The rates of pay set by the National Living Wage (NLW) and National Minimum Wage (NMW) increased on 1 April 2023. Those employers that flout the NMW laws now risk more than just being fined and forced to repay underpayments. HMRC keeps a public 'name and shame' list of offenders. Here, we take a look at the new rates and what to do to make sure you comply.

Naming and shaming

This year the government named and shamed 202 employers for failing to pay their lowest paid staff the minimum wage.

Together these firms were found to have failed to pay their workers almost £5 million in a breach of NMW law, leaving around 63,000 workers out of pocket.

The companies named by the government ranged from major high street brands to small businesses and sole traders. The government reiterated that no employer is exempt from paying their workers the statutory minimum wage.

The NLW and the NMW

Anybody working aged 23 or over and not in the first year of an apprenticeship is legally entitled to the NLW.

Despite its name, this rate is essentially a NMW for the over 22s. The government is committed to increasing this every year.

The NLW rate changes every April, while the NMW rates have traditionally been revised in October. However, since April 2017 the NMW and NLW cycles have been aligned so that both rates are amended in April each year. Employers will need to make sure they are paying their staff correctly as the NLW will be enforced as strongly as the NMW.

The table below shows the NMW and NLW rates applying from 1 April 2023:

*Under 19, or 19 and over in the first year of their apprenticeship

Who does not have to be paid the National Minimum Wage?

• The genuinely self-employed.
• Child workers - anyone of compulsory school age (i.e., until the last Friday in June of the school year they turn 16).
• Company directors who do not have contracts of employment.
• Students doing work experience as part of a higher education course.
• People living and working within the family, for example au pairs.
• Friends and neighbours helping out under informal arrangements.
• Members of the armed forces.

Workers on government employment programmes such as the Work Programme.

• People working on a Jobcentre Plus Work trial for up to six weeks.
• People on the European Union Programmes: Leonardo da Vinci, Youth in Action, Erasmus+ and Comenius programmes.
• Share fishermen.
• Prisoners.
• Volunteers and voluntary workers.
• People living and working in a religious community.

Beware the family company trap

Although there is an exemption for family members working in the family business and residing in the family home of the employer, the Regulations specifically refer to the employer's family. If the family business (i.e., the employer) is a limited company, then it does not have a family. Even if the family business operates as a sole trader or partnership, the only family members exempted are those who actually live in the home of the employer.

Breaching NMW laws

The government can impose penalties on employers that underpay their workers in breach of the minimum wage legislation. The penalty can be as much as 200% of arrears owed to workers. The maximum penalty is £20,000 per worker.

The penalty is reduced by 50% if the unpaid wages and the penalty are paid within 14 days. 

Periodically the government publishes a list of employers who have not complied. The reasons employers fail to comply vary and include topping up pay with tips and deducting sums for uniforms, among others.

The employers named by the government fell foul of the following NMW laws:

• 39% of employers deducted pay from workers' wages
• 39% of employers failed to pay workers correctly for their working time
• 21% of employers paid the incorrect apprenticeship rate.

Calculating the NMW and NLW

Calculating the NMW and the NLW can prove to be complex. Please contact us to discuss any concerns you may have over this or any other payroll matters.

The fight against scammers and fraudsters continues for both businesses and individuals. Modern technology has helped to create new ways for fraudsters to target and bombard individuals with texts, calls and emails. Fraudsters often use impersonation tactics to pose as a trusted organisation.

It is vital that businesses and individuals are on their guard against potential scams. Here, we take a look at the threat posed by scams and consider some steps to protect against them.

Millions of pounds lost to scams

£177.6 million was lost to impersonation scams in 2022, according to data from UK Finance.

The data showed that there were 45,367 cases of impersonation scams in 2022. It also revealed that just 51% of individuals always check whether a request for personal data or money is legitimate.

Impersonation scams take place when a criminal pretends to be a trusted organisation such as a bank, the police, a delivery or utility company, or even a friend or family member. The scams can be very sophisticated and often start with a call, text, email or direct message with an urgent request for money or personal and financial information.

The research found that younger adults are particularly at risk. Just 38% of 18–34-year-olds always check a request for their money or information is genuine – the lowest of any age group. This age group was also the most likely to believe that they had been contacted by a criminal after they had responded to an initial request for information from what they thought was a trusted organisation.

