Photovoltaic (PV) systems like solar panels harness energy from sunlight and convert it into electricity, which you can use to power your home or business.

Generating renewable electricity instead of relying on an energy supplier can help to reduce your energy costs. The Energy Saving Trust estimates the average household could save £455 a year by installing solar panels on the roof.

If you generate more electricity than you need, you can sell the excess back to the National Grid, converting the extra energy into extra cash.

With energy prices remaining high, now could be a great time to install solar panels on your property, generating your own energy and selling the excess back to the Grid – but you should be aware of the rules, including potential taxation.

How does the Smart Export Guarantee (SEG) work?

The Smart Export Guarantee (SEG) is a government-backed scheme that requires electricity suppliers with at least 150,000 customers to provide a tariff that pays small-scale electricity generators for the energy they export to the National Grid.

To qualify for the SEG scheme, your installation must be accredited by the Microgeneration Certification Scheme (MCS), your solar panels must have a capacity of 5 megawatts or less, and you’ll need a smart meter to track half-hourly energy exports.

Generators must apply for an SEG tariff through an approved supplier. This doesn’t have to be the same as your current import supplier, as multiple suppliers can use the same smart meter. You can shop around for the SEG licensee with the best rates.

SEG tariffs can be fixed or variable, and rates can vary from 1p/kWh to a possible 15p/kWh, but the best rates are usually available when you use the same energy supplier, as most companies will offer discounts for existing customers.

Are solar energy exports exempt from tax?

The amount of money you can make from selling excess solar energy back to the National Grid depends on many factors, such as the location of your home, how much sunlight the roof panels receive every day, and how much energy your property uses.

However, you have to think about the possibility of paying tax on the money you make from selling energy to the Grid. This income is only exempt if the system is installed on or near a residence, and does not generate more than 20% in excess of the home’s consumption.

This means a domestic property can generate up to 120%
of the energy needed to run the home, and sell up to 20% excess energy without it becoming taxable.

Even if the sales do become taxable, they could still be exempt under the £1,000 trading allowance. If your annual income from excess energy sales is more than this tax-free allowance, you must report it to HMRC, though you could still deduct the £1,000 from the taxable total.

If your microgeneration system is too large, or you don’t have a solar battery for storing excess energy, you may end up selling too much back to the Grid. These taxable sales could mean it takes much longer than the usual 10-year period to recoup the costs of the initial investment in the solar panel system installation.

There’s also the fact that VAT-registered businesses who generate their own energy and sell excess to the Grid must agree to self-billing of output tax, with VAT added to export payments that must be declared to HMRC on tax returns.

You can learn more about SEG tariffs through the government website, and if you have concerns about your tax liability, you can get in touch with our accountants in Barnsley.

After Inheritance Tax (IHT) receipts doubled between 2012–2022, the latest figures from HMRC revealed that 2023–2024 is on track to become another record-breaking year for IHT revenue.

In 2022–2023, the Treasury raised £7.1 billion from IHT receipts, and based on figures from this April–May being up 9.1% (£1.2 billion) on the previous year, this is likely to rise again to £7.7 billion for the current financial year.

The Office for Budget Responsibility (OBR) predicted that annual IHT bills will only raise £7.2 billion this year and reach £8.4 billion by 2027–2028, but the early data suggests that the Treasury’s takings will surpass the official forecasts.

This is likely due to the ongoing nil-rate band (NRB) threshold freeze – fixing the tax-free IHT allowance at £325,000 until
2028 – combined with increasing property values.

With more estates being dragged into the IHT net, the average bill is now almost £62,000, with even larger amounts due for estates that include property in London or South East England.

Here’s a summary of what’s happening with IHT, and what you can do to minimise your estate’s Inheritance Tax liability and leave as much as possible to your loved ones.

Why are more people paying IHT?

Inheritance Tax is levied by the UK government on the estate of a deceased person. Their estate includes all of the deceased’s assets – not just property, but also personal possessions (e.g. vehicles, jewellery, artworks), investments, and some lifetime gifts.

