Under current rules in England and Wales, private landlords cannot legally rent out their property without an Energy Performance Certificate (EPC) with a minimum rating of E, while social landlords are not subject to any minimum energy efficiency standard.

Previously, the Conservative government had proposed making it mandatory to achieve a minimum EPC rating of C by 2025 for new tenancies and 2028 for existing ones, but this policy was scrapped a year ago due to concerns that upgrades would cost too much.

Now, the new Labour government is set to bring the EPC upgrade enforcement back, but with an extended deadline of 2030 for all rental properties to have a rating of at least C.

Around 1/3 of rental properties were constructed before 1919, many of which have solid walls, which will be difficult to bring up to the minimum energy efficiency rating – but without the compulsory upgrade, these properties cannot be legally let to tenants from 2030.

So, what does this mean for landlords right now, and is there any financial support available?

 

EPC grant conditions

New funding has been announced to help some landlords with older properties, but this will not be available for all landlords, as it depends on the property’s rating and location.

From April 2025, the government will make grants of up to £30,000 available for landlords to upgrade one property. This will be split into £15,000 caps each for upgrading energy efficiency to a C rating and installing low-carbon heating systems (such as solar panels or heat pumps).

For second or subsequent properties, the total grant will be capped at £15,000, with the landlord required to contribute at least the same amount themselves.

There currently is no limit for the number of properties that a landlord can claim grants for, but the maximum funding each landlord can claim is £315,000 altogether.

To qualify, a rental property must meet at least one of the following criteria:

  • Currently has an EPC rating between D to G
  • Let to low-income tenants either receiving means-tested benefits or with an annual family income below £36,000 a year
  • Located within an eligible postcode area with older housing stock

The latter is a kind of postcode lottery covering around half of postcodes in England and Wales, identified as more ‘deprived’ areas with many pre-1919 properties that are costlier to upgrade.

 

Required EPC upgrades

Whether you make use of the grants or fund energy efficiency improvements yourself, the government expects landlords in England and Wales to invest in the following upgrades:

  • Energy performance – insulation, draughtproofing, double or triple glazing, smart controls
  • Low carbon heating – heat pumps, high retention storage heaters, solar panels

More details about this scheme can be found in the Warm Homes: Local Grant guidance.

At the moment, landlords might prefer to wait for further clarification before taking action, as the government needs to consult on how assessments and exemptions will work.

After the grant scheme opens to expressions of interest on 1st April 2025, the government expects to operate it for at least 3–5 years, up until the 2030 deadline for EPC upgrades.

Some landlords may prefer to sell up rather than make significant financial investments in improving the energy efficiency of their properties, as this ‘capital expenditure’ is not tax deductible – meaning it cannot be written off as maintenance to reduce taxable profits.

However, while the upfront costs are considerable, an energy efficient property will not only be more attractive to tenants, but will also increase in value for whenever you decide to sell it.

If you are a landlord looking for financial advice to help you optimise your operating costs, from tax planning to managing Service Charge Accounts, we can help here at gbac.

To speak to our team of Barnsley accountants about our range of services, please call 01226 298 298. Alternatively, you can send an email to info@gbac.co.uk and we’ll get back to you.

With the UK government looking for ways to reduce tax fraud and increase tax collection, it is encouraging businesses to use electronic invoicing – also known as e-invoicing.

This is a digital format of creating, sending, receiving, and processing invoices, containing the same information as a traditional invoice, but with the potential to prevent invoice fraud.

Over half of Organisation for Economic Co-operation and Development (OECD) countries mandate e-invoicing, but the UK is lagging by still allowing paper invoices.

Though details are currently scarce, the government intends to carry out a consultation into mandating e-invoicing, which could be incorporated into the Making Tax Digital rollout.

A decision on compulsory e-invoicing may be a while away, but in the meantime, business owners in the UK might want to get ahead and implement this voluntarily – read on to learn why.

What are the benefits of e-invoicing?

If you operate internationally or plan to expand beyond the UK, it’s likely that your business needs to use e-invoicing anyway. Even if you don’t, there are still many benefits to adopting a digital invoicing system before it becomes mandatory, which include the following:

  • Faster processing of invoices with fewer errors thanks to a standardised format
  • Real-time tracking to reduce the number of invoice disputes and rejections
  • Avoiding duplicate invoices and preventing fraud through interception or amendment
  • Improved cashflow forecasting with better management of capital requirements
  • Taking advantage of prompt payment discounts due to faster payment of invoices

The speed and reliability of digital invoice processing can also strengthen relationships between buyers and suppliers, leading to higher customer satisfaction and retention.

