The mandatory rollout of Making Tax Digital for Income Tax (MTD for ITSA) is scheduled to begin in April 2026. The process will significantly adjust how businesses, self-employed individuals, and landlords engage with HMRC. The system will require businesses and individuals to register, file, pay, and update their details through an online tax account.

It is important to begin to consider using accounting software that is equipped to send updates to HMRC in preparation for the launch of MTD for ITSA in April 2026.

According to HMRC, the software must be capable of:

• creating and storing digital records of your business income and expenses — you can choose to use spreadsheets with compatible software to do this;
• sending quarterly updates;
• submitting your tax return by 31 January after the end of the year; and
• receiving information from HMRC.

The MTD for ITSA rules will initially apply to businesses, self-employed individuals and landlords with an income of over £50,000 annually. MTD for ITSA will then be extended to those with an income between £30,000 and £50,000 from 6 April 2027. A new system of penalties for the late filing and late payment of tax for ITSA will also apply. At present there are no plans to extend ITSA to smaller businesses with income below £30,000 or to Corporation Tax.

Readers affected by this forthcoming change who have not yet converted to the use of an MTD compatible accounting software should consider their options, and we can help. Please call.

There are several types of reliefs from Inheritance Tax (IHT), one of which is IHT Business Relief. This can be a significant tax benefit for those with business interests, potentially offering either 50% or 100% relief from IHT on the value of business assets if certain criteria are met.

• 100% Business Relief can be claimed for a business, an interest in a business, or on shares in an unlisted company.

• 50% Business Relief is available for:

• Shares with more than 50% of the voting rights in a listed company.
• Land, buildings, or machinery owned by the deceased and used in a business they were involved with or controlled by.
• Land, buildings, or machinery used in a business and held in a trust benefiting from it.

This relief only applies if the deceased owned the business or asset for at least two years prior to their death.

However, there are limitations, for example, if the company primarily deals in securities, stocks, shares, land, buildings, or investments. In some situations, partial Business Relief might be possible.

Given its complexity, it is crucial to assess whether IHT Business Relief applies based on your specific circumstances.

The Chancellor has promised to take immediate action to fix the foundations of the economy, rebuild Britain and make every part of the country​ better off.

In her first speech as Chancellor, Rachel Reeves pledged to leaders of some of the UK’s pioneering industries to build growth on strong and secure foundations built on stability, investment and reform, and forged through a new partnership with the private sector.

Addressing the difficult economic inheritance this government faces, she committed to taking immediate action to drive sustained economic growth, the only route to improving the prosperity of our country and the living standards of working people.

Setting out her first steps to deliver on the government’s commitments in its manifesto that every action it takes will be based on sound money and economy stability, the Chancellor promised a new economic model that will grow the economy and keep taxes, inflation and mortgages as low as possible.

The Chancellor said had the UK economy grown at the average rate of OECD economies over the fourteen years from 2010, it would be £143.3 billion larger – worth £5,053 for every household in the country. This could have brought in an additional £58 billion in tax revenues in the last year alone to sustain our public services.

Taking decisive action, the government is today announcing a series of measures to lay the foundations for a dynamic, modern and growing economy, including taking urgent steps to build 1.5 million homes over the next five years and the immediate removal of the de facto ban on onshore wind in England, as part of its clean energy mission.

You can view the detail of the Chancellor’s statement at https://www.gov.uk/government/news/chancellor-unveils-a-new-era-for-economic-growth.

The new government will be judged by the actions flowing from these statements of intent, watch this space as we witness the progress of the “new brooms”.

There is an online tool, developed by HMRC, that allows taxpayers to check if they need to notify HMRC about additional income. The online tool can be found at www.gov.uk/check-additional-income-tax.

You are required to submit a self-assessment return if any of the following apply:

• you were self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on);
• you were a partner in a business partnership;
• you had a total taxable income of more than £150,000 in 2023-24 (£100,000 in 2022-23);
• you had to pay Capital Gains Tax when you sold or ‘disposed of’ something that increased in value; or
• you had to pay the High Income Child Benefit Charge.

You may also need to send a tax return if you have any untaxed income, such as:

• money from renting out a property;
• tips and commission;
• income from savings, investments and dividends; or
• foreign income.

There could be other reasons why you may be required to register for self-assessment and therefore using HMRC’s online tool can help you check if you are required to submit a return.

The changes to the High Income Child Benefit Charge (HICBC) announced as part of the Spring Budget came into effect on 6 April 2024. The income threshold at which HICBC starts to be charged has been increased from £50,000 to £60,000.

The HICBC is charged at the rate of 1% of the full Child Benefit award for each £200 (2023-24: £100) of income of the highest wage earner between £60,000 and £80,000. (2023-24: between £50,000 and £60,000). For taxpayers with income above £80,000 (2023-24: £60,000) the amount of the charge will equal the amount of Child Benefit received. The HICBC therefore either reduces or removes the financial benefit of receiving child benefit.

The increase in the HICBC threshold is expected to have a positive impact for around 485,000 families. Going forward, the government intends to administer the HICBC on a household rather than individual basis, but this move is expected to take until at least April 2026 to implement and may or may not be changed following the announced general election.

For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year - if backdating would otherwise create a HICBC liability in the 2023-24 tax year.

If the HICBC applies to you or your partner it is usually worthwhile to continue your claim for Child Benefit for your child, as it can help to protect certain benefits and will make sure your child receives a National Insurance number. However, you still have the choice to keep receiving child benefit and pay the tax charge, or you can elect to stop receiving Child Benefit and not pay the charge.

Employers can register on a voluntary basis (before the start of the tax year) to report and account for tax on certain benefits and expenses via the RTI system. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits at the tax year end.

Registration is now open to payroll your benefits from 6 April 2024. Effective 6 April 2023, HMRC ceased accepting new informal arrangements. If you have had one of these informal arrangements in place, you must register to payroll your expenses and benefits for 2024-25.

The deadline for submitting the 2023-24 forms P11D, P11D(b) and P9D is 6 July 2024. These forms can be submitted using commercial software or via HMRC’s PAYE online service. HMRC no longer accepts paper P11D and P11D(b) forms. Employees must also be provided with a copy of the information relating to them on these forms by the same date. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits.

It should be noted that a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. The deadline for paying Class 1A NICs is 22 July 2024 (or 19 July if paying by cheque).

Where no benefits were provided from 6 April 2023 to 5 April 2024 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D's accurately, including all the details of cars and loans provided. There are penalties of £100 per 50 employees for each month or part month a P11D(b) is late. There are also penalties and interest if late payments are made.

The taxable turnover threshold that determines whether businesses should be registered for VAT increased to £90,000 from 1 April 2024. The previous limit was £85,000. The taxable turnover threshold that determines whether businesses can apply for deregistration was also increased from £83,000 to £88,000 on the same date. It had been previously announced that the rates would be frozen until 31 March 2026. However, the Chancellor’s announcement makes the first change in 7 years to the rates and has been designed to help SMEs.

Businesses are required to register for VAT if they meet either of the following two conditions:

1. At the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £90,000 (2023-24: £85,000); or
2. At any time, there are reasonable grounds for believing that the value of taxable supplies to be made in the next 30 days alone will exceed £90,000 (2023-24: £85,000)

Businesses with no physical presence in the UK may also have a liability to be VAT registered in the UK if they supply any goods or services to the UK (or expect to in the next 30 days).

As expected, the Chancellor has found wriggle room in his fiscal rules that have allowed him to please his fellow Conservatives by reducing the impact of taxation. Not an unfamiliar tactic for a government in a general election year.

The impact of tax changes announced are summarised below.

Impact on personal finances

Further fall in employee National Insurance contributions (NIC)

As expected, the Chancellor has found headroom to make a further reduction of 2 percentage points, from 10% reduced to 8%, effective from April 2024.

Taken together with the previous 2% drop following the Autumn Statement, this represents a reduction in this tax charge by one-third. It means that a person earning £35,400 will be more than £900 a year better off.

High Income Child Benefit Charge (HICBC)

From 6 April 2024, the income threshold at which the HICBC can recover Child Benefits from parents is being increased from £50,000 to £60,000. The band of income that will affect the amount of any HICBC clawback is also doubled, from £60,000 to £80,000.

From April 2024, Child Benefits will be subject to the HICBC at a rate of 1% of benefits received for every £200 the highest paid parent exceeds £200. This means that when the highest paid earner’s income exceeds £80,000, all Child Benefits will be recovered.

For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year if backdating would otherwise create a HICBC liability in the 2023-24 tax year.

Capital Gains Tax (CGT) on UK residential property sales

The higher rate of CGT for residential property gains is being reduced from 28% to 24%. The change will take effect from 6 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.

The 18% and 28% rates of CGT that apply to gains in respect of carried interest remain unchanged from 6 April 2024. These rates previously mirrored those for CGT on disposals of residential property.

Restriction in scope of Agricultural Property Relief and Woodlands Relief

The scope of Agricultural Property Relief and Woodlands Relief will be restricted to property in the UK. Property located in the European Economic Area (EEA), the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK. The changes will take effect from 6 April 2024.

Stamp Duty Land Tax - Multiple Dwellings Relief (MDR)

The MDR is being abolished. This change will come into effect for transactions with an effective date on or after 1 June 2024. Transitional rules mean that MDR can still be claimed for contracts which are exchanged on or before 6 March 2024, regardless of when completion takes place. This is subject to various exclusions, for example that there is no variation of the contract after that date.

Changes to Non-UK Domiciled tax rules

The government will abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a simpler residence-based regime, which will take effect from 6 April 2025. Individuals who opt into the regime will not pay UK tax on foreign income and gains for the first four years of tax residence.

Overseas Workday Relief (OWR) will be reformed with eligibility for the relief based on the new regime. OWR will continue to provide Income Tax relief for earnings from duties conducted overseas for the first three years of tax residence with restrictions on remitting these earnings removed.

The government has also announced an intention to move to a residence-based regime for Inheritance Tax, with plans to publish a policy consultation on these changes, followed by draft legislation for a technical legislation, later in the year.

A new ISA

A new British ISA with its own allowance of £5,000 a year is to be introduced for investments in UK equity. Further details of the new scheme will be released later this year.

Flat lining Income Tax rates and allowances

One area of personal tax that was not eased in the Budget announcements was the fiscal drag created by the freezing of the Income Tax personal Allowance and High Income Threshold.

The Income Tax Personal Allowance (presently £12,570) and the higher rate threshold (presently £50,270) above which you will pay Income Tax at 40% not 20%, have not seen a significant increase for over four years.

In the same period, the Consumer Prices Index (CPI) has increased from 108 to 132. To keep pace with inflation, based on the CPI increase, a £45,000 salary in April 2020 would now need to be £55,000 to maintain the same purchasing power. And as the higher rate threshold has remained unchanged, at £50,270, the top £4,730 will be taxed at 40% not 20%.

Based on the CPI change, the present Personal Allowance should be circa £15,400 and the Higher Rate threshold £61,400 to maintain their monetary value.

The Income Tax Personal Allowance and Higher Rate Threshold will remain unchanged and will not be reviewed again until April 2028.

Vaping Products Duty

The government has published a consultation on the detailed design and implementation of the duty, which will close on 29 May 2024. Registration for the duty will open on 1 April 2026 with the duty taking effect from 1 October 2026 alongside a proportionate increase in tobacco duties.

The duty will apply to liquids for use in vaping devices and e-cigarettes at the following rates:

• £1 per 10ml for nicotine free liquids
• £2 per 10ml for liquid containing nicotine at concentrations between 0.1 to 10.9mg per ml
• £3 per 10ml for liquids containing nicotine at concentrations 11mg per ml, or above

The government will also make a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026.

Alcohol Duties

These duties will be frozen from 1 August 2024 until 1 February 2025. This extends the present six-month freeze announced last year.

Fuel Duty main rates

The rates of Fuel Duty introduced at Spring Statement in March 2022, and extended at Spring Budget in March 2023, will be extended for a further 12 months.

This will maintain the cut in the rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5 pence per litre, and the proportionate percentage cut (equivalent to 5 pence per litre from the main Fuel Duty rate of 57.95 pence per litre) in other lower rates and the rates for rebated fuels, where practical.

The changes will take effect from 23 March 2024.

Impact on UK businesses

VAT registration threshold increase

The taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £85,000 to £90,000. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £83,000 to £88,000.

These changes will be effective from 1 April 2024.

This will benefit smaller traders who are tiptoeing towards the present registration threshold of £85,000 and really don’t want to register as they will not be able to pass on the 20% VAT to their customers.

NIC cuts for the self-employed

The Chancellor has made a further reduction in the Class 4 NIC paid by the self-employed. The further cut will be a reduction from 8% of chargeable profits to 6%. Essentially, the overall reduction will be from 9% to 6% effective from 6 April 2024.

No change in Corporation Tax (CT) rates

For the financial year beginning 1 April 2025, the rates of CT will remain unchanged. The main rate will stay at 25% with the reduced small profits rate at 19%.

Abolition of the Furnished Holiday Lets (FHL) tax regime

In a surprise announcement, the present favourable tax benefits of letting properties as short-term holiday lets is to be abolished from April 2025.

Draft legislation will be published at a future date and will include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.

Full expensing to be extended to leased assets

At present, full-expensing of plant or machinery for leasing is excluded from a claim under the full-expensing or the 50% first year allowance for special rate assets.

The government will shortly publish draft legislation to bring leased assets into these reliefs.

Support for independent film makers

This relief will benefit independent filmmakers and will be provided via the Audio-Visual Expenditure Credit.

The Independent Film Tax Credit is aimed at films that have budgets (or total core expenditure) of up to £15 million and that receive a new accreditation from the British Film Institute. The credit rate will be 53% of qualifying expenditure. Qualifying expenditure is capped at a maximum of 80% of a film’s total core expenditure; the most taxable credit a film can receive will be £6.36 million.

The changes will take effect for films that commence principal photography from 1 April 2024 on expenditure incurred from 1 April 2024. Claims may be submitted from 1 April 2025.

Permanent extension for higher rates of Theatre, Orchestra and Museums and Galleries Tax Reliefs

This change affects the permanent extension of 40%/45% (for non-touring/touring and orchestral productions respectively) headline rates of relief for Theatre Tax Relief, Orchestra Relief, and Museums and Galleries Exhibition Tax Relief. These rates will take effect from 1 April 2025.

Energy Profits Levy — One Year Extension

As announced at Spring Budget 2024, the government will extend the sunset end date of the Energy Profits Levy to 31 March 2029. This is expected to raise a further £1.5 billion for the Treasury.

OUR SUMMARY

There are no radical changes in this Budget from a tax point of view although the Chancellor seems to have abolished as much as he has created in new regulations.

The Chancellor’s Budget speech to parliament was also peppered with much point scoring against the opposition parties. We will have to wait and see if the contents of the Budget provide a big enough rise in polling to prompt the Prime Minister to plump for a May general election.

If you earn over £100,000 in any tax year your personal allowance is gradually reduced by £1 for every £2 of adjusted net income over £100,000 irrespective of age. This means that any taxable receipt that takes your income over £100,000 will result in a reduction in personal tax allowances. Accordingly, your personal Income Tax allowance would be reduced to zero if your adjusted net income is £125,140 or above.

Your adjusted net income is your total taxable income before any personal allowances, less certain tax reliefs such as trading losses and certain charitable donations and pension contributions.

For the current tax year, if your adjusted net income is likely to fall between £100,000 and £125,140 you would pay an effective marginal rate of tax of 60% as your £12,570 tax-free personal allowance is gradually withdrawn.

If your income sits within this band, you should consider planning opportunities available to avoid this personal allowance trap by reducing your income below £100,000. This can include giving gifts to charity, increasing pension contributions and participating in certain investment schemes.

A higher rate or additional rate taxpayer who wanted to reduce their tax bill could make a gift to charity in the current tax year and elect to carry back the contribution to 2022-23. A request to carry back the donation must be made before or at the same time as the 2022-23 self-assessment return is completed i.e., by 31 January 2024.

There are two ways to consider the effects or benefits of business and personal expenditure.

The payment of rates or utility costs are an essential part of our daily expenditure, but it would be difficult to view them as an investment.

Whereas the cost of building a new online sales platform for your business may open up the prospect to win additional sales for your business or additional income for your family finances. But the costs of the build are a real expense.

Any costs that you undertake that will have a direct impact on improving your financial situation should be considered an investment rather than an expense.

Having made this distinction, it makes sense, when you are considering cost cutting or planning your finances, to protect investment costs and see if you can reduce those costs that are not going to have a direct, positive influence in 2024.

In certain cases, the two distinctions may rub shoulders with each other. For example, investing in solar technology, while not impacting your ability to earn more, may help you reduce your ongoing electricity costs.

If we are to recover from the economic challenges of the past few years, we must address a more considered reclassification of our planned outgoings.

Be wary of reducing investment expenditure.

Other aspects of your expenditure that will also need consideration in this exercise could include:

• Will an investment in a new piece of plant really have a positive impact on your sales or could the expenditure be deferred until trading conditions improve?
• Do you really need to change your car? It may get you from A to B more comfortably, but it will likely use financial resources that may be more profitably employed in improving productivity and sales/income.

Trimming costs or expenditure that will have little impact on your future financial prospects makes sense.

Trimming “investment” costs that could have a positive impact makes less sense.

We recommend that your take this distinction into your planning for 2024. And if you need help creating plans, pick up the phone. We can help.

The marriage allowance applies to married couples and those in a civil partnership where a spouse or civil partner does not pay tax or pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2023-24).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used where the recipient of the transfer (the higher earning partner) does not pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,571 and £50,270 in 2023-24. For those living in Scotland this would usually mean income between £12,571 and £43,662.

Making a claim, could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year. In fact, even if a spouse or civil partner has died since 5 April 2018, the surviving person can still claim the allowance (if they qualify) by contacting HMRC’s Income Tax helpline.

If you meet the eligibility requirements and have not yet claimed the allowance, you can backdate your claim to 6 April 2019. This could result in a total tax break of up to £1,256 if you can claim for 2019-20, 2020-21, 2021-22, 2022-23 as well as the current 2023-24 tax year. If you claim now, you can backdate your claim for four years (if eligible) as well as for the current tax year. Even if you are no longer eligible or would have been in all or any of the preceding years, then you can claim your entitlement.

