Happy New Year
Welcome …
To our January 2025 newsletter designed to bring you tax tips and news to keep you one step ahead.
Contents
TAX CHANGES TO PROGRESS TO LAW IN THE NEW YEAR
The 2024-25 Finance Bill is on course to complete in the new year. This will enact the many tax measures announced in the Autumn Budget into law.
The Government has published an official document entitled 'Overview of tax legislation and rates', detailing the main changes set to take effect following the Chancellor's announcements on 30 October. Within the core parts of the paper is the setting of rates and thresholds for Income Tax, Corporation Tax, Inheritance Tax and Capital Gains Tax - the latter two of which were among the biggest reforms in the Budget. Reforms to tax rules for alternative finance and carried interest, also feature.
The bill has reached the committee stage in Parliament and is on track to become legislation in the coming weeks.
One of the areas of tax that received very little attention at the Budget but is contained within the draft legislation is the reduction of tax-free overseas transfers of tax-relieved UK pensions.
According to Government papers, this will 'remove the exclusion from the Overseas Transfer Charge of transfers to Qualifying Recognised Overseas Pension Schemes (QROPS) established in the European Economic Area and Gibraltar, where the member is resident in the UK or an EEA state'.
The consequence of this change is that pension transfers from 'tax relieved UK pensions to QROPS in the EEA and Gibraltar will now be subject to a 25% charge, unless another exclusion applies'.
The measure will apply, backdated in effect, from 30 October 2024.
One of the key exceptions to the bill in terms of how it affects people across the whole of the UK relates to taxpayers in Scotland and Wales. For Scottish taxpayers things are a bit different, with income tax rates and limits set by the Scottish Parliament, rather than by the UK Government at Westminster. And it's also worth noting that UK rates are reduced by 10 pence in every £1 for Welsh taxpayers. Income Tax for non-savings and non-dividend income for people in Wales is set by the Welsh Parliament.
SELF-ASSESSMENT SCAMMERS WARNING AS JANUARY DEADLINE NEARS
It's sadly become all too common a trend in recent times, that the Self-Assessment Tax Returns deadline has become a time for criminals to exploit and target.
Attempts to scam the self-employed and others filling out their forms before the 31 January are ramping up, officials have warned.
In particular, taxpayers have been cautioned to look out for so called 'refund scams'. Watch out for emails that take this approach.
HMRC received nearly 150,000 referrals about possible scams in the last year. Around half of all scam reports (71,832) in the last year were fake tax rebate claims.
And it seems to be rising more and more as we approach the key deadline, with a reported 16.7% increase in all scams flagged to the tax man. Some 144,298 came between November 2023 and October 2024, up from 123,596 in the previous 12-month period.
The target for fraudsters is huge: there are millions of people due to complete their tax return and pay their taxes before 31 January.
In a statement, HMRC warned: 'Fraudsters are targeting people with offers of tax refunds or demanding payment of tax to get hold of personal information and banking details.
'HMRC will never leave voicemails threatening legal action or arrest, or ask for personal or financial information over text message - only fraudsters and criminals will do that.'
Kelly Paterson, Chief Security Officer at HMRC, said: 'Being vigilant helps you spot potential scams. And reporting anything suspicious helps us stop criminal activity and to protect you and others who could have received similar bogus communication. Our advice remains unchanged. Don't rush into anything, take your time and check 'HMRC scams advice' on GOV.UK.'
Further advice from HMRC:
- If you are contacted by someone claiming to be from HMRC and they ask you for their personal information a tax rebate, check the advice on GOV.UKto help identify if it is a scam
- report suspicious 'phishing emails' to phishing@hmrc.gov.uk
- report tax scam phone calls to HMRC on GOV.UK
- forward suspicious texts claiming to be from HMRC to 60599
- HMRC will not contact you by email, text, or phone to announce a refund or ask you to request one
- Anyone due a refund can claim it via the online HMRC account or app
TREASURY COFFERS SWELL FROM IHT BILLS - EVEN BEFORE IMMINENT REFORMS SET IN
Reforms to Inheritance Tax were arguably among the most contentious measures that Rachel Reeves announced during her Autumn Budget.
We've seen farmers staging significant protests in London regarding changes to how agricultural properties are taxed when it comes to IHT.
But it seems that IHT receipts are rising swiftly even before any of the proposed changes can take effect.
Compared to the same half-yearly period last year, the Treasury took in £0.6bn extra in April to November 2024. That's according to new figures released by HMRC.
With these latest numbers, it appears that IHT continues to be on course for a record year of receipts. Analysts have noted that in total this year, before December's figures are announced, IHT receipts are already more than half a billion pounds higher than 2023. Commentators are predicting that with the changes to come as well, that the amount of IHT reaching Treasury coffers will keep on increasing in the next few years.
Another noteworthy figure that has been recorded in the media regarding the latest stats is that gross tax and National Insurance receipts for April to November 2024 rose by £15bn compared to a year ago. This figure included the IHT receipts.
