Are your Child Benefits under threat?

For some time now, HMRC have had the power to claw back some or all of the Child Benefits you receive if either parent’s income exceeds £50,000.

The benefit is recovered by the High Income Child Benefit Charge (HICBC). This states that if either parent had income over £50,000 and:

  • either partner received Child Benefit, or
  • someone else received Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep.

Then part or all of the Child Benefit received may need to be paid back to HMRC. It doesn’t matter if the child living with you is not your own child.

You may not have considered the HICBC before if your incomes were below the £50,000 cap, but if your income for 2020-21 exceeded this amount you should be aware of the following.

  • The parent with the higher income for 2020-21 (more than £50,000) will need to register to submit a self-assessment tax return and pay any HICBC due – unless they are already registered in which case, they will need to enter the amount of Child Benefit received on their return and pay any tax due.
  • The parent with the higher income, even if they were not the person claiming the Child Benefit, will need to make this declaration.

How will benefits be paid back?

1% of the Child Benefit received will be recovered by HMRC’s HICBC for every £100 the highest earner’s income exceeds £50,000. Accordingly, once the highest income exceeds £60,000 all the Child Benefits received will be reclaimed.

To avoid the charge, it is possible to decline receipt of Child Benefits. Care should be taken in triggering this option as it can have roll-on disadvantages when claiming future State Benefits or obtaining a National Insurance number for children.

To summarise:

  • Parents where the highest income is below £50,000 will not be affected and can continue to claim Child Benefit with no tax claw back.
  • Parents where the highest income is above £50,000 but below £60,000 will be affected and will need to pay the appropriate HICBC.

There are strategies that you could use to reduce your taxable income below the £50,000 or £60,000 thresholds as these are calculated net of any allowable deductions.

Please call if you would like more advice regarding these deductions or dealing with your registration for self-assessment, if required.

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Data Protection obligations

Everyone in business that handles personal data must register for data protection purposes with the Information Commissioners Office.

Most business will need to pay an annual fee of £40 or £60 but this can rise to £2,900. Some organisations only pay £40 regardless of their size and turnover. These are: charities and small occupational pension schemes.

If you need to register, there is an online process you can use at https://ico.org.uk/for-organisations/data-protection-fee/self-assessment/.

What is personal data?

Understanding whether you are processing personal data is critical to understanding whether the UK GDPR applies to your activities. Generally speaking, personal data is information that relates to an identified or identifiable individual. The following additional definitions are reproduced from the ICO website:

  • What identifies an individual could be as simple as a name or a number or could include other identifiers such as an IP address or a cookie identifier, or other factors.
  • If it is possible to identify an individual directly from the information you are processing, then that information may be personal data.
  • If you cannot directly identify an individual from that information, then you need to consider whether the individual is still identifiable. You should consider the information you are processing together with all the means reasonably likely to be used by either you or any other person to identify that individual.
  • Even if an individual is identified or identifiable, directly or indirectly, from the data you are processing, it is not personal data unless it ‘relates to’ the individual.
  • When considering whether information ‘relates to’ an individual, you need to consider a range of factors, including the content of the information, the purpose or purposes for which you are processing it and the likely impact or effect of that processing on the individual.
  • It is possible that the same information is personal data for one controller’s purposes but is not personal data for the purposes of another controller.
  • Information which has had identifiers removed or replaced in order to pseudonymise the data is still personal data for the purposes of UK GDPR.
  • Information which is truly anonymous is not covered by the UK GDPR.
  • If information that seems to relate to a particular individual is inaccurate (i.e., it is factually incorrect or is about a different individual), the information is still personal data, as it relates to that individual.
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A new government-backed loan scheme

