Sunak springs surprises

The Chancellor presented two Budgets in 2021 in which he set out
a great many details of the tax rates and rules that will apply until
April 2026. The 2022 Spring Statement was expected to review the
economic situation and adjust forecasts, but was not supposed
to include anything significant about tax. Of course, things have
changed dramatically since October: there is a war in Ukraine,
energy prices are rising sharply and inflation has returned to levels
last seen in the early 1990s. An announcement had already been
made in February of measures to help people with fuel bills later
in the year, and commentators were speculating how much more
Mr Sunak might do now, with tax receipts running higher than
forecast and the effect of inflation set to increase those receipts
in the future. Most predicted he would do something, but many
believed he would be cautious and leave significant changes for
the next Budget.
In the event, his speech contained more on tax than almost
anyone could have expected. He started with a temporary cut in
fuel duty, expected to save the average motorist about £100 in
the next year. He went on to remove VAT from the installation of
energy-saving materials in houses, which will save money for
a smaller number of people. Then he declared that he intended
to implement a ‘tax plan’ going forward, with the overall aim of
bringing taxes down year on year over the life of the Parliament,
and started with a big surprise: a huge rise in the National
Insurance Contribution thresholds to apply in July 2022 that
will mean that 70% of people will pay less NIC in spite of the
introduction of the 1.25% increase that will apply from April. He
went on to increase Employment Allowance, which is a relief from
Employers’ NIC for small businesses, and to promise a cut in the
basic rate of income tax from 20% to 19% in April 2024.
The announcement of significant tax changes several times
a year, to apply from different dates, makes it hard to keep track
of what is changing and when, and how it affects your finances.
In this document we have set out the latest proposals and their
impact, but also included a reminder of significant measures from
the two Budgets in 2022 and other separate announcements.
The Spring Statement was mainly about tax cuts, but the October
Budget included a number of tax increases. If you would like to
discuss what it all means for you, we will be happy to help.

Personal Income Tax

Spring Statement

The Chancellor announced that he intends to cut the
basic rate of income tax from 20% to 19% from 6 April
2024. This costs over £5 billion a year and therefore
has a significant effect on the public finances. The
promise is conditional on the government continuing
to meet its ‘fiscal rules’ – borrowing going down and
not being required for day-to-day spending – but
Mr Sunak must be very confident that this will
happen. It would be very embarrassing not to carry
this through.
The promised cut will not affect the tax rates in
Scotland, which are set by the Scottish Parliament.
The Scottish Government will receive additional
funding in the tax year 2024/25 and will be able to
decide whether to pass it on to taxpayers as a
tax cut.
Reductions in the basic rate of tax are not
generally favourable to charities, because they
depend on claiming back basic rate tax paid by
donors under Gift Aid. If the donor gives the same
net amount, the charity is entitled to a smaller
tax credit. The current rate of tax credit will be
maintained for three years, until April 2027, to reduce
the impact on the income of charities.

Tax rates and allowances – 2022/23

(Table A)

As announced a year ago, the income tax rates and
bands and the main allowances are frozen at their
2021/22 levels until the end of 2025/26, instead
of the usual inflation-linked increases each year.
Although this means that someone with the same
income will pay the same tax year on year, the
effect of inflation on salaries and business profits
means that this represents a significant tax increase
over the period. Based on last year’s estimates,
government receipts for 2025/26 were forecast to
rise by £8 billion because of this. Inflation will add to
the increase, and the promised cut in the basic rate
from 2024/25 only returns part of it to taxpayers.
Two other thresholds remain fixed as they have
been since they were introduced: the income levels
at which the High Income Child Benefit Charge
begins to claw back Child Benefit receipts (£50,000
since 2012/13) and at which tax-free personal
allowances are withdrawn (£100,000 since 2010/11).
These measures create a higher marginal tax rate in
the income bands £50,000 – £60,000 (for those in
receipt of Child Benefit) and £100,000 – £125,140 (as
the personal allowance is reduced to nil). Inflation
brings more people each year within these charges.
The Scottish Parliament sets its own tax rates
and thresholds for Scottish taxpayers for nonsavings,
non-dividend income. As shown in the table,
the starter rate for those on low incomes is
1% below that applicable in the rest of the UK, but the
intermediate, higher and top rates are 1% above their
equivalents in the rest of the UK, and the higher rate
of 41% applies at a lower income level. The Welsh
Government has similar powers for Welsh taxpayers,
but has not varied the main UK rates.

