Tax Matters with James Milne


In the dynamic world of taxation, significant changes are on the horizon for the upcoming tax year. Companies like James Milne have compiled a valuable summary to give you insights into what’s on the horizon. Scan through the headlines below, and if something piques your interest or you need guidance, don’t hesitate to reach out to James Milne’s experts for qualified support.

Key Tax Changes for the New Tax Year

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The April edition highlights several key tax changes taking effect at the beginning of the new tax year. Unfortunately, most income tax and national insurance threshold levels remain frozen, leading to an increase in the number of taxpayers facing higher rates. One notable exception is the welcome increase in the threshold for high-income child benefit payments. Additionally, further reductions in national insurance contributions for employees and self-employed individuals will be implemented from April 6th, representing a step toward potential future abolishment.

Self-employed individuals will witness important changes in how they calculate profits in 2024/25, with “cash accounting” becoming the default method unless an alternative accrual method is chosen. The mechanism for assessing these profits will also change starting from April 6th, 2024, with tax applied to activity results between April 6th and April 5th, allowing for a clearer delineation of financial and tax years.

Corporate Tax Landscape

For limited liability companies, corporate tax rates remain unchanged from April 2024. However, additional changes are being introduced to tax incentives for research and development (R&D), affecting accounting periods commencing on or after April 1st, 2024.

Capital Gains Tax Considerations

Annual exemption for capital gains is decreasing to just £3,000 per taxpayer for profits earned in 2024/25. Furthermore, the higher rate for gains on residential property is being reduced from 28% to 24%, as announced in the spring budget.

High-Income Child Benefit Charge (HICBC) Update

Recent changes to the HICBC outlined in the Spring Budget have been integrated into the latest Finance Bill, effective April 6th, 2024. While the increased threshold is positive news, calls for complete removal of the charge continue. HICBC aims to recoup child benefits where the higher-earning individual in a relationship has adjusted income exceeding £60,000 (£50,000 until 2023/24).

Planning Considerations and Implications

Understanding the impact of these changes on taxable profits is crucial. Strategies such as pension contributions and charitable donations can reduce net income for HICBC purposes. Similarly, salary sacrifice agreements with employers can effectively lower net income for tax assessment purposes.

Transition to Cash Accounting

Cash accounting was introduced to simplify tax preparation for small businesses. From 2024 onwards, it will become the default method for sole traders and partnerships, excluding those with corporate members or limited liability partnerships. Businesses can opt out of cash accounting to follow Generally Accepted Accounting Practice (GAAP) standards, which require adjustments for accruals and prepayments.

Navigating Transitional Year 2023/24

The shift in profit assessment methods also introduces complexities during the transitional year. Businesses must navigate the calculation of profits for 2023/24, transitioning from the old ‘current year’ basis to the new tax year basis. It’s essential to assess transitional profits accurately and plan tax liabilities accordingly.

Seeking Expert Advice

Given the intricacies of these tax changes, working with tax professionals like James Milne can provide invaluable guidance and support. We can assist in calculating transitional profits, understanding tax liabilities, and optimizing strategies for the new tax year.

For personalised advice and assistance tailored to your specific circumstances, please reach out to us. We’re here to help you navigate the evolving tax landscape with confidence.

This blog post summarises the complex tax changes expected in the upcoming year and emphasises the importance of seeking professional guidance to optimize tax planning strategies. If you need further information or wish to explore specific tax implications, please feel free to contact us.

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