If the total value of their assets does not exceed the nil-rate band (NRB), no tax will be levied. If the estate is worth more than the NRB threshold, which has stayed at £325,000 since 2009, the inheritors will be taxed 40% on the excess value.

The residence nil rate band (RNRB) was implemented in 2017 to increase the allowance for main residences passed onto a direct descendant. At £175,000, this boosts the tax-free value to £500,000 for spouses, children, or grandchildren inheriting a residence.

As the RNRB applies per person, the allowance for a married couple would increase to £350,000. Any unused NRB is also transferable to the deceased’s spouse, meaning married couples can potentially pass on property worth up to £1 million with no IHT due.

These allowances may seem generous initially, but the NRB
has not changed since it was it introduced. With the freeze lasting until 2028, this threshold will have been the same for almost 20 years, while asset values have continued to rise.

The average UK property value has risen by 86% since 2009
– despite property prices fluctuating recently, the average detached house increased in value by £20,000 from March 2022–March 2023. With the average price of a detached house being £454,000 (closer to £525,000
in London), a typical estate could now be worth almost £480,000.

If the RNRB doesn’t apply, the IHT bill for such an estate would be around £62,000, whereas no IHT would have been due if the NRB had been updated to keep pace with inflation.

How can you reduce IHT?

Now that a tax initially targeting the wealthy is affecting average families, it’s even more important to plan your estate and manage taxes carefully. There are several things you can do to reduce your IHT
liability and keep your estate value within the taxable threshold.

For example, if your entire estate is valued below £2 million and your main residence is worth £500,000 or less, you could pass your home directly to your widowed spouse, children, or grandchildren without them having to pay tax on the residence.

You may decide to share your assets with family members during your lifetime, whether in the form of regular payments or gifts worth up to £3,000 a year. Wedding gifts to children or grandchildren (up to £5,000
or £2,500 respectively) can also be exempt from tax. You can give unlimited gifts of up to £250 to anyone else who hasn’t already received one, too.

However, you must be wary of the fact that IHT can still be charged on these gifts if you pass away within 7 years of giving them. This will be levied on a tapering scale, but if you pass away within 3 years of giving the gifts, the full 40% will be charged.

You could also choose to donate a portion of your estate to a charitable organisation. If you leave 10% or more to a charity or community (sports) club, this will trigger a 4% discount on IHT. So, if your estate value is still above the threshold after deducting the charitable donation, the excess will be taxed at 36% instead of 40%.

Other options include setting up trusts for relatives, or transferring ownership of assets such as a property or business while you’re still alive – but ‘gift with reservation’ tax rules may apply.

Financial planning for IHT

High house prices and frozen tax bands are sure to push more estates over the IHT threshold in the coming years, so people shouldn’t risk leaving IHT planning too late if they want to protect their estate and reduce the tax burden for their heirs.

You can read through HMRC’s Inheritance Tax guide
online to learn more about IHT exemptions, but remember there are risks in attempting to reduce your tax liabilities by yourself. It’s such a complex area that it’s easy to fall foul of the rules, and mistakes can be costly.

If you’re serious about financial planning, it’s best to get professional guidance from a financial adviser. At gbac, our accountants in Barnsley
can help individuals and families evaluate their financial positions and plan for their futures.

This includes helping with estate valuation, gift giving, placing assets in trust, and minimising liability for income taxes and Capital Gains Tax (CGT) as well as IHT. We can regularly review your finances and identify ways to help you meet your goals.

To learn more and get started with IHT financial planning, call us on 01226 298 298, or send an email to info@gbac.co.uk and we’ll be in touch soon.

There are many reasons why it may be necessary to file a Self-Assessment tax return, but most workers who are taxed through PAYE are exempt from having to do this.

This exemption previously had a total income ceiling of £100,000, but this threshold is now increasing to £150,000 (including gross salary, taxable benefits, and investment income).

At the end of May, HMRC confirmed in Issue 108 of Agent Update that the higher threshold for Self-Assessment tax returns will apply from the current tax year onwards.

This means that PAYE taxpayers who would have been required to complete a Self-Assessment return under the previous threshold – earning over £100,000 a year but less than £150,000 a year – may no longer have to do so from the 2023–2024 tax year.

