• 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.

The post The Autumn Statement 2022 Full Report – what it means for small business owners appeared first on Assure Accountants.

In this blog we focus on just that, and explore the top 7 things you can be doing to reduce your income tax bill in 2022.

1. Make pension contributions

Personal pension contributions are made from taxed money, so whilst you the taxpayer will pay in X net amount (for example 80% if you’re a basic-rate taxpayer, 60% if you’re an higher-rate taxpayer, or 55% if you’re an additional-rate taxpayer), HMRC will directly contribute the tax paid on that contribution, into your chosen pension scheme. The amount as a whole is then invested tax-free, so for example if you’re a basic-rate taxpayer you’d pay £80 and HMRC would pay the remaining £20. The total investment would then grow without income tax or Capital Gains Tax.

If you’re aged under 75 and are a UK resident that’s not currently receiving your pension, you’re able to contribute a maximum of £40,000 per annum from your earnings, and still receive this tax relief. If you have a spouse ensure they’re also doing the same to make the most from this allowance.

2. If you have a partner, make pension contributions on their behalf

If your partner isn’t currently earning, you are able to contribute to their pension in a tax-efficient manner, so long as you yourself are paying tax. Your partner must be a UK resident, not earning themselves, and also not already be receiving a pension. You’re able to contribute a maximum of £2,880 per annum, and HMRC will ‘top this up’ to £3,600 with the remaining £720.

3. Make sure you’ve used all of your pension annual allowance

If you have any unused allowance from the past three years you’re able to carry it over, so long as the pension scheme was in place during these years. It’s worth having a look back over your contributions to check you’ve used all of your allowances since 2019 to date.

4. Make a financial gift to charity

When you give a gift to a UK registered charity it’s exempt from income tax, so long as you sign a gift aid declaration when making the contribution. So for example, if you were to give £80 of your taxed money to a charity, HMRC will again pay the additional 20%, so the charity would in fact receive £100. Again if you’re a higher or additional-rate taxpayer, then the tax bands are extended, respectively.

5. Transfer investments to your partner

If you have investments, it’s advisable to revise them annually, so that you can ensure they’re in the best proportion for tax purposes, should you happen to share them with your spouse. If any funds you have are generating interest, and your spouse isn’t receiving an income from employment, trading or property lettings that exceed £17,570 in 2022/23, then the first £6,000 of the received amount will be tax-free.

If your spouse happens to have non-savings earnings greater than this amount, basic-rate taxpayers should earn a minimum of £1,000 interest, and for higher-rate taxpayers it’s £500 to be able to take advantage of the personal savings allowance.  Should the investment income generate dividends, then each spouse should hold enough capital to generate dividends of £2,000 (which is the annual dividends allowance – but do be aware that this allowance is by no means tested).

6. Transfer your personal allowance to your partner

The marriage allowance allows you to transfer 10% of your personal allowance to your partner, and vice versa, so long as you’re both paying the basis-rate tax amount. By doing so this process could save you up to £252 per annum, which can be done online through HMRC.

7. Check you’ve used all of your ISA allowances

ISAs are a great way of increasing your income tax-free. Whether its stocks and shares you choose to invest in, or cash ISAs, whatever you choose you have a limit of £20,000 for the tax year 2022/23, and £9,000 for a Junior ISA.

How your Vantage Accountant can help you

One of our main goals as your trusted contractor accountant is to ensure your money is working as hard as it can for you, in the most tax efficient way possible. Our expertise in the complex and sometimes demanding issues Limited Company contractors face mean that it’s our job to ensure you receive the right advice and support you need, in order to maximise your income. Get in touch with your Vantage Accountant to discuss any points raised in this blog.

The post Vantage’s top tips for reducing your income tax bill in 2022 appeared first on Assure Accountants.

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.

3 ways to trade tax-efficiently in 2022/23

1. Use the optimum salary levels for 2022/23

There are two main scenarios for salary levels if you are the Director of your own Limited Company For the majority of cases the salary level should be:

• If you have more than one employee in the company (i.e your spouse) – £12,570: You’re able to continue to claim employment allowance when you have more than one employee through the business. This will in turn reduce the employer’s National Insurance payable.
• If you’re the only employee in your company – £9,100: If you as the Director are the only employee of your company then the employment allowance is withdrawn. You’ll still qualify for state pension entitlement with a salary of £6,396 pa.

