Last week, the Chancellor announced her Autumn Statement – salient points include the following:-

Increase in dividend tax

The rates of corporation tax remain unchanged at 19% or 25% but the Chancellor announced an increase of 2% on the ordinary and upper rates of dividend income tax from April 2026 as follows:-

· Ordinary 8.75% to 10.75%

· Upper 33.75% to 35.75%

· Additional rate of 39.35% remains unchanged

From April 2026, the notional dividend tax credit previously available to non-UK residents on UK dividend income will be abolished. Non-residents will now be treated identically to UK residents for dividend tax purposes, subject to the same rates as above.

Increase in property and savings tax

From April 2027, the rate of income tax applicable to rental income and savings will rise by two percentage points to 22% for basic rate taxpayers, 42% for the savings higher rate and 47% for the savings additional rate.

Electric Vehicles – pay per mile tax

With effect from April 2028, a new tax on electric vehicles will be introduced, based on the number of miles driven. For fully electric cars, 3p per mile will be charged; hybrid cars will be charged at 1.5p per mile.

Capping of pension salary sacrifice for NIC

From April 2029, there will be a cap of £2,000 annually on the amount of salary that can be sacrificed. Both the employer and employee contributions will be levied on any contributions above the threshold. Those with pensionable pay of £40,000 or less and paying the 5% minimum should not be affected.

National Living Wage (NLW) and National Minimum Wage (NMW)

From April 2026, the NLW for workers aged 21 and over will increase by 4.1%, from £12.21 to £12.71 an hour. Larger increases have been given to the NMW those aged 18- 20 (an 8.5% increase, from £10 to £10.85 an hour) and apprentices and under 18s (a 6% increase, from £7.55 to £8 an hour).

Making Tax Digital (MTD)

Making Tax Digital for Income Tax (filing draft accounts to HMRC every 3 months in a digital format) will continue as planned in April 2026.

Other announcements

· Personal tax thresholds – i.e., personal allowance, basic and higher-rate thresholds for income tax remain frozen until April 2031 at the current levels of £12,570 and £50,270.

· The main rate of writing down allowance will be cut to 14% (from 18%), and a 40% first-year allowance will be introduced from January 2026. The annual investment allowance is still in place for capital items up to £1 million.

· As previously announced, Business Asset Disposal Relief (BADR, formerly Entrepreneurs’ Relief) CGT rate increases from 14% to 18% on the first £1m of qualifying gains from 6 April 2026.

· From the tax year 2026/27 onwards, the option to pay voluntary Class 2 NICs for periods abroad will be removed.

· From April 2026, penalties for submitting Corporation Tax returns late will double.

Making Tax Digital (MTD)

1.2% increase in National Insurance contributions for Employers

Capital Gains Tax

Taxation of Company Cars

Furnished Holiday Lettings (FHL) regime abolished

Other announcements

• The main rate of Corporation tax for businesses with taxable profits over £250,000 will remain at 25% until the next election
• Personal tax thresholds – i.e., personal allowance, basic and higher-rate thresholds for income tax remain frozen until April 2028 at the current levels of £12,570 and £50,270.
• From 31 October 2024, the Higher Rates for Additional Dwellings (HRAD) surcharge on Stamp Duty Land Tax (SDLT) will increase from 3% to 5%.

2% reduction in National insurance Contributions 

• Class 1 (primary) rate of NIC for employees – reduced from 10% to 8% with effect from 6 April 2024

• Class 4 NIC for the self-employed, reduced from 8% to 6% from 6 April 2024

VAT registration threshold to increase 

Capital Gains Tax for landlords cut by 4%

High Income Child Benefit Charge

Furnished Holiday Lettings (FHL) regime abolished

Other announcements

• No changes to income tax bands or rates in 2024/25
• Dividend allowance reduces from £ 1,000 to £ 500 in 2024/25
• No change to National Insurance thresholds or limits in 2024/25
• No change to employer’s NIC (secondary) rates in 2024/25
• CGT annual exempt amount reduces from £ 6,000 to £ 3,000 in 2024/25
• No change to IHT limits or rates in 2024/25
• No change to corporation tax thresholds or rates in 2024/25
• New British ISA with additional £ 5,000 per annum limit for investing in UK assets
• Extension to various cultural reliefs such as Audio-Visual Expenditure Credit, Theatre Tax Relief and a new Independent Film Tax Relief
• SDLT multiple dwellings relief to be abolished

National insurance for self-employed workers

National insurance for employees 

‘Full expensing’ of capital expenditure made permanent

What is ‘full expensing’?

