Spring loaded: crisis solutions or half-measures?

Amid rising pressure to bring in significant relief measures to combat the current international emergency, Chancellor Rishi Sunak implied ahead of time that he could only do so much.

Speaking at the weekend, he acknowledged concerns about price hikes and inflation, vowing to stand by people in the same way he's "done over the past couple of years". But, in the same breath, the Chancellor warned that the Government couldn’t "completely protect people against some of the difficult times ahead".

This month the insider covers:

• HMRC waives penalties again for late self-assessment
• Omicron-hit employers can reclaim statutory sick pay
• Treasury's pensions tax relief bill soars past £42bn
• Deadline looms for new hospitality and leisure grants

Is it only worth what the buyer wants to pay?

The last year has been challenging for all of us, let alone business owners who've had to claim emergency support and battled hard to stay afloat.

Having survived those choppy waters, maybe it's time to get your business valued as thoughts drift towards an exit strategy or securing external investment to facilitate growth.

It might be difficult to say what that value is from within your business. After all, you've put hours of hard work into building your business from the ground up. But what does that translate to in monetary terms?

Pensions usually fall outside of your estate.

Inheritance tax was thought to be ripe for reform in last year's Autumn Budget but, as it happened, it was left untouched for another tax year.

What that means is the £325,000 nil-rate band has been in place since 2009, while the 40% standard rate of tax that can apply on any amount above that figure goes back even further than that.

This form of death duty is levied on our estates, which consist of any property, money and possessions.

Chancellor Rishi Sunak resisted temptation to raise taxes to start paying for the emergency support schemes that kept so many businesses afloat during the pandemic in 2020/21.

Instead, Sunak continues to bask in the warm glow reserved for generous chancellors following his latest Autumn Budget speech, thanks largely to cutting the Universal Credit taper rate by 8%, bringing it down from 63% to 55%, from 1 December 2021 at the latest.

Sunak also boosted struggling businesses with premises by revealing a five-point plan to retain and revamp business rates in England, starting with cancelling the multiplier for 2022/23 and confirming revaluations will take place every three years from April 2023, instead of every five years.

Beyond that, the Treasury took the unusual step of announcing several key measures well in advance of the day itself.

This month the insider covers:

• Salary sacrifice could 'dampen increased NICs costs'
• Hospitality and tourism VAT rate increases to 12.5%
• Business Rates burden eases for retailers and hospitality firms
• Extension for temporary £1m annual investment allowance

How we can make your lives easier.

As a business owner, you will find that few things in your line of work are as precious as your time – time that would be better spent doing something other than accounting.

Many people come to us asking for help with tasks that usually result in time slipping through their fingers, because of their often onerous nature to the layman.

If that rings true with you, it might be time to consider offloading some of that work outside of your expertise in order to give yourself back the time you need.

Understanding your early-access pension options.

Despite remaining complex, pensions offer you far more flexibility from the age of 55 (rising to 57 from 6 April 2028) than was once possible.

If you are approaching 55, you might be feeling a twinge of trepidation or excitement that you could soon become "a pensioner" as this is the age at which you are allowed to access some pension savings.

For some it may not be a moment too soon. The economic burden of COVID-19 has raised the spectre of redundancy for more people, while inflation is on the rise and interest rates remain low. Fuel shortages and empty shelves add to the general feeling of uncertainty, and some fear a deep recession.

This month the insider covers:

• Curtain comes down on Stamp Duty Land Tax holiday
• Government launches new trust registration service
• The rise of electric vehicles could create £30bn tax hole
• National Insurance and Dividends tax rates to rise 1.25% in 2022/23

Three grants worth up to £21,570 are taxable.

A chunk of time has passed since the self-employed income support scheme (SEISS) was launched in May 2020, following the onset of the COVID-19 pandemic.

The first taxable grant, worth up to £7,500 in total, was paid out in August 2020. That was followed by a second grant of up to a total of £6,570 and a third grant, worth up to £7,500 in total.

Many self-employed individuals or business partners who met the SEISS's eligibility criteria could have claimed up to £21,570 in total from these grants claimed during 2020/21.

What's that got to do with your next personal tax return, you might wonder? Quite a lot, actually, as any of the three emergency support grants you received via the SEISS between 6 April 2020 and 5 April 2021 are taxable.

How your status affects the amount of tax you pay.

For most UK citizens, the question of what income and gains should be included on their tax return is easily answered because they are both UK domiciled and UK tax resident.

Anyone domiciled and resident in the UK will need to report their worldwide income and capital gains on their return. However, what happens if you are either non-UK domiciled (non-dom) but UK resident, or UK domiciled but non-UK resident?

In these circumstances, different rules apply and the last four years have seen considerable change to tax legislation in this area as the Government seeks to expand the scope of what can be taxed within the UK.

This month the insider covers:

• Deadline approaches for fifth and final self-employed grant
• National Insurance contribution rates 'poised to increase'
• 1 in 5 UK employers consider making redundancies
• Capital Gains Tax receipts climb 3% to record-high

How the third sector is assessed for tax.

Anyone who's involved in operating a charity knows how it differs from running a business, both in terms of motives and objectives.

