Over the past decade, HMRC (Her Majesty’s Revenue and Customs) has frequently conducted surprise audits, and the number of tax investigations has significantly increased year by year to ensure businesses remain compliant with tax regulations. Many clients facing a tax investigation need to hire accountants and other professionals to defend their case, gather evidence, and organize their accounts. The entire process can be costly, often reaching thousands of pounds in fees. But what exactly does this process entail, and how could it affect you? Can HMRC audit accounts submitted for previous years? How many years back can HMRC audit? How should you respond? Can HMRC audit accounts submitted for previous years? Yes, HMRC has the authority to audit accounts from previous years. The specific audit period will depend on your unique situation, but an audit typically begins with the most recent tax return you have submitted. Once HMRC completes an initial review, one of the following scenarios may occur: Scenario 1: If no errors are found, the investigation will be closed immediately. Scenario 2: If HMRC identifies unintentional mistakes, they can re-examine previously closed tax returns going back up to four years. Scenario 3: In cases where errors are attributed to negligence, HMRC can audit records up to six years into the past. Scenario 4 : If deliberate tax evasion is discovered, HMRC may extend the audit period to as much as twenty years. How many years back can HMRC audit? At any point during an audit, HMRC has the right to extend the period under review if new information comes to light. For instance, if an initial audit covers four years but HMRC suspects negligence, they may decide to extend the audit to six years. In cases of suspected or proven tax evasion, the review can extend as far back as 20 years. In addition to your tax returns, HMRC might request access to other financial documents, such as land registry records or information on overseas bank accounts. These too can be audited for the same time periods (four, six, or 20 years), depending on the severity of the issue. How should you respond? The broader the scope of the investigation, the more concerned taxpayers tend to become. When large amounts of time have passed, it can be difficult to recall potential errors in past tax returns, or you may find that relevant documents have been lost. So, what steps should you take? Keep accurate records: Ensure that all documents, including statements and tax returns, are meticulously recorded and properly stored each year. Seek professional advice: If you are unsure about any aspect of your taxes, it is highly recommended that you consult a tax professional for guidance and support. A qualified expert can help clarify your situation and provide peace of mind during the audit process. Remaining organised and seeking advice early can help you navigate an audit with confidence and ensure that any issues are addressed promptly and correctly. Once you receive a tax audit notification, the individual or business involved must follow the instructions outlined in the letter to prepare. Since the process can be quite complex, taxpayers or businesses typically require assistance from professional accountants or tax experts to navigate through it smoothly. During the investigation phase, professionals are needed to help their clients collect and organize all the necessary documents, cross-check the accuracy of all financial data, and ensure they are fully prepared for the HMRC’s review. These steps are crucial to successfully manage the audit process. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

It is well known that taxes in the UK are not cheap. However, if you seek professional advice in advance to plan a reasonable tax bill, you still have the opportunity to reduce some of the costs. In recent years, His Majesty’s Revenue and Customs (HMRC) has ramped up tax investigations, targeting both businesses and individuals suspected of non-compliance with tax regulations. So, what’s been happening, and why has there been such a sharp increase in penalties? Let’s explore. 1. Investigations One of the key trends in recent times has been the heightened scrutiny of high-profit companies and small to medium-sized enterprises (SMEs). HMRC investigations into these groups have surged by 60%, making them the primary focus of enforcement efforts. Smaller businesses and individual taxpayers haven’t been spared either, with investigations in this category increasing by 22%. Even large corporations have faced increased attention, seeing a 17% rise in cases. During the 2021/22 fiscal year, HMRC significantly expanded its specialist tax investigation teams, adding over 3,000 new staff to the compliance and audit departments. This bolstered workforce enabled a more rigorous and widespread approach to identifying and penalising errors. A substantial number of businesses were fined for mistakes in their paperwork, with particular emphasis placed on Value-Added Tax (VAT) penalties, which have been extended in scope this year. Even businesses filing zero returns or requesting refunds can face penalties if they delay the submission of accurate VAT data. 2. A new record for penalties HMRC’s collection of penalties has reached its highest level on record, with a 25% increase leading to £851 million collected. This is part of a broader trend of rising fines over the past three years, contributing to an estimated £37 billion in unpaid tax debt. Despite these results, HMRC has faced criticism for being overly severe in issuing fines for what are sometimes genuine errors. The authority’s approach, often described as ‘shoot first, ask questions later’, has left many businesses and individuals feeling frustrated. The penalty process, once initiated, is stringent, although it’s worth noting that around 50% of fines are overturned on appeal. In defence of their actions, an HMRC spokesperson explained that the goal is to ensure taxpayers meet their obligations – ‘[we] are committed to helping customers pay the taxes they owe on time. We impose penalties to encourage compliance and to sanction those who fail to meet their obligations. If customers are unable to pay on time, they can contact us to discuss their options’ . For taxpayers – whether individuals or businesses – who owe less than £30,000, there is the possibility of arranging a payment plan, allowing them to pay off outstanding debt in manageable instalments. 3. Global tax auditing trends and digital compliance While HMRC intensifies its tax audits within the UK, over 80 other countries are embracing digital solutions such as electronic invoicing or continuous transaction controls (CTCs). These technologies enable tax authorities to monitor business transactions in real time, ensuring greater transparency and compliance in tax systems around the world. This global move towards digital tax compliance underscores the importance of businesses remaining vigilant and up to date with their tax obligations as the era of manual processes rapidly becomes a thing of the past. As HMRC continues its stringent enforcement measures, it is clear that the focus is on encouraging tax compliance and reducing tax debt, even if that means more aggressive measures and penalties for non-compliance. In recent years, His Majesty’s Revenue and Customs (HMRC) has ramped up tax investigations, targeting both businesses and individuals suspected of non-compliance with tax regulations. So, what’s been happening, and why has there been such a sharp increase in penalties? Let’s explore. 