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London’s ultra low emission zone (ULEZ) aims to improve air quality and public health.

The latest ULEZ expansion means that many more businesses and individuals could face charges when driving vehicles that don’t meet emissions standards.

We’re here to help you understand how to comply with these clean air schemes and offer advice on minimising the extra financial and administrative burdens.

What is ULEZ?

First introduced in 2019 to tackle air pollution in London, ULEZ initially covered the same area as the congestion zone. As of 29 August 2023, the scheme now applies to all London boroughs.

Under ULEZ, motorists must pay a £12.50 daily charge when driving high-emission vehicles in the zone. According to London Mayor Sadiq Khan, this will help with the “vital task” of improving air quality and tackling climate change.

However, with businesses already stretched thin by the cost-of-living crisis, the decision to expand ULEZ has been divisive. One primary concern is that the expansion will place a greater financial burden on many businesses in and around London, which could be damaging for small firms and sole traders.

 

When does the ULEZ charge apply?

ULEZ operates across Greater London 24 hours a day, every day of the year, except for Christmas Day. Charging days run from midnight to midnight, meaning drivers travelling late at night could incur two charges for one journey.

Unless exempt, most motorists driving in the zone will need to pay a daily £12.50 charge if their vehicle does not meet the following emissions standards:

• petrol vehicles — Euro 4 standard
• diesel vehicles — Euro 6 standard
• motorcycles — Euro 3 standard.

You can usually find your vehicle’s emissions standards on your vehicle registration document or by checking the Transport for London (TfL) website.

Making your payment

If you drive a non-compliant vehicle in the ULEZ, you must pay the charge by midnight on the third day following the journey. You can also pay up to 90 days in advance.

TfL may issue you a penalty charge notice (PCN) if you fail to comply. You could also incur a fine by paying for the wrong date or the incorrect number plate.

Larger vehicles

ULEZ emissions standards don’t apply across the board. Businesses that use vehicles such as HGVs, lorries, and buses may need to comply with low emission zone (LEZ) rules instead.

Penalties for not meeting LEZ emissions standards are often steeper, so it’s essential to look into which scheme applies to the vehicles you use in your business.

Discounts and exemptions for businesses

Short-term exemptions

Certain charities, sole traders and small businesses with fewer than 50 employees can apply for a temporary ULEZ exemption. This grace period can give you up to six months to comply with requirements.

To qualify, you must have either ordered a new vehicle that meets the ULEZ emissions standards, or booked one to be retrofitted to meet them.

While you can submit your application until 29 May 2024, you will only qualify for a short-term exemption if you order your new vehicle or book the retrofit before 29 November 2023.

There is no limit to the number of vehicles you can apply for, but you must make a separate application for each vehicle you use in your business.

 

Scrappage scheme

Under the £160 million scrappage scheme, many London-based charities, sole traders and SMEs can access increased Government grants worth between £6,000 and £11,500 to help them afford a compliant vehicle or retrofit. Grants for wheelchair-accessible vehicles have also increased from £5,000 to £10,000.

However, the scrappage scheme has limited funds and works on a first-come, first-served basis. As such, you should speak to your accountant about making a claim as soon as possible.

Tax implications

If you cannot secure a temporary exemption or replace a non-compliant vehicle, you’ll need to pay the daily charge when driving within the zone — but there are still ways to minimise costs.

HMRC recently confirmed that ULEZ charges count as an allowable expense. That means self-assessment customers can claim these costs against their taxable income, but only if incurred wholly and exclusively for business purposes.

Advice for employers

Employees who pay the charge for work-related travel are also entitled to tax relief, although this excludes commuting.

The good news is that reimbursing employees for the charge is no different from reimbursing bridge tolls or car park costs.

Other clean air zones in the UK

It’s not just Londoners who need to think about the effects of clean air zones on their businesses. Several English and Scottish local authorities have already launched similar schemes in cities such as Bristol, Sheffield, Edinburgh and Glasgow.

Policymakers are also considering introducing further clean air strategies in the UK, including in Wales and Northern Ireland.

How can businesses navigate clean air zones?

