Autumn Budget 2021
As is the case with all budgets, the announcements made impact different industries/pockets of the population and so for the sanity of those reading this, and as with all of our previous budget posts, we have only included the key aspects of the budget that impacts the majority of those that we look after in the media accounting space (e.g. actors, production staff, contractors, freelancers and more). You may also note that we have included some sections of our previous budget analysis; this is because we firmly believe that both the information provided and advice outlined to you is still valuable to either act on, or at the very least be aware of:
RELEVANT TO ALL INDIVIDUALS:
Universal Credits- If out of work, double check to see if you are eligible
· An absolute lifeline for countless households over the course of the past year, and still are an essential benefit for those that still unable to work
· The temporary weekly £20pw increased payment that helped thousands of households navigate life around COVID has now been terminated, estimated to cost households affected by this in the region of £1,000 annually
· The only silver lining here is that for those both in receipt of UC and also receiving income from employment at the same time, you will be able to keep an extra 8p for every £1 of income they earn from December 2021 onwards. This will still not make up for the £20pw reduction in cash, but could be worth around £800
· There were many of those that we look after that had tried to apply for UC but were unsuccessful due to having more than £16,000 in personal savings, of which some of this cash had actually been ring-fenced for tax. We confirmed this at the time but to stress again- the DWP will disregard personal tax savings from the savings calculations, and so if you are out of work and have less than £16,000 in savings you may be entitled to UC
Marriage Allowance- Read this if you are a basic rate taxpayer (i.e. taxable PERSONAL income up to £50,000) and your husband/wife/civil partner earns less than the personal allowance (currently at £12,500pa):
· This allowance, though not new, is not well known and so worth bringing to your attention. It allows the lower earner to transfer £1,250 of their personal allowance to the higher earner, who can then receive tax relief on this extra allowance
· The Marriage Allowance could save the household up to around £250 per year and can be backdated back to April 2016– if you know for sure that you qualify, apply online via https://www.gov.uk/apply-marriage-allowance
· If you are unsure if you are eligible for this, get in touch and we can let you know if you are or not. Though this isn’t life changing money, we would be hard pressed to find anybody that would turn down £250-£1000, and so is in our opinion worth exploring
Increase in Pension Withdrawal Age- Pushed Back
· At present, pension savers (i.e. those that have any private pensions) are able to access 25% of their pension pot tax free at the age of 55
· From April 2028, the earliest age that you can access your savings will be pushed back to 57
· It is quite vague at present, but it appears that dependent on the pension itself, you still MAY be able to access your pension at the current age of 55 as opposed to it being pushed back until you reach 57 years old
· Regardless, if you were born after 5th April 1973, you are affected by this change and we would recommend that you speak to your financial advisor ASAP to discuss this in more detail to seek clarity on the issue
Capital Gains Tax (CGT)- Still no change
· CGT annual allowance remains the same, at £12,300, and will continue to be held at this level all the way through to the 2025/26 tax year
· We have mentioned on numerous occasions over the course of the past couple of years that there may be changes on the horizon in relation to either the rate or structure of CGT
· Yet again, there are no changes to report on either the structure or rate of tax for capital gains for the time being- and so this continues to be a very good result for any of those that own investment properties, have shares in a company (your own or others), or hold any other assets that are looking to be sold in near/mid term future
CGT Reporting and Payment when Investment Property Sold
· For those of you who own investment properties, you are likely to be aware that it was a legal requirement to file a CGT Tax Return within 30 days of completing on the sale, with the appropriate CGT that is due then paid across to HMRC within this 30 day deadline
· The deadline to submit the Tax Return, and pay the relevant CGT, has now been extended to 60 days for all completions from 27th October 2021 onwards
· Though this doesn’t reduce the admin burden of completing the CGT Tax Return, and makes minimal difference from a cash-flow perspective in relation to the CGT that needs to be paid to HMRC, it does give slightly more breathing room to both you to supply the necessary information, and to your lovely accountant who will be submitting it for you!
Health and Social Care Levy
· As the vast majority of you will already be aware, the Government announced in September that in order to fund massive investments into our health and social care (and of course let us hope that it is used for that purpose), there would be a UK-wide 1.25% increase in dividend taxes and NIC from 6th April 2022, with a separate ring-fenced tax (named above) from 6th April 2023 onwards
· It is worth noting that though the individual (English) income tax rates have remained the same- being 20% for basic rate, 40% for high rate, and 45% for additional rate- the 1.25% increase is an effective tax hike and will negatively impact nearly every tax-payer
· The only exception to the above are landlords, who will not see an increase in taxes paid in relation to rental profits, as these are not subject to NIC or the Levy
· This is likely to cost the average basic rate tax payer around £180 per year, with the average high rate tax payer worse off by around £715 per year
Dividend Tax Rates
· In line with the Levy outlined above, the Government have also increased the overall dividend tax rate by 1.25% for each tax band effective from 6th April 2022
· The dividend tax rates as a result, from 6th April 2022 will be 8.25% for basic rate tax payers, 33.25% for high rate tax payers and 39.35% for additional rate tax payers
· There was no mention of any immediate or up-coming changes in relation to the £2,000 tax free allowance that each UK tax payer is eligible for- good news
· For those who are directors of their own Limited Companies, rest assured that Blue Skies have already factored this change of dividend rates into our tax strategy for your business, and we will of course discuss this with you closer to the end of the financial tax year
RELEVANT TO ALL BUSINESSES:
Bounce Back Loan (BBL) – Is action required for your business?
