know how revolutionary it has been in handling everyday business tasks through automation.

Using AI to streamline your business operations

We have seen small businesses leveraging AI to help with the following:

  • Identifying and addressing inefficiencies – Analyse where slowdowns or challenges occur in your operations. Whether it is delayed approval processes, repetitive administrative tasks, or inventory management that consumes too much time, AI can streamline these areas to improve efficiency.
  • Improving customer engagement – Use AI-driven tools to personalise customer experiences, from targeted marketing to AI chatbots that respond immediately to routine customer queries. This can improve satisfaction and free up your team for more complex issues.
  • Resource allocation and cost reduction – Are your resources being underutilised or overburdened? AI can suggest optimal staffing levels and help you make more informed budgeting decisions. It can also identify areas where costs can be reduced without compromising quality.

As you can see, there are countless opportunities to capitalise on AI to streamline your everyday operations and ensure your employees can focus their efforts where they will have a greater impact.

Why you should still be cautious in AI implementation 

Despite AI offering many benefits, public perception in the UK remains mixed.

Over a third of the population fears AI’s impact on society and the job market, with many associating it with robots taking over human jobs and creating widespread unemployment.

As the UK continues pushing AI integration, it is important to remember that the technology is still largely unregulated.

You should avoid inputting sensitive information, such as customer details or financial records, into AI tools unless you know how your data will be stored and used.

Always check the tool’s privacy policy to ensure it complies with data protection regulations – you do not want to breach data protection laws inadvertently.

AI is a powerful assistant but not a replacement for human judgement.

Always review AI-generated content and outputs to ensure quality, accuracy, and appropriateness, as this is not guaranteed due to the lack of regulation to hold it accountable for misinformation.

Speak to our team about potential tax reliefs, allowances and funding opportunities to help you invest in AI safely and effectively.