Announcements

The Chancellor announced several changes, including:

National insurance contributions

The primary threshold for Class 1 national insurance contributions (NICs) will increase from £190 a week (£9,880 a year) to £242 a week (£12,570 a year) from 6 July 2022, bringing it in line with the frozen personal allowance.

For company directors, who are subject to special rules, the equivalent annual amount from July will be £11,908. From 2023/24, all employees will share the same £12,570 annual threshold. The maximum potential Class 1 employee NICs saving in 2022/23 is £269.

For the self-employed, the lower profits limit will increase from £9,880 to £11,908 in 2022/23, rising to £12,570 in 2023/24. Class 2 NICs will not be payable if profits are below these limits. The maximum potential Class 4 NICs saving in 2022/23 is £208.

There is no change to the Class 1 secondary threshold (employer), but the employment allowance will be raised from £4,000 to £5,000 for 2022/23 onwards.

Fuel duty

The rate of fuel duty on petrol and diesel is reduced by 5p a litre for 12 months from 6pm on 23 March.

Basic rate tax

The basic rate of income tax will be reduced to 19% from 2024/25. The cut will apply to non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland and also to the savings basic rate, which applies to savings income for taxpayers across the UK.

Scotland sets its own basic rate of tax on non-savings, non-dividend income and will receive corresponding funds under the Barnett formula.  

VAT on energy saving

Eligibility for VAT relief on energy saving materials will be expanded and the VAT rate reduced to zero for five years from 1 April 2022. These changes do not apply to Northern Ireland.

Research & development tax credits

From April 2023, all data, cloud computing and pure maths costs associated with research and development (R&D) will qualify for R&D relief.

Green relief for business rates

The Autumn 2021 Budget introduced targeted business rates exemptions from 1 April 2023 until 31 March 2035 for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill. The implementation of these measures will now take effect from April 2022.

Tax Plan

The Chancellor announced a ‘Tax Plan’ alongside the Spring Statement, setting a basis for consultation ahead of measures in the Autumn 2022 Budget. The plan echoes themes in Mr Sunak’s recent Mais lecture at the Bayes Business School and focuses on three areas:

• Capital  The Chancellor wants to reform the tax incentives for investment from April 2023, when the 130% super-deduction will end and the main corporation tax rate is due to rise to 25%.
• People  In his speech Mr Sunak said that he wanted to ‘consider whether the current tax system, including the operation of the apprenticeship levy, is doing enough to incentivise businesses to invest in the right kinds of training’.
• Ideas  R&D expenditure in the UK is half the OECD average, but the UK spends more than many other countries on R&D tax relief. The Chancellor plans to reform R&D tax credits, potentially making some R&D expenditure credits more generous.

Read more:

• Introduction
• Economic Update
• Announcements
• 2022/23 changes already announced
• 2022/23 tax data

@ Copyright 23 March 2022. All rights reserved. This summary has been prepared very rapidly and is for general information only. You are recommended to seek competent professional advice before taking or refraining from taking action on the basis of the contents of this publication. The guide represents our understanding of the law and HM Revenue & Customs practice as at 23 March 2022, which are subject to change.

* Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000
† Married couple’s/civil partner’s allowance reduced by £1 for every £2 of adjusted net income over £31,400, until minimum reached

INCOME TAX RATES AND BANDS

** Not available if taxable non-savings income exceeds the starting rate band

TAX INCENTIVISED INVESTMENTS

*Above £1,000,000 investment must be in knowledge-intensive companies

REGISTERED PENSIONS

Annual allowance charge on excess is at applicable tax rate(s) on earnings

Lifetime allowance charge if excess is drawn as cash 55%: as income 25%

Pension commencement lump sum up to 25% of pension benefit value

* Reduced by £1 for every £2 of adjusted income over £240,000 to a minimum of £4,000, subject to threshold income being over £200,000

PROPERTY TAXES

Property transaction taxes have different rates and names depending on where in the UK a purchase takes place.

England & N Ireland – Stamp Duty Land Tax (SDLT) on slices of value

*0% for freeport qualifying property in England only
First time buyers: 0% on first £300,000 for properties up to £500,000
Non-resident purchasers: 2% surcharge on properties £40,000 or more
Residential properties bought by companies etc. over £500,000: 15% of total consideration, subject to certain exemptions

The Chancellor announced several changes, including:

National insurance contributions

The primary threshold for Class 1 national insurance contributions (NICs) will increase from £190 a week (£9,880 a year) to £242 a week (£12,570 a year) from 6 July 2022, bringing it in line with the frozen personal allowance.

For company directors, who are subject to special rules, the equivalent annual amount from July will be £11,908. From 2023/24, all employees will share the same £12,570 annual threshold. The maximum potential Class 1 employee NICs saving in 2022/23 is £269.

For the self-employed, the lower profits limit will increase from £9,880 to £11,908 in 2022/23, rising to £12,570 in 2023/24. Class 2 NICs will not be payable if profits are below these limits. The maximum potential Class 4 NICs saving in 2022/23 is £208.

There is no change to the Class 1 secondary threshold (employer), but the employment allowance will be raised from £4,000 to £5,000 for 2022/23 onwards.

Fuel duty

The rate of fuel duty on petrol and diesel is reduced by 5p a litre for 12 months from 6pm on 23 March.

Basic rate tax

The basic rate of income tax will be reduced to 19% from 2024/25. The cut will apply to non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland and also to the savings basic rate, which applies to savings income for taxpayers across the UK.

Scotland sets its own basic rate of tax on non-savings, non-dividend income and will receive corresponding funds under the Barnett formula.  