Dividend income

The tax rates on dividend income over £2,000 will
increase for the tax year 2022/23. The ordinary rate,
paid by basic rate taxpayers, will rise from 7.5% to
8.75%; the upper rate becomes 33.75% (from 32.5%)
and the additional rate 39.35% (from 38.1%). These
rates will apply across the UK. The addition of 1.25%
to each rate is related to the increases in National
Insurance Contributions and the introduction of
the Health and Social Care Levy described further
below, and is intended to ensure that individuals
who work through companies and take their profits
as dividends rather than salary cannot avoid paying
the charge. However, it will also apply to dividends
from passive investments, as well as from personal
companies.
The 33.75% rate will also apply to tax payable by
close companies (broadly, those under the control of
five or fewer shareholders) on ‘loans to participators’
that are not repaid to the company within 9 months
of the end of the accounting period, where the loan is
advanced on or after 6 April 2022.

High Income Child Benefit Charge (HICBC)

The HICBC applies where a taxpayer has income of
over £50,000 and is the higher earner of a couple
where one partner receives Child Benefit. A tax case
showed that HMRC could not raise a ‘discovery’
assessment to collect the HICBC where a person
had not paid it because they had not been aware
they were liable and had not been asked to file a
tax return. The law has now been amended with
retrospective effect to enable HMRC to collect the
charge in these circumstances.

Employees

Company cars and fuel

The basis for taxing company cars and fuel provided
for private use is set out in Table C. No changes
have been made to the rates already announced in
previous years; for 2022/23, cars first registered after
5 April 2020 and electric cars will see their benefit
charge rise by one percentage point (subject to the
maximum of 37%). This means that the rates for
2022/23 will be the same for cars registered before
and after 5 April 2020. They will now remain fixed
until the end of 2024/25.
The provision of a van available for private use
gives rise to a tax charge on a deemed income figure
of £3,600, plus £688 if fuel is also provided free. An
electric van available for an employee’s private use
does not give rise to a tax charge.

National Living Wage (NLW) and National
Minimum Wage (NMW)

The NLW will increase by 6.1% for individuals aged
23 and over to £9.50 per hour from 1 April 2022.
Other rates of NMW will rise from the same date by
different percentages, as recommended by the Low
Pay Commission.

National Insurance Contributions

Spring Statement

The thresholds above which employers’ and
employees’ National Insurance Contributions (NIC)
become payable were set to increase from 6 April
in line with inflation in 2022/23, an increase of
about £300 a year to £9,880. In a surprise move, the
Chancellor announced that they will further rise in
July 2022 to match the level at which income tax
starts to be payable – an annual figure of £12,570.
This is a tax cut of £6.25 billion, a very significant
figure, and will save employees up to £356 over
a full year.
Because NIC on wages and salaries are
calculated on individual payments, it is possible to
change the thresholds in the middle of a tax year
in this way. The delay is considered necessary to
allow software providers to update their products
so employers can calculate the NIC correctly.
Thresholds for self-employed people are set for the
tax year as a whole, and the 2022/23 Lower Profits
Limit (LPL) for Class 4 NIC will be determined by
apportioning £9,880 from April to July and £12,570
from July to the end of the year. The resultant figure
is £11,908, above which Class 4 NIC will be payable
on business profits.
The accrual of State pension benefits for selfemployed
people continues to depend on paying
Class 2 NIC. Those with profits between the Small
Profits Threshold and the LPL will not be required
to pay Class 2 NIC for 2022/23, but will still earn a
credit for the year.

Employment Allowance

The Employment Allowance reduces employers’
NIC for small businesses employing at least two
people being paid above the Class 1 NIC Secondary
Threshold, if the total employers’ NIC bill did not
exceed £100,000 in the previous year. The Chancellor
announced an immediate increase in this tax relief
from £4,000 to £5,000, taking effect from 6 April
2022. It will benefit around 495,000 businesses by up
to £1,000 each in 2022/23 at a cost to the Exchequer
of £425 million.

Previously announced: Thresholds and rates

(Table D)

The upper limits for employee and self-employed
contributions remain aligned with the point at which
40% income tax is payable (£50,270 per year, or £967
per week), and are frozen at that level until the end of
2025/26.
Because the Scottish higher rate of income
tax applies at a lower level than in the rest of the
UK (above £31,092 of taxable income in excess of
allowances rather than above £37,700), Scottish
taxpayers can be liable to 41% income tax and full
primary NIC on the same income (12% in 2021/22
rising to 13.25% in 2022/23).

