IFS predicts millions to be worse off next year due to tax rises

IFS predicts millions to be worse off next year due to tax rises

The Institute for Fiscal Studies (IFS) has predicted that millions of people will be worse off in 2022 as a result of spiralling costs and tax rises.

Responding to the Autumn Budget, the IFS predicted that low-income families will be squeezed by a rise in the cost of living. The Office for Budget Responsibility (OBR) recently warned that the cost of living is set to rise at its fastest rate in 30 years.

The IFS stated changes to income tax and National Insurance, alongside rising household bills, will mean slow growth in living standards.

Paul Johnson, Director of the IFS, said:

‘With, in the words of the OBR, inflation quite possibly hitting its ‘highest rate in the UK for three decades’, millions will be worse off in the short term. Next April benefits will rise by just over 3%, but inflation could easily be at 5%. That will be a real, if temporary, hit of hundreds of pounds a year for many benefit recipients.

‘We are not at 1970s levels of inflation, but we are now experiencing enough inflation that real pain will be felt as low income households – most of whom have next to nothing in the way of financial assets – wait more than a year for their incomes to catch up. For some in work that may never happen.’

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Craig Walker Tax Adviser Sheffield

Craig Walker

Tax Director, Sheffield

0114 266 7141

[email protected]

Related Content

New Penalty Regime for VAT Returns

New Penalty Regime for VAT Returns

The budget has confirmed that HMRC is to introduce a new penalty regime for VAT. The new system will be in place for VAT returns beginning on or after 1 April 2022.

Currently, late submission and payment of VAT returns are penalised by a single default surcharge. For the first default businesses receive a surcharge liability notice which acts as a warning. Subsequent defaults are surcharged at 2%, 5%, 10%, and a maximum of 15% of the tax owed. The surcharge is imposed at a fixed amount for a late filing – it currently does not increase according to how late the submission is, and no interest is charged on late payments.

Current default interest charges can result in unexpectantly large fines for those who submit and/or pay just a few days late.

New Regime – This will impose up to 4 different penalties parallel charges on businesses that do not submit and/or pay their returns on time.

  1. Late submission penalty – HMRC will issue a single penalty point for late submission of a VAT return and once a business has exceeded a points threshold for multiple missed returns, a flat penalty of £200 will be charged.
  2. Late payment penalties – this is a two-part penalty. The first charge will be imposed at 2% of the outstanding tax if the tax due on a return remains unpaid after 15 days after its due date.  After 30 days the penalty increases to 4%.
  3. The second late payment penalty is a daily penalty (set at 4% per year of the tax still outstanding at that point), starting from 31 days after its due date until the business pays the tax that is due.
  4. Late payment interest – is calculated at 2.5% above the Bank of England rate and will be payable on tax outstanding after the due date for the VAT return. Where a payment is made after the due date, late payment interest will be payable from the due date until the date full payment of that tax is received by HMRC.

 

This new system appears fairer and although it is complicated, businesses who might occasionally submit and/or pay their VAT return less than 15 days late (for example, because of an administrative or bank error or a short cashflow-related delay) will benefit as they will only pay relatively small amounts of penalties and interest.

However, should a business fail to submit their VAT returns on time and are frequently more than 30 days late paying any VAT owed, they may find themselves in a situation with various penalties to pay.

Free initial meeting

Tony Nickson

VAT Consultant, Sheffield

0114 266 7141

[email protected] 

Related articles

VAT Partial Exemption Changes

To ensure the continuation of fairness HMRC has decided to implement an accelerated process when it comes to VAT Partial Exemptions. This accelerated process will allow businesses to request changes to their VAT Partial Exemption methods due to Covid-19. To submit a...

Tax Rates and Allowances 2021/22

Tax Rates and Allowances 2021/22

Introduction We have summarised the key rates and allowances which are fundamental to our business and personal lives. We are sure that you will find them a useful point of reference and have set out below a few examples of how they can be used. Personal tax rates As...

Autumn Budget: R&D Tax Relief to be Reformed

Autumn Budget: R&D Tax Relief to be Reformed

The Chancellor announced in his Autumn Budget that the R&D tax relief regime will be reformed.

The key changes:

  • The scope of the regime will be extended to support modern research methods by including expenditure on data and cloud computing costs
  • The relief will be refocused on innovation carried out in the UK, to discourage outsourcing R&D to offshore territories
  • HMRC aim to target abuse of the system and improve compliance

These changes will take effect from April 2023.

Further details of these changes and the next steps will be announced later in the autumn.

 

What is R&D tax relief?

R&D tax reliefs are HMRC incentives created to encourage innovation and technological advances in the UK.  Further details of the relief can be found here

 

Am I eligible?

Many companies carry out eligible R&D activities without realising that this work qualifies for relief.

R&D tax incentives are not just for niche sectors – eligible companies can be in any sector, any size, and even be loss-making. A common misconception is that R&D incentives are only for those who undertake scientific research in a laboratory, but this is certainly not the case.

