Archive: 15th May 2025

Value Added Tax

When can you deregister for VAT?

May 15, 2025 by Terry Harris 0 Comments

Considering VAT deregistration? Whether compulsory or voluntary, knowing the rules, deadlines and risks of delay can save your business from costly penalties.

The decision to deregister for VAT may be necessary or beneficial in a range of circumstances. Whether it's a legal requirement or a voluntary decision, it’s important for businesses to understand the rules and deadlines to avoid penalties and ensure proper compliance. The rules differ depending on whether the deregistration is compulsory or voluntary.

You must cancel your VAT registration if your business is no longer eligible. This typically applies when a business:

  • Stops making taxable supplies
  • Sells the business
  • Changes its legal structure (e.g., from sole trader to limited company)
  • Disbands a VAT group
  • Joins an existing VAT group
  • Joins the Agricultural Flat Rate Scheme

In these cases, deregistration must be completed within 30 days of the change. Failure to do so may result in penalties. In some situations, it may be possible to retain the same VAT number, particularly where the business continues in a different form.

A business may also apply for voluntary deregistration if it expects its taxable turnover to remain below the current threshold of £88,000. HMRC may request supporting evidence to confirm that the turnover will stay below this level. It's important to note that voluntary deregistration cannot be backdated—the cancellation will only take effect from the date the request is received or a future date agreed with HMRC.

Even after deregistering, a business can still make late input tax claims on services received while it was VAT registered, as long as the claims fall within the standard VAT time limits.

Source:HM Revenue & Customs | 12-05-2025
HMRC notices

The transition from FHL to Property Rental business

May 15, 2025 by Terry Harris 0 Comments

Tax perks for Furnished Holiday Lets have ended. From April 2025, lettings fall under standard rental rules. Check the transition rules to avoid surprises.

The tax advantages that were previously available to property owners letting their properties as short-term holiday lets, known as Furnished Holiday Lets (FHL), has now ended. The changes took effect on 6 April 2025 for Income Tax and Capital Gains Tax, and on 1 April 2025 for Corporation Tax and Corporation Tax on chargeable gains.

The following is a summary of the key transitional rules that apply as FHL status is phased out and properties are brought under the standard property rental business regime:

  • FHLs will no longer qualify for capital allowances but can claim "replacement of domestic items relief." Existing capital allowance pools can still use writing-down allowances, but new any expenditure will follow standard property business rules.
  • FHL losses, which could only be offset against future FHL profits, will now be absorbed into the wider UK or overseas property business and offset accordingly.
  • Carried-forward FHL losses can still be set against future profits of either the UK or overseas property business as appropriate.
  • Eligibility for reliefs like roll-over relief, business asset disposal relief, and gift relief have now ended, however, where criteria for relief includes conditions that apply in a future year these specific rules will not be disturbed where the FHL conditions were satisfied before repeal.
  • Business asset disposal relief may still apply if the FHL business ceased before the changes and disposal occurs within the normal three-year period following cessation.
  • An anti-forestalling rule, effective from 6 March 2024, blocked the use of unconditional contracts to secure capital gains relief under old FHL rules.
Source:HM Revenue & Customs | 12-05-2025
National Insurance

Deadline for paying Class 1A NIC

May 15, 2025 by Terry Harris 0 Comments

Employers must pay Class 1A NICs on 2024–25 benefits by 19 July (22 July if paying electronically). Avoid penalties by meeting deadlines and using correct references.

Employers are reminded of the upcoming Class 1A National Insurance contributions (NICs) deadline, which applies to most benefits in kind provided to employees during the 2024–25 tax year. These contributions must be paid by 19 July 2025 (or 22 July 2025 if paying electronically) to avoid penalties.

Class 1A NICs are payable by employers on the value of most taxable benefits provided to employees and directors, such as company cars and private medical insurance. They are also due on the portion of termination payments exceeding £30,000, where Class 1 NICs haven’t already been applied.

To ensure payment is correctly allocated, employers must use their Accounts Office reference number as the payment reference and indicate clearly which tax year and month the payment relates to. Note that Class 1A NICs paid in July will always relate to the previous tax year.