When should you submit a self-assessment return?

Even if a PAYE employee earns an annual income below the new threshold of £150,000, other criteria could still require them to submit a Self-Assessment tax return.

This typically involves other income that has not been taxed through PAYE, such as:

Taxpayers may also be required to file a Self-Assessment return if they are liable for paying the High Income Child Benefit Charge, or Capital Gains Tax under the new allowances.

Even if they don’t meet the above criteria, some taxpayers may want to submit a tax return anyway in order to claim tax reliefs for pension contributions or charity donations.

If you don’t file Self-Assessment tax returns, it’s important to check your tax code to make sure you’re paying correctly for taxable benefits and savings. There’s also a HMRC online service
that allows you to check whether you should be filing Self-Assessment returns
or not.

When is a self-assessment return not required?

Taxpayers who are likely to be affected by the Self-Assessment return threshold increase must still complete and submit their tax returns for the 2022–2023 tax year, due by 31st January 2024, for which the previous threshold applies.

Those who submit a 2022–2023 tax return with total annual earnings between £100,000–£150,000, who don’t meet any of the other criteria for filing requirements, should receive an ‘exit letter’ from HMRC confirming they do not need to file again from next year onwards.

In some cases, taxpayers may need to contact HMRC directly to inform them that filing a Self-Assessment return is no longer necessary. If you submit a return late when you aren’t required to submit one, you can apply for withdrawal and waiving of any penalties.

Get help with self-assessment tax returns

Though an adjustment affecting returns due by January 2025 may not seem pressing right now, it’s important to take this into account alongside other tax reforms that could change the amount of PAYE tax
you pay or how you manage taxes on self-employment income.

While Making Tax Digital for ITSA won’t become mandatory until April 2026, HMRC scrapped paper tax returns this year, meaning everyone needs to get to grips with filing Self-Assessment tax returns online as soon as possible – ready or not.

If you are uncertain about your Self-Assessment tax liability or need help setting up digital accounting for online tax management, you’re in the right place to find professional assistance. Get in touch with our Barnsley accountants to benefit from our range of financial services.

Under Ofgem’s latest price cap revision, annual energy bills for typical households are expected to fall to £2,074 from 1st July 2023 – the lowest in over a year.

The Energy Price Guarantee (EPG) that the government introduced last October capped energy prices per unit to limit the average bill to £2,500 a year until 30th June 2023, helping domestic consumers to save compared to Ofgem’s £3,280 cap for the current quarter.

The EPG is due to increase to £3,000 from 1st July
and will remain in place until March 2024, but Ofgem reducing their cap to £2,074 means most people are unlikely to pay that much.

This seems like good news for families, home-based employees, and small business owners working from a residence – but will energy bills really change that drastically?

Why is the energy price cap going down?

Since the energy price cap was introduced in 2019, setting a maximum rate for standard tariffs to prevent suppliers from overcharging customers, the regulator Ofgem has increased the frequency of its energy price reviews from twice a year to once every three months.

Over the last two years, the price cap kept increasing due to a range of factors, including wholesale gas supply issues exacerbated by Russia invading Ukraine in early 2022. More than a year on, even as the war continues, European gas prices have dropped as supply is able to meet demand again.

Quarterly reviews of energy market rates allow Ofgem to adjust its unit price cap as closely as possible to the market’s fluctuations, which is why the cap soared to £4,279 in the first quarter of 2023 and is now dropping to £2,074 in the second half in response to lower demand.

This cap will take effect from 1st July – 30th September 2023, and Ofgem will announce the next energy price cap for the last quarter of the year at the end of August.

How will this affect households in the UK?

Most household energy bills haven’t been as high as the Ofgem price cap since last October, thanks to the Energy Price Guarantee. Though the EPG is increasing by £500 in July, many will see their bills fall to the lower Ofgem price cap instead.

This means the average customer on a variable tariff is expected to pay around £400–450 less annually based on the current price cap. However, it’s important to remember that the cap applies to the price per unit, not energy bills in general.