Should your business implement e-invoicing?

If you work in the realm of B2B e-commerce, it’s never too early to get on board with e-invoicing.

In other countries that have mandated e-invoicing, the process of implementation typically involves a phased rollout over at least 3 years, with larger businesses complying first.

This is similar to the ongoing Making Tax Digital strategy in the UK, which is staggering sign-ups for different business sizes over several years to ease the transition.

It could take a couple of years or more for the government to conclude their consultation and put a plan in place for obligatory e-invoicing in the UK. However, instead of waiting until they have no choice in the matter, businesses should start preparing sooner rather than later.

Most businesses may not have the resources or budget to develop an e-invoicing solution of their own, but there are plenty of e-invoicing service providers available to choose from.

It’s important to choose the right provider that can fully meet your business needs both currently and in the future. If you need help with selecting or implementing digital invoicing for your business, you can always seek assistance from financial advisers, like the gbac team.

Give us a call on 01226 298 298 or send an email to info@gbac.co.uk and you’ll hear back from one of our accountants in Barnsley as soon as possible.

Despite the Capital Gains Tax (CGT) rate on residential property disposals decreasing by 4% this past spring, rising interest rates and the imminent scrapping of holiday let tax reliefs in 2025 led many buy-to-let landlords to sell their properties in 2024.

Speculators believe the new Labour government could increase CGT rates in the Autumn Budget, but this may not be the case, as the rise in residential property disposals by landlords selling up early to avoid higher CGT bills has already increased CGT receipts.

According to HMRC reports, from early April to the end of August this year, the tax agency collected almost 10% more CGT than the same period in the year before.

Compared to buy-to-let landlords, anyone with an investment portfolio has more flexibility in choosing the timing of disposals – but with the annual tax-free amount reduced to £3,000, what can you do to plan ahead for CGT in 2024–2025 and beyond?

How can investors reduce CGT?

Investors with larger portfolios can make the most of annual exemptions and basic rate tax bands with lower CGT rates by spreading out their asset disposals over several years.

It’s important to note that if you make personal pension contributions in the same year as disposing of an asset, this could increase your tax band and therefore the CGT rate.

Those who are married or in a civil partnership can also utilise the annual exempt amount and basic rate tax band of their spouse or partner, as one person can give or sell an asset to the other tax-free, and they will only be liable for CGT if they sell the asset themselves.

However, if CGT rates do increase in the next few years, this type of planning could quickly unravel. It’s important to stay on top of any CGT updates as soon as they’re announced.

Another risky option is to invest in a Seed Enterprise Investment Scheme (SEIS). Offering a CGT exemption of 50% on reinvested gains and the same amount in Income Tax relief, a landlord could benefit from up to 64% in tax relief through such a scheme.

This relief would increase in alignment with any future CGT uplifts, but these high-risk investments should not be undertaken without seeking proper advice.

In the long term, holders of large investment portfolios might have the opportunity to avoid tax liability in the UK by retiring overseas. This isn’t possible for landlords, though, as UK property will still be liable for CGT regardless of their residence status.

What’s the outlook for CGT?

Chancellor of the Exchequer Rachel Reeves is due to share the Autumn Budget on 30th October, when the public will discover the government’s tax plans for the next few years.

In the meantime, HMRC’s CGT guide is available on the government website, which explains the current rules and thresholds that will apply until April 2025.

Still wondering what you should do with your savings and investments? If you want to get a head start adapting to any changes that the Labour government plans to implement, it could be worth seeking financial advice from consultants like our accountants in Barnsley.

If you would like to learn more about our tax consultancy services and how we can help you optimise allowances and exemptions, please call gbac on 01226 298 298 or email info@gbac.co.uk.

Last year, we posted about the National Audit Office (NAO) findings that more than a quarter of matured Child Trust Funds had still not been claimed by the summer of 2023.

Currently, in the autumn of 2024, HMRC has expressed concerns that around 670,000 accounts are still unclaimed by Gen Z adults who are now between 18 and 22 years old.

Under Gordon Brown’s Labour government, Child Trust Funds were set up for every child born between 1st September 2002 and 2nd January 2011. These were started off with a £250 voucher to encourage parents to build savings accounts for their children.

As almost 30% of Child Trust Funds were established without parental involvement and the scheme closed in 2011, it’s not surprising that there are still so many unclaimed accounts, with now-adult account holders unaware of their existence.

