The Bank of England (BoE) has cut the base rate by 0.25%, bringing it to its lowest since May 2023.

Seven members of the Monetary Policy Committee (MPC) supported the move, but two pushed for a deeper cut to 4.25%.

Governor Andrew Bailey warned that inflation could climb to 3.7% this year. Despite progress in reducing inflation over the past two years, the Bank emphasised the need to keep rates at a restrictive level. Inflation currently stands at 2.5%, while GDP grew by just 0.1% in November. The Bank does not expect any significant economic growth until mid-2025.

Concerns are mounting over additional pressures on businesses, including an increase in employers’ National Insurance contributions and the rise in the minimum wage from April. These changes have dampened business confidence heading into 2025.

The rate cut relieves businesses struggling with rising costs, but the UK is cutting rates slower than major global competitors. There are also fears over the potential impact of US-imposed tariffs on the EU, which could indirectly harm UK trade. Despite forecasting higher inflation, Bailey did not mention the US tariff threat in his remarks.

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Following the Bank of England’s base rate cut to 4.5% on 6 February, HMRC will lower its late payment and repayment interest rates from 25 February.

The late payment interest rate will drop from 7.25% to 7.0%, while the repayment interest rate will decrease from 3.75% to 3.5%. These changes reflect HMRC’s standard approach, where late payment interest is set at the base rate plus 2.5%, and repayment interest is set at the base rate minus 1%, with a minimum floor of 0.5%.

For corporation tax, interest on underpaid quarterly instalments will fall to 5.5% from 5.75% on 17 February – one week earlier than the main rate change. Similarly, interest on overpaid quarterly instalments and early corporation tax payments will drop to 4.25%.

Looking ahead, from 6 April 2025, HMRC will increase its premium on late payment interest, raising the surcharge from 2.5% to 4% over the base rate. Announced in last October’s Budget, this move will generate £255 million a year from 2025/26, targeting tax avoidance and late payments.

Despite these adjustments, HMRC continues to pay lower interest on overpayments than on late payments. It has defended this policy by citing international tax authority practices and comparing commercial loan and deposit rates.

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From April 2027, unused pension pots and death benefits will be included in an individual’s estate for inheritance tax (IHT) purposes.

The Association of Taxation Technicians (ATT) has warned that this change, announced in the Autumn Budget, could increase costs and cause delays for around 50,000 families a year.

Pension pots are exempt from IHT rules, making them a popular tool for estate planning. Under the new system, personal representatives handling a deceased person’s affairs must work with Pension Scheme Administrators (PSAs) to determine the value of any unspent pension assets and allocate allowances accordingly. Each pension fund will then be responsible for paying its share of IHT before probate can be granted.

The ATT has raised concerns that these additional administrative steps will increase the time and effort required to finalise estates. Delays in obtaining probate could create financial difficulties for beneficiaries, while the added complexity may result in higher costs for professional assistance.

The ATT has called for a separate IHT regime for pensions to reduce the impact on bereaved families. With pensions playing a key role in IHT planning, it may be worth reviewing your arrangements to ensure they remain tax-efficient. While some view tax-free pension pots as a loophole, others argue they provide a vital means of passing on wealth.

Talk to us about your pension.

Maximising efficiency with digital accounting tools.

In the modern business environment, efficiency and accuracy in financial management are paramount. We understand businesses’ challenges in maintaining precise financial records while striving for growth. Implementing accounting software can be a game-changer, offering numerous benefits that streamline operations and enhance decision-making. This guide explores how the right tools can simplify financial processes, improve compliance, and free up time to focus on growing your business.

Benefit 1: Automating routine tasks
One of the primary advantages of accounting software is the automation of repetitive tasks. Processes such as invoicing, payroll, and tax calculations can be handled automatically, reducing the time and effort required for manual entry. This automation saves time and minimises the risk of human error, ensuring that your financial data remains accurate.

Benefit 2: Enhancing financial accuracy
Manual data entry is prone to errors, significantly affecting financial reporting and compliance. Accounting software minimises these risks by providing accurate calculations and consistent data entry protocols. This precision ensures that your financial statements reflect the true state of your business, aiding in compliance with tax regulations.

Benefit 3: Real-time financial insights
Access to real-time financial data is crucial for informed decision-making. Accounting software offers up-to-date insights into your business’s financial health, allowing you to monitor cashflow, track expenses, and assess profitability anytime. This immediacy enables proactive management and swift responses to financial challenges.

Benefit 4: Facilitating compliance with tax regulations
Navigating the tax landscape can be daunting. Accounting software simplifies this by keeping you updated with the latest tax laws and ensuring your financial records comply. Features such as automated tax calculations and report generation make it easier to meet HMRC requirements, reducing the risk of penalties.

