Tax Rates and Allowances 2022/23

by Hawsons | Apr 7, 2022 | Agriculture, Audit, Auto Enrolment, Bookkeeping, Brexit, Business Services, Care Homes, Charities, Cloud Accounting, Corporate Finance, Corporate Tax, COVID-19, Cyber Security, Dental, Doncaster, Engineering, Exit Planning, Family Business, GPs, Hawsons, Healthcare, IT, IT and Technology, Legal, Leisure & Hospitality, Making Tax Digital, Manufacturing, Northampton, Payroll, Pensions, Personal Tax, Pharmacy, Property & Construction, R&D, Retail, Sheffield, SME, SME Tax Corner, Solicitors, Tax, Transport & Logistics, VAT, Wealth Management

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 the UK tax system becomes more devolved, it is important to keep abreast of the changes taking place in the Scottish and Welsh income tax rates and bands. We have summarised the relevant information together with the rates and allowances which apply to investment income.

Buying property

If you buy property then property taxes payable are different depending where the property is in the United Kingdom. Stamp Duty Land Tax is payable on property in England and Northern Ireland, whilst Land and Buildings Transaction Tax is payable on property in Scotland and Land Transaction Tax on property in Wales. Our tax rates highlight the main rates so that you can consider the potential cost of buying property.

Business or asset sale

If you sell an asset such as shares or your business, capital gains tax may be due. Our tax rates highlight the main rates and reliefs so that you can consider the tax bill that may arise.

Rates for businesses

If you run a business, obtaining the right allowances on equipment that your business buys can affect the tax that your business has to pay each year. We have summarised the main allowances that are available.

Rates for employees

There are changes to the way company car benefits are calculated this year. Our guide explains how these are computed to help ensure that you are paying the correct amount of tax.

Rates that affect us all

Long term planning for a comfortable retirement can never start too early. Our tax rates explain how much can be contributed to an approved pension scheme each year tax efficiently.

Our tax rates contain the main inheritance tax rates and exemptions but early planning can mitigate these tremendously.

These rates are intended for use as a quick point of reference. Should you require any further information, have a simple question or require detailed advice we are only a phone call away.

Capital Gains Tax

CGT is payable by individuals, trustees and personal representatives (PRs). Companies pay corporation tax on their capital gains.
There are annual tax-free allowances (the ‘annual exempt amount’) for individuals, trustees and PRs. Companies do not have an annual exempt amount.
For individuals, net gains are added to total taxable income to determine the appropriate rate of tax. The standard rate applies only to the net gains which, when added to total taxable income, do not exceed the basic rate band.
Gains which qualify for Investors’ Relief are charged at 10% for the first £10m of qualifying gains.
Gains which qualify for Business Asset Disposal Relief are charged at 10% for the first £1 million.

Rates and annual exemption

Individuals	2022/23
	£
Exemption	12,300
Standard rate	10%
Higher rate	20%

The higher rate applies to higher rate and additional rate taxpayers.

Gains accruing on the disposal of certain residential property and arising on carried interest can attract a standard rate of 18% or a higher rate of 28% for individuals and of 28% for Trusts and Personal Representatives.

Trusts	2022/23
	£
Exemption	6,150
Rate	20%

CGT is payable by individuals, trustees and personal representatives (PRs) . Companies pay corporation tax on their capital gains.
There are annual tax-free allowances (the ‘annual exempt amount’) for individuals, trustees and PRs. Companies do not have an annual exempt amount.
For individuals, net gains are added to total taxable income to determine the appropriate rate of tax. The standard rate applies only to the net gains which, when added to total taxable income, do not exceed the basic rate band.
Gains which qualify for Investors’ Relief are charged at 10% for the first £10m of qualifying gains.
Gains which qualify for Business Asset Disposal Relief are charged at 10% for the first £1 million.

Rates and annual exemption

Individuals	2021/22
	£
Exemption	12,300
Standard rate	10%
Higher rate	20%

The higher rate applies to higher rate and additional rate taxpayers.

Gains accruing on the disposal of certain residential property and arising on carried interest can attract a standard rate of 18% or a higher rate of 28% for individuals and a rate of 28% for Trusts and Personal Representatives.

Trusts	2021/22
	£
Exemption	6,150
Rate	20%

Car Benefits

The car benefit is calculated by multiplying the car’s list price, when new, by a percentage linked to the car’s CO₂ emissions.
For diesel cars generally add a 4% supplement (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard).
The overall maximum percentage is capped at 37%.
The list price includes accessories.
The list price is reduced for capital contributions made by the employee up to £5,000.
Special rules may apply to cars provided for disabled employees.

2022/23
CO₂ emissions (g/km)	% of list price taxed
0	2
1–50 (split by zero-emission miles) More than 130 70-129 40-69 30-39 Under 30	2 5 8 12 14
51–54	15
55-59	16
60-64	17
65-69	18
70-74	19
75-79	20
80-84	21
85-89	22
90-94	23
95-99	24
100-104	25
105-109	26
110-114	27
115-119	28
120-124	29
125-129	30
130-134	31
135-139	32
140-144	33
145-149	34
150-154	35
155-159	36
160 and above	37

The car benefit is calculated by multiplying the car’s list price, when new, by a percentage linked to the car’s CO ₂emissions.
For diesel cars generally add a 4% supplement (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard).
The overall maximum percentage is capped at 37%.
The list price includes accessories.
The list price is reduced for capital contributions made by the employee up to £5,000.
Special rules may apply to cars provided for disabled employees.

2021/22	Cars registered pre 6/4/20	Cars registered after 5/4/20
CO ₂emissions (g/km)	% of list price taxed	% of list price taxed
0	1	1
1–50 (split by zero-emission miles) More than 130 70-129 40-69 30-39 Under 30	2 5 8 12 14	1 4 7 11 13
51–54	15	14
55-59	16	15
60-64	17	16
65-69	18	17
70-74	19	18
75-79	20	19
80-84	21	20
85-89	22	21
90-94	23	22
95-99	24	23
100-104	25	24
105-109	26	25
110-114	27	26
115-119	28	27
120-124	29	28
125-129	30	29
130-134	31	30
135-139	32	31
140-144	33	32
145-149	34	33
150-154	35	34
155-159	36	35
160-164	37	36
165 and above	n/a	37

Car Fuel Benefit

Car fuel benefit applies if an employee has the benefit of private fuel for a company car.
The benefit is calculated by applying the percentage used to calculate the car benefit by a ‘fuel charge multiplier’.
The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.

Car fuel benefit 2022/23
Fuel charge multiplier	£25,300

Car fuel benefit applies if an employee has the benefit of private fuel for a company car.
The benefit is calculated by applying the percentage used to calculate the car benefit by a ‘fuel charge multiplier’.
The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.

Car fuel benefit 2021/22
Fuel charge multiplier	£24,600

Cars - Advisory fuel rates for company cars

Advisory rates only apply where employers reimburse employees for business travel in a company car or require employees to repay the cost of fuel used for private travel in a company car.
If the rate paid per mile of business travel is no higher than the advisory rate for the particular engine size and fuel type of the car, HMRC will accept that there is no taxable profit and no Class 1 NIC liability.

The advisory fuel rates for journeys undertaken on or after 1 March 2022 are:

Engine size	Petrol
1400cc or less	13p
1401cc – 2000cc	15p
Over 2000cc	22p

Engine size	Diesel
1600cc or less	11p
1601cc – 2000cc	13p
Over 2000cc	16p

Engine size	LPG
1400cc or less	8p
1401cc – 2000cc	10p
Over 2000cc	15p

Hybrid cars are treated as either petrol or diesel cars for this purpose.

The Advisory Electricity Rate for fully electric cars is 5 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

Capital Allowances - Plant and Machinery

The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.
Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building (‘integral features’), computers, cars, vans and similar equipment used in a business.
There are special rules for cars.
Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.
A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

AIA

Special rules apply to accounting periods straddling the dates shown in the tables below.
The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies

Expenditure incurred:	Annual limit
	£
From 1 January 2019 to 31 March 2023	1,000,000
From 1 April 2023	200,000

AIA limits – sole traders and partnerships

Expenditure incurred:	Annual limit
	£
From 1 January 2019 to 31 March 2023	1,000,000
From 1 April 2023	200,000

Other plant and machinery allowances

Expenditure upon which AIA is not given/claimed will obtain relief through the ‘main rate pool’ or the ‘special rate pool’ rather than each item being dealt with separately.
The annual rate of WDA is 18% in the ‘main rate pool’ and 6% in the ‘special rate pool’.
A 100% first year allowance (FYA) may be available on certain cars.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from a new FYA. A company will be allowed to claim a super-deduction of 130% on certain new plant and machinery investments that ordinarily qualify for the 18% WDA and a 50% FYA on most new plant and machinery investments that ordinarily qualify for the 6% WDA.

Cars

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
AIA is not available on any car but a 100% FYA may be available on certain cars. To qualify for FYA, the car must be purchased new.

Cars acquired from April 2021

Emissions (g/km)	Pool	Allowance
0	Main rate	100% FYA
≤ 50	Main rate	18% WDA
>50	Special rate	6% WDA

The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.
Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building (‘ integral features ‘), computers, cars, vans and similar equipment used in a business.
There are special rules for cars.
Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.
A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

AIA

Special rules apply to accounting periods straddling the dates shown in the tables below.
The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies

Expenditure incurred:	Annual limit
	£
From 1 January 2019 to 31 March 2023	1,000,000
From 1 April 2023	200,000

AIA limits – sole traders and partnerships

Expenditure incurred:	Annual limit
	£
From 1 January 2019 to 31 March 2023	1,000,000
From 1 April 2023	200,000

Other plant and machinery allowances

Expenditure upon which AIA is not given/claimed will obtain relief through the ‘ main rate pool ‘ or the ‘ special rate pool ‘ rather than each item being dealt with separately.
The annual rate of WDA is 18% in the ‘ main rate pool ‘ and 6% in the ‘ special rate pool ‘.
A 100% first year allowance (FYA) may be available on certain cars.

Cars

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
AIA is not available on any car but a 100% FYA may be available on certain cars. To qualify for FYA, the car must be purchased new.

Cars acquired from April 2021

Emissions (g/km)	Pool	Allowance
0	Main rate	100% FYA
≤ 50	Main rate	18% WDA
>50	Special rate	6% WDA

Child Benefit

Child Benefit is receivable by a person responsible for each child who is under 16, or under 20 if they stay in approved education or training.If the person (or their spouse or partner) has ‘adjusted net income’ above £50,000 the person with the highest income has to pay some of the Child Benefit as a tax charge.

Where adjusted net income is more than £60,000 a year, the tax charge equals the Child Benefit received.

Rates – 2022/23	£ per week
Eldest/Only Child	£21.80
Other Children	£14.45

Child Benefit is receivable by a person responsible for each child who is under 16, or under 20 if they stay in approved education or training.If the person (or their spouse or partner) has ‘ adjusted net income ‘ above £50,000 the person with the highest income has to pay some of the Child Benefit as a tax charge.

Where adjusted net income is more than £60,000 a year, the tax charge equals the Child Benefit received.

Rates – 2021/22	£ per week
Eldest/Only Child	£21.15
Other Children	£14.00

Corporation Tax Rates

Corporation tax rates are set for each Financial Year. A Financial Year runs from 1 April to the following 31 March.
If the accounting period of a company straddles the 31 March, the profits are apportioned on a time basis to each Financial Year.
The Northern Ireland Executive has committed to setting the rate of corporation tax at 12.5% to apply to certain trading income. While legislation has been passed, the final devolution is subject to agreement between the UK Government and the Northern Ireland Executive, which has not yet been reached.

Year to 31.3.23	Rate %
All profits	19

Corporation tax rates are set for each Financial Year. A Financial Year runs from 1 April to the following 31 March.
If the accounting period of a company straddles the 31 March, the profits are apportioned on a time basis to each Financial Year.
The Northern Ireland Executive has committed to setting the rate of corporation tax at 12.5% to apply to certain trading income. While legislation has been passed, the final devolution is subject to agreement between the UK Government and the Northern Ireland Executive, which has not yet been reached.

Year to 31.3.22	Rate %
All profits	19

Employee Statutory Payments

Statutory pay

Payments may be required from an employer if an employee is not at work for a variety of reasons.
There are detailed conditions for an employee to qualify for any of these statutory payments.
Employees are only eligible for a statutory payment if they have sufficient average weekly earnings of at least the lower earnings limit.

Statutory Sick Pay

Payments may be required from an employer if an employee is too ill to work.
SSP is generally payable for a period up to 28 weeks.

Statutory Maternity Pay

Payments may be required from an employer when an employee takes time off to have a baby.
SMP is payable for a period up to 39 weeks.

Statutory Paternity Pay

Payments may be required from an employer when an employee takes time off during their partner’s Statutory Maternity Pay period.
Payment is for a period of either one or two complete weeks.

Shared Parental Pay

Payments may be required from an employer when an employee takes time off following the curtailment of the period of SMP by the mother.
Payment is for up to a maximum of 37 weeks and is dependent on the mother’s unused SMP period.

Statutory Adoption Pay

Payments may be required from an employer when an employee takes time off when they adopt a child.
Payment is for a period up to 39 weeks.

Statutory Parental Bereavement Pay

Payments may be required from an employer when parents take time off following the death of a child or a stillbirth.
Payment is for up to a maximum of two weeks.

2022/23 Statutory pay rates – average weekly earnings £123 or over
Statutory Sick Pay	£99.35
Statutory Maternity Pay
First six weeks	90% of weekly earnings
Next 33 weeks	£156.66
Statutory Paternity Pay – two weeks	£156.66
Statutory Adoption Pay – 39 weeks
First six weeks	90% of weekly earnings
Next 33 weeks	£156.66
Shared Parental Pay	£156.66
Statutory Parental Bereavement Pay – two weeks	£156.66

With the exception of Statutory Sick Pay, statutory payments may
be payable at 90% average weekly earnings throughout the payment period
in certain circumstances. This applies where 90% weekly earnings
are less than the standard rate of £156.66.

Statutory pay

Payments may be required from an employer if an employee is not at work for a variety of reasons.
There are detailed conditions for an employee to qualify for any of these statutory payments.
Employees are only eligible for a statutory payment if they have sufficient average weekly earnings of at least the lower earnings limit.

Statutory Sick Pay

Payments may be required from an employer if an employee is too ill to work.
SSP is generally payable for a period up to 28 weeks.

SSP support during coronavirus outbreak

The government temporarily made SSP more accessible to employees in response to the coronavirus outbreak. During the outbreak SSP was available from the first day of absence, including for those self-isolating or caring for others.

The government supported small and medium-sized businesses and employers to cope with the extra costs of paying coronavirus related SSP by refunding eligible SSP costs.

Statutory Maternity Pay

Payments may be required from an employer when an employee takes time off to have a baby.
SMP is payable for a period up to 39 weeks.

Statutory Paternity Pay

Payments may be required from an employer when an employee takes time off during their partner’s Statutory Maternity Pay period.
Payment is for a period of either one or two complete weeks.

Shared Parental Pay

Payments may be required from an employer when an employee takes time off following the curtailment of the period of SMP by the mother.
Payment is for up to a maximum of 37 weeks and is dependent on the mother’s unused SMP period.

Statutory Adoption Pay

Payments may be required from an employer when an employee takes time off when they adopt a child.
Payment is for a period up to 39 weeks.

Statutory Parental Bereavement Pay

Payments may be required from an employer when parents take time off following the death of a child or a stillbirth.
Payment is for up to a maximum of two weeks.

2021/22 Statutory pay rates – average weekly earnings £120 or over
Statutory Sick Pay	£96.35
Statutory Maternity Pay
First six weeks	90% of weekly earnings
Next 33 weeks	£151.97
Statutory Paternity Pay – two weeks	£151.97
Statutory Adoption Pay – 39 weeks
First six weeks	90% of weekly earnings
Next 33 weeks	£151.97
Shared Parental Pay	£151.97
Statutory Parental Bereavement Pay – two weeks	£151.97

Income Tax Allowances

A personal allowance gives an individual an annual amount of income free from income tax.

Income above the personal allowances is subject to income tax.

The personal allowance will be reduced if an individual’s ‘adjusted net income’ is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.

An individual born before 6 April 1935 may be entitled to a married couple’s allowance but this is reduced if ‘adjusted net income’ is above the married couple’s allowance income limit (see table below).

Marriage allowance – 10% of the personal allowance may be transferable between certain spouses where neither pays tax above the basic rate. The Marriage allowance is not available to couples entitled to the Married Couple’s allowance.

Income tax personal allowances	£
Personal Allowance	12,570
Marriage Allowance	1,260
Blind person’s allowance	2,600
Married couple’s allowance Either partner born before 6 April 1935
– Maximum reduction in tax bill	941.50
– Minimum reduction in tax bill	364.00
Married couple’s allowance income limit Reduce married couple’s allowance by £1 for every £2 of ‘adjusted net income’ above this limit	31,400

A personal allowance gives an individual an annual amount of income free from income tax.

Income above the personal allowances is subject to income tax.

The personal allowance will be reduced if an individual’s ‘ adjusted net income ‘ is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.

An individual born before 6 April 1935 may be entitled to a married couple’s allowance but this is reduced if ‘ adjusted net income ‘ is above the married couple’s allowance income limit (see table below).

Income tax personal allowances	£
Personal Allowance	12,570
Marriage Allowance	1,260
Blind person’s allowance	2,520
Married couple’s allowance Either partner born before 6 April 1935
– Maximum reduction in tax bill	912.50
– Minimum reduction in tax bill	353.00
Married couple’s allowance income limit Reduce married couple’s allowance by £1 for every £2 of ‘adjusted net income’ above this limit	30,400

Income Tax Rates - Across the UK

Income tax applies to the amount of income after deduction of personal allowances.
Income is taxed in a specific order with savings and dividend income taxed last.
Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
There is also a starting rate band (SRB) of £5,000 which is only applicable to savings income. The band is not available if the taxable amount of non-savings income exceeds the SRB.
The Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents on non-savings and non-dividend income.
Income tax is devolved to Wales on non-savings and non-dividend income.