If you aren’t sure how to find out whether you have a Child Trust Fund, this blog explains how to claim your forgotten savings and what your options are.

How to find your Child Trust Fund

All CTFs are held by a bank, building society, or other savings provider. Some of these have exited the market or merged over the last 10+ years, which makes it more difficult to locate the new provider and track down where the funds have been transferred to.

If you are an eligible adult and you don’t know who your CTF provider was, you can contact The Share Foundation for help finding it or use HMRC’s ‘Find a Child Trust Fund’ tool.

You’ll need to provide information such as your name, date of birth, address, and National Insurance number, so they can trace the bank, building society, or investment company.

HMRC advises against using third-party agents who offer to track missing Child Trust Funds, as they charge a fee for this service that can be up to 25% of the account’s value.

With a reported average of £2,200 in each unclaimed Child Trust Fund, you’ll want to find yours and access your savings with as little interference as possible.

What can you do with a Child Trust Fund?

If you are at least 18 years old and have located your Child Trust Fund, you have the choice of withdrawing the money in the account or transferring it to an Individual Savings Account (ISA).

While accessing the funds immediately may be an attractive idea, if you don’t need the money immediately, it could be better for you in the long term to invest it into a savings account with a strong interest rate, such as a two or three-year fixed-rate cash ISA.

More information about this is available on the government website in HMRC’s Child Trust Fund guide, which explains how parents can manage the account for their children and how eligible children can access their CTF when they’re old enough.

If you need further assistance managing your savings and would like professional financial advice on trust funds, you can always contact our accountants in Barnsley.

Here at gbac, we help individuals, families, and businesses with all kinds of financial planning, so give us a call on 01226 298 298 or send an email to info@gbac.co.uk to get started.

According to the Labour Party, there is a ‘black hole’ in public finances left unaccounted for by the previous government to the tune of £22 billion.

This applies to the current financial year alone – and as the Office for Budget Responsibility (OBR) is yet to publish the official figures, the total could be even bigger.

For Chancellor of the Exchequer Rachel Reeves, finding the money to cover this shortfall means making controversial decisions like cutting winter fuel payments for pensioners and potentially increasing taxes.

With the Autumn Budget due at the end of October, which Prime Minister Keir Starmer has said will be ‘painful’, there are plenty of suggestions from think tanks on how to raise the billions needed to fill the gap.

This includes a report from the Fabian Society – one of the original founders of the Labour Party – that suggests the government could raise £10 billion a year by reforming pension tax.

Read on to learn more about their proposals and how changes like this could affect you if the government decides to implement similar policies as part of the Budget.

What could pension tax relief reforms involve?

Pension contributions are mostly exempt from tax, meaning most workers will receive more in tax relief on their pension investments than they will be taxed on their pension income – especially high earners.

This is therefore a key area to introduce reforms in a Budget focused on raising revenue.

At the end of August 2024, the Fabian Society published a taxation report titled Expensive and Unequal: The case for reforming pension tax relief.

The report suggests changing tax reliefs on pension contributions by:

  • Creating one flat tax relief rate for all tax bands, which would apply to both individual contributions and employer contributions.
  • Increasing tax on pension lump sums, charging National Insurance on private pensions, and charging Inheritance Tax on pension assets.
  • Consulting on National Insurance Contribution reforms for pension contributions, including both employee and employer NICs.
  • Recycling savings made by these changes into increasing minimum employer contributions, developing an opt-out pension for self-employed workers, and providing pension credits for carers.

Together, these reforms could raise £10 billion annually – compared to the £1.5 million that means-testing winter fuel payments is expected to raise in 2025–2026.

The new system should be simple to follow, incentivising individual and employer pension contributions while keeping tax reliefs proportionate to earnings.

How would a flat rate of pension tax relief be beneficial?

The most significant part of the Fabian Society’s proposals is the idea of introducing a flat rate tax credit instead of Income Tax relief for pension contributions.

This plan was allegedly once considered by George Osborne, the former Chancellor of the Exchequer for the Conservative government between 2010 and 2016.

HMRC figures from the 2022–2023 tax year featured in the report highlight issues like only 1/3 of pension tax relief being offset by tax revenue from pension payments, and inequalities like the majority of tax relief on pension contributions going to higher earners, employers, and men.

Reducing the tax benefit for higher and additional rate taxpayers, who receive over half of pension contribution tax relief despite earning the most, will help to generate revenue for the Treasury.

As an example, a higher-rate taxpayer would currently contribute £60 to pay £100 into their pension with tax relief. Under the Fabian Society’s proposal, contributing £75 from net income would be topped up by a £25 tax credit instead to bring the total to £100 – like a Lifetime ISA.