Benefit 5: Improving client relationships
Maintaining strong client relationships is essential for accounting practices. Accounting software enhances client interactions by providing accurate and timely financial information. This transparency builds trust and allows for more strategic discussions based on real-time data. According to a report by Libeo, 67% of accountants say cloud technology is improving client interactions and service offerings.

Benefit 6: Adapting to technological advancements
The accounting industry is experiencing a significant shift towards digitalisation. A report by Sage and Demos found that widespread AI adoption in accounting practices could add £2 billion to GDP and create nearly 20,000 jobs.

Embracing accounting software positions your business to take advantage of these technological advancements, ensuring your business remains competitive in the evolving market.

Customising software to suit your business needs
Every business has unique financial processes, and off-the-shelf accounting software may not always align perfectly with specific requirements. Many platforms offer customisation options, allowing businesses to tailor features such as charts of accounts, reporting formats, and user access levels.

For instance, a retail business may require advanced inventory tracking, while a consultancy firm may prioritise time-tracking and project-based invoicing. Platforms like Xero, Sage, and QuickBooks provide industry-specific add-ons and configurations, ensuring that businesses can adapt the software to meet their operational needs.

Beyond core functionality, businesses can also personalise dashboards and reports to highlight key performance indicators (KPIs) relevant to their financial goals. By customising accounting software, businesses can optimise workflow efficiency and gain deeper insights into their financial performance.

Choosing the right software for your business size
The size and complexity of a business significantly influence the choice of accounting software. Small businesses and sole traders may only require basic bookkeeping and invoicing features, whereas larger organisations need advanced capabilities such as multi-currency transactions, consolidated reporting, and extensive automation.

For micro-businesses, user-friendly software like FreeAgent or Zoho Books offers straightforward solutions without overwhelming features. In contrast, mid-sized businesses may benefit from Sage or QuickBooks Online, which provide scalable options that accommodate growth. Larger enterprises with more complex accounting needs often use software like NetSuite or SAP Business One, which offer enterprise-level customisation and automation.

By selecting software that aligns with business size and growth plans, companies can avoid paying for unnecessary features while ensuring they have the necessary tools to support expansion.

 
How software improves cashflow management
Accounting software not only tracks incoming and outgoing payments, but also offers AI-driven forecasting tools. These tools analyse historical data and predict cashflow trends, allowing businesses to plan for future expenses, identify potential shortfalls, and manage credit more effectively. This is particularly useful for businesses with seasonal revenue fluctuations, helping them allocate funds efficiently and avoid cash shortages.

The role of accounting software in financial reporting and audits
Accurate financial reporting is essential for compliance and business decision-making. Accounting software simplifies report generation by automatically categorising transactions and compiling data into structured financial statements.

Accounting software streamlines daily financial management and audits by maintaining structured, traceable records. Features such as automated categorisation, built-in audit trails, and secure data storage allow businesses to provide auditors and regulatory bodies with clear, verifiable financial statements.

By maintaining well-organised digital records, businesses can comply with regulatory requirements and gain better financial oversight and strategic insights.

Overcoming adoption challenges
While the benefits are clear, some businesses may face challenges adopting new technologies. To overcome this, it’s important to choose user-friendly software and provide adequate training to staff, ensuring a smooth transition.

Integrating software with other business tools
One of the biggest advantages of modern accounting software is its ability to integrate seamlessly with other essential business tools. Many platforms offer direct integrations with customer relationship management (CRM) systems, payment gateways, and inventory management software. This interconnected approach streamlines workflows, reducing the need for duplicate data entry and improving overall efficiency.

For example, integrating accounting software with an e-commerce platform like Shopify or WooCommerce automatically records sales transactions, eliminating the need for manual updates. Similarly, linking software with payroll systems like BrightPay or Xero Payroll simplifies salary calculations and tax deductions, ensuring accuracy and compliance.

These integrations give businesses a more comprehensive view of their financial health while reducing administrative burdens. According to a study by Xero, businesses that integrate their accounting software with other tools report a 30% improvement in operational efficiency.

 
Cloud accounting vs traditional software: Making the right choice
Cloud solutions offer businesses a competitive edge through automatic software updates, real-time data access, and integration with other digital tools. This ensures businesses can manage finances flexibly, regardless of location, without needing manual updates or on-premises infrastructure.

A 2023 report by QuickBooks found that 78% of small businesses in the UK now use cloud-based accounting solutions due to their flexibility and cost-effectiveness. Cloud accounting also plays a crucial role in compliance with Making Tax Digital (MTD) requirements, ensuring that VAT submissions are done correctly and on time. This will become even more relevant when HMRC brings in further MTD requirements for sole traders.

Data security and compliance considerations
Financial data is highly sensitive, so ensuring robust security measures is a key consideration when using accounting software. Cloud-based platforms employ high-level encryption and multi-factor authentication to protect data, but businesses must also implement strong internal policies to prevent unauthorised access.