UK Finance says individuals should stop and take a moment to think before parting with money or information; challenge any unsolicited communication; and protect themselves and their finances by contacting their bank immediately if they think they've fallen for a scam.

Take Five

The Take Five to Stop Fraud campaign urges people to take a moment to stop and think before parting with their money or information.

The campaign brings together law enforcement, government to encourage members of the public to be more vigilant against fraud, particularly about sharing their financial and personal information, as criminals seek to capitalise on the cost-of-living crisis.

Criminals are experts at impersonating people, organisations and the police. Take Five advises:

Stop: Taking a moment to stop and think before parting with your money or information could keep you safe.

Challenge: Could it be fake? It's ok to reject, refuse or ignore any requests. Only criminals will try to rush or panic you.

Protect: Contact your bank immediately if you think you've fallen for a scam and report it to Action Fraud.

Too good to be true

The cost-of-living crisis has provided another avenue of attack for fraudsters with a rise in fake fuel vouchers, phone bill discounts and supermarket offers being reported.

These scams use tactics like phishing emails and fake ads in order to encourage people to handover their personal information over the phone or by registering on a bogus website.

If you see an offer that sounds too good to be true, it probably is. Always check the brand's official website or social media channels to verify whether an offer is authentic.

Devastating pension savers

Pension savers have long been a target of scammers. Pension scams often include free pension reviews, 'too good to be true' investment opportunities and offers to help release money from your pension, even for under 55s, which is not permitted under the pension freedom rules.

Pension fraud can have a devastating impact, both financially and emotionally, but anyone can fall victim to a fraud if they are not careful.

Protecting your pension

Although a ban on cold calling in the UK, including emails and texts, was introduced at the beginning of 2019, the problem continues. Cold calls are a major red flag for scams and unsolicited offers should be ignored or rejected. Cold callers will often offer a free pension review. Professional advice on pensions is not free – a free offer out of the blue is probably a scam.

It is crucial that pension savers know who they are dealing with so checking the FCA Register is imperative. Dealing with an authorised firm gives access to the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS), which can hold firms to account and give financial protection.

A common scam is to pretend to be a genuine FCA-authorised firm (called a 'clone firm'). The contact details on the FCA Register should always be used, not the details the firm gives out. 

Pension savers should never allow themselves to be rushed or pressured into making a decision. They should not be afraid to miss out on an 'amazing deal' because of artificial deadlines, and if promised returns sound too good to be true, they probably are.

Impartial information, financial guidance and advice are all key to making a good decision before changing pension arrangements. 

Anyone and every business are potential targets for fraudsters and scammers, so always check before you respond to messages, even if they appear genuine at first sight. If in any doubt about contact, please do get in touch.

Prompted by the experience of the Covid-19 pandemic many of those in the UK workforce re-assessed their priorities, including their work/life balance, a process that has altered the UK's labour market. Some opted for early retirement, while others pushed for more flexible working arrangements. A considerable number dropped out of the labour market due to the lack of available childcare, whilst mental health difficulties caused some to withdraw from the world of work. Here we look at what employers can do to help attract and retain talent amid the ongoing people and skills shortages crisis.

Changed perspectives

The pandemic changed perspectives on the balance of work in our lives and the way we lead them. It prompted many in their 50s and 60s, particularly individuals with private pensions and property wealth, to take early retirement. Those still in the workforce are demanding businesses adopt new values of work.

A report published by the Business, Energy and Industrial Strategy (BEIS) Committee has warned that the UK's shrinking workforce is restricting economic growth.

A poll commissioned by the Committee revealed that whilst many workers took early retirement, some individuals would consider returning to work if flexible roles with adequate protections allowed them to continue a semi-retirement.

In addition, the march of technology is leaving many without the requisite skills for the modern workplace leaving many potential workers in need of retraining.

New realities, new approach

Business groups say that new realities demand a new approach. They are calling on the government to play its part in getting people back to work through support with childcare, healthcare and skills.

However, they also acknowledge that businesses must play their part in a revolution in childcare; flexible working policies becoming mainstream; embracing automation; wellness becoming an employer's job; and skills and immigration policies being brought together.

