Archive for March, 2022

A few days left to pay self-assessment bills

Thursday, March 31st, 2022

Self-Assessment taxpayers have until 1 April 2022 to pay their tax bill for 2020-21 or set up a payment plan to avoid incurring a penalty.

A payment plan, if agreed with HMRC, will allow a taxpayer to spread the cost of their bill into manageable monthly instalments.

The online Time to Pay service is available for businesses and individuals who have filed their Self-Assessment tax return and owe up to £30,000. They can set up a payment plan online at GOV.UK without speaking to HMRC.

If taxpayers owe more than £30,000, or need longer to pay, they can call the Self-Assessment payment helpline on 0300 200 3822.

The Self-Assessment deadline was 31 January but, this year, HMRC gave customers extra time to file and pay their 2020-21 tax return and not face penalties.

More than 11.3 million customers filed by 28 February, with one million of those taking advantage of the extra time by filing their tax return in February.

Customers can make secure Self-Assessment payments through the HMRC app by either connecting to their bank to make their payments or paying by Direct Debit, personal debit card or corporate/commercial credit/debit card.

A full list of the payment methods customers can use to pay their Self-Assessment tax bill is available on GOV.UK.

HMRC has urged everyone to be alert if they are contacted unexpectedly by someone asking for money or personal information. Taxpayers should always type in the full online address www.gov.uk/hmrc to get the correct link for filing their Self-Assessment return online securely and free of charge. HMRC sees high numbers of fraudsters emailing, calling or texting people claiming to be from the department. If customers are in doubt, do not reply directly to anything suspicious, but contact HMRC straight away and search GOV.UK for ‘HMRC scams’.

Further information:

Interest has been applied to all outstanding balances owing to HMRC since 1 February.

A 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on 1 April 2022. Further late payment penalties will be charged at the usual 6 and 12-month points (August 2022 and February 2023 respectively) on tax outstanding where a payment plan has not been set up.

Energy bills support 2022

Tuesday, March 29th, 2022

We have summarised below the three main sources of government support to assist householders with their energy bills for the coming year. They are:

  • A £200 discount on their energy bill this Autumn for domestic electricity customers in Great Britain. This will be paid back automatically over the next 5 years.
  • A £150 non-repayable Council Tax Rebate payment for all households that are liable for Council Tax in Bands A-D in England.
  • £144 million of discretionary funding for Local Authorities to support households who need support but are not eligible for the Council Tax Rebate.

The devolved administrations are receiving around £715 million funding through the Barnett formula as usual where UK Government support does not cover Scotland, Wales or Northern Ireland.

Details of each scheme are set out below:

How will the Energy Bill Discount Scheme work?

  • Domestic energy customers in Great Britain will receive a £200 cash discount on their bills this Autumn. The government will provide funding to all suppliers for them to pass on to their domestic energy customers from October.
  • Customers will pay back the discount automatically in equal instalments over five years, starting from financial year 2023-24, when wholesale gas prices are expected to come down. This is expected to be reflected as an increase to standing charges on bills.
  • This approach will help to spread the increased costs of global prices over time in a way that is more manageable for households.
  • The Department for Business, Energy and Industrial Strategy will set out more detail on this policy in a consultation in the spring.

How will the Council Tax rebate work?

  • Households in England in Council Tax Bands A-D, who are not exempt from Council Tax, will be eligible for a £150 Council Tax Rebate payment from April this year.
  • The rebate will be made by local authorities as a payment to households. This won’t have to be repaid.
  • 80% of households in England are in Council Tax Bands A-D, so will benefit from this rebate.
  • The rebate will not be paid for second homes or empty properties.
  • Households in England in Bands A-D that pay less than £150 or do not pay Council Tax as a result of Local Council Tax Support will also be eligible for a payment of £150.
  • People in receipt of the Single Person Discount in Bands A-D will be eligible for a payment of £150.
  • We expect the vast majority of people who pay by Direct Debit to receive this money in April. For households in Bands A-D who do not pay by Direct Debit, their councils will be ready to process their claims in April.
  • The government is providing new funding to local authorities for these rebates, as well as extra funding to help with increased administrative costs.
  • For those who need help with their energy bills but are not eligible – such as households on income support in higher bands (E-H) or with properties in bands A-D that are exempt from council tax – local authorities will receive £144 million of discretionary funding to help.
  • Further details will be set out by the Department for Levelling Up, Housing and Communities and local authorities.