On Wednesday 27th October 2021, the Chancellor announced his Budget – salient points include the following:-

Capital Gains Tax payment deadline on property disposals extended from 30 days to 60 days

The payment deadline extends from 30 days to 60 days for making Capital Gains Tax (CGT) returns and associated payments on account when disposing of UK land and property and is effective for disposals that complete on or after 27 October 2021.

There is also clarification that, for UK residents only, where a gain arises in relation to a mixed-use property that only the portion of the gain that is the residential property gain is to be reported and paid.

Confirmation of the previously announced increase to the rate of income tax applicable to dividend income in line with the health and social care levy

This measure increases the rate of income tax applicable to dividend income by 1.25%. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75% and the dividend additional rate will be set at 39.35%.

The changes will apply UK-wide and will take effect from 6 April 2022.

Annual Investment Allowance (AIA)

The Annual Investment Allowance (AIA) limit of £1,000,000 for qualifying expenditure on plant and machinery has been extended to cover purchases made during the period from 1 January 2022 to 31 March 2023. The limit was originally set to return to £200,000 from 1 January 2022.

Basis period reform

The government has confirmed the introduction of basis period reform to “simplify” the system for taxing self-employed people and business partnerships.

The change, which will apply from 2024/25 with a transition year in 2023/24, will change the way profits are calculated for a tax year. This will now be based on the profits arising in the tax year itself, rather than on the profits of a 12-month set of accounts ending in the tax year.

This means that if you’re s sole trader/partnership, your accounts year end will become 31st March or 5th April (irrespective of what it’s currently set at).

The Government say the simplification will significantly reduce the burden of calculating overlap taxation and relief, and remove the tax deferral advantage possible under the old rules. Trading income will now be taxed on the same basis as property and investment income, creating a more consistent and aligned system that will greatly reduce the opportunity for error and confusion for businesses.

It will, however, mean that during that transitional year businesses who use a non-tax year accounting period will face a significant increase in their tax bill.

Our company accepts no liability for the content of this, or for the consequences of any actions taken on the basis of the information provided.

Here’s three of the latest VAT changes that you should be aware of:

Domestic Reverse Charge – Construction industry

HMRC’s new domestic reverse charge for construction services came into force on 1 March 2021 and is expected to have a significant impact on the accounting practices and cash flow of businesses in the sector.

Under the new regime, the recipient rather than the supplier is required to account for the VAT on certain construction services through its VAT return, instead of paying the VAT amount to the supplier.

If you’re acting as the ‘subcontractor’ and are VAT-registered, when you invoice the ‘contractor’, you should no longer charge VAT (assuming the criteria are met).

There’s more detail here on HMRC Website – Domestic Reverse Charge

Submitting VAT returns from April 2022

If you currently file your VAT returns directly via the HMRC website, this method of filing returns comes to an end in April 2022 – that HMRC VAT return filing page will no longer exist.

From that date, you will need to keep your records using separate software (irrespective of the level of your turnover), that files the return figures directly to HMRC.

If you’re still filing your VAT return figures directly via the HMRC website, please get in touch soon so we can help you comply with the new method.

If we prepare your VAT returns for you, then you’re already complying with the new way of filing.

There’s more details here HMRC website – VAT record keeping

VAT deferral

If you deferred VAT payments due between 20‌‌ ‌March and 30 June 2020 and still have payments to make, you should’ve paid by 31‌‌ ‌March if you can.

If you cannot afford to pay by 31‌‌ ‌March this year, you can now join the ‘online VAT deferral new payment scheme’ to spread the payment.

The new scheme lets you pay your deferred VAT in equal monthly instalments, interest free. You can spread payment across a number of months, depending when you join – the earlier you join, the more months you have to spread the payments across:

• 10 instalments if you join by 21‌‌ ‌April
• 9 instalments if you join by 19‌‌ ‌May
• 8 instalments if you join by 21‌‌ ‌June.

You can join the scheme quickly and simply online, without the need to call HMRC. To find out more information, further details here – HMRC website – VAT deferral

The online service will close on 21‌‌ ‌June 2021 – if you want to join the scheme online, you must do so before this date.