GDPR compliance is another essential factor. Businesses using cloud accounting software must ensure their provider adheres to GDPR data protection and storage guidelines. Platforms like FreeAgent and QuickBooks Online offer compliance features, including secure data storage within the UK or EU jurisdictions.

Additionally, implementing role-based access controls within accounting software ensures that only authorised personnel can access specific financial information. This reduces the risk of internal fraud and maintains data integrity.

The future of accounting software: AI and automation
The accounting industry is rapidly evolving, with AI increasing in automating tasks such as bank reconciliation, invoice processing, and financial forecasting. AI-powered tools can analyse large volumes of financial data in seconds, providing valuable insights that help businesses make better decisions.

A recent survey by Sage found that 58% of accountants believe AI will transform how financial data is processed within the next five years. Automated bookkeeping, fraud detection, and AI-generated financial reports are just a few advancements businesses can expect.
Embracing AI-driven accounting software improves efficiency and frees accountants to focus on advisory services, helping businesses grow strategically. As AI capabilities expand, integrating smart accounting solutions will become a key competitive advantage for businesses.

 
Final thoughts
Implementing accounting software is a strategic move that offers numerous benefits, from automating routine tasks to providing real-time financial insights. We are committed to helping businesses harness these tools to enhance efficiency and achieve financial goals. By embracing digital solutions, you can position your business for success in an increasingly competitive environment.

Get in touch to discuss how software can streamline your accounting operations.

Making up for lost time with smart pension planning.

By your 50s, retirement planning often moves to the top of the financial agenda. If your pension pot isn’t where you’d like it to be, there are ways to increase contributions, take advantage of tax reliefs, and strengthen your long-term financial security. This guide outlines the latest pension rules, allowances, and strategies, helping you make informed decisions about your retirement savings. Whether you’re looking to top up your pension, explore additional investment options, or adjust your approach, having a clear understanding of your options can make a significant difference to your future financial stability.

The current outlook for retirement saving in the UK
Retirement savings in the UK typically include workplace, private, and state pensions. Automatic enrolment has significantly increased participation, with 88% of eligible employees enrolled in a workplace pension in 2023, covering approximately 20.8 million individuals.

Many people underestimate how much they need to save for retirement, with the Pensions Policy Institute highlighting a gap between expected and actual retirement income. By your 50s, earnings may be more stable, but financial commitments – such as a mortgage or supporting children – can still be a priority. However, with careful planning, higher earning potential offers a chance to boost pension contributions and strengthen retirement savings.

Tax relief and pension allowances for 2025/26
Annual allowance
The annual allowance is the maximum you can contribute to pensions each tax year while still benefiting from tax relief. From April 2023, it increased to £60,000 for most people.

Money purchase annual allowance (MPAA)
If you have started taking pension benefits flexibly (for example, using flexi-access drawdown), the MPAA might apply. This restricts contributions to £10,000 per year once triggered.

Lifetime allowance (LTA)
The Government abolished the Lifetime Allowance (LTA) on 6 April 2024, removing the previous tax charge for exceeding a set lifetime pension pot limit. This means that there is no LTA from the 2025/26 tax year onwards, and individuals can contribute to their pensions without facing additional tax penalties for breaching a lifetime cap. However, standard tax rules still apply to withdrawals, and certain lump sums remain subject to limits.

 
Personal allowance and tax thresholds
Income tax thresholds remain frozen until April 2028. The personal allowance is £12,570, with 20% tax up to £50,270, 40% tax up to £125,140, and 45% tax above £125,140. In 2025/26, you can expect these bands to remain the same unless new policies intervene.

Workplace pensions in your 50s
Review your contribution rate
Auto-enrolment sets a minimum total contribution of 8% of qualifying earnings, including at least 3% from your employer. Contributing more than the minimum is often beneficial if you want to catch up on retirement savings. Some employers match higher contributions, so find out if yours does.

Use salary sacrifice
A salary sacrifice agreement allows you to reduce your gross salary in exchange for higher employer pension contributions. This lowers your National Insurance liability and can increase pension funding. However, salary sacrifices may affect other benefits such as life insurance or bonuses.

Explore additional voluntary contributions (AVCs)
If your workplace offers a defined benefit (final salary) scheme, AVCs can boost your retirement income. Tax relief for AVCs works like it does for other pension contributions, so you usually receive relief up to your available allowance.

State Pension considerations
Understand your State Pension age
Your State Pension age may be 66 or 67, depending on your date of birth. Future increases are possible, but any changes must be passed into law.

Check your National Insurance record
To get the full new state pension, you need around 35 qualifying years of NI contributions. Review your NI record online, and if there are gaps, you may opt to make voluntary contributions to improve your State Pension.

