Personal

The Cost of Living support package has been designed to help over 8 million households in receipt of mean tested benefits. The details for Cost of Living Payments due in the 2023-24 tax year have been published. 

Eligible recipients will receive up to 3 Cost of Living Payments of £301, £300 and £299. This includes those receiving pension credit. These payments will be made separately from other benefit payments.

The total payments expected are as follows:

• £301 paid between 25 April 2023 and 17 May 2023 for most people on DWP benefits
• £301 paid between 2 and 9 May 2023 for most people on tax credits and no other low income benefits
• £300 to be paid during autumn 2023 for most people
• £299 to be paid during spring 2024 for most people

There are also additional payments that may be made such as a Disability Cost of Living Payment of £150 that is expected to be paid to qualifying individuals during the summer.

An additional one-off payment of £150 or £300 will be paid to pensioners during winter 2023-24. The Winter Fuel Payment is provided by the government to help older people keep warm during winter. The amount a pensioner will receive depends on a number of factors including their age and the age of other people living with them.

HMRC’s guidance on the payments has been updated to clarify that claimants will not get a Cost of Living Payment for a low income benefit if their benefit is reduced to £0 because they received a ‘sanction’. They may still receive a Cost of Living Payment if they had a 'hardship payment' because they received a 'sanction'.

The Cost of Living support package has been designed to help over 8 million households in receipt of means tested benefits. The details for Cost of Living payments due in the 2023-24 tax year have been published.

Eligible recipients will receive up to three Cost of Living Payments of £301, £300 and £299. This includes those receiving pension credit and these payments will be made separately from other benefit payments.

The payments are expected to be made as follows:

• £301 paid between 25 April 2023 and 17 May 2023 for most people on DWP benefits
• £300 paid during autumn 2023 for most people
• £299 paid during spring 2024 for most people

An additional one-off payment of £150 or £300 will be paid to pensioners during winter 2023-24. The Winter Fuel Payment is provided by the government to help older people keep warm during winter. The amount a pensioner will receive depends on a number of factors including their age and the age of other people living with them.

HMRC’s guidance will be updated with the qualifying dates for the payment when they are published. Pensioners will be sent a letter in October or November telling them how much Winter Fuel Payment they will get if they are eligible. Any money pensioners receive for the Winter Fuel Payment is tax-free and will not affect any other benefits they may receive. The payment is not means-tested.

One of the main areas targeted by the Spring Budget was changes to childcare. Billed as a revolution in childcare, the Chancellor, Jeremy Hunt, said that he wanted to reform the childcare system to help more than a million women come back to work. 

The 30-hours per week of funded childcare for eligible 3 to 4-year-olds in England will be extended to children from 9-months of age. This reform will be introduced in stages starting with the addition of 15-hours of free care for 2-year-olds from April 2024. The 15-hours will be extended to all children from 9-months from September 2024 before increasing to 30-hours from September 2025.

All schools will also be expected to offer breakfast and 'wraparound' clubs by September 2026 so all school-age parents can drop-off and collect their children between 8 am and 6 pm.

Universal credit provision on childcare is also being improved. This includes the government paying the upfront payment necessary to access subsidised childcare for any parents who are moving into work or want to increase their hours.

There will also be an increase in the maximum they can claim to £951 for one child and £1,630 for two children, an increase of almost 50%.

The Chancellor also announced an increase in the funding paid to nurseries providing free childcare by £204m from this September rising to £288m next year. The government will also change the minimum staff-to-child ratios from 1:4 to 1:5 for two-year-olds in England (the same as Scotland). The new ratios will remain optional. 

The Mortgage Guarantee Scheme was set to end on 31 December 2022. In a last-minute announcement from HM Treasury, it was confirmed that the scheme will now be extended for a further 12 months until 31 December 2023.

The scheme helps prospective home buyers (mainly first-time buyers) who only have a small deposit and may find getting a traditional mortgage difficult. Under the scheme, lenders can offer 95% mortgage products.

The scheme has assisted over 24,000 households since it was launched in April 2021.

The scheme is open to first time buyers and home movers across the UK. Home buyers can purchase properties valued at up to £600,000 and both new-build and existing properties are eligible.

The government provides lenders with the option to purchase a guarantee on the top-slice of the mortgage (over 80%). Lenders will also take a 5% share of net losses above this 80% threshold. This helps to ensure that lenders are not motivated to provide poor quality loans. Lenders also need to pay the government a commercial fee for each mortgage in the scheme. The mortgage guarantee is valid for up to seven years after the mortgage is taken out.

