Autumn Budget 2024 – How Will it Affect Me?

On Wednesday 30th October, Rachel Reeves delivered her first budget as Chancellor of the Exchequer, and Labour’s first budget in 14 years. But what changes have been announced in the Autumn Budget? And how will those changes affect you?

National Minimum Wage Increase

The National Minimum Wage (NMW) will increase from April 2025. The hourly rate will rise by 6.7% for those aged 21 and over. The current NMW hourly rate is £11.44, this will rise to £12.21 next year.

Under 18s and apprentices will see their rate increase to £7.55 from £6.40.

The rate for 18–20-year-olds will increase by 16.3% to £10 per hour. This has been implemented as part of a long-term goal to consolidate NMW rates. This plan will see everyone over the age of 18 having the same minimum rate in the future, much like how the 21-22 age bracket was scrapped in April 2024.

Employer National Insurance Increase

From April 2025, the Employer National Insurance (NI) rate will increase from 13.8% to 15%.

Employer NI is the tax contribution made by employers on their employees’ earnings. These contributions are due on earnings which exceed the employer NI threshold. The budget announced that this threshold is now set to reduce from £9,100 to £5,000; employers will be paying a higher rate of tax on more earnings.

Employment Allowance Increase

To combat the impact of the changes to Employer NI, the Autumn Budget did announce an increase in Employment Allowance from £5,000 to £10,500.

Employment Allowance is a government scheme which allows eligible employers to reduce their National Insurance costs by the allotted amount each year. This means that an employer who claims the allowance in April 2025 can reduce their total ER NI contributions for the year by £10,500.

Capital Gains Tax Increases

The autumn budget also announces increases to Capital Gains Tax (CGT) rates in the next financial year. The lower rate will increase from 10% to 18%, whilst the higher rate will increase from 20% to 24%. The new rates match the tax rates for capital gains on property sales.

These rates are in effect from 30th October 2024. Remember that the rate used is dependent on when the sale occurred; sales made before the budget will not be taxed at the new rates. You can find more information on capital gains here.

Inheritance Tax

Currently, the tax-free threshold for inheritance tax (ITH) is £325,000. This increases to £500,000 if the estate is left to children or grandchildren. It was announced in the budget that these thresholds would remain frozen until 2030.

The largest change to IHT is that, from April 2027, inherited pensions will be included within the estate; they will be taxed.

Exemptions on IHT that previously applied to agricultural property have been reviewed. Previously, no IHT applied to agricultural land. The reformed relief will see the first £1m in combined assets be tax-free, but tax on value exceeding this will see a relief of 50%. This means that the IHT rate will be 20%, rather than the usual 40%.

If you need support or resources regarding inheritance tax, you can learn more here.

Carer’s Allowance

Carer’s allowance is a form of government support given to unpaid carers who provide care for a minimum of 35 hours per week. The allowance is currently £81.90 per week. However, you can only claim the allowance if you are earning below the weekly earnings limit. Once this limit is surpassed, you cannot claim the allowance and must repay any allowance claimed that year.

In the autumn budget, it was announced that the weekly earnings limit would be increasing from £151 per week to £181 per week. This will allow carers to work more hours a week without needing to forfeit their benefits.

Additional Announcements

  • Employee National Insurance, VAT, and income tax will not increase. The personal tax thresholds, which are used for income tax and Employee NI, are currently frozen until the 2027/28 tax year, but it will increase in line with inflation after this.
  • The corporation tax main rate (for companies with profits over £250,000) will remain at 25% for the duration of this Labour government.
  • Plans have been made for HMRC to hire additional compliance officers, update their IT systems, and enhance their app services.
  • Businesses in the retail, leisure and hospitality sectors will receive 40% relief on business rates from the 2026/27 tax year, up to a £110,000 cap.
  • “Non-Dom” status will be abolished from April. A new residence-based scheme will be introduced in its place.
  • Benefits will rise by 1.7%, in line with inflation, in April.
  • Stamp duty on purchases of second homes and residential property purchases by companies will increase to 5%
  • Fuel duty will remain frozen for the next tax year. The 5p cut will also continue.
  • Air passenger duty will see small increases, apart from on private jets, which will see a 50% increase.
  • A vaping liquid levy will be introduced, and tax on tobacco will continue to rise.
  • VAT will be applied to private school fees from 1st January 2024.
  • The bus fare cap will remain for another year, but it will be increasing to £3.

