The recent Scottish Widows 2024 retirement report highlights a growing pensions crisis, with the number of people not on track for even a minimal retirement lifestyle rising from 35 to 38 per cent over the past year.
Author Archive: Muhammad Zia
Is your business running a workplace nursery scheme? Key steps to remain tax compliant
HM Revenue & Customs (HMRC) has recently issued a warning to employers regarding the proper use of workplace nursery schemes.
Trends in rental property demand for 2024 – what landlords need to know
As a landlord, you’ll know that the rental market is constantly changing and if you don’t keep up, you’ll be left behind.
In the last few years, we’ve seen economic fluctuations, changes in housing policies, and the global pandemic all of which have had an impact on the rental sector.
Even with all these challenges, renting is still a popular choice in the UK, particularly in big cities like Manchester, London and Birmingham. With the shortage of affordable homes in the UK, more people are being driven towards renting. This strain on the housing market isn’t expected to change anytime soon, which is good news for landlords.
Embrace sustainability
Sustainability has been a popular topic that has affected everyone over the last few years.
In fact, prospective tenants are seeking eco-friendly properties that are equipped with energy-efficient features, due to their environmental and financial benefits.
So, if you want to attract tenants, you may want to look at ways to make your property more sustainable. This could include adding energy-efficient appliances and mindful waste disposal items to your property.
Prioritising tenant retention
After the financial chaos that has been in place for the last few years, landlords have recognised the value of stability and the benefits of long-term, reliable tenancies.
If you can bring in and retain a high-calibre group of tenants, it will help your rental business thrive. To do this you’ll need to foster a good landlord-tenant relationship.
Leverage technology
There are various solutions available to help streamline landlord tasks and improve a tenant’s experience. This can be anything from using communication platforms like WhatsApp to easily converse with tenants to installing smart home technology and security systems to improve your property.
Financial planning
As the rental market continues to change, it’s important that you keep up to date with the changes to your responsibilities as a landlord in 2024.
This includes adhering to any changes to the Office for National Statistics operations or any new bills that come into force.
For instance, the Renters Reform Bill was expected to be introduced in 2024, though with the general election set for 4 July, we may not see this come into effect.
Speaking of the general election, landlords should pay close attention to the outcome of the election as the rental market is a hot topic for both major parties.
Although uncertainties always exist, the key takeaway is that landlords can achieve success by staying informed, proactive, and responsive to market dynamics.
By thinking agile and adaptable, you will be well-equipped to thrive regardless of what 2024 brings.
Eco-friendly upgrades – how going green can increase property value
We’re told time and time again that going green can save you money, but did you know it can also increase the value of your property?
Green buildings are gaining in popularity with more people looking for ways to save on energy costs, but how does this increase your property value?
Well, by making the property more energy efficient it means utility bills will be lower for tenants ultimately making your property more attractive to buyers and renters.
Also, green buildings are usually built with higher-quality materials and construction methods, so the property will last longer adding to its value.
Not to mention more of society is becoming concert about environmental issues, so properties that are eco-friendly and sustainable will be more of high demand in the future.
Key steps to making your property eco-friendly
- Implement energy-efficient measures – This could include anything from installing LED lighting to purchasing solar panels for your property. You will save money on utility bills by using less power which these products will help you do.
- Install a smart meter – This provides you with a real-time view of your gas and electricity consumption and access to a wider range of tariffs, which can help you optimise your energy usage and save money.
- Look at your insulation – Draught-proofing your property can make it more energy efficient, reducing your carbon footprint and your bills. Draughts are most commonly found at windows, doors, open chimneys, old floorboards, and worn-out extractor fans, so be sure to monitor these areas.
- Upgrade the boiler – If you’re not ready to switch to renewable energy technologies, upgrading to a modern, energy-efficient boiler could be an alternative.
- Practice sustainable gardening – If your property has an outdoor space, make it eco-friendly by planting native plants and a wildflower patch to help improve air quality and make the property more attractive.
- Sustainable lifestyle – Whether it’s yourself or tenants living in the property you should encourage a sustainable lifestyle. This me using recycling bins, installing electric vehicle charging points and even having a compost bin.
Financial benefits to going green
We’ve already mentioned a few of obvious reasons that going green saves you money, like saving energy means less money spent on bills.
Other financial benefits include a reduction in maintenance costs. By ensuring your property invests in durable materials and has modern appliances, you can reduce the number of times something may need to be fixed or replaced. This results in a greater return on investment for the landlord.
Whether you start with simple steps like recycling boxes or make a significant investment in a renewable energy source for your property, every action towards creating a greener property is a positive move.
