Author: Glenn

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company, or an individual’s interest in a trading partnership. When this relief is available, a reduced Capital Gains Tax (CGT) rate of 10% is applied instead of the standard rate, potentially resulting in significant tax savings for those exiting their business.

To qualify for BADR, certain conditions must be met:

1. Sale of a Business or Business Closure:
   • you must be a sole trader or business partner;
   • you must have owned the business for at least 2 years leading up to the sale or closure; and
   • you must dispose of your business assets within 3 years to qualify.
2. Sale of Shares or Securities: Both of the following must apply for at least 2 years up to the date you sell your shares:

• You must be an employee or office holder of the company (or a company within the same group).
• The company’s main activities must involve trading, not non-trading activities like investment, or it must be the holding company of a trading group.

Additional rules can apply if the shares are from an Enterprise Management Incentive (EMI).

Currently, you can claim a total of £1 million in BADR over your lifetime, allowing you to qualify for the relief multiple times. The lifetime limit may be higher if you sold assets before 11 March 2020.

Most self-employed people are required to pay Class 4 National Insurance contributions (NICs) if their profits are £12,570 or more a year. Class 4 NIC rates for the tax year 2024-25 are 6% for chargeable profits between £12,570 and £50,270 plus 2% on any profits over £50,270.

A number of categories of people are exempt from paying Class 4 NICs, these include:

• People under the age of 16 at the beginning of the year of assessment.
• People over State pension age at the beginning of the year of assessment. A person who attains State pension age during the course of the year of assessment remains liable for Class 4 NICs for the whole of that year.
• People receiving profits in their capacity as a trustee, executor or administrator of a person liable to tax.

The mandatory payment of Class 2 National Insurance Contributions (NICs) for the self-employed was abolished effective from 6 April 2024. It can be beneficial for some self-employed people who do not pay NICs through self-assessment to make voluntary Class 2 NICs. This can help them access certain contributory benefits including the State Pension. It is important to confirm that this would be beneficial before making any voluntary payment. The current weekly rate for making voluntary Class 2 NICs is £3.45.

When a new employee is added to the payroll it is the employers' responsibility to ensure they meet the employees’ rights and deduct the correct amount of tax from their salary. This includes any employees who are family members.

It is possible to employ young people if they are 13 or over but there are special rules regarding how long they can work and what jobs they can undertake. Children younger than 13 can work in certain areas such as television, theatre and modelling but their employer will need to apply for a child performance licence. There is no National Insurance liability for children under 16 and they would only need to be included on an employer’s payroll if their total income is over their Personal Allowance.

Young workers (aged 16 to 17) are subject to different National Minimum Wage rates. The current minimum hourly rate for this age group is £6.40. Any payments to young workers need to be handled through the payroll. If the workers earn more than £123 a week, then the employer will also need to do undertake regular PAYE tasks like making deductions.

There are different rules if you take on volunteers or voluntary staff, but the employer is still responsible for health and safety and must give inductions and training in the tasks they are going to do.

The deadline for submitting paper self-assessment tax returns for the 2023-24 tax year is 31 October 2024. If the return is submitted late, a £100 penalty will be imposed, regardless of whether there is a tax liability or if any owed tax is fully paid by 31 January 2025.

We recommend that taxpayers still using paper returns consider switching to electronic submission, which offers an additional three months (until 31 January 2025) to file their self-assessment tax return.

Taxpayers with certain underpayments in the 2023-24 tax year can elect to have this amount collected via their tax code (in 2025-26), provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts and the amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. The maximum coding out allowance applies to taxpayers with earnings exceeding £90,000.

Daily penalties of £10 per day will also take effect if the tax return is still outstanding three months after the filing date up to a maximum of £900. If the return still remains outstanding further higher penalties will be charged from six months and twelve months late.

You must inform HMRC by 5 October 2024 if you need to complete a tax return for the 2023-24 tax year and have not done so before.

There are late filing penalties which are designed to encourage companies to file their accounts and reports on time. All companies, private and public, large or small, trading or non-trading must send their accounts to Companies House. A penalty is automatically imposed by Companies House if the accounts are late.

The table of penalties for late submission is as follows:

Failure to file confirmation statements or accounts is a criminal offence which could result in the directors being personally fined in the criminal courts. Late penalties which are unpaid will be referred to collection agents and could result in a County Court judgement or a Sheriff Court decree against the company.

It is possible to appeal against a penalty, but it will only be successful if the appellant is able to demonstrate that the circumstances of the late filing were exceptional, for example, a fire destroying records a few days before the filing deadline.

According to Companies House guidance, an appeal is unlikely to be successful if it’s based on the following examples:

• your company is dormant
• you cannot afford to pay
• your accountant was ill
• you relied on your accountant
• these are your first accounts
• you are not familiar with the filing requirements
• your company or its directors have financial difficulties (including bankruptcy)
• your accounts were delayed or lost in the post
• the directors or LLP members live (or were travelling) overseas
• another director or LLP member is responsible for preparing the accounts.