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The "post covid age of optimism": Autumn Budget 2021

28/10/2021

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With the Autumn Budget being announced yesterday by Rishi Sunak, the chancellor's message was that we are in a "post covid age of optimism." 

But what does this mean to the likes of you and me, and how or will the changes effect us?

Rates and allowances
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While some Income tax rates will stay the same as we go into 2022/23, the 20% basic rate rises slightly by £270. There is no change to the current Scottish Tax Rates, as their budget will be published 9th December 2021, and there is no change to the Personal Allowance either. 

Rates and Allowances from 6 April 2022.

National Insurance

​From April 2022 the rate of National Insurance contributions across all classes (except class 2 and 3) will change for one year. The amount of the contribution will increase by 1.25% which will be spent on the NHS and social care across the UK. This increase in National Insurance contributions will apply to:

  • Class 1 (paid by employees)
  • Class 4 (paid by self-employed)
  • secondary Class 1, 1A and 1B (paid by employers).

Employers will only pay on earnings above the secondary threshold.

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Pensions

With effect from 6 April 2028 the earliest age at which most pension savers can access their pensions without incurring an unauthorised payments tax charge will increase from 55 to 57.
 
Capital gains tax annual exempt amount
(after personal allowance)

These are frozen at £12,300 for individuals and £6,150 for trusts.
 
Capital Gains Tax (CGT): property payment window

From 27 October 2021 the deadline for residents and non-residents to report and pay CGT after selling UK residential property increases from 30 days after the completion date to 60 days. This will be a welcome measure for taxpayers, giving them sufficient time to report and pay CGT.
 
Dividend allowance
​

The tax-free dividend allowance is unchanged at £2,000. The dividend tax rates are increased by 1.25% for each category of taxpayers for 2022 -23.

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​Directors loan accounts s.455 rate will also increase from April 2022, from 32.5% to 33.75%.


Corporation tax

The corporation tax rate will remain at 19% but from April 2023 the applicable corporation tax rates will be 19% and 25%. Businesses with profits of £50,000 or below will still only have to pay 19% under the small profits rate.
 
Enhanced capital allowances: super deduction
 

This introduces increased reliefs for expenditure on plant and machinery. For qualifying expenditures incurred from 1 April 2021 up to and including 31 March 2023, companies can claim in the period of investment:
 
  • a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main-rate writing-down allowances
  • a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances
 
Annual Investment Allowance (AIA)

Annual Investment Allowance of £1m was due to end by December 2021. This will now be extended until 31 March 2023. Businesses will therefore have longer to consider bringing forward capital investments of between £200,000 and £1m, accessing upfront support by claiming tax relief on such costs in the year of investment.
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Rates 

Business rates in England will move to a more frequent revaluation cycle of every three years from 2023. A new temporary relief of 50% (up to £110,000) will be introduced for retail, hospitality and leisure properties in 2022/23. The rate multiplier will also be frozen for 2022/23.
 
Multipliers, revaluations and reliefs for the devolved nations remain subject to policy decisions by devolved governments.
 
From 2023 a new rates investment relief will be available to ensure qualifying property improvements do not result in a higher rates liability for a year following improvements, to support investments in green technologies, improvements to productivity and expansion of premises. 
 
Recovery Loan Scheme
 

The Recovery Loan Scheme is extended six months until 30 June 2022 for small and medium sized enterprises and from 1 January capped at a finance level of £2m per business with the government guarantee reducing to 70%.
 
Apprenticeship funding

In England, the government will continue to meet 95% of the apprenticeship training cost for employers who do not pay the Apprenticeship Levy. The £3,000 apprenticeship hiring incentive payment (per new hire) has been extended four months to 31 January 2022.
 
In Wales, apprenticeships are funded by the Welsh government, and apprenticeship incentive payments ranging from £1,500 – £4000 are available until 28 February 2022.
 