Consider eco-friendly upgrades as an investment rather than just another expense. This isn’t just about enhancing your personal wealth.
Yes, the energy-efficient improvements will increase your property’s appeal and value, but they’re also an investment in our planet’s future, protecting the environment for generations to come.
Energy Performance Certificate (EPC) rule changes
The government had originally proposed that new tenancies would need an EPC rating of C by 2025, or 2028 for those with existing tenancies. These changes have been scrapped.
So, for now, the EPC rules for landlords require an E rating or higher, but changes could be introduced if a change in government is made with intentions to help the UK meet its net zero carbon emissions target by 2050.
Therefore, landlords can no longer let or continue to let properties covered by the MEES Regulations if they have an EPC rating below E, unless a valid exemption is in place. Failure to obtain an EPC prior to leasing or selling your property is not a criminal offence but could result in a fine of between £500 and £5,000.
If you need more information about EPCs or other legislation affecting rented properties, you can contact an accountant for advice.
Funding improvements to your property
To make energy efficient improvements to our property to bring it to at least an EPC E rating, you will never be asked to pay more than £3,500.
If you need to spend more than this to make the necessary improvements, you can apply for an exemption following making the improvements up to this amount.
There are various grants and government schemes available to help you make your property energy-efficient, including the boiler upgrade scheme.
To find out about the grants you may be eligible for, you should seek professional advice from an accountant to make sure you are accessing all the assistance available to you.
To find out more about how you make your property green, get in touch.
Essential tips to reduce tax on rental income
To become a successful landlord, there are many factors you need to consider. One of those is tax efficiency which can easily be overlooked.
As a landlord, you’re expected to pay income tax on any rental profits you earn from your properties, but there are ways you can make sure that your tax payments are as efficient as possible and avoid paying additional costs.
That’s why we’ve put together a few tax-saving tips to help your buy-to-let business thrive in time for next year’s tax return.
Maximise deductible expenditures
The tax code allows for various expenses to be deducted from your rental income, leading to substantial savings.
The permitted expenses include but are not limited to:
- Property taxes
- Insurance premiums
- Utilities
- Advertising and marketing
- Repairs and maintenance
If you want to reduce the amount on your tax payment, we recommend that you keep a meticulous record of all expenses incurred in maintaining your rental business.
For landlords that rent out multiple properties, it is possible to use deductible expenses from one to offset the income from another.
Create a limited company
When landlords incorporate their rental business, they open themselves up to additional benefits that can aid their long-term financial goals.
These benefits include:
- Rental profits are subject to corporation tax, which is often lower than personal tax rates.
- Mortgage interest deductions can be made before taxation.
- You can offset the loss of mortgage repayment deductions for personal landlords without current corporation tax rates.
Incorporating your rental property business does however come with upfront costs. You’ll be responsible for paying legal fees, potential stamp duty, and the possibility of early redemption fees on existing mortgages.
You can gain access to tax reliefs such as capital allowance and the Annual Investment Allowance (AIA), which ultimately lead to tax reduction opportunities. To understand the complexities of utilising these benefits, you should seek professional advice.
Tax return submission
The deadline for submitting your tax return is fixed, making timely submission essential. Filing late triggers a series of escalating penalties, beginning with an immediate fixed penalty and becoming more severe after six and twelve months.
Adhering to the self-assessment tax return deadline of 31 January following the end of the tax year is vital to avoid these penalties.
Additionally, landlords must report any untaxed income to HMRC by 5 October to ensure accurate reporting.
You should keep all your receipts and records for at least five years after the filing deadline.
Short-term tenants
If you are between tenants, you can reduce your tax bill by claiming council tax and utilities as expenses, though generating income might be preferable. You should consider short-term lets during vacant periods to earn property income.
Long-term leases, typically 12 months or more, have drawbacks such as fixed rent, delayed maintenance, and difficulty terminating agreements, leading to potential profit loss.
Short-term rentals, on the other hand, allow for flexible rent adjustments and can generate two to four times more profit.
Maintenance is also more manageable with shorter gaps between occupants.
Landlords should claim utility bills, taxes, and maintenance costs as expenses when properties are vacant.
Loss adjustment
Every now and again as a landlord, you may face periods of rental losses, where expenses exceed income. These losses can be carried forward to offset future profits.
Understanding the tax implications of rental losses is crucial, as it impacts your overall tax position and compliance.
Losses need to be reported on tax returns, with the ‘loss brought forward’ section completed each year until fully utilised.
Importantly, rental losses from overseas properties cannot offset UK property earnings and vice versa, maintaining the integrity of each property’s tax obligations.
Additionally, landlords should be aware of the tax implications of operating within different tax bands, as rental income is subject to varying rates based on total income.