HMRC’s online Marriage Allowance calculator can be used by couples to find out if they are eligible for the relief. An application can be made online at GOV.UK.

The Chancellor of the Exchequer, Jeremy Hunt, has delivered his Autumn Statement to the House of Commons. The government continues to be faced with challenging economic conditions as the cost of living crisis continues to affect many families across the UK.

The Chancellor, however, had some good news with inflation falling to 4.6% in October, down from a peak of over 11% last year. This together with the prospect of an upcoming general election suggested that there may have been more giveaways than in a usual Autumn Statement and this seems to have been borne out.

The OBR also provided good news and forecast inflation to continue to fall gradually. CPI inflation is expected to be 4.8% in Q4 2023 and fall further to 2.8% in Q4 2024. The OBR expects CPI inflation to average 1.8% over 2025 before returning to the 2% target in the medium term.

The following summary of the measures announced by the Chancellor as part of the Autumn Statement measures is split into two sections:

1. Taxation changes
2. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

Taxation changes

National Insurance

The Chancellor announced a number of changes to the National Insurance contributions (NICs) rates.

His first announcement concerned the removal of Class 2 NICs for the self-employed. This means that self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs from 6 April 2024. Class 2 NICs are currently paid by the self-employed who make profits above £12,570, in order to qualify for benefits such as the state pension. This change effectively abolishes Class 2 NICs for some two million self-employed people. The self-employed benefitting from this change will continue to receive access to contributory benefits including the State Pension. Those currently paying Class 2 NICs voluntarily will still be able to do so at the same rate.

In addition, the Chancellor announced that the main rate of self-employed National Insurance, Class 4 NICs, on all earnings between £12,570 and £50,270 will be cut by 1%, from 9% to 8% from April 2024.

The Chancellor saved his largest giveaway of the Autumn Statement for the end of his speech with the announcement of a reduction in the main rate of Employee National Insurance. This will see Class 1 NICs reduced by 2% from 12% to 10%. Unusually, this measure will come into effect before the start of the next tax year, effectively, from 6 January 2024. Perhaps this can be seen as a not-so-subtle hint of an earlier than expected general election? The Chancellor said this change will save the average worker some £450 a year.

Business Tax - Full expensing

The major announcement in the Autumn Statement affecting business investment related to ‘full expensing’. Full expensing was introduced at Spring Budget 2023 and offers companies the ability to write off the purchase of qualifying plant and machinery. The relief was initially introduced for a 3-year period from 1 April 2023 until 31 March 2026. In the Autumn Statement, the Chancellor announced that the government will now make full expensing permanent. According to the Chancellor, this means that the UK will now have one of the most generous capital allowances regimes in the world.

Full expensing is available on expenditure that includes, but is not limited to, warehousing equipment such as forklift trucks, tools such as ladders and drills, construction equipment such as bulldozers and excavators, machines such as computers and printers, vehicles such as tractors, lorries and vans, office equipment such as chairs and desks, and some fixtures such as kitchen and bathroom fittings and fire alarm systems. This effectively allows qualifying purchases to be written off completely against company taxable profits in the year when purchased.

Business Tax – R&D

The existing R&D Expenditure Credit and Small and Medium Enterprise Scheme will be merged from April 2024, simplifying the system and boosting innovation in the UK.

The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%, and the threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30%, benefiting a further 5,000 SMEs.

Other announcements

National Living Wage increases

Promoted as the “Biggest ever increase to the National Living Wage (NLW)” the Chancellor confirmed the following changes that will apply from 1 April 2024. For the first time, eligibility for the NLW will be extended to 21 year olds. The increase will see the NLW rate increased to £11.44 per hour.

The National Minimum Wage (NMW) rates are also to be increased from the same date, 1 April 2024.

The new rates will be:

• 18 to 20 year-old rate will be £8.60 per hour
• 16 to 17 year-old rate will be £6.40 per hour
• The apprentice rate will also be £6.40 per hour

It is interesting to reflect that the impact of these increases will fall on employers, not the government.

Back to Work

The government is expanding its programme of employment support for the long-term unemployed for two years from 2024 across England and Wales.

Mandatory work placements will boost skills and employability for those who have not found a job after 18 months of intensive support. Those who choose not to engage with the work search process for six months will have their claims closed and benefits stopped.

Making Tax Digital

It was announced during the Autumn Statement that the government will introduce a package of changes to simplify the design of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA). This will benefit 1.7 million businesses and landlords set to be mandated to use MTD.

It was announced late last year that the introduction of MTD had been delayed until April 2026. From that date, those with annual income over £50,000 will be mandated to join the scheme, followed by those with income over £30,000 from April 2027. The government has said they will keep under review the decision on whether MTD for ITSA will be extended to businesses and landlords with income below £30,000.

Business Rates

The Chancellor announced a business rates support package worth £4.3 billion over the next 5 years. This included a rollover of 75% Retail, Hospitality and Leisure relief for 230,000 properties and a freeze to the small business multiplier, which will protect around 90% of ratepayers for a fourth consecutive year.

Investment Zones

The Investment Zones programme and freeport tax reliefs will be extended from 5 years to 10 years. This will double the envelope of funding and tax reliefs available in each Investment Zone from £80 million to £160 million, to provide greater certainty to investors.

The Chancellor also announced that three advanced manufacturing Investment Zones will be established in Greater Manchester, East Midlands, and West Midlands.

Alcohol duty

As part of the Autumn Statement measures the Chancellor announced, to a big cheer, that the duty rates on beer, cider, wine and spirits will be frozen at the current rates until 1 August 2024.

Tobacco duty

The duty rates on tobacco products were increased by 2% above the rate of inflation (based on RPI) effective from 6pm on 22 November 2023. The Chancellor also announced that the duty for hand-rolling tobacco increased by RPI plus 12% at the same time. The government remains committed to maintaining high tobacco duty rates as a tool to reduce smoking.

Benefits Uprating

Benefit payments will rise by September Consumer Price Index (CPI) inflation – 6.7% rather than what many had predicted which could have seen the Chancellor using the lower 4.6% October rate.

This means the government will raise benefits, including Universal Credit and other working age benefits by 6.7% from April 2024.

The new full State Pension will increase by 8.5%, in line with average earnings growth, from £203.85 per week in 2023-24 to £221.20 per week in 2024-25.  The basic State Pension and Pension Credit standard minimum guarantee will also increase by the same percentage.

Local Housing Allowance

To support low income households, the government will increase the Local Housing Allowance rate to cover the lowest 30% of rents from April 2024. This will benefit 1.6 million households with an average gain of £800 next year.

There are now less than 100 days to file your 2022-23 Self-Assessment tax return online. The deadline is 31 January 2024. The deadline for paper returns ended on 31 October 2023.

You should also be aware that payment of any tax due should also be made by this date, 31 January 2024. This includes the payment of any balance of Self-Assessment liability for the 2022-23 plus the first payment on account due for the current 2023-24 tax year.

If you miss the filing deadline you will usually be charged a £100 fixed penalty. If your return is up to 3 months late, regardless of whether you owed tax or not, and if you do not file and pay before 1 May 2024, then you will face further penalties unless you have arranged to pay with HMRC.

HMRC is encouraging taxpayers to complete their tax return as early as possible to avoid getting more stressed as the filing date looms. Those who submit their returns early still have until 31 January 2024 to pay any tax due.

If you are filing online for the first time you should ensure you register to use HMRC’s Self-Assessment online service as soon as possible. Once registered an activation code will be sent by mail. This process can take up to 10 working days.

There are a number of conditions that must be satisfied for an activity to be within the scope of UK VAT.

An activity will fall within the scope of VAT when all the following conditions are met:

• it is done for consideration;
• it is a supply of goods or services;
• the supply is made in the UK;
• it is made by a taxable person; or
• it is made in the course or furtherance of any business carried on or to be carried on by that person.

One of the conditions that needs to be carefully considered when deciding whether an activity is within the scope of VAT is the concept that the supply must be made in the course or furtherance of business.

This idea of 'business' is one of the less well-known conditions. However, the concept of business is an important condition that determines whether a business must charge VAT on their sales, known as output VAT, and on its ability to recover VAT, known as input tax.

In most cases it will be clear whether an activity is ‘business’ related and should fall within the scope of VAT. However, in cases where the result is less clear cut, there is a test based on an historic court case where the court identified six factors or indicators to determine whether an activity was ‘business’ related. The test should be applied to individual activities separately.

HMRC’s internal manuals provide the following example:

Imagine a person registered as a self-employed plumber who now and again renovates old cars. They do not automatically have to charge tax when selling those cars. This is because it would be hard to see the activity of car renovation being included within their business as a plumber.

On the other hand, if the car activity can be seen to have the attributes of a business in its own right, then the plumber would have to charge tax on the sales.

There are a number of reasons why you might need to complete a Self-Assessment return for the first time. This includes if you are self-employed, have an annual income over £100,000 and / or have income from savings, investment or property.

Taxpayers that need to complete a Self-Assessment return for the first time (for the 2022-23 tax year) should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October 2023.

HMRC has an online tool www.gov.uk/check-if-you-need-tax-return/ that can help you check if you are required to submit a Self-Assessment return.

The following list summarises some of the reasons when taxpayers are usually required to submit a Self-Assessment return:

• newly self-employed (earning more than £1,000);
• individuals with multiple sources of income;
• taxpayers that have received any untaxed income, for example earning money for creating online content;
• individuals with income over £100,000, and note, that from tax year 2023-24 the Self-Assessment threshold for individuals taxed through PAYE only, will change from £100,000 to £150,000;
• those who earn income from property that they own and rent out;
• who are a new partner in a business partnership;
• taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
• those receiving interest on savings or investment income of £10,000 or more before tax;
• taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax; and
• taxpayers who are self-employed and earn less than £1,000 but wish to pay Class 2 NICs voluntarily to protect their entitlement to State Pension and certain benefits.

In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes, effectively, at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold the gain or loss will be calculated from when the asset was first owned by the original spouse or civil partner.

There are a few exceptions that couples should be aware of when the relief does not apply. This mainly relates to the use of goods which are sold on by the transferee’s business and for couples that are separated or divorced. The CGT rules that apply during separation and divorce changed for disposals that occurred on or after 6 April 2023.

These changes extended the period for separating spouses and civil partners to make no gain/no loss transfers extended to up to three years after they cease to live together. The new rules also provide for an unlimited time if the assets are the subject of a formal divorce agreement. Previously, the no gain/no loss treatment was only available in relation to any disposals in the remainder of the tax year in which the separation occurred. If a transfer does not ultimately qualify for relief, then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.

There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.

HMRC has issued an updated version of their online guidance entitled ‘Check if a text message you've received from HMRC is genuine’. The guidance provides a current list of genuine text messages issued by HMRC.

The list has been updated to include details of a text message HMRC is sending to some taxpayers about a Self-Assessment tax check.

HMRC is also sending certain taxpayers a text message if they call an HMRC helpline from a mobile phone. These messages might include a link to relevant GOV.UK information or webchat.

Although these communications are genuine, taxpayers should still be wary of receiving phishing texts, emails and phone calls that are purported to come from HMRC. Messages from HRMC will never ask for personal or financial information.

Fake messages can appear to be genuine but clicking on a link from within the message or email can result in personal information being compromised and the possibility of computer viruses affecting your computer or smartphone. If you are unsure as to the validity of any message it should not be opened until the sender can be verified. Any suspicious text messages can be sent to 60599 or by email to phishing@hmrc.gov.uk.

The Bank of England’s Monetary Policy Committee (MPC) met on 10 May 2023 and voted 7-2 in favour of raising interest rates by 25 basis points to 4.5% in a move to try and continue to tackle continued inflation. This is the twelfth consecutive time that the MPC has increased interest rates with rates now the highest they have been since 2008.

This means that the late payment interest rate applied to the main taxes and duties that HMRC charges increased by 0.25% to 7%.

These changes came into effect on:

• 22 May 2023 for quarterly instalment payments; and
• 31 May 2023 for non-quarterly instalments payments.

The repayment interest rates applied to the main taxes and duties that HMRC pays interest on increased by 0.25% to 3.5% from 31 May 2023. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

The annual exempt amount applicable to Capital Gains Tax (CGT) has been reduced to £6,000 (from £12,300) for the new 2023-24 tax year.

CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT.

A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). The rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers.

Most people are aware that they do not usually have to pay CGT when they sell their qualifying residential property used wholly as a main family residence. However other sales of property that are not a principle private residence (PPR) will be subject to CGT.

This includes:

• buy-to-let properties
• business premises
• land
• inherited property

The deadline for paying any CGT due on the sale of a residential property is 60-days. This means that a CGT return needs to be completed and a payment on account of any CGT due should be made within 60-days of the completion of the transaction. This applies to UK residents selling UK residential property where CGT is due.

There are various reliefs available from CGT for the sale of qualifying business assets.

Designed in part to help offset the increased Corporation Tax main rate, the Chancellor announced the introduction of a new ground-breaking 100% first-year capital allowance for qualifying plant and machinery assets. This measure is also expected to help boost business investment and growth.

The new measure, known as full expensing, will initially apply from 1 April 2023 until 31 March 2026 although the Chancellor suggested that it may be made permanent in due course. The measure builds on the success of the super-deduction which ends on 31 March 2023. Under full expensing, for every pound a company invests, their taxes will be cut by up to 25p.

To qualify for full expensing, expenditure must be incurred on the provision of “main rate” plant or machinery. It should be noted that full expensing is available to companies subject to Corporation Tax only.

Plant and machinery that may qualify for full expensing includes (but is not limited to):

• machines such as computers, printers, lathes and planers
• office equipment such as desks and chairs
• vehicles such as vans, lorries and tractors (but not cars)
• warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers
• tools such as ladders and drills
• construction equipment such as excavators, compactors, and bulldozers
• some fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential property.

For “special rate” expenditure, that doesn’t qualify for full expensing, a 50% first-year allowance (FYA) can be claimed instead. The 50% FYA was introduced alongside the super-deduction and was due to end on 31 March 2023. It will now be extended by three years to 31 March 2026.

Businesses can also continue to use the Annual Investment Allowance (AIA) to claim a 100% tax deduction on qualifying expenditure on plant and machinery of up to £1m per year. This includes unincorporated businesses and most partnerships.

As expected, the Chancellor, Jeremy Hunt, resisted pressure to reduce taxes in any significant way, and the majority of his announced changes were already in the public domain. According to the Chancellor, the UK economy is on track to grow in the coming year with inflation halving.

We have listed any new variations in the UK tax rates, allowances, reliefs and other matters of interest in the update set out below.

Impact on personal finances

Increase in pensions’ tax support
The present £40,000 cap on annual pension contributions that qualify for Income Tax relief is being increased to £60,000 from 6 April 2023.

The present Lifetime Allowance is being abolished.

Both of these changes are intended to incentivise older employees to continue in work whilst continuing to build additional pension savings.

In addition, the Money Purchase Annual Allowance will increase from £4,000 to £10,000 and the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from 6 April 2023.

The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

Childcare support increased 
Childcare support in England is being expanded to include children over the age of 9 months. The announcement confirmed 30-hours of free childcare for every child over the age of 9 months, with support being phased in until every single eligible working parent of under 5s gets this support from September 2025.

The changes will be introduced in phases, with 15-hours of free childcare for working parents of 2-year-olds coming into effect in April 2024 and 15 hours of free childcare for working parents of children from 9 months from September 2024.

Parents receiving Universal Credits as well as being in employment will receive financial support to include upfront payment of childcare costs. The maximum they can claim will also be boosted to £951 for one child and £.1,630 for two children – an increase of around 50%

Extension of Energy Price Guarantee
It was announced that the Energy Price Guarantee cap of £2,500 would be extended for the next three months until 30 June 2023. From 1 July 2023 (rather than 1 April 2023 as previously announced), this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500).

Also, from 1 July 2023, the government will adjust the Energy Price Guarantee premium that over 4 million households pay for their prepayment meter. This will bring their charges into line with comparable customers who pay by direct debit.

Duties on fuel frozen
The proposed 11p rise in fuel duty will be cancelled thus maintaining last year’s 5p cut for another 12-months.

Draught Relief
Draught Relief has also been significantly extended from 5% to 9.2%, so that the duty on an average draught pint of beer served in a pub, from 1 August 2023, will be up to 11 pence lower than the duty in supermarkets. The commitment to duty on a pub pint being lower than the supermarket has been termed the “Brexit Pubs Guarantee” by the Chancellor, and this change will also be enjoyed by every pub in Northern Ireland thanks to the Windsor Framework.

Access to employment reforms
Major set of reforms to support people into work, removing barriers that stop those on benefits, older workers, and those with health conditions who want to work.

Impact on UK businesses

Full expensing
The major announcement affecting business investment, and to reduce the impact of the forthcoming increase in Corporation Tax from April 2023, is the ability of companies to “fully expense” the purchase of qualifying plant and other equipment.

This will include spending on, but is not limited to, warehousing equipment such as forklift trucks, tools such as ladders and drills, construction equipment such as bulldozers and excavators, machines such as computers and printers, vehicles such as tractors, lorries and vans, office equipment such as chairs and desks, and some fixtures such as kitchen and bathroom fittings and fire alarm systems.
Effectively, qualifying purchases can be written off completely against company taxable profits.

The ‘full expensing’ policy will be introduced from 1 April 2023 until 31 March 2026.

The 50% First Year Allowance (FYA)
This current allowance lets taxpayers deduct 50% of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. This includes long life assets such as solar panels and thermal insulation on buildings.

The 50% FYA was introduced alongside the super-deduction and was due to end on 31 March 2023. It will now be extended by three years to 31 March 2026. For each year following the first year, 6% of the remaining cost will be written off via Writing Down Allowances (WDAs).

The 50% FYA allows for faster relief than under the default WDAs-only regime, which is worth 6% each year, including year one.

As part of his commitment to maintain a stable economy, the Chancellor’s long-term ambition is to make the 50% FYA permanent.