Projected amount of the State Pension
The full new State Pension is £221.20 per week for 2024/25 and is set to rise to £230.25 per week from April 2025. This increase follows the triple lock mechanism, which ensures the State Pension rises by the highest of inflation, average earnings growth, or 2.5%. The 2025/26 increase is based on average earnings growth of 4.1%. Keep an eye on official updates for any further changes.

Increasing your pension contributions
Catch-up approach
In your 50s, higher earnings or lower expenses may allow you to increase pension contributions. If you pay 40% tax, a £12,000 gross contribution effectively costs £7,200 after tax relief. Ensure your contributions remain within the £60,000 annual allowance to avoid potential tax charges.

Carry forward rules
Carry forward lets you use unused annual allowance from up to three previous tax years if you had a pension in those years. This can allow significant one-off contributions. If you have enough earnings and capacity for tax relief, carry forward may help you catch up quickly.

Balancing other savings
At this stage in your life, you may also want to pay off a mortgage, build an emergency fund, or address high-interest debts. Compare your mortgage interest rate to the long-term growth of pension investments, and if the pension offers higher returns (especially with tax relief), extra pension contributions may be more appealing. However, reducing high-interest debts is often wise before stepping up pension savings.

Drawing benefits and avoiding early withdrawal pitfalls
When can you start drawing your pension?
The normal minimum pension age will rise to 57 in April 2028. By 2025/26, most individuals can access pensions from at least age 55. If you withdraw too early, however, you might deplete your funds before retirement.

Tax implications of early withdrawals
Taking pension benefits early can trigger the MPAA, lowering your future contribution limit to £10,000 a year. If you plan to keep contributing significantly, be aware of how early withdrawals might limit you.

Partial retirement
Some people choose to reduce work hours in their 50s and draw partial pension benefits. This can help you transition into retirement, but you should check if your overall pot can still grow or maintain its value; you might pay income tax on withdrawals, depending on your allowances.

Diversifying your retirement strategy
Consider ISAs and other savings
An Individual Savings Account (ISA) offers tax-efficient savings alongside pensions. You can invest up to the annual ISA allowance (currently £20,000). Withdrawals are free of income tax. In retirement, these funds can complement your pension and give you more flexibility.

Investments outside of pensions
Some people choose to invest in property, shares, or bonds. These can yield returns but also carry risks. They are also likely to be less tax efficient. If you have limited time to rebuild savings, you may prefer investments that are less prone to volatility. Seek advice from your accountant or financial adviser if you need to decide on risk levels that suit your age and goals.

Self-employed considerations
If you are self-employed, auto-enrolment does not apply. You must set up your own pension, such as a personal pension or SIPP. In your 50s, you can still receive tax relief on contributions within your annual allowance. Increase contributions if your earnings allow, especially while you have the carry forward option.

 
Reviewing and adjusting your plan
Regular pension forecasts
Ask your pension provider for updated projections. This allows you to track progress toward your retirement target. If you find a shortfall, you can increase contributions or adjust your investments.

Adjust contributions when possible
If you receive a salary increase or bonus, direct a share of it to your pension. This approach ensures consistent growth and reduces the chance of spending extra earnings on non-essentials.

Monitor legislation changes
Pension policies can shift with Government budgets. Check official sources such as GOV.UK or HMRC for announcements. If changes affect the annual allowance or the MPAA, adjust your strategy accordingly.

Talk to your employer
Your employer might offer more generous matching or additional benefits. Also, they can explain any changes to workplace pensions that could affect your contributions for the 2025/26 tax year.

Potential risks and how to address them
1. Overexposure to certain assets: Relying on one type of investment can lead to higher risks. Diversify across different asset classes to reduce vulnerability.
2. Delaying contributions: Time in the market is important for compound growth. Contributing sooner, even if the amount is moderate, is generally beneficial.
3. Ignoring inflation: Rising living costs can erode the real value of your savings. Consider strategies or funds that aim to outpace inflation over the long term.
4. Accessing your pension too early: Early withdrawals reduce your pot’s ability to grow. Evaluate whether you truly need the funds and the possible tax implications.

Practical steps to boost your pension before retirement
1. Carry forward: Check your unused allowances from the past three tax years. You can make a large lump-sum contribution in 2025/26 if you have enough earnings and space for tax relief.
2. Increase regular contributions: Small monthly increases can add up significantly over the remaining years to retirement.
3. Review monthly outgoings: Identify unnecessary spending and redirect these funds toward your pension.
4. Maximise employer matching: If your employer offers to match above the minimum, contribute enough to claim the maximum match.
5. Track old pension pots: Consolidating older pensions might reduce fees and simplify management.

 
Key takeaways
You can still improve your retirement prospects in your 50s. By taking note of the current annual allowance, carrying forward opportunities and workplace pension benefits, you can raise your contributions. Watch for changes to pension legislation, tax thresholds, and State Pension rules, and make sure you understand the impact of early withdrawals.