1. Investigations One of the key trends in recent times has been the heightened scrutiny of high-profit companies and small to medium-sized enterprises (SMEs). HMRC investigations into these groups have surged by 60%, making them the primary focus of enforcement efforts. Smaller businesses and individual taxpayers haven’t been spared either, with investigations in this category increasing by 22%. Even large corporations have faced increased attention, seeing a 17% rise in cases. During the 2021/22 fiscal year, HMRC significantly expanded its specialist tax investigation teams, adding over 3,000 new staff to the compliance and audit departments. This bolstered workforce enabled a more rigorous and widespread approach to identifying and penalising errors. A substantial number of businesses were fined for mistakes in their paperwork, with particular emphasis placed on Value-Added Tax (VAT) penalties, which have been extended in scope this year. Even businesses filing zero returns or requesting refunds can face penalties if they delay the submission of accurate VAT data. 2. A new record for penalties HMRC’s collection of penalties has reached its highest level on record, with a 25% increase leading to £851 million collected. This is part of a broader trend of rising fines over the past three years, contributing to an estimated £37 billion in unpaid tax debt. Despite these results, HMRC has faced criticism for being overly severe in issuing fines for what are sometimes genuine errors. The authority’s approach, often described as ‘shoot first, ask questions later’, has left many businesses and individuals feeling frustrated. The penalty process, once initiated, is stringent, although it’s worth noting that around 50% of fines are overturned on appeal. In defence of their actions, an HMRC spokesperson explained that the goal is to ensure taxpayers meet their obligations – ‘[we] are committed to helping customers pay the taxes they owe on time. We impose penalties to encourage compliance and to sanction those who fail to meet their obligations. If customers are unable to pay on time, they can contact us to discuss their options’ . For taxpayers – whether individuals or businesses – who owe less than £30,000, there is the possibility of arranging a payment plan, allowing them to pay off outstanding debt in manageable instalments. 3. Global tax auditing trends and digital compliance While HMRC intensifies its tax audits within the UK, over 80 other countries are embracing digital solutions such as electronic invoicing or continuous transaction controls (CTCs). These technologies enable tax authorities to monitor business transactions in real time, ensuring greater transparency and compliance in tax systems around the world. This global move towards digital tax compliance underscores the importance of businesses remaining vigilant and up to date with their tax obligations as the era of manual processes rapidly becomes a thing of the past. As HMRC continues its stringent enforcement measures, it is clear that the focus is on encouraging tax compliance and reducing tax debt, even if that means more aggressive measures and penalties for non-compliance. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Since coming to power, the UK Labour Party has consistently emphasised that the UK is facing a dire situation, attributing everything to the mess left by 14 years of Conservative rule. The world was then hit with explosive news: the UK is on the brink of bankruptcy! It is reported that the Prime Minister’s office acknowledged ‘Britain is bankrupt, broke, and broken’. The strain on the UK’s public finances is not news to anyone following current affairs. However, few expected that the finances could be so tight as to be ‘on the brink of bankruptcy’. After the statement was released, the Labour government boldly announced a staggering figure: a budget deficit of £22 billion. This news immediately sparked intense discussions worldwide about what has happened to the once-great British Empire. Many commentators online felt that the media was sensationalising the issue, pointing out that even a single company like Evergrande Group can be in debt to the tune of £220 billion. Can a £22 billion budget deficit really lead to the bankruptcy of the country? However, upon further reflection, it’s notable that since the end of the pandemic, ten local councils in the UK have declared bankruptcy. Even Birmingham, the UK’s second-largest city, and the industrial city of Nottingham have announced bankruptcy. People have begun to suspect that the funding shortfall in the UK might be even larger than reported. Is the UK indeed on the road to bankruptcy? How will the Labour government respond to this situation? 1.Why is there a £22 billion shortfall, leading the UK towards bankruptcy? On July 29, the UK’s new Chancellor of the Exchequer, Rachel Reeves, publicly stated that the Labour government immediately ordered an audit upon taking office. The financial audit report revealed a significant fiscal black hole. The new government inherited a fiscal shortfall of £22 billion from the previous Conservative government, placing the UK’s public finances in a precarious position. The audit report highlighted that the Conservative government made significant funding commitments during its 14 years in power to gain public support, without understanding where the funds would come from. These unfunded promises amount to billions and include the Rwanda plan, higher UK standards, and new hospital projects. It is estimated that this year alone, funding for the government’s asylum system exceeds £6.5 billion, including payments for resettled individuals and costs related to the now-abandoned Rwanda plan. Military assistance to Ukraine has exceeded reserves by £1.7 billion, and railway construction costs have exceeded £1.6 billion. Moreover, the previous government failed to increase departmental budgets to cover public sector salaries, which exceeded the amounts recorded in the last spending review by £11-12 billion. However, former Conservative Chancellor Jeremy Hunt dismissed these claims as fabrications.  Regardless of whether Rachel Reeves’ claims are fabricated, it cannot be denied that successive UK governments have been adept at passing the blame. Historically, each government tends to exaggerate the shortcomings it inherits, providing itself with a layer of protection. If they fail to deliver, they can blame the mess left by the previous administration. For instance, the Conservatives have never stopped quoting Labour’s former Chancellor Liam Byrne, who left a note for his successor in 2010. In the political arena, Reeves’ tactics of passing the blame can be understood by politicians. However, for ordinary people, what we want to know is: how will the Labour government tackle these challenges? Labour has spent most of its time during the election assuring that it would not raise taxes. However, with such a significant fiscal shortfall, it seems the government may have little choice but to justify tax increases. Many believe that while politicians play games, it is ultimately the ordinary citizens who suffer. 2.How will the government respond? With a fiscal shortfall in national public finances, the government cannot simply dissolve or cease operations; it must carefully consider how to cut unnecessary spending while increasing revenue through various means. On Monday, the Labour Chancellor officially announced the details of a spending cut plan. Overall, the government aims to cut £5.5 billion in spending this year and an additional £8 billion next year. She also confirmed that difficult decisions regarding tax increases would be included in this autumn’s budget, to be announced on October 30. Regarding the measures the Labour government plans to implement, here are several key points: Winter Fuel Subsidy The Chancellor stated that one way to cut spending is to stop providing winter fuel subsidies for retirees (except those receiving state benefits). This subsidy, worth £300, is applicable to all individuals above state pension age. The government confirmed that starting this winter, retirees will only receive this payment if they are on a pension, meaning ten million people will no longer receive it. This move will save the government approximately £1.5 billion. The proposal has been highly controversial, facing opposition from various sectors. Charities are concerned that this will affect 1.8 million low-income individuals. However, Reeves stated that considering the state of public