Happy New Year from Mercian Accountants, and welcome to the January 2025 edition of our Newsletter. We hope your New Year resolutions are still intact (or at least as sturdy as your festive leftovers). As always, this newsletter is brimming with essential updates, key deadlines, and timely reminders to keep you and your business in tip-top shape for the year ahead.

January can feel like the Monday of months – dark mornings, endless receipts, and that one rogue Christmas tree needle you keep stepping on. But fear not; we are here to make the start of your year as smooth as a well-organised spreadsheet. So, grab a coffee (or two if those bean prices haven’t hit too hard), and let’s dive into the latest tax updates and news.

Here’s to a productive and prosperous 2025. As always, we’re here to help with any tax or accounting queries – because if there’s one thing better than a balanced book, it’s a trusted advisor to guide the way.

Get Ready for Making Tax Digital for Income Tax

Before the Autumn Budget, there was hope that the new Labour Government might further delay the introduction of Making Tax Digital for Income Tax (MTD for IT). However, such hopes were dashed on Budget Day, with confirmation of the previously announced timescales and an additional announcement that individuals with income from trading or property of over £20,000 will be mandated to comply with MTD for IT requirements in future. The mandate timescales are as follows:

At present, no mandate deadlines have been set for partnerships.

Complying with MTD’s IT requirements will involve keeping business records in compatible software and then using that software to submit the business results to HMRC quarterly.

The introduction of MTD for IT is just over one year away, so now is the time to start thinking about the changes it will bring to your business if you are self-employed (but not in a partnership) or receive rental income. We are here to help, so please talk to us about how MTD for IT will affect you.

Corporate Tax Roadmap

The Government published a ‘Corporate Tax Roadmap’ in the Autumn Budget 2024. The Roadmap is designed to give corporate businesses (and, in some areas, non-corporate businesses) certainty about the tax framework ahead to give confidence in business decisions. The Roadmap sets out the areas in which the Government intends to maintain the status quo for the duration of this parliament and areas in which change is expected.

Starting with corporation tax rates, the Government have committed not to increase the rates of corporation tax paid by small or larger companies and to keep the rates under review to ensure they remain competitive. This means that small companies (those with profits below £50,000 a year) will continue to pay at 19%, and larger companies (with profits above £250,000 a year) will continue to pay at 25%, with marginal relief given from the 25% rate for companies with profits between the two thresholds. No changes have been made to the ‘associated company’ regime. To ensure the correct corporate tax rate is applied, it remains crucial to fully identify group companies and those under the control of the same individual(s).

Turning to capital allowances, which are of interest to unincorporated businesses as well as companies, the Government has committed to maintaining the rates of writing down allowances in the main and special rate plant and machinery pools. They also plan to make available the very valuable 100% annual investment allowance for up to £1 million of qualifying expenditure each year. For companies, the unlimited ‘full-expensing’ regime will also be maintained for expenditure on brand-new and otherwise qualifying plant and machinery, with the hope of expanding the qualification criteria.

For companies, the two mechanisms for obtaining tax relief for revenue research and development (R&D) expenditure that have been in place since 1 April 2024 will also be maintained. This remains a very complex area, so please contact us if you need support in this area or are considering whether you can make a claim.

Payrolling Benefits in Kind

‘Payrolling benefits in kind’ means that employee benefits in kind (e.g. company cars and medical insurance) are reported to HMRC through the employer’s payroll. Employees’ tax codes are amended so that any income tax due on the benefits is paid throughout the tax year. If a benefit has been payrolled, it does not need to be included on form P11D.

Payrolling is possible for all benefits in kind, except for employer-provided living accommodation and beneficial (interest-free or low-interest) loans; these must still be reported on the P11D.

If an employer wishes to payroll benefits, they must register with HMRC before the start of the tax year in which they plan to start.

Whether benefits are included in the payroll or on a P11D, the employer must still include them in summary form P11D(b) and pay Class 1A National Insurance Contributions on the total taxable benefit value across the workforce. The deadline for filing the P11D(b) and paying the Class 1A NIC due is 6 July, following the end of the tax year.

