Business owners who pay themselves through a combination of salary and dividends should revisit their remuneration strategy this tax year.  

With Income Tax thresholds frozen until 2028 and a lower dividend allowance rate of £500, a strategy that once worked may now cost more than it saves. 

How should you be paid as a director?  

A salary of £12,570 uses the full Personal Allowance and qualifies you for National Insurance (NI) credits without triggering personal Income Tax or employee NICs.  

This regular salary combined with dividends, where payable, and a generous pensions scheme, could help you to reduce the amount of Income Tax that you are liable to pay.  

If your company qualifies for Employment Allowance, which has now increased to £10,500, even employer NICs can be mitigated. 

Lower salaries of around £6,500 may suit directors with other sources of NIC credits or pension plans, while avoiding employee contributions altogether. 

Dividends  

You need to remember that any dividend income above £500 will be taxed at the dividend tax rate of 8.75 per cent, 33.75 per cent or 39.35 per cent, depending on your marginal rate of Income Tax – basic, higher and additional, respectively.  

While dividend tax rates remain lower than Income Tax rates, the reduced allowance – introduced in the last few years – means higher effective rates for many than they have previously experienced in the past.   

However, a carefully planned director’s remuneration strategy, which incorporates dividends, can still help to minimise an individual’s annual tax bill.   

When dividends cannot be paid to directors 

Your company’s profitability and your shareholding will determine how much dividends you can pay yourself, as dividends can only be paid from retained profits after Corporation Tax.  

That means if your company is not making a profit, you won’t be able to distribute dividends, and you will be limited to drawing a normal salary. 

Setting your remuneration strategy 

A blend of salary and dividends remains one of the most popular ways for directors to pay themselves, but achieving the most tax-efficient approach now involves carefully adjusting your income to reduce the amount of earnings that fall within higher tax bands.  

You should speak to an experienced tax adviser to ensure your strategy aligns with the latest thresholds, minimises your tax liabilities, and allows you to keep more of your income. 

Could you be paying less tax with a smarter remuneration strategy? Contact us today for tailored advice. 

Capital allowances allow businesses to claim tax relief on money invested in assets like machinery, equipment, or certain vehicles used commercially.

There are a variety of capital allowances available, including:

• Full Expensing
• Annual Investment Allowance (AIA)
• Writing-Down Allowances (WDA)

The allowance that your business is eligible for depends on what you buy, how much you invest, and how your business is structured.

Full Expensing

Full Expensing allows companies to deduct 100 per cent of the cost of qualifying plant and machinery assets from taxable profits in the year of purchase.

This applies to new assets only and is available to limited companies subject to Corporation Tax.

It is an ideal option if you are looking for immediate relief or using the investment to improve cash flow.

Annual Investment Allowance

The AIA offers a similar benefit but is more widely available to sole traders, partnerships, and limited companies.

This allowance allows for 100 per cent relief on qualifying expenditure up to £1 million per year.

Unlike Full Expensing, AIA can apply to both new and used assets, though exclusions can apply to assets such as leased items.

Writing-Down Allowances

WDAs apply to any expenditure that exceeds the AIA threshold or when assets are not eligible for Full Expensing or the AIA.

These allowances offer tax relief spread over several years, typically at a rate of relief against profits of 18 per cent for main pool items and six per cent for special rate pool items, like integral features or solar panels.

How to claim capital allowances

Capital allowances must be claimed within your tax return and can be set against your business’s taxable profits. Eligible items must be used in your business, not for personal use.

There are additional schemes, such as Enhanced Capital Allowances, which can be used for “eco” investments, which may also be useful to certain businesses.

For a full list of qualifying items and further guidance on how to claim, please visit gov.uk/capital-allowances or speak to your tax adviser.

If you would like to know more about the capital allowances available to your business, please get in touch.

This Easter, Rotherham Taylor is spreading the joy and giving back to the community by hosting a special Easter Raffle in aid of Samaritans. It’s the perfect opportunity to get involved, support a fantastic cause, and potentially win a delicious chocolate Easter hamper!

Tickets are only £2 each, and all proceeds will go directly to supporting the vital services provided by Samaritans, helping those in need. To enter, simply email Sue at Sue@rtaccountants.co.uk to purchase your tickets.

The raffle will close on 17th April, so don’t miss your chance to take part! The lucky winner will be drawn shortly after, and will receive a hamper filled with mouth-watering Easter treats.

Don’t wait – grab your tickets today and support Samaritans while enjoying the chance to indulge in some chocolatey goodness!

VAT is complex, and too many businesses are making costly, avoidable mistakes.

Even a simple oversight or misunderstanding can lead to penalties, cash flow problems, and disputes with HM Revenue & Customs (HMRC).

