TAX BRIEFING SUMMER 2022.
CHANGING NIC IN JULY
The rates for national insurance contributions (NIC) increased by 1.25
percentage points for everyone on 6 April 2022. From 6 July the NIC starting
threshold will rise to £12,570 per year (£1,048 per month) for employees.
This means that some lower paid employees will have more Class 1 NIC deducted from their pay from
April to June 2022 but may pay no NIC from July 2022 onwards.
Employers are not so fortunate as the
threshold from which they pay Class
1 NIC on employees' salaries remains
at £9,100 per year (£758 per month)
for most workers. Employees who are
apprenticed or aged under 21 have a
higher NIC threshold at £50,270 per year
(£4,189 per month).
Directors of family companies who pay themselves
quarterly can only benefit from the higher Class 1
NIC threshold from 6 July 2022. Directors who pay
themselves annually must use a Class 1 NIC threshold
of £11,908 for the whole of the tax year to 5 April
2023.
The employment allowance has also
increased from £4,000 to £5,000 for
2022-23. This allowance provides relief
against employer's Class 1 NIC but it can
only be claimed where the employer had
a total NIC liability of less than £100,000
in the previous tax year and the director
is not the sole employee of the company.
The employment
allowance has
also increased from
£4,000 to £5,000
for 2022-23.
COST OF LIVING SUPPORT
The Chancellor has announced a range of financial support measures
The following are available to individuals:
- all households: £400 automatically deducted from each electricity bill in October;
- pensioners: £300 for each household that receives the winter fuel payment;
- disabled: £150 in September for those claiming a range of disability benefits including the attendance
allowance;
- other claimants: £650 split over two instalments paid in July and the Autumn for those claiming various
means-tested benefits including pension credit; and
- council tax payers: £150 for those with homes in council tax bands A to D.
Those claiming means-tested benefits must have commenced their claim by 25th May 2022 in order to
receive the payments.
These are tax-free grants; they do not need to be repaid and they are ignored for state benefit calculations.
The grants will be paid directly by HMRC or the DWP into the individual's bank account.
Most local councils have already paid the £150 rebate to those who pay council tax by direct debit
but those who pay by other means may need to make a separate claim. Local
councils have also been given additional funds to provide
targeted support to those in greatest
need.
TAX IMPLICATIONS OF HOMES FOR UKRAINE
Ukrainian refugees are being hosted by private individuals and
organisations in spare rooms and properties across the UK.
The Government is providing hosts
with a monthly payment of £350
per property, administered by local
authorities. This payment is only given
to those who register as sponsors
through the Homes for Ukraine
scheme and will be paid for up to 12
months.
The host is expected to provide rent-free
accommodation for at least six months although
they can ask the refugees to contribute towards the
cost of meals provided and extra energy and water
used. The host cannot claim expenses against the
income received.
The monthly payments are free of
tax and national insurance in the
hands of the host. They are also
disregarded as income for state
benefits, council tax discounts and
rent-a-room relief.
Where the host is a company the payments are
exempt from corporation tax. The residential
property used to house the refugees is not subject
to the annual tax for enveloped dwellings while it is
used for the Homes for Ukraine scheme.
The Government is
providing hosts with
a monthly payment
of £350 per property,
administered by local
authorities.
REPORTING EMPLOYEE EXPENSES
It is time to report the expenses and benef its provided
to employees during the year to 5 April 2022.
This reporting process is known
as the P11D after the number of
the relevant HMRC form although
these days the report is normally
a function within payroll software.
HMRC has been discouraging
people from using paper P11D
forms for some time and in recent
years it has provided an interactive
PDF for employers to submit the
information online. However
in 2020 this reporting method
created a number of problems
and it has since been scrapped.
This year you have three options
to complete the P11D report by
the deadline of 6 July 2022:
- HMRC's PAYE online for
employers service (for up to 500
employees);
- commercial payroll software; or
- the paper P11D form.
We do not recommend option 3
as paper forms can easily get lost
in the HMRC system. We can help
you with P11D reporting which
can be a hassle.
It may be worthwhile 'payrolling'
any regular employee benefits
such as health insurance or cars.
This would mean adding the cash
equivalent of the benefit to the
employee's pay and the employee
will be charged income tax but
not NIC on that amount. As the
employer you pay Class 1A NIC on
the value of the benefit after the
end of the tax year.
In order to payroll any benefits
you need to apply to HMRC online
in advance of the start of the tax
year for which payrolling is to
apply. We can help you with that.
CAR OR VAN QUESTIONS
When completing the annual expenses and benef its
return (P11D) you need to know what company-provided
vehicles each employee and director used in the tax year.
A problem can arise when deciding whether small
commercial vehicles should be treated as vans or as
cars. The difference can have a significant impact on
the level of taxable benefit chargeable for the driver.
For example pure electric vans currently attract a
zero taxable benefit and the benefit assessed for
using petrol or diesel vans was
just £3,500 in 2021-22. On the other hand driving a company car
can generate a taxable benefit of up to 37% of the
list price of the vehicle per year.
HMRC has recently updated its guidance
on how to tell the difference between a car and a van for tax benefit
purposes.
