Welcome to our round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!
I hope you have a good weekend.
Kind regards,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk
Chancellor steps into the fiscal storm and pulls more people into the top income tax band
On Thursday 17 November, the Chancellor presented the government’s Autumn Statement in which he told the House of Commons his plans to tackle the cost-of-living crisis, "rebuild our economy" and significantly reduce borrowing over the coming years.
The Chancellor
said that global factors are the primary cause of current inflation and that
most countries are still dealing with the fallout from the pandemic. He stated
that the measures taken to combat Covid-19 in the UK must be paid for. He also
acknowledged that the UK is in recession and that things will have to get worse
before they get better.
His measures on
taxes mean that tax as a percentage of national income will increase by 1% over
the next 5 years and this is now amongst the highest proportion of income going
to HMRC for at least 70 years.
The key
taxation points made by the Chancellor include:
●
The
highest rates of income tax (45% or, in the case of dividend income, 39.25%) will
apply to those with incomes of more than £125,140 from April 2023. The
threshold is currently £150,000.
●
Other
income tax thresholds are being frozen until 2028, effectively meaning higher
tax each year on earnings that increase with inflation.
●
NIC
bands and rates remain as they are, following the reversal of the 1.25% percentage
point increase on 6 November 2022. Like income tax, the NIC bands/thresholds
will also be frozen until 2028.
●
The
dividend allowance, which determines the amount of dividend income subject to
0% income tax each year, will reduce from its current level of £2,000 to £1,000
in the 2023/24 tax year and to just £500 in 2024/25.
●
The
current £12,300 annual tax-free capital gains tax (CGT) allowance will be
reduced to just £6,000 in 2023/24 and to only £3,000 in 2024/25.
●
The
VAT registration threshold will remain at £85,000 until April 2026.
●
Electric
vehicles will no longer be exempt from vehicle excise duty from April 2025 and,
for employer provided company cars, benefit in-kind rates will start to
increase.
●
Tax
reliefs for Research and Development (R&D) are being ‘re-balanced’ meaning
increased rates for some (usually larger companies) and reduced rates for
others (usually small or medium sized enterprises).
●
The
increased Stamp Duty Land Tax starting thresholds that were brought in from 23
September 2022 will now be treated as a temporary change, with the thresholds
reverting to their original levels from 1 April 2025.
Some of the key
spending statements made include:
●
Government
departments will be subject to tighter controls to tackle waste and
inefficiency, except for the department for Health.
●
The
NHS budget will be increased in each of the next two years by £3.3bn.
●
Education
will have an additional £2.3bn for schools.
●
Additional
funding will be available for the devolved administrations for the NHS and
schools.
●
Overseas
aid spending remains at 0.5% for the forecast period.
●
A
commitment to the climate pact agreed upon at COP26, including a 68% reduction
of emissions by 2030.
●
Northern
Powerhouse rail, the HS2 and the East West Rail will go ahead as planned.
In other
announcements, help for energy bills will be extended, but it will be less
generous. There will be targeted support with the cost of living for those on
low incomes and disability benefits, as well as for pensioners. These include
£900 to be paid to those on means-tested benefits, £300 to pensioner households
and £150 to people on disability benefits. The National Living wage will be
increased from £9.50 an hour for over-23s to £10.42 from April 2023.
Pensions and
means-tested benefits, including Universal Credit, will also rise in line with
September’s inflation figure of 10.1% from April 2023. Rent increases in the
social sector will be capped at 7% from the same date.
Immediately
after the Autumn statement, the Office for Budget Responsibility (OBR) released
its November 2022 economic and fiscal outlook. Forecasts predict the economy
will shrink by 1.4% next year.
Their summary
makes grim reading. They state that inflation is set to peak at a 40-year high
of 11% in the current quarter, and the peak would have been a further 2½
percentage points higher without the energy price guarantee (EPG), limiting a
typical household’s annualised energy bill to £2,500 this winter and £3,000
next winter.
Rising prices will
erode real wages and reduce living standards by 7% in total over the two
financial years to April 24 (wiping out the previous eight years’ growth),
despite over £100billion of additional government support. The squeeze on real
incomes, rise in interest rates, and fall in house prices all weigh on
consumption and investment, tipping the economy into a recession lasting just
over a year from the third quarter of 2022, with a peak-to-trough fall in GDP
of 2%. Unemployment rises by 505,000 from 3.5% to peak at 4.9% in the third
quarter of 2024.
