Super-deduction allowance announced by the government in their 2021 Spring Budget comes to an end for claims on 31 March 2023.

Kayleigh Wilson, Tax Manager at Stephenson Smart, highlights that if you are a company that is looking to purchase new plant and machinery you may want to take advantage of this allowance before it ends.

What is super-deduction allowance?

Super-deduction works alongside the Annual Investment Allowance and gives 130 per cent deduction against the purchase of new plant and machinery.  However, it is only applicable to companies and for the purchase of new equipment.

Unlike the Annual Investment Allowance, there is no upper expenditure limit on super-deduction.

Example:

Purchasing a new tractor for 100,000 pounds.

Annual Investment Allowance – 100 per cent deduction = 100,000 pounds.

Corporation Tax at 19 per cent = tax saving of 19,000 pounds

Super-deduction – 130 per cent deduction = 130,000 pounds

Corporation Tax at 19 per cent = tax saving 24,700 pounds

As illustrated above, under the temporary super-deduction your company could gain an additional tax saving of 5,700 pounds.

What is Annual Investment Allowance?

Annual Investment Allowance gives 100 per cent deduction against business profits for the purchase of qualifying plant and machinery.

The current expenditure limit is 1 million pounds. It was announced in the 2022 Autumn Statement that this would remain at this level indefinitely.

Any expenditure in excess of this limit goes into a Main Pool or Special Rate pool for tax purposes and attract Capital Allowances at either 18 per cent or 6 per cent per annum.

There is also a 50 per cent first-year allowance for assets that would ordinarily qualify for the Special Rate Pool. However, if you have any remaining Annual Investment Allowance to use you should utilise that first to get 100 per cent deduction rather than 50 per cent deduction.

Do vehicles qualify for super-deduction?

Commercial vehicles such as lorries and vans do but cars do not. However, electric cars still qualify for the 100 per cent First Year Allowances.

Planning and timing are key to making the most of super-deduction and the Annual Investment Allowance. At Stephenson Smart we can help you get this right, please get in touch if we can support you with this.

Chris Goad, partner Stephenson Smart Chartered Accountants and Business Advisors offers some business start up advice.

Business Start Up Advice

Longer days and the promise of Spring bring with them a feeling of new beginnings.  This is a fitting time to think about setting up and running a business.

You may have a great idea that you are considering turning into a business but feel concerned about your lack of knowledge over what is needed and how it can be afforded.

Our advice is to always start with a business plan. It’s essential in guiding you in establishing and growing your venture and it can be a good way of planning targets and goals and looking at how much investment you are going to require.

Business Start Up Finance

You can look at two types of business finance – debt or equity.

Debt essentially means you borrow the money to set up a business in the form of a loan, whereas equity relates to selling an ownership interest in your business. This sort of sale takes many forms, such as the admitting of a partner.

A grant is also achievable. There are many on the market that you can apply for depending on what your business is and how big it is.

Type of Business Start Up

One of the most important aspects of setting up a business is deciding which type is right for you.

It might be that you wish to become a sole trader, limited company, company limited by guarantee or a limited liability partnership.

The type you choose will be dependent on a number of factors. Your tax position needs to be considered alongside the nature of the business you wish to run.

Compliance

It is important to consider how the business complies with tax, legislation and insurance requirements, which are imposed by various authorities, as well as understand how to keep the accounting records in order and make sure all self-assessment returns are completed on time.

At Stephenson Smart we support many clients who have independent and small businesses.

“Chris has been brilliant. I can literally send him a text with a quick question, and he is always so helpful.
With each start-up I have worked on Chris has guided me through the process and helped me with the business model. He’s also been so supportive throughout Covid and the different claims available to me.
I haven’t had the need to worry about anything because I know Chris is always at the end of the phone with an answer.”

Sean Brown, Owner, Cambridgeshire Hair and Beauty

We guide our clients through the appropriate registrations, cash flow forecasts and provided performance updates, and pride ourselves on our personal approach to nurture exciting and new ventures in a cost-effective way.

Our dedicated business start-up team are always happy to help, so get in touch.

Related pages: Business Start Ups

Profile: Chris Goad BFP FCA

Advisory fuel rates company car – an overview by Partner, Chris Goad:

New company car advisory fuel rates have been published and took effect from 1 September 2022.

The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 December 2022 are:

HMRC guidance states that the rates only apply when you either:

• reimburse employees for business travel in their company cars
• require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 8p per mile. Electricity is not a fuel for car fuel benefit purposes.

