July Accounting Updates: A Guide for UK Business Owners

July Accounting Updates: A Guide for UK Business Owners

As a business owner, staying informed about the latest accounting changes is essential to managing your finances effectively. We are now over the halfway mark in 2024, so here’s a overview of the key developments that are shaping the current environment.

Tax Changes: Encouraging Business Investment

The government has introduced significant tax changes aimed at encouraging business investment. One of the most notable is the "full expensing" measure, which allows businesses to claim 100% capital allowances on qualifying expenditures until March 2026. This initiative is designed to stimulate investment by enabling businesses to deduct the full cost of certain assets from their taxable profits.

In addition to full expensing, the rate of Research & Development (R&D) relief has increased. Companies can now claim a repayment of almost 27% on qualifying R&D expenditure, providing substantial support for innovation and development activities within businesses.

Dividend Allowance Reduction: Exploring Alternative Options

The dividend allowance has been reduced from £2,000 to £500, affecting many business owners who rely on dividends for income. This change increases the tax burden on traditional profit extraction methods for owner-managed businesses.

To manage this impact, businesses are encouraged to explore alternative strategies such as pension contributions, charitable donations, and Individual Savings Accounts (ISAs). These options can provide tax-efficient ways to handle profits and maintain financial health.

Corporation Tax Changes: Strategic Planning Required

Starting in April 2023, the corporation tax rate for profits exceeding £250,000 has risen to 25%. These changes necessitate strategic planning to mitigate their effects on your business finances. It is advisable to work closely with your accountant to review and adjust your tax planning strategies accordingly.

Making Tax Digital (MTD): Preparing for the Future

Although the implementation of MTD for Income Tax Self-Assessment (ITSA) has been postponed until 2026, businesses should begin preparing for this transition. MTD for VAT is already in place, and compliance with digital tax reporting requirements is crucial to avoid penalties. Adopting digital tools and processes now can help streamline your tax operations and ensure you are ready for future requirements.

Staying Informed and Proactive

Adapting to these changes is vital for maintaining compliance and optimising your business’s financial strategies. By staying proactive and informed, you can ensure your business remains resilient and well-positioned for growth in the evolving accounting landscape.

Are you looking for a local and proactive accountant? We’d love to hear from you! Get in touch by emailing gary.summons@perkaccounting.co.uk or if you prefer, you can use our bespoke financial health quiz and we’ll get back to you with personalised help and advice tailored to your business needs.