Tax briefing autumn budget 2021.
NATIONAL MINIMUM WAGE RATES RISE
The national living wage (NLW) will rise to £9.50 per hour for pay periods starting on and after 1.4.22
along with the other national minimum wage rates (see table). Since 6.4.21 the NLW rate has applied to
workers aged 23 and over.
The apprentice rate will rise significantly by 11.9% to £4.81 and will be aligned with the rate for employees
aged 16 and 17. This will help employers who will not have to have a formal apprenticeship agreement
in place for trainees under 18 to pay the correct amount of NMW. Older apprentices do need a formal
apprenticeship agreement. Keep a sharp eye on your employees' birthdays to ensure that any rise in the
NMW rate is implemented for the pay period that begins after they move into a different age category.
You can claim a £3,000 incentive for each apprentice hired before midnight on 31.1.22.
Anyone employed through the Kickstart scheme must be paid the NMW relevant to their age. Employ- ers must apply for funding to pay employees on the Kickstart scheme before 17.12.21 but the start date
for new employees on the scheme has been extended to 31.3.22.
| Hourly rate for pay periods starting from |
NLW aged 23+ £/hr |
aged 21 & 22 £/hr |
aged 18 to 20 £/hr |
aged 16 & 17 £/hr |
apprentice rate £/hr |
| 1.4.22 |
9.50 |
9.18 |
6.83 |
4.81 |
4.81 |
| 1.4.21 |
8.91 |
8.36 |
6.56 |
4.62 |
4.30 |
UNIVERSAL CREDITS CLAIMANTS TO KEEP MORE WAGES
Many employed and self- employed people claim Universal
Credit as they have low or unpredictable levels of income.
It provides a much needed top-up
to their earnings but the benefit is
reduced as the worker earns more
due to the Universal Credit taper
rate.
Currently the taper rate is 63%
which means that for every extra £1 earned the
individual will keep only 37p. In the Budget the
Chancellor announced that the Universal Credit
taper rate will be cut to 55% so that for every extra
£1 earned the worker will keep 45p for earnings
received from 1.12.21. Those figures are calculated
after deductions for tax and NIC.
The Universal Credit
taper rate will be cut
to 55% so that for every
extra £1 earned the
worker will keep 45p
CAPITAL INVESTMENT ENCOURAGED
In the March 2021 Budget the Chancellor announced a super-
deduction scheme that provides a 130% deduction for the cost of
new plant or equipment if it is purchased by a company before 1.4.23.
Expenditure on other new assets such as fixtures
and integral features in buildings can also qualify
for a 50% first year deduction if purchased before
1.4.23.
There are two major restrictions to these attrac-
tive investment reliefs:
- the assets must be purchased new (not secondhand); and
- the super-deductions can only be claimed by companies.
An alternative to these reliefs is the Annual Investment Allowance (AIA) where up to £1m of the cost
may be relieved. This AIA cap was due to reduce
to £200,000 per year from 1.1.22 but will now stay
at £1m until 31.3.23.
This offers a unique
window for investing
in business equipment
including commercial
vehicles but please talk
to us before agreeing the deal to check the tax
implications.
Please talk to us
before agreeing
the deal to check
the tax implications
INCREASES IN INCOME TAX
The tax payable on dividends is set to rise from
7. 5% to 8.75% for basic rate taxpayers from 6.4. 22.
Higher rate taxpayers will pay 33.75% on dividends and additional rate taxpayers must budget for dividend tax of 39.35%.
These rates will apply to all dividends taken from all companies where the total
dividend income exceeds the dividend allowance which has been held at £2,000 for 2022-23.
This tax increase is significant. A shareholder/director who takes a salary of £12,570 and dividends of
£37,700 per year will see their personal tax and NIC bill increase by £442.44 in 2022-23. That is an increase
in the amount of tax and NIC paid of nearly 14.5%.
If you borrow from your company and leave the loan outstanding for more than nine months after the
accounting year end the company must pay a tax charge of 32.5% of the loan. This tax rate may well also
increase in April 2022 to match the dividend tax rise but this is as yet unconfirmed.
INCENTIVES FOR RESEARCH AND DEVELOPMENT
Research and development (R&D) tax reliefs can be very generous for
small companies, giving a deduc tion of 230% of qualifying costs.
However the categories of
expenditure which qualify for R&D
relief were defined over 20 years ago
and do not include costs of a typical
internet based business.
From April 2023 cloud computing
and data costs will be qualifying
expenditure categories for R&D relief. These are
both very broad concepts and we will have to
wait for guidance from HMRC and the new law to
determine exactly what will be allowed.
The R&D tax relief scheme has
unfortunately been the target of abuse
and fraudsters and the Government
intends to clamp down on such abuse
and improve compliance through
various measures, including limiting
the R&D tax relief to work undertaken
in the UK.
More detail on the new conditions for R&D tax
relief is expected to be announced in the
coming weeks.
From April 2023
cloud computing
and data costs will
be qualifying ex-
penditure catego-
ries for R&D relief
BUSINESS RATES RELIEFS
High street shops, hospitalit y and leisure businesses were some of the hardest
hit during the Covid-19 pandemic and many have not fully recovered.