In Scotland, the type of funding you can access will depend on the type of apprenticeship. Additionally, the Adopt an Apprentice scheme provides employers with £5,000 for employing a redundant apprentice.
 
Making Tax Digital (MTD)

MTD for ITSA will be introduced from 6 April 2024. This impacts sole traders and landlords, with income over £10,000. General partnerships will not be required to join MTD for ITSA until 6 April 2025.

VAT

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The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2022.
 
The reduced rate of VAT of 12.5% ends on 31 March 2022 for the hospitality sector returning to the standard rate of VAT of 20% from 1 April 2022.
  
Self-Employment Income Support Scheme
(SEISS) and other support


The amounts received through the support schemes are taxable income and is required as a separate entry on tax returns. 
 
Losses

Trading losses will have more flexibility to carry them back over three years. This applies only for losses incurred by companies for accounting periods ending between 1 April 2020 and 31 March 2022, and for individual for trade losses of tax years 2020/21 and 2021/22.
 
Cross-Border Group Relief (CBGR) and other related loss reliefs have been removed from 27 October 2021.
 
Entrepreneurs’ relief

The lifetime limit on gains eligible for entrepreneurs’ relief is £1m for qualifying disposals.
 
Employment allowance reform

The allowance is £4,000 but continues to be limited to employers with an employer NIC bill below £100,000 in the previous tax year.
 
R&D

SMEs applying for R&D tax credits will be eligible to a maximum of £20,000 in repayments per year plus three times the company’s total PAYE and NIC liability.

Inheritance tax (IHT)

The nil-rate band remains at £325,000 frozen until 2026. The residence nil-rate band for deaths in the following tax years are:
 
  • £100,000 in 2017/18    
  • £125,000 in 2018/19
  • £150,000 in 2019/20    
  • £175,000 in 2020/21
  • £175,000 in 2021/22 and subsequent tax years to 2026.
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Powers 

HMRC will have new powers relating to offshore tax avoidance schemes, allowing them to target the UK based entities which act as go-betweens. The rules would allow HMRC to impose additional penalties on UK facilitators, apply to the courts for freezing orders to prevent funds being dissipated and for winding up orders against companies or partnerships ‘operating against the public interest’. The rules also create a power to name promoters and share the details of their schemes. Although the powers would not come into force until Royal Assent, they can be used in respect of evidence or activities predating Assent.
 
New powers will also allow HM Treasury to make temporary modifications to support taxpayers in the event of a disaster or emergency of national significance including exempting benefits in kind and specified reimbursements or providing relief for specified expenses.
 
Time to pay

Taxpayers can set up a payment plan online via GOV.UK.
 
Pensions

The pension lifetime allowance will remain at its current level of £1,073,100 until April 2026.

​Interest relief for landlords

Landlords will be able to obtain relief as follows:

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Annual Tax on Enveloped Dwellings (ATED)
The ATED charge increases automatically each year in line with inflation (based on the previous September’s Consumer Prices Index).

More than £0.5m but not more than £1m
£3,800 in 2022/23 & £3,700 in 2020/21

More than £1m but not more than £2m
£7,700 in 2022/23 & £7,500 in 2020/21

More than £2m but not more than £5m
£26,050 in 2022/23 & £25,300 in 2020/21

More than £5m but not more than £10m
£60,900 in 2022/23 & £59,100 in 
2020/21

More than £10m but not more than £20m
£122,250 in 2022/23 & £118,600 in 2020/21

More than £20m
£244,750 in 2022/23 & £237,400​ in 2020/21

I hope this information has been useful to you, and if you have any questions at all don't hesitate to get in touch, or follow my social media for regular, up-to-date posts.

Join me on Facebook or follow me on Twitter.

[All information in this blog is correct at the time of writing and credit to ACCA]


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Property Income Part 2:  new and recent changes to property income.