1. Know your obligations

Researching the specific rules, charges and exemptions of different clean air zones before you travel can make it easier to stay compliant. Planning ahead can also give you more time to make alternative travel arrangements and avoid incurring unexpected charges.

2. Weigh up your upgrade options

If you or your employees often travel into ULEZ or other clean air zones for work, investing in a more eco-friendly vehicle or retrofitting an existing one could save you money in the long run.

3. Maintain good bookkeeping practices

Keeping detailed records of payments and maintaining good bookkeeping practices can make it easier to stay on top of your finances and claim the charges on your tax returns.

4. Work with experts

If you need help complying with the rules, your accountant is your first port of call. To minimise any extra costs to your business, we’ll offer expert advice on managing your finances efficiently, helping you apply for Government grants so you can replace non-compliant vehicles more easily.

We can also prepare and submit your tax returns for you, making sure we claim any ULEZ or clean air zone charges you incur to reduce your taxable profits.

Contact us to discuss your business finances.

How to register for and file your self-assessment tax return.

 If you’ve never had to complete a self-assessment tax return, the first time can be daunting. But don’t worry: we’ll demystify the process in this article. And if you have completed one before, this guide might still teach you a thing or two about doing your self-assessment better.

What exactly is self-assessment?

Self-assessment is the way millions of people in the UK report and pay their taxes. Specifically, 11.7 million people filed their tax return via self-assessment for the 31 January deadline in 2023.

As the name suggests, self-assessment is all about the taxpayer assessing their own tax liabilities by telling HMRC about their financial activities and income via form SA100. HMRC then uses that reported income to work out how much tax and National Insurance contributions (NICs) you need to pay.

This is in stark contrast to employees, who have their income tax and NICs automatically deducted through the PAYE system — this doesn’t happen for self-employed workers, or for some other sources of income, such as dividends, pensions or income from savings and investment, which is again where self-assessment comes in.

Who has to register?

In general, self-assessment is due for anyone who receives income that is not taxed at source.

So, in the case of a sole trader, because your income received through invoices does not have NICs or income tax subtracted, you must tell HMRC about your income, even if it turns out that you don’t owe any tax.

Income from abroad, income from rental properties, investment income, dividends from your limited company — it all has to be reported via self-assessment.

Employees who earn over £100,000 also have to register for self-assessment. This is because once you make above this amount, your personal allowance changes. HMRC requires people in this category to file a self-assessment tax return so they can ensure the correct tax has been paid.

What about side hustles?

Freelancing on the side is an increasingly popular way of supplementing income nowadays. You might have reporting duties if you do this and earn more than the trading income allowance.

This allowance allows you to make up to £1,000 from one or more trades in a tax year without having to inform HMRC about it, subject to certain conditions.

Be aware that the allowance applies to gross income, which is your overall income before you remove expenses.

When to register

Before you can file a tax return, you need to register for self-assessment with HMRC by 5 October following the tax year you’re filing for. As an example, if you need to file for the 2022/23 tax year for the first time, you should register by 5 October 2023.

If you miss the deadline, you may have to pay a fine. The good news is that you’ll never have to register again — unless you tell HMRC you no longer need to file a tax return.

Once you’ve registered, you have until 31 October after the tax year in question to file a paper return, but in all honesty, you’re far better off filing online. However, if you have partnership or trust income, or are non-resident, you can’t file online — your easiest option is to use an accountant as they’ll be able to file for you using software.

There’s no worry about your return getting lost in the post, the tax you owe is automatically calculated based on what you’ve entered into the form, and you can check your account at any time for mistakes.

Plus, the deadline for online filing is later — the 31 January that follows the tax year in question (in our example above, 2024). This is also the date at which you need to pay any tax you owe, lest you receive a financial penalty.

What you’ll need when registering

Registering is actually relatively straightforward. You’ll just need to supply some personal information, like your full name and date of birth, a phone number, email address, and National Insurance number.

In return, you’ll get a unique taxpayer reference (UTR) number through the post that HMRC will use to identify you.