STAMP DUTY TAX RECEIPT TRENDS REVEALED IN NEW REPORTS
Among the changes we saw at Budget 2024 related to Stamp Duty - the tax you pay when you buy a new property.
And a raft of new statistics has been released in the last couple of weeks, suggesting a significant trend downwards in terms of the amount of money the Treasury is receiving from this form of tax in the last couple of years. But on the flip side, other figures show signs of an increase in the later part of 2024.
The higher rates for people owning more than one home - and for companies, is set to rise from 3% to 5% above the standard residential rates, following the Chancellor's Budget in October. The single rate of Stamp Duty Land Tax (SDLT) payable by companies and 'non-natural persons' buying homes for more than £500,000, will also go up from 15% to 17%.
In its latest annual report, the Government revealed that total stamp tax receipts fell between financial year 2022-23 and 2023-24. There was a 23% drop - falling from £19.13 billion to £14.81billion. And SDLT receipts fell from £15.36billion to £11.61billion from tax year 2022-23 to 2023-24 - a reduction of 24%.
The latest quarterly figures for 2024 were also released, showing a rise in the latter part of the year for total SDLT transactions. They were 15% higher than in Q3 2024 (July to September) than the previous quarter, and 8% higher than in Q3 2023. This report also showed residential property transactions in Q3 2024 were 17% higher than in the previous quarter, and 9% higher than in Q3 2023.
In terms of total SDLT receipts, in Q3 2024 these were 14% higher than in the previous quarter, and 6% higher than Q3 2023. Residential property receipts in Q3 2024 rose by 20% compared to the previous quarter, and were 5% higher than Q3 2023, according to the Government data.
And, finally, additional figures showed that about £1.31bn was paid in SDLT in November, slightly lower than the £1.35bn intake in October.
QUESTIONS & ANSWERS
Q: I use various online marketplaces to sell my unwanted items - from clothes to old phones and various other things. I'm a bit concerned though by stories I've read in the media that rules are changing and I may have to start filing a tax return. That's not something I've ever had to worry about before. Can you help me understand if my fears are justified?
A: There has been a lot written in the papers over the last year or so about this issue and, with the angle that we see often taken in these reports, it's understandable that people like yourself could feel worried about the implications. Millions of people do what you do. It's become an everyday activity to sell second hand things online.
However, HMRC has become so concerned itself about what it feels are misleading stories in the press, that it's recently issued a long statement to try to reassure and clarify the matter.
The HMRC website stated: 'People selling unwanted items online can continue to do so with confidence and without any new tax obligations.'
The reason these concerns have arisen is due to the fact that a new process is taking effect in January. It means online platforms have to share certain sales data with HMRC.
These new measures 'generated inaccurate claims that a new tax was being introduced,' officials said, adding that 'absolutely nothing has changed for online sellers'.
However, you and others do need to be aware that if you're buying goods for re-sale or make things with the intention of selling for profit and you garner a total income from this activity of over £1,000 in one tax year (before deducting expenses), you may need to register for Self-Assessment and fill out a tax form.
HMRC stated: 'Those who sold at least 30 items or earned roughly £1,700 (equivalent to €2,000), or provided a paid-for service, on a website or app in 2024 will be contacted by the digital platform in January to say their sales data and some personal information will be sent to HMRC due to new legal obligations.'
Angela MacDonald, HMRC's Second Permanent Secretary and Deputy Chief Executive Officer, had this to say: 'We cannot be clearer - if you are not trading and just occasionally sell unwanted items online - there is no tax due. As has always been the case, some people who are trading through websites or selling services online may need to be paying tax and registering for Self-Assessment.'
So, whilst it's worth looking again at the criteria above that may mean you're in need of registering, it sounds as though, as for many people around the country, you don't need to be concerned or change your habits in this regard.
Q: I have recently started a business which offers consultancy for building and engineering. I'm running the business side for my new partner, who is the building consultant. So, I'm not the expert in the field and I'm trying to get a fuller understanding of our potential obligations with regard to the Construction Industry Scheme (CIS) and the need for registration. Can you provide any guidance?
Q: I'm in the process of starting a new business and want to ensure I'm fully prepared for upcoming compliance changes. I'm aware requirements for reporting benefits in kind (BiKs) are changing, but how will it affect small businesses like mine? Specifically, do I need to report loans or accommodation benefits immediately?
JANUARY KEY DATES
19th
- For employers operating PAYE, this is the deadline to send an Employer Payment Summary (EPS) to claim any reduction on what you'll owe HMRC.
22nd
- Deadline for employers operating PAYE to pay HMRC. This is also the quarterly deadline for businesses that pay per quarter.
31st
- Deadline for filing Self-Assessment Tax Returns online
- Deadline paying any tax owed to HMRC for those doing online returns
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Disclaimer: The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.
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