Without a digital invoice processing system, companies leave themselves vulnerable to invoice fraud – a scam that almost a third of businesses have been targeted by in the last year.

Employees can easily process fake invoices if they appear genuine and the amount is below the company’s payment threshold, paying money into the bank accounts of fraudsters.

Though fraud against UK businesses has reduced in the last few years, over £1.2 billion was lost to invoice fraud in 2022, and developing technologies ensure that it remains a growing threat.

It’s vital for all businesses to learn how to recognise potential invoice fraud and avoid falling for this common scam – so here’s what you should know about how to prevent invoice fraud.

Types of invoice fraud to look out for

The most common kinds of invoice fraud include false invoices for non-existent goods or services, where scammers claim to be a supplier or tradesperson the company has previously worked with, or duplicate invoices for legitimate bills that have already been processed.

It’s also common for existing invoices to be altered as a result of criminals hacking into a genuine business email account and changing invoice payment details so they receive the money instead.

Unfortunately, it can be difficult for employees to identify a fake invoice if it appears to be from a legitimate business that the company has worked with and paid before.

Additionally, there’s also the possibility of internal invoice fraud, where senior employees with access swap payment details on invoices to divert the money to their own bank accounts. In a recent case, an employee at a public limited company stole £660,000 through 29 fake invoices in a single month.

Invoice fraud doesn’t only result in financial loss, though – it can also damage a company’s business relationships and brand reputation, and have a negative impact on staff morale.

Invoice fraud prevention tips

There are several things a company can do to avoid falling for false invoices, including:

  • Confirming with a trusted person if you receive emails about changing payment details
  • Reconciling every invoice by checking against previous records to verify information
  • Not sharing supplier names online, as fraudsters can use this to falsify invoices
  • Training employees to recognise fraud and implementing an invoice approval system

One of the most effective ways to prevent invoice fraud is to update your accounts with a digital processing system, which will automatically compare invoice details against order and payment information, flagging errors and thereby preventing most types of fraud.

Managing an onboarding process where all suppliers have to use your digital system prevents fraudulent traders from joining your network, reducing the potential for fake invoices.

On top of fraud prevention, digital invoicing comes with many other benefits, as it can also prevent missing due dates, reduce errors, and improve cashflow forecasting for the business!

Update your accounting system

Digital accounting systems make it much easier to keep accurate and accessible records of financial information and process approved payments on time – so, if you haven’t yet, it could drastically help your business to update your accounting with efficient digital services.

Of course, businesses should already be planning to switch to up-to-date digital accounting software if they haven’t already, as the UK government is rolling out its Making Tax Digital plan to improve the process of reporting financial information to HMRC and paying taxes.

Here at gbac, our accountants in Barnsley can help businesses of all sizes with payroll services and bookkeeping and VAT management. If you need assistance with digital or cloud accounting, don’t hesitate to get in touch with our team and discuss our financial services.

Every year, HM Revenue & Customs (HMRC) publishes the latest tax gap figures – revealing the difference between the amount of tax due and the amount that they actually collect.

Compared with a tax gap of 7.4% in 2005–2006, the first year of taking these records, the most recent revised figures for the 2022–2023 tax year put the current tax gap at 4.8%.

While this percentage has stayed the same since 2020–2021, in monetary terms, the tax gap has been increasing along with tax liabilities – rising from £31 billion the previous year to £35.8 billion in 2021–2022, then reaching a record high of £39.8 billion in 2022–2023.

This is the largest the tax gap has ever been in cash terms, and while some of the increase will be a result of non-payment due to the rise in company insolvencies affected by the pandemic, small businesses are now taking the blame for up to 60% of all uncollected taxes.

Small companies defaulting on tax

The tax gap share attributed to small limited companies – with an annual turnover of less than £10 million and fewer than 50 employees – has escalated significantly in the last 5 years.

