by Acuaccounts | Nov 19, 2025 | accounting, self assessment, selfemployed, tax
PLEASE NOTE: This article was updated in March 2026 to reflect the latest developments in Making Tax Digital for Income Tax.
From April 2026, a significant change to the UK tax system comes into effect. Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will become mandatory for individuals with £50,000 or more in sole trade or property income. One year later, the threshold will reduce to £30,000, with further expansion expected in subsequent years.
This is not a new tax. It is a digital reporting requirement designed to modernise how income tax is recorded and submitted; reducing errors, simplifying record-keeping, and providing greater visibility over your financial position throughout the year.
This guide explains what is changing, what remains the same, and what you need to do now to ensure a smooth transition.
What MTD for Income Tax Means in Practice
Today, most sole traders maintain their records in a way that suits them, whether through paper records, spreadsheets, or basic bookkeeping tools, before submitting a single annual Self Assessment return each January.
Under Making Tax Digital for Income Tax, this approach changes. From April 2026, individuals above the threshold must keep accounting records digitally and submit quarterly updates to HMRC using compatible software. These updates are summary figures of income and expenses, not full tax returns.
At the end of the tax year, a final digital submission is required to confirm the overall position, replacing the traditional Self Assessment return.
In practice, this means moving from a once-a-year reporting process to a more regular reporting cycle throughout the year.
Importantly, payment deadlines do not change. Tax will still be due on 31 January and, where relevant, 31 July. MTD changes how information is reported, not when tax is paid.
For up-to-date guidance, HMRC provides detailed resources on Making Tax Digital for Income Tax.
Who Must Join, and When
MTD for Income Tax will be introduced in phases, based on your total qualifying income from self-employment and property.
From April 2026
- Sole traders with income over £50,000
- Landlords with income over £50,000
From April 2027
From April 2028 (planned)
Those earning below £20,000 are not currently required to join, although this may change as the system expands.
Businesses below the threshold can choose to adopt MTD voluntarily, which may offer improved financial visibility and more accurate tax forecasting.
What Income Counts Toward the £50,000 Threshold?
One of the most common areas of confusion is how HMRC calculates whether you fall within Making Tax Digital for Income Tax.
The threshold is based on your total gross income from:
- self-employment (sole trader income)
- property income (UK and overseas rental income)
Importantly, this is turnover, not profit.
This means:
- expenses are not deducted when assessing the threshold
- the figure is based on total income before costs
Examples
- A sole trader earning £52,000 in revenue (with £20,000 expenses) must join MTD
- A landlord earning £30,000 rental income and £25,000 from self-employment (total £55,000) must join MTD
- A sole trader earning £28,000 does not need to join in April 2026, but may be required from April 2027
What Does Not Count
The threshold does not include:
- employment income (PAYE salary)
- dividends from a limited company
- savings or investment income
Why This Matters
Many taxpayers assume they fall below the threshold because their profit is lower, but HMRC assesses eligibility based on gross income. This means some businesses may be required to comply earlier than expected.
If you are unsure whether you meet the threshold, AcuAccounts can review your income and confirm when you will need to comply.
Does This Apply to Limited Companies or Company Directors?
Making Tax Digital for Income Tax applies to individuals, not limited companies.
If you operate through a limited company, these rules do not apply to your company’s income or Corporation Tax obligations.
However, whether MTD applies to you personally depends on your sources of income.
MTD for Income Tax applies to personal income, which means:
- Salary paid through PAYE → not included
- Dividends from a limited company → not included
- Corporation Tax → not affected
You may still need to comply if you have:
- self-employment income outside your company
- rental income from property (UK or overseas)
If your combined income from these sources exceeds the threshold, you will need to follow MTD for Income Tax rules — even if you also run a limited company.
Limited companies are already subject to Making Tax Digital for VAT, where applicable. HMRC is also developing Making Tax Digital for Corporation Tax, although no mandatory start date has been confirmed.
Common Misunderstandings About MTD, and the Reality
Since HMRC announced the phased rollout, a number of misconceptions have caused confusion. Below are some of the most common — and what they mean in practice.
“I will have to pay tax four times a year”
You will not. Quarterly updates are for reporting purposes only. Payment deadlines remain unchanged, with tax still due on 31 January and, where applicable, 31 July.
“I can wait until HMRC signs me up”
HMRC will contact taxpayers who fall within the threshold, but it remains your responsibility to prepare and ensure you are compliant. Leaving this until the deadline increases the risk of errors, penalties, and last-minute disruption.