Childcare revolution

The UK has some of the highest childcare costs in the OECD, with public funding for childcare comprising less than 0.1% of GDP – the second lowest investment in the OECD.

In England, the cost of a part-time nursery place for a child under two grew by 60% in cash terms between 2010 and 2021 – twice as fast as average earnings. This prevents parents from working, especially women who continue to carry the burden of caring responsibilities. However, the Spring Budget saw significant reforms to childcare. Chancellor Jeremy Hunt announced 30 hours of free childcare for every child over the age of nine months with working parents by September 2025.

The funding paid to nurseries for the existing free hours offers will also be increased by £204 million from this September, rising to £288 million next year.

According to Mr Hunt, these measures will remove barriers to work for many parents, reducing discrimination against women and benefit the wider economy in the process.

Rising costs

However, there is still uncertainty about whether these changes will be enough. A recent report carried out by recruitment firm Indeed Flex has suggested that rising childcare costs are keeping mothers from returning to the workplace.

The report found that one third of working mothers spend over 30% of their wages on childcare. Two in five mothers polled said that the government's free childcare expansion will be enough to allow them to go back to work. However, a similar sized proportion of mothers believe that childcare costs are still too high, despite additional government help.

Flexible working to go mainstream

Research from think tank Timewise, shows that nine out of ten people want flexible work, but only three out of ten job adverts offer it.

These numbers put the issue into stark relief for employers who need to embrace the merits of flexible working. Those that do will stand a far better chance of attracting those who have left the workplace, and are now economically inactive, back into the workforce.

Embracing automation

According to the business groups, wider use of artificial intelligence (AI) across the UK economy and the adoption of digital technologies by SMEs could create add billions to the country's Gross Added Value (GVA).

They say the UK needs more robotics and AI to help firms deploy the people they have more effectively, as well as take the place of people they are struggling to hire. Those firms that fail to review their use of such technologies will be in danger of getting left behind.

Employers to lead on wellness

Over a quarter of those who are now economically inactive are out of the workforce because of long-term sickness, according to the business groups.

It says that employer-led health interventions, to prevent common physical and mental health risks, could help save £60 billion every year – reducing the impact of ill-health on the UK workforce by up to 20%.

Skills and immigration brought together

Business groups say that the UK needs to work smarter in upskilling and reskilling existing workers and attracting the best talent in the world.

This means migrating the Apprenticeship Levy into a new Skills Challenge Fund, where businesses can invest in accredited training for the variety of skills they know their people need − working alongside a cross-departmental approach to immigration policy.

Clearly, this is a matter for the government, but as shown by the childcare measures in the Spring Budget, the authorities do sometimes listen to businesses and make the necessary changes.

Updated relationship

Businesses must think progressively to meet the other requirements discussed in this blog.
To attract and keep the best talent, employers need to update their relationship with their employees. This means constantly evaluating and evolving their offer to their employees and wider talent.

Business groups means a mutual value exchange of what the employee gives and gets that goes way beyond terms and conditions. The return for firms is greater loyalty, discretionary effort and leadership, rather than employees who merely clock in.

Businesses that look to the future must invest wisely using the available government support to develop a skilled and motivated workforce.

We are happy to advise in detail on the best approach to suit your circumstances. Please contact us for more information.

Recent research has highlighted the importance of The Bank of Mum and Dad in helping young people start their adult lives, marriages and, most commonly of all, get themselves on the property ladder. However, passing down wealth through the generations takes careful planning. Here we look at how long-term objectives for family finances can be met.

Billions of gifts and loans

Parents in the UK gift or loan their children an estimated £17 billion each year, mostly to help with buying a house or as a wedding present, according to recent research from the Institute for Fiscal Studies (IFS).

Most transfers come from parents aged over 50 to children in their late 20s and early 30s. Around 30% of young adults receive at least one substantial transfer (of £500 or more) over any eight-year period.

The majority of this transfer comes in the form of gifts while £3.3 billion is in the form of loans, although these are frequently lent with very favourable terms and low expectation of them being repaid.

