24th March, 2022, Kayleigh Wilson
Against a backdrop of rising inflation, Chancellor Rishi Sunak presented his first Spring Statement on Wednesday 23 March 2022.
The Chancellor announced a cut in fuel duty for petrol and diesel as he sought to ease the impact of rising prices for households and businesses.
He will lift the starting thresholds for National Insurance contributions (NICs) and also pledged a cut to income tax in 2024. However, the Health and Social Care Levy will still be implemented in April 2022.
For businesses, there is an increase to the Employment Allowance, as well as relief from business rates on a range of green technologies and help with training and the adoption of digital technology.
Increase in the National Insurance threshold and Lower Profit Limit
There had been speculation that the Chancellor would try and make some kind of tax cut to answer his critics that he was not doing enough to ease the cost of living rises. His solution was to announce an increase in the annual National Insurance Primary Threshold and the Lower Profits Limit in his 2022 Spring Statement, to take effect from July 2022.
Primary Class 1 contributions are paid by employees. To align the starting thresholds for income tax and National Insurance contributions (NICs) the threshold will increase from 6 July 2022 from £9,880 to £12,570.
The Lower Profits Limit is the point where the profits of the self-employed become subject to Class 4 NICs. From 6 April 2022 the Lower Profits Limit is increased to £11,908 and from 6 April 2023 the limit is increased further to £12,570.
In addition, there will be no Class 2 NICs on profits between £6,725 and £11,908. £3.15 per week is payable where profits are over £11,908.
Temporary increase in National Insurance rates
The temporary increase in National Insurance rates (the Health and Social Care Levy) will still come into effect from April 2022.
There will be a temporary increase in the rates of NICs payable for employees, employers and the self-employed as a transitional provision in readiness for the introduction of the Health and Social Care Levy from April 2023.
With the increase to the thresholds announced in the Spring Statement, from 6 July 2022 employees earning between £242 (£190 from 6 April to 5 July 2022) and £967 per week will pay NICs at 13.25%. Earnings over £967 will attract a 3.25% charge. Employers will pay 15.05% on their employees’ earnings over £175 per week.
Although employees’ NICs only become payable once earnings exceed £242 per week, any earnings between £123 and £242 per week protect an entitlement to basic state retirement benefits without incurring a liability to NICs.
For the self-employed, where their profits exceed £11,908 per annum, they will pay 10.25% on the profits up to £50,270 and 3.25% on profits over that upper profits limit.
Income tax reduction
The Chancellor announced the reduction in the basic rate of income tax for non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland to 19% from April 2024.
The change will be implemented in a future Finance Bill.
A welcome measure announced in the Spring Statement to help all motorists – individuals, small businesses and hauliers – fuel duty for petrol and diesel is cut by 5 pence per litre across the whole of the UK. This measure took effect from 6pm on 23 March 2022 and is in place for 12 months.
Increased Employment Allowance
Employers are able to claim the Employment Allowance which reduces their employer Class 1 NICs each year.
In the Spring Statement, the Chancellor announced an increase from April 2022 of £1,000 for eligible employers to reduce their employer NICs by up to £5,000 per year.
The allowance can be claimed against only one PAYE scheme, even if the business runs multiple schemes. Connected businesses, such as companies under the control of the same person or persons, are only entitled to one Employment Allowance between them.
VAT on energy saving materials
The Chancellor announced a UK wide, time-limited zero rate of VAT from April 2022 for the installation of energy saving materials. This will apply to installations such as rooftop solar panels.
This is in addition to the extension of the VAT relief to include additional technologies and the removal of complex eligibility conditions.
Green reliefs for business rates
The government is introducing targeted business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill. It was announced in the Spring Statement, that these measures will now take effect from April 2022, a year earlier than previously planned.
Spring Statement Summary
These are the main highlights of the Spring Statement announcements by the Chancellor. An above average amount of changes to allowances and tax bands for a Spring Statement, some of which come into play very soon and will have an immediate effect on calculations.
At Stephenson Smart we are specialists in helping people navigate their business and personal finances. You should contact us for advice before taking any action as a result of the contents of this response.