Income tax rates

Band of taxable income		Rate	Rate if dividends
£		%	%
0 – 37,700	Basic rate	20	8.75
37,701 – 150,000	Higher rate	40	33.75
Over 150,000	Additional rate	45	39.35
Special rates for savings and dividend income falling into above bands of taxable income
Savings Allowance
Basic rate taxpayers	1,000	0
Higher rate taxpayers	500	0
Additional rate taxpayers	Nil	N/A
Dividend Allowance
for all taxpayers	2,000		0

Income tax applies to the amount of income after deduction of personal allowances.
Income is taxed in a specific order with savings and dividend income taxed last.
Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
There is also a starting rate band (SRB) of £5,000 which is only applicable to savings income. The band is not available if the taxable amount of non-savings income exceeds the SRB.
The Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents on non-savings and non-dividend income.
Income tax is devolved to Wales on non-savings and non-dividend income.

Income tax rates

Band of taxable income		Rate	Rate if dividends
£		%	%
0 – 37,700	Basic rate	20	7.5
37,701 – 150,000	Higher rate	40	32.5
Over 150,000	Additional rate	45	38.1
Special rates for savings and dividend income falling into above bands of taxable income
Savings Allowance
Basic rate taxpayers	1,000	0
Higher rate taxpayers	500	0
Additional rate taxpayers	Nil	N/A
Dividend Allowance
for all taxpayers	2,000		0

Income Tax Rate - Scotland

Scottish resident taxpayers are liable on non-savings and non-dividend income as set out below.
Savings income and dividend income are taxed using UK tax rates and bands.

Band of taxable income		Rate
£		%
0 – 2,162	Starter rate	19
2,163 – 13,118	Basic rate	20
13,119 – 31,092	Intermediate rate	21
31,093 – 150,000	Higher rate	41
Over 150,000	Top rate	46

Scottish resident taxpayers are liable on non-savings and non-dividend income as set out below.
Savings income and dividend income are taxed using UK tax rates and bands.

Band of taxable income		Rate
£		%
0 – 2,097	Starter rate	19
2,098 – 12,726	Basic rate	20
12,727 – 31,092	Intermediate rate	21
31,093 – 150,000	Higher rate	41
Over 150,000	Top rate	46

Income Tax Rates - Wales

Income tax is devolved to Wales.
Welsh resident taxpayers continue to pay the same overall income tax rates using the UK rates and bands.
The total rate of income tax = UK income tax + Welsh rate of income tax
Savings income and dividend income are taxed using UK tax rates and bands.

Band of taxable income		UK Rate	Welsh Rate	Total Rate
£		%	%	%
0 – 37,700	Basic rate	10	10	20
37,701 – 150,000	Higher rate	30	10	40
Over 150,000	Additional rate	35	10	45

Income tax is devolved to Wales from 6 April 2019.
Welsh resident taxpayers continue to pay the same overall income tax rates using the UK rates and bands.
The total rate of income tax = UK income tax + Welsh rate of income tax
Savings income and dividend income are taxed using UK tax rates and bands.

Band of taxable income		UK Rate	Welsh Rate	Total Rate
£		%	%	%
0 – 37,700	Basic rate	10	10	20
37,701 – 150,000	Higher rate	30	10	40
Over 150,000	Additional rate	35	10	45

Individual Savings Account (ISA)

The income from ISA investments is exempt from income tax. Any capital gains made on investments held in an ISA are exempt from capital gains tax.

Savers are able to subscribe any amounts into a cash ISA, a stocks and shares ISA or an innovative finance ISA subject to not exceeding the overall annual investment limit.

Investors may transfer their investments from one kind of ISA to another.

The Lifetime ISA is available for those aged between 18 and 40. Save up to £4,000 each year up until the age of 50, and receive a government bonus of 25% (a bonus of up to £1,000 a year). Savers can use some or all of the money to buy their first home, or keep it until they are aged 60 when the account can be accessed tax free. Conditions apply to the account holder and property purchased. Penalties apply if funds are withdrawn in other circumstances.

A Help to Buy ISA provides a tax free savings account for first time buyers wishing to save for a home. The scheme provides a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings. The bonus will be paid in the form of a voucher when the first home is purchased. Conditions apply to the account holder and to the property purchased. Help to Buy ISAs closed to new savers on 30 November 2019. Existing holders can continue saving until 30 November 2029 and will have until 1 December 2030 to claim their bonus.

ISA limits 2022/23
Overall annual investment limit	£20,000
Junior ISA annual investment limit	£9,000
Help to Buy ISA monthly subscription limit	£200
Lifetime ISA annual investment limit	£4,000

The income from ISA investments is exempt from income tax. Any capital gains made on investments held in an ISA are exempt from capital gains tax.

Savers are able to subscribe any amounts into a cash ISA, a stocks and shares ISA or an innovative finance ISA subject to not exceeding the overall annual investment limit.

Investors may transfer their investments from one kind of ISA to another.

ISA limits 2021/22
Overall annual investment limit	£20,000
Junior ISA annual investment limit	£9,000
Help to Buy ISA monthly subscription limit	£200
Lifetime ISA annual investment limit	£4,000

Inheritance Tax (IHT)

IHT may be payable when an individual’s estate is worth more than the IHT nil rate band when they die.
Lifetime and death transfers between UK domiciled spouses are exempt from IHT.
A further nil rate band of £175,000 may be available in relation to current or former residences.
The IHT threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the first death.
There are reliefs for some business and farming assets which reduce their value for IHT purposes.
IHT may also be payable on gifts made in an individual’s lifetime but within seven years of death.
Some lifetime gifts are exempt.
Transfers of assets into trust made in an individual’s lifetime may be subject to an immediate charge but at lifetime rates.
There are also charges on some trusts.

IHT rates and nil rate band 2022/23 and 2021/22

IHT nil rate	£325,000
Lifetime rate	20%
Death rate	40%
Death rate if sufficient charitable legacies made	36%

IHT reliefs for lifetime gifts

Annual exemption	£3,000
Small gifts	£250
Marriage
– parent	£5,000
– grandparent	£2,500
– other	£1,000

IHT – reduced charge on gifts within seven years of death

Years before death	% of death charge
0-3	100
3-4	80
4-5	60
5-6	40
6-7	20

Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland.

LBTT (Residential property)

Consideration (£)	Rate
0 – 145,000	0%
145,001 – 250,000	2%
250,001 – 325,000	5%
325,001 – 750,000	10%
750,001 and above	12%

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief raises the zero rate tax threshold for first-time buyers from £145,000 to £175,000.

LBTT (Non-residential)

Consideration (£)	Rate
0 – 150,000	0%
150,001 – 250,000	1%
Over 250,000	5%

The rates apply to the portion of the total value which falls within each band.

Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland.

LBTT (Residential property)

Consideration (£)	Rate
0 – 145,000	0%
145,001 – 250,000	2%
250,001 – 325,000	5%
325,001 – 750,000	10%
750,001 and above	12%

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief raises the zero rate tax threshold for first-time buyers from £145,000 to £175,000.

LBTT (Non-residential)

Consideration (£)	Rate
0 – 150,000	0%
150,001 – 250,000	1%
Over 250,000	5%

The rates apply to the portion of the total value which falls within each band.

Land Transaction Tax

Land Transaction Tax (LTT) is payable on land and property transactions in Wales.

LTT (Residential property)

Consideration (£)	Rate
0 – 180,000	0%
180,001 – 250,000	3.5%
250,001 – 400,000	5%
400,001 – 750,000	7.5%
750,001 – 1,500,000	10%
1,500,000 and above	12%

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties costing over £40,000 or over are acquired.

Higher residential tax rates

Higher residential rates may apply when you already own one or more residential properties.

Consideration (£)	Rate
0 – 180,000	4%
180,001 – 250,000	7.5%
250,001 – 400,000	9%
400,001 – 750,000	11.5%
750,001 – 1,500,000	14%
1,500,000 and above	16%

The rates apply to the portion of the total value which falls within each band.

LTT (Non-residential)

Consideration (£)	Rate
0 – 225,000	0%
225,001 – 250,000	1%
250,001 – 1,000,000	5%
Over 1,000,000	6%

The rates apply to the portion of the total value which falls within each band.

Land Transaction Tax (LTT) is payable on land and property transactions in Wales.

LTT (Residential property)

Rates applying to 30 June 2021

Consideration (£)	Rate
0 – 250,000	0%
250,001 – 400,000	5%
400,001 – 750,000	7.5%
750,001 – 1,500,000	10%
1,500,000 and above	12%

Rates applying from 1 July 2021

Consideration (£)	Rate
0 – 180,000	0%
180,001 – 250,000	3.5%
250,001 – 400,000	5%
400,001 – 750,000	7.5%
750,001 – 1,500,000	10%
1,500,000 and above	12%

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties costing over £40,000 or over are acquired.

Higher residential tax rates

Higher residential rates may apply when you already own one or more residential properties.

Consideration (£)	Rate
0 – 180,000	4%
180,001 – 250,000	7.5%
250,001 – 400,000	9%
400,001 – 750,000	11.5%
750,001 – 1,500,000	14%
1,500,000 and above	16%

The rates apply to the portion of the total value which falls within each band.

LTT (Non-residential)

Consideration (£)	Rate
0 – 225,000	0%
225,001 – 250,000	1%
250,001 – 1,000,000	5%
Over 1,000,000	6%

The rates apply to the portion of the total value which falls within each band.

Mileage Allowance Payments (MAPS) for Employees

MAPs represent the maximum tax free mileage allowances an employee can receive from their employer for using their own vehicle for business journeys.
An employer is allowed to pay an employee a certain amount of MAPs each year without having to report payments to HMRC.
If the employee receives less than the statutory rate, tax relief can be claimed on the difference.

MAP rates per business mile 2022/23 and 2021/22

Cars and vans	Rate per mile
Up to 10,000 miles	45p
Over 10,000 miles	25p
Bicycles	20p
Motorcycles	24p

Minimum Wage

National Minimum Wage rates apply to employees up to the age of 22.
National Living Wage (NLW) rates apply to employees 23 and over.
The Apprentice rate applies to apprentices under 19, or 19 and over in the first year of apprenticeship.
Penalties apply to employers who fail to pay minimum wages.

Age	NLW	21-22	18-20	16-17	Apprentice
From 1 April 2022	£9.50	£9.18	£6.83	£4.81	£4.81

National Minimum Wage rates apply to employees up to the age of 22.
National Living Wage (NLW) rates apply to employees 23 and over.
The Apprentice rate applies to apprentices under 19, or 19 and over in the first year of apprenticeship.
Penalties apply to employers who fail to pay minimum wages.

Age	NLW	21-22	18-20	16-17	Apprentice
From 1 April 2021	£8.91	£8.36	£6.56	£4.62	£4.30

National Insurance Contributions (NICS) - Rates and Allowances

Employees start paying Class 1 NIC from age 16 (if sufficient earnings).
Employers pay Class 1 NIC in accordance with the table below.
Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 15.05% to 0% up to the Upper Secondary Threshold of £967 per week. Also applies to veterans in the first 12 months of employment.
Employees’ Class 1 NIC stop when they reach their State Pension age. The employer’s contribution continues.

Employees – Class 1 – 2022/23

Earnings per week	%
Up to £190*	Nil
£190.01 – £967	13.25
Over £967	3.25

* £242 from 6 July 2022

Entitlement to state pension and other contribution-based benefits is retained for earnings between £123 and £190* per week.

Employers – Class 1 – 2022/23

Earnings per week	%
Up to £175	Nil
Over £175	15.05

Other National Insurance payable by employers

Class 1A – 15.05% on broadly all taxable benefits provided to employees and on certain taxable termination and sporting testimonial payments in excess of £30,000

Class 1B – 15.05% on taxable PAYE Settlement Agreements

Self-employed – Class 2 and 4

A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits)
Class 2 NIC stop when a person reaches State Pension age
Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

Self-employed – Class 2 – 2022/23

Flat rate per week	£3.15
Small Profits Threshold	£6,725 per year
Lower Profits Limit	£11,908

For 2022/23 the point at which the self-employed person starts to pay Class 2 NICs will increase to £11,908. This means those with profits between the Small Profits Threshold and the Lower Profits Limit will not pay Class 2 NICs, but will still be able to access entitlement to contributory benefits. A self-employed person with profits below the Small Profits Threshold might decide to carry on paying Class 2 voluntarily to accrue entitlement to the State Pension and other benefits.

Class 4 – 2022/23

Annual profits	%
Up to £11,908	Nil
£11,908.01 – £50,270	10.25
Over £50,270	3.25

Class 3

A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.
Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Class 3 – 2022/23

Flat rate per week £15.85

Employees start paying Class 1 NIC from age 16 (if sufficient earnings).
Employers pay Class 1 NIC in accordance with the table below.
Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 13.8% to 0% up to the Upper Secondary Threshold of £967 per week. Also applies to veterans in the first 12 months of employment.
Employees’ Class 1 NIC stop when they reach their State Pension age . The employer’s contribution continues.

Employees – Class 1 – 2021/22

Earnings per week	%
Up to £184	Nil
£184.01 – £967	12
Over £967	2

Entitlement to state pension and other contribution-based benefits is retained for earnings between £120 and £184 per week.

Employers – Class 1 – 2021/22

Earnings per week	%
Up to £170	Nil
Over £170	13.8

Other National Insurance payable by employers

Class 1A – 13.8% on broadly all taxable benefits provided to employees and on certain taxable termination and sporting testimonial payments in excess of £30,000

Class 1B – 13.8% on taxable PAYE Settlement Agreements

Self-employed – Class 2 and 4

A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits)
Class 2 NIC stop when a person reaches State Pension age
Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

Self-employed – Class 2 – 2021/22

Flat rate per week	£3.05
Small Profits Threshold	£6,515 per year

No Class 2 is due if the amount of trading profits assessable to income tax and Class 4 NIC is below this figure. However, a person might decide to carry on paying Class 2 voluntarily to accrue entitlement to the State Pension and other benefits.

Class 4 – 2021/22

Annual profits	%
Up to £9,568	Nil
£9,568.01 – £50,270	9
Over £50,270	2

Class 3

A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.
Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Class 3 – 2021/22

Flat rate per week £15.40

Pensions Automatic Enrolment

Auto enrolment places duties on employers to automatically enrol ‘workers’ into a work based pension scheme. Employers are required to automatically enrol all ‘eligible jobholders’ into a qualifying pension scheme and pay pension contributions on their behalf.

Employer minimum contribution	Total minimum contribution
3%	8%

Where the employer does not make the total minimum contribution the employee is obliged to pay the balance.

	2022/23
Automatic enrolment earnings trigger	£10,000
Qualifying earnings band – lower limit	£6,240
Qualifying earnings band – upper limit	£50,270

Employer minimum contribution	Total minimum contribution
3%	8%

Where the employer does not make the total minimum contribution the employee is obliged to pay the balance.

	2021/22
Automatic enrolment earnings trigger	£10,000
Qualifying earnings band – lower limit	£6,240
Qualifying earnings band – upper limit	£50,270

Pensions - Tax Relief on Pensions Contribution

Tax relief available for personal contributions is the higher of £3,600 (gross) or 100% of relevant earnings.
Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual.
The limit may be reduced to £4,000 once money purchase pensions are accessed.
Where the £40,000 limit is not fully used it may be possible to carry the unused amount forward for three years.
The annual allowance is tapered for those with adjusted income over £240,000. For every £2 of income over £240,000 an individual’s annual allowance will be reduced by £1, down to a minimum of £4,000.
Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’ for the purposes of the business. The tax relief for large contributions may be spread over several years.

Tax relief available for personal contributions is the higher of £3,600 (gross) or 100% of relevant earnings.
Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual.
The limit may be reduced to £4,000 once money purchase pensions are accessed.
Where the £40,000 limit is not fully used it may be possible to carry the unused amount forward for three years.
The annual allowance is tapered for those with adjusted income over £240,000. For every £2 of income over £240,000 an individual’s annual allowance will be reduced by £1, down to a minimum of £4,000.
Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’ for the purposes of the business. The tax relief for large contributions may be spread over several years.

Property Allowance

A property allowance is available to individuals.
The property allowance will not apply to partnership income or to income on which rent a room relief is given.

Income up to £1,000	Property income assessable NIL
Income over £1,000	Election to deduct £1,000 rather than the actual expenses

Self Assessments - Key Dates

31 January 2022 – First payment on account due for 2021/22 tax year.

31 July 2022 – Second payment on account for 2021/22 tax year.

5 October 2022 – Deadline for notifying HMRC of new sources of income (including the Child Benefit charge) if no tax return has been issued for 2021/22 tax year.

31 October 2022 – Deadline for submission of 2021/22 non-electronic returns.

30 December 2022 – Deadline for submission of 2021/22 electronic tax returns if ‘coding out’ of eligible underpayment is required.

31 January 2023 – Deadline for filing electronic tax returns for 2021/22. Balancing payment due for 2021/22 tax year. First payment on account due for 2022/23 tax year.

31 January 2021 – First payment on account due for 2020/21 tax year.

31 July 2021 – Second payment on account for 2020/21 tax year.

5 October 2021 – Deadline for notifying HMRC of new sources of income (including the Child Benefit charge) if no tax return has been issued for 2020/21 tax year.

31 October 2021 – Deadline for submission of 2020/21 non-electronic returns.

30 December 2021 – Deadline for submission of 2020/21 electronic tax returns if ‘coding out’ of eligible underpayment is required.

31 January 2022 – Deadline for filing electronic tax returns for 2020/21. Balancing payment due for 2020/21 tax year. First payment on account due for 2021/22 tax year.

Stamp Duty

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction. If you buy shares electronically Stamp Duty Reserve Tax (SDRT) is payable. For shares purchased using a stock transfer form, you will pay Stamp Duty if the transaction is over £1,000.

Stamp Duty Land Tax (SDLT)

SDLT is payable on land and property transactions in England and Northern Ireland.
Property transactions in Scotland are subject to Land and Buildings Transaction Tax (LBTT).
Property transactions in Wales are subject to Land Transaction Tax (LTT).

Residential property

The rates apply to the portion of the total value which falls within each band.

