Welcome to our regular monthly collection of news and announcements that impact accountants and their clients in Scotland.
With less than three weeks until Christmas, you’ll continue to be busy on their behalf – which is why we created our accountants hub so you’ll have access to the most important and accurate insolvency information whenever you need it.
But you can’t read everything and be everywhere at once, so we collect the most interesting and important business and insolvency news stories every month along with new blogs on a range of topics each and every week.
We’re always keen to hear what you think so email us at ask@businessrescueexpert.co.uk because we really want to write what you want to read!
Tax changes in the Scottish budget
The latest Scottish budget which was presented by the Finance Minister Shona Robison last week sets out the tax and spending plans for Scotland for 2025/26 with a commitment to a 3.5% rise in two key tax thresholds affecting the majority of Scottish taxpayers.
The decision to increase thresholds was taken to offset the impact of the UK-wide increase in employer’s National Insurance Contributions (NICs) from next April which the Institute of Fiscal Studies expects will affect employers directly as businesses pass on costs to staff and customers.
The Minister told MSPs “Scottish taxes will raise £20.4 billion in 2025/26, £775 million more than forecast.
“This is due to average earnings in Scotland growing faster than in the rest of the UK and £1.7 billion more tax will be delivered in 2025/26 than if Scotland followed the UK tax system.
“So may I thank those with the broadest shoulders who’ve supported our health service and our social programmes.
“The increase in employers’ national insurance is estimated to take more than £2 billion out of the Scottish economy next year, so I will not introduce any new bands or rates during this parliament.
“I have decided to provide tax support for low and middle earners. Basic and intermediate thresholds will increase by 3.5% – that means more of people’s money will be taxed at the starter and base rate.
“The intermediate 21% rate covers incomes from £27,492 to £43,662. This means the higher rate tax at 42% will kick in at £43,663. Basic rate tax at 20% will be paid on earnings between £15,398 and £27,491.
“Scottish government figures predict that anyone in Scotland earning around £30,300 will pay slightly less income tax than their counterparts in the rest of the UK in 2025/26.”
An additional £32 million will be raised through raising the additional dwelling supplement rate for second home owners and buy-to-let landlords from 6% to 8% (excepting properties at the final stage of completion in transactions).
Scottish landfill tax will be increased to match rates in England.
On business rates Robison said: “The Small Business bonus scheme will be protected. We have budgeted so rate relief is capped at £110,000 for small businesses and in our islands there will be 100% relief.”
The hospitality sector will benefit from the Small Business Bonus Scheme receiving 40% non-domestic rates relief if they fall within the basic property rate. Retail and leisure businesses won’t see any benefit from the announcement which will be a disappointment as the UK government has given 75% relief in the last two years and will lower it to 40% for 2025/26.
“The basic property rate kicks in at £51,000, giving relief for properties valued below this level. In total 200,000 businesses will be protected as a result of the extension of this scheme.”
There will also be investment to fund new jobs in the green energy supply chain. £321 million will be spent on innovation and high tech jobs creation and a £150 million investment in green energy which will leverage £1.5 billion private sector investment.
FCA labelled “incompetent at best, dishonest at worst” by MPs and peers
A devastating report into the Financial Conduct Authority (FCA) by a cross-party group has been published after a three-year inquiry.
The All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services received testimony from 175 individuals highlighting the FCA’s failure to protect consumers and small businesses from financial misconduct.
They found the FCA to be slow and inadequate in its response to financial scandals, often doing “too little, too late – or nothing” to prevent or punish alleged wrongdoing.
Bob Blackman MP, co-chair of the APPG, said the group has heard “tragic tales of regulatory failure” causing significant financial and emotional distress.
He said: “The FCA responded to the excoriating criticism it received about its poor performance by launching a Transformation Programme. Unfortunately, the testimony received by the APPG in response to its Call for Evidence indicates that this programme has been a failure.
“The FCA’s deep-rooted cultural problems, described so forensically by the series of external reports, are still there; if they weren’t then the FCA’s handling of recent issues such as the Woodford, WealthTec and Philips Trust Corporation scandals would have been satisfactory.
“The government has reasons for concern in that the trust deficit in financial services is acting as a brake on growth, the opposite of what any administration wants for the economy.”
The FCA responded with a statement: “We sympathise with those who have lost out as a result of wrongdoing in financial services. However, we strongly reject the characterisation of the organisation.
“We have learned from historic issues and transformed as an organisation so we can deliver for consumers, the market and the wider economy.”
HMRC Cuts late payments interest rate
Following the decision of the Bank of England’s Monetary Policy Committee to cut the base rate to 4.75%, HMRC has also reduced late payment and repayment interest rates.
From November 18th, the late payment interest rate was cut from 7.5% to 7.25% and the repayment interest rate was cut from 3.75% to 3.5%.
HMRC’s late payment interest is set at base rate plus 2.5% while repayment interest is set at base rate minus 1% with a minimum floor of 0.5%.
However, from April 6th 2025, HMRC will be able to charge a higher premium on repayment interest rates with the current 2.5% surcharge rising to 4% over the base rate.