 

If you require any advice regarding changes announced in the budget, or you require help with accounting, tax preparation, or payroll, please do not hesitate to contact us.

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Spring Budget 2024

On 6th March 2024, Chancellor of the Exchequer, Jeremy Hunt, announced the government’s plans for the UK economy in the Spring Budget. With a focus on lowering inflation and increasing the countries GDP per capita, the chancellor set out plans to be enrolled over the next few years. But how will these changes affect business owners and taxpayers?

National Insurance Cuts

The most notable change announced during the Spring Budget was a 2% cut in employee National Insurance (NI). This is on top of the 2% cut announced in the Autumn Statement last November. This means that, from 6th April 2024, employee NI will drop to 8%; the lowest rate since 1975. Those earning an average salary of £35,400 will save £450.

It is important to note that these changes only apply to the basic NI rate. Any earnings over £4,189 per month will still be taxed at 2%.

Previously, NI for the self-employed (known as Class 4) was set to decrease to 8% from April 2024. The Spring Budget has announced a further 2% reduction. This means those who are self-employed will be taxed at 6% from next month.

Employer NI contributions will not be changing according to the Spring Budget. The rate will remain at 13.8%.

VAT Threshold

Another significant announcement from this year’s Spring Budget relates to the VAT threshold. The threshold will increase from £85,000 to £90,000. This is the first rise the VAT threshold has seen since 2017.

The increase has been introduced to prevent smaller businesses from falling into the VAT regime due to rising inflation and the cost of living crisis. However, many are worried that this increase of only £5,000 may not be enough to cover the cost increases.

Capital Gains Tax

The higher rate of Capital Gains Tax (CGT) on residential property sales will decrease. The Spring Budget states that the rate is being cut from 28% to 24% from 6th April 2024. The basic rate on property sales will remain at 18%. CGT only applies to certain property sales – you can find out more here.

High Income Child Benefit Charge

A raise of the High Income Child Benefit Charge (HICBC) threshold to £60,000 was also announced in the Spring Budget, along with raising the withdrawal taper from £60,000 to £80,000. This will increase from April 2024.

The charge allows child benefits to be taken back from higher earners through the tax system and has been unchanged since its introduction in 2013.

The rise will be introduced to prevent basic rate taxpayers having to complete tax returns for only their HICBC. This issue was caused by the tax thresholds increasing for the 2021/22 tax year, pushing the higher-rate bracket above the original £50,000 threshold.

Additional Changes

The following are additional changes announces during the Spring Budget:

  • Non-Dom status will be abolished from April 2025. A new system will be introduced where no tax will be paid on non-UK income for the first 4 years of being in the UK. UK tax rates will apply after this period.
  • Multiple dwellings relief will be abolished. This allowed Stamp Duty Land Tax relief for transactions where two or more dwellings were purchased at once.
  • The furnished holiday lets regime will cease from April 2025. This allowed short-term lets to receive tax reliefs like small businesses.
  • A New UK ISA will be introduced, allowing individuals an additional £5,000 annual investment in UK assets.
  • Fuel Duty freeze has been extended for a further 12 months.
  • Alcohol Duty will be frozen until February 2025.
  • Vape Duty will be implemented from October 2026. An increase in Tobacco Duty will occur at the same time.

 

If you have any questions about how the budget could affect you or your business, please do not hesitate to contact us.

 

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Double Cab Pickups – Benefit In Kind Changes

Update – Government U-Turn

On 19th February 2024, 1 week after the classification criteria was updated, HMRC announced a full U-turn on the treatment of double cab pickups. It has been decided that they will now continue to use the payload system to classify vehicles, as explained in our “How Were Double Cab Pickups Treated Previously?” section. This has occurred due to push back from the motor industry over the significant increase in tax the change would have caused for most double cab pickup owners.

