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2024 Spring Budget

On the 6th of March 2024, the chancellor delivered his Spring budget.

Below are the key announcements made:

BUSINESSES

‘Full expensing’ deduction for leased assets

The chancellor announced an intention to include full expensing tax relief on leased assets. The relief will enable businesses to be more efficient by leasing assets to nurture productivity by getting the newest, cleanest and most efficient plant and machinery into the hands of business owners. No timeline for the start of the relief has been announced and the relief is subject to draft legislation to be published.

UK Independent Film Tax Credit

At Spring Budget 2024, the Chancellor announced the UK Independent Film Tax Credit (IFTC). Under IFTC, eligible films will be able to opt-in to claim enhanced Audio-Visual Expenditure Credit (AVEC), at a rate of 53%, on their qualifying expenditure. Qualifying productions must have started principal photography on or after 1 April 2024, and only expenditure incurred on or after 1 April 2024 can be claimed. Claims can be submitted to HMRC from 1 April 2025 onwards, in respect of expenditure incurred from 1 April 2024, provided a film began principal photography after 1 April 2024.

Theatre Tax Relief 

As announced at Spring Budget 2024, the government will introduce legislation in Spring Finance Bill 2024 for permanent 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.

Recovery loan scheme

The third iteration of the Recovery Loan Scheme – which is due to end in June 2024 – will be extended and renamed as the Growth Guarantee Scheme. The terms of the scheme will remain unchanged, ensuring continuity and consistency for lenders and the business community and will provide a 70% guarantee to participating lenders on finance of up to £2m offered to smaller businesses.

VAT Thresholds

From 1 April 2024 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.

Furnished Holiday Lettings (FHL) regime abolished.

The government will abolish the FHL tax regime, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. This will take effect from April 2025.

At the moment, landlords who use the furnished holiday lets regime can deduct the full cost of their mortgage interest payments from their rental income, are entitled to capital allowances on the furniture, pay lower capital gains tax (CGT) when they sell, are entitled to CGT rollover relief etc.

INDIVIDUALS

Income tax

As previously announced, Personal tax thresholds – i.e. personal allowance, basic and higher-rate thresholds for income tax remain frozen until April 2028 at the current level of £12,570 and £50,270. The additional rate threshold was reduced from £150,000 to £125,140 from 6 April 2023. 

Personal allowance for higher rates from 2023/24

Where annual income exceeds £100,000, personal allowance is lost at a rate of £1 for every £2 of income above £100,000. This is the threshold where the entire personal allowance is lost. 

The loss of the personal allowance means a person is taxed at 40% on the additional £2 of income, and they also pay an extra 40% on the £1 of personal allowance lost. This results in a marginal rate of 60%, which continues up to £125,140 (£100,000 + (£12,570 x 2)). At the £125,140 point the entire personal allowance is lost.

National insurance

The government will introduce legislation to reduce the main rate of primary Class 1 National Insurance contributions by 2 percentage points from 10% to 8% from 6 April 2024.

For the self-employed, the government will introduce legislation to reduce the main rate of Class 4 National Insurance contributions by 2 percentage points from 8% to 6% from 6 April 2024.

This is in addition to the previously announced reduction in the main rate of Class 4 National Insurance contributions from 9% to 8% and means that from 6 April 2024 the main rate will reduce from 9% to 6%.

Capital gains tax: reduced annual exemption. 

As previously announced, the annual exemption amount for capital gains tax for individuals will reduce from £6,000 to £3,000 from April 2024. 

The CGT rate for higher rate taxpayers on gains on disposals of residential properties will be reduced to 24% from April 2024.

Non-Dom status to be replaced by new residence based system

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. 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.

High Income Child Benefit Charge threshold 

The government will introduce legislation in the Spring Finance Bill 2024 to increase the High-Income Child Benefit Charge (HICBC) adjusted net income starting threshold to £60,000, from the 2024-25 tax year onwards. It will also amend section 681C to extend the HICBC taper to between £60,000 and £80,000. For those with income between £60,000 and £80,000, the rate at which HICBC is charged is halved, and will equal 1% for every £200 of income that exceeds £60,000. The charge on taxpayers with income above £80,000 will be equal to the full amount of child benefit paid.