As salaries are treated as a business expense, Corporation Tax relief is available. The salary levels are below the personal tax free allowance.

2. Increase the amount of dividends being taken from the Company

The basic rate tax band remains the same as the previous tax year, at £50,270. This therefore means you’re able to earn a total income of £50,270 pa before you’d have to pay the higher rate of tax. The optimum amount of dividends for most people in each tax year will be:

• £37,700 per year (6 April to 5 April) or £3,141 per month, if on a salary of £12,570 per year
• £41,170 per year (6 April to 5 April) or £3,430 per month, if on a salary of £9,100 per year

If you have any other forms of income, these must also be taken into consideration. This can be from anything, such as rental income, bank interest, other employment income, etc. Once you’ve calculated your total complete income you may need to reduce the dividends accordingly, to ensure you remain in the lower tax band. Remember that the first £2,000 of dividends you receive are taxed at a rate of 0%.

3. Don’t take out unnecessary funds from the company

You have the ability to decide how much tax you pay, based on the amount of dividends you take. To be the most tax efficient possible you should take dividends and salary based on the advice in points 1 and 2 above, and for any extra profit to be left in the company if you don’t need it.

What happens to the money left in the company?

You have a few options with what to do with it:

1. You can make investments in the company name – ie shares, bonds, property. Although it is worth getting advice from your Vantage accountant before doing so, to ensure the trading status of the company is preserved.
2. Make one-off larger dividend payments and pay the higher rate of tax (33.75%) or additional rate (39.35%) tax. There are ways to mitigate this also, for example in the form of income tax relief on EIS, SEIS and VCT investments.
3. Leave the money within the company. When you decide to stop trading you can either:

– Draw out £2,000 per year, at a rate of 0%

– Liquidate the company and draw out the total profits in one lump sum at 10% tax rate using Business Asset Disposal Relief, subject to the new 2 year rule

4. Pension contributions are not just attractive to the over-55’s. It’s advisable that you make contributions, as you’ll make tax savings at the highest rate of tax, or at least up to the annual contribution limits (i.e – 100% of salary or £40,000, whichever is highest), as well as Corporation Tax relief level at 19%.  Annual contribution limits, utilising both the current year and previous years with under-utilised allowances, and drawdown can be complicated, therefore we suggest speaking with our trusted financial adviser, who will be able to advise you on the set up of your pension and administer advice, should you require it. Simply get in touch with your Vantage Accountant, will be able to point you in the right direction.

What else should you consider?

Payments of dividend tax
The tax on dividends is a personal tax liability and will be payable annually as part of your Self Assessment tax return calculations. This will be due by the 31 January following the end of the tax year. Once you have taken account of any other income, tax on dividends is at the following rates:

The first £2,000 in dividends will be taxed at 0%. Above this dividends will be taxed at the following rates from April 2022 onwards:

• 8.75% for basic- rate tax payers (on dividends falling below £50,270)
• 33.75% for higher-rate tax payers (on any dividends above £50,270 per year and below £150,001)
• 39.35% for additional-rate tax payers (on any dividends above £150,000 per year)

Payments on account
If you had not paid tax (or had a liability below £1,000) under Self Assessment previously you will have not had to make payments on account. It is likely however that you will now be bought within the payment on account regime. Payments on account are payments towards the following tax year.

For example if you had a liability of £2,000 for the year ended 5 April 2022, your tax payable would be:

Due 31 January 2023 – £3,000.00 made up as:

• £2,000 – tax due for the year ended 5 April 2022
• £1,000 – 50% of tax towards the year ending 5 April 2023

Due 31 July 2023 – £1,000 made up as:

• £1,000 – remaining 50% of the tax towards the year ending 5 April 2023. This is known as your second payment on account

This will be taken into account the following year, and then the same process continues with payments on account for the following year.

