Workers across the UK will get a pay rise from April as higher National Minimum Wage (NMW) rates are introduced.

According to the Government, around two million of the UK’s lowest-paid workers will benefit from the rise in the National Living Wage (NLW) and NMW rates.

From April 2023, the NLW will increase by 92 pence per hour, or 9.7 per cent, to £10.42 whilst the NMW rates for younger workers will also increase.

Currently, the National Living Wage applies to those 23 and over, the age having been lowered from 25 in April 2021.

Those aged 21-22 will earn £10.18 an hour, a £1 rise, whilst 18–20-year-olds will receive £7.49 an hour, an increase of 66p.

Apprentices and 16 and 17-year-olds will receive £5.28 an hour, a 47p increase.

These rates are for the National Living Wage (for those aged 23 and over) and the National Minimum Wage (for those of at least school-leaving age).

The new rates are:

The Low Pay Commission estimates that there were two million workers paid at or below the minimum wage in April 2019, around seven per cent of all UK workers.

Penalties for failing to meet statutory wage rates

If an employer is found by HM Revenue & Customs (HMRC) to have failed to pay the minimum wage, the actions that can be taken against them include:

• Requiring payment of the outstanding amount owed, going back up to six years, through the issuance of a notice
• Imposing a fine of no less than £100 per employee or worker affected, and up to £20,000, regardless of the amount of underpayment
• Pursuing legal action, including criminal proceedings
• Providing the names of businesses and employers to the Department for Business, Energy and Industrial Strategy (BEIS), which may choose to list them publicly.

If you are unsure of how these changes affect your workforce and existing employment practices, you should seek professional advice.

Businesses should be planning for the rise in Corporation Tax (CT), which comes into force from 1 April 2023, and sees the top rate of tax rising from 19 per cent to 25 per cent.

The tax applies to all profitable limited companies – both from trading income and from the sale of investments or assets.

The new approach to Corporation Tax

After 1 April, small companies with profits of up to £50,000 will continue to pay CT at 19 per cent thanks to the small profits rate. However, companies with profits of £250,000 and over will pay CT at 25 per cent.

Those companies between this upper and lower threshold will pay CT at the top rate of 25 per cent but benefit from marginal rate relief that reduces their effective rate of tax on a sliding scale depending on their level of profitability.

To calculate this, all profits between £50,001 and £250,000 are effectively taxed at a rate of 26.5 per cent.

As an example, if a company enjoyed profits of £150,000 the first £50,000 would be taxed at 19 per cent and the remaining £100,000 at 26.5 per cent.

As a result, the company would receive a tax bill of £36,000, which means that the actual tax rate that applies is 24 per cent.

Associated Companies for Corporation Tax rules have been newly reintroduced and they will apply from 1 April 2023 in the context of the small companies rate of CT.

It applies to clients who own or control more than one company. Where two or more companies are “associated” with each other, the Corporation Tax limits are divided by the number of companies concerned.

Like all taxes, CT can be complicated and there are a variety of ways to plan for and mitigate these changes with the right professional advice.

Chancellor Jeremy Hunt announced many R&D tax changes in his Autumn Budget, including how the funding is allocated, which will be implemented in April.

He announced changes to the rates paid by the Research and Development Expenditure Credit (RDEC) for larger firms and the small and medium enterprises (SME) R&D relief scheme.

Under these changes, from 1 April, the RDEC rate will be increased to 20 per cent from 13 per cent.

Meanwhile, the SME deduction rate on qualifying expenditure will be reduced to 86 per cent from 130 per cent, and the SME credit rate decreased to 10 per cent from 14.5 per cent.

Changes also announced by the Chancellor in November, included new eligibility criteria from 1 April 2023.

Overseas R&D

Subcontracted R&D expenditure from outside the UK will no longer be eligible for inclusion in R&D claims from April 2024.

The aim of this is to bring more R&D activity to the UK and incentivise companies to move operations into the UK.

Cloud costs will now be eligible

Currently, costs relating to cloud-based technology can’t be included in an R&D claim.

From April 2023, cloud-based computing costs such as AWS will be eligible for inclusion.

Other changes in April include:

• Claims must be submitted digitally
• Claims must include additional information
• Claims must be supported by a named officer of the company
• Claims must include details of any associated agents

Pre-notification

From 1 April 2023, new rules for R&D Tax Relief claims will also require businesses to submit a pre-notification of their claim to HMRC digitally.

This applies if a business:

• is a new claimant; or
• has not claimed in the last three financial periods.

The requirement to pre-notify HMRC will affect any business that conducts research and development if they are eligible to claim under either the R&D Expenditure Credit (RDEC) or the SME R&D relief schemes.

Looking ahead, HM Treasury also launched an eight-week consultation on the design of a single, simplified R&D tax relief scheme earlier this year, merging the existing RDEC and SME R&D relief. If implemented, the new scheme is expected to be in place from 1 April

People planning to claim the UK state pension have been advised to check their National Insurance (NI) record to identify any shortfalls in their payment history.