Simplifying tax system
Changes to simplify the tax system of the UK were underlined by a number of changes to positively impact the lives of small business owners. They are:

• Changes to the Enterprise Management Incentives (EMI) scheme from April 2023 to simplify the process to grant options and reduce the administrative burden on participating companies. This includes, from 6 April 2023, removing requirements to sign a working time declaration and setting out details of share restrictions in option agreements.
• Delivery of IT systems to enable tax agents to payroll benefits in kind on behalf of their clients – allowing agents to better support their clients and reducing burdens on employers.
• The government will extend the Help to Save scheme by 18-months, on its current terms, until April 2025. A consultation will also be launched on longer terms options for the scheme.
• Measures to simplify the customs import and export processes, including improvements to the Simplified Customs Declaration Process, and the Modernising Authorisations project.

R&D tax credits
A £500 million per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits was announced. In full, the Chancellor’s announced changes in this important area are:

• The scheme is targeted specifically at loss making R&D intensive SMEs. Focusing support towards those most impacted by the rate changes introduced at Autumn Statement 2022.
• A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure.
• Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non-R&D intensive loss makers.
• Around 1,000 claiming companies will come from the pharmaceutical and life sciences industry. This will support the development of life saving medicines.
• Around 4,000 digital SMEs will be from the computer programming, consultancy, and related activities sector. This will support the development of AI, machine learning and other digital based technologies.
• Around 3,000 other manufacturing firms, and another 3,000 professional, scientific, and technical activities firms will also qualify for the enhanced support.
• This builds on previously announced changes to support modern research methods by expanding the scope of qualifying expenditure for R&D reliefs to include data & cloud computing costs.
• The permanent increase from 13% to 20% for the R&D Expenditure Credit rate announced at Autumn Statement 2022 also means the UK now has the joint highest uncapped headline rate of tax relief in the G7 for large companies.

Creative sector tax concessions
Newly announced reforms to tax reliefs for the creative sectors will ensure theatres, orchestras, museums and galleries are protected against ongoing economic pressures and will continue to guarantee that more world-class productions are made in the UK.

UK AI research support
£900 million of funding was committed for an AI Research Resource and an exascale computer – making the UK one of only a handful of countries to have one – and a commitment to £2.5 billion ten-year quantum research and innovation programme through the government’s new Quantum Strategy.

Levelling up
The following measures were announced to help level-up growth across the UK:

• Greater responsibility for local leaders to grow their local economy.
• Over £200 million for high quality local regeneration projects in areas of need, from the transformation of Ashington Town Centre to a skills and education campus in Blackburn.
• Over £400 million for new Levelling Up Partnerships for twenty areas in England, such as Rochdale and Mansfield.
• Business rates retention expanded to more areas in the next Parliament.
• Delivering trailblazer devolution deals for the West Midlands and Greater Manchester Combined Authorities that include single multi-year settlements for the next Spending Review, alongside a commitment to negotiate further devolution deals in England.
• 12 Investment Zones across the UK including 4 across Scotland, Wales and Northern Ireland.
• £8.8 billion over the next five-year funding period for a second round of the City Region Sustainable Transport Settlements.

Many of the Budget decisions on tax and spending apply in Scotland, Wales and Northern Ireland. As a result of decisions that do not apply UK-wide, the Scottish Government will receive around an additional £320 million over 2023-24 and 2024-25, the Welsh Government will receive £180 million, and the Northern Ireland Executive will receive £130 million.

Previously agreed changes effective from April 2023
Changes to personal or business finances (from April 2023) that were agreed or announced prior to the Budget presentation by Jeremy Hunt on 15 March are listed below:

• £900 Cost of Living Payment for households on means-tested benefits in 2023-24
• £300 Pensioner Cost of Living Payment in 2023-24
• £150 Disability Cost of Living Payment in 2023-24
• Business Rates: freezing the multiplier in 2023-24
• Business Rates: 75% relief for Retail, Hospitality and Leisure sectors in 2023-24, up to £110,000 cash cap
• Business Rates: three-year transitional relief to limit bill increases at the revaluation
• Business Rates: three-year supporting small businesses scheme for properties losing Small Business Rates Relief or Rural Rates Relief
• Business Rates: delay improvement relief by one year to April 2024
• Business Rates: relief for property improvements from 2024-25
• Income Tax and National Insurance: maintain thresholds at 2023-24 levels until April 2028
• Inheritance Tax: maintain thresholds at current level until April 2028
• Income Tax: reduce the dividend allowance from £2,000 to £1,000 from April 2023 and then £500 from April 2024
• Income Tax: reduce the additional rate threshold from £150,000 to £125,140 from April 2023
• Capital Gains Tax: reduce the annual exempt amount from £12,300 to £6,000 from April 2023 then £3,000 from April 2024
• Vehicle Excise Duty: equalise treatment of electric and internal combustion engine vehicles from April 2025
• National Insurance: maintain the secondary threshold for employer contributions at current level from April 2023 until April 2028
• R&D tax reliefs: rebalance generosity of reliefs from 1 April 2023
• VAT: maintain registration threshold at current level, £85,000 to 31 March 2026
• Van benefit charge: uprate with CPI in 2023-24
• Car fuel benefit charge: uprate with CPI in 2023-24
• First Year Allowance for electric vehicle charge points: extend for a further two years until April 2025
• Pension Credit: uprate Standard Minimum Guarantee by CPI in 2023-24
• Benefit cap levels: uprate by CPI in 2023-24
• Capital Gains Tax: extend the period for no gain/no loss transfers to three years for couples that separate or divorce
• Annual Investment Allowance: permanently set at £1m from April 2023
• Income Tax: basis periods reform for the self-employed from April 2024 with transition year in 2023-24
• Corporation Tax: 19% rate for profits up to £50,000, tapering to main rate of 25% for profits over £250,000, from April 2023

OUR SUMMARY

One thing is for sure, our tax code and the supporting business regulations are becoming more complex in spite of the promoted changes towards simplifying matters.

We encourage readers who are concerned or interested in more information on any of the announcements described in this short update, to pick up the phone to discuss how you may be affected.

The annual exempt amount applicable to Capital Gains Tax (CGT) is to be more than halved from April 2023. This means that the exempt amount will be reduced from £12,300 to £6,000 from April 2023 before being further reduced to £3,000 from April 2024.

Taxpayers with small gains should consider the benefits of crystalising these gains before 6 April 2023 in order to fully utilise the £12,300 allowance for 2022-23. Married couples and civil partners both qualify for the £12,300 allowance in which case organising joint ownership of these assets before disposal may be beneficial if each individual partner is not fully utilising their annual allowance.

Transfers between spouses and civil partners are exempt from CGT. Making use of the full allowance can, in some circumstances, effectively double the CGT exemption before the end of the current tax year to £24,600.

CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers pay basic rate tax on their income and make a small capital gain, they may be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT.

A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). The rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers.

The Corporation Tax main rate will increase to 25% from 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will also be introduced from the same date for companies with profits of up to £50,000 - ensuring these companies pay Corporation Tax at the same rate as currently.

Where a company has profits between £50,000 and £250,000 a marginal rate of Corporation Tax will apply that bridges the gap between the lower and upper rates. The lower and upper limits will be proportionately reduced for short accounting periods of less than 12 months and where there are associated companies.

The effect of marginal relief is that the effective rate of Corporation Tax gradually increases from 19% where profits exceed £50,000 to 25% where profits are more than £250,000.

The amount of Corporation Tax payable will be found by multiplying taxable profits and gains by the main rate of 25% and deducting marginal relief. For the fiscal year 2023, the marginal relief fraction will be 3/200. HMRC also offers an online calculator that can be used to check basic eligibility for marginal relief. The calculator can be found at www.tax.service.gov.uk/marginal-relief-calculator.

For certain businesses it may be prudent to reconsider associated company relationships before April 2023. This will help avoid partial loss of the lower 19% rate or marginal tapering relief.

A statement was made by the Financial Secretary to the Treasury on 19 December 2022. It confirmed that the roll-out of Making Tax Digital for Income Tax, due to commence April 2024, is being delayed. The statement says:

Across the globe, digitalisation of tax is increasingly the norm. Modernisation of UK businesses and the tax system remains of crucial importance to the UK.

Making Tax Digital (MTD) for VAT is already demonstrating the benefits to businesses that digital ways of working can bring.

MTD for Income Tax Self-Assessment (ITSA) will follow, with businesses, self-employed individuals, and landlords keeping digital records and using MTD-compatible software to submit updates to HM Revenue and Customs.

The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC.

That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually.

The government is therefore announcing more time to prepare, so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.

The mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals, and landlords with income over £50,000 mandated to join first.

Those with income over £30,000 will be mandated from April 2027.

The government will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at whether and how the MTD for ITSA service can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their Income Tax obligations. Once that review is complete - and in consultation with businesses, taxpayers, agents, and others - the government will lay out the plans for any further mandation of MTD for ITSA.

Following the phased approach, the government will not extend MTD for ITSA to general partnerships in 2025. It remains committed to introducing MTD for ITSA to partnerships at a later date.

The new penalty system, harmonising late submission and late payment penalties for Income Tax Self-Assessment with those for VAT, will come into effect for taxpayers when they become mandated to join MTD. This makes penalties fairer and simpler for taxpayers. The government will introduce the new penalty system for Income Tax Self-Assessment taxpayers outside the scope of MTD after its introduction for MTD taxpayers.

The government anticipates that most taxpayers within the scope of MTD for ITSA will be able to sign-up voluntarily before they are mandated to do so. HMRC will keep this under review to ensure all taxpayers using the MTD for ITSA service receive a high-quality service.

The Corporation Tax main rate will increase to 25% from 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will also be introduced from the same date for companies with profits of up to £50,000 ensuring these companies pay Corporation Tax at the same rate as currently.

Where a company has profits between £50,000 and £250,000 a marginal rate of Corporation Tax will apply that bridges the gap between the lower and upper limits. The lower and upper limits will be proportionately reduced for short accounting periods of less than 12 months and where there are associated companies.

The effect of marginal relief is that the effective rate of Corporation Tax gradually increases from 19% where profits exceed £50,000 to 25% where profits are more than £250,000.

The amount of Corporation Tax to pay will be found by multiplying your profits by the main rate of 25% and deducting marginal relief. For the fiscal year 2023, the marginal relief fraction will be 3/200.

For some businesses, it may be prudent to reconsider associated company relationships before April 2023 to avoid partial loss of the lower 19% rate or marginal taper relief.

The new Chancellor of the Exchequer, Jeremy Hunt, was only appointed on Friday 14 October 2022. However, following another turbulent weekend, the Chancellor made not one but two important statements on 17 October 2022 about the future of the economy. The first, an emergency televised statement to the nation and the second, a statement to MPs in the House of Commons.

HM Treasury had prefaced these events with a short press release stating that the announcements followed the Prime Minister's statement on Friday, and further conversations between the Prime Minister and the Chancellor over the weekend, to ensure sustainable public finances underpin economic growth.

The previous Prime Minister’s statement on Friday had confirmed that the planned increase in Corporation Tax that was set to come into effect in April 2023 will now go ahead. This move represented a second major U-turn by the government following the mini-budget. The first U-turn being the announcement to scrap the proposed removal of the 45p personal tax rate from April 2023.

The Corporation Tax main rate will now increase from 19% to 25% on 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will apply for companies with profits of up to £50,000. There will also be a marginal rate of Corporation Tax for companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm makes.

On Monday (17 October 2022), the Chancellor went even further and announced a reversal of almost all of the remaining tax measures set out in the Growth Plan (23 September 2022) by the previous Chancellor, Kwasi Kwarteng, that have not yet been legislated for in parliament.

In his emergency statement, the Chancellor confirmed that the following tax policies will no longer be taken forward:

• Cutting the basic rate of income tax to 19% from April 2023. This means that the basic rate of income tax will remain at 20%. The Chancellor said that any reduction in the basic rate will now only take place when economic conditions allow for it and a change is affordable.
• Cutting dividends tax by 1.25% from April 2023. This means that the 1.25% increase, which took effect in April 2022, will remain in place.
• The moves to simplify IR35 rules, including the repeal of the 2017 and 2021 reforms will not go ahead. The reforms will now remain in place.
• The planned introduction of a new VAT-free shopping scheme for non-UK visitors to Great Britain will not go ahead.
• Freezing alcohol duty rates from 1 February 2023 for a year. This will see the price of beer, cider, wine and spirits increase.

The changes are estimated to be worth around £32 billion a year.

It was also announced that the Energy Price Guarantee Scheme that came into effect on 1 October 2022 to help tackle the energy crisis and was set to remain in place for two years will now only be guaranteed until April 2023. There is also a parallel Energy Bill Relief Scheme to help cut energy bills for non-domestic energy customers, including UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals that was due to remain in place until 31 March 2023. HM Treasury has announced that a new review will be launched to consider how to support households and businesses with energy bills after April 2023.

The government has confirmed the move to reverse the 1.25% rise in National Insurance contributions (NICs) that came into effect at the start of the 2022-23 tax year on 6 April 2022 remains in place. This will see the reversal of the NIC increase from 6 November 2022 and will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs. It was also confirmed that the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will not now go ahead as originally planned.

The increase in the Stamp Duty Land Tax (SDLT) nil rate band to £250,000 (from £125,000), effective since 23 September 2022 will also remain in place as will the increased SDLT bands payable for first-time buyers.

The increase in the Annual Investment Allowance threshold (to £1 million) will also remain in place.

The Chancellor is expected to deliver a full autumn statement on 17 November 2022.

Employees who are working from home may be able to claim tax relief for bills they pay that are related to their work.

Employers may reimburse employees for the additional household expenses incurred through regularly working at home. The relief covers expenses such as business telephone calls or heating and lighting costs for the room you are working in. Expenses that are for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment they have bought, such as a laptop, chair or mobile phone.

Employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount.

If the expenses or allowances are not paid by the employer, then the employee can claim tax relief directly from HMRC. Employees will receive tax relief based on their highest tax rate. For example, if they pay the 20% basic rate of tax and claim tax relief on £6 a week, they will receive £1.20 per week in tax relief (20% of £6). Employees can claim more than the quoted amount but will need to provide evidence to HMRC. HMRC will accept backdated claims for up to 4 years.

Employees may also be able to claim tax relief for using their own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from the regular place of work. The rules are different for temporary workplaces where the expense is usually allowable if the employee uses their own vehicle to do other business-related mileage.

Note, that if an employee agreed with their employer to work at home voluntarily, or they choose to work at home, they cannot claim tax relief on the bills they have to pay. If an employee previously claimed tax relief when they worked from home because of coronavirus (COVID-19), they might no longer be eligible for relief.

HMRC is using the wedding season to issue a reminder to married couples and those in civil partnerships to sign up for marriage allowance if they are eligible and haven’t yet done so.

The marriage allowance applies to married couples and those in a civil partnership where a spouse or civil partner doesn’t pay tax or doesn’t pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2022-23).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) doesn’t pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,570 to £50,270 in 2022-23. The limits are somewhat different for those living in Scotland.

This could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year. In fact, even if a spouse or civil partner has died since 5 April 2018, the surviving person can still claim the allowance (if they qualify) by contacting HMRC’s Income Tax helpline.

If you meet the eligibility requirements and have not yet claimed the allowance, you can backdate your claim to 6 April 2017. This could result in a total tax-break of up to £1,242 if you can claim for 2018-19, 2019-20, 2020-21, 2021-22 as well as the current 2022-23 tax year.

In the Spring Statement earlier this year, the then Chancellor, Rishi Sunak, announced an NIC tax-cut to take effect from 6 July 2022. This change sees the National Insurance threshold increased from £9,880 to £12,570. This increase means that the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs are now aligned with the personal allowance of £12,570. It was also confirmed as part of the Spring Statement measures that the thresholds will remain aligned going forward.

The NIC tax cut is worth up to £330 for thirty million taxpayers across the UK and represents a £6 billion tax cut. 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 NIC PT and LPL remained at £9,880 (as previously announced) from 6 April 2022 – 5 July 2022. Whilst it is unusual for tax rates to change during a tax year the short period remaining after the Spring Statement and the start of the 2022-23 tax year meant that the increase was delayed for 3 months until 6 July 2022. This means that the average 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.

Businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs by applying to HMRC’s Time To Pay service.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. Agreements reached with HMRC allow businesses and individuals to pay off their debt by instalments over a period of time.

HMRC will usually offer taxpayers the option of extra time to pay if they think they genuinely cannot pay in full but will be able to pay in the future. If HMRC do not think that more time will help, then they can require immediate payment and start enforcement action if payment is not forthcoming.

An online payment plan for Self-Assessment tax bills can be used to set up instalment arrangements for paying tax liabilities up to £30,000. Taxpayers that qualify for a Time to Pay arrangement using the self-serve Time to Pay facility online, can do so without speaking to an HMRC adviser.

Taxpayers that want to use the online option must also have filed their latest tax return, be within 60 days of the payment deadline and intend to pay their debt off within the next 12 months or less.

Taxpayers with Self-Assessment tax payments that do not meet the above requirements and businesses need to contact HMRC to request a Time To Pay arrangement.

There are many benefits to encourage the use of electric cars including lower running costs, the environmental advantages and reduced noise pollution. There are also tax benefits to encourage the purchase of electric cars.

We have listed some of these benefits below.

The benefit-in-kind (BIK) due on company cars can be significantly reduced. For example, most electric cars will incur a BIK rate of only 2% in 2022-23. Compare this with the benefit charge for a gas-guzzler pumping out 160 g/km or more of CO2 which would be based on 37% of the list price when new. This means that company car drivers who switch to an electric car should see their tax bill significantly reduced. This also benefits employers who may see a significant decrease in Class 1A National Insurance charges.

Businesses purchasing electric cars can expect to recover more of their investment in direct tax relief. For example, businesses can write-off 100% of the cost of an electric vehicle against the profits of the year of purchase and there are no restrictions on the value of the vehicle. The car must be new and unused to qualify for the 100% relief.

Companies can also benefit from the super-deduction, which offers 130% first-year allowance on qualifying electric charging points for cars and vans. To qualify for the relief the company must use the charging point in their own business. This relief is available until 31 March 2023.

The road tax, or Vehicle Excise Duty (VED) rates for all fully electric vehicles have been reduced to £0 until at least 2025. There are reduced VED rates for plug-in hybrid electric vehicles (PHEVs).

There is no benefit-in-kind charge for the private use of a company van if the private mileage is insignificant. If the van is an electric vehicle, there is no benefit-in-kind charge even if the private mileage is significant.

