The Cost of Living

The Government’s plan to help people with the cost of living

You may have seen that the Chancellor, Rishi Sunak has announced the government’s plans to help people with the cost of living. The plans bring together measures to provide support for people on low incomes whilst raising tax revenue from the profits made by the oil and gas sector.

The key measures announced on Thursday are:

  • A one-off non-taxable Cost of Living Payment of £650 will be made in two instalments from the Department of Work and Pensions (DWP) (and HMRC for Tax Credits customers) to provide additional support to more than 8 million people in receipt of income-related benefits. The DWP will make a separate additional payment of £150 in September to claimants of certain disability benefits. On top of this, pensioner households will receive a one-off £300 Pensioner Cost of Living Payment to help them stay warm this winter. 
  • A temporary Energy Profits Levy surcharge of 25% on the extraordinary profits the oil and gas sector is making. The levy will include a new ‘super-deduction’ style relief to encourage firms to invest in oil and gas extraction in the UK.
  • A doubling of support to £400 for household energy bills through an expansion of the Energy Bills Support Scheme. The full £400 payment will now be made as a grant which will not be recovered through higher bills in future years.

If you have any questions regarding the information above then please do get in touch.

2022 Spring Statement

As you may be aware, the Chancellor, Rishi Sunak has announced the Spring budget. The key changes that may effect the clients of our practice are detailed below.

  • The Chancellor announced the first cut to the basic rate of income tax in 16 years – from 20% to 19% – by the end of Parliament in 2024
  • Fuel duty will be cut by 5p a litre from 18:00 GMT until March 2023
  • The National Insurance threshold will be raised by £3,000, meaning people must earn £12,570 per year before paying income tax or NI. The Chancellor said it’s a tax cut for 30 million people worth over £330 a year.
  • VAT will be scrapped on home energy-saving measures such as insulation, solar panels and heat pumps
  • The Household Support Fund for local councils to help the most vulnerable will be doubled to £1bn from April
  • Retail hospitality and leisure sectors will have a 50% discount in business rates up to £110,000

If you have any questions regarding the information above then please do get in touch.

North Lincolnshire Covid-19 Grants

Various new Covid-19 grants have been announced by North Lincolnshire Council. You can find details of the grants below.

Omicron Hospitality and Leisure Grant
The Government have announced a one-off grant of up to £6,000 per premises to support eligible hospitality and leisure sector businesses due to the potential trading challenges brought in by the Omicron variant.

Businesses that are eligible for the grant can be found using the table below:

Business Category Types of Businesses
Food courts Wine bars
Public Houses/pub restaurant Cafes
Restaurant Roadside restaurants
Leisure Casinos and gambling clubs Arenas
Cinemas Concert halls
Museums and art galleries Tourist attractions
Stately homes & historic houses Theme parks
Theatres Amusement arcades
Zoo and safari parks Soft play centres or areas
Amusement parks Indoor riding centres
Wedding venues Clubs & institutes
Event venues Village halls & scut huts
Night clubs & discotheques Cadet huts etc
Accomodation Caravan parks Holiday apartments
Caravan sites and pitches Cottages or bungalows
Chalet parks Campsites
Coaching inns Boarding houses
Country house hotels Canal boats or other
Guest houses Vessels
Hostels B&Bs
Hotels Catered holiday homes
Lodge Holiday homes

The amount that business will depends on the rateable value. Changes in the ratings list after 30th December 2021 will not count towards the grant eligibility.

  • Rateable Value of £15,000 or under = £2,667
  • Rateable Value of between £15,000 and £51,000 = £4,000
  • Rateable Value of over £51,000 = £6,000

The scheme will close for applications on Friday 28th February 2022 and all payments will be made by Thursday 31st March 2022.

You can apply via North Lincolnshire Council by using the following link: Omicron Hospitality and Leisure Grant Application Form (office.com)

North Lincolnshire Discretionary Grant
North Lincolnshire Council has ben awarded further Discretionary Funding to allow them to reopen the scheme. This grant is for businesses who are outside of the business rates system who have had a severe impact from Covid-19 and can demonstrate this.

The amount received is dependent on eligibility, details of this can be found below:

  • £979.50 – Businesses who are severely impacted who do not pay/are liable for business rates
  • £1,401 – Businesses who are severely impacted whose rateable value is £15,000 or below
  • £2,100 – Businesses who are severely impacted whose rateable value is between £15,001 and below £51,000
  • £3,150 – Businesses who are severely impacted whose rateable value is over £51,000

You can apply via North Lincolnshire Council by using the following link: North Lincolnshire Discretionary Grant Application Form (office.com)

If you have any questions then please do get in touch.

Important Money Changes for 2022

As you may be aware, there will be many financial changes this year. The key changes that may effect the clients of our practice are detailed below.

The National Minimum Wage will see an increase in April by the following amounts:

  • National Living Wage for over-23s: from £8.91 to £9.50 an hour
  • National Minimum Wage for those aged 21-22: from £8.36 to £9.18
  • National Minimum Wage for 18 to 20-year-olds: from £6.56 to £6.83
  • National Minimum Wage for under-18s: from £4.62 to £4.81
  • The Apprentice rate: from £4.30 to £4.81

The state pension will increase by up to £5.50 a week from April 2022 after September’s inflation of 3.1%.