So, if you use more energy than average, you will still end up paying more for your increased usage, and if you use less energy, you could save more than the estimate. This will depend on your property’s energy efficiency, the number of people living in it, and how they use it.

It’s also important to note that even with savings of around £400 under the new price cap, the average household will essentially be paying the same as they were last winter, when the government’s temporary Energy Bill Support Scheme provided a £400
discount.

Therefore, despite the latest Ofgem cap being lower than the previous cap and the EPG from April to June, most people won’t see much of a difference in their energy bills after all.

What does this mean for future energy prices?

Though the Ofgem price cap dropping from £3,280 to £2,074 seems like a dramatic reduction, the current cap is still much higher – almost double – than the £1,162 it was before wholesale gas prices began to increase in August 2021.

Experts across the industry predict that energy prices will remain stable for the rest of 2023 and into 2024, meaning households will have to adjust to annual energy bills remaining at around £2,000 for at least the next year.

Unfortunately, this could continue for several more years, as the Energy and Climate Intelligence Unit (ECIU) predicts that annual energy bills may not fall below £1,700 for the rest of the decade.

That said, there’s hope that stable prices will enable the return of fixed energy deals with competitive rates. This could help customers to save money and budget better with a fixed price – but there’s still the risk of fixed tariff customers paying more than variable tariff customers if market rates fall below the fixed rate.

You can find more information about the energy price cap and Energy Price Guarantee in the government’s research briefing, and Ofgem will publish their next price cap review on 25th August.

If you need assistance with financial planning for the current year, especially if you are a self-employed small business owner who works from their residence with specific tax considerations, you can always reach out to our Barnsley accountants to learn more about our services at gbac.

In March 2023, as the 2022–2023 tax year drew to a close, the Office for Budget Responsibility published its full ‘Economic and fiscal outlook’ report, detailing its economic forecasts for the next five years.

The report predicts the effectiveness of policy measures announced from the Autumn Statement 2022 to the Spring Budget 2023, and whether the government will meet its fiscal targets by the 2027–2028 tax year.

Amongst the projected outcomes are an expected increase in higher rate taxpayers and corporate tax yield – read on to learn more about the UK tax forecast and what these figures could mean for you.

Income tax

Generally, the policy for increasing income tax thresholds has been to keep pace with inflation by default. This hasn’t been happening, due to threshold freezes for many personal taxes being extended to 2028 despite inflation hitting the highest levels in decades.

These freezes are expected to see 2.2 million earners pushed over the personal allowance threshold to start paying basic rate tax, and 1.3 million basic rate taxpayers pushed over the threshold to become higher rate taxpayers, having to pay twice as much tax.

The resulting fiscal drag is predicted to bring in an additional £13.1 billion of income tax revenue for 2023–2024 alone, followed by an additional £20 billion a year for the four years after that.

It’s unsurprising, then, that income tax now makes up 28% of the government’s tax receipts, up from just 2% a few years before the freezes began.

VAT registration

Since the VAT registration threshold has stayed the same since 2017, stuck at £85,000, it may also be unsurprising that new VAT registrations are estimated to stay at around 300,000 annually.

This may be impacted by a significant number of traders – who would otherwise be eligible for paying VAT – avoiding registration by limiting their growth to keep their annual turnover below the threshold, as reported by the think tank Tax Policy Associates earlier this year.

That said, the VAT threshold being frozen until 2026
is expected to bring in an extra £1.4 billion by the end of the forecast, with VAT receipts rising gradually by around 2.7% a year from 2023–2024.

Corporation tax

Corporation tax receipts delivered a stronger performance than expected throughout the pandemic, providing a yield of 8% in 2021–2022.

Increasing the main corporation tax rate from 19% to 25% is predicted to boost this yield by about 2%. This rise to 10% represents an increase in receipts from £68 billion to £112 billion.

Though there is still some uncertainty about future performance, the forecast anticipates that the main rate increase and capital allowance restrictions could generate an additional £23.2 billion to the estimated corporation tax receipts by 2027–2028.

The total collected from corporation tax is largely contributed by around 18,000 big companies (55%), while the remaining 45% is split amongst 1.5 million small-to-medium enterprises.