A new Recovery Loan Scheme was launched 6 April 2021, to provide much needed liquidity to businesses affected by COVID lockdown measures. Under the scheme, loans of up to £10m are available. The minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
Potentially, these loans will be attractive to businesses in retail and hospitality that are gradually being allowed to reopen.
As with the Bounce-Back Loans, the government is providing lenders – the high street banks – with a measure of guarantee to underwrite their risks.
In a recent press release government confirmed:
The scheme, which was announced at budget and runs until 31 December 2021, will be administered by the British Business Bank, with loans available through a diverse network of accredited commercial lenders. 
26 lenders have already been accredited for day one of the scheme, with more to come shortly, and the government will provide an 80% guarantee for all loans. Interest rates have been capped at 14.99% and are expected to be much lower than that in the vast majority of cases, and Ministers are urging lenders to ensure they keep rates down to help protect jobs. 
The Recovery Loan Scheme can be used as an additional loan on top of support received from the emergency schemes – such as the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme – put into place last year.
Business owners who are considering a recovery loan should apply the usual considerations. i.e., can they afford the interest and capital repayments.
Please call if you would like help considering your options.

 

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Charity – using a subsidiary trading company

One or more charities can set up a subsidiary trading company to trade on their behalf. This may be a useful strategy if your charity:

  • makes profits on trading that is not linked to its primary purpose
  • makes a profit that comes close to or is higher than the small trading tax exemption limit
  • wants to protect its assets from any trading losses
  • wants to have a separate organisation to carry out all its trading activities

VAT considerations

A charity’s trading company will not have to pay VAT on:

  • profits it makes from donated good sales (as long as it gives these profits to the parent charity)
  • fundraising events it runs for its parent charity

Other types of VAT relief that charities get are not available for their trading subsidiaries.

Trading companies must pay tax and VAT on all their other income and profits in the same way as ordinary limited companies.

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Averaging profits for creators of literary or artistic works

A special relief is available for creators of literary or artistic works under which they can claim to add together their profits for 2 years and be taxable on the average of those profits if certain conditions are met. This helps to even out fluctuating tax charges for creative persons who may pay little tax one year but perhaps higher rates of Income Tax the following year. The averaging process may help to reduce overall liabilities.

You can claim averaging if your profits come from disposing of works or from royalties you get for allowing people to reproduce your works. So, for example, you can claim if you are:

  • an author whose income comes from the sale of your written work – even if a small part of your income comes from personal appearances
  • a computer software writer whose income comes from royalties for reproducing the code you write, which is protected by copyright

You cannot claim averaging if your profits come from the services you provide. So, for example, you cannot claim if you’re:

  • an architect whose income comes mainly from your services – even if some of your income comes from selling material protected by copyright
  • a computer programmer whose income comes from the service of writing scripts or programs, not the actual works
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Advisory Fuel Rates from 1 March 2021

The advisory electricity rate for fully electric cars is 4 pence per mile.

Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.

The advisory fuel rates for petrol, LPG and diesel cars are shown in these tables.

From 1 March 2021

You can use the previous rates for up to 1 month from the date the new rates apply.

Engine size

Petrol – rate per mile

LPG – rate per mile

1400cc or less

10 pence

7 pence

1401cc to 2000cc

12 pence

8 pence

Over 2000cc

18 pence

12 pence

 

Engine size

Diesel – rate per mile

1600cc or less

9 pence

1601cc to 2000cc

11 pence

Over 2000cc

12 pence

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Tax Diary May/June 2021

1 May 2021 – Due date for Corporation Tax due for the year ended 30 July 2020.

19 May 2021 – PAYE and NIC deductions due for month ended 5 May 2021. (If you pay your tax electronically the due date is 22 May 2021).

19 May 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2021.

19 May 2021 – CIS tax deducted for the month ended 5 May 2021 is payable by today.

31 May 2021 – Ensure all employees have been given their P60s for the 2020-21 tax year.

1 June 2021 – Due date for Corporation Tax due for the year ended 31 August 2020.

19 June 2021 – PAYE and NIC deductions due for month ended 5 June 2021. (If you pay your tax electronically the due date is 22 June 2021)

19 June 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2021.

19 June 2021 – CIS tax deducted for the month ended 5 June 2021 is payable by today.

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Data Protection obligations

Everyone in business that handles personal data must register for data protection purposes with the Information Commissioners Office.

Most business will need to pay an annual fee of £40 or £60 but this can rise to £2,900. Some organisations only pay £40 regardless of their size and turnover. These are: charities and small occupational pension schemes.

