Spring 2022 tax and NI update

Posted on By dc_admin

A Summary of changes to UK tax and NI rates and thresholds from April 2022

Employers and Employees

Minimum and living wage rates increase from 1st April 2022

23 and over 21 to 22 18 to 20 Under 18 Apprentice
April 2021 (current rate) £8.91 £8.36 £6.56 £4.62 £4.30
April 2022 £9.50 £9.18 £6.83 £4.81 £4.81

 

The Employment Allowance will increase

From April 2022 the employment allowance, which reduces employer’s national insurance contributions for certain employers, will increase to £5,000.  Employer’s NIC rates and thresholds remain unchanged.

The planned increase to National Insurance rates will go ahead

The rate of National Insurance will increase by 1.25 percentage points between 6th April 2022 and 5th April 2023.   After 5th April 2023, the increase will be replaced by a separate Health and Social Care Levy.

Class 1 and Class 4 National Insurance thresholds will increase

From July 2022, the threshold at which employees start paying Class 1 National Insurance contributions – which is currently £9,569 and will rise to £9,880 in April 2022 – will increase again to £12,570. This means that employees won’t have to start paying National Insurance until they have earned a minimum of £12,570 in a single tax year, though there may be special arrangements for the 2022/23 tax year.

As NIC is paid according to the pay period, and is not cumulative, only nine months of earnings (from July 2022 to March 2023) will benefit from the higher PT.

Sole Traders and Self-employed

Class 4 NIC

The threshold for Class 4 National Insurance contributions – which self-employed people pay on their profits – will also increase from July 2022. Currently £9,569 and £9,880 from April 2022, the threshold will increase again in July to £12,570.

The class 2 small profits threshold (SPT) will remain in place from April 2022, but the individual will not be liable to pay class 2 NIC until their profits exceed the lower profits threshold for the tax year, which is aligned with the lower profits threshold for class 4 NIC.

Tax year Flat rate per week Small profits threshold Lower profits limit
2022/23 £3.15 £6,725 £11,908*
2023/24 TBA TBA £12,570

*effective limit for the year with the first 13 months at £9,880 and the remainder from July at £12,570.

New class 2 NI credit 

Where the individual has annual profits between the SPT and the LPL, they will effectively build up a NI credit for that year, while paying zero class 2 NIC. Note that the taxpayer has to make profits at least equal to the SPT for the year in order to benefit from this class 2 NI credit.

In order to receive the class 2 NI credit the taxpayer will have to submit a tax return, although if they have no other income in the year they will have no tax to pay.

The introduction of the class 2 NI credit does not eliminate the need for voluntary class 2 NIC payments. Where the trading profits are less than the SPT the individual may still wish to pay voluntary class 2 NIC in order to maintain their contribution record and qualify for the state pension, as well as for other contributory benefits.

 

Class 2 National Insurance rules will change 

From April 2022, sole traders whose annual profits fall between the Small Profits Threshold and the Lower Profits Limit will be able to claim that year as a qualifying year for contributions towards the State Pension and other benefits, without paying Class 2 National Insurance.

The Small Profits Threshold is currently £6,515 and will rise to £6,725 on 6th April 2022. The Lower Profits Limit is currently £9,569. It will rise to £9,880 on 6th April 2022 and will increase again in July 2022 to £12,570.

Personal Income Tax

The basic rate of Income Tax will decrease

In April 2024, the basic rate of Income Tax in England, Wales and Northern Ireland will decrease from 20% to 19%. It’s not yet known whether any equivalent change in Scotland, where rates are set by the Scottish government, will be introduced.

Dividend tax will increase by 1.25 percentage points in 2022.  The new dividend tax rates for 2022/23 tax year (factoring in the 1.25 point rise) are: 8.75% (basic), 33.75% (higher) and 39.35% (additional).

Corporation Tax

Further news on capital allowances is expected in the Autumn Budget

The Annual Investment Allowance will remain at £1 million until March 2023. The Chancellor indicated that more news on the UK’s capital allowances regime can be expected in the Autumn Budget later this year.

This is just a brief summary of changes, please get in touch if you’d like assistance with your tax returns or employee payrolls. You can read the Spring Statement 2022 in full on the government’s website.

 

 

 

Business mileage expenses – why, what, how?

Posted on By dc_admin

Business mileage expenses explained

It’s very simple to record, can save you tax, and contributes to an accurate set of accounts and tax return.  So why do I meet so many people who don’t do it?

What is business mileage?