The Treasury said it had made his decision in order to help with the wider clampdown on tax avoidance and non-payment of taxes. This is expected to raise £255 million a year from 2025/26.
Corporation Tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments also reduced from 6% to 5.75%.
Interest paid to taxpayers affected by overpayments drops to 4.5% from 4.75% while interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments also fell to 4.5% from 4.75%.
Upcoming company law changes
We reported last month on the increase in company size thresholds that are the main company law change unveiled by the government to ease businesses non-financial reporting.
There are also several others that are important to be aware of.
Directors’ report
There are several changes aimed at removing several obsolete or overlapping requirements. These include removing information requirements related to:-
- Employment of disabled people
- Financial instruments
- Branches
- Employee engagement
- Engagement with suppliers, customers and others
- Important events, future developments, R&D
Medium-sized companies
The previous Conservative government announced plans to consult on redefining a “medium-sized” business that would have involved doubling the headcount from 250 to 500 and potentially providing an exemption for these companies having to include a strategic report in their annual report.
The Labour government has confirmed that they will not be taking these proposals forward.
Future of corporate reporting
A new consultation will be launched in 2025 aimed at simplifying and modernising non-financial reporting in order to better meet the needs of investors and business.
ID Verification
Companies House are implementing new measures to ensure that all directors, members of limited liability partnerships (LLPs), PSCs and even individuals delivering documents to the building verify their identity.
ID Verification is expected to be a one-off requirement so an individual who has several directorships will only need to have their identity verified once.
A number of methods to verify the ID will be accepted including the gov.uk ID check application, the One Login web journey or in person at the Post Office. Additionally authorised corporate service providers (ACSPs) will be able to provide ID verification services if they wish.
Verification will be voluntary until Autumn 2025 when Companies House aims for incorporation and the appointment of new directors and new registrations of PScs to be compulsory.
As there are currently seven million existing directors and PSCs, a 12-month transition phase is expected to last between Autumn 2025 and 2026.
Three quarters of accountants report feeling “burnt out”
The festive break can’t come soon enough for many of us and this seems to be particularly acute for accountants.
New research published by Caba, the accountants charity, indicates that nearly three in four (74%) of accountants said they felt burnt out in the previous 12 months with the effects seeping into their job performance.
This is a 20% increase on the same response from last year with several mentioning high levels of stress and long working hours.
Additionally a third of respondents out of 400 surveyed said they had been diagnosed with depression while a similar amount said they were affected by insomnia and had experienced panic attacks.
Dr Christian Holmes, Chief Executive of Caba, said: “Cases of burnout have spiked across large parts of the UK workforce in recent years. So much so, that Mental Health UK is now warning that the country is on the verge of becoming a “burnt-out nation”.
“As a sector, accountancy has proven to be especially vulnerable.
“Being a chartered accountant is a highly respected and rewarding career choice, and there are a great many people who are incredibly happy in their role.
“However, for some, long working hours and tight deadlines can make for a high pressure environment, which can sometimes lead to severe physical, emotional and behavioural symptoms we often associate with burnout.”
Real-time Benefits In Kind (BIK) reporting coming in 2026
HMRC have confirmed that there will be a phased introduction of new compulsory reporting requirements of Benefits In Kind (BIK) expenses through payroll software from April 2026.
Employers will be required to report all BIK expenses in real time except payroll loans and accommodation. HMRC said they had made no decision on when they would make those mandatory, noting that “careful consideration will be given to make sure sufficient notice of any change will be provided.”
An end-of-year process will be introduced to amend the taxable values of any BIKs that can’t be determined during the tax year but all need to be reported as accurately as possible. Additionally the requirement to submit P46 (Car) forms will also be removed as functionality will be provided to report the data required in real-time.
Overdue Invoices increase
New findings from R3 show that overdue invoices grew by 42.8% compared to the same period last year – equating to over 600,000 unpaid invoices.
This is the highest monthly total of 2024 so far and an increase of more than 180,000 from October 2023.
The West Midlands was the area which saw the largest growth in their area with an increase of 49.5%.
In Scotland the number of businesses reporting overdue invoices increased by 22.7% to 37,821 – the highest total of 2024. This is up from 30,827 in the same period in 2023 and was the largest yearly percentage increase of all the UK’s regions and nations.
Richard Bathgate, chair of R3 in Scotland said: “The sharp rise in overdue invoices is a clear indication of the financial strain many businesses in Scotland are still facing.
“Costs are continuing to rise, albeit at a slower pace and it’s becoming increasingly more difficult to pass on these extra costs to customers or to cut back in other ways.
“As a result, businesses are experiencing tighter margins and cash flow challenges, making it harder to keep up to date with the payments they owe.”
“While late payments are not an issue unique to Scotland, we have seen a significantly sharper increase in the number of companies that are failing to pay their bills on time in comparison to the other UK nations.
“England and Wales have already experienced significant increases in insolvency numbers in recent years and Scotland’s rising debt burden could be a warning sign that we are on a similar path, as many of the businesses grappling with overdue payments become insolvent as a result of the weight of their debt.”