· Applications for the BBL scheme now closed- therefore if you have not already taken advantage of the BBL, please skip this section
· Many businesses that have successfully applied for the BBL will soon be in a position whereby the first and final interest-free year is coming to an end, and repayments must start to be made. We would strongly recommend that you get in touch with us to discuss the repayment, so that we can outline the benefits/drawbacks of each option available to you
· Please check out our original post on the BBL should you wish to have a brief recap of the options available to you: https://www.blue-skies.tv/blue-skies-blog/chancellors-financial-announcement-headline-points
· If you have already applied for the full 25% of turnover loan that you are eligible for and feel that your business still needs a vital cash injection, see the below Recovery Loan Scheme (but most importantly please speak to us before doing so)
The Recovery Loan Scheme- Deadline to apply extended
· Open to all businesses (even to those who have applied for the BBL), however the minimum borrowing value is £25,000 and the average interest rate on average is around 5-6%
· Deadline to apply for this loan has been extended to 31st June 2022
· 70% of the loan value is Government backed- meaning that lenders SHOULD be receptive to applicants
· However, this 70% Government guarantee has been reduced from 80%, and so expect for lenders to put even more focus on the viability of your business before approving the loan. This is a world away from the BBL, which as we all remember was 100% Government backed and led to a very high success rate of applications
Making Tax Digital (MTD) - Delayed once again
· If you are a VAT registered business, we will have already registered you for MTD as is required and so you can skip this section
· MTD has been discussed and partially implemented over the past few years, and is based on businesses being required to maintain their accounting records in a specified digital format and submit their records on a quarterly basis to HMRC
· For non VAT-registered businesses and landlords with income of over £10,000, the existing deadline was that you must be registered for MTD from 6th April 2023- but this has now been extended by a year to 6th April 2024
RELEVANT TO LIMITED COMPANIES:
Corporation Tax
· Current corporation tax rate of 19% is set to increase for many businesses up to a (maximum) rate of 25% from 1st April 2023
· The tax increase will only relate to businesses with profits of over £50,000, with those earning profits of less than this amount remaining at the current 19% rate
· The rate of corporation tax payable WILL NOT simply increase from 19% to 25% if your profits are over £50,000- instead, it is calculated on a sliding scale between £50,000 to £250,000 trading profit. Therefore, for businesses with profits lower than £250,000, you will not be paying the maximum corporation tax rate of 25%
· Details have not yet been confirmed as to what the tapered amounts will be, but for the time being though the headline point sounds ominous, it doesn’t appear to be as bad for Limited Companies as many had feared
Job Retention Scheme (JRS)- Now ended
· Commonly known as the furlough scheme, this has now ended and subject to there being no further lockdowns or significant COVID-driven events, we do not expect this scheme to open up again at any point in the future
RELEVANT TO SOLE TRADERS & PARTNERSHIPS:
Self Employment Income Support Scheme (SEISS)- Now ended
· A vital lifeline for many sole traders and partnerships, there was no further announcement that there was an intention to release any further grants
· Though we may sound like a broken record on this, it is worth repeating- please ensure that you retain a record of any documentation/correspondence that can help support your SEISS claim! HMRC have invested over £100 million and significant resources into their investigation units, and it is absolutely inevitable that a huge focus of attention will be on the SEISS grants. It is HMRC’s job to claw back as much tax money as possible (which is more important than ever given the current deficit that we have) and it will be seen by HMRC as a cash-cow – we fully expect them to systematically go through the list of SEISS claimants
· For those of you who think you may have incorrectly claimed due to not fully meeting all necessary criteria, please get in touch with us ASAP- you have until 31st January 2022 to repay grants one-three without penalty or interest added
Summary
Though this specific budget didn’t carry any major unwelcome surprises, there is no doubt that a combination of tax rate increases, rising inflation, increased interest rates and energy price hikes are going to result in the vast majority of both businesses and the general public very noticeably feeling the financial pinch by the new tax year start in April 2022 at the latest. We can’t stress enough that due to the uncertainty surrounding each households’ finances at the moment, it is more important than ever to take advantage of Blue Skies’ expertise and knowledge within this landscape, and so please do just drop us a line- we are only a phone call or email away.
Best Wishes
Team Blue Skies