There are three key dates to keep in mind for 2024–25 Class 1A NICs:

  • 6 July 2025 – Submission deadline for forms P11D and P11D(b) (‘Return of Class 1A National Insurance contributions due’)
  • 19 July 2025 – Deadline for postal cheque payments to be received by HMRC
  • 22 July 2025 – Deadline for electronic payments to clear into HMRC’s bank account

These contributions are typically due on benefits provided to:

  • Company directors and those in controlling positions
  • Employees
  • Family members or household members of the above
Source:HM Revenue & Customs | 12-05-2025
General

HMRC interest rates following Bank of England rate cut

May 15, 2025 by Terry Harris 0 Comments

Following a Bank Rate cut to 4.25%, HMRC late payment and repayment interest rates will drop from 19 and 28 May 2025. Check which taxes this affects.

The Bank of England’s Monetary Policy Committee (MPC) met on 8 May and, in a narrow 5–4 vote, decided to reduce the interest rate by 25 basis points, bringing it down to 4.25%. Of the four dissenting members, two supported a larger cut to 4%, while the other two preferred to keep the rate at 4.5%. This marks the fourth interest rate reduction since August 2024.

This means that the late payment interest rate applied to the main taxes and duties on which HMRC charges interest will decrease from 8.5% to 8.25%. This change takes effect on 19 May 2025 for quarterly instalment payments, and on 28 May 2025 for non-quarterly instalment payments.

Additionally, the repayment interest rate HMRC pays on main taxes and duties will also drop by 0.25%, from 3.5% to 3.25%, from 28 May 2025. The repayment rate is calculated as the Bank Rate minus 1%, subject to a minimum of 0.5%.

Source:Other | 12-05-2025
Income Tax

MTD for Income Tax deadline is approaching

May 15, 2025 by Terry Harris 0 Comments

MTD for Income Tax starts 6 April 2026 for the self-employed and landlords with £50k+ income. Plan early to stay compliant and avoid disruption.

MTD represents one of the most significant overhauls to the self-assessment regime since its introduction in 1997. This includes new requirements to keep digital records, using MTD-compatible software, and submitting quarterly updates of income and expenses to HMRC.

From April 2026, self-employed individuals and landlords with annual qualifying business or property income over £50,000 will be required to comply with the MTD for Income Tax rules. Qualifying income includes gross income from self-employment and property before any tax allowances or expenses are deducted.

This first rollout of MTD for Income Tax will affect approximately 780,000 taxpayers, with the next stage following in April 2027, extending the rules to those earning between £30,000 and £50,000. A further expansion, announced during the Spring Statement 2025, will apply MTD obligations to those with income over £20,000 from April 2028. The government is still considering the best approach for individuals earning below this lower threshold.

HMRC is asking some eligible taxpayers to sign up to its MTD testing programme on GOV.UK. This provides an opportunity to get comfortable with the new process before it becomes mandatory. Importantly, penalties for late submissions will not apply during the testing phase.

This move follows the rollout of MTD for VAT, which according to an independent report prepared for HMRC has helped over two million businesses improve accuracy and reduce errors.

As the deadline approaches, it is important to start planning in order to ensure a smooth transition to the new way of reporting Income Tax.

Source:HM Revenue & Customs | 12-05-2025
HMRC notices

Save up to £2,000 a year on childcare costs

May 15, 2025 by Terry Harris 0 Comments

Is your child starting school this September? Tax-Free Childcare could save you up to £2,000 a year. Check your eligibility now and start planning ahead.

Working families whose children are starting school for the first time September 2025 could save up to £2,000 a year per child on their childcare bills, thanks to the government’s Tax-Free Childcare (TFC) scheme.

Designed to ease the financial burden of childcare, the TFC scheme offers eligible working families valuable support through a wide network of registered childcare providers. This includes childminders, breakfast and after-school clubs, and approved UK play schemes. Families can also build up their TFC account throughout the year, allowing them to save for higher childcare costs during school holidays.

The scheme is available for children up to the age of 11, with eligibility ending on 1 September following the child's 11th birthday. For children with certain disabilities, the scheme extends eligibility until 1 September after their 16th birthday.

Under the TFC scheme, for every £8 a parent contributes, the government adds £2, effectively topping up childcare savings by 25%. This support is capped at a maximum of £10,000 in contributions per child each year, meaning parents could receive up to £2,000 annually per child, or £4,000 for children with disabilities.