There are also other benefits including an EV charge-point grant that provides funding of up to 75% towards the cost of installing electric vehicle smart charge-points, up to a maximum of £350 (including VAT) per household/eligible vehicle. Electric cars are also exempt from the London congestion charge when applying for a Cleaner Vehicle Discount.

There are a number of reasons why you might need to complete a Self-Assessment return. This includes if you are self-employed, a company director, have an annual income over £100,000 and / or have income from savings, investment or property.

Taxpayers that need to complete a Self-Assessment return for the first time should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a Self-Assessment return needs to be filed. If you required to submit a Self-Assessment return for 2021-22, you should ensure that you file your tax return electronically and pay any tax due by 31 January 2023.

HMRC has an online tool www.gov.uk/check-if-you-need-tax-return/ that can help you check if you are required to submit a Self-Assessment return.

The list of taxpayers that are usually required to submit a Self-Assessment return includes:

• The self-employed (earning more than £1,000);
• Taxpayers who had £2,500 or more in untaxed income;
• Those with savings or investment income of £10,000 or more before tax;
• Taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax;
• Company directors - unless it was for a non-profit organisation (such as a charity) and you did not get any pay or benefits, like a company car;
• Taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
• Taxpayers who had income from abroad that they needed to pay tax on;
• Taxpayers who lived abroad and had a UK income;
• Income over £100,000.

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.

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.

If you are an employee working from home, you may be able to claim tax relief for some of the bills you pay that are related to your work.

Employers can reimburse employees for the additional household expenses incurred by working at home. The relief covers expenses such as business telephone calls or heating and lighting costs for the room you are working in. Expenses that are for both for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment they have bought, such as a laptop, chair or mobile phone.

Employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount.

If the expenses or allowances are not paid by the employer, then you can claim tax relief directly from HMRC. You will get tax relief based on your highest tax rate. For example, if you pay the basic (20%) rate of tax and claim tax relief on £6 a week, then you would get £1.20 per week in tax relief (20% of £6). You can claim more than the quoted amount but will need to provide evidence to HMRC. HMRC will accept backdated claims for up to 4 years.

These tax reliefs are available to anyone who has been asked to work from home on a regular basis, either for all or part of the week including working from home because of coronavirus.

If you are an employee working from home, you may be able to claim tax relief for some of the bills you pay that are related to your work.

Employers can reimburse employees for the additional household expenses incurred through regularly working at home.

The relief covers expenses such as business telephone calls or heating and lighting costs for the room you are working in. Expenses that are for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment they have bought, such as a laptop, chair or mobile phone.

Employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount.

If the expenses or allowances are not paid by the employer, then employees can claim tax relief directly from HMRC. Employees will get tax relief based on their highest tax rate. For example, if they pay the 20% basic rate of tax and claim tax relief on £6 a week, they will get £1.20 per week in tax relief (20% of £6). Employees can claim more than the quoted amount but will need to provide evidence to HMRC. HMRC will accept backdated claims for up to 4 years.

These tax reliefs are available to anyone who has been asked to work from home on a regular basis, either for all or part of the week including working from home because of coronavirus.

Most COVID support scheme grants are treated as taxable income in the same way as other taxable receipts and need to be reported to HMRC. The grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax. This means that if you received a support payment during the COVID pandemic, this may need to be reported on your tax return. This applies to the self-employed, partnerships and businesses.

The treatment extends to support measures including the following:

• the Self Employment Income Support Scheme (SEISS)
• test and trace or self-isolation payments
• the Coronavirus Job Retention Scheme (CJRS)
• Eat Out to Help Out
• Coronavirus Statutory Sick Pay Rebate
• Coronavirus Business Support Grants

HMRC’s guidance is clear that whether or not any tax is paid will depend on the business profits of the grant recipient (taking into account the grant and other business income and expenditure under normal tax rules), any other taxable income they may have and any personal or other allowances to which they are entitled.

HMRC also has the power to recover payments and charge penalties where claimants have made support grant claims that they were not entitled to. There is no requirement to report COVID welfare payments made by a council such as those to help with council tax payments and housing benefit.

Loans, such as Bounce Back Loans or those from the Coronavirus Business Interruption Loan Scheme (CBILS), are not COVID-19 support payments.

The Chancellor of the Exchequer, Rishi Sunak confirmed that the government has accepted in full the proposals of the Low Pay Commission for increasing minimum wage rates from 1 April 2022. This puts the government back on track to reach their minimum wage target of two-thirds of median earnings by 2024.

The new National Living Wage (NLW) rate of £9.50 will come into effect on 1 April 2022 and represents an increase of 59p or 6.6%. The NLW is the minimum hourly rate that must be paid to those aged 23 or over. The threshold is expected to further reduce to 21 by 2024. The increase represents a pay rise of over £1,000 for someone working full-time and earning the NLW.

The hourly rate of the NMW (for 21-22 year olds) will increase to £9.18 (a rise of 82p or 9.8%). This increase narrows the gap with the NLW and leaving this age group on course to receive the full NLW by 2024.

The rates for 18-20 year olds will increase to £6.83 (a rise of 27p) and the rate for workers above the school leaving age but under 18 will increase to £4.81 (a rise of 19p). The NMW rate for apprentices will increase by 51p to £4.81.

As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press prior to the official report to parliament, 27th October 2021.

But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections:

1. Taxation changes
2. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

Taxation changes

Income Tax 2022-23 to 2025-26

No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK.

In what many commentators consider to be a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the full value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any increases in earnings will be taxed and, in some cases, this may push earnings into the higher rate tax bands.

Regional variations to Income Tax rates may apply in Wales and Scotland.

Income Tax and dividend income

The current £2,000 dividend tax-free allowance is unchanged.

As announced 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are:

• Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22)
• Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22)
• Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22)

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2022-23.

Reform of Basis Periods for self-employed and partners

The basis on which profits are taxed in a tax year are to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year end at the end of the tax year will experience no change in their basis of taxation.

For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24 and the new rules will come into force from 6 April 2024.

The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and profits.

National Insurance

Boris Johnson announced – earlier this year - a 1.25% increase in certain National Insurance Contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate.

The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions, for 2022-23.

This excludes the Upper Earnings Limit and Upper Profits Limit which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax.

Lifetime Allowance for pension pots

From April 2021 to April 2026 the pensions lifetime allowance will remain frozen at £1,073,100.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, there are two changes worth mentioning:

• Capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements, and
• The deadline for reporting chargeable residential property sales – not a main residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that complete on or after 27 October 2021.

The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due.

Corporation Tax

No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%.

As announced earlier this year, from 1 April 2023, there will be two rates of CT.

• Taxable profits up £50,000 will continue to be taxed at 19%
• Taxable profits more than £250,000 will be taxed at 25%
• Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Corporation Tax and banking companies

From 1 April 2023, the rate of surcharge on banking companies will be 3% and the surcharge allowance increased from £25m to £100m.

Corporate Tax – R&D Relief

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improve compliance. These changes will be legislated for in Finance Bill 2022-23 and take effect from April 2023.

Museums and Galleries Exhibition Tax Relief

The sunset clause in this relief is extended for a further two years until 31 March 2024.

Cultural Relief changes

Theatre Tax Relief and Museums and Galleries Tax Relief

Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50% respectively from 27 October 2021.

From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024.

Orchestra Tax Relief

From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023, and returning to 25% from 1 April 2024.

Reliefs for investments in qualifying assets

Super-deduction

The temporary “Super-deduction” and a 50% first year allowance – that were introduced April 2021 – will continue to apply to qualifying expenditure up to 31 March 2023.

The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.

Annual Investment Allowance

The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023.

Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.

Reform of loss relief rules for Corporation Tax

The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have retrospective effect from 1 January 2019.

Van and car benefit changes

This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688.

Inheritance Tax

No changes to present rates and allowances. These are all frozen at current levels until April 2026.

This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.

VAT

There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic.

VAT rules in Freeports

From 3 November 2021, the government will introduce new elements into the VAT free zone model for Freeports.  They are:

• implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model,
• make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive,
• amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.

Other announcements

Business rates changes

The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022/23.

Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business.

A relief is also being introduced for improvements to business properties which will delay the start date of higher business rates triggered by the improvements for 12 months. The government are to consult on how to implement the relief, which will take effect from 2023 and will be reviewed in 2028. If you are planning improvements to your business premises, this may benefit you.

From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings.

From 2023, business rate revaluations will take place every three years rather than every five years.

Transitional relief for small and medium-sized businesses is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000).

Increasing the normal minimum pension age

The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.

From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.

Universal Credits

To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned.

Duties and Miscellaneous taxes 

• Tobacco Duty will be increased by agreed rates above the Retail Prices Index (RPI) from 6pm on 27 October 2021.
• Alcohol duty rates will be frozen.
• Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022.
• Aggregates Levy – the government will freeze the Levy rates in 2022-23.
• Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022.
• VED rates for cars, vans and motorcycles will increase in line with RPI changes. Change will be effective from April 2022.
• VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022.
• Fuel Duty rates for 2022-23 will remain frozen.
• Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced.

ISA investment limits for 2022-23

The limits set for 2022-23 are:

• Adult ISAs the limit remains at £20,000
• Junior ISA limit remains at £9,000
• Child Trust Funds remain unchanged at £9,000

National Living Wage increases

The NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022.

The full changes to the National Minimum Wage rates from 1 April 2022 are as follows:

• The 21 to 22 year-old rate will be £9.18 per hour
• The 18 to 20 year-old rate will be £6.83 per hour
• The 16 to 17 year-old rate will be £4.81 per hour
• The apprentice rate will be £4.81 per hour

The trivial benefits in kind (BiK) exemption applies to small non-cash benefits, for example a bottle of wine or a bouquet of flowers, given occasionally to employees.

Although the benefit is defined as ‘trivial’, employers should remember that this can be an efficient way to provide small rewards and incentives to employees. The main requirement is that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions. There is no requirement to let HMRC know once the benefit meets the necessary criteria.

The tax exemption applies to trivial BiKs where the BiK:

• is not cash or a cash-voucher; and
• costs £50 or less; and
• is not provided as part of a salary sacrifice or other contractual arrangement; and
• is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year.  The £300 cap doesn’t apply to other employees. If the £50 limit is exceeded for any gift, the total value of the benefit will be taxable.

If a company has stopped trading and has no other income then the company is usually classed as dormant for Corporation Tax purposes.

A company is usually dormant for Corporation Tax if it:

• has stopped trading and has no other income, for example investments
• is a new limited company that hasn’t started trading
• is an unincorporated association or club owing less than £100 Corporation Tax
• is a flat management company

HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.

Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax and according to Companies House. A company defined as 'small' by Companies House can instead file 'dormant accounts' and doesn’t have to include an auditor’s report.

A dormant company must also ensure they deregister for VAT within 30 days of the company becoming dormant and close any unused PAYE schemes. A company can stay dormant indefinitely, however there are costs associated with this option. This might usually be done if for example a company is restructuring its operations or wants to retain use of a company name, brand or trademark.

In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated based on the original cost when the asset was first owned by the spouse or civil partner.

There are a few exceptions that couples should be aware of when the relief does not apply. This relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.

There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.

The Let Property Campaign provides landlords who have undeclared income from residential property lettings in the UK or abroad with an opportunity to regularise their affairs by disclosing any outstanding liabilities whether due to misunderstanding the tax rules or because of deliberate tax evasion. Participation in the campaign is open to all residential property landlords with undisclosed taxes. The campaign is not suitable for those letting out non-residential properties.

Landlords who do not avail of the opportunity and are targeted by HMRC can face penalties of up to 100% of the tax for UK gains and 200% for offshore liabilities together with possible criminal investigation.

Taxpayers that come forward will benefit from better terms and lower penalties for making a disclosure. Landlords that make an accurate voluntary disclosure and have taken ‘reasonable care’ are likely to face the lowest penalties. There are higher penalties where you did not take reasonable care if you deliberately misled HMRC regarding offshore liabilities.

There are three main stages to taking part in the campaign, notifying HMRC that you wish to take part, preparing an actual disclosure and making a formal offer together with payment. The campaign is open to all individual landlords renting out residential property. That includes landlords with multiple properties and single rentals as well as specialist landlords with student or workforce rentals.

We would like to remind readers that existing legislation is in place to ensure that COVID support grants are treated as taxable income in the same way as other taxable receipts. The grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax.

This treatment extends to the Self-Employment Income Support Scheme (SEISS), the Coronavirus Job Retention Scheme (CJRS), the Coronavirus Statutory Sick Pay Rebate Scheme, any coronavirus business support grant scheme and any other support scheme payments.

HMRC’s guidance is clear that whether any tax is paid will depend on the business profits of the grant recipient (taking into consideration the grant and other business income and expenditure under normal tax rules), any other taxable income and personal and other allowances to which they are entitled.

The taxing of the COVID support payments is based on the fact that these payments are designed to substitute various income streams for businesses and individuals affected by the pandemic and hence should follow the same tax treatment.

HMRC also has the power to recover payments and charge penalties where claimants have made support grant claims to which they were not entitled.

The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme will be extended until the 30 September 2021. The Chancellor confirmed that employees will receive up to 80% of their salary for hours not worked subject to a monthly maximum of £2,500 until the scheme ends. The CJRS will also continue in its present form for employers until the end of June 2021. As the economy reopens and demand returns, the government will introduce employer contributions towards the cost of unworked hours of 10% in July and 20% in August and September.

The Chancellor, Rishi Sunak also confirmed that the Self Employed Income Support Scheme (SEISS) will continue for a fourth and fifth grant. The fourth grant covers the period from 1 February 2021 to 30 April 2021 and the fifth and final grant will cover the period from May onwards. The fourth grant will provide support covering 80% of average trading profits, up to a maximum of £7,500 for those who meet the eligibility requirements. The fifth and final grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant.

The SEISS scheme will also be extended to the newly self-employed who filed a 2019-20 tax return by midnight, 2 March 2021.

More has been disclosed, leaked, of this year’s Budget announcements than in previous years. But we now have the details and there is a lot to consider. The following Budget summary is split into four sections:

1. COVID-19 related support measures for UK businesses
2. Support for the UK housing market
3. Taxation changes
4. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

COVID-19 related support measures for UK businesses

The Treasury is to continue the two existing major support schemes in an attempt to hold back a significant increase in unemployment rates as business owners grapple with the effects of COVID-19 disruption. Details are set out below.

Coronavirus Job Retention Scheme 

This scheme, nicknamed the Furlough Scheme, was due to end 30 April 2021. It is now being extended to 30 September 2021.

The judgement must be that there will be enough control over COVID by autumn 2021 to stimulate demand and give employers more confidence to retain staff. The Chancellor has obviously crunched the numbers and considers employment support in this way a more attractive strategy than increasing unemployment costs.

In more detail:

• For employees, there will be no change to the terms – they will continue to receive up to 80% of their salary, for hours not worked, until the scheme ends.
• Employers will be asked to contribute 10% towards wages for hours not worked from July 2021, rising to 20% in August and September 2021.

Self-Employed Income Support Scheme (SEISS)

There has been much criticism of this scheme as it has not been possible for self-employed businesses that commenced trading during 2019-20 to claim.

To counter this, the following changes to SEISS have been announced.

1. All qualifying self-employed businesses can continue to claim SEISS grants if they continue to be adversely affected by COVID lockdown measures. The present scheme was due to end 30 April 2021. This has now been extended to 30 September 2021.
2. Businesses previously excluded from claims because they commenced during the 2019-20 tax year will now be eligible to claim the fourth and fifth SEISS grants as long as their tax return for 2019-20 was filed by midnight 2 March 2021.
3. For the fifth grant claims can be made from July 2021. Self-employed persons whose turnover has fallen by more than 30% will continue to qualify for the 80% grant. Those with decreases in turnover of less than 30% will be restricted to a 30% claim.

Restart grants

£5bn of funding is being allocated for these grants. They will support businesses obliged to close during much of lockdown. The grants will consist of:

• A one-off grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.
• Non-essential retail that have tended to open first, can apply for a one-off £6,000 grant.

Business rates holiday continued

This year, government will continue with the 100% business rates holiday for the first three months of the 2021-22 financial year, in other words, through to the end of June 2021 for the retail, leisure and hospitality sectors.

For the remaining nine months of the year, to 31 March 2022, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.

Exemption for COVID-19 related home office expenses

The temporary Income Tax exemption and Class 1 National Insurance Contributions disregard for employer reimbursed expenses that cover the cost of relevant home office equipment is extended and will have effect until 5 April 2022.

Exemption for reimbursement of antigen test costs

The government will legislate in Finance Bill 2021 to introduce a retrospective Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020-21.

A new Recovery Loan Scheme

The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance between £25,000 and up to £10 million per business once the existing COVID-19 loan schemes close. This will provide further support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.

Once received, the finance can be used for any legitimate business purpose, including growth and investment.

The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.

The scheme launches on 6 April 2021 and is open until 31 December 2021, subject to review. Loans will be available through a network of accredited lenders.

Reduced rate of VAT

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions will be extended until 30 September 2021. This is a welcome bonus for this sector badly affected by COVID lockdown restrictions.

This will be followed by the introduction of a new reduced rate of 12.5% from 1 October 2021 that will be in effect until 31 March 2022 at which point it will revert to the 20% standard rate.

Other support measures

Other measures outlined in the Budget include:

• Extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000.
• £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.
• Additional £126 million for 40,000 more traineeships in England, funding high quality work placements and training for 16-24 year olds in 2021-22 academic year.

Support for the UK housing market

Support will include a mortgage guarantee scheme that will help home buyers purchase properties up to £600,000, and an extension to the existing stamp duty holiday that was due to end 31 March 2021.

The detail:

Mortgage guarantee scheme

The government will underwrite 95% of the risk of default. It will apply to home acquisitions up to £600,000 and set deposits required to 5%.

Stamp duty holiday

The present £500,000 threshold for paying Stamp Duty Land Tax (SDLT) was increased on a temporary basis and was due to end 31 March 2021.

The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021. This applies to England and Northern Ireland only. The devolved administrations have not announced any further extension beyond 31 March 2021 when this summary was written on Budget Day.

Non-resident SDLT

A 2% SDLT surcharge, above existing rates, for non-UK residents purchasing residential property in England and Northern Ireland is to be introduced from 1 April 2021.