If you need to register, there is an online process you can use at https://ico.org.uk/for-organisations/data-protection-fee/self-assessment/.

What is personal data?

Understanding whether you are processing personal data is critical to understanding whether the UK GDPR applies to your activities. Generally speaking, personal data is information that relates to an identified or identifiable individual. The following additional definitions are reproduced from the ICO website:

  • What identifies an individual could be as simple as a name or a number or could include other identifiers such as an IP address or a cookie identifier, or other factors.
  • If it is possible to identify an individual directly from the information you are processing, then that information may be personal data.
  • If you cannot directly identify an individual from that information, then you need to consider whether the individual is still identifiable. You should consider the information you are processing together with all the means reasonably likely to be used by either you or any other person to identify that individual.
  • Even if an individual is identified or identifiable, directly or indirectly, from the data you are processing, it is not personal data unless it ‘relates to’ the individual.
  • When considering whether information ‘relates to’ an individual, you need to consider a range of factors, including the content of the information, the purpose or purposes for which you are processing it and the likely impact or effect of that processing on the individual.
  • It is possible that the same information is personal data for one controller’s purposes but is not personal data for the purposes of another controller.
  • Information which has had identifiers removed or replaced in order to pseudonymise the data is still personal data for the purposes of UK GDPR.
  • Information which is truly anonymous is not covered by the UK GDPR.
  • If information that seems to relate to a particular individual is inaccurate (i.e., it is factually incorrect or is about a different individual), the information is still personal data, as it relates to that individual.
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A new government-backed loan scheme

A new Recovery Loan Scheme was launched 6 April 2021, to provide much needed liquidity to businesses affected by COVID lockdown measures. Under the scheme, loans of up to £10m are available. The minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
Potentially, these loans will be attractive to businesses in retail and hospitality that are gradually being allowed to reopen.
As with the Bounce-Back Loans, the government is providing lenders – the high street banks – with a measure of guarantee to underwrite their risks.
In a recent press release government confirmed:
The scheme, which was announced at budget and runs until 31 December 2021, will be administered by the British Business Bank, with loans available through a diverse network of accredited commercial lenders. 
26 lenders have already been accredited for day one of the scheme, with more to come shortly, and the government will provide an 80% guarantee for all loans. Interest rates have been capped at 14.99% and are expected to be much lower than that in the vast majority of cases, and Ministers are urging lenders to ensure they keep rates down to help protect jobs. 
The Recovery Loan Scheme can be used as an additional loan on top of support received from the emergency schemes – such as the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme – put into place last year.
Business owners who are considering a recovery loan should apply the usual considerations. i.e., can they afford the interest and capital repayments.
Please call if you would like help considering your options.

 

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Charity – using a subsidiary trading company

One or more charities can set up a subsidiary trading company to trade on their behalf. This may be a useful strategy if your charity:

  • makes profits on trading that is not linked to its primary purpose
  • makes a profit that comes close to or is higher than the small trading tax exemption limit
  • wants to protect its assets from any trading losses
  • wants to have a separate organisation to carry out all its trading activities

VAT considerations

A charity’s trading company will not have to pay VAT on:

  • profits it makes from donated good sales (as long as it gives these profits to the parent charity)
  • fundraising events it runs for its parent charity

Other types of VAT relief that charities get are not available for their trading subsidiaries.

Trading companies must pay tax and VAT on all their other income and profits in the same way as ordinary limited companies.

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Beware trading into insolvency

The present pandemic has created just the right conditions for certain businesses to trade their way into insolvency.

As we start the gradual withdrawal from lockdown, consumers will be on the lookout to spend after months of enforced home “arrest”. This will likely fuel an increase in economic activity on an unprecedented scale as we bounce-back towards pre-pandemic levels.

But isn’t this good news?

Under normal circumstances, yes, this is great news, but unfortunately, many businesses have needed to spend reserves and borrow in order to survive the last fifteen months of COVID disruption. They are standing on the starting line for a marathon, wearing slippers; unprepared financially for what is about to unwind.

Does your business fit into this category?

