Author: Glenn

Capital Gains Tax rates have increased for disposals from 30 October 2024, with further changes ahead. Stay informed on the updated rates for assets, property, and reliefs to optimise your tax planning.

We would like to remind our readers of the updated Capital Gains Tax (CGT) rates that apply to gains realised on or after 30 October 2024. The main CGT rates for assets other than residential property and carried interest has increased to 18% (from 10%) for Income Tax basic rate payers, and to 24% (from 20%) for Income Tax higher rate payers.

For trustees and personal representatives, the CGT rate will has also increased to 24% (from 20%) for disposals made on or after 30 October 2024. The CGT rates for residential property disposals (18% and 24%) remain unchanged.

The CGT rate for Business Asset Disposal Relief and Investors’ Relief will increase from 10% to 14% for disposals made on or after 6 April 2025. A further increase to 18% will apply for disposals made on or after 6 April 2026. The lifetime limit for Business Asset Disposal Relief remains unchanged at £1 million, but the lifetime limit for Investors’ Relief will be reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. Special provisions apply to certain contracts entered into before 30 October 2024.

Additionally, the normal and higher rates of CGT on carried interest (currently 18% and 28%, respectively) will rise to a single unified rate of 32% from 6 April 2025. From April 2026, carried interest will be subject to a broader package of policy changes, which will be announced at a later date.

The cash basis is now the default for self-employed income reporting. Learn about the key updates, opt-out options, and how this simplified method can ease your self-assessment obligations with HMRC.

The cash basis is used by sole traders and other unincorporated businesses to determine their income and expenses for self-assessment. This simplified method can ease record-keeping and income reporting to HMRC, whilst still providing a suitable measure of profits for many businesses.

Since 6 April 2024, the cash basis has become the default method for calculating income and expenses for self-employed individuals and partnerships when filing their Income Tax self-assessment return.

Businesses that prefer traditional accruals accounting or who are ineligible for the cash basis, must opt out of the cash basis when submitting their self-assessment return. The first return requiring this decision will be the 2024-25 return, due by 31 January 2026.

There have also been a number of other changes to the cash basis that took effect for the current 2024-25 tax year. This includes the following:

• The removal of the turnover thresholds for businesses to use the cash basis.
• The removal of the restrictions on using relief for losses made in the cash basis, aligning the rules with accruals.
• Interest restrictions have been removed so both cash basis and accruals accounting are subject to the same tax rules.
• People with more than one business will be able to choose whether they use the cash basis or accruals accounting for each business they have, rather than having to pick one method for all their businesses.

The cash basis is not available to limited companies and limited liability partnerships.

1 February 2025 – Due date for Corporation Tax payable for the year ended 30 April 2024.

19 February 2025 – PAYE and NIC deductions due for month ended 5 February 2025. (If you pay your tax electronically the due date is 22 February 2025)

19 February 2025 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2025.

19 February 2025 – CIS tax deducted for the month ended 5 February 2025 is payable by today.

1 March 2025 – Due date for Corporation Tax due for the year ended 31 May 2024.

2 March 2025 – Self-Assessment tax for 2023-24 paid after this date will incur a 5% surcharge unless liabilities are cleared by 1 April 2025, or an agreement has been reached with HMRC under their time to pay facility by the same date.

19 March 2025 – PAYE and NIC deductions due for month ended 5 March 2025 (If you pay your tax electronically the due date is 22 March 2025).

19 March 2025 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2025.

19 March 2025 – CIS tax deducted for the month ended 5 March 2025 is payable by today.

From April 2026, Making Tax Digital for Income Tax (MTD for ITSA) will transform tax compliance for businesses, self-employed individuals, and landlords, mandating digital record-keeping and online submissions. Get prepared!

The mandatory signup for Making Tax Digital (MTD) for Income Tax is set to commence from April 2026. MTD for ITSA will fundamentally change the way relevant businesses, the self-employed and landlords interact with HMRC. The regime will require businesses and individuals to register, file, pay and update their information using an online tax account.

The rules will initially apply to businesses, self-employed individuals and landlords with an income of over £50,000 annually. MTD for Income Tax will then be extended to those with an income between £30,000 and £50,000 from 6 April 2027. A new system of penalties for the late filing and late payment of tax for ITSA will also apply.

It was announced as part of the recent Autumn Budget measures that MTD for Income Tax will be extended to sole traders and landlords with income over £20,000 by the end of the current Parliament. The precise timing of this change has yet to be confirmed.

HMRC states that, MTD for Income Tax is a new way of reporting income and expenses if you’re a sole trader or landlord. You’ll need to:

• use software that works with Making Tax Digital for Income Tax;
• keep digital records of your business income and expenses;
• send us quarterly updates; and
• submit a tax return and pay tax due by 31 January the following year.

If you have volunteered to test the MTD for Income Tax service then the new late submission penalties and late payment penalties will apply. If you are looking to volunteer now then you will be required to confirm that you agree that the new penalties will apply to you as part of the sign-up process.

The new penalties apply as following during the testing phase.

For companies selling shares, the Substantial Shareholdings Exemption (SSE) can mean significant tax relief. Introduced in 2002 and simplified in 2017, this exemption allows qualifying gains on share disposals to go untaxed—provided key conditions are met.

The SSE regime provides that a gain on a disposal by a company of shares (or an interest in shares, or certain assets related to shares) will not normally be a chargeable gain. This is provided the following two conditions are met for disposals on or after 1 April 2017. 

1. The ‘investing company’ must have held shares in the ‘investee company’ in such number, and for such time, that the shareholding satisfies ‘the substantial shareholding requirement’.
2. The ‘investee company requirement’ must meet similar ‘trading’ conditions. An exception to this condition was introduced for investments held through an investor company which is itself owned by qualifying institutional investors (“QIIs”). Where 25% or more of the Ordinary Share Capital of the company holding the shares being disposed of is owned by QIIs, the investee company requirement does not apply to the disposal, leaving only the substantial shareholding requirement. 

However, the exemption does not apply if:

• the disposal is a no gain/no loss disposal, or
• the gain would not have been a chargeable gain because of some other provision, or
• the gain arises to an insurance company on a certain type of deemed disposal, or
• should an anti-avoidance rule apply.

No formal claim is needed. If the conditions for the relief are met, the gain is automatically exempt. However, a loss on a disposal where the conditions for the relief are met is not an allowable loss.