Budget Update & Smarter News 17 Oct

by | Oct 17, 2022 | 0 comments

We hope that everyone is well. The weather has turned and now has an autumnal feel to it, yet we are still getting some pretty warm days which is good. For us at Smarter Accounting, the autumn is busy as the tax return season enters full swing. Remember that self-assessment tax returns must be filed by 31 January 2023, we are not expecting any extensions this time. Therefore, if you need us to work on your return and you have not already got your records in, then get the records to us as soon as you can.

Budget Update

In our last blog we updated you on the ‘mini’ budget. As I am sure you are aware the financial markets reacted badly to the budget and the Government has been U-turning ever since. It feels like we are living in some strange times, but the events of the last few weeks have been extraordinary. On Friday, the Chancellor was sacked from his position and in doing so apparently taking the blame for the unfortunate market reaction.
We wrote this blog over the weekend, but even today before we issued it there have been further developments, with the latest changes as follows:

  • 45% Top Rate of Tax to Stay – This seemed the most shocking item in the mini budget. If you recall, the plan was to reduce the top rate of tax from 45% to 40%. This seemed a very strange decision in the first place but was removed at the Conservative Party Conference
  • Corporation Tax – On Friday the Prime Minister removed Kwasi Kwarteng from his position as Chancellor and replaced him with Jeremey Hunt. She then delivered a press conference, during which she went back on the mini budget announcement to cancel the planned Corporation Tax Increase. Corporation Tax rates will now increase from April 2023, as announced by Rishi Sunak back in October 2021. Corporation Tax Rates are currently 19% and will now increase as follows:
    • For companies with profits under £50,000 – Corporation Tax rates will continue at 19%
    • For companies with profits above £250,000 – Corporation Tax rates will increase to 25%
    • For companies with profits between £50,000 and £250,000 – Corporation Tax rates will increase on a sliding scale e.g., a company making profits halfway between the two figures, £150,000, will see half of the increase in Corporation Tax and pay at a rate of 22%
  • Jeremy Hunt Announcements Today – The new Chancellor has made an announcement this morning that seems to have reversed most of the remaining ‘mini’ budget changes:
    • Basic Rate Income Tax – Will remain at 20% and the planned 1% cut has been put on hold ‘indefinitely’
    • Energy Bills – The Government had announced to put a cap in place so that the average household energy bills were capped at £2,500. Today the Chancellor changed that significantly and the cap will now only be in place until April 2023. The Treasury led review will look at what measures should be put in place after this date
    • IR35 Rules – The Government had previously promised to change these rules, but the Chancellor announced today that the proposed change will not go ahead
    • Alcohol duties were due to be frozen, but the planned increases in the duty rates for beer, cider, wines and spirits will now go ahead
    • National Insurance – The removal of the extra 1.25% Health and Social Care levy will continue. However, company dividend tax rates have also increased by 1.25% and that increase will now stay.
Jeremy Hunt has been making various statements since his appointment and clearly, he is setting a far more secure and cautious approach. It really feels like the Government have been properly shaken by the market’s reaction and rumours abound about the security of the Prime Minister’s position. It is almost easier to say which of the ‘mini’ budget measures will stay:
  • National Insurance – The reversal of the extra 1.25% National Insurance will still be reversed
  • Stamp Duty – Plans unchanged and no stamp duty on first £250,000 and for first time buyers that rises to £425,000
  • Bankers’ Bonuses – The rules that limit bankers’ bonuses to twice their fixed salary will still be scrapped
  • Benefits – Rules will still be tightened by reducing benefits if people don’t fulfil job search commitments
Jeremy Hunt also announced on Sunday morning that we will not see a return to the budget austerity, which is good news. However, the Government and the Country faces a difficult time economically. A return to a more cautious fiscal policy will hopefully lead to the minimisation of interest rate and inflation rises. However, the UK along with the world are facing some very volatile and uncertain times.
Whilst things are economically uncertain, a return to a point where the Government announces policies and changes that we know are going to happen will be welcome. The mini budget always looked very strange and the uncertainty that it has created is very unwelcome indeed, at all levels.
Enough of the budget and onto other news!
Limited Company 130% Capital Allowances Super Deduction
Just a quick note that the current 130% super deduction on purchase of new plant and equipment by Limited companies is due to come to an end on 31 March 2023.
Therefore, if you are a Limited company and considering buying new plant and equipment make sure you get your orders in. In lots of areas there are significant lead times for purchases of equipment and the allowance can only be claimed once you are in possession of the item. Please note that the normal 100% deduction will still exist after 31 March.
Tax Investigation Service
It is the time of year where we write to clients inviting them to join our tax investigation service. This service is a bit like an insurance policy and covers clients for accountancy costs in the case of an HMRC enquiry. It also comes with other benefits (this year via an online business hub) offering advice, help and resources on:
  • HR
  • Legal
  • Health and Safety
We have seen an increase in HMRC activity in this area and now Furlough claims and the Self Employed Income Support Scheme (SEISS) grants are prime items for them to enquire about. This service is therefore a worthwhile one if you are worried about the cost of such enquiries. The time spent working on enquiries can add up, even for simple cases, and even if you haven’t done anything wrong there is usually still work to be done to prove that that is the case. Of course, even if you do not take out the service we will represent you in the case of an enquiry, but we will have to charge for time spent.
As there has been an increase in HMRC enquiries, our costs have increased and therefore the rise in the cost of the service this year is higher than normal. We do try and keep costs for the service low and for several years did not increase prices at all, but that is not always possible.
Personal Tax Account
HMRC for some years now have been pushing the benefits of a Personal Tax Account. This is an online login to your personal tax details. It is part of HMRC’s drive to turn everything digital and we are increasingly seeing a reliance on it for new tax items. It could be worth getting one as it may give you some interesting benefits:
  • Check your income tax code
  • Pay overdue tax
  • View the latest update on the value of your expected state pension
  • See what tax you have paid for the last 4 years
  • Claim a tax refund

Personal tax Accounts are probably the future and the above are only a few of the benefits. We particularly like the ability to view the latest position on your state pension qualifying years. Previously this has been a manual and lengthy postal process. It may be worth getting one and if you would like to apply (all online) then click on the link below
Apply for a Personal Tax Account

Xero Price Increases

Sorry to be the bearer of bad news. Xero have announced a price increase and we will have to increase prices from November. For most clients they will see a £2 per month increase. It is just over a year since the last increase and this year’s rise is, overall, similar to inflation.

Smarter Recruitment
We are currently recruiting to both offices. We are particularly looking for Accounting Technicians with practice experience. If you know anyone who may be interested, then please ask them to contact David in Teignmouth or Mark in Crediton.

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Best wishes and stay safe,


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