*First-time buyers pay nothing on the first £425,000 for properties up to £625,000. A rate of 5% applies between £425,001 and £625,000.

**For residential purchases by ‘non-natural persons’ of more than £500,000, a rate of 15% applies subject to certain exclusions.

Land and buildings transaction tax in Scotland

For people buying a residential property in Scotland, no land and buildings transaction tax will be owed on the first £145,000 of the property price.

The 2% land and buildings transaction tax rate kicks in for homes worth between £145,001 and £250,000.

A 5% rate applies on the slice of the residential property price between £250,001 and £325,000, while a 10% rate kicks in between £325,001 to £750,000. Above this, a 12% rate is levied.

People trying to buy additional residential property in Scotland pay a surcharge at 6% on properties worth more than £40,000 for transactions entered into on or after 16 December 2022. For transactions entered into before this date, a 4% tax applies. This ‘additional dwelling supplement’ also applies to the total purchase price.

First-time buyers in Scotland pay no land and buildings transaction tax on properties worth less than £175,000. Tax will apply at various rates on any excess above this amount.

Land transaction tax in Wales

In Wales, the pre-pandemic land transaction tax regime has applied since 1 April 2018.

If you do not own other property, no land transaction tax is owed on the first £225,000 of a residential property in Wales.

A 6% rate applies on the portion between £225,000 and £400,000, before a 7.5% rate is liable on the residential property price worth between £400,000 and £750,000.

Above £750,000 and up to 1.5m, a 10% tax rate is in place, and a 12% rate applies to the portion above £1.5m.

When you buy a residential property in Wales for £225,000 or more and you already own one or more residential properties, you may need to pay higher residential rates.

Capital gains tax

The capital gains annual exemption for 2022/23 is £12,300, or £6,150 for trusts.

Married couples and civil partners each have a £12,300 exemption, with gains above this usually taxed at a rate depending on their income levels and the type of asset.

If you jointly own an asset with another person, you can use both of your allowances to double the exempt amount available (£24,600) before capital gains tax is due.

Where taxable income is less than the UK basic-rate limit of £37,700 (the roof of the basic rate for income tax minus your personal allowance) the capital gains tax rate for most gains up to the remaining basic-rate band is 10%. After this it rises to 20%, while the standard rate for a trust is 20%.

Gains from the sale of residential properties which are not your main residence are taxed at rates of 18% in the basic-rate band and 28% in the higher or additional-rate bands. The rate usually applicable to disposals of residential properties by trustees is 28%.

Key considerations

• Have you used your £12,300 annual exemption? This will decrease to £6,000 in 2023/24 and to £3,000 in 2024/25, so use your tax-free allowance while it’s more generous.
• What can be saved by maximising family member tax-free exemptions?
• To utilise the spouse annual exemption, should an asset be put into joint names before being sold?
• Do you have other assets that can be used to reduce your gains by creating a capital loss?
• If a negligible value claim can be made on any shares you hold, they do not need to be sold to create a capital loss to offset against any gains made in the tax year.
• If tax is owed, can you defer or rollover the gain?
• Have you made a main residence election?
• Did you know you must report and pay any capital gains tax on the sale of additional UK residential property within 60 days of completion?

Business asset disposal relief

Business asset disposal relief can reduce the rate of capital gains tax due on disposal of qualifying assets and all or part of your business from 20% to 10%. Prior to 6 April 2020, this relief was known as entrepreneurs’ relief.

To qualify, you must have owned the business – either as a sole trader or in a business partnership – for the last two years.

If you sell shares or securities, you may also qualify if you have been an employee or office holder of a ‘trading’ company for two years up to the date the shares are sold.

You must also have at least 5% of both the shares and voting rights, plus be entitled to at least 5% of either the profits that are available for distribution and the assets on winding up, or the disposal proceeds if the company is sold.

Different rules apply to shares from an Enterprise Management Incentive Scheme.

If you are closing your business, the same conditions apply, and you must also dispose of any assets owned by the business within three years.