finances, this decision is ‘fair’. Public Sector Salaries The Chancellor promised that the government would increase salaries for six million public sector workers by £9 billion. NHS workers and teachers will receive a 5.5% salary increase, while most other departments will see a 5% raise. Additionally, the government plans to address long-standing protests over low pay by increasing salaries by 22% for junior doctors over two years. Tax Increases The government confirmed that the budget on October 30 will include ‘difficult decisions’ regarding taxes, public spending, and welfare. This indicates that tax increases are on the table, exceeding what is outlined in Labour’s manifesto. Increasing capital gains tax and cutting pension tax relief are being considered. Cost Cutting Rachel Reeves stated that departments must bear one-third of the costs for public sector pay raises, which amounts to approximately £3.2 billion next year. Proposed measures include stopping ‘all unnecessary consulting expenditures’ which will save £550 million next year; achieving administrative efficiencies across government, saving £225 million, and addressing surplus public buildings. Additionally, the Treasury stated that ending the Rwanda plan will save another £1.4 billion. New Hospitals The Labour government will conduct a comprehensive review of the Conservative government’s new hospital plan, which promised to build 40 new hospitals in England by 2040. Rachel Reeves indicated that since the announcement of this plan in October 2020, only one new project has opened to patients, and only six projects have started construction, adding that the previous government failed to fulfil its commitments due to inadequate funding. Social Care Cap The Conservatives promised to implement a cap on social care costs by October 2025, limiting personal contributions to no more than £86,000. This timeline is now cancelled, and Labour plans to establish a Royal Commission to seek a cross-party solution. Rachel Reeves stated that the £1.1 billion needed for reforms over the next two years has not been secured. Transportation Additionally, the Conservatives’ promised £1 billion transport projects have yet to receive funding.  However, the Labour government has decided that several major road upgrade projects will not proceed, including the planned dual carriageway and tunnel on the A303 near Stonehenge and the A27 Arundel bypass. Moreover, plans to reopen closed rail lines under the Restore Rail program will be scrapped. Advanced British Standard Last year, former Prime Minister Rishi Sunak announced the Advanced British Standard, a qualification combining A-levels and T-levels, but Rachel Reeves stated that the previous government ‘did not set aside a penny for it’. Therefore, this plan will be cancelled, claiming it would save £200 million. National Westminster Bank Shares Rachel Reeves stated that the current government will also abandon a Conservative plan to sell the government’s 20% stake in NatWest through a ‘Tell Sid’ campaign. Reeves indicated that she still plans to sell these shares, but retail sales would waste taxpayer money and potentially lose hundreds of millions due to discounts. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

At the end of this month, the Labour government will announce its first autumn budget after taking office. Recently, the government has emphasised that they are facing a £22 billion spending gap and are preparing to make ‘tough decisions’.  In this context, is the UK about to raise taxes? This has become a focal point of public attention. As speculation grows, many media outlets seem to have insider information suggesting that the government may focus on adjusting capital gains tax, increasing pension taxes, and inheritance tax. How can we save as much as possible in this time? We believe you can take advantage of current tax rules before the next budget. Our top tips to get ahead of the Budget 1.Contribute to Pensions There are rumours that the new Chancellor of the Exchequer may adjust annual pension allowances and tax relief. Currently, taxpayers can benefit from pension tax relief. As a higher or additional rate taxpayer, you can gain more benefits—40% to 45% pension tax relief. For instance, a higher rate taxpayer contributing £60,000 would only need to spend £36,000, while an additional rate taxpayer would only need to spend £33,000. If you haven’t contributed much to your pension in recent years, you can carry forward unused allowances from the last three years, potentially allowing contributions to rise to £200,000 this tax year (provided your income reaches this amount). 2.Maximize Your ISA Allowance In addition to potential pension adjustments, it’s rumoured the government might increase capital gains tax. If so, you may want to maximise your ISA contributions before the budget is announced. Whether when selling and cashing out or rebalancing your portfolio, investing through an ISA allows you to avoid capital gains tax altogether. Reports indicate a 31% increase in the number of people utilizing the full £20,000 ISA allowance compared to last year. 3.Purchase a Junior ISA for Your Children Many have opened Junior ISAs for their children this tax year, with a 40% increase in account numbers, as parents want to ensure allowances are secured while protecting investments from tax. Junior ISAs provide triple tax benefits, allowing contributions of £9,000 per tax year, which can grow tax-free. This might not seem significant for younger children, but it can have a massive impact as they grow. For those worried about inheritance tax (IHT) increases, Junior ISAs can help pass on assets without significant tax liabilities. 4.Use Bed and ISA for Existing Investments If you hold assets outside of your ISA or pension, you can utilize the Bed & ISA process to sell those assets within your £3,000 CGT allowance and transfer them into an ISA. This method is smart for those whose portfolios exceed their ISA limits, as it allows for the immediate sale and repurchase of assets without worrying about dividend or capital gains taxes. 5.Utilise Your Capital Gains Tax Allowance Capital gains tax is charged on profits from selling assets (including property or investments), and everyone has a £3,000 allowance each tax year. You can choose when to realize gains, potentially taking advantage of this allowance within the current tax year. Spreading out gains over several years can lower your tax bill. To reset your capital gains tax, you can sell and repurchase within an ISA, exit the market for 30 days, or consider new investments. 6.Transfer Assets to Your Spouse If you are married or in a civil partnership, you can transfer ownership of some assets to your spouse or partner without incurring capital gains tax. This won’t reset the tax bill to zero, but they can utilise their own allowances to reduce tax liabilities. If they are on a lower income tax rate, they may pay a lower rate on capital gains tax. 7.Use Your Gift Allowance You can donate up to £3,000 each year, which will be deducted from your estate immediately. This not only provides an opportunity to save on inheritance tax but allows your family to benefit from your generosity while ensuring the funds are used wisely. A word from TB Accountants We want to remind you that the above tips are merely for reference and may not suit everyone. It’s crucial to avoid rushing into decisions; you should consider your personal circumstances carefully. Even if the UK government raises taxes, don’t let these policies pressure you into making decisions you wouldn’t normally make. Remember, the value of all investments can go up or down, and your returns may be less than your investment. If you’re seeking the best strategy for your situation or are uncertain which approach is right for you, you should consult a financial expert. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

