We are now coming to the end of the government’s principal coronavirus support measures.
In addition, a significant change to taxation was announced with a 1.25% increase to employee national insurance, employer national insurance, and income tax on dividends. In further detail:
Coronavirus Job Retention Scheme – Furlough
This ends on 30 September 2021, with final claims needing to be made by Thursday 14 October 2021. Until that point, employers can claim up to 60% of an employee’s wages for a non-working time, up to a maximum of £1875 per month. Employers must fund a minimum of 20% of wages plus employer NIC and pension contributions.
If you have not considered already you need to decide whether it will be possible to bring these employees back, or whether you need to be taking employment law advice regarding their redundancy.
Self employment income support scheme
The final deadline for claiming the fifth grant under the SEISS scheme is tomorrow 30th September 2021. The conditions for this grant are relatively complex and if you are still to claim, or if you are still to determine whether you are eligible, we would draw your attention to our earlier guidance on this grant which can be viewed here
HMRC are now pursuing unpaid tax debts with increased vigour and from 1 October 2021, it will again be possible to serve winding-up proceedings on a company that has not paid a debt. We expect that HMRC will seek to use this new power. This means that if your business does have tax arrears, now is the time to put a time to pay agreement in place with HMRC. However, both commercial and residential tenants will remain protected from eviction proceedings until the spring of 2022. See more on the Government website.
Personal tax increase
Few will have missed Boris Johnson’s announcement regarding the new health and social care tax to be introduced in April 2022.
The new tax is intended to raise £12 billion per year and for the first three years is intended by the government to be used to address the NHS backlog caused by COVID, and then in the longer term to fund reform in the social care system.
The tax will initially be a 1.25% rise in National Insurance paid by both employers and employees (effectively an increase of 2.5% on payroll salaries) and from April 2023 will become a separate tax (Health and Social Care Levy) on earned income. From April 2023 it will also be paid by people who continue to work beyond retirement age. In addition, from April 2022 there will be an increase of 1.25% in income tax on dividends.
The main exemptions from the Health and Social Care Levy and a general increase in tax rates are rental income (including buy to let landlords) and pensions income.
As both employee and employer, national insurance contributions are increased (ie a total increase of 2.5%), but dividend tax rates are only increased by 1.25%, this will restore some of the savings available to business owners from paying themselves in dividends. These savings would previously have largely disappeared from April 2023 as a consequence of the corporation tax increase to 25%.
The Chancellor has announced that he will deliver a Budget on Wednesday 27th October 2021. No doubt there will be media speculation as to its content. Harts will send out a high-level budget briefing thereafter and are undertaking a webinar on Thursday 4th November 2021 to provide a more detailed and in-depth analysis once full details are available for interpretation.
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