New British ISA investment allowance

The government has announced the introduction of the UK ISA. This will have a new ISA allowance of £5,000 in addition to the existing annual ISA allowance of £20,000 and will provide a new tax-free savings opportunity for people to invest in the UK. This will be introduced after a consultation which will run from 6 March 2024 to 6 June 2024.

OTHER

Stamp Duty Land Tax (SDLT) relief for multiple dwellings to be abolished.

Purchasers of residential property in England and Northern Ireland who acquire more than one dwelling in a single transaction or linked transactions will not be able to obtain Multiple Dwellings Relief (MDR) from 1 June 2024. MDR is a bulk purchase relief in Stamp Duty Land Tax (SDLT). The rate of tax is normally determined by the total consideration given for land. MDR is available to any purchaser buying 2 or more dwellings in a single transaction, or linked transactions, and allows the purchaser to calculate the tax based on the average value of the dwellings purchased as opposed to their aggregate value.

KEY TAX RATES

                  
 Income tax rates: England, Wales & Northern Ireland 
(non-dividend income)
2024/252023/24
0% starting rate for savings onlyUp to £5,000Up to £5,000
0% on personal allowance (subject to any clawback of PA)£0 – £12,570£0 – £12,570
20% basic rate tax£12,571 – £50,270£12,571 – £50,270
40% higher rate tax£50,271 – £125.140£50,271 – £125.140
45% additional rate taxAbove £125,140Above £125,140
Scottish rates of income tax (non-dividend income)                                     
0% on personal allowance (subject to any clawback of PA)£0 – £12,570£0 – £12,570
19% starting rate £12,571 – £14,876£12,571 – £14,732
20% basic rate tax£14,877 – £26,561£14,733 – £25,688
21% intermediate rate tax£26,562 – £43,662£25,689 – £43,662
42% higher rate tax £43,663 – £75,000£43,663 – £125,140
45% advanced rate£75,001 – £125,140n/a
48% top rate (47% for 2023-24)Above £125,140Above £125,140
National insurance2024/252023/24
Lower earnings limit, primary class 1 (per week)£123£123
Upper earnings limit (UEL), primary class 1 (per week)£967£967
Primary threshold (PT) (per week)£242 £242 
Secondary threshold (per week)£175£175
Employment allowance (per year/employer)£5,000£5,000
Employee’s primary class 1 rate between PT and UELFrom 6 April 2023 to 5 January 2024From 6 January 2024 to 5 April 20248% 12%10%
Employee’s primary class 1 rate above upper earnings limit 2% 2% 
Married woman’s reduced rate between PT and UELFrom 6 April 2023 to 5 January 2024From 6 January 2024 to 5 April 20241.85% 5.85%3.85%
Married woman’s rate above upper earnings limit2%2%
Employer’s secondary class 1 rate above secondary threshold 13.8%13.8%
Class 2 small profits threshold (per year) £6,725£6,725
Class 2 lower profits threshold (per year) n/a12,570
Class 2 small profit threshold (voluntary- per week)£3.45£3.45
Class 2 rate (per week where profits are above lower profits limit threshold£0£3.45 
Class 3 voluntary rate (per week)£17.45£17.45
Class 4 lower profits limit £12,570£12,570
Class 4 upper profits limit£50,270£50,270
Class 4 rate between lower profits limit and upper profits limit 6%9%
Class 4 rate above upper profits limit 2%2%
Class 1A/1B NIC 13.8%13.8%

Contact us regarding this article.

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Autumn Statement 2023

The tax measures announced in the autumn statement had been previously announced except for the reduction of the main rate of National insurance.

We have summarised below key announcements made.

Business

  • Expensing allowance made permanent. This was initially set to expire by April 2026.

It relates to qualifying expenditure of plant and machinery (business assets). 100% first year allowances for main rate expenditure and 50% allowances for special rate expenditure.

The relief is available to incorporated businesses on the purchase of qualifying plant and machinery (business assets).

  • Enhanced support for Research and Development intensive small and medium sized businesses.
  • The special tax site reliefs for Freeports and investment zones will be available for a further five years until 30 September 2031.  

Personal

  • A 2% reduction of the main rate of National insurance effective 06.01.2024.

Reduced from 12% to 10% on income between 12,570 and £50,268.

Reduction of class 4 national insurance for self-employed individuals from 9% to 8%.

Abolition of class 2 national insurance for the self-employed individuals.