 

Changes to the tax treatment of double cab pickups have recently been announced by the government. This will change how benefit-in-kind tax is calculated for these vehicles if owned by your company. These changes will be introduced to remove a loophole which allowed them to be accounted for as vans rather than company cars. The tax paid on vans is usually lower than the tax paid on cars.

How Will Double Cab Pickups be Accounted for?

For vehicles ordered on or after 1st July 2024, new criteria will dictate that almost all double cab pickups will be classed as cars. This is due to the new legislation used to determine how a vehicle should be classified.

 If a vehicle’s primary suitability is construction, it will be classed as a van. This means that the vehicle must only be used for transporting goods. As double cab pickups can transport both goods and passengers, they cannot be classed as vans and must be treated as cars.

Vehicles that are already on fleet or have been ordered prior to 1st July will be treated as they were until 5th April 2028.

How Were Double Cab Pickups Treated Previously?

The old criteria that were used to decide whether a vehicle was a car or van was dependent on payload. A vehicles payload is usually given in the manufacturer’s manual and is equal to the gross weight minus the unoccupied kerb weight.

Vehicles with a payload under 1 tonne would be classed as cars, whilst those which are 1 tonne or over would be classed as vans.

Double cab pickups are much heavier than standard cars; they would almost always meet the old van criteria.

Will All Double Cab Pickups be Classed as Cars?

Not necessarily. Within the legislation, the government have included exceptions which could allow double cab pickups to be classed as vans. This is dependent on whether modifications have been made to the vehicle.

The modifications must be “sufficiently permanent & substantial in scale”. Examples provided include replacement of the rear side windows (either with metal panels or fibreglass) or welding a new load base.

Defining whether a modification can fit the criteria can be difficult. For example, removal of the rear seats of a double cab pickup would only be classed as substantial if all the related fittings are also removed. The easiest way to check that the modification is substantial is if it could be easily reversed. If so, the changes cannot be used to justify the van classification.

How does the Benefit in Kind Differ?

A benefit in kind (BIK) is defined as goods and services received by employees or directors from a company which are not included in their salary, for example a company vehicle. The method of taxing these BIKs is dependent on the type of vehicle they are classed as.

Vans use a flat rate to calculate the tax owed. On the other hand, the tax owed on cars is dependent on the CO2 emissions and list price of the vehicle. Please see our Vehicle Benefit In Kind Breakdown for more information on how it is calculated.

Example

The tax owed by a basic rate (20%) taxpayer on a petrol-powered double cab pickup with a list price of £20,000 and CO2 emissions of 170 g/km would be calculated as follows if it was classed as a car:

BIK% = 37%

BIK Tax = 20000*37%*20% = £1,480

Fuel Benefit Tax = 27800*37%*20% = £2057.20

Total tax owed = £3,537.20.

The calculation for the same vehicle if classed as a van is as follows:

BIK Tax = 3960*20% = £792

Fuel Benefit Tax = £757*20% = £151.40

Total tax owed = £943.40

You would have to pay £2,593.80 more if the vehicle was classed as a car. As double cab pickups tend to have both high list prices and high emissions, the tax owed will almost always be higher when classed as a car.

 

If you are unsure about how these changes could affect you, or you have any other queries about tax, please contact us

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Tax on Ebay, Vinted and Airbnb Sales

From 1st January 2024, digital platforms such as Ebay, Vinted and Airbnb will be required to collect and report information on their sellers’ income. This has raised concerns with users of these online marketplaces, but how much will they be affected?

What do the New Rules Mean?

Digital platforms will now need to provide breakdowns of sales made on their sites by sellers of goods and services by the end of January 2025. HMRC hopes that this system will allow information to be exchanged more quickly and efficiently. It will be as available as tax information of traditional businesses, making the tax system fairer.

It has been ruled that the digital platforms must provide a copy of the information given to the seller. This will help users to evaluate if they will need to pay tax. It also allows for transparency with what is being shared.

Examples of platforms which will be impacted include Ebay, Vinted, Depop, Etsy, Amazon, Airbnb, Uber, Deliveroo, and Fiverr.

What Information Will Digital Platforms Share?

