VAT Registration: What You Need to Know 

Value Added Tax (VAT) must be charged by sole traders and companies once their taxable turnover exceeds £90,000 in a rolling 12-month period—or if they expect to exceed that threshold within the next three months. At that point, businesses are legally required to register for VAT with HMRC. 

 

You can also choose to register voluntarily before reaching the threshold. This can be beneficial if your business regularly purchases goods or services that include VAT, as registration allows you to reclaim VAT on eligible expenses. 

 

There are several VAT schemes available, each designed to suit different business types and sizes. Selecting the right one can help reduce administrative burden and maximise financial benefits for your business 

  Choosing the Right VAT Scheme for Your Business 

Cash Accounting Scheme: A Simple Way to Manage VAT 

The Cash Accounting Scheme offers a straightforward approach to handling VAT, especially for businesses looking to improve cash flow. Under this scheme, you only pay VAT once your customer pays their invoice, and you can reclaim VAT on purchases once you've paid your suppliers. 

 

To join the scheme, your business must have an annual turnover of £1.35 million or less. If your turnover exceeds £1.6 million, you’ll need to leave the scheme and switch to a different VAT accounting method. 

 

This option can be particularly helpful for businesses that experience delays in receiving payments, as it ensures you’re not paying VAT upfront before income is received. 

 

 

Flat Rate VAT Scheme: Simplify Your Tax Without the Hassle 

Annual Accounting VAT Scheme: Fewer Returns, Less Admin 

  Child Trust Funds: Fifth Cohort Gain Access This September 

Young adults born on September 1, 2007 will be able to access their Child Trust Funds (CTFs) for the first time this September, as they officially turn 18. 

 

CTFs were introduced by the UK Government to help families—especially those on lower incomes—build savings for their children’s future. The scheme began for children born on or after September 1, 2002, making this year’s group the fifth cohort to benefit from the initiative. 

 

The first accounts were opened in January 2005, when providers began setting up funds and distributing government-funded vouchers to kickstart each child’s savings journey. 

As these young adults come of age, they now have the opportunity to take control of their funds—whether to invest further, support education, or take their first financial steps into adulthood. 

  What Did the Government Pay Into Child Trust Funds? 

Can You Add Money to a Child Trust Fund? 

Yes—you can! Contributions to a Child Trust Fund (CTF) have always been allowed, and they still are. Up to £9,000 per year can be added to the account until the child turns 18. 

 

In CTF terms, a “year” runs from the child’s birthday to the day before their next birthday. It’s important to note that any unused portion of the £9,000 allowance does not roll over—if it’s not used within that year, it’s lost. 

 

Until age 18, the CTF grows tax-free. From age 16, the child can take control of the account—meaning they can manage how it’s invested—but they cannot withdraw the funds until they turn 18. 

 

Once they reach 18, they have two options: 

- Cash in the fund and use the money however they choose 

- Transfer it into an adult Individual Savings Account (ISA), allowing the investment to continue growing 

 

At this point, the original CTF account will be closed, and the young adult takes full ownership of their financial future 

Forgotten Where Your Child’s CTF Was Opened? 

  First labour budget 2024 

Labour Chancellor Rachel Reeves presented her inaugural Budget at the end of October, marking the first time a female Chancellor of the Exchequer has done so. The Budget places the greatest financial burden on Britain's wealthiest individuals and businesses. 

 

Starting in April next year, employers will face an increase in National Insurance (NI) contributions to address a £22 billion deficit attributed to the previous Tory government. Additional measures include adjustments to inheritance tax on farms passed down to the next generation, which has caused concern among British farmers, and changes to Capital Gains Tax (CGT) rates. Other measures include maintaining the freeze on the 5p reduction in fuel duty. 

  What do you need to know? 

What about state pension and minimum wage? 

Starting April 2025, the minimum wage for those over 21 will increase from £11.44 to £12.21 per hour, and for those aged 18 to 20, it will rise from £8.60 to £10 per hour. The long-term goal is to establish a single rate for all adults. 

 

Thanks to the "triple lock" which aligns with the rise in average weekly earnings, the Basic State Pension will increase by 4.1% from April. This means the full new State Pension will go up from £221.20 to £230.25 per week. 

