In this blog, we look at the electric car tax rates vs. fuel, to help you decide if it’s worth the upgrade.

Company car tax changes

Owning a company car used to be seen as a useful benefit for those running their own Limited Company. However, the tax burden and perceived responsibilities linked to company car tax have led many to abandon this idea. Thankfully, HMRC has introduced recent tax changes that have made electric cars more accessible.

Electric car tax rates

In order to help the government achieve its net zero targets by 2050, a reduction has been made to the Benefits in Kind (BiK) tax rate for electric company cars. The rate has been set at 2% for the tax years 2023/24 and 2024/25, with annual increases of 1% in the following years. For instance, the rate will be 3% in 2025/26, 4% in 2026/27, and so on. While this gradual increase might appear substantial to some, it remains significantly lower than the 25% BiK rate applicable to petrol or diesel cars.

Currently, only 2% of the list price of your electric car will be subject to taxation for the next two financial years.

Calculating the Cost

The cost of company car tax is split between what your Limited Company pays and your personal contribution as an employee. For example, if you own an electric car valued at £40,000, the taxable amount (BiK) would be £800. The portion of that £800 you’d pay as an employee of your Limited Company depends on your income tax bracket. If you fall into the basic rate tax bracket of 20%, your annual payment would be 20% of £800, amounting to £160. A higher-rate taxpayer at 40% would therefore pay 40% of £800, which is £320 per year. It’s important to note that your Limited Company will also be required to pay National Insurance Contributions (NICs).

If you are unsure of what the cost of an electric car will be for you, reach out to your dedicated business accountant, who will be able to assist you.

Electric vs. Petrol: Does it Save Money?

We’ll now compare the costs of a petrol car and an electric car using the same £40,000 car example. In this case, let’s assume a higher income tax bracket of 40% and that the petrol car emits 130 grams per kilometre of carbon dioxide. This falls under the 31% BiK rate for the current financial year. So with 31% of £40,000 being £12,400, a 40% tax-bracket employee would need to pay £4,960 per year, or £413.33 per month in tax. Therefore in this example you’d be looking at an annual saving of over £4,500 per year if you went for an electric vehicle.

How Do Hybrids Compare?

Taxation for hybrids depends on their battery range and level of emissions. Conventional hybrids that can’t be charged via a plug generally have a limited electric range of less than a mile and emit over 50g per kilometre of CO2. The tax authorities consider these vehicles similar to petrol or diesel cars in their emission output and so you will be taxed similarly.

However, plug-in hybrids (PHEVs) generally emit less than 50g per kilometre of CO2. For these cars, the BiK rates are determined based on the distance they can travel using only battery power. Here are the BiK rates for PHEVs based on their battery range for the next three financial years:

• Less than 30 miles →14% BiK rate
• Between 30-39 miles → 12% BiK rate
• Between 40-69 miles → 8% BiK rate
• Between 70-129 miles → 5% BiK rate
• Over 130 miles → 2% BiK rate (treated as a 100% electric vehicle)

Choosing the Right Option for You

Figuring out whether you could benefit from an electric or a hybrid will depend on how many miles you will average and the availability of charging points. If you’re not confident you can rely solely on electric power, especially if there are very few charging points in your area, you might be better off with a hybrid for now. By 2030, the ban on petrol and diesel cars will take effect, and as charging infrastructure continues to expand in the coming years, you could consider transitioning to a fully electric car. For an illustration of how much tax you could expect to pay on an electric car, visit the gov.uk website and use their company car tax calculator.

Are There Any Other Savings?

Corporation Tax

Certain low-emission vehicles qualify for a 100% first-year allowance, allowing you to deduct the car’s purchase cost from your Limited Company’s profits and, as a result, reduce your Corporation Tax burden. If you opt to lease a car, the lease payments can also be used to offset your company’s profits, also reducing your Corporation Tax liability.

Road Tax

Currently, electric cars are exempt from road tax. However, from 2025 onwards, this will no longer be the case, and road tax will be the same amount for all car types.

Considering Your Financial Situation

Before deciding to purchase an electric or hybrid vehicle, why not get in touch with our team of expert accountants here at Assure Accountants. They’re able to offer advice and support when it comes to tax matters that affect your business, and can help you make the right decisions financially both personally and professionally. Get in touch today to find out more.

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First things first – what is Corporation Tax?

Corporation Tax is a levy on your company’s profits, which is essentially a charge on the profits left in your company once expenses such as your salary, have been deducted from your company’s turnover.

For example – If your company’s turnover was £150,000 and your business expenses came to £80,000, you’d have to pay Corporation Tax on the remaining £70,000. At present the rate of Corporation Tax is 19%.

When do you need to pay Corporation Tax?