“This will create more work”
For most businesses, the opposite is true. Maintaining digital records throughout the year spreads the workload more evenly, reducing the pressure and uncertainty that typically builds ahead of the January deadline.
“It will be expensive to comply”
While there may be some initial adjustment, many businesses find that digital record-keeping simplifies their processes and reduces time spent on administration. The focus should be on establishing an efficient and sustainable bookkeeping routine.
“It will complicate VAT submissions”
MTD for Income Tax is designed to align with existing digital VAT requirements, not duplicate them. Businesses already using digital VAT systems will find many of the processes familiar.
Why Acting Now Makes a Difference
With April 2026 approaching, businesses that fall within the £50,000 threshold should now be finalising their approach to Making Tax Digital for Income Tax.
The focus at this stage is not preparation, but ensuring your processes are in place and working.
- Review your current record-keeping
Your records should already be maintained digitally in a consistent and structured way. If you are still relying on spreadsheets or manual processes, this should be addressed immediately.
- Ensure your records are up to date
Quarterly reporting requires accurate, up-to-date records. Any backlog should be cleared now to avoid issues when submissions begin.
- Establish a regular bookkeeping routine
MTD requires ongoing record-keeping throughout the year. A monthly or weekly routine will ensure your records remain accurate and ready for submission.
- Confirm how quarterly submissions will be handled
Decide whether you will manage submissions yourself or work with your accountant. This should be agreed in advance to avoid confusion once reporting begins.
- Review your systems and processes
If you use multiple tools or systems, ensure they work together efficiently and support digital record-keeping without manual re-entry.
- Speak to your accountant if you are unsure
If you are not confident that your current setup meets MTD requirements, now is the time to review it. Addressing this before April avoids unnecessary disruption and potential compliance issues.
At this stage, the goal is simple: ensure your records, processes, and responsibilities are clear so that the transition into MTD is smooth and controlled.
How AcuAccounts Can Support Your Transition
AcuAccounts supports sole traders and landlords in moving to Making Tax Digital in a structured and practical way — ensuring compliance without unnecessary complexity.
We work with you to:
- review your current record-keeping and identify what needs to change
- establish a clear and sustainable bookkeeping process
- ensure your records are ready for quarterly reporting
- clarify your obligations and reporting timeline under MTD
To suit different working styles and levels of involvement, we offer three levels of support:
Tier 1 – Compliance Review
Client-led with year-end support
- You maintain your bookkeeping
- You prepare and submit quarterly updates
- We review your records at year end
- We prepare and submit the final end-of-year declaration
This option is suitable for clients who prefer to remain hands-on while ensuring year-end compliance.
Tier 2 – Quarterly Accountant Review
Shared responsibility
- You maintain your bookkeeping
- We review your records quarterly
- We prepare and submit the quarterly updates
- We prepare and submit the final end-of-year declaration
This is typically the most popular option, providing a balance between cost and professional oversight.
Tier 3 – Fully Managed
Complete accountant-led service
- We maintain your bookkeeping
- We prepare and submit all quarterly updates
- We prepare and submit the final end-of-year declaration
This option is ideal for clients who want their compliance fully managed you are confident managing your records or prefer full support, we can structure the process in a way that works for your business
📩 info@acuaccounts.com
📞 0203 907 9027
Prepare early, stay digital, and ensure you are ready for April 2026 without the last-minute pressure.
Also starting on November 18th Identity verification for directors, PSCs and LLPs is now required.
Learn what you must do to stay compliant in our other article here.
by Acuaccounts | Apr 11, 2025 | accounting, budget, latest news, selfemployed, spring statement, tax
What You Need to Know About Chancellor Reeves’ Latest Announcements
Last updated: April 11, 2025
The Spring Statement delivered by Chancellor Rachel Reeves on March 26, 2025, confirms several significant tax and financial changes introduced in the Autumn Budget that will directly impact small businesses and self-employed individuals. As your financial advisors, we have analysed these changes previously announced in the Autumn Budget to help you understand what they mean for your business and finances.
Key Tax and National Insurance Changes at a Glance – as mostly announced in the Autumn Budget
1. Employer’s National Insurance Contributions (NICs) 📈
What’s changing:
- The employer NIC rate will increase from 13.8% to 15% from April 6, 2025
- The earnings threshold will decrease from £9,100 to £5,000
What this means for you: Employers will pay higher NICs on a larger portion of employee earnings. For a single employee earning £30,000 annually, this represents an additional cost of £865.80 per year. For businesses with multiple employees, this increase will significantly impact your bottom line.
