November & December 2022

The new Chancellor Jeremy Hunt had warned the public and the financial markets that his Autumn Statement would include “eye-watering” cuts in public spending and tax rises for those with the ‘broadest shoulders’. Unlike the ill-fated Fiscal Event of 23 September, the Government “rolled the pitch” this time with several leaks prior to the event. 

Mr Hunt wants to avoid the austerity that followed the 2008 financial crash and is focused on measures that will keep the period of recession as short as possible.

Many pensioners and those on means-tested benefits will be relieved that their 2023/24 payments will be uprated in line with the 10.1% inflation in the year to September 2022. There will also be further support for those struggling with energy bills. But this continued support needs to be paid for and the tax increases and spending cuts will not be popular.

For all individuals, the first £2,000 of dividend income is taxed at 0%.

The government have now decided that this 'dividend allowance’ of £2,000 will be reduced to £1,000 in the 2023/24 tax year and then again to just £500 in the 2024/25 tax year.

It should be remembered that the income tax rates applied to dividend income outside of the allowance have only recently been increased to 8.75%, 33.75% and 39.35% (for dividend income falling into basic rate, higher rate and additional rate bands respectively).

Combined, these measures will mean that those reliant on dividend income will pay more tax. If you are a director/shareholder, please contact us to discuss the best strategy for extracting profits from your company from 6 April 2023.

For those provided with an electronic or ultra-low emission company car (emitting less than 75g of CO2 per kilometre), there will be annual increases in the benefit-in-kind percentages, and therefore the taxes paid by both employees and employers, from the 2025/26 tax year.

For all other company car users, there will be a 1 percentage point increase (up to a maximum of 37%) in the calculation of the benefit-in-kind in 2025/26 before being fixed for the following two tax years.

The fixed multipliers used to calculate benefits-in-kind on employer provided vans, van fuel (for private journeys in company vans) and car fuel (for private journeys in company cars) will increase in line with the Consumer Price Index (CPI) from 6 April 2023.

The government have also announced that they will introduce Vehicle Excise Duty on electric cars, vans and motorcycles from April 2025.

As previously announced and as we head into 2023;

• The £1million Annual Investment Allowance - giving 100% tax relief to businesses investing in qualifying plant and machinery - is now permanent.
• The Government is increasing the generosity and availability of certain Venture Capital Schemes, including the Seed Enterprise Investment Scheme for start-up companies.

And finally, in all matters, we are here to help you. Please do get in touch about any of the Autumn Statement measures or otherwise.

With all of the U-turns on tax policy in the last couple of months, businesses may be confused about what changes are going ahead and which ones have been scrapped by the new chancellor.

One of the controversial announcements in the mini-budget on 23 September was the abolition of the “off-payroll” rules that apply when workers are engaged via an intermediary, typically their own personal service company (PSC). This was due to take effect from 6 April 2023, restoring the tax rules to the pre-6 April 2017 position and would have reduced the compliance burden on end-user organisations. However, this is one of the many measures that was scrapped by Jeremy Hunt, so the current rules continue to apply.

This means that public sector bodies and large and medium-sized organisations will still need to decide the employment status of every worker who supplies their services through their own intermediary (PSC), even if they are provided through an agency. Whether the organisation qualifies as large or medium-sized is determined by the criteria set out in the Companies Act.

If the off-payroll working rules apply to the relationship, they are required to communicate the worker’s employment status determination to them and also the fee-payer by using a Status Determination Statement (SDS). If the end-user organisation is also the fee-payer, they will need to deduct and pay Income Tax and National Insurance contributions to HMRC.

HMRC suggest that end-users utilise the Check Employment Status for Tax service to help them decide if the off-payroll working rules apply.

For detailed guidance see: April 2021 changes to off-payroll working for clients.

With the Christmas season suddenly on the horizon, principals will be looking at ways to thank their staff for their contributions and hard work during the year. Whatever your plans are, you do need to be aware of the tax implications of entertaining and making such gifts.

Staff entertainment

As an employer providing social functions and parties for your employees, you have certain National Insurance and reporting obligations.

What you need to report and pay depends on:

• if it’s an annual event
• if it’s open to all of your employees
• if it costs more than £150 per head
• how many events you provide during the tax year
• whether the employee is a director, and how much they earn

You might not have to report anything to HM Revenue and Customs (HMRC) or pay tax and National Insurance. To be exempt, the party or similar social function must be all the following:

• £150 or less per head per year
• annual, such as a Christmas party or summer barbecue
• open to all your employees

Trivial benefits

You do not have to report a benefit for your employee if all of the following apply:

• it costs you £50 or less to provide (per employee)
• it is not cash or a voucher that can be exchanged for cash
• it is not a reward for their work or performance
• it is not in the terms of their contract

This is known as a ‘trivial benefit’. You do not need to pay tax or National Insurance or let HMRC know.

The employee will have to pay tax on any benefits that do not meet all of the above criteria.

If a business provides a bottle of wine in a nice gift bag as a Christmas gift, for example, the value of the gift bag should be included in the value of the gift when deciding whether the total value exceeds the trivial benefits limit.

Staff Christmas Bonuses

Staff bonuses issued must be reported through payroll as these are subject to Income Tax and National Insurance.

Bonuses paid to staff must be included in payroll as additional earnings. If you do have plans to pay a bonus, you will need to speak to your payroll provider in advance of the payment to ensure that this is reported to HMRC at the time of payment.

As always, do feel free to contact us if should you require advice.