Health and Social Care Levy

As announced on 7 September 2021, a new Health
and Social Care Levy will be charged to raise £13
billion a year – dwarfing most of the other figures
in the Budget policy decisions. In 2022/23, this will
be achieved by raising the rates of NIC; in 2023/24,
the levy will be formally separated from NIC and
collected separately by HMRC, and will also apply to
earnings of individuals who are above State Pension
age and are therefore not liable to NIC.
From 6 April 2022, Class 1 NIC paid by employers
and employees, and Class 4 NIC paid by selfemployed
people, will increase by 1.25%. This means
that employees will pay 13.25% from the primary
threshold up to the upper earnings limit and 3.25%
above that; employers will pay 15.05% on all earnings
above the secondary threshold. Self-employed
people will pay 10.25% on earnings between the
lower and upper profits limits, and 3.25% above the
upper limit. The NIC rates will revert back to their
previous levels from 6 April 2023 when the separate
levy is introduced.

Working from home

During the pandemic, HMRC has been more
generous than usual in allowing claims for tax relief
by employees who have been required to work
from home. This has covered exemption of some
payments by employers to meet the extra costs
incurred in relation to a home office, and also direct
claims by employees for tax relief on some costs not
reimbursed by employers. This relaxation applied for
the tax years 2020/21 and 2021/22, but the normal
rules will be restored for 2022/23.

Ex-service personnel

An employer taking on ex-service personnel in their
first year of civilian employment is eligible for a
nil rate of employers’ NIC on earnings up to £967
per week. In 2021/22 the NIC has had to be paid
through the PAYE system and reclaimed at the end
of the year, but from 6 April 2022 the PAYE system is
intended to allow for a nil rate of contributions under
Real Time Information.

Savings and Pensions

ISA limits

The investment limits for 2022/23 remain £20,000
for a standard adult ISA (within which £4,000 may be
in a Lifetime ISA – unchanged since 2017/18), and
£9,000 for a Junior ISA or Child Trust Fund.

Pension contributions (Table B)

The tax reliefs for pension contributions remain
unchanged. As announced in the March 2021
Budget, the Lifetime Allowance (LA), which is the
maximum amount that a person can save in taxadvantaged
pension schemes before extra tax
charges arise on certain events (including drawing
benefits and reaching age 75), is frozen at its
2020/21 level of £1,073,100 until the end of 2025/26.
As with the increases in income tax generally due
to the freezing of rate bands and allowances, this
fixing of the LA is likely to bring many more people
within the scope of the LA Charge that applies when
pension benefits are taken from funds valued above
this limit.
Contributions to a registered pension scheme by
individuals and their employers are restricted by the
Annual Allowance (AA). Where this is exceeded, an
AA Charge arises. The taxpayer can choose to ask
the pension scheme to pay an AA tax charge if it
exceeds £2,000, reducing the future pension benefits
instead of having to meet the liability personally. The
deadlines for ‘Scheme Pays’ reporting and payment
will be extended in circumstances where there is
a delay in the individual receiving the information
that shows they are liable to the charge. The new
rules take effect from 6 April 2022, but also have
retrospective effect to 6 April 2016.

Taking pension benefits

The minimum age at which most people can first
access their tax-advantaged pension scheme
benefits is currently 55. This will be increased to
57 with effect from 6 April 2028, and will therefore
affect those who were born on or after 6 April 1973.

Capital Gains Tax

Rates and annual exempt amount

As announced in the March 2021 Budget, the annual
exempt amount will be fixed at its 2020/21 level of
£12,300 until the end of 2025/26. No changes have
been announced to the rates at which gains
are taxed.

Sales of UK property

Since 2015, non-UK residents have been required to
report the sale of UK residential property, and pay
any CGT due, within 30 days of completion of the
transaction. This was extended to non-residential
UK property in 2019 and, from April 2020, to UK
residents selling residential property on which CGT is
payable. The Autumn Budget extended the deadline
for reporting and payment to 60 days in all these
circumstances, for transactions completed on or
after 27 October 2021.

Inheritance Tax Rates

The March 2021 Budget fixed the IHT nil rate band
at £325,000 until the end of 2025/26. Holding the
threshold at the same amount for 17 years (from 6
April 2009) will bring far more people into the scope
of the tax. However, the £175,000 ‘residential nil rate
band enhancement’ on death transfers can reduce
the impact where it applies. A married couple may
now be able to leave up to £1 million free of IHT to
their direct descendants (£325,000 plus £175,000
from each parent), but the rules are complicated,
and the prospect of the nil rate band being fixed for
the next 4 years increases the importance of proper
IHT planning.

