First a big thank you to our clients and congratulations to our compliance team who successfully filed nearly all of our self-assessment tax returns ahead of the 31 January filing deadline, which was actually extended to 28 February this year by HMRC due to a significant increase in Covid infections in early January. More than 10.2m customers filed their tax returns by the 31 January. Of these, over 630,000 customers filed on 31 January, with 20,947 completing their tax return between 11pm and 11:59pm.
Although there is an extension for filing tax returns, there was no extension for tax payments, Late payment interest will be charged on payments not made by 31 January, which will be increased by HMRC again in mid-February (after an initial increase in January) following the rise in the Bank of England interest rate to 0.5% last week. HMRC is advising that anyone who cannot or will struggle to pay their tax liability to set up a Time to Pay arrangement by 1 April 2022. Failure to do so will result in a late payment penalty surcharge of 5%.
Apart from the office having to deal with the challenging situation of the increase in covid infections and self-isolation, this year’s tax return January push had some challenging areas, which we would like to flag, so that clients are pre-warned for next year.
- We flagged in our January newsletter the requirement to report Covid support claims, in particular for our clients the self-employed income support grant. Many people forgot this grant was taxable, thereby increasing their tax liability beyond what they were expecting. This assumes the grant was correctly claimed in the first place as HMRC will reclaim the grant and charge penalties for incorrect claims;
- This year also saw a significant increase in the number of clients using self-service online investment platforms for shares and crypto trading, due to the increase in availability of such platforms, low cost and probably having time while in lockdown or on furlough. The issue with this increase in investment activity is the requirement to complete detailed capital gains tax calculations for tax reporting, many of which require what is known as pooling (tax rules on the buying and selling of shares and similar type assets). With more expensive, advisor-led investment portfolios, we are generally provided with capital gains tax workings already completed as part of the annual summary or at least a comprehensive transaction history. The lower cost self-service platforms don’t seem to provide these summaries, with clients just being able to access a list of purchases and sales, which we then have to work through to get to the capital gains tax position – hence some clients incurred a fee increase.
We flagged in the JANUARY NEWSLETTER that HMRC have a heightened interest in these self-service platforms, in particular regarding crypto assets, having already issued “nudge” letters to taxpayers where they have already sourced third party information from platform providers.
YEAR-END TAX PLANNING
As we finish reporting the 2021 tax year, the end of the 2022 tax year approaches and now is a good time to consider your financial position and check whether you have taken full advantage of the tax reliefs and exemptions that are available, as well as prepare for the new tax year (you have less than two months). We will be contacting our corporate clients with a 31st March year-end to consider any corporate planning, which will also be a good opportunity to catch up.
Please follow the link below to our individual planning checklist which is intended to provide a guide to the opportunities that we believe may be worth considering. There are many tax-saving measures available and steps that can be taken to improve your tax position, without significant effort. We have listed some planning points to consider which may help reduce your taxes for this tax year (ending 5th April) or prepare for the next, if implemented now. Remember, following the Government announcement in Autumn, dividend income tax rates and National Insurance rates, will increase by 1.25% from 6th April, with the introduction of the Health and Social Care tax.
It is difficult to see that with the 1.25% increase, and other tax increases (and frozen allowances) announced in the last two Budgets, together with inflation and utility cost increases, that any tax increases will be announced in the Budget (23 March), but Government finances are still tight.
The impact of taxation is only one element in looking at your financial planning you should also be considering such issues as your savings, investment performance and succession planning. Always take professional advice when deciding your tax planning or investment strategy using a FCA regulated financial advisor.
Our tax planning checklist can be HERE.
PAYE CODING NOTICES
One area of tax planning that gets overlooked is checking your PAYE coding notice for those who receive employment or pension income. These notices are issued over the next month via the post and/or via personal tax accounts. The notice determines the level of tax that will be deducted at source and should be checked as, if incorrect, too much tax will be collected, which can be claimed back or too little tax deducted, which results in having a tax bill to pay in January 2024.
CHANCELLOR ANNOUNCES TECH SUPPORT FOR SME'S
The Chancellor has announced that small businesses can apply for a grant of up to £5,000 to assist with acquiring or updating software under the Help to Grow Digital scheme. The grant scheme is part of the of the Chancellor’s plan for businesses to become more innovative, more competitive and more profitable. Business Secretary Kwasi Kwarteng said the scheme is “future-proofing our small businesses and putting the UK at the forefront of the worldwide digital revolution."
More details can be found HERE.
SECOND HOME OWNERS CRACKDOWN
Michael Gove has pledged to crack down on second home owners who abuse the tax system, announcing changes to tax relief for holiday lets, targeting second home owners who pretend to let out their property but actually leave them empty. Under new rules, second homeowners will only be able to register for business rates if they can prove they let their properties for at least 70 days in a year. At present they are allowed to pay business rates, as opposed to Council Tax and, as generally qualifying as a small business, they will be exempt from business rates, escaping paying anything, if they make their property available for letting for at least 140 days a year. However, there is no requirement for evidence that the property has been commercially let. In addition to paying no Council Tax, many of these individuals claimed the £10,000 small business covid support grant, paid out in May/June 2020. Mr Gove said: "The Government backs small businesses, including responsible short-term letting However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.”
DATES FOR YOUR DIARY
- 28 February 2022 Last day to file 2021 self-assessment return, before late filing penalty incurred;
- 23 March 2022 The Chancellor’s Budget Statement;
- 1 April 2022 5% late payment surcharge applies for those who have not paid their tax liability of arranged a time to pay arrangement with HMRC;
- 5 April 2022 Last day of the 2022 tax year and opportunity for any tax planning.
Should you wish to speak with us about a specific matter, or just to be a sounding board or for a chat, please do not hesitate to give us a call.
Please do not hesitate to give us a call us on 01452 713277