Related pages: Budget 2021
27th October, 2021, Dan Jastrzebski
Autumn Budget 2021: Response by Dan Jastrzebski
Today’s Autumn Budget 2021 announcement and Spending Review by the Chancellor focused on economic recovery and investment.
Dan Jastrzebski, partner at Stephenson Smart, analyses the main changes that will impact upon our clients and local businesses.
Business groups have been lobbying for the government to support the high street and ‘brick and mortar’ businesses by looking at business rates in this Budget.
In response, the Chancellor announced three new measures that will directly affect business rates:
Firstly, a new temporary 50 per cent business rates relief for the Retail, Hospitality and Leisure industry in the financial year 2022/23. This is alongside freezing the business rates multiplier for a second year, from 1 April 2022 until 31 March 2023, keeping the multipliers at 49.9p and 51.2p.
The government will also look to introduce a 100 per cent improvement relief for business rates from 2023. This will provide 12 months relief from higher bills for occupiers, where eligible improvements to an existing property increase the rateable value.
Also introduce targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100 per cent relief for eligible heat networks, to support the decarbonisation of non-domestic buildings from 1 April 2023 until 31 March 2035.
There was very little mention of tax changes in the Autumn Budget 2021 announcement. However, there are tax changes afoot that are already in progress.
The Health and Social Care Levy is due to come into effect in April 2022; the income generated from this is due to be ring-fenced for spending on health and social care. Alongside this, it was also announced that there would be a 1.25 per cent increase to dividend tax rates.
We also already know that the main rate of Corporation Tax will rise from 19 per cent to 25 per cent from April 2023.
However, the main changes to the tax system that the government are forecasting to bring in income to the Treasury are aimed at how the self-employed pay income tax.
From April 2024 there will be three main changes to income tax for the self-employed:
Sole traders and landlords with annual business or property income over £10,000 a year will be eligible for Making Tax Digital for Income Tax Self Assessment from 6 April 2024. This means that those businesses who are eligible will be required to submit their income and expenses via digital software, in a more timely, quarterly manner. Read more here.
From the same date, the government are looking to reform income tax basis periods so businesses’ profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of its accounting date.
Lastly, the government are reforming penalties for late submission and late payment of tax for Income Tax Self Assessment, again from April 2024, for those taxpayers required to submit digital quarterly updates through Making Tax Digital.
Just these changes to tax strategy are forecast to bring in an additional £440 billion to the Treasury by 2026/27.
A surprising amount of the Chancellor’s Autumn Budget 2021 announcement was taken up by talking about alcohol duty. The main change worth mentioning is the reduction in duty on draft alcohol by 5 per cent – another welcome hand of support to the hospitality industry. However, increases to the living wage of 6.6 per cent for over 23 year olds from April 2023 could offset the reduction in duty meaning no decrease in prices for the consumer.
Our teams will look forward to further direction from the government on the announcements made today, and in the run up to the Budget, so that we can ensure our clients are compliant with any changes and managing their tax liabilities accordingly.
If you would like more detailed, one-to-one advice on any of the issues raised in the Chancellor’s Autumn Budget 2021 speech, please get in touch.
Profile: Dan Jastrzebski ACA CTA
Related Pages: Budget 2021 & Making Tax Digital
Related Articles: Autumn Budget Predictions
Further Reading: Autumn Budget and Spending Review 2021
26th October, 2021, Kayleigh Wilson
Autumn Budget Predictions
The Chancellor, Rishi Sunak will officially present his Autumn Budget and Spending Review to the Commons tomorrow, 27 October.
In this article, Kayleigh Wilson ACCA CTA, gives her Autumn Budget predictions, thoughts and analysis:
You may be forgiven for thinking that the Autumn Budget 2021 has pretty much all been announced via releases to the press; but these announcements are all the positives around spending and don’t dig into the details.
Based on these pre-announcements, we know that the Chancellor has already committed over £30 billion of investment to support economic recovery through schemes that support his government’s ‘Plan for Jobs’ and ‘Levelling Up’, although all this comes at a price and the announcements that will have the most ears will be around the measures put in place to financially support these.
