General

The Scottish Child Payment increased to £25 per week from 14 November 2022. The payment is available to qualifying applicants living in Scotland for children under the age of 16. The Scottish Child Payment was launched in February 2021, initially for children under the age of 6. It is estimated that some 400,000 children in Scotland are now eligible for the payment.

In order to qualify, the applicant or their partner must meet the necessary conditions.

The Scottish government website states the following:

You can apply whether you're in work or not, and if you or your partner are getting one or more of the following benefits:

• Universal Credit
• Child Tax Credit
• Working Tax Credit
• Income-based Jobseeker's Allowance (JSA)

Social Security Scotland also accept claims if you alone are named on one of these benefits:

• Pension Credit
• Income Support
• Income-related Employment and Support Allowance (ESA)

If your partner is named on any of the above three benefits and you are not, your partner should apply.

An application can be made online, by post or by calling Social Security Scotland free on 0800 182 2222. Payments are made every 4-weeks. There are currently delays in processing applications, but payments will be backdated to the date of application. Being in receipt of the Scottish Child Payment does not affect any other UK or Scottish Government benefits that you, or any person in your household, currently receive.

Working people across the UK will be protected from disruptive strikes thanks to new laws introduced recently. They will allow employers in critical public sectors to maintain minimum levels of service during strikes.

The government is introducing this legislation to ensure that striking workers don’t put the public’s lives at risk and prevent people getting to work, accessing healthcare, and safely going about their daily lives.

The government will first consult on minimum service levels for fire, ambulance, and rail services, recognising the severe disruption that the public faces when these services are impacted by strikes, especially the immediate risk to public safety when blue light services are disrupted.

The government hopes it will not have to use these powers for other sectors included in the Bill, such as education, other transport services, border security, other health services and nuclear decommissioning.

The government expects parties in these sectors to reach a sensible and voluntary agreement between each other on delivering a reasonable level of service when there is strike action. This will, however, be kept under review and the Bill gives the government the power to step in and set minimum service levels should that become necessary.

The Bank of England’s Monetary Policy Committee (MPC) met on 15 December 2022 and voted 6-3 in favour of raising interest rates by 50 basis points to 3.5% in a move to try and continue to tackle upward pressures on inflation. This is the ninth time in a row that the MPC has increased interest rates with rates now the highest they have been since November 2008.

Consequently, the late payment interest rate applied to the main taxes and duties that HMRC charges increases by 0.5% to 6.00%.

These changes will come into effect on:

• 26 December 2022 for quarterly instalment payments; and
• 6 January 2023 for non-quarterly instalments payments.

The repayment interest rates applied to the main taxes and duties that HMRC pays interest will increase by 0.5% to 2.5% from 26 December 2022. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

The Chancellor of the Exchequer, Jeremy Hunt has confirmed, in a written statement, that the next UK Budget will take place on Wednesday, 15 March 2023. This will technically be the Chancellor’s first Budget although his Autumn Statement to the House of Commons on 17 November 2022 included many announcements more typically seen in a traditional Budget.

This means there have already been a raft of changes announced for 2023-24, so it will be interesting to see what further changes are announced as part of the Budget next Spring.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech next March.

The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR). This forecast will be in addition to that published for the Autumn Statement and fulfil the obligation for the OBR to produce at least two forecasts in a financial year, as is required by legislation.

The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

The Chancellor, Jeremy Hunt, recently hosted a meeting at 11 Downing Street to discuss what help may be available to support homeowners who encounter problems paying their mortgage. The meeting was attended by leaders of the UK’s major mortgage lenders, the Chair of the Financial Conduct Authority (FCA), and Martin Lewis of Money Saving Expert. The meeting was convened in light of the increase in interest rates over the last year coupled with rising inflation. 

At the meeting, mortgage lenders committed to help all their customers by:

• enabling customers who are up to date with payments to switch to a new competitive, mortgage deal without another affordability test;
• providing well-timed information to help customers plan ahead should their current rate be due to end;
• offering tailored support to those who start to struggle with payments, which may vary by lender, but may include extending the term of the mortgage to make monthly payments lower, a short-term reduction in monthly payments or accepting interest-only payments for a period where appropriate; and 
• ensuring highly trained and experienced staff are on hand to help where needed.

The government also confirmed that they would take action to make Support for Mortgage Interest easier to access and increased funding for the Money and Pensions Service to provide debt advice in England. 

The FCA in turn published a consultation on draft guidance clarifying how lenders can support borrowers impacted by the rising cost of living and will also publish more information for borrowers struggling to make their monthly mortgage payment.