It would benefit most taxpayers because it would reduce the net cost of their pension contributions.

Should you be making changes to your pension plans?

It’s likely that the Treasury was already considering most of the tax-raising ideas presented in this Fabian Society report, but we must wait until 30th October to find out whether the government will be introducing any pension tax relief reforms in the Autumn Budget.

Even if it turns out that these measures aren’t included in Labour’s plans to fill the ‘financial black hole’, it’s still worth noting they could happen in the future when considering topping up your private pension.

With the cost of retirement and State Pension age both rising, it’s essential to review your pension contributions and start planning for retirement to build your savings effectively.

If you need financial planning advice to help you optimise your retirement income without maximising your tax liability, why not speak to our Barnsley accountants?

Here at gbac, we provide a wide selection of accounting services, so call us on 01226 298 298 or email us at info@gbac.co.uk to learn how we can help you with efficient pension planning.

New legislation introduced this year makes it illegal for employers to withhold tips from their staff, overhauling gratuity practices to ensure that from 1st October 2024 workers can keep 100% of the money they have earned in the form of tips and service charges.

Primarily applying to businesses in the hospitality sector, the government expects this change to boost wages by giving around £200 million back to workers each year.

Paying tips is likely to cost both employers and employees through increased National Insurance Contributions (NICs), but employers can circumvent this by using a tronc arrangement.

Read on to learn more about the new tipping laws, troncs, and what your business can do to distribute tips fairly and stay on the right side of HMRC.

The Employment (Allocation of Tips) Act 2023

Following a consultation several years ago, which looked into the unfair distribution of tips due to employer malpractice that was highlighted by the media in 2016, the Employment (Allocation of Tips) Act 2023 was given Royal Assent in May 2023.

This amends the Employment Rights Act 1996 with the introduction of Part 2B, which applies in England, Wales, and Scotland.

While the legislation, often referred to as the Tipping Act, was due to take effect in July 2024, delays caused by the general election meant the Act only came into force on 1st October 2024.

Employers must now pass all tips, service charges, and gratuities on to employees without deductions – for example, retaining a portion as an ‘administration fee’ is no longer allowed.

Cash tips given directly to a worker without involving the employer were already legally protected, but the new law covers cashless tips via card payment, too.

Employer obligations for distributing tips

Under this legislation and the Code of Practice on Fair and Transparent Distribution of Tips, which came into effect at the same time, employers must:

  • Pass on tips to workers in full with no deductions (other than tax or NICs)
  • Have a written tipping policy and keep a record of how tips were managed
  • Provide information about their tipping record if a worker requests it
  • Pay tips to workers within 1 calendar month of the customer paying the tip
  • Not alter an employee’s hourly wage (tips don’t count towards minimum wage)
  • Consider different roles, performance levels, seniority, and customer intention

This applies to hospitality businesses like cafés, restaurants, and bars, but also any business that accepts tips, such as hairdressers. The legislation covers all employed workers, including agency workers and those on zero-hour contracts.

The Act regulates the fair and transparent allocation of tips to staff, so if their employer retains their tips, workers can submit an employment tribunal claim against them. Employers found to have acted illegally could have to pay fines or compensation to workers.

Tips, Income Tax, and NICs

Tips are subject to Income Tax and employee NICs, typically through the PAYE system.

Customers giving cash tips directly to individual employees or leaving them on the table are subject to Income Tax, but not National Insurance, as PAYE doesn’t apply. In these cases, it’s the worker’s responsibility to report income from tips to HMRC via Self-Assessment.

In all cases of an employer forwarding tips to an employee, they must operate via PAYE, whether the employer makes the payment or delegates this task to an employee.

When it comes to NICs, gratuity payments paid to employees are exempt if:

  • It isn’t allocated by the employer to the employee, whether directly or indirectly
  • It isn’t directly or indirectly paid to the employee by the employer and doesn’t comprise of monies paid to the employer previously by customers

On most occasions, an employer passing tips on to an employee will be responsible for both employer and employee NICs, because neither condition is satisfied.

An 8% NIC rate applies when tips (added to normal earnings) reach between £1,048–£4,189 a month. When a threshold of £758 a month is reached, employers must pay NICs, but their liability is usually reduced by the £5,000 annual employment allowance.

As an example, if a restaurant pays £25,000 in tips, the employer could face nearly £3,500 in additional NIC costs, while the extra cost may be up to £2,000 for staff.