Taxation changes

Many of the tax changes announced are for a fixed period, generally, from April 2021 to April 2026. This does provide welcome certainty for businesses. Announcements made include:

Income Tax 2021-22 to 2025-26

The basic rate threshold is increasing to £37,700 for 2021-22 (2020-21: £37,500) and then frozen until April 2026. For the same period, the personal tax allowance is set at £12,570 (2020-21: £12,500) and will apply to all regions of the UK.

Taxpayers who will benefit from annual increases in their earnings up to April 2026 may find themselves paying tax at the higher rates if these increases breach the £37,700 annual basic rate limit.

Regional variations to Income Tax rates apply in Scotland and may apply in Wales.

National Insurance

NIC Upper Earnings limits and Upper Profits limits will also remain at a fixed amount until April 2026 and will be based on the Income Tax higher rate threshold of £50,270.

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2021-22.

Lifetime Allowance for pension pots

From April 2021 to April 2026 the pensions lifetime allowance will be frozen at £1,073,100.

Cycle to work scheme change

The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.

The change will have effect on and after Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.

Van benefits for zero carbon emissions

The government will legislate in Finance Bill 2021 to reduce the van benefit charge to zero for vans that produce zero carbon emissions. The change will have effect on and after 6 April 2021.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, the only announcement on this tax that has general relevance is capping the annual exempt amount. This will be fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives and some types of trusts for disabled people; and £6,150 for trustees of most settlements.

Corporation Tax

As expected, there will be increases in Corporation Tax, but not yet and only for larger companies. Company owners will be relieved that there are no imminent increases in CT rates until April 2023.

From 1 April 2023, there will be two rates of CT.

• Taxable profits up £50,000 will continue to be taxed at 19% under the new Small Business Profits Rate
• Taxable profits in excess of £250,000 will be taxed at 25%
• Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Carry back of trading losses

The present provisions that restrict the carry back of tax losses is being relaxed, temporarily, extending the period over which incorporated and unincorporated businesses may carry-back trading losses from one year to three years.

This extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020-21 and 2021-22 by unincorporated businesses. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.

The £2,000,000 cap will be subject to a group-level limit, requiring groups with companies that have capacity to carry back losses in excess of £200,000 to apportion the cap between its companies. Further detail on the group limit will be published in due course.

R&D tax credit cap to be introduced

For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and National Insurance contributions liability, in order to deter abuse.

Enterprise Management Incentives

As announced on 21 July 2020, the government will legislate in Finance Bill 2021 to extend the time-limited exception that ensures that employees who are furloughed or working reduced hours because of coronavirus (COVID-19) continue to meet the working time requirements for EMI schemes.

The change will apply to existing participants of EMI schemes and it also allows employers to issue new EMI options to employees who do not meet the working time requirement as a result of COVID-19. This measure will have effect until 5 April 2022.

Major new investment reliefs

A new “super-deduction” and a 50% first year allowance are to be introduced that will allow businesses to increase the tax relief they can claim for qualifying investments in plant and other equipment. It will apply to expenditure between 1 April 2021 and 31 March 2023.

The super-deduction will mean that assets will qualify for tax relief based on 130% of the actual cost of expenditure incurred.

Assets that qualify for the special rate relief will qualify for the 50% first year allowance.

The existing Annual Investment Allowance £1m limit will continue to be available until 31 December 2021.

Freeports

In an attempt to reposition the UK as a global player a raft of tax incentives are to be provided to the eight freeport locations in England announced in the Budget. They will include enhanced structures and buildings allowances.

Inheritance Tax

No changes in the present rates and allowances that are all frozen at current levels until April 2026.

This means the nil-rate band will be £325,000 and the residence nil-rate band at £175,000 for this period.

VAT

There be no changes to the standard 20% rate.

The £85,000 registration limit and the £83,000 deregistration limit will be frozen until 31 March 2024.

Other announcements

Universal Credits

The recent increase in benefits of £20 per week is to be extended for a further six months.

Working Tax Credit claimants will receive equivalent support via a £500 one off payment.

Duties

There will be no increases in duty on alcoholic drinks or fuel.

Vehicle excise duties will see a small increase in line with the Retail Prices Index (RPI).

Air Passenger Duty long haul rates will also increase in line with RPI as will gaming duty and Landfill Tax.

ISA investment limits for 2021-22

The limits set for 2021-22 are:

• Adult ISAs the limit remains at £20,000
• Junior ISA limit remains at £9,000
• Child Trust Funds remain unchanged at £9,000

National Living Wage increase

The NLW will increase to £8.91 per hour from 1 April 2021.

Visa reforms

There will also be new reforms to the immigration system that will help ambitious UK businesses entice top talent. These reforms will include a new unsponsored points-based visa to attract highly skilled migrants and a new, improved visa process for scale-ups and entrepreneurs.

Help to Grow schemes

Two new Help to Grow schemes are set to launch by the autumn to help support 130,000 small and medium sized businesses. The Help to Grow: Management scheme will help small and medium sized businesses get world-class management training with the government contributing 90% of the cost.

In addition, the Help to Grow: Digital scheme will help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each.

Single contactless payments

Our final comment on the Budget seems to anticipate a coming consumer spending bonanza. The legal limit for single, contactless payments is increasing from £45 to £100.

A further reminder that new VAT rules for building contractors and sub-contractors will come into effect from 1 March 2021. The new rules were originally expected to commence from 1 October 2019, but an initial 12 month delay was announced. The start date was then delayed for a further 5 months until 1 March 2021 due to the impact of the coronavirus pandemic.

The new rules will make the supply of most construction services between construction or building businesses subject to the domestic reverse charge. The reverse charge will only apply to supplies of specified construction services to other businesses in the construction sector.

This means that from 1 March 2021, sub-contractors will no longer add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers. This is known as the Domestic Reverse Charge. However, there is no loss of cashflow as the deemed output VAT can be deducted as input VAT subject to any existing restrictions; in this way the two entries on VAT returns cancel each other out.

This change will mean that contractors will have to alter the way that supplies from sub-contractors are treated by their accounting software.

HMRC’s guidance states that, for invoices issued for specified supplies that become liable to the reverse charge, the VAT treatment for invoices with a tax point:

• before 1 March 2021 – the normal VAT rules will apply, and VAT registered subcontractors should charge VAT at the appropriate rate on supplies
• on or after 1 March 2021 – the domestic reverse charge will apply.

It’s official. We are in lock-down 3 in England, Scotland following suit and the other regions expected to enforce similar restrictions.
It is evident that any freeing impact of the vaccine roll-outs will not have sufficient impact before February at the earliest, and more likely, later in the year.

What now for businesses directly affected by these measures, predominantly the hospitality and entertainment trades? 

Lock-down would probably be better described as locked-out for these business sectors. Businesses that depend on social mobility are basically cut-off from their customers by COVID restrictions and there are no obvious ways for a pub or hotel to entertain its customers online.

There are still local authority support grants that may cover certain fixed costs and furlough has been extended to the end of April 2021. But this state sanctioned support will not cover all costs and affected businesses face the prospect of funding losses for yet another extended period. Many may decide that enough is enough and call it a day.

Planning is vital. Choose your next course of action, don’t get pushed into making decisions.

Clearly, economic activity will be depressed by this further period of lock-down and this may have adverse effects across many business sectors in addition to those mentioned above. All businesses would benefit from a planning review and in particular, clarifying your challenges, the effects on your finances and the choices you therefore face.

We can help. Please call if you would like to discuss your options.

Fraudsters are continuing to target taxpayers with scam emails in advance of the 31 January deadline for submission of Self-Assessment returns.  In fact, over the last year, HMRC received more than 846,000 reports about suspicious HMRC contact.

A number of these scams purport to tell taxpayers they are due a tax rebate or tax refund from HMRC and ask for bank or credit card details in order to send the refund. The fraudsters use various means to try and scam people including making contact by phone calls, texts or emails. In fact, fraudsters have been known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

HMRC’s dedicated Customer Protection team to identify and close down scams but is advising customers to recognise the signs to avoid becoming victims themselves. For example, genuine organisations like HMRC and banks will never contact customers asking for their PIN, password or bank details.

If you think you have received a suspicious call or email claiming to be from HMRC you are asked to forward the details to phishing@hmrc.gov.uk and texts to 60599. If you have suffered financial loss you should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.

The Prime Minister, Boris Johnson speaking at a press conference on Saturday night, 31 October 2020, confirmed widespread expectations of a second national lockdown in England to help stem the growing resurgence of the coronavirus. The Government was faced with significant concerns that if they took no action, the NHS could be overwhelmed with death rates far exceeding those seen in the first lockdown.

The four week lockdown came into effect on Thursday 5 November and applies until Wednesday 2 December 2020. This lockdown will close pubs, restaurants, entertainment venues, hotels and non-essential shops and people will be advised to work from home if possible. In a marked departure from the first spring lockdown, schools, colleges and universities remain open. The exit strategy from this lockdown remains unclear and there are fears that the lockdown could continue beyond this period if the infection rate does not reduce significantly.

We have set out below the most up-to-date support measures available to businesses following the announcement of these new restrictions.

Coronavirus Job Retention Scheme 

The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme will be extended until the 31 March 2021. The most recent update (further extending the life of the scheme) was announced by the Chancellor Rishi Sunak when delivering his fourth Winter Economic Plan to the House of Commons on 5 November 2020.

The Chancellor confirmed that employees will receive up to 80% of their salary for hours not worked. There will be a review date of the CJRS in January 2021 which may see employers taking on an increased financial contribution if the economic and health outlook of the country show signs of improvement.

It had been announced that the CJRS would be replaced by the Job Support Scheme (JSS), a scheme that would have topped up wages for people returning to work on reduced hours. The introduction of the JSS has now been put on hold.

A bullet-point summary of the main details of the CJRS extension announced is set out below:

• People who are unable to work will receive up to 80% of their wages. This payment is subject to a monthly maximum of £2,500 per employee (for hours not worked). Employers will have the discretion to top-up the payments if they so wish.
• The scheme will apply across the UK, in England, Wales, Scotland and Northern Ireland even where the regions are subject to different lockdown restrictions.
• Employers will be required to pay employer NICs and pension contributions for their employees whilst on furlough.
• Flexible furloughing, whereby employers can bring back employees to work part-time will be allowed. Employers will have to pay employees for the hours they work but can still use the scheme to cover any normal hours where employees are furloughed.
• To be eligible, employees must have been registered on their employers PAYE payroll by 23:59 on 30 October 2020.  The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
• Employees employed as of 23 September 2020 and on payroll, who were made redundant or stopped working for the employer afterwards can also qualify for the scheme if they are re-employed and placed on furlough.
• All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the CJRS.
• The first claims under the extended CJRS can be made from 8am on Wednesday 11 November. Claims for November must be submitted to HMRC no later than 14 December 2020.
• There will be no gap in eligibility between the previously announced end date of the scheme on 31 October 2020 and this extension.

Mortgage holidays

It has also been confirmed that mortgage payment holidays will no longer end as planned on 31 October 2020. Borrowers who have been impacted by coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.

Cash grants

It had been previously announced that businesses in England that are forced to shut as a result of a lockdown will be eligible for grants of up to £3,000 per month payable every two weeks. Businesses will be eligible to claim after two weeks of closure.

The amount businesses will be able to claim from their local authority depends on their rateable value:

• Small businesses with a rateable value of or below £15,000 will be able to claim £1,334 per month or £667 per two weeks.
• Medium-sized businesses with a rateable value between £15,000 and £51,000 will be able to claim £2,000 per month, or £1,000 per two weeks.
• Larger businesses will be able to claim £3,000 per month, or £1,500 per two weeks.

Further support for businesses

The government is providing an additional £1.1bn to Local Authorities in England, distributed on the basis of £20 per head. These payments are designed to help Local Authorities to support businesses more broadly.

Self Employed Income Support Scheme Extension (SEISS)

The Government has also confirmed that there will be additional help for the self-employed during Lockdown 2.0.

It had previously been announced that the grants for the self-employed would be based on 40% of previous qualifying earnings for the months of November, December and January. The November figure was then increased to 80%. It has now been confirmed that the self-employed will receive 80% of average trading profits for the entire three month period. This will increase the grant for the three months to a maximum of £7,500 made available to those who meet the eligibility requirements.

It has also been confirmed that the claims window for the grant is being brought forward from 14 December to 30 November to allow payments to be made more quickly.

An additional second grant will be made available from 1 February 2021 to 30 April 2021. The level of this second grant amount is subject to review and will be set in due course.

Government-backed loan schemes

The deadline for applications for government-backed loan schemes and the Future Fund have been extended until 31 January 2021.

It will also be possible for businesses to ‘top up’ existing Bounce Back Loans should they need additional finance. This will apply to businesses who borrowed less than their maximum allowance.

Devolved administrations

There has also been an increase in the upfront guarantee of funding for the devolved administrations from £14 billion to £16 billion. This uplift will continue to support workers, business and individuals in Scotland, Wales and Northern Ireland.

Job Retention Bonus

The Job Retention Bonus was meant to provide a £1,000 bonus payment to employers that brought back employees that were furloughed under the CJRS from November 2020 to January 2021. Following the extension of the CJRS, it has been confirmed that the Job Retention Bonus will not be paid in February. The government will instead redeploy a retention incentive at the appropriate time.

The government has published detailed new guidance for employers on the regulations and legal obligations relating to running internal workplace coronavirus (COVID-19) testing programmes, i.e. those which are outside of the NHS Test and Trace service. The guidance covers:

• legislation, regulations and best practice surrounding the testing process, including compliance with the GDPR
• selecting and procuring test kits
• the difference between virus and antibody testing
• what the test results mean
• next steps after a positive or negative test, including communicating results to staff and what an employer can and cannot do with a result
• contact tracing.

The guidance emphasises that the NHS Test and Trace service is for those who are displaying symptoms of coronavirus or who have been advised to take a test by a medical practitioner or public service, so employers must not advise any staff without symptoms to get a test from the NHS Test and Trace service. However, they may offer alternative private provision in accordance with this guidance.

Public Health England (PHE) has updated its guidance to increase the minimum self-isolation period for those with symptoms of coronavirus from seven to ten days, starting from when symptoms first begin. In addition, those who test positive for coronavirus but who are not experiencing symptoms must stay at home for at least ten days starting from the day the positive test was taken, and if they then develop symptoms during this self-isolation period, the ten days must restart from the date their symptoms first appear.

To correspond with the extended self-isolation period, the Statutory Sick Pay (General) (Coronavirus Amendment) (No. 5) Regulations 2020 came into force on 5 August 2020. The regulations have amended the Statutory Sick Pay (General) Regulations 1982 to confirm that an employee self-isolating in accordance with the updated PHE guidance will be deemed incapable for work and so entitled to statutory sick pay (SSP) for the duration of the extended minimum ten-day period for which they are now required to self-isolate.

The Chancellor, Rishi Sunak continued with his campaign to support the business and jobs community today, 8 July 2020, as firms engage with the disruption caused by the coronavirus outbreak and the measures taken to control infection.

The main thrust of his announcements during his Summer Economic update concerned his nominated Plan for Jobs 2020, details are listed below.

He also announced measures to support the hospitality and tourism industry including a novel voucher scheme and a temporary reduction in VAT. Again, details are provided in the following update.

In an attempt to boost the flagging property market Stamp Duty is being temporarily reduced in England and Northern Ireland. Separate announcements on this topic are awaited for Scotland and Wales who have their own Stamp Duty regimes.

Details of these announcements follow:

1. Job Retention Bonus: employers that bring back an employee that was furloughed, and continuously employ them through to January 2021, will be paid a £1,000 government bonus per employee retained. Employees must be seen to be gainfully employed during this period and be paid at least £520 a month, on average, from November 2020 to January 2021. All furloughed employees returned to employment in this way will be available for the £1,000 bonus.
2. Kickstart scheme: this new scheme will cover the wages (plus associated costs) of new jobs created for any 16 to 24-year-old - at risk of long-term unemployment - for six months. These will have to be new jobs, of at least 25 hours a week and paid the National Minimum Wage. Employers will need to offer kickstarters training and support to find a permanent job. Employers can apply to be part of this new scheme from next month – August 2020 with first jobs starting in the autumn. Government has made an initial £2bn available for this scheme, but there is no cap on the number of places made available.
3. Apprenticeships: for the next six months government will pay employers to create new apprenticeships. The amount payable will be £2,000 for each apprentice. A new bonus to take on apprentices aged over 25 has also been announced. This will amount to £1,500 per appointment.
4. Green jobs initiatives: as an incentive to create jobs in the green jobs’ market a number of new grants have been announced. From September 2020, homeowners and landlords in England will be able to apply for a grant to make their home more energy efficient. The £2bn Green Homes grant will cover at least two-thirds of the cost up to £5,000 per household. For low income households these grants will cover all costs up to £10,000. There will also be a further £1bn allocated to make public buildings greener.
5. Boost for the housing market: Presently, in England and Northern Ireland (different amounts apply in the regions) no Stamp Duty Land Tax is payable on residential property purchases below £125,000. From today – for a temporary period to 31 March 2021 – this threshold is increased to £500,000. It is projected that this will reduce the average stamp duty bill by £4,500. Regional variations may apply. Purchasers buying a second residential property will still have to pay the 3% Stamp Duty Land Tax for property purchases up to £500,000.
6. VAT reduction for hospitality and tourism: for the next six months VAT charged on food, accommodation and attractions (such as eat-in or takeaway food in restaurants, cafes, pubs, cinemas, theme parks and zoos) will see VAT reduced from 20% to 5%. This will apply from 15th July 2020 until 12th January 2021.
7. Eat Out to Help Out discount: for the month of August 2020, meals eaten at any participating business Monday, Tuesday or Wednesday, will be 50% off up to a maximum discount of £10 per head including children. To access the discount businesses will need to register and can do so through a website to be opened next Monday, 13 July 2020. Businesses will be able to claim the money back weekly with the money in their bank accounts within 5 working days.

As we manage the cautious steps to emerge from lock-down, still wary of COVID-19, the new incentives announced by Rishi Sunak should be welcomed.

As more details emerge on the various schemes announced today they will be published accordingly.