 

How we can help?

We have extensive experience of making successful R&D tax relief claims. If you would like to discuss whether your company may be eligible to claim R&D relief, please get in touch with us.

 

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Craig Walker Tax Adviser Sheffield

Craig Walker

Tax Director, Sheffield

0114 266 7141

[email protected]

More similar content

Autumn Budget: R&D Tax Relief to be Reformed

The Chancellor announced in his Autumn Budget that the R&D tax relief regime will be reformed. The key changes: The scope of the regime will be extended to support modern research methods by including expenditure on data and cloud computing costs The relief will...

Autumn Budget: Changes to Creative Tax Reliefs

Autumn Budget: Changes to Creative Tax Reliefs

Creative tax reliefs have been made even more generous following the Autumn Budget.  Find out here if your company qualifies for these reliefs

 

The Chancellor has announced a temporary increase in the rates of relief for the following tax reliefs:

 

Theatre Tax Relief (TTR)

  • Non-touring (27 October 2021 to 31 March 2023) – 45% (formerly 20%)
  • Non-touring (1 April 2023 to 31 March 2024) – 30%
  • Non-touring (From 1 April 2024) – 20%
  • Touring (27 October 2021 to 31 March 2023) – 50% (formerly 25%)
  • Touring (1 April 2023 to 31 March 2024) – 35%
  • Touring (From 1 April 2024) – 25%

 

Museums and Galleries Exhibition Tax Relief (MGETR)

  • Non-touring (27 October 2021 to 31 March 2023) – 45% (formerly 20%)
  • Non-touring (1 April 2023 to 31 March 2024) – 30%
  • Non-touring (From 1 April 2024) – 20%
  • Touring (27 October 2021 to 31 March 2023) – 50% (formerly 25%)
  • Touring (1 April 2023 to 31 March 2024) – 35%
  • Touring (From 1 April 2024) – 0%

 

The Finance Bill will also extend the sunset clause for MGETR for a further two years until 31 March 2024.

 

Orchestra Tax Relief (OTR)

  • Expenditure from 27 October to 31 March 2023 – 50% (formerly 25%)
  • Expenditure from 1 April 2023 to 31 March 2024 – 35%
  • Expenditure from 1 April 2024 – 25%

 

The Finance Bill will also implement anti-avoidance changes to better target these reliefs and ensure they are safeguarded from abuse.  These changes will apply to companies entering into productions from 1 April 2022.

 

 

What are Creative tax reliefs?

Creative tax reliefs are a group of 8 corporation tax reliefs that were devised by the UK government to help and support the UK creative industries to grow.  The reliefs are as follows:

  • Film Tax Relief
  • High-end Television Tax Relief
  • Children’s Television Tax Relief
  • Animation Tax Relief
  • Video games Tax Relief
  • Theatre Tax Relief
  • Orchestra Tax Relief
  • Museum and Gallery Exhibition Tax Relief

 

Broadly speaking, these creative tax reliefs enables your company to increase its allowable expenditure by way of an enhanced deduction which can reduce the amount of Corporation Tax your company has to pay.

If your company makes a loss as a result of the claim, you may be able to surrender the loss and convert some or all of it into a payable tax credit.

 

How can we help?

At Hawsons our team of experts can take care of your creative tax relief claim for you so you do not have to worry about your claim.

Our team will complete the claim process for you to include the preparation and the final submission of your claim. We will also use our expert knowledge to investigate whether there are any other tax reliefs that could apply to supplement your claim.

If you would like to find out if your business is eligible for a creative tax relief claim please book your free initial meeting here.

Free initial meeting

Craig Walker Tax Adviser Sheffield

Craig Walker

Tax Director, Sheffield

0114 266 7141

[email protected]

Annual Investment Allowance Extended

Annual Investment Allowance Extended

The Chancellor announced in the Autumn Budget an extension of the temporary increase in the Annual Investment Allowance (AIA) to 31 March 2023.

Most corporate and unincorporated businesses are able to utilise the AIA to claim 100% tax relief on their qualifying expenditure on plant and machinery.

The allowance was temporarily increased from £200,000 to £1 million for expenditure incurred on or after 1 January 2019 and was due to revert back to £200,000 from 1 January 2022. The Chancellor has announced that the £1 million allowance will now be retained until 31 March 2023.

Transitional rules will apply to accounting periods that span 1 April 2023.

For companies, this aligns the end of the temporary AIA with the end of the ‘super-deductions’ as announced by the government in Spring Budget 2021.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Craig Walker Tax Adviser Sheffield

Craig Walker

Tax Director, Sheffield

0114 266 7141

[email protected]

Related content

Autumn Budget: R&D Tax Relief to be Reformed

The Chancellor announced in his Autumn Budget that the R&D tax relief regime will be reformed. The key changes: The scope of the regime will be extended to support modern research methods by including expenditure on data and cloud computing costs The relief will...