A free HMRC tax app is available and offers some useful functionality. In fact, in the 12 months up to October 2022, HMRC received almost 3 million calls from people asking for information that is now readily available on the app.

This included:

• 354,499 calls from people who forgot/lost their National Insurance number;
• 444,301 calls from people who wanted their employment history and tax details; and
• 323,381 calls from people who wanted their tax codes.

The information can also be downloaded and printed – so there is no need to call HMRC to ask for it to be sent in the post.

The APP can be used to see:

• your tax code and National Insurance number;
• an estimate of the tax you need to pay;
• your income and benefits;
• how much you will receive in tax credits and when they will be paid;
• your Unique Taxpayer Reference (UTR) for self-assessment; and
• how much self-assessment tax you owe.

The app can also be used to complete a number of tasks that usually require the user to be logged on to a computer. This includes:

• make a self-assessment payment;
• renew and report changes to your tax credits;
• access your Help to Save account;
• using HMRC’s tax calculator to work out your take home pay after Income Tax and National Insurance deductions;
• track forms and letters you’ve sent to us;
• claim a refund if you’ve paid too much tax; and
• update your postal address.

The app is available to download from the App Store for iOS and from the Google Play Store for Android.

The Department for Digital, Culture, Media & Sport (DCMS) has published a new press release to confirm that they have been working together with internet service providers to deliver low-cost broadband and phone packages called social tariffs.

These new social tariffs offer discounted broadband and mobile deals for people on Universal Credit and other benefits. The new tariffs are being offered by a range of suppliers and the deals currently range from £10 – £25 per month. This can offer savings of up to 50% compared to the average cost of similar broadband packages. 

If you or someone in your household claims Universal Credit, you could switch to any of the tariffs available. Some providers also include people on other benefits such as Pension Credit, Employment and Support Allowance, Jobseeker’s Allowance, and Income Support. The person receiving the benefit will need to be the main person on the contract.

If your current provider offers a social tariff, you can switch at any time free of charge. If your provider does not offer one of these tariffs you can switch to one that does. Your provider might let you leave your current contract without paying a penalty fee if you explain the reasons for the change.

The government published the Autumn Finance Bill 2022 on 22 November 2022. The Bill is officially known as Finance Bill 2022-23. The Bill contains the legislation for many of the tax measures announced in the recent Autumn Statement.

The Autumn Finance Bill will be followed by the main Spring Finance Bill 2023 which will be published after the spring Budget and will cover any remaining tax measures needed ahead of April 2023.

Some of the many measures included within the Bill are:

• The Energy Profits Levy (EPL) will increase to 35% (from 25%), effective 1 January 2023. The investment allowance will be reduced from 80% to 29% for qualifying investment expenditure thereby maintaining its existing cash value.
• The Income Tax additional rate threshold will be reduced from £150,000 to £125,140 with effect from 6 April 2023
• The current £2,000 dividend tax-free allowance is to be reduced to £1,000 from April 2023 and to £500 from April 2024.
• Vehicle Excise Duty (VED) will become payable on new electric cars, vans and motorcycles from April 2025 in the same way as it currently applies to petrol and diesel vehicles. This change will apply to new and existing zero emission cars.
• The Income Tax thresholds will be maintained at their current levels for a further two years until April 2028. The higher rate threshold will remain frozen at £37,700 and the personal tax allowance will remain at £12,570 through to April 2028.
• The Research and Development Expenditure Credit (RDEC) rate will increase to 20% (from 13%) with effect from 1 April 2023. From the same date, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.

You may have encountered this phrase, fiscal drag, in recent weeks, particularly if following the Autumn Statement announcements last week.

A large part of Chancellor Hunt’s announcements confirmed that rates and allowances for Income Tax are to be frozen at current levels until April 2028.

Your immediate response to this news may have been one of ‘underwhelm’. No changes so no worse-off.

But in many cases, this would be an incorrect assumption.

As we are frequently reminded, with inflation currently running at over 11%, you would need to secure a pay increase of 11% to maintain the purchasing power of your take-home pay.

Unfortunately, if you are already a taxpayer, you would need a pay increase in excess of 11% to maintain your spending power.

For example, freezing your annual tax-free personal at the current £12,570 means any additional income you earn will by taxed (on the assumption that you are already paying tax) and it will be payable at your top rate.

In certain circumstances, this may mean paying tax at higher rates for the first time.

This double hit on your earnings, from inflation and tax on pay increases, will likely result in falling disposable income in the coming years.

May be time to dust off ideas for additional income streams?