Combine your pension with other savings vehicles like ISAs to give yourself more flexible options. Seek regulated professional advice if you need personalised guidance, and review your plan regularly to ensure it remains on track.

With active steps, you can catch up on retirement savings and strengthen your finances before you reach State Pension age.

Speak to us today to ensure you’re making the most of your pension allowances and tax reliefs.

Most UK businesses are optimistic about the start of 2025, with economic confidence surveys showing plans for growth following a difficult period. However, retail and hiring concerns linger.

According to Lloyds Bank, 70% of businesses expect turnover to rise over the next year, up from 62% in December 2023. Additionally, 73% anticipate greater profitability. Seven in ten leaders in the financial services sector believe Government initiatives will boost growth and competitiveness in 2025.

The survey, which consulted over 160 senior executives, revealed that 68% are confident the chancellor’s plans to “regulate for growth” and introduce a competitiveness strategy in spring will attract foreign investment.

However, these positive findings contrast with other recent reports. The Confederation of British Industry’s (CBI) growth indicator survey warns of a sharp decline in business activity as companies brace for reduced hiring and output in early 2025.

Retailers are also facing challenges, with the British Retail Consortium reporting a six-point drop in consumer spending forecasts for the new year. The Bank of England recently suggested that UK growth likely stalled in the final quarter of 2024, as inflation rose to 2.6%, the highest level in eight months.

While signs of optimism are evident in some sectors, conflicting data highlights the uncertain outlook for the broader economy.

Talk to us about your business.

A guide for contractors and subcontractors.

The Construction Industry Scheme (CIS) is a vital part of the tax system for workers in construction. Whether you’re a contractor managing subcontractors or a subcontractor working on various projects, understanding how CIS works is key to ensuring compliance and managing cashflow effectively. In this guide, we’ll break down the essentials of CIS, covering who it applies to, how it operates, and the key responsibilities involved.

What is the Construction Industry Scheme?

The CIS is a tax deduction system designed to ensure subcontractors in the construction sector pay the correct amount of tax. Under the scheme, contractors deduct money from subcontractors’ payments and pass it to HMRC. These deductions are advance payments towards the subcontractor’s tax and National Insurance.

CIS applies to a broad range of construction work carried out in the UK, including site preparation, building work, repairs, decoration, and demolition. However, it doesn’t cover all work, so it is important to confirm whether specific activities fall under the scheme.

Who does CIS apply to?

CIS applies to two primary groups within the construction industry:

1. Contractors
   Contractors are businesses or individuals who pay subcontractors for construction work. This includes companies or individuals who spend more than £3 million annually on construction projects, even if construction isn’t their primary business.
2. Subcontractors
   Subcontractors are businesses or individuals that carry out construction work for a contractor. This group includes sole traders, partnerships, and limited companies.

If you fall into either category, you need to be aware of your responsibilities under CIS and how it impacts your tax obligations.

Key responsibilities for contractors

As a contractor under CIS, you have several obligations to ensure compliance with HMRC’s requirements:

• Registration: Register with HMRC as a contractor before engaging subcontractors. Failing to do so could result in penalties.
• Verification of subcontractors: Before paying a subcontractor, you must verify their status with HMRC. This determines whether to deduct tax at the standard rate (20%), a higher rate (30%) for unverified subcontractors, or make no deductions for those with gross payment status.
• Deductions: Deduct the appropriate amount from payments for subcontractors and submit these to HMRC.
• Record-keeping: Maintain detailed records of payments, deductions, and verification checks.
• Monthly returns: Submit a monthly CIS return to HMRC detailing all payments and deductions made to subcontractors. Ensure accuracy to avoid penalties.

Key responsibilities for subcontractors

Subcontractors also have duties under CIS to ensure their tax affairs are in order:

• Registration: Register with HMRC as a subcontractor to avoid higher-rate deductions. Registration can be done online or by phone.
• Gross payment status: If you meet the criteria, you can apply for gross payment status, allowing you to receive full payments without deductions. This is particularly beneficial for subcontractors with significant expenses.
• Record-keeping: Under CIS, keep track of all income and deductions. This helps with tax returns and ensures you don’t pay more tax than necessary.
• Filing tax returns and offsetting CIS deductions:
• If you’re self-employed, you’ll typically offset CIS deductions against your personal tax liability on your self assessment tax return.
• If you operate through a limited company, you can offset CIS deductions against your PAYE liabilities or corporation tax.

CIS rates and how deductions work

CIS deductions are calculated on the labour portion of a subcontractor’s invoice, excluding materials, VAT, and specific equipment hire. The current deduction rates are:

• 20% for verified subcontractors
• 30% for unverified subcontractors
• 0% for those with gross payment status

For example, if a verified subcontractor invoices £1,000 for labour and £200 for materials, the deduction applies only to the £1,000 labour charge. The contractor deducts £200 (20% of £1,000) and pays £800 to the subcontractor, passing the £200 deduction to HMRC.