Consideration (£)	Rate
0 – 125,000	0%
125,001 – 250,000	2%
250,001 – 925,000	5%
925,001 – 1,500,000	10%
1,500,001 and above	12%

These rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief

From 1 July 2021 First-time buyers may be eligible for first-time buyer relief on purchases of residential property up to £500,000. The rates apply to the portion of the total value which falls within each band.

Consideration (£)	Rate
0 – 300,000	0%
300,001 – 500,000	5%
for purchases over 500,000	normal rates apply

Non-residential SDLT rates

Consideration (£)	Rate
0 – 150,000	0%
150,001 – 250,000	2%
Over 250,000	5%

Payable on consideration which falls in each band.

SDLT is payable on land and property transactions in England and Northern Ireland.
Property transactions in Scotland are subject to Land and Buildings Transaction Tax (LBTT).
Property transactions in Wales are subject to Land Transaction Tax (LTT).

Residential property

The rates apply to the portion of the total value which falls within each band. The following rates apply to 30 June 2021:

Consideration (£)	Rate
0 – 500,000	0%
500,001 – 925,000	5%
925,001 – 1,500,000	10%
1,500,001 and above	12%

The following rates apply from 1 July to 30 September 2021:

Consideration (£)	Rate
0 – 250,000	0%
250,001 – 925,000	5%
925,001 – 1,500,000	10%
1,500,001 and above	12%

The following rates apply from 1 October 2021:

Consideration (£)	Rate
0 – 125,000	0%
125,001 – 250,000	2%
250,001 – 925,000	5%
925,001 – 1,500,000	10%
1,500,001 and above	12%

These rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief

Consideration (£)	Rate
0 – 300,000	0%
300,001 – 500,000	5%
for purchases over 500,000	normal rates apply

Non-residential SDLT rates

Consideration (£)	Rate
0 – 150,000	0%
150,001 – 250,000	2%
Over 250,000	5%

Payable on consideration which falls in each band.

State Pensions

The basic State Pension is a regular payment from the government that an individual may be entitled to when they reach State Pension age.
The basic State Pension depends on the number of years an individual has paid National Insurance or has National Insurance credits, eg while unemployed or claiming certain benefits.
To receive the basic State Pension an individual must have paid or been credited with National Insurance contributions (NIC).
In 2016 the State Pension was reformed into a single-tier new State Pension. In order to benefit from the full amount the individual will need 35 years, rather than the previous 30 years of NIC or credits for the full amount, with pro-rating where 35 years is not achieved. You will usually need 10 qualifying years to get any State Pension. The amount an individual receives can be higher or lower depending on their National Insurance record. It will only be higher if you have over a certain amount of Additional State Pension.
Currently an individual may also be entitled to the Additional State Pension. How much an individual gets depends on the number of qualifying years of NIC, the amount of earnings and whether the individual has been contracted out of the scheme.

Weekly State Pension 2022/23
Basic – single person	£141.85
New State Pension	£185.15

The basic State Pension is a regular payment from the government that an individual may be entitled to when they reach State Pension age .
The basic State Pension depends on the number of years an individual has paid National Insurance or has National Insurance credits, eg while unemployed or claiming certain benefits.
To receive the basic State Pension an individual must have paid or been credited with National Insurance contributions (NIC).
In 2016 the State Pension was reformed into a single-tier new State Pension. In order to benefit from the full amount the individual will need 35 years, rather than the previous 30 years of NIC or credits for the full amount, with pro-rating where 35 years is not achieved. You will usually need 10 qualifying years to get any State Pension. The amount an individual receives can be higher or lower depending on their National Insurance record. It will only be higher if you have over a certain amount of Additional State Pension.
Currently an individual may also be entitled to the Additional State Pension. How much an individual gets depends on the number of qualifying years of NIC, the amount of earnings and whether the individual has been contracted out of the scheme.

Weekly State Pension 2021/22
Basic – single person	£137.60
New State Pension	£179.60

Tax reliefs for Individuals

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. Individuals are entitled to relief on investments in certain unquoted trading companies through EIS. A junior version of EIS the SEIS is also available.

Maximum investment per annum	£1,000,000
Additional investment limit where investing in knowledge-intensive companies	£1,000,000
Income tax relief	30%
CGT treatment on disposal if held for 3 years	Exempt

Capital gains from the disposal of other assets may be deferred by making an EIS investment.

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. SEIS is a junior version of EIS.

Maximum investment per annum	£100,000
Income tax relief	50%
CGT treatment on disposal if held for 3 years	Exempt

Capital gains from the disposal of other assets may be exempt up to £50,000 per annum by making an SEIS investment.

Social Investment Relief (SIR)

Social Investment Relief (SIR) is designed to encourage private individuals to invest in social enterprises including charities. Individuals are entitled to relief on their investment:

Maximum investment per annum	£1,000,000
Income tax relief	30%
CGT treatment on disposal if held for 3 years	Exempt

Capital gains from the disposal of other assets may be deferred by making a SIR investment.

Venture Capital Trusts (VCTs)

Venture Capital Trusts (VCTs) are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies. VCTs operate by indirect investment through a mediated fund. In effect they are very like the investment trusts that are obtainable on the stock exchange, albeit in a high-risk environment. Individuals are entitled to relief on investments in VCTs.

Maximum investment per annum	£200,000
Income tax relief	30%
Dividend income	Exempt
Capital gains treatment on disposal	Exempt

All reliefs are subject to detailed conditions being met.

Trade Allowances

A Trade Allowance is available to individuals.
There is an equivalent rule for certain miscellaneous income. This will apply to the extent that the £1,000 trading allowance is not used against trading income.
The trade allowance is not available against partnership income.

Income up to £1,000	Profits assessable NIL
Income over £1,000	Election to deduct £1,000 allowance rather than the actual expenses

Van Benefits

Van benefit is chargeable if the van is available for an employee’s private use.
A fuel benefit may also be chargeable if an employee has the benefit of private fuel paid for in respect of a company van.
The charges do not apply to vans if a ‘restricted private use condition’ is met throughout the year.
From 6 April 2021 a 0% benefit charge may apply to vans which cannot emit CO₂ when driven.

Van benefits 2022/23
Van benefit	£3,600
Fuel benefit	£688

Van benefit is chargeable if the van is available for an employee’s private use.
A fuel benefit may also be chargeable if an employee has the benefit of private fuel paid for in respect of a company van.
The charges do not apply to vans if a ‘ restricted private use condition ‘ is met throughout the year.
From 6 April 2021 a 0% benefit charge may apply to vans which cannot emit CO ₂when driven.

Van benefits 2021/22
Van benefit	£3,500
Fuel benefit	£669

VAT

Registered businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs.
Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
There are three rates: standard which applies to most goods and services, reduced rate for some goods and services such as home energy and zero rate goods and services, for example, most food and children’s clothes.
Some supplies are exempt from VAT for example postage stamps, financial and insurance transactions.
A business is required to register for VAT if the value of taxable supplies exceeds the annual registration limit.

VAT – rates and limits
Standard rate	20%
Reduced rate	5%*
Annual Registration Limit – from 1.4.22 – 31.3.23	£85,000
Annual Deregistration Limit – from 1.4.22 – 31.3.23	£83,000

Registered businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs.
Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
There are three rates: standard which applies to most goods and services, reduced rate for some goods and services such as home energy and zero rate goods and services, for example, most food and children’s clothes.
Some supplies are exempt from VAT for example postage stamps, financial and insurance transactions.
A business is required to register for VAT if the value of taxable supplies exceeds the annual registration limit.
The government has frozen the VAT registration and deregistration limits until 1 April 2022.

VAT – rates and limits
Standard rate	20%
Reduced rate	5%*
Annual Registration Limit – from 1.4.21 – 31.3.22	£85,000
Annual Deregistration Limit – from 1.4.21 – 31.3.22	£83,000

* 12.5% for hospitality and tourism from 1 October 2021 to 31 March 2022

VAT Fuel Scale Charges

Businesses must use these new VAT fuel scale charges from the start of their next prescribed accounting period beginning on or after 1 May 2021.

CO₂ band	Gross monthly £	VAT £	Net £
120 or less	48	8.00	40.00
125	72	12.00	60.00
130	77	13.00	65.00
135	82	14.00	68.00
140	87	14.50	72.50
145	91	15.17	75.83
150	97	16.17	80.83
155	102	17.00	85.00
160	106	17.67	88.33
165	111	18.50	92.50
170	116	19.33	96.67
175	121	20.17	100.83
180	126	21.00	105.00
185	130	21.67	108.33
190	136	22.67	113.33
195	141	23.50	117.50
200	145	24.17	120.83
205	150	25.00	125.00
210	155	25.83	129.17
215	160	26.67	133.33
220	165	27.50	137.50
225 or more	169	28.17	140.83

CO ₂ band	Gross 3 month period £	VAT £	Net £
120 or less	145	24.17	120.83
125	219	36.50	182.50
130	233	38.83	194.17
135	247	41.17	205.83
140	262	43.67	218.33
145	277	45.83	230.83
150	292	48.67	243.33
155	306	51.00	255.00
160	321	53.50	267.50
165	336	56.00	280.00
170	350	58.33	291.67
175	364	60.33	303.33
180	379	63.17	315.83
185	394	65.67	328.33
190	409	68.17	340.83
195	423	70.50	352.50
200	438	73.00	365.00
205	453	75.50	377.50
210	467	77.83	389.17
215	481	80.17	400.83
220	496	82.67	413.33
225 or more	511	85.17	425.83

CO ₂ band	Annual gross £	VAT £	Net £
120 or less	585	97.50	487.50
125	875	145.83	729.17
130	936	156.00	780.00
135	992	165.33	826.67
140	1,053	175.50	877.50
145	1,109	184.83	924.17
150	1,170	195.00	975.00
155	1,226	204.33	1,021.67
160	1,287	214.50	1,072.50
165	1,343	223.83	1,119.17
170	1,404	240.00	1,170.00
175	1,460	243.33	1,216.67
180	1,521	253.50	1,267.50
185	1,577	262.83	1,314.17
190	1,638	273.00	1,365.00
195	1,694	282.83	1,411.67
200	1,755	292.50	1,462.50
205	1,811	301.83	1,509.17
210	1,872	312.00	1,560.00
215	1,928	321.33	1,606.67
220	1,989	331.50	1,657.50
225 or more	2,045	340.83	1,704.17

Where the CO₂ emission figure is not a multiple of five, the figure is rounded down to the next multiple of five to determine the level of the charge.

For a bi-fuel vehicle which has two CO₂ emissions figures, the lower of the two figures should be used.

For cars which are too old to have a CO₂ emissions figure, you should identify the CO₂ band based on engine size. If its cylinder capacity is:

If its cylinder capacity is 1,400cc or less, use CO₂ band 140
If its cylinder capacity exceeds 1,400cc but does not exceed 2,000cc, use CO₂ band 175;
If its cylinder capacity exceeds 2,000cc, use CO₂ band 225 or above.

Businesses must use these new VAT fuel scale charges from the start of their next prescribed accounting period beginning on or after 1 May 2020.

CO ₂ band	Gross monthly £	VAT £	Net £
120 or less	48	8.00	40.00
125	72	12.00	60.00
130	76	12.67	63.33
135	81	13.50	67.50
140	87	14.50	72.50
145	91	15.17	75.83
150	96	16.00	80.00
155	101	16.83	84.17
160	106	17.67	88.33
165	111	18.50	92.50
170	115	19.17	95.83
175	120	20.00	100.00
180	125	20.83	104.17
185	130	21.67	108.33
190	135	22.50	112.50
195	140	23.33	116.67
200	144	24.00	120.00
205	149	24.83	124.17
210	154	25.67	128.33
215	159	26.50	132.50
220	164	27.33	136.67
225 or more	168	28.00	140.00

CO ₂ band	Gross 3 month period £	VAT £	Net £
120 or less	144	24.00	120.00
125	218	36.33	181.67
130	231	38.50	192.50
135	246	41.00	205.00
140	261	43.50	217.50
145	275	45.83	229.17
150	290	48.33	241.67
155	305	50.83	254.17
160	319	53.17	265.83
165	334	55.67	278.33
170	348	58.00	290.00
175	362	60.33	301.67
180	377	62.83	314.17
185	392	65.33	326.67
190	406	67.67	338.33
195	421	70.17	350.83
200	436	72.67	363.33
205	450	75.00	375.00
210	464	77.33	386.67
215	479	79.83	399.17
220	493	82.17	410.83
225 or more	508	84.67	423.33

CO ₂ band	Annual gross £	VAT £	Net £
120 or less	581	96.83	484.17
125	870	145.00	725.00
130	930	155.00	775.00
135	986	164.33	821.67
140	1,047	174.50	872.50
145	1,103	183.83	919.17
150	1,163	193.83	969.17
155	1,219	203.17	1,015.83
160	1,279	213.17	1,065.83
165	1,335	222.50	1,112.50
170	1,396	232.67	1,163.33
175	1,452	242.00	1,210.00
180	1,512	252.00	1,260.00
185	1,568	261.33	1,306.67
190	1,628	271.33	1,356.67
195	1,684	280.67	1,403.33
200	1,745	290.83	1,454.17
205	1,801	300.17	1,500.83
210	1,861	310.17	1,550.83
215	1,917	319.50	1,597.50
220	1,977	329.50	1,647.50
225 or more	2,033	338.83	1,694.17

Where the CO ₂emission figure is not a multiple of five, the figure is rounded down to the next multiple of five to determine the level of the charge.

For a bi-fuel vehicle which has two CO ₂emissions figures, the lower of the two figures should be used.

For cars which are too old to have a CO ₂emissions figure, you should identify the CO ₂band based on engine size. If its cylinder capacity is:

If its cylinder capacity is 1,400cc or less, use CO ₂band 140
If its cylinder capacity exceeds 1,400cc but does not exceed 2,000cc, use CO ₂band 175;
If its cylinder capacity exceeds 2,000cc, use CO ₂band 225 or above.

Vehicle Excise Duty (VED) - Passenger Cars

New diesel vehicles that do not meet the Euro 6d emissions standard are charged a supplement on their First Year Rate to the effect of moving up by one VED band.

VED bands and rates for cars first registered on or after 1 April 2017

CO₂ emissions (g/km)	Standard rate	First year rate
0	£0	£0
1-50	£165	£10
51-75	£165	£25
76-90	£165	£120
91-100	£165	£150
101-110	£165	£170
111-130	£165	£190
131-150	£165	£230
151-170	£165	£585
171-190	£165	£945
191-225	£165	£1,420
226-255	£165	£2,015
Over 255	£165	£2,365

VED bands and rates for cars registered on or after 1 March 2001 but before 1 April 2017

VED band	CO ₂emissions (g/km)	Standard rate
A	Up to 100	£0
B	101-110	£20
C	111-120	£30
D	121-130	£135
E	131-140	£165
F	141-150	£180
G	151-165	£220
H	166-175	£265
I	176-185	£290
J	186-200	£330
K	201-225*	£360
L	226-255	£615
M	Over 255	£630

*Including cars emitting over 225g/km registered before 23 March 2006.

New diesel vehicles that do not meet the Euro 6d emissions standard are charged a supplement on their First Year Rate to the effect of moving up by one VED band.

VED bands and rates for cars first registered on or after 1 April 2017

CO ₂emissions (g/km)	Standard rate	First year rate
0	£0	£0
1-50	£155	£10
51-75	£155	£25
76-90	£155	£115
91-100	£155	£140
101-110	£155	£160
111-130	£155	£180
131-150	£155	£220
151-170	£155	£555
171-190	£155	£895
191-225	£155	£1,345
226-255	£155	£1,910
Over 255	£155	£2,245

VED bands and rates for cars registered on or after 1 March 2001 but before 1 April 2017

VED band	CO ₂emissions (g/km)	Standard rate
A	Up to 100	£0
B	101-110	£20
C	111-120	£30
D	121-130	£130
E	131-140	£155
F	141-150	£170
G	151-165	£210
H	166-175	£250
I	176-185	£275
J	186-200	£315
K	201-225*	£340
L	226-255	£585
M	Over 255	£600

*Including cars emitting over 225g/km registered before 23 March 2006.

Disclaimer

This article is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this publication can be accepted by the authors or the firm.

Spring Statement 2022

by Hawsons | Mar 24, 2022 | Aaron Hemmington, Agriculture, Audit, Auto Enrolment, Bookkeeping, Brexit, Business Services, Care Homes, Charities, Cloud Accounting, Corporate Finance, Corporate Tax, COVID-19, Craig Walker, Cyber Security, David Cairns, Dental, Engineering, Exit Planning, Family Business, GPs, Healthcare, IT, IT and Technology, Jenny Brown, Legal, Leisure & Hospitality, Manufacturing, Payroll, Pensions, Personal Tax, Pharmacy, Property & Construction, Retail, SME, Solicitors, Stephen Charles, Tax, Tony Nickson, Transport & Logistics

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.

You should contact us before taking any action as a result of the contents of this summary.

Increase in the National Insurance threshold and Lower Profit Limit

Chancellor Rishi Sunak announced an increase in the annual National Insurance Primary Threshold and the Lower Profits Limit in his 2022 Spring Statement.

Primary Class 1 contributions are paid by employees. To align the starting thresholds for income tax and National Insurance contributions (NICs) the threshold will increase from 6 July 2022 from £9,880 to £12,570.

The Lower Profits Limit is the point where the profits of the self-employed become subject to Class 4 NICs. From 6 April 2022 the Lower Profits Limit is increased to £11,908 and from 6 April 2023 the limit is increased further to £12,570.

In addition, there will be no Class 2 NICs on profits between £6,725 and £11,908. £3.15 per week is payable where profits are over £11,908.

Temporary increase in National Insurance rates

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.

With the increase to the thresholds announced in the Spring Statement, 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.

Income tax reduction

The Chancellor announced the reduction in the basic rate of income tax for non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland to 19% from April 2024. This reduction will not apply for Scottish taxpayers because the power to set these rates is devolved to the Scottish Government.

The change will be implemented in a future Finance Bill.

Fuel duty

In a measure announced in the Spring Statement to help all motorists – individuals, small businesses and hauliers – fuel duty for petrol and diesel is cut by 5 pence per litre across the whole of the UK. This measure took effect from 6pm on 23 March 2022 and is in place for 12 months.

