UK businesses: How to prepare for the tax year end in 2024

The UK tax year, or the fiscal year, is significant because it dictates when individuals and businesses must assess their tax responsibilities and submit tax returns. It also impacts when you should pay taxes and who qualifies for specific tax benefits and deductions. It's crucial for anyone operating in the UK to grasp the difference between their financial year and the fiscal year to meet obligations and prevent penalties.

What's the difference between the end of a company's financial year and the end of the UK tax year?

A company's year-end marks the end of its financial reporting period, during which it prepares financial statements like the profit and loss account and balance sheet. The company chooses this date, which doesn't have to align with the UK tax year-end (which falls between April 6th and April 5th of the following year).

During the company year-end, internal accountants and auditors scrutinise statements to assess the business's financial standing and performance over the year. Conversely, HM Revenue & Customs (HMRC) evaluates individuals' tax liabilities at the tax year-end, ensuring correct tax collection. HMRC also issues Personal Tax Summaries to most employees to verify accurate tax deductions. Additionally, employers file P11D forms annually to report specific taxable benefits provided to directors and employees that weren't subject to PAYE and NIC deductions throughout the year.

In a nutshell, a company year-end deals with financial statements, while the tax year-end involves tax calculations and payments.

How does the end of the tax year impact UK businesses?

As the tax year winds down in the UK, it's a critical time for businesses, and here's why:

1. Employee benefits: Businesses typically use "perks" like pensions and company cars as part of their offering. When the tax year ends, they must ensure everything's up-to-date and recorded with these benefits. You and your finance team colleagues must double-check that they follow the tax rules and report any perks correctly.
2. Budget planning: This essentially involves a business checking its financial compass. UK companies typically take a moment to reflect on how they've done financially over the past tax year. They use this info to plan out where they want to go next. It's all about setting goals for making money, managing expenses wisely, and deciding where to invest for growth.

In conclusion, "the end of the tax year can significantly impact UK businesses, from tax filings and payments to budget planning and capital allowances." Businesses must adhere to all deadlines and requirements to keep things accurate with HMRC and prevent any possible penalties.

What do businesses need to know in 2024?

There are a couple of new things to be aware of as per the new UK Spring Budget, which was announced on March 6th.

Huge thanks to Maggie Stancheva from Tech Accounting Firm VEDA for her support with this section and for helping us pick apart the details that could affect your business.

For businesses, important changes include:

• A rise in the minimum wage
• An increase in the VAT threshold
• Adjustments to National Insurance Contributions (NIC)

Employees should also note changes to the high-income child benefit charge threshold.

The minimum wage is changing for the next tax year: What should your business do to prepare?

• Review your current payroll practices to understand how the minimum wage increase will affect your employees' wages and identify which employees will be impacted by the change
• Assess the impact of the minimum wage increase on your operating costs and overall profitability
• Adjust your budgets and forecasts accordingly
• Evaluate pricing strategies and consider whether you need to adjust your own prices to offset the higher labour costs
• Look for opportunities to improve operational efficiencies and reduce labour costs without compromising on quality or customer service
• Communicate with your employees about the minimum wage increase and how it will impact their wages. Be mindful of requests for salary increases from other employees (not on minimum wage) as well and address any concerns your employees might have

What is your business's responsibility when it comes to contractors who need to fill in self-assessments?

• Your organisation (receiving the worker's services) must determine whether the IR35 rules (introduced in April 2021) apply. The IR35 Reforms affect medium and large private sector businesses that engage workers operating through an intermediary (a personal service company, PCS). The rules are designed to ensure that where the individual works like an employee but provides services through their PCS, they broadly pay the same tax and NIC as they would if they were a direct employee
• You should determine employment status and, if necessary, support contractors with self-assessment by providing all the required information and documentation to fulfil their tax obligations (this may include details of income earned, expenses incurred, and any relevant statements)

Unlocking employee benefits with Payhawk's spend management solution

At Payhawk, we help businesses cover a tonne of important spend management needs like accounts payable, corporate cards, multi-entity management, international payments, expense management software, and more. While we leave payroll to other solutions, we can support employee benefits when it comes to tracking and reporting on spend.

Here’s how: If your team enjoys perks like gym memberships or medical insurance provided by the company, you could choose to pay for and record the expenses with Payhawk. Our solution and custom categorisation features can help you keep tabs on all these extra benefits and ensure everything is accounted for accurately.

Using custom fields in Payhawk

Picture the scene: Your Sales Manager, Sarah, uses her corporate card for her work commute, turning it into a benefit in kind.

Here's how it works: Sarah simply uses her card to pay for her train ride, snaps a photo of the receipt, and uploads it to the Payhawk expense management app. From there, she picks a category from a list set up by the finance team and adds any necessary details. This real-time data allows Sarah's colleagues in finance to track her spending and see which category it falls into.

Our solution makes it easy to track and report on expenses like these. You can customise expense categories and fields within the app and platform, just like Sarah did, allowing you to manage expenses efficiently.

Setting categories in Payhawk

You can easily set up an expense category called ''benefit in kind'' within the Payhawk platform. Then, by integrating this category code into your accounting system or ERP, you can effortlessly track all related expenses.

Take MDM Props, for example, a UK art fabrication company that loves how Payhawk helps them categorise expenses. It's transformed their understanding of project spending, allowing them to refine their strategy and budget management.
Finance Manager Uchenna states:

Each cardholder codes up the job themselves to see where their costs are going. This is important because it keeps all the information in one place and pulls all the project budget spend info together to see what we can improve. Also, we now have the time to proactively do project analysis because we're no longer chasing receipts!

Using custom fields in Payhawk

Alternatively, you can set up custom fields in the app specifically for different types of 'benefit in kind', like staff welfare or travel. These fields would only be visible to you and your finance team colleagues, so it won't affect how cardholders use the app. You can track these expenses without disrupting the user experience, just like with other categories.

Managing VAT reclaims with Payhawk

At Payhawk, we're here to support you with VAT reclaims (especially important around tax year-end, whether you pay VAT monthly or quarterly). Our smart OCR technology makes receipt capture easy, our categorisation features help organise your spending data for reclaim purposes, and our integration with 60dias supports you in making claims even for backdated spend.

Take ATU, for example, a German automotive customer who saved over 2 million euros in a year by efficiently capturing and categorising their spending.

Mathias Goetz, Senior Project Manager at ATU, explains.

We no longer have to chase receipts. Since using Payhawk, managers must simply take a picture of their receipt — thus digitising it — and enter it into the automated finance system. In the first year, this change resulted in ATU recouping € 2 million from the tax office that would have otherwise been lost.

Ready to take control of your business payments and get ahead of the next tax year-end? Book a personalised demo today to learn more.