Here are some of the most common VAT mistakes to avoid:

• Charging the wrong VAT rate – Some goods and services have reduced or zero-rated VAT and applying the wrong rate can mean underpaying or overpaying tax.
• Incorrect VAT reclaims – Not all expenses qualify for VAT recovery. Claiming back VAT incorrectly can trigger an HMRC investigation.
• Late VAT returns and payments – HMRC penalises businesses that miss deadlines. In the Spring Statement the Government announced that late payment penalties for VAT taxpayers will increase from April 2025 onwards. Filing and paying on time is essential to avoid these fines and unnecessary scrutiny.
• Missing the VAT registration threshold – If your annual turnover exceeds £90,000, you must register for VAT. Failing to monitor this can result in penalties for late registration.

Additionally, you may need to consider the Kittle principle which allows HMRC to deny VAT reclaims if a business knew or should have known it was involved in a fraudulent supply chain.

Even if a company is not directly involved in fraud, failing to carry out proper due diligence on suppliers can lead to serious financial consequences.

How to stay compliant

VAT mistakes are avoidable with the right approach, so we suggest you do the following:

• Check VAT rates carefully to avoid costly errors.
• Keep track of turnover to ensure VAT registration happens on time.
• Maintain proper records to support VAT claims and submissions.
• Submit returns and pay on time to avoid HMRC scrutiny.
• Verify suppliers to steer clear of fraudulent transactions.

For extra peace of mind, seeking expert advice can help ensure your VAT processes are always compliant.

Protect your business from VAT traps – speak with our team today.

The Government has confirmed that Making Tax Digital (MTD) for Income Tax will apply to sole traders and landlords earning over £20,000 a year.

This latest extension means that an additional 900,000 sole traders must adopt digital record-keeping and quarterly tax submissions by this deadline.

Who is affected and when?

Mandating digital record-keeping allows HMRC to enhance compliance and streamline reporting for taxpayers and the tax authority, reducing errors and improving efficiency.

Over the next few years, more sole traders will be brought into the MTD system.

Here is when different income thresholds will come into effect:

• From April 2026 – Sole traders and landlords with income over £50,000 must comply.
• From April 2027 – The threshold reduces to £30,000.
• From April 2028 – Those earning over £20,000 will also be required to join.

You will need to plan ahead to ensure your business is ready for these changes before they are enforced.

How should you prepare?

Sole traders should take the following steps to ensure compliance before the deadline:

1. Adopt digital record-keeping – Research and select HMRC-approved accounting software that best fits your needs.
2. Understand quarterly reporting – Rather than submitting a single annual return, you must provide tax updates every three months, followed by a final declaration. Keeping up-to-date financial records will help to avoid errors and late submissions.
3. Seek professional guidance – An accountant can clarify compliance and help optimise tax efficiency. Their expertise can make the transition less stressful.
4. Stay informed – HMRC may refine its requirements, so signing up for relevant updates and attending webinars will ensure you remain prepared.

Taking proactive steps now to prepare for mandatory digital record-keeping will make your transition to MTD smoother.

Are you ready for MTD? Get in touch for tailored support.

The Chancellor’s Spring Statement introduced harsher penalties for late taxpayers under Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

With the Government confirming an extension to sole traders and landlords earning more than £20,000 from April 2028, a lot more taxpayers – an estimated 900,000 – will need to pay tax via MTD for ITSA.

Under the current rules, you will not receive a penalty if you pay your tax within the first 15 days of the deadline.

Penalties then apply at the following rates:

• Day 15 – two per cent
• Day 30 – four per cent
• Annual interest rate on late payments – four per cent

However, from April 2025, the new penalty rates will be:

• Day 15 – three per cent
• Day 30 – six per cent
• Annual interest rate on late payments – 10 per cent

The 15-day grace period, however, will remain.

These increased penalties also apply to taxes paid under MTD for VAT.

How to avoid late tax penalties

Higher penalty charges will be painful for those with cashflow difficulties, businesses still getting to grips with MTD for ITSA, and those who simply forget to pay their taxes on time.

To avoid getting caught out, make sure your bookkeeping is up to date and that you have money set aside for tax bills in advance.

Give yourself plenty of time to submit your tax return and make payments. Leaving everything to the last minute will be even more costly than before.

Avoid getting caught by costly penalties. Get in touch today for urgent advice and guidance.

Submitting your Self-Assessment tax return at the start of this tax year is a great way to manage your tax bill effectively.

The earlier you file a return, the sooner you will find out how much tax you owe.

This can help with financial planning and budgeting for the year ahead.

Early submission also means that any refunds you are owed can be paid to you sooner, thus boosting your cash flow.

You will also have more time to calculate any reliefs or allowable expenses available to you.

This could reduce the amount of tax you owe and free up crucial funds for your business.

Furthermore, submitting a tax return at the beginning of the year provides you with proof of income, which can otherwise be difficult to obtain for those who are self-employed.

