In recent times there have been reports of possible tax increases to recoup the monies spent on the COVID-19 pandemic.
Possibilities that have been mooted include: aligning the capital gains tax rates with income tax rates (for those who sell an asset such as property or shares at a gain), corporation tax rate increases, pension contribution relief cuts, to name a few.
However, that brings me to the bright side – in a surprise announcement recently the 2020 Autumn Budget was cancelled. The explanation given was ‘now is not the right time to outline long-term plans ― people want to see us focused on the here and now’. Chancellor Rishi Sunak delivered his winter economic plan focusing on the short-term, aiming to protect jobs and support business.
The key announcements were:
Enhanced Time to pay for self-assessment tax payers
Individuals who file tax returns will be able to pay their January 2021 tax bill using a payment plan over 12 months to January 2022. Self-assessment taxpayers who have a payment to make in January 2021 of up to £30,000 will be able to use a self-service time to pay facility. Whilst this is good news in regards to settling the January 2021 tax bill, the liability will still need to be settled over a period where additional liabilities for the 20/21 tax year will be becoming due.
Support for Employers
The current job retention scheme ends on 31 October 2020. Under the new Job Support Scheme the employer will continue to pay the employee for work carried out and for the hours not worked, the employee will be paid up to two-thirds of their usual wage. One-third of this will be paid by the government (up to a cap of £697.92 per month) and one third by the employer. The employee will not be paid for the remaining hours. The employee will therefore be paid a minimum of 77% of their wages. The scheme will run for six months from 1st November and claims can be made from December 2020.
Extension of the Self-Employed Income Support Scheme
Similar to the extension for employers the SEISS has been extended for six months for those who actively trade but have reduced demand to COVID-19. For the first grant your business must face reduced demand between 1 November and the date that you make your claim. In addition, you must have been eligible to claim the original SEISS support. The first grant will cover 3 months’ worth of profits from 1 November until 31 January. It will be worth 20% of average monthly profits, capped at £1,875 in total.
The second grant is expected to cover 3 months’ worth of profits from 1 February until 30 April. The amounts for this will be reviewed and confirmed by the government in due course.
Businesses that deferred VAT due in March to June 2020 will have the option to spread their payments over the financial year 2021/22 in 11 equal instalments. To take advantage of this you will need to opt in.
The 5% VAT reduction for the hospitality and tourism sector is to be extended to 31 March 2021.
What does the future hold?
Whilst the above measures are good news, there is a consensus in the profession that tax increases are inevitable. Given the government spending since March, it is widely expected that there will be changes to the tax system in the UK and the ongoing Capital Gains Tax review is likely to be part of this. Anyone with significant assets should think about potential planning opportunities and act now before it’s too late!
This article is written based on the legislation at 28 September and is subject to change.
For all the latest on COVID recovery initiatives and legislation changes, visit www.frenchduncan.co.uk/covid-19/
To contact Hazel or to discuss your own tax situation, please email email@example.com or call 01786 451745.