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 | Nov 6, 2020 | accounting, Loans, tax
As England goes back into a national lockdown this November the chancellor has announced a new series of measures increasing the support previously announced with the Winter Economic Plan which included the following highlights:
- Extension of the Coronavirus Job Retention Scheme further (the furlough scheme), until the end of March
- Job Retention Bonus of £1,000 per retained employee will not be paid in February but instead redeployed a retention incentive at the right time
- Increase the third self-employed grant, covering November to January, from 55% to 80% of trading profits.
Extension of the Coronavirus Jobs Retention Scheme (CJRS): Furlough again at 80%
- The government is extending the CJRS until the end of March for all parts of the UK. To be reviewed in January to decide whether economic circumstances are improving enough to ask employers to contribute more. The Job Support Scheme is postponed.
- Eligible employees will receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month.
- Employer flexibility: Businesses will have the flexibility to use the scheme for employees for any amount of time and shift pattern, including furloughing employees full-time.
- Employer contribution: There will be NO employer contribution to wages for hours not worked. Employers will only be asked to cover National Insurance and Employer pension contributions for hours not worked. For an average claim, this accounts for just 5% of total employment costs or £70 per employee per month.
- Payment: The extended CJRS will operate as the previous Scheme did, with businesses being able to claim either shortly before, during, or after running payroll. Claims can be made from 8 am Wednesday 11 November. Claims made for November must be submitted to HMRC by no later than 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month, to ensure prompt claims following the end of the month which is the subject of the claim.
- Employee eligibility: Neither the employer nor the employee needs to have previously claimed or have been claimed for under CJRS to make a claim under the extended CJRS (if other eligibility criteria are met). An employer can claim for employees who were employed and on their PAYE payroll on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
- Employees that are re-employed: Employees that were employed and on the payroll on 23 September 2020 (the day before the Job Support Scheme announcement) who were made redundant or stopped working afterwards can be re-employed and claimed for. The employer must have made an RTI submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.
More support announced for the self-employed at 80% of trading profits capped at £2,500/month
- The government has recently announced an extension of the Self-Employment Income Support Scheme to support self-employed individuals which will be returned the overall level of the grant to 80% of trading profits covering November to January for all parts of the UK. This provides equivalent support to the self-employed as we are providing to employees through the government contribution in the CJRS. It is calculated based on 80% of 3 months’ average trading profits, paid out in a single instalment and capped at £7,500.
- Timing: HMRC will pay this more generous grant sooner than planned and in time for Christmas – the window for claiming a grant will open on 30 November, two weeks earlier than previously announced.
- The Government has already announced that there will be a fourth SEISS grant covering February to April. The Government will set out further details, including the level, of the fourth grant in due course.
More financial support for local businesses in England and extension of loan schemes including BBL
- Businesses in England that are forced to close due to national or local restrictions will receive up to £3,000 per month. This will benefit over 600,000 business premises.
- 90% of small and medium-sized business premises in the closed Retail, Hospitality, and Leisure sectors should broadly have their monthly rent covered by these grants (based on VOA data on Rateable Values as the best proxy we have for rent).
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The application deadline for loan schemes – that is, the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, Future Fund, and Coronavirus Large Business Interruption Loan Scheme – has been extended to the end of January 2021. This will give businesses two extra months to make loan applications (relative to the current deadline of 30 November).
- The Bounce Back Loan Scheme rules will be adjusted to allow those businesses who have borrowed less than their maximum (i.e. the lower of £50,000 or less than 25% of their turnover) to top-up their existing loan. Businesses will be able to take-up this option from next week; they can make use of this option once. Some businesses might not have anticipated the disruption to their business from the pandemic would go on for this long; this will ensure that they are able to benefit from the loan scheme as intended.
To find out what the recent announcement means for your business get in touch via email or phone.
For more information about what has been outlined above the full updates are at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/932977/ECONOMIC_SUPPORT_FACTSHEET_5_November.pdf
#Employer #Employee #Salary #Wages #PAYE #business #update #coronavirus #covid19 #income #support #SEISS
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