The new Chancellor of the Exchequer, Jeremy Hunt, has delivered his Autumn Statement to the House of Commons against a backdrop of a worsening cost of living crisis and with confirmation from the Office for Budget Responsibility OBR that the UK has now entered into a recession.

The OBR has stated that the economy is still forecast to grow by 4.2% this year. GDP is then predicted to fall by 1.4% in 2023, before rising by 1.3% in 2024.

As expected, the Chancellor set out billions of pounds in tax increases and spending cuts to continue the restoration of market stability after the disastrous mini-budget.

The following summary of the measures announced by the Chancellor as part of the Autumn Statement measures is split into two sections:

1. Taxation changes
2. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

Income Tax

The Chancellor has announced that the Income Tax additional rate threshold will be reduced from £150,000 to £125,140 with effect from 6 April 2023. This move will see an estimated 250,000 further taxpayers pay the additional rate of Income Tax of 45% from next April.

It had been previously announced that there would be no increase in the Income Tax Personal Allowance and higher rate threshold until April 2026. The Chancellor has now confirmed that the thresholds will be maintained at their current levels for a further two years until April 2028. Higher rate threshold will remain frozen at £37,700 and the personal tax allowance will remain at £12,570 through to April 2028.

This is effectively a “stealth tax” increase. Wage earners benefitting from annual increases in their earnings up to April 2028 will find themselves paying tax on the full value of any increases. This is because, with personal allowances frozen until April 2028, any increases in earnings will be taxed and, in some cases, this may push earnings into the higher rate tax bands especially for those who will now be subject to the 45% rate (with its new reduced limit).

Regional variations to Income Tax rates may apply in Wales and Scotland.

Income Tax and dividend income

The current £2,000 dividend tax-free allowance is to be reduced to £1,000 from April 2023 and to £500 from April 2024.

The 1.25% increase in the tax rates payable on dividend income, which took effect in April 2022 remains in place.

The rates that apply in all regions of the UK from 6 April 2023 are as follows:

• Dividends that form part of the basic rate band – 8.75%
• Dividends that form part of the higher rate band – 33.75%
• Dividends that form part of the additional rate band – 39.35%

Inheritance Tax

No changes to present rates and allowances were announced. These rates and allowances will remain frozen at current levels until April 2028.

The nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.

Stamp Duty Land Tax

On 23 September 2022, the then Chancellor, Kwasi Kwarteng, announced a permanent increase in the SDLT nil rate band to £250,000 (from £125,000). There was also an increase in the nil-rate threshold for first-time buyers making a purchase of up to £425,000 (from £300,000). The first-time buyers relief also increased the nil-rate threshold to £425,000 (from £300,000) for first-time buyers of properties costing up to £625,000 (from £500,000). There is no relief available for first-time buyers spending more than £625,000 on a property. There are a number of requirements that must be met in order to qualify for the relief.

These changes were one of the only surviving measures from the mini-Budget. It was announced as part of the Autumn Statement that these measures will remain but as a temporary SDLT reduction until 31 March 2025 and not as a permanent change as originally announced.

It is important to note that these measures apply to England and Northern Ireland only. Any changes to the Land and Buildings Transaction Tax in Scotland or the Land Transaction Tax in Wales would be announced separately.

National Insurance

The Chancellor also confirmed that the National Insurance contributions (NICs) Upper Earnings Limit (UEL) and Upper Profits Limit (UPL) that were already fixed at their current levels until April 2026 will now be maintained for an additional two years until April 2028.

The 1.25% rise in National Insurance contributions (NICs) that came into effect at the start of the 2022-23 tax year on 6 April 2022 was reversed on 6 November 2022. There have been no further changes announced and the cancellation of the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 remains in place and will not go ahead as originally planned.

The alignment of the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs with the personal allowance of £12,570 that came into effect on 6 July 2022 will stay at this level until April 2028.

The government will fix the Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) at 2022- 23 levels in 2023-24. The LEL will remain at £6,396 per annum (£123 per week) and the SPT will remain at £6,725 per annum. The Upper Secondary Threshold will stay fixed at £50,270 per annum until April 2028, to remain aligned with the UEL and UPL.

The government will use the September CPI figure of 10.1% to uprate the Class 2 and Class 3 NICs rates for 2023-24. The Class 2 rate will be £3.45 per week, and the Class 3 rate will be £17.45 per week.

Capital Gains Tax

The Chancellor announced a significant reduction in the annual exempt amount applicable to Capital Gains Tax (CGT). This rate had previously been fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people.

The exempt amount will now be reduced to £6,000 from April 2023 before being further reduced to £3,000 from April 2024.

Corporation Tax

The Chancellor had previously announced on 17 October 2022 that the planned increases in Corporation Tax (CT) rates from April 2023 would be going ahead.

