Changes to VAT penalty regime delayed until 2023

Changes to VAT penalty regime delayed until 2023

by | Jan 14, 2022 | Corporate Tax, Craig Walker, SME, Tax, Tony Nickson, VAT

The government has announced that the new penalty regime for VAT, which was due to be introduced from 1 April 2022, will now be delayed until January 2023.

The delay is to provide HMRC with extra time to ensure their IT systems are ready and well tested. The new scheme will reform the penalty regime for late submission of VAT returns and late payment of VAT.

Under the new regime, HMRC will issue a single penalty point for each late submission of a VAT return and once a business has exceeded a points threshold for multiple missed returns, a flat penalty of £200 will be charged.

There will also be penalties for late payments. The first charge will be imposed at 2% of the outstanding tax if the tax due on a return remains unpaid 15 days after its due date. After 30 days the penalty increases to 4%. The second late payment penalty is a daily penalty (set at 4% per year of the tax still outstanding at that point), starting from 31 days after the due date until the business pays the tax that is due. Late payment interest will be calculated at 2.5% above the Bank of England rate and will be payable on tax outstanding after the due date.

 

How can we help?

At Hawsons we provide a range of VAT services. Over the past 12 months, we have registered companies, sole proprietors, and partnerships for VAT with HMRC. Using our expertise, we have advised clients whether to register for VAT voluntarily or if they are required to register due to their turnover.

VAT on services is a complicated area. VAT rates may or may not apply depending on who is providing or buying them, where they are provided and the precise nature of the services provided.

More from our tax experts

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

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

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

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Tax Director, Sheffield

[email protected]
0114 266 7141
Tony Nickson, VAT consultant

Tony Nickson

VAT Consultant, Sheffield

[email protected]
01604 645 600

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Autumn Budget: Changes to Creative Tax Reliefs

Autumn Budget: Changes to Creative Tax Reliefs

by | Nov 1, 2021 | Corporate Tax, Craig Walker, Tax

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

 

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

 

Theatre Tax Relief (TTR)

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

 

Museums and Galleries Exhibition Tax Relief (MGETR)

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

 

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

 

Orchestra Tax Relief (OTR)

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

 

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

 

 

What are Creative tax reliefs?

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

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

 

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

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

 

How can we help?

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

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

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

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Craig Walker, Tax Director

Craig Walker

Tax Director, Sheffield

[email protected]
0114 266 7141
Autumn Budget 2021

Autumn Budget 2021

by | 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)

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.

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.

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.

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 £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)

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.

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.

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 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.

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 (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

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

Stephen Charles

Tax Partner, Sheffield

[email protected]
0114 266 7141
Aaron Hemmington, Tax partner

Aaron Hemmington

Tax Partner, Northampton

[email protected]
01604 645 600
Craig Walker, Tax Director

Craig Walker

Tax Director, Sheffield

[email protected]
0114 266 7141

David Cairns

David Cairns

Tax Partner, Northampton

01604 645 600

[email protected]

More similar content

R&D cap announced

R&D cap announced

by | Mar 17, 2021 | Corporate Tax, Craig Walker, R&D, Tax

The government has announced a cap on the amount of payable tax credit that a company can claim for Research and Development (R&D). The cap will be £20,000 per period plus 300% of the PAYE and NIC payable for the period. This will take effect for periods starting on or after 1 April 2021.

Why is an R&D cap being introduced?

The cap is being introduced to deter abuse of R&D tax relief. The government believes that the tax credit has become a target for fraud and abuse and this measure is a response to that.

 

Will this change affect my company?

The cap will affect small or medium sized companies (SMEs) that carry out R&D and claim the payable R&D tax credit.

The payable tax credit provides valuable support to loss-making companies engaged in R&D. It allows those companies to claim a tax credit worth up to 14.5% of the R&D element of their surrendered losses.

The smallest claims will not be negatively affected due to the £20,000 minimum element of the cap.

If you are unsure whether you are affected by the cap, please contact one of our R&D tax relief specialists.

 

Is my company exempt from the R&D cap?

A company is exempt from the cap if its employees are creating, preparing to create, or managing Intellectual Property and the company does not spend more than 15% of its qualifying R&D expenditure with connected persons.

The aim is to exempt companies with low PAYE and NIC, but which are nevertheless engaged in genuine, substantial R&D.

 

Has there previously been an R&D cap?

Some people may recall that there used to be a cap on the amount of payable R&D credits, linked to the amount of PAYE and NIC payable by a small company. This cap was removed in 2012.

The Chancellor announced in 2018 that a cap would be reintroduced and a period of consultation followed. The cap will be implemented from April 2021.

 

How we can help?

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

For more information on R&D tax relief, read our guide here.

More from our tax experts

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

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

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

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Craig Walker, Tax Director

Craig Walker

Tax Director, Sheffield

[email protected]
0114 266 7141
Tax Rates and Allowances 2021/22

Tax Rates and Allowances 2021/22

by | Mar 17, 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, Property & Construction, R&D, Retail, SME, 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 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

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 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

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 £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).

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 2,520

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.

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 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

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 entitlement to 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

  • 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
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.

  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

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. 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

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).

 

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)

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.

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 2 emissions (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 2 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

CO 2 emissions (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 2 emissions (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

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.

Introducing the Super-deduction

Introducing the Super-deduction

by | Mar 10, 2021 | Aaron Hemmington, Corporate Tax, COVID-19, Craig Walker, SME, Stephen Charles, Tax

What is the Super-deduction?

The super-deduction is a 130% first-year capital allowance for qualifying plant and machinery assets. There is also a less generous 50% first-year allowance for assets qualifying for the special rate pool. The super-deduction will allow companies to reduce their tax bill by up to 25p for every £1 they invest.

This is an exciting and innovative development that should encourage companies to invest in productivity-enhancing plant and machinery assets.

 

Key points on the 130% super-deduction

  • It does not apply to cars, although it can be claimed on commercial vehicles
  • It does not apply to assets leased out or to assets hired out (e.g. a hire fleet). Although for example in the construction industry, HMRC should accept that plant provided predominantly with an operative is more than just hire and therefore is not excluded and so can qualify.
  • It does not apply to used or second-hand items
  • Any assets going into the special rate pool, such as integral features or long life assets, only qualify for a 50% super-deduction
  • Only companies qualify (not sole traders or partnerships)
  • Only expenditure after 1 April 2021 is eligible, but if the contract is entered into before Budget day (3/3/2021) then the company won’t qualify
  • If you sell the asset you have to bring in 130% of the proceeds as a balancing charge.

 

How can we help?

At Hawsons we have a dedicated team of expert tax advisers at our offices in Sheffield, Doncaster, and Northampton. Our team of corporate tax advisers work together to provide proactive, well rounded, technically robust tax advice at all stages of a business’ life cycle – from incorporation, right through to exit, wherever in the world you do business.

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

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

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Stephen Charles, Tax Partner

Stephen Charles

Tax Partner, Sheffield

[email protected]
0114 266 7141
Craig Walker, Tax Director

Craig Walker

Tax Director, Sheffield

[email protected]
0114 266 7141
Aaron Hemmington, Tax partner

Aaron Hemmington

Tax Partner, Northampton

[email protected]
01604 645 600