Corporation Tax Rate
The Corporation tax rate will remain at 19%, but will increase to 25% from April 2023.

What are the next steps?
Ahead of the new tax year we will be taking a look at each of our client’s individual circumstances and will be advising adjusting salary levels to the figures shown below:

• £12,570 per year if more than one employee through the Company
• £9,100 per year if only one employee through the Company

The payroll summary will be emailed at the start of the new tax year in April 2022.

How Assure Accountants can help

As always if you have any questions regarding any points raised in this blog, or would like to discuss your tax planning for the new tax year in greater detail, get in touch with your accountant. We’re here to help you make the most from your company, and make your money work as hard as possible.

The post Tax planning for small business owners in 2022/23 appeared first on Assure Accountants.

So what are your options when considering purchasing an electric car, and how much tax can you expect to pay? In this blog we explore all that, plus any attractive tax benefits that are associated with your green mode of transportation.

Company cars

If you’ve ever considering purchasing a car through your Limited Company before, the cost of doing so may have put you off. The increasing tax and perceived hassle with keeping a record of your outgoings may have seen more trouble than it’s worth. But with the recent changes to tax and the introduction of electric cars, if you’re considering changing your car, then your luck is in!

The rise of the electric car

Electric car popularity is set to rise, at a compound rate of 29% between now and 2030. Set to play one of the biggest roles in the government’s plans to meet their targets in reducing the UK’s carbon emissions, HMRC are giving a helping hand by reducing the Benefits in Kind (BiK) tax for electric cars to zero. The BiK rate will rise soon, but even with the planned increase, it’ll still offer a great deal for those looking to buy electric.

How will electric cars be taxed?

Car tax is currently split between what you as an employee of your Limited Company pays, and what your Limited Company pays. The amount of tax due is dependent on its actual value, the BiK tax, and the car’s emissions.

Depending on your current tax band, as an employee of your Limited Company you’ll need to pay income tax on this value. For example:

Basic rate tax band – you’ll pay 20%

Higher rate tax band – you’ll pay 40%

To calculate your employee tax, you’ll need to do the following calculation: (P11D value) x (BiK band) x (tax bracket). Your Vantage accountant will be able to calculate this for you.

Your Limited Company will need to also pay National Insurance Contributions (NICs) on your company car. BiK tax comes in various bands, and the higher your car’s Co2 emissions, the higher the band you’ll fall into. You’re able to see your car’s Co2 emissions and your tax band by visiting the gov.uk website.

Before April 2020 the BiK for electric cars was 16%, so for example, if your car’s list price was £30,000, your BiK would be £4,800 (16% of £30,000). You’d then need to personally pay income tax on this amount, depending of course on which tax band you fall into (20% or 40%). Your Limited Company will also pay National Insurance on this via the P11D form (13.8% of the BiK).

Good news for electric car owners

April 2021 saw good news for those about to purchase an electric car, as the BiK dropped from 16% to 0%. It will rise to 1% in 2021/22, and then 2% in 2022/23. After this rise there are no further announcements, but the government has committed to releasing any planned BiK increases at least up to two years in advance, so as to allow people to properly plan, and to also provide certainty.

The tax on vans

If you use your van for both personal and professional use, you’ll be liable to pay a ‘van benefit charge’, which is currently £3,500. As with cars, you’ll need to also personally pay 20% (or 40% if you’re in the higher rate) of the BiK (£3,500) via your Self Assessment Tax return, and 13.8% via your company’s P11D.

What about hybrids?

A hybrid’s BiK will depend on the distance it can travel whilst remaining in its low electric mode, as well as it’s Co2 emissions. For example:

If your petrol hybrid can travel between 30 and 39 miles alone – you’ll pay a BiK at 11%

If your petrol hybrid can travel between 40 and 69 miles alone – you’ll pay a BiK at 7%

Even though the BIK rates are greater than pure electric models, it’s still substantially lower than the BiK rates (up to 37%) which you’d pay for a purely petrol or diesel car.

Which is best for you?