Common pitfalls and how to avoid them

CIS compliance can be complex; even small errors can lead to penalties. Here are some common pitfalls and how to avoid them:

1. Incorrect registration: Ensure you’re correctly registered as a contractor or subcontractor. Late registration can result in fines.
2. Misclassification of workers: Accurately classify individuals as subcontractors or employees. Incorrect classification can result in additional tax liabilities and penalties.
3. Missed deadlines: Submit monthly returns and payments to HMRC on time. Late submissions can attract penalties starting at £100 and increasing with delays.
4. Inaccurate deductions: Verify subcontractors’ status with HMRC to ensure you apply the correct deduction rate. Over- or under-deducting can cause issues for both parties.

Benefits of gross payment status for subcontractors

Gross payment status allows subcontractors to receive their payments in full without CIS deductions. To qualify, subcontractors must meet specific criteria, including:

• Operating within the construction industry
• Maintaining a good compliance record with HMRC
• Meeting a turnover threshold (excluding materials)

While gross payment status offers cashflow advantages, it also requires disciplined tax management to ensure you can meet your liabilities at the end of the tax year.

CIS and VAT reverse charge

The introduction of the VAT reverse charge for building and construction services in 2021 added another layer of complexity to the industry. Under the reverse charge, subcontractors no longer charge VAT to contractors for certain services. Instead, contractors account for VAT on their behalf.

If you’re both a CIS contractor and subcontractor, you’ll need to manage this process alongside CIS deductions. Ensure your invoices clearly indicate when the reverse charge applies, and stay informed on the latest VAT rules.

CIS compliance tips

To make managing CIS smoother, consider these practical tips:

1. Use accounting software: Many accounting platforms offer features tailored to CIS compliance, simplifying record-keeping, deduction calculations, and monthly returns.
2. Stay organised: Keep detailed records of all transactions, including invoices, deduction statements, and HMRC correspondence.
3. Seek professional advice: If you’re unsure about any aspect of CIS, working with a knowledgeable accountant can save you time and avoid costly mistakes.
4. Regularly review your processes: CIS rules and thresholds can change, so staying up-to-date is essential.

Recent statistics and trends

According to HMRC data, CIS tax receipts for 2022/23 exceeded £6.3bn, reflecting the scheme’s importance in maintaining tax compliance within the construction industry. With over 1.2 million businesses registered under CIS, the scheme continues to play a crucial role in ensuring fair tax collection.

The industry has also seen increased adoption of digital tools for managing CIS. Accounting software with integrated CIS features is helping contractors and subcontractors improve accuracy and save time on compliance tasks.

The importance of CIS compliance for business growth

While CIS compliance may seem like an administrative burden, getting it right can significantly impact your business’s growth and reputation. For contractors, ensuring timely and accurate deductions builds trust with subcontractors, reinforcing professional relationships. Subcontractors who handle their CIS obligations efficiently are more likely to secure contracts with reputable contractors who value compliance.

Failing to comply, however, can damage your business’s reputation and lead to financial setbacks. HMRC penalties for non-compliance can range from late return fines to significant charges for underpaid deductions. For subcontractors, incorrect handling of CIS could lead to overpaid tax or refund delays, affecting cashflow and operational stability.

Preparing for CIS audits

HMRC has the right to carry out CIS compliance checks to ensure businesses are meeting their obligations. Preparing for these audits involves keeping organised and detailed records, including:

• Subcontractor verification details
• Copies of invoices and deduction statements
• Monthly CIS returns and payment confirmations

Regularly reviewing your records and processes can help identify potential issues before they escalate. Contractors should ensure all subcontractors are properly verified and that deductions are calculated correctly. On the other hand, subcontractors should cross-check payments and deductions against their own records to ensure accuracy.

Emerging trends and future changes in CIS

The construction industry is constantly evolving, and changes to tax rules or digital processes can directly impact CIS. For example, HMRC has been promoting the use of digital tools for tax compliance, and future updates to the Making Tax Digital (MTD) programme may further streamline CIS management.

Another potential development is increased scrutiny of employment status. HMRC’s focus on correctly classifying individuals as employees or subcontractors could lead to stricter enforcement measures. This makes it vital for contractors to regularly review their contracts and engagement processes.

How we can help

Understanding and managing CIS can be time-consuming and challenging, but it’s essential for contractors and subcontractors to get it right. If you’re looking for support with CIS registration, compliance, or tax planning, our team of experts is here to help. We provide tailored advice and services to keep your business running smoothly while ensuring you meet your tax obligations.

Get in touch to learn more.

Savings strategies for your child’s education.