Digital platforms will be required to provide the following information to HMRC:

  • The seller’s name.
  • The seller’s address.
  • The seller’s National Insurance number.
  • Income earned during the year.
  • Any fees incurred on the platform during the year.

If the income relates to property lets (i.e., Airbnb listings), the addresses of these properties will also be provided.

It is possible that digital platforms will increase their fees to cover the admin cost of providing this information, however this has not been confirmed.

Do I Need to Pay Tax on my Online Income?

You will only need to pay tax on your online income if you are trading or making capital gain.

To be classed as trading you must be producing or purchasing goods for resale with the intention of making a profit. If you are selling items from around the house that you already owned it is unlikely that you will be required to pay tax.

If you are trading, but your income from the digital platform was less than £1,000 (before expenses) you are not required to inform HMRC. This is because it will be covered by the Trading and Miscellaneous Income Allowance. The allowance is available to all sole traders.

Examples

Vinted, Ebay, or Depop income you receive after selling clothes from your own wardrobe that you no longer wear is not trading; you would not be taxed. However, selling clothes you have purchased purely to resell for profit through these digital platforms is trading, and would be classed as taxable income.

If you were to sew the clothes yourself and sold them through Etsy or Amazon, this would also be classed as taxable income.

You can find more information about self-assessment tax returns here. Unsure of how to pay your self-assessment bill? Please find more information here on the topic. And, if you have any further questions regarding these changes or tax returns, do not hesitate to contact us.

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Autumn Statement 2023

On 22nd November 2023, the Chancellor of the Exchequer, Jeremy Hunt, set out the UK Government’s plans for the country’s economic growth in the 2023 Autumn Statement. This blog will outline the effects of these announcements on the public.

Growth, Inflation & GDP

It has been announced that forecasts produced by the Office for Budget Responsibility (OBR) show that the UK economy will grow by 0.6% this year and is now 1.8% larger than it was pre-pandemic. This is despite predictions in March that it would shrink by 0.2%. The rate of growth predicted earlier this year, however, was higher, meaning that the current forecast sees only a 0.6% improvement in growth for 2027 when compared with the March projections.

Inflation is currently at 4.6% and it is expected to fall to 2.8% by the end of 2024. A target of 2% has been set for 2025.

The Autumn Statement shows that GDP is expected to rise over the next four years, reaching 2% in 2027.

National Living Wage

From April 2024, the National Living Wage will increase to £11.44 per hour. This is a 9.8% increase from the current rate of £10.42. It is important to note that from April 2024, the rate bracket for ages 21-22 will be scrapped; workers aged 21 and over will be entitled to the National Living Wage.

Rates for the 2024 National Minimum Wage (workers aged 20 and under) are as follows:

  • Under 18s and apprentice rates – £6.40 per hour
  • 18–20 year-olds – £8.60 per hour

Please note that the apprentice rate only applies during the first year of the apprenticeship if the apprentice is aged 19 or over.

Employee National Insurance

Starting on 6th January 2024, Employee National Insurance will be cut to 10%. This is a 2% decrease from the current rate of NI. On an average salary of £35,000 a year, there will be a saving of £450. The government believes that decreasing employment taxes will increase employment rates as a higher net wage acts as an incentive to find work.

Taxing the Self-Employed

Self-Employed individuals currently pay Class 2 National Insurance at £3.45 per week (if your profits are over £12,570) and Class 4 National Insurance at 9% on profits between £12,570 and £50,270. The Chancellor has announced a reform for how the self employed are taxed. This means that, from April 2024, the Class 4 NI rate will be reduced to 8%. Class 2 NI will be abolished.

Pensions

In line with the pensions triple lock, the state pension will increase by 8.5% to £221.20 per week.

A call for evidence has been launched by the government relating to a “lifetime provider model” of pension schemes. This would allow contributions to be paid into an existing scheme when changing employers, rather than having several “small pot” pensions.

Benefits & Back to Work Scheme

It has been announced that Universal Credit and other benefits will be increasing by 6.7% from April 2024. This is in line with the September 2023 inflation figure.