Increased Employment Allowance

Employers are able to claim the Employment Allowance which reduces their employer Class 1 NICs each year.

In the Spring Statement, the Chancellor announced an increase from April 2022 of £1,000 for eligible employers to reduce their employer NICs by up to £5,000 per year.

The allowance can be claimed against only one PAYE scheme, even if the business runs multiple schemes. Connected businesses, such as companies under the control of the same person or persons, are only entitled to one Employment Allowance between them.

VAT on energy saving materials

The Chancellor announced a UK wide, time-limited zero rate of VAT from April 2022 for the installation of energy saving materials. This will apply to installations such as rooftop solar panels.

This is in addition to the extension of the VAT relief to include additional technologies and the removal of complex eligibility conditions.

Green reliefs for business rates

The government is introducing targeted business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill. It was announced in the Spring Statement, that these measures will now take effect from April 2022, a year earlier than previously planned.

Making Tax Digital for Business: VAT

April 2022 sees the final phase of the introduction of the Making Tax Digital (MTD) for VAT regime. All VAT registered businesses, regardless of turnover, will enter MTD for VAT from their first VAT return period starting on or after 1 April 2022.

Businesses must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.

Comment

Keeping digital records will not mean businesses are mandated to use digital invoices and receipts but the actual recording of supplies made and received must be digital. It is likely that third party commercial software will be required. Software is not available from HMRC. The use of spreadsheets will be allowed, but they will have to be combined with add-on software to meet HMRC’s requirements.

HMRC is looking at a scenario where income tax updates are made quarterly and digitally under the MTD for Income Tax Self Assessment (ITSA) from April 2024.

MTD for Corporation Tax (CT)

The Government is committed to ongoing collaboration with stakeholders on the service design and, following any decision to mandate MTD for CT, will provide sufficient notice ahead of implementation but this will not be mandated before 2026 at the earliest.

Corporation Tax rates

The main rate of CT is 19% for the Financial Year (FY) beginning 1 April 2022. This rate will increase to 25% for the FY beginning on 1 April 2023.

If a company’s accounting period straddles more than one FY, the amount of profits for that accounting period must be apportioned to arrive at the tax rate charged.

A small profits rate will be introduced for qualifying companies with no associated companies in the accounting period and profits of £50,000 or less so that they will continue to pay CT at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective CT rate.

Capital allowances

Plant and machinery

A further extension to the temporary increase in the Annual Investment Allowance (AIA) to 31 March 2023 allows 100% tax relief to businesses investing up to £1 million in qualifying expenditure.

The AIA reverts to £200,000 for expenditure incurred on or after 1 April 2023 and special rules apply to accounting periods which straddle these dates.

First Year Allowances (FYA) for companies

For qualifying expenditure which is unused, not second-hand and is incurred on or after 1 April 2021 but before 1 April 2023 a super-deduction of 130% is available where the expenditure would normally qualify for the 18% main rate of writing down allowance or a Special Rate Allowance of 50% for expenditure which would normally attract the 6% special rate of writing down allowance.

For FYAs, what matters is the actual date on which the expenditure is incurred and not the date on which it is treated as incurred.

Comment

Businesses incurring expenditure on plant and machinery should carefully consider the timing of their acquisitions to optimise their cashflow. In 2023, not only will the tax relief rules for expenditure on plant and machinery change, but for companies the percentage of CT relief on that expenditure may change as well.

Preventing abuse of the R&D tax relief

From April 2023 a number of changes are proposed to the regimes from both existing schemes of relief which will include the expansion of relief to cloud and data computing.

Claims for relief will have to be made digitally and more detail will be required within the claim. Each claim will need to be endorsed by a named senior officer of the company and companies will need to inform HMRC, in advance, that they plan to make a claim. Claims will also need to include details of any agent who has advised the company on compiling the claim.

Cultural relief

A temporary increase in cultural tax reliefs for theatres, orchestras, museums and galleries across the UK will apply until 31 March 2024, increasing the relief organisations can claim as they invest in new productions and exhibitions.

From 1 April 2022 changes will also be introduced to better target the cultural reliefs and ensure that they continue to be safeguarded from abuse.

The Residential Property Developer Tax

The Residential Property Developer (RPDT) will be introduced on the very largest property developers for accounting periods beginning on or after 1 April 2022.

Broadly RPDT is a charge of 4% treated as corporation tax on the profits of the residential property developer over an allowance of £25 million in a 12-month period.

Capital gains tax (CGT) rates

The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for private residence relief.

There are two specific types of disposal which potentially qualify for a 10% rate:

Business Asset Disposal Relief (BADR) which was formerly known as Entrepreneurs’ Relief. This is targeted at working directors and employees of companies who own at least 5% of the ordinary share capital in the company and the owners of unincorporated businesses. BADR has a lifetime limit of £1 million for each individual.
Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares. This has a lifetime limit of £10 million for each individual.

CGT annual exemption

The CGT annual exemption is £12,300 for 2022/23 and will remain frozen until April 2026.

CGT reporting

New reporting and payment on account obligations for chargeable gains on residential property were introduced in April 2020. From 27 October 2021 the deadline to report and pay CGT after selling UK residential property was increased from 30 days after the completion date to 60 days.

Inheritance tax (IHT) nil rate bands

The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2026.

IHT residence nil rate band

The residence nil rate band (RNRB) was introduced in 2017, meaning that the family home can be passed more easily to direct descendants on death.

The rate of the RNRB is £175,000 for 2022/23.

There are a number of conditions that must be met in order to obtain the RNRB.

For many married couples and registered civil partnerships the relief which is available following the second death can effectively be doubled as each individual has a main nil rate band and a residence nil rate band which passes on the death of the surviving spouse.

Charitable giving

A reduced rate of IHT applies where broadly 10% or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. In those cases the 40% rate will be reduced to 36%.

Employer provided cars

The scale of charges for working out the taxable benefit for an employee who has use of an employer provided car are normally announced well in advance. Most cars are taxed by reference to bands of CO₂ emissions multiplied by the original list price of the vehicle. The list price is reduced for capital contributions made by the employee up to £5,000.

For fully diesel cars generally add a 4% supplement unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard.

The maximum charge irrespective of the fuel, is capped at 37% of the list price of the car.

The rates announced for 2022/23 will remain frozen until 2024/25.

Employer provided fuel benefit

From 6 April 2022 the figure used as the basis for calculating the benefit for employees who receive free private fuel from their employers for company cars is increased to £25,300.

Employer provided vans and fuel

For 2022/23 the benefit increases to £3,600 per van and the van fuel benefit charge where fuel is provided for private use increases to £688.

Changes to the van benefit charge from April 2021 means that if the van cannot in any circumstances emit CO₂ by being driven the cash equivalent is nil.

National Insurance contributions (NICs)

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals will lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government will introduce a UK-wide 1.25% Health and Social Care Levy based on the NIC system but ring fenced for health and social care.

From April 2022 the Health and Social Care Levy Act provides for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23.

From April 2023 onwards, the NIC rates will revert back to 2021/22 levels and will be replaced by a new 1.25% Health and Social Care Levy.

Broadly, the new Health and Social Care Levy will be subject to the same reliefs, thresholds and requirements as NIC. However the Levy (as opposed to the temporary increase in NICs for 2022/23) will also apply to those above State Pension age who are still in employment or are self-employed.

Existing reliefs for NICs to support employers will apply to the Levy. Companies employing apprentices under the age of 25, all people under the age of 21, veterans and employers in Freeports will not pay the Levy for these employees as long as their yearly gross earnings are less than £50,270, or £25,000 for new Freeport employees.

The Employment Allowance, which reduces employers’ Class 1 NICs by up to £5,000, will also be available for the employers’ liability to the Levy.

Comment

The Levy will be applied to those above State Pension age although this does not apply in respect of the temporary increase from April 2022. The Levy will not apply to Class 2 (a flat rate paid by many self-employed) and Class 3 (voluntary contributions for taxpayers to fill gaps in their contribution records).

The burden of the 1.25% increase falls on the shoulders of the employer, the employee and the self-employed as each will have higher contributions to make. Those with property income will be relieved that they are not being included in the Levy.

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.

Comment

In total, the annual gross earnings of a full-time worker on the NLW will have increased by over £5,000 since its introduction in April 2016.

The UK personal allowance, tax rates and bands for the tax year 2022/23 were announced by the Chancellor in the October 2021 Budget.

The personal allowance

The personal allowance is currently £12,570 and will be frozen at £12,570 for the tax years to 2025/26.

There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So there is no personal allowance where adjusted net income exceeds £125,140.

The marriage allowance

The marriage allowance permits certain couples, where neither party pays tax in the tax year at a rate other than the basic rate, to transfer £1,260 of their personal allowance to their spouse or civil partner.

Comment

The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. To benefit from the marriage allowance one spouse or civil partner must normally have no income or income below the personal allowance for the year. The marriage allowance was first introduced for 2015/16 and there are couples who are entitled to claim but have not yet done so. It is possible to claim for the four years back to 2018/19 where the entitlement conditions are met. The total tax saving for all years up until 2022/23 could be over £1,000. A claim for 2018/19 will need to be made by 5 April 2023.

Tax bands and rates

The basic rate of tax is 20%. In 2022/23 the band of income taxable at this rate is £37,700 so that the threshold at which the 40% band applies is £50,270 for those who are entitled to the full personal allowance. The bands of tax are also frozen for the tax years to 2025/26.

Individuals pay tax at 45% on their income over £150,000.

Scottish residents

The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland to taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2022/23 there are five income tax rates which range between the starter rate of 19% and the top rate of 46%. The basic rate of tax is 20% and there is an additional intermediate rate of 21%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK residents. For 2022/23 the threshold at which the 41% band applies is £43,663 for those who are entitled to the full personal allowance.

Savings and dividend income are taxed using UK rates and bands.

Welsh residents

From April 2019, the Welsh Government has the right to vary the rates of income tax payable by Welsh taxpayers. The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence. The Welsh Government has set the Welsh rate of income tax at 10 pence which will be added to the reduced rates. This means the tax payable by Welsh taxpayers continues to be the same as that payable by English and Northern Irish taxpayers.

Tax on savings income

Savings income is income such as bank and building society interest.

The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.

Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income exceeds £5,000.

Tax on dividends

The first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). For 2022/23 and subsequent tax years the rate at which dividends received above the Dividend Allowance are taxed has increased across all rates by 1.25% to the following rates:

8.75% for basic rate taxpayers
33.75% for higher rate taxpayers
39.35% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

VAT rates and limits

The VAT registration and deregistration thresholds will remain unchanged for a period of two years from 1 April 2022.

The six-month extension to the UK-wide VAT reduction to 12.5% for the tourism and hospitality sectors comes to an end on 30 March 2022 with rates returning to the standard rate of 20%.

Vehicle Excise Duty (VED)

With effect from 1 April 2022 the rates of VED rates for cars, vans, motorcycles, and motorcycle trade licenses will increase in line with Retail Prices Index (RPI).

For heavy goods vehicles, VED continues to be frozen in 2022/23. The HGV Levy is suspended for another 12 months from 1 August 2022.

Landfill Tax

With effect from 1 April 2022 both the standard and lower rates of Landfill Tax will increase in line with the RPI.

Disclaimer

This publication is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this publication can be accepted by the authors or the firm.

For more information

For more information on anything discussed in this article or if you would like some tax planning advice please contact your usual Hawsons contact. Alternatively, please contact your nearest office to arrange your free initial meeting.

Free initial meeting

Get in touch

Stephen Charles

Tax Partner, Sheffield

[email protected]

0114 266 7141

Aaron Hemmington

Tax Partner, Northampton

[email protected]

01604 645 600

Craig Walker

Tax Director, Sheffield

[email protected]

0114 266 7141

David Cairns

Tax Partner, Northampton

01604 645 600

[email protected]

Hospitality sector to benefit from ban on exclusivity clauses

by Hawsons | May 23, 2022 | Leisure & Hospitality, Richard Burkimsher

What is an exclusivity clause? When an exclusivity clause is put into an employee’s contact, it restricts the employee from being able to take on additional work with another employer. In 2015, exclusivity clauses were banned from being placed into zero-hours...

Charity Commission Opens Online System for Annual Returns

by Hawsons | May 20, 2022 | Charities, Simon Bladen

After a delay due to a technical issue the Charity Commission has now opened its online system for submitting annual returns. The system was originally scheduled to go live towards the end of April. But due to the delay it was not released until 5th of May. What is...

Charities Statement of Recommended Practice

by Hawsons | May 17, 2022 | Charities, Simon Bladen

A revised version of the Charities Statement of Recommended Practice (SORP) is set to be updated from 1 January 2024. This is less than two years away. The charities SORP was first introduced in 2015 and updated in 2019 to clarify and reflect amendments and changes to...

Autumn Budget 2021

by Hawsons | Oct 28, 2021 | Aaron Hemmington, Agriculture, Agriculture update, Audit, Auto Enrolment, Bookkeeping, Brexit, Business Services, Care Homes, Charities, Cloud Accounting, Corporate Finance, Corporate Tax, COVID-19, Craig Walker, Cyber Security, Dental, Doncaster, Engineering, Exit Planning, Family Business, GPs, Healthcare, IT, IT and Technology, Jenny Brown, Legal, Leisure & Hospitality, Making Tax Digital, Manufacturing, Northampton, Payroll, Pensions, Personal Tax, Pharmacy, Press Release, Property & Construction, R&D, Retail, Retirement, Sheffield, SME, Solicitors, Stephen Charles, Tax, Transport & Logistics, VAT, Wealth Management

Budget 2021

The Chancellor Rishi Sunak presented his third Budget on 27 October 2021. In his speech he set out the plans to “build back better” with ambitions to level up and reduce regional inequality.

Main Budget proposals

Tax measures include:

a new temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022/23
a change in the earliest age from which most pension savers can access their pension savings without incurring a tax charge. From April 2028 this will rise to 57
the retention of the £1 million annual investment allowance until 31 March 2023
individuals disposing of UK property on or after 27 October 2021 now have a 60 day CGT reporting and payment deadline, following the completion of the disposal.

Other measures include:

a complete overhaul of alcohol duties that will see drinks taxed on their strength
the cancellation of the previously announced rise in fuel duties
pubs supported with a reduction in draught beer and cider duty
increases in the National Living Wage and the National Minimum Wage rates
an ultra-long-haul band of air passenger duty introduced.

Some Budget proposals may be subject to amendment in the Finance Bill 2021-22. Should you need any further help or support please contact us.

Making Tax Digital for income tax

The Making Tax Digital (MTD) regime is based on businesses being required to maintain their accounting records in a specified digital format and submit extracts from those records regularly to HMRC. It had been expected that sole trader businesses and landlords with business income of more than £10,000 per annum would be required to enter the MTD regime for income tax purposes from 6 April 2023. However, HMRC recently announced that this will be deferred until 6 April 2024. Early adoption of digital record keeping and voluntary submission of MTD for income tax data remains possible.

Following the deferral for sole trader businesses and landlords, general partnerships will not be required to comply with MTD for income tax until 6 April 2025 and the date other types of partnerships (for example limited liability partnerships) will be required to comply will be confirmed in the future.

HMRC has also confirmed that the new system of penalties for the late filing and late payment of tax for income tax self assessment will be aligned with when a taxpayer becomes mandated into MTD for income tax. For individuals without trade or property income or otherwise exempt from MTD for income tax, the new penalty regime will apply to their income tax affairs from 6 April 2025.

MTD for corporation tax

HMRC has previously announced that MTD for corporation tax will not be mandated before 2026.

Accounting periods that are not aligned to tax years

Aligned to the revised start date for MTD for income tax, changes will be made to simplify the rules under which trading profits made by self-employed individuals and partnerships are allocated to tax years.

The changes mainly affect unincorporated businesses that do not draw up annual accounts to 31 March or 5 April. The transition to the new rules will take place in the 2023/24 tax year and the new rules will come into force from 6 April 2024.

Affected self-employed individuals and partnerships may retain their existing accounting period but the trade profit or loss that they report to HMRC for a tax year will become the profit or loss arising in the tax year itself, regardless of the chosen accounting date. Broadly this will require apportionment of accounting profits into the tax years in which they arise.

Example
A business draws up accounts to 30 June every year. Currently, income tax calculations for 2024/25 would be based on the profits in the business’s accounts for the year ended 30 June 2024. The change will mean that the income tax calculations for 2024/25 will be based on 3/12 of the profits for the year ended 30 June 2024 and 9/12 of the profits for the year ended 30 June 2025.

This change will potentially accelerate when business profits are taxed but transitional adjustments in 2023/24 are designed to ease any cashflow impact of the change.

Comment
An estimated 93% of sole traders and 67% of trading partnerships draw up their accounts to 31 March or 5 April and thus the current rules are straightforward and the proposed changes will not affect them. Those with a different year end might wish to consider changing their accounting year end to simplify compliance with tax rules.

Corporation tax rates

The main rate of corporation tax is currently 19%. In the Spring Budget 2021, the Chancellor announced the rate would remain at 19% until 1 April 2023 but the rate will then increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

Capital allowances

Plant and machinery

Most corporate and unincorporated businesses are able to utilise a £200,000 annual investment allowance (AIA) to claim 100% tax relief on their qualifying expenditure on plant and machinery. The allowance was temporarily increased 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 £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.

Reminder – super-deductions
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from new capital allowances, termed ‘super-deductions’ or ‘first year allowances’, as follows: a super-deduction of 130% can be claimed on most new plant and machinery investments that ordinarily qualify for the 18% main rate writing down allowances a first year allowance of 50% can be claimed on most new plant and machinery investments that ordinarily qualify for the 6% special rate writing down allowances. These reliefs are not available for unincorporated businesses.

Comment
Businesses incurring expenditure on plant and machinery should carefully consider the timing of their acquisitions to optimise their cashflow. In 2023 not only will the tax relief rules for expenditure on plant and machinery change, for companies the percentage corporation tax relief saving on the expenditure may change as well.