Calculation breakdown:
- Current system (until April 5, 2025):
- Taxable earnings: £30,000 – £9,100 = £20,900
- NICs at 13.8% = £2,884.20
- New system (from April 6, 2025):
- Taxable earnings: £30,000 – £5,000 = £25,000
- NICs at 15% = £3,750
- Increase: £865.80 per employee
Our advice: Review your staffing budget immediately and forecast the impact this will have on your business over the next financial year. Consider whether you can offset these costs elsewhere or if you need to adjust your pricing strategy.
2. Employment Allowance Increase 🎯
What’s changing:
- Employment Allowance will increase from £5,000 to £10,500
- The previous upper eligibility threshold of £100,000 will be removed
What this means for you: This is positive news for eligible employers, who can now reduce their annual NIC liability by up to £10,500. With the removal of the £100,000 threshold, more businesses will qualify for this relief.
Important note: Single-director companies without employees remain ineligible.
Example impact: If your total employer NICs amount to £12,000:
- With the new £10,500 Employment Allowance: You’ll only pay £1,500
Our advice: Ensure you’re claiming Employment Allowance if eligible. This could significantly offset the increased NIC costs outlined above.
3. Business Asset Disposal Relief (BADR) Changes 📊
What’s changing:
- BADR Capital Gains Tax rate will increase from 10% to 14% from April 6, 2025
- A further increase to 18% is planned for April 6, 2026
What this means for you: Business owners looking to sell or dispose of qualifying assets will face significantly higher tax liabilities. On a qualifying gain of £100,000, the tax payable will increase from £10,000 to £14,000 (after April 2025) and to £18,000 (after April 2026).
Our advice: If you’re planning to sell your business or dispose of significant assets in the near future, consider accelerating these plans to complete before April 2025 to benefit from the current lower rate.
4. Capital Gains Tax (CGT) Rate Increases 💰
What’s changing: For disposals made on or after October 30, 2024, CGT rates for most assets (excluding residential property) will increase:
- Basic rate taxpayers: From 10% to 18%
- Higher rate taxpayers: From 20% to 24%
What this means for you: This represents a substantial increase in capital gains tax liability. On a gain of £50,000, a basic rate taxpayer would now pay £9,000 instead of £5,000 – an increase of £4,000.
Our advice: Review your investment portfolio and potential disposals with urgency. If you’re considering selling assets, you may want to complete transactions sooner rather than later.
5. Making Tax Digital (MTD) for Income Tax 💻
What’s changing:
- From April 2026: Mandatory for sole traders and landlords with qualifying income over £50,000
What this means for you: If you fall into this category, you’ll need to prepare for quarterly digital tax reporting. This will require MTD-compatible software and potentially new bookkeeping processes.
Our advice: Don’t wait until 2026. Start reviewing your current accounting systems now and consider adopting MTD-compliant software early to avoid disruption when the requirements take effect.
What Business Organisations Are Saying
The business community has expressed mixed reactions to the Spring Statement:
- Federation of Small Businesses (FSB) has expressed concern over the economic outlook, emphasising the need for immediate action to stimulate growth.
- Institute of Directors (IoD) viewed the Chancellor’s approach as a balanced response to fiscal challenges, noting that while the strategy relies more on increasing tax receipts than spending cuts, there are positive aspects such as planning reforms.
Your Spring Statement 2025 Action Plan
Immediate Actions (April-May 2025)
- Recalculate your employer NIC costs using the new rates and thresholds
- Check your Employment Allowance eligibility and ensure you’re claiming the full amount
- Review any planned business or asset disposals in light of the CGT and BADR changes
- Schedule a tax planning session with us to explore specific strategies for your business
Medium-Term Planning (June-December 2025)
- Reforecast your 2025/26 business budget to account for increased employment costs
- Evaluate your business structure to ensure it remains tax-efficient given the changes
- Begin preparations for Making Tax Digital if you’ll be affected by the 2026 implementation
- Consider reviewing your pricing strategy to maintain margins in light of increased costs
Payroll & Employer NICs Checklist
- Recalculate Employer NICs with the new 15% rate and £5,000 threshold
- Adjust staff budgets to reflect increased NIC costs
- Check Employment Allowance eligibility
- Apply for the increased £10,500 Employment Allowance if eligible
Capital Gains & Business Disposal Checklist
- Review business disposal plans (consider completing before April 2025)
- Check CGT exposure on potential asset sales
- Explore tax-efficient investment alternatives where appropriate
Digital Tax Compliance Checklist
- Prepare for Making Tax Digital for Income Tax (MTD ITSA)
- Check if your current software is MTD compatible
- Consider training needs for you or your team on new systems
How We Can Help
At AcuAccounts, we specialise in helping self-employed individuals and small businesses navigate tax changes efficiently. We can:
- Provide a personalised assessment of how these changes will impact your specific business
- Create tax-efficient strategies tailored to your circumstances
- Help you implement and transition to MTD-compliant systems
- Ensure you’re claiming all available allowances and reliefs
Don’t navigate these complex changes alone. Book a consultation with our specialists today to ensure your business is prepared for the changes ahead. Get in touch at info@acuaccounts.com and book a consultation with our team. You can also call us directly on 0203 907 9027.
