File your tax return by 30 December 2021 to have underpayments coded out

The deadline for filing your 2020/21 self-assessment tax return is midnight on 31 January 2022. However, if you have underpaid tax and you are employed and would prefer HMRC to collect that underpayment through your tax code, you will need to file your return online by midnight on 30 December 2021. You can also have an underpayment coded out if you filed a paper return by 31 October 2021.

Paying tax through your tax code

If you owe tax for 2020/21, rather than paying the underpaid tax in full by 31 January 2022, you may be able to have the underpayment collected through PAYE. This is done by adjusting your 2022/23 tax code (known as ‘coding out’). The effect of this is that collection of the underpayment will be spread throughout the 2022/23 tax year and deducted from your pay or your pension.

Conditions

The option to have a tax underpayment coded out is only available if all of the following conditions are met:

you owe less than £3,000;
you already pay tax under PAYE (for example, as an employee or on a company pension); and
you submitted a paper tax return by 31 October 2021 or an online tax return by 30 December 2021.

If you owe more than £3,000, coding out is unavailable; you will need to pay what you owe by 31 January 2022.

Talk to us

If you are likely to have a tax underpayment for 2020/21 and want to pay the tax that you owe through an adjustment to your tax code, talk to us about what you need to do to meet the 30 December 2021 filing deadline.

November 29, 2021

Tax checks for licence renewal applications

From 4 April 2022, applicants applying to renew certain licences will need to pass a tax check before their licence application can be considered. Initially, the requirement will only apply in England and Wales. However, the Government have consulted on extending the requirements to Scotland and Northern Ireland from 2023.

Licences affected

Tax conditionality (the need to pass a tax check before a licence is renewed) will apply to licences to:

drive taxi and private hire vehicles (such as mini cabs);
operate a private hire vehicle business;
carry on the business of a scrap metal dealer on a site; and
carry on business as a mobile collector of scrap metal.

The check will only apply to licence renewal applications, not to first-time applications. However, the licensing authority will need to provide first-time applicants with information on what they need to do to comply with their tax obligations, and check that the applicant has received that information, before considering the licence application.

Nature of the tax check

The new tax check will apply in addition to the existing requirements imposed by the licensing authority. The purpose of the check is to confirm that the applicant is registered for tax. The check should only need to be completed about once every three years.

If you are applying to renew a licence on or after 4 April 2022, you will be able to complete the check, which will comprise a few short questions, via your Government Gateway account. The Government are to make guidance on completing the check available on the Gov.uk website. A helpline will also be available.

Once you have completed the check, you will be given a code. The code is important, and you must give it to your licensing authority as they are unable to progress your licence renewal application without it.

HMRC will inform the licensing authority whether you have passed the tax check. However, they will not provide them with any details of your tax affairs.

Plan ahead

In preparation for the introduction of tax conditionality, it is advisable to ensure that your tax affairs are in order, and get them up to date if they are not. HMRC have published a communications pack explaining what this will mean for licence applicants. It is worth a read.

We can help

If you will be required to pass the tax check in order to renew a licence that you need to operate your business, we can help you ensure that your tax affairs are in order.

November 22, 2021

New VAT rate for hospitality and leisure

To help the hospitality and leisure industries recover from the impact of the COVID-19 pandemic and associated lockdowns, a reduced rate of VAT of 5% applied from 15 July 2020 until 30 September 2021. This rate has now come to an end, and a new reduced rate of 12.5% applies from 1 October 2021 until 31 March 2022. The rate of VAT applicable to this sector will return to the standard rate of 20% from 1 April 2022.

Supplies benefitting from the reduced rate

You are able to take advantage of the reduced rate of 12.5% if you make supplies of any of the following:

food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs;
hot takeaway food and hot takeaway non-alcoholic beverages;
sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities; and
admissions to cultural attractions that do not already benefit from the cultural VAT exemption, such as theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and other similar cultural events and facilities.