Accounting for 44% of the overall tax gap back in 2018–2019, small businesses are now responsible for 60% of the gap in expected tax takings in 2022–2023. While the pandemic was the probable cause of the uptick around 2020, the same effect didn’t happen for other business sizes – and the increase in unpaid taxes for small businesses hasn’t slowed down since.

Small companies are the worst offenders when it comes to not paying Corporation Tax, in particular.

Not only has the total of unpaid Corporation Tax bills almost tripled from £3.7 billion in 2018–2019 to £10.9 billion in 2022–2023, but small businesses are responsible for 32.3% of this tax gap – with 45% of small companies submitting incorrect returns and under-declaring liability.

In comparison, mid-sized businesses account for 11% of the overall tax gap and 6.7% of the Corporation Tax gap, while large businesses are responsible for 11% and 2.9% respectively.

Increased liabilities and high tax take

The recent figures also illustrate how much HMRC’s tax take has increased – with the theoretical total growing by about 15% each year, and almost doubling since 2005–2006.

Between the 2020–2021 to 2022–2023 tax years alone, the agency’s tax take rose from £640.1 billion to £823.8 billion, which is a high record of 95.2% of all tax due that year.

As a portion of the GDP (gross domestic product – the market value of goods and services), tax receipts have maintained a steady 28% over the last 20 years, but now represent just over 30%.

However, HMRC clearly has a lot of work to do to address the remaining tax gap, especially where small businesses are concerned. After all, if the Corporation Tax gap hadn’t increased, or had shrunk in line with other business sizes, HMRC could have collected a further £7.5–£9.5 billion in tax.

Non-compliant tax behaviour

The two behaviours that contribute to the tax gap the most are failure to take reasonable care and criminal action. Even if it isn’t done intentionally, like criminal action such as tax avoidance, filing errors resulting from a lack of care are responsible for almost half of unpaid tax bills.

HMRC expects small business owners and limited company directors to take a higher level of care compared to sole traders to ensure they understand and fulfil their tax obligations.

If you own a small company and fail to report accurate financial information to HMRC or neglect to pay outstanding tax without a ‘reasonable excuse’, the agency can also issue tax penalties.

It’s essential for businesses of all sizes to stay on top of their accounts and legal obligations, especially with the roll-out of Making Tax Digital creeping up on previously exempt earners.

So, if you need help managing your tax liabilities and ensuring that your small business is tax compliant, it’s likely you would benefit from contacting our accountants in Barnsley.

Here at gbac, we provide a range of professional financial services for all kinds of businesses and individuals – so why not call 01226 298 298 or email info@gbac.co.uk to speak to our team?

On top of the 1p cut to the National Insurance rate that was announced in last year’s Autumn Statement, the Spring Budget announced in March 2024 introduced a further 2p cut.

This means that for self-employed workers paying Class 4 National Insurance contributions (NICs), the rate will drop from 9% to 6% for the tax year from April 2024 to April 2025.

Maximum NIC savings

Class 4 contributions are paid on annual profits from £12,570 to £50,270 – so the 3% rate reduction represents potential savings of up to £1,131 in the current tax year.

The abolition of Class 2 NIC requirements also means that self-employed people making more than £6,725 a year in profits will no longer have to pay the weekly rate of £3.45, saving £179.40 a year.

For the average self-employed worker earning £28,000 a year, the Class 4 reductions and Class 2 abolition combined could save them up to £650 a year.

However, for profits exceeding £50,270, the additional rate for Class 4 NICs will remain at 2%.

NIC liability for lower profits

Those in self-employment earning less than £50,270 a year can expect the following reductions in their liability for National Insurance contributions this year:

Profit 2024–2025 NICs Reduction
£15,000 £146 £232
£25,000 £746 £552
£35,000 £1,346 £852
£45,000 £1,946 £1,152

 

However, we can’t consider NICs in isolation – as other tax threshold freezes mean that the savings from NIC reductions are unlikely to be enough to offset fiscal drag.

Frozen tax thresholds

As the Personal Allowance and Income Tax thresholds have been frozen at 2021 levels, and will stay frozen for several more years, this is likely to push more people over the thresholds as their earnings increase, resulting in a changing tax status with greater tax liability.

