A summary of the issues we think are relevant now and going forward. It’s not a riveting read but there’s quite a lot going on. There is a
budget planned for 23 March so this may only be good for the bottom of the litter tray.
The tax-free allowance has been frozen at £12,570 for 2022/23 and the following 3
years. Individuals with income over £100k lose this on a sliding scale of £1 for every
£2 until they get to £125,140. So income between £100k and £125,140 actually gets taxed at 60%. To be avoided.
The point at which the 40% tax rate applies, is £50,270k, ignoring the things that
increase that level, such as pension contributions and charitable donations. The
additional rate sticks at 45% on income exceeding £150k.
Nil rate band and residence nil rate band stay at £325k and £175k respectively
These allowances/rates will apply until April 2026.
The nil rate band is £2k The rates over this are 8.75%, 33.75% and 39.35%. This
includes the 1.25% increase for the health and social care support assuming that it is
Interest on savings up to the £1,000 is tax free. For HR taxpayers they get the first
£500 tax free and additional rate taxpayers don’t get any allowance. This tax-free
savings allowance can be as much as £5k where the individual has a lot of interest on
savings and does not use up all of their tax-free allowance.
Transfer of allowances between couples
Married couples where one person has unused tax relief can transfer up to £1,257 to the other and save a maximum of £250. This only works where neither spouse is a
higher rate taxpayer.
Still repayable where one of the household has income over £50k. Some families have decided not to claim child benefit, but this could cause a problem for a non working parent who does not pay national insurance because it creates a gap in contributions and impacts on the amount of state pension (if there is any left).
If child benefit is never claimed for a child, their National Insurance number will not
be automatically issued at the age of 16, which will cause a problem further down the line.
No change yet from 10/ 20% and 18/28% for houses.
Currently still at 19%. From April 2023 we go back to different rates. 19% for small
profits (upto £50k). Profits over £250k will taxed at 25%. Profits falling between
£50k and £250k will be taxed at the marginal rate.
Extended loss carry back
Applies to both corporates and non corporates and will enable businesses to carry
back losses for up to 3 years rather than 1.
Capital Allowances and super deduction
100% allowances (AIAs) have been extended to 31.3.23. Super deduction applies
from 1.4.21 and will apply to most new kit until 31.3.23. 130% of spend will be
deductible BUT only 50% for special rate assets. The downside of super deduction is
that the proceeds from the sale of the asset is multiplied by £130%.
HMRC have promoted this relief over recent years with the result that lots of
businesses have claimed. Now HMRC have concluded that they may have been over
generous and have decided the cap the amount of relief to £20,000 plus 300% of the
They have also started to issue ‘nudge’ letters suggesting that claimants may want to
withdraw previous claims and repay the refunds. I cannot explain the logic of this.
National Living Wage
To increase to £9.50 per hour from 1.4.22. This applies to 23 year olds and above.
Don’t miss birthday related increases.
This is also going up by 1.25%. So employees will pay at 13.25% and employers at
15.05%. The self employed pay at 10.25%. The employed will feel it from their April
pay packet but the self employed will not see it until their tax bill for January 2024.
Registration thresholds stuck until April 2024.
Reverse charge for certain transactions within the construction industry started on 1 st March 2021. The onus is on the bill raiser to get it right. Work done for private
householders will not be affected, just other VAT registered businesses. The recipient of the bill should state if they are an ‘End user’ and therefore liable to VAT. If in doubt charge VAT and let the other side prove that it’s not due.
MTD for VAT
This will apply to all registered businesses operating under the VAT threshold from April 2022. In other words, you can no longer be too small for MTD.
MTD for business (quarterly tax returns) will apply to non registered businesses and
landlords from April 2024. The start date for MTD for partnerships and companies
will not be compulsory before 2025 for the former and 2026 for the latter.
Standardisation of tax and accounts
By this I mean that HMRC wants all self employed businesses to be taxed on the profit they make in a tax year regardless of their accounting date. A business with accounts to 30 April face the prospect of reporting nearly 2 years’ worth of profits on their return for the first year. There will be complicated rules for spreading the extra tax over a number of years. The transitional tax year will be 2023/24 so the tax bill payable in January 2025 could be painful. This measure will make no difference to businesses who draw up accounts to 31st March or 5 th April.
Still in play for now. Only covers £1m and if you’ve already used all of it before the
rules changed, there’s no more.
Corona Virus measures
While Boris has lifted all restrictions, HMRC have not forgotten. They are intending
to recoup support payments made which they consider should not have been claimed.
This applies to CJRS (furlough) and SEISS (for the self employed). The criteria for
claim evolved from ‘go on, have some cash’ to ‘you better be able to prove that you
In the summer of 2020, none of us knew how the situation would evolve and
some businesses have done well, despite the situation, but they did not know that at
the time of claim. It remains to be seen if HMRC start challenging claims in practice.
Buy to Lets- restriction of interest relief
100% of the interest paid is excluded from the rental calculation and included as a tax reducer. Does not affect furnished holiday lets.
CGT on residential property sales – report and pay deadline extended to 60 days
If you sell a house and CGT is due, the gain must be reported and tax paid within 60
days of sale. The mechanics of this are a little unwieldy and require individuals to set
up their personal tax accounts which take time. HMRC will issue penalties for
missing the 60 day deadline.
IR35 in the private sector/off payroll working
From April 2021, businesses using contractors who operate through their own
company will be expected to operate PAYE on the gross payments.
Small companies will not be obliged to follow these rules. Small = Turnover no more
than £10.2m, Balance sheet not more than £5.2m, Not more than 50 employees.
Car and van benefits
From April, zero emission cars will incur a taxable benefit of 2% of the list price.
Emissions between 1g/km and 50g/km will be taxed between 2% and 14% based on
the electric range.
Astonishingly vans/commercial vehicles are still taxed at much lower rates than
petrol/diesel cars. The taxable van benefit in 22/23 will be £3,600 and fuel £688. This is still remarkably low. For zero emission vans, the benefit is zero.
HMRC do not like company cars. Green ones are encouraged. Gas guzzlers are not.
They will endeavour to tax any car that is provided by virtue of the employment.
HMRC may still expect a benefit in kind even if the finance is in the employee’s
name but where a favourable deal was struck due to the involvement of the employer.
Where the finance is in the name of the employer, but the employee covers the leasing charges, there will still be a benefit in kind. This arrangement is better avoided.
To make matters worse, HMRC have argued that a benefit in kind still arises if an
employee get a favourable deal from the garage by virtue of their connection with the employer.
Cars with CO2in excess of 50g/km go into the lower rate pool (6%) for Capital
Employer allowance: £4k per annum, but employers with only one employee cannot
claim it. From April any business with an NI bill (Ers only) of £100k or more cannot
claim it. Connected businesses (those under common control) can only claim once
and the NI bills are amalgamated for the purposes of the £100k test.
There will be an update for the end of the (tax) year. Please download it in plenty of
time. If you don’t, you may not be able to do the payroll end of year process and
Time to pay
HMRC are still prepared to enter into delayed payment terms for personal and
business taxes. They will expect chapter and verse on the reasons and circumstances.
HMRC speak for ‘we are not answering the phone today.’ Where do they get them
And finally. Some well needed humour
I decided to teach my dog to play the trombone on the London Underground. He went
from Barking to Tooting in half an hour.*
* credit to M Merrick