  • Cash reserves are limited
  • Losses have stripped away accumulated profits
  • You are obliged to offer better terms of trade to your customers than you receive from your suppliers. i.e., you sell goods on say 60-days credit terms but pay your suppliers for raw materials cash on delivery.

But why does this matter if sales are profitable?

When you sell goods on credit – 60-days in our example – for those 60 days you will have to pay suppliers and other overheads, wages, rent and other costs, before cash arrives in your bank account for sales made almost two months ago.

Ironically, the more successful you are in creating new sales, the more damaging this funding crisis potentially becomes. In accounting speak, you will be over-trading.

Planning is critical

If your business fits the description we have outlined above it is imperative that you plan your business growth. It may still be possible to manage higher sales as long as you organise cash-flow support to fund costs until higher sales, and therefore retained profits, provide you with the resources to self-sustain future growth.

No business owner should have to suffer the financial tragedy of over-trading through lack of planning. Pick up the phone, we can help.

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New build your own home funding

Considering a home build? It would seem that government is keen to support this activity as they have just announced new plans to provide over £150 million in new government funding. This is aimed to make it easier and more affordable for people to build their own homes.

The ‘Help to Build’ scheme will ensure that self and custom home building can become a realistic option to get onto the housing ladder through lower deposit mortgages.

Lowering the required deposit will free up capital, so people can build the home that they want and need whether it’s a commissioned, made to order home, or a new design from scratch. The scheme will provide an equity loan on the completed home, similar to the Help to Buy scheme.

Made to order homes allow people to customise the home they want based on existing designs. This could include more office space, or a particular design to support a family’s requirements including for disabled or older people.

Self and custom build could deliver 30-40,000 new homes a year: a significant contribution to the country’s housebuilding ambitions.

The scheme is part of the government’s wider Plan for Jobs as the new plans will also benefit small building firms. SME builders account for 1 in 10 new homes and the scheme will help scale up the number of self and custom build homes built every year.

This follows the news that major lenders have signed up to the government’s new 95% mortgage guarantee scheme to help more people than ever on to the housing ladder. Lloyds, Santander, Barclays, HSBC and Natwest are launching mortgages under the scheme with Virgin Money following next month.

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New Recovery Loan Scheme

A new government backed loan scheme was launched 6 April 2021.

A recent news story confirming the details is reproduced below:

The scheme, which was announced at budget and runs until 31 December 2021, will be administered by the British Business Bank, with loans available through a diverse network of accredited commercial lenders.

 

26 lenders have already been accredited for day one of the scheme, with more to come shortly, and the government will provide an 80% guarantee for all loans. Interest rates have been capped at 14.99% and are expected to be much lower than that in the vast majority of cases, and Ministers are urging lenders to ensure they keep rates down to help protect jobs. The Recovery Loan Scheme can be used as an additional loan on top of support received from the emergency schemes – such as the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme – put into place last year.

The Recovery Loan Scheme will ensure businesses continue to benefit from Government-guaranteed finance throughout 2021.

With non-essential retail and outdoor hospitality reopening this week, Ministers intend that new support is still available to businesses to protect jobs. From 6 April 2021, businesses – ranging from coffee shops and restaurants to hairdressers and gyms – can access loans varying in size from £25,000, up to a maximum of £10 million. Invoice and asset finance is available from £1,000.

Businesses who are tempted to secure lending under this scheme should ensure that future trading will generate sufficient funds to cover interest charges and provide cash flow to repay the amount borrowed.

Please call if you would like our help to consider your options.

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The Finance Bill 2021

An outline of the Finance Bill 2021 has been published and provides the legal framework for changes announced in the recent Budget. We have reproduced below the published text. This is subject to scrutiny by parliament and may change before the Bill receives Royal Assent.