£1.3 billion is set to be invested over the next five years to help those with health conditions find work. A new “Back to Work” scheme will also be introduced which will implement mandatory work placement for claimants who have been unemployed for 18 months. If this is not engaged with the claimant may have their benefits claim closed.

Full Expensing

Full expensing is a form of relief which allows businesses to claim 100% of capital allowances on investments in qualifying fixed assets. This was originally intended to cease in March 2026; however, it has been announced today that it will now be implemented permanently.

Research and Development

The Research and Development Expenditure and SME relief schemes will be merged in an effort to simplify tax. The tax rate applied to losses will be reduced to 19%. This will apply to R&D expenditure incurred during accounting periods beginning on or after 1st April 2024.

Additional Announcements

The following information has also been announced within the Autumn Statement:

  • The local housing allowance, which has been frozen for three years, will increase, being raised to the 30th percentile of local market rents.
  • The Small Business Procurement Act means that 30-day payment terms will now apply throughout the subcontract chain.
  • The small business multiplier has been frozen for another year. It has remained at 49.9 pence since the 2020-21 tax year.
  • Business rates relief for hospitality, retail and leisure has been extended for another year.
  • Alcohol duty will be frozen until August 2024.
  • Tobacco duty will increase from 22nd November 2023.
  • A further four investment zones will be introduced. These will be in the East Midlands, West Midlands, Greater Manchester and Wrexham, Wales. They hope to increase employment in those areas.
  • Increased funding has been proposed for apprenticeships, technology and AI development, and regeneration projects.
  • £4.5 billion has been proposed for supporting companies on the approach to the Net Zero deadline over the next 5 years.

If you have any concerns regarding the changes set out in the Autumn Statement and how they could impact you and your business, do not hesitate to contact us. You can find our contact information here.

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VAT Penalties and Interest Charges

On 1st January 2023, changes were made to fines for late VAT filing and payments. Previously, the default VAT surcharge system was in place. This system meant that you would be fined a percentage of the VAT owed. This started at 2%, then increasing to 5%, 10%, and 15% every time a payment or VAT return was missed.

The new system implements a point system for late submissions, as well as new penalties and interest charges on late payments.

Late Filing Points System

The late filing point system works on the basis that every time VAT is submitted late, you will receive a penalty point. Once the penalty Point threshold is reached, a £200 penalty is applied. A further £200 penalty is issued for every late submission whilst at the threshold. The threshold is dependent on how frequently you submit your VAT return:

Accounting PeriodPenalty Points Threshold
Annually2
Quarterly4
Monthly5

HMRC will adjust both the threshold and the points you have been issued if you change your accounting period.

The penalty rules do not apply to the first VAT return, final VAT return, or one-off returns which cover a period other than those listed in the table above.

HMRC will issue a penalty decision letter to your registered business address if a penalty or penalty point has been given. This letter will offer a review with HMRC where you will be able to appeal the penalty. Also, penalties can be checked, and reviews can be requested through your VAT online account.

Late Payment Penalties

Late payment penalties have been introduced and can apply to any VAT that has not been paid in full by the due date. This is excluding payments on account and annual accounting scheme installments.  The penalty you will receive is dependent on both the number of days that the payment is overdue, and if it is your first penalty:

First Late Payment PenaltySecond Late Payment Penalty
Payments up to 15 days overdueNoneNone
Payments 16-30 days overdue2% of the VAT owed at day 15None
Payments 31 days or more overdue2% of what was outstanding at day 15.
Plus 2% of what is still outstanding at day 30.		Daily rate of 4% per year on the outstanding balance.
This is charged from day 31 until the outstanding balance is paid in full.

A period of familiarisation has been implemented until 31/12/2023. This means that first late penalties will not take effect if a payment is made within 30 days of the payment due date.

Much like the late filing penalties, HMRC will notify you of a late payment penalty via a penalty decision letter and details of the penalty will be available through your VAT online account.

Late Payment Interest

Late payment interest will now be applied from the first day that a VAT payment is overdue until the day it is paid in full. The interest rate directly correlates with the Bank of England’s base rate. It is calculated as the base rate plus 2.50%. This means that the current interest rate is 7.75%.