Yesterday, the Chancellor announced his Budget – salient points include the following:-

Increase in Corporation Tax

The current flat rate of 19% will be increased to 25% from 1 April 2023 for companies with taxable profits over £ 250,000. The current 19% rate will be maintained for small companies with taxable profits below £ 50,000.

These thresholds will be reduced accordingly if there are associated companies (ie one or more companies under the same control of another company or the same person/group of persons).

For example, if there are two associated companies, then each company can only make £ 25,000 taxable profit before moving into higher rates (ie £ 50,000 divided by number of associated companies of 2). If three associated companies, then each company can make only £ 16,667 profit before moving into higher rates (ie £ 50,000 divided by 3), and so on.

Single companies with taxable profits between these two thresholds will pay tax at the main rate, reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate. The marginal relief fraction has not been announced but is expected to mirror that used in 2011/12 where the difference between the small company rate (20%) and main rate (26%) of Corporation Tax was also 6%.

Enhanced tax relief for capital expenditure

Limited companies (not unincorporated businesses such as sole traders/partnerships) that acquire new plant and machinery assets that qualify for capital allowances will be entitled to a tax deduction of either 50% or 130% for expenditure incurred between 1 April 2021 and 31 March 2023, with the 130% rate expected to apply to the majority of qualifying new assets.

VAT for Hospitality and Catering Sector

The reduced 5% VAT rate for the hospitality and catering sector is to be extended until 30 September 2021. In addition to this, an interim VAT rate of 12.5% will apply for a further six months to 31 March 2022. This is welcome but perhaps surprising, especially as most of the sector is expected to be fully open well before this date.

These VAT rate cuts will help businesses in two ways. It will provide financial support if they decide to keep prices the same and retain additional revenue created by the VAT reduction. Alternatively, it allows businesses to pass on some or all of the VAT reduction to their customers by reducing their prices, in order to stimulate consumer spending. Provided the business charges the customer the correct amount of VAT, it is entirely their choice on whether they reduce their headline prices or not.

VAT deferral

If you deferred VAT payments due between 20‌‌ ‌March and 30 June 2020 and still have payments to make, you should pay by 31‌‌ ‌March if you can.

If you cannot afford to pay by 31‌‌ ‌March this year, you can now join the ‘online VAT deferral new payment scheme’ to spread the payment.

The new scheme lets you pay your deferred VAT in equal monthly instalments, interest free. You can spread payment across a number of months, depending when you join – the earlier you join, the more months you have to spread the payments across:

11 instalments if they join by 19‌‌ ‌March
10 instalments if they join by 21‌‌ ‌April
9 instalments if they join by 19‌‌ ‌May
8 instalments if they join by 21‌‌ ‌June.

You can join the scheme quickly and simply online, without the need to call HMRC. To find out more information, further details here – HMRC website – VAT deferral

The online service will close on 21‌‌ ‌June 2021 – if you want to join the scheme online, you must do so before this date.

Stamp taxes

The stamp duty holiday on properties worth up to £ 500,000 will be extended from the end of March until the end of June and then there will still be no duty on homes worth up to £ 250,000 for another three months. After that, the threshold returns to the usual level of £ 125,000 from October.

Extension to the Coronavirus Job Retention Scheme (CJRS)

To support businesses and employees across the UK through the next stage of the pandemic, the government is extending the CJRS for a further five months from May until the end of September 2021.

Employees will continue to receive 80% of their current salary for hours not worked. There will be no employer contributions beyond National Insurance contributions (NICs) and pensions required in April, May and June.

From July, the government will introduce an employer contribution towards the cost of unworked hours of 10% in July, and 20% in August and September, as the economy reopens.

The Self-employed Income Support Scheme (SEISS)

Fourth grant – To support the self-employed across the UK through the next stage of the pandemic, the government confirmed that the fourth SEISS grant will be worth 80% of three months’ average trading profits, paid out in a single instalment and capped at £7,500 in total. The grant will cover the period February to April, and can be claimed from late April.

Self-employed individuals must have filed a 2019/20 Self Assessment tax return to be eligible for the fourth grant.

This means that over 600,000 individuals may be newly eligible for SEISS, including many new to self-employment in 2019/20. All other eligibility criteria will remain the same as the third grant.

Fifth grant – The government announced that there will be a fifth and final SEISS grant covering May to September. The value of the grant will be determined by a turnover (ie. income before expenses) test, to ensure that support is targeted at those who need it the most as the economy reopens. People whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months’ average trading profits, capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850. The final grant can be claimed from late July.