HMRC treats non-profit organisations and charities very differently to businesses, offering some unique tax breaks in the process.

If a charity is recognised by the tax authority, it will benefit from certain tax reliefs as long as the funds raised are used for charitable purposes.

What might this mean for your business?

Unincorporated businesses could be about to see significant changes to the ways in which they are taxed, following the launch of a Government consultation.

The Government plans to reform the basis period rules in a bid to simplify how unincorporated businesses, such as sole traders and business partnerships, allocate trading profits to tax years for inclusion on their self-assessment returns.

It aims to streamline the system before Making Tax Digital for income tax self-assessment (MTD for ITSA) becomes mandatory from April 2023 for these small businesses and align the way self-employed income is taxed with other forms of income, such as property income.

This month the insider covers:

• Lower stamp duty land tax threshold in place until October
• Employer costs increase as furlough scheme winds down
• Treasury seeks feedback on business rates revaluations
• Pensions tax traps catch out thousands more savers

Increasing house prices raise inheritance tax risk.

Soaring house prices coupled with certain thresholds being frozen in the most recent Budget have the potential to drag more estates into the inheritance tax net over the coming years.

Back in March 2021, Chancellor Rishi Sunak confirmed the main inheritance tax thresholds will remain frozen at their 2021/22 levels "up to and including 2025/26".

Inheritance tax is usually charged at 40% on the value of your estate (your property, money and possessions) over the £325,000 nil-rate band. There's an additional allowance of up to £175,000 if you pass on your family home to children or grandchildren.

How new businesses can grow and flourish.

Not much can stop determined entrepreneurs from building a new business from the ground up, even during such challenging times as a COVID-19 or its ensuing fallout.

The pandemic has proven a huge challenge for businesses, with 396,155 UK firms closing in 2020 according to the Office for National Statistics, as business owners struggled to cope with restrictions and lockdowns.

The Federation of Small Businesses expects that an additional 250,000 small businesses could fold by the end of 2021.

This month the insider covers:

• Sweeping VAT reforms in the EU will affect the UK's online retailers
• Families hit with big bills after believing gifts would not be taxed
• OTS considers bringing the end of the tax year forward
• UK tax incentive 'fails to deliver extra r&d spending'

Should employers shift towards greener vehicles?

Despite the potentially high personal tax charge, many employees still enjoy and prefer the convenience of being offered the use of a company car by their employer.

Those employers familiar with the benefit-in-kind tax rules will be aware the tax impact on the employee is much lower for those that choose lower emission cars.

On 6 April 2020, new benefit-in-kind percentage bands were introduced which took into account very low-emission cars and electric cars, favouring full electric cars more.

Planning to take advantage of low interest rates?

After a challenging year for the UK's residential landlords, you might have read about improvements to the buy-to-let mortgage market in recent weeks.

In the three months to 31 May 2021, the average interest rates for residential landlords had declined. A two-year fixed-rate buy-to-let mortgage fell 0.10 percentage points to 2.95%, while a five-year fixed dropped 0.11 percentage points to 3.30%.

For higher loan-to-value (LTV) ratios, the drop was even more significant and as you would expect, it is vice versa for lower LTV. This may partly be down to increased competition.

This month the insider covers:

• Deadline approaches for SME Brexit support grant
• Employers told to issue childcare voucher reminder
• Directors back mandatory climate credential disclosure plan
• HMRC seeks to remove VAT repayment supplement

Allowable expenses and allowances in 2021/22.

If you're self-employed, your business will rack up various running costs throughout 2021/22. Some of those you’re able to deduct as allowable expenses.

By deducting these allowable expenses as part of calculating your business’s taxable profits, it's possible for us to reduce your income tax bill in the process.

For example, if your business has turnover of £50,000 in 2021/22, and you have £15,000 in allowable expenses, your taxable profit will be £35,000. This is what you will pay tax on.

An introduction to the main business tax.

VAT is a business tax on the supply of goods and services. It is charged at varying rates depending on what is being supplied, who it is being supplied to and where it is being supplied to.

But with Brexit, temporary rate changes due to COVID-19, the rollout of Making Tax Digital for VAT and new rules relating to the reverse charge and subcontractors, this is a complex time for a business grappling to ensure VAT compliance. With penalties in place for non-compliance, it’s important to seek professional help to aid with navigating any tricky issues.

As a VAT-registered business, you will essentially act as a collecting agent for HMRC. Your business can recover the VAT it incurs on purchases (known as input VAT), but in return must charge VAT on sales (output VAT).

This month the insider covers:

• Three-month extension for business rates holiday in England
• New recovery loan scheme replaces previous Covid-19 loans
• VAT-registration and deregistration thresholds frozen until 2024/25
• Treasury issues guidance on the final two self-employed grants

What's changing for the new tax year?

If there's one thing to take away from Spring Budget 2021, it's taking charge of your personal finances is going to be increasingly important over the next five years.

With the financial fallout from COVID-19 over the last year being the fiscal equivalent of fighting a war at more than £280 billion, we will be paying back that debt for many decades to come.

A new tax year is now upon us and it's much the same as the previous 12 months from a personal tax planning perspective, while the threat of COVID-19 appears to be receding. Here's what you need to know from April 2021 and in some cases beyond.