NI contributions, or lack of them, can affect a person’s entitlement to the state pension in later life.

A temporary window which allows people to voluntarily top up NI contributions for tax years dating as far back as 2006, will now close on 31 July 2023 to give taxpayers more time to fill gaps in their National Insurance record and help increase the amount they receive in State Pension.

This gives additional time on top of the original 5 April deadline for individuals to make the additional contributions required.

HMRC has confirmed that “where the rates of voluntary National Insurance contributions were due to go to up from 6 April 2023, payments made by 31 July 2023 will be paid at the lower rate.”

Filling payment gaps

To ensure people were able to claim their full pension, the Government had put a temporary extension in place enabling people to fill any gaps in their NIC history.

However, from 31 July 2023, the timeframe for making voluntary contributions will revert to the normal six years.

This means that in the 2023/24 tax year, it will be possible to make contributions going back to the 2017/18 tax year only.

Part payment

To qualify for the new maximum state pension, you must have at least 35 years of qualifying NI contributions.

You may only receive a part payment if you don’t qualify for a full state pension, and you need a minimum of 10 qualifying years to receive a partial state pension.

Individuals should therefore take the opportunity to check their NI record to identify any shortfalls in their NI history.

HMRC is advising taxpayers to take the following action before 31 July 2023:

• Check your NI record
• Identify any discrepancies between NI contributions paid and those showing on HMRC’s system
• Identify any NI credits that are missing from periods in which they should have been received (eg, on receipt of universal credit or child benefit)
• Identify any shortfalls in contributions
• Contact HMRC if you think there are any errors

Decide whether to make voluntary NI contributions

It is that stressful time of year again with the payroll year-end fast approaching.

Payroll year-end ties in with the tax year-end, which is 5 April. The deadline for submitting details to HM Revenue & Customs (HMRC) is 31 May.

Important dates around payroll year-end include:

• 5 April – End of the 2022/23 tax year
• 6 April – Beginning of the new tax year (2023/24)
• 19 April – Deadline for the final submission of the 2022/23 tax year
• By 31 May – Employees need to receive their P60s

The late filing of payroll information could attract penalties. To make sure the process is as smooth as possible, check the following has been dealt with:

• Staff details: Are all staff details correct and up to date on your payroll software?
• Pay details: Have you submitted details showing how you have reported all your staff’s pay correctly?
• The final pay run: Process your last pay run that falls on or before 5 April 2023 and check you are happy with your employees’ year-to-date figures.
• Process leavers:Have you processed any leavers before you do your final submission, so this information is recorded in the correct tax year?
• Extra payroll week(s): If you run a weekly payroll (including fortnightly or four-weekly) then you may have to complete an extra pay run.
• Final submission: This allows HMRC to finalise the figures for this tax year for each employee. If you didn’t pay anyone in the last period before 5 April, then you will need to submit an employer payment summary (EPS).
• Process employee P60s: This is important as every employee is legally entitled to this document.

Please check and double-check your payroll reporting as getting this wrong can cause financial problems for both your business and its employees.

Small business owners need to take measures to avoid costly mistakes when it comes to calculating, reporting and paying Value Added Tax (VAT).

The best way to prevent errors and stay on the right side of HM Revenue & Customs (HMRC) is to have an expert take care of your VAT affairs.

Having a qualified accountant or bookkeeper can ensure that all calculations are correct, up-to-date, and submitted on time and in line with the latest VAT regulations, including Making Tax Digital.

Employing an accountant to keep on top of record keeping will go a long way in preventing expensive mistakes and financial penalties related to VAT.

Some of the most common VAT errors include:

• Entertainment: You can claim back VAT on entertaining employees, but not normally for clients.
• Split usage: Where you provide items such as cars or phones, you can only claim VAT back on business use.
• Inaccurate information: Entering the wrong figures on a VAT return may leave you liable to an investigation by HMRC or lead to you paying too much or too little tax.
• Filing late: Ensuring that you file the necessary VAT information, on time, each quarter is essential to preventing the accumulation of penalty points, which can lead to a fine.
• Failing to register: If you reach a taxable turnover of £85,000 or more in any tax year, you will need to register.

To cut down on the chance of errors there are a few things you can do to improve VAT reporting:

• Take time to update – Keep on top of VAT by setting aside a regular time each week – or each day – to update your accounting records.
• Maintain accurate records – It is important that you retain invoices and receipts so that you can accurately report VAT. This is easily achievable with the latest cloud accounting software and apps.

Speaking to a VAT expert will help you avoid many of these mistakes, which can be easy to overlook, but could be costly to you and your business.

Business plans provide goals to work towards, help identify potential problems, give insight into competitors, and highlight potential opportunities.

A great business plan should include a concept, strategy, executive summary, market analysis, competitor analysis, the company’s financials and a clear action plan.

Concept

This part of the business plan is usually broken down into three elements:

• Executive summary
• Company description
• Products/services.

The executive summary will highlight the mission of the business by describing its products and services.