Corporation Tax payments must be made nine months and one day from your company’s yearend. You’re also required to complete and file a CT600 tax return annually, 12 months from your company’s yearend date. Failure to comply with these dates will result in fines from HMRC, and a possible increase in your Corporation Tax bill.

What’s changing in April 2023?

Corporation Tax will be increasing from 19% to 25% from April 2023, with a tapered relief for those Limited Companies whose profits fall between £50,000 and £250,000. Should your company profits fall below £50,000 you’ll be subject to the new ‘small profits rate’ of 19%.

Why is it increasing?

Corporation Tax has been 19% for a long time, and with the added pressure the financial support provided to businesses during the Covid-19 pandemic, the then Chancellor of the Exchequer, Rishi Sunak decided an increase would help to recoup some of the money spent. The government is keen for UK businesses to ‘give back’, and to aid in the UK’s economic recovery.

How will this affect Limited Company businesses?

If your company’s profits remain below the £50,000 threshold you’ll remain unaffected, but if they increase between £50,001 – £250,000 you’ll be subject to the new tapered relief of tax, reaching up to a maximum of 25% that you can expect to pay.

How can Assure Accountants help?

Tax is tough and with the government constantly moving the goal posts it can feel near impossible to run a business and keep on top of your tax affairs. That’s why it’s a good idea to enlist the services of a small business accounting expert who can keep you up to date with what will affect you, your money and your business. Here at Vantage our team of expert accountants do just that, ensuring our clients’ personal and professional needs are taken care of, no matter what changes are on the horizon. Get in touch today to find out more and speak to a member of our team today.

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• Decrease in the additional rate threshold from £150,000 to £125,140 from 6 April 2023. The government is also fixing other personal tax thresholds within income tax, NICs and Inheritance Tax for an additional 2 years, until April 2028
• Reduction in the Dividend Allowance (currently £2,000 tax free but set to reduce to £500 from April 2024)
• Reduction in Capital Gains Tax Annual Exempt Amount (reducing to £6,000 from April 2023 and £3,000 from April 2024). The Personal Allowance will generally be available in addition to the reduced Dividend Allowance and Capital Gains Tax Annual Exempt Amount
• The income tax additional rate threshold will be lowered from £150,000 to £125,140 from 6 April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The ART for savings and dividend income will apply UK-wide.
• VAT registration and deregistration thresholds will be maintained at the current levels for an additional 2 years and will not change for a further period of 2 years from 1 April 2024.
• Confirmed Off-payroll working rules: maintain 2017 and 2021 reforms (also known as IR35)
• Reflecting the success of the transition to electric vehicles, the government will introduce Vehicle Excise Duty (car tax) on electric cars, vans and motorcycles from April 2025

The Autumn Statement 2022 – Full Report

On 17 November 2022, the government undertook the third fiscal statement in as many months, against a backdrop of rising inflation and economic recession. The Chancellor laid out three core priorities of stability, growth and public services. The government sought a balanced path to support the economy and return to growth, partially through public spending restraint and partially through tax rises.

Income tax

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This was to be accelerated so that it took effect from April 2023. However, whilst the government aims to proceed with the cut in due course, this will only take place when economic conditions allow and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely.

At the Mini Budget on 23 September 2022 the government announced a plan to abolish the 45% additional rate of income tax from April 2023. It was announced on 3 October 2022 that the government would not proceed with this plan.

From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

Income tax allowances

The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively.

The government will uprate the married couple’s allowance and blind person’s allowance by inflation for 2023/24.

Dividends

The government has also confirmed that, from April 2023, the rates of taxation on dividend income will remain as follows:

• the dividend ordinary rate – 8.75%
• the dividend upper rate – 33.75%
• the dividend additional rate – 39.35%.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

In addition, the government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024.

These changes will apply to the whole of the UK.

National Insurance contributions

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided 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 were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the government has:

• reversed the temporary increase in NICs and
• cancelled the Health and Social Care Levy completely.

More detail for employees and employers

The changes took effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) generally reduced from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) reduced from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

NICs thresholds

A similar principle to that outlined above for income tax thresholds will be followed in respect of the NICs upper earnings limit and upper profits limit. From July 2022, the NICs primary threshold and lower profits limit were increased to align with the personal allowance and will be maintained at this level from April 2023 until April 2028. The Class 2 lower profits threshold will also be fixed from April 2023 until April 2028 to align with the lower profits limit. They will again be £12,570 and £50,270 as appropriate.

In addition, the government will fix the lower earnings limit and the small profits threshold at 2022/23 levels in 2023/24, namely £6,396 and £6,725 per annum respectively.

The government will uprate the Class 2 and Class 3 NICs rates for 2023/24 to £3.45 per week and £17.45 respectively.

Finally, the government will fix the level at which employers start to pay Class 1 NICs for their employees at £9,100 from April 2023 until April 2028.