In recent years, the UK government has introduced many housing policies to the public, aimed at encouraging young people to buy homes and helping first-time buyers get on the property ladder sooner. The UK offers four different types of property ownership – this can be different from other countries, so make sure you are aware of how the property market works here! This time, the key issues we’ll be covering are: What are the different types of property ownership? The explanation and the pros and cons of each type. Should you choose freehold or leasehold? We hope this analysis provides valuable guidance for your decision-making and addresses any questions you may have in the related fields. 1. Freehold Let’s start with Freehold. Simply put, if you buy a freehold property, you own the house and the land it’s on with no time limit. You are free to use, rent, or transfer it, and it can be passed down through generations. You don’t need to pay service charges or ground rent. However, freehold properties are usually more expensive, and in the UK, only houses are typically sold as freeholds, offering fewer choices. 2. Leasehold Leasehold means that you’ve bought the right to live in the property, but the land it sits on still belongs to the landowner. Essentially, you are still a tenant, and the freeholder is your landlord. However, don’t worry too much; the lease period is long, usually between 125 and 999 years for new apartments. 3. Share of freehold Share of freehold is a special type of leasehold. Some freeholders divide their houses into separate apartments to earn more from the land. In this case, the owners of different units share the freehold rights of the land with their neighbours within the same building. 4. Shared ownership Shared ownership is another type of leasehold, which is part of the UK government’s assistance scheme for first-time homebuyers. The buyer gradually purchases 100% ownership of the property. For example, you can initially buy 25%, and the remaining 75% belongs to a housing association. After moving in, you pay rent on the part you don’t own. Once you have the money, you can buy back the remaining share. This process is known as “staircasing.” For example, Ms. Zhang purchased a 50% share of a one-bedroom property in East London through this scheme and paid rent on the remaining 50% owned by the landlord. In the third year, after saving some money, she bought an additional 20% share from the landlord. The following year, she purchased the remaining 30% share. Eventually, Ms. Zhang achieved full ownership of the one-bedroom property. Some advice from TB Accountants In our opinion, the choice of ownership depends on your budget, needs, and investment expectations.  If you’re not sure about which option is best for you, we highly recommend that you consult with the relevant professionals before making your choice.  Before buying, you should also make sure to ask about potential issues. One more important note – when purchasing leasehold property, be mindful of leases that are 90 years or shorter. Leases below 80 years are often considered undesirable and can significantly affect the property’s value, so be prepared to pay to extend the lease.  The costs for this can vary depending on the lease and property. If you have any questions regarding property ownership or related taxes, feel free to consult us further. Our advisors will provide you with professional advice. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Recently, many people have asked us whether it’s more advantageous to take a salary or dividends as a company owner. When running a company in the UK, as a director of a limited company (LTD), even though you own the company, legally, you and the company are separate entities. This means that you need to decide how to pay yourself. There are two main options: taking a salary or dividends, which is a common dilemma for many business owners. 1. Taking a salary As a company director, you are also an employee of the company and can receive employee remuneration. If you pay yourself a director’s salary, it means you will have a fixed income throughout the year, enjoy employee benefits, and be eligible to participate in a workplace pension scheme. Additionally, when you need a loan, having a stable income will increase your chances of a successful application. However, the director’s salary is taxed at the source, with personal income tax deducted through the HMRC’s PAYE system. Remember the ‘60% tax trap’ we’ve discussed before? The higher your salary, the higher your tax rate. When your income exceeds £100,000, for every additional £2, your personal tax-free allowance is reduced by £1. This means you will pay more income tax, and both you and the company will need to pay National Insurance contributions (NICs), which increases your costs. You need to pay 8% employee in NICs on your director’s salary.  The company needs to pay 13.8% employer NICs on top of your director’s salary. 2. Taking dividends Unlike taking a salary, many directors prefer to take dividends, mainly for tax-saving purposes. The income tax rate on dividends is lower than the income tax rate on salaries, reducing the tax burden. Additionally, NICs do not need to be paid on dividends. 8.75% (Basic Rate) — Income between £13,070 and £50,270 33.75% (Higher Rate) — Income between £50,271 and £125,140 39.35% (Additional Rate) — Income over £125,140 However, dividends are a portion of the company’s profits. This means if the company is not profitable, you cannot take dividends. Furthermore, dividends can only be paid from the company’s profits, so you must first pay corporation tax. On the other hand, a director’s salary is a tax-deductible business expense, which helps reduce the company’s tax liability, but dividend income does not enjoy this benefit. 3. Choosing between the two According to the current tax law, taxpayers can have some tax-free allowances to reduce the dividend tax they would otherwise need to pay: the personal allowance and the separate dividend allowance. For the 2023/24 tax year, the tax-free personal allowance is £12,570. This allowance can only be used once in a tax year and applies to your total income, including any dividends. Therefore, if you received £10,000 in dividends and this was your only income for the year, you would not need to pay any tax. The dividend allowance refers to the amount of dividend income you can earn tax-free in a year. It is separate from the personal allowance, and you can use both allowances simultaneously. Therefore, dividend income below the allowance thresholds is not subject to tax. If a company decides to pay a salary to its directors, this amount will be considered a business expense and can be deducted from the company’s profits, thereby reducing the corporation tax owed. However, it is important to set an appropriate salary level to maximize the overall benefits of income tax and corporation tax. Next time, we’ll take a deeper dive into how you should decide which strategy to use, in order to maximise your earnings in the most tax-efficient way. For more personalised information, contact TB Accountants for a free one-to-one consultation. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Last time, we explored the advantages and disadvantages of receiving a salary versus dividends from your company. But now comes the crucial question: which option is ultimately more beneficial for your specific situation, and what factors should guide you in making that choice? Historically, the answer was more straightforward—dividends were generally the more cost-effective option compared to taking a salary. However, recent changes in tax regulations have added layers of complexity to this decision, meaning there is no longer a simple one-size-fits-all answer. 1. New Regulations One of the most significant changes has been the reduction of the dividend allowance threshold in the 2024/2025 tax year, now set at just £500. This reduced threshold significantly limits the tax-saving benefits that dividends once provided, especially for directors looking to maximise their tax efficiency. Additionally, if a company’s corporation tax rate exceeds 19%, the tax advantages associated with dividends can diminish, making it essential to weigh the pros and cons more carefully. 