The Bill will ensure a number of tax changes set out by the Chancellor at last week’s Budget will take effect from the start of the next tax year beginning in April 2021, including:

  • the extension of the stamp duty holiday
  • extending the VAT cut for tourism and hospitality to September

As the country begins to recover from the effects of the pandemic, the Bill also legislates to help strengthen the public finances in the medium term through:

  • Increasing the rate of Corporation Tax to 25% on profits over £250,000 from April 2023, balancing the need to raise revenue with the objective of having an internationally competitive tax system. Over 90 per cent of businesses will pay less than the 25%.
  • Maintaining Income Tax Personal Allowance and Higher Rate Threshold at 2021 levels. This is a progressive measure: the richest households will contribute the most.
  • keeping the Capital Gains Tax Annual Exempt Amount (AEA), the inheritance tax nil-rate band and the pensions Lifetime Allowance at their current levels

The Bill also helps deliver a fairer and more sustainable tax system too through legislating to:

  • Implement a Plastic Packaging Tax which encourages the use of recycled plastic instead of new plastic within packaging. The rate of the tax is £200 per tonne of plastic packaging which contains less than 30% recycled plastic content.
  • Reform the penalty regime for VAT and Income Tax Self-Assessment (ITSA) to make it fairer and more consistent. The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached.

The Bill helps drive an investment-led recovery through:

  • the ‘super deduction’ – from 1 April 2021 until 31 March 2023. The independent OBR have forecast that, at its peak, the super-deduction will raise the level of business investment by 10%, or roughly £20bn a year.
  • supporting the introduction of Freeports through allowing the government to designate ‘tax sites’ in Freeports in Great Britain, where businesses will be able to benefit from a number of tax reliefs.

The Bill will now follow the normal passage through parliament.

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HMRC clarifies furlough queries

HMRC has recently clarified the action you need to take if you have claimed too little or too much under the furlough scheme (Coronavirus Job Retention Scheme). They are published in a FAQ format. Here’s what they say:

What if I’ve claimed too much in error?

If you have claimed too much CJRS grant and have not already repaid it, you can repay as part of your next online claim without needing to call us. If you claimed too much but do not plan to submit further claims, you can let us know and make a repayment online through our card payment service or by bank transfer – go to 'Pay Coronavirus Job Retention Scheme grants back' on GOV‌‌‌‌‌‌‌‌‌‌.‌‌‌‌‌‌UK.

You must notify us and repay the money by the latest of whichever date applies below:

  • 90 days from receiving the CJRS money you’re not entitled to
  • 90 days from the point circumstances changed so that you were no longer entitled to keep the CJRS grant.

If you do not do this, you may have to pay interest and a penalty as well as repaying the excess CJRS grant. For more information on interest search 'Interest rates for late and early payments' on GOV‌‌‌‌‌‌‌‌‌‌.‌‌‌UK.

What if I haven’t claimed enough?

If you made a mistake in your claim that means you received too little money, you’ll need to amend it within 28‌‌ ‌calendar days after the month the claim relates to – unless this falls on a weekend or bank holiday, in which case the deadline is the next weekday. The deadline to amend claims for February is Monday‌‌ ‌29‌‌ ‌March.

To find out how to amend your claim, search 'Get help with the Coronavirus Job Retention Scheme'.

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What are Super-Deductions?

Most company business owners understand that if you incur a cost that is wholly and exclusively for the purpose of your trade, then it can be deducted from your taxable profits or added to tax losses.

Likewise, if companies invest in plant or other equipment that qualifies for tax relief, even though the expenditure is the acquisition of an asset – something that will be working in your business for years – it can be partly or wholly written off for tax purposes in the year it was acquired.

The facility that allows assets to be written off are called capital allowances and currently, they range from just a few percent per annum to a 100% write down. That was the case until Mr Sunak delivered his Budget last week…

Business owners have become accustomed to this writing off process and it had proved to be an incentive for companies to invest in new equipment.

But last week the Chancellor surprised us all by saying that companies investing in plant and machinery in the period from 1 April 2021 to 31 March 2023 will be able to benefit from enhanced capital allowances. These are:

  • Investments in assets that qualify for the main rate of capital allowances of 18% will benefit from a 130% first-year allowance. This means that for every £100 that you spend, you can deduct £130 in computing your taxable profits. This is equivalent to a tax saving of 24.7%. For example, if a company bought a new machine for its factory for £10,000 during April 2021, it could deduct £13,000 from its profits; at the present 19% rate of corporation tax this would save £2,470 in corporation tax. And so, for an expenditure of £10,000 the company would reduce its tax bill be £2,470, amounting to 24.7%.
  • In a further twist, investments in assets qualifying for special rate capital allowances benefit from a 50% first year allowance (although claiming the 100% annual investment allowance instead where this is available will be more beneficial).

