Client access Client access

Category: Corporation Tax

MTD for corporation tax

MTD for corporation tax

The Government would like to hear your views on proposals for a new process for keeping records for corporation tax purposes and reporting tax information to HMRC, known as Making Tax Digital (MTD). Your comments will help ensure that the design makes it as easy as possible for smaller businesses to comply when the rules are introduced.

The consultation closes at 11.45pm on 5 March 2021.

March 2, 2021

NIC implications of COVID-19 support payments

NIC implications of COVID-19 support payments

Various support payments have been made to help those affected by the COVID-19 pandemic. How are those payments treated for National Insurance purposes?

Grant payments under the CJRS

Where an employer claims a grant payment under the Coronavirus Job Retention Scheme (CJRS), the full amount of the grant (topped up to 80% of wages in the last two months of the scheme) must be paid over to the employee. As far as the employee is concerned, this is treated in the same way as a normal salary payment. The employer deducts Class 1 National Insurance and pays it over to HMRC.

The payment is also liable to employer’s Class 1 National Insurance to the extent that it is not covered by the employment allowance. For pay periods prior to 1 August 2020, the employer can reclaim the associated employer’s National Insurance on grant payments from the Government under the CJRS. The employer’s National Insurance must be paid over to HMRC in the usual way.

Grants under the SEISS

Grants under the Self-Employment Income Support Scheme (SEISS) should be taken into account in computing profits for 2020/21. Where those profits exceed £9,500, Class 4 National Insurance contributions will be payable. If the profits for 2020/21 are more than £6,475, you must pay Class 2 contributions.

As a result of the pandemic, profits may be lower in 2020/21 than previously. If profits are below the small profits threshold, set at £6,475 for 2020/21, there is no obligation to pay Class 2 contributions. However, it may be worthwhile to do so voluntarily to ensure that 2020/21 remains a qualifying year for state pension and contributory benefit purposes. This is much cheaper than paying Class 3 contributions to make up a shortfall.

Other grants

Businesses may also receive other grants, such as those payable to businesses qualifying for small business rate relief or payable to specific sectors, such as the hospitality and leisure sector. For self-employed taxpayers, these are taken into account in calculating profits, which in turn will determine whether a liability to Class 2 and Class 4 National Insurance contributions arise.

Talk to us

Speak to us to ascertain the effect of grant payments on your National Insurance bill.

June 3, 2020

Budget 2020 – rates and allowances

Budget 2020 – rates and allowances

The Chancellor, Rishi Sunak, presented his first Budget on 11 March 2020, confirming the rates and allowances applying for the 2020/21 tax year. The following key rates and allowances were announced.

Full details of the rates and allowances applying for 2020/21 are available on the Gov.uk website.

Income tax

As previously announced, the personal allowance remains at £12,500 for 2020/21. It is reduced by £1 for every £2 by which income exceeds £100,000. This means that if your income is more that £125,000 for 2020/21, you will not receive a personal allowance.

Income tax rates and allowances are unchanged too. The basic rate remains at 20%, the higher rate at 40% and the additional rate at 45%. The basic rate band is also unchanged at £37,500, meaning that the point at which higher rate tax becomes payable remains at £50,000. Tax is payable at the additional rate on income over £150,000.

The Scottish and Welsh rates of income tax apply to the non-savings, non-dividend income of Scottish and Welsh taxpayers.

Dividends

The dividend allowance remains at £2,000 for 2020/21. Dividends, which are treated as the top slice of income, are taxed at 7.5% to the extent that they fall within the basic rate band, 32.5% to the extent that they fall in the higher rate band and at 38.1% to the extent that they fall in the additional rate band.

Savings

Basic rate taxpayers continue to benefit from a savings allowance of £1,000 for 2020/21, while higher rate taxpayers can enjoy a savings allowance of £500. There is no savings allowance for additional rate taxpayers.

The starting savings rate of 0% applies to savings in the savings starting rate band of £5,000, but remember this is reduced by taxable non-savings income.

Corporation tax

The rate of corporation tax was due to fall to 17% for the financial year 2020. However, as previously announced, it will remain at 19%. It will stay at 19% for the financial year 2021 too.

Capital gains tax

The capital gains tax annual exempt amount is increased to £12,300 for 2020/21 for individuals and personal representatives, and to £6,150 for trustees.

Capital gains tax rates remain at 10% where income and gains fall in the basic rate band and at 20% thereafter. Higher rates of 18% and 28% apply to residential property gains.

March 12, 2020