Business Tax

Spring Statement

No extra measures were announced to take effect
immediately. However, the Chancellor noted that
productivity is lower in the UK than the average
for countries in the Organisation for Economic
Cooperation and Development, and promised
consultation through the summer on measures to be
included in the next Budget to address this. Areas
that will be considered include incentives for training
people, for encouraging innovation and development
of ideas through research and development, and
incentivising capital investment.
The 2022 Budgets in March and October already
included measures on research and development
and capital allowances, described below. It seems
likely that there will be more significant changes
to follow, in particular when the benefits of the
higher Annual Investment Allowance and the ‘super
deduction’ for plant are phased out.

Reform of basis periods

For sole traders and individuals who are members of
partnerships (including limited liability partnerships),
the profits assessable in a tax year are those arising
in the ‘basis period’ for that year, which is normally
the accounting period ending in the tax year. Special
rules apply on commencement and cessation of
trade, as well as on a change of accounting date.
These produce complications, such as some
profits being assessed twice (‘overlap profits’). The
double charge then has to be relieved later, usually
on cessation of trade (and sometimes where the
business changes its year-end).
From 2024/25 (a year later than originally
planned), a different basis of assessing profits is
being introduced. Trading profits chargeable in a
tax year will be the profits actually arising in that
tax year. These will be calculated by apportioning
the business accounting periods across tax years
if the business does not have a 31 March or 5 April
year-end.
2023/24 will be a transitional year for moving
from the old to the new basis of assessment. It will
involve up to 23 months’ profits being assessed
in the year, with full relief for any overlap profits
previously taxed twice. As businesses may have a
significant increase in taxable profits for 2023/24
due to these rules, such additional profits will
be spread over a period of five years (although a
business may opt out of spreading during this time
and bring more of the profits into charge earlier). The
rules will also ignore the extra transition year profits
when calculating the High Income Child Benefit
Charge, the abatement of personal allowance where
income exceeds £100,000, and the averaging of
profits that is available to certain taxpayers such as
farmers and creative artists.
Businesses with accounting periods ending
early in a tax year (e.g. 30 April or 31 May) will have
a much smaller delay between profits being earned
and tax being payable on them. Any self-employed
trader, partnership or LLP with an accounting date
other than 31 March or 5 April should consider the
effect of this change as a matter of urgency.

Carry back of losses

The March 2021 Budget extended the period for
which companies and unincorporated businesses
can ‘carry back’ losses to offset against taxable
profits of earlier years and claim a refund of tax paid
on those profits. Losses of 2020/21 and 2021/22 (for
companies, accounting periods that end between
1 April 2020 and 31 March 2022) can be carried back
three years (subject to monetary limits). This rule has
not been extended, so losses of 2022/23 will revert
to the normal carry back period of one year.

Corporation Tax

Rate of tax

As announced in March 2021, the Corporation Tax
rate will remain at 19% until 31 March 2023. It will
then increase to 25% for companies with profits
over £250,000. Since 1 April 2015, all corporate
profits have been taxed at the same rate; the ‘small
profits rate’ that was familiar before that will be
reintroduced at 19% for companies with profits of up
to £50,000. Between £50,000 and £250,000 there will
be a tapering calculation that produces an effective
marginal rate of 26.5% on profits between these
limits, but an average rate on all profits of between
19% and 25%. The limits will be divided between
companies under common control.
Companies with an accounting period that
straddles 31 March 2023 will time apportion the
profits of that period to be taxed at the two different
rates. It may be worth considering a change of
accounting date to produce a lower tax charge: for
example, a company with a 30 September 2023
accounting date that makes a large profit on a
transaction before 31 March 2023 will pay 25% tax on
6/12 of it. If a short accounting period is ended on 31
March 2023, that large profit will all be taxed at 19%.