Capital gains

The government has announced that the capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

Inheritance tax

The inheritance tax nil-rate bands are already set at current levels until April 2026 and will stay fixed at these levels for a further two years until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000 and the residence nil-rate band taper will continue to start at £2 million.

Stamp Duty Land Tax

A number of changes were made to the Stamp Duty Land Tax (SDLT) regime earlier this year and these remain. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Higher rates may be payable where further residential properties are acquired.

Land Transaction Tax

The Welsh government also altered its rates in relation to land and buildings in Wales for transactions with an effective date on or after 10 October 2022.

Higher rates may be payable where further residential properties are acquired.

Business

Corporation tax rates

It had been previously announced that the expected increase in the rate of corporation tax for many companies from April 2023 to 25% would not go ahead. However the government announced on 14 October 2022 that this increase will now proceed and this has been confirmed.

This means that, from April 2023, the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,001 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.

In addition:

• bank corporation tax surcharge changes will proceed, meaning that from April 2023 banks will be charged an additional 3% rate on their profits above £100 million and
• from April 2023 the rate of diverted profits tax will increase from 25% to 31%.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses.

The government will also extend the 100% first year allowance for electric vehicle chargepoints to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.

Research and Development

For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

VAT

The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2024, staying at £85,000 and £83,000 respectively.

Vehicles

The government will set the rates for the taxation of company car benefits until April 2028 to provide long term certainty for taxpayers and industry. Rates will continue to incentivise the take up of electric vehicles.

In addition, from 6 April 2023 car and van fuel benefits and the van benefit charge will increase in line with inflation.

Welfare, work and pensions

Cost of living payments

The government will provide households on means-tested benefits with an additional £900 cost of living payment in 2023/24. Pensioner households will receive an additional £300 and individuals on disability benefits will receive an additional £150.

Uprating of benefits

The government will increase benefits in line with inflation, including the state pension. The standard minimum income guarantee in pension credit will also increase in line with inflation from April 2023.

Raising the benefit cap

The benefit cap will be raised in line with inflation, so that more households will see their payments increase as a result of uprating from April 2023. The cap will be raised from £20,000 to £22,020 for families nationally and from £23,000 to £25,323 in Greater London. For single adults it will be raised from £13,400 to £14,753 nationally and from £15,410 to £16,967 in Greater London.

National Living Wage and National Minimum Wage uprating

The government will increase the National Living Wage (NLW) and National Minimum Wage from 1 April 2023 as follows:

• the rate for 23 year olds and over to £10.42 an hour
• the rate for 21-22 year olds to £10.18 an hour
• the rate for 18-20 year olds to £7.49 an hour
• the rate for 16-17 year olds to £5.28 an hour and
• the apprentice rate to £5.28 an hour.

In-work conditionality for Universal Credit claimants

The government will bring forward the nationwide rollout of the In-Work Progression Offer, starting with a phased rollout from September 2023, to support individuals on Universal Credit (UC) and in work to increase their earnings and move off benefits entirely. This will mean that over 600,000 claimants on UC whose household income is typically between the equivalent of 15 and 35 hours a week at the NLW will be required to meet with a dedicated work coach in a Jobcentre Plus to increase their hours or earnings.

Energy

The Autumn Statement sets out reforms to ensure businesses in the energy sector who are making extraordinary profits contribute more. From 1 January 2023, the Energy Profits Levy will be increased to 35% and extended to the end of March 2028 and a new, temporary 45% Electricity Generator Levy will be applied on the extraordinary returns being made by electricity generators.

The Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000.

The government is also setting a national ambition to reduce energy consumption by 15% by 2030, delivered through public and private investment, and a range of cost-free and low-cost steps to reduce energy demand.

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As part of his ‘Growth Plan’, Kwarteng had set out a number of tax cuts designed to support the growth of the British Economy. However, following widespread criticism and instability in financial markets, Mr Kwarteng was replaced with Jeremy Hunt who has scrapped all of the growth plan changes bar the planned cut to stamp duty and National Insurance. As of today, 17^th October 2022, the only changes still going ahead are:

• NI (health and social care levy) increase of 1.25% has been repealed from 6th November 2022
• Stamp duty 0% threshold increased to £250,000

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The (not so) mini-budget delivered by new Chancellor, Kwasi Kwarteng last Friday, had a lot more in it than anyone expected, and lots of great news for small businesses. Here are the headlines:

• Corporation Tax planned increase from 19% to 25% has been scrapped
• Basic rate of income tax reduced from 20% to 19% from April 2023
• Reversal of the 1.25% increase in the dividend tax rate from 2023
• Additional rate of income tax of 45% has been scrapped
• NI (health and social care levy) increase of 1.25% has been repealed from 6th November 2022
• AIA remains at £1m indefinitely
• Stamp duty 0% threshold increased to £250,000. This is a saving of £2,600 on an average house costing £312,000
• Freeze on energy bills
• Rules on bankers’ bonus limits are to be scrapped
• IR35-off-payroll rules to be repealed from April 2023. Reverting to pre-2017 rules

For a more detailed look at the mini budget and what was announced, please see below.