 

Additionally, there will be an increase in the earnings threshold for the allowance paid to full-time carers. The maximum earnings threshold will rise from £151 to £195 per week. 

 

 

Anything else? 

Contact us 

  From Oct 2024 rules regarding tipping are changing 

Business owners whose staff are given tips by customers must now ensure every penny given goes to the workers and none of it is kept by the business owner. The rule change, which came into effect on October 1, is expected to add around £200m to the pockets of workers in industries such as hospitality. 

 

The changes require all tips, gratuities, and service charges to be passed to employees without any deductions. Any employer who fails to adhere to this can be taken to an employee tribunal. Most business owners do pass on all tips, but there are still some who fail to do this, something the Government deems “unacceptable tipping practices”. 

 

Justin Madders, Minister for Employment Rights, said: “When you tip someone for good service, you expect them to keep all their tip. They did the work - they deserve the reward. 

 

“This is just the first step of many in protecting workers and placing them at the heart of our economy. We will be introducing further measures on tipping to ensure workers get their fair share of tips. 

 

"Britain’s outdated employment laws require an urgent update. This Government will ensure they are fit for the modern economy and deliver on our plan to Make Work Pay.” 

 

Other measures to strengthen workers' rights 

Let us help you 

If your business deals with tips and you want to find out how to make sure you’re meeting your legal requirements, please get in touch and we will be happy to offer you the help and guidance you need. 

 

 

  Time is running out to top up your state pension back to 2006 

If you have any gaps in your National Insurance (NI) record from 2006 to 2016, you have until April 5, 2025, to top up your contributions and boost your state pension. Normally, you can only make voluntary NI contributions to cover up to six years, but for a limited time, the Government has extended this period. 

 

Since April, more than 10,000 people have used HMRC's digital service to make top-up payments, totaling an impressive £12.5 million. 

  Who is eligible to top up their NI record? 

Why do people have gaps in their NI record? 

There are several reasons why someone may not have a full NI record. For example, they may have taken time out of work to raise their children. Or they may have been unemployed, self-employed, on a low income or even working abroad and not paying UK NI. 

 

However, topping up NI isn’t right for everyone. If you are still working, you may be able to complete your full record with the years you have left in employment. You may also qualify for Home Responsibilities Protection (HRP) or National Insurance Credits, which replaced HRP after 2010. These provide compensation for the years you are out of work without the need to pay extra NI. 

 

You should check that any NI credits you might be entitled to have been applied before you spend money on topping up. 

 

 

  CORPORATION TAX RATES 

Corporation tax changed to a marginal rate as of 1st April 2023.  

 

From 1 April 2023 the main rate of Corporation Tax will be 25% for Companies with profits of £250,000 or more. This applies for all profits. 

A small profits rate of 19% will exist for Companies for profits of £50,000 or less. 

The main rate will taper in between £50,000 and £250,000. 

 

The effective tax rates will be; 

£0 - £50,000 – 19% 

£50,000 - £249,000 – 26.5% 

Above £250,000, all profits are taxed at 25%. 

 

It is important to note that these thresholds are divided by the number of 'associated companies' HMRC guidance on associated companies.  

 

A company is associated with another if, at any time in the chargeable accounting period (1) one company has control over another, or (2) both companies are under control of the same person or group of persons.  

 

If an individual is holding control over three separate companies the 25% threshold would reduce to £83,333.  

  SALARY SACRIFICE 

COMPANY CARS 

The benefit in kind on electric cars is currently 2%, set to rise a further 1% from 5th April 2025. 

 

In practice this means an employee is deemed to have received a benefit of 2% of the cars original list price (this value doesn’t change) as income. 

 

For example, if a car has a list price of £50,000. The employee will pay income tax based on receiving £1,000 extra income. Tax payable of £200 at lower rate, £400 at higher rate. 

 

The employer pays employers national insurance (13.8%) based on this figure, £138. 

 

Overall yearly tax charge for the use of a £50,000 electric vehicle – lower rate £338 / higher rate £538. 

 

 

DIRECTOR'S SALARIES 

TRIVIAL BENEFITS AND DIRECTOR'S EXPENSES