The importance of tax planning

This latest forecast from the OBR expects the UK’s tax burden (the ratio of taxes collected compared to the value of goods and services produced) to reach 37.7% by 2027–2028, the highest post-war level on record. This figure includes the highest ratio of corporation tax receipts in particular since the introduction of the tax back in 1965.

If the UK economy is to stay on track for recovery, it’s more important than ever for individuals and businesses to reduce their tax burden and ensure they’re paying the correct taxes in the most efficient manner. For this reason, it could be beneficial for those who need assistance with tax management to invest in accounting services.

As reliable Barnsley accountants
serving individuals and businesses throughout Yorkshire and beyond, GBAC
should be your go-to when it comes to bookkeeping and tax guidance. Call us on 01226 298 298 or email info@gbac.co.uk for more information.

If you’re self-employed and have to submit your own Self-Assessment tax returns, the new tax year might be longer than you were expecting.

Normally, self-employed taxpayers are taxed on their profits made in their accounting year ending within the tax year. However, the government wants to speed up the tax return process by making self-employed earners pay tax on their profits made in the tax year instead.

Moving from the individual’s accounting year system – or ‘current year basis’ – to a tax year basis means catching up by paying tax on more than twelve months of profits in one tax year.

Unless your accounting year ends on 31st March or 5th April, more or less aligning with the tax year already, this will begin to take effect in the current 2023–2024 tax year. Read on to learn about why this is happening and how it could impact your self-employed business.

What is basis period reform?

All business owners, including the self-employed, have an accounting year which runs for twelve months. The start and end date of their accounting year may be different to the UK tax year, which runs from 6th April each year to 5th April the following year.

Now that HMRC plans to use the tax year as the basis period for all taxes, rather than letting businesses use their own accounting year, there is a new set of rules for when this basis period reform is likely to cause an overlap in taxable profits and relief eligibility.

To make tax returns more straightforward, shifting all accounting periods to the standard tax year was intended to apply from April 2024 along with the mandatory introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA),
but the launch of this digital platform has been pushed back until April 2026.

However, the basis period reform is still going ahead from April 2024, enforcing a transitional period that starts with the current tax year from April 2023. This means those with different accounting periods will not only be taxed on profits for the last basis period within the 2022–2023 tax year, but will also be charged an extra ‘transitional’ component from the end of that period to April 2024.

Theoretically, this will stretch out the tax year for up to 23 months, though the additional tax liability from this period can be spread over several years.

What if you don’t adjust your accounting period?

While self-employed taxpayers are still allowed to choose their own accounting periods for now, adjusting them to comply with the tax year basis for tax returns will be complicated, and is likely to cause problems with reporting profits and losses and claiming reliefs.

It’s not always practical for accounting periods to immediately switch to the tax year, as many businesses design their accounting year around commercial dates relevant to their work. However, if they don’t, they’ll have to take the extra administrative step of apportioning profits and losses.

For example, if a self-employed trader ran their accounts according to the calendar year (from the first day of January to the last day of December), they would have to calculate 270/366ths of profits from the 2023 calendar year and combine it with 95/365ths of profits from the 2024 calendar year to report their profits for the 2023–2024 tax year.

This obviously involves a lot more work, but there’s also the problem of those with accounting year end dates falling later in the year not having available profit figures to use before the tax return filing deadline. Using provisional figures instead would require amending their tax returns when the actual figures become available, creating an even larger administrative burden.

Even if the trader chose to wait until submitting the next year’s tax return to update the previous return’s profit and loss figures, which HMRC will allow, this would create uncertainty around tax liabilities and their National Insurance and State Pension contributions.

What do the transitional rules mean for your business?

If you run a limited company, or your accounting year ends between 31st March to 5th April, then the basis period change shouldn’t affect you. As the change is supposed to simplify the system, HMRC doesn’t intend to make businesses apportion a few days of profit or loss.

That said, if your accounting period doesn’t align with the tax year even with the allowance of those dates, then the move will potentially increase your tax liabilities from 2023. In addition, everyone else will be affected by the ‘transitional’ component mentioned earlier.