Commercial vehicles are defined as those
constructed primarily for the conveyance of goods
or burden of any description. However if the vehicle
is equally suited to carrying either goods or people it
is a car. This ruling is particularly relevant to double-
cab pick-ups or combi-vans.
It is the construction of the vehicle rather than its
use that determines whether it should be treated
as a van. Thus an estate car with blocked out side
windows that is used for carrying tools is still a car as
it is primarily designed to carry people. However if a
vehicle has been adapted after leaving the factory
that adaptation must be taken into account when
deciding whether it is a car or a van.
Please talk to us about any vehicle that you feel is on
the boundary of being a car or a van.
TRIVIAL BENEFITS FOR DIRECTORS
It is important to keep your personal money and your company's money
completely separate. If you use your company's bank card to buy personal
items or to pay your own bills, that expenditure is treated as a loan to you.
The loan creates a corporation tax charge if it is not cleared within nine months of the company's year end
and may create a personal tax charge for you.
However every rule has exceptions. Your company can purchase occasional unsolicited gifts for your family
and you with no tax implications, subject to the following:
- the item costs no more than £50 (VAT inclusive);
- it is not cash or a cash voucher;
- you are not entitled to receive the item as part of any contractual obligation; and
- it is not provided in recognition of services that you perform for the company.
The gifts can be anything from sandals to handbags, books to booze. Linked gifts
such as a monthly subscription count as one purchase so would break the £50 limit.
A director can only receive up to £300 worth of such trivial gifts tax-free each tax year, including gifts to
family members.
A director can
only receive
up to £300 worth
of such trivial
gifts tax-free each
tax year.
BEWARE OF TAX SCAMS
Scammers are very aware of the tax payment deadlines and will step up
their efforts to divert payments from taxpayers to their own bank accounts.
When you complete your tax return by logging
into your personal tax account (see below) you can
now choose to scan a QR code to complete a tax
payment on your mobile device. This has generated
a new type of scam with text messages or emails
containing a QR code being sent to
taxpayers to direct them to a fake
HMRC website.
HMRC will never send a QR code to
a taxpayer. If you receive a QR code
via email or other electronic message
supposedly from HMRC it is a scam.
HMRC will never ask for personal
information or payment
information
by phone; WhatsApp; email; or text message. If you
are contacted and asked for such information by
someone claiming to be from HMRC the best advice
is to end the call and forward any text message to
60599 (local rates).
Any phone call purporting to be from
HMRC asking for money urgently or
threatening arrest is always a scam.
If you are concerned about contact that
you have received from HMRC, please
contact us for advice.
Any phone call
purporting to be
from HMRC asking
for money urgently or
threatening arrest is
always a scam.
PREPARING FOR MTD FOR INCOME TAX
The making tax digital (MTD) rules currently only apply for businesses that submit VAT returns.
Those traders need to keep their VAT records in
a digital format and transmit their VAT return data
directly from their digital records to HMRC using
MTD-compatible software.
From 6 April 2024 similar MTD rules
will apply to most individual traders
and landlords who will need to keep
digital business records and send digital
summaries of their business income and
expenses to HMRC every quarter.
If your gross trading and/or property income is
more than £10,000 in the current tax year (2022-
23) you will need to submit quarterly MTD updates
plus an annual end of period statement and an
annual finalisation statement which replaces your
tax return. All of these reports must be submitted to
HMRC online using MTD-compatible software, not
on paper.
HMRC will tell you early in 2024 whether you need to
comply with MTD for income tax but it is best to start
preparing your business now.
How do you keep your business records?
If you are recording the information in
accounting software or on a spreadsheet
you are halfway there with the digital
records requirement.
The next stage is to choose some MTD-
compatible software to submit the MTD
reports. Currently there is a limited range of suitable
software on the market, but many software providers
are planning enhancements to their accounting
packages or developing bridging software to link
existing spreadsheets to HMRC software to cope
with the income tax aspect of MTD.
Let's discuss how you can best prepare your business
for MTD for income tax.
From 6 April 2024
similar MTD rules
will apply to most
individual traders
and landlords.
USING YOUR PERSONAL TAX ACCOUNT
Your online personal tax account (PTA) is a useful source
of information about your personal tax position and
allows you to communicate with HMRC quickly and easily.
For example you can check your PAYE code, update
any estimated aspects of your code and view your
annual tax summary.
Your PTA also contains your complete national
insurance record for the whole of your adult life so
you can check for gaps in that record. By clicking on
'state pension' you can see a forecast of the value of
your pension and when you will be able to draw it.
If you claim tax credits or child benefit you can tell
HMRC about changes to your claim through your
PTA.
There is also a messages section where HMRC
sends reminders to complete a tax return and other
important notices.
To access your PTA go to
gov.uk/personal-tax-account and click the green
button. You need to set up a Government Gateway ID
for which you need one of the following government
issued documents:
- UK passport;
- payslips or P60 form;
- self assessment tax
- Northern Irish driving licence; or
- tax credit details.
You should never give anyone your Government
Gateway ID details as they could be used to make
fraudulent claims in your name. We cannot access
your PTA as your tax agent.
This newsletter is written for the general interest of our clients and is not a substitute for
consulting the relevant legislation or taking professional advice. The authors and the firm
cannot accept any responsibility for loss arising from any person acting or refraining from
acting on the basis of the material included herein.
