Taxaccount; views from the village.

VAT exemption thresholds, income tax, capital gains tax, inheritance tax rates, reliefs and allowances are all more or less frozen in time.

The personal allowance will remain at £12,750 until 2026.

The higher-rate tax threshold will increase to £50,270 next year, and also remain at that level.

(The “62%” anomalous penalising tax rate on taxable earnings between £100,000 and £125,500 has not been addressed so tax planning still needs to be employed to avoid/minimise this problem).

National Insurance thresholds etc are to be aligned.

Furlough scheme – is to be extended in the short term in modified form.

Employers will pay 10% towards the hours their staff do not work in July increasing to 20% in August and September.

A fourth Self Employment Income Support Scheme (SEISS) grant will be available to cover lost earnings for February, March and April 2021.

The grant will cover 80% of monthly earnings up to a maximum of £2,500.

The fifth grant will be available from July.

Eligibility of the SEISS grants has also been widened to include many people who became self-employed in the 2019-20 tax year.

The maximum pension investment “lifetime allowance” is also frozen. The current allowance, £1,073,100, will stay until April 2026.

Corporation tax will rise from 19% to 25% from April 2023 for companies with taxable profits of £250,000+over. Companies with profits of less than £50,000 will still pay 19%.

We feel this is a return to the former smaller companies’ rate & “marginal relief” system that operated until 2014. These new limits will be split/spread/shared between companies who are “associated” and/or members of groups.

This may be an area for planning to reduce the number of affected companies. Perhaps consolidating to get rid of redundant, or little used, companies.

This new scheme does not apply to property rental companies but does apply to “close investment companies”.

Thoughts – losses built up over years affected by covid may be carried forward and relieved at the higher rates in later years when businesses recover.

Higher corporation tax rates may trigger more companies to relocate outside the UK. For example, Ireland’s corporation tax rate is currently only 12.5%

Sunak’s plans largely reverse the Osborne cuts with the rise projected to generate an extra £16BN for the Treasury by the end of this parliament. This is closer to Jeremy Corbyn’s policy for corporation tax at the 2019 election than Boris Johnson’s was.

LOSSES – extension to the company “carry back” provisions. Losses until 31^st March 2022 may be carried back to set against profits of THREE previous years up to a maximum of £2M p.a.

Capital allowances – a new “super deduction” is to be granted for the two years 1^st April 2021 to 31^st March 2023 for companies ONLY. A new 130% deduction is given for expenditure on NEW plant & machinery that would usually qualify for the 18% allowance.

50% first-year allowances will be granted for assets qualifying for “special rate relief”.

[Note….the Annual Investment Allowance is available for unincorporated businesses for expenditure of up to £1M.]

VAT –

The reduction in rates charged by the hospitality sector will be –   

5% continues to Sept 2021

12.5% October 21 to March 22

20% full rate from April 2022.

Software will need to update to accommodate new rate and timings

Under the VAT New Payment Scheme applications to start “Deferred payments” is extended up to three months.

Stamp Duty Land Tax – The nil-rate band at £500,000 is to be continued until 30^th June 2021.

Thereafter it will fall to £250,000 to 30^th September 2021.

A surcharge of 2% will be applied from 1^st April 2021 for non UK residents.

Business rates – pubs/gyms/shops and similar – the 100% rates holiday continues to June 2021.

From July 2021 relief will drop to 66% until March 2022 subject to conditions.

To qualify for this relief businesses must have been “affected by the third national lockdown” i.e. they were required to close on 5^th January 2021.

This is all subject to a £2M claim cap.

Future Fund Breakthrough – government proposes to match large investment in tech industries.

For companies attracting third party investment of £20M in R&D projects the government will match it with another £20M.

An R&D review is to be undertaken to examine various aspects of the scheme including its international competitiveness and exploitation. Could involve capping SME claims loosely connected to their salaries.

Freeports – 8 new locations – East Midlands Airport, Felixstowe and Harwich, Humber Region, Liverpool City Region, Plymouth, Solent, Thames and Teesside.

This is aimed at easing trade barriers and increasing localised tax incentives for corporation and income tax including enhanced 10% “Structures and Buildings Allowance” where the structures are brought into use before 30^th September 2026 in designated sites.

Capital allowances of 100% will be available to 30^th September 2026 for companies investing in plant & machinery in designated sites.