  • Removal of the self-assessment filing threshold of £150,000 for individuals who earn all their income via pay as you earn.
  • Cash based accounting for self-employed individuals and individuals in a partnership as default with an option for businesses to opt out.
  • ISA system to be simplified. By widening the scope of investments, allowing multiple subscriptions to ISAs in the same tax year and making ISA reporting systems digital effective 06 April 2024
  • Venture capital schemes: the enterprise investment scheme and venture capital trusts will be extended by another ten years, to April 2035.

Other

• National Minimum Wage: the full National Living Wage rate will increase to £11.44/hour (up from £10.42) from April 2024 and will be extended to those aged 21 and over. The 18–20 rate will increase to £8.60/hour, and the apprentice rate to £6.40/hour. 

• Pensions: the full new state pension will increase by 8.5% in April 2024 (maintaining the triple lock guarantee). Digitalisation of relief at source will be delayed ‘until April 2027 at the earliest’. 

• Benefits (including Universal Credit): will increase by 6.7% from April 2024 (based on Sept 2023 inflation).

Administration

  • Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) design changes

Planned improvements to the design of the system.

Draft regulations will be published for technical consultation later in 2023.

Contact us regarding this article.

Cash,Flow

Cashflow management

A positive cashflow and good cashflow management are the bloodline of a business. It is especially essential in the current economic climate to ensure that as a business owner, you have got your eye on the proverbial ball, whether you are doing this yourself or have outsourced it.

Here are some points to consider:

  • Create a cashflow forecast.

A cashflow forecast is a prediction of how much money you expect to receive minus the amount of costs you expect to incur.

For a simple cashflow forecast, start with your current expenditure and income, review future income and expenditure and input these figures on a spreadsheet to get the difference between money in and money out. If the money coming in is more than the money going out, this is a good start.

A cashflow forecast is useful to plan expenses, strategize for your business – for example accessing plans to grow the business, planning and implementing a marketing strategy. It also of course helps with the management of cash.

Get your accountant’s help for an In-depth cashflow forecast.

  • Analyse your cashflow regularly.

You have done the cashflow forecast, don’t stop there, review the income that is coming in and when is it coming as well as payments due and when they are due to be paid out on an ongoing basis, then adjust your cashflow forecast accordingly. Review what’s working and what is not, what expenses can be reduced or cut out altogether and how the business can get more money in.

  • Implement an efficient invoice system.

As well as having an efficient invoice system, make sure you have an efficient invoicing process in place to ensure invoices are raised when they should be raised and reminders for payment are sent accordingly.

Automate as much as possible. There are various software options to help with this.

  • Negotiate better payment terms with your suppliers.

Check with your main suppliers on whether the current payment terms could be improved. If you don’t ask, you don’t get.

  • Make It easy for your clients to pay you.

Automate your payment system and make it easy for your clients to pay you; offer more than one payment option.

Implement a robust process to chase and review overdue payments.

  • Invoice financing or discounting

Invoice financing is where an invoice financing company takes over your unpaid invoices and pays you a percentage of the value of your invoices, this includes them taking over the payment collection for the unpaid invoices. 

Invoice discounting is when a business uses its unpaid invoices as security for debt. The business will remain responsible for the collection of the unpaid invoices.

This can be expensive but useful when cash is tight.

  • Utilise all available concessions like cash accounting for VAT and gross status for construction clients.

Businesses with turnover of £1.35M or less can use cash accounting for VAT. This means that you only pay VAT when you get paid. This can be a massive boast to your cashflow as you only pay VAT when you are paid bearing in mind that VAT is 20% of the value of what you invoice for standard rated supplies.

For construction businesses, consider applying for the gross status, this means that when you are working on a project, you will not have CIS which is normally 20% or 30% of the value of your invoice for labour withheld by your clients.

  • Build up an emergency fund for your business.

Its sensible to set aside funds to cover unexpected business expenses.

This can also include easy to access cash.

Need help with your cashflow – get in touch here.

shutterstock_2228022231-scaled

The Autumn Statement 2022

It comes as no surprise that the 2022 Autumn statement has little in way of tax cuts.

We summarise below the key announcements made by The Chancellor.

Income Tax

The personal tax thresholds for basic and higher rate taxpayers will be maintained at their current levels of £12,570 and £50,270.

The threshold for the additional rate of tax has been reduced from £150,000 to £125,140 effective 6 April 2023. This will bring more individuals within the threshold and increase current additional rate taxpayers tax bill by £1,243.00.