That said, freezing the Class 4 NIC main rate threshold at £50,270 is still beneficial for self-employed earners. For example, if this was increased to £60,000, a self-employed individual would have to pay 6% instead of the 2% additional rate on an extra £9,730 in profits.

Learn more by reading the 2024 Budget fact sheet and the fiscal drag research briefing from the House of Commons. We can expect the next Budget between September and November.

If you need help managing your self-employed accounts and taxes, why not enlist professional help from our accountants in Barnsley? You can reach the gbac team by calling 01226 298 298 or emailing info@gbac.co.uk to find out how to optimise your self-employed tax liabilities.

Following the UK general election on 4th July 2024, the Labour Party returned to power after 14 years of Conservative governance, led by the new Prime Minister, Sir Keir Starmer.

After quickly assembling his Cabinet, there is a heavy weight of expectation on Starmer’s Labour government – but what can we expect to happen within its first 100 days?

Here’s what we know so far about the Labour government’s plans for the next few months.

The King’s Speech

The King’s Speech marks the State Opening of Parliament, or the formal beginning of Parliament’s calendar, and took place on 17th July. Though delivered by King Charles, the speech is written by the government, and sets out Labour’s plans or ‘missions’.

These include multiple bills focusing on economic stability and growth, British energy and clean energy, secure borders and safe streets, health, and breaking down social, financial, and regulatory barriers to give children, workers, and renters better opportunities.

As bills introduced under the previous government are not carried over, the Labour Party has the flexibility to start over and make changes before submitting them again.

Summer Recess

During the summer recess, which typically takes place from late July to early September, the House of Commons and House of Lords take a break and MPs do not meet for business.

This recess was due to start on 23rd July before former Prime Minister Rishi Sunak announced the general election, but this is only 6 days after the King’s Speech, which won’t be enough time for the House of Commons to debate the Speech and approve an agenda.

The start of summer recess has therefore been pushed back to 30th July, ending on 2nd September.

Party Conference

As usual, party conferences will commence in September, where the main political parties host events to set out their strategies and engage with party members, politicians, journalists, and representatives from various organisations, unions, and think tanks.

The Labour conference will take place from 22nd to 25th September in Liverpool, where the party is likely to emphasise what they have achieved before the end of their first 100 days in government (12th October), and announce more details on their plans for ‘rebuilding Britain’.

Autumn Budget

While Labour already published its manifesto pledges, after the party’s election victory, people will be keen to understand how the new government’s plans will affect their finances. Unfortunately, we won’t know more until the Labour government delivers its first Budget, due in autumn.

If the Office for Budget Responsibility (OBR) was advised to begin preparing its Economic and Fiscal Outlook on 5th July, this will take 10 weeks to prepare – meaning the Chancellor of the Exchequer, Rachel Reeves, can’t deliver the Autumn Budget any sooner than 13th September.

However, it seems likely that the Chancellor may wait until after the party conference season ends to deliver Labour’s first Budget in late October or early November.

The Chancellor is expected to announce the Budget date before the start of the summer recess.

What might Labour’s first Budget include?

The Autumn Budget 2024 should contain more information about the party’s manifesto pledges, which include the following:

  • Adding VAT to private school fees (removal of VAT exemption)
  • Cracking down on tax avoidance (abolishing non-dom status)
  • Tightening energy market regulations (expanding windfall tax)
  • Reducing the Stamp Duty exemption threshold for first-time buyers
  • Reviewing pensions (maintaining the State Pension Triple Lock)

Labour also has not ruled out potential changes to Inheritance Tax (IHT) or Capital Gains Tax (CGT), though the party has stated that they won’t be increasing taxes for working people – likely maintaining most frozen tax thresholds until 2028.

This reinforces the importance of keeping up with tax announcements from the new Labour government over the next several months and getting your finances in order now to prepare.

