Updated: Aug 5
Crikey, a lot's happened over the summer.
We have new PM (the fourth in five years), a new Chancellor (the fifth in five years), and a new monarch (the second in seventy years). Her late Majesty had 15 PM's in her reign, and the way things are going that might be one record that our new King has a chance of beating.
I must confess I was slow at getting something out to our readers (assuming the plural is correct) about the mini-Budget that wasn't a Budget. Hindsight is great, and I'm therefore going to claim there was a sixth sense telling me things would change...and of course they did.
The content falls in the 'dull but important' category of life and I've therefore tried to summarise it as concisely as possible below:-
HEALTH AND SOCIAL CARE LEVY SCRAPPED
It was on 7 September 2021 that we first heard about a new 1.25% Health and Social Care Levy, imposed on employers, employees and the self-employed, coming in from 2023/24. Further, this was to be effectively accelerated into 2022/23 by a 1.25 percentage point rise in National Insurance contributions (NICs). As expected, and despite changes to thresholds earlier this year, the increased NIC rates have resulted in a reduction in take home pay for many individuals.
The Health and Social Care Levy has now been abolished and will not come in next April. Further, the Government is removing the associated 1.25 percentage point increase in NICs from 6 November 2022.
Employers will need to make sure that they update their payroll software in time for this third change in NIC rates and bandings in 2022/23! (Note that the 'message' we were all encouraged to add on our payslips will also need to come off)
In the case of NIC rates which apply annually, transitional rates will apply to deal with the mid tax-year change. In particular,
Class 1 employee NIC rates that apply annually (including for company directors) will be set at a main rate of 12.73% and an additional rate of 2.73% for 2022/23.
Class 1A NICs on taxable and expenses (if not paid monthly through the payroll) will be set at 14.53% for 2022/23. The same applies to Class 1B NICs for PAYE Settlement Agreements.
Class 4 NICs paid by self-employed individuals will be set at a main rate of 9.73% and an additional rate of 2.73% for 2022/23.
INCOME TAX RATESCUT FOR 2023/24
Rishi Sunak, when Chancellor had dangled a possible cut in the basic rate of income tax from 20% to 19% from 2024/25. This will now be brought forward by one year to 2023/24 and will apply to non-dividend income.
It must be noted that Scottish income tax rates for general income are set independently, and we await the results of the Scottish Budget Review for more information on the rates applicable in Scotland next year.
The top rate 45% tax rate which was to have been abolished is now staying....
CORPORATION TAX RATE INCREASE SCRAPPED
In the March 2021 Budget, it was announced that the rate of corporation tax would increase to 25% from 1 April 2023 where a company’s profits exceeded £250,000 a year, with the current 19% rate continuing to apply where profits were no more than £50,000 a year. There was also scheduled to be an effective 26.5% rate on profits between £50,000 and £250,000 a year.
This has now been reversed - in short all companies currently paying corporation tax at 19% will continue to do so.
SDLT THRESHOLD INCREASED TO £250,000
Ironic that the logic behind this was to stave off a housing slump when the subsequent mortgage jumps in the last two week are more likely to encourage one...
For residential property transactions completed on or after 23 September 2022;
The Nil Rate Band (NRB) has been increased from £125,000 to £250,000.
The NRB for first-time buyers has been increased from £300,000 to £425,000. This applies where first-time buyers purchase a property costing less than £625,000 (previously £500,000)
These changes only apply to English and Northern Irish properties - Welsh and Scottish powers are subject to devolved powers.
AND OF LESS RELEVANCE TO MOST BUT STILL IMPORTANT
We're seeing changes to the SEIS share investment scheme, improvements to the Employee Company Share Ownership Plans and some relaxation around IR35.
That's all a bit dry, are there any other positives out there ?
We don't have dodgy election slogans - well, OK....maybe we weren't 'ready for Rishi', so we're now getting 'Busy with Lizzie' - whatever either of those mean.
But at least it's a stage removed from the Richard Nixon slogans of the 1960's. In case you're wondering what on earth I'm talking about, I've attached a link...
Brenda has a tax liability, or maybe she doesn't - I love seeing taxpayers' money well spent on administration.
Brenda, one of my smaller clients, had sold her rental property a couple of years ago and now only has pension income, all taxed at source. I wrote to HMRC to suggest that they shouldn't continue to need a tax return completed which, helpfully for Brenda, they agreed.
So instead of me calculating her tax (for a very modest and reasonable fee), HMRC did. They assessed it (correctly) at 20 pence, and wrote to us both telling us this and that they would collect it through PAYE.
Another letter followed changing this (incorrectly) to £5.75, before the next day a further letter arrived apologising for the error and restating it to 20 pence.
We then had a notice of coding issued to reflect the 20p being collected through PAYE
Two days later we both received a letter saying that they can no longer collect the tax under PAYE and therefore could she arrange to pay it at the end of January.
A day after that a revised notice of coding came through the post which stops it being collected through PAYE.
Today I received an unprompted letter reviewing the case, HMRC apologise for the original misunderstanding of the amount being coded in to PAYE. There is a whole paragraph deducted to 'hardship' which says 'If your client finds herself unable to pay the amount demanded (remember it's 20 pence !) then she should contact HMRC at the earliest opportunity to agree a payment plan.
Or, they could just have written it off and saved the postage.
With all that's been going on in the last few days it's been difficult to get away from mathematics - with the Chancellor doing his sums (or not...), mortgage rates going up, exchange rates going down.
It brought me back to my youth, I used to love what was still called arithmetic, and once dated a Maths teacher. We had to split up though, she was obsessed by an x.
Time to go...