However, if the admission to an attraction is within the existing cultural VAT exemption, the exemption applies rather than the reduced rate of VAT.

Contact us

If you operate in the hospitality and leisure sector, please get in touch with us to check that you are applying the correct rate of VAT to any supplies that you make.

November 15, 2021

AIA transitional limit extended

The Annual Investment Allowance (AIA) is a capital allowance that enables you to claim an immediate deduction against your profits for qualifying capital expenditure up to the available limit. The AIA limit was temporarily increased from £200,000 to £1 million from 1 January 2019 to 31 December 2021. It was due to return to its permanent level of £200,000 from 1 January 2022. However, the Chancellor announced in his Autumn Budget that the temporary limit will be extended until 31 March 2023.

Take advantage of the higher limit

The announcement allows more time to take advantage of the higher temporary limit. If you are intending to spend more than £200,000 on plant and machinery that qualifies for the AIA, you now have until 31 March 2023 to benefit from the higher allowance and immediate relief for your expenditure.

Calculating the AIA limit for your accounting period

The AIA limit for your accounting period depends on when that period falls and on the length of that period. The limit is proportionately reduced for accounting periods of less than 12 months.

Accounting period ends on or before 31 March 2023

If your accounting period is 12 months in length and falls wholly within the period running from 1 January 2019 to 31 March 2023, the AIA limit for the period is the temporary amount of £1 million.

Consequently, if your accounting period ends on or before 31 March 2023, you will be able to benefit from the £1 million limit.

Accounting period spans 31 March 2023

Calculating your AIA limit is more complicated if your accounting periods spans 31 March 2023 as transitional rules apply.

If you are planning capital expenditure in an accounting period that spans 31 March 2023, you will need to be aware of the transitional rules. Depending on the level of investment planned, it may be advisable to incur it prior to 31 March 2023, rather than after this date.

Super-deduction for companies

Companies are able to benefit from a ‘super-deduction’ equal to 130% of qualifying expenditure incurred in the period from 1 April 2021 to 31 March 2023. It applies where the expenditure would be eligible for main rate writing-down allowances of 18%. This is a better option than the AIA as it secures a higher rate of relief. However, unincorporated businesses are unable to benefit from the super-deduction.

Companies can also benefit from a 50% first-year allowance for expenditure incurred in the same window where the expenditure would qualify for reduced rate writing-down allowances of 6%. However, where the AIA is available, this is preferable to claiming the first-year allowance as will give relief at the rate of 100% of the expenditure, rather than at the rate of 50%.

To benefit from both the super-deduction and the 50% first-year allowance, companies must incur the qualifying expenditure on or before 31 March 2023.

Speak to us

If you are planning significant capital expenditure, speak to us to find out how to maximise your available capital allowances. The timing of the expenditure will affect the allowances that are available to you.

November 8, 2021

Budget highlights

The Chancellor presented his Autumn Budget and Spending Review on 27 October 2021. Some of the highlights are discussed below.

Income tax rates and thresholds

The rates and thresholds applying for 2022/23 were confirmed.

Personal allowance

As previously announced, the personal allowance remains at £12,570 for 2022/23. The allowance is reduced by £1 for every £2 by which adjusted net income exceeds £100,000. This means that where income exceeds £125,140, the personal allowance is lost in its entirety.

Rates and bands

The basic rate remains at 20%, the higher rate remains at 40% and the additional rate remains at 45%.

The basic rate band remains at £37,700. This means that where a person receives the standard personal allowance of £12,570, they will start to pay higher rate tax of 40% once their income exceeds £50,270.

The additional rate of 45% is payable on taxable income in excess of £150,000.

The rates applying to the non-dividend, non-savings income of Scottish taxpayers will be announced at the time of the Scottish Budget in December.

Dividend tax rates

As previously announced, the rates at which dividends are taxed are to rise by 1.25% from 6 April 2022. The increase will provide funding for health and adult social care.