The property ladder

Half of the value of gifts received was used for property purchases or improvement. Those using transfers for this purpose received over £20,000, on average. Those in the least wealthy third are relatively more likely to report using gifts for the purchase of a new car, to pay off debts or for educational expenses.

Whatever the purpose of a gift or loan, it can attract the attention of the tax authorities with the potential for inheritance tax (IHT) or capital gains tax (CGT) liabilities.

Lifetime gifts

Many smaller or regular lifetime gifts are exempt from IHT, while larger gifts may become exempt after seven years, so a strategy of making gifts in your lifetime can substantially reduce your taxable estate on death.

You can also take out life insurance to cover any IHT which might be due following your death within seven years of making larger gifts. However, potential CGT must be taken into account with this option.

Inheritance tax

IHT is currently payable where a person's taxable estate is in excess of £325,000. Therefore, if you own your own house and have some savings, your estate could be liable. 

The good news is that there are a number of allowances and strategies that may help to reduce your liability to IHT. This may include utilising the residence nil-rate band, which was introduced with the intention of enabling a 'family home' to be passed tax-free on death.

It could be said that the art of IHT planning is to give away as much as possible during your lifetime, while still keeping enough to ensure that you and your spouse can live a comfortable and fulfilling retirement. 

Full rate

The full rate of tax is 40% on the estate value in excess of £325,000. Taxable gifts made up to seven years before death are added back into your estate and tax is calculated on the inclusive value. But to the extent that such lifetime gifts made between three and seven years before death exceed the tax threshold, the associated tax is discounted by up to 80%.

In addition, the 'residence nil-rate band' (RNRB) applies where a residence is passed on death to direct descendants, such as a child or a grandchild. The RNRB is set at £175,000 for 2022/23. 

Trusts

Trusts allow you to make gifts without giving the recipient complete control over the asset and/or the income it generates. Gifts into trust may result in an IHT liability, depending on the nature, timing and terms of the gift and the value of other chargeable gifts in the preceding seven years. Ten-yearly and exit charges may also arise.

You can also create a discretionary trust in your Will to allow your trustees to decide how your assets should be distributed, giving a (non-binding) letter of wishes and taking into account all relevant circumstances at the time. This option has the advantage of deferring all CGT charges.

A key issue in a recent high profile tax dispute centred around a penalty issued by HMRC for an error that was described as 'careless and not deliberate'. This phrase has caused many to ask questions about how HMRC categorises mistakes on tax returns and when penalties and interest payments might apply. Here we explain some of the terms used and take a look at the self assessment process.

Reasonable care

A plain English reading of the phrase 'careless and not deliberate' implies a simple error was made. However, UK tax law is more complicated, and the phrase is more likely a designation settled on by HMRC if it concludes it cannot prove deliberate behaviour.

A more thorough explanation was later given by HMRC's Chief Executive Jim Harra, who appeared before MPs on the Public Accounts Committee (PAC) in Parliament.

Mr Harra said: 'There are no penalties for innocent errors in your tax affairs. If you take reasonable care, but nevertheless make a mistake, whilst you will be liable for the tax, and for interest . . . you would not be liable for a penalty.

'But if your error was as a result of carelessness, then legislation says that a penalty could apply in those circumstances.

'Carelessness is a concept in tax law. It can be relevant to how many back years that we can assess, can be relevant to whether someone is liable to a penalty and if so, what penalty they will be liable to for an error in their tax affairs.'

While these words will come as a relief to many, it is still vital that care is taken to file tax returns in a timely and accurate manner.

Tax returns

Tax returns are issued shortly after the end of the fiscal year. Tax returns are issued to all those whom HMRC are aware need a return including all those who are self-employed or company directors.

This year saw a record 11.7 million self assessment taxpayers submitted their returns by the 31 January deadline.

Those individuals who complete returns online are sent a notice advising them that a tax return is due. If a taxpayer is not issued with a tax return but has tax due, they should notify HMRC, and it may then issue a return.

If you are not asked to complete a tax return, it remains your responsibility to advise HMRC if there is a new source of untaxed income, a capital profit that could lead to a tax liability, or your savings or dividend income is significant enough to result in tax being payable at the basic, higher or additional rates of tax.