Structures and Buildings

A Structures and Buildings Allowance (SBA) was introduced with effect from 29 October 2018 to relieve costs for new structures and buildings used for qualifying purposes. A business must hold an allowance statement containing certain information to be eligible to claim SBA. Minor changes will be made to the allowance statement requirements to clarify the information required to be kept.

Annual Tax on Enveloped Dwellings

The Annual Tax on Enveloped Dwellings (ATED) charges increase automatically each year in line with inflation. The ATED annual charges will rise by 3.1% from 1 April 2022 in line with the September 2021 Consumer Price Index.

Residential Property Developer Tax

A new tax will be applied from 1 April 2022 on company profits derived from UK residential property development. The tax will be charged at 4% on profits exceeding an annual allowance of £25 million. For companies that are part of a group, the £25 million allowance will be allocated by the group between its companies.

Cultural relief

The government has announced that it will temporarily increase cultural tax reliefs for theatres, orchestras, museums and galleries across the UK from 27 October 2021 to 31 March 2024, increasing the relief organisations can claim as they invest in new productions and exhibitions.

Changes will also be introduced to better target the cultural reliefs and ensure that they continue to be safeguarded from abuse. These will apply from 1 April 2022.

Research and Development relief reform

Research and Development (R&D) tax reliefs for companies will be reformed to:

support modern research methods by expanding qualifying expenditure to include data and cloud costs
more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK
target abuse and improve compliance.

These changes will take effect from April 2023.

Cross-border group relief

Following the UK’s exit from the European Union (EU), the government is bringing the corporation tax group relief rules relating to European Economic Area (EEA) resident companies into line with those for non-UK companies resident elsewhere in the world. This applies to accounting periods ending on or after 27 October 2021 and will affect UK groups with subsidiary companies established in the EEA along with EEA-resident companies that are trading in the UK through a permanent establishment.

Online Sales Tax

The government has announced its plans to consult and explore the arguments for and against the introduction of an ‘Online Sales Tax’.

Should such a tax be introduced in future, it would raise revenue to fund business rates reductions.

Business rates review

Business rates have been devolved to Scotland, Northern Ireland and Wales.

The government announced at Budget 2020 that it would conduct a fundamental review of the business rates system in England. The government’s objectives for the review were reducing the overall burden on business, improving the current business rates system and allowing the consideration of more fundamental changes in the long term.

In March 2021, the government published the Interim Report of the review. The Final Report was published on 27 October 2021. Collectively, these set out the government’s commitments by:

Supporting local high streets as they adapt and recover from the pandemic by introducing a new temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022/23. Over 90% of retail, hospitality and leisure businesses will receive at least 50% off their business rates bills in 2022/23. This amounts to support worth more than double the relief that was announced pre-COVID for the 2020 to 2021 financial year and includes additional businesses such as hotels, gyms and bowling alleys.
Cutting the burden of business rates for all businesses by freezing the multiplier for 2022 to 2023.
Introducing a new relief to support investment in property improvements , enabling occupying businesses to invest in expanding their properties and making them work better for customers and employees.
Introducing new measures to support green investment and the decarbonisation of non-domestic buildings. This will provide exemptions for eligible green plant and machinery such as solar panels, wind turbines and battery storage used with renewables and electric vehicle charging points, as well as a 100% relief for low-carbon heat networks that have their own rates bill.
Making the system fairer by moving to three-yearly revaluations from 2023 .
Providing stability ahead of the 2023 revaluation by extending Transitional Relief and the Supporting Small Business Scheme for 2022 to 2023 to protect small businesses from significant bill increases in the final year of the current revaluation cycle.

Capital gains tax (CGT) rates

No changes to the current rates of CGT have been announced. This means that the rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains, mainly chargeable gains on residential properties, with the exception of any element that qualifies for Private Residence Relief.

There is still potential to qualify for a 10% rate, regardless of available income tax basic rate band, up to a lifetime limit for each individual. This is where specific types of disposals qualify for:

Business Asset Disposal Relief (BADR). This is targeted at directors and employees who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met. It can also apply to owners of unincorporated businesses.
Investors’ Relief. The main beneficiaries of this relief are investors in unquoted trading companies who have newly-subscribed shares but are not employees.

Current lifetime limits are £1 million for BADR and £10 million for Investors’ Relief.

CGT annual exemption

The CGT annual exemption will be maintained at the current level of £12,300 for 2022/23 and up to and including 2025/26.

CGT reporting and payment following a property disposal

UK resident individuals who dispose of UK residential property are sometimes required to deliver a CGT return to HMRC and make a payment on account of CGT within 30 days of completion of the property disposal. Broadly, this only applies where the property disposal gives rise to a CGT liability and as such usually excludes the disposal of a property to which private residence relief applies.

Non-UK residents are subject to similar deadlines in respect of the disposal of all types of UK land and property.

In both cases, for disposals that complete on or after 27 October 2021, the reporting and payment deadline is extended to 60 days following the completion of the disposal.

From the same date, changes will clarify that for UK residents disposing of a mixed use property, only the portion of the gain that is the residential property gain is required to be reported and paid.

Inheritance tax (IHT) nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and this will now continue up to 5 April 2026. An additional nil rate band, called the ‘residence nil rate band’ (RNRB) is also frozen at the current £175,000 level until 5 April 2026. A taper reduces the amount of the RNRB by £1 for every £2 that the ‘net’ value of the death estate is more than £2 million. Net value is after deducting permitted liabilities but before exemptions and reliefs. This taper will also be maintained at the current level.

National Insurance Contributions (NICs)

The Health and Social Care Levy Act provides for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates will decrease back to 2021/22 levels and will be replaced by a new 1.25% Health and Social Care Levy.

The Employment Allowance, which reduces employers’ Class 1 NICs by up to £4,000, will also be available for the employers’ liability to the Levy.

Comment
A novel aspect of the Levy is the application to employees above State Pension age. This does not apply in respect of the temporary increase for 2022/23. The Levy will not apply to Class 2 (a flat rate paid by many self-employed) and Class 3 (voluntary contributions for taxpayers to fill gaps in their contribution records). The main burden of the 1.25% increase falls on the collective shoulders of the employer and employee as each will have higher contributions to make. Those with property income will be relieved that they are not being included in the Levy.

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

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.

Comment
In total, the annual gross earnings of a full-time worker on the NLW will have increased by over £5,000 since its introduction in April 2016.

Power to make temporary modifications of taxation of employment income

This will allow HM Treasury, under ministerial direction, to make regulations to make temporary modifications to existing legislation for a period of up to two tax years in the event of a disaster or emergency of national significance as determined by HM Treasury. This will enable the government to support taxpayers, for example by:

exempting benefits in kind of a specified description from income tax where appropriate
changing the qualifying conditions for exemptions on benefits in kind
exempting specified reimbursements from the charge to income tax
providing relief for specified expenses.

This will have effect on and after the date of Royal Assent to the Finance Bill 2021-22.

The personal allowance

The personal allowance is currently £12,570. The Chancellor announced in the March 2021 Budget that the personal allowance will be frozen at £12,570 for the tax years 2022/23 to 2025/26.

The marriage allowance

Comment
The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. To benefit from the marriage allowance one spouse or civil partner must normally have no income or income below the personal allowance for the year. The marriage allowance was first introduced for 2015/16 and there are couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2017/18 where the entitlement conditions are met. The total tax saving for all years up until 2021/22 could be over £1,000. A claim for 2017/18 will need to be made by 5 April 2022.

Tax bands and rates

The basic rate of tax is 20%. In 2021/22 the band of income taxable at this rate is £37,700 so that the threshold at which the 40% band applies is £50,270 for those who are entitled to the full personal allowance.

At Spring Budget 2021, the Chancellor announced that the basic rate band will be frozen at £37,700 for the tax years 2022/23 to 2025/26. The National Insurance contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 for these years.

Individuals pay tax at 45% on their income over £150,000.

Scottish residents

The tax on income (other than savings and dividend income) is different, for taxpayers who are resident in Scotland, from that paid by taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2021/22 there are five income tax rates which range between 19% and 46%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK residents. Currently the 41% band applies to income over £43,662 for those who are entitled to the full personal allowance. The 46% rate applies to income over £150,000.

The Scottish Government will announce the Scottish income tax rates and bands for 2022/23 in the Scottish Budget on 9 December.

Welsh residents

From April 2019, the Welsh Government has had the right to vary the rates of income tax payable by Welsh taxpayers (other than tax on savings and dividend income). The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence. For 2021/22 the Welsh Government has set the Welsh rate of income tax at 10 pence which has been added to the reduced rates. This means the tax payable by Welsh taxpayers is the same as that payable by English and Northern Irish taxpayers.

The Welsh Government will publish its Draft Budget for 2022/23 on 20 December.

Tax on savings income

Savings income is income such as bank and building society interest.

Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits, and property income, less allocated allowances and reliefs) exceeds £5,000.

Tax on dividends

The first £2,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates for 2021/22:

7.5% for basic rate taxpayers
32.5% for higher rate taxpayers
38.1% for additional rate taxpayers.

In September 2021 the government announced an increase to the rates of dividend tax by 1.25% from 6 April 2022 to help fund the new planned investment in health and social care. The new rates will therefore be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

Comment
Dividends on shares held in ISAs and pension schemes are not subject to dividend tax and thus will not be affected by the increase in rates.

Green National Savings and Investment (NS&I) product

In the Spring Budget 2021 the government announced a green retail savings product through NS&I. The Bonds are now available to buy online and offer savers a chance to support green projects at a fixed rate of 0.65% pa over a three-year term. The Bonds are available to those aged 16 or over, with a minimum investment of £100 and a maximum limit of £100,000 per person. The interest is taxable in the tax year the Bond matures.

The UK’s inaugural sovereign green bond (or ‘green gilt’) was launched in September 2021, and was followed by a second issuance in October 2021. They are the first sovereign green retail product of their kind in the world.

Universal Credit

The Universal Credit taper rate is reduced from 63% to 55%, meaning Universal Credit claimants will be able to keep an additional 8p for every £1 of net income they earn.

Increase to the normal minimum pension age

The current earliest age at which most pension savers can access their pension savings without incurring a tax charge is age 55. From April 2028 this earliest age will rise to 57.

This measure will affect individuals born after 5 April 1973 whose earliest date to access their pension benefits will see a two-year delay to those born on or before that date.

Pensions – Scheme Pays

Although there are no limits to how much an individual can save or accrue in a registered pension scheme, there is an overall limit on the amount of an individual’s tax-relieved annual pension savings or accrual which includes employer contributions. This is known as the annual allowance and the standard annual allowance is currently £40,000, but in some circumstances this is reduced, with the maximum reduction taking it down to £4,000.

An individual’s unused annual allowance from the three previous tax years can be carried forward and added to the annual allowance. However, if the individual’s pension savings for the tax year exceed their annual allowance, the annual allowance tax charge is applied to the excess.

Although this tax liability would normally be the individual’s liability it is possible for them to elect for the pension scheme administrator to be jointly liable.

Where an individual has inputted more than £40,000 and their annual allowance charge exceeds £2,000 the individual can request that their pension company pays the charge for them in return for an equivalent reduction in the value of their pension pot. This is called mandatory Scheme Pays.

From April 2022 there will be a change to the rules for certain pension schemes to remove anomalies where the tax charge has arisen due to a retrospective change of facts, the tax charge is £2,000 or more and the individual requests the pension scheme pays the amount. This measure applies retrospectively from 6 April 2016.

Tonnage Tax

The UK’s tonnage tax regime will be reformed from April 2022 to help the UK shipping industry grow and compete in the global market. The reform is intended to make it easier for shipping companies to move to the UK, ensure they are not disadvantaged compared with firms operating in other countries, and reduce unnecessary administrative burdens.

Landfill Tax

As announced at Spring Budget 2021 both the standard and lower rates of Landfill Tax will increase from 1 April 2022 in line with the Retail Prices Index (RPI).

Gaming Duty

The government will raise the bandings for Gaming Duty in line with inflation. The new bandings will affect Gaming Duty accounting periods commencing on or after 1 April 2022.

Vehicle Excise Duty (VED)

The government will increase VED rates for cars, vans, motorcycles, and motorcycle trade licences in line with RPI with effect from 1 April 2022.

For heavy goods vehicles, VED continues to be frozen in 2022/23. The HGV Levy is suspended for another 12 months from 1 August 2022.

Tobacco Duty

Increases in Tobacco Duty rates take effect from 27 October 2021 and the government will legislate in Finance Bill 2021-22 to introduce tougher sanctions to tackle Tobacco Duty evasion.

Alcohol Duty

Rates of Alcohol Duty were not changed in this Budget. The government is publishing a consultation on its detailed proposals for Alcohol Duty reform. These include:

changes to duty structures
new rates for some products sold on draught
extension of small producer reliefs
simplification of the administrative regime.

In addition, alcohol duties have been frozen to February 2022.

Air Passenger Duty (APD)

The government will introduce a new domestic band for APD for reduced rate and standard rate travel, covering flights within the UK. In addition, a new ultra-long-haul band will be introduced, covering destinations with capitals located more than 5,500 miles from London. These changes will take effect from 1 April 2023.

Freeports

The government announced its plans for Freeports in 2020. Freeports are specified geographical areas that allow certain benefits to businesses operating within them. The main VAT benefit is that businesses selling goods within free zones will be able to zero-rate their supplies. Services carried out on goods in those zones may also be zero-rated subject to conditions. The government will introduce an additional element to the VAT free zone model for Freeports. This will implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model. The measure will take effect from 3 November 2021.

VAT on second-hand cars sold in Northern Ireland

In a measure that will be backdated to 1 January 2021, motor dealers in Northern Ireland will be able to include motor vehicles sourced from Great Britain in their second-hand margin scheme calculations. This measure will apply should a relevant agreement be reached with the EU.

Second-hand Motor Vehicle Export Refund Scheme

Under this scheme, businesses that remove used motor vehicles from Great Britain for resale in Northern Ireland or the EU may be able to claim a refund of VAT following export. The power will come into effect on Royal Assent of Finance Bill 2021-22. Legislation outlining the detail of the scheme will be introduced in 2022.

VAT treatment of fund management fees

A consultation will take place on options to simplify the VAT treatment of fund management fees.

VAT penalties

Budget documents confirm that the new late submission and late payment penalties for VAT will still come into effect for VAT registered businesses for accounting periods starting on or after 1 April 2022, as announced at Spring Budget 2021.

Plastic Packaging Tax

Draft legislation has been issued to establish a Plastic Packaging Tax. This is a new tax that applies to plastic packaging produced in or imported into the UK, that does not contain at least 30% recycled plastic. Plastic packaging is packaging that is predominantly plastic by weight.

The tax rate will be £200 per tonne of non-compliant plastic packaging. There will be an exemption for businesses that manufacture or import less than ten tonnes of plastic packaging per year. The tax will take effect from April 2022.

Disclaimer

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David Cairns

Tax Partner, Northampton

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Tax Rates and Allowances 2021/22

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Introduction

Personal tax rates

Buying property

If you buy property then property taxes payable are different depending on where the property is in the United Kingdom. Stamp Duty Land Tax is payable on property in England and Northern Ireland, whilst Land and Buildings Transaction Tax is payable on property in Scotland and Land Transaction Tax on property in Wales. Our tax rates highlight the main rates so that you can consider the potential cost of buying property.

Business or asset sale

If you sell an asset such as shares or your business, capital gains tax may be due. Our tax rates highlight the main rates and reliefs so that you can consider the tax bill that may arise.

Rates for businesses

Rates for employees

There are changes to the way company car benefits are calculated this year. Our guide explains how these are computed to help ensure that you are paying the correct amount of tax.

Rates that affect us all

Long term planning for a comfortable retirement can never start too early. Our tax rates explain how much can be contributed to an approved pension scheme each year tax efficiently.

Our tax rates contain the main inheritance tax rates and exemptions but early planning can mitigate these tremendously.

These rates are intended for use as a quick point of reference. Should you require any further information, have a simple question or require detailed advice we are only a phone call away.

Capital Gains Tax

CGT is payable by individuals, trustees, and personal representatives (PRs). Companies pay corporation tax on their capital gains.
There are annual tax-free allowances (the ‘annual exempt amount’) for individuals, trustees and PRs. Companies do not have an annual exempt amount.
For individuals, net gains are added to total taxable income to determine the appropriate rate of tax. The standard rate applies only to the net gains which, when added to total taxable income, do not exceed the basic rate band.
Gains which qualify for Investors’ Relief are charged at 10% for the first £10m of qualifying gains.
Gains which qualify for Business Asset Disposal Relief are charged at 10% for the first £1 million.

Rates and annual exemption

Individuals	2021/22
	£
Exemption	12,300
Standard rate	10%
Higher rate	20%

The higher rate applies to higher rate and additional rate taxpayers.

Additionally, higher rates of 18% and 28% may apply to the disposal of certain residential property.

Trusts	2021/22
	£
Exemption	6,150
Rate	20%

Car Benefits

The car benefit is calculated by multiplying the car’s list price, when new, by a percentage linked to the car’s CO2 emissions. Due to a change in the way CO2 emissions are measured different benefit percentages apply to cars registered from 6 April 2020.
For diesel cars generally add a 4% supplement (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard). The overall maximum percentage is capped at 37%.
The list price includes accessories.
The list price is reduced for capital contributions made by the employee up to £5,000.
Special rules may apply to cars provided for disabled employees.
For cars registered before 1 January 1998 and cars with no agreed CO2 emissions the charge is based on engine size.

2021/22	Cars registered pre 6/4/20	Cars registered after 5/4/20
CO 2 emissions (g/km)	% of list price taxed	% of list price taxed
0	1	1
1–50 (split by zero-emission miles) More than 130 70-129 40-69 30-39 Under 30	2 5 8 12 14	1 4 7 11 13
51–54	15	14
55-59	16	15
60-64	17	16
65-69	18	17
70-74	19	18
75-79	20	19
80-84	21	20
85-89	22	21
90-94	23	22
95-99	24	23
100-104	25	24
105-109	26	25
110-114	27	26
115-119	28	27
120-124	29	28
125-129	30	29
130-134	31	30
135-139	32	31
140-144	33	32
145-149	34	33
150-154	35	34
155-159	36	35
160-164	37	n/a
165 and above	n/a	37

Car Fuel Benefit

Car fuel benefit applies if an employee has the benefit of private fuel for a company car.
The benefit is calculated by applying the percentage used to calculate the car benefit by a ‘fuel charge multiplier’.
The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.