Filing your return

Once you’ve registered for self-assessment, it’s time to file your tax return. Watch out for these common mistakes:

1. Missing or incorrect UTR/National Insurance number

Accuracy is key when it comes to tax returns, and that begins with your identification numbers. You’d be surprised at how many people make a mistake at the first hurdle.

2. Incorrect figures and incomplete information

The last thing you want to do is under-report your income and incur a penalty. The second-to-last thing you want to do is over-report and chase HMRC for a refund. Get your figures right the first time by checking and double checking them.

3. Ticking the wrong boxes

To prevent mistakes and unnecessary delays, make sure you’re ticking the correct boxes when completing your self-assessment tax return.

4. Over- or under- claiming allowable expenses

As a sole trader, landlord or self-employed individual, you can claim a range of allowable expenses for some costs and expenses. Make sure you include them on your tax return — their value can be deducted from your pre-tax profit, leaving you with a smaller sum that HMRC applies a tax charge on, and thus a smaller tax bill.

But make sure you’re not over-claiming allowable expenses — they must be made “wholly and exclusively” for trade to be allowable.

5. Missing some sources of income

Deliberately missing out earnings from your tax return is called underreporting, which is tax evasion. Mistakenly missing sources of income won’t be punished as harshly, but save yourself the headache and report all of your income.

6. Leaving your tax return until last minute

Leaving your tax return until the week before the deadline can cause serious problems if you realise you don’t have all the financial records you need to complete it at hand. Late filings also come with an automatic £100 penalty and interest on any payment due.

Speak with us

Self-assessment is complicated, especially for the uninitiated and those with particularly complex and numerous revenue streams.

Don’t get caught out: hire an accountant for a fraction of the cost of what you might have to pay if you get your tax return wrong.

Get in touch for support with self-assessment.

How the off-payroll rules will affect you and your business.

Contractors and freelancers operate through a private company to enjoy a better tax treatment compared to sole traders — but a more favourable tax position is actually never guaranteed because of off-payroll working rules known as IR35.

According to IR35, if a contractor or freelancer has a working relationship with a client that is more akin to regular employment, that worker has to pay income tax and National Insurance contributions on their income, rather than the more generous corporation tax.

This is called ‘deemed employment’, and working out whether you or your contractor are deemed employees can be difficult.

At first, the responsibility for determining employment status fell solely on the worker themselves. However, reforms in 2017 for the public sector and 2021 for the private sector shifted this burden to the client engaging a contractor’s services.

According to estimates by HMRC, around 130,000 workers are likely to have been affected by the 2021 reform. It’s essential that both contractors and clients understand how to comply with off-payroll working rules and what happens when it goes wrong.

Whether you’re a contractor yourself or hiring someone to carry out work for you, making mistakes can lead to time-consuming tax investigations and costly penalties.

Who determines IR35 status?

These days, the client (or “deemed employer”) is usually responsible for determining the worker’s IR35 status. However, there are exceptions to this rule.

For example, if a contractor provides services to a small private sector client, the contractor’s intermediary must determine their employment status instead. (An ‘intermediary’ under IR35 might be the contractor’s own limited company.)

There are a number of different factors that are used to assess whether someone falls within the boundaries of IR35 or not. In short, these include:

• Substitution: could you send a substitute to do your work?
• Control: do you have autonomy over how, where and when you work?
• Mutuality of obligation: can you choose whether to accept work or not, and can your client choose whether they provide it?
• Risk: do you take on the financial risk of the arrangement?
• Equipment: do you provide your own equipment to do the job?
• Payment: are you paid once the project is complete (rather than on a regular basis)?
• Number of clients: are you able to have multiple clients at the same time?

These are just a few of the factors that might make a difference to your determination. Make sure to speak with a financial adviser to iron out the details of all of them.

HMRC investigations

If you determine that you fall outside the scope of IR35 but HMRC thinks off-payroll working rules could apply, they may launch an enquiry.

In this case, HMRC will send you an initial letter asking for the following information:

• the reasons you’ve determined IR35 does not apply to you
• a breakdown of your business income for that tax year
• copies of all your written contracts for work in that same year.

If you provide “adequate evidence” that you fall outside IR35, HMRC will close the enquiry.