TFC is open to a wide range of working families, including the self-employed and those earning the National Minimum or Living Wage. Parents on paid sick leave, maternity, paternity, or adoption leave (both paid and unpaid) are also eligible. To qualify, each parent must work at least 16 hours per week and meet minimum income thresholds. However, households where either parent earns more than £100,000 a year, or those receiving Universal Credit or employer-provided childcare vouchers, are not eligible for the scheme.

Commenting on the scheme, HMRC’s Director General for Customer Services said:

“Starting school can be an expensive time – there’s a lot to buy and organise. Now that you know where your child will be going to school, it’s a good time to start planning your childcare arrangements. Tax-Free Childcare can help make those costs more manageable. Sign up today on GOV.UK and start saving.”

With school starting in just a few months, now is the perfect time for parents to check their eligibility and take advantage of the savings available through the scheme.

Source:HM Revenue & Customs | 12-05-2025
Income Tax

Why filing early makes sense

May 15, 2025 by Terry Harris 0 Comments

Filing your 2024-25 Self-Assessment return early means faster refunds, better budgeting, and no deadline stress. Do not delay, start gathering your tax details today.

The 2024–25 tax year officially ended on 5 April 2025, with the new 2025–26 tax year beginning on 6 April 2026. While many taxpayers may be tempted to put off dealing with their self-assessment tax return until later this year, or early next year, there are several compelling reasons why filing early makes sense.

HMRC recently reported that nearly 300,000 people submitted their 2024–25 self-assessment returns during the first week of the new tax year, almost ten months before the 31 January 2026 filing deadline.

Filing early doesn’t mean paying early. However, by preparing and submitting your tax return well in advance, you gain the advantage of knowing exactly what you’ll owe by the 31 January deadline. This can be incredibly helpful for budgeting and avoiding any last-minute financial surprises.

Submitting your return early gives your accountant more time to work through the details without the pressure of a looming deadline. If you are due a tax refund, the sooner your return is filed and processed, the sooner you'll receive your money.

The 31 January 2026 is not just the final date for submission of the 2024-25 self-assessment tax return but also an important date for payment of tax due. This is the final payment deadline for any remaining tax due for the 2024-25 tax year. In addition, the 31 January 2026 is also the usual payment date for any Capital Gains Tax due in relation to the 2024-25 tax year and also the due date for the first payment on account for 2025-26. Note that any CGT due on the sale of a second residential property must be paid within 60 days of the sale, not in the following January.

In summary, filing your tax return early offers a clearer financial picture, helps spread the workload, and ensures you’re not caught out by deadlines. If you are due a refund, there’s no reason to wait as filing early means a quicker refund.

Source:HM Revenue & Customs | 12-05-2025
Business Support

Still recording your accounts on spreadsheets?

May 12, 2025 by Terry Harris 0 Comments

For small and medium-sized enterprises (SMEs), adopting accounting software offers a range of practical benefits that help streamline financial management, reduce errors, and improve decision-making. Here are the key advantages:

Time-Saving Automation
Accounting software automates routine tasks such as invoicing, bank reconciliations, VAT calculations, and payroll processing. This reduces manual data entry and allows business owners and finance teams to focus on running and growing the business, rather than spending hours on admin.

Real-Time Financial Insights
Most modern platforms offer real-time dashboards and reporting tools. Business owners can instantly see cash flow positions, outstanding invoices, and profit margins. This helps with day-to-day financial decisions and longer-term planning, such as forecasting and budgeting.

Accuracy and Reduced Errors
Manual bookkeeping can lead to errors in data entry, calculations, or tax reporting. Accounting software includes built-in checks and reconciliation tools to minimise these risks. With fewer mistakes, businesses are less likely to face penalties or compliance issues from HMRC.

Simplified Tax Compliance
Cloud-based software is increasingly aligned with HMRC’s requirements, including Making Tax Digital (MTD). It helps SMEs maintain digital records and submit VAT and income tax returns directly from the system. This not only saves time but ensures timely and accurate compliance.

Better Cash Flow Management
With tools to track incoming payments, flag overdue invoices, and send automatic payment reminders, SMEs can manage credit control more effectively. Improved cash flow visibility makes it easier to plan for outgoings and avoid late payment issues.

Access Anywhere, Anytime
Cloud-based accounting software allows users to log in from multiple devices, enabling remote working and access for accountants or bookkeepers. This flexibility supports businesses that operate across locations or use outsourced finance support.