In situations like these, tronc arrangements can come into play to help reduce costs.

Troncs and troncmasters

A tronc is an arrangement or system used to divide tips, service charges, and gratuities to pay employees their share. A troncmaster is responsible for managing this.

If a troncmaster decides on tip distribution and not the employer, there are no employee or employer NICs due, but it’s still possible to include the tips on the employer’s payroll.

An employer can appoint the troncmaster, whether it’s a member of staff or a specialist provider, but they must play no part in the actual allocation of tips.

Tips will still be subject to Income Tax, but it will be the troncmaster’s responsibility to set up and run a separate PAYE scheme for this, which can be within the employer’s payroll but must be independent of the employer’s PAYE scheme.

The troncmaster must operate the scheme for tips, report the income to HMRC, and deduct tax accordingly, otherwise they will be held accountable for tax errors by HMRC.

If troncmasters need help with setting up or running a tronc and complying with PAYE requirements, they can consult the government guidance or contact financial advisers like the team at gbac.

What does this mean for your business?

Under the Employment (Allocation of Tips) Act 2023, if an employer breaks the rules, they could be taken to an employment tribunal and made to pay fines and compensation – so it’s essential for employers to stay on top of the changes introduced by this legislation.

Businesses that receive tips, service charges, and gratuities must review their tipping policies, allocation management, and record-keeping practices to ensure they are 100% compliant.

Changing these practices may have an impact on cash flow, but it should also contribute to higher rates of employee satisfaction and retention, saving on recruitment costs while also building trust between businesses and customers who want to tip employees.

It’s important to make sure all employees are on the right tax code, so any Income Tax or NICs due can be taken through PAYE. Using a tronc PAYE scheme can help with this.

If you have any concerns about adjusting your payroll services and keeping everything in order for HMRC to review, why not speak to our accountants in Barnsley?

At gbac, we offer a wide range of financial services, so if your business needs help managing tax liabilities on tips, then call us on 01226 298 298 or email info@gbac.co.uk.

The threshold for repaying student loans in England and Wales, which determines the amount of money a graduate can earn annually before they must begin repaying their university loans, has been frozen at £25,000 until the 2027 tax year.

This applies to ‘Plan 5’ students who started their course from the 2023 academic year onwards. With fewer international students and good A-level results, more UK students are going to university, so this threshold freeze will impact even more people.

Here’s a quick summary of student loan repayments for new students and how parents can help.

Current student loan repayment rules

Students don’t become liable for loan repayments until the April after their graduation. As most university courses last for 3 years, students starting in September 2024 won’t begin repaying their loans until April 2028 at the earliest.

Rather than increasing the threshold to reflect inflation or wages, freezing it at £25,000 a year (£2,083 a month) means that more graduates will begin repaying earlier than they might have if the repayment threshold was increased.

For earnings above the threshold, repayments are taken at 9% of the excess, with interest accrued from the first day of taking the loan and a potential term of up to 40 years.

After 2027, the government may decide to increase the student loan repayment threshold to be in line with inflation, but this will still result in a few years of fiscal drag.

Is it worth self-funding university fees?

Wealthier families may consider self-funding their children’s university tuition fees and living costs themselves, but it’s not so straightforward, as normal debt rules don’t apply to student loans.

If a parent paid the full cost of their child’s university education at around £60,000, but their child never earns more than the much lower repayment threshold during the repayment term, then self-funding will have been an expensive mistake.

Of course, it’s difficult to estimate earnings up to 4 decades in the future, so it’s hard to know whether self-funding will be worth it unless you’re sure your child will go into a high-earning career.

The compromise could be for the child to receive the full student loan, then for the parents to look into paying off the loan early after their child graduates if they get a high-paying job.

However, the pros and cons of this very much depend on personal circumstances.

Official guidance on repaying student loans is available on the government website, or it can help to consult a financial adviser to assess which route would be most salient in your case.

If you would like to speak to our accountants in Barnsley about your family finances and financial planning for your child’s future, please contact gbac by calling 01226 298 298, or send an email to info@gbac.co.uk and we’ll be in touch soon.

HMRC is known to send ‘nudge letters’ to taxpayers who may have undeclared taxable income – from online trading or sales suppression, for example – encouraging recipients to contact the tax agency and provide more information about their earnings.

Unfortunately, scammers are aware of this, and just as there are many email phishing scams, criminals are also sending fake HMRC letters in an attempt to steal sensitive information for fraudulent purposes.

