Strong Customer Authentication (SCA) rules – what they mean for businesses and consumers

You may have already noticed when you are buying things online that you are now being asked to confirm your purchase in more than one way to improve security, and this is the result of the new Strong Customer Authentication (SCA) regulations which came into effect on 14 March 2022.

What are the SCA regulations?

The SCA regulations create an additional layer of security for card payments which involve a second method of identification. This could be a text message with a code that needs to be added to a purchase, a phone call to a landline, or via a card reader or smartphone app. The aim is to reduce the amount of fraud and make customer transactions safer.

The effect on businesses

There is, of course, an impact on customers directly. But all companies who sell directly to consumers via card purchases have had to make some changes to their technology too. Retailers should have already upgraded their payment gateways and payment services providers have been working towards helping achieve this.

Declined transactions

From 14 March 2022, any transaction that is not SCA compliant will be declined, which would be costly to retailers. If you are still having problems with this for your business, then you urgently need some help.

Find out how we can help you

If you want to know more about SCA or have any problems implementing it, then please get in touch and we will do what we can to help you.

Bank of England (BoE) base rate rises to 0.75% – what it means for consumers and businesses

The Bank of England (BoE) base rate rose to 0.75% in March in response to Consumer Prices Index (CPI) inflation rising to 5.5% – almost triple the BoE’s target of 2%. Inflation is set to continue rising throughout the year (see Spring Statement round-up) with the Russian invasion of Ukraine creating increased pressure on already rising prices.

What does it mean for you?

Any rise in the base rate has an impact on borrowing rates for businesses and individuals, and on savings rates. Each is likely to rise – great news for savers, not such great news for borrowers.

How will borrowers be affected?

Any loan you have that does not have a fixed rate – such as some mortgages, personal loans or credit card debt, for example – could face a rise in interest rates if the company providing this chooses to pass this rate on. And many will.

However, if you have a fixed-rate mortgage, unsecured personal loan or other loan, for example, then you will not see these rates change until you reach the end of the offer term or until the loan is paid off.

How are savers affected?

If you have savings in a fixed-rate account, these will not rise either. But if your savings are in a non-fixed interest rate account, then you could see the interest you are paid on this rise.

If you see a better rate than you are being paid elsewhere, then it is worth considering moving your savings to the better-paying account. But bear in mind if you are in a fixed-rate account, you could face a penalty for doing this which could negate the benefit of moving. So, check with an expert before taking any action.

Safety net

You also need to consider how much of your money is in each institution. The Financial Services Compensation Scheme (FSCS) covers your money on deposit with a single institution up to £85,000. But you need to be aware that various brands come under one institution – such as Halifax and TSB coming under the Lloyds Banking Group.

You would be covered up to £85,000 across all these accounts, not in each. It only becomes relevant if one of the banks goes bust, but we know from experience that however unlikely, this can happen. So, it is something to bear in mind.

Find out how we can help you

If you are unsure about whether your money is working as hard for you as it could, then please feel free to get in touch and we will help you in any way we can.

Spring Statement round-up

The Chancellor’s Spring Statement on March 23 was limited on giveaways, but there were some measures designed to help people struggling with the highest rates of inflation in 30 years.

The Office for Budget Responsibility (OBR) has forecast that inflation will average 7.4% this year, and there are many people who are already struggling with everything from filling their cars with fuel to keeping the heating on.

Fuel Duty cut but NI increase

One cut came in the form of a 5p a litre reduction in the price of fuel thanks to a fall in fuel duty to help offset the spiralling cost of oil.

Yet despite many experts imploring the Chancellor to postpone the 1.25% hike in National Insurance for 2022/23 – the Health and Social Care Levy – Rishi Sunak refused to do this. The one change he made was raising the NI threshold by £3,000 rather than the planned £300, to bring it in line with the £12,570 personal allowance. He described this as a “£6 billion personal tax cut for 30 million people”.

Employment Allowance increase for small businesses

The Employment Allowance will increase to £5,000 for small business, which is a tax cut of £1,000 for around 500,000 firms which starts in April.

Businesses can also expect to benefit from tax cuts on business investment during the Autumn Budget, and there will be an increase in business research and development tax credits to boost productivity.

Income tax cut in 2024

The basic rate of income tax will fall from 20% to 19% from April 2024, the first cut in this tax in 16 years according to the Chancellor. But he refrained from bringing this cut in for the coming tax year as there is too much uncertainty in the economy.

We can help you

Even if you or your business did not see anything in the Spring Statement to help you, there are likely to be ways you can benefit from existing tax efficiencies to maximise your money. Get in touch with us to find out how.

Reclaim Married Couple’s Allowance

Married Couple’s Allowance can be transferred between spouses and civil partners, and while 2m couples have claimed this since it was introduced back in 2015, there are many more people who are entitled to claim it.

Go back four years

The allowance, which is worth up to £1,220 for each year, can be reclaimed back for every year to the 2017/18 tax year right the way through to the 2021/22 tax year. For those entitled to the maximum amount, this could create a windfall of £4,880.