This increase applies to taxpayers in England, Wales, and Northern Ireland; Scotland has different tax rates. 

 The additional rate of tax for savings and dividend income will apply UK- wide. 

Married couples’ allowance and Blind Person’s Allowance will be increased by 10.1% from 6 April 2023.

Dividend allowance will be reduced from £2,000 to £1,000 from April 2023, and £500.00 from April 2024

National Insurance

All national insurance thresholds for all classes will remain fixed at their current levels until April 2028.

The rate at which employer’s start to pay national insurance will be fixed at £9,100 from April 2023 until April 2028.

The employment allowance will remain at its current level of £5,000.

National Living Wage

From 1 April 2023, the government will increase the National Living Wage by 9.7% to £10.42 an hour for individuals aged 23 years and over.

Capital gains 

The capital gains allowance will reduce from £12,300 to £6,000 from April 2023 and £3,000 from April 2024.

Business Tax

VAT registration and deregistration thresholds will be maintained at the current levels of £85,000 for an additional two years from 1 April 2024.

Annual Investment Allowances

Annual Investment Allowance has been confirmed at a permanent rate of £1 million from 1 April 2023.

Research and Development

For expenditure on or after 1 April 2023, the Research & Development Expenditure Credit rate will increase from 13% to 20%, the SME additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.

Other measures

Stamp Duty

The SDLT cuts announced on the 23 Sep 22 will remain in place until Mar 2025. The nil threshold was increased from £125,000 to £250,000 for all purchases of residential properties, the nil threshold for first time buyers was increased from £300,000 to £425,000. These rates apply to purchasers in England and Northern Ireland.

The maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000. 

Energy price guarantee

The Energy price guarantee will continue from April 2023 though support will be less generous based on a higher average usage price of £3,000 up from £2,500.

Business rates

The planned revaluation for England will proceed in April 2023 for business rates to reflect property values as at 1 April 2021. Current values have been in effect since April 2017 and are based on market values as at 1 April 2015.

A transitional rates scheme to phase in changes with the new values will be in place for 3 years following revaluation. The rates multiplier will be frozen in 2023-24 and relief provided to businesses in retail, hospitality, and leisure sectors from 50% to 75%.

Business can check with their local councils for other non-domestic relief that might be available to them. https://www.gov.uk/apply-for-business-rate-relief

Eligibility for start-up loans

The eligibility for start-up loans has been widened to include businesses that have been trading for up to 3 years. Qualifying business can borrow up to £25,000 (businesses that have been trading for up to 3 years, this was previously for businesses that had been trading for two years)

New second loans are available to businesses that have been trading for up to 5 years.

Find out more here

Recovery loan scheme

The Recovery Loan Scheme, launched in April 2021 to help businesses recovering from the pandemic, has been extended to 2024. Details of the scheme and eligibility criteria can be found on the British Business Bank website FAQs

Car tax

Electric cars, vans and motorcycles will begin to pay Vehicle excise duty in the same way as petrol and diesel vehicles from April 2025.

Company car taxes are going to be set up until April 2028 to provide long term certainty for taxpayers and industry in Autumn Finance Bill 2022. 

Rates will continue to incentivise the take up of electric vehicles:

  • appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1 percentage point in 2025-26: a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars
  • rates for all other vehicles bands will be increased by 1 percentage point for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28.

Inheritance tax

The inheritance tax nil band rates will remain at the current levels.

£325,000, residence nil band rate £175,000 and the residence nil-rate band taper will continue to start at £2m.

Contact us regarding this article

The Autumn Statement 2022

It comes as no surprise that the 2022 Autumn statement has little in way of tax cuts.

We summarise below the key announcements made by The Chancellor.

Income Tax

The personal tax thresholds for basic and higher rate taxpayers will be maintained at their current levels of £12,570 and £50,270.

The threshold for the additional rate of tax has been reduced from £150,000 to £125,140 effective 6 April 2023. This will bring more individuals within the threshold and increase current additional rate taxpayers tax bill by £1,243.00.

This increase applies to taxpayers in England, Wales, and Northern Ireland; Scotland has different tax rates. 

 The additional rate of tax for savings and dividend income will apply UK- wide. 

Married couples’ allowance and Blind Person’s Allowance will be increased by 10.1% from 6 April 2023.

