Recently the Chancellor of the Exchequer, the Rt Hon Jeremy Hunt MP, made his Autumn Statement 2022 speech.
Please see below a summary of the key points and please do not hesitate to contact us if you have any queries regarding how these matters may affect you.
Income tax rates and personal allowances will remain at the same level until at least April 2028.
The personal allowance will remain at £12,570 and the higher rate threshold will remain at £50,270.
Meanwhile, the threshold at which people start paying the top 45p rate of Income tax will be reduced from £150,000 to £125,140 from 6th April 2023.
National Insurance thresholds will be frozen until April 2028.
From 6th April 2022 to 5th November 2022, the National Insurance rates included a 1.25% increase. From 6th November 2022 to 5th April 2023, most employees will pay 12% on earnings between the primary threshold and the upper earnings limit. Employers will pay 13.8% towards employees’ National Insurance on earnings above the secondary threshold.
The Dividend allowance will reduce to £1,000, while the Capital Gains Allowance will reduce to £6,000 per year from April 2023.
The Dividend allowance will reduce to £500 from April 2024, while the Capital Gains Allowance will reduce to £3,000 per year.
From April 2022, the government implemented a 1.25% rise in tax on dividends to help fund social care. Therefore for 2022/23, basic rate taxpayers will pay 8.75% on dividends above the allowance, while higher rate taxpayers will pay 33.75%. Anyone in the additional rate tax band will pay 39.35%.
There has been confirmation of the increase in Corporation Tax main rate to 25% from April 2023.
Companies with less than £50,000 of profit will not see any increase at all, continuing to pay Corporation Tax at 19%.
Companies whose profits fall between the lower (£50,000) and upper (£250,000) profits limits will pay corporation tax at the main rate, reduced by marginal relief. This provides a gradual increase in the rate of corporation tax as profits increase until the main rate of 25% is payable once profits reach the upper profits limit.
The Finance Bill 2021 announced that HMRC will extend the scope of Making Tax Digital for VAT to include all VAT registered businesses (including those voluntarily registered) with effect from 1 April 2022.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will be able to benefit from generous new first year Capital Allowances.
Under this new measure, for most business equipment purchased, there will be a 130% ‘Super Deduction’ against taxable profits. For new additions qualifying for Special Rate relief, this expenditure will benefit from a 50% first year allowance.
Since April 2019, government regulations mean that self employed people and business owners, including rental property businesses, who are over the VAT threshold, are required to keep digital business records and have to file their VAT returns quarterly using Making Tax Digital (MTD) compatible software.
Meridian are well equipped to help any of our VAT registered business clients and can advise on suitable software available to achieve this.
HMRC sees cryptocurrencies, not as a currency, but as investment assets and so transactions are subject to Capital Gains Tax.
You might need to pay Capital Gains Tax when you:
Your gain is normally the difference between what you paid for the cryptoasset and what you sold it for. If the cryptoasset was free, you will need to use the market value when working out your gain.
Income tax, instead of Capital Gains Tax, would only apply to dealers that are generating trading profits in cryptoassets. It would be very rare for HMRC to assess an individual’s cryptoassets activity to be applicable to Income Tax and this is likely to only affect professional traders and businesses.
From 6th April 2020, anyone selling a property in the UK may have to complete an online report to HMRC and pay any Capital Gains Tax which is due, within 60 days of the date of completion of sale. You can find more information on this on our Capital Gains page.
The Off Payroll Working rules exist to cover situations where clients are effectively treating contractors as employees, but choose to utilise their work via their company, in order to avoid paying Employer’s National Insurance. By having these regulations in place, the aim is to ensure workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.
Previously the rules were that the contractor (yourself), working through your own Personal Service Company, was responsible for reviewing the guidance and making the decision regarding your employment status. From April 2021, this is switching round such that Public sector clients and medium or large-sized Private sector clients will be responsible for deciding your employment status as a worker (see below for further requirements). There are no changes to the rules if your client is a small, Private sector client.
If it is deemed the Off Payroll Working rules apply to you, your income received via your Personal Service Company will be subject to PAYE tax and National Insurance Contributions before being paid to your company. This income will not be subject to corporation tax and can be withdrawn to a personal bank account. The income, and associated income tax already deducted, should be included on your personal tax return as employment income.
Public sector clients and medium or large-sized Private sector clients will need to determine your employment status as a worker, subject to the following:
If your client does not have a UK connection (i.e. they are not UK resident or do not have a permanent establishment in the UK), the April 2021 changes to the Off Payroll Working rules will not apply. Your own limited company should continue to consider whether the Off Payroll Working rules apply for your worldwide income for each contract.
You can use the Check Employment Status for Tax service to help you decide if the Off Payroll Working rules apply to a specific contract. The test considers the following issues to establish your employment status:
If your client does have a UK connection (i.e. they are UK resident or do have a permanent establishment in the UK), your client will need to decide if the rules apply, and what your employment status for tax is for each contract. They should communicate this to you via what is called a “Status Determination Statement” setting out and explaining their decision.
If your client determines that your contract is inside the Off Payroll Working rules and so you are a deemed employee for tax purposes, then your client, or the Agency who pays your fees, will also be responsible for deducting Income Tax and National Insurance Contributions before they pay your company.
If your client determines that your contract is outside the Off Payroll Working rules, they will continue to pay your company gross, as before.
If you disagree with the decision made by your client on your employment status for tax, you will be able to raise your concerns through your client’s Status Disagreement Process. All clients are required to introduce a process from April 2021 to allow you to disagree with their decision.
Please note these changes do not affect whether you can continue to work through your own limited company. This will still be possible after 6 April 2021, however the way Income Tax and National Insurance Contributions are calculated and paid may change for some contractors, or some clients/ agencies may change the way they wish to engage you.
Finally, if you work through an Agency, the Agency should take reasonable care when making a decision about whether the Off Payroll Working rules apply and it is not right to rule all engagements to be inside or outside of the rules irrespective of the contractual terms and actual working arrangements.
We understand this is a very detailed and complex area, so if you have any further thoughts or queries, please do not hesitate to contact us.
You may have heard of certain schemes where income payments are described as ‘loans’ or ‘advances’ thereby deferring or even avoiding tax on these payments.
HMRC’s view is that these schemes do not work and they have been successfully challenging these arrangements on a case by case basis. As a result of this, HMRC have issued some guidance about how to deal with the tax consequences of these schemes. By notifying them of your interest in settling the tax liabilities on these payments, this will avoid further increased tax and hefty penalties and interest.
We can guide you through this process if you are in this position – please contact us using the information on our ‘Contact’ page.