Car fuel benefit 2021/22
Fuel charge multiplier	£24,600

Cars - Advisory fuel rates for company cars

Advisory rates only apply where employers reimburse employees for business travel in a company car or require employees to repay the cost of fuel used for private travel in a company car.
If the rate paid per mile of business travel is no higher than the advisory rate for the particular engine size and fuel type of the car, HMRC will accept that there is no taxable profit and no Class 1 NIC liability.

The advisory fuel rates for journeys undertaken on or after 1 March 2021 are:

Engine size	Petrol
1400cc or less	10p
1401cc – 2000cc	12p
Over 2000cc	18p

Engine size	Diesel
1600cc or less	9p
1601cc – 2000cc	11p
Over 2000cc	12p

Engine size	LPG
1400cc or less	7p
1401cc – 2000cc	8p
Over 2000cc	12p

Hybrid cars are treated as either petrol or diesel cars for this purpose.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

Capital Allowances - Plant and Machinery

The cost of purchasing capital equipment in a business is not a revenue tax-deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.
Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building (‘integral features’), computers, cars, vans and similar equipment used in a business.
There are special rules for cars and certain ‘environmentally friendly’ equipment.
Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.
A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

AIA

Special rules apply to accounting periods straddling the dates shown in the tables below.
The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies

Expenditure incurred:	Annual limit
	£
From 1 January 2019 to 31 December 2021	1,000,000
From 1 January 2022	200,000

AIA limits – sole traders and partnerships

Expenditure incurred:	Annual limit
	£
From 1 January 2019 to 31 December 2021	1,000,000
From 1 January 2022	200,000

Other plant and machinery allowances

Expenditure upon which AIA is not given/claimed will obtain relief through the ‘main rate pool’ or the ‘special rate pool’ rather than each item being dealt with separately.
The annual rate of WDA is 18% in the ‘main rate pool’ and 6% in the ‘special rate pool’.
A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from a new FYA. A company will be allowed to claim a super-deduction of 130% on certain new plant and machinery investments that ordinarily qualify for the 18% WDA and a 50% FYA on most new plant and machinery investments that ordinarily qualify for the 6% WDA.

Cars

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
AIA is not available on any car but a 100% FYA may be available on certain cars. To qualify for FYA, the car must be purchased new.

Cars acquired from April 2021

Emissions (g/km)	Pool	Allowance
0	Main rate	100% FYA
≤ 50	Main rate	18% WDA
>50	Special rate	6% WDA

The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.
Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building (‘ integral features ‘), computers, cars, vans and similar equipment used in a business.
There are special rules for cars and certain ‘environmentally friendly’ equipment.
Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.
A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

AIA

Special rules apply to accounting periods straddling the dates shown in the tables below.
The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies

Expenditure incurred:	Annual limit
	£
From 1 January 2019 to 31 December 2021	1,000,000
From 1 January 2022	200,000

AIA limits – sole traders and partnerships

Expenditure incurred:	Annual limit
	£
From 1 January 2019 to 31 December 2021	1,000,000
From 1 January 2022	200,000

Other plant and machinery allowances

Expenditure upon which AIA is not given/claimed will obtain relief through the ‘ main rate pool ‘ or the ‘ special rate pool ‘ rather than each item being dealt with separately.
The annual rate of WDA is 18% in the ‘ main rate pool ‘ and 6% in the ‘ special rate pool ‘.
A 100% first-year allowance (FYA) may be available on certain energy-efficient plant and cars.

Cars

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
AIA is not available on any car but a 100% FYA may be available on certain cars. To qualify for FYA, the car must be purchased new.

Cars acquired from April 2018 to March 2021

Emissions (g/km)	Pool	Allowance
≤50	Main rate	100% FYA
≤ 110	Main rate	18% WDA
>110	Special rate	6% WDA

Child Benefit

Child Benefit is receivable by a person responsible for each child until they reach 16, or 19 if they stay in education or training.If the person (or their spouse or partner) has ‘adjusted net income’ above £50,000 the person with the highest income has to pay some of the Child Benefit as a tax charge.Where adjusted net income is more than £60,000 a year, the tax charge equals the Child Benefit received.

Rates – 2021/22	£ per week
Eldest/Only Child	£21.15
Other Children	£14.00

Employee Statutory Payments

Statutory pay

Payments may be required from an employer if an employee is not at work for a variety of reasons.
There are detailed conditions for an employee to qualify for any of these statutory payments.
Employees are only eligible for a statutory payment if they have sufficient average weekly earnings of at least the lower earnings limit.

Statutory Sick Pay

Payments may be required from an employer if an employee is too ill to work.
SSP is generally payable for a period up to 28 weeks.

SSP support during coronavirus outbreak

The government has temporarily made SSP more accessible to employees in response to the coronavirus outbreak. During the outbreak SSP is available from the first day of absence, including for those self-isolating or caring for others.

The government is supporting small and medium-sized businesses and employers to cope with the extra costs of paying coronavirus related SSP by refunding eligible SSP costs.

Statutory Maternity Pay

Payments may be required from an employer when an employee takes time off to have a baby.
SMP is payable for a period up to 39 weeks.

Statutory Paternity Pay

Payments may be required from an employer when an employee takes time off during their partner’s Statutory Maternity Pay period.
Payment is for a period of either one or two complete weeks.

Shared Parental Pay

Payments may be required from an employer when an employee takes time off following the curtailment of the period of SMP by the mother.
Payment is for up to a maximum of 37 weeks and is dependent on the mother’s unused SMP period.

Statutory Adoption Pay

Payments may be required from an employer when an employee takes time off when they adopt a child.
Payment is for a period up to 39 weeks.

Statutory Parental Bereavement Pay

Payments may be required from an employer when parents take time off following the death of a child or a stillbirth.
Payment is for up to a maximum of two weeks.

2021/22 Statutory pay rates – average weekly earnings £120 or over
Statutory Sick Pay	£96.35
Statutory Maternity Pay
First six weeks	90% of weekly earnings
Next 33 weeks	£151.97
Statutory Paternity Pay – two weeks	£151.97
Statutory Adoption Pay – 39 weeks
First six weeks	90% of weekly earnings
Next 33 weeks	£151.97
Shared Parental Pay	£151.97
Statutory Parental Bereavement Pay – two weeks	£151.97

Corporation Tax Rates

Corporation tax rates are set for each Financial Year. A Financial Year runs from 1 April to the following 31 March.
If the accounting period of a company straddles the 31 March, the profits are apportioned on a time basis to each Financial Year.
The Northern Ireland Executive has committed to setting the rate of corporation tax at 12.5% when the Northern Ireland Executive demonstrates its finances are on a sustainable footing.

Year to 31.3.22	Rate %
All profits	19

Income Tax Rates - Across the UK

Income tax applies to the amount of income after deduction of personal allowances.
Income is taxed in a specific order with savings and dividend income taxed last.
Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
There is also a starting rate band (SRB) of £5,000 which is only applicable to savings income. The band is not available if the taxable amount of non-savings income exceeds the SRB.
The Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents on non-savings and non-dividend income.
Income tax is devolved to Wales on non-savings and non-dividend income.

Income tax rates

Band of taxable income		Rate	Rate if dividends
£		%	%
0 – 37,700	Basic rate	20	7.5
37,701 – 150,000	Higher rate	40	32.5
Over 150,000	Additional rate	45	38.1
Special rates for savings and dividend income falling into above bands of taxable income
Savings Allowance
Basic rate taxpayers	1,000	0
Higher rate taxpayers	500	0
Additional rate taxpayers	Nil	N/A
Dividend Allowance
for all taxpayers	2,000		0

Income Tax Allowances

A personal allowance gives an individual an annual amount of income free from income tax.Income above the personal allowances is subject to income tax.

The personal allowance will be reduced if an individual’s ‘adjusted net income’ is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.

An individual born before 6 April 1935 may be entitled to a married couple’s allowance but this is reduced if ‘adjusted net’ income is above the married couple’s allowance income limit (see table below).

Income tax personal allowances	£
Personal Allowance	12,570
Marriage Allowance	1,260
Blind person’s allowance	2,520
Married couple’s allowance Either partner born before 6 April 1935
– Maximum reduction in tax bill	912.50
– Minumum reduction in tax bill	353.00
Married couples’s allowance income limit Reduce married couple’s allowance by £1 for every £2 of ‘adjusted net income’ above this limit	30,400

Income Tax Rate - Scotland

Scottish resident taxpayers are liable on non-savings and non-dividend income as set out below.
Savings income and dividend income are taxed using UK tax rates and bands.

Band of taxable income		Rate
£		%
0 – 2,097	Starter rate	19
2,098 – 12,726	Basic rate	20
12,727 – 31,092	Intermediate rate	21
31,093 – 150,000	Higher rate	41
Over 150,000	Top rate	46

Income Tax Rates - Wales

Income tax is devolved to Wales.
Welsh resident taxpayers continue to pay the same overall income tax rates using the UK rates and bands.
The total rate of income tax = UK income tax + Welsh rate of income tax
Savings income and dividend income are taxed using UK tax rates and bands.

Band of taxable income		UK Rate	Welsh Rate	Total Rate
£		%	%	%
0 – 37,700	Basic rate	10	10	20
37,701 – 150,000	Higher rate	30	10	40
Over 150,000	Additional rate	35	10	45

Individual Savings Account (ISA)

The income from ISA investments is exempt from income tax. Any capital gains made on investments held in an ISA are exempt from capital gains tax.Savers are able to subscribe any amounts into a cash ISA, a stocks and shares ISA or an innovative finance ISA subject to not exceeding the overall annual investment limit.Investors may transfer their investments from one kind of ISA to another.

ISA limits 2021/22
Overall annual investment limit	£20,000
Junior ISA annual investment limit	£9,000
Help to Buy ISA monthly subscription limit	£200
Lifetime ISA annual investment limit	£4,000

Inheritance Tax (IHT)

IHT may be payable when an individual’s estate is worth more than the IHT nil rate band when they die.
Lifetime and death transfers between UK domiciled spouses are exempt from IHT.
For 2021/22, a further nil rate band of £175,000 may be available in relation to current or former residences.
The IHT threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the previous death.
There are reliefs for some business and farming assets which reduce their value for IHT purposes.
IHT may also be payable on gifts made in an individual’s lifetime but within seven years of death.
Some lifetime gifts are exempt.
Transfers of assets into trust made in an individual’s lifetime may be subject to an immediate charge but at lifetime rates.
There are also charges on some trusts.

IHT rates and nil rate band 2021/22 and 2020/21

IHT nil rate	£325,000
Lifetime rate	20%
Death rate	40%
Death rate if sufficient charitable legacies made	36%

IHT reliefs for lifetime gifts

Annual exemption	£3,000
Small gifts	£250
Marriage
– parent	£5,000
– grandparent	£2,500
– other	£1,000

IHT – reduced charge on gifts within seven years of death

Years before death	% of death charge
0-3	100
3-4	80
4-5	60
5-6	40
6-7	20

Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland.

LBTT (Residential property)

Consideration (£)	Rate
0 – 145,000	0%
145,001 – 250,000	2%
250,001 – 325,000	5%
325,001 – 750,000	10%
750,001 and above	12%

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief raises the zero rate tax threshold for first-time buyers from £145,000 to £175,000.

LBTT (Non-residential)

Consideration (£)	Rate
0 – 150,000	0%
150,001 – 250,000	1%
Over 250,000	5%

The rates apply to the portion of the total value which falls within each band.

Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland.

Land Transaction Tax

Land Transaction Tax (LTT) is payable on land and property transactions in Wales.

LTT (Residential property)

Rates applying to 30 June 2021

Consideration (£)	Rate
0 – 250,000	0%
250,001 – 400,000	5%
400,001 – 750,000	7.5%
750,001 – 1,500,000	10%
1,500,000 and above	12%

Rates applying from 1 July 2021

Consideration (£)	Rate
0 – 180,000	0%
180,001 – 250,000	3.5%
250,001 – 400,000	5%
400,001 – 750,000	7.5%
750,001 – 1,500,000	10%
1,500,000 and above	12%

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties costing over £40,000 or over are acquired.

Higher residential tax rates

Higher residential rates may apply when you already own one or more residential properties.

Consideration (£)	Rate
0 – 180,000	4%
180,001 – 250,000	7.5%
250,001 – 400,000	9%
400,001 – 750,000	11.5%
750,001 – 1,500,000	14%
1,500,000 and above	16%

The rates apply to the portion of the total value which falls within each band.

LTT (Non-residential)

Consideration (£)	Rate
0 – 225,000	0%
225,001 – 250,000	1%
250,001 – 1,000,000	5%
Over 1,000,000	6%

The rates apply to the portion of the total value which falls within each band.

Land Transaction Tax (LTT) is payable on land and property transactions in Wales.

Mileage Allowance Payments (MAPS) for Employees

MAPs represent the maximum tax free mileage allowances an employee can receive from their employer for using their own vehicle for business journeys.
An employer is allowed to pay an employee a certain amount of MAPs each year without having to report payments to HMRC.
If the employee receives less than the statutory rate, tax relief can be claimed on the difference.

MAP rates per business mile 2021/22 and 2020/21

Cars and vans	Rate per mile
Up to 10,000 miles	45p
Over 10,000 miles	25p
Bicycles	20p
Motorcycles	24p

Minimum Wage

National Minimum Wage rates apply to employees up to the age of 22.
National Living Wage (NLW) rates apply to employees 23 and over.
The Apprentice rate applies to apprentices under 19, or 19 and over in the first year of apprenticeship.
Penalties apply to employers who fail to pay minimum wages.

Age	NLW	21-22	18-20	16-17	Apprentice
From 1 April 2021	£8.91	£8.36	£6.56	£4.62	£4.30

National Insurance Contributions (NICS) - Rates and Allowances

Employees start paying Class 1 NIC from age 16 (if sufficient earnings).
Employers pay Class 1 NIC in accordance with the table below.
Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 13.8% to 0% up to the Upper Secondary Threshold of £967 per week. Also applies to veterans in the first 12 months of employment.
Employees’ Class 1 NIC stop when they reach their State Pension age. The employer’s contribution continues.

Employees – Class 1 – 2021/22

Earnings per week	%
Up to £184	Nil
£184.01 – £967	12
Over £967	2

Entitlement to state pension and other contribution-based benefits is retained for earnings between £120 and £184 per week.

Employers – Class 1 – 2021/22

Earnings per week	%
Up to £170	Nil
Over £170	13.8

Other National Insurance payable by employers

Class 1A – 13.8% on broadly all taxable benefits provided to employees and on certain taxable termination and sporting testimonial payments in excess of £30,000

Class 1B – 13.8% on taxable PAYE Settlement Agreements

Self-employed – Class 2 and 4

A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits)
Class 2 NIC stop when a person reaches State Pension age
Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

Self-employed – Class 2 – 2021/22

Flat rate per week	£3.05
Small Profits Threshold	£6,515 per year

Class 4 – 2021/22

Annual profits	%
Up to £9,568	Nil
£9,568.01 – £50,270	9
Over £50,270	2

Class 3

A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.
Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Class 3 – 2021/22

Flat rate per week £15.40

Employees start paying Class 1 NIC from age 16 (if sufficient earnings).
Employers pay Class 1 NIC in accordance with the table below.
Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 13.8% to 0% up to the Upper Secondary Threshold of £962.
Employees’ Class 1 NIC stop when they reach their State Pension age. The employer’s contribution continues.

Pensions Automatic Enrolment

Employer minimum contribution	Total minimum contribution
3%	8%

Where the employer does not make the total minimum contribution the employee is obliged to pay the balance.

	2021/22
Automatic enrolment earnings trigger	£10,000
Qualifying earnings band – lower limit	£6,240
Qualifying earnings band – upper limit	£50,270

Pensions - Tax Relief on Pensions Contribution

Tax relief available for personal contributions is the higher of £3,600 (gross) or 100% of relevant earnings.
Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual.
The limit may be reduced to £4,000 once money purchase pensions are accessed.
Where the £40,000 limit is not fully used it may be possible to carry the unused amount forward for three years.
The annual allowance is tapered for those with adjusted income over £240,000. For every £2 of income over £240,000 an individual’s annual allowance will be reduced by £1, down to a minimum of £4,000.
Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’ for the purposes of the business. The tax relief for large contributions may be spread over several years.

Property Allowance

A property allowance is available to individuals.
The property allowance will not apply to partnership income or to income on which rent a room relief is given.

Income up to £1,000	Property income assessable NIL
Income over £1,000	Election to deduct £1,000 rather than the actual expenses

Self Assessments - Key Dates

31 January 2021 – First payment on account due for 2020/21 tax year.31 July 2021 – Second payment on account for 2020/21 tax year.5 October 2021 – Deadline for notifying HMRC of new sources of income (including the Child Benefit charge) if no tax return has been issued for 2020/21 tax year.

31 October 2021 – Deadline for submission of 2020/21 non-electronic returns.

30 December 2021 – Deadline for submission of 2020/21 electronic tax returns if ‘coding out’ of any underpayment is required.

31 January 2022 – Deadline for filing electronic tax returns for 2020/21. Balancing payment due for 2020/21 tax year. First payment on account due for 2021/22 tax year.

Stamp Duty

Stamp Duty Land Tax (SDLT)

SDLT is payable on land and property transactions in England and Northern Ireland.
Property transactions in Scotland are subject to Land and Buildings Transaction Tax (LBTT).
Property transactions in Wales are subject to Land Transaction Tax (LTT).

Residential property

The rates apply to the portion of the total value which falls within each band. The following rates apply to 30 June 2021:

Consideration (£)	Rate
0 – 500,000	0%
500,001 – 925,000	5%
925,001 – 1,500,000	10%
1,500,001 and above	12%

The following rates apply from 1 July to 30 September 2021:

Consideration (£)	Rate
0 – 250,000	0%
250,001 – 925,000	5%
925,001 – 1,500,000	10%
1,500,001 and above	12%

The following rates apply from 1 October 2021:

Consideration (£)	Rate
0 – 125,000	0%
125,001 – 250,000	2%
250,001 – 925,000	5%
925,001 – 1,500,000	10%
1,500,001 and above	12%

These rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief

Consideration (£)	Rate
0 – 300,000	0%
300,001 – 500,000	5%
for purchases over 500,000	normal rates apply

Non-residential SDLT rates

Consideration (£)	Rate
0 – 150,000	0%
150,001 – 250,000	2%
Over 250,000	5%

Payable on consideration which falls in each band.