If you are looking to invest in plant and machinery, it can be advantageous to do so within this window to benefit from the super-deduction. However, it is not available where contracts were agreed before Budget day.

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Pension pot top-ups before 6 April 2021

The 2020/21 tax year comes to an end on 5 April 2021. As this date approaches, it is prudent to review your pension contributions and consider whether it would be beneficial to top up your pension before the end of the tax year.

Is there a limit on tax-relieved contributions?

Yes — tax relief is only available on contributions to registered pension schemes up to certain limits. Individuals can make contributions to the higher of £3,600 and 100% of their earnings, as long as they have sufficient annual allowance available to shelter the contributions. Contributions can be made by (or on behalf of) non-taxpayers up to £3,600 a year. Net of basic rate relief at 20%, this will cost £2,880.

 

How much is the annual allowance?

The annual allowance is set at £40,000 for 2020/21. However, a taper applies which reduces your annual allowance if you have:

  • adjusted net income of £240,000 or more (broadly income including pension contributions); and
  • threshold income of £200,000 or more (broadly income excluding pension contributions).

Where both of these apply, the annual allowance is reduced by £2 for every £1 by which adjusted net income exceeds £240,000 until the minimum level of the annual allowance is reached. This is set at £4,000 for 2020/21.

The impact of the taper means that if your adjusted net income is £312,000 or more, and your threshold income is at least £200,000, you will only receive the minimum annual allowance of £4,000 for 2020/21

A reduced annual allowance – the money purchase annual allowance (MPAA) — also applies if you have flexibly accessed a money purchase pension pot having reached the age of 55. This is set at £4,000 for 2020/21.

 

What about employer contributions?

Contributions made by your employer count towards the annual allowance. They are also considered when working out adjusted net income for the purposes of determining whether the annual allowance taper applies.

 

Don’t forget unused allowances from earlier years

Where the annual allowance is not fully utilised in a tax year, the unused portion can be carried forward for up to three years. This means that when working out the total tax relieved pension contributions that you can make before 6 April 2021, you need to consider not only the available annual allowance for the current tax year, but also any unused allowances brought forward from:

  • 2019/20;
  • 2018/19; and
  • 2017/18.

Allowances brought forward from a previous year can only be used once the current year’s annual allowance has been used up. Once this has been done, brought forward allowances from an earlier year are used before those of a later year. Any allowances brought forward from 2017/18 are lost if they are not used by 5 April 2021. However, remember, contributions cannot exceed 100% of your earnings (or £3,600 if higher).

 

Why make additional pension contributions?

Making pension contributions is tax-efficient as relief is given at your marginal rate of tax. This means that a contribution of £100 will only cost you £60 if you are a higher rate taxpayer, and £55 if you are an additional rate taxpayer.

Planning ahead to secure an income in retirement is worthwhile in itself.

If you have some or all of the 2017/18 annual allowance available, making contributions to mop it up prevents it from being lost.

 

Pension contributions may also protect your personal tax allowance

Making pension contributions can also be useful if you want to reduce your income, for example to preserve some or all of your personal allowance for 2020/21 or to move into a lower tax bracket. The personal allowance, set at £12,500 for 2020/21, is reduced by £2 for every £1 by which adjusted net income (in this instance, income before personal allowances and less trading losses, charitable donations and pension contributions) exceeds £100,000. For 2020/21, this means that the personal allowance is lost once adjusted net income reaches £125,000. Because of the taper, the marginal rate of tax between £100,000 and £125,000 is 60%. Where making additional pension contributions is an option, this can be valuable, whether to prevent losing any of the personal allowance or to preserve some of it or more of it.

 

We can help

If you are thinking of making additional pension contributions before the end of the tax year, we can help you work out your options in conjunction with your pension’s adviser.

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SEISS – the net widens

One aspect of the recent budget will please self-employed business owners that have previously been unable to claim under the Self-Employed Income Support Scheme (SEISS) as they commenced trading after 5 April 2019.