VAT on energy saving

Eligibility for VAT relief on energy saving materials will be expanded and the VAT rate reduced to zero for five years from 1 April 2022. These changes do not apply to Northern Ireland.

Research & development tax credits

From April 2023, all data, cloud computing and pure maths costs associated with research and development (R&D) will qualify for R&D relief.

Green relief for business rates

The Autumn 2021 Budget introduced targeted business rates exemptions from 1 April 2023 until 31 March 2035 for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill. The implementation of these measures will now take effect from April 2022.

Tax Plan

The Chancellor announced a ‘Tax Plan’ alongside the Spring Statement, setting a basis for consultation ahead of measures in the Autumn 2022 Budget. The plan echoes themes in Mr Sunak’s recent Mais lecture at the Bayes Business School and focuses on three areas:

• Capital  The Chancellor wants to reform the tax incentives for investment from April 2023, when the 130% super-deduction will end and the main corporation tax rate is due to rise to 25%.
• People  In his speech Mr Sunak said that he wanted to ‘consider whether the current tax system, including the operation of the apprenticeship levy, is doing enough to incentivise businesses to invest in the right kinds of training’.
• Ideas  R&D expenditure in the UK is half the OECD average, but the UK spends more than many other countries on R&D tax relief. The Chancellor plans to reform R&D tax credits, potentially making some R&D expenditure credits more generous.

@ Copyright 23 March 2022. All rights reserved. This summary has been prepared very rapidly and is for general information only. You are recommended to seek competent professional advice before taking or refraining from taking action on the basis of the contents of this publication. The guide represents our understanding of the law and HM Revenue & Customs practice as at 23 March 2022, which are subject to change.

Inflation and its headline label, the cost-of-living crisis, have now become the focus of economic attention.

When the Chancellor presented his Autumn Budget on 27 October 2021, the UK economy appeared to be emerging from the pandemic, with the Omicron variant yet to arrive. Back then, the most recent reading for CPI inflation (September 2021) was 3.1%, which the OBR formally projected would peak at 4.4% in 2022. By November 2021, CPI inflation was 5.1%, while the latest reading (for February 2022), released on the day of the Chancellor’s statement, is 6.2%.

Last week the Bank of England upped its inflation forecast once again, pencilling in 8% for April, with the risk of a higher rate still in October if current energy prices are maintained. However, in 2023 the Bank believes inflation will ‘fall back materially’, nearing the official target of 2% on a two to three year horizon. 

The OBR is broadly in agreement with the Bank. Its new Economic and Fiscal Outlook (EFO) report sees inflation ending 2022 at 7.4%, but then dropping to 4.0% a year later and to just 1.5% in 2024.

Meanwhile the current rise in inflation has been a two-edged sword for government finances:

• On the plus side, inflation is boosting tax receipts. For example, yesterday’s public sector finance figures showed that so far in 2021/22, PAYE income tax receipts are 13.6% higher than for the same period in 2020/21 and VAT receipts are up 18.8%.
• On the downside, the cost of servicing government debt, including over £500 billion of (RPI) index-linked stock, has risen sharply. With one more month of the financial year remaining, interest payments are already £29.5 billion (78.6%) higher than at the same point in 2020/21. 

The debt and inflation combination was apparent in public sector finance figures published just before the Spring Statement. The Chancellor looks to be undershooting the OBR’s Autumn borrowing forecast for 2021/22 by over £25 billion and that gave him the wiggle room for some larger than expected giveaways.

@ Copyright 23 March 2022. All rights reserved. This summary has been prepared very rapidly and is for general information only. You are recommended to seek competent professional advice before taking or refraining from taking action on the basis of the contents of this publication. The guide represents our understanding of the law and HM Revenue & Customs practice as at 23 March 2022, which are subject to change.

Just before Christmas, the Chancellor asked the Office for Budget Responsibility (OBR) to produce an economic and fiscal forecast for 23 March. The timing and brief nature of the accompanying Treasury announcement reflected Mr Sunak’s wish to keep the Spring Statement a low-profile event.

This was not meant to be a March mini-Budget, despite what many headlines have suggested. Mr Sunak believes in the once-a-year approach to major tax and spending changes, unlike some of his predecessors. However, in both 2020 and 2021, the pandemic put paid to that aspiration.

2022 has already proved similarly disruptive to his singular Budget plans. Early in February, a little over three months after his Autumn Budget, Mr Sunak was back at the despatch box presenting proposals for £9 billion of spending in the form of council tax rebates and repayable loans to mitigate April’s 54% utility price cap rise. Seven weeks and the Ukrainian invasion later, the Chancellor was once again before Parliament, introducing new measures to cope with soaring energy prices.

Tuesday’s public finance figures suggested the Chancellor had £25-30 billion of wiggle room and, to the surprise of some commentators, he used a good part of it in what looked suspiciously like a mini-Budget, complete with a deferred, rabbit-out-the-hat income tax cut for 2024/25.

@ Copyright 23 March 2022. All rights reserved. This summary has been prepared very rapidly and is for general information only. You are recommended to seek competent professional advice before taking or refraining from taking action on the basis of the contents of this publication. The guide represents our understanding of the law and HM Revenue & Customs practice as at 23 March 2022, which are subject to change.

