£100,000 – Loss of income tax personal allowance

Your income tax personal allowance – £12,570 for 2021-22 – will be reduced by £1 for every £2 your adjusted net income exceeds £100,000.

If your projected earnings for the current tax year are expected to be in excess of £100,000, perhaps for the first time, you still have three months to consider planning options to help you avoid this potential reduction in your personal allowance for 2021-22.

It is worth considering ways to avoid this as the effective rate of income tax you will pay if your earning fall between £100,000 and £125,140 is 60%. This is because as your personal allowance reduces, you not only lose the tax relief this has previously afforded, but the increase in taxable income will be subject to higher rate tax.

If you estimate that you may be affected by this loss of personal allowance, please call so we can help you consider your tax planning options.

£50,000 – Payback of Child Benefit payments

If either parent’s taxable income exceeds £50,000, HMRC will be entitled to a full or part-repayment of any Child Benefits (CBs) they may have received during the current tax year.

CBs will be repayable at the rate of 1% of the amount received for every £100 of income in excess of the £50,000 limit. This means that once income is in excess of £60,000, all CBs received will be recovered.

If affected, you can cancel receipt of future CBs, but this may not be advisable for NIC reasons.

HMRC will make a tax charge called the High-Income Child Benefit Charge (HICBC) to recover any CBs repayable. The parent with the highest income in excess of £50,000 will have to declare their need to repay CBs by submitting a self-assessment tax return.

If you are affected by this HICBC and are usure what you need to do, please call, we can help with any filing obligations.

£37,700 – Income subject to tax at higher rates

If your taxable income, after deducting your personal allowance, exceeds this amount you may be subject to income tax at higher rates.

There are strategies that may reduce this higher rate tax charge and keep you within lower rates of tax.

Please call so we can help you consider your options.

Please note that regional differences may apply where assemblies set their own income tax rates.

We are now two years into the COVID-19 pandemic and the virus is showing a remarkable ability to adapt. In its latest form, the Omicron variant, it is proving to be more transmissible and successful at seeking out new hosts.

If we have learnt anything from the experience of the past two years of anxiety and disruption it’s that adaptability is a key response. Included in this newsletter are tips to stay ahead of these challenges from a business perspective.

Unfortunately, the need to safeguard the NHS means that our entertainment and hospitality trades will again be asked to bear the brunt of COVID-19 related disruption strategies.

It will be interesting to see, if in the coming year, government is again drawn into providing furlough or similar grants to sustain affected small business employers and the self-employed.

With inflation rising, currently 5.1%, Rishi Sunak will be scratching his head as printing money to fund further support is directly opposite to his Autumn Budget claims that he is now focussed on repaying government debt, and this largesse could fuel further inflationary pressures.

Resilience needs to be a worthwhile goal for 2022 but tempered with realism; we may be sometime away from relegating COVID-19 to the same nuisance value as the flu.

We have listed below a number of ideas that might ease your progress through any continuing COVID-19 related disruption during 2022.

The following comments are not advice. Every business is different so please call if you have concerns due to a reduction in trade this year.

• Mothball investment plans. Could you defer decisions on buying that new car or other equipment for your business. In a year’s time the economy may have had a chance for a more sustainable recovery that would make more productive use of your acquisition.
• Discuss a hiatus in pensions investments with your pension’s advisor.
• Agree an instalment plan with HMRC to clear any current or future Income Tax or Corporation Tax liabilities.
• Reduce stocks of goods. If turnover falls due to future lockdown activity, reducing stocks will ease pressure on cash-flow and release storage space.
• Negotiate a reduction in hours with your staff rather than laying people off. This may be a solution to keeping teams together.
• Consider your staff as a service option if they become under-employed by reduced activity. i.e., sell their time to firms who need periodic, additional support but don’t want to commit to taking on a full-time worker.
• Clear out under-utilised office or production space and offer to sub-let on short-term lease arrangements.
• Hire out under-utilised plant.
• Defer any expenditure that can be safely delayed for a year without unduly affecting your ability to trade.

Planning is key

As soon as you become aware of threats to your future trading, take time out to formally plan a survival process.

We can help. Don’t wait until cash resources are exhausted. Contact us as soon as you feel your hard-earned business is under threat.

Do you have half-completed plans to open an online-shop this year?

Even if you have never considered internet trading, could this be an option for 2022?