For further advice on how to reduce your tax on your rental income, please contact us today.
Over a third of SMEs rely on accountants for advice
According to The Longitudinal Small Business Survey (LSBS), 37 per cent of SMEs turn to accountants for information and advice on their finances, especially those operating in the transport and storage sector.
The survey highlighted that many of these companies were turning to accountants for advice on tax and national insurance law and payments.
This trend shows the growing complexity of running a business in today’s economic climate.
So, why are business owners relying on accountants?
Compliance
SMEs often find it challenging to keep up with the changing laws and regulations that their company and themselves need to comply with.
With accountant being trained in this area, they utilise their expertise to help businesses understand what regulations they need to follow to optimise their financial position and avoid penalties.
Tax planning
Tax planning can be extremely complex and your tax obligations and the reliefs available to you can vary depending on the size of your business, the industry you are in and other additional factors.
Accountants are trained to create strategic tax plans to benefit businesses and individuals. Including informing clients of deductions, credits and incentives they may be eligible for, reducing their tax burden effectively.
Investigations
With a high volume of tax investigations being launched every year, accountants can be a valuable support.
They can assist in responding to inquiries from tax authorities and advocate for the best possible outcomes.
If a business owner is unaware of investigation processes, accountants can alleviate the stress of these investigations.
If you would like accountancy support for your business, please get in touch
A look at the latest shifts in the UK housing market
UK house prices are on the rise again, the job market remains resilient, and inflation is moderating. However, there’s been a spike in mortgage arrears, according to Morningstar DBRS analysts in their latest housing market review.
House price growth
In Q1 2024, after four consecutive quarters of negative year-on-year house price inflation, the UK finally experienced a positive shift with the average house price increasing by one per cent compared to 2023 levels.
With rising wages, moderating inflation, stabilising mortgage rates, and slowly increasing house prices, affordability is expected to gradually improve, though it remains the main constraint on faster house price growth.
Rising arrears and repossessions
Despite the positive trends, mortgage arrears are on the rise.
Outstanding balances in arrears reached £20.3 billion in Q4 2023, a significant 50.3 per cent increase year-on-year.
While the UK, with fixed-rate loans being so popular, is less exposed to the cost-of-living crisis than markets with more floating-rate loans, the proportion of total loan balances in arrears remains at just over one per cent.
However, the severity of these arrears has been increasing for several quarters.
Repossessions have also seen an uptick as COVID-19 relief measures have been lifted, though they remain historically low.
Loan-to-Value Ratios
The proportion of loans with high loan-to-value ratios (LTVs) has been on a continuous rise since Q1 2010 but has stabilised in recent years.
In Q4 2023, loans with LTVs over 90 per cent accounted for 5.5 per cent of gross mortgage advances, the highest since Q1 2020.
Mortgage rates have fallen since late 2023, except for new floating-rate mortgages, due to lower inflation and a stabilised bank rate.
However, rates remain high and volatile, with new rates rising by about 25 basis points in early Q2 2024 following the Bank of England’s announcement of prolonged higher interest rates.
Will we see house prices rise in 2024?
With tight financial conditions and persistent high inflation, the UK economic growth has slowed, leading to a weak recovery outlook.
House prices are still expected to stabilise and show modest increases in 2024, supported by low unemployment, moderating inflation, and strong wage growth.
However, it will not be entirely positive as borrowers are transitioning from favourable fixed rates and adjusting to higher mortgage costs.
Speak to us to find out more about the housing market forecast for 2024.
Keeping your tax liabilities to a minimum
Establishing your strategy as early as possible can alleviate the pressures of tax planning.
Familiarising yourself with deadlines and thresholds will help you prioritise and reduce the stress associated with the end of the financial year.
Additionally, this year’s Spring Budget introduced changes to personal and business taxes that may affect your tax liabilities, such as a reduction in National Insurance for employees.
Keeping updated on these changes as they occur will help you manage stress and gain a clearer perspective on your financial planning.
Allowances and reliefs available
Tax reliefs provide deductions from taxable income and are commonly applied to business expenses to encourage investment in specific capital.
However, some reliefs also benefit individuals, such as those related to pension contributions.
You are only required to pay Income Tax on taxable income that exceeds your Personal Allowance, currently set at £12,570.
This is the standard allowance given to each person, but you may be able to increase your tax-free income threshold through the following:
- Marriage allowance: You can transfer up to £1,260 of your Personal Allowance to your spouse or civil partner if you earn below the £12,570 threshold, potentially saving you up to £252 per tax year as a couple.
- Married couple’s allowance: An older form of Marriage Allowance, this can reduce your tax bill by between £401 and £1,037.50 per year, provided one of you was born on or before 6 April 1935.