Visit our contact page at AcuAccounts Contact for more information.
This article provides general information based on the Spring Statement 2025 and should not be considered as specific tax advice. Tax regulations can change, and individual circumstances vary. Always consult with your qualified accountant before making financial decisions.
by Acuaccounts | Nov 5, 2024 | accounting, budget, latest news, selfemployed
In a historic first, Labour Chancellor Rachel Reeves delivered the first autumn budget by a woman and the first Labour budget in 14 years this October. The announcement brings significant changes for small businesses and the self-employed, with a mix of support measures and increased costs coming into effect from April 2025. You can find the full policy paper here.
Key Takeaways for Small Businesses
Employment Allowance Doubles
In a major win for small businesses, the Employment Allowance will double from £5,000 to £10,500 annually, starting in April 2025. This increase will help shield smaller employers from rising employment costs, allowing a small firm to employ four people on the National Living Wage without paying any employer National Insurance Contributions (NICs). Approximately 865,000 small employers will benefit from this change.
Example: Small Business Employment Cost Savings
Consider a small retail shop with four full-time employees on the National Living Wage (£12.21/hour from April 2025):
- Annual salary per employee: £25,397 (based on a 40-hour week)
- Employer NICs per employee without allowance: ~£2,625
- Total employer NICs for four employees: £10,500
- With the new Employment Allowance: £0 payable in NICs
- Total annual savings: £10,500
National Insurance Changes
However, the budget also brings challenges. Employer NICs will rise by 1.2 percentage points to 15% from April 2025. Additionally, the earnings threshold at which employer NICs apply will be lowered from £9,100 to £5,000. This combination could add over £700 to National Insurance costs for each full-time employee on the National Living Wage, and over £800 for those on the average salary (£29,800).
Example: Impact on Medium-Sized Business
For a business with 10 employees on an average salary of £29,800:
- Current NICs per employee (13.8% above £9,100): ~£2,857
- New NICs per employee (15% above £5,000): ~£3,720
- Increase per employee: £863
- Total increased cost for 10 employees: £8,630
- After £10,500 Employment Allowance: Additional net cost of £3,700
National Living Wage Increase
Small businesses will need to prepare for a 6.7% increase in the National Living Wage, rising from £11.44 to £12.21 per hour from April 2025. For 18-20-year-olds, the rate will increase significantly from £8.60 to £10.00 per hour.
Example: Cost Impact for Different Employee Types
For a small business with mixed staffing:
- Full-time experienced employee (40 hours/week):
- Current annual cost at £11.44/hour: £23,795
- New annual cost at £12.21/hour: £25,397
- Annual increase: £1,602
Part-time young staff member (20 hours/week, aged 19):
-
- Current annual cost at £8.60/hour: £8,944
- New annual cost at £10.00/hour: £10,400
- Annual increase: £1,456
Impact on Self-Employed and Company Directors
Single Director Companies
Single directors of limited companies who do not have any other employees face a particular challenge—they will not benefit from the increased Employment Allowance. Those paying themselves through payroll above the new £5,000 threshold will face increased employer NIC costs.
Example: Impact on Company Director For a director taking a salary of £25,000:
- Current employer NICs (13.8% above £9,100): £2,192
- New employer NICs (15% above £5,000): £3,000
- Annual increase in costs: £808
Business Asset Disposal Relief
For entrepreneurs planning to sell their businesses, the Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) will be retained but with gradual rate increases. The tax rate will rise from 10% to 14% in April 2025 and then to 18% in April 2026, though the £1 million lifetime limit remains unchanged.