2. TB Accountants’ Approach Our rule of thumb suggests a balanced strategy, where directors receive a low, tax-efficient salary from the company, keeping within the basic income tax bracket to minimise exposure to higher tax rates and National Insurance contributions. The remaining profits can then be allocated as dividends. Importantly, your salary can also serve as a business expense, lowering the company’s taxable income and offering further tax efficiency. Combining these two elements—salary and dividends—usually provides the most cost-effective means of drawing income from the company. Of course, each individual’s and company’s circumstances will influence the optimal approach. Before making a decision, consider a thorough analysis that takes into account several factors: How much profit has your company generated? How much are you looking to minimise your personal tax bill? How much can you reduce your company’s tax obligations? Do you wish to retain eligibility for state benefits, such as maternity pay or state pension, which are tied to your salary 3. Seek Professional Advice It’s worth noting that this approach is a basic tax strategy, and individual circumstances will vary. Therefore, we highly recommend consulting a professional tax advisor who can assess your specific situation and provide personalised advice. A professional can ensure your tax strategy aligns with your long-term financial goals and complies with the latest regulations. If you need further assistance, TB Accountants is here to help. Our team of experts can work with you to plan a tailored tax strategy that best suits your unique circumstances, ensuring your business and personal finances are as tax-efficient as possible. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

On the 30th October, the Chancellor of the Exchequer Rachel Reeves announced Labour’s first Autumn Budget since taking office earlier this year. Reeves emphasised that Labour’s core goal is to revive the UK economy and boost investment. As anticipated, most of the budget is focused on tax increases, with many observers describing it as the largest tax hike budget in history.  According to government projections, the new measures in the Autumn Budget are expected to raise £40 billion. We’ve summarised the key points from the Autumn Budget so that you can see which policies could affect your finances. Increase in Statutory Minimum Wage Starting from April 2025, the statutory minimum wage for employees aged 21 and above will rise from £11.44 per hour to £12.21 per hour. The government estimates that 3 million low-income workers in the UK will benefit, raising their standard of living. For full-time employees meeting this threshold, the 6.7% increase equates to £1,400 per year. The minimum wage for young people aged 18 to 20 will also increase from £8.60 to £10.00 per hour, the largest-ever increase of £1.40, meaning that full-time young workers will earn £2,500 more next year. Additionally, eligibility for full-time carer allowances will expand, raising the maximum income threshold from £151 to £195 per week. Changes to Income Tax and National Insurance Employees and consumers alike can expect a favourable outcome, as the Chancellor stated the government will not raise income tax, employee national insurance, or VAT rates. However, from April next year, employer national insurance contributions will increase to 15%, and the threshold for employer national insurance contributions will be lowered. Employers will start paying national insurance for each employee from an annual income threshold of £5,000, down from £9,100. The Employment Allowance will however increase from £5,000 to £10,500, which means 865,000 eligible employers will no longer pay national insurance. Additionally, the freeze on income tax and national insurance thresholds will end in 2028, which will eventually prevent people from being pushed into higher tax brackets as wages rise. From the 2028/29 tax year, income tax thresholds will be adjusted based on inflation. State Pension Increase The government previously promised to maintain the triple-lock policy. Rachel Reeves confirmed that the national pension will increase by 4.1% in April 2025 as per the triple-lock guarantee.  The full new State Pension will therefore rise to £230.30 per week (£11,975 annually), while the full basic State Pension will increase to £176.45 per week (£9,175 annually). Second Home Stamp Duty Increase Landlords and those planning to purchase second homes may be disappointed by the Chancellor’s announcement. Reeves confirmed that the government will raise the stamp duty surcharge for purchasing a second property from 3% to 5%, effective from the 31st October 2024. This measure aims to support first-time and primary homebuyers. Capital Gains Tax Increase The budget mentions that the lower rate of capital gains tax will rise from 10% to 18%, while the higher rate will increase from 20% to 24%. For residential property, capital gains tax rates will remain at 18% and 24%. Reeves confirmed the continuation of the private residence relief policy, which exempts primary residences from capital gains tax. Inheritance Tax Reform The previous Conservative government froze the inheritance tax threshold until 2028. The Labour government announced it would extend this freeze by another two years, until 2030. This means that estates up to £325,000 can be inherited tax-free, while estates with a residence passed to direct descendants can benefit from a £500,000 exemption, increasing to £1 million if transferred to a surviving spouse or partner. From April 2027, inherited pensions will be subject to inheritance tax for the first time. The government will also reform agricultural and business property relief: the first £1 million in assets will remain exempt, but assets exceeding this will receive a 50% relief, meaning a 20% effective tax rate. Alternative investment markets and similar stocks will also see a 50% inheritance tax relief at an effective tax rate of 20%. Overall, these changes are expected to raise over £2 billion by the end of the forecast period. Business Measures The retail, hospitality, and leisure sectors will be eligible for a 40% reduction in business rates, with a cap of £110,000 per business. The lifetime limit for entrepreneurs’ relief on business asset disposal remains at £1 million to encourage investment in businesses. The disposal relief rate will remain at 10% this year, rising to 14% in April 2025 and 18% by 2026-27. Overall, these changes are expected to raise £2.5 billion. From 2026-27, the Treasury plans to introduce two permanently lower tax rates for retail, hospitality, and leisure properties. Notably, from April 2025, the UK government will formally move ahead with plans to abolish the non-domicile tax regime, which allowed UK residents with foreign domiciles to avoid UK tax on overseas earnings.  