However, if HMRC still believes IR35 may apply, they’ll send another letter to schedule a face-to-face meeting with you. These meetings aren’t compulsory, but speaking to a representative in person can help resolve the matter more swiftly.

HMRC’s decision

At the end of the enquiry, HMRC will issue an opinion on whether you have complied with IR35 or not.

If you disagree with HMRC’s ruling, you can object and the tax authority will take your reasoning into account before making their final decision on your case. After that, you can choose to appeal against the decision and take the matter to tribunal.

As with any tax investigation, it’s important to seek professional advice as soon as possible — especially if you disagree with HMRC’s verdict.

Penalties

If HMRC finds that you fall within the scope of IR35, you’ll need to repay the tax you owe as well as any interest accrued on these amounts.

Depending on your case, you may also need to pay a penalty — for example, if you failed to take “reasonable care” in determining your employment status. You could also receive a more severe penalty if HMRC finds that you deliberately misled them.

If you get IR35 wrong as a client

It’s vital to take reasonable care when determining a contractor’s IR35 status, and you’ll need to issue a status determination statement (SDS) when you make your decision.

If you incorrectly determine that a worker falls outside IR35 but HMRC decides that they fall inside IR35, you may become the subject of a tax investigation, as explained above.

Some companies take a blanket approach to these rules to avoid triggering an investigation. However, it’s important to look at each contract individually.

For example, if you say a genuine contractor or freelancer is inside IR35, they could end up paying more tax than they need to — which, in turn, could do damage to your business’s reputation.

Handling disagreements

Unfortunately, disagreements between contractors and clients can happen. If a worker challenges your decision as a client, you should consider their reasons for disagreeing with your determination. After that, you’ll need to either maintain your determination or provide a new one.

Once you’ve been notified of the disagreement, you’ll have 45 days to respond with your decision. Until then, you should continue applying the rules in line with your original determination.

How to get IR35 right

Navigating off-payroll working rules can be complicated, but there are a few things you can do to avoid getting it wrong.

As a client, you’ll need to ensure your process for determining employment status is watertight. Reviewing each contract on a case-by-case basis can make it easier to stay in line with IR35 legislation.

It’s also a good idea to speak to your employees and contracted workers about off-payroll working rules to make sure they understand how to comply.

If you’re a contractor, you should review your contracts and working practices from the outset, paying attention to the list of factors we mentioned earlier. For example, bringing your own computer or other equipment to the job,  or not working fixed hours might help to keep you out of the boundaries of the legislation.

This can also help you build up a robust defence if HMRC does launch an enquiry.

Work with tax experts

As your accountants, we’ll help you understand how off-payroll working rules affect your taxes, offering specialist advice on ways to minimise your liabilities while meeting your obligations to HMRC.

Get in touch for advice about IR35.

Rising interest rates and frozen thresholds will force over one million more taxpayers to pay taxes on their savings interest this tax year, new data reveals.

Over 2.7 million individuals will pay tax on cash interest in the 2023/24 tax year, up by a million in a single year as more savers breach the personal savings allowance.

According to the figures, obtained by AJ Bell through a freedom of information request to HMRC, the Treasury will collect £6.6 billion in tax on earned savings interest.

The investment firm said that 1 in 20 basic-rate payers will pay tax on cash interest this tax year, rising to 1 in 6 higher-rate payers and around half of additional-rate payers.

It urged Chancellor Jeremy Hunt to end the freeze on the personal savings allowance, which has remained unchanged since 2016 despite wage inflation and surging interest rates yielding higher gains.

Tax is owed when a taxpayer earns more in interest than the personal savings allowance, which is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and non-applicable to additional-rate payers.

Furthermore, tax is paid either through self-assessment or deducted from income through a tax code adjustment. However, many taxpayers will be unaware that they owe tax until HMRC contacts them, AJ Bell said.

Laura Suter, head of finance at AJ Bell, said: “The figures highlight just how many taxpayers are facing a tax bill for their savings interest this year — a huge leap when compared to last year.