BUDGET HIGHLIGHTS

• Substantial amounts of revenue over the next five years will be raised from previously announced measures, such as the freezing of tax allowances and the introduction of the Health and Social Care Levy.
• HMRC will be able to make 20% top-up payments for 2024/25 onwards in respect of contributions made by low-earning individuals saving in a pension scheme under a Net Pay Arrangement.
• From 27 October 2021, the deadline for reporting and paying CGT after selling UK residential property will increase from 30 days to 60 days after completion.
• Businesses will benefit from several changes to the business rates regime, including the freezing of business rates multipliers for a second year, from 1 April 2022 until 31 March 2023.
• Income tax basis periods will be reformed so that a business’s profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of its accounting date.
• Qualifying expenditure for tax relief on research and development will be extended to include data and cloud costs.
• Alcohol duty will be restructured so that all beverages will be taxed in direct proportion to their alcohol content.
• A new domestic air passenger duty band will cover flights within the UK at a rate of £6.50 for 2023/24. A new ultra-long-haul band will apply to flights to destinations with capitals located more than 5,500 miles from London, with an economy rate of £91.

@ Copyright 27 October 2021. All rights reserved. This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

INTRODUCTION

The first autumn Budget for three years was a three-part presentation. The Chancellor’s well-trailed speech was accompanied by the first multi-year Spending Review since 2015 and the latest Economic and Fiscal Outlook (EFO) from the Office for Budget Responsibility (OBR).

Mr Sunak’s previous two Budgets had been dominated by the pandemic, which has wreaked havoc with the public finances. Third time around, the backdrop was brighter, at least relatively speaking.

In addition to recent helpful borrowing data, the Chancellor had the £42 billion of tax increases he announced in March and September. The extent of a further windfall was revealed in the Budget Red Book, which shows that suspending the State pension ‘triple lock’ next April will save £5.4 billion in 2022/23, rising to £6.7 billion four years later. It is therefore not surprising that few new tax-raising measures emerged in Mr Sunak’s second formal Budget of 2021. The reports from the Office for Tax Simplification on inheritance tax and capital gains tax have been left to gather more dust on the shelves of 11 Downing Street.

Mr Sunak was in spending rather than taxing mode on this occasion. He made two significant changes to Universal Credit, partially reversing the impact of the £20 a week reduction that took effect earlier this month. There were also cuts to business rates, air passenger duty and the cost of a pint of beer.

The Chancellor took advantage of better than OBR-projected economic performance both to spend more and to put some money aside. He must hope that his war chest is enough to cover whatever COVID-19 and rising inflation/interest rates conspire to deliver in the coming year.

PERSONAL TAXATION

INCOME TAX

¹ Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.
² Reduced by £1 for every £2 of adjusted net income over £31,400 (£30,400 for 2021/22), until the minimum is reached.

³ Reduced by £1 for every £2 of adjusted income over £240,000 to a minimum of £4,000, subject to threshold income being over £200,000.

⁴ Not available if taxable non-savings income exceeds the starting rate band.

PERSONAL TAXATION AND INVESTMENTS

Income tax

For 2022/23 to 2025/26, the personal allowance will remain at £12,570 and the higher rate threshold at £50,270, as previously announced. In Scotland, the higher rate threshold for non-savings, non-dividend income will be announced in the Scottish Budget on 9 December.

Dividend tax

The dividend allowance will remain at £2,000. The rate of tax on dividends above the dividend allowance will rise by 1.25 percentage points from 2022/23, as announced in September 2021.

The dividend trust rate of tax will be 39.35% for 2022/23.

SAVER

Don’t lose your personal allowance. Your personal allowance of £12,570 is reduced by 50p for every pound by which your income exceeds £100,000. You may be able to make a pension contribution or a charitable gift to bring your income below £100,000.

National insurance contributions (NICs)

The lower NIC thresholds and limits will rise by 3.1%, in line with CPI inflation to September 2021. The upper earnings limit, upper secondary thresholds and upper profits limit will remain aligned to the unchanged higher rate threshold at £50,270 for 2022/23, as previously announced.

NIC rates will rise by 1.25 percentage points in 2022/23, as announced in the NHS/social care package launched in September 2021. From 2023/24, NIC rates will revert to their previous levels and a new 1.25% Health and Social Care Levy will apply to employers, employees and the self-employed (including those above State pension age).

THINK AHEAD

NICs increase from 6 April 2022. Salary sacrifice arrangements, for example for employers rather than employees to make pension contributions, will offer even greater savings in 2022/23.

Pension contribution tax relief

In 2025/26, a new system will be introduced so that HMRC can make 20% top-up payments in respect of contributions made from 2024/25 onwards directly to low-earning individuals saving in a pension scheme using a Net Pay Arrangement. At present such contributions may not benefit from any tax relief and these top-ups will help align their outcomes with equivalent savers using Pension Relief at Source to save into pension schemes.

Pension charge cap

There will be consultation on further changes to the regulatory charge cap for defined contribution pension schemes to unlock institutional investment to support some of the most innovative businesses.

Company car tax

The company car tax rates already announced for 2022/23 will remain frozen until 2024/25, as announced at Budget 2020. From 2022/23 there will be no difference in the scale rate for emissions measured on NEDC or WLTP cycles.

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2022/23 will remain at £20,000 and the corresponding limit for Junior ISAs (JISAs) and child trust funds (CTFs) will stay at £9,000.

National Savings & Investment (NS&I) Green Savings Bonds

Green Savings Bonds, which were announced in the March 2021 Budget, were launched by NS&I on 22 October and will be on sale for a minimum of three months. The NS&I Green Savings Bonds are a three-year fixed-term savings product with an interest rate of 0.65% and investment limits between £100 and £100,000.

Lifetime allowance

The lifetime allowance for pension savings will remain frozen at £1,073,100.

WELFARE AND FAMILY SUPPORT

Universal Credit (UC)

The taper rate in UC will be reduced from 63% to 55%, meaning that UC claimants will keep an additional 8p for every £1 of net income they earn.

The Work Allowance will be increased by £500 a year. This is the amount that households with children or a household member with limited capability for work can earn before their UC starts to be reduced.

The aim is to introduce both UC changes no later than 1 December 2021.

