LATEST HMRC GUIDANCE FOR EMPLOYERS

HMRC has published the latest issue of the Employer Bulletin. The April issue has information on various topics including:

  • Forthcoming deadlines
  • Claiming employment allowance from April 2022
  • Student loans
  • Coronavirus updates and information
  • Official rate of interest
  • Hybrid working.

Small businesses are being invited to share their views of the tax system through the Tell ABAB 2022 survey.

You can also feedback on the UK central government complaints standards by participating in a survey launched by the Parliamentary and Health Service Ombudsman.

Please contact us for help with tax matters.

Internet link: Employer Bulletin

HMRC STARTS CHASING UP SEISS OVERPAYMENTS

HMRC has started to recover overpayments of Self-employment Income Support Scheme (SEISS) grants.

From April, HMRC is writing to taxpayers whose entitlement to the fourth or the fifth SEISS grant has reduced by more than £100 to ask them to repay amounts that were overpaid.

Entitlement to the fourth and fifth SEISS grants can be affected by an amendment to a tax return. HMRC’s letters include an assessment and a date by which you must make the repayment. If the payment is over 30 days late, a late payment penalty of 5% of the unpaid tax will be applied.

Even if you do not receive a letter, you must tell HMRC within 90 days if an amendment to a tax return affects your entitlement.

Anyone who needs to repay grants can make use of HMRC online tools to help them calculate what they owe. Individuals who receive a letter from HMRC are required to use the payment reference beginning with X when making their repayment.

If you are not able to pay in full, you may be able to set up a Time to Pay arrangement with HMRC.

Internet links: GOV.UK

NEW HMRC ONE-STOP ONLINE SHOP PROVIDES TAXPAYERS WITH TAX RELIEF INFORMATION

HMRC has launched a new one-stop online shop designed to provide taxpayers with information on the tax reliefs and financial help available from HMRC.

In a new section of the GOV.UK website, HMRC has listed financial support available to ensure individuals are not missing out. There is guidance on relief for childcare and work-related expenses, as well as information about savings and getting help if you cannot pay your tax bill.

The shop is designed to make it easier than ever for taxpayers to claim the benefits, credits and allowances they are entitled to. HMRC has provided online guidance and tools to permit people to check if they are eligible for each relief.

Myrtle Lloyd, Director General for Customer Services at HMRC, said:

‘We understand these are very difficult times for many so it’s vitally important we continue to highlight the range of support available.

‘We’d encourage those who think they may be eligible for support to take a look and claim what they’re entitled to – it could make an important difference to household budgets at a time when it’s needed the most.’

Internet link: GOV.UK

MTD FOR VAT BRINGS IN UP TO AN EXTRA £195 MILLION IN TAX

Estimates show that up to £195 million in extra tax revenue has been collected via Making Tax Digital for VAT (MTD for VAT), according to research from HMRC.

The research, conducted by HMRC and peer reviewed by independent academics, showed that in 2019/20 the estimated additional tax revenue was between £185 million to £195 million, compared to a previous estimate of £115 million.

The tax authority stated that the additional revenue was due to the reduction in error on tax returns.

The research revealed that, for businesses below the £85,000 turnover threshold, the estimated additional tax revenue that is collected is £19 per business per quarter, which is a 2.2% increase from the average liability estimates for businesses not signed up to MTD.

For businesses above the threshold, the estimate of the average additional tax revenue is £57 per business per quarter and is a 0.9% increase.

Internet link: GOV.UK

CHANCELLOR CUTS FUEL DUTY IN SPRING STATEMENT

Chancellor Rishi Sunak announced a 5p per litre cut in fuel duty for petrol and diesel in the 2022 Spring Statement.

The government says it is the largest ever cut on all fuel duty rates, which applies from 6pm on 23 March 2022.

The Chancellor also announced that the starting thresholds for national insurance contributions (NICs) will rise to £12,570.

From 6 July 2022 employees earning between £242 (£190 from 6 April to 5 July 2022) and £967 per week will pay NICs at 13.25%. Earnings over £967 will attract a 3.25% charge. Employers will pay 15.05% on their employees’ earnings over £175 per week.

Although employees’ NICs only become payable once earnings exceed £242 per week, any earnings between £123 and £242 per week protect an entitlement to basic state retirement benefits without incurring a liability to NICs.

For the self-employed, where their profits exceed £11,908 per annum, they will pay 10.25% on the profits up to £50,270 and 3.25% on profits over that upper profits limit.

However, from April 2022, there will be a temporary increase in the rates of NICs payable for employees, employers and the self-employed as a transitional provision in readiness for the introduction of the Health and Social Care Levy from April 2023.