“The combination of higher interest rates and people having shunned ISA accounts in recent years means that the number paying tax on their savings has more than tripled in the past four years.

“Rising rates and a frozen personal savings allowance means some individuals are being taxed despite having relatively modest pots of cash set aside for a rainy day.”

Contact us for personal tax planning advice.

Growth remained sluggish between April and June 2023, with GDP growing by 0.2% in the second quarter of 2023 following a 0.1% rise in the first.

 Monthly estimates also show that GDP grew by an estimated 0.5% in June 2023 after falling by 0.1% in May and rising by 0.2% in April.

Growth of 1% in the information and communication sub-sector and a 1.6% increase in accommodation and food services made the largest contribution to increasing GDP.

However, these gains were partially offset by a 1% decline in professional, scientific and technical activities, which saw downturns in scientific research and development, architectural and engineering activities, and advertising and market research.

Prime Minister Rishi Sunak welcomed the figures as “good news”, adding “there’s still more work to do, but today’s figures show the plan is working.”

David Bharier, head of research at the British Chambers of Commerce, said the GDP figures were “better news than expected”, but stressed that the UK economy remains in a “precarious place”.

“While the UK remains on course to avoid a technical recession, small movements in one direction or the other won’t mean much for many firms facing the toughest trading conditions in years.”

Get in touch for business advice.

Real wages in June 2023 were higher than a year ago for the first time in 18 months, ending a pay squeeze across Britain.

Wages grew by 7.8% in the three months to June, the fastest annual rate since records began in 2001, according to figures from the Office for National Statistics.

Darren Morgan, ONS director of economic statistics, said: “Coupled with lower inflation, this means the position on people’s real pay is recovering and now looks a bit better than a few months back.”

Prime Minister Rishi Sunak said there was “light at the end of the tunnel” for the millions struggling with the cost of living.

However, inflation remains relatively high at 7.9% in June and 6.8% in July, meaning real wages including bonuses rose by 0.5% in the year to June and wages excluding bonuses rose by 0.1%.

Moreover, while rising wages is a win for workers, not everyone is as optimistic.

Following the data, Sushil Wadhwani, a former member of the Bank’s rate-setting Monetary Policy Committee, said financial markets believe an interest rate rise at the next meeting in September is a “virtual certainty”.

Nye Cominetti, senior economist at the Resolution Foundation, said: “Pay growth accelerated in June to end Britain’s painful 18-month pay squeeze.

“This welcome news for workers won’t be shared by policy makers at the Bank of England though, as it will put further pressure on their efforts to curb inflation. They will hope that rising unemployment and falling vacancies will take the steam out of pay rises in the coming months.”

The wage growth figures also highlight the “unrelenting workforce pressures businesses are facing”, according to Jane Gratton, deputy director of the British Chambers of Commerce.

“In a tight labour market, employers are struggling to contain wage inflation as the expectations of their staff and job candidates continue to rise,” she continued.

Speak to us for advice on employing staff.

One in five British importers have altered their supply chains because of geopolitical tensions, particularly with China, new research suggests.

A survey by the Institute of Directors (IoD), found that 20.5% of importers have altered their supply chains because of tensions abroad, while a further 14.5% were considering doing the same.

Just 42.4% of importers said their supply chain had been unaffected by the geopolitical tensions.

Many firms have become “more risk aware” since the pandemic and the invasion of Ukraine, the research suggested, and are looking for stability.

Some are particularly concerned about sudden disruptions to their supply chains if UK-China relations deteriorate as well as the security of their data in Chinese systems, according to the IoD.

Emma Rowland, trade policy adviser at the IoD, said: “It is clear businesses are sensing geopolitical-shaped clouds on the horizon, particularly while China’s standing with the US, Russia and Taiwan remains uncertain.

“The pandemic, coupled with the invasion of Ukraine, has exposed vulnerabilities in international supply chains and an overreliance on countries perceived to be high-risk to the UK.

“Ultimately, firms are pursuing long-term stability in their supply chains, so they can provide certainty to their customers.”

Talk to us about your business.

