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

If you are recently self-employed, or in receipt of rental income or other sources of untaxed income, this may be the first year that you will be asked by HMRC to make payments on account to them, and you might be wondering why…

What are payments on account?

Payments on account are payments to HMRC towards your next year’s income tax liability. They are advance payments towards your tax bill (including Class 4 National Insurance if you’re self-employed).

Each payment is half your previous year’s uncollected tax bill. Payments are usually due by midnight on 31 January and 31 July.

Payments on account do not include anything you owe for capital gains or student loans (if you’re self-employed) – you’ll pay those in your ‘balancing payment’.

Do I have to pay the payments on account?

Yes. If you’re a UK taxpayer who pays less than 80% of your income tax at source and your tax bill is over £1,000, you will be asked by HMRC to make payments on account. However, if you expect your tax liability to be less in the following tax year you can make a claim to reduce your payments on account. If your adjusted payments on account are not sufficient to cover your liability, HMRC will charge 6 per cent interest (rate from 6 January 2023). If your payments on account are more than your tax liability, HMRC will pay repayment interest at 2.5% (rate from 6 January 2023).  If you will struggle to make the payments, you talk to HMRC about their Time to Pay scheme.

How are payments on account worked out?

For example:

If your tax liability for the 2020 to 2021 tax year is £3,000, and you haven’t made any payment on account towards this, you would owe HMRC £3,000 by 31 January 2023 to cover 2020/21.

In addition to this you will need to pay HMRC £1,500 towards your 2021/22 tax bill by 31 January 2023 and another £1,500 towards your 2021/22 tax bill by 31 July 2023.

If your tax bill for the 2021 to 2022 tax year is more than £3,000 (the total of your 2 payments on account), you’ll need to make a ‘balancing payment’ by 31 January 2024.

What if my circumstances change and I end up overpaying?

If you end up paying too much in advanced tax payments, HMRC will give you the difference back. This will either be via cheque or bank transfer, or by deducting the difference from your next tax bill.

If you know that you will pay too much on account because your tax bill next year will be lower, if you’re winding your business down, or because you’re passing retirement age and will no longer have to pay class 4 National Insurance, you can apply to HMRC to reduce your payments on account.

If you need help with working out your tax liability and ensuring you are compliant with HMRC please get in touch as soon as possible.

Profile: Henry Pettitt ACA CTA

Useful links: HMRC: Payments on account

That time of year is fast approaching where those who are self-employed, a partner or director in a business, or get income from property, may need to complete a Self Assessment tax return.

The deadline for completing this return online is 31 January 2023.

What is a Self Assessment tax return?

A Self Assessment tax return is currently an annual return that demonstrates to HMRC an individual’s annual income, that does not fall into their Pay As You Earn (PAYE) earnings.

So, for example, you may be employed and paying tax via your employer under the PAYE scheme, but also have a property that you rent out.  The additional income from the property should be declared to HMRC by completing a Self Assessment tax return.

HMRC send out ‘notice to file’ notifications.  If you have received one of these, you MUST complete a return by 31 January 2023.

If you have not received one of these, but fall under certain categories, you are advised to complete a Self Assessment return by 31 January 2023, for any earnings that fall into the period 6 April 2021 to 5 April 2022:

• If you are self-employed (unless this income is within the annual £1,000 trading allowance)
• If you are a partner in a business
• If you are a company director and have income on which tax is due that is not taxed under PAYE
• If you have property income – for example, you are renting out a room, a garage or a whole property to someone else (unless this income qualifies for rent-a-room relief or is within the annual £1,000 property allowance)
• If you want to claim tax relief on employment expenses over £2,500 in a year
• If you have to pay a tax charge on your child benefit, known as the high income child benefit charge
• If you have untaxed savings income. HMRC might be able to collect any tax due on small amounts without you doing a full tax return, but should always tell them about savings income of more than £1,000 a year (or £500 if you pay tax at the higher rate) and dividends of more than £2,000 a year
• If you have capital gains tax to pay which hasn’t already been paid in-year – this should be paid within 60 days of the sale of the property.

How do I complete a Self Assessment tax return?

There are many reliefs that can be applied to additional, private income.  If you have had a ‘notice to file’ or fall into any of the above categories, it may be worth employing the services of an accountant to help you complete your Self Assessment tax return.

Accountants are experts in ensuring the return is completed correctly and have the knowledge to apply any reliefs that you may be eligible for, such as married couple’s allowance or property allowances.

This is an incredibly busy time of year for us, but we will always help where we can. The earlier you approach us though, the better we can help you.

If you would like our support with your Self Assessment tax return, or any other advice relating to tax or business, please get in touch.

Profile: Sean Page BA ACA

Helpful links: HMRC

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.