As long as you submitted your self-assessment tax return for 2019-20 before midnight 2 March 2021, and you meet the other qualifying criteria – basically that you have been adversely affected by COVID disruption – then you should be able to claim.

Two grants will be available. The fourth grant under the scheme covers February to April 2021. It is worth three months’ average profits capped at £7,500. It can be claimed from late April.

The fifth and final grant covers the period from May to September 2021. The amount of the grant will depend on the impact that Covid-19 has had on your profits. If your turnover has fallen by 30% or more because of Covid-19, you will be able to claim a grant equal to 80% of your average profits for three months, capped at £7,500. However, if your turnover has dropped by less than 30%, you will be entitled to a reduced grant of 30% of three months’ average profits, capped at £2,850.

The final grant can be claimed from late July. At present, this scheme is therefore timed to end 30 September 2021.

Remember, you can only claim the grant if you have been adversely affected by the pandemic.

Grants received under the scheme are taxable and must be considered in working out your profits.

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Concerned about tax payments due 31 January 2021?

UK taxpayers that file a tax return will need to pay a variety of self-assessment tax and NIC liabilities that will fall due at the end of January 2021. They include:

 

· The second payment on account for 2019-20 if deferred when first due 31 July 2020.

· Any balance of taxes unpaid for 2019-20

· The first payment on account for 2020-21

The second two amounts will have been quantified when your self-assessment tax return was filed for 2019-20.

If you have concerns that you will not have sufficient funds to meet these liabilities on 31 January 2021, it is possible to negotiate under HMRC’s time to pay scheme. On their website HMRC offer the following advice:

If you cannot pay your Self-Assessment tax bill

You can set up a payment plan to spread the cost of your latest Self-Assessment bill if:

  • you owe £30,000 or less

  • you do not have any other payment plans or debts with HMRC

  • your tax returns are up to date

  • it’s less than 60 days after the payment deadline

You do not need to contact HMRC if you set up a payment plan online. Call the Self-Assessment helpline if you’re not eligible for a payment plan or cannot use the online service.

Self-Assessment Payment Helpline
 

Telephone: 0300 200 3822
Monday to Friday, 8am to 4pm
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If you cannot pay other taxes

You might be able to set up a Time to Pay Arrangement with HMRC if you’re unable to pay any other taxes in full. This lets you spread the cost of your tax bill by paying what you owe in instalments.

How you do this depends on whether you’ve received a payment demand.

If you’ve received a payment demand, like a tax bill or a letter threatening you with legal action, call the HMRC office that sent you the letter. If you’ve not received a bill or letter, call the Payment Support Service.

Payment Support Service
Telephone: 0300 200 3835
Monday to Friday, 8am to 4pm
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Parting shot from the Chancellor

For a man that has admitted he has concerns about the level of government funding committed to the support of businesses during the last nine months, Rishi Sunak’s disclosure last week that he is extending the furlough scheme to the end of April 2021 points to a deepening concern in government that we are not out of the woods just yet.

He also extended the deadline for making applications under the government-guaranteed loan schemes. Applications were required before 31 January 2021, this deadline is now 31 March 2021.

In his statement to parliament the Chancellor hinted that he may be offering more financial support when he stands to present his budget on 3rd March 2021.

None of us want to contemplate another year like 2020. Although the various vaccines coming online should make some difference to the efforts to control infection it is likely that these efforts will not be some magic bullet to completely tame COVID.

What is likely, is that as soon as government is able to cut-back on its furlough funding and other commitments it will turn its attention to pay-back.

This will likely involve public expenditure cuts and higher taxation. Described by the pundits in the past as austerity.

We will have wait for Rishi Sunak’s announcements on 3rd March to see how this will play out.

The options the Treasury are probably contemplating are reductions in costly tax reliefs – such as continuing higher rate tax relief for pension contributions – and increases in taxation.

Economists that have a different view of government spending and whether it needs to be paid back, will be pressing for a different fiscal agenda. They will no doubt point out that we need to kick-start the economy by encouraging investment and stimulating consumers to buy.