Payments that are subject to interest include:

  • VAT Returns
  • Corrections and Amendments
  • HMRC VAT Assessments
  • Missed Payments on Account
  • Late payment penalties
  • Late submission penalties

If interest is being applied to an amount which should be paid in installments, the interest will be charged on the outstanding balance until the tax has been paid in full.

Unfortunately, HMRC does not have an appeals process for late payment interest. However, you can object to the interest for a variety of reasons, such as, you believe HMRC has caused a mistake or there has been any unreasonable delay, you dispute the relevant date or effective date of payment, or you are questioning the legislation. It is important to note that interest objections can only be accepted if the tax relating to the interest has been fully paid. To discuss interest objections with HMRC, contact the VAT General Inquiries Helpline.

VAT Repayment Interest

On the other hand, if you are owed a VAT repayment from HMRC will also be applied. Like the late payment interest, the interest rate is dependent on the Bank of England’s base rate. It is calculated as the base rate minus 1%; the rate is currently 4.25%. Interest will not be applied on early payments or payments made in error (such as paying £2,500 instead of £250).

If the VAT has already been paid to HMRC, the repayment interest is calculated from the later date of either when the VAT was paid or the payment deadline for the period.

If the VAT has not been paid to HMRC, the repayment interest is calculated from the day after the later date of either the payment deadline or when the VAT was submitted.

HMRC will only pay repayment interest if there are no outstanding VAT returns. Because of this, the interest will only be paid from the date that all outstanding VAT returns are received.

The end date for the interest will be when HMRC repays the VAT, or it is set off against a different VAT return. It can also be set off against other types of tax you may owe.

If You Cannot Pay

If you are aware that you will not be able to pay your VAT in full by a deadline, call HMRC’s Payment Support Service for guidance. They have a specific line relating to VAT payments. One option they may propose is a payment plan. You can find out what you will be asked during the set up process, or if you can set up a payment plan online, here. Setting up a payment plan could lead to penalties being reduced.

HMRC offer a flexible plan known as a Time to Pay arrangement which will cover any penalties and interest that has been applied. If this arrangement is put in place before a penalty deadline, the penalties will not be applied. However, if you do not adhere to the conditions of the arrangement and it is cancelled, the penalties will be applied. You can find out more about Time to Pay here.

Contact Us

If you require our services for VAT, or have any further questions regarding your accounts, please do not hesitate to contact us.

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Student Loan Changes 2023

Last year, the government announced several significant changes to student loan plans. You may have noticed that your own loan deductions have changed since April 2023, or that a new plan will be implemented for this year’s students. In this blog we discuss how these updates will affect you.

Current Student Loan Schemes

Currently, there are four student loan repayment schemes. The scheme you pay through is dependent on criteria such as the country where you are based and when you started your studies. The current schemes are:

  • Plan 1 – Applies to all students, UK-wide, whose loans were taken before September 2012.
  • Plan 2 – Applies to English and Welsh borrowers from September 2012.
  • Plan 4 – Student Award Agency Scotland Loans
  • PGL – Postgraduate loans for England and Wales (PGL can also be called Plan 3)

You will only make repayments when your rate of pay passes the annual threshold. This, and the rate of deduction, is dependent on your loan scheme. The thresholds applied from April 2023 are in the table below:

Loan PlanPrevious Annual ThresholdAnnual Threshold from April 2023Rate of Deduction
1£20,195£22,0159%
2£27,295£27,2959%
4£25,375£27,6609%
PGL£21,000£21,0006%

Plan 5

A new student loan scheme called Plan 5 will be introduced for English individuals taking student loans from 1st August 2023, in place of Plan 2. The deduction rate shall remain at 9% of pay, but the threshold shall fall to £25,000 per year. This works out to £2083 per month, or £480 per week. This threshold shall remain until April 2028, after which it shall increase in line with the retail price index. This scheme will also increase the repayment period so that loans will be cleared after 40 years, rather than the usual 30.

Students on Plan 5 will not be expected to make payments until April 2026 at the earliest. This includes students who leave their courses early. The scheme will only apply to English borrowers as Welsh students shall remain on Plan 2.