The plans to create a new housing element of Pension Credit, replacing pensioner Housing Benefit, will now take effect in 2025. This will align with the full rollout of working-age Housing Benefit into UC.

National living wage (NLW) and national minimum wage (NMW)

The Chancellor confirmed the reports of increases to the NLW and NMW which appeared before the Budget.

The 9.8% increase in the NMW for 21-22 year olds reflects the aim to raise the NLW for all aged over 21 to two-thirds of median earnings by 2024. 

CAPITAL TAXES

Capital gains tax (CGT) annual exempt amount

The annual exempt amount for individuals and personal representatives will remain at £12,300 for 2022/23 and the annual exempt amount for most trusts will likewise remain at £6,150 (minimum £1,230).

CGT – property payment window

From 27 October 2021, the deadline for UK residents to report and pay CGT after selling UK residential property will increase from 30 days to 60 days after completion. For non-UK residents disposing of property in the UK, this deadline will also increase from 30 days to 60 days. Legislation will clarify that when UK residents dispose of mixed-use property, the 60-day payment window will only apply to the residential element of the property gain.

Inheritance tax (IHT)

The IHT nil rate band will remain at £325,000 for 2022/23. The residence nil rate band (RNRB) will likewise stay at £175,000 and the RNRB taper will continue to apply where the value of the deceased’s estate is greater than £2 million.

Stamp duty land tax (SDLT)

There are no changes to SDLT rates.

Annual tax on enveloped dwellings (ATED)

The ATED annual charge will rise by 3.1% from 1 April 2022 in line with the CPI.

BUSINESS TAXES

Corporation tax and bank surcharge

The main rate of corporation tax will remain at 19% for the year beginning 1 April 2022 and will rise to 25% from April 2023 for businesses with profits of £250,000 and over. The rate for businesses with profits of £50,000 or less will remain at 19% and there will be a marginal taper for profits between £50,000 and £250,000 – all as announced in March 2021.

The bank surcharge rate will be set at 3% from April 2023, so banks will pay corporation tax at 28%. The annual allowance within the surcharge will be raised to £100 million.

THINK AHEAD

Dividend tax rates will rise from 6 April 2022. You could save tax if your company pays you a dividend in the current tax year.

Business rates

The business rates multipliers will be frozen for a second year, from 1 April 2022 until 31 March 2023, keeping the multipliers at 49.9p and 51.2p.

There will be a temporary business rates relief for eligible retail, hospitality and leisure properties for 2022/23. Eligible properties will receive 50% relief, up to a cap of £110,000 per business.

From 2023, a 100% improvement relief for business rates will provide 12 months’ relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. The relief will be reviewed in 2028.

From 1 April 2023 to 31 March 2035 there will be targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage. There will also be a 100% relief for eligible heat networks to support the decarbonisation of non-domestic buildings.

Business rates revaluations will take place every three years instead of every five years, from 2023.

Transitional relief for small and medium-sized businesses and the supporting small business scheme will be extended for one year. This restricts increases in rates bills for properties with a rateable value of up to £100,000.

Online sales tax consultation

The government will publish a consultation about an online sales tax ‘shortly’. If it is introduced, the revenue from such a tax would be used to reduce business rates for retailers in England and increase the block grants of the devolved administrations.

Income tax basis period reform

Income tax basis periods will be reformed so that a business’s profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of the business’s accounting date. This removes the basis period rules, which result in tax being charged on profits twice in some circumstances, as well as the need for overlap relief. The new rules will come into force from 6 April 2024 with a transition period in 2023/24.

Research and development (R&D) tax reliefs

Qualifying expenditure will be expanded to include data and cloud costs. Other changes will refocus support towards innovation in the UK rather than overseas, targeting abuse and improving compliance. The changes will take effect from April 2023.

THINK AHEAD

Your business might be entitled to a valuable R&D tax credit – even if it doesn’t make a taxable profit. Check out the new position; you might be surprised what expenditure can now qualify and how much it could be worth to you.

Annual investment allowance (AIA)

The temporary £1 million level of the AIA will be extended to 31 March 2023.

Recovery loan scheme

The recovery loan scheme will be extended to 30 June 2022 to help small and medium-sized businesses to continue to recover from the pandemic, but the government guarantee will be reduced from 80% to 70%.

Cross-border group relief

Cross-border group relief and related loss reliefs are abolished from 27 October 2021.

Residential property developer tax

A new tax will be introduced on company profits derived from UK residential property development, to help pay for the removal of unsafe cladding and other building safety remediation, as announced in February 2021.

It will be charged on relevant profits arising after 31 March 2022, at 4% on profits exceeding an annual allowance of £25 million. It will be included in corporation tax returns.

Cultural reliefs

Museums and galleries exhibition tax relief (MGETR) will be extended until 31 March 2024. The headline rates of the tax reliefs for theatres, orchestras and MGETR are increased with immediate effect but will reduce on 1 April 2023 and again on 1 April 2024.

English freeports

The first English freeport sites – in Humber, Teesside and Thames – will be able to begin initial operations from November 2021.

Alcohol duty reform

The government intends to restructure alcohol duty so that all beverages will be taxed in direct proportion to their alcohol content.

To simplify the regime, the government intends to reduce the number of main rates from 15 to 6, with common thresholds for each set of bands across product categories. The rates will be harmonised for drinks at 8.5% ABV or above and there will be reduced rates for products below 3.5% ABV.

The government also intends to introduce a common small producer relief, to reduce the tax burden on smaller producers of wine, cider, spirits and made-wine below 8.5% ABV. Duty rates on draft beer and cider will be cut by 5% to help pubs and support responsible drinking.