In addition Freepports will benefit form Stamp Duty Land Tax relief.

Sunak ended with a comment about freeports intended to persuade the public this will be a Brexit dividend. WRONG. This is yet another measure that could have been introduced when the UK was in the EU.

Social Investment Tax Relief under the VCT regime will be extended until April 2023.

The National Living Wage will go up from £8.91 an hour from 1^st April.

The highest rate will also now include those aged 23 and over – workers who previously fell under the lower wage bracket.

23 and 24 year olds, currently on £8.20 an hour, will see their pay increase by 71p to £8.91 from 1^st April.

RECOVERY POST PANDEMIC

Restart grant – for hospitality/ gyms/ hairdressers and similar businesses. Businesses such as shops and hospitality reopening from April 2021 can apply for grants up to £18,000.

Recovery loans – “Bounce Back” loans will be replaced with new “recovery loans”. Businesses can apply for loans from £25,000 to £10M but businesses will need to consider carefully – will it be wise to take on even more debt?

“Help to Grow” scheme – £520M will be introduced to help companies’ growth after the pandemic. The scheme will provide access to digital and management services.

This will be a new online platform offering free advice on technology that to help businesses save time, reduce costs and reach more customers.

Vouchers will be given to eligible SMEs, up to £5,000 each, to get up to 50% off the purchase of new productivity enhancing software.

Culture Recovery Fund – The Fund will receive an additional £300M.

There will also be an extra £90M for museums and cultural bodies in England with £18.8M for community cultural projects.

£77M will be awarded to similar projects in Scotland, Wales and Northern Ireland.

Not enough for everyone so let’s see how it’s spread around.

Sports recovery – £300M is to be provided to sports (including cricket, tennis and horse racing) to aid recovery along with £25M support to grassroots football.

95% mortgages – from April 2021 various banks are on board including Virgin.

The new mortgage guarantee scheme will enable all UK homebuyers secure a mortgage up to £600,000 with a 5% deposit.

May push up property prices though.

A new green savings bond will be issued via National Savings and Investments (NS&I).

Funds raised will be used to fund projects on renewable energy and ‘clean’ transportation but the interest rates have not been announced as yet.

Missing from the Budget

No change to the process for taxing dividends received by individuals.

No Capital Gains Tax changes such as alignment of Capital Gains Tax rates with income tax rates or any reduction of the “annual exemption”.

No mention of any “online sales tax”. Yet. (Not to be confused with the 2% “digital sales tax” introduced by last year’s Budget)

ISA investment limits are unchanged.

Many urged the government to make permanent the £20 per week universal credit uplift and to include measures to address social care. Neither were included in the announcements, reportedly, to the annoyance of MPs David Davies and Jeremy Hunt.

And finally …some government departments are facing cuts in real-terms.

According to the Institute for Fiscal Studies the figures for government spending in the red book imply that, outside protected budgets for health, education, defence and international aid, other departments face real-terms spending cuts.

Info here…..

https://www.moneysavingexpert.com/news/2020/10/paypal-to-introduce-p12-yr-fee-for–inactive–accounts—act-now/

Making Tax Digital (MTD) is already operational for VAT registered businesses over the VAT threshold £85,000.

It will be extended.

Well we knew it was coming, covid or no covid, brexit or no brexit.

From April 2022 MTD will be extended to ALL VAT registered businesses with turnover below the VAT threshold.

From April 2023 MTD will apply to ALL self-assessment tax returns for businesses or property income of more than £10,000 a year.

That may seems like a long way off but we all know time passes quickly.

Our advice is to make sure your tax affairs are up to date as quickly as possible – and stay that way – AND ensure that books/records are organised, spick & span.

Preparation is the key. Always.

I very much doubt HMRC will provide the necessary software to handle the new rules. That means everyone will have to buy their own software and learn how to use it in a compliant manner.

At the moment our Making Tax Digital clients are using a variety of different software. The hope is that companies will increase their program offerings to the public to accommodate these new requirements.

Obviously if you need any help or guidance on this MTD nonsense as time goes by just let us know.

A few brief notes on The Chancellor’s speech today.

He announced the second phase of the government’s economic response to Covid19 – a “plan for jobs”.

Employers who bring back furloughed staff and employ them until at least the end of January 2021 will get a £1,000 bonus per employee.

Will this encourage employers to bring back staff? We doubt it.