Chancellor reveals his plan for growth

The week leading up to Chancellor Kwasi Kwarteng’s ‘Mini Budget’ may have been a short one due to the Queen’s funeral but the new government managed to fill it with a stream of policy announcements.

Before Mr Kwarteng stood up to make his statement on ‘The Growth Plan’ much of what he had to say about energy support for businesses and households, bankers’ bonuses, investment zones and reversals to NICs had already been announced. The government also said that the Chancellor’s statement would not be subject to a forecast from the Office for Budget Responsibility. However, this did not stop the media from dubbing this event a Mini Budget.

The Growth Plan set out a new approach to the economy built around three central priorities:

• reforming the supply-side of the economy
• maintaining a responsible approach to public finances
• cutting taxes to boost growth.

National Insurance contributions

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided 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 were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the new Chancellor has decided to:

• reverse the temporary increase in NICs from November and
• cancel the Health and Social Care Levy completely.

The Health and Social Care Levy was expected to raise around £13 billion a year to fund health and social care and the Chancellor has confirmed that funding will be maintained at the same level as if the Levy was in place, funded from general taxation.

More detail for employees and employers

The changes take effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) will generally reduce from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) will reduce from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

Income tax

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This is now being accelerated so that it takes effect from April 2023.

In addition, to ‘incentivise enterprise and hard-work and simplify the tax system’, the government will abolish the 45% additional rate of income tax from April 2023. Consequently, there will be a single higher rate of income tax of 40%.

There are a number of tax consequences which stem from these changes. One of them is the amount of tax relief given at source on pension contributions and Gift Aid donations. This is currently given at the basic rate of 20%. The government has stated that there will be a four-year transition period for Gift Aid relief to maintain the income tax basic rate relief at 20% until April 2027. This will support almost 70,000 charities and is worth over £300 million. However, there was little comment on pension contributions other than that there will also be a one-year transitional period for Relief at Source pension schemes to permit them to continue to claim tax relief at 20%.

Dividends

From April 2023:

• the dividend ordinary rate of 8.75% will reduce to 7.5%
• the dividend upper rate of 33.75% will reduce to 32.5% and
• the dividend additional rate will be abolished.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, it will also reduce to a 32.5% charge for loans made on or after 6 April 2023.

These changes will apply in Scotland as the rules on dividends apply to the whole of the UK.

Business

Corporation tax rates

It had been previously announced that the rate of corporation tax would increase for many companies from April 2023 to 25%. This change will now not go ahead, leaving the rate of corporation tax at 19% for the majority of companies.

In line with this change, the Bank Corporation Tax Surcharge will remain the same, as will the Diverted Profits Tax.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery, including cars with zero emissions, up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses. Interestingly, these allowances were not mentioned, other than minor amendments to the current rules, so it appears the scheduled withdrawal of them will occur in 2023.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

Investment Zones aim to encourage rapid development

As part of the government’s plan to drive economic growth and encourage development the Chancellor confirmed that Investment Zones will be established across the UK.

These zones will benefit from lower taxes and liberalised planning frameworks to encourage business investment.

The government is already in discussions with 38 local authorities to establish investment zones in England. In addition, it says it will work closely with the devolved administrations to offer the same opportunities in Scotland, Wales and Northern Ireland.

Businesses in designated areas in investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.

In addition, businesses will receive full Stamp Duty Land Tax relief on land bought for commercial or residential development and a zero rate for employer NICs on new employee earnings up to £50,270 per year.

There will also be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.

As well as time-limited tax benefits there will be designated development sites that will release more land for housing and commercial development in the zones. The need for planning applications will be minimised and streamlined.

Stamp Duty Land Tax

A number of changes are made to the Stamp Duty Land Tax (SDLT) regime. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold is increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief is increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief is increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Residential rates may be increased by 3% where further residential properties are acquired.

Other comments

There were a number of other interesting comments made by the Chancellor which suggest future policies and changes, although lacking detail at the moment.

IR35 and off-payrolling

Over the last 20 years, there have been numerous changes to the tax system to try and address ‘disguised employment’ and to generate additional tax and NICs accordingly. In a surprise announcement, the government has stated that it will repeal the off-payroll working rules from 6 April 2023. From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.

Infrastructure

The Chancellor announced plans to accelerate new roads, rail and energy infrastructure with new legislation which will cut barriers and restrictions. This will make it quicker to plan and build new roads, speeding up the deployment of energy infrastructure such as offshore wind farms and streamlining environmental assessments and regulations.