SDLT is payable on land and property transactions in England and Northern Ireland.
Property transactions in Scotland are subject to Land and Buildings Transaction Tax (LBTT).
Property transactions in Wales are subject to Land Transaction Tax (LTT).

State Pensions

The basic State Pension is a regular payment from the government that an individual may be entitled to when they reach State Pension age.
The basic State Pension depends on the number of years an individual has paid National Insurance or has National Insurance credits, eg while unemployed or claiming certain benefits.
To receive the basic State Pension an individual must have paid or been credited with National Insurance contributions (NIC).
In 2016 the State Pension was reformed into a single-tier new State Pension. In order to benefit from the full amount the individual will need 35 years, rather than the previous 30 years of NIC or credits for the full amount, with pro-rating where 35 years is not achieved. You will usually need 10 qualifying years to get any State Pension. The amount an individual receives can be higher or lower depending on their National Insurance record. It will only be higher if you have over a certain amount of Additional State Pension.
Currently an individual may also be entitled to the Additional State Pension. How much an individual gets depends on the number of qualifying years of NIC, the amount of earnings and whether the individual has been contracted out of the scheme.

Weekly State Pension 2021/22
Basic – single person	£137.60
New State Pension	£179.60

Tax reliefs for Individuals

Enterprise Investment Scheme (EIS)

Maximum investment per annum	£1,000,000
Additional investment limit where investing in knowledge-intensive companies	£1,000,000
Income tax relief	30%
CGT treatment on disposal if held for 3 years	Exempt

Capital gains from the disposal of other assets may be deferred by making an EIS investment.

Trade Allowances

A Trade Allowance is available to individuals.
There is an equivalent rule for certain miscellaneous income. This will apply to the extent that the £1,000 trading allowance is not used against trading income.
The trade allowance is not available against partnership income.

Income up to £1,000	Profits assessable NIL
Income over £1,000	Election to deduct £1,000 allowance rather than the actual expenses

VAT

Registered businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs.
Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
There are three rates: standard which applies to most goods and services, reduced rate for some goods and services such as home energy and zero rate goods and services, for example, most food and children’s clothes.
Some supplies are exempt from VAT for example postage stamps, financial and insurance transactions.
A business is required to register for VAT if the value of taxable supplies exceeds the annual registration limit.
The government has frozen the VAT registration and deregistration limits until 1 April 2022.

VAT – rates and limits
Standard rate	20%
Reduced rate	5%*
Annual Registration Limit – from 1.4.21 – 31.3.22	£85,000
Annual Deregistration Limit – from 1.4.21 – 31.3.22	£83,000

VAT Fuel Scale Charges

Businesses must use these new VAT fuel scale charges from the start of their next prescribed accounting period beginning on or after 1 May 2020.

CO₂ band	Gross monthly £	VAT £	Net £
120 or less	48	8.00	40.00
125	72	12.00	60.00
130	76	12.67	63.33
135	81	13.50	67.50
140	87	14.50	72.50
145	91	15.17	75.83
150	96	16.00	80.00
155	101	16.83	84.17
160	106	17.67	88.33
165	111	18.50	92.50
170	115	19.17	95.83
175	120	20.00	100.00
180	125	20.83	104.17
185	130	21.67	108.33
190	135	22.50	112.50
195	140	23.33	116.67
200	144	24.00	120.00
205	149	24.83	124.17
210	154	25.67	128.33
215	159	26.50	132.50
220	164	27.33	136.67
225 or more	168	28.00	140.00

CO ₂ band	Gross 3 month period £	VAT £	Net £
120 or less	144	24.00	120.00
125	218	36.33	181.67
130	231	38.50	192.50
135	246	41.00	205.00
140	261	43.50	217.50
145	275	45.83	229.17
150	290	48.33	241.67
155	305	50.83	254.17
160	319	53.17	265.83
165	334	55.67	278.33
170	348	58.00	290.00
175	362	60.33	301.67
180	377	62.83	314.17
185	392	65.33	326.67
190	406	67.67	338.33
195	421	70.17	350.83
200	436	72.67	363.33
205	450	75.00	375.00
210	464	77.33	386.67
215	479	79.83	399.17
220	493	82.17	410.83
225 or more	508	84.67	423.33

CO ₂ band	Annual gross £	VAT £	Net £
120 or less	581	96.83	484.17
125	870	145.00	725.00
130	930	155.00	775.00
135	986	164.33	821.67
140	1,047	174.50	872.50
145	1,103	183.83	919.17
150	1,163	193.83	969.17
155	1,219	203.17	1,015.83
160	1,279	213.17	1,065.83
165	1,335	222.50	1,112.50
170	1,396	232.67	1,163.33
175	1,452	242.00	1,210.00
180	1,512	252.00	1,260.00
185	1,568	261.33	1,306.67
190	1,628	271.33	1,356.67
195	1,684	280.67	1,403.33
200	1,745	290.83	1,454.17
205	1,801	300.17	1,500.83
210	1,861	310.17	1,550.83
215	1,917	319.50	1,597.50
220	1,977	329.50	1,647.50
225 or more	2,033	338.83	1,694.17

Where the CO₂ emission figure is not a multiple of five, the figure is rounded down to the next multiple of five to determine the level of the charge.

For a bi-fuel vehicle which has two CO₂ emissions figures, the lower of the two figures should be used.

For cars which are too old to have a CO₂ emissions figure, you should identify the CO₂ band based on engine size. If its cylinder capacity is:

If its cylinder capacity is 1,400cc or less, use CO₂ band 140
If its cylinder capacity exceeds 1,400cc but does not exceed 2,000cc, use CO₂ band 175;
If its cylinder capacity exceeds 2,000cc, use CO₂ band 225 or above.

Vehicle Excise Duty (VED) - Passenger Cars

For vehicles first registered on or after 1 April 2017, the VED or ‘Road Tax’ rate for the first 12 months is based on CO₂ emissions shown on the V5 (Registration Document).Subsequent years are charged at the standard rate. Cars with a list price of over £40,000 when new pay an additional rate of £325 per year on top of the standard rate, for 5 years.New diesel vehicles that do not meet the Euro 6d emissions standard are charged a supplement on their First Year Rate to the effect of moving up by one VED band.

VED bands and rates for cars first registered on or after 1 April 2017

CO₂ emissions (g/km)	Standard rate	First year rate
0	£0	£0
1-50	£155	£10
51-75	£155	£25
76-90	£155	£115
91-100	£155	£140
101-110	£155	£160
111-130	£155	£180
131-150	£155	£220
151-170	£155	£555
171-190	£155	£895
191-225	£155	£1,335
226-255	£155	£1,895
Over 255	£155	£2,245

VED bands and rates for cars registered on or after 1 March 2001 but before 1 April 2017

VED band	CO ₂emissions (g/km)	Standard rate
A	Up to 100	£0
B	101-110	£20
C	111-120	£30
D	121-130	£130
E	131-140	£155
F	141-150	£170
G	151-165	£210
H	166-175	£250
I	176-185	£275
J	186-200	£315
K	201-225*	£340
L	226-255	£585
M	Over 255	£600

*Including cars emitting over 225g/km registered before 23 March 2006.

For vehicles first registered on or after 1 April 2017, the VED or ‘Road Tax’ rate for the first 12 months is based on CO ₂emissions shown on the V5 (Registration Document).Subsequent years are charged at the standard rate. Cars with a list price of over £40,000 when new pay an additional rate of £325 per year on top of the standard rate, for 5 years.New diesel vehicles that do not meet the Euro 6d emissions standard are charged a supplement on their First Year Rate to the effect of moving up by one VED band.

VED bands and rates for cars first registered on or after 1 April 2017

CO ₂emissions (g/km)	Standard rate	First year rate
0	£0	£0
1-50	£150	£10
51-75	£150	£25
76-90	£150	£110
91-100	£150	£135
101-110	£150	£155
111-130	£150	£175
131-150	£150	£215
151-170	£150	£540
171-190	£150	£870
191-225	£150	£1,305
226-255	£150	£1,850
Over 255	£150	£2,175

VED bands and rates for cars registered on or after 1 March 2001 but before 1 April 2017

VED band	CO ₂emissions (g/km)	Standard rate
A	Up to 100	£0
B	101-110	£20
C	111-120	£30
D	121-130	£125
E	131-140	£150
F	141-150	£165
G	151-165	£205
H	166-175	£240
I	176-185	£265
J	186-200	£305
K	201-225*	£330
L	226-255	£565
M	Over 255	£580

*Including cars emitting over 225g/km registered before 23 March 2006.

Van Benefits

Van benefit is chargeable if the van is available for an employee’s private use.
A fuel benefit may also be chargeable if an employee has the benefit of private fuel paid for in respect of a company van.
The charges do not apply to vans if a ‘restricted private use condition’ is met throughout the year.
From 6 April 2021 a 0% benefit charge may apply to vans which cannot emit CO₂ when driven.

Van benefits 2021/22
Van benefit	£3,500
Fuel benefit	£669

Disclaimer

Budget 2021

by Hawsons | Mar 4, 2021 | Agriculture, Audit, Auto Enrolment, Bookkeeping, Brexit, Business Services, Care Homes, Charities, Cloud Accounting, Corporate Finance, Corporate Tax, COVID-19, Cyber Security, Dental, Engineering, Exit Planning, Family Business, GPs, Healthcare, IT, IT and Technology, Legal, Leisure & Hospitality, Making Tax Digital, Manufacturing, Payroll, Pensions, Personal Tax, Pharmacy, Press Release, Property & Construction, R&D, Retail, SME, Solicitors, Tax, Transport & Logistics, VAT, Wealth Management

Budget 2021

The Chancellor Rishi Sunak presented his second Budget on Wednesday 3 March 2021. In his speech, he stated his Budget ‘meets the moment with a three-part plan to protect the jobs and livelihoods of the British people’.

Main Budget proposals

Tax measures include:

a super-deduction for companies investing in new plant and machinery
a time extension of the temporary increase to the SDLT nil rate band for residential property in England and Northern Ireland
an extension to the temporary 5% reduced rate of VAT for certain supplies
a temporary increase in the carry-back period for business losses
an increased rate of corporation tax from 2023.

Other measures include:

a new mortgage guarantee scheme
extension to the Job Retention Scheme
a Self-Employment Income Support Scheme fourth and fifth grant
an extension to the business rates holiday in England.

Previously announced measures include:

a cap on the amount of R&D tax credit paid to a loss-making small or medium-sized enterprise
new rules apply to off-payroll working payments made for services provided on or after 6 April 2021.

Some Budget proposals may be subject to amendment in the 2021 Finance Act. You should contact us before taking any action as a result of the contents of this summary.

Coronavirus loan schemes

In 2020, the government introduced a number of government-guaranteed coronavirus loan schemes. In December 2020 the Chancellor extended, until the end of March 2021, access to the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme.

Budget 2021 announced a new loan scheme to be introduced to replace those coming to an end.

From 6 April 2021 the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

Restart Grants

In addition Restart Grants will be provided in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses. This will provide the cash certainty needed to plan ahead and safely relaunch trading over the coming months.

Self-Employment Income Support Scheme (SEISS)

Budget 2021 has confirmed details of a fourth grant. This will be 80% of three months’ average trading profits to be claimed from late April 2021. Payment will be in a single instalment capped at £7,500 in total and will cover the period February to April 2021. The scheme has been extended to those who have filed a 2019/20 self assessment tax return prior to 3 March 2021. This means that the newly self-employed from April 2019 now qualify subject to satisfying the other conditions.

A fifth and final grant was announced and can be claimed from late July 2021 to cover the period May to September 2021. This grant will be determined by a turnover test. Where the self-employed business turnover has fallen by 30% the grant will be worth 80% of three months’ average trading profits capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. All four nations have introduced 100% business rates relief mainly aimed at retail, leisure and hospitality businesses. Such businesses have not had to pay business rates from 1 April 2020 to 31 March 2021.

In a Scottish Budget update statement on 16 February, the Scottish Government proposed an extension to the relief for the retail, hospitality, leisure and aviation sectors until 31 March 2022.

The Chancellor has now announced a continuation of 100% business rates relief for eligible retail, hospitality and leisure properties in England to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties. Nurseries will also qualify for relief in the same way as other eligible properties.

Following the Chancellor’s announcement, the Welsh Finance Minister has extended the rates holiday for the retail, leisure and hospitality sectors in Wales for a further 12 months.

Rates review

The government announced at Budget 2020 that it would conduct a fundamental review of the business rates system in England. The government’s objectives for the review are reducing the overall burden on business, improving the current business rates system and considering more fundamental changes in the medium-to-long term.

The government has recently announced the final report will be published in Autumn 2021 with an interim report published on 23 March.

Reduced VAT rate for hospitality sector

In July 2020, the government introduced a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation and admissions to certain attractions. In September 2020 the Chancellor extended the reduced rate to 31 March 2021. The government has now announced an extension of the reduced rate until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.

Corporation tax rates

The main rate of corporation tax is currently 19% and it will remain at that rate until 1 April 2023 when the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

Comment
The main rate of corporation tax has been 19% since 1 April 2017. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor reversed this decision in Budget 2020.

Tax losses

A temporary extension of the period over which businesses may carry trading losses back for relief against profits of earlier years to get a repayment of tax paid will have effect for company accounting periods ending in the period 1 April 2020 to 31 March 2022 and for tax years 2020/21 and 2021/22 for unincorporated businesses.

Trade loss carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years first.

For companies, after carry back to the preceding year, a maximum of £2 million of unused losses will be available for carry back against profits of the same trade to the earlier two years. This £2 million limit applies separately to the unused losses of each 12 month period within the duration of the extension.

For individuals a separate £2 million cap will apply to the extended carry back of losses made in each of the tax years 2020/21 and 2021/22.

The £2 million limit applies separately to the unused losses of each tax year within the duration of the extension. Income Tax payers will not be subject to a partnership-level limit.

Super-deduction

Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.

Under this measure a company will be allowed to claim:

a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.

This relief is not available for unincorporated businesses.

First year allowances for business cars from April 2021

Budget 2020 announced the extension of 100% first year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021.

CO₂ emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first year allowances for low CO₂ emission cars and from 110g/km to 50g/km for the purpose of writing down allowances (WDAs) for business cars.

Comment
The reduction in thresholds will mean that only business cars acquired with CO₂ emissions of 0g/km will be eligible for first year allowances. Ultra-low emission vehicles which currently qualify for first year allowances if 50g/km or less will no longer qualify. They will be eligible for WDAs at the main rate (18%). Cars with CO₂ emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).

Freeports

In 2020 the government consulted on proposals to create up to ten Freeports across the UK. The government is now proposing a range of measures covering customs, tax reliefs, planning, regeneration funding and innovation to create Freeports as national hubs for global trade and investment across the UK.

A UK Freeport will be a geographical area with a diameter up to 45km which is closely linked to a sea port, airport or rail port. East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England.

The government is working with devolved administrations to establish Freeports in each of the nations.

Customs benefits

Within the Freeport there will be a primary customs site and perhaps custom subzones. A customs site or subzone provides customs and tariff benefits such as:

duty deferral while goods remain on site
duty inversion if the finished goods exiting the Freeport attract a lower tariff than their component parts
subject to the UK’s trade agreements, customs duty exemption on goods that are imported into a Freeport, processed into finished goods and subsequently re-exported
simplified import procedures.

Tax benefits

Freeports may also have one or more tax sites within which tax reliefs will apply. The aim is for a single site and up to three tax sites may be allowed but the total area of the site(s) must not exceed 600 hectares. The tax site will likely be located on primarily underdeveloped land to generate new, additional productive activity in Freeport locations.

The intention is to offer:

Stamp Duty Land Tax relief on land purchases within Freeport tax sites in England where that property is to be used for qualifying commercial activity
a 10% rate of Structures and Buildings Allowance rather than the 3% rate that applies for businesses constructing or renovating structures and buildings for non-residential use
enhanced tax relief for qualifying new plant and machinery assets for the full cost of the qualifying investment in the same tax period the cost was incurred
100% relief from business rates on certain business premises within Freeport tax sites in England.

Very broadly, the reliefs will apply for expenditure from various dates in 2021 to 30 September 2026.

In addition, a 0% rate of employer NICs on the salaries of any eligible employee working in the Freeport tax site is proposed. The relief is intended to be available for up to 9 years from April 2022.

Research and Development (R&D) tax relief

A cap on the amount of R&D tax credit which can be paid to a loss-making small or medium-sized enterprise (SME) will be introduced for accounting periods which commence on or after 1 April 2021.

Prior to the introduction of the cap, loss-making SMEs incurring qualifying expenditure on R&D activities are allowed to make a claim to surrender the unrelieved loss for a payable tax credit of up to 14.5%. For accounting periods commencing on or after 1 April 2021, payable tax credits are restricted to £20,000 plus three times the company’s relevant expenditure on workers.

Relevant expenditure on workers is the company’s PAYE and NICs for the period and importantly this is the company’s whole PAYE and NIC liability. In addition, if the company is supplied with workers by a connected company the relevant workers’ expenditure is extended to include a proportion of those worker costs.

Some companies which create or manage intellectual property and spend less than 15% with connected persons on R&D qualifying expenditure will be exempt from this cap.

Capital gains tax (CGT) rates

No changes to the current rates of CGT have been announced at Budget 2021. This means that the rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for Private Residence Relief.

There are two specific types of disposal which potentially qualify for a 10% rate up to a lifetime limit for each individual:

Business Asset Disposal Relief (BADR) (formerly known as Entrepreneurs’ Relief). This is targeted at directors and employees of companies who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met, and the owners of unincorporated businesses.
Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares.