The government is publishing a consultation on the detail of these reforms, which will close on 30 January 2022. The government will continue to discuss the application of these reforms to Northern Ireland with the EU during the consultation period of the review.

Air passenger duty (APD)

A new domestic APD band will cover flights within the UK. The rate will be £6.50 for 2023/24. The existing short-haul economy rate will be frozen for 2023/24 at £13 and the long-haul economy rate will increase by £3 to £87. There will be a new ultra-long-haul band, covering destinations with capitals located more than 5,500 miles from London, with an economy rate of £91.

Asset holding companies (AHC) tax regime and real estate investment trusts (REITs)

A new framework will be introduced for the taxation of companies used by funds and institutional investors to make investments, while targeted changes will be made to the REIT tax rules, with effect from April 2022.

UK funds regime review

The government will publish in the coming months its response to the call for input on the broader elements of the UK funds regime review, as well as a consultation on options to simplify the VAT treatment of fund management fees.

Anti-money laundering levy

Businesses and other entities subject to the money laundering regulations will have to pay a new anti-money laundering levy starting with the year 1 April 2022 to 31 March 2023, as previously announced.

The levy will be a fixed fee based on their ‘size’ band, as determined by their UK revenue for the relevant accounting period.

Payments will be due after the end of the relevant year. The levy is intended to raise about £100 million a year to help fund anti-money laundering and economic crime reforms.

Diverted profits tax (DPT)

HMRC will not be able to close corporation tax enquiries into profits subject to a DPT charge until after the DPT review period ends. This will apply to any application for a corporation tax closure notice made after 26 September 2021.

Under another measure, companies can still use certain relieving provisions to amend their company tax returns and bring taxable diverted profits into charge to corporation tax during the DPT review period.

New legislation will enable HMRC to implement tax treaty mutual agreement procedure decisions reached after 27 October 2021.

Tonnage tax reform

The government will introduce a package of measures to reform the UK’s tonnage tax regime for shipping businesses from April 2022. These reforms aim to see more firms basing their headquarters in the UK and flying the UK flag.

VALUE ADDED TAX

Registration and deregistration thresholds

The VAT registration threshold will remain at £85,000 and the deregistration threshold will stay at £83,000 until 31 March 2024.

Dental prostheses imports

The current VAT exemption for dental prostheses supplied by registered dentists and other dental care professionals and technicians will be extended to imports of dental prostheses by these persons.

The measure will take effect on or after Royal Assent to Finance Bill 2021 but will apply retrospectively from 1 January 2021.

Second-hand motor vehicle export refund scheme

A second-hand motor vehicle export refund scheme will be introduced. Businesses that remove used motor vehicles from Great Britain for resale in Northern Ireland or the EU may be able to claim a VAT refund following export.

This will ensure that Northern Ireland motor dealers will remain in a comparable position to those applying the VAT margin scheme elsewhere in the UK.

The VAT margin scheme will be extended to Northern Ireland for motor vehicles sourced from Great Britain until the second-hand motor vehicle export refund scheme is implemented if the government reaches a relevant agreement with the EU. It will then apply retrospectively from 1 January 2021.

Implementation of VAT rules in free zones

Additional elements will be introduced to the previously announced VAT-free zone model for freeports, with effect from 3 November 2021.

A free zone exit charge will ensure that businesses do not gain an unintended tax advantage from the zero rate in the free zone model. The existing VAT law will be amended to ensure that the free zone rules and warehousing rules are mutually exclusive.

Penalties for late submission and late payment

The government has confirmed that the new late submission and late payment penalties for VAT will come into effect from accounting periods starting on or after 1 April 2022.

THINK AHEAD

Making tax digital. From April 2022 the requirement to keep digital records and submit VAT returns using MTD compatible software will be extended to VAT-registered businesses that are below the £85,000 VAT registration threshold. Make sure you are ready.

TAX ADMINISTRATION

Making tax digital (MTD) for income tax self-assessment (ITSA)

As announced in September, sole traders and landlords, who have annual income over £10,000 will be given an extra year to prepare for MTD.
MTD for ITSA will now be introduced from 6 April 2024. General partnerships will not be required to join MTD for ITSA until 6 April 2025.

Reform of penalties for late submission and late payment of tax for ITSA 

As announced in September, the new regime of penalties for the late filing and late payment of tax for ITSA will now come into effect on 6 April 2024 for those taxpayers required to submit digital quarterly updates through MTD, and 6 April 2025 for all other ITSA taxpayers.

Clamping down on promoters of tax avoidance 

The government will introduce further measures to clamp down on promoters of tax avoidance. The package of measures, which will take effect following Royal Assent, will:

Tax administration and maintenance announcements

A further set of tax administration and maintenance announcements will be issued later in the autumn. This follows a similar set of announcements published in the Command Paper Tax policies and consultations (Spring 2021).

NATIONAL INSURANCE CONTRIBUTIONS

¹ Employees generally under 21 years and apprentices under 25 years. Veterans in first 12 months of civilian employment. Employees at freeports in Great Britain in the first three years of employment starting from 6 April 2022.

Not available if the sole employee is a director or employer’s NICs for 2021/22 £100,000 or more.

