2023/24 Tax year end – things to consider

Whether managing your corporate or personal tax affairs, March is a really good time to spend a little while preparing for the impending end of the tax year. As ever, the budget statement on 6^th March means a number of changes will take effect from April 6^th, requiring due consideration in advance. There are also those perennial matters for which prior planning prevents post-Christmas palpitations – Yes, now is a good time to be thinking self-assessment.

Here’s a brief rundown of some key actions for businesses and individuals in March.

Business tax year end planning

• The National Minimum Wage (NMW) will increase in April.
  • You should prepare accordingly by updating payroll software ahead of your first April payroll, and immediately after 6^th April
  • You should also make sure that you are actually paying the National Minimum Wage. The Government has once again named and shamed over 500 companies, including big employers such as Estee Lauder, Greggs and EasyJet, who are/have been (in some cases) inadvertently underpaying staff that are meant to receive the NMW. Some of the companies identified by the Government have been caught out because of their policies on deductions and holiday that result in the employee actually receiving an hourly rate below the NMW. Whether intentional or inadvertent the Government will enforce against those not paying National Minimum Wage, requiring them to reimburse underpaid staff and potentially levying a penalty against them.
• Self-Assessment Reporting changes for Self-Employed and Partnerships
  • As outlined in our recent blog, if you are self-employed or in a trading partnership and your accounting year end does not match the tax year (April to March), new annual self-assessment reporting changes will impact you from this tax year.

Personal income and tax planning for the tax year end

• Child Benefit and National Insurance changes don’t come into effect until 6^th April. The recent announcements by the Chancellor relate to the next tax year, starting in April 2024. All previous rates and limits still apply for March and the 23/24 tax year.
  • For child benefit, don’t get caught out as the £50k limit for the High Income Child Benefit Charge still applies this tax year
• Use valuable ISA allowances
  • If you have a cash ISA, you can invest up to £20,000 each tax year tax free. If you’ve got some spare income and can put it away, make use of these valuable allowances.
• Remember savings interest counts as income
  • If you’re keen to make the most of income tax rate thresholds and you’re looking at your final payroll figure for March, then remember that with the exception of ISA interest and winnings on Premium Bonds, all the interest gained on bank accounts, savings and investments, counts towards your income, regardless of the allowances in place
  • Basic rate taxpayers can earn up to £1,000 of interest in a year (+ ISA allowances and Premium Bonds) before paying any tax on the income and for higher rate taxpayers this allowance drops to £500. Whilst you have an allowance, the full value of your interest income counts towards your overall income.
• Self-assessment – Plan ahead!
  • Whilst the deadline for self-assessment remains as 31^st January in the year following the end of the tax year (i.e. the next deadline is 31/1/25) now is a great time to spend 5 or 10 minutes pulling some of the headline figures together – even if you sit on them until you’re ready to complete your tax return. Here are three key figures to grab now:
    • Pay – Gross and net payments and tax paid
    • Interest Income – across all accounts and investments, including share holdings and values at the beginning and end of the tax year
    • Other incomes – dividends, rents, child benefit etc
• Dividend tax allowance drops to £500 for 24/25
  • The amount you can take in dividends from a UK business before paying any tax will decrease from £1,000 to just £500 for the 24/25 tax year. Whilst you pay no National Insurance on dividend income and the tax rates on dividends remain the same and are (around 25% in relative terms) lower than the income tax rates, this £500 reduction in allowance may make it pertinent for you to review how you draw your income from your business. If you’d like to consider how best to draw an income in 24/25 tax year, please speak to a member of the team so you’re ready for April payroll.