There is no cap on the number of times you can claim the relief, but you can only claim a total of £1 million in business asset disposal relief in your lifetime. Before 11 March 2020, this lifetime limit was £10m.

If you have already claimed business asset disposal relief on gains of £1m or more, any future disposals will not qualify for business asset disposal relief.

Alternatively, if you have never previously claimed this relief, only the first £1m will qualify for the 10% with the rest of the disposal taxable at 20% in 2022/23.

Non-domiciled tax

A non-dom is a UK resident whose permanent home, or domicile, is outside of the UK. An individual may have more than one tax residence but can only have one domicile at any given time. Domicile status is incredibly difficult to change and is significant because it determines an individual’s liability to UK income tax, capital gains tax and inheritance tax.

As a non-dom UK resident taxpayer, you can choose to be taxed on either the arising basis or the remittance basis.

Under the arising basis you are taxed as any other UK-domiciled and resident taxpayer would be, on your worldwide income and gains.

Under the remittance basis you are only taxed on your UK earnings and gains. Any income or gains arising outside of the UK are not taxed unless you choose to bring that money into, or enjoy use of it in, the UK.

New deemed-domicile rules were introduced from 6 April 2017 to limit the time that these beneficial rules can be used.

Non-doms will be deemed UK-domiciled for income tax, capital gains tax and inheritance tax purposes if they’ve been a UK resident for at least 15 out of the past 20 tax years immediately before the start of the current tax year.

If you become deemed domiciled moving forward you will no longer be able to claim the remittance basis and will be assessed on your worldwide income and gains on the arising basis. You will also potentially be liable to inheritance tax on worldwide assets.

Tax-efficient staff benefits

Working-from-home allowance

Employees who are required to work from home may be able to claim tax relief of £6 a week from HMRC. Alternatively, employers can pay the allowance to employees tax-free via payroll.

This cannot be claimed if you choose to work from home – for example, if your employer operates a hybrid working policy.

Electric vehicles

Drivers of electric vehicles and some hybrids provided by an employer pay 2% on this benefit-in-kind.

Hybrid company cars need to be registered from 6 April 2020, have CO² emissions of less than 50g/km, and travel more than 130 miles on a single electric charge to qualify for the existing 2% rate.

Other low benefit-in-kind rates apply depending on the CO² emissions and the electric miles it can travel on a single charge.

Trivial benefits

Employers can provide trivial benefits worth up to £50 per employee, as long as it’s not cash or a cash voucher, not a performance-related bonus and not in their contracts. No tax or Class 1A NICs will be due.

Directors also qualify, although it is limited to six occasions per tax year (e.g., £300 per tax year).

Key considerations

• Have you or your employer claimed homeworking relief in 2022/23? Bear in mind that you might no longer be eligible, even if you previously claimed this relief while Covid-19 restrictions were in place.
• Employers that provide pure electric cars in 2022/23 will save Class 1A NICs and employees may see significant income tax benefits.
• The employer can also pay for vehicle repairs and servicing, car insurance and car tax, as part of the benefit, and if VAT-registered may be able to claim back 50% of the VAT on any lease charges.

Corporation tax

Most incorporated businesses making profits in the UK pay the main rate of corporation tax at 19% in 2022/23. This will change for companies with profits above £50,000 in the 2023/24 tax year.

Companies need to keep accounting records and prepare company tax returns.

Payment is usually due nine months and one day after the company’s accounting period, while company tax returns are usually due 12 months after the company’s accounting period.

However, larger companies may be required to pay via quarterly instalments depending on the profits being made. 

Business deductions

When you’re working out your business’s taxable profit, you can deduct any costs that were incurred “wholly and exclusively” for the purposes of the trade.

These could include the cost of travel, staff salaries, pension contributions, bills for your business premises, advertising and marketing, and training.

Directors’ bonuses can also be claimed as a deductible cost, as long as they are paid within nine months of the company year-end, and the entitlement to the bonus is established before the accounting date.