BUDGET HIGHLIGHTS

• The Chancellor announced a £12 billion “temporary, timely and targeted” coronavirus stimulus on top of an £18 billion increase in general public spending, but tax measures were relatively few.
• The pension annual allowance thresholds will each be increased by £90,000 from 2020/21, removing taper as an issue for most people with incomes under £200,000.
• The capital gains tax entrepreneurs’ relief lifetime limit has been cut from £10 million to £1 million with immediate effect.
• The annual investment limit for Junior ISAs and child trust funds will be increased to £9,000 from 2020/21.
• The national insurance contributions employment allowance will increase from £3,000 to £4,000 from April 2020.
• There will be a review of the taxation of funds to make the UK more attractive for fund management. It will also consider the VAT treatment of fund management fees.
• From April 2021, only zero-emission vehicles will get 100% first-year allowances. Cars with emissions up to 50g/km will have an 18% a year writing down allowance; for higher emitters, the allowance will be 6% a year.
• From April 2022, red diesel (and rebated biofuels) will only be available to users for agriculture, rail and non-commercial heating.
• E-publications (e-books, e-newspapers, e-magazines and academic e-journals) will be VAT zero-rated from 1 December 2020.

CONTENTS

@ Copyright 11 March 2020. All rights reserved. This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

INTRODUCTION

“….get it done” was a recurrent phrase in the Budget speech of the new Chancellor, Rishi Sunak. It could equally have been “get it spent” or “get it borrowed” as Mr Sunak announced a raft of spending initiatives with few supporting tax increases.

His performance did not follow the standard playbook for the first Budget after a general election. Such set pieces have generally been when a Chancellor takes advantage of his distance from the next visit to the polls to deliver the bitter medicine of tax rises. However, with the threat to the global economy caused by the coronavirus pandemic, these were not normal times. The Office for Budget Responsibility (OBR) was expected to cut projected UK economic growth even before the virus emerged. Its pre-measures forecasts were all closed by 25 February, meaning that the coronavirus effect was “largely confined to a modestly weaker outlook for growth in world trade and the UK’s export markets”.

Mr Sunak had the benefit of seeing what happened since that date and clearly decided that the medicine required was a large dose of tonic, rather than tax. He announced a total package of fresh spending for 2020/21 of £30 billion, of which £12 billion was directly attributed to countering the impact of coronavirus on the UK economy and NHS finances.

Total government borrowing was increased for the next five years by over £110 billion as a result of decisions taken in this Budget. But this is not the end of the story, as another Budget is due in the autumn. By then the consequences of coronavirus should be clearer and we may see other topics addressed, such as inheritance tax reform, which were understandably put on hold this time around.

PERSONAL TAXATION

1 Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.
2 Reduced by £1 for every £2 of adjusted net income over £30,200 (£29,600 for 2019/20), until the minimum is reached.
3 Reduced by £1 for every £2 of adjusted income over £240,000 (£150,000 for 2019/20) to a minimum of £4,000 (£10,000 for 2019/20), subject to threshold income being over £200,000 (£110,000 for 2019/20).

High income child benefit charge: 1% of benefit per £100 adjusted net income of £50,000 – £60,000.

PERSONAL TAXATION

Income tax

The personal allowance will remain at £12,500 and the higher rate threshold will stay at £50,000 for 2020/21, as announced in the 2018 Budget. In Scotland, the higher rate threshold for non-savings, non-dividend income will also be unchanged at £43,430.

Off-payroll working (IR35)

From April 2020 the responsibility for operating the off-payroll working rules in the private and third sectors will move from individual workers to the organisation, agency or other third party engaging them. The change applies to services carried out from 6 April 2020.

Car benefit

The car benefit scale charge percentages for 2020/21 will be restructured, taking account of the recently introduced Worldwide Harmonised Light Vehicle Test Programme (WLTP) emissions standards. The scales for 2020/21 are as follows:

All zero CO₂ emission vehicles: 0%

Petrol and diesel hybrids with CO₂ emissions 1-50g/km

*Increased for every extra 5g/km by 1% up to the maximum 37%

The rates will increase by 1% in 2021/22 and a further 1% in 2022/23 before being frozen until 2024/25.

Increasing the flat rate deduction for homeworking

From April 2020 the maximum flat rate income tax deduction available to employees to cover additional household expenses will increase from £4 per week to £6 per week, where they work at home under homeworking arrangements.

Tax treatment of welfare counselling provided by employers

The scope of non-taxable counselling services will be extended from April 2020 to include related medical treatment when it is provided to an employee as part of an employer’s welfare counselling services.

Employment allowance

The employment allowance will be increased from £3,000 to £4,000 a year for 2020/21, as previously announced. But it will be restricted to employers with an employer Class 1 national insurance contributions (NICs) bill below £100,000 in 2019/20.

National insurance contributions

The primary threshold (employee contributions) for Class 1 NICs and the lower profits limit for Class 4 NICs will rise to £9,500 for 2020/21, as announced in January 2020. However, the secondary threshold (employer contributions) will not move in parallel, but instead it will increase to £8,788.

SAVER

Don’t lose your personal allowance. Your personal allowance of £12,500 in 2020/21 is reduced by 50p for every pound by which your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.

PENSIONS, SAVINGS AND INVESTMENTS

Tapered annual allowance for pensions 

The two tapered annual allowance thresholds for pensions will each be raised by £90,000 from 2020/21. The ‘threshold income’ figure will therefore be £200,000 and the ‘adjusted income’ figure will be £240,000. This will help many people, such as medical consultants, who have faced large tax bills on extra pay. While the rate of taper is unchanged, the minimum annual allowance for the highest earners from April 2020 will be reduced from £10,000 to £4,000 ­– at an ‘adjusted income’ of £312,000 or more.

Lifetime allowance for pensions 

The lifetime allowance for pension savings will increase to £1,073,100 for 2020/21, in line with inflation.

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2020/21 will remain at £20,000. However, the annual subscription limit for Junior ISAs (JISAs) and child trust funds (CTFs) will more than double, from £4,368 to £9,000.

Top slicing relief on life insurance policy gains

In response to the Silver First-Tier Tribunal case, the legislation will specify how allowances and reliefs must be set against life insurance policy gains. This measure will apply to all relevant gains occurring on or after 11 March 2020.