Self assessment timetable

• Income tax and capital gains tax are both assessed for a tax year which runs from 6 April to the following 5 April.
• Shortly after 5 April - SA returns or a notice to complete a return are issued by HMRC.
• 31 October following - non-electronic returns need to be submitted to HMRC by this date.
• 31 January following - final date for submission of the return and all outstanding tax to be paid.

Penalties

Late filing penalties apply for personal tax returns as follows:

£100* penalty immediately after the due date for filing (even if there is no tax to pay or the tax due has already been paid)

*The full penalty of £100 will always be due if your return is filed late even if there is no tax outstanding.

Additional penalties can be charged as follows:

• over three months late - a £10 daily penalty up to a maximum of £900
• over six months late - an additional £300 or 5% of the tax due if higher
• over 12 months late - a further £300 or a further 5% of the tax due if higher. In particularly serious cases there is a penalty of up to 100% of the tax due.

Interest rates

HMRC will charge interest on late payments.

The current late payment and repayment interest rates applied to the main taxes and duties that HMRC currently charges and pays interest on are:

• late payment interest rate - 6% from 6 January 2023
• repayment interest rate - 2.50% from 6 January 2023.

Correcting the tax return

HMRC may correct a self assessment in order to correct any obvious errors or mistakes in the return.

An individual can usually, by notice to HMRC, amend their self assessment at any time within 12 months of the filing date.

HMRC may enquire into any return by giving written notice. In most cases the time limit for HMRC is within 12 months following the date of submission.

If HMRC does not enquire into a return, it will be final and conclusive unless the taxpayer makes an overpayment relief claim or HMRC makes a discovery.

It should be emphasised that HMRC cannot query any entry on a tax return without starting an enquiry. The main purpose of an enquiry is to identify any errors on, or omissions from, a tax return which result in an understatement of tax due. Please note however that the opening of an enquiry does not mean that a return is incorrect.

Keeping records

HMRC wants to ensure that underlying records to the return exist if they decide to enquire into the return.

Records are required of income, expenditure and reliefs claimed. For most types of income this means keeping the documentation given to the taxpayer by the person making the payment. If expenses are claimed records are required to support the claim.

January is a time when many businesses look to the future and plan for the year ahead. Later in the Spring, the new tax year will bring a number of changes that will impact on those businesses. Here we outline the key measures that will take effect from April 2023.

Income tax rates

At the Mini Budget in September, the government announced a plan to abolish the 45% additional rate of income tax from April 2023. It was announced on 3 October 2022 that the government would not proceed with this plan.

From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140. The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively.

Reduction in the Dividend Allowance

The government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024.

Additionally, from April 2023, the rates of taxation on dividend income will remain as follows:

• the dividend ordinary rate - 8.75%
• the dividend upper rate - 33.75%
• the dividend additional rate - 39.35%.

As corporation tax due on directors' overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

Capital gains

The government has announced that the capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

Research and Development

For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but 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%.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Vehicles

From 6 April 2023, car and van fuel benefits and the van benefit charge will increase in line with inflation.

National Living Wage and National Minimum Wage uprating

The government will increase the National Living Wage (NLW) and National Minimum Wage (NMW) from 1 April 2023. The rates will be as follows:

• £10.42 an hour for those aged 23 and over
• £10.18 an hour for workers aged 21-22
• £7.49 an hour for 18–20-year-olds
• £5.28 for 16-17-year-olds
• £5.28 an hour for apprentices.

Energy

The Government has protected businesses this winter from these high energy costs through the £18 billion Energy Bill Relief Scheme.

However, Chancellor Jeremy Hunt has made it clear that this level of support is 'unsustainably expensive' and that the current scheme was always time limited to six months.

The Chancellor has said that any future support, while at a lower level, would be designed to help them transition to the new higher price environment and avoid a cliff edge in support.

For consumers, the Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000.

Whatever 2023 has in store, we will be on hand to keep you up to date with changes to the tax system. We are available to help with any matters related to taxes, tax reliefs and grants. Please contact us if you have any queries.