The third phase of the Covid19 response is expected in the autumn with a budget and spending review.

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To help boost the economy the Chancellor announced an immediate six-month Stamp Duty holiday. Stamp Duty is cut on properties up to £500,000 until 31 March 2021.

Looking back at the experience of the last temporary stamp duty cut in 2008 this may not work.

Studies showed that the 2008 cut increased transactions by 8% but, more significantly, the increase was offset by a substantial downturn when the holiday ended.

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Under the Green Homes Grant many thousands of homeowners could receive vouchers of up to £5,000 for energy-saving home improvements with the poorest getting up to £10,000.

The Government will pay at least two-thirds of the cost of any home improvements that save energy.

Homeowners will be able to apply online for the Green Homes Grant from September.

The scheme is not available to renters.

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VAT will be cut from 20% to 5% on domestic tourism and hospitality sectors.

VAT on food and drink (excluding alcohol), accommodation, and visits to attractions will be reduced from for six months.

He also announced an “Eat Out to Help Out” scheme for the month of August that will give people a 50% discount at participating restaurants, cafes and pubs between

The scheme will operate Monday to Wednesday for a maximum of £10 per person.

Businesses can register for the discount online and will be reimbursed for the 50% discount they give to customers.

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A six-month work placement scheme is to be started for people on Universal Credit, aged between 16 and 24, who are at risk of long-term unemployment.

Firms will get a £2,000 bonus for each apprenticeship role they create, with a £1,500 bonus for apprentices aged over 25.

Warning from CityAM a few days ago. Take note.

HMRC doubles down on undeclared foreign income crackdown

The Chancellor has delivered his first Budget today, 11th March 2020.

Factoid ….until now the UK has not had a Budget for a whole year. That has not happened for over 250 years, since 1768, but we are in uncharted waters.

A brief summary of some main practical points are:

1. The giveaways will be supported, in the main, by colossal levels of borrowing not detailed on the speech (wonder why?)
2. Many promises to give more funding to help rough sleepers, roads, schools, the NHS and for “gigabit broadband” but NO money for social care.
3. Entrepreneurs’ Relief “lifetime allowance” is reduced from £10M to £1M.
4. National Insurance threshold lifted from £8,632 to £9,500 meaning fewer people will pay.
5. National Insurance relief for employers who take on veterans.
6. The previously announced corporation tax cut from 19% to 17% in April 2020 will now NOT happen.
7. Business rates are “suspended” for properties with a RV of under £51000.
8. The pension “taper allowance” – which has caused so many problems with high earners such as senior doctors and surgeons refusing to work overtime – has risen by £90,000 from £110,000 to £200,000.
9. VAT on digital publications, including newspapers, books and journals, is scrapped from December 2020.
10. Statutory Sick Pay (SSP) now starts on “day 1” of illness/self isolation, not after “day 3”, and there will be help for the self employed.
11. The new Structures and Buildings Allowance (SBA) rises from 2% to 3%.

No doubt more will come out in the small print so get in touch with us if you see, read or hear anything that affects you directly. We can advise.

 

 

UK residents who own holiday homes in Spain will suffer after brexit as the Spanish tax system is harsh on non EU/EEA people.

For example…… rents received in Spain by UK resident individuals (or companies):

Pre brexit – deductions are allowed for most property costs and tax is charged at 19%.

Post brexit – NO deductions allowed, tax of 24% is levied on gross rental income.

There are many other nasty Spanish tax consequences of brexit.

Be warned everyone.

This is NOT advice of any kind but simply a “heads up” to highlight an issue.

The “Help To Buy” ISA investment opportunity ends on 30th November 2019.

If you don’t get one before that date then you won’t be able to.

Open an account with just £1 in it, to keep your foot in the door, and you can add more later if you want.

This from Martin Lewis will explain……

https://www.birminghammail.co.uk/news/midlands-news/martin-lewis-last-gasp-warning-16998323

Good luck and pass on the tip to any family or friends who may benefit from it.

The chancellor’s statement on 13 March confirmed two things about the timing of Making Tax Digital (MTD)………….

1. MTD for VAT will go ahead as planned from April 2019….BUT ….

2. MTD will NOT be made mandatory for any other taxes or businesses in 2020 as was originally feared.

My guess is not that HMRC are being generous in any way. More likely they know they cannot possibly be ready for any more MTD upheavals that soon.