Review of the UK funds regime

A review of the UK funds regime will be undertaken during 2020, covering direct and indirect tax, as well as relevant areas of regulation. A consultation paper will examine whether there are “targeted and merited” tax changes that could help to make the UK a more attractive location for companies used by funds to hold assets. The review will also consider the VAT treatment of fund management fees and other aspects of the UK funds regime. 

Call for evidence on pension tax administration

Depending on how their pension scheme administers tax relief, people earning around or below the level of the personal allowance may or may not benefit from a top-up on their pension savings equivalent to the basic rate of tax.

A review of the options for addressing the differences will begin shortly with a call for evidence on pensions tax relief administration.

Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

The venture capital limits and reliefs remain unchanged, as detailed below.

¹ Investment above £1,000,000 must be in knowledge-intensive companies

THINK AHEAD

The pension lifetime allowance will rise by £18,100 from 6 April 2020. If you plan to draw from your pensions and already have funds exceeding the current £1,055,000 lifetime allowance limit, you may want to wait before taking your pension benefits.

THINK AHEAD

The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2019/20 and 2020/21 – use it or lose it.

CAPITAL TAXES

Capital gains tax (CGT): annual exempt amount

The annual exempt amount for individuals and personal representatives will rise to £12,300 for 2020/21, while the amount for most trustees will increase to £6,150 (minimum £1,230).

Entrepreneurs’ relief

For disposals on or after 11 March 2020, the lifetime limit on gains eligible for Entrepreneurs’ Relief, which offers a reduced 10% rate of CGT on qualifying disposals, will be reduced from £10 million to £1 million. There will be rules that apply to forestalling arrangements entered into before Budget day.

Private residence relief

From 6 April 2020, lettings relief of up to £40,000 will only apply where the owner of the property shares occupancy with the tenant. The final period exemption for CGT will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled individuals or people in a care home.

Inheritance tax (IHT)

The IHT nil rate band will remain at £325,000 for 2020/21.

The residence nil rate band (RNRB) will increase to £175,000 from 6 April 2020, as set out in existing legislation.

Non-UK resident stamp duty land tax (SDLT) surcharge

A 2% SDLT surcharge will be introduced from 1 April 2021 for non-UK residents purchasing residential property in England and Northern Ireland.

Annual tax on enveloped dwellings (ATED)

The ATED for 2020/21 will be increased in line with inflation.

THINK AHEAD

IHT simplification remains on the agenda. Now maybe a good time to review making lifetime gifts before the tax rules are ‘simplified’ into something less generous.

BUSINESS TAXES

Corporation tax rate

The rate of corporation tax will remain at 19% and will not fall to 17% in 2020, as had been planned.

Structures and buildings allowance

The annual rate of capital allowances for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%, from 1 April 2020 for corporation tax and 6 April 2020 for income tax.

Research and development (R&D)

The rate of R&D expenditure credit will increase from 12% to 13% from 1 April 2020.

The government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.

The introduction of the PAYE cap on the payable tax credit in the R&D schemes for SMEs will be delayed until 1 April 2021, following consultation last year. There will be further consultation on changes to the cap’s design to ensure it targets abusive behaviour, while also ensuring that eligible businesses can access the relief.

First year allowances for business cars

Only zero-emission vehicles will qualify for first-year allowances from April 2021. The main rate of writing down allowance (WDA) of 18% will be given for cars with emissions up to 50g/km. The 6% WDA rate will apply to cars with emissions above 50g/km. First-year allowances for zero-emission goods vehicles and natural gas and hydrogen refuelling equipment will be extended until 2025.

Corporate capital loss restriction

The proportion of annual capital gains that can be relieved by brought forward capital losses will be restricted to 50% from 1 April 2020, on similar lines to the corporate income loss rules. An allowance will give companies unrestricted use of up to £5 million capital and/or income losses each year. Certain companies in liquidation will be excluded from the scope of the restriction.

Non-UK resident companies with UK property income

Non-UK resident companies will be charged corporation tax on their UK property income from 6 April 2020, under legislation enacted in Finance Act 2019. Further legislation will ensure these rules work as intended to provide a smooth transition of the taxation of UK property profits from income tax to corporation tax.

Digital services tax

A new 2% tax will be charged from April 2020 on the revenues of certain digital businesses that derive value from their UK users. The tax will apply to revenues generated from the provision of search engines, social media platforms and online marketplaces, where those activities are linked to the participation of UK users and will be subject to an annual allowance of £25 million.

The tax will only apply to groups that generate global revenues from in-scope business activities of more than £500 million a year. It will include a safe harbour provision that will exempt loss makers and reduce the effective rate of tax on businesses with very low profit margins.

Private use of company vehicles

The fuel multiplier for 2020/21 will be £24,500 for cars. For vans, the fuel chargeable amount will be £666.

For zero-emission vans, the van benefit charge will be nil from April 2021.

From 6 April 2020, fuel benefit charges and the van benefit charge will increase in line with the consumer prices index (CPI) rather than the retail price index (RPI).

Intangibles

The pre-2002 exclusion from the Intangible Fixed Assets regime will be removed. This means that tax relief for the cost of acquiring corporate intangible assets from 1 July 2020 will be provided under a single regime subject to restrictions to prevent tax avoidance.

Business rates

The Budget included several reliefs from business rates, some of them temporary in response to coronavirus.

• The retail discount for properties with a rateable value below £51,000 in England will be increased to 100% for 2020/21 and will be expanded to include hospitality and leisure businesses for 2021.
• There will be a discount of £5,000 for pubs in England with a rateable value below £100,000 for one year from 1 April 2020.
• The £1,500 discount for office space used by local newspapers in England will be extended until 31 March 2025.
• A fundamental review of business rates will call for evidence in the spring and report in the autumn.