From 6 April 2026, payrolling benefits in kind will become mandatory for all employers for all benefits except beneficial loans and living accommodation, although these will be able to be included in the payroll voluntarily. It is hoped that this will simplify and clarify things for employers and employees. As mentioned above, it is possible to voluntarily enter the regime one year early, from 6 April 2025. Please talk to us if you are considering this or have questions about future obligations.

HMRC Scam Warning

Be wary of Self-Assessment scams; attempts are on the increase. HM Revenue and Customs (HMRC) have issued a reminder to be careful about scam attempts that target people filing Self-Assessment tax returns. In the last year, nearly 150,000 scam attempts were referred to HMRC, a 16.7% increase from last year. With the 31 January 2025 filing deadline approaching, fraudsters will likely step up their activities.

HMRC reports that around half of all scam reports in the last year were fake tax rebate claims. Fraudsters usually aim to get access to personal information and banking details.

If you receive an email, text or phone call from someone claiming to be from HMRC asking you for personal information or offering you a tax rebate, HMRC provides a useful checklist to help you identify a scam. If you receive communication claiming to be from HMRC that asks for your personal information or is offering a tax rebate, check the advice on GOV.UK to help identify if it is scam activity.

It is helpful to know that HMRC will never leave voicemails threatening legal action or arrest, and they will never ask for personal or financial information over text messages.

HMRC also will not contact you by email, text, or phone to announce a refund or ask you to request one.

If you have been contacted by someone claiming to be from HMRC and feel unsure whether it is a scam or you would like to check whether you are due a tax refund, call us at any time. We would be happy to help.

Get Britain Working White Paper

The government has unveiled some significant reforms to employment support, underpinned by a £240 million investment. The measures aim to address deep-rooted issues of unemployment, economic inactivity, and barriers to work, as detailed in the recently published Get Britain Working White Paper. 

Figures quoted in the government’s announcement made for sobering reading. 1.5 million are unemployed, 9 million are economically inactive, and a record 2.8 million are out of work due to long-term illness. Young people, in particular, are disproportionately affected, with one in eight not in education, employment, or training.

The UK is the only major economy to have seen its employment rate fall over the last five years. The government has attributed the decline to an increase in long-term ill health and an outdated employment support system.

Therefore, the White Paper highlights the need for a fundamentally different approach to employment, health, and skills support to revitalise Britain’s workforce.

What are the key reforms being proposed? 

1. Revamping jobcentres: These will be transformed into a new “national jobs and careers service”. This overhaul will focus on developing people’s skills and careers rather than simply monitoring benefits.
2. Tackling economic inactivity due to ill health: To address health-related issues, extra NHS staff will be employed in 20 areas with high inactivity to cut waiting list times. Mental health support will also be expanded.
3. A new “Youth Guarantee”: Every 18-to-21-year-old will have access to an apprenticeship, quality training, and education opportunities. The current Apprenticeship Levy will be replaced by a more flexible Growth and Skills Levy. Eight youth “trailblazer” areas, including in Liverpool, Tees Valley, and the East Midlands, will be set up to help young people in those areas find education, training, or work.
4. Supporting people with disabilities and health conditions: An independent review will be launched into the role of UK employers in promoting health and inclusive workplaces. It will look at what more can be done to enable employers to increase the recruitment and retention of disabled people and those with health conditions. It will also explore early intervention for sickness absence and what may help increase returns to work.
5. Empowering local communities: Local leaders, including mayors and councils, in areas of England that are not getting a trailblazer will receive up to £15 million to develop their plans. 

How will the reforms affect you?

Based on the proposed changes, we may begin to see new measures introduced into employer’s obligations towards long-term sickness.

Over the longer term, if these initiatives result in more younger people receiving more training, this may increase the number of skilled people available for hire. This could alleviate the difficulty some businesses find in locating suitably qualified staff.

To review the White Paper, see here.

New Fair Payments Code

The government’s promised new Fair Payments Code was launched last month to tackle late payment problems, which can be particularly harmful to small businesses.

How will the Fair Payments Code help?

The code introduces a gold, silver, and bronze system that smaller firms can use to identify business partners who have committed to paying fairly and within certain time limits.