Consequently, for 2022/23, the ordinary dividend rate is 8.75%, the upper dividend rate is 33.75% and the additional dividend rate is 39.35%.

National Insurance rates and thresholds

The rates and thresholds applying for 2022/23 have been confirmed.

Employees and employers

As previously announced, the upper earnings limit for primary Class 1 purposes will remain at £967 per week for 2022/23. This is aligned with the point at which higher rate tax becomes payable. The upper secondary thresholds that are linked to the upper earnings limit, namely, the upper secondary threshold for employees under the age of 21, the apprentice upper secondary threshold and the upper secondary threshold for armed forces veterans in the first year of their first civilian employment since leaving the armed forces, also remain at £967 per week.

A new secondary threshold for new Freeport employees is introduced from 6 April 2022. This is set at £481 per week.

The remaining thresholds are increased in line with the increase in the Consumer Price Index. The effect of this is that the lower earnings limit is set at £123 per week for 2022/23, the primary threshold is set at £190 per week and the secondary threshold is set at £175 per week.

As previously announced, the rates of primary and secondary Class 1, Class 1A and Class 1B contributions are increased by 1.25% for 2022/23 only pending the introduction of the Health and Social Care Levy. The main primary rate is 13.25% and the additional primary rate is 3.25%. Employers will pay secondary Class 1, Class 1A and Class 1B contributions at 15.05%. The rates are due to revert to their 2021/22 levels from 6 April 2023 when the Health and Social Care Levy comes into effect.

The Employment Allowance remains at £4,000 for 2022/23.

The self-employed

The self-employed pay Class 2 and Class 4 contributions.

Class 2 contributions are weekly contributions payable where profits exceed the small profits threshold. For 2022/23, the small profits threshold is £6,725 and the Class 2 contribution rate is £3.15 per week.

The self-employed also pay Class 4 contributions on their profits. The upper profits limit (which is aligned with the upper earnings limit for Class 1 and the rate at which higher rate tax becomes payable) is frozen at £50,270, while the lower profits limit is increased to £9,880.

Pending the introduction of the Health and Social Care Levy, the Class 4 rates are increased by 1.25% for 2022/23. As a result, the main Class 4 rate is set at 10.25% and the additional Class 4 rate is set at 3.25%. The rates are due to revert to their 2021/22 levels from 6 April 2023 when the Health and Social Care Levy comes into effect.

Cars and vans

The rates of company car tax already announced for 2022/23 will continue to apply for 2023/24 and 2024/25.

The fuel scale multiplier used for working out the fuel benefit charge is set at £25,300 for 2022/23 (up from £24,600 for 2021/22).

The amount on which tax is charged in respect of a taxable company van is increased to £3,600 for 2022/23. The amount is £3,500 for 2021/22.

A separate fuel charge applies where fuel is provided for private journeys in a company van. This is set at £688 for 2022/23 (up from £669 for 2021/22).

Residential capital gains tax

Where a residence has not been your only or main residence throughout the time that you have owned it, you may have to pay capital gains tax if the chargeable gain is more than your annual exempt amount. This may be the case if you sell an investment property or a second home.

From 27 October 2021, the window for reporting a residential capital gain and making a payment on account of the tax that is due is increased from 30 days to 60 days.

Duties

The Chancellor also announced a welcome freezing of certain duties that had been expected to rise.

Fuel duty

Fuel duty rates are to remain frozen for 2022/2023.

Alcohol duty

Alcohol duty rates will remain at their current levels. However, change is on the cards.

The Government are consulting on reforms to alcohol duty which will reduce the number of rates from 15 to six, and which will see higher duty charged on stronger drinks. The consultation will run until 30 January 2022.

Air passenger duty

A new lower band of air passenger duty (APD) is being introduced from 1 April 2023 for flights within the UK. In addition, a new ultra long-haul band will apply to destinations with capitals more than 5,500 miles from London.