If you still feel like having the best of both a fuel and electric car is the right decision for you, then a hybrid might be the best option. Whilst we’re moving towards having electric plugs and points outside our homes, and plenty of charging points around the country, they’re still few and far between, so having the comfort of knowing you’ve also got a backup of fuel on-board may be the right option for you.

No doubt by 2030 when the ban comes into force charging points will be everywhere, along with batteries with much greater lives, but until then a selection of both might be best.

What other savings are there?

A low emissions car may also mean savings in Corporation Tax. For certain low emission cars there’s 100% first year allowance, which means you’re able to put the cost of the car’s purchase value towards reducing the profits from your Limited Company, and ultimately save on Corporation Tax. Should you lease rather than purchase, you’re also able to use the lease payments to offset your company’s profits, and therefore also reduce your company’s Corporation Tax liability.

What’s in the future for electric cars?

Whilst we can’t say for sure whether teleporting will be a reality by 2030 (and we can’t wait to see how HMRC would tax that mode of transportation!), we do know that the popularity for electric cars will only continue to grow, and as this blog has proven, be cheaper from a tax point of view.

How your Vantage accountant can help

With another 8/9 years to go until the ban comes into full force, there’s plenty of time for the technology to develop and electric to become the new norm. But if you’re considering purchasing a new car in the next year or so, be sure to run your decision past your Vantage accountant to know exactly how much you can expect to pay in tax, and whether going electric or hybrid could save you money based on your own personal circumstances. We look forward to helping you on the way to embracing greener travel and saving you money in the process.

The post How much tax can you expect to pay with an electric car? appeared first on Assure Accountants.

But when it comes to partying during the festive period, are you allowed to claim your party expenses? The answer is ‘yes’, but there are some rules you must abide by. In this blog we outline the dos and don’ts to having a good time this festive season, courtesy of HMRC.

Allowable business expenses

HMRC usually like to take money from small businesses, so it may come as a surprise to learn that when it comes to entertainment costs, they are rather quite generous. Before you start planning a festive party that even Father Christmas would be RSVPing to, there are a number of rules you must stick to.

The rules

As a director of your own Limited Company, you’re able to host events throughout the year, which are exempt from Tax and National Insurance, so long as you abide by the following:

• The total cost of all events collectively throughout the year do not exceed the limit of £150 per person
• The event is annually reoccurring
• All employees are able to attend
• The £150 limit must include VAT, and any other additional costs such as travel and accommodation
• If you’re not able to physically attend an event, or because of current circumstances would prefer to host a virtual event, you can send each employee a hamper, or box of wine for example, up to the value of £150
• If you or any of your employees are part of a salary sacrifice scheme, you have to report the amount to those employees

What if it’s just you in your company?

As long as the event you’ve planned follows the above rules, then you’re still allowed to enjoy yourself, free from Tax and National Insurance.

What if you have employees?

There are no limits to the number of employees you can invite.

Remember! The cost of an event is an exemption, not an allowance

The £150 is an exemption, not an allowance, so don’t be tempted to go over the limit. If you do, even by a penny, the whole expense will be subjected to Tax and National Insurance, so don’t be tempted to party like a rockstar!

It’s simple to calculate the cost of your event:

If it’s just for you – total up all of the associated costs

If it’s for you and your employees – add together all costs, and divide it by the total number of employees to get the cost per head

Vantage’s final thoughts

Remember that whilst it would be lovely to have the £150 limit per event, it’s per year, so you could have multiple events, but only the £150 once.

How can your Vantage accountant help?

No one likes to be out of pocket, especially at this time of year, so before parting with your cash be sure to run your party plans past your Vantage accountant.

As a Vantage client your expert advice and support is only a touch of a button or phone call away, we might even be able to suggest some good local venues for your party to take place! Get in touch with the team today.

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In this blog we explore the ways in which you can help your business thrive in 2022, with 6 easy New Year’s resolutions you’ll actually want to keep.

Nurture the good – throw away the bad

One really easy resolution is to take a look back over the past year at what worked really well for your business, and what maybe didn’t. Is there anything you can continue to do or develop, or maybe there’s something which just isn’t working for your business anymore. Whatever it is, be sure to identify it, what made it a success or failure, and learn from it.