HMRC will automatically allow self-employed taxpayers to spread the ‘transitional’ profits from the 23-month tax period over 5 years to ease the financial burden, though some or all of those profits can be brought forward to pay off tax liabilities sooner if you prefer.

For example, if your accounting year ends on 30th April, your taxable profits for 2022–2024 would be the regularly calculated profits for your accounting year from 1st May 2022 to 30th April 2023, plus one-fifth of the ‘catch-up’ element for your profits from 1st May 2023
to 5th April 2024 (around 541/366ths of the profits from your May 2023–April 2024 accounting year).

If you experienced double taxation in your first year of trading due to your accounting year overlapping tax years, you can carry the amount over and deduct it from another year’s tax liability as ‘overlap relief’ – so if you have remaining overlap relief, you must apply it during this transitional year, as HMRC will not allow it to be generated or carried forward after that.

If you cease trading during the transition period, the total balance that would have been spread over the next few years will become payable in your final tax year of trading.

Get help with Making Tax Digital tax returns

The easiest way forward for most sole traders will be to make the switch from a different accounting period to the tax year basis during the transitional year (April 2023–April 2024).

While you’ll have to account for additional tax on liable profits from the overlapping period, administration will be much simpler from then on, without having to apportion profits and deal with the resulting cashflow issues every year.

Of course, this is easier said than done, as there isn’t a general strategy that would work for every situation. You should speak with an accountant to discuss your unique circumstances and the best way to implement these changes with the least disruption to your business.

If all this is giving you a headache, you’re not alone – but don’t let this complicated situation put you off from taking action to organise your accounts and tax management. It’s better to get to grips with the newer tax system and digital accounting before it becomes mandatory to use the Making Tax Digital online filing system.

For guidance on anything from MTD software to changing your accounting end date to match the tax year, get in touch with us at GBAC by phone or email. Our Barnsley accountants can help traders throughout Yorkshire and across the country get to grips with recent and upcoming tax changes to minimise your administrative burden.

A recent investigation into Child Trust Funds by the National Audit Office (NAO) revealed that almost £400 million is languishing across hundreds of thousands of unclaimed accounts, with many children unaware that they could have several hundred pounds waiting for them.

Child Trust Funds were set up by the Labour government under Gordon Brown, creating savings accounts for more than 6 million children who were born between September 2002–January 2011. The government paid around £2 billion into these accounts in free cash vouchers of up to £250, or £500 for low-income families, so each account will have at least this amount in it.

With Child Trust Funds being locked until the child’s eighteenth birthday, and no new accounts being opened since the scheme was scrapped over a decade ago, many parents will have forgotten about them – or may have never been aware that their child has one.

However, the money is still out there and can still be claimed – if you were born between 1st September 2002 and 2nd January 2011, or the parent of a child who was born between these dates, this blog explains what you should know about these forgotten funds.

27% of Child Trust Funds remain unclaimed

All children born within the dates above should have a Child Trust Fund, regardless of family wealth or whether their parents or guardians set the account up for them. While parents were encouraged to contribute extra savings to the account for their child to withdraw when they turned 18 years old, many failed to set them up when they received the free voucher.

The government then had to set up around a third of Child Trust Funds on behalf of these children, meaning there are around 1.7 million accounts that children or their parents are unlikely to know about as they had no involvement with them.

Additionally, many Child Trust Fund providers have either closed down or merged with others, taking the number of providers from 74 down to 55, and increasing the likelihood of accounts moving to different providers and being harder to track.

Though HMRC has been writing to some children to remind them they might have a Child Trust Fund when sending out National Insurance numbers ahead of their sixteenth birthdays, the NAO believes the government isn’t doing enough to notify account holders or monitor account data.

In fact, the NAO found that despite the first eligible children reaching adulthood in 2020, almost half of matured Child Trust Funds were not claimed as of April 2021. This has dropped from 45%
to 27% according to the most recent estimates, but over a quarter of matured accounts are still unclaimed.

With the NAO estimating an average of £2,700 per unclaimed Child Trust Fund and the possibility of these savings eroding over time as the providers charge levies on the accounts, the sooner eligible children can withdraw their matured funds, the better.