Will people across the whole UK benefit?

  • The £200 energy bills discount applies across England, Wales and Scotland. The Northern Ireland Executive is responsible for energy policy in Northern Ireland. The Northern Ireland Executive will be funded to provide comparable support with around £150 million through the Barnett formula next year. The Barnett formula will also be applied when UK Government spending is recovered in future years, which will result in lower funding for the Executive in those years.
  • The £150 Council Tax Energy Rebate applies in England only, as Council Tax policy is devolved in Wales, Scotland and Northern Ireland. As a result, the devolved administrations will receive around £565 million extra funding through the Barnett formula, which will enable them to provide similar support. They will be able to choose whether to spend this funding this year or next year.
  • This comprises around £290million for the Scottish Government, £175million for the Welsh Government and £100million for the Northern Ireland Executive.

Sunak’s Statement – A summary

Thursday, March 24th, 2022

Our glossy summary of the Chancellor’s Spring Statement on 23rd March 2022 can be found by clicking here:

Spring 2022 Statement

As ever, please just get in touch if you’ve any questions about this.

Donald Parbrook

Director, Head of Tax Services

Spring Statement 2022

Thursday, March 24th, 2022

The Chancellor, Rishi Sunak, has delivered his Spring Statement to the House of Commons against a backdrop of a growing cost of living crisis. The Chancellor also stressed that, apart from the untold human suffering, the Russian invasion of Ukraine is creating further uncertainty in the domestic and global economy, particularly in relation to energy markets and the food supply-chain.

On the morning of the Spring Statement, the Office for National Statistics (ONS) announced that the rate of Consumer Price Index inflation increased to 6.2% in February putting further pressure on the Chancellor to act. The Office for Budget Responsibility (OBR) also expects average inflation to rise to 7.4% this year.

We have highlighted below the main tax measures that were announced:

National Insurance contributions (NICs)

The Chancellor did not remove the 1.25% increase in NICs due to come into effect from this April to help fund the NHS and Social Care. However, he did try to soften the blow by announcing a significant increase in the National Insurance Threshold from £9,880 to £12,570. This increase will see the alignment of the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs with the personal allowance of £12,570 from 6 July 2022. It has also been confirmed that the thresholds will remain aligned going forward. According to government figures this means that around 70% of employees will pay less NICs, even accounting for the introduction of the Health and Social Care Levy.

The PT and LPL will be £9,880 (as previously announced) from 6 April 2022 – 5 July 2022. It is unusual for tax rates to change during a tax year, but the Chancellor was facing pressure to make changes and the short period before the new tax year starts left him with no choice but to delay the increase for 3 months. July is the earliest date that will allow all payroll software developers and employers to update their systems and implement the necessary changes. This means the LPL will be £11,908 for the 2022-23 tax year which is equivalent to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570.

Reducing Class 2 NICs payments for low earners

From April 2022, the self-employed will see Class 2 NICs liabilities reduced to nil on profits between the Small Profits Threshold (SPT) and LPL. This will ensure that no one earning between the SPT and LPL will pay any Class 2 NICs, while allowing individuals to be able to continue to build up National Insurance credits. This change represents a tax cut for around 500,000 self-employed people worth up to £165 per year.

Employment Allowance

In his speech, the Chancellor confirmed that the government would increase the Employment Allowance by £1,000 to £5,000 from April 2022. This represents a tax boost for around 495,000 small businesses who can claim an increased reduction in their NIC liabilities or even reduce their bills to zero.

In total, this means that from April 2022, 670,000 businesses will not pay NICs and the Health and Social Care Levy due to the Employment Allowance. The Employment Allowance is only available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance.