Scalability
Most accounting packages offer scalable features that grow with the business. SMEs can start with basic invoicing and reporting and add features like inventory management, multi-currency support, or project tracking as needed.

Integration with Other Systems
Accounting platforms often integrate with other business software, such as e-commerce, payroll, point-of-sale, and CRM tools. This creates a joined-up business system and reduces duplication of work.

Professionalism
Using accounting software can improve the presentation of invoices and financial reports, giving a more professional impression to clients, suppliers, and lenders.

In summary, accounting software helps SMEs improve efficiency, accuracy, and control, making it a worthwhile investment for sustainable business growth.

If you are still considering your software options, we can help. Call now…

Source:Other | 11-05-2025
General

Landmark economic deal with United States

May 12, 2025 by Terry Harris 0 Comments

On 8 May 2025, the UK government announced a landmark trade agreement with the United States, aimed at reducing tariffs and bolstering key British industries. This deal is projected to save thousands of jobs, particularly in the automotive and steel sectors, and marks a significant step in strengthening UK-US trade relations.

Key Achievements of the UK-US Trade Deal:

  1. Reduction of Car Export Tariffs:
    The US has agreed to lower tariffs on British car exports from 27.5% to 10% for up to 100,000 vehicles annually. This move is expected to save hundreds of millions of pounds for UK car manufacturers, notably benefiting companies like Jaguar Land Rover.
  2. Elimination of Steel and Aluminium Tariffs:
    Tariffs on UK steel and aluminium exports to the US, previously set at 25%, have been removed. This change reopens the US market to British steelmakers, providing a critical boost to an industry that supports approximately 80,000 jobs across the UK.
  3. Enhanced Market Access for UK Farmers:
    The agreement includes a reciprocal arrangement allowing UK farmers to export up to 13,000 metric tonnes of beef to the US. Importantly, this deal maintains existing UK food safety standards, ensuring that consumer protections remain intact.
  4. Removal of Tariffs on US Ethanol:
    The UK will eliminate tariffs on US ethanol imports, facilitating the entry of 1.4 billion litres into the UK market. This measure is anticipated to lower costs for UK industries that use ethanol, such as manufacturing and transportation.
  5. Support for the Whisky Industry:
    The resolution of the Section 232 tariff dispute has led to the lifting of tariffs on American whiskey. This development is expected to benefit UK spirits importers and the hospitality industry, while also encouraging greater investment in the UK spirits sector by US companies.
  6. Commitment to Ongoing Trade Negotiations:
    Both nations have expressed a commitment to continue discussions on broader trade issues, including digital services taxes and pharmaceutical tariffs. These ongoing negotiations aim to further enhance bilateral trade relations and address remaining areas of concern.

This trade agreement represents a significant advancement in UK-US economic relations, providing immediate benefits to key industries and laying the groundwork for future cooperation.

Source:Other | 11-05-2025
General

Electronic invoicing consultation

May 8, 2025 by Terry Harris 0 Comments

The government wants your say on e-invoicing. Quicker payments, fewer errors, and better VAT reporting are on the table. A 12-week consultation could shape the future.

HMRC and the Department for Business and Trade (DBT) jointly launched a 12-week consultation earlier this year. The consultation is examining the broader adoption of electronic invoicing (e-invoicing) across UK businesses and public sector bodies. This is the first time UK businesses have been invited to share their views on how e-invoicing could be implemented and scaled nationally.

E-invoicing refers to the digital exchange of invoice data directly between buyers and suppliers. It has the potential to reduce paperwork, improve productivity, and help businesses get their taxes right first time. Benefits include fewer data and invoicing errors, more accurate VAT reporting, faster payments, and improved cash flow.

An example cited by HMRC highlights how an NHS trust processes e-invoices within 24 hours, compared to 10 days for paper invoices, resulting in invoices being paid almost twice as fast, while supplier queries have dropped by 15%.

The consultation seeks input on key issues such as:

  • different models of e-invoicing;
  • whether e-invoicing should be mandated or voluntary, and the appropriate scope of any mandate; and
  • the potential for real-time digital reporting alongside e-invoicing.

The government is encouraging responses from businesses of all sizes, software providers, and other stakeholders to help shape future e-invoicing policy and adoption strategy.

Source:HM Revenue & Customs | 05-05-2025