Dividend allowance will be reduced from £2,000 to £1,000 from April 2023, and £500.00 from April 2024

National Insurance

All national insurance thresholds for all classes will remain fixed at their current levels until April 2028.

The rate at which employer’s start to pay national insurance will be fixed at £9,100 from April 2023 until April 2028.

The employment allowance will remain at its current level of £5,000.

National Living Wage

From 1 April 2023, the government will increase the National Living Wage by 9.7% to £10.42 an hour for individuals aged 23 years and over.

Capital gains 

The capital gains allowance will reduce from £12,300 to £6,000 from April 2023 and £3,000 from April 2024.

Business Tax

VAT registration and deregistration thresholds will be maintained at the current levels of £85,000 for an additional two years from 1 April 2024.

Annual Investment Allowances

Annual Investment Allowance has been confirmed at a permanent rate of £1 million from 1 April 2023.

Research and Development

For expenditure on or after 1 April 2023, the Research & Development Expenditure Credit rate will increase from 13% to 20%, the SME additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.

Other measures

Stamp Duty

The SDLT cuts announced on the 23 Sep 22 will remain in place until Mar 2025. The nil threshold was increased from £125,000 to £250,000 for all purchases of residential properties, the nil threshold for first time buyers was increased from £300,000 to £425,000. These rates apply to purchasers in England and Northern Ireland.

The maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000. 

Energy price guarantee

The Energy price guarantee will continue from April 2023 though support will be less generous based on a higher average usage price of £3,000 up from £2,500.

Business rates

The planned revaluation for England will proceed in April 2023 for business rates to reflect property values as at 1 April 2021. Current values have been in effect since April 2017 and are based on market values as at 1 April 2015.

A transitional rates scheme to phase in changes with the new values will be in place for 3 years following revaluation. The rates multiplier will be frozen in 2023-24 and relief provided to businesses in retail, hospitality, and leisure sectors from 50% to 75%.

Business can check with their local councils for other non-domestic relief that might be available to them. https://www.gov.uk/apply-for-business-rate-relief

Eligibility for start-up loans

The eligibility for start-up loans has been widened to include businesses that have been trading for up to 3 years. Qualifying business can borrow up to £25,000 (businesses that have been trading for up to 3 years, this was previously for businesses that had been trading for two years)

New second loans are available to businesses that have been trading for up to 5 years.

Find out more here

Recovery loan scheme

The Recovery Loan Scheme, launched in April 2021 to help businesses recovering from the pandemic, has been extended to 2024. Details of the scheme and eligibility criteria can be found on the British Business Bank website FAQs

Car tax

Electric cars, vans and motorcycles will begin to pay Vehicle excise duty in the same way as petrol and diesel vehicles from April 2025.

Company car taxes are going to be set up until April 2028 to provide long term certainty for taxpayers and industry in Autumn Finance Bill 2022. 

Rates will continue to incentivise the take up of electric vehicles:

  • appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1 percentage point in 2025-26: a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars
  • rates for all other vehicles bands will be increased by 1 percentage point for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28.

Inheritance tax

The inheritance tax nil band rates will remain at the current levels.

£325,000, residence nil band rate £175,000 and the residence nil-rate band taper will continue to start at £2m.

Contact us regarding this article

London,,Uk,-,March,23,,2022:,Downing,Street,Sign,On

The Mini-budget reversal

Yesterday, the 17th of October, the government brought forward the announcement of most the UK’s fiscal measures that were due to take place on the 31st of October. A decision on whether benefits will be increased in line with inflation is expected to be announced on the 31st of October 2022 when further fiscal measures will be announced. 

This comes after a turbulent few weeks since the announcement of the mini budget on the 23rd of September 2022. 

Before getting into the announcements made on the 17th October 2022, here is a quick recap of what has happened since the mini-budget 

  • Pound against dollar at its lowest. 
  • U-turn on the reversal of the scrapping of the 45% tax rate. 
  • U-turn on the decision to not increase corporation tax to 25% from April 2023. 
  • Chancellor Kwasi Kwarteng sacked; Jeremy Hunt appointed new chancellor.  
  • Jeremy Hunt announces some of the fiscal measures that were due to be announced on 31 October 2022. 