The lifetime limit for BADR was reduced from £10 million to £1 million for BADR qualifying disposals made on or after 11 March 2020. Investors’ Relief continues to have a lifetime limit of £10 million.

CGT annual exemption

The CGT annual exemption will be maintained at the current 2020/21 level of £12,300 for 2021/22 and up to and including 2025/26.

Inheritance tax (IHT) nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and this will now continue up to 5 April 2026. An additional nil rate band, called the ‘residence nil rate band’ (RNRB) which has been increased in stages and is now £175,000 for deaths in 2020/21 will also be frozen at the current level until 5 April 2026. A taper reduces the amount of the RNRB by £1 for every £2 that the ‘net’ value of the death estate is more than £2 million. Net value is after deducting permitted liabilities but before exemptions and reliefs. This taper will also be maintained at the current level.

Business assets and Gift Hold-Over Relief

Gift Hold-Over Relief operates by deferring the chargeable gain on the disposal when a person gives away business assets. The gain then comes into charge when the recipient disposes of the gifted asset. The recipient is treated as though they acquired the asset for the same cost as the person who gave them the asset.

A change to the relief ensures that Gift Hold-Over Relief is not available where a non-UK resident person disposes of an asset to a foreign-controlled company, controlled either by themselves or another non-UK resident with whom they are connected. This measure will affect disposals made on or after 6 April 2021.

The Coronavirus Job Retention Scheme (JRS)

The current JRS allows an employer to place an employee on furlough and apply for a grant to cover wage costs for the time an employee is on furlough. The employer:

can claim 80% of ‘usual salary’ for hours not worked, up to a maximum of £2,500 per employee (pro-rated for hours not worked) per month
needs to fund employer National Insurance contributions (NICs) and the minimum employer automatic enrolment pension contributions.

In December 2020, the Chancellor extended the scheme until the end of April 2021.

Further extension of JRS

In Budget 2021 the Chancellor has further extended the scheme to 30 September 2021.

The level of grant available to employers under the scheme will stay the same until 30 June 2021.

From 1 July 2021, the level of grant will be reduced and employers will be asked to contribute towards the cost of furloughed employees’ wages. To be eligible for the grant an employer must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

The reduction in the level of the grant means that the percentage recovery of furloughed wages will be as follows:

for July 2021 70% of furloughed wages up to a maximum of £2187.50 and
for August and September 2021 60% of furloughed wages up to a maximum of £1,875.00.

Employers will need to continue to fund employer NICs and mandatory minimum automatic enrolment pension contributions.

Comment
The Chancellor has also extended eligibility for the scheme. For periods starting on or after 1 May 2021, employers can claim for employees who were employed on 2 March 2021, as long as a PAYE Real Time Information (RTI) submission was made between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee.

Apprenticeships and traineeships

High quality traineeships for young people

The government will provide an additional £126 million in England for high quality work placements and training for 16-24 year olds in the 2021/22 academic year. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

Payments for employers who hire new apprentices

The government will extend and increase the payments made to employers in England who hire new apprentices. Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme.

This is in addition to the existing £1,000 payment the government provides for all new 16-18 year-old apprentices and those aged under 25 with an Education, Health and Care Plan, where that applies.

Supporting apprenticeships across different employers

The government will introduce a £7 million fund from July 2021 to help employers in England set up and expand portable apprenticeships. This will enable people who need to work across multiple projects with different employers to benefit from the high quality long-term training that an apprenticeship provides.

Off-payroll working in the private sector

New tax rules are soon to come into force for individuals who provide their personal services via an ‘intermediary’ to a medium or large business. The new rules apply to payments made for services provided on or after 6 April 2021.

The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and NICs and pay any employer NICs.

The legislation uses an existing statutory definition within the Companies Act of a ‘small company’ to exempt small businesses from the new rules. A small company is one which meets two of these criteria:

a turnover of £10.2 million or less
having £5.1 million on the balance sheet or less
having 50 or fewer employees.

If the business receiving the work of the individual is not a company, it is only the turnover test that will apply.

Comment
The Status Determination Statement (SDS) is a key part of the status determination procedure. The client must provide the SDS to the worker and should include not only the decision of the client but also the reasons underpinning it. The client must take ‘reasonable care’ in coming to its conclusion. If it doesn’t, the statement is not a valid SDS

In the Budget the government announced minor technical changes to improve the operation of the rules, in response to feedback from stakeholders, which will be legislated for in Finance Bill 2021. The government will make changes to the rules regarding provision of information by parties in the labour supply chain.

Comment
These changes will make it easier for parties in a contractual chain to share information relating to the off-payroll working rules by allowing an intermediary, as well as a worker, to confirm if the rules need to be considered by the client organisation.

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

The National Living Wage will increase by 2.2% and will be extended to 23 and 24 year olds for the first time. For workers aged under 23, the government has announced smaller increases in NMW in recognition of the risks to youth employment which the current economic situation poses.

From 1 April 2021, the new hourly rates of NLW and NMW are:

£8.91 for those 23 years old and over
£8.36 for 21-22 year olds
£6.56 for 18-20 year olds
£4.62 for under 18s
£4.30 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.

Comment
The extension of the NLW to 23 and 24 year olds may catch out some employers. Employees in this category, if they are on the NMW rate, are currently being paid £8.20 an hour.

Enterprise Management Incentives (EMI) scheme

At Budget 2020, the government announced a review of the EMI scheme to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme.

As part of this review the government is publishing a consultation alongside the Budget.

Van benefit charge nil-rating for zero-emission vans

From 6 April 2021, a nil rate of tax applies to zero-emission vans within the van benefit charge. In 2020/21 such vans have a van benefit charge at 80% of the standard flat rate of £3,490.

Comment
A zero-emission van is a van which cannot in any circumstances emit CO₂ emissions when driven. Governments have provided varying amounts of discounts from the van benefit charge for zero-emissions vans since 2010. We are now back to the policy which applied from 2010 to 2015 when there was no charge.

Temporary changes to legislation resulting from coronavirus

Easement for employer-provided cycles exemption

The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.

The change will have effect on and after Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.

Employer-reimbursed coronavirus tests

The government will legislate in Finance Bill 2021 to introduce a retrospective income tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020/21. Legislation will extend this exemption for the tax year 2021/22.

The change will have effect on and after Royal Assent of Finance Bill 2021. The corresponding NICs disregard is already in force and this will also be extended for the tax year 2021/22.

Extension of income tax exemption for COVID-19 related home office expenses

The government will, by secondary legislation, extend the temporary income tax exemption and Class 1 NICs disregard for employer reimbursed expenses that cover the cost of relevant home office equipment. The extended exemption will have effect until 5 April 2022.

The personal allowance

The personal allowance is currently £12,500. Budget 2018 announced that the allowance would remain at the same level until 2020/21 and the statutory provision to increase the allowance annually by CPI was to be overridden. The Chancellor has confirmed that the personal allowance will increase by CPI (0.5%) for 2021/22 to £12,570.

There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So for the current tax year there is no personal allowance where adjusted net income exceeds £125,000. For 2021/22 there will be no personal allowance where adjusted net income exceeds £125,140.

The Chancellor announced that the personal allowance will be frozen at £12,570 for the tax years 2022/23 to 2025/26.

The marriage allowance

The marriage allowance permits certain couples, where neither pays tax at more than the basic rate, to transfer 10% of their personal allowance to their spouse or civil partner.

Comment
The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. The marriage allowance was first introduced for 2015/16 and there are couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2016/17 where the entitlement conditions are met. The total tax saving for all years up until 2020/21 could be over £1,000. A claim for 2016/17 will need to be made by 5 April 2021.

Tax bands and rates

The basic rate of tax is 20%. In 2020/21 the band of income taxable at this rate is £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.

The Chancellor announced that for 2021/22 the basic rate band will be £37,700 so that the threshold at which the 40% band applies will be £50,270 for those who are entitled to the full personal allowance. The Chancellor announced that the basic rate band will be frozen at £37,700 for the tax years 2022/23 to 2025/26. The National Insurance contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 for these years.

Individuals pay tax at 45% on their income over £150,000.

Scottish residents

The tax on income (other than savings and dividend income) is different, for taxpayers who are resident in Scotland, from taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2020/21 there are five income tax rates which range between 19% and 46%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK residents. For 2020/21, the 41% band applies to income over £43,430 for those who are entitled to the full personal allowance. The 46% rate applies to income over £150,000.

In the Scottish Budget on 28 January 2021, the Scottish Government proposed that the Scottish income tax rates will be frozen for 2021/22. The thresholds for the tax bands will be increased by 0.5% except for the 46% rate threshold which remains at £150,000. So the 41% band will apply to income over £43,662 for those who are entitled to the full personal allowance.

Welsh residents

From April 2019, the Welsh Government has had the right to vary the rates of income tax payable by Welsh taxpayers. The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence. For 2020/21 the Welsh Government has set the Welsh rate of income tax at 10 pence which has been added to the reduced rates. This means the tax payable by Welsh taxpayers is the same as that payable by English and Northern Irish taxpayers.

The Welsh Government has announced that the income tax rate will remain at 10 pence for 2021/22.

Tax on savings income

Savings income is income such as bank and building society interest.

Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5,000.

Tax on dividends

The first £2,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:

7.5% for basic rate taxpayers
32.5% for higher rate taxpayers
38.1% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

Universal Credit

Universal Credit is a single payment that is made up of different amounts depending on an individual’s circumstances. There is no entitlement if an individual’s capital is worth more than £16,000. Shortly after the 2020 Budget the Chancellor announced an increase in the Universal Credit standard allowance by £20 per week for one year.

The government is extending the temporary £20 per week increase for a further six months.

Working Tax Credit

The government is making a one-off payment of £500 to eligible Working Tax Credit claimants to provide extra support over the next six months.

Mortgage guarantee scheme

The government will introduce a new mortgage guarantee scheme in April 2021. This scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of 5% on homes with a value of up to £600,000.

Under the scheme, all buyers will have the opportunity to fix their initial mortgage interest rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31 December 2022, is designed to increase the availability of mortgages on new or existing properties for those with small deposits.

Green National Savings and Investment (NS&I) product

The government will offer a green retail savings product through NS&I in the summer of 2021. This product will be closely linked to the UK’s sovereign green bond framework and will give all UK savers the opportunity to take part in the collective effort to tackle climate change. The green gilt framework, to be published in June, will detail the types of expenditure that will be financed to meet the government’s green objectives.

Venture Capital Schemes: extension of the Social Investment Tax Relief

The government will continue to support social enterprises that are seeking growth investment by extending the operation of Social Investment Tax Relief to April 2023. This will continue the availability of income tax relief and capital gains tax hold-over relief for investors in qualifying social enterprises.

Pensions Lifetime Allowance

The lifetime limit sets the maximum figure for tax-relieved savings that an individual can build up over their lifetime.

Legislation will be introduced to remove the annual link to the CPI increase for the next five years. This will maintain the standard Lifetime Allowance at £1,073,100 for tax years 2021/22 to 2025/26.

Land and buildings transaction taxes

Land and buildings transaction taxes are devolved to Scotland (Land and Buildings Transaction Tax) and Wales (Land Transaction Tax). Stamp Duty Land Tax (SDLT) applies to transactions in England and Northern Ireland. All these taxes have had a temporary increase in the nil rate threshold for residential properties. The thresholds were set to return to the previous thresholds from 1 April 2021.

Budget announcement

The government will extend the temporary increase to the SDLT nil rate band for residential property in England and Northern Ireland to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021.

Wales – Land Transaction Tax

Following the Chancellor’s announcement, the Welsh Finance Minister has confirmed that the Land Transaction Tax temporary reduction period will be extended by a further three months so that it will end on 30 June 2021.

In December 2020, the Welsh Government changed the rates charged on higher rates residential property transactions and non-residential transactions including the rent element of non-residential and mixed leases. The changes to the higher residential rates have the effect of increasing the tax rates applied to the bands by 1%. For non-residential transactions, changes have been made to the bands so as to increase the nil rate thresholds. These changes came into effect on 22 December 2020.

SDLT surcharge

New SDLT rates are proposed for purchasers of residential property in England and Northern Ireland who are not resident in the UK. The new rates will be 2% higher than those that apply to purchases made by UK residents, and will apply to purchases of both freehold and leasehold property as well as increasing SDLT payable on rents on the grant of a new lease. The surcharge will apply to land transactions with an effective date of 1 April 2021 or later. Transitional rules may apply to some contracts exchanged before 11 March 2020 but completed or are substantially performed on or after 1 April 2021, or some contracts substantially performed on or before 31 March 2021 but not completed until 1 April 2021 or later.

Plastic Packaging Tax

Draft legislation has been issued to establish a Plastic Packaging Tax. This is a new tax that applies to plastic packaging produced in, or imported into the UK that does not contain at least 30% recycled plastic. Plastic packaging is packaging that is predominantly plastic by weight.

The tax rate will be £200 per tonne of non-compliant plastic packaging. There will be an exemption for businesses that manufacture or import less than 10 tonnes of plastic packaging per year. The tax will take effect from April 2022.

Van Vehicle Excise Duty (VED)

Van VED is currently levied at £250 per year for most light goods vehicles (under 3.5 tonnes) which have been registered since 1 March 2001. A consultation paper explored creating a graduated first year rate for new light goods vehicles and motorhomes from April 2021. The government has recently decided not to proceed with the change in light of the pandemic. Motorhomes will continue to be placed in the Private/Light Goods class.

Reform of penalties for late submission and late payment of tax

The government will reform the penalty regime for VAT and Income Tax Self Assessment (ITSA) to make it fairer and more consistent. The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached. The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. These reforms will come into effect: for VAT taxpayers, from periods starting on or after 1 April 2022; for taxpayers in ITSA with business or property income over £10,000 per year, from accounting periods beginning on or after 6 April 2023; and for all other taxpayers in ITSA, from accounting periods beginning on or after 6 April 2024.

Contactless payment card limit

Following a public consultation by the Financial Conduct Authority, the government has approved an increase to the legal contactless payment limits previously set by the European Commission. This will allow banks to support single contactless payments up to £100, and cumulative contactless payments up to £300, without the need for customers to input their chip and pin. The government hopes the banking industry will implement the new limits later this year.

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Tax Director, Sheffield

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0114 266 7141

Jenny Brown

Senior Tax Manager, Sheffield

0114 266 7141

[email protected]

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Tax Rates and Allowances 2022/23

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Basic Cash Flow Management Tips

by Hawsons | Jul 8, 2020 | Business Services, Scott Sanderson, SME

Basic Cash Flow Management Tips

This article serves as an introduction to the fundamentals of cash flow management. If you need help with anything concerning cash flow or anything else, then please do get in touch.

What is cash flow?

Cash flow is typically defined as the amount of money moving in and out of your business. Of course, the preference is for your business to have a positive cash flow. This means that the cash inflows are in excess of the outflows enabling you to settle your debts as they fall due. If you have a negative cash flow it can sometimes require you to source alternative methods of finance such as bank loans to cover a shortfall. However, this approach is not normally sustainable in the long term.

How to calculate your cash flow?

To calculate your net cash flow you will first need to select a time period – typically a month. You total your cash receipts and deduct cash payments over that period. This is your cash flow. However, it is important to also calculate this on a quarterly and annual basis which will help you to identify any cyclical patterns emerging. For example, are there months where your cash flow is stretched due to seasonality of income? Spotting these trends can enable you to take appropriate actions.

A few tips to manage your cash flow

Keep your records accurate and up to date

It is important to make sure that you constantly update your record of accounts. If you start to fall behind updating your finances, then your calculated cash flow may be incorrect which could lead to poor decision making based on misinformation.

Do not be too lenient with customers

It is important to strike a balance between being strict and a pushover when invoicing clients. It is important that your business has an invoicing strategy in place to achieve this. You should give customers a sufficient and realistic timescale to pay whilst not agreeing to lengthy terms that effectively see you acting as an overdraft for your customers.

Keep your accounting simple

If you are not completely confident with numbers, you should use quality cloud accounting software such as Quickbooks, Sage, and Xero. This will make it much easier to keep your accounts accurate and up to date. For more information about cloud accounting please visit our cloud accounting webpage here. Alternatively, you could hire a professional to do your bookkeeping for you to free up your time. Visit our bookkeeping services webpage to find out more information.

Keep your business and your personal finances separate

Mixing personal and business finances can leave you confused and unsure about how your business is performing. Keeping your business and personal finances separate will provide more clarity on performance whilst avoiding any tax complications from mixing personal and business expenditures.

Build a cash reserve

Building a cash reserve is always worthwhile. This will help when the unexpected happens (such as the Covid-19 pandemic). Having a buffer will help your business to survive any unforeseen downturns. Furthermore, it can enable you to be more reactive when growth opportunities present themselves.

Cut costs

Look through your records and regularly review bills, payroll, rent, subscriptions, and utilities, etc. Are you spending too much money on these? Are there any subscriptions that you do not really need that you could cancel? These are the kind of questions you need to be asking yourself. Where can you save money that will not affect the performance of your business?

Contingency planning

Does your business have fixed assets such as equipment, buildings, furniture, etc? Consider what you have that you could sell to generate funds quickly should you ever need it.

Consider leasing equipment instead of buying it

Unless your business can easily afford it you may want to consider leasing equipment, computers, and vehicles. This helps smooth the cash flow impact of larger capital purchases.

Stay on top of your invoices

Whenever you have completed a job always aim to send the invoice out in a timely fashion. Make sure you know the correct contact details when sending an invoice as you do not want it being passed around departments. It is very important to make your invoices easy to understand so it will not confuse your clients. E-mailing invoices is often now the preferred method for many businesses.

Offer an incentive for early payments

If you are struggling to get clients to pay on time you could offer an incentive to persuade them to pay early. This can be anything from offering a discount or including something additional for free. Obviously, it is very important to ensure this is affordable for your business before offering it.

Business credit cards can help cushion cash flow

Credit cards with rewards attached can be helpful so you can use these towards future purchases. They can also provide a cushion for your business during tough times.

Conclusion

We hope you have found some of these basic tips of use, if you do need any help on this or anything else then please do get in touch with us – first free initial meeting.

Scott Sanderson

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.[/author_info]

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Scott Sanderson

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[email protected]

0114 266 7141

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