Hello

 

Welcome to our October newsletter/blog looking at some of what has happened over the month of September and a few items that come into place in October or later which I hope is of interest to our clients.

 

Wow, what month September was!

 

Multiple Government announcements from a new National Insurance rate to deferring MTD for Self Assessment. Please read the summaries below. We will be issuing more information over the coming weeks about various items.

 

Don’t forget that we are here to assist you with any business queries you may have.

 

In this month’s issue:

 

NIC increases

 

 

On 7 September the Prime Minister, Boris Johnson, announced an increase in National Insurance Contributions and dividend tax which would raise £36bn for frontline services in the next three years and be the "biggest catch-up programme in the history of the NHS". He accepted the tax and NIC increases broke a manifesto pledge, but said the global pandemic was in no one's manifesto.

 

It is proposed that there will be a 1.25% rise in National Insurance Contributions (NICs) from April 2022 paid by both employers and workers and will then become a separate tax on earned income from 2023 - calculated in the same way as NIC and appearing on an employee's payslip. Note that the 1.25% increase applies to the Class 4 contributions paid by the self-employed on their profits as well as the Class 1 contributions paid by employees increasing the rates to 10.25% and 13.25%. The employers Class 1 rate will increase from 12.8% to 14.05% however many small businesses are able to set off a £4,000 employment allowance against their employers NIC liability.

 

Those above State Pension Age who are earning or self-employed will start paying NIC and the new Health and Social Care Levy from 2023/24.

 

The 1.25% additional levy doesn’t just apply to national insurance contributions, it is proposed that the income from share dividends, earned by those who own shares in companies, will also see a 1.25% tax increase. This would mean that after the current £2,000 tax free dividend allowance the rate of tax would be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for those with income in excess of £150,000 a year.

 

This is obviously a tax rise by any other name and it will effect everyone, even those who have income other than the state pension.

 

 Budget date announced

 

 

The government has confirmed that a full Spending Review will be held alongside the Budget on 27 October 2021. The Budget will bring into law many of the new announcements made this month, especially the new National Insurance rises detailed above.

  

VAT Registered - Are you ready for Making Tax Digital?

 

 

From 1 April 2022 (only 6 months away!) a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

 

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

 

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

 

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software.

 

Also be aware that Income Tax for Self Assessment will be start from 2024 and limited companies will be forced to join from around 2026.

 

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

 

Speak to us for more details.

 

 

MTD for Self Assessment delayed

 

 

The government have announced that they will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.This will give the self-employed and buy to let landlords an extra year to prepare for the digitalisation of Income Tax and also allow HMRC more time for customer testing of the pilot system.The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.

There has been no change to the £10,000 per annum gross income threshold which means that most self-employed traders and buy to let landlords will be mandated to comply with MTD for income tax from April 2024.

 

The change in basis year for tax assessment has also been pushed back a year to the 2023/24 tax year. The change in the basis of taxation will mean that for the self employed a 31 March/ 5 April year end will be the best year end to have. Now is the time to consider changing your year end if you do not already make your self employment accounts up to his date.

 

We will be issuing a Tax Briefing on the whole MTD ITSA situation in the next month. If you are not a client and want a copy then please contact us at mail@stewartpartners.co.uk to request a copy.

 

New VAT rate

From 1 October there will be a new rate of VAT of 12.5%. This rate replaces the previous 5% rate for the tourism and hospitality sectors. If you have been able to take advantage of the reduced 5% rate in the recent past then the rate will rise to 12.5% from 1 October 2021.

 

VAT on these sectors will remain at this level until 31 March 2022 when they will revert back to the standard rate of 20%.

 

If you have any queries about the rate change or need assistance in updating your software please get in touch.

 

Capital Gains on the sale of Residential Property

 

 

Taxpayers who make a taxable gain on the disposal of a UK residential property have to report this gain and pay the CGT due within 30 days of the property deal completion date. These actions both have to be performed using the badly designed UK property reporting service.

 This online property reporting service does not transfer data about the disposal or the tax paid into the SA tax return system, so the reporting and payment functions have to be repeated at when submitting the SA tax return. This is an unnecessary duplication of tax compliance work, which also requires the taxpayer to separately authorise their tax agent to act for them on two different HMRC systems.

 Where the taxpayer cannot manage the digital process, perhaps because they don’t have the UK documents which will allow them to complete the online ID checks, a paper return of the property disposal can be submitted.

 However, where a paper return has been filed the CGT can‘t be paid until HMRC issue a payment reference and a demand for the tax due. This can take from three to six months, as HMRC has a backlog of paper returns to process.

 

HMRC has now confirmed that taxpayers will have 30 days from the issue of a demand to pay, rather than 14 days to pay. A late payment penalty will not be issued if the tax is paid within 30 days of the manual demand charge. However, a late filing penalty may apply if the paper return was not submitted within 30 days of the completion date – this can be appealed.

 We have a number of clients who have sold residential properties over the past few months and we have assisted them in the preparation oof CGT computations and have also walked them through the HMRC registration process and submission of returns.

 If you are in the process of selling a residential property or have recently done so then talk to us about the whole process and how we can ensure that you are compliant with the rules an make sure the returns and tax are submitted on time.

 

Coronavirus Job Retention Scheme (CJRS) - update

 

 

The CJRS has finished and no more grants will be paid by the Government. We are finalising the last grant claims at the moment.

 

If you making the grant claim yourself you have until 15 October to make the claim.

 

Getting back to business

 

 

Most businesses have now opened fully again and although things are slow they are getting back to earning money.

 There is a temptation to reduce prices to bring in customers, both old and new. In my opinion this is an error. Your services or products have a value and you should be charging a fair price for what you are offering. If you discount now it will be difficult to raise prices for the same product later once things are starting to look up.

 Most businesses will be focussing short term on their recovery and in the medium term on being resilient, improving profitability and growing turnover. If taxes rise to fund government spending, we recommend all businesses should map out a range of scenarios with “what if” analysis to understand their available future strategies for success. 

Please talk to us about scenario planning – we have the tools to help you prepare for the future and set realistic and achievable targets.   

  

Why don’t you ask us?

 

 

Are you considering starting something new as you come out of Covid hibernation and your business opens up again or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

 

In addition to scenario planning mentioned above we have a broad range of experience that goes far beyond just preparing accounts and tax returns. Get in touch as we will probably have an answer to help you with your challenges.

 

  

I wish you the best for the next month.

 

If you have any queries you can book a free 15 minute zoom meeting with me.

 

Also there is the client zoom drop in session which continues for clients at 11.00am every Wednesday.

 

Zoom meeting details:

 

Meeting URL:

 https://us02web.zoom.us/j/86149133301?pwd=VkZuWURZQ0gxM0t2WnZiWjNneUpnZz09

Meeting ID: 861 4913 3301

Password: 054121

 

Please note that the meeting details have changed from the old meeting URL

 

 

Regards

 

 

Simon

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