Claim it now

However, these payments need to be claimed before 5 April 2022. Married couples and those in civil partnerships can transfer 10% of their personal allowance to their spouse or partner if one is a non-taxpayer and the other is a basic-rate taxpayer. This could apply if one partner loses hours or sees a significant reduction in their salary due to reduced hours – entirely possible during the Covid-19 pandemic – retirement or a change of job. It also applies if someone takes a career or study break.

Who claims?

The lowest earning spouse or partner would make the claim for this transfer of personal allowance, and even if your spouse or civil partner has died since 5 April 2017, then the remaining spouse or partner can still claim this allowance. This is done via the income tax helpline. If the claim is made via the online service, they will automatically roll on to the following years.

But if you make the claim via a self-assessment, this does not automatically roll on. If a couple no longer qualifies, then they need to cancel their claim.

We can help you reclaim what is due

If you think you are entitled to the Married Couple’s Allowance or any other benefit, such as the Blind Person’s Allowance, Tax Relief for Employment Expenses – which includes the £6 per week allowance for employees required to work from home in 2020/21 and 2021/22 – and could benefit from going back up to four years with your claim, then please contact us for more information.

End of year tax planning – what you need to consider

The new tax year on April 6 is accelerating quickly towards us, and now is the time to make sure that any last-minute allowances you may not have made the most of in the 2021/22 tax year are mopped up.

There are plenty of allowances that have a time limit on each tax year, and if you can use these last few days to maximise the benefits, then it would be a good deed done.

Individual Savings Account (ISA) Allowance

Each year, we can put up to £20,000 into an ISA, and if you have not put the full amount into your ISA for this year, then consider adding any additional funds to it before April 5.

Putting your savings and investments into an ISA wrapper allows the funds to grow free of tax, and when you take those funds out at the other end, you don’t pay any tax on them then either. You can spread this across a number of different types of ISAs – for example a cash ISA, Stocks and Shares ISA, Innovative Finance ISA, which is peer-to-peer lending, or a Lifetime ISA (although you can only invest £4,000 in this type as a maximum, which would leave you £16,000 of your allowance to invest elsewhere).

If you fail to use your full ISA allowance within the tax year, then you will lose it once we hit April 6, so make sure you maximise this tax benefit.

Avoiding a 60% effective tax rate for higher earners

Once you reach £100,000 of earnings, you begin to lose your personal allowance at a rate of £1 for every £2 of earnings above this threshold. This means that by the time you reach £125,140 you no longer have a personal allowance. Between £100,000 and £125,140, your effective tax rate is 60%.

However, you can reduce the impact of this by making payments into your pension, or by donating money and benefiting from Gift Aid on the payments. Pension contributions and Gift Aid payments are made from gross income, which means you reduce the amount of taxable income you have. You cannot put more than £40,000 into your pension each year and receive tax relief, and you cannot reclaim more in tax in a single year than you would have paid.

This annual allowance as it is known will also reduce by £1 for every £2 earned above £240,000 and will stop reducing at £312,000 – leaving everyone with a minimum annual allowance of £4,000.

Carry forward

If you have any unused allowance from any of the three previous tax years, then you can carry this forward for one year to help you reduce your tax liabilities and maximise your pension contributions.

There are a few caveats to this, including:

• You must have been in a registered pension scheme for each of these previous three years.
• You must have already used all your allowance for the current tax year.
• The carried forward annual allowance from the first year must be used first.
• The amount you can carry forward may be subject to the tapered allowance if your earnings were high enough for this to apply in any of the previous three years.

Taking more than your tax-free lump sum out of a money-purchase pension scheme will also mean your annual allowance is reduced to £4,000.

However, if you have any annual allowance available from the three previous tax years and have used your full allowance for the current tax year, then this is another way you can reduce your taxable income and put extra into your pension pot. But make sure you remain within the Lifetime Allowance, which is currently set at £1,073,100.

Dividend Income

If you take dividends from your company, then you can take up to £2,000 each year at 0% tax, but if you miss this within a tax year, it is not possible to roll this over to the next year. Any dividend income after this between £12,570 and £50,270 is subject to 7.5% tax up to April 5 and 8.25% from April 6 – due to the addition of the equivalent of the 1.25% Health and Social Care Levy – so if you can bring any dividend payments into the current tax year, you may be able to avoid the additional tax.

Corporation Tax

The Corporation Tax rate is set to increase from 1 April 2023, and while this is a year away, it makes sense to plan ahead to make sure you make the most of the lower rate of 19% for the coming year.

Companies with profits between £50,000 and £250,000 will continue to pay corporation tax at 19% even after 1 April 2023, but companies with profits above this will face a tapered rate up to 25%.

For this reason, it would be wise to plan ahead for the next trading year to consider how you may be able to effectively mitigate this tax. But it is not something you should do without expert advice.

Contact us

If you are interested in benefiting from either personal or business tax advice, then please contact us and we will be happy to help you make the most of your tax breaks.