Mr Sunak also pledged that the basic rate of income tax will be cut by 1p in the pound in April 2024. By then the Chancellor said that the Office for Budget Responsibility (OBR) expects inflation to be back under control, with debt falling sustainably.

From April 2022, a £1,000 increase to the Employment Allowance will benefit SMEs, while there will be no business rates due on a range of green technology used to decarbonise buildings.

In addition, the Chancellor announced 50% business rates relief for eligible retail, hospitality, and leisure properties.

In his Spring Statement speech, the Chancellor said:

‘This statement puts billions back into the pockets of people across the UK and delivers the biggest net cut to personal taxes in over a quarter of a century.

‘Cutting taxes means people have immediate help with the rising cost of living, businesses have better conditions to invest and grow tomorrow, and people keep more of what they earn for years to come.’

Internet links: GOV.UK

BANK OF ENGLAND RAISES INTEREST RATES FOR THIRD TIME IN A ROW

The Bank of England has raised interest rates for the third consecutive time.

The Bank also warned that the Ukraine conflict could see under-pressure households hit with double-digit inflation later this year.

Members of the Bank’s Monetary Policy Committee (MPC) voted eight to one to increase rates from 0.5% to 0.75%. The move takes rates back to where they were before the pandemic struck.

Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI), said:

‘With ongoing conflict in Ukraine pushing global commodity prices higher and exacerbating supply chain disruption, the MPC are clearly making moves to counter growing inflation.

‘But they will be walking a tightrope in the months ahead, having to both keep price pressures in-check and manage the impact of tighter monetary policy on economic growth – particularly against a background of rising living costs.’

Internet link: Bank of England website

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

Following the recommendations of the independent Low Pay Commission, the government will increase the NLW for individuals aged 23 and over by 6.6% from 1 April 2022. The government has also accepted the recommendations for the other NMW rates to be increased.

From 1 April 2022, the hourly rates of NLW and NMW will be:

  • £9.50 for those 23 years old and over
  • £9.18 for 21-22 year olds
  • £6.83 for 18-20 year olds
  • £4.81 for 16-17 year olds
  • £4.81 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.

Please do not hesitate to get in contact with us if you have any queries with regards to the new minimum wage or any other payroll queries.

SPRING STATEMENT 2022

Against a backdrop of rising inflation, Chancellor Rishi Sunak presented his first Spring Statement on Wednesday 23 March 2022.

In his Spring Statement, the Chancellor announced a cut in fuel duty for petrol and diesel as he sought to ease the impact of rising prices for households and businesses.

The Chancellor will lift the starting thresholds for National Insurance contributions (NICs). He also pledged a cut to income tax in 2024. However, the Health and Social Care Levy will still be implemented in April 2022.

For businesses, there is an increase to the Employment Allowance, as well as relief from business rates on a range of green technologies and help with training and the adoption of digital technology.

Click here to read our summary of the Spring Statement 2022.

Six tax tactics to deploy before financial year-end

With the end of the tax year a fortnight away, it may seem too late to think about making your finances more tax efficient. But there’s still time to employ some effective tax tactics, says Jason Hollands, managing director at investing platform Bestinvest

With a five-year freeze to many allowances announced at the last Spring Budget, it’s important that households use their tax exemptions efficiently and comprehensively.

Here we look at six steps you can still implement before 5 April which will help to reduce tax liability and protect wealth.

1.           Use your annual pensions allowances

Jason Hollands, managing director at investing platform Bestinvest, says: ‘Nothing beats pensions when it comes to tax perks, with contributions attracting tax relief at your marginal income tax rate. This means a 40% income taxpayer can get £10,000 of pension at a net cost of just £6,000, once the tax reliefs are factored in.

‘If you have not hit your annual £40,000 pension contribution allowance, then consider using any spare funds to take advantage of the generous tax reliefs on offer. But keep an eye on your lifetime allowance too.’

You can also carry forward unused annual allowances from the last three tax years, to add an even larger lump sum into your pot – although the total contribution over the tax year is still subject to the limit that it cannot exceed your annual gross earnings.

Currently you are about to lose the option of using unused allowance from the tax year 2018-19. It may be that you maxed out the allowances in the following two tax years – so is it worth using this allowance before it disappears for good?

2.           Use – or lose – your Individual Savings Account (ISA) allowances

Up to £20,000 per adult can be subscribed to an ISA before midnight on 5 April, with all returns generated within it sheltered from future taxation. Hollands stresses: ‘If you are unsure of where to invest, you can fund your ISA initially with cash between now and then to use up any of the allowance that remains. Investments do not have to be purchased before then.’