Example:

If you were paid a salary of £26,000, you would only need to repay the 9% on the £1000 exceeding the threshold. This equates to £90 per year. If your salary was £30,000, you would be paying £450 per year.

By using this rule of £90 to pay per £1000 over the threshold you will be able to predict the contributions you are due to pay per year.

How are Student Loans Paid?

If you are employed, repayments are taken from your salary by your employer, much like tax and National Insurance. The amount deducted per pay period will be displayed on your payslips.

If you are employed but also complete a tax return you must include the total amount paid during the tax year. This figure will be reflected on a P60.

If you are self-employed the amount you owe will be calculated and included on your Self Assessment, and you will pay the amount at the same time as your tax. The figure can either be calculated before submission by your accountant, or by HMRC once it is submitted.

If you are self-employed and in need of advice, or if you are unsure if you need to complete a Self Assessment, please review the information on our page.

How to Apply for Student Loans

HMRC offer a step-by-step guide on applying for student loans. It will allow you to check if you are eligible and how large your loan can be. It also gives advice on reapplying during your study (which must be done each year of your course) and what happens with payments once you leave education. This guide can be found here.

FAQs

  • “Will my student loan go on my credit file?” – No, it doesn’t. This means that taking out student loans will not affect your ability to apply for a mortgage, for example.
  • “Is there interest on my loan?” – Yes, for Plan 5 loans the interest rate will be set at the rate of inflation for the current year.
  • “Does how much I owe on my loan affect how much I pay?” – No, as the amount you pay is solely related to your earnings. The remaining balance is not a factor.
  • “Can I make additional payments towards the loan?” – Yes. Additional payments can be made at any time during the repayment period; however, these payments cannot be refunded. You can find more information from HMRC here.
  • “Will I need to make repayments if I move abroad?” – Yes, you must still pay 9% on all earnings exceeding the currency equivalent of £25,000.
  • “When will I start repaying my student loan?” – If you are earning over the annual threshold, repayments will start the April after you leave university, but Plan 5 repayments will only start from April 2026.
  • “Are student loan contributions calculated before or after tax?” – Before tax. They are calculated the same way as National Insurance contributions.
  • “Will student loan repayments affect my pension contributions?” – The student loan repayment will be deducted before the pension contribution is calculated.

If you are usure of how your loan will affect your pay, please do not hesitate to contact us.

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September Mini Budget Breakdown

On 23rd September 2022, Chancellor of the Exchequer, Kwasi Kwarteng, announced a new growth plan.

This blog will provide a breakdown of the changes announced by the Chancellor and how they will impact you and your business.

 

Income Tax

The basic rate of income tax is set to receive its first cut in 15 years, reducing from 20% to 19%. This means that less tax will be applied to your non-dividend and non-saving income. This cut had been previously pledged by Rishi Sunak in the Spring but has been brought forward from 2024 to 6th April 2023. The government are currently estimating the average basic rate tax payers will save £130 per year.

 

When the growth plan was first announced, the decision was been made to scrap the 45% Additional Rate, which would have seen those earning more than £150,000 per annum being  charged at the current Higher Rate of 40% from April 2023. This has since been reviewed and, on 3rd October, a U-turn on the removal was announced; the 45% rate will now stay in place.

 

The 20% rate will stay in place for Gift Aid until April 2027.

 

Corporation Tax

The rate of corporation tax was initially expected to rise for companies with profits over £250,000 from 19% to 25% from April 2023. This increase has now been scrapped, meaning all companies will be paying at the 19% rate. The government hopes that this will encourage business owners to invest more into their companies, further improving and diversifying the UK economy.

 

National Insurance

At the beginning of the current tax year, National Insurance rates saw a 1.25% increase with the introduction of the Health & Social Care Levy. This aimed to increase funding for the worst affected sectors of the COVID-19 pandemic. It has now been announced that the levy will be reversed from 6th November 2022, and the National insurance rate will return to 12%. Plans to introduce the levy as a separate tax in the next tax year have also been scrapped.

This change will be reflected by a blended National Insurance rate on Self Assessments upon submission to ensure that the correct contribution is made.

This change will reduce the National Insurance bills of companies, giving a potential for further investments.