The saga of HMRC's Making Tax Digital (MTD) initiative continues with the news of further delays to the introduction of Making Tax Digital for income tax self assessment (MTD for ITSA). As well as a two-year postponement the government has altered the terms of the self assessment stage of MTD, and a review means further changes could be in the pipeline. However, MTD for VAT (MTDfV) already applies to all VAT-registered businesses. Here we take a look at what we know about MTD so far.

Delay to MTD for ITSA

The mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self-employed individuals and landlords with income over £50,000 mandated to join first, an apparent change from the current £10,000 limit.

Those with income over £30,000 will be mandated from April 2027.

The government will also review the needs of smaller businesses and look in detail at whether the MTD for ITSA service can be shaped to meet the needs of smaller businesses.

Following the new approach, the government will not extend MTD for ITSA to general partnerships in 2025.

How does MTD apply?

HMRC research suggests many people are unsure which developments apply to them. So, what are the rules on records and software?

MTD involves keeping and preserving specific accounting records in a prescribed digital format and transmitting information to HMRC digitally. It does not mean having to scan and store receipts and invoices digitally, as originally envisaged.

MTD rules require what is called functional compatible software for record keeping purposes. To make submissions to HMRC, the software is linked with HMRC systems, and there is a specific authorisation process at the outset (and every 18 months afterwards) to do this.

The rules require an uninterrupted digital journey to HMRC, information flowing from the accounting records to the digital filing, without manual input.

Spreadsheets can form a component part of digital record keeping, provided that the product that consolidates records or summary records from the spreadsheet is digital.

MTDfV so far

All VAT-registered businesses should now be using MTDfV, whether businesses with taxable turnover over the VAT registration threshold of £85,000, or those operating under this level. 

From 1 November 2022, the online VAT return facility will close. For businesses filing annual VAT returns, the last date to file the old way is 15 May 2023.

Appropriate software

Appropriate functional compatible software must be used for all business income and expenses. For retail sales, digital records mean a single digital record of the daily gross takings.

The penalty regime

New penalty rules are being introduced for late submission and late payment. They apply initially to VAT, for VAT periods beginning on or after 1 January 2023. The essence of the change is that instead of an automatic financial penalty for failure to submit on time, penalty points accrue. When a particular points threshold is reached, a penalty arises.

Last week saw Chancellor Jeremy Hunt present his first Autumn Statement. The announcement marked the end of a volatile period that began with previous Chancellor Kwasi Kwarteng's disastrous Mini Budget in September, which ended with him replaced by Mr Hunt who promptly rolled back most of his predecessor's measures.

As the dust settles on the Autumn Statement, we take a look at what it means for businesses and families across the UK.

Few surprises

The Autumn Statement had few surprises in store and Mr Hunt resisted the urge to pull any rabbits out of his hat on the day. It was an almost sombre occasion, with warnings that tough decisions would need to be made due to a grim economic picture heavily trailed prior to the day.

Most of the measures announced by Mr Hunt had been briefed to the press beforehand, so it was little surprise when a series of frozen tax thresholds increased the burden on UK taxpayers.

Frozen thresholds

The Chancellor announced that both the income tax personal allowance and higher rate thresholds will be frozen for a further two years until April 2028. In addition, basic national insurance and inheritance tax (IHT) thresholds have also been frozen until April 2028.

The threshold for the top 45% additional rate of income tax was cut to £125,140 from £150,000. The Dividend Allowance will be reduced from £2,000 to £1,000 next year and £500 from April 2024, while the capital gains tax (CGT) exemption will be reduced from £12,300 to £6,000 next year and then to £3,000 from April 2024.

Fair solutions

These measures are part of what the Chancellor called providing 'fair solutions' with his plan to tackle the cost-of-living crisis and rebuild the UK economy. The Chancellor said his priorities are stability, growth and public services, which required 'difficult decisions'.

Energy prices

As well as increasing the personal tax burden, the Chancellor also increased the windfall tax on the profits of oil and gas firms. This was increased from 25% to 35% and extended until March 2028.

There will also be a new 'temporary' tax on companies that generate electricity, which will apply from January. As energy prices continue to drive inflation, the Chancellor confirmed that the Energy Price Guarantee will be extended for a year from April 2023. However, the level at which typical bills are capped will increase to £3,000 a year from £2,500.