The Chancellor announced a new, residency-based scheme for temporary UK residents to make the UK more competitive internationally, though specific details were not provided. According to the Office for Budget Responsibility, these measures are expected to raise £12.7 billion over the next five years. Other Key Changes VAT on Private Schools From the 1st January 2025, VAT will apply to all education, training, and boarding services provided by private schools. The funds raised will support greater investment in public education, raising standards and creating more opportunities for all. Fuel Tax Freeze With high living costs and global uncertainties potentially causing fuel price fluctuations, the government has decided to freeze fuel tax from next year and extend the 5p per litre reduction for another year. This means the average driver will save £59 in the 2025/26 tax year, and fuel station charges will remain stable next year. Tobacco and Alcohol Tax From the 1st October 2026, the UK government will impose a uniform tax rate on e-cigarettes, and tobacco taxes will increase. Taxes on non-cask alcoholic beverages will rise with the retail price index, while taxes on cask beverages will decrease by 1.7%. Airline and Private Jet Taxes Air Passenger Duty for short-haul economy flights will increase by up to £2, and an additional 50% will be applied to private jet taxes, with a maximum of £450 per passenger per flight. Bus Fare Cap The single-trip bus fare cap on several routes in England will rise from £2 to £3. Carer Allowance Currently, carers claiming benefits can earn up to £151 per week before facing deductions. This threshold will increase to £195 per week (or £10,000 annually), allowing carers to earn £45 more per week without losing any benefits. Housing and Infrastructure  The budget introduced new policies related to housing and infrastructure investment. For the new tax year, the government will provide £1 billion to speed up the removal of dangerous cladding on residential buildings. Local governments will retain revenue from social housing sales to reinvest in both existing stock as well as new supply. The Chancellor announced the opening of the TransPennine route connecting York, Leeds, Huddersfield, and Manchester, promising fully electric local and regional services between Manchester and Stalybridge by the end of the year. The East-West Rail route will also be launched to foster growth between Oxford, Milton Keynes, and Cambridge. Funds have also been allocated towards HS2 to commence tunnelling from Old Oak Common to Euston in London.  Without the tunnelling extension, passengers using HS2 would have needed to switch trains at the previously designated Old Oak Common terminus for onward travel to central London. For road maintenance, an additional £500 million has been allocated next year to meet the commitment of filling 1 million potholes annually. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

In our previous reports, we shared that over 500,000 UK taxpayers have fallen into the 60% tax trap, an increase of nearly a quarter from last year due to the impact of frozen thresholds. As inflation continues to push up wages, the number of people caught in the high-income tax trap has surged significantly over the past year. Bowmore Financial Planning has warned that the new government should take urgent action to address this inequality, as it could deter people from striving to increase their income above £100,000 per year.  Bowmore’s CEO Mark Incledon stated, ‘As the rising cost of living erodes the real value of wage growth, the new government must address the problem’. This will only undermine people’s motivation to work harder, increase productivity, and ultimately drive economic growth.” — now let’s explore some strategies you might consider to help avoid it! 1. Utilising Personal Pensions When HM Revenue and Customs (HMRC) calculates your taxable income, only your adjusted net income is considered. This means that personal pension contributions have a direct impact on the final taxable amount, which could, in turn, help reduce your overall net income. For example, consider Mr Z, who has an annual income of £125,000. He decides to contribute £20,000 to his personal pension scheme. Under current regulations, personal pension contributions are eligible for 20% basic rate income tax relief, and higher-rate taxpayers can benefit from an additional 20%. Consequently, Mr Z can ultimately gain 40% tax relief, effectively increasing his pension contribution to £30,000. As a result, his adjusted net income reduces to £95,000, allowing him to retain his personal allowance while simultaneously enhancing his pension pot. At the same time, based on the performance of your pension fund, you may benefit from potentially higher returns, and in the long term, your interest can earn additional interest. 2. Non-Cash Bonuses For those employed in industries such as investment banking or sales consulting, requesting non-cash bonuses from your employer can be an effective approach. These bonuses could include benefits such as private medical insurance, a company car, or childcare provisions. By opting for these non-cash perks, you can potentially reduce your basic taxable income to below £100,000 while still enjoying additional ‘perks’ provided by your employer. Alternatively, you could donate to charity to cut your income to under £100,000 and get tax relief. 3. Tax-Free Savings When developing a financial plan, you must avoid being too hasty. While the interest rate on deposit accounts is certainly important—the higher the rate, the more you could potentially earn—we recommend also taking your situation into account. This will determine whether you have a tax-free allowance. If a portion of your annual income is derived from savings interest, opening an Individual Savings Account (ISA) could be a prudent choice. Individuals currently have an annual ISA allowance of £20,000 per financial year, and the income earned within an ISA account is completely tax-free. By taking advantage of this allowance, you can maximise your  savings and reduce the impact of taxable income from interest. After doing this, you could then consider opening other types of deposit accounts. 4.Investing in Start-Ups Another valuable strategy involves exploring the UK government’s Seed Enterprise Investment Scheme (SEIS). This scheme encourages investments in qualifying start-up companies and offers up to 50% income tax relief to investors. The plan requires that businesses must have been established for less than two years and have fewer than 25 employees. For instance, if you invest £10,000 in a qualifying start-up, your income tax bill could be reduced by £5,000. While this can be an attractive measure, it is essential to consider the risks involved in start-up investments and assess whether it aligns with your financial goals and risk tolerance. While these strategies offer promising  opportunities, the UK system is complex, and various aspects must be carefully managed. Therefore, we highly recommend consulting an advisor for tailored advice and meticulous planning to navigate these options effectively. If you have further questions or would like more information, please feel free to reach out to us for additional guidance! For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

The UK property market has always been attractive to investors, including not just new residents in the UK but also many overseas landlords who live elsewhere but still want to invest in UK rental properties. But are you aware that overseas landlords are subject to the Non-Resident Landlord Scheme (NRLS)? In most cases, the UK does not tax non-residents. However, if non-residents earn income from the UK, they are required to pay taxes on it. To address this, the government introduced the Non-Resident Landlord Scheme (NRLS) in 1996. This scheme allows HMRC to collect taxes in advance from landlords living outside the UK. The scheme applies not only to landlords themselves, but also to those managing properties in the UK on behalf of overseas friends or family members. 1.How does the NRLS work? The Non-Resident Landlord Scheme (NRLS) applies to ‘non-resident landlords’ (also referred to as overseas landlords) and places responsibilities on both the tenant and letting agents. The tax year for NRLS runs from April 1 to March 31. If you live abroad but earn income from renting property in the UK, this income is typically subject to UK tax, just like any other income sourced from the UK. However, as it is difficult for HMRC to track individuals living overseas, the NRLS is designed to deduct taxes in advance. 