State benefits

Universal Credit claimants who earn less than the equivalent of 15 hours a week at the National Living Wage will be required to meet regularly with their work coach and take active steps to increase their earnings or face having their benefits reduced, broadly from January 2023. Jobseekers over the age of 50 will also be given extra time with Jobcentre work coaches, to help them return to the job market.

VAT-free shopping areas

The government will introduce a modern, digital, VAT-free shopping scheme with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors. The delivery will include modernising the scheme that currently operates in Northern Ireland and introducing a new digital scheme in Great Britain. The new VAT-free shopping scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.

Alcohol duties

Reforms to modernise alcohol duties will also be taken forward and the government has published a consultation response on these plans. The reforms will be implemented from 1 August 2023. The government is also freezing the alcohol duty rates from 1 February 2023 to provide additional support to the sector.

Further announcements

Over the next few weeks, the government will set out further details of plans to speed up digital infrastructure, reform business regulation, increase housing supply, improve our immigration system, make childcare cheaper, improve farming productivity and back the financial services sector.

Government announces plans to help cut energy bills for businesses

On 21 September 2022 the government announced a new scheme, the Energy Bill Relief Scheme, which is designed to cut energy prices for non-domestic energy customers, such as businesses, charities and public sector organisations. The new scheme is in addition to the recently announced Energy Price Guarantee for households.

The scheme will apply to fixed contracts agreed on or after 1 April 2022 in addition to deemed, variable and flexible tariffs and contracts. Running for an initial six-month period, the scheme will apply to energy usage from 1 October 2022 to 31 March 2023. According to the government, savings will first be seen in businesses’ October bills.

Businesses are not required to take action or apply for the scheme, support will be automatically applied to bills.

The government intends to conduct a review of the scheme in three months to assess:

• how effective it has been in giving support to vulnerable, non-domestic customers
• which groups of non-domestic customers remain vulnerable to energy price rises
• the extent to which the scheme could either be extended or further targeted.

Support after 31 March 2023 will be determined following the review.

Energy Price Guarantee plan caps household bills

Prime Minister Liz Truss announced the Energy Price Guarantee (EPG) for households on 8 September 2022 which will apply from the start of October 2022. The EPG means that an average household will pay no more than £2,500 per year for each of the next two years. It comes in addition to the £400 Energy Bill Support Scheme and will save the average household at least £1,000.

The EPG limits the price suppliers can charge customers for energy supplies. This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.

Under the plan, those households who do not pay directly for mains gas and electricity, such as those living in park homes or on heat networks, will be no worse off and will receive support through a new fund.

The government estimates that the EPG will deliver substantial benefits to the economy, boosting growth and curbing inflation by four to five percentage points, which will in turn reduce the cost of servicing the national debt.

The government will provide energy suppliers with the difference between this new lower price and what energy retailers would charge their customers if this were not in place. Schemes previously funded by green levies will also continue to be funded by the government during this two-year period to ensure the UK’s investment in homegrown, secure renewable technologies continues.

New plan for patients aims to tackle NHS backlog

Health and Social Care Secretary Thérèse Coffey unveiled the government’s new ‘Our plan for patients’ on 22 September 2022, which aims to tackle NHS backlogs.

The centrepiece of the plan is the expectation that everyone who needs an appointment at a GP practice should get one within two weeks, with patients with the most urgent needs being seen the same day.

The plan also includes changing funding rules to recruit extra support staff so that GPs can focus on treating patients. The government says this will free up over one million appointments per year.

There will also be ‘more state-of-the art telephone’ systems to make it easier for patients to get through to their GP surgeries. In addition, more information will be available for patients, with appointments data published at a practice level for the first time ever.

Pharmacies will help ease pressures on GPs and free up time for appointments by managing and supplying more medicines without a GP prescription and taking referrals from emergency care for minor illnesses.

The post MINI BUDGET SEPTEMBER 2022 appeared first on Assure Accountants.

In this blog we explore all that, to help you confidently borrow money from your Limited Company.

How does it work?

It doesn’t matter how much or for how long you wish to borrow from your small business, but what does matter is how much you have in your business bank account, and that you have enough to account for tax, any staffing costs, and other business depreciation elements.

Taking money out of your small business legally

There are various ways you’re able to take money out of a Limited Company, including:

1. By paying yourself a director’s salary
2. By issuing dividend payments from available profits within the company
3. In the form of a director’s loan
4. By claiming expenses for business-related items

A director’s salary

Most directors of Limited Companies will pay themselves a salary through PAYE. Depending on the amount you pay yourself, you may also need to pay National Insurance Contributions (NICs), and/or income tax. All salary payments are a tax deductible expense, so your company will not be liable to pay any Corporation Tax liability on this money. Your company will however, be subject to paying the 15.05% Employer’s NICs on any salary earnings that fall above the NIC Secondary Threshold of £9,100 (for the 2022/23 tax year).