Business rates support

The Chancellor also announced a £13.6 billion package of support for business rates payers in England. To protect businesses from rising inflation, the multiplier will be frozen in 2023/24, while relief for 230,000 businesses in the retail, hospitality and leisure sectors was also increased from 50% to 75% for 2023.

Falling living standards

As the Chancellor finished his statement, the Office for Budget Responsibility (OBR) published a grim forecast for the UK economy.

The OBR says that despite the new support with energy bills, living standards are going to fall by 7% over the next two years, which will wipe out eight years of growth. It said that while the Chancellor's fiscal support over the next two years cushions the blow of higher energy prices, the economy will still fall into recession.

Global crisis

The Chancellor said: 'There is a global energy crisis, a global inflation crisis and a global economic crisis. But today with this plan for stability, growth and public services, we will face into the storm. Because of the difficult decisions we take in our plan, we strengthen our public finances, bring down inflation and protect jobs.'

The annual rush countdown for self assessment tax returns is now underway after HMRC reminded taxpayers that they have under 100 days to file online. Filing early comes with a number of benefits including the budgeting payments and receiving repayments sooner. Here, we take a look what taxpayers can do to prepare for the self assessment process.

The countdown

Self assessment taxpayers have until 31 January 2023 to submit their online return for the 2021/22 tax year. This means there are now under 100 days until the deadline for self assessment online returns.

According to HMRC, more than 66,000 taxpayers beat the clock and filed their tax return on 6 April – the first day of the new tax year.

HMRC is now encouraging others to complete their return as soon as they can, so they know what they owe and can budget to make the payment by 31 January 2023. This also means that if a repayment is due, it can be claimed back sooner.

The self assessment cycle

Under the self assessment regime an individual is responsible for ensuring that their tax liability is calculated, and any tax owing is paid on time.

Tax returns are issued shortly after the end of the fiscal year. The fiscal year runs from 6 April to the following 5 April. Tax returns are issued to all those whom HMRC are aware need a return including all those who are self-employed or company directors. Those individuals who complete returns online are sent a notice advising them that a tax return is due. If a taxpayer is not issued with a tax return but has tax due they should notify HMRC who may then issue a return.

A taxpayer has normally been required to file his tax return by 31 January following the end of the fiscal year. The return must be filed by 31 October if submitted in 'paper' format. Returns submitted after this date must be filed online otherwise penalties apply.

Late filing penalties

For those that fail to file their returns on time there is an automatic £100 penalty (even if there is no tax to pay or the tax due has already been paid).

The full penalty of £100 will always be due if your return is filed late even if there is no tax outstanding. Generally, if filing by 'paper' the deadline is 31 October and if filing online the deadline is 31 January.

Additional penalties can be charged as follows:

• over three months late – a £10 daily penalty up to a maximum of £900
• over six months late – an additional £300 or 5% of the tax due if higher
• over 12 months late – a further £300 or a further 5% of the tax due if higher. In particularly serious cases there is a penalty of up to 100% of the tax due.

Calculating your tax liability

The taxpayer does have the option to ask HMRC to compute their tax liability in advance of the tax being due in which case the return must be completed and filed by 31 October following the fiscal year.

Whether you or HMRC calculate the tax liability there will be only one assessment covering all your tax liabilities for the tax year. 

Changes to the tax return

HMRC may correct a self assessment within nine months of the return being filed in order to correct any obvious errors or mistakes in the return.

An individual may, by notice to HMRC, amend their self assessment at any time within 12 months of the filing date.

Enquiries

HMRC may enquire into any return by giving written notice. In most cases the time limit for HMRC is within 12 months following the filing date.

The main purpose of an enquiry is to identify any errors on, or omissions from, a tax return which result in an understatement of tax due. Please note however that the opening of an enquiry does not mean that a return is incorrect.

If there is an enquiry, we will also receive a letter from HMRC which will detail the information regarded as necessary by them to check the return. If such an eventuality arises we will contact you to discuss the contents of the letter.

Keeping records

HMRC wants to ensure that underlying records to the return exist if they decide to enquire into the return.

Records are required of income, expenditure and reliefs claimed. For most types of income this means keeping the documentation given to the taxpayer by the person making the payment. If expenses are claimed records are required to support the claim.