As our readers will be aware, the Coronavirus Job Retention Scheme (CJRS), has been extended until 31 October 2020. There are a number of important changes to the way the scheme works that will start to come into effect from 1 July 2020, when employers can bring back furloughed employees to work part-time, for any amount of time and any shift pattern.

For any periods starting on or after the 1 July, the maximum number of employees that employers can claim for cannot be higher than the maximum number they claimed for in a previous period. For example, if the highest single claim for periods up to 30 June was for 100 people, then employers cannot claim for more than this number in later periods.

The government will continue to pay 80% of costs for normal hours not worked up to the £2,500 cap during the month of July. From August 2020, employers will be expected to start contributing towards furloughed employees wage costs by paying employers’ NIC and pension costs for any normal hours an employee does not work. There will be further reductions in government support to 70% of capped wages in September and to 60% in October before the scheme is closed.

On Friday afternoon, in the Government's daily news briefing, the Chancellor outlined how the Coronavirus Job Retention Scheme will operate moving forward to allow for employees to return to work part time. Following that announcement, self-employed workers got a boost when it was revealed that they will be able to get Government assistance for a further three months. The new details are outlined below.

Self-Employed Income Support Scheme (SEISS)

No doubt due to recent lobbying by the press and other interested support groups, the Chancellor has extended the SEISS for a final three-month period to 31 August 2020.

This means that the self-employed who are eligible to claim will have received six-months financial support from government.

As before, applicants will have to wait until the last month of the claim period, August 2020, to make a claim.

A bullet-point summary of the changes is set out below:

• SEISS extended for three months to 31 August 2020
• Applications covering the June – August 2020 period will open in August.
• Grant available will be 70% of eligible earnings (previous quarter 80%).
• Maximum grant for the three-months will be £6,570 (previous quarter £7,500) paid in a single instalment.
• Eligibility criteria remains unchanged.
• A self-employed person can claim for the second grant, to August 2020, even if they had not claimed for the first grant.
• More information on these changes will be published 12 June 2020.

If you are eligible to make a claim for this second grant under the scheme you will still be subject to the same rules regarding eligibility. You will need to confirm that your business has been adversely affected by the Coronavirus outbreak.

If you did not claim for the first quarter, to May 2020, as your business at that time was not adversely affected, but will be affected in the quarter to 31 August 2020, it will be possible to claim for the second quarter.

And finally, claims for the first quarter (March-May 2020) will close 13 July 2020.

Coronavirus Job Retention Scheme (CJRS)

As previously announced, the CJRS has been extended to 31 October 2020 and will be changed to a flexible arrangement from 1 July 2020 to allow employees to resume part-time working.

The Chancellor and his advisers will be gritting their teeth as drawing a line in the sand by tapering and then closing the CJRS on 31 October 2020 will force the hand of employers to consider their options. It is likely that redundancies will start to climb from that date as will the number of the unemployed.

A bullet-point summary of the changes announced is set out below:

• The CJRS will close to new entrants on 30 June 2020. The final date employers can furlough staff for the first time will be 10 June 2020.
• From 1 July 2020, employers can bring back employees to work part-time, for any amount of time and any shift pattern. Any claim under CJRS will be limited to normal hours not worked.
• June/July 2020 – Government will continue to pay 80% of costs up to the £2,500 cap.
• August 2020 – Government will pay 80% of wages up to £2,500 cap, but employers will have to cover employers’ NIC and pension costs for the hours the employee does not work.
• September 2020 – Government will pay 70% of wages up to a reduced £2,187.50 cap. Employers will pay employers’ NIC, pension costs and 10% of wages to a total cap of £2,500.
• October 2020 - Government will pay 60% of wages up to a reduced £1,875 cap. Employers will pay employers’ NIC, pension costs and 20% of wages to a total cap of £2,500.
• The cap will be proportional to hours not worked.
• The CJRS will be closed-down 31 October 2020.

The above changes to a flexible approach cloak a raft of detail that government is not publishing until 12 June 2020. Those responsible for making CJRS claims will need to wait for these further clarifications as they will explain how employers should calculate claims.

We will be integrating the changes into our payroll services when they are available and will contact clients if further details regarding part-time working are to be introduced.

Clearly, there are planning considerations. Please call if you have employees on furlough and you need to consider your options; for part-time working up to 31 October and longer-term considerations after this date.

HMRC’s guidance on the Coronavirus Job Retention Scheme has recently been updated. HMRC will reimburse 80% of furloughed workers' wage costs, capped at £2,500 per month per employee. The scheme will run for at least 3 months, backdated from 1 March 2020, but will be extended if necessary.

Company directors and other office holders can be furloughed under the scheme. However, only PAYE income - generally salary - can be furloughed, and so the common practice of taking most of directors' earnings as dividends will limit a director's claims to salary only.

The guidance is clear that where one or more individual directors are furloughed this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Under the scheme no work can be undertaken by furloughed employees who remain technically employed by the company. In many scenarios, especially for sole directors, this would be untenable as all business would have to be technically suspended.

The guidance does make it clear that company directors can do what is reasonably necessary to fulfil the statutory obligations they owe to their company. These actions are not specified but do not include any work undertaken to generate commercial revenue or provide services to or on behalf of their company.

These measures also apply to salaried individuals who are directors of their own Personal Service Company (PSC). Salaried Members of Limited Liability Partnerships (LLPs) are also entitled to be furloughed but should refer to the terms of their LLP agreement in the first instance.

The Chancellor, Rishi Sunak, outlined a raft of further measures last night to support the UK’s ailing businesses, those affected by the forbidding COVID-19 outbreak. The list that follows summarises his announcements in the order they were announced:

• The Treasury are making available £330bn of loan guarantees. These guarantees will underpin government backed bank loans on attractive terms. The loans can be used to support businesses through financial difficulties during the COVID-19 crisis. Note they are loans. At some point interest will be charged and repayments will have to be made. The Chancellor confirmed that if this level of support was insufficient, further guarantees would be forthcoming.
• Support for liquidity to larger firms will be provided by low-cost, easily accessible commercial paper. Support for smaller firms will be accessed via the Business Interruption Loan Scheme previously announced – the initial loan ceiling of £1.2m is to be increased to £5m and no interest due for the first six months. Both of these schemes are due to be up and running by the start of next week.
• Further measures are to be introduced to support airlines. No details as yet.
• Businesses in the hospitality, leisure and retail sectors who have made claims for business interruption from their insurers due to government interventions, may have had difficulties making a claim. Government have now intervened and the insurers have agreed to pay up in appropriate cases.
• Businesses in the retail, hospitality and leisure sectors with a rateable value below £51,000, will also receive – in addition to the 100% rates relief previously announced – a cash grant of up to £25,000 per business.
• In the same sector, the 100% rates reduction will be applied to all business irrespective of rateable value.

To clarify, the previous two bullet points mean that all businesses in the retail, hospitality or leisure sector – shops, pubs, theatres, music venues, restaurants etc – will have no rates to pay for 2020-21, and if the rateable value of their property is below £51,000, they may also be able to claim a cash grant of up to £25,000.

• The £3,000 grants to smaller business, announced last week, are to be increased to £10,000.
• Mortgage lenders have agreed with government that individuals disrupted by the Coronavirus can have at least a three-month holiday from making mortgage repayments.

The Chancellor also hinted that there would be further support for incomes and jobs. Perhaps an increase in statutory sick pay or increased access to State Benefits. Watch this space.

What is not clear is how we claim for the various loans and grants on offer. We offer the following suggestions although the actual processes finally agreed may differ from these:

• Rates reductions should be made automatically and revised statement sent by local authorities in the coming weeks for 2020-21. Contact your local rating department to clarify that this is so.
• It is not clear how qualifying businesses will claim the grants mentioned in the above list – those that range between £10,000 to £25,000 – could be applications need to be made to local authorities or another government department. We will confirm as soon as details are released.
• We assume that you will need to apply to your bank for the guaranteed Business Interruption Loan. It is likely that your bank will need up-to-date figures to back up your application. Please call if you need help preparing these.
• At the time this update was composed, the government had still not confirmed how employers can claim back the 14-day cost of Statutory Sick Pay paid to employees. Again, we will publish details as soon as they are released.

Although not part of the Chancellor’s presentation, Chief Secretary of the Treasury, Steve Barclay, made a further announcement to parliament last night (17 March 2020). The government are postponing the roll-out of draconian IR35 measures to the private sector that would have affected the tax status of many incorporated contractors across the UK. This a welcome change as it will defer much disruption in this sector until the worst aspects of the COVID-19 outbreak have passed. The new rules are now slated to come into effect from 6 April 2021, a year later than planned.

Our best wishes to all who are directly affected by this unprecedented outbreak. And please get in touch if you need more information or support.

If your total assets exceed £325,000 then the excess will usually be subject to Inheritance Tax (IHT) at 40% when you die. A reduced rate of IHT of 36% applies where 10% or more of a deceased’s net estate is left to qualifying charities or Community Amateur Sports Clubs (CASCs).

The net value of an estate is the total value of its assets (gross value) after deducting the following:

• Debts and liabilities
• Inheritance tax reliefs
• Exemptions such as assets left to a married or civil partner
• All items below the current £325,000 IHT threshold.

If you are considering making a charitable legacy this can make the process very tax efficient and significantly reduce the 'cost' of your charitable donation. It can also be a worthwhile exercise to review your will and see if your estate will qualify for this relief, especially if you are at or near the 10% limit.

Remember, the 'net estate' value on which the 10% figure is based is after all relevant deductions. So, if the value of your net estate was £100,000, the estate would have to pay IHT of £40,000 (£100,000 x 40%). If a charitable legacy was left of £10,000, then the remaining chargeable assets in the estate of £90,000 would pay IHT of £32,400 (£90,000 x 36%). This represents a saving in IHT of £7,600.

It can sometimes be a complex procedure to ensure that an estate qualifies for the reduced rate of IHT. The value of certain charitable gifts (such as a piece of land) must be calculated to establish whether or not the 10% test is met. It is possible for an election to be made that the estate does not pay the reduced rate of IHT. This could happen where the administrative costs, such as valuing assets, outweigh the benefit of the reduced rate of tax.

The 31 January is not just the final date for submission of your Self-Assessment tax return but also an important date for paying tax. It is the final payment deadline for any remaining tax due for the 2018-19 tax year and any payment on account due for 2019-20.

If you miss the filing deadline then you will be charged a £100 fixed penalty if your return is up to 3 months late, regardless of whether you owed tax or not.

If you do not file and pay before 1 May 2020, then you will face additional penalties and interest. A daily penalty of £10 per day, up to a maximum of £900 (90 days) will be charged from 1 May 2020. Further penalties then apply if your return is still outstanding for more than 6 months after the 31 January filing deadline. From 1 August 2020 you will be charged a penalty of the greater of £300 or 5% of the tax due. If your return still remains outstanding one year after the filing deadline, then further penalties will be charged from 1 February 2021.

You can appeal against any penalties that have been issued and HMRC has said that they will treat those with genuine excuses, leniently. However, you need to act fast and the excuse must be genuine and HMRC can of course ask for evidence to support any claim. An appeal must usually be made within 30 days of receipt of the penalty.

If you do not have the necessary funds to make payment you should be pro-active and contact HMRC as soon as possible. Pretending the problem does not exist will not make the problem go away and will likely make matters worse.

If you are an employee and use your own money to buy things you need for your job, you can sometimes claim tax relief for the associated costs. It is usually only possible to claim tax relief for the cost of items used solely for your work.

You may also be able to claim tax relief for using you own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to do other business related mileage.

Employers usually make payments based on a set rate per mile depending on the mode of transport used. There are approved mileage rates published by HMRC. The approved mileage allowance payment rates are available where you use your own car on a business trip. Where the approved mileage rates are used, the payments to you are not regarded as a taxable benefit.

Where an employer pays less than the published rates, you could claim tax relief for the shortfall using mileage allowance relief. For all cars the approved mileage allowance payment for the first 10,000 business miles is 45p per mile and 25p per mile for every additional business mile. The approved mileage rates are 20p per mile for bicycle travel and 24p per mile for motorcycle travel.

There is an additional passenger payment you can receive of 5p per passenger per business mile from your employer. This is available if you carry fellow employees in your car or van on journeys which are also work journeys for your colleagues.

We would be happy to help you review any vehicle related expenses to understand any tax relief that may be available.

Entrepreneurs' Relief (ER) can be valuable relief when selling your business, your shares in a trading company or your interest in a trading partnership. Where ER is available, Capital Gains Tax (CGT) of 10% is payable. This rate applies to qualifying lifetime gains of up to £10 million.

However, it is important to remember that there are qualifying conditions that must be met to ensure you are eligible to benefit from the lower 10% rate.

If you are selling all or part of your business, then both of the following must apply in order to qualify for relief:

1. You must be a sole trader or business partner,
2. You must have owned the business for at least 2 years before the date you sell it.

If you are selling shares in the business you must be an office holder or employee of the company, own at least 5% of the company and have at least 5% of the voting rights for at least 2 years before you sell your shares. You must also be entitled to at least 5% of either the profits that are available for distribution and assets on winding up the company or the disposal proceeds if the company is sold.

The company must also be a trading company or the holding company of a trading group. If the number of shares you hold falls below 5%, because the company has issued more shares, you may still be able to claim ER. The rules are different if your shares came from certain Enterprise Management Incentive (EMI) schemes.

There is also a sister relief called Investor’s Relief which has a separate £10 million lifetime cap. This is useful for investors who do not meet the officer or employee requirement for ER.

Now is the time that many businesses are planning a Christmas celebration for staff as well as possibly for partners/spouses, clients and prospective clients.

The cost of a staff party or other annual entertainment is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below, then there is no requirement to report anything to HMRC or pay tax and National Insurance. There will also be no taxable benefit charged to employees.

1. An annual Christmas party or other annual event offered to staff generally, is not taxable on those attending provided that the average cost per head of the function does not exceed £150.
2. The event must be open to all employees. If a business has multiple locations, then a party open to all staff at one of the locations is allowable. You can also have separate parties for separate departments, but employees must be able to attend one of the events.
3. There can be more than one annual event. If the total cost of these parties is under £150 per head, then there is no chargeable benefit. However, if the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt and the others taxable. Note, the £150 is not an allowance and any costs over £150 per head are taxable on the full cost per head.
4. It is not necessary to keep a running total by employee but a cost per head per function. All costs including VAT must be considered. This includes the costs of transport to and from the event, food and drink and any accommodation provided.

VAT incurred on Christmas parties for your staff can be recovered subject to the usual rules. If staff partners/spouses or clients are also invited to the event, the input tax has to be apportioned as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees make a contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.

It is important to pay attention to the nuanced tax rules to ensure that your party is tax exempt.

Important changes to the VAT rules for building contractors and sub-contractors are coming into effect from 1 October 2019. In a nut-shell, if you are subject to the Construction Industry Scheme (CIS) and if you are registered for VAT, from the 1 October 2019 you may need to change the way you account for VAT on supplies between sub-contractors and their contractor customers.

At present, sub-contractors registered for VAT are required to charge VAT on their supplies of building services to contractors. From 1 October, this approach is changing and sub-contractors will not add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers.

This does not mean that contractors, in most cases, are paying their sub-contractors’ VAT as an additional cost. When contractors pay their sub-contractors’ VAT to HMRC, they can claim back an equivalent amount as VAT input tax; subject to the usual VAT rules. Accordingly, the two amounts off-set each other.

The change is described as the Domestic Reverse Charge (DRC) for the construction industry. It has been introduced as an increasing number of sub-contractors have been registering for VAT, collecting the VAT from their customers, and then disappearing without paying the VAT collected to HMRC.

However, the change to DRC may create cash flow issues especially if you use the VAT Cash Accounting Scheme or the Flat Rate Scheme. We recommend that all affected CIS readers contact us so we can help you make the necessary changes to your invoicing and accounting software and reconsider the use of VAT special schemes if your continued use would adversely affect your cash flow.

Entrepreneurs' Relief (ER) can be a valuable relief when selling your business, your shares in a trading company or your interest in a trading partnership. Where ER is available Capital Gains Tax (CGT) of 10% is payable in place of the standard rate. CGT on the disposal of chargeable assets is usually chargeable at 20%. There are a number of qualifying conditions that must be met in order to qualify for Entrepreneurs' Relief.

There is a lifetime limit that means that you can qualify for ER more than once, subject to an overriding total limit of £10m of qualifying capital gains. There are time limits that must be met to make a claim. To qualify for relief you should be either an officer or employee of the company and own at least 5% of the company and have at least 5% of the voting rights. There are also other qualifying conditions that must be met in order to qualify for the relief.

In a recent change, the minimum period during which certain conditions must be met in order to qualify for ER increased from one to two years (from 6 April 2019). If you are looking to sell your business, you need to be mindful of meeting all the necessary conditions in order to qualify for ER.

There is also a sister relief called Investor’s relief which has a separate £10 million lifetime cap. This is useful for investors who do not meet the officer or employee requirement for ER.

The new National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2019. The NLW first came into effect on 1 April 2016 and is the minimum hourly rate that must be paid to those aged 25 or over. The new rate for the NLW is £8.21 which is a 38p or almost 5% increase over the previous year.

The hourly rate of the NMW (for 21-24 year olds) increased to £7.70 (a rise of 32p). The rates for 18-20 year olds increased to £6.15 (a rise of 25p), and the rate for workers above the school leaving age but under 18 increased to £4.35 (a rise of 15p). The NMW rate for apprentices increased by 20p to £3.90.

Penalties may be levied if you get this wrong

It is important that you ensure that you have adopted the new rates as there are significant penalties for employers who are found to have paid workers less that they are entitled to by law. If you have underpaid an employee, you must pay any arrears immediately. There are penalties for non-payment of up to 200% of the amount owed, unless the arrears are paid within 14 days. The maximum fine for non-payment can be up to £20,000 per employee and employers who fail to pay face a possible 15-year ban from being a company director as well as being publicly named and shamed.

There are a number of reasons why you may need to register with HMRC to submit a tax return. This includes if you:

• are self-employed and earning more than £1,000,
• are a company director,
• have an annual income over £100,000 and / or if you have certain income from savings, investment or property.

If you need to complete a tax return for the first time, you should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a return needs to be filed.