Autumn Budget 2024: Key Changes for the Self-Employed
While the rise in Corporation Tax to 25% and freeze on personal tax allowance until 2028 will affect some self-employed professionals, significant updates around National Insurance, Capital Gains Tax, and Making Tax Digital (MTD) will impact those earning from diverse sources or planning to grow their businesses. Self-employed individuals may also see a Capital Gains Tax hike from 10% to 18% at the lower rate and the expansion of Making Tax Digital (MTD) for ITSA will mean that by 2027, freelancers with an income of over £20,000 may be required to maintain digital tax records. While fuel duty and certain pension reliefs are unaffected, these changes reflect the government’s approach to tax equity and compliance, affecting financial planning for many self-employed individuals.
Additional Support Measures
Business Rates Relief Small businesses in England will benefit from a freeze on the small business multiplier for 2025/26, cancelling the scheduled inflation-linked increase. Small firms in retail, hospitality, and leisure sectors will receive an additional year of business rates relief.
Infrastructure Investment The Chancellor has pledged over £5 billion in government investment in housebuilding, with specific support promised for small housebuilders. An additional £500 million has been allocated for pothole repairs in England.
The Federation of Small Business (FSB) on the budget
The FSB welcomed the Chancellor’s decision to increase the employment allowance for small businesses from £5,000 to £10,500, calling it a “very welcome move” that will “shield the smallest employers from the jobs tax.” FSB Policy Chair Tina McKenzie said this represents “a pro-jobs prioritisation in a tough Budget.” However, the FSB warned that larger small and medium-sized businesses “will struggle with the rises on employer national insurance on top of the high costs from the Government’s employment law plans.” It cautioned about the potential impact on jobs, wages and prices.
Looking Ahead
The autumn budget signals a clear shift in business policy, with support targeting small businesses rather than large corporations. However, the combined impact of increased employment costs, higher wages, and various tax changes will require careful planning and potentially tough decisions for many small business owners.
Small businesses should:
- Review staffing costs in light of the new NICs and minimum wage requirements.
- Consider whether they can benefit from the increased Employment Allowance.
- Plan for the implementation of these changes before April 2025.
- Assess their business rates position and available reliefs.
- Consider the timing of any planned business sale in light of the changing tax landscape.
While the increased Employment Allowance offers welcome relief for many small businesses, the overall package of measures presents a mixed picture, with rising costs that must be carefully managed over the coming years.
AcuAccounts is committed to helping clients navigate the complexities of tax legislation, pensions, accounting, and more.
Questions about how the autumn budget could impact your small business or self-employment? Get in touch at info@acuaccounts.com and book a consultation with our team. You can also call us directly on 0203 907 9027.
Visit our contact page at AcuAccounts Contact for more information.
by Acuaccounts | Dec 21, 2022 | accounting, latest news, r&d credits, self assessment, selfemployed, tax return
The 2022 Autumn Statement by chancellor Jeremy Hunt reversed several policies introduced with the previous mini-budget by his predecessor Kwasi Kwarteng, as well as changing several thresholds that apply to businesses and the self-employed.
The autumn budget freezes the VAT threshold for businesses at £85,000, which with the current price rises will likely make VAT registration mandatory for more small businesses. Similarly, the personal tax allowance freeze at £12,570 was extended from 2026 to 2028, which with rising wages will move more people into higher tax brackets.
Reduced thresholds and allowances in 2023, 2024 and beyond
Two annual tax-free allowances that frequently apply to company owners and directors will be reduced in 2023-24: the dividend allowance and capital gains tax allowance.
The dividend allowance applies to directors paying themselves partially or entirely in dividends. The tax-free amount will be cut from £2,000 to £1,000 in 2023-24, then to £500 in 2024-25. The capital gains tax allowance, that applies for example, for sales of business assets will be cut from £12,300 to £6,000 in 2023-24, then to £3,000 in 2024-25.
Changes to business rates and energy bills for businesses
From 1 April 2023, business rates will be updated to reflect changes in property values since the previous evaluation in 2017. To support changes in business rates, the UK government has disclosed a targeted support package worth £13.6 billion over five years.
Furthermore, the Energy Bill Relief Scheme for businesses will remain in place until 31 March 2023. The government will introduce more targeted support on energy bills for the most vulnerable businesses from April 2023.
Increase in national living wage and reduction in research and development tax relief
The government has announced that the national living wage will increase from 1 April 2023, from the current rate of £9.50 per hour to £10.42 per hour for employees aged 23 and over. The UK minimum hourly wage for employees aged 21 to 22 will increase from £9.18 to £10.18, and the rate for employees aged 18 to 20 will increase from £6.83 to £7.49.