If you need help with auditing or managing your accounts and tax planning, our accountants in Barnsley can help – give the gbac team a call on 01226 298 298 or email info@gbac.co.uk to find out more about our extensive financial services.

In January, the UK government introduced a zero emission vehicle mandate, which requires 100% of new cars and vans to be zero emission vehicles by 2035.

Despite this, electric car sales seem to have been stalling recently – perhaps due to difficult economic conditions with high interest rates.

One way to make electric vehicles more accessible to individuals is to use them in salary sacrifice schemes, as the taxable benefit is low for employees.

While it might seem counter-intuitive, opting into a salary sacrifice scheme for an electric car and taking the pay cut could actually boost an employee’s take-home pay, thanks to reduced Income Tax and National Insurance Contributions (NICs).

Salary sacrifice with an electric car

A salary sacrifice scheme involves an employer making an arrangement with an employee to reduce their pay in return for a non-cash benefit, such as a leased company car.

As a company vehicle would be considered a benefit in kind (BIK), it would still be subject to tax, but at a much lower rate. The employee’s remaining income after the salary sacrifice is deducted will also be subject to less tax and lower NICs.

The tax rate for this benefit is 2% of the electric car’s list price, but it will increase by 1% per year over the next few years – reaching a still somewhat reasonable 5% by 2027.

The same can’t necessarily be said for hybrid cars, as the electric range of most models is too low to qualify, resulting in a less attractive rate of 12% that will rise to 15%.

However, this is still much more attractive than the company car tax rates for petrol and diesel cars, which can go up to 37% (though this maximum won’t be increasing).

High marginal tax rates

More employees are beginning to face higher marginal tax rates as increasing income pushes them over frozen Income Tax thresholds due to fiscal drag.

While the basic rate is 20%, the higher rate is 40%, and the additional rate is 45%, there is also a marginal rate of up to 60%
due to the tapering away of the tax-free Personal Allowance on annual earnings between £100,000 and £125,140.

However, if – for example – an employee with a salary of £125,000
sacrificed £10,000, and their employer provided a £40,000
electric car with costs covered by the employer’s lease arrangements, then the employee would pay £6,200 less in tax and NICs, while only paying £480
tax on the company car as a benefit.

In comparison, if they chose to lease the electric car personally, covering similar leasing costs would take nearly £26,000 of the employee’s gross pay.

Benefits for employers

Hiring an electric car through a salary sacrifice scheme seems worth it for employees, but what about the employers managing the leasing arrangements?

An employer will also benefit from providing an electric car to an employee, as they will also pay less tax on the electric car and reduced NICs for the employee, on top of potentially receiving a corporate discount for the lease.

Additionally, offering electric car salary sacrifice arrangements with the aforementioned benefits for employees can help employers to both attract and retain staff.

Whether you’re an employee or an employer interested in a salary sacrifice scheme, you may want to seek professional guidance on the tax implications of such an arrangement, or get help with managing your accounts.

If this is the case, gbac has a team of accountants in Barnsley who can assist you.

To find out more about our payroll and tax consultancy services, reach out by calling 01226 298 298, or send an email to info@gbac.co.uk
and we will get in touch.

Relying on a homemade will comes with the risk of it being found invalid, as highlighted by the recent legal case of Ingram and Whitfield v Abraham 2023.

In this case, Joanne Abraham’s children were the original beneficiaries of her estate, but a homemade will drafted by her brother claimed that he should be the inheritor. However, the court found this will to be invalid, so Joanne’s estate went to her children after all.

Here’s what you should be aware of regarding invalid wills and the importance of keeping a well-written will up to date with Inheritance Tax (IHT) changes.

What makes a will invalid?

While it would usually be presumed that the testator (person who wrote the will) would have known about and approved the will, it may be considered suspicious if it:

In Ingram and Whitfield v Abraham 2023, the court found the will drafted by Joanne’s brother invalid because it was homemade and spelled Joanne’s name incorrectly.

Keep your will up to date

Though Inheritance Tax (IHT) reliefs have largely remained the same since the residence nil rate band (RNRB) was introduced in 2017, there have been talks of IHT abolition in the last year, and future changes are possible with the upcoming general election.