 

 

Fuel duty cut

The Chancellor announced a temporary UK-wide 5p per litre cut in fuel duty on petrol and diesel from 6pm on 23 March 2022 for 12 months. This is a saving worth around £100 for the average car driver, £200 for the average van driver, and £1500 for the average haulier in the coming year. This represents total savings for households and businesses worth around £2.4 billion in 2022-23 and is only the second cut in fuel duty over the last 20 years.

VAT

The government will expand the scope of VAT relief available for energy saving materials (ESMs) by reducing VAT from 5% to 0% from 1 April 2022 until 31 March 2027. This will ensure that households having energy saving materials installed like solar panels, heat pumps, or insulation will pay no VAT.

The government will also include additional technologies and remove the complex eligibility conditions, reversing a Court of Justice of the European Union ruling that unnecessarily restricted the application of the relief. A typical family having roof top solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills.

The VAT rate cannot immediately be reduced to 0% in Northern Ireland due to the Northern Ireland Protocol. However, the Northern Ireland Executive will receive a Barnett share of the value of the relief until it can be introduced UK-wide.

Household Support Fund

The government launched a £500 million package of support for vulnerable households in October 2021. The Household Support Fund is used to help support millions of vulnerable households in England and monies is distributed by councils. This means that local councils can use the funding to provide discretionary support to vulnerable households. This could include using small grants to meet daily needs such as food, clothing, and utilities.

The Chancellor announced as part of his Spring Statement measures that the government will provide an additional £500 million for the Household Support Fund from April 2022. The Barnett formula will apply in the usual way to additional funding for the devolved administrations.

R&D tax relief reform

It has been confirmed that from April 2023, all cloud computing costs associated with R&D, including storage, will qualify for relief. This change will boost sectors where the UK is a world-leader, including AI, robotics, manufacturing, and design. Further changes to the relief may also be announced as part of the Budget later this year.

Income Tax basic rate

Whilst no immediate changes were announced, the Chancellor confirmed that the government will reduce the basic rate of income tax to 19% from April 2024.

This will apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland and to the savings basic rate which applies to savings income for taxpayers across the UK.

The reduction in the basic rate for non-savings-non-dividend income will not apply for Scottish taxpayers because the power to set these rates is devolved to the Scottish Government. However, the Scottish government will receive additional funding which they can use as they see fit, including on reducing income tax or other taxes, or increased spending.

Increase in corporation tax next year

Wednesday, March 23rd, 2022

In just over a year’s time, from 1 April 2023, corporation tax rates are increasing.

At present, companies pay tax on profits at a single rate of 19%, irrespective of the amounts of profits subject to corporation tax. From 1 April 2023, this elegantly simple process is about to change.

From 1 April 2023:

  • Companies will continue to pay tax at 19% if their taxable profits are below a lower profits limit of £50,000. Accordingly, many smaller businesses will see no increase in their tax bills.
  • Companies with taxable profits above £250,000 will pay tax at the new mainstream rate of 25%.
  • Companies with profits between £50,000 and £250,000 will pay tax at the 25% mainstream rate less marginal relief. Marginal relief smooths the impact of the 25% rate which will be adjusted to gradually increase from 19% to 25%.

Complications if a company is associated with other companies

Unfortunately, companies that have a number of associated companies will suffer a reduction in these £50,000 and £250,000 limits.

The limits are divided by the number of associated companies plus 1. For example, if you have one associated company, the lower limit is reduced to £25,000 and the upper limit to £125,000 – the limits are divided by two. Likewise, if you have four associated companies, the limits are £10,000 and £50,000 – the limits are divided by five.

A company is an associated company of another company if one of the two has control of the other or both are under the control of the same person or persons.

Reviewing company structures

You may want to review your company structures prior to 6 April 2023. For example, if you have one company with taxable profits of £40,000 and one company with taxable profits of £5,000, the company with the taxable profits of £40,000 will not benefit from the small profits rate as the profits are above the lower limit of £25,000 that applies to a company with one associate.

Merging the companies will mean that there is only one company and the combined profits of £45,000 will be charged at the small profits rate of 19%.

Time for a review?

If you have a number of associated companies, you may want to consider your options. Please call, we can help.

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