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Have you completed your self assessment tax return?

20/12/2021

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Help, I haven't completed my self assessment tax return! When do I need to complete my self assessment tax return? What were the tax rates for the year to 5 April 2021? What were the NIC rates for the year to 5 April 2021? What does payments on account mean? Do I need to pay payments on account? When do I need to pay payments on account? What are supplementary pages? Do I need to complete the supplementary pages? Is there a deadline for me to pay my tax bill? What if I can't afford to pay my tax bill? 


We are fast approaching the 2020/21 tax return deadline of 31 January 2022. 

Have you completed your self assessment tax return yet?

If the answer is yes, give yourself a pat on the back. It still might be worth reading this article, as it covers all aspects of your self assessment tax return, and you can ensure you haven't missed anything. 

If the answer is no, read on, as I will be covering all aspects of completing your self assessment tax return. Most importantly, try not to panic, and if you're really stuck, you can always get in touch.
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​What were the tax rates for the year to 5 April 2021?

Personal allowance – which is the amount you can earn before being liable for income tax was £12,500

Basic rate band of 20% income tax is on earnings of £12,501 - £50,000
Higher rate band of 40% income tax is on earnings of £50,000 - £150,000
Additional rate band of 45% is earnings over £150,000

If your income is over £100,000 your personal allowance goes down by £1 for every £2 that your adjusted net income is above this amount. This means your allowance is zero if your income is £125,140 or above.
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What were the NIC rates for the year to 5 April 2021?

Class 1 is payable on employment earnings but I will only discuss NIC on self employment here.

Self employed taxpayers often don’t realise that they also have to pay Class 2 NIC (which was £3.05 per week in 2020/21) and also Class 4 NIC which is 9% on profits between £9,500 - £50,000 and then 2% above this amount.

Both Class 2 and Class 4 NIC are payable with any income tax due by 31 January 2022.
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Class 4 NIC is also added to the income tax liability when calculating payments on account but Class 2 isn’t.
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​I've been asked for payments on account, what are these? 

If your tax liability is more than £1,000 you will have to make payments on account in both the January and July following the tax year for which you have prepared a return. These payments will be 50% each time. Then when you prepare your next tax return, the liability will be reduced by these payments on account and you will have either a balancing payment to make (if your income is higher) or a repayment to claim.

However, again if your liability for that year is more than £1,000 you will need to make payments on account again. The first year you fall within this regime is often a shock having to pay upfront so make sure that you budget throughout the year for your tax liabilities.
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If you think your profits have fallen in the current tax year you can reduce your payments on account accordingly by making a claim on your tax return.

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When do I need the supplementary pages on the self assessment tax return?

If you have other income such as PAYE income as an employee or if you made a Capital gain or loss in the year there are additional sections of the return you will need to complete.
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Make sure you include each self employment you have separately; they cannot be added together.

Other information worth remembering about completing your self assessment tax return


Do you know what your government gateway login and password is?
Ensure that you know what your government gateway login and passwords are as it can take up to 10 working days for a new code to arrive through the post.


My tax is higher than I expected it to be, what should I do if I can't afford to pay it?
If you are struggling to find the funds to pay your bill by 31 January 2022 you can contact HMRC to arrange a payment plan and this can now be done online. There will be interest added to any amounts still outstanding from 1 February 2022.



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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
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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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    Author

    Sonya Jolly qualified as a chartered certified accountant in 2000 and has over 20 years of general practice experience.

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