Any journey you make solely for the purpose of business. Examples include travelling to visit customers, suppliers, to attend work-related training events and business banking.   It does not include commuting to your normal place of work.  If you drop off the business post on the way home from your office, you can’t count that as a business trip.

Why record business mileage?

Keeping sufficient financial records is a legal obligation. The benefit to you is in claiming this tax free expense.  Say you travel an average of 20 business miles per day, 4 days per week, 48 weeks per year.  At 45p per mile that could save you £345 per year in tax at the current basic rate.  So what’s stopping you?

It’s a choreBusiness mileage

Well, I can’t argue with that.  It’s not much fun, but it really doesn’t take long and quickly becomes a habit you’ll barely notice.  All you need to do is keep a notebook and pen in the vehicle you use for business, or use your smartphone.

I haven’t got time

10 seconds spent jotting down the details at the end of the trip and it’s done.  You can link several business trips together. So if you start at your business premises one day and travel to a customer’s premises, then go to a 2nd customer, then onto the stationers to pick up some flyers you’ve had printed, and drop off the flyers at the distribution company, that can all be recorded as one trip.

I forget

I believe you.  I also know you’re doing your best to run a successful business, often under very difficult circumstances.  So find a way to integrate the recording of business mileage into your daily or weekly routine.

Give me an easy solution

There are 2 options for tracking mileage.  You can use the old paper and pen method, or use one of the many apps that are available now.

For each trip your paper record needs to show:

  • The date

    business mileage
    Mileage record made simple
  • details of where you’re going to and from
  • the reason for the trip and
  • the business mileage.

There are mobile apps which are appropriate for UK taxpayers Most will deal with more than just mileage. Try Concur,  Eclipsecs, Webexpenses or search for an app that will record mileage.

A note on the value of your business mileage expense claims: there is more than one method of calculating mileage expenses, although there are certain restrictions.  Have a chat with your accountant or contact us to find out which is best for you.

 

 

 

Payroll changes 2014-15

Posted on By dc_admin

Payroll changes 2014-15Payroll changes 2014-15 are the usual updates to tax codes, tax rates and NIC rates.  Good news includes a delay in the implementation of late filing penalties under the RTI system, and a £2,000 reduction to employer’s NIC.  On the downside, employers will no longer be able to reclaim SSP paid to employees.

 

RTI LATE FILING PENALTIES

The penalties for late filing of the FPS files which were due to commence April 2014 have been postponed until October 2014.

The FPS files are the Real Time Information (RTI) reports sent each pay period and are due on or before the pay date. The fines are per late FPS and depend upon the number of staff you have:

Staff Monthly Penalty

  • 1 to 9 employees  £100
  • 10 to 49 employees £200
  • 50 to 249 employees £300
  • 250 or more employees £400

The penalty notices will only be sent out quarterly ,so the bill could be quite high when you receive it.  Payment is due within 30 days of the notice.

Where an FPS is late for more than 3 months and the information is not included on a later submission a further charge is made – 5% of the Tax/NICs which should have been on the submission.

SSP RECLAIM ABOLISHED

From April 2014 the reclaim of SSP will be abolished. You still need to keep a record of SSP paid in the normal way but there will be no reclaims at all. Reclaims for SMP, SPP and SAP remain the same.

TAX RATES 2014-15

The new standard tax code is 1000L

Tax Bands:

  • 20% £1 to £31,865
  • 40% £31,866 to £150,000
  • 45% £150,001 and above

NIC Thresholds 2014-15:

Payments start from the primary threshold: weekly pay of  £153, monthly £663, annual £7,956

Employees deductions are 12% on amounts above the primary threshold, up to £805 weekly/ £3,489 monthly then 2% on all other earnings

Employers liability: 13.8% on all earnings above the secondary threshold (values are the same as the primary threshold mentioned above).

The threshold for statutory payments is £111 per week.

SSP rate £87.55 per week

SMP/SPP/SAP standard rate £138.18

Student loans are recovered at 9% on earnings above: weekly £325.19 , monthly £1,409.16 or annual £16,910.00.

£2,000 NIC ALLOWANCE

HMRC are introducing a £2,000 Employers Allowance to be offset against your Employer’s NIC. Most employers are eligible for this and we will be taking it into account on your monthly PAYE Summaries.

There are a small number of employers who are not eligible and you can check your entitlement by logging on to the following website:

https://www.gov.uk/employment-allowance-up-to-2000-off-your-class-1-nics