The Chancellor has left business taxes alone!
This Budget had very little that businesses need to get excited about.
Probably the biggest issue to hit the headlines has been the increase in the minimum wage. We covered the possibility of this happening in a previous blog post – The real cost of employment.
There are two sides to the coin; it will impact employers in the pocket as it means that their staff costs will rise if they have young people on their staff. Clearly it’s good news for young people trying to survive on minimum wage.
The increases may seem relatively small, but although the apprentice and 16-17 year old rate has only risen by £1.15 per hour (to £7.55), that’s well over £2,000 a year. For a small company that can impact on the affordability of taking on new staff.
High income child benefit charge (HICBC)
Since 6th April 2024 if your income exceeds £60,000 and your spouse receives child benefit the child benefit will need to be paid as a tax charge. The tax charge is 1% of child benefit for every £200 of income between £60,000 and £80,000. Once your income hits £80,000 all the child benefit is repayable as a tax charge.
Typically this tax charge is repayable under self-assessment by 31st January following the end of the tax year.
We wrote about the increase of the threshold to £60K last year, which was one of the changes in last year’s Budget. However, if you’re a taxpayer who is facing the high income child benefit charge you will no longer have to do a tax return from this summer, as HICBC will be deductible through PAYE earnings.
From August 2025, if you’re earning over £60,000 and fall under the HICBC, you will be able to report your family’s child benefit payments through a new HMRC online service.
Once registered with HMRC, you can opt to pay the HICBC charge directly through PAYE via your company payroll, without having to register to complete a self-assessment tax return.
This means that parents with one of the partners (married or civil partnership) earning over £60,000 will no longer have to file a self-assessment tax return, even if they are employed.
As the HICBC will be taken through PAYE, the charge is effectively spread over 12 months as opposed to being payable in one lump, so it’s likely to be less painful to your bank account when the 31st January comes around. When tax payment is due right after all the costs of the festive season, having spread the cost of 12 months seems to be just good sense.
Adding this to your PAYE doesn’t affect your employer’s contributions.
Late payment penalties
We always recommend that our clients pay their income tax and VAT liabilities on time, so that penalties don’t kick in.
HMRC now offer even more of an ‘incentive’ to get your tax obligations organised, as the penalties for late payment will rise from 2% to 3% of unpaid tax at 15 days, 2% to 3% at 30 days, and 4% to 10% from day 31. This will take effect from April 2025 – as in right now!