How to trace a lost Child Trust Fund account

If you are an eligible child or the parent of an eligible child, and you know who the provider was who should be managing the account, you can contact the company directly to access the Child Trust Fund and transfer the funds if the account has matured.

If you don’t know who the provider was, you can contact HMRC to request this information through their Child Trust Fund tracing service. You’ll need a Government Gateway account to log in and submit the online form – alternatively, you can write to them by post, but it can take up to 3 weeks to receive a response this way.

You can do this whether you are the parent or guardian of an eligible child, or an eligible child yourself. If you are over 16 years old, you can request your own Child Trust Fund details, but you cannot access or withdraw the money in it until you are 18 years old.

In all cases, to request Child Trust Fund provider information from the government, you’ll need to provide the name, date of birth, National Insurance number, and address of the eligible child. They should respond with the details of the bank, building society, or investment company that provides the account, so you can contact the provider directly.

Get help with a Child Trust Fund

More information about Child Trust Funds, including how to locate them and add or withdraw money, is available on the government website. Once you’ve found the account and checked the funds in it, you’ll have a few options.

If the holder of the Child Trust Fund is under 16 years old, you can either leave the account as it is or add more money into it until they’re old enough to claim it. Alternatively, if the holder is between 16–18 years old, you may want to switch the account to a Junior ISA.

While you aren’t allowed to take the money out before the holder is 18 years old, the government does allow closing the account and transferring its contents to a Junior ISA instead, which can then be withdrawn once they reach the qualifying age. This is often preferable, as ISAs
tend to have lower charges and higher interest rates.

Once the holder is 18 years old or above, they are free to withdraw the money from their Child Trust Fund and do whatever they like with it. There’s no obligation to re-invest, but it would be wise to transfer at least some of the funds to a new savings account or adult ISA.

If you want to do something sensible with the savings from a Child Trust Fund, and are interested in financial planning services for yourself or your family, get in touch with our accountants in Barnsley.

The most recent and second ever Tax Day (Tax Administration and Maintenance Day) took place on 27th April 2023 – an event that is becoming a fiscal calendar fixture following the Spring Budget. This day focuses on technical proposals for future tax policies.

This April, the UK government published a series of policy updates and consultation announcements, which primarily aim at modernising the current tax system and reducing the tax gap (the amount of tax that should be paid to HMRC that isn’t actually being paid).

Here is a summary of the steps the government is taking to update the tax system over the next couple of years, and who may be affected by these key areas.

Definite changes for parents and repayment agents

While most proposals related to ongoing or upcoming consultations on potential system changes, there were some concrete changes announced. One of these is the requirement for repayment agents to register with HMRC by 2nd August 2023, to reduce speculative repayment claims.

Another is the acknowledgement that not claiming Child Benefit – perhaps due to the High Income Child Benefit Charge – may have a negative impact on State Pension eligibility for some parents. The government intends to resolve this by allowing eligible parents to receive retrospective National Insurance credits, though they have yet to announce how this will be actioned.

Consultations on simplifying the tax system

The primary tax simplification consultations that may affect the average taxpayer involve the Help to Save scheme and off-payroll working rules. Firstly, the government’s scheme to help low-income savers earn a 50% bonus is running until April 2025, but a consultation is being launched on reforming it to make the scheme simpler and more accessible for the target group.

Secondly, the government is also publishing a technical consultation on potential changes to the legislation for off-payroll working. This would allow HMRC to set off payments by a worker or the worker’s personal service company against the deemed employer’s PAYE liability, reducing the risk of taxes and National Insurance contributions being paid twice on the same income.

Many other miscellaneous consultation announcements for more niche areas of tax policy include:

Some of these consultations have already been published, while others have yet to be launched.

Consultations on tackling the tax gap

There are also several consultations aimed at tackling the non-compliance responsible for the tax gap. The main concerns that may affect small businesses include regulatory scrutiny of umbrella companies and further reform of the Construction Industry Scheme (CIS).

A consultation on a reform package for the construction industry has been published, considering adding VAT to the list of taxes for Gross Payment Status tests (which allow subcontractors to get payments without withholding taxes), and taking measures to reduce their administrative burden.

