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Business Companion Newsletter January 2025
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Business Companion Newsletter January 2025

Remember – the deadline for submitting personal tax returns and any tax due is 31st January 2025.  We give more detailed advice in the article below.  If you want help with your personal tax return just contact us.

January 2025

• Self Assessment Tax Due

• National minimum wage and salary sacrifice

• Update on employment allowance

• Making Tax Digital threshold reduced to £20,000

• Pensions to lose IHT exemption

Self Assessment Tax Due


If you have submitted a personal tax return any balance on your 2023-24 tax is due by 31st January 2025. If your tax bill was over £1,000 HMRC will also ask you to pay Payments on Account towards your 2024-25 tax.  The first Payment On Account is also due by 31st January. The second Payment On Account is due by 31st July 2025.  

HMRC Bank account details:
Sort Code: 08 32 10
Account number: 12001039
Account Name: HMRC Cumbernauld
Payment Reference:
Use your 10 digit Self Assessment number (UTR), followed by the letter K for example: 1234567890K.

Struggling to pay your Personal Tax?
Once we have submitted the tax return you should be able to set up the Payment Plan with HMRC using your Online tax account. See https://www.gov.uk/difficulties-paying-hmrc/pay-in-instalments . Alternatively you can give HMRC a ring on 0300 200 3835.
If you believe your net income will be down in 2024-25 we can ask for these Payments On Account to be set lower. Just Contact Us

National minimum wage and salary sacrifice


As announced in the Autumn Budget, the national minimum wage (NMW) and the national living wage (NLW) are set to increase from April 2025.
The hourly rate will depend on the worker’s age and whether they are an apprentice
 
Age of worker 1st April 2025 1st April 2024
21 and over (NLW)  £12.21  £11.44
18 to 20 (NMW)  £10.00    £8.60
Under 18   £7.55   £6.40
Apprentice   £7.55   £6.40

The NLW applies to workers aged 21 and over, while workers of school leaving age are entitled to the NMW. The increase for 18–20-year-olds is the largest on record and is the first step towards a single rate for all adults.

Employers might breach the NMW rules inadvertently by making certain deductions from workers pay. Where such deductions take an employee’s pay below the NMW, employers must ensure that the worker is not underpaid.

Update on Employment Allowance


Although employers’ NI will be levied at 15% on earnings over £416 per month, the employment allowance (EA) will reduce your annual bill by £10,500 for all eligible employers irrespective of size. This compares with the current £5,000 and more limited eligibility.

EA Eligibility
Besides ineligible one-person companies and public bodies, businesses (not charities) undertaking more than 50% of their work in the public sector is excluded from the EA, except those providing IT, security or cleaning services.

Making Tax Digital threshold reduced to £20,000


The Budget confirmed that taxpayers with qualifying income of £50,000 or more will be required to join MTD in April 2026 as planned. Those with qualifying income between £30,000 and £50,000 will be brought into MTD from April 2027.

The scope will be expanded to include incomes of £20,000 and above by the end of the current parliament, bringing many more sole traders and landlords within the scope of MTD.

To comply with the requirements, mandated taxpayers will need to use third party MTD-compliant software to keep digital records and file quarterly summaries of their income and expenses with HMRC.

Qualifying income is broadly defined as total gross income from trading and property, as reported on the most recent self assessment tax return. To decide which taxpayers will be mandated to join MTD for Income Tax in April 2026, HMRC will look at the 2024-25 tax return, i.e. the one for the current tax year.

Online eligibility checker
You will need to use MTD for income tax from April 2026 if you:
•    are an individual registered for self assessment;
•    get income from self-employment or property, or both, before 6.4.25; and
•    have a qualifying income of more than £50,000 in the 2024-25 tax year.

You can use HMRC’s online eligibility checker at GOV.uk to decide when you will be required to join MTD for income tax.
Where an individual cannot use MTD, for example if they are digitally excluded, they may be able to claim an exemption. We can help you with this when the application process opens.

If you or someone you know is a sole trader or landlord with qualifying income of £20,000 or more, contact us without delay so we can help get the business MTD-ready.

 Pensions to lose IHT exemption


At the Autumn Budget the Chancellor announced plans to remove the exemption which allows unused pension funds to be inherited tax free.

Currently, if a pension holder dies before the age of 75 their beneficiaries can generally inherit the remaining funds tax-free, whether as a lump sum or as income. If the deceased is 75 or older at the time of death, the inherited pension will be taxed at the beneficiary’s marginal income tax rate.

From April 2027, HMRC has proposed that most unspent pension pots will be subject to inheritance tax (IHT) at 40% regardless of the age of the deceased, unless the pension is passed to their spouse or civil partner.

Bringing unused pension pots into the scope of IHT will also mean that their value will count towards the IHT threshold, which the Chancellor confirmed will be frozen at £325,000 for a further two years until April 2030. Many more estates will be brought into IHT as a result of this change.

Further, if the pension holder dies aged 75 or older, the inherited pension will (as currently) also attract income tax at the beneficiary’s marginal rate. Without careful planning, this could result in a marginal rate of up to 67% if the person receiving the pension is an additional rate taxpayer.

If you have carried out succession planning based on the current rules, we recommend that you seek advice from a pensions expert or independent financial advisor if you think you may need to re-evaluate your options.

Need Help?


Please contact us if we can help you with these or any other tax or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.

New Clients Welcome


If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.

About Us


Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Xero.

‘All clients using these software packages can benefit from our support. Visit our website www.simpleaccounting.co.uk for a look at the resources on offer.’
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