Business owners

If you are selling goods, creating a web-based sales platform will vastly expand your reach to willing buyers.

Combined with effective social media and other marketing activity this may be an effective hedge against future dips in the wider economy.

If you supply services, perhaps you could create online resources to be purchased and downloaded from your website.

Non-business individuals

Do you have a hobby that you could expand into a part-time business selling goods online?

It isn’t necessary to build your own website to do this. There are a number of ready-made sales platforms like Etsy.com.

You should be able to trial this, and see if the idea has legs, without giving up your day job.

We can help

Please call if you would like to brainstorm this option for your business or to develop additional income streams.

As you will see from the tax diary notes this month, there are two significant tax payment deadlines this month.

• 1 January 2022 – Companies with a 31 March 2021 year end date will need to settle their Corporation Tax payment on or before this date.
• 31 January 2022 – Taxpayers who are subject to self-assessment will need to pay any underpaid tax and NIC for 2020-21 plus any first payment on account for 2021-22.

Clients reading this reminder who need to know how much to pay or reference numbers to quote should contact us asap.

And if you cannot make payment in full, on the due date, you could contact HMRC to ask for more time.

You can make your own Time to Pay arrangement using your Government Gateway account, if you:

• have filed your latest tax return
• owe less than £30,000
• are within 60 days of the payment deadline
• plan to pay your debt off within the next 12 months or less

Call the Self-Assessment helpline if you cannot make your own Time to Pay Arrangement online, for example, if you owe more than £30,000 or need longer to pay.

Self-Assessment Payment Helpline
Telephone: 0300 200 3822
Monday to Friday, 8am to 4pm

For other taxes, contact the Payment Support Service, 0300 200 3835.

1 January 2022 – Due date for Corporation Tax due for the year ended 31 March 2021.

19 January 2022 – PAYE and NIC deductions due for month ended 5 January 2022. (If you pay your tax electronically the due date is 22 January 2022).

19 January 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2022.

19 January 2022 – CIS tax deducted for the month ended 5 January 2022 is payable by today.

31 January 2022 – Last day to file 2020-21 self-assessment tax returns online.

31 January 2022 – Balance of self-assessment tax owing for 2020-21 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2021-22.

1 February 2022 – Due date for Corporation Tax payable for the year ended 30 April 2021.

19 February 2022 – PAYE and NIC deductions due for month ended 5 February 2022. (If you pay your tax electronically the due date is 22 February 2022)

19 February 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2022.

19 February 2022 – CIS tax deducted for the month ended 5 February 2022 is payable by today.

We are all ‘up to here’ in accommodating COVID-19, and depending on our tolerance levels, this is likely to continue into 2022.

There are remote signs that a combination of vaccines and/or anti-viral drugs will eventually arrest the spread of this infection, but we will have to face disruption in economic activity next year and the entertainment and hospitality trades will again bear the brunt of any downward trends in trade.

The Bank of England has confirmed that inflation is running ahead of targets and year on year to the end of November 2021, it was 5.1%. Expect increases in interest rates in the new year.

Prices will likely be volatile until inflation is reduced to more manageable levels and supply issues are resolved.

Many trades are still starved of appropriate labour, including the NHS. This may create conditions for wage inflation as employers vie for suitable applicants.

Which is shaping up as just a few challenges ahead for business owners in 2022.

What to do?

As the title of this post suggests, planning, being prepared is a sensible option. Burying your head in the sand may do more than restrict your vision. At a minimum you should:

• Prepare a budget for 2022 and monitor your actual results against these forecasts.
• Be prepared to flex your budgets if your situation changes.
• Each month extend your budget projections, so you are always looking at trading expectation twelve months ahead.
• Take remedial action sooner rather than later if the numbers highlight possible challenges. For example, if cash flow dips and you will need funding to bridge the gap.
• If you have resisted the use of cloud accounting software to this point in time, speak to us as a matter of urgency. Having real time data available to you at the click of a mouse is a must-have resource in these difficult times. The software we recommend would also accommodate your budgets and provide reports that compare actual results with forecasts.

And finally, discuss your results with us. We can help you chose your best options to weather any inconveniences that circumstance may throw at us. If we have learnt anything from the past years of disruption, it’s that its prudent to expect the unexpected, plan for the worst and hope for the best.

From 15 December 2021, the government is making the following reductions to the grants made available for certain electric vehicle purchases.