From April 2022, all employees, employers and the self-employed will pay an extra 1.25p more in National Insurance for every pound they earn.

  • If you earn £20,000, you’ll pay an extra £130
  • If you earn £30,000, you’ll pay an extra £255
  • If you earn £50,000, you’ll pay an extra £505
  • If you earn £80,000, you’ll pay an extra £880
  • If you earn £100,000, you’ll pay an extra £1,130

Dividend Tax will rise by the following:

  • Basic rate taxpayers – 7.5% to 8.75%
  • Higher rate taxpayers – 32.5% to 33.75%
  • Additional rate taxpayers – 38.1% to 39.35%

Tax Thresholds will remain frozen by the following amounts:

  • The personal allowance will stick at £12,570 in April, and every year until 2025/26
  • The higher rate threshold will be frozen at £50,270
  • The capital gains tax annual exempt amount remains at £12,300
  • The pension lifetime allowance is still £1,073,100
  • The inheritance tax nil rate band is £325,000, and the residential nil rate band £175,000
  • Plus everything from ISA allowances to the annual gifting allowance, the high-income child benefit tax charge and the savings allowance remain the same

There will be a change in the state pension rules for British citizens who move to live in, or move between, an EU or EEA country or Switzerland. They will no longer be able to count time lived abroad in the following countries towards their state pension:

  • Australia (before 1st March 2001)
  • Canada
  • New Zealand

This doesn’t affect those who continue to live in the UK, or are living in the EU, EEA or Switzerland by December 31st 2021.

If you have any questions then please do get in touch.

£1billion Fund for Businesses

As many of you may be aware, the Chancellor, Rishi Sunak announced yesterday that there will be a £1billion fund to help businesses that have been affected by the rise in Covid cases, including leisure and hospitality.

The main points detailed in the announcement are:

  • Restaurants, bars, cinemas and theatres can apply for a grant of up to £6,000 for each of their premises.
  • Other struggling businesses outside of the leisure and hospitality sector can apply to local councils for a different grant under the Additional Restrictions Grant.
  • The Statutory Sick Pay Rebate Scheme is being reintroduced, meaning that business with less than 250 employees can claim money to cover sick pay for employees who are affected by Covid.

If you have any questions then please do get in touch.

We Have an Announcement

Come and visit us in Lincoln!

As many of you may be aware, we have recently posted on our social media regarding a big announcement.

The time has finally come to tell you what that announcement is.

In November 2021, we acquired Fawcett & Co in Lincoln. Fawcett & Co has been established for 40 years, employing 11 members of staff. Over the coming months, the merger will see the firm be rebranded to Jackson Stapleton, building on the excellent work of the previous management.

The details for our Lincoln office are detailed below:
Fawcett & Co Accountants
86-88 Carholme Road
Lincoln
LN1 1SP
Telephone number: 01522 519400

Tom and Chris have now joined the team at Lincoln but are still available for anyone who would like to speak to them.

As always thank you for your continued support.

If you have any questions then please do get in touch.

Capital Allowances: Super Deduction

Please find below a short summary of a new scheme announced in the 2021 budget known as the “super deduction” and other changes to capital allowances.
New Capital Allowances Offer
For expenditure incurred from April 1st 2021 until 31st March 2023, any limited company can now benefit from three significant capital allowance measures:

  • 130% super-deduction on plant and machinery.
  • 50% “special rate” allowance, on other qualifying assets.
  • An increased level of Structures and Buildings Allowance.

With the new super deduction for every £1 reinvested in your business in the form of plant and machinery additions, corporation tax in that accounting period can be cut by up to 25p.

Assets covered by the deduction (although this is not an exhaustive list) could include:

  • Solar Panels
  • Computer equipment and servers
  • Tractors, lorries, vans
  • Ladders, drills, cranes
  • Office chairs and desks
  • Electric vehicle charging points
  • Refrigeration units
  • Compressors
  • Foundry equipment

Please note that this is only for plant and machinery assets that are purchased brand new, if they are second hand then standard annual investment allowance can be used up to the limit of £1,000,000.

If you have any questions about the super deduction, or capital allowances more generally, then please do get in touch.

MTD for ITSA Postponed

As you may be aware, the government has postponed the start of MTD for ITSA by a year meaning that it will not start until 6 April 2024. MTD for general partnerships will now be postponed until 2025. The change to the tax year basis has also been delayed until at least April 2024.

MTD for ITSA

It remains mandatory that anyone with a turnover of £10,000 or above must use MTD for ITSA.

As the turnover must take into account the taxpayer’s income from all of their sole-trader businesses, plus any rental income, HMRC will need to pull together several figures from the taxpayer’s self assessment tax returns. Only when the tax return reaches the £10,000 threshold will HMRC issue a notice to file under MTD regulations.

