Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
MTD for ITSA – on hold
The timetable for the introduction of MTD for Self-Assessment Income Tax has been put back for 2 years.
The changes announced are:
- A two-year delay until April 2026 for mandatory MTD ITSA filing.
- Minimum income reporting level increased to £50,000, with those earning more than £30,000 mandated to join the scheme in 2027.
- The situation for landlords and sole traders earning less than £30,000 will be reviewed to see if MTD ITSA can be shaped to meet the needs of smaller businesses.
- Partnerships will not be brought into MTD for ITSA as previously planned in 2025.
- Points-based penalty system to be extended to MTD ITSA filers when they join.
The decision on when partnerships might join the scheme will be taken at a later date, as for those on less than £30,000.
The government has opted to allow more time to prepare, “so that all businesses, self-employed individuals, and landlords within scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.” There is a contrary view being expressed that HMRC were just not ready and could not have the systems in place in time.
The Scottish Budget – How was it for you?
The Scottish Government is facing the same inflationary pressures as the rest of the UK, but it has chosen a different approach to the Conservative government in Westminster, by increasing taxes on higher earners and purchasers of second homes.
The planned increase in taxes is expected to raise £1bn over the next tax year but that is being paid by Scottish taxpayers. So, on average this will be a couple of hundred pound from each of us. Unfortunately, this is an average figure so if you anyone paying higher rates of tax will pay more. However, this is bearable, but if you feel the need to move to England to pay a lower rate of tax, bye!
Thresholds will stay the same except the top rate of tax will now start at the point where your personal allowance if fully abated, just like England.
The changes to income tax rates will increase the higher rate of income tax by 1% to 42% for anyone earning over £43,663, and for additional rate earners there will be a 1% increase to 47% . The threshold for the additional rate will be reduced to £125,140.
There is one anomaly and that is that employees living in Scotland earning between £43,663 and £50,270 will now pay 42% income tax as well as 12% Class 1 National Insurance on each additional £1 they earn – which reflects an effective rate of tax of 54% in that earnings range, 22% more than equivalent employees elsewhere in the UK.
The other big change is that second home buyers will see a 2% increase in the additional land and dwellings tax to 6% in addition to the standard rate. The increase will come into effect from 16 December 2022.
The legislation does not have effect in relation to any land transaction where contracts for the land transaction have been entered into prior to 16 December 2022.
The effective tax rates are therefore as follows:
|Income in band||Scottish tax||Class 1 NIC||Total tax and NIC rates on band|
|0 – £12,570||0%||0%||0%|
|£12,571 – £14,732||19%||12%||31%|
|£14,733 – £25,688||20%||12%||32%|
|£25,689 – £43,662||21%||12%||33%|
|£43,663 – £50,270||42%||12%||54%|
|£50,271 – £100,000||42%||2%||44%|
|£100,001 – £125,140||62.5%||2%||64.5%|
If you work through a company, you can choose to take a low salary and then the balance as dividends. In this situation, the dividends are subject to English tax rates and bands, not Scottish.
The main rates and bands of land and buildings transaction tax (LBTT) will remain unchanged in 2023/24 for both residential and non-residential purchases. First-time buyer relief, which increases the effective nil rate band to £175,000, will remain in place.
However, the additional dwelling supplement (ADS) increases from 4% to 6% on 16 December 2022, unless the contract was entered into before 15 December 2022, when the old rate will apply.
|Purchase price of residential property||Main rates||ADS|
|Up to £145,000||0%||6%|
The rates of Scottish landfill tax have been increased but they remain in line with landfill taxes elsewhere in the UK, including in Wales.
The intermediate band has been expanded slightly – it extends to £100,000 rather than £95,000.
|Rates band||Valuation band||Rates payable per £1 of rateable value|
|Basic Property||Up to £51,000||49.8p|
|Intermediate Property||£51,001 and £100,000||51.1p|
|Higher Property||Above £100,000||52.4p|
The Scottish government also applies a number of rates relief schemes such as Fresh Start, which encourages regeneration in town centres, and Day Nursery Relief, which has been extended indefinitely.
Bank of England interest rate now 3.5%
There was also an indication that the rate would rise to 4.25% in 2023 and are unlikely to fall anytime next year.
Conservative MP made bankrupt over £1m tax debt
Conservative MP Adam Afriyie has been made bankrupt. A bankruptcy order was made against the MP for Windsor at a hearing in the Insolvency and Companies Court, which found that he owed about £1m to HMRC and £700,000 to Barclays Bank.
Despite the bankruptcy order, Afriyie insisted that he will not be standing down as an MP until the general election, expected in 2024.
Commons rules dictate that if an MP is declared bankrupt, then after six months they must step aside and a by-election is triggered.
HMRC more tax enquiry activity
Enquiry levels are returning to those pre-pandemic.
During the pandemic HMRC changed its focus to delivering covid support programmes but now it is focusing intense efforts on cracking down on potential tax avoidance and non-compliance activities.
The escalation in enquiry activity highlights the importance of having fee protection insurance in place, and of course, all of our clients are automatically covered at no extra cost.
This means that you are covered for the fees required to deal with an HMRC enquiry, and they can sometimes amount to many thousands of pounds.
Mandatory e-invoices from 2024
The EU is planning to introduce mandatory e-invoicing for businesses that operate cross-border, including third party countries like the UK
The directive also introduces new rules for operators of online transport and accommodation platforms such as Uber and Airbnb, who will be responsible for VAT collection in future on behalf of their drivers, and house and flat renters. This is designed to help clamp down on high levels of VAT fraud across the EU, estimated at a loss of €93bn a year.
Mandatory e-invoicing rules for business to business (B2B) intra-EU supplies will affect British businesses operating in or exporting to EU markets.
Help to Grow: Digital Scheme Closes
The government has announced that its Help to Grow: Digital scheme will close in February 2023 after hitting just 1% of its original sign-up target.
The Help to Grow: Digital programme will close to new business applications on 2 February 2023, with discounts issued for eligible software redeemable within 30 days of the issue date.
The scheme was intended to ramp up digital skills and technology adoption by offering free advice and discounts of up to £5,000 for small businesses looking to adopt digital accounting or customer relationship management (CRM) tools for the first time.
Questions? If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at firstname.lastname@example.org