Paying for higher education can be one of the largest financial commitments families face. By planning in advance, you can reduce the need for costly borrowing and help your child start adulthood on a strong financial footing.

This guide explains current tuition fees, student finance arrangements, and tax-efficient ways to save for university costs in the United Kingdom. The aim is to provide a resource that supports parents, guardians, and anyone involved in preparing a child for university.

Introduction

Higher education expenses include more than tuition fees. Daily living costs, learning materials, travel, and accommodation can add up quickly. The largest share of expenses usually consists of tuition fees, which remain capped at £9,250 per year for full-time undergraduate programmes in England. Wales, Scotland, and Northern Ireland have their own fee structures, although many of the general principles in this document will still apply across the UK.

While there have been calls to review the current tuition fee cap, it remains in place for the 2024/25 academic year for institutions that meet certain criteria in England. Many students pay for these costs with the help of student finance, but that might not cover all living expenses. It is, therefore, valuable to understand how you can set money aside in advance. This will support your child’s financial security when they begin their studies.

Overview of current university fees and costs

The current fee limit for most full-time undergraduate programmes in England is £9,250 a year. Some universities charge less for certain courses, but parents and guardians should still assume that the maximum fee will apply to popular programmes. In Wales, for the 2024/2025 academic year, tuition fees for undergraduate students were capped at £9,250 per year. For courses starting on or after 1 August 2025, the fee cap will increase to £9,535. In Northern Ireland, tuition fees for Northern Ireland residents are approximately £4,710 a year at local universities, while those from outside Northern Ireland (including the rest of the UK) may face fees of up to £9,250. There are no tuition fees in Scotland for eligible Scottish students studying their first degree at Scottish universities, but students from other parts of the UK pay up to £9,250.

Aside from tuition, living costs can vary depending on the location of the university and personal circumstances. Some estimates place average annual living costs for full-time students between £9,000 and £12,000, including accommodation, food, and transport. Students in large cities, such as London, may find that they need a higher budget to cover rent and daily necessities.

When you add tuition fees and living costs together, total annual expenses often range from around £18,000 to £21,000 for students in England. Over a typical three-year course, that can climb to more than £60,000, and this figure can rise further if a student needs four or five years to complete a programme, such as in certain science or medical degrees.

Student finance: Loans and maintenance support

The Student Loans Company (SLC) provides tuition fee and maintenance loans to eligible students. These loans cover tuition fees upfront and offer a means-tested living cost loan, with the exact amount depending on your household income, the university’s location, and whether your child lives at home or away.

For students beginning their course on or after August 2023, Plan 5 sets a repayment threshold (the income level above which repayments start). The threshold and interest rates may change each academic year, so it’s important to check official government or SLC sources for the latest figures. Repayments are taken at a rate of 9% of earnings over the threshold, and they begin from the April after the student finishes or leaves the course.

Even with these loans, parents and guardians often choose to save in advance. Doing so can reduce the amount your child needs to borrow and cover costs not included in maintenance loans, such as study materials or unforeseen expenses.

Tax allowances and benefits for families

In the 2024/25 tax year, the Personal Allowance remains at £12,570. Families who save for university should consider how tax allowances can shape their savings. Some families may consider transferring assets or income to the spouse or partner with a lower income to make full use of their Personal Allowance or to stay within a lower tax band. This can also help if you want to gift money directly to your child once they reach 18. However, parents must pay attention to relevant tax rules and any asset transfer implications.

If grandparents or other relatives want to contribute, they may consider their own gifting allowances. UK inheritance tax rules allow an annual gift allowance of £3,000 per individual, and this can be doubled if no gifts were made in the previous tax year. Additionally, gifts from normal expenditures out of income can be exempt from inheritance tax. Although these allowances do not directly refer to university fees, they can still help families plan for big life events such as education costs.

Saving strategies: accounts and investment vehicles

Different savings options can help you grow a fund for your child’s future education in a tax-efficient way. Below are some popular methods used by UK families.

Junior ISAs (JISAs)

A Junior ISA allows you to save or invest up to £9,000 per year for each child, with no tax on interest, dividends, or capital gains. Funds remain locked until the child turns 18, at which point they gain full access. Options include Cash JISAs (lower risk, modest returns) or Stocks & Shares JISAs (potentially higher returns, but with investment risk).

Child Trust Funds (CTFs)

CTFs were issued to children born between 1 September 2002 and 2 January 2011. Although new CTFs are no longer set up, existing ones remain tax-free. Depending on the terms, you can transfer a CTF to a Junior ISA or keep it.

Adult ISAs

Parents can use their own annual ISA allowance of £20,000 to build a savings pot and later contribute those funds to university costs. Gains and income remain tax-free. Unlike JISAs, you keep control until you choose to gift the money.