We have already had a huge tax announcement this year with the planned introduction of the Health and Social Care levy that will raise National Insurance Contributions from April 2022.
This Budget also comes at the start of the government’s 10-year tax administration strategy and is being called a ‘technical budget’. This implies that the Chancellor may make technical changes that can raise revenue, rather than simply take the unpopular option of raising more taxes. An example of this is the proposed reform of basis periods for the self-employed, this is being sold as a simplification measure to help sole-traders and partnerships with the move to Making Tax Digital reporting from April 2023 but also has the potential to accelerate revenue for the Exchequer for 2023 and the next 5 years.
We know that Corporation Tax will rise from 19 per cent to 25 per cent from April 2023, but what other proposed changes might the Chancellor make to taxes in this Budget to try and balance the books?
Lots of commentators are predicting changes to Inheritance Tax and Capital Gains Tax following recent reviews by the Office of Tax Simplification. It is quite likely that the Chancellor could change Inheritance Tax Rules that would increase future revenues without directly changing headline tax rates.
Millions will get a pay rise next year when the National Living Wage is increased from £8.91 an hour, as the Treasury confirmed the move for all over-23s, on Monday.
This move supports the Prime Minister’s pledge to move Britain towards a high wage, high skill, high productivity economy.
With a lot of the Covid support schemes such as Furlough, Business Rates Relief and VAT relief coming to end, businesses will be feeling the impact on their cash flow.
There are calls from the business communities for the Chancellor to look at how business rates are calculated, to support the high street, and put some further package of support in for the hospitality and tourism industry.
We will be watching the Chancellor live as he presents to the Commons on Wednesday and analysing his announcement and the accompany documentation carefully.
Profile: Kayleigh Wilson ACCA CTA
Related pages: Budget 2021
3rd August, 2021, Henry Pettitt
What is Legislation Day?
Dubbed as ‘Legislation Day’ the announcements made by HM Treasury on 20 July included draft legislation, consultation updates and promises of future tax measures as a build-up to Finance Bill 2022.
Nothing announced will have immediate effect, but the various documents do give a good sense of the direction of travel for future changes to the tax system. The key announcements include proposals to reform income tax basis periods, clamp down on promoters of tax avoidance schemes and introduce a requirement for larger businesses to notify HMRC about uncertain tax treatments.
The full list of tax measures can be found on the Finance Bill 2021/22 page.
Below is a summary of the key areas that I feel may have the potential to bring about the biggest change.
Legislation Day: Sole traders and partnerships
One of the proposals was that sole traders and partnerships will be taxed by reference to profits earned in a tax year, rather than taxed by reference to the profits of an accounting period where that period does not coincide with the tax year ended 5 April, from 2023.
For example, if a business draws up accounts to 30 June every year, currently the income tax for 2023/24 would be based on the profits in the business’s accounts for the year ended 30 June 2023, subject to basis period rules. The proposed reform would mean income tax for 2023/24 would be based on: 3/12 of year end 30 June 2023, plus 9/12 of year end June 2024. So, there is an acceleration in profits being assessed and taxed.
It is felt that setting tax year 2023/24 as the year of change (with year 2022/23 as a transitional year) is very ambitious and it may be that the speed of change is linked to Making Tax Digital for Income Tax Self-Assessment, as this is scheduled to be mandatory from April 2023. Another move towards real-time tax reporting and payment for the self-employed.
We have been anticipating this change to how business profits are quantified and encouraging clients to consider their year ends and utilising overlap profits.
Legislation Day: Pensions
There was draft legislation released relating to pensions.
Of interest is a proposed increase in the normal minimum pension age from 55 to 57 in April 2028.
Where a pension scheme annual allowance charge of at least £2,000 arises, the scheme member can request that the liability is met from their pension fund under the “scheme pays” rule. The deadline for doing this is currently 31 July in the year following the end of the tax year. However, where an annual allowance charge is triggered retrospectively, because of retrospective amendment to their pension input amount (as could be the case with the government’s planned remedy for addressing the age discrimination found in the 2015 public service pension reforms), the taxpayer may be out of time to request that the scheme meets their liability.