Some businesses
are more likely to be affected by the downturn and get into cash flow problems,
while others will be more resilient. If you are a business owner, you might be
wondering which category your business falls into. No matter how inventive or
simple your business model is, you can still have problems with cash flow. Here
are our thoughts on managing the flow of cash in your business:
·
The
first stage of understanding and predicting how funds flow is to perform a
health check on your accounts. Look at your latest profit and loss statement
and check that your income is sufficient to cover your expenses. If your income
is falling behind your expenses and cash flow is slowing down, you might need
to act. Prepare a funds flow statement so you know where the money goes.
·
Next,
create a yearly budget and look at where cash could become tight and months
where you can save to cover the quieter times. Look at those quieter months and
think about flexible work scheduling, new products or services or other
activities to tide you over.
·
Finally,
make sure to collect your money quickly from those who owe you. Reward customer
loyalty by offering early bird discounts and set credit limits and payment
terms to ensure customers follow the rules. If you take on new customers, make
credit checks. Penalise late payers and request upfront deposits or payment.
Talk
to us about preparing a funds flow statement and annual budget so that you can
work on your business for maximum success!
Get ready for new VAT penalties
from 1 January 2023
For VAT periods
starting on or after 1 January 2023, HMRC is replacing the default surcharge
with separate penalties for late returns and late payment of VAT. At the same
time, HMRC is introducing a new approach to charging interest on late-paid VAT.
The new
points-based system for late submissions is designed to be more lenient for
the occasional slip-up, whilst still penalising those who repeatedly fail to
comply. It will operate in a similar way to the penalty points system for
motoring offences. Also, like the system for motoring penalties, the points
expire after a period of time.
If your
business submits its return late (which also applies if you submit a nil or
repayment return late), you could face penalty points and a £200 fine.
See the
attached for details of the new points-based system: Prepare for upcoming changes to VAT penalties and VAT
interest charges - GOV.UK (www.gov.uk)
Ten years of Automatic Enrolment
achieves over £114bn in pension savings
Automatic
Enrolment has helped millions put more into their pension pots than ever
before, according to new figures released to mark 10 years since the policy was
introduced.
In 2021,
employees across the UK saved £114.6 billion in their pensions. This is a real
terms increase of £32.9 billion compared to 2012 when Automatic Enrolment was
introduced.
The figures
reveal how the policy has transformed pension saving over the last ten years by
normalising workplace pension saving, establishing a culture of retirement
saving for a new generation, and helping foster a greater sense of security in
later life.
More than 10.7
million employees were paying into a workplace pension in 2021. The
proportion of women saving into a workplace pension, be it in the public or
private sector, jumped by about 50% since 2012. Furthermore, young people have
benefitted, with those aged 22 to 29 saving into a workplace pension more than
doubling in the same period.
See: Ten years of Automatic Enrolment achieves over £114bn
pension savings - GOV.UK (www.gov.uk)
The Green Alley Award 2023
The Green Alley
Award is Europe's first start-up competition focused on the circular economy.
Green Alley is looking for great green ideas, new services, products, and
technologies that can turn waste into a resource.
In return, they
offer strategic support, networking opportunities, expertise in entering the
circular economy across Europe, and a prize of €25,000.
Startups
applying for the Green Alley Award have to fit into one of the following
categories:
●
Recycling
●
Waste
prevention
●
Digital
solutions
The closing
date for applications is today, 21 November 2022.
See: Green
Alley Award | Apply in 2023 | Application process (green-alley-award.com)
Old-style stamps will soon be out
of date
Royal Mail are
adding barcodes to their regular stamps. After 31 January 2023, regular stamps
without a barcode will no longer be valid. You can either use up these stamps
before the deadline or swap them for the new barcoded ones.
The stamps that
are changing are the stamps that will be very familiar to you. They feature the
profile of Her Late Majesty The Queen on a plain-coloured background.
Your
non-barcoded stamps can be exchanged for the new barcoded version through the
Stamp Swap Out scheme.
See: Discover our new barcoded stamps | Royal Mail Group Ltd
Shetland enters new frontier as UK
space industry leader
Shetland is set
to be at the heart of Scotland’s - and the UK’s - space industry success story,
UK Government Minister for Scotland John Lamont said as he visited the Saxa
Vord spaceport on Unst last week.
Saxa Vord is on
track to launch its first satellites in 2023 – part of UK-wide efforts to gain
up to a £4bn share of the global space market by the end of the decade. The minister
visited the site’s first, newly completed concrete launch pad, one of three
orbital launch pads that will support up to 30 vertical launches a year from
the former RAF station site, employing up to 200 people in connection with each
launch.
