In case you missed it last week the Chancellor announced a number of changes with the purported aim of reducing the tax burden for lower earners in the midst of the ever-increasing cost of living.
- National Insurance Thresholds increase to £12,570 matching the personal allowance. It should be noted that this comes into effect from July 2022 and the threshold for the first few months of the tax year will remain at £9,600.
- Fuel Duty was cut by 5p with effect from 6pm Wednesday 23 March although if you blinked you might have missed the effect of this given fuel prices are continuing to increase.
- VAT on the installation of energy efficient plant at home has been reduced to 5%.
- Research and Development tax relief will be extended to include areas such as cloud computing and data storage. Detailed announcements will be made in the Autumn Budget.
- The basic rate of income tax will reduce from 20% to 19% with effect from 6 April 2024.
End of 2021/22
Last call for those wishing to reduce their 2021/22 tax bills:
- Relief for pension contributions can only be claimed in respect of the tax year in which they are paid, this is particularly important if your income is close to £100,000 as breaching this threshold will result in the incremental loss of your personal allowance.
- Gift aid contributions can be backdated but they must be made before your 2021/22 tax return is submitted and HMRC will not accept an amended return to include a claim for gift aid.
- If you are a basic rate taxpayer and your spouse’s total income is below the personal allowance (or vice versa) you may wish to make a claim for marriage allowance.
- SEIS, EIS, VCT, and SITR are all qualifying investment vehicle whereby an immediate tax-reducer can be claim in a person’s return. They also offer other tax benefits.
It’s also the final few days for individuals to utilise their 2021/22 ISA limit.
Given the imminent 1.25% increase in the rate at which dividends are taxed it is also worth carefully considering the possibility of declaring dividends before the end of the tax year.
MTD for VAT comes into effect for QE after 1 April
Making Tax Digital (“MTD”) came into effect for all businesses over the VAT registration threshold from April 2019. From 1 April 2022 MTD is compulsory for all VAT registered businesses regardless of their annual turnover. This means that, for VAT quarters starting on or after 1 April, digital records will need to be maintained and VAT returns will need to be submitted using MTD compatible software including Microsoft Excel bridging software.
If you have not yet signed up for MTD we would advise this is done as a matter of urgency to ensure the systems and digital records are in place ready for the first submission required via MTD. This is particularly important if you are engaging an agent to file on your behalf as there is a separate authorisation process.
ATED – revaluation year
HMRC introduced the Annualised Tax on Enveloped Dwellings (“ATED”) with effect from 1 April 2013. It is payable where a dwelling is owned by a company, a partnership with any number of corporate partners, or a collective investment scheme.
The amount of ATED payable is calculated with reference to the property’s value at the later of the acquisition date or a ‘revaluation year’. Revaluations are due every fifth anniversary from 1 April 2012, the next being 1 April 2022. At its inception the legislation allowed for a value of up to £2 million, but this fell to £1 million on 1 April 2015 and to £500,000 from 1 April 2016. If the property value falls below the threshold then it is outside the scope of ATED and will not need to make the associated returns.
There are a number of exemptions where ATED is not payable (although returns must still be submitted to claim the exemption). These include where the dwelling is let to an unconnected third party on a commercial basis, used in the owner’s trade, or open to the public for at least 28 days a year. There are a number of other exemptions which should be reviewed ahead of submission of the return. Where the property is acquired, or any of the exemptions apply, part way through the tax year the charge can be apportioned.
The return must be filed by 30 April each year in respect of the forthcoming year, it is therefore imperative that revaluations are obtained sooner rather than later.