Capital allowances for plant and machinery

The March 2021 Budget introduced enhanced
allowances for qualifying expenditure on plant and
machinery (P&M) contracted for from 3 March 2021
and incurred from 1 April 2021 to 31 March 2023 by
companies. They can claim:
• a ‘super-deduction’, providing allowances of 130%
on new P&M investment that would ordinarily
qualify for 18% writing down allowances (WDAs)
in the main capital allowance pool;
• a first-year ‘special rate allowance’ of 50% on new
P&M investment that would ordinarily qualify for
6% WDAs in the special rate pool (e.g. integral
plant in buildings).
The rate of the super-deduction will require
adjustment if an accounting period straddles 1 April
2023 to ensure that the super-deduction cannot
be relieved at the 25% rate of corporation tax.
Adjustments will also be required on the disposal of
assets on which a super-deduction or special rate
allowance has been claimed.
The 100% Annual Investment Allowance (AIA),
which is available to companies and unincorporated
businesses, will also be available for qualifying
expenditure on P&M up to £1 million until 31 March
2023. The limit will be subject to transitional rules
where accounting periods straddle 31 March 2023.
The AIA may produce more tax relief for
companies than the 50% FYA available for special
rate expenditure described above. However, as the
main corporation tax rate will increase from 19% to
25% on 1 April 2023, advancing expenditure to March
2023 in order to secure 100% deduction will result in
a smaller amount of tax relief – the tax reduction will
come sooner, but it will be given at the lower tax rate.

Research & Development (R&D)

The Small and Medium-sized Enterprise (SME) R&D
relief (a 130% enhancement of the expenditure) and
the R&D expenditure credit (currently 13%) apply to
‘qualifying expenditure’ as defined in the legislation.
At present, this comprises:
• Staff costs
• Software used directly for the R&D
• Relevant payments to the subjects of clinical
trials
• Consumable or transformable materials
• Subcontracted R&D costs
• Externally provided workers
Following a consultation launched in March
2021, R&D tax reliefs will be reformed to support
modern research methods by expanding qualifying
expenditure to include data and cloud costs.
At present there is no limitation on incurring
the expenditure outside the UK, for example by
subcontracting work to suppliers in other countries.
The legislation will be amended to focus support
towards innovation in the UK, which is likely to
require qualifying expenditure, or at least a large
percentage of it, to be incurred within the UK.
Other changes will be made to target abuse and
improve compliance. The changes to the law are
intended to take effect for expenditure incurred
from 1 April 2023; the Spring Statement included a
declared intention to reform, refocus and increase
the incentives for R&D spending.

Uncertain tax treatments

The law has been changed to require very large
companies and partnerships to notify HMRC where
they take a tax position in their returns for VAT,
corporation tax or income tax (including PAYE) that
is ‘uncertain’. An ‘uncertain treatment’ is defined as
arising either where a provision has been made in the
accounts for the uncertainty, or the position taken in
the accounts is contrary to HMRC’s known position
(as stated in the public domain or in dealings with
HMRC). Taxpayers will only need to notify where
the tax advantage of the position taken – when
compared with HMRC’s view – is expected to be over
£5 million in a 12-month period. The new rule will
apply for returns filed with effect from 1 April 2022.
This is a difficult and controversial area, but it only
affects businesses with turnover of more than £200
million a year, or a balance sheet total of more than
£2 billion.

Value Added Tax

Spring Statement

For more than 20 years, the reduced VAT rate of 5%
has applied to the supply by a trader of ‘installation
of energy saving materials’ in some housing. There
are a number of restrictions on how this relief
operates, and the Court of Justice of the EU required
the UK to narrow the scope of the tax relief because
the UK’s version did not comply with EU law. The
Chancellor has decided to take advantage of Brexit
to reverse the changes required by the Court and to
expand the scope of the relief to more energy-saving
technologies. For a limited period, the relief will be
further increased by making the supply zero-rated
rather than reduced rated. These changes will take
effect from April 2022. They are a more narrowly
targeted tax cut than other measures in the Spring
Statement, costed at £45 million in the first year.

Registration threshold

The VAT registration and deregistration thresholds
will remain frozen at their present levels of £85,000
and £83,000 until 31 March 2024. This will tend to
require more businesses to register for the tax as
they grow, and therefore represents a small taxraising
measure.

Making Tax Digital for VAT

For VAT periods commencing on or after 1 April
2022, all VAT-registered businesses, unless they
claim a limited range of exemptions, are required
to comply with the requirements to maintain
their VAT records digitally and file their VAT
returns using MTD-compliant software. Up to
this point, MTD has been compulsory for those
trading above the VAT threshold of £85,000 in
taxable turnover, but has been optional for those
traders who have voluntarily registered. Anyone
who is not yet registered for MTD should now
take steps to join up as a matter of urgency.