Okay, so what was announced on the 17th October 2022 

  • The basic rate of tax will remain at 20% for the foreseeable future. 
  • Off payroll reforms introduced in April 2017 and 2021 will remain. 
  • Increase in dividend tax will remain.  
  • The cap on energy prices, previously meant to stay in place for 2 years will now stay in place until April 2023 at which point support will be reviewed. This is obviously a huge disappointment for many.  
  • No new VAT- free shopping scheme for overseas visitors to the UK. 
  • No freeze on alcohol duty. 

The only tax cuts to that survived Jeremy Hunt are the reversal of the 1.25% national insurance increase as well as the increase in thresholds for stamp duty. 

The celebrations for the scrapping of the off-payroll reforms will have to wait! 

However, following the announcements, the pound recovered against the dollar and yields on 30 year gilts are easing back. 

Contact us about this article 

2022,Is,A,Good,Year,For,Business.,Grass,Growing,In

The Mini Budget

There is nothing mini about the mini budget. With the biggest tax cuts since 1972, the lowest drop of the pound against the dollar in history, there is definitely nothing mini about it.

Here are the key changes/announcements

Income tax cut 

The basic rate income tax has been reduced from 20% to 19%, effective 5 April 2023; this has been brought forward a year. The previous chancellor Rushi Sunak had pledged to reduce the basic rate of tax to 19% in 2024.

The current chancellor Kwasi Kwarteng has abolished the additional rate of tax of 45% which is currently paid on income over £150,000 a year.

Income tax bands are different in Scotland,  the cuts on income tax and abolishing of the additional rate of tax will not apply to Scotland.

National insurance

The 1.25% national insurance increase introduced this April, will be reversed effective November 2022.

The health and social care levy will not be introduced 

Stamp Duty

No stamp duty due on the first £250,000, previously £125,000.

No stamp duty on the first £425,000 for first time buyers, previously £300,000.

Bankers’ bonuses

The cap on bankers’ bonuses has been scrapped.

Corporation tax

The planned raise which was due to take place in April 2023 of 25% from 19% has been scrapped.

IR35

The 2017 and 2021 IR35 reforms have been scrapped. This means that the responsibility for working out whether one falls within IR35 is now back to the contractor instead of the end user. This change will be mostly welcomed by contractors and those in the industry.

Other announcements

  • The amount companies can invest tax free in qualifying equipment, fixtures, business cars and plant and machinery (Annual investment allowance) will remain at £1m indefinitely.
  • Freeze on energy bills 
  • The amount of funds new and start-up companies can raise has been increased from £150,000 to £250,000 under the SEIS scheme.
  • The EIS (Enterprise Investment Scheme) and VCT (Venture capital trusts) both due to expire April 2025 have been extended.

It remains to be seen whether the drive for the growth of the economy will pay off.

Please contact us here, if you have any questions.

2022,Is,A,Good,Year,For,Business.,Grass,Growing,In

Spring Statement 2022

Here are the key takeaways from this year’s Spring statement

Income Tax and National insurance

The primary national insurance threshold and lower profits limit have been increased from £9,880 to £12,570 which brings both thresholds in line with the income tax threshold. The increase is set for July 2022 which should make for an interesting payroll run just as most payroll professionals were getting over the furlough calculations.

The employment allowance will increase to £5,000 from April and the basic rate tax rate will be reduced by 1% to 19% from April 2024.

The 1.25% “NHS Tax” will remain.

Business investment

To help small businesses, the chancellor announced an increase to the annual investment allowance from £200,000 to £1 million until March 2023.

R&D tax credits are to be made more generous to boost UK productivity.

Cost of living

With the cost of living set to raise even further, a temporary 12 month cut to duty on petrol and diesel was announced of 5p per litre.

Households installing energy saving items to their homes like solar panels and insulation will have 0% VAT on the items as opposed to 5% VAT.

Has the spring statement delivered to your expectations?

Happy,Little,Boyn,Calling,While,Climbing,High,Tree,And,Ropes.

Tax-efficient childcare

Childcare is expensive; however, the tax system can provide a helping hand. In recent years, there has been a shift from tax relief for employer-supported childcare and vouchers to a Government top-up scheme. 

Government scheme

The Government operate a tax-free childcare scheme whereby parents deposit money into an account which can be used to meet childcare costs and the Government provide a tax-free top up.

To qualify for the scheme, the parent (and their partner if they have one) must each expect to earn at least £1,853.28 over the next 3 months. This is equivalent to 16 hours a week at the National Living Wage of £8.91 an hour. However, if either the claimant or their partner expect to have adjusted net income of more than £100,000 in the current tax year, they cannot benefit from the tax-free top up.