If you would like to discuss your company car policy, please contact us.

Kayleigh Wilson FCCA CTA, Tax Manager at Stephenson Smart, responds to the Autumn Statement 2022.

It has been a turbulent few months in UK politics, that has impacted hugely on our economy.  On 17 November 2022 the current Chancellor, Jeremy Hunt, announced his Autumn Statement to the Commons; the government’s third fiscal statement in as many months.

This was a statement that was supported by research from the Office of Budget Responsibility and, most evident by his smiling and head nodding when it was delivered, the Prime Minister, former Chancellor, Rishi Sunak.

The Chancellor laid out three core priorities of stability, growth and public services. The government is seeking a balanced path to support the economy and return to growth, partially through public spending restraint and partially through tax rises.

But how does the Autumn Statement 2022 announcement affect you?

Income tax

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This was to be accelerated so that it took effect from April 2023. However, whilst the government aims to proceed with the cut in due course, this will only take place when economic conditions allow and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely.

At the Mini Budget on 23 September 2022 the government announced a plan to abolish the 45% additional rate of income tax from April 2023. It was announced on 3 October 2022 that the government would not proceed with this plan.

From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

Income tax allowances

The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively.

The government will uprate the married couple’s allowance and blind person’s allowance by inflation for 2023/24.

Dividends

The government has also confirmed that, from April 2023, the rates of taxation on dividend income will remain as follows:

• the dividend ordinary rate – 8.75%
• the dividend upper rate – 33.75%
• the dividend additional rate – 39.35%.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

In addition, the government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024.

These changes will apply to the whole of the UK.

National Insurance contributions

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the government has:

• reversed the temporary increase in NICs and
• cancelled the Health and Social Care Levy completely.

According to the government, not proceeding with the Levy will reduce tax for 920,000 businesses by nearly £10,000 on average next year.

For SMEs, the government predicts that the savings will be around £4,200 on average for small businesses and £21,700 for medium sized firms from 2023/24.

In addition, it will help almost 28 million people across the UK save £330 on average in 2023/24, with an additional saving of around £135 on average this year.

More detail for employees and employers

The changes took effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) generally reduced from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) reduced from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

The government hopes that most employees will receive the NICs reduction directly via the payroll in their November pay but acknowledges that some will have to wait until December or January, depending on the complexity of their employer’s payroll software.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

NICs thresholds

A similar principle to that outlined above for income tax thresholds will be followed in respect of the NICs upper earnings limit and upper profits limit. From July 2022, the NICs primary threshold and lower profits limit were increased to align with the personal allowance and will be maintained at this level from April 2023 until April 2028. The Class 2 lower profits threshold will also be fixed from April 2023 until April 2028 to align with the lower profits limit. They will again be £12,570 and £50,270 as appropriate.

In addition, the government will fix the lower earnings limit and the small profits threshold at 2022/23 levels in 2023/24, namely £6,396 and £6,725 per annum respectively.

The government will uprate the Class 2 and Class 3 NICs rates for 2023/24 to £3.45 per week and £17.45 respectively.

Finally, the government will fix the level at which employers start to pay Class 1 NICs for their employees at £9,100 from April 2023 until April 2028.

Capital Gains Tax

The government has announced that the capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

Inheritance tax

The inheritance tax nil-rate bands are already set at current levels until April 2026 and will stay fixed at these levels for a further two years until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000 and the residence nil-rate band taper will continue to start at £2 million.

Stamp Duty Land Tax

A number of changes were made to the Stamp Duty Land Tax (SDLT) regime earlier this year and these remain. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Higher rates may be payable where further residential properties are acquired.

However, the government has now confirmed that these changes will be a temporary SDLT reduction. The SDLT cut will remain in place until 31 March 2025 to support the housing market.

Corporation tax rates

It had been previously announced that the expected increase in the rate of corporation tax for many companies from April 2023 to 25% would not go ahead. However the government announced on 14 October 2022 that this increase will now proceed and this has been confirmed.

This means that, from April 2023, the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

In addition:

• bank corporation tax surcharge changes will proceed, meaning that from April 2023 banks will be charged an additional 3% rate on their profits above £100 million and
• from April 2023 the rate of diverted profits tax will increase from 25% to 31%.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses.

Companies incurring expenditure on plant and machinery should carefully consider the timing of their acquisitions to optimise their cashflow.