2.Who qualifies as a ‘non-resident landlord’? Under the NRLS, if you spend six months or more per year outside the UK but own rental property in the UK, you are considered a ‘non-resident landlord’. This is different from the broader tax definition of a ‘non-resident’. In practice, HMRC considers people who have left the UK for six months or more as having a habitual residence outside the UK. Even if you are a UK citizen, you are still classified as a non-resident landlord if you do not meet the residency conditions. Furthermore, the NRLS applies not only to individuals but also to companies and trustees that own rental properties in the UK but are based abroad. If you qualify as a non-resident landlord, you must register with the NRLS to manage your tax obligations. Here are the steps: Fill out the NRL form: Individuals use form NRL1, companies use NRL2, and trustees use NRL3. Provide documents: Submit evidence of living abroad, such as utility bills, rental agreements, or bank information. Submit to HMRC: Send the completed forms and documents for approval. 3.Letting agents and tenants’ responsibilities If you do not manage your UK property yourself, you may hire a letting agent or ask friends or family to help, who will then act as your letting agent. Alternatively, you may manage the property directly from abroad by liaising with tenants. In these cases, your letting agent or tenant has a legal responsibility under the NRLS. They must send quarterly reports to HMRC and handle the paperwork. Additionally, they are responsible for deducting the required tax from your rental income before forwarding it to HMRC. 4.How is tax deducted? UK tax law mandates that 20% (the basic rate of income tax) be deducted from rental income paid to a non-resident landlord before the landlord receives it. For example, if a letting agent is managing a property and needs to pay the landlord £1,000 in rent, they must deduct £200 (20%) in tax, pay £800 to the landlord, and send £200 to HMRC. The purpose of this rule is to prevent rental income from flowing overseas and eroding the UK tax base. However, non-resident landlords can request to receive the full rental income without tax being deducted in advance by applying for ‘full rent receipts’ from HMRC. If granted, the landlord can manage their tax obligations themselves, but they must ensure they pay taxes on time. 5.What if you don’t apply for full rent receipts? If non-resident landlords do not apply for or receive approval for full rent receipts, 20% tax will automatically be deducted from their UK rental income. Any pre-deducted tax must be paid to HMRC within 30 days after each calendar quarter ends. Letting agents or tenants are responsible for making these deductions, submitting payments, and filing quarterly and annual tax returns. Tenants must also deduct tax if there is no letting agent involved and the weekly rent exceeds £100. 6.What if there are multiple landlords? If multiple landlords co-own a property, each landlord must individually register for the NRLS and submit their self-assessment tax returns. Tax deductions under the NRLS will be calculated and paid based on each landlord’s ownership share in the rental income. Some advice from TB Accountants It’s important to note that even if a non-resident landlord applies for full rent receipts, this does not reduce their tax obligations. Overseas landlords must review their tax situation in their country of residence and pay any owed taxes on time. Additionally, if letting agents or tenants are responsible for managing the property, you must ensure that they fully understand the NRLS rules. Non-compliance can have serious consequences. At TB Accountants, we offer a range of services to help non-resident landlords register for and comply with the NRLS. We’ve assisted many overseas landlords with tax returns, dual tax treaties, and personal allowances. If you need help, feel free to contact us for professional advice. For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

If you plan to invest in property in the UK for rental business or want to temporarily rent out a vacant property, whether you are a professional landlord or just a side hustler, you have an obligation to declare your rental income for tax purposes. You must report this income each tax year and pay income tax and National Insurance. HMRC is strict, and there are many documents landlords need to prepare and fill out when reporting taxes. If it’s your first time filing a tax return, you might feel overwhelmed – the more properties you rent out, the more complex the process becomes. Today, we aim to clarify things and guide you step-by-step on how to report and pay taxes on rental income. When do I need to file a tax return? Landlords are subject to taxes including stamp duty, capital gains tax, and income tax on rental income. Stamp duty and capital gains tax usually apply when landlords buy and sell properties; here, we focus mainly on income tax from rental income. If you are a landlord with rental income below £1,000, you don’t need to report or pay any tax. However, if your rental income is between £1,000 and £2,500, you must proactively contact HMRC to inform them of your income. Remember, if your rental income exceeds £2,500 in a tax year, you must report it. According to tax law, you need to register and fill out a “self-assessment tax return” to report to HMRC. If you fail to do this before the annual deadline, you may face penalties ranging from £100 to fines based on 100% of your taxable rental income. Our step-by-step guide for tax returns 1.Register with HMRC The deadline for submitting the self-assessment tax return online is January 31 of the following tax year. However, if you haven’t registered for self-assessment before, you must do so by October 5 of the tax year in which you first receive rental income. Go to the government’s self-assessment tax return website to register. After registering, you will receive a government gateway user ID and password. Use these to set up your personal tax account, allowing you to manage all your taxes online. You will then receive a Unique Taxpayer Reference (UTR) number, which is your code for submitting tax returns and making payments. You can then submit your self-assessment online before the January 31 deadline. Late submissions will incur penalties. If you prefer, you can still submit the return on paper and mail it to HMRC, but ensure you complete this before October 31. 2.Prepare Your Documents Even if you can submit everything online, you need to compile the relevant documents first, including rental dates, expenses incurred, and accounts of rental income received. Keeping all documents related to your rental income and expenses can simplify tax reporting; you can also file them in case tax officials have any questions about your return. Here’s a summary of the information landlords need to retain: Contracts/Lease agreements Receipts Rent books Invoices Bank statements Mileage logs and vehicle costs (if applicable) Documents related to property purchases Days the property was rented out Amounts spent Total rental income received 3.Organise and calculate rental income You need to pay tax on your rental income, which refers to the net profit. Therefore, calculate your rental income for the tax year and then determine the allowable deductions—HMRC allows landlords to deduct business expenses incurred for renting out property when calculating profits. Allowable expenses include: Property repairs and maintenance (not including renovations) Utilities, council tax, gas, and electricity Replacement of household items (if the property includes items like wardrobes or beds) Accounting and agency fees (you can reduce these by not hiring agents) Landlord insurance Operating costs Service fees, including cleaning Direct costs, including phone bills, stationery, advertising for tenants Vehicle operating costs You might know that mortgage interest is no longer a deductible expense. However, you can claim a 20% tax credit on mortgage interest payments. If you have questions about allowable business expenses, feel free to consult us. 4.Fill out your tax return Log in to your personal tax account using your government gateway ID. Next, using your UTR, you can select the option to submit your self-assessment. It assumes you will report rental income along with other income, dividends, interest, etc. If these do not apply to you, you don’t have to fill them out. Just declare which sections you need to complete, and the form will adjust accordingly. You need to submit your rental income from properties in the UK in the property section. One section of the form will ask about the deductions you want to claim (which we advised you to prepare in advance) to apply for tax relief. After filling out all online sections of the form, you can return to modify data, save for later use, or submit. 