These businesses were
granted 100% business
rates relief during 2020-
21 which continued until
30.6.21 for properties in
England. Different rates
reliefs apply in Scotland
and Wales.
From 1.7.21 the English business rates relief was
capped at £105,000 per business and restricted
to 66% of the rates payable. For the year 2022-23
retail and hospitality businesses will be able to
claim 50% business rates relief, capped at £110,000
per business.
In addition the automatic increase in the level of
business rates which was suspended in 2021-22
will also be frozen for 2022-23.
From April 2023 the Government will allow
businesses in England one year's grace before they
must pay business rates on any improvements
that they make to their properties. There will also
be a complete exemption from rates for eligible
heat networks and plant used for renewable
energy generation and storage.
Retail and hospitality businesses will be able
to claim 50% business rates relief,
capped at £110,000
CAPITAL GAINS REPORTING PRESSURE EASED
If you sell a UK residential proper t y subjec t to capital gains tax (CGT ) you must
report the gain and pay the tax within 30 days of the completion date of the deal.
The report generally
has to be done online
through a UK property
account which needs
to be activated for
that purpose. The
reporting must be
repeated in your self
assessment tax return after the end of the tax
year. We can help you with CGT reporting.
Property investors who live outside the UK must
report within 30 days gains from all types of UK
property - commercial and residential - held
directly or indirectly. However getting through
HMRC's security systems to set up the online
property account can be very difficult and
sometimes impossible.
HMRC has listened to complaints and extended
the period for reporting and paying CGT on
relevant property disposals from 30 to 60 days for
deals completed on and after 27.10.21. Property
deals completed before that date still need to be
reported within 30 days if tax is payable.
Where gains are made by UK residents from
mixed-use properties - commercial and residential
- for example a shop with a flat above, only the
residential part of the gain should be reported on
the UK property account.
HMRC has listened
to complaints and
extended the period
for reporting and pay-
ing CGT on relevant
property disposals
HOW TO DECLARE YOUR CHILD BENEFIT
Child benefit is not taxable but sometimes needs to be declared on tax returns.
Since 2013 the high income
child benefit charge (HICBC)
claws back some or all of the
child benefit paid to families
where the highest earner in
the family has total income
of £50,000 or more. It is not
necessarily the person who
receives the child benefit who
must pay the HICBC.
If your income is around
£50,000 and you or your
partner receives child benefit,
the benefit received must be
declared to HMRC on your tax
return. If you do not currently
complete a self assessment tax
return you should ask for one.
We can help you with that.
HMRC can also look at your tax
affairs for earlier years to check
whether you should have paid
the HICBC in those periods.
Interest and penalties will be
charged where the correct
declarations have not been
made.
NIC RISES FOR ALL
Two areas in the public sec tor that desperately
need funding are the NHS and social care.
To pay for these services the Government is
raising a new tax: the
health and social care
(HSC) levy. This will be
charged at 1.25% of
income or profits for the employed and self-em-
ployed respectively from 6.4.23 as it takes time to
adjust computer systems to collect a new tax..
In the meantime national insurance contributions
(NIC) will rise by 1.25% for all working people be-
low retirement age. Employees will pay 13.25%
NIC on earnings between £9,880 and £50,270 per
year and 3.25% above that threshold. Employers
will pay 15.05% on all employees' wages above
£9,100 per year.
This temporary increase in NIC for 2022-23 will
be replaced by the HSC levy from 6.4.23. How-
ever that levy will also apply to individuals who
are still working and aged over state retirement
age. The Government hopes that the HSC levy will
be shown separately on payslips to make it clear
what taxes people are paying.
Employers with small payrolls can offset up to
£4,000 per annum of their employer's Class 1 NIC
against the employment allowance. It is still not
yet clear whether the employment allowance will
cover the HSC levy from 6.4.23.
The Government is
raising a new tax:
the health and social care (HSC) levy
CHANGES FOR SELF-EMPLOYED TAX RETURNS
Making tax digital for income tax self assessment (MTD ITSA) will replace
the self assessment tax return for unincorporated businesses from
April 2024 for sole traders and from April 2025 for most partnerships.
The MTD ITSA regulations will require you to keep records of your
business transactions in a digital format and use those records to send
a summary of income and expenses
to HMRC each quarter. You will also
have to submit an end of period statement (EOPS)
after the tax year end and a finalisation statement reporting all other non-business income.
These reports will have to be submitted using
MTD-compatible software. We can help you with
those tasks.
The Government has decided that all unincorporated businesses will need to report profits or
losses for periods that align with the tax year: 6
April to 5 April. Business that currently draw up accounts to a different date may have
to submit estimated figures in their
EOPS. Accounting periods ending
between 31 March and 5 April will
be treated as ending on 5 April.
If your business uses an accounting period that
does not end on 5 April we need to talk about
what profits or losses will need to be reported in
the transition year 2023-24. It is likely that some
profits will be reported earlier and you may have
a larger tax bill for 2023-24. In such cases it may
be possible to spread the extra tax due over five
years.
All this will take some planning, so let's talk soon.
Making tax digital for income tax self assessment (MTD ITSA) will replace
the self assessment tax return for unincorporated businesses from
April 2024 for sole traders and from April 2025 for most partnerships.