You may also be able to claim capital allowances for things you buy to keep in your business, such as equipment, machinery and business vehicles.

A 130% super-deduction capital allowance is available on qualifying plant and machinery investments until 31 March 2023. This could cut your corporation tax bill by up to 25p for every £1 invested.

The 50% first-year allowance for qualifying special rate assets will also end on 31 March 2023.

Key considerations

• If you are due a director’s bonus, have you accrued it in the annual accounts as a deductible cost?
• Have you paid any employer pension contributions? These must be paid before the year-end to get tax relief in the accounting period.
• Are you paying a member of your family a salary? Salaries can be paid to family members as long as they are justifiable and at commercial rates.
• Have you considered tax-efficient ways of extracting profits, such as dividends, pension contributions and benefits-in-kind?
• Have you brought qualifying capital expenditure forward to take advantage of the super-deduction or the 100% annual investment allowance? This provides same-year tax relief on capital investments in plant and machinery worth up to £1 million until 31 March 2023.

VAT

Around 2.7 million businesses in the UK are registered for VAT, which is usually charged at 20% on the sale of goods and services.

Your business must register for VAT when it has a taxable turnover of more than £85,000 in the previous 12 months or if it expects to exceed this threshold in the next 30 days.

Your VAT taxable turnover is the total of everything sold that is not exempt.

You can voluntarily register for VAT, and also voluntarily deregister if your taxable turnover is expected to be less than £83,000 over the next 12 months.

Schemes exist to simplify accounting for VAT, including the cash accounting scheme, annual accounting scheme, and the flat-rate scheme.

MTD for VAT

Most VAT-registered firms need to keep digital records of their sales, and file monthly or quarterly VAT returns using digital software under the Making Tax Digital (MTD) regime. 

From 1 January 2023, HMRC moved to a points-based penalties system to encourage good taxpayer behaviour. This is also when stringent rules around the way businesses digitally link their software and how they must upload their VAT returns were introduced.

MTD applies to all VAT-registered businesses, regardless of whether their taxable turnover is above the current VAT-registration threshold or not. They are required to operate MTD for their VAT reporting and record-keeping obligations.

Key considerations

• Could your business use one of the simplified accounting schemes?
• Does your business need to be VAT-registered?
• Are you entitled to claim VAT bad debt relief?
• Are you accounting for VAT correctly on the fuel used for private motoring? Should you be accounting for the appropriate scale charge?
• Are you reclaiming VAT only where you are entitled to? You are not entitled to reclaim VAT on certain assets or expenses. For example, only certain types of business may reclaim VAT on cars.
• If you are just registering for VAT, you can reclaim the VAT on certain pre-registration expenses including services you have paid for in the six months prior to registration and any goods or fixed assets you still have (or that were used to make other goods you still have) in the four years before registration.

Penalties

Fines are in place for non-compliance with income tax, corporation tax, VAT and inheritance tax.

The self-assessment deadline for income tax is midnight on 31 January 2023, and you will receive fines if yours is late. You will also be charged interest on late payments at 6.00% from 6 January 2023. 

If you send a late self-assessment income tax return, you will have to pay:

• £100 for being a day late
• £10 a day for a maximum of 90 days for being three months late
• 5% of the tax you owe or £300, whichever is greater if six months late
• a further 5% of the tax you owe or £300, whichever is greater if 12 months late – in some cases, you may have to pay up to 100% of the tax you owe.

If you delay paying your self-assessment income tax by:

• 30 days – you’ll have to pay 5% of the tax you owe at that date
• 6 months – you’ll have to pay a further penalty of 5% of the tax you owe at that date
• 12 months – you’ll have to pay a further penalty of 5% of the tax you owe at that date.

New businesses also face being fined for not notifying HMRC that they have commenced trading. If the business is a company, then it will also need to ensure it submits its annual accounts ahead of their deadline to avoid incurring a penalty. Penalties vary from £150 for a private company filing its annual accounts one month late to £7,500 for a public company that files its accounts more than six months late.

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