Further details here – HMRC website – SEISS Grants

Personal Allowance

The income tax Personal Allowance and higher rate threshold will be maintained from April 2022 until April 2026. The 2021/22 increase of the Personal Allowance to £ 12,570 and basic rate limit to £ 37,700 will be set to remain for 2022/23, 2023/24, 2024/5 and 2025/26. The higher rate threshold will therefore be £ 50,270 for these years.
Scams

Unfortunately, we are aware of an increase in scam emails, calls and texts.
If someone gets in touch claiming to be HMRC, saying that financial help can be claimed or that a tax refund is owed, and asks you to click on a link or to give information such as your name, credit card or bank details, please do not respond.
HMRC will never contact you out of the blue to ask for these details.

Our company accepts no liability for the content of this, or for the consequences of any actions taken on the basis of the information provided.

MTDfV started on 1^st April 2019 for VAT registered businesses with turnover over £85,000 in any 12 month period.

If this affects you, you should be filing your VAT returns via third party software and your records must be kept digitally. The first returns affected by this are:

Mar, Jun, Sep & Dec – quarter ended 30^th June 2019

Apr, Jul, Oct & Jan – quarter ended 31^st July 2019

May, Aug, Nov & Feb – quarter ended 31^st August 2019

You will need to sign up for MTDfV via Gov.UK. The old Government Gateway will be closed.

If you currently use accounting software you will need to check that it is compatible with MTDfV and possibly upgrade to the latest version.

If you do not currently use software (i.e. you use Excel or a manual cashbook), please speak to us to discuss your best way forward. There are a number of products out there that will do the job – we recommend Xero – a cloud based package that can incorporate an automatic bank feed (so that all your bank transactions are automatically brought into the software). You can also use it to create invoices and run customer and supplier ledgers.

If you’d like to try it out, please speak to Henry or David.

There have been a number of important changes over the past few years not all of which are appreciated by busy landlords. We believe that
it would be time well spent to have a review of your current knowledge of the rules and the past and proposed changes. Please contact us if you would like an appointment to discuss.

The main changes:

Proposed changes to Principal Private Residence Exemptions and Lettings Relief (expected March 2020)

HMRC have proposed a reduction of the PPR exemption for the final period of ownership from 18 months to 9 months and the restriction of relief for letting to circumstances where the owner of the property is in shared occupancy with the tenant.

The proposal may increase tax due by shortening the ‘exempt from tax’ period for proportioning of gains and by the removal of the ‘lettings exemption’ which can be up to £40,000.

If you are considering selling such a property in the near future, please contact us to discuss. A recent case showed that a client could save up to £14,000 in Capital Gains Tax by selling a property before the changes ‘proposed’ after March 2020.

Rates of Capital Gains Tax on sale of residential property

Whilst capital gains tax rates in general were reduced in 2016/17 to 10% / 20%, the tax rates for residential properties remain
at 18% / 28%.

Notification to HMRC of sale of property (proposed from 6^th April 2020)

Capital gains tax (CGT) is normally accounted for and paid as part of the annual self-assessment cycle. From April 2020, a payment on account of CGT will need to be made when a residential property is sold or otherwise disposed of (e.g. by giving it away). The payment
will be credited against the person’s income tax and capital gains tax liability for the tax year. Payment will be due within 30 days of the completion of the disposal.  A special payment on account return confirming the disposal and the amount payable will also need to be sent to HMRC at the same time.

Changes in tax relief for mortgage interest (being phased in from 2017/18)

Landlords paying higher rate income tax are no longer able to deduct all of their mortgage interest/finance costs from their rental profits. Instead, they receive a basic rate tax reduction. The restriction is being phased in as follows:

2017/18 75% allowed against rental profits, 25% available as a basic rate tax reduction

2018/19 50% allowed against rental profits, 50% available as a basic rate tax reduction

2019/20 25% allowed against rental profits, 75% available as a basic rate tax reduction

2020/21 0% allowed against rental profits, 100% available as a basic rate tax reduction

Repairs and replacements deductions (introduced 6^th April 2016)

HMRC removed the ‘wear and tear’ allowance at the end of 15/16.

See the links below for what you can now claim for:

Expenses you can claim for replacement of domestic items

Typical maintenance and repair costs