19/10/2021

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What's new and what’s changed in recent years in the world of property income? When have there been changes to property income? Why have there been changes to property income? Who do the changes to property income effect?
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Changes to property income from 6 April 2016:
 
  • Rent-a-Room relief raised to £7,500.
  • Withdrawal of the 10% Wear and Tear allowance.
  • Replacement of Domestic Items Relief introduced (similar to replacement cost basis).
  • An additional 3% Stamp Duty Land Tax (SDLT) payable by buyers of investment residential property.

Changes to property income in recent years:

In 2017 HMRC changed their Property Income Manual guidance (and presumably part of their policy) on tax relief on interest when a loan is increased on a property to allow the withdrawal of capital. Their guidance in their Business Income Manual remains unaltered.

Autumn Budget 2017 provided for a change of policy in relation to landlords' motor expenses: 

From 6 April 2017 (Landlords’ motor expenses):
​
  • Individual landlords and partnerships (excluding Mixed Member Partnerships) are able to use fixed mileage allowances.
  • Transitional provisions apply to landlords who had previously used the Extra Statutory Concession.
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​Also from 6 April 2017
​
  • The cash basis become the default method for unincorporated property businesses with receipts under £150,000.
  • Taxpayers can elect to use the accruals basis instead.
  • A separate decision can be made for each property and trading business of a taxpayer as to whether to apply the cash or accruals basis.
  • Joint owners can each pick their own basis unless they are spouses or civil partners who must both adopt the same basis.
  • The existing cash basis rules for traders apply with some modifications.
  • The cash basis  doesn’t apply to companies, Limited Liability Partnerships (LLPs), partnerships with corporate members, or trusts.

Higher rate relief on mortgage interest restricted for buy-to-let landlords
​
  • Basic rate tax paying landlords are not immune from these measures: mortgage interest is no longer an allowable deduction from property income and a new adjustment is then required in order to claim basic rate tax relief.
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From 6 April 2017, as included in Finance (No 2) Act 2017 individuals receive two new annual tax allowances of £1000

Property allowance
​
  • Individuals with UK and overseas property income can choose how to allocate the allowance but cannot create a loss.
  • The allowance will not apply to income on which Rent-a-Room relief is given.
  • The property allowance is not available if an individual receives a tax reduction for non-deductible interest.
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From 6 April 2020

COVID-19 measures creating changes to property income: 
​
  • Although Furnished Holiday Letting (FHL) is specially treated as a trading activity for income tax, any other property letting is classed as an investment activity and landlords cannot claim for lost profits under the COVID-19: Self-employed Income Support Scheme (SEISS).
  • HMRC allowed a temporary soft landing on penalties under a new 30-day Capital Gains Tax (CGT) reporting regime.  Capital Gains on UK residential property within the new 30-day deadline until after July 2020.   
  • Finance Act 2020 made changes to CGT Private Residence Relief. Lettings relief is restricted and is only available for periods where the owner is in shared occupancy with the tenant.
  • The final period exemption is reduced from 18 months to nine months. It will remain 36 months for those cases that currently qualify for the extended period.
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Recent changes to property income:

From 6 April 2021

  • Finance Act 2021 introduced an extended trade loss relief carry-back for income tax and corporation tax, this does not apply to rental business or FHL.
  • Finance Act 2021 also made changes to SDLT (Stamp Duty Land Tax) & ATED (Annual Tax on Enveloped Dwellings)

Upcoming changes to property income: 

From 6 April 2024
  • Self-employed businesses and landlords with business turnover above £10,000 must report under Making Tax Digital (MTD) for Income Tax.
  • HMRC is testing the system with a MTD Income Tax Pilot.
  • Corporation tax rates increase to 25% for profits over £250,000.

If you want to learn more about Making Tax Digital... click here to read an article from gov.uk or follow me on Facebook and Twitter and I will keep you updated with everything as it happens. 
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    Sonya Jolly qualified as a chartered certified accountant in 2000 and has over 20 years of general practice experience.

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