Payments into a Lifetime ISA (LISA) – available to those under 40 – come out of your overall ISA allowance. But the generous government top-up means that for some savers – like those building up a deposit to purchase their first home – using up the annual £4,000 limit may well be worthwhile.

3.           Start saving for children

‘Early saving at or soon after the birth of a child is a powerful tool that can generate big pots by the time they reach adulthood,’ says Hollands. The Junior ISA allowance is a generous £9,000 a year. Moreover, even those who are not paying tax are entitled to tax relief on pension contributions of £2,880 a year (which the top-up takes to £3,600), the so-called ‘basic amount’. This means a pension with tax benefits can be opened for a child of any age – or indeed a non-earning spouse.

4.           Be strategic with capital gains

Regular disposals of investments each year to take advantage of the annual capital gains tax (CGT) exemption can protect you against a hefty future CGT bill when you come to dispose of an investment, the profits on which might take you over the annual £12,300 allowance.

This tactic can also be used to transfer investments that are held outside an ISA into one by the process called ‘Bed and ISA’.  But take action quickly as funds will need to be sold down to cash and moved into the ISA before 5 April and this can take a few days to clear.

Equally it might be beneficial to crystallise some losses by making a disposal of poorly performing assets to bring the year’s overall capital gains down below the annual allowance.

If you are married or in a civil partnership, then inter-spousal transfers can be used to make sure both partners’ allowances are used optimally. When shares, for instance, are transferred from one spouse to another, it is assumed they are given at cost value and therefore do not trigger a tax liability. The CGT allowance for that year of the spouse who receives the transfer then comes into play.

5.           Consider other tax-incentivised investments

Subscriptions to venture capital trust (VCT) new share issues offer 30% income tax relief on the amount invested (capped at £200,000), which can be offset against your income tax liability during the tax year of purchase. To keep the relief, you must then hold the shares for at least five years. Any dividends or capital growth on the investment are also tax free.

Many higher earners who hit their pension allowances have turned to VCTs, which also often offer high tax-free dividends. Their popularity is likely to grow with personal and pension allowances frozen until April 2026, plus dividend tax increases coming in the new tax year.

Hollands says that ‘it is important to understand that VCTs are high risk investments which target small, early-stage and illiquid companies. While VCTs are not suitable for most investors they can be useful for high earners with substantial portfolios who are already maximising use of ISAs and pensions and who understand the risks’.

Many VCT offers have already closed for this tax year and with capacity in each offer strictly limited, those interest in VCT investing should not delay. For details on which VCT offers are still available visit www.bestinvest.co.uk/VCT

6.           Gifts to reduce inheritance tax liability

There are a number of tax-free financial gifts that you can make each year. These leave your estate immediately so there will not be any inheritance tax to pay. These include:

  • gifts to a civil partner, husband or wife (if their permanent home is in the UK);
  • up to £3,000 in gifts each tax year. This can be carried over for one year giving a total of £6,000;
  • an unlimited number of gifts up to £250 per person; and
  • wedding gifts to a child of up to £5,000, to a grandchild or great-grandchild of up to £2,500 or to anybody else of up to £1,000.

The gifting rule noted above allows married couples and civil partners to transfer assets such as cash and investments between them, without giving rise to any tax liabilities, creating numerous opportunities to maximise the use of two sets of tax allowances.

CORONAVIRUS SSP REBATE SCHEME CLOSED ON 17 MARCH

The Statutory Sick Pay Rebate Scheme (SSPRS) closed on 17‌‌‌ ‌March‌‌‌ ‌2022.

The SSPRS was reintroduced by the government on 21 December 2021 for employers with fewer than 250 employees.

The maximum claim per employee is two weeks at the statutory sick pay (SSP) rate of £96.35 per week (£192.70 in total), which is the rate for 2021/22 (£99.35 2022/23). The employer’s claim is also capped at the number of employees in its PAYE scheme on 30 November 2021.

In a statement, the government said:

‘You have until 24‌‌‌ ‌March‌‌‌ ‌2022 to submit any new claims for absence periods up to 17‌‌‌ ‌March‌‌‌ ‌2022, or to amend claims you have already submitted.

‘You will no longer be able to claim back SSP for your employees’ coronavirus-related absences or self-isolation that occur after‌‌‌ ‌17‌‌‌ ‌March‌‌‌ ‌2022. 

‘From 25 March we will return to the normal SSP rules, which means you can revert to paying SSP from the fourth qualifying day your employee is off work regardless of the reason for their sickness absence.’

Internet link: GOV.UK