The Chancellor’s parting shot for 2020 will also be coloured by the outcome of the present, protracted EU trade negotiations. At the time this article was written the outcome of discussions was far from clear and mirrors the general feeling of uncertainty that has grown since the first signs of COVID appeared March 2020.

Meantime, we are required to make the best of a situation that is feeling increasingly like self-imposed house arrest and yet there is a note of optimism that 2021 will see a change in our fortunes, and for the better.

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Looks like we are heading for a no-deal exit from the EU

If the following criteria apply, this is what our government recommend that you do from 1 January 2021:

You:

  • Are British
  • Live and work in the UK
  • Travel to the EU for business reasons
  • Have no plans in the short-term to travel abroad for holidays
  • Do not plan to move to the EU
  • Run and/or own a business in the UK
  • Do not employ EU citizens in your business
  • Do not exchange any form of personal data with customers or suppliers in the EU
  • Do not sell your products or services to the UK public sector
  • Do not rely on intellectual property protection
  • Do not have a website with an .eu domain
  • Import and export goods from and to the EU
  • Are manufacturers of consumer goods

 

If the above apply to your circumstances, our government advises that you need to attend to the following matters to comply with our new trading relationship with the EU from 1 January 2021:

  1. URGENT Check what you need to do to export to the EU from 1 January 2021
  2. URGENT Check what you need to do to import from the EU from 1 January 2021
  3. URGENT Decide how you want to make customs declarations and whether you need to get someone to deal with customs for you.
  4. Check if you need to pay a tariff on the goods you import from 1 January 2021
  5. Get an EORI number that starts with GB to move your goods into or out of the EU. It takes up to a week and you will not be able to move your goods into or out of the EU without an EORI number.

There are also a number of specialist issues that you may have to consider including:

  1. Moving goods between or through common transit countries including the EU
  2. How to comply with REACH chemical regulations
  3. Exporting controlled goods from 1 January 2021
  4. Meeting climate change requirements from 2021
  5. Movement of wood packaging material from 2021
  6. Trading and moving endangered species protected by CITES
  7. Applying for a trade remedies investigation

 

Additionally, you and your family will need to consider

1. Taking out travel insurance and health insurance before travelling to the EU.

2. Check if you need a visa or work permit.

3. Check your mobile contract as providers may reintroduce roaming charges.

4. Allow more time at border crossings.

We will need to get used to treating countries in the EU as non-local. Borders will be re-established at the end of December, no more quick-access to EU gates in airports.

Hopefully, you will have attended to most of these issues already. If not, use the hyperlinks in our text to find out what’s to do next. And call if you want to discuss these or your wider options as we grapple with Brexit and COVID-19.

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Are you eligible for further self-employed grants?

Two quarterly grants have been paid to UK self-employed traders that qualify for the Self- Employed Income Support Scheme (SEISS). These covered the periods up to 31 October 2020.

The Chancellor has announced that two further quarterly payments will be made. Traders will still need to qualify for the payments and in particular:

  • Have been previously been eligible for the SEISS first and second grant (although they do not have to have claimed the previous grants)
  • Declare that they intend to continue to trade and either:
    • are currently actively trading but are impacted by reduced demand due to coronavirus
    • were previously trading but are temporarily unable to do so due to coronavirus

If these conditions are confirmed then a claim can be made for the following periods:

Quarter 1 November 2020 to 31 January 2021

The maximum that can be claimed for this period is 80% of average, qualifying quarterly earnings capped at £7,500. This is an increase on the previously announced amount of 55%.

The online portal to make a claim will open 30 November 2020 and payments should be received before Christmas.

Quarter 1 February 2021 to 30 April 2021

Details of the amount that will be paid for this quarter will be announced January 2021.

Self-employed traders who, for what ever reason, do not qualify for this grant, but are still suffering financial hardship due to COVID disruption, may be able to claim under the Universal Credit.

The SEISS is taxable…

And don’t forget, when you prepare accounts covering any period during which you received an SEISS grant these will need to be added to your taxable earnings in the relevant tax period.

Need help applying?

Please call if you need assistance claiming these additional SEISS grants.

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