Having this proof of income is crucial if you need to apply for a mortgage, claim benefits, or open a savings account.

Finally, leaving your tax return to the last minute can lead to panic, errors, and late submissions that result in penalties from HM Revenue & Customs (HMRC).

This was the case for the more than one million taxpayers who missed the 31 January 2025 deadline this year.

Submitting your tax return at the beginning of the tax year gets it done and out the way, giving you peace of mind and enabling you to focus on other business and financial matters.

Need help submitting your tax return? Contact our experts today.

The new financial year will see many of the proposed changes announced in the Autumn Budget enacted, impacting businesses across the country.

These changes will have business owners planning their tax strategy for the 2025/26 tax year, and a key part of this should be considering capital allowances.

Capital allowances available to businesses

While the changes made in the Autumn Budget could cause you financial problems, capital allowances provide a efficient way to reduce taxable profits.

Here are just a few of the capital allowances you can take advantage of in the 2025/26 tax year:

• Full expensing
  • Available to companies investing in new, qualifying plant and machinery.​
  • Allows 100 per cent of the cost to be deducted in the year of purchase.​
  • Applies to main rate assets only (machinery, equipment), not to long-life or special rate assets.​
• Annual Investment Allowance (AIA)
  • Offers 100 per cent relief on qualifying capital expenditure.​
  • Available to companies, sole traders, and partnerships.​
  • The limit is £1 million per year. ​
• First-Year Allowances (FYA)
  • Allows 100 per cent relief on certain environmentally beneficial or energy-efficient equipment.​
  • Does not reduce the available AIA.​
  • Must be claimed in the year of purchase.​
  • Qualifying assets include electric cars with zero CO₂ emissions and equipment for electric vehicle charging points. ​
• Writing Down Allowances (WDA)
  • Used when assets do not qualify for AIA or full expensing.​
  • Main rate pool – 18 per cent per year on a reducing balance basis.​
  • Special rate pool – Six per cent per year (integral features, long-life assets).

In short, capital allowances can give your business a real financial boost, but only if the claims are done right.

It is easy to overlook what qualifies or make mistakes that invite HMRC attention, so a bit of expert help now can save a lot of hassle later.

Speak to us today and make capital allowances work for your business in 2025/26.

From 6 April 2025, many directors will need to report dividend income in much more detail in their Self-Assessment tax return.

This change will affect an estimated 900,000 directors across the UK.

HM Revenue & Customs (HMRC) will now require directors to disclose the name and registration number of the company, the highest percentage shareholding held during the tax year, and the amount of dividend income received from that company.

These figures must be listed separately from dividends received from other sources.

At present, directors simply report total dividend income. HMRC has no visibility of how much comes from their own business versus other investments.

This change will allow HMRC to build a clearer picture of remuneration and target compliance activity more effectively.

Employee hours reporting scrapped

The Government has abandoned its proposal to require the reporting of actual hours worked by employees through payroll.

Originally delayed to April 2026, the plan has now been dropped entirely due to concerns over the implementation cost, which was estimated at nearly £60 million.

Compulsory questions are coming

The question about whether a taxpayer is a director of a close company will also become mandatory on the Self-Assessment return from 2025/26.

As a director, you will need to be prepared with accurate figures, particularly where shareholdings change during the year or where different share classes are involved.

These changes are an indication of a move towards increased transparency and more detailed individual reporting.

If you own a business and need help preparing for the 2025/26 changes then contact our team of expert accountants today.

If you are thinking about selling your business, timing could be everything.

Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, helps business owners reduce their Capital Gains Tax (CGT) liability when selling qualifying assets.

However, with adjustments to BADR coming in April 2025, it is important to make plans for an exit strategy sooner rather than later.

Current BADR rules and the upcoming change

BADR currently allows eligible sellers to pay a reduced CGT rate of 10 per cent on gains up to £1 million over their lifetime.

This is a substantial saving compared to the standard CGT rate of up to 24 per cent.

However, from April 2025, this preferential rate rises to 14 per cent, and from April 2026, it increases again to 18 per cent.

So, if you are a business owners considering a sale, should you bring forward your plans to lock in the lower tax rate?

Consider your options before a rushed sale

While selling before the rate rise may seem like a straightforward decision, there are other factors to consider:

• Is the market favourable?
• Is your business in the best possible position to attract buyers?
• Does the timing coincide with your personal financial goals?

Anti-forestalling rules also mean that certain transactions, such as share reorganisations, loan notes or sales to connected parties, could be caught under the new rates.

If you have structured a sale or disposal in recent years, you may need to review your position to avoid unexpected tax liabilities.

With the deadline fast approaching, you should act immediately.

Speak with our experts today for exit strategies and advice on the reliefs available to you.