The Institute for Fiscal Studies (IFS) recommends the scrapping of three IHT reliefs:

If the next government follows these recommendations, this would have a significant impact on wills relating to these assets – and in any case, it’s essential to plan your will carefully if you want to reduce the IHT bill for your beneficiaries.

Estate administration services

Do you have a will that’s not only fit for purpose, but also future-proof? Even well-written wills must be reviewed to make sure they take the latest legal changes into account.

Not only might you experience changes in your circumstances and wealth, but changing IHT rules in particular could disrupt your estate administration plans.

Here at gbac, our qualified will writers can help you to create an organised will that sets out exactly what you want to happen with the distribution and management of your estate, in line with the most current regulations.

Our proficient probate services
can also help family members with the execution of a will after the passing of a loved one, from probate application and asset valuation to the preparation of accounts and final tax return submissions.

For more information, or to arrange a free initial consultation, contact our accountants in Barnsley by calling 01226 298 298 or emailing info@gbac.co.uk.

The controversial Renters Reform Bill has taken a long time to pass through the House of Commons. After making some concessions in favour of landlords, the Bill must proceed through the House of Lords before becoming law.

So, what are the concessions, and how are leasehold properties affected? Here’s what landlords can expect if the Renters Reform Bill becomes law.

Changes to the Renters Reform Bill

Though it is meant to protect renters, the primary changes to the original Bill sway in favour of landlords rather than tenants. The concessions include:

Additionally, the abolition of leasehold properties has been cut back, arriving at the compromise of capping annual ground rents at £250 for the next 20 years.

This would be good news for landlords whose leasehold flats have escalating ground rents, but the government has not formally announced this decision yet.

Will the Renters Reform Bill become law?

The Bill had a good chance of becoming law – before Prime Minister Rishi Sunak made an announcement on 22nd May that a snap general election will take place on 4th July.

Unfortunately, this decision meant that the government had to rush the passing of outstanding legislation before the dissolution of Parliament at the end of May. This resulted in many bills being shelved, including Renters Reform.

However, while this Bill has fallen from the parliamentary timetable, the Leasehold and Freehold Reform Bill was passed. While this law will help leaseholders become freeholders, there are currently no provisions for capping ground rent.

Whichever party wins the general election in July will effectively have to start from scratch if they want to introduce reforms for renters and landlords.

Tax planning for landlords

In the meantime, landlords should make sure they are staying on top of relevant policy developments – and if you decide to sell up amidst the ongoing uncertainty, consider careful Capital Gains Tax planning for buy-to-let sales.

If you need help with this or Service Charge Account management, why not get in touch with our accountants in Barnsley to find out how we can assist you?

Contact gbac by calling 01226 298 298, or email your enquiry to info@gbac.co.uk
and we will get back to you as soon as possible.

In a bold move that took everyone by surprise, including members of his own party, Prime Minister Rishi Sunak announced on 22nd May that the next UK general election will take place in several weeks – on 4th July 2024.

Earlier in the year, Sunak said that he was working with the assumption that the election would be held ‘in the second half of the year’. While most people expected a winter election, the July date technically meets that description.

So, what happens next, and what does this mean for UK tax policies?

UK 2024 election timeline

In the lead-up to the dissolution of parliament, there will likely be a week where the government rushes to try to pass outstanding legislation. Though they may be thin, manifesto documents will probably appear by the second week of June.

The ‘wash up’ period of 23rd–24th May will see 16 bills either dropped or pushed through by consensus, including the Finance Bill from the March Budget.

Parliament will be dissolved on 30th May as the parties gear up for an election campaign cycle lasting around 25 days. Party manifestos are expected to be published between 5th–16th June, with voting taking place on 4th July.

What we know about new tax policies

There is limited knowledge on the planned tax policies of the main parties. While the Conservatives have voiced the long-term aspiration of abolishing individual National Insurance Contributions, the cost would be over £40 billion.