To address circumstances where a scheme member is informed of a retrospective change to their pension inputs by the scheme administrator, draft legislation extends the deadline to the earlier of three months following the date that the scheme administrator provides that information and six years following the end of the tax year in question.
Legislation Day: Tax avoidance
HMRC published a summary of responses to its proposals made earlier this year for measures to clamp down on promoters of tax avoidance. Four new measures are being introduced:
- A new power for HMRC to seek freezing orders that would prevent promoters from dissipating or hiding their assets before paying the penalties that are charged as a result of breaching anti-avoidance obligations.
- New rules that would enable HMRC to make a UK entity that facilitates the promotion of tax avoidance by offshore promoters subject to a significant additional penalty.
- A new power to enable HMRC to present winding-up petitions to the courts for companies operating against the public interest.
- New legislation that would enable HMRC to name promoters, details of the way they promote tax avoidance and the schemes they promote, at the earliest possible stage, to warn taxpayers of the risks and help those already involved to get out of avoidance arrangements.
Other areas of note published on legislation day:
An amendment to allowance statement for structures and buildings allowance.
Insurance premium tax
Draft legislation has been published to move the criteria for determining the location of a risk for insurance premium tax into primary legislation.
As announced on 23 March, the government will not be taking forward any changes to VAT grouping but has now published a summary of the responses to the call for evidence on VAT grouping establishment, eligibility and registration.
Legislation Day: Next steps
Once all the consultations have ended in September, there will be a Finance Bill in the Autumn, possibly to accompany an Autumn Budget and a Spending Review.
However, it has been reported in the media that the Budget may be deferred until Spring 2022 to reflect more on the economic impact of the pandemic.
If you would like to discuss how any of the proposed changes may affect you or your business, please get in touch.
Profile: Henry Pettitt ACA CTA
Related Articles: Tax Day: Response by Kayleigh Wilson
23rd March, 2021, Kayleigh Wilson
Dubbed as ‘Tax Day’, HM Treasury released 30 documents and consultations today as part of their tax policies and consultations update to inform future tax policies. These would normally be published on Budget day but this year they have been published separately in a what they say is a move to ‘strengthen policy making and modernise the UK tax system.’
In July 2020, the government announced its 10-year tax administration strategy, today’s update is part of that on-going review and reform process.
What does ‘Tax Day’ mean to most businesses and individuals
In amongst the technical information surrounding tax legislation and reform announced today, there were also updates that have the potential to significantly impact the tax affairs of many small business owners, and some individuals.
Making Tax Digital
Making Tax Digital for VAT registered business with a turnover over £85,000 has been the first phase of what the government hope will become a new, digital way of working that will include all taxpayers reporting their income and expenses via digital software, in a more timely manner. With all VAT registered businesses needing to be Making Tax Digital compliant from 1 April 2022 and subsequently, businesses and landlords with trading income over £10,000 from 1 April 2023, being the next phase of the ’10-year strategy’.
Ultimately, HMRC are looking for this to lead to the more frequent payment of tax, in line with the increased reporting requirements, for all self-employed and small businesses owners.
It is currently the case that many holiday lets in England are registered to pay business rates, rather than council tax, when an owner declares that they intend to let their property in the next year. As a result, many are able to benefit from Small Business Rates Relief, providing up to 100% relief against business rates, meaning no tax is due.
In today’s announcement a change was tabled that will mean that owners of properties that are not genuine businesses are not able to reduce their tax liability by declaring that a property is available for let but make little, or no realistic effort to let it out.
From 1 January 2022, over 90% of estates that do not need to pay inheritance tax will no longer have to complete inheritance tax forms for deaths when probate or confirmation is required.
The areas summarised are a small part of today’s tax policies and consultations update, that I feel have the most relevance to the businesses and individuals that we support. These announcements are part of a consultation process by the government and a call for evidence before considering whether they will become part of its 10-year tax administration strategy.
We will be keeping a close eye on the developments and will inform our clients on any changes that are made that may affect them.
If you wish to discuss any of these areas further, please contact us
Related Pages: Making Tax Digital and Inheritance Tax
Related Articles: Budget 2021: Response from Henry Pettitt
Profile: Kayleigh Wilson
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