From1 April 2023, there will be two rates of CT.

• Taxable profits up £50,000 will continue to be taxed at 19%.
• Taxable profits more than £250,000 will be taxed at the main rate of 25%.
• Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Corporation Tax and banking companies

From 1 April 2023, the rate of surcharge on banking companies will be 3% and the surcharge allowance will increase from £25m to £100m.

Diverted Profits Tax

The rate of Diverted Profits Tax will increase from 25% to 31% from 1 April 2023. This will maintain the 6% differential above the main rate of CT.

Corporation Tax – R&D Relief

The Research and Development Expenditure Credit (RDEC) rate will increase to 20% (from 13%) with effect from 1 April 2023. From the same date, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improve compliance. These changes will be legislated for in the Spring Finance Bill 2023.

Windfall Taxes

The Energy Profits Levy (EPL) will increase to 35% (from 25%), effective 1 January 2023. The investment allowance will be reduced from 80% to 29% for qualifying investment expenditure thereby maintaining its existing cash value. The Levy is scheduled to end on 31 March 2028, raising £40 billion over the next 6 years. This will bring the headline tax rate for the sector to 75%.

The Chancellor also announced the introduction of a temporary Electricity Generator Levy. This will see a temporary 45% tax that will be levied on certain extraordinary returns from low-carbon UK electricity generation. The tax will apply to extraordinary returns arising from 1 January 2023.

Vehicle Excise Duty (VED)

VED will become applicable on electric cars, vans and motorcycles from April 2025 in the same way as it currently applies to petrol and diesel vehicles. This change will apply to new and existing zero emission cars.

Company Car Tax

The rates of company car tax that apply until April 2028 have been announced in order to provide long term certainty for taxpayers and industry.

The rates will continue to incentivise the take up of electric vehicles:

• The appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1% in 2025-26; a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars.
• The rates for all other vehicles bands will be increased by 1% for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28.

First Year allowances for electric charging points

Businesses can currently benefit from First Year allowances on qualifying electric charging points for cars and vans. To qualify for the relief the company must use the charging point in their own business. This relief was set to expire in 2023 but has now been extended for a further two years, to 31 March 2025 for Corporation Tax purposes and to 5 April 2025 for Income Tax purposes.

VAT

There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will now remain at these levels until 31 March 2026.

Other announcements

National Living Wage increases

The NLW will increase to £10.42 per hour (previously £9.50) from 1 April 2023.

The full changes to the National Minimum Wage rates from 1 April 2023 are as follows:

• The 21 to 22 year-old rate will be £10.18 per hour
• The 18 to 20 year-old rate will be £7.49 per hour
• The 16 to 17 year-old rate will be £5.28 per hour
• The apprentice rate will be £5.28 per hour

Council Tax flexibility

The government is to raise the cap on the level of council tax rises by increasing the referendum limit for council tax rises to 3% per year from April 2023.

Business rates

Business rate bills in England will be updated from 1 April 2023 to reflect changes in property values since the last revaluation in 2017. A package of targeted support worth £13.6 billion has been announced to help support businesses with this change as well as increased costs.

These measures are as follows:

• Freezing the business rates multiplier for another year
• Extended and increased relief for retail, hospitality and leisure businesses
• Reforming Transitional Relief
• Protection for small businesses who lose eligibility for either Small Business or Rural Rate Relief.

Energy price guarantee scheme

The Chancellor announced that the energy price guarantee scheme which will see the average household have their energy bills capped at £2,500 a year will remain in place until the 31 March 2023.

From 1 April 2023, this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500). This will save the Exchequer around £14 billion next year while still saving the typical household £500 a year off their energy bills, compared to the price of the energy price cap.

The government will also double to £200 the level of support for households that use alternative fuels, such as heating oil, LPG, coal or biomass, to heat their homes. 

Cost of Living Payments

The Cost of Living support package to help over 8 million households in receipt of mean tested benefits is to be extended. This will see an additional Cost of Living Payment of £900 in 2023-24. The payments will be made in more than one instalment. DWP and HMRC will provide further detail on timing of these payments and eligibility dates in due course.

There will also be a new Cost of Living payment for pensioners who will receive an additional £300 and an additional £150 payment for those on non-means-tested disability benefits in 2023-24.

Benefits Uprating

The government will also raise benefits, including working age benefits and the State Pension, in line with inflation from April 2023.  These payments will rise by September Consumer Price Index (CPI) inflation – 10.1%. As a result of uprating these working age and pension benefits around 19 million families will see their benefit payments increase from April 2023.