As businesses have become more wary of digital scams, criminals are trying the ‘old school’ method of posting letters with details that make them appear to genuinely be from HMRC.

Would you be able to recognise a fake HMRC letter if you received one?

To avoid falling for this scam, here’s what you should look out for.

What does a fake HMRC letter look like?

These scam letters can be surprisingly convincing, as they feature a realistic HMRC letterhead and claim to be sent by the ‘Indy and Small Business Compliance’ team.

They inform the targeted company that they need to provide evidence verifying their income to ensure they aren’t avoiding tax, threatening a HMRC investigation into the company and potentially freezing their business activities if they don’t comply with the letter.

The fake HMRC letters will usually request sensitive information such as business bank statements, the latest filed accounts, VAT returns, and copies of each director’s ID documents.

If scammers get their hands on a copy of a business director’s passport or driving licence, they can use this to commit fraud and potentially access the company’s bank account.

How can you spot a HMRC scam letter?

It can be a little tricky at first to recognise a fake letter, as they use correct technical and legal terms and typically avoid spelling or linguistic errors that would be a clear giveaway of a scam.

While HMRC does request information from businesses by letter, the two things you should remember to look for that indicate a scam include:

A legitimate HMRC letter will always include the company’s UTR and official email addresses, which end in @hmrc.gov.uk. You should also be able to double-check communications from HMRC in your online tax account.

To help you confirm whether a letter you’ve received from HMRC is real, a list of genuine letters the tax agency has sent out is available to check on gov.uk.

It can also help to have a tax consultant on your side to manage HMRC enquiries on your behalf, helping you keep your tax accounts up to date and avoid prompting from HMRC.

If you would benefit from the assistance of accountants in Barnsley, contact gbac today to learn more about what we can do for your business. You can reach us by calling 01226 298 298, or email your query to info@gbac.co.uk and we’ll get back to you soon.

Dividend income, which is paid to company shareholders, is taxed like most other forms of income – but there is also an annual tax-free allowance for dividends.

While this allowance was cut from £5,000 a year in 2018, it remained at £2,000 a year until 2022, after which it has been gradually reduced year on year – dropping to £1,000 in 2023 and halving again to £500 from April 2024.

With this latest cut to the dividend tax-free allowance, it’s now expected that the number of people paying tax on dividend income for the 2024–2025 tax year will be double the amount it was three years ago before this round of reductions.

The dividend tax rate depends on the individual’s Income Tax rate, and this latest reduction has impacted basic rate taxpayers the most. While around 700,000 basic rate taxpayers were taxed on dividends for 2022–2023, this number will jump to almost 1.7 million for 2024–2025.

Here’s what this could mean for basic rate taxpayers who may receive dividend payments, and what you can do to mitigate your dividend tax liability.

Tax liability for dividends

While you won’t have to pay Income Tax on dividend income that falls within the Personal Allowance of £12,570, you’ll still have to pay 8.75% tax on dividend income over the £500 allowance if you’re a basic rate taxpayer.

For example, if you had a modest portfolio of £10,000 in shares, a 5% yield would use up that allowance and leave you liable to notify HMRC and pay tax on anything above that.

This means contacting HMRC and either requesting a tax code change so HMRC can collect the tax via PAYE if you’re employed, or declaring the dividend income in a Self-Assessment Tax Return. If you aren’t already registered for this, you must do so by the following October.

The hassle of this can be frustrating considering the low tax bill – with the average being £385 for a basic rate taxpayer this year, compared to £780 three years ago.

It’s even worse if an investor chooses script dividends, as they’re still taxable even though no cash is received, leaving the investor to fund the tax from another source.

As the allowance has been repeatedly cut, dividend payouts have risen to pre-pandemic levels, so it’s important for taxpayers to manage their liabilities effectively.

Dividend tax mitigation

If your dividend income for the year is above the £500 tax-free allowance, there may be some mitigations possible to reduce your tax liability while maintaining compliance.

For example, dividends on shares in ISAs (Independent Savings Accounts) are not taxed, so you should be making full use of ISA allowances for share investments.

Alternatively, you could invest in capital growth rather than dividends, or spread your portfolio across the family to make use of a spouse’s, partner’s, or adult child’s dividend allowances.

Take a look at HMRC’s guide to dividend tax on the government website for more information, or if you need tax advice on dividend income, get in touch with our accountants in Barnsley.

At gbac, we provide professional tax management services to individuals and businesses alike to make sure you manage your savings and investment portfolio efficiently – so call us on 01226 298 298 or email info@gbac.co.uk to get started.