It might also be a good idea to briefly explain why you are starting your business and include details about your experience in the industry that you are entering.

Strategy

Understand the scope of your business, as well as the amount of time, money, and resources you will need to get started by writing it down to help clarify your ideas.

Market analysis

You should identify your target customers’ needs, desires and pain points and understand how you can meet them. You also need to understand what else is available on the market and how your offering differs.

Competitor analysis

While it is important to understand the market you are operating in, it is also important to assess the success and weaknesses of competitors within your market to spot gaps and beat the competition.

Financials

A crucial area, this should outline projections for short-term growth and long-term profitability. You should include projections of your profit and loss statements, balance sheets, and cash flow statements for the next three years.

Setting these points out should help you create a clear set of definable actions that can help your business to grow and flourish. Having a detailed, well-prepared business plan will increase the chances of survival and success for any venture.

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will now come into effect in April 2026 for businesses, self-employed individuals, and landlords with gross business and/or property income over £50,000.

This will be followed in April 2027 for those with similar incomes over £30,000. The question is, how soon should your business start using cloud-based compatible software before that deadline?

The answer – the sooner the better.

Beyond compliance, the benefits of MTD cloud accounting software include:

• Reduce human error by keeping digital records and submitting tax information digitally
• Easily capture and digitise receipts using associated apps
• Making important decisions faster with a real-time overview of your financial position and performance
• Automate important financial functions, like cashflow forecasting
• Reduce your costs and saves you time by remaining constantly connected to your business through secure, remote servers
• Enjoy up-to-date software, with all the latest functions and legislative compliance
• Your work is saved automatically as you go, so you save both time and money on backup procedures
• Collaborate with your accountant anywhere in the world, at any time.

MTD-compliant cloud accounting software will generate the summary updates, which must be sent to HMRC every quarter via your HMRC digital account under Making Tax Digital.

You will be able to see how much tax you owe based on the information you have provided, so you can be better prepared for future tax bills.

Being prepared for MTD and having the correct software in place and ready to use will ensure a smooth transition to the new system, but, as you can see, the benefits go far beyond compliance.

With the end of the tax year fast approaching on 5 April, it makes sense to assess your tax situation and make use of the reliefs and allowances available to you.

Here are a few quick wins you can consider to help reduce your liabilities now and in the future:

Inheritance Tax (IHT)

Each tax year individuals are allowed to give away up to £3,000 worth of assets or cash without it being added to the value of their estate, referred to as your ‘annual exemption’.

If you have any unused annual exemption, this can be carried over to the next tax year.

Capital Gains Tax Allowances

Capital Gains Tax (CGT) is charged when you sell or dispose of an asset and make a profit. You are only taxed on the amount you gain from the sale or disposal.

UK residents can make a certain amount of gains each tax year before being charged CGT, this is known as the Capital Gains Tax Exemption.

The figure for 2022/23 is £12,300 but this will fall to £6,000 for 2023/24, before being reduced to £3,000 for 2024/25.

You should ensure that you are using your CGT Exemption before the end of the tax year and plan disposals to take advantage of the current higher rate.

Personal Allowance (PA)

Each individual is entitled to their own personal allowance (PA), which is set at £12,570 for 2022/23.

Part of the PA can be transferred between spouses and civil partners. The Marriage Allowance of £1,260 can be transferred, but only where neither spouse/civil partner pays tax at the higher rate.

Annual Pension Allowance

Ensuring you have made full use of your annual pension allowance is an important way to save tax. The current allowance allows most individuals to invest up to £40,000 a year before tax is applied. This allowance can be carried over several years if it has previously been unused.

Individual Savings Accounts (ISAs)

You pay no Income Tax on the interest or dividends you receive from an ISA and any profits from investments are free of Capital Gains Tax. You can pay your whole allowance of £20,000 (for 2022/23) into a Stocks and Shares ISA, a Cash ISA or any combination of these.

Taking advantage of these allowances will save you and your business money. It is good practice to repeat the process every tax year.

With the Spring Budget looming in March, it is easy to be tempted to delay tax planning until afterwards in hopes of favourable tax cuts.

However, the Chancellor has made it clear that significant cuts to taxation aren’t likely to be in his speech and so businesses should be taking steps now to prepare for the changes already being introduced in the months ahead.

Tax planning for businesses doesn’t have to be complicated. Small business owners can take advantage of certain deductions, credits and other tax benefits to help reduce the amount of tax they owe.

Corporation tax is a major tax for companies and tax planning allows businesses to reduce liabilities by taking advantage of capital allowances, R&D tax relief or other initiatives that encourage investment by offsetting expenditure against profits.

Effective tax planning can enable you to bring forward expenses or defer income, so as to delay tax payments into future years.

Your taxation planning should be part of a wider business plan helps you to:

• Outline your business’s goals
• Plan for investments and expenditure
• Identify and be prepared for potential problems
• Have the ability to measure your progress

A robust and well-prepared corporate tax plan can help you to make the most of the money and investments within your company.