Research and development tax relief supports companies carrying out R&D projects related to their trade or business sector. However, in an effort to reduce fraud, the rate for small businesses will be reduced to 86 per cent, and the credit rate will be reduced to 10 per cent. The rate of the separate research and development expenditure credit will increase from 13 per cent to 20 per cent.
How to file your self-assessment correctly in 2023
With the self-assessment deadline less than a month and a half away, we review who needs to file for self-assessment and how it works.
You need to file for self-assessment in the UK in 2023 if any of the following apply:
- you have earned more than £1,000 from self-employment income
- you have earned from than £2,500 from renting property
- you have earned more than £2,500 in untaxed income like tips or commissions
- you have earned more than £10,000 from savings or investments
- you are a company director
- your taxable income was over £100,000
- you have earned income abroad that you need to pay tax on, or you live abroad but have an income in the UK
- you owe capital gains tax on profits from selling things like shares or a second home
- additional conditions as outlined on the government website
You can find the full list of conditions for self-assessment and check if you need to file a self-assessment tax return at https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return
To file a self-assessment tax return, you will need to gather the following information:
- your National Insurance Number and your ten-digit Unique Taxpayer Reference (UTR)
- detailed information about any untaxed income from the tax year, including your income from self-employment, dividends and interest on shares
- records of any expenses relating to your self-employment
- any contributions to charity or pensions eligible for tax relief
- your P60 or any other records showing any income you received and have already paid tax on
For any questions on how to prepare the information about your untaxed income, what can and cannot be expensed, or to book a full self-assessment service feel free to get in touch with our team at info@acuaccounts.com or on 0203 907 9027.
Keep track of your monthly and yearly tax and payment deadlines in 2023
In the UK, there are several important tax deadlines for businesses throughout the year.
Here are some of the key deadlines for the calendar year 2023:
- Self-Assessment Tax Return deadline: 31 January 2023 for the tax year that started on 6 April 2021 and ended on the 5 April 2022
- VAT Return deadline: Every 7th of the month following the end of the VAT period
- Corporation Tax Return deadline: 9 months and 1 day after the end of the company accounting period
- Payroll deadlines: Real Time Information (RTI) submissions must be made to HMRC on or before the date that payment is made to the employee
Review the monthly and quarterly tax deadlines in 2023:
Monthly Tax Deadlines
- On the 1st of the month: Corporation Tax payment for the tax year ending nine months prior (for example on January 1 2023 the Corporation Tax payment for tax year ending 31 March 2022 will be due)
- Every 7th of the month: VAT return submission and payment (online) if your business payment cycle is month-end
- Every 21st of the month: PAYE, NIC and CIS payment (electronic) for month-end 5 January 2022 and quarter-end 5 January 2022
Quarterly Tax Deadlines
- Due on the 21st of every three months: PAYE, NIC and CIS payment (electronic) if your company pays quarterly
Do you have questions about the recent updates and changes from the Autumn Statement? Any concerns about how to manage your taxes and business in 2023 or do you need help to submit your self assessment tax return?
Have a look at our services and feel free to get in touch with us. You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Mar 29, 2022 | accounting, selfemployed, tax, tax return
Chancellor Rishi Sunak unveiled his Spring Statement on March 23rd, amidst the fastest price increases seen in the past 30 years.
Inflation is expected to peak at 8.7% in the final quarter of 2022, with significant effects on individuals and small businesses. Energy costs alone are estimated to rise on average by 54% from April 2022.
The Spring Statement included announcements on cuts in fuel duty, it raised the threshold at which people start paying National Insurance from July and included a pledge to cut the basic rate of income tax before the next general election.
Summary Points of the Spring Statement 2022
The key points announced in the Chancellor’s spring statement are as follows:
- Fuel duty was reduced by 5p per litre for one year
- The increase in National Insurance Contributions (NIC), called the Health and Social Care Levy, will go ahead as planned from April 2022
- The threshold to start contributing NIC will rise from July for Class 1 employees NIC, Class 2 self-employed NIC and Employers NIC (for smaller employers)
- The basic rate of income tax will be cut by 1% from 20% to 19% from April 2024
- The planned reforms for R&D relief to be implemented from April 2023 will go ahead with some exceptions to the block in deductions for oversees R&D work including clinical trials, regulatory reasons and geographical factors. Furthermore, companies will be able to claim R&D relief on projects supported by pure maths. Further reforms to R&D relief are being considered and expected to be published in the summer
- VAT on energy-saving materials like insulation will be reduced from 5% to 0% from April 2022 to April 2027
- The Apprenticeship Levy will be reviewed to determine whether the scheme is “doing enough”
- A review of the Enterprise Management Incentives has concluded that they do not require reform
- Several tax reliefs will be simplified or removed in the lead-up to 2024
How to prepare for the changes in National Insurance Contributions and Thresholds
Businesses and employers must ensure that their payroll systems are ready to handle the increase in NICs in April 2022 and the new Health and Social Care Levy in April 2023.