Understand the power of marketing

Whether you’re a buy to let landlord, a café owner or a dog walker, whatever you do you’ll need new customer’s business in order to grow. One way to gain new clients is to create a marketing strategy for the New Year.

To some, self-promotion is second nature, and they find it very easy to shout about their business to prospective clients. If this isn’t you, then here are a few tips for you to include in your 2022 marketing plans:

• Identify your client base and understand their needs
• Consider approaching your clients for referrals. Could you offer them an incentive for successfully promoting your business to a friend who then goes on to become a new client?
• Cross / up sell your products to current clients, if they have additional needs your products could satisfy
• Utilise social media. It’s a fantastic way to see where your clients are and promote your services directly to them. And it’s free!
• Take a look at advertising in local publications that are distributed in your local area. Usually for a small fee you can run a print ad in a local newsletter, which would also probably include a mention in their email newsletter and also on their social media
• Ask your current clients for google reviews. Word of mouth is such a strong form of promotion (who doesn’t read Amazon reviews before making a purchase?!) and if you’ve got happy clients, it’ll really help new clients in making their decision whether to use your services or not
• Ask other business owners what has worked well for them, and if their service compliments yours you could even collaborate on a special offer or promotion

Build your business plan

Building a business plan can sometimes seem overwhelming, but it needn’t be. There’s no set plan to what you must include, so build one that works for you and your goals. If you’re having trouble getting going, think about where you want to be this time next year, and how you can achieve your goals. By doing so you’ll also have a clear indicator on how well your business is doing financially, and what you might need to spend money on the following year.

You can find plenty of free business plan templates online, so if you find easier to follow a structured plan where you just fill in the gaps, this may be the best option for you.

Create a business to-do calendar

So you’ve got your marketing and business plan sorted, what’s next? Looking at the big picture with twelve months’ worth of work to do will be a lot to take in at once, so have a think about what you can achieve on a monthly, quarterly and annual basis. Create a plan on what you need to do every week to keep on top of things, and at the end of each month do a round-up on how well certain things are working.

Ensure you are also setting yourself some personal goals. This can be anything, from getting your personal pension sorted, to thinking about financial planning or investing. A specialist small business accountant will be able to advise you on all these areas, and help ensure you’re taking care of your most important client – you!

Cut costs where you can

Now is the perfect time to review your outgoings and see if there’s anywhere you can save the pennies. Is there a particular supplier that has increased their prices, or a cheaper insurance or energy provider you could swap to which would free up more of your cash flow? Whatever it is, it’s worth taking the time to shop around to see if you can save money, which ultimately will mean more money in your pocket.

Get the right professional support

Do you find yourself struggling to get your accounts done, or frantically panicking come tax return season to ensure you’ve included everything to keep HMRC from knocking on your door? There’s a reason why accountants exist, and for a monthly fee you can offload the stress and time constraints that come with trying to do it all yourself, to someone who’s business is looking after yours.

The same can also be said for needing extra staff, help with managing your marketing, the day to day running of your business, the list is endless! Hiring extra help can free up more of your time to drive your business forward. And if it doesn’t work out, it’s not a permanent fixture, so you won’t lose out financially in the long run.

How Assure Accountants can help you

We look after small business owners every single day. Whether it’s help with your taxes, bookkeeping, financial services or even just for some advice, we’re here to help make your business a success. With friendly local offices in Ringwood, Totton, Winchester and London we actively encourage our clients to pop in for a chat over a cuppa, whenever you need to see us. If this sounds like the type of friendly expert advice you need to help drive your business forward in 2022, get in touch today.

The post Ways to prepare your small business for 2022 appeared first on Assure Accountants.

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.

Personal Tax

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.

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:

• 5% for basic rate taxpayers
• 5% for higher rate taxpayers
• 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.

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.

Employment

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.

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.

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.

Business

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.

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.

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.

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 reliefin 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 multiplierfor 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 investmentand 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 2023to protect small businesses from significant bill increases in the final year of the current revaluation cycle.

Capital Taxes

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.

Other Matters

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.

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