The government is due to release a response to their previous call for evidence on umbrella companies in 2021, with a further consultation on regulating these companies to address non-compliance and prevent their usage for tax fraud purposes.

Similarly, another consultation will be released on the introduction of criminal offence laws for the promotion of tax avoidance schemes, which will clamp down on non-compliance after receiving legal notices and speed up the disqualification of company directors involved in tax avoidance.

Other consultations relating to the government’s aim to close the tax gap include:

Again, some of these consultations are already underway, while others will be published soon.

What are the next steps?

Individuals and businesses who could be affected by the changes resulting from these consultations should consider whether they want to take part in the consultations themselves, and what the implications may be if the government follows up on their suggested policy changes. You can find a summary of Tax Day announcements and consultations on the government website.

While the proposals mentioned are subject to amendments of the Finance Act before possibly coming into effect in the next few years, they do underline the importance of self-employed individuals and business owners alike ensuring that they are totally tax compliant in all areas.

To this end, you might want to arrange professional assistance with your tax management or bookkeeping
and PAYE
services, which the team here at GBAC is well qualified to provide. Whether you need help with Income Tax or VAT returns, get in touch with our accountants in Barnsley by phone or email to find out how we can assist you and your business.

There are two accounting methods used by small businesses – cash basis accounting and accrual basis accounting. Cash basis is often favoured by sole traders and partnerships, as it involves recording revenue and expenses when payments are received and made, while accrual basis requires recording transactions as they occur rather than when invoices are paid.

Small businesses using the cash basis method don’t have to wrangle with accruals or most capital allowances, but there is a turnover limit that forces businesses to switch from cash basis to accrual basis at a certain point. The government wants to make this simpler to help new businesses meet their tax obligations as they grow.

With HMRC looking into cash basis reform, here’s how the cash basis scheme could change, and how it could affect your small business.

What is the cash basis income threshold?

Currently, small self-employed businesses can only use the cash basis scheme if their turnover is below £150,000 a year (though they don’t need to leave the scheme until their annual turnover reaches £300,000). This threshold applies to all businesses owned – meaning if you have more than one, their combined turnover must not exceed the threshold.

As announced in the 2023 Spring Budget, the government will be consulting on ways to expand the cash basis scheme to expand eligibility and make the tax system easier to understand. Some of the ways that HMRC is considering increasing its availability include:

The first suggestion, if implemented, would set the same limits as the VAT cash accounting scheme.

While cash basis is currently an ‘opt in’ system, HMRC is also considering a change to an ‘opt out’ system, meaning it would become the default for eligible businesses.

Will loss relief rules change?

Some businesses may not want to opt in to using cash basis accounting due to restrictions on interest cost reliefs and losses. Currently, interest and bank charges have a maximum deduction of £500, and traders can only carry losses forward – they can’t be carried backward, or relieved against other income.

Though HMRC hasn’t announced anything definitively, the maximum interest and bank charges deduction could be increased up to £1,000
to accommodate higher interest rates. It’s also possible that the loss relief rules could be relaxed, but not to the same extent as accrual accounting rules.

Should your business use cash basis accounting?

Larger businesses that aren’t eligible for the cash basis scheme must use other traditional accounting methods, but if your small business fits the eligibility criteria, you could opt in.

With this method, you would have to record income as payments received and expenses as business costs paid during the tax year – not including payments still owed. Even VAT-registered businesses can use cash basis if their annual income (including VAT repayments from HMRC) is £150,000 or less.

However, cash basis may not be suitable if you have plans to grow your business quickly, apply for business financing, or have more complicated operations (e.g. keeping high levels of stock). When you have a higher turnover or more stakeholders get involved, you’ll have to switch to accrual basis for a more accurate analysis of income and expenses.

If you’re transitioning from one type of accounting to another and need professional guidance, or need help getting your financial records in order, why not enquire at GBAC? Our accountants in Barnsley offer a range of services that could help your business operate smoothly and grow at your desired pace, including bookkeeping and VAT and cloud accounting.