Paying yourself a salary up to the NIC Secondary Threshold of £9,100 means no income tax or NI is payable. This value does still allow you to qualify for the State Pension and any other benefit entitlements, as your income exceeds the Lower Earnings limit of £6,396 per annum.

Another popular salary level taken by directors is the tax-free Personal Allowance of £12,570, whereby you won’t be liable to pay Income Tax, but you must pay employee NIC contributions on any earnings between £11,908 and £12,570.

Dividend payments

Any shareholder of the Limited Company is able to take profit out of the company in the form of dividends. You can only do so though when there’s profit in the company, otherwise the dividend is classed as ‘illegal’.

The total amount you’re able to pay yourself is dependent on the number of shares you personally hold, so for example if you hold 100% of the shares then you’re able to take the remainder of the profit from your company once all other costs have been accounted for (i.e. tax, expenses, etc).

All Limited Companies have to pay 19% Corporation Tax on taxable income (which is going to increase to 25% for all profits exceeding £250,000 from 1 April 2023). The first £2,000 of annual dividend income is taxed at 0%, and is free from NICs and Income Tax. Any amount that exceeds the £2,000 limit will be subject to dividend tax that’s based on your Income Tax band (ie basic, higher or additional rate tax).

Before you pay out a dividend you must declare the dividend to the board, and make a written record of the meeting’s minutes. This provides a black and white paper trail of what was said and when, the amounts issued and to whom. You must also keep a record of a dividend voucher, which will display the dividend’s details.

Director’s Loan

By taking money from your company in the form of a Director’s Loan, you’re able to:

1. Lend money back to your company
2. Borrow more money from your company than the original amount you paid in
3. Reclaim any money you originally paid into the company

You must keep and maintain records of Director’s Loans in a Director’s Loan Account, which must be shown as part of your company’s balance sheet.

If you decide to take out more money than you’ve paid into the business, your Director’s Loan Account will become overdrawn, and there are tax implications from being so. If your company owes money then your loan account will be in credit and you’ll be also to take money out without facing any tax liabilities.

For example – if you owe your company less than £10,000:

• There are no personal tax liabilities, but there may be tax consequences for your company if your loan is overdrawn for more than 9 months following your company’s yearend (your company’s filing deadline). If this is the case then the company must pay Section 455 Tax on the full amount overdrawn
• Section 455 Tax carries a 33.75% tax charge (32.5% for loans prior to 06/04/2022), which your company is liable to pay alongside its Corporation Tax liability
• You must display any outstanding loan amounts on your company’s tax return

If the amount you owe your company exceeds £10,000 at any point:

• If the loan from your company is overdrawn for more than 9 months from your company yearend, there may be tax consequences. If this is the case the company must pay Section 455 Tax on the full amount overdrawn
• Section 455 Tax carries a 33.75% tax charge (32.5% for loans prior to 06/04/2022) which your company is liable to pay alongside its Corporation Tax liability
• Any outstanding loan amounts must be displayed on your company’s tax return
• When a director’s loan exceeds £10,000, if you repay the loan to the company with interest applied (at HMRC’s official rate of interest) the loan will not be classed as a taxable benefit
• If the loan is repaid minus the interest you’ll need to declare the loan via your company P11D and your Self Assessment Tax Return. This is because the loan is deemed as a benefit in kind (BiK) for the Director to receive an interest-free loan from the company
• The value of the benefit is calculated at the official rate of interest. Class 1A National Insurance at 15.05% will then be payable from your company via form P11D, and the benefit will also be included within your personal tax return, taxed at your appropriate rate of tax

What you need to keep a record of when it comes to Director’s Loans:

• The value of money a Director gives to the company, excluding any share payments they may take
• The total value a Director may borrow from the company
• Any interest that may be payable on that loan

These records are usually kept within the Director’s Loan Account. It may be subject to certain types of tax, depending on how much is borrowed. It’s therefore advisable to discuss your plans with your Vantage Accountant before borrowing any money from your Limited Company.

What if your Director’s Loan Account has zero balance, or is in credit?

If you take out less than the total balance you’ve paid in, you’re not borrowing any money, and therefore claiming funds which you’ve already paid in.

The Director’s Loan Account will either show a balance of nil or remain in credit, depending on the total amount you draw out. You’re able to take out the available balance at any given time without any tax implications, so long as your company account is in credit.

What happens when your Director’s Loan Account is overdrawn?

If you draw out more than what’s already in there (discounting a salary payment, dividend or expense) the withdrawal is a benefit, and will therefore be classed as a Director’s Loan. This will in effect make your Director’s Loan Account overdrawn.

Your Limited Company’s financial year

If your account remains overdrawn for 9 months after the end of the accounting period, HMRC will charge you S455 Tax at a rate of 33.75% (32.5% for loans prior to 06/04/2022). You are able to claim back the tax paid once you’ve paid the full amount of overdrawn money back into your Limited Company.