In evidence submitted to the Public Accounts Committee’s Progress with Making Tax Digital inquiry, contributors from across the accounting profession handed down a blistering verdict on the project, and HMRC’s ability to deliver on its new timeline.

The written submissions criticised HMRC’s failure to consult with and listen to taxpayers, agents, professional bodies and software vendors, spoke of the Revenue’s ‘limited understanding’ of how businesses operate, and expressed frustration at a lack of clarity over how MTD would work in practice.

The tax digitisation project’s current timetable will see it deliver Making Tax Digital for income tax self assessment (MTD ITSA) eight years behind schedule, and a recent National Audit Office paper reported that the scheme will come in more than £1bn over budget.

However, HMRC officials told MPs they were confident about the prospect of delivering MTD ITSA to its new timelines – those with incomes above £50,000 will join the programme in 2026, the £30,000 to £50,000 bracket will join in 2027, while quarterly reporting for incomes between £10,000 and £30,000 is under review.

Yet the Association of Tax Technicians (ATT) said there remains “an enormous amount of work to do” to deliver MTD in a workable and valuable form by 2026.

With a project this wide-ranging and complex, there were always going to be problems the project’s architects needed to tackle. However, the following stumbling blocks have yet to be satisfactorily resolved:

• The treatment of jointly owned properties
• Accommodating taxpayers with multiple agents
• Providing a coherent definition of what a digital record should look like
• The frequency of updates and whether these can be made cumulative
• The interaction of the MTD reporting period with basis period reform

HMRC officials told MPs that since December 2022 it has been undertaking a series of ‘co-creation’ events involving unnamed stakeholders “with the ambition of resolving the most pressing design issues within the coming months”.

Contact us for advice on MTD for ITSA.

After “a successful trial period”, HMRC has decided to extend its call time information messages to more of its helplines in a bid to give taxpayers and agents a better understanding of how long they can expect to be waiting on the phone.

According to HMRC’s most recent stakeholder digest, the extension, which came into effect on 4 July, will allow callers to make an “informed choice about whether they want to hang on, use our digital services or call back another time”.

Callers who have dealt with HMRC’s PAYE helpline are likely to already be aware of HMRC’s automated wait time messaging. However, the extension now covers the following services:

• Child benefit ​
• Tax credits ​
• VAT ​
• Online services ​
• National insurance​
• Construction Industry Scheme​
• Employers

The driving force behind HMRC’s decision was the apparent success of introducing automated messaging into services such as the PAYE helpline, with a spokesperson noting that thanks to this addition, “wait times reduced from 40 minutes at the start of the trial, to consistently below 20 minutes”.

The spokesperson added: “We want to be open and transparent about how long our customers can expect to wait and encourage the use of our digital services which are quicker and easier than calling us.”

Meanwhile, HMRC is also showing the wait time for its web chat for self assessment. Taxpayers using this service see the message: “Thank you for your patience, your estimated wait time is…” and then a timer counts down from that point.

The extension comes only a month after the announced closure of HMRC’s self assessment helpline over the summer and the transfer of 350 of its call handlers to other telephone services during the three-month closure. HMRC said that the decision was taken to divert resources and improve overall customer service levels.

Speak to us about self assessment.

 

 

Monthly GDP fell by 0.1% in May after growth of 0.2% in April, according to the Office for National Statistics (ONS), suggesting the economy remains on shaky ground.

In the three months to May 2023, GDP has “shown no growth” when compared with the three months to February, the ONS added.

The services sector also showed no growth in the three months to May, while production grew by 0.4% and construction grew by 0.2%.

A range of manufacturing and construction businesses cited the additional bank holiday for King Charles’s Coronation as a reason for reduced output.

There was also anecdotal evidence submitted to the ONS that industrial action in May 2023 had an impact on industries to varying degrees.

Martin McTague, national chair of the Federation of Small Businesses described the fall in GDP as “unwelcome, but not a surprise”.

“Small firms have been telling us they are facing pressure from all directions, such as interest rate rises, cost inflation and an ongoing late payment culture by big corporations”, he added.

Jeremy Hunt, Chancellor of the Exchequer, said: “The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible”.

Get in touch to discuss your business.