Back in May 2022, the then Chancellor Rishi Sunak announced a package of support measures targeted mainly to the most vulnerable members of society. One of the main measures was the Cost of Living support package to help over 8 million households in receipt of mean tested benefits. 

These households were set to receive a payment of £650 before the end of the year with the DWP making the payment in 2 lump sums. The first payment of £326 was made in July and it has been confirmed that the second payment of £324 will be made in November.

The money will be paid between 8 November and the 23 November. The second payment will automatically be paid into the bank accounts of those eligible in England, Scotland, Wales and Northern Ireland who receive a qualifying benefit, meaning they will not need to do anything to receive the money.

Some individuals who are not on a qualifying DWP benefit may still be eligible for the £324 payment as HMRC are also making payments to those who receive tax credits and no other eligible benefits.

The Work and Pensions Secretary, Chloe Smith said:

‘Millions of families will soon see a £324 cash boost as part of our extensive £1,200 support package, helping to raise incomes and manage the rising cost of living.’

An additional one-off payment of £300 will also go to the over 8 million pensioner households across the UK who receive the Winter Fuel Payment. This amount will be paid in addition to any other one-off support a pensioner household is entitled to.

The Winter Fuel Payment is not taxable and does not affect eligibility for other benefits. The government will make these payments directly to households across the UK. This money will be paid out as top-up to pensioner households annual Winter Fuel Payment in November / December.

Any taxpayers that have ceased to be self-employed must notify HMRC of their change in status. There are a number of steps that must be followed if a taxpayer ceases trading as a sole trader or if they are ending or leaving a business partnership.

Taxpayers must send in a Self-Assessment return by the relevant deadline and will need to work out their trading income, allowable expenses and any capital allowances. Taxpayers must also determine if they have any Capital Gains Tax (CGT) to pay.

They may also be able to claim back any overpaid tax or National Insurance. It is also important to check if there is an entitlement to tax relief by way of entrepreneurs’ relief, overlap relief and / or terminal loss relief. There are also other reliefs available that may reduce the amount of CGT due.

Taxpayers that owe tax or National Insurance and have difficulty paying it, may be able to negotiate an agreement with HMRC for more time to pay. In addition, where a VAT registration was in place this will also need to be cancelled and anyone who employed staff will need to close their PAYE scheme and submit final payroll reports.

The Right to Buy scheme has been available in various guises since it was first launched in the 1980s and following a relaunch in 2012. In essence the scheme gives qualifying social tenants the opportunity to buy their rented home at a discount.

There is a maximum discount of 70% of the value of the property and a number of conditions must be met to use the scheme. The Prime Minister announced, on 9 June 2022, that the scheme is to be extended to housing association tenants. This move that could benefit some 2.5 million tenants renting their homes in this way.

The government will work closely with the housing association sector on the design of the scheme and has also pledged to build a new social home for every one sold.

The government will also change the rules to incentivise those who are claiming Universal Credit to save for a deposit. Currently, welfare rules taper the amount of Universal Credit received when the claimant’s savings exceed £6,000, and it stops entirely when savings exceed £16,000.

The government have also committed to launching an independent review of access to mortgage finance for first-time buyers, with the aim of making it easier for this group by widening access to low-cost, low-deposit finance such as 95% mortgages.

Under new rules that came into effect from April 2017 the tax relief on mortgage costs for residential landlords was restricted to the basic rate of tax. The finance costs restriction was phased in over a number of years and is now fully in place since 6 April 2020. This means that all finance costs, such as mortgage interest on rented properties, are disallowed as expenses and any tax relief is restricted to the basic rate of tax (20%) tax reduction.

The definition of finance costs include interest on mortgages, loans – including loans to buy furnishings and overdrafts as well as alternative finance returns, mortgage fees and other costs and discounts, premiums and disguised interest. No relief is available for capital repayments of a mortgage or loan.

These changes have affected many higher rate and additional rate taxpayers and particularly those with highly leveraged properties, i.e., loans form a significant part of property values. The rules also mean that relevant taxpayers are pushed into paying higher tax rates than previously was the case. This could mean losing some or all of their personal allowances as well as restricting the amount of tax relief on money invested in their pension.

The finance cost restrictions apply if you are a UK resident individual that lets residential properties in the UK or overseas, a non-UK resident individual that lets residential properties in the UK or if you are involved with a partnership that lets properties or are a trustee or beneficiary of a trust liable for Income Tax on the property profits.

Interestingly, landlords of furnished holiday lettings are not affected by the restriction on finance costs.