So, if you had income that necessitated you registering for Self Assessment in the 2018-19 tax year, you will need to notify HMRC by 5 October 2019.

HMRC publishes a list of taxpayers who would usually be required to submit a Self Assessment return. The list includes:

• The self-employed;
• Taxpayers who had £2,500 or more in untaxed income;
• Those with savings or investment income of £10,000 or more before tax;
• Taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax;
• Company directors - unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car;
• Taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
• Taxpayers who had income from abroad that they needed to pay tax on;
• Taxpayers who lived abroad and had a UK income;
• Those whose income was over £100,000.

In certain limited circumstances HMRC can also ask you to complete tax returns for other reasons.

Need help registering for Self-Assessment?

If you are unsure if you need to register, or would like assistance with the formal registration process, please call.

New legislation comes into force from 6 April 2019 which requires all employers to provide an itemised payslip to all workers, i.e. not just to employees, and to show hours on payslips where the pay varies by the amount of time worked.

The government has now published guidance to help employers with the new rules on showing the hours on payslips, which includes several useful example case studies. The guidance is non-statutory and has no legal effect on the interpretation of the legislation, but it will assist employers to better understand it.

The new rules apply to payslips covering pay periods which begin on or after 6 April 2019.

The annual Capital Gains Tax (CGT) exemption for individuals is £11,700 for 2018-19. A husband and wife each benefit from a separate exemption. Same-sex couples who acquire a legal status as civil partners are treated in the same way as married couples for CGT purposes.

CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. A higher rate of CGT applies (18% and 28%) to gains on the disposal of residential property (apart from a principal private residence).

The usual due date for paying CGT to HMRC is the 31 January following the end of the tax year in which a capital gain was made. This means that CGT will be payable for any gains made during 2018-19 on or before 31 January 2020. The usual way to report a gain is to complete the relevant sections of the Self Assessment tax return.

HMRC also offers a 'real time' Capital Gains Tax service that allows taxpayers to report any gains and pay straight away. Using this service would obviously mean paying any CGT due before the official deadline so we would assume that the use of this service would only be appealing under limited circumstances. Taxpayers using this service must wait for HMRC to issue a payment reference number before making payment.

There are also special payment and reporting requirements if you live abroad and sell a UK residential property, and you must inform HMRC within 30 days of the sale. The notification must be made whether or not there is any non-resident CGT to be paid. Any non-resident CGT that is due must also be paid within 30 days of the conveyance date. There are penalties for late payment, and we would strongly advise that you monitor any CGT due and ensure the relevant payment deadlines are met.

HMRC has issued an updated version of their online guidance on Genuine HMRC contact and recognising phishing emails and texts. The guidance provides a current list of genuine messages from HMRC. This includes email messages, text messages and telephone contacts from HMRC.

HMRC is currently carrying out compliance checks for midsized businesses, charities and public bodies by way of a compliance check interview over the phone. If you are unsure if a request is genuine you can ask the HMRC staff member to send an email while you are on the call to confirm their identity. Their email address should have their name and end in @hmrc.gsi.gov.uk. You can also call the relevant HMRC general enquiry helpline to check if a request is genuine. HMRC may also ask for business records to be sent by post or electronically, by a secure platform.

Until December 2018, HMRC is also working with Populus, an independent research agency to carry out stakeholder engagement research. First contact will be by email with follow up contact by email and telephone. Populus may send further emails to stakeholders or telephone them to encourage them to take part in the research.

Although these communications are genuine, taxpayers should still be wary of receiving messages that are purported to come from HMRC. Fake email and text messages can appear to be genuine, but clicking on a link from these messages can result in personal information being compromised and the possibility of computer viruses affecting your computer or smartphone. If you are unsure as to the validity of any message it should not be opened until the sender can be verified.

The Prime Minister announced at the Conservative Party conference that the end of austerity was in sight. Recent tax revenues have exceeded expectations, and although there was an expectation that these declarations and indicators would herald a relaxation of fiscal policy, the Chancellor is mindful of the potential fallout next year when we leave the EU, with or without a deal. The Chancellor mentioned he would consider a Spring Budget in the event of a ‘no deal’ Brexit.

And so, prudence seems to have directed his thinking.

The remainder of this update confirms tax and other changes announced that will affect businesses and other taxpayers from next year.

Personal Tax and miscellaneous matters

Personal Tax allowance

The personal Income Tax allowance for 2019-20 will be increased to £12,500 (2018-19 £11,850). It will remain at this increased level for two years.

Changes to personal tax allowances will apply to the whole of the UK.

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2019-20 have been increased. They are:

• Basic rate band increased to £37,500 (2018-19 £34,500)
• Higher rate band £37,501 to £150,000 (2018-19 £34,501 to £150,000)
• Additional rate, no change, applies to income of more than £150,000.

As a result, the higher rate threshold will increase to £50,000 from April 2019. There is no change in Income Tax rates and the tax rates applied to dividend income.

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

Earlier payments of Capital Gains Tax (CGT)

UK residents will be required to make a payment on account for CGT due on a residential property sale. The new regulations will also affect disposals by non-UK residents.

The changes will apply from April 2019 for non-UK residents and April 2020 for UK residents.

Capital Gains Tax Private Residence Relief changes

From April 2020, the government intends to make two changes to the Private Residence Relief:

1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those who are disabled or in care homes, and
2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

CGT Entrepreneurs’ relief

Two changes are coming into effect:

1. Claimants must have a 5% interest in the distributable profits and the net assets of the company to qualify, and separately
2. That the minimum period, during which certain conditions must be met to qualify for the relief, is being increased from one to two years.

The first measure will have effect for disposals on or after 29 October 2018.

The second measure will have effect for disposals on or after 6 April 2019, unless a business ceased before 29 October 2018.

Inheritance Tax: changes to the nil-rate band

From 29 October 2018, amendments to the residence nil-rate band will provide certainty as to when a person is treated as “inheriting” property and clarify the “downsizing” rules.

Rent-a-room relief change cancelled

The expected change to require shared occupancy to qualify for rent-a-room relief is not to be introduced.

ISAs

For 2019-20, the ISA limit will remain at £20,000. The limit for Junior ISAs and the Child Trust Fund is to be increased to £4,368.

Limit on pensions’ savings to be increased

The life time limit on pension savings is to be increased in line with inflation to £1,055,000 for the 2019-20 tax year.

Stamp duty first time buyers’ relief in England

This relief is being extended to cover the purchase of qualifying shared ownership property and will be effective for transactions on or after 29 October 2018 and will be backdated to 22 November 2017.

The first £300,000 of an initial share purchased will not be liable to SDLT based on the market value of the property. The remainder of the value over £300,000 will be charged at 5%. No SDLT will be chargeable on the associated lease. Relief is not extended to further shares purchased and will not apply to purchases of property valued at over £500,000.

Tobacco duty increases confirmed

The rates for duty for all tobacco products increased by inflation plus 2% from 6pm, 29 October 2018.

Hand-rolling tobacco also rose by an additional 1% above this increase, to 3% above the RPI from the same date.

Duties on beer, wine and spirits

There are to be no increases to the duty charged on beers, spirits or cider, except for certain ciders treated as high strength for duty purposes.

Wines and high strength sparkling cider drinks will see duty increased in line with inflation from 1 February 2019.

Vehicle excise duty

The VED rates for cars, vans and motorcycles is due to increase by reference to the RPI from 1 April 2019.

Fuel duty increase frozen

Duty increase is frozen for the ninth consecutive year.

Air passenger duty (APD) increases

Travellers should note that APD will increase in line with inflation for long-haul flight passengers only. The new rates will apply from 1 April 2020.

Business Tax changes

Corporation Tax

Corporation Tax rates to remain at 19% for the financial year beginning 1 April 2019.

Employment Allowance reform

From 2020, the government will legislate to restrict access to the £3,000 NIC Employment Allowance, to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers will have their contributions aggregated for this purpose.

Annual Investment Allowance increased

The Annual Investment Allowance (AIA) is to be increased from the present £200,000 to £1m from 1 January 2019 to 31 December 2020. It is then presumed that this will return to the £200,000 limit. This should provide a welcome boost to business investment during the Brexit transition period.

Please note that not all capital purchases qualify for this relief. Please call for clarification of what is covered if you are considering a significant acquisition.

R&D tax credit claims to be restricted

From 1 April 2020, the amount of payable tax credit that can be claimed under the R&D SME tax relief scheme will be limited to three times the company’s total PAYE and NIC payments for the period. Any loss that cannot be surrendered can be carried forward and used against future profits.

The government will consult with interested parties on this issue.

IR35 changes

The changes recently made to IR35 arrangements in the public sector are to be rolled out to the private sector. The changes will come into effect from April 2020 and small firms will be exempt. Firms that have concerns that they may be affected should contact us for more details.

Car and van fuel benefit charge increases

For 2019-20, these will increase by reference to the September 2018 Retail Prices Index.

A new 2% digital services tax

From April 2020, the major social media, search engine and online retailers will be subject to a 2% tax on revenues generated from UK users of their services. The Chancellor did indicate that if an internationally recognised levy was introduced, that the UK may fall into line in place of this 2% UK tax.

At last, rates relief for High Street retailers

In a much anticipated announcement, smaller retailers in England, occupying shop premises with rateable values under £51,000, should benefit from a cut of one-third in their business rates bills for 2 years from April 2019.

They should also benefit from £675m to be spent on improvements by councils to help transform high streets, the redevelopment of empty shops as homes and offices and the repurposing of old and historic buildings.

In a humorous exchange, the Chancellor also announced 100% business rates relief for public lavatories.

Plastics tax

For those readers who are concerned about the environment they will be pleased to note that the government is to consider introducing a tax on the production and importing of plastic packaging from April 2022.

The charge will apply to plastic packaging that does not contain at least 30% recycled plastic.

Changes to the apprentices’ levy

From April, larger employers will be able to invest up to 25% of their apprenticeship levy to support apprentices in their supply chain. Additionally, some smaller employers will pay half what they currently pay for apprenticeship training: a reduction from 10% to 5%. The government will fund the remaining 95%.

Charities small trading exemption increase

The limits that exempt small scale trading by charities from UK tax are to be increased from the current £5,000 – where turnover is under £20,000 – and £50,000 where turnover exceeds £200,000. These £5,000 and £50,000 exemptions are to be increased to £8,000 and £80,000 respectively.

The changes will apply from 6 April 2019 for unincorporated charities and from 1 April 2019
for incorporated charities.

A new structures and buildings allowance (SBA)

This will provide tax relief for qualifying capital expenditure on new non-residential buildings where all contracts for the physical construction works are entered into on or after 29 October 2018.

Relief will not include the cost of land or dwellings.

Tax relief for electric charge points to be extended

The present first year allowances available for the installation of electric charge points is to be extended for four years, until the end of the financial year 2022-23.

Reduction in tax writing down allowance

The special rate of writing down allowance is being reduced from 8% to 6% from April 2019.

Supposedly, this is intended to closer align tax depreciation with commercial depreciation rates.

Anti-avoidance measures

The Finance Bill will contain a number of measures that will continue to improve HMRC’s campaigns to reduce the impact of tax avoidance schemes.

Tax to be protected in insolvency

From 6 April 2020, the government will change the insolvency rules so that taxes collected on behalf of employees and customers, primarily employees PAYE and NIC and customers VAT, will be treated as a preferential creditor on winding up rather than distributed to other creditors.

Company loss relief loop-holes to be closed

Most of the changes will apply from April 2019 and will prevent relief for carried forward losses being claimed in excess of that intended by legislation.

The changes will include:

• the definition of “relevant profit”,
• the computation of life assurance and annuity business profits,
• the deductions allowance in group situations,
• the calculation of terminal relief,
• the cap on profits against which certain losses may be allowed,
• and other minor considerations.

VAT: reverse charge process to be extended to construction services

This change, to extend the reverse charge process to the building and construction industry is due to come into effect from 1 October 2019.

This will place the onus for dealing with the VAT charge due on subcontractors’ bills to the main contractor.

This will cause accounting rather than cash flow issues for main contractors as they will add entries to their VAT returns to pay the subcontractors VAT, but then deduct the same amount as input VAT on the same return.

The aim is to stop subcontractors adding VAT to their bills and then disappearing without remitting the VAT to HMRC.

VAT registration threshold – no change

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

As well as producing a wide range of new and updated guidance for organisations to assist them with their GDPR compliance, which is all available on its website, the Information Commissioner’s Office (ICO) has launched a long-term campaign, “Your Data Matters”, to help people understand why their personal data matters and how they can take back control.

The ICO’s resources for organisations include:

• Guide to the GDPR
• More detailed guidance on specific GDPR areas, covering: determining what is personal data; the right to be informed; legitimate interests; consent; documentation; automated decision-making and profiling; data protection impact assessments (DPIAs); and children and the GDPR
• Data protection self-assessment toolkit
• GDPR FAQs
• GDPR myth-busting blogs
• Lawful basis interactive guidance tool
• Personal data breach reporting resources
• Guide to the data protection fee (see below).

The Data Protection (Charges and Information) Regulations 2018 also came into force on 25 May 2018 and they have introduced a new data protection charging structure for data controllers. There is no longer a requirement to pay the ICO a notification fee. Instead, there are three tiers of charges which apply unless all processing undertaken by the data controller is exempt. For very small organisations with no more than ten members of staff or which have a maximum turnover of £632,000, the fee is £40, organisations with no more than 250 members of staff or which have a maximum turnover of £36 million must pay £40 and larger organisations must pay £2,900. The fee is reduced by £5 for paying by direct debit.

There are now just 3 weeks to go until the new data protection regulations become law on 25 May 2018. The new provisions known as the General Data Protection Regulation (GDPR) represent a step change in data protection regulation, that will impose much stricter controls over the way that businesses collect, store and manage the personal data of customers, suppliers, staff and other contacts. For many businesses, the new rules are more onerous than the current Data Protection Act (DPA) rules.

New requirements, not in the present Data Protection Act 1998, include:

• Reporting data breaches.
• Cross-border considerations.
• New rights for contacts: need to inform contacts how you are using their personal data and their rights under the GDPR to request that personal data is deleted.
• Need to demonstrate that your firm is mitigating against risks of misuse of clients’ personal data.

The GDPR is an EU-wide initiative and as the UK will continue to be part of the EU when the new rules enter into force, the provisions will apply in the UK as elsewhere in the EU. It is expected that the GDPR will remain UK law after Brexit. However, there may be changes to ensure there are no gaps in the UK’s data protection regime.

If you have not already begun to prepare for the GDPR, we would strongly recommend that you make a start. The Information Commissioner's Office (ICO) has published a number of documents to help businesses prepare for the changes.

One of the most often used and valuable of the capital gains tax (CGT) exemptions concerns the sale of the family home. As a general rule there is no CGT on a property which has been used as the main family residence. An investment property which has never been used will not qualify. This relief from CGT is commonly known as private residence relief.

Taxpayers are usually entitled to full relief from CGT where all the following conditions are met:

1. The family home has been the taxpayer's only or main residence throughout the period of ownership.
2. The taxpayer has not been absent from the home other than for an allowed period of absence or because they have been living in job-related accommodation, during the period of ownership.
3. The garden or grounds including the buildings on them are not greater than the permitted area.
4. No part of the family home has been used exclusively for business purposes.

The last 18 months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold. This means that a qualifying property that is rented out for up to 18 months before being sold will remain eligible for full private residence relief. If the property has been let for more than 18 months the seller will be entitled to private residence relief for the time they lived in the property in addition to the last 18 months of ownership. Any further gain will be liable to CGT.

Prospects for growth, especially for productivity have been downgraded, but the Chancellor was bullish in his forecasts for investment and the Government’s intention to sort out the slow pace of house building in the UK. A few non-tax comments of note were:

• Unemployment at its lowest rate since 1975.
• Chancellor is providing an extra £3bn to prepare for Brexit over the next two years.
• Government to create 5 new garden towns, make better use of land and aim to be building 300,000 new homes a year by the mid-2020s.
• Devolved administrations will have more money to spend. An increase of £2bn for Scotland, £1.2bn for the Welsh Government and £660m for the Northern Ireland Executive.

Our summary of a selection of specific tax changes and other budget announcements for 2018-19 and future years follow.

Personal Tax and miscellaneous matters

Personal Tax allowance

The personal allowances for 2018-19 is £11,850 (2017-18 £11,500). According to HMRC, this means that an average taxpayer will pay £1,075 less tax than in 2010-11.

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2018-19 have been increased. They are:

• Basic rate band increased to £34,500 (2017-18 £33,500)
• Higher rate band £34,501 to £150,000 (2017-18 £33,501 to £150,000)
• Additional rate, no change, applies to income of more than £150,000.

There is no change in Income Tax rates, and the tax rates applied to dividend income. Readers should note that the present £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.

The Scottish parliament sets the basic rate limit for Scotland meaning that higher rate taxpayers may pay more tax in 2018-19.

Marriage Allowance extended

There is a small increase in this allowance to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer.

From 29 November 2017, the Government will also allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.

Offshore trusts

Changes will be made to ensure that payments from an offshore trust intended for a UK resident individual do not escape tax when they are made via an overseas beneficiary or a remittance basis user. This will take effect from April 2018.

Abolishing Stamp Duty Land Tax for certain first-time buyers

With immediate effect, first-time buyers will pay no stamp duty on homes costing no more than £300,000.

First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property.

80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.

National Living Wage (NLW) and National Minimum Wage (NMW) increases

From April 2018, the NLW will increase from the present £7.50 per hour to £7.83 per hour.

From the same date, the NMW rates will also increase to:

• £7.38 per hour for 21 – 24 year olds
• £5.90 per hour for 18 - 20 year olds
• £4.20 per hour for 16 and 17 year olds
• £3.70 per hour for apprentices

Fuel duty no change

For 2018, the fuel duty will remain frozen, for the eighth consecutive year.

New railcard for the 26 to 30 age group

No doubt to win back the support of the younger generation, the government will work with the rail industry to introduce a new railcard from Spring 2018.

Duty frozen for most alcoholic drinks

The duty on beer, wine, cider and spirits to be frozen. However, cheap, high strength cider will be subject to a new band of duty from 1 February 2019.

Duty on tobacco products to increase

The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation, with effect from 6pm, 22 November 2017.

Universal Credit (UC) changes

In response to recent adverse publicity the Government has agreed to various changes that are intended to ease the financial hardship for new claimants. They include:

• Households in need, who qualify for UC will be able to access a month’s worth of support within 5 days. This will be funded by an interest free loan that can be repaid over a 12-month period.
• Claimants will be eligible for UC from the day they apply, the present 7-day rule will be scrapped.
• Low-income households affected by areas with higher rent increases will receive an extra £280 on average to meet these higher costs.

Pension lifetime allowance increased

The lifetime allowance will increase to £1,030,000 from April 2018.

Diesel Vehicle Excise Duty (VED) change

From April 2018, the first year VED (car tax) rate for diesel cars that don't meet the latest standards will go up by one band. The Chancellor emphasises this is cars only, and that the money will go to a new Clean Air Fund.

Business Tax changes

Corporation Tax changes

Although there is no change to the rate of Corporation Tax, maintained at 19%, HMRC is to freeze indexation allowance on corporate capital gains for disposals after 1 January 2018.

£64m for construction and digital training courses

The new funding will be split as to:

• £34m to teaching construction skills, and
• £30m towards digital courses using Artificial Intelligence.

Partnership tax

Legislation has been revised to be more compatible with commercial arrangements for allocating shares of profit, and to avoid additional administrative burdens for taxpayers. The changes will have effect for the tax year 2018-19 and subsequent tax years.

Business rates changes

From April 2018, business rates will rise by any increase in the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years. Historically, the RPI has tended to be higher than the CPI.

Rates revaluations will now be undertaken every 3 years rather than the present 5 years. This will start after the next rates revaluation due during 2022.

Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year.

Venture Capital Schemes

Changes are to be made to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts. The aim is to target Venture Capital Schemes on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’.

Incentives to encourage VCTs towards higher risk investments will include:

• removing certain ‘grandfathering’ provisions that enable VCTs to invest in companies under rules in place at the time funds were raised, with effect on and after 6 April 2018;
• requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period, with effect on and after 6 April 2018;
• increasing the proportion of VCT funds that must be held in qualifying holdings to 80%, with effect for accounting periods beginning on and after 6 April 2019;
• increasing the time to reinvest the proceeds on disposal of qualifying holdings from six months to 12 months for disposals on or after 6 April 2019;
• introducing a new anti-abuse rule to prevent loans being used to preserve and return equity capital to investors, with effect on and after Royal Assent of Finance Bill 2017-18.

EIS and VCTs will also see increased limits for investments in knowledge-intensive companies:

The Government will legislate to:

• double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies;
• raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million;
• allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of first commercial sale.

The changes will have effect on and after 6 April 2018. This measure is subject to normal state aid rules.

R & D expenditure credit increase

The Government will legislate to increase the rate of the R&D expenditure credit from 11% to 12%, to support business investment in R&D.

This change will have effect on and after 1 January 2018.

Diesel car supplement increase

The diesel car supplement is to be increased from 3% to 4% from 6 April 2018. This will increase the company car tax and car fuel benefit charge (for company cars provided with an element of private use).

This change will apply to all diesel cars registered on or after 1 January 1998 that do not meet the Real Driving Emissions (Step 2) standards.

As existing self-assessment tax filers will be aware, the deadline for online submission of your 2016-17 self-assessment tax return is 31 January 2018. This is also the date that the payment is due for the balance of any self-assessment liability for 2016-17, and the due date for any payment on account due for the current 2017-18 tax year.

There are penalties for late self-assessment returns including an automatic £100 penalty for submitting a late return even if there was no tax to pay or the tax due was paid on time.

The following additional penalties apply to self-assessment returns that are filed late:

• From 3 months late: taxpayers will be charged an automatic daily penalty of £10 per day up to a £900 maximum.
• From 6 months late: taxpayers will be charged additional penalties which are the greater of 5% of tax due or £300.
• Over 12 months late: there are additional penalties based on greater of 5% of tax due or £300. In serious cases this penalty may be increased up to 100% of tax due.

If you are struggling to meet the 31 January 2018 filing deadline we can help.

Planning note

The filing deadline for taxpayers with certain underpayments in the 2016-17 tax year, and who want to apply to have tax collected through their tax code (in 2018-19), is even earlier - 30 December 2017.

Completing your 2017 tax return will also ensure that you know how much you will need to pay HMRC at the end of January 2018.

The Chancellor has announced that the Autumn Budget 2017 will be held on Wednesday, 22 November 2017. The announcement was made on the GOV.UK website and included a video message from the Chancellor, Philip Hammond. In the video, the Chancellor said that the budget will 'set out our thinking on how to keep the economy strong and resilient and fair. An economy that works for everyone'.

This will be the first Budget to take place in November following the government’s decision to switch to a new cycle with the annual Budget taking place in the autumn. In order to commence the new schedule we have the unusual scenario of two Budget dates in 2017.

The Budget cycle will then continue annually from autumn 2018. Each spring also starting in 2018 there will be a Spring Statement. The government retains the option to make changes to fiscal policy at the Spring Statement if the economic circumstances require it.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in November.

This Budget is likely to bring a number of important announcements as the government negotiates Britain’s exit from the EU, deals with rising inflation and an uncertain economic outlook.

As a general rule, the fall-back position for couples who live together with their spouse or civil partners is that property income held in joint names is divided 50:50. This is regardless of the actual ownership structure. However, where there is unequal ownership and the couple want the income taxed on that basis a notification must be sent to HMRC together with proof that the beneficial interests in the property are unequal. This is done using Form 17 published by HMRC.

A Form 17 declaration can only be made by spouses or civil partners that are living together and who own property in unequal shares and who wish to be taxed on income arising in the same proportion. Couples that are separated or in some other type of union cannot make a Form 17 declaration. The declaration is only valid if both partners agree. If one spouse / partner does not agree then the income will continue to be treated on a 50:50 basis even if the ownership structure is different.

A Form 17 declaration stays in place until there is either a change in the status of the couple, i.e. separation or divorce or a change in the ownership structure. If either of these occur the 50:50 income split will reapply.

There are a number of scenarios where a form 17 cannot be used. These include where a husband and wife or civil partners own property as beneficial joint tenants, if the property is let as furnished holiday accommodation and for partnership income.

Planning note:

Where property is held in unequal shares, making a form 17 declaration can be advantageous if the majority owner of the property pays tax at a lower marginal rate than their partner. We would be happy to review any jointly owned property holdings of readers to see if any tax savings are possible using this planning option.

A new timetable for the introduction of Making Tax Digital (MTD) has been announced. The new regime was due to start from April 2018, but was delayed by the snap general election earlier this year. The government now appears to have listened to concerns that the roll-out of the MTD was moving too fast. The original proposals would have required most businesses to upload quarterly figures to HMRC.

Under the new implementation plan these obligations have been substantially changed. They are:

• Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes. These businesses will only be required to use MTD compliant upload software from April 2019.
• Other businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes (Income Tax and Corporation Tax) until ‘at least’ April 2020, and only if their annual turnover is above the VAT registration threshold.
• HMRC has also confirmed that the use of MTD by smaller businesses and for other taxes will be voluntary. This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.

As VAT returns are already submitted on a quarterly basis, the change of pace of MTD implementation means that all businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.

HMRC’s MTD pilot tests will be extended to pilot MTD/VAT for businesses later this year, with a more extensive testing phase starting in the Spring of 2018. This means that there will be far more time to test the system and iron out any issues before the system goes live.

Director shareholders are wont to ensure that they pay the lowest amount of tax and NIC consistent with their obligations under the relevant legislation. For many years, director shareholders have followed a high dividend, low salary extraction strategy. This tended to reduce Income Tax and NIC contributions. The dividend changes that came into effect in April 2016, took some of the shine off this strategy, but taking dividends in preference to salary is still effective. Presently, there is an annual tax-free limit of £5,000 and dividends drawn in excess of this amount are taxed at 7.5%, 32.5% or 38.1%, it all dependent on where the dividend income slots into the basic, higher or additional rate Income Tax bands. Also, dividends continue to be exempt from a National Insurance Contributions (NIC) charge.

Planning note: It is important to remember that dividends can only be taken from retained profits, if your company has no retained profits you cannot take dividends. There are also other profit extraction options: paying interest on any funds directors may have loaned their company is one, or re-examining tax-free benefits. Further, director shareholders looking at implementing the high dividend, low salary strategy should ensure that they take at least a minimum salary to ensure that they maintain sufficient contributions for State Pension purposes. This is currently, 2017-18, a minimum of £157 per week or £8,164 per year.

We can help you examine your options and advise you on a suitable strategy to fit your circumstances. Please call to discuss.

Employers are reminded that the deadline for submitting the 2016-17 forms P11D, P11D(b) and P9D is 6 July 2017. P11D forms are used to provide information to HMRC on certain benefits and expenses that employees and directors receive during the tax year such as company cars, loans and private medical insurance.

Since 6 April 2016, employers may register on a voluntary basis to report and account for tax on certain benefits and expenses via the RTI system rather than by submitting Form P11D at the tax year end. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments. Employers making online submissions will need to correct any problems with the forms before being able to file electronically. Employers who submit paper forms with errors will receive the forms back to be corrected and re-submitted.

Where no benefits have been provided from 6 April 2016 to 5 April 2017 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or complete the '2016 to 2017 Employer - No return of Class 1A' form. A 'no return to make' form is available online. Employers are also required to provide, for each employee for whom a form P11D is due, a statement of the information shown on the employee’s form. The statement should also be provided by 6 July 2017.

Budget Statement 8 March 2017

Pundits are mixed in their interpretation of the prospects for the UK economy as we approach the formal Brexit disengagement. They are keen to see encouragement for industry to invest and export rather than more of the same debt fuelled consumer expenditure. Has Philip Hammond succeeded in meeting these demands, and will he be able to bank any hard-won savings for this financial year?

Our summary of a selection of specific tax changes and other budget announcements for 2017-18 and future years follow.

Personal Tax and miscellaneous matters

Personal Tax allowance

The personal allowances for 2017-18 is £11,500 (2016-17: £11,000).

Transferrable allowances

The maximum amount of free personal allowance that can be transferred between spouses is increased to £1,150 in 2017-18. Couples can only make a claim if one partner has spare personal tax allowance and the other is a basic rate tax payer.

Income Tax rate bands

The levels for 2017-18 are:

• For 2017-18 - £45,000 (the UK apart from Scotland)
• For 2017-18 - £43,000 (Scotland)

If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).

The threshold at which the 45% rate starts is unchanged at £150,000.

For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).

Dividend allowance to be reduced

From 6 April 2018, the tax-free dividend allowance of £5,000 is to be reduced to £2,000. Director shareholders of small companies that have adopted the strategy of minimising salary and maximising dividends will likely pay more Income Tax on their dividend income because of this change.

Capital Gains Tax (CGT)

There are no changes to the basic CGT rates for 2017-18. The CGT on the disposal of chargeable assets, apart from residential property, remains at:

• 10% on disposals that form part of the basic rate band.
• 20% on disposals that form part of the higher rate band.

The higher rates (18% and 28%) will continue to apply to disposals of residential property subject to this tax and carried interest. Gains on a disposal of your home will continue to be exempt. The annual exempt amount for 2017-18 is £11,300 (2016-17: £11,100).

Money Purchase Allowance reduced to £4,000 from £10,000

This will restrict the amount of tax relieved contributions that can be made by an individual, into a money purchase arrangement, who has accessed their pension savings from April 2017.

Reminder for non-doms to be bought into the IHT net

A reminder, that from April 2017, Inheritance Tax will be charged on all UK residential property even when indirectly held by a non-domiciled person through an off-shore structure.

Excise duties

Duty on wine, beer, spirits and alcohol will increase in line with the Retail Prices Index from 13 March 2017. These measures will typically add 2p to the price of a pint of beer, 1p to the price of a pint of cider, 36p to a bottle of whisky and 10p to a bottle of wine.

Tobacco duty rates

Changes to excise duties mean that a pack of twenty cigarettes will increase by an average of 35p, an additional 17p per 10 grams of cigars, and a 35-gram pouch of tobacco by 42p.

Fuel duty

There will be no increase in fuel duties. At the end of 2017-18 this will be the 7th year fuel duty has been frozen.

New National Savings investment clarified

From April 2017, individuals aged 16 years or older will be able to invest in the new NS & I Investment Bond. It will be available for one year from April 2017. Minimum deposit is £100, maximum deposit allowed £3,000. The rate of interest applied is 2.2%.

Lifetime ISA previously announced

From April 2017, any person aged from 18 to 40 will be able to save into a new Lifetime ISA until the age of 50.

Up to £4,000 can be saved each year and savers will receive a government bonus of 25% – that is a bonus of up to £1,000 a year.

Some or all of the money can be used to buy a first home, or it can be kept until age 60.

Accounts will be limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together. If a saver has a Help to Buy ISA it can be transferred into the Lifetime ISA in 2017, or savers can continue saving into both, but it will only be possible to use the bonus from one to buy a house.

After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 25% charge.

ISA limit from April 2017

The ISA savings limit for 2017-18 is confirmed as £20,000.

Business tax changes

Corporation Tax rate

The main rate of Corporation Tax from 1 April 2017 will be reduced to 19%. A further reduction has been announced to 17% from 1 April 2020.

NIC increases for the self-employed

To narrow the perceived imbalance in NIC charges for the employed and self-employed, Philip Hammond announced increases in the self-employed Class 4 NIC contributions.

The increases are:

• From April 2018, an increase from 9% to 10%, and
• From April 2019, a further increase from 10% to 11%.

The earlier increase is timed to coincide with the cessation of Class 2 contributions.

Business rates increases

In response to the negative publicity regarding increases in business rates in England, particularly for retailers, the Chancellor has stepped in with help for smaller businesses.

There are three areas of relief announced:

1.     Small businesses that find they are losing Small Business Rates Relief from April 2017, will have any annual rates increase capped at the higher of £600 or the transitional relief cap.

2.     Local authorities will be funded to provide an element of discretionary relief, and

3.     Public houses with a rateable value of up to £100,000 will benefit from a fixed £1,000 business rate discount – subject to State Aid limits if multiple properties are owned. This discount is available for one year from April 2017.

Local authorities will be fully compensated for any loss of income because of these measures.

Making Tax Digital

The Chancellor announced a one year deferral from Making Tax Digital for Business for unincorporated businesses and landlords with turnovers below the VAT threshold. This means that businesses, self-employed people and landlords with income of less than the VAT threshold will not have to start quarterly reporting until 2019.

Changes to trading and property income allowances

The two previously announced £1,000 tax-free allowances for small scale trading or letting will still be introduced from April 2017, but will now include restrictions if the income or rents are generated by dealings with companies or partnerships of which the recipient is a participator or partner.

Loss relief reform

Legislation is to be introduced to reform the rules governing corporate losses carried forward from earlier periods. The changes will:

• Allow more flexibility by relaxing the way companies can use carried forward losses from 1 April 2017.
• Restrict the set-off of losses such that profits cannot be reduced by more than 50%. This restriction will apply to companies or groups with profits of more than £5m.

Corporation Tax relief for museums and galleries

Rates for 2017-18, already announced, are 25% for touring exhibitions and 20% for non-touring exhibitions. Following consultation, the draft legislation is to be amended to allow for exhibitions that have a performance element, but where the live performance is not the main focus of the exhibition.

VAT registration and deregistration limits

From 1 April 2017:

• Registration threshold increases to £85,000
• Deregistration threshold increases to £83,000

Avoidance and evasion

The government will continue to challenge and seek to overturn artificial arrangements whose sole purpose seems to be a reduction of tax.

Making Tax Digital (MTD) is likely to be the most wide ranging change to the UK tax system since the introduction of Self Assessment many years ago and will fundamentally change the way businesses, the self-employed and landlords interact with HMRC. The introduction of MTD over the coming years will see HMRC move towards a fully digital tax system by 2020. The introduction of MTD was first announced as part of the March 2015 Budget measures.

A number of consultations were launched in the summer of 2016 and HMRC has now published its responses to the consultation documents together with draft legislation.

HMRC has confirmed that under MTD:

• Businesses will be allowed to use spreadsheets to record receipts and expenditure and then submit them electronically to HMRC. This measure was requested by a wide range of stakeholders, particularly small businesses and the Treasury Select Committee.
• Free software will be available to the majority of the smallest businesses.
• Businesses that cannot go digital will not be required to do so.
• Self-employed businesses and landlords with a turnover under £10,000 a year will not have to make quarterly updates or keep records electronically.
• The cash basis scheme for sole traders and other unincorporated businesses will be extended to allow for a simpler way of managing financial affairs.
• Charities will not have to keep their records digitally or make quarterly updates.
• There will be a 12 month initial period where HMRC will be lenient in issuing late submission penalties. A consultation on this measure will be published in the spring.
• There will be an extensive trial period beginning in April 2017 for testing the MTD reporting system before any full scale rollout.

HMRC is still reviewing a number of areas including the exemption threshold and deferring changes for some small businesses with final decisions to be announced before legislation is introduced later this year. There has been a lot of pressure on HMRC to increase the exemption threshold to a more reasonable figure such as the VAT threshold.

In April 2016, the eligibility to claim the employment allowance was removed from limited companies with a single director and no other employees. This measure was put in place to ensure that companies with a single director and no employees do not benefit from an allowance designed to help small businesses take on additional staff.

We wanted to remind anyone still receiving the employment allowance, that is no longer entitled to do so, should ensure that they stop claiming the allowance. This can be done by selecting 'No' in the ‘Employment Allowance indicator’ field when submitting an Employment Payment Summary (EPS) to HMRC. HMRC can charge interest and penalties on any overpaid employment allowance and is likely to take a stronger stance in enforcing this over the coming months.

There are a number of excluded employers who cannot claim the employment allowance. For example, persons employed for personal, household or domestic work, such as a nanny or au pair and employment that is either wholly or mainly of a public nature. No allowance is available for deemed payments of employment income.

The employment allowance (currently £3,000 per year) is available to most businesses and charities to be offset against their employers Class 1 NIC bill. The allowance can be claimed as part of the normal payroll process. An employer can claim less than the maximum if this will cover their total Class 1 NIC bill. Eligible employers that have not yet done so can still claim for the current 2016-17 tax year (as well as make a backdated claim for one further tax year).