The three award tiers have the following requirements:

• Gold award: for businesses paying at least 95% of all invoices within 30 days.
• Silver award: for businesses paying at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses within 30 days.
• Bronze award: for businesses paying at least 95% of invoices within 60 days.

Businesses granted an award also agree to abide by the principles in the Code of being “Clear, Fair and Collaborative” with their suppliers.

Once granted, the awards last for two years and must be reapplied for after that time. A “robust” complaint system will be established so that businesses that don’t meet the requirements of their award or otherwise comply with the principles in the Code can be reported.

Late payments can be challenging. While the new Fair Payments Code may help, there are a variety of methods you can use to reduce the effect of late payments. If you need practical help improving how quickly your business is paid, please get in touch. We would be happy to help you.

Coffee Bean Prices at a Record High

Those who rely on a coffee fix to start the day may find it more expensive. Coffee prices on international commodity markets soared to their highest level on record in December.

The price for Arabica beans, the most used in global production, increased to $3.44 a pound, increasing by more than 80% this year. Robusta beans similarly reached a fresh high in September.

Coffee traders expect crops to shrink due to bad weather in Brazil and Vietnam, two of the world’s largest producers. Brazil experienced its worst drought in 70 years during August and September, followed by heavy rains in October. Vietnam, where Robusta beans are grown, has also experienced drought and heavy rainfall during 2025.

Meanwhile, coffee’s popularity continues to grow. For example, coffee consumption has doubled in the last decade in China, which is not traditionally a coffee-drinking nation.

In recent years, major coffee roasters have been absorbing price increases to keep customers happy and maintain their market share. However, some experts believe this could soon change, and consumers will see price increases as a result.

New Reporting Requirements for Online Platforms

Recent changes come into effect in January 2025, when online platforms such as eBay and Airbnb will start sharing some user sales and personal data with HM Revenue and Customs (HMRC).

Although these reporting requirements have caused concern, HMRC has confirmed that there are no changes to the tax rules for someone selling unwanted possessions online.

Angie MacDonald, HMRC’s Second Permanent Secretary and Deputy Chief Executive Officer said: “We cannot be clearer—if you are not trading and just occasionally sell unwanted items online, there is no tax due.”

HMRC has advised that anyone who sold at least 30 items, earned roughly £1,700, or provided a paid-for service on a website or app in 2024 will be contacted by the digital platform they used in January to say their sales data and some personal information will be sent to HMRC due to new legal obligations.

This does not mean an individual must automatically complete a tax return. However, if the following applies, then you would likely need to register for Self-Assessment (if you are not already registered) and pay tax.

• Buying goods for resale or making goods to sell them at a profit.
• Offering a service through a digital platform – such as delivery driving or letting out a holiday home.
• And you generate a total income before deducting expenses of more than £1,000.

If you are concerned about whether you are likely to need to register for self-assessment or pay tax, give us a call, and we will be happy to help you.

Scottish Budget Announcement

The 2024/25 Scottish Budget was delivered on 4 December. This Budget was centred on the following priorities:

• Eradicate child poverty.
• Grow the economy.
• tackle the climate emergency, and
• ensure high-quality and sustainable public services.

The following measures will be of particular interest to Scotland’s business community:

• Scottish income tax rates will not be increased, and no new bands will be introduced for the remainder of this parliament. From April 2025, the Basic and Intermediate rate thresholds will increase by 3.5%. The higher, Advanced, and Top rate thresholds will be frozen at their current levels.
• Business Rates: The Basic Property Rate will be frozen at 49.8p, and a 40% relief will be introduced for hospitality premises liable for the Basic Property Rate, capped at £110,000 per business.
• Rates and bands of residential and non-residential Land & Buildings Transaction Tax (LBTT) will remain at their current levels. However, the Additional Dwelling Supplement (ADS) will increase from 6% to 8% from 5 December 2024. The increase will not apply to transactions for which legal missives have been signed on or before 4 December.
• Landfill Tax rates will increase from 1 April 2025, in line with those for the rest of the UK.