Dividends

Dividend tax rates will also fall by 1.25% in the next tax year following the removal of the Health & Social Care Levy.

 

Annual Investment Allowance

The Annual Investment Allowance (AIA) available to claim is set to permanently be £1,000,000. Plans had previously been put in place to reduce this to the previous amount of £200,000 in March 2023. AIA allows you claim 100% tax relief on assets up to the set amount. By having this as the higher amount, businesses will be able to claim more relief, reducing their tax.

 

Stamp Duty

Significant cuts to Stamp Duty have been announced, and all have come into effect as of midnight on 23rd September. Stamp duty is a form of tax applied when documents are recognized, most commonly through the purchase of houses.

The Nil Rate Band has doubled, increasing from £125,000 to £250,000, allowing more people to buy homes without paying any stamp duty. It is expected to save the average buyer £2500.

First-time home buyers will not have to pay stamp duty up to £425,000 and can claim relief on properties up to £625,000.

 

Additional Changes

  • Universal Credit Claimants who earn less than 15 hours per week at the National Living Wage will be required to meet with a Work Coach to help increase their earnings. Their benefits could be reduced if these meetings are ignored. Extra support will be offered to jobseekers over 50.
  • New legislation will be implemented to decrease planning and building times for new roads and energy infrastructure.
  • Changes in regulations on private investments are set to allow more funding from pension funds. This is expected to boost economic growth and see a particular increase in science and technology investment.
  • Alcohol duty will be frozen for another year and is expected to be reviewed and modernised.

 

It is expected that in the coming weeks, like with all changes in government, further plans will be announced, tackling issues like the reduction of childcare costs and the housing supply, as well as a review on digital infrastructure.

 

If you have any concerns regarding these changes and how they could impact you and your business, do not hesitate to contact us. You can find our contact information here.

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Dividends and Income Tax Changes April 2022

Changes to Dividends

As the new tax year begins, many changes will be made to reflect the current economic climate of the United Kingdom. One such change that shall come into effect from the 6th of April 2022 is a 1.25% increase in the Income Tax rates applied to dividends.

What are Dividends?

Dividends are the payments made out to the shareholders of a company, such as directors and investors. The dividends will come from the remaining value after the Corporation Tax that is due is taken from the total profit for the period. Because of this, the total dividends issued must not exceed the company’s profits from the current, or previous, periods.

Paying Dividends

The amount that each shareholder will be paid is dependent on the number of shares in the company that they hold. The dividends they receive will be proportional to their shares.

For dividends to be paid, a directors’ meeting must be held to the payment to be declared, even if the company only has one director, and a dividend voucher must be completed. The dividend voucher will include the date, the company name, the shareholder’s name, and the amount of dividend they will be paid. Dividends are usually paid quarterly but can also be paid in other installments such as annually or bi-annually.

Many companies will choose to pay their directors through a mix of both salary and dividends. This is because National Insurance contributions are not deducted from dividends; they are more tax efficient.

The New Income Tax Rates

The rise in Income Tax is being introduced as a part of a government scheme to increase funding for the health and social care sector, after it was hit hard by the pandemic over the last two years. Please view the table below to see how your tax rate will be impacted by the increase:

Tax Brackets Thresholds (£)

 

 Dividend Tax Rate
2021/22 2022/23
Personal Allowance

(If no other income)

 0 – 12,570 0% 0%
Basic-Rate 12,571 – 50,270 7.5% 8.75%
Higher-Rate 50,271 – 150,000 32.5% 33.75%
Additional-Rate Exceeding 150,000 38.1% 39.35%

The £2,000 dividends allowance introduced in April 2018 will still be available, meaning that any dividends within that amount will not be subjected to any tax deductions.

The government have predicted that the average loss that will be suffered because of the increase will be around £335 for those affected but has stated more than 50% of shareholders may not even need to pay any Income Tax on their dividends as they fall within the personal allowance or dividend allowance thresholds.

 

If you are interested in learning about the other changes brought in with the new tax year, please refer to our previous blog.

If you require assistance or any further information about how your dividends may be affected, please do not hesitate to contact us.

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