Reduced rate for hospitality and entertainment

No further changes have been announced relating to
the reduced rate of VAT that has applied to qualifying
supplies by hospitality, leisure and entertainment
businesses to help offset the impact of the
pandemic. The rate reduced from 20% to 5% in July
2020, and increased to 12.5% with effect from
1 October 2021. It will revert back to the standard
20% rate on 1 April 2022.
There are no ‘anti-forestalling rules’ to counter
the VAT saving enjoyed by someone who pays a
deposit before the rate goes back up – that will lock
in the 12.5% rate of VAT to the extent that a supply is
paid for before 1 April 2022, even if the actual supply
takes place later.

Default surcharge

The rules for late payment of VAT will be reformed
for return periods beginning on or after 1 January
2023 (delayed from the intended introduction of the
new rules on 1 April 2022). Default surcharge will be
replaced by interest on late payment and separate
penalties for late filing of returns. It is interesting to
see this delay shown in the government’s accounting
as a cost – implying that they believe the new
system will raise more money than the old.

Property

New rules for holiday lettings

Owners of holiday homes may be able to pay no
council tax or business rates for their property by
registering the property as business premises. They
then claim small business rates relief (SBRR) to
reduce the business rates bill to nil. An assessment
for business rates takes priority over council tax, but
it is normally more costly to pay business rates if
SBRR is not available.
From April 2023, for the property to qualify for
SBRR, the landlord will have to provide evidence
that the property will be offered for short-term
commercial letting for at least 140 days in the
current year. This evidence may be in the form
of bookings, receipts or adverts. In addition, the
landlord will have to show that in the previous tax
year the property was:
• available for short-term commercial letting for at
least 140 days; and
• actually let for short-term letting for at least
70 days.
Anyone who lets holiday accommodation that
seeks to benefit from SBRR will need to meet these
conditions for the year starting 6 April 2022, in order
to be able to provide the required evidence in
April 2023.

Residential Property Developer Tax

As announced in February 2021, the government
is introducing a new tax from April 2022 on the
profits that companies and corporate groups derive
from UK residential property development. This is
intended to ensure that the largest developers make
a fair contribution to help pay for building safety
remediation. The tax will be charged at 4% on profits
exceeding an annual allowance of £25 million.

Annual Tax on Enveloped Dwellings (ATED)

ATED applies to residential property worth above
£500,000 which is owned through companies and
other corporate structures, unless the situation
qualifies for a relief. The rates increase automatically
each year in line with inflation: they will rise by 3.1%
from 1 April 2022 in line with the September 2021
Consumer Price Index. The amount ranges from
£3,800 to £244,750 per year.
The next 5-yearly revaluation of relevant
properties is due on 1 April 2022, which may affect
the ATED payable from 1 April 2023, if a property
moves into a different valuation band as a result.

Other measures: Spring Statement

Cost of living support

As widely predicted, the Chancellor cut fuel duty
on petrol as a response to increases in the cost of
living. From a range of possibilities, he chose to limit
the reduction to one year from 6pm on 23 March
2022, set at 5p per litre. As VAT is charged on top
of the duty, this should in total reduce the tax by 6p
per litre. The price of fuel has already gone up by
several times that amount since the start of the war
in Ukraine, so this will only have a limited impact
on overall costs. However, it is expected to save the
average motorist about £100 a year, at a cost to the
Exchequer of nearly £2.4 billion.
Mr Sunak made no changes to the measures
announced in February to help people impacted by
higher energy bills. These involve a £200 rebate on
bills in the autumn, which will be recovered at £40 a
year over the following 5 years, and a £150 rebate on
Council tax bills for people with houses in Bands A to
D. This rebate is not repayable. Local authorities will
also be given funds to make grants to people who are
in need but not eligible for the central government
scheme. This is described as a ‘£9 billion support
package’, but the majority of it is a loan rather than
an outright grant.

Tax avoidance and evasion

Hidden in the government’s costings are significant
extra amounts of money described as ‘HMRC:
investment in compliance’ and ‘DWP: investment
in compliance’ (over £500 million in 2022/23, rising
to over £1.2 billion in 2026/27). This ‘investment’ is
expected to bring in £3 billion of extra tax over the
next five years and savings in the benefits system
of a similar amount. The HMRC staff will ‘provide
greater support to taxpayers seeking to pay off
accrued tax debts’ and ‘tackle the most complex tax
risks, ensuring large and mid-sized businesses pay
the tax they owe’. The DWP effort will be directed
at preventing and detecting fraud and error, and
collecting more debt.

Other measures: already announced

Interest on overdue tax

The rates of interest on overdue tax are linked to the
Bank of England base rate by a statutory formula. As
the base rate has recently risen from 0.1% to 0.75%,
the rates of interest on overdue tax will also rise.
From 5 April 2022 the rate rises from 3% to 3.25%,
and it is likely to rise further if interest rates continue
to go up.

