Q. What is the Patent Box regime and what are the benefits for businesses in the 2024/25 tax year?
A. The Patent Box regime allows UK companies to pay a reduced corporation tax rate on profits earned from patented inventions. In the 2024/25 tax year, the effective tax rate is 10%. According to HMRC, the regime is designed to “encourage companies to keep and commercialise intellectual property in the UK”.
If your company earns £100,000 in profits from patented products, the tax liability would be £10,000 under the Patent Box, compared to £19,000 at the standard 19% rate.
To qualify, the company must own or exclusively license the patents and actively develop them. Plus, they must make a profit from them. Furthermore, the company must have undertaken qualifying development on the patents.
Incidentally, to give an idea of how widely this scheme is used, the most recent figures, published by the Government last year, showed in the tax year 2021 to 2022, an estimated 1,510 companies elected into Patent Box.
If you’d like to delve into the details of the regime and how your business can benefit, please contact our team.
Q. Dividends: I am set to earn £39,570 for my basic salary in the current tax year. On top of that, I’m due to receive for the first time some dividend payments from shares I own in a company – around £5,000. What are the tax implications for me this year?
A. The first thing to mention here is that you have a Dividend Allowance each year. Unfortunately for you and other dividend beneficiaries that has decreased for the 2024/25 tax year. It was £1,000 but it is now just £500. What it means is that you won’t have to pay tax on the first £500 of the £5,000 you’re set to earn from dividends.
For the remainder of that sum – the £4,500 of dividends – the amount of tax you pay comes down to the Income Tax Band that you fall in. Helpfully, you’ve mentioned your basic salary. So, we can see you’re in the basic rate (20%) Income Tax Band category. For the dividends, that means you must pay a rate of 8.75% on your £4,500 sum. Hence, you will pay £393.75 in tax on your dividends.
For anyone else reading this with dividends, it’s worth noting that you would need to pay 33.75% on your dividends if your income puts you in the Higher Rate Income Tax Band or 39.35% if you’re in the Additional Rate category.
If you only earn up to £500 in Dividends (this tax year’s allowance), and you don’t already file a Self-Assessment Tax Return there’s no requirement to inform HMRC or take any other action.
Those who earn between £500 or £10,000 from dividends and who don’t already normally fill out a Self-Assessment Tax Return need to tell HMRC about it. You can call their helpline, and there are two options for payment of tax. Firstly, via filling out a Self-Assessment Tax Return. Or, by having HMRC adjust your tax code to automatically take it from your salary or pension. For Dividends over £10,000 you must complete a tax return.
Q. My company has missed the deadline to pay our employers’ PAYE bill. We owe £23,000 but the debt is only for the last year. What can we do?
A. In cases like this, there is something called a Time to Pay arrangement, which HMRC may allow you to make use of. This gives businesses extra time to settle their bill by paying back in monthly instalments that are more affordable. The rules governing this have been made less stringent in recent times, widening the eligibility. Looking at the list of criteria, it would seem your business should qualify for this particular support – and you can set it up online. But that is predicated on checking the points below.
The Time to Pay arrangement is open for companies that pay via PAYE if they have missed the deadline to pay an employers’ PAYE bill, as in your case. You must owe £50,000 or less and have debts that are 5 years old or less – both of which in your case, is correct).
However, you also must be registered for digital services and not have any other payment plans or debts with HMRC. Lastly, to qualify, you must have sent any outstanding employers’ PAYE submissions and Construction Industry Scheme returns that are still due.