Tik Tok and Tax all in one sentence

Who would have thought I would have ever be uttering the words – I’m so lucky to be a tax advisor 😊 it’s the only job where you get to celebrate new years eve twice, once on the 31st December and then again on the 5th April.  In case you had not heard the 2024/2025 tax year has arrived.

When I first decided to start writing the Tax Matters to You newsletter, I did ask the question will there be enough to write about every other week?  Before I knew it the newsletter has gone weekly as there is always something to write about.  Before I start, can I just take the opportunity to thank everyone who has telephoned or emailed me over the last week to congratulate me on the newsletter, although  I would not say I was the most competent writer the words of encouragement are more than appreciated.

Tik Tok and Tax in the same sentence what is that all about, tax points to consider in the new tax year and something for the daily mail readers.

The TikTok Tax Trap

In the age of social media, where influencers reign supreme, it seems there's nothing too sacred to escape the grasp of advertising. From cosmetics to clothing, products are peddled with abandon across platforms like TikTok and Instagram. However, the latest trend in this digital marketplace is a far more dangerous one: tax avoidance schemes.

Recently, a disturbing trend has emerged on platforms like TikTok, where individuals, often clad in smart attire, present complex diagrams, and promise ingenious solutions to sidestep inheritance tax and other financial obligations. These slick presentations may seem harmless, even educational, but they are anything but.

Behind the facade of helpful advice lies a potentially perilous trap for the financially naive. The individuals behind these schemes prey on unsuspecting victims, promising significant savings while leaving them vulnerable to severe legal and financial repercussions.

While HM Revenue & Customs (HMRC) has made strides in combating tax avoidance over the years, the battle is far from over. The so-called "tax gap" — the shortfall between expected and collected tax revenue — remains substantial, with avoidance accounting for a significant portion of this deficit.

It's crucial to note that not all tax advisers engage in these dubious practices. Many reputable professionals adhere to strict codes of conduct and provide legitimate, lawful guidance to their clients (Yes I do). However, the landscape is fraught with peril, as the field of tax advice lacks formal regulation, allowing unscrupulous individuals to operate with impunity.

One common tactic employed by these promoters is the endorsement of a barrister's opinion, ostensibly lending credibility to their schemes. While seeking legal counsel is not inherently suspect, the heavy promotion of such opinions should raise red flags for potential investors.

Thankfully, legislation has evolved to target these nefarious promoters, imposing criminal penalties for those found guilty of promoting illegal tax schemes. However, this has done little to dissuade the proliferation of such schemes on social media platforms. 

For those tempted by the allure of quick financial gains, the consequences can be dire. HMRC does not take kindly to tax evasion or avoidance, and individuals caught in these schemes risk hefty fines and even criminal prosecution.

In the face of this growing threat, it's imperative for individuals to exercise caution and seek advice from reputable, qualified professionals. While tax efficiency is a legitimate goal, it must be pursued within the bounds of the law and with careful consideration of the potential risks involved.

Therefore, the seductive promises of TikTok tax schemes may seem enticing, but they often lead down a treacherous path. As the saying goes, if it seems too good to be true, it probably is — especially when it comes to matters of finance.

YouTube

As I said last week not all my new YouTube videos are about Tax, I lied this one is but not all the others are so please follow the link and take a look for yourself

If you enjoy the clips, please remember to give them a like and even subscribe to the channel so that you don’t miss any future editions.

Key Tax Changes Coming with the New Tax Year 2024/2025

As we usher in the new tax year, several significant changes are set to take effect, impacting individuals, families, and businesses alike. From adjustments to dividend allowances to shifts in national insurance contributions, here's what you need to know:

Dividend Allowance Reduction: the dividend allowance will be slashed to £500 from the current £1,000, significantly affecting owner-managed businesses. This move is estimated to generate an additional £455 million in tax revenue for the 2024-25 fiscal year, impacting around 4.4 million taxpayers.

Capital Gains Tax Changes: the annual exempt allowance for capital gains tax will be halved to £3,000 from £6,000. Additionally, a new reduced CGT rate of 24% will apply to residential property sales for higher rate taxpayers, down from the usual 28% rate, however it is worth noting that there is no change to the basic rate which remains at 18%.

Employee National Insurance Contributions (NICs): employee NICs will see a further 2% cut to 8%, following a previous reduction announced in January. This translates to substantial savings for the average worker, amounting to over £900 annually for those earning £35,400.

Tax Threshold Freezes: despite the NICs reduction, tax thresholds for basic and higher rate taxpayers remain frozen until 2028, potentially pushing more individuals into higher tax brackets. The high income child benefit cap will also increase to £60,000 from £50,000.

Changes for Self-Employed Individuals: the main rate of Class 4 NICs will decrease from 9% to 6%, accompanied by the abolition of the requirement to pay Class 2 NICs, simplifying the tax system and saving an average self-employed person over £650 annually.

Child Benefit Adjustments: rates will see modest increases, with families receiving up to £1,331 annually for the eldest child and up to £881 for additional children. Additionally, the state pension will rise to £221.20 per week, nearing the basic rate tax threshold.

Working Tax Credit Amendments: with the basic element rising to £2,435 and the couple and lone parent element increasing to £2,500.

Pension and Property Tax Changes: there will no longer be a lifetime allowance for private pensions, while the annual tax on enveloped dwellings (ATED) charges will increase by 6.7%, aligning with the September 2023 CPI. 

As these changes come into effect, it's essential for individuals and businesses to review their financial plans and adapt accordingly, so please do not hesitate to give me a call if you would like to talk further 01442 828006.

For the Daily Mail readers

Many of you will know I am not a huge fan of reading or watching the news anymore, the important bits seem to have their own way of finding their way to you which cuts out all the bits that are simply not important. 

With this in mind I would like to thank J Bishop who called me to tell me about the article in this week’s Daily Mail  which reported that some 1.6 million pensioners will be paying tax and possibly be preparing a tax return by the 2027/2028 tax year.  This is a direct consequence of the freezing of the personal allowance.   This year alone it is anticipated that up to 750,000 could be affected, just s well HMRC kept those telephone lines open, I expect the phone could be ringing off the hook.


I hope you have enjoyed this edition of my newsletter, and found it both enjoyable and informative, if you have any suggestions or comments then please let me know it is always good to hear from you. In addition to the newsletter, I am also updating the website, so please take a look from time to time to see what is happening.

If I or the Tax Matters team can be of any assistance to you, your family or your friends then please do not hesitate to contact me at 01442 828006 or jreeves@taxmatters.tax

Previous
Previous

April tax returns and child benefit

Next
Next

Would you want an IHT bill of 3.5M