The government will also extend the 100% first year allowance for electric vehicle chargepoints to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.

Research and Development

For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%.

This government states that ‘this reform ensures that taxpayer support is as effective as possible, improves the competitiveness of the RDEC scheme, and is a step towards a simplified, single RDEC-like scheme for all’. The government will consult on the design of a single scheme and consider whether further support is necessary for R&D intensive SMEs. As previously announced at Autumn Budget 2021, the R&D tax reliefs will be reformed by expanding qualifying expenditure to include data and cloud costs, refocusing support towards innovation in the UK, and targeting abuse and improving compliance.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

VAT

The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2024, staying at £85,000 and £83,000 respectively.

Vehicles

The government will set the rates for the taxation of company car benefits until April 2028 to provide long term certainty for taxpayers and industry. Rates will continue to incentivise the take up of electric vehicles.

In addition, from 6 April 2023 car and van fuel benefits and the van benefit charge will increase in line with inflation.

In addition, from April 2025 electric cars, vans and motorcycles will begin to pay Vehicle Excise Duty in the same way as petrol and diesel vehicles. According to the government, this will ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate.

National Living Wage and National Minimum Wage uprating

The government will increase the National Living Wage (NLW) and National Minimum Wage from 1 April 2023 as follows:

• the rate for 23 year olds and over to £10.42 an hour
• the rate for 21-22 year olds to £10.18 an hour
• the rate for 18-20 year olds to £7.49 an hour
• the rate for 16-17 year olds to £5.28 an hour and
• the apprentice rate to £5.28 an hour.

Energy

The Autumn Statement 2022 sets out reforms to ensure businesses in the energy sector who are making extraordinary profits contribute more. From 1 January 2023, the Energy Profits Levy will be increased to 35% and extended to the end of March 2028 and a new, temporary 45% Electricity Generator Levy will be applied on the extraordinary returns being made by electricity generators.

The Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000.

The government is also setting a national ambition to reduce energy consumption by 15% by 2030, delivered through public and private investment, and a range of cost-free and low-cost steps to reduce energy demand.

It was predicted that this would be a tough fiscal statement, with tax rises announced.  The government blaming the long-term impact of Covid on the global economy and supply chains, and Russia’s war on the Ukraine.

The Office of Budget Responsibility has now said that we are in recession, this Autumn Statement 2022 designed to bring stability and growth to our economy to lessen the impact. Let’s just hope that the current Prime Minister and Chancellor stay in post long enough to see the announced changes through.

If we can help support you to understand the impact of these announced changes to you and your business, please get in touch.

Martyn Benstead, Partner at Stephenson Smart Chartered Accountants and Business Advisors explains why now, more than ever, employing an accountant is important:

Financially, as well as politically, these are turbulent times.

Replacements in Prime Minister and Chancellor of the Exchequer are coming thick and fast and with these changes, volatility in the financial markets and economic climate inevitably follow.

Why employ an accountant at times likes these?

Good accountants relish change as it enables them to advise clients to take advantage of tax reliefs and of opportunities to maximise wealth.

Interest rates, tax rates and the markets are all changing constantly and it is hard to follow and understand what to do for the best with our finances and how to plan for the future.

Employing an accountant to your team at times like these is crucial and at Stephenson Smart, we’re available to help.

“Martyn was extremely helpful and clear and went above and beyond in trying to resolve the issues we had – even though it was our first meeting with him. We definitely got the sense that he cared about his work and clients and would do all he could to help. We had a very positive experience and would highly recommend Martyn and Stephenson Smart.”

Key areas that may affect you:

Property

If you are thinking about selling a residential property, you may need to be aware of the requirement to submit a Capital Gains Tax (CGT) Return and pay the tax due online within 60 days of completion. We can calculate the likely CGT to assist you in making an informed decision over whether to sell or rent your property.

Depending on the asset, you may be able to reduce any tax you pay by claiming reliefs.

As well as CGT, another factor needing consideration over whether to sell would be your inheritance tax position. Some assets would be subject to inheritance tax if left to beneficiaries in your estate at your death. Careful planning can assist in minimising the impact of this.

Business

There have been a raft of changes in the rates and thresholds in Income Tax, Corporation Tax, National Insurance and Dividend Tax.

It’s more important than ever to consider your business structure – whether you’re operating as a sole trader, partnership or limited company, it may no longer be the best for your circumstances.

Please contact us if you need a fresh look at how you structure your business.