In addition, changes to the threshold which will increase when NIC has to be paid will come into effect on July 6th 2022. According to HMRC, the increase in the threshold should save the typical employee over £330 per year.
Changes to National Insurance Contributions for employees and employer
From April 6th 2022, the Class 1 rate of National Insurance Contributions will be increased from 12% to 13.5% on earnings between £9,880 and £50,270 per year. Contributions on earnings of more than £50,270 will increase from 2% to 3.25%.
From July 6th 2022, the threshold to pay the new increased rate of 13.5% for Class 1 NIC will increase from £9,880 as it stands currently to £12,570. No changes will apply to incomes above £50,270.
The changes in NIC will impact take-home pay for employees across the board. For example, an employee making £25,000 per year today has a net income of £20,662. From April, their net income will be reduced to £20,511 and increased again from July to £20,867. This increases take-home pay for an employee earning £25,000 between today and July by £205.
On the other hand, an employee earning £60,000 today takes home £43,489. Their take-home pay will decrease to £42,900 in April and increase again to £43,257 in July. The employee will take home £232 less from July.
The contributions to National Insurance paid by employers will rise from 13.8% to 15.05% in April 2022.
Changes to National Insurance Contributions for the self-employed
The self-employed pay Class 2 and Class 4 NICs depending on their profits.
Class 2 weekly contributions to National Insurance will increase to £3.15 a week in 2022-23. Class 4 rates on the other hand will increase by 1.25%.
However, the lower earnings limit thresholds will be increased to £12,570 reducing the tax burden on profits for most self-employed people in the UK.
Currently the self-employed with profits up to £9,568 pay £3.05 per week (Class 2), and Class 4 contributions of 9% kick in for profits between £9,568 and £50,270 in addition to Class 2. From July 6th 2022, the self-employed making profits under £12,570 will not have to contribute to National Insurance.
Class 3 contributions, usually paid on a voluntary basis to avoid contribution gaps, will increase from £15.40 per week to £15.85 per week from July 2022.
Changes to National Insurance Credits for state pension etc.
Paying National Insurance builds an employee’s entitlement to certain benefits, such as the state pension. The lower earnings limit to receive a National Insurance credit will remain at £6,396 for employees.
For the self-employed, the current weekly flat-rate contribution will be scrapped for profits between £6,515 and £9,568. Anyone exceeding the new increased small-profits threshold of £6,725 will continue to receive National Insurance credits.
The 2022 Spring Statement can be accessed in full at https://www.gov.uk/government/publications/spring-statement-2022-documents
Do you have questions about the Spring Statement? Any concerns about payroll and upcoming changes in National Insurance Contributions? Have a look at our services and feel free to get in touch with us.
You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Dec 23, 2021 | accounting, covid19, latest news, lockdown, self assessment, selfemployed
Chancellor Rishi Sunak has announced today, December 21st, new funding of £1bn in response to the rise in Covid cases. The funding supports primarily the hospitality and leisure sectors, as a surge in cases has been affecting trade.
The £1bn funding package is split as follows:
- Grants of £6,000 per business premises in hospitality and leisure (for around 200,000 businesses that will be eligible)
- More than £100m discretionary funding for local authorities to support other businesses
- £30m overall added to the Culture Recovery Fund to support culture
- The Statutory Sick Pay Rebate Scheme to cover the cost of Statutory Sick Pay for Covid-related absences for small and medium-sized employers across the UK
As of December 21st, the chancellor has not yet reintroduced the furlough scheme, which protected workers’ incomes as well as covered labour costs between April 2020 and September 2021. Calls for additional measures in addition to the above have come from all sides and could be introduced over the next few days or weeks.