Labour plans to charge VAT on private education fees, adjust tax on carried interest for investment managers, and extend tax on non-domiciled individuals beyond Jeremy Hunt’s proposals from March – each of which raises minor revenue.

Shadow Chancellor Rachel Reeves has effectively agreed to Hunt’s spending plans from the Spring Budget, but these plans are not considered credible by experts.

The Office for Budget Responsibility chairman referred to them as being ‘worse than fiction’, while the International Monetary Fund identified a £30 million ‘black hole’ in the Chancellor’s plans that would require tax rises or spending cuts to fill.

When will we know more about tax changes?

Based on elections of years past, we can expect to find out more about the incoming government’s spending and tax intentions within a few months of the election.

We could see a new budget from the new government in early September, with the current Shadow Chancellor already saying they want to hold a single annual budget in autumn rather than presenting budgets in both autumn and spring.

In any case, the new Chancellor must deliver a Spending Review covering the next 3 years from April 2025, which they cannot defer beyond November 2024.

This autumn will bring several costly expenses for the government, including compensation for the blood contamination and Post Office scandals, and potentially funds for bailing out local councils and failing water companies.

As the next Economic and Fiscal Outlook from the Office for Budget Responsibility is due in autumn, this will likely be a challenge for the new Chancellor.

Need tax advice for 2024–2025?

Here at gbac, our accountants in Barnsley stay on top of the latest UK tax policy developments to make sure we provide the most appropriate and beneficial financial advice and services for our valued clients.

As tax treatment will vary, depending on individual circumstances and government policies that are subject to change, it’s important to get up-to-date professional guidance to ensure efficient tax planning.

To learn more about how gbac can help you account for future tax changes in your spending, bookkeeping, or saving, contact us by calling 01226 298 298, or send an email to info@gbac.co.uk
and we’ll be in touch soon.

Frozen or reduced tax allowances and rising income – from interest, dividends, or pensions – all provide a recipe for higher tax bills and more taxpayers.

An increasing number of people who hadn’t been liable for tax before are discovering that they are now taxpayers, despite their only income in 2023–2024 coming from a State Pension (whether new or old).

Those who are affected by such tax changes should receive a simple assessment tax bill from HMRC (HM Revenue & Customs), as the DWP (Department of Work & Pensions) provides payment details.

Have you underpaid tax for 2023–2024?

It’s possible that your tax position may have changed throughout the last year or so without you noticing. Here are the factors that may have affected your liabilities:

Tax Year

2021–2022

2022–2023

2023–2024

Personal Allowance

£12,570

£12,570

£12,570

Dividend Allowance

£2,000

£1,000

£500

Personal Savings Allowance

£1,000 max*

£1,000 max*

£1,000 max*

Bank of England Base Rate

Close to 0%

Average 4.5%

5.25% (May 2024)

New State Pension

£9,339

£10,600

£11,502

*For nil rate and basic rate taxpayers. The savings allowance for higher rate taxpayers is £500, and nil for additional rate taxpayers.

The situation is similar for Capital Gains Tax (CGT), as the annual exempt amount fell from £12,300 in 2021–2022 to £6,000 in 2023–2024, now dropping to just £3,000.

Do you need to contact HMRC?

If you don’t already submit self-assessment tax returns, it’s your responsibility to notify HMRC if your interest exceeds your personal savings allowance or your dividends exceed the dividend allowance. You can let HMRC know about a change in circumstances that affects your tax liability through your online tax account. Though you probably won’t have to, you can check if you need to send a self-assessment tax return online.

If you don’t tell HMRC about your interest and dividends, building societies and banks will automatically report this information to the tax agency, so you could end up receiving warnings or fines from HMRC on top of owing tax.

Careful planning can help with sidestepping HMRC’s traps, but you may need professional tax planning advice from experts like our accountants in Barnsley.

Call gbac on 01226 298 298 or email info@gbac.co.uk
and our team will be happy to help you liaise with HMRC and sort out your tax affairs.