If MTD for ITSA was put in place from 6 April 2023, the turnover test would need to apply to the figures reported in the 2021/22 tax return which would need to be submitted by 31 January 2023, and possibly turnover reported in 2020/21 given that those years were affected by the pandemic meaning that turnover and rental income was reduced for many businesses and landlords.

Local authority grants for businesses liable for business rates would also increase business turnover for those periods. The SEISS grant should not have been included in business turnover, however some taxpayers have reported them as such, leading to HMRC having to make corrections to taxpayers’ self-assessments for 2020/21, and possibly also for 2021/22.

As MTD for ITSA will now start in April 2024, the turnover test will be the tax year 2022/23. The turnover figures for that year should not be distorted by Coronavirus related grants and hopefully will reflect normal trading beyond the pandemic for most businesses.

Tax Year Basis

When the consultation on changing to the tax year basis of assessment was released in July 2021, doubts were raised over whether there would be enough time to introduce such drastic changes to tax law before MTD for ITSA.

It was apparent that HMRC wanted all unincorporated businesses to switch to the tax year basis before the introduction of MTD for ITSA in 2023, but this would make 2022/23 a difficult transition year.

For businesses with an accounting year end that doesn’t approximate to the tax year, more than 12 months of profits would be assessed in 2022/23. This would have a knock-on effect for a wide variety of allowances and charges, including NIC and student loan repayments meaning that there wasn’t enough time to write amendments to regulations in all the areas affected before April 2022.

The financial secretary to the Treasury has confirmed that the change to the tax year basis will not come into effect before April 2024 with the transition year being no earlier than 2023.

If you require any further information then please do not hesitate in contacting us.

Dividend Tax and National Insurance Increase

As many of you may be aware, the government announced today that as of April 2022, both dividend tax and National Insurance will be increased by 1.25%.

This is the biggest UK tax increase in 28 years meaning that someone earning £30,000 would be paying an extra £250 in tax per year, including the self employed.

The current dividend allowance is set at £2,000 meaning that dividends totaling £2,001 and over will be taxed. Dividends from shares in an ISA are tax-free. Your ISA allowance during one tax year (6 April to 5 April) is set at £20,000. Once the new tax year starts, you get a new ISA allowance meaning that any allowance unused in the previous year will go to waste.

The increase is set to fund the NHS and social care reform, the Prime Minister’s plans include:

  • A 1.25% increase in National Insurance (NI) and dividend tax from April 2022
  • From April 2023, the NI increase will be reversed and a health and social care levy will be introduced instead, meaning that pensioners who are still earning will also need to pay.
  • In return, there will be a limit of £86,000 on social care costs.
  • People will not pay social care when their assets are below £20,000 and there will be a means test between £20,000 and £100,000.

As always we will explore ways to mitigate the impact that this decision has on our clients.

If you require any further information then please do not hesitate in contacting us.

MTD for ITSA

In April 2023, HMRC will be Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).

This will require individuals with rental income above £10,000 to use software for their accounting and store their accounting records digitally. It also applies to sole traders and if the landlord is also a sole trader then that income is added to any rental income to work out if MTD for ITSA applies.

The rules of MTD for ITSA are as follows:

  • Software compatible with MTD for ITSA must be used for accounting relating to income tax.
  • Registration for MTD for ITSA must be completed before 6th April 2023. If you are already registered for Self Assessment, or have already registered for MTD for VAT, you will not be transferred across automatically when MTD for ITSA begins.
  • You will no longer need to send a Self Assessment return for income tax, although one might still be needed in some cases to report other kinds of income outside the scope of MTD for ITSA. This will be submitted in addition to fulfilling the requirements that arise from MTD for ITSA.
  • HMRC will require quarterly updates using software that details all property income as well as any sole trader business which will require a quarterly update of its own.
  • By 31st January following the end of the tax year, HMRC will require an end of period statement (EOPS). This will detail all of your property income and allowable expenses. If you own a sole trader business/businesses then they will also need to submit an EOPS for each. These should follow the end of the accounting period for that business, but all EOPS should be submitted by 31st January at the latest.
  • By 31st January following the end of the tax year, HMRC will require a signed final declaration of your income. If you have any income from a sole trader business, then this will need to be included too.
  • By 31st January, you will need to pay the balance on any tax and National Insurance contributions due. The payment on account system will continue, so you may need to make a further payment on 31st July of the same year.

Frequently asked questions

When do landlords have to start using MTD for ITSA?
Individuals within the scope of MTD for ITSA should use it for all property rental income received after 6th April 2023.

What information do landlords need to send as part of MTD for ITSA?
There is no real change to the information that will need to be provided compared to your Self Assessment tax return. The only difference is that the information will need to be provided to HMRC more frequently (quarterly at the minimum).

How do landlords sign up for MTD for ITSA?
The full MTD for ITSA scheme is not open for registration yet. It is likely that HMRC will open the portal to sign up for MTD for ITSA closer to the 6th April 2023.

We appreciate that this legislation is some way off, however it will take time to implement with the process starting for us in April 2022. If applicable, your client manager will be in contact in due course.

If you require any further information then please do not hesitate in contacting us.