Scottish Rate of Income Tax

• If a taxpayer’s main residence is in Scotland or is otherwise classed as a ‘Scottish taxpayer’, their non-savings/non-dividend income is subject to the SRIT. Cabinet Secretary for Finance & Local Government, Shona Robinson, announced that the SRIT will not be increased, and no new bands will be introduced for the remainder of this parliament. From 6 April 2025, the Basic and Intermediate rate thresholds will, however, increase by 3.5%, meaning more income of a Scottish taxpayer can be taxed at the lower 20% and 21% rates before moving into the higher 42%+ rates.
• For 2025/26, after the personal allowance has been deducted, non-savings/non-dividend income will be taxed in bands as follows:

Land & Buildings Transaction Tax

Rates and bands of residential and non-residential LBTT will remain at their current levels, although the Additional Dwelling Supplement (ADS) increased from 6% to 8% from 5 December 2024. The increase does not apply to transactions for which legal missives were signed on or before 4 December.

To review the Scottish Budget in full, see here.

If you would like any help understanding how the Scottish Budget will affect your business or personal situation, please give us a call at any time. We will be pleased to help!

Welsh Budget Announcement

The Welsh budget was announced on 10 December. The key decisions for Welsh businesses and individuals were as follows:

Welsh Rates of Income Tax

The Welsh income tax rates for 2025/26 will remain at 10p for the three income tax rates (Basic, higher, and additional). Welsh taxpayers will pay the same income tax as England and Northern Ireland.

Land Transaction Tax

In disappointing news for purchasers, the higher residential rates of Land Transaction Tax (LTT) are increasing by one percentage point across all bands. This change was made almost immediately, coming into force on 11 December. Purchasers who exchanged contracts before this date will pay the former rates, provided they comply with transitional rules.

This change results in the higher residential rates of LTT being five percentage points above the main residential rates. The current starting threshold for the main residential rates of LTT remains at £225,000. The government estimates that around 60% of residential transactions are below the threshold for paying LTT.

The Budget also includes the intention to limit multiple dwellings relief (MDR) available on purchasing two or more dwellings in Wales. The changes will mean that taxpayers subject to the subsidiary dwelling exemption (SDE) will pay the main residential rates on the total consideration without the benefit of MDR. This will not be the only change to MDR, as the relief will be further considered over the next year.

It was also announced that the new LTT special tax sites relief that currently applies to the Celtic Freeport will also be extended to the Ynys Môn Freeport. Senedd approval will be sought on these in January so that the relief is in place when the UK government’s designation regulations come into force.

The Higher Residential Rates of Land Transaction Tax (LTT) apply to purchases of additional residential properties in Wales. These rates were increased from 11 December 2024 as follows:

Landfill Disposals Tax

The standard rate of Landfill Disposals Tax (LDT) will be increased to £126.15 per tonne from 1 April 2025. This matches the increase made to the UK government’s equivalent Landfill Tax.

The lower rate of LDT will be increased to £6.30 per tonne. This means the lower rate will be 5% of the standard rate, just under double the existing rate.

The new approach to lower rate setting and the substantial increase for next year is designed to increase the incentive to reduce landfill waste disposals. The intention is to raise the rate further if the volumes of lower-rated waste disposals by way of landfill do not reduce in line with Welsh government objectives. The goal is to become a zero-waste nation by 2050.

The unauthorised rate remains at 150% of the standard rate, and so increases to £189.25 per tonne.

If you would like any help understanding how the Welsh Budget will affect your business or personal situation, please give us a call at any time. We will be pleased to help!

Diary of Main Tax Events January / February 2025

Closing Note

As we step into 2025, let’s tackle the year ahead with confidence and clarity – whether it’s embracing new regulations, navigating tax complexities, or simply staying on top of deadlines. Remember, we’re here to make the process easier for you.

If you have any questions, need advice, or simply want to chat about how these updates might affect you or your business, don’t hesitate to get in touch. After all, there’s no challenge too big when you’ve got the right team on your side (and a decent cup of coffee in hand).

Here’s to a successful, stress-free, and prosperous 2025.

Kind regards,
Mercian Accountants

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October 2023 Tax Newsletter November 2023 Tax Newsletter December 2023 Tax Newsletter January 2024 Tax Newsletter