A look at what lies ahead in 2022
As of April 1st 2022, the national wage will increase by 6.6% to £9.50 an hour:
The national wage will rise as follows for workers aged 22 and under:
- Apprentices: increase from £4.30 to £4.81
- 16-17 years old: increase from £4.62 to £4.81
- 18-20 years old: increase from £6.56 to £6.83
- 21-22 years old: increase from £8.36 to £9.18
As of April 2022 around 400,000 retail, hospitality and leisure properties will be eligible for the new, temporary, £1.7bn of business rates relief. The business rates multiplier will be frozen from 2022/23 which will lower business rates bills by 3%.
From April 6th 2022, National Insurance contributions will increase by 1.25% for both employees and employers. Employers pay NICs on earnings above £8,840 per year. The employer National Insurance rate is currently 13.8%. From April 2022, the rate of NICs employers pay will also increase by 1.25%. HMRC has requested a message be included on payslips, wherever possible, for the duration of the 2022/2023 tax year that reads “1.25% uplift in NICs funds NHS, health and social care”.
Tax and Accounting Deadlines between January and June 2022
January 2022
- January 1st 2022: Corporation Tax payment for 31st March 2021 year ends
- January 7th 2022: VAT return submission and payment (online): month-end or quarter 30th November 2021
- January 21st 2022: PAYE, NIC and CIS payment (electronic) for month-end 5th January 2022 and quarter-end 5th January 2022
- January 31st 2022: Online Self Assessment Tax Return 2020-21 and amendments to 2019-20 tax returns
- January 31st 2022: IR35: amend or correct 2020-21 deemed payment on employer return and pay any balance of PAYE/NIC
- January 31st 2022: National Insurance: notify of liability to Class 2 NI where self-employment commenced in 2020-21
February 2022
- February 1st 2022: Corporation Tax payment for 30th April 2021 year ends
- February 7th 2022: VAT return submission and payment (online): month-end or quarter 31st December 2021
- February 14th: National Insurance Form CA72A (deferral) for the employed
- February 19th: CIS return and payments made to subcontractors in the month to 5th February 2022
- February 22nd 2022: PAYE, NIC and CIS payment (electronic) for month-end 5th February 2022 and quarter-end 5th February 2022
- February 28th 2022: Corporation Tax returns for 28th February 2021 year ends
March 2022
- March 1st 2022: Corporation Tax payment for 31st May 2021 year ends
- March 7th 2022: VAT return submission and payment online for month-end or quarter 31 January 2022
- March 19th: CIS return and payments made to subcontractors in the month to 5th March 2022
- March 22nd 2022: PAYE, NIC and CIS payment (electronic) for month-end 5th of March 2022
- March 31st 2022: Corporation Tax returns for 31st March 2021 year ends
April 2022
- April 1st 2022: Corporation Tax payment for 30th June 2021 year ends
- April 5th: The tax year 2021-22 ends
- April 5th: P46car electronic for the quarter to 5 April 2022
- April 5th: National Insurance deadline to pay voluntary Class 2 or Class 3 NI for 2015-16
- April 6th: 2022-23 tax year begins
- April 7th 2022: VAT return submission and payment online for month-end or quarter 28 February 2022
- April 19th: CIS return and payments made to subcontractors in the month to 5th of April 2022
- April 22nd 2022: PAYE, NIC and CIS payment (electronic) for month-end 5th of April 2022
- April 30th 2022: Corporation Tax returns for 30th April 2021 year ends
May 2022
- May 1st 2022: Corporation Tax payment for 31st of July 2021 year ends
- May 1st 2022: VAT fuel scale charge where new rates apply from the next VAT period beginning on or after 1st May 2022 (NEW)
- May 7th 2022: VAT return submission and payment online for month-end or quarter 31st March 2022
- May 20th 2022: PAYE, NIC and CIS payment (electronic) for month-end 5th of May 2022
- May 31st 2022: VAT annual accounting to stagger VAT return and balancing payment
- May 31st 2022: P60 issue to employees
June 2022
- June 1st 2022: Corporation Tax payment for 31st of August 2021 year ends
- June 1st 2022: Advisory fuel rates for company car drivers: new rates published
- June 7th 2022: VAT return submission and payment online for month-end or quarter 30th April 2022
- June 20th 2022: PAYE, NIC and CIS payment (electronic) for month-end 5th of June 2022
- June 30th 2022: VAT partial exemption with annual adjustment due this quarter for 31st March stagger
- June 30th 2022: Corporation Tax returns for 30th June 2021 year ends
Do you have questions about the recent announcement from the Chancellor? Any concerns on how to manage your taxes and business in 2022?
Have a look at our services and feel free to get in touch with us.
You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
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