- Blind person’s allowance: If you are registered blind, you may qualify for an additional £2,870 on your Personal Allowance.
- Tax relief for maintenance payments: If you were born before 6 April 1935 and are making maintenance payments to an ex-spouse under a court order, you may be able to reduce your taxable income.
- Dividend allowance: If you receive both a salary and dividends, ensure you utilise your £500 dividend allowance.
There are typically residency requirements for UK tax allowances, so you will need to ensure you are eligible before you claim for any of the above.
For those of you who may have a substantial estate you may want to look into the changes to Capital Gains Tax and how this could affect your assets should you wish to sell them.
If you would like advice on how to maximise your tax allowances, please contact our team to discuss your personal circumstances.
How to effectively plan your business tax return
Business and personal tax can be incredibly complex for small businesses, especially when they’d rather be spending their time focused on other aspects of the business.
Using effective corporate tax planning is important if you want to optimise your tax obligations and improve your net profit margin.
Here are some strategies to ensure your company remains compliant with HMRC regulations while also making the most of the tax reliefs available.
Tax thresholds
The threshold for VAT has risen from £85,000 to £90,000 this year as part of the Chancellor’s attempt to support small businesses in the Spring Budget.
For some businesses, this will mean you can defer your VAT registration.
However, you may need to reassess your growth strategies and plan for when you will be required to register.
Registering for VAT before your profits hit the threshold can enable you to reclaim VAT on your business expenses, improving your cash flow and making your business appear more established to potential clients and suppliers.
Investing
The Annual Investment Allowance, still set at £1 million this year, allows you to make a full deduction from profits in the year of purchase.
Full expensing also permits you to completely deduct the cost of qualifying new plant and machinery from your taxable profits in the year you invest.
Until 31 March 2026, you can utilise this to substantially lower your taxable income and tax bill by immediately writing off 100 per cent of these investments.
R&D tax relief can foster innovation by reducing your taxable profits, but it’s crucial to be aware of the new merged schemes now in place.
The combined scheme of R&D Expenditure Credit (RDEC) and Enhanced R&D Intensive Support (ERIS) replaces the previous RDEC and Small and Medium-Sized Enterprise (SME) schemes.
Under this unified regime, companies of all sizes will receive an above-the-line credit, with special provisions for R&D-intensive SMEs.
The merged scheme has lowered the R&D intensity threshold from 40 per cent to 30 per cent for accounting periods beginning on or after 1 April 2024.
This change makes it easier for more SMEs to qualify for enhanced support if their R&D expenditure constitutes at least 30 per cent of their total expenditure.
Compliance considerations
As everyone should know, compliance with legislation is necessary to avoid penalties, so, with changes to regulations – it’s important that you keep updated.
The Making Tax Digital (MTD) scheme mandates that starting in April 2026, all unincorporated businesses with an income exceeding £50,000 will be required to maintain digital records and submit quarterly reports.
Additionally, for non-incorporated business, basis period reform will align the income assessment of unincorporated businesses with the tax year, necessitating more thorough reporting and documentation procedures.
Incorporated companies with profits up to £50,000 pay a Corporation Tax rate of 19 per cent, while those with profits exceeding £250,000 are subject to a higher rate of 25 per cent.
Profits between these amounts fall under a tapered rate system, gradually increasing the tax rate from 19 per cent to 25 per cent as profits rise.
This tiered system highlights the importance of managing your profitability to optimise your tax liabilities.
For tailored business tax planning advice for your business, please get in touch.
HMRC reports an increase in Income Tax-paying pensioners
According to data from HM Revenue and Customs (HMRC), the number of Income Taxpayers in the 2024-25 tax year is estimated to be 37.4 million, marking an increase from 33 million in 2021-22.
This figure includes the 8.5 million taxpayers who are above state pension age, representing a 26 per cent rise compared to the 6.7 million recorded in 2021-22.
The significant increase in pensioners paying tax primarily stems from the freezing of the income tax threshold, specifically the £12,570 personal allowance which has remained unchanged since 2021.
The triple lock guarantees that the state pension increases in line with inflation, earnings, or 2.5 per cent annually.
However, maintaining the freeze on the personal allowance results in a situation where a pensioner receiving the full £11,500 per year state pension along with additional private pension income becomes subject to income tax.
Pensioners coming into income tax is also the result of increased interest rates and the need to pay tax on savings above the savings allowance.
If part of your retirement plan includes substantial savings, alongside your general pension pot, you need to think about the tax implications of income from your investments.
If you would like advice on pension planning or would like to discuss your Income Tax payments, please get in touch.