Expenses

You are able to reclaim the cost of expenses, so long as they were purchased wholly and exclusively for the purpose of the business. You must keep all receipts and a record of each expense, what they were needed for and when. You are able to claim tax-deductible expenses in the following forms:

• Parking and mileage costs
• Travel and accommodation
• Mobile phone contract costs
• Entertainment
• Food and drink
• Computer and office equipment
• Training costs
• Postage costs

If the expense is incurred personally on behalf of your business you’ll be reimbursed by your company when you’re paid weekly or monthly, or whenever is convenient to you. Your company must keep a record of all expenses for a period of 6 years, along with what the expense was and what it was needed for.

How your Vantage Accountant can help

Tax is confusing, especially when it comes down to working out your % margins, what taxes are due and when, and how much extra you could end up paying if you get your numbers wrong. That’s where your expert Vantage Accountant comes in handy, to help you navigate the complex world of running your Limited Company. If you’re considering borrowing money from your company give your Vantage Accountant a call today.

The post How to borrow money from your Limited Company and the associated tax risks appeared first on Assure Accountants.

Where are we?

Located in unit B9 of the Arena Business Park, our friendly team are busy working away, keeping our clients’ accounts up to date and helping them run their small businesses in the most tax efficient way possible. Our phone number and contact emails haven’t changed, so if you need to get in touch you’re still able to reach your Vantage accountant exactly as you did before.

What does this mean for our clients?

Other than our temporary location from now until the end of 2022 when we’ll be relocating to our new office in central Ringwood, nothing else has changed. If you need our assistance face-to-face, where possible your Client Director can still come and visit you, or you’re more than welcome to visit us in Ferndown for a chat and a cuppa. And of course, our offices in Winchester and Totton are still staffed and ready to welcome our local clients there too.

What if you’re looking for an accountant?

We’d love to hear from you! We service the needs of small businesses, from Limited Companies, Sole Traders, eCommerce sellers, buy-to-let landlords, or if you simply need a tax return and advice or financial services, we can help you out. Get in touch to find out more, or if you’d like to pop in for a chat with one of our accountants we’d love to hear about your professional needs and how we can help you.

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A much anticipated Spring Statement was delivered on March 23rd by Chancellor, Rishi Sunak against a backdrop of war in Ukraine, post pandemic super spending and an ever increasing rate of inflation. With that in mind I was expecting some headline grabbing announcements. I’ve highlighted below some of the key points, but if you want to see the full details you can read them in our full pdf guide: Spring Statement March 2022

• The National Insurance threshold is being increased by £3,000 to bring it in line with the Income Tax Personal Allowance. This is a Class 1 saving of over £330 per year now based on the increased rate of 13.25% including the new 1.25% Health and Social Care Levy
• The planned Health and Social Care Levy of 1.25% will go ahead from April this year
• Personal Income Tax will be reduced from 20% to 19% by the end of this government (2024)
• The OBR predicts the rate of inflation for this year to average 7.4% and the economy to grow by 3.8%
• For the next five years, there will be no VAT applied to energy-saving materials including solar panels, heat pumps and insulation
• Fuel duty will be cut by 5p per litre from this evening at 6pm. This is a temporary measure until March next year
• The employment allowance to help with the costs of Employers National insurance is being increased to £5,000 from £4,000. Single employee/Director companies are not eligible for this allowance

If you are a Assure Accountants client, your accountant will be in touch if these changes affect you. If you’re not a Assure Accountants client but are looking for an accounting partner to support you with the minefield of legislation and tax, then get in touch today. We’d love to hear from you.

The post The Spring Statement 2022 – the lowdown appeared first on Assure Accountants.

Q1 – As an accountant, what’s the best piece of advice you’d give to a small business owner?

Even after your business has taken off it is still beneficial to budget and be aware of cash flow, ensuring that you always have enough capital to pay for any forecasted expenses, and regularly updating to allow for any adjustments to your business plan. I was once told that most businesses fail in their first year of trade, but this is not necessarily because of the business itself, it would be down to managing cash flow.  Also, always check if anything has changed and to keep updated with any requirements specific to your business, such as insurances or specific software and equipment that would need to help grow the business.

Q2 – What’s the most common topic you’re quizzed about by your clients?