Regular savings accounts

Many banks offer child-focused savings accounts with competitive rates, at least initially. They can encourage regular saving and avoid stock market fluctuations. However, interest may be lower than inflation, and you should keep an eye on your Personal Savings Allowance (£1,000 for basic rate taxpayers and £500 for higher rate taxpayers).

Planning for living costs

Even if tuition fees are covered by a loan or early savings, living costs can create a challenge. Maintenance loans often do not stretch far enough in areas like London or major university towns with higher accommodation expenses. Some parents choose to buy property near the university for their child to live in and possibly rent spare rooms to other students. This arrangement might create an additional income stream, but it also involves property purchase costs and tax obligations, such as Stamp Duty Land Tax.

Another approach is to set aside a dedicated monthly sum in a separate account, building a living cost fund that your child can access term by term. You can top it up regularly and keep an eye on how the money is spent, ensuring your child learns practical money management skills. Some families also encourage children to find part-time work during term-time or the holidays. While part-time work can help finance living expenses, students must balance employment with study commitments.

Scholarships and bursaries

Many universities offer scholarships or bursaries based on academic achievement, financial need, or other criteria. Parents and students may overlook these opportunities, missing out on free or reduced-cost benefits.

The amounts vary and can be as modest as a few hundred pounds per year or as large as a full tuition fee waiver. It is worth checking individual university websites well before the application process. Professional bodies, charities, and some businesses also sponsor students in specific subject areas. Even if a scholarship only covers part of the living costs, it can ease the overall financial burden.

Practical steps to get started

1. Set a clear goal
   Estimate the likely cost of tuition and living expenses for the length of your child’s course. Decide whether you want to fund all, part, or none of these costs. Setting a specific target helps you gauge how much to save each month.
2. Review your budget
   Look at your current household income, outgoings, and cashflow. Determine how much you can spare each month or year to put into a savings or investment vehicle.
3. Use available tax allowances
   Consider Junior ISAs, your own ISA allowance, or pensions if relevant. Explore whether splitting assets or income with a partner makes sense, staying within the rules set by HMRC.
4. Compare account options
   Check interest rates, account fees, and features. If you are considering an investment option (such as Stocks & Shares JISA), read about the underlying funds or assets to see if they match your tolerance for risk.
5. Keep track of student finance changes
   Monitor announcements regarding tuition fee caps, maintenance loan amounts, and loan repayment thresholds. This helps you adjust your savings plan if required.
6. Investigate scholarships and bursaries
   Encourage your child to research these opportunities before they apply to universities. They should also check any awards offered by professional organisations or charities linked to their intended subject area.
7. Regularly revisit your plan
   Schedule an annual review of your savings progress, your child’s changing needs, and any shifts in government rules. Adapting your plan early on can prevent shortfalls later.

Closing thoughts

Planning for university costs takes time, but proactive steps can ease pressure on both parents and students. Tuition fees, living expenses, and other study-related costs can sum up to a significant financial commitment. By looking at your options for saving and investing, using tax allowances, and keeping track of official guidance, you will build a more secure foundation for your child’s educational journey.

If you need further assistance choosing the right mix of accounts, investments, and tax strategies, consider consulting a qualified financial adviser or accountant specialising in personal taxation. They will be able to examine your individual circumstances and provide tailored guidance while ensuring you remain compliant with the latest tax regulations. Planning in advance puts you one step closer to helping your child pursue their academic goals with confidence and financial stability.

Need further guidance? We’re here to help.

According to HMRC, nearly 92,800 people spent part of their Christmas break completing their tax returns.

With the self assessment deadline fast approaching, HMRC is urging those who have yet to file to avoid penalties by submitting on time.

On Christmas Eve, 23,731 returns were submitted, with 1,108 people filing between 11am and midday. On Christmas Day, 4,409 people filed their returns, including 368 between 3pm and 4pm, likely as many enjoyed their festive lunch.

Boxing Day remained busy, with 11,932 taxpayers opting to complete their forms and 1,108 filing between 4pm and 5pm. Over the three days from Christmas Eve to Boxing Day, 40,072 returns were filed.

The trend continued into New Year’s Eve when 38,000 people took the opportunity to submit their tax returns. Between 11pm and midnight, 310 last-minute filers rushed to beat the clock. On New Year’s Day, 24,800 individuals tackled their forms – possibly clearing their heads from the celebrations the night before.

In total, 52,800 returns were filed between 31 December and 1 January.

Last year, over 97% of tax returns were completed online by the 31 January self assessment deadline. With penalties in place for late submissions, HMRC encourages those yet to file to act now and avoid unnecessary charges.

Myrtle Lloyd, HMRC’s Director General for Customer Services said:

“We know completing your tax return isn’t the most exciting item on your New Year to-do list, but it’s important to file and pay on time to avoid penalties or being charged interest.

“The quickest and easiest way to complete your tax return and pay any tax owed is to use HMRC’s online services.”

Talk to us about your tax return.