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What is a tax calculation?

A tax calculation is created by HMRC if you have not paid the right amount of tax. HMRC’s annual reconciliation of PAYE for the tax year 2020-21 is now almost complete. HMRC use salary and pension information to calculate if you have paid the correct amount of tax.

The tax calculation is usually generated automatically by HMRC’s computer systems on what is known as a P800 form. P800s are generally sent out after the end of the tax year and the process is generally completed by the end of November. The P800 form is also used if you have not paid enough tax so be sure to read the document carefully.

If you are due a refund, the P800 form will usually tell you that you can claim a refund online. Once you complete the claim online, the refund will be paid within 5 working days and will be in your UK account once your bank has processed the payment. If you do not claim the refund online within 45 days, HMRC will send you a cheque.

If your P800 tells you that you will be repaid by cheque, then you do not need to take any further action and you should receive a cheque within 14 days of the date on the P800 Tax Calculation.

If you have not received a P800 form but think that you have overpaid tax, you can contact HMRC to inform them. If HMRC agrees that you are due a tax refund they will send you a P800 form.

If you complete a Self-Assessment return, then you should not expect to receive a P800 form as any underpayment or overpayment of tax will be handled by way of your tax return.

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Autumn Budget Summary 27 October 2021

As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press before the official report to parliament, 27 October 2021.

But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections:
Taxation changes and Other announcements


Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

1. Taxation changes

Income Tax 2022-23 to 2025-26

No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK.

In what many commentators consider a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the total value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any gains in earnings will be taxed, and, in some cases, this may push earnings into the higher rate tax bands.

Regional variations to Income Tax rates may apply in Wales and Scotland.

Income Tax and dividend income

The current £2,000 dividend tax-free allowance is unchanged.

As announced on 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are:

– Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22)
– Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22)
– Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22)


Starting rate for savings

The band of savings income subject to the 0% starting rate will remain at £5,000 for 2022-23.

Reform of Basis Periods for self-employed and partners

The basis on which profits are taxed in a tax year is to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year-end at the end of the tax year will experience no change in their basis of taxation.

For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24, and the new rules will come into force from 6 April 2024.

The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and gains.

National Insurance

Boris Johnson announced – earlier this year – a 1.25% increase in certain National Insurance Contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate.

The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds and the rates of Class 2 and 3 National Insurance contributions for 2022-23.

This excludes the Upper Earnings Limit and Upper Profits Limit, which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax.

Lifetime Allowance for pension pots

From April 2021 to April 2026, the pensions lifetime allowance will remain frozen at £1,073,100.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart-avoidance changes, there are two changes worth mentioning:

Capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements, and
The deadline for reporting chargeable residential property sales – not the primary residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that are complete on or after 27 October 2021.
The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and pay any taxes due.

Corporation Tax

No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%. As announced earlier this year, from 1 April 2023, there will be two rates of CT.

– Taxable profits up to £50,000 will continue to be taxed at 19%

– Taxable profits more than £250,000 will be taxed at 25%

– Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and short accounting periods.

Corporation Tax and banking companies

From 1 April 2023, the rate of surcharge on banking companies will be 3%, and the surcharge allowance increased from £25m to £100m.

Corporate Tax – R&D Relief

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improving compliance. These changes will be legislated in Finance Bill 2022-23 and will take effect from April 2023.

Museums and Galleries Exhibition Tax Relief

The sunset clause in this relief is extended for a further two years until 31 March 2024.

Cultural Relief changes

Theatre Tax Relief and Museums and Galleries Tax Relief

Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50%, respectively, from 27 October 2021.
From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024.

Orchestra Tax Relief

From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023 and returning to 25% from 1 April 2024.
Reliefs for investments in qualifying assets

Super-deduction

The temporary “Super-deduction” and a 50% first-year allowance introduced in April 2021 will continue to apply to qualifying expenditure up to 31 March 2023.
The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.

Annual Investment Allowance

The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023.

Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.

Reform of loss relief rules for Corporation Tax

The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have a retrospective effect from 1 January 2019.

Van and car benefit changes


This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rAs a result, the van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300, and the flat-rate van fuel benefit charge will increase to £688.

Inheritance Tax

No changes to present rates and allowances. These are all frozen at current levels until April 2026.
This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.

VAT

There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.
The temporarily reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic.

VAT rules in Freeports

From 3 November 2021, the government will introduce new elements into the VAT-free zone model for Freeports. They are:
– implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model,
– make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive,
– amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.


2. Other announcements

Business rates changes


The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022/23.

Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business.

A relief cap is also being introduced for improvements to business properties which will delay the start date of higher business rates triggered by the improvements for 12 months. However, the government is to consult on implementation, which will take effect from 2023 and will be reviewed in 2028. So if you are planning improvements to your business premises, this may benefit you.

From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings.

From 2023, business rate revaluations will take place every three years rather than every five years.

Transitional relief for small and medium-sized businesses is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000).

Increasing the normal minimum pension age

The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.

From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.

Universal Credits

To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned.

Duties and Miscellaneous taxes


– The agreed-upon rates above the Retail Prices Index (RPI) will increase Tobacco Duty from 6 pm on 27 October 2021.
– Alcohol duty rates will be frozen.
– Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022.
– Aggregates Levy – the government will freeze the Levy rates in 2022-23.
– Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022.
– VED rates for cars, vans and motorcycles will increase in line with RPI changes. The change will be effective from April 2022.
– VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022.
– Fuel Duty rates for 2022-23 will remain frozen.
– Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. – Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced.


ISA investment limits for 2022-23

The limits set for 2022-23 are:
– For Adult ISAs the limit remains at £20,000
– Junior ISA limit remains at £9,000
– Child Trust Funds remain unchanged at £9,000


National Living Wage increases

The NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022.

The full changes to the National Minimum Wage rates from 1 April 2022 are as follows:
– The 21 to 22-year-old rate will be £9.18 per hour
– The 18 to 20-year-old rate will be £6.83 per hour
– The 16 to 17-year-old rate will be £4.81 per hour
– The apprentice rate will be £4.81 per hour

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Getting prepared to use Freeport customs sites

In the Spring Budget earlier this year, the chancellor announced that eight Freeport locations would be created in England. The Freeports will be in the East Midlands Airport, Felixstowe and Harwich, the Humber region, Liverpool City Region, Plymouth, the Solent, the Thames, and Teesside.

Freeports are a special kind of port where normal tax and customs rules do not apply rather there are simplified customs procedures and duty suspensions on goods. This will allow firms to import components and other pre-manufactured goods into a Freeport without paying taxes. The goods would then be processed into a finished product to be built in the UK.

In these new Freeport areas, no duties will be charged on goods or materials until they leave the zone as a finished product for the UK domestic market. There should be no UK tariffs payable when the finished product is re-exported directly from the Freeport.

HMRC has published new guidance to help businesses get ready to use a Freeport site. You cannot currently use the Freeport customs special procedure to import or export excise goods. HMRC’s guidance will be updated with details when this becomes possible.

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