Eligible parents can access the tax-free top up by setting up an online childcare account for their child. For every £8 that is deposited into the account, the Government will add a further £2, to a maximum of £2,000 a year (or £4,000 a year where the child is disabled). The funds can be used to provide approved childcare, including that provided by childminders, nurseries, nannies, after-school clubs and playschemes, as long as the provider has signed up to the scheme. The care can be provided until the September after the child’s 11th birthday (or up to the child’s 17th birthday if the child is disabled). 

The Government top-up scheme is not available to universal credit claimants, and cannot be used in addition to employer-provided vouchers or employer-supported care.

Employer-supported childcare and childcare vouchers

Where an employee joined their employer’s childcare or childcare voucher scheme on or before 4 October 2018, they can continue to benefit from the associated tax relief while their employer continues to operate the scheme. Childcare vouchers and/or employer supported childcare are tax-free up to the employee’s exempt amount. Where the employee is a basic rate taxpayer or joined the scheme prior to 6 April 2011, the exempt amount is £55 per week. Otherwise the exempt amount is £28 per week where the employee is a higher rate taxpayer and £25 per week where the employee is an additional rate taxpayer. The exemption also applies for National Insurance purposes. Employees only have one exempt amount for employer-supported care and vouchers, regardless of the number of children that they have.

It is also possible for employer-provided childcare and childcare vouchers to be made available under a salary sacrifice scheme without triggering the alternative valuation rules. 

Workplace nurseries

No tax charge arises under the benefit in kind rules where childcare is provided in a workplace nursery. Unlike the exemption for employer-supported care and vouchers, there is no cap on the value of childcare that can be provided tax-free in a workplace nursery. However, there are stringent conditions that must be met for exemption to be forthcoming.

Which is best?

Where a parent could potentially benefit from more than one scheme, they should evaluate the options and can choose the one best suited to their needs. Employees in an employer-supported scheme or employer voucher scheme will need to leave that scheme if they sign up for the Government scheme, and will not be able to re-join the employer’s scheme if they change their minds.

Please get in touch here, if you have any questions.

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SDLT and uninhabitable properties

For many the lure of a renovation project is strong and for those looking to generate rental income, doing up a dilapidated property to let out may make commercial sense.

When buying an investment property, the addition of the 3% SDLT supplement means that the SDLT hit may be significant. However, as this only applies to residential dwellings, buying a derelict property that does not meet the definition of a ‘dwelling’ can deliver substantial SDLT savings. Not only is the purchase price on which SDLT payable low as the renovation costs are incurred post sale and SDLT-free, SDLT is charged at the non-residential rates and the 3% supplement does not apply.

The Bewley case

In 2019, the First Tier Tribunal ruled in the case of Bewley v HMRC that a bungalow and plot of land, which had planning permission for the demolition of the existing building and the construction of a new dwelling was not suitable for residential use at the effective date of the transaction. As a result, SDLT was payable at the non-residential rates rather than the residential rates, and consequently the 3% SDLT supplement did not apply.

Use or suitable for use as a dwelling

The legislation defines a ‘dwelling’ as a building that is used or suitable for use as a single dwelling or which is in the process of being constructed or adapted for such use.

In the Bewley case, the property was not used as a dwelling on the effective date of the transaction; the question therefore was whether it was ‘suitable’ for use at that date. 

The radiators and heating pipes had been removed from the bungalow and the presence of asbestos prevented repairs and alterations being carried out without posing risks. As a result, the tribunal found that the property was not suitable for use as a dwelling. Consequently, SDLT was payable at the lower non-residential rates, in respect of which the 3% supplement does not apply.

Effective date

The test as to whether the property is a dwelling is undertaken at the effective date of the transaction – the completion date. All that matters is whether it is used as or is suitable for use as a dwelling at that date or in the process of being constructed or adapted at that date – it is irrelevant whether it has previously been used as a dwelling, or may be used as one in the future.

More than modernisation

The test of whether a property is uninhabitable is a strict one and an uninhabitable property will lack basic facilities necessary to live in it, such as a functioning bathroom and kitchen and heating. A property which is in need of modernisation and redecoration may still be habitable and count as a dwelling – the fact that a property is a renovation project will not in itself mean that non-residential rates apply.

Please get in touch here, if you have any questions.