• It will provide grants of up to £1,500 (previously £2,500) for electric cars priced under £32,000. There are currently around 20 models on the market that would qualify for this grant.
• Support for wheelchair accessible vehicles is being prioritised, with these retaining the £2,500 grant and a higher £35,000 price cap.

Grant rates for the Plug in Vans will now be:

• £5,000 for large vans and
• £2,500 for small vans, with a limit of 1,000 per customer per year.

According to government sources, Plug in Van Grant orders in 2021 are already over 250% higher than in 2020.

Motorcycle and moped grants will also be changing, with the government now providing £500 off the cost of a motorcycle, and £150 for mopeds, with a price cap on vehicles of £10,000. Almost 50% of mopeds sold this year were battery electric, with some models now at price parity with their internal combustion engine equivalent.

The government’s total investment in the EV transition remains unchanged following these changes, although total money invested in these grants will depend on the publics’ reaction.

If grant funding is reduced this will increase the price of a new, qualifying EV vehicle. Logic would predict that if the price increases, demand will drop.

Many individuals and businesses will have been affected by the disruption in electricity supplies due to recent storm damage.

Most of the serious damage that disrupted supplies was reconnected fairly quickly, but for many home and business owners, reconnection has become a protracted affair.

A recent letter from the Secretary of State for Business to Ofgem is worth noting. In his letter, the RT Hon Kwasi Kwarteng MP said:

“Storm Arwen saw the worst damage and disruption to the electricity system in over 15 years. A significant number of customers in Northern England and Scotland have faced power disruptions in excess of one week, and the prolonged restoration has made life incredibly difficult for thousands of customers across the country.

“I understand that under Ofgem’s Guaranteed Standards, Distribution Network Operators have up to 10 working days from when a customer applies to make payments to impacted customers in all scenarios barring severe weather. Given the significant scale of disruption caused, particularly during the run up to Christmas, I expect Ofgem to ensure Distribution Network Operators make every effort to deliver compensation to affected customers swiftly and without delay, considering the burden making a detailed application might place on impacted customers, and in line with the Guaranteed Standards expectations.

“I am mindful of the 3-month eligibility window customers have to apply for compensation, however I expect Distribution Network Operators to proactively notify affected customers of their eligibility to simplify the application process, following what has already been a stressful and disruptive time.

In the review into the response to the Storm I have asked officials to conduct, we will also be looking at DNOs responsiveness in providing compensation. Please confirm to my officials what steps Ofgem are taking to ensure customers will receive compensation as soon as reasonably practical.”

The Ofgem ‘Know your rights’ following power cuts can be accessed at https://www.ofgem.gov.uk/sites/default/files/docs/2016/12/ofg581_guarantee_standards_booklet_updated_dec16.pdf

The message is clear, apply for compensation, and quickly, and certainly within the 3-month claim’s window.

January 2022 is a ‘taxing’ month. It is the last month to file a self-assessment tax return (electronically) for 2020-21 and avoid late filing penalties.

It is also a month when significant tax bills may become payable.

Companies

Companies that have a 31 March 2021 year end will need to pay any corporation tax due for the year ending on that date, on or before 1 January 2022.

New Year revellers may want to take this into account if they fit this profile and pay any corporation tax due the week before New Year’s Day.

Self-assessment

Any balance of income tax or NIC due for the tax year 2020-21 plus any first payment on account for 2021-22, both become payable on or before 31 January 2022.

Need time to pay?

If cash flow restricts your ability to meet these tax payments by the due dates, you could set up a Time to Pay facility with HMRC.

In a recent press release on the subject HMRC said:

“Where taxpayers are struggling to pay their bill in full, the self-serve Time to Pay service allows Self-Assessment individuals manage how they pay their tax liabilities. They can use the online service for tax bills worth up to £30,000 without the need to talk to HMRC.

“If they can’t pay in full, taxpayers can set up their own Time to Pay arrangement online if they:

• have filed their tax return for the 2020 to 2021 financial year
• owe less than £30,000
• are within 60 days of the payment deadline
• plan to pay their debt off within the next 12 months or less

“If taxpayers owe more than £30,000, or need longer to pay, they should call the Self-Assessment Payment Helpline on 0300 200 3822.

“The service will create a bespoke monthly payment plan based on how much tax is owed and the length of time needed to pay.”