5.Pay your taxes! Now comes the crucial part—payment. The tax portal will calculate your tax bill, and you must pay by the January 31 deadline. If you applied online, you can view your calculations to see how much you need to pay. Payments can be made via online banking or telephone banking, debit cards, or company credit cards (if applicable), but not with personal credit cards or bank or building society payments. Other options include BACS, checks, or direct debit, but allow extra time for processing. If you plan ahead and set aside part of your monthly income for tax, life will be much easier. If for any reason you don’t have the cash to pay your taxes, you can arrange a payment plan with HMRC over the next 12 months. If you have questions about this process, please consult your accountant. Some advice from TB Accountants Many landlords in the UK rent out one or more properties in their personal names to earn extra income. Therefore, most landlords need to fill out self-assessment tax returns to report to HMRC rather than filing corporate tax returns. There are various issues that may arise when submitting self-assessment tax returns, so you must remain vigilant. Here are a few points to note: If you rent out multiple properties, you need to combine your total profits/losses before calculating your tax obligations Profits/losses from overseas properties must be reported separately from UK properties, as these need to be reported individually If you are a foreign national, you must fulfil your tax obligations through the Non-Resident Landlord Scheme If you cannot pay your taxes on time, contact HMRC immediately to discuss the support they can provide to avoid penalties For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Recently, the High Pay Centre in the UK released a corporate pay report, and the figures are jaw-dropping! According to the report, the average salary for CEOs of FTSE 100 companies last year reached a record high of £4.2 million.  To put this into perspective, this means the income of a FTSE 100 CEO is 120 times higher than that of the average worker. 1.How much are CEOs paid? In 2022, the average salary for FTSE 100 CEOs was £4.1 million, meaning there was an increase of £100,000 in just one year. The High Pay Centre noted that this growth was mainly driven by particularly generous pay agreements at a small number of publicly listed companies. Reportedly, eight companies last year offered salaries exceeding £10 million, while only four companies did so in 2022. The report also highlighted the gender disparity in CEO salaries within FTSE 100 companies. Female CEOs earned significantly less, with an average salary of £2.69 million, compared to £4.19 million for male CEOs. This gap is primarily due to the smaller number of female CEOs – in the 2022-2023 financial year, only six companies had female CEOs. At the top of the pay list is Pascal Soriot, CEO of AstraZeneca, who is 65 years old. Can you guess how much he earned? Last year, Soriot’s salary was £16.85 million. In second place is Erik Engstrom, CEO of analytics company Relx, aged 61, with a salary of £13.64 million. Reportedly, companies such as Rolls-Royce, BAE Systems, GSK, HSBC, Pearson, and Diageo also paid their CEOs eight-figure salaries last year. For these executives, there could be even more good news – the UK government has made no commitments to limit executive compensation packages or introduce a ‘wealth tax’ on the super-rich, meaning most of their money stays in their pockets! You might be wondering, why are UK executives paid so much? The FTSE 100 index refers to the 100 companies listed on the London Stock Exchange, mostly UK companies but also including firms from other European countries. In comparison to American executives, the pay of these CEOs is actually quite modest! In 2020, the average salary for UK executives was only one-fifth of that for US executives. For instance, Sundar Pichai, CEO of Google’s parent company Alphabet, earned $226 million (£177 million) last year, and Nikesh Arora, CEO of Palo Alto Networks, earned $151 million. Astonishing, right? 2.How are executive and employee salaries determined? Salaries are usually determined by balancing various factors. For company executives, their pay structure can be quite complex, with base salary being just one part of the package. Executives also receive significant bonuses, often a mix of cash and stock options, which include annual bonuses based on internal targets and long-term incentives tied to performance over time. Executives also receive pensions (or cash equivalents in lieu of pensions) and other perks such as company cars, drivers, health insurance, and life insurance. If a new executive has to forfeit substantial stock or bonuses from a previous job, they may negotiate additional compensation, on top of other incentives. All these pay details are set by the company’s remuneration committee, made up of board members, and the committee typically hires compensation consultants to devise pay formulas. The details are published in the company’s annual report, and executive pay packages are subject to shareholder votes every three years. Shareholders can also vote annually to express their dissatisfaction with the current pay package, though these votes are advisory, meaning the company isn’t obligated to make changes. If you’re planning to start a company in the UK, you need to think not only about how much to pay your executives but also about employee salaries. Offering high pay can attract and retain talent, showing you value your employees and boosting their self-worth. However, as a business owner, you don’t want to overspend on salaries. So, what’s the right number? You’ll need to weigh factors such as: What future employees want The market value of employees Their value to your business What you can afford 3.Tips for employers Be clear about the role Understand your business structure and know what type of employee you need and for which position. Make sure the job title accurately reflects the role and responsibilities and define the percentage of time spent on each task. Research the Market and Gather Salary Data Look into what other companies are paying for similar roles. Keep in mind that salary data can change quickly, particularly for in-demand skills, so stay updated. Talk to local employers While online research is a good start, it’s also useful to talk to other business owners and recruitment firms to get a sense of appropriate salary ranges. Follow local laws Be aware of legal requirements regarding wages, including minimum wage, pay dates, frequency, and record-keeping obligations. Understand candidate expectations When interviewing candidates, don’t forget that they may have their own salary expectations. You can ask about their current pay structure and additional benefits. Calculate what you can afford After gathering market data, it’s time to assess your business budget. Consider how much a new employee can generate in revenue within the first year and how their salary fits into your company’s structure. Lastly, don’t forget to consider taxes! For instance, if you’re paying yourself as a company director, research whether it’s more tax-efficient to receive a salary or dividends.  If you’re paying employees, remember to apply for business expenses to lower your company’s tax bill. For any tax-related questions, feel free to contact TB Accountants for expert advice! For individuals and businesses looking for UK taxation services, use our contact form  to get in touch for more information. Get in touch with us at info@tbgroupuk.com  or for a free one-to-one consultation.  This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .