UK Fiscal measures

New Chancellor Jeremy Hunt reverses Kwasi Kwarteng’s mini budget in his first statement on 17th October 2022.

No longer going ahead:

• The proposal to abolish the 45% additional income tax rate
• The planned increase in corporation tax cut from 19% to 25%
• The planned cut in basic rate of income tax from 20% to 19%
• Plans to reform the off payroll IR35 rules

Remaining:

• The plan to cut stamp duty on the first £250,000 of any property and the first £425,000 for first-time buyers
• The Health and Social Care Levy will not come into force from 6th April 2023
• The reversal of the 1.25% rise in national insurance

Spring Statement 2022

Key measures announced by the Chancellor in his annual Spring Statement on 23rd March 2022:

• The proposed 1.25% temporary increase in National Insurance rates (becoming the Health and Social Cary Levy in April 2023) will still go ahead
• The National Insurance thresholds for the Class 1 primary threshold and the self-employed Class 4 lower earnings limit will increase by £3,000, aligning them with the income tax personal allowance of £12,570 from 6 July 2022
• The Employment Allowance for eligible businesses and charities will increase from £4,000 to £5,000 from 6 April 2022
• The basic rate of income tax will reduce from 20% to 19% in 2024
• Fuel duty cuts by 5p per litre with immediate effect

If you would like to discuss how these measures may affect you then please contact the Sampson West team on 020 7404 5040

MTD - Aboloshing the VAT threshold

At present, only VAT-registered businesses and organisations with gross turnover exceeding £85,000 are obliged to digitally report their quarterly VAT returns under the ‘Making Tax Digital’ (MTD) regime. However, the turnover threshold will be abolished from April 2022, meaning all VAT-registered businesses and organisations regardless of turnover will be required to report via the ‘Making Tax Digital’ system.

For more information on the aboloshing of the threshold and how this may affect your company, please get in touch.

MTD for VAT - late filing penalties

A new points system is set to be introduced from January 2023 for filing late VAT returns.

If the ‘points threshold’ (based on the frequency of returns) is exceeded, a fixed £200 penalty will apply. For example, quarterly returns will have a ‘4 point threshold’. Therefore, if more than 4 returns are filed late, the £200 penalty is charged.

If the threshold is exceeded, accumulated points will expire based on a set of obligations.

If the threshold is not exceeded, accumulated points will expire after 24 months.

A similar points system will be introduced for income tax returns when ‘Making Tax Digital for Income Tax Self-Assessment’ is introduced in April 2024.

The Health and Social Care Levy

The Government recently announced a temporary increase in National Insurance Contributions and the introduction of a Health and Social Care Levy. The NIC increase of 1.25% from April 2022 is temporary and will be replaced with the Health and Social Care Levy when it is introduced as a new tax in April 2023.

This also apply to dividends, meaning all dividend income will be taxed at a rate increased by 1.25% from April 2022.

The new Health and Social Care Levy from April 2023 will apply to both employees and employers including those over the state pension age.

More detail on the new tax will be outlined in the near future, so watch this space for any updates or contact us to learn how these changes may affect you.

Making Tax Digital for Income Tax

Income tax will be the next tax to join the ‘Making Tax Digital’ legislation but the Government have postponed the start date to April 2024.

In potentially the biggest change to income tax compliance in years, the new legislation will see all self-employed individuals and landlords with gross income in excess of £10,000, reporting quarterly online instead of annually.

The quarterly deadlines will be the same for every individual regardless of their accounting period, meaning basis periods will eventually be abolished. The transitional year will be no earlier than 2023/24.

Reporting income tax will therefore change from April 2024, but the timing of your self-assessment payments will remain the same.

There is speculation that the gross threshold for MTD ITSA will eventually align with VAT at £85,000, but this will be discussed at a later date, as well as the requirement for Partnerships and Businesses to join MTD in the future.

The postponed start date does not mean we should take a back seat, it means we have more time for planning.

Contact us for advice on compatible MTD software and for more information regarding your basis periods and how the transitional year could affect you.

Self-Assessment Deadline

The submission deadline for self-assessment tax returns for the year ended 5 April 2021 remains as 31 January, however, late filing penalties will not apply if filed online by 28 February 2022. Any outstanding 2020/21 tax liabilities , along with the first 2021/22 payment on account, are due by midnight on 31 January 2022. Penalties will apply for late submission and interest will be charged on late payments.

If you have difficulties meeting the payment deadline, you can set up a time to pay arrangement by contacting HMRC.

If you need assistance with your self-assesment return or setting up a time to pay arrangement with HMRC, please contact us on 020 7404 5040.

A Brief Summary of the 2021 Autumn Budget

Income Tax and National Insurance Contributions (NIC)

• Basic and higher rate thresholds for income tax as well as the personal allowance will remain frozen until 2025/26
• The NIC lower earnings limit and primary and secondary thresholds will increase from yearly thresholds of £6,240, £9,568 and £8,840 to £6,396, £9,880 and £9,100 respectively from April 2022
• The main NIC rates will increase by 1.25% but only until the new Health and Social Care levy is introduced in April 2023
• Dividend rates will increase by 1.25% from April 2022 and are expected to stay at this level alongside the Health and Social Care levy

Capital Gains Tax (CGT)

• The time limit to report and pay tax when disposing of UK land and property is immediately extended from 30 days to 60 days
• The annual exemption and CGT rates will remain frozen until 2025/26

Making Tax Digital (MTD)

• Income tax will join the MTD legislation from April 2023
• Basis periods will be abolished from April 2024 year with the 2023/24 tax year being the transitional year