Making Tax Digital (MTD) for Income Tax

As announced on 23 September 2021, the
government has decided to delay the requirement for
sole traders and landlords with income over £10,000
to file income tax self assessment (ITSA) information
using MTD until the tax year 2024/25. General
partnerships will not be required to join the system
until 6 April 2025.
At the same time that MTD for ITSA is introduced,
new penalties for late filing and late payment will
apply to those within the new system.

Business rates

In the Autumn Budget, the government announced
several measures to reduce the burden of business
rates in England:
• freeze the business rates multiplier for a second
year, from 1 April 2022 to 31 March 2023
• introduce a new temporary business rates relief
for eligible retail, hospitality and leisure properties
for 2022/23, giving 50% relief up to a £110,000 per
business cap
• extend transitional relief for small and mediumsized
businesses, and the supporting small
business scheme, for 1 year, restricting increases
in rates bills, subject to subsidy control limits
The government will reform the system of business
rates by increasing the frequency of revaluations
from 5 years to 3 years, starting in 2023.
In October, the Chancellor announced an intention
to introduce reliefs, also in 2023, where occupiers
incur certain types of expenditure on improvements,
including eligible plant and machinery used in onsite
renewable energy generation and storage. In the
Spring Statement, he announced that this would be
brought forward by a year to April 2022.

Recovery Loan Scheme

The Recovery Loan Scheme, which was introduced
to help businesses recover from the impact of the
pandemic, has been extended until 30 June 2022.
The following changes apply to all offers made from
1 January 2022:
• The scheme is only open to small and mediumsized
enterprises
• The maximum amount of finance available is
£2 million per business
• The guarantee coverage that the government will
provide to lenders falls to 70%

Universal Credit

The Autumn Budget included two measures that
were intended to benefit Universal Credit recipients:
reducing the taper rate at which extra earnings
leads to a reduction in benefits (from 63% to 55%)
and increasing the Work Allowance by £500 a year.
These measures are worth more to some claimants
than the £20 per week that was temporarily granted
during part of the pandemic and then cancelled,
but not everyone will enjoy the same benefit. Some
commentators predicted that the Spring Statement
would include some measures on Universal Credit,
but no further changes were announced.

Freeports

The March 2022 Budget outlined the introduction
of ‘Freeports’, areas in which a number of tax and
other incentives will operate to encourage trade. The
enhanced tax reliefs will include 10% Structures and
Buildings Allowances (instead of 3%), 100% First Year
Allowances for plant and machinery, full relief from
Stamp Duty Land Tax, full Business Rates relief for
five years, and relief from Employer’s NIC on some
salaries. The reliefs will depend on designation as
a ‘tax site’ within a Freeport and will run until 30
September 2026, with a possible extension to
April 2031.
The English Freeports announced so far are East
Midlands Airport, Felixstowe & Harwich, Humber,
Liverpool City Region, Plymouth and South Devon,
Solent, Teesside and Thames.
The October Budget included further measures
clarifying the VAT reliefs that will apply in free zones,
and the detailed operation of these new ‘onshore tax
havens’ is being developed as they begin to operate.

Anti-Money Laundering Levy

The Finance Act 2022 has introduced an Economic
Crime (Anti-Money Laundering) Levy, which is
expected to raise around £100m per annum to help
fund anti-money laundering and economic crime
reforms.
Any entity which is subject to Anti-Money
Laundering regulations (such as credit institutions,
financial institutions, auditors, insolvency
practitioners, accountants, tax advisers, legal
professionals, estate agents, trust or company
service providers, high value dealers and casinos)
will be impacted but it will not apply to small entities
(those with under £10.2m of UK revenue).
There will be three charging bands: medium
(turnover from £10.2m – £36m), large (£36m – £1bn)
and very large (over £1bn). A flat rate charge will
apply in each band, being £10,000, £36,000 and
£250,000 respectively.
It will be first charged for the year from 1 April
2022 to 31 March 2023, but it will not be collected
until after the year-end.

Information contained on this document has been prepared as a way of
summarising measures announced by the Government and HMRC as at
the date of publication for the benefit of our clients. No responsibility is
accepted for completeness on the part of this firm, its partners and/or
employees. Modifications and clarifications may follow.