Time to Pay

Tailored arrangements will be available to give a business the time it needs to pay HMRC. The aim is to support the business’s recovery while operating through any temporary financial challenges that occur, for example as a result of the coronavirus pandemic. HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties because of coronavirus in trying to contact HMRC or pay taxes.

Enterprise management incentives (EMI) scheme

The EMI scheme will be reviewed to ensure it provides support for high-growth companies to recruit and retain the best talent.

Plastic packaging tax

A new tax will be introduced from April 2022 to incentivise the use of recycled plastic in packaging. The rate will be £200 per tonne of plastic packaging that contains less than 30% recycled plastic. It will apply to the production and importation of plastic packaging.

Red diesel

The entitlement to use red diesel and rebated biofuels will be removed from April 2022 except for agriculture (including horticulture, pisciculture and forestry), rail and non-commercial heating.

Tax guidance for self-employed people

To make it easier for self-employed individuals to navigate the tax system, the government will this summer launch new interactive online guidance for taxpayers with non-PAYE income.

THINK AHEAD

Your business might be entitled to valuable research and development (R&D) tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.

THINK AHEAD

If you want to take advantage of Time to Pay, make sure that you have adequate records to justify your claim to HMRC.

THINK AHEAD

Company car tax rules change from 6 April 2020. Make certain you – and anyone you employ – are aware of the consequences.

VALUE ADDED TAX

Registration and deregistration thresholds

The taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 until April 2022. The deregistration threshold will stay at £83,000 for the same period.

E-publications

The zero-rate of VAT on printed books, newspapers, magazines and academic journals will be extended to their electronic counterparts from 1 December 2020. The government will consult on the details of the legislation ahead of its implementation.

Postponed accounting

Postponed accounting for VAT will apply from 1 January 2021 to all imports of goods, including from the EU. The measure is aimed at helping VAT-registered UK businesses that are integrated in international supply chains as they adapt to the UK’s position outside the EU.

VAT on call-off stock

Simplified rules will be introduced for the VAT treatment of intra-EU movements of call-off stock, allowing businesses to delay accounting for VAT until the goods are called off. The legislation will be backdated to goods removed from a Member State on or after 1 January 2020.

Long-term cross-border goods policy

The government will consult informally with stakeholders on the VAT treatment of goods crossing UK borders after the EU exit transition period.

Women’s sanitary products

The zero rate of VAT will be charged on tampons and other women’s sanitary products from 1 January 2021.

Agricultural flat rate scheme

New entry and exit rules for the agricultural flat rate scheme will be introduced from 1 January 2021. Businesses will be able to join the scheme when their annual turnover for farming-related activities is below £150,000.

They must deregister from it once such turnover exceeds £230,000 and register for VAT instead. Businesses with a turnover that exceeds £85,000 for non-farming activities will be ineligible for the scheme and will have to register for VAT.

SAVER

The flat rate VAT scheme for small businesses can save some traders money and administration costs. Take advice on whether it is right for you, as some businesses pay more VAT under the scheme.

THINK AHEAD

VAT rules on cross-border trading may change after the EU exit transition period. Take advice periodically on how exit from the EU might affect your business.

TAX AVOIDANCE AND EVASION

Construction Industry Scheme (CIS) abuse

The legislation will be introduced in the Finance Bill 2020-21 to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled. The government is also launching a consultation that considers options on how to promote due diligence in the supply chain.

A domestic reverse charge for building and construction services

The implementation of the VAT domestic reverse charge for building and construction services will be delayed until 1 October 2020, as previously announced.

Conditionality for granting business licences

Legislation in Finance Bill 2020-21 will make the renewal of licences to drive taxis and private hire vehicles (PHVs), operate PHV firms, and deal in scrap metal conditional on applicants completing checks that confirm they are appropriately registered for tax. This measure will take effect in England and Wales in April 2022. The government is considering extending this reform to Scotland and Northern Ireland in the future and will work with the devolved administrations to this effect.

In the spring a discussion document will be issued seeking views on the wider application of tax conditionality.

Loan charge

The forthcoming Finance Bill will legislate to implement the recommendations of the Independent Loan Charge Review that the government has accepted. A call for evidence on further action to stamp out disguised remuneration schemes will be issued shortly.

HMRC’s promoter strategy

HMRC will publish a new strategy for tackling the promoters of tax avoidance schemes in addition to the legislative changes in Finance Bill 2020-21.

A call for evidence will be published in the spring about raising standards for tax advice.

Large business notification

From April 2021 large businesses will be required to notify HMRC when they take a tax position that HMRC is likely to challenge.

Clarifying the treatment of Limited Liability Partnership (LLP) returns

The government will legislate prospectively and retrospectively in Finance Bill 2020 to put beyond doubt that LLPs should be treated as general partnerships under income tax rules.

Money laundering levy

The government intends to introduce a levy to be paid by firms subject to the Money Laundering Regulations to help fund new action to tackle money laundering. A consultation on the levy will be published later this spring.

Stamp duty and stamp duty reserve tax – transfer of unlisted securities to connected companies 

The targeted market value rule is intended to prevent the artificial reduction of the tax due on share acquisitions when listed shares are transferred to a connected company. The rule is being extended to unlisted shares. The measure will be in Finance Bill 2020. As part of this change, the government will amend legislation to prevent a double tax charge arising on certain company reorganisations.

NATIONAL INSURANCE CONTRIBUTIONS

¹ Employees generally under 21 years and apprentices under 25 years.

² Employees generally under 21 years and apprentices under 25 years.