It has to be dividends! With the end of the tax year in sight a lot of our clients are wondering what the tax rates currently are, if they have any unused allowance, and if the rates are changing in the new tax year. Here’s a little background information about dividends, in case you’re wondering what the answers are:

Dividend tax changes – rates will increase from 6 April 2022. The below points highlight the current % you pay based on which tax band you fall into, and what you can expect to pay from April onwards:

• If you’re a basic rate taxpayer – increase from 7.5% to 8.75%
• If you’re a higher rate taxpayer – increase from 32.5% to 33.75%
• If you’re an additional rate taxpayer (for those earning over £150,000) – increase to 39.35%

Self Employed

• If you’re a basic rate taxpayer – increase from 9% to 10.25%
• If you’re a higher rate/additional rate taxpayer – increase from 2% to 3.25%

Employees

• If you’re a basic rate taxpayer – increase from 12% to 13.25%
• If you’re a higher rate/additional rate taxpayer – increase from 2% to 3.25%

The £2,000 dividend allowance isn’t set to change, so you’re able to continue to enjoy the first £2,000 at 0%.

If you have unused allowance then speak to your Vantage Accountant, who will be able to advise the maximum dividend you’re able to take whilst remaining in the lower tax band. Our blog on dividends has a deeper look at the facts and figures behind the upcoming changes should you want to take a more in-depth look at dividends, or alternatively speak to your accountant.

Q3 – The Spring Statement is due March 23^rd. What would you like to see announced that would really help small business owners?

In an ideal world after the last few years that everyone has been through, it would be great to hear that decreases to rates would be announced in the Statement, but unfortunately HMRC will be trying to make up for the grants they have helped some businesses with during this time. As inflation has increased it would be handy if lower VAT rates were introduced to entice businesses and individuals to keep spending, along with maybe an increase in the VAT registration threshold to help small businesses trade for a little longer before they are required to register. Many of these things are the same points that come up year after year, but one can always hope.

Q4 – If a small business is just starting out, what’s the first thing they should do (other than sourcing a reliable accountant!)?

It is not uncommon to make a loss in your first year of trade, as you are starting out you will have a lot of expenses or capital assets that you may need to consider whilst your business kicks off. It would be within your interest to get up to speed and set reminders for when your accounts and tax will be due, alongside the tax rates for your business so you know how much to keep aside for your tax liability at the end of the year so it isn’t a surprise – HMRC don’t wait to send out penalties for any late filings. These are all things we can help with so please feel free to get in touch if you have any queries. Also, from the moment you start trading it is ideal to keep ahead of the game and stay organised with your accounting records. Make sure all receipts are kept and recorded in a spreadsheet or software to keep an eye on your costs throughout the year.

Q5 – What piece of advice would you give to your clients who have been in business for a while?

One thing is certain with what we have learned with Covid, the world can change suddenly, so you should make sure that your business is diverse enough for future change. It is always a good idea to budget and plan throughout the year and not just at the end when your accounts are complete, allowing for any variances that could happen as and when they arise, such as a regular customer not paying you. Alternatively, if you have been in business for a while and have built up some spare funds, utilising them in the best way can help benefit you in the long run. It is always a good idea to keep some cash aside for anything that can come up, but it may be beneficial to check if there are any specific allowances that you can take advantage from to use some of the surplus cash, such as the temporary super allowance with 130% tax relief on qualifying assets, or maybe contributing into a pension might suit you as another way of getting some tax relief.

Q6 – For seasoned small business owners, is there any tax legislation they should particularly be focusing on this year to help maximise their take home pay?

Understanding your tax thresholds and what you’re entitled to is the best way to make the most from what’s available to you, and therefore make the most from your take home pay. We’ve recently written a blog that details what you can do before 5 April 2022 to make the most from your tax allowances, and another blog that looks ahead to the new tax year, and what you can be doing to get a head start. Your Vantage Accountant will also be able to advise you further, based on your personal and professional goals.

Q7 – What’s your favourite part about being a Vantage accountant?

I like being able to help people wherever I can, whether it be with something simple like advising their forecasted tax to plan at the end of the year for, or something in a bit more detail like intercompany loans. It is also great to build relationships with clients and learning about the different varied businesses they have and what they do, enabling me to help advise for each client individually.

Q8 – Tell us something about you personally that your clients won’t know

I like to be as eco-friendly as possible and have tried to increase my recycling over the last few years, finding places outside of my local council collection to venture to. I was amazed to find that there are all sorts of recycle schemes, ranging from toothpaste tubes and make up brushes to a variety of all sorts of plastics.

Q9 – What do you enjoy doing when you’re not helping Vantage clients

I like the natural world so when I am outside the flat I like to explore new places, whether it be off path deep in the forest or far down a coastline somewhere, half the fun is finding your way back home before it gets too dark. On a rainy day I like to look after and propagate my plants, its great watching them grow from seed and watching them flourish.

Q10 – What made you decide to become an accountant?

When I was at school, numbers were one of the things that always made sense to me. When it came to number puzzles and problems, mathematics felt like second nature to me. As an added bonus I always enjoyed any challenge and love my spreadsheets outside of work too, so who wouldn’t want a job they enjoy! I have also never really liked the fact that HMRC like to take as much tax as they can, so I thought it looked like a perfect opportunity to try and put the two together, helping business owners run their business in the most tax efficient way.

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