See: Shetland enters new frontier as UK space industry leader
- GOV.UK (www.gov.uk)
First satellite launch from the UK
The first ever
orbital satellite launch from the UK is happening soon, marking a new era in
the UK’s space history. The first launch will take place from Spaceport
Cornwall in the southwest of England. It
will be what is known as a ‘horizontal launch’.
A specially
modified Boeing 747 from Virgin
Orbit called
Cosmic Girl, with a rocket attached under its wing, will take off from a
runway. In flight, the LauncherOne rocket will launch from the wing, taking
multiple small satellites into orbit. The plane will then return to the
Spaceport, able to launch more satellites in future.
Spaceport
Cornwall is situated at Newquay Airport, near the coast of Cornwall. The 747
will fly out over the sea and launch its rocket far away from populated areas.
The UK has a
growing space sector, which employs 47,000 people. UK space companies have a
track record in satellite manufacturing, spacecraft design and data
applications. In fact, Glasgow builds more satellites than anywhere outside of
the United States.
The UK is also
located relatively far north, which means it’s perfect for launching satellites
into polar and Sun-synchronous orbits, which go over the north and south poles.
These orbits are ideal for satellites that monitor the Earth and provide
telecommunications.
With a long
coastline and many islands, the UK offers a range of suitable locations for
launching rockets safely out over the sea – away from settlements and people.
See: First launch from the UK - Case study - GOV.UK
(www.gov.uk)
UK sanctions on Russia top £18
billion for the first time
Data released
last week reveals the full effect of UK sanctions on Russia – with £18.39
billion of Russian assets frozen and reported to the Office of Financial
Sanctions Implementation (OFSI).
The figure,
released for the first time in OFSI’s Annual Review, demonstrates the key role
the UK has played in standing up to Russia following their illegal invasion of
Ukraine. It is nearly £6 billion pounds more than reported across all other UK
sanctions regimes.
In conjunction
with its allies, the UK has imposed the most severe sanctions Russia has ever
faced, designating more than 1,200 individuals and 120 entities, and freezing
the assets of 19 Russian banks with global assets of £940 billion since they
began their illegal invasion.
See: UK sanctions on Russia top £18 billion for the first time
- GOV.UK (www.gov.uk)
UK signs science co-operation
agreement with Switzerland
The UK and
Switzerland have signed a Memorandum of Understanding, deepening the
relationship between the two countries' research and innovation communities.
The agreement
was signed by UK Minister of State for Science, Research and Innovation, George
Freeman MP, alongside Federal Councillor Parmelin, Head of Switzerland’s
Federal Department of Economic Affairs, Education and Research, at a ceremony
in London.
Switzerland -
placed top of the global rankings for innovation for the past 10 consecutive
years, as well as being home to 2 of Europe’s top 10 universities, a number of
world-class research laboratories and companies such as Roche and Novartis, and
commercial space and satellite technology companies - is a natural partner for
the UK.
Together, the 2
nations have 10 of Europe’s top 20 research universities, and this agreement
will deepen an ambitious bilateral relationship in areas of mutual interest
across 3 key pillars: deep science, industrial commercialisation and
international standards and regulation.
The UK, with 7
universities in Europe’s top 10, and a larger share of its own research among
the world’s most highly cited than any other G7 country, brings its own unique
research and innovation strengths to the table. The memorandum outlines the
principles of the relationship, and specific forms of cooperation, including:
●
Coordinated
or joint initiatives, programmes or projects.
●
Meetings,
workshops, conferences or symposia.
●
Exchange
of information and documentation.
●
Mobility,
visits and delegations.
●
Strategy
and coordination meetings.
●
Plans
for ministers to convene a regular annual Anglo-Swiss Research Collaboration
Council to oversee activities.
See: UK signs major science co-operation agreement with
Switzerland - GOV.UK (www.gov.uk)
New British standard on modern
slavery
The British
Standards Institution (BSI) have published a national standard, giving
organisations guidance on how to manage modern slavery risks in their
operations, supply chains and wider operating environment.
BS 25700
provides organisations with guidance for addressing the risk of modern slavery,
including prevention, identification, response, remediation, mitigation, and
reporting.
The benefits to
businesses include:
●
Effective
management of the risk of modern slavery in a way that supports human rights
due diligence.
●
Positive
business reputation.
●
Increased
sales and customer loyalty, as consumers seek businesses with higher ethical
standards.
●
Greater
ability to attract talent and retain staff.
●
Improved
investor confidence.
●
More
responsive and stable supply chains.
See: BS 25700:2022 Organizational responses to modern slavery
– Guidance | BSI (bsigroup.com)
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