Income Tax Rates and Allowances (Table A)

Main allowances 2022/23 2021/22
Personal Allowance (PA)*† £12,570 £12,570
Blind Person’s Allowance 2,600 2,520
Rent a room relief § 7,500 7,500
Trading income § 1,000 1,000
Property income § 1,000 1,000

 

* PA will be withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There will therefore be no allowance given if adjusted income is £125,140 or more.

† £1,260 of the PA can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer, where both spouses were born after 5 April 1935.

§ If gross income exceeds this, the limit may be deducted instead of actual expenses.

Rate Bands 2022/23 2021/22
Basic Rate Band (BRB) £37,700 £37,700
Higher Rate Band (HRB) 37,701-150,000 37,701-150,000
Additional rate over 150,000 over 150,000
Personal Savings Allowance (PSA)    
– Basic rate taxpayer 1,000 1,000
– Higher rate taxpayer 500 500
Dividend Allowance (DA) 2,000 2,000
BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.
Rate Bands 2022/23 2021/22
Rates differ for General, Savings and Dividend income within each band:
  G S D G S D
Basic % 20 20 8.75 20 20 7.5
Higher % 40 40 33.75 40 40 32.5
Additional % 45 45 39.35 45 45 38.1

General income (salary, pensions, business profits, rent) usually uses personal allowance, basic rate and higher rate bands before savings income (mainly interest). To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%.
The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%.
Dividends are normally taxed as the ‘top slice’ of income. The DA taxes the first £2,000 of dividend income at nil, rather than the rate that would otherwise apply.

High Income Child Benefit Charge (HICBC)

1% of child benefit for each £100 of adjusted net income between £50,000 and £60,000.

Income Tax – Scotland Rate 2022/23 2021/22
Starter Rate 19% £2,162 £2,097
Basic Rate 20% 2,163 – 13,118 2,098 – 12,726
Intermediate Rate 21% 13,119 – 31,092 12,727 – 31,092
Higher Rate 41% 31,093 – 150,000 31,093 – 150,000
Top Rate 46% over 150,000 over 150,000
The Scottish rates and bands do not apply for savings and dividend income, which are taxed at normal UK rates.
Remittance basis charge 2022/23 2021/22
For non-UK domiciled individuals who have been UK resident in at least:    
7 of the preceding 9 tax years £30,000 £30,000
12 of the preceding 14 tax years £60,000 £60,000
15 of the preceding 20 tax years                                 Deemed to be UK domiciled for tax purposes

Registered Pensions (Table B)

  2022/23 2021/22
Lifetime Allowance (LA) £1,073,100 £1,073,100
Annual Allowance (AA) 40,000 40,000

Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.

The AA is usually reduced by £1 for every £2 by which relevant income exceeds £240,000, down to a minimum AA of £4,000.

Car and Fuel Benefits (Table C)

Cars

Taxable benefit: List price multiplied by chargeable percentage.

2022/23                                             2021/22 percentage for cars first registered
CO2 emissions g/km Electric range Miles All cars

%

Pre 06.04.2020

%

Post 05.04.2020

%

0 N/A 2 1 1
1-50 >130 2 2 1
1-50 70 – 129 5 5 4
1-50 40 – 69 8 8 7
1-50 30 – 39 12 12 11
1-50 <30 14 14 13
51-54 N/A 15 15 14

Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%.
Diesel cars that are not RDE2 standard suffer a 4% supplement on the above figures but are still capped at 37%.

Car Fuel
Where employer provides fuel for private motoring in an employer-owned car, CO2-based percentage from above table multiplied by £25,300 (2021/22: £24,600).

National Insurance Contributions (Table D)

Class 1 (Employees) Employee Employer
Main NIC rate 13.25% 15.05%
6.4.2022 to 5.7.2022: No NIC on first £190pw £175pw
6.7.2022 to 5.4.2023: No NIC on first £242pw £175pw
Main rate* charged up to £967pw no limit
3.25% rate on earnings above £967pw N/A
Employment allowance per qualifying business N/A £5,000

*Nil rate of employer NIC on earnings up to £967pw for employees aged under 21, apprentices aged under 25 and ex-armed forces personnel in their first twelve months of civilian employment.

Employer contributions (at 15.05%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).

Class 2 (Self-employed)

Flat rate per week on profits above £11,908

£3.15
Class 3 (Voluntary)

Flat rate per week

 

£15.85

Class 4 (Self-employed)

On profits between £11,908 and £50,270

 

10.25%

On profits over £50,270 3.25%

Employees with earnings above £123pw and the self-employed with profits over £6,725 access entitlement to contributory benefits.

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