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.

 

Student Loans and Unearned Income

There are five types of student loans, which all have slightly different repayment conditions, so you need to know which loan or loans is relevant for you.

Loan type	Taken out	Written off	Income threshold  2022/23	Deduction rate
Plan 1	Before 1/9/2012 for English and Welsh, or before 1/4/21 for Scottish and Northern Irish	At age 65 or 25 years after first due to repay, depending on date taken out	£20,195	9%
Plan 2	After 1/9/2012	30 years after it became eligible to be repaid	£27,295	9%
Plan 4 (Scottish students or Scottish courses)	After 1/9/1998	At age 65 or 30 years after first due to repay, depending on date taken out	£25,375	9%
Plan 5 (not yet effective)	After 1/8/2023	40 years after next April after  date first due to repay	£25,000	9%
Post-graduate masters or PhD courses	Masters after 31/7/2016 or PhD after 31/7/2018	30 years after it becomes eligible to be repaid	£21,000	6%

 

The repayment is normally deducted by employers under PAYE from employment income. But repayments are also triggered by rental income.

Loan repayments will only be due from rental income if you have been given notice to file a tax return, and your “unearned income” exceeds £2,000 for the year.

Unearned income includes:

• interest from savings
• profits from letting
• profits from trade
• pension income.

The £2,000 threshold of unearned income is all or nothing, as once the total of the unearned income in the year exceeds £2,000, the whole amount is subject to SLR deducted at the appropriate rate.

You could find yourself in a position where your earned income is too little for your employer to account for student loan repayments, but you need to register for self-assessment and pay over student loan payments because your rental income exceeds £2000, and your income as a whole exceeds the income threshold.

You can of course make a voluntary payment of student loan directly to the Student Loan Company at any time.

Source: Based upon an Article by Rebecca Cave and published on Accountingweb

 

CGT Losses – Don’t Lose Them

The CGT annual exemption operates in a similar fashion to the personal allowance for income tax and just like personal allowances any unused exemption cannot be carried forward to be used in another tax year.

The annual exemption is being cut from £12,300 to £6,000 with effect from 6 April 2023, and then to £3,000 from 6 April 2024.

You need to consider whether you need to complete a disposal before April 2023 to benefit from the higher annual exemption.

Capital losses are automatically carried forward to be used against gains in a future year.

To be eligible to be carried forward a capital loss must be claimed within four years of the end of the tax year in which it arose, so by 5 April 2023 for losses that arose in 2018/19.

A capital loss is normally only realised when the asset is sold or destroyed. When a company is dissolved and the shareholders do not receive back the value subscribed, a capital loss will crystallise to the extent of the value lost on those shares.

You can make a  negligible value claim where an asset that you hold has diminished in value even though it is not being sold. This creates a loss to be used in the usual way.

HMRC regularly updates a list of quoted shares and securities which it agrees have negligible value.

Where you are holding worthless unquoted shares you may need to provide evidence to HMRC that the shares are of negligible value..

 

Astra Zeneca Moves to Ireland

Astra Zeneca chief executive Paul Soriot said the decision to locate the $400m (£330m) facility in Ireland was taken due to the benefits of a more favourable tax environment and a stronger green energy environment.

Soriot said: ‘We’ve made a $400m investment in the state-of-the-art manufacturing facility, which we wanted to make in this country and we’ve made in Ireland because the tax rate was discouraging.

Its annual report noted the imminent rise in corporation tax to 25%, adding that ‘the company is currently assessing the potential impact of these draft rules upon its financial statements’.

The Irish corporation tax rate is 12.5%, compared with 19% in the UK, rising to 25% from 1 April. This means that businesses based in the UK are paying double the corporation tax on relevant earnings.

 

Scottish ADS Changes

Changes to the additional dwelling supplement (ADS), would extend the length of time a buyer moving between properties has to sell their original home in order to be able to reclaim the ADS.

The proposals would extend the current time limit from 18 months to 36 months, These rules would Therefore apply for those disposing of a previous main residence after purchasing a new main residence.

There will also be an exemption for people buying a new property to live in after divorce or separation if they are required by court to keep their previous home.

The treatment of individual and joint buyers is to be aligned so that where a main residence is purchased jointly, only one buyer needs to meet the relevant conditions provided that no additional relevant properties are held.

People inheriting properties will also see changes to the current rules.

Also where individuals have an interest in a share of property, and that share has a value of less than £40,000, this will be excluded from ADS.

A consultation on these proposals closes for comment on 5 April.

 

Digital Pound by 2030

The digital pound would be issued by the Bank of England and could be used by households and businesses for everyday payments in-store and online with a limit of between £10,000 and £20,000 spend.

A decision on whether to introduce a digital pound will be taken within the next three years, with a possible rollout by 2030. Pilot tests would start in 2025 after prototypes were developed before any decision was taken.

Due to the reliance on IT and server networks, the Bank admitted: ‘Like other digital payments systems, such as card networks, the digital pound would be exposed to risks of electricity outages and cyber-attack. The Bank and other UK authorities would need to ensure the digital pound had the highest standards of resilience against such risks.’

A consultation closes for comment on 7 June 2023.

 

Sponsorship of Employees

Clothing provided for an employee by an employer is an employment related benefit. If the employer provides a uniform with the company name on it, this will not be a benefit in kind, as long as every item of clothing they provide has the company name/logo permanently fixed and outwardly visible on it.

Where an employee receives clothing as part of a sponsorship it is likely that  HMRC would accept that there is no benefit in kind as long as the company name is permanently fixed and outwardly visible on them.

If the employer also pays the employee to wear that clothing, this will be pay from the employment as they are receiving this money by reason of their employment.

If they were sponsoring the championships as a whole or sponsoring the whole team, it could be argued that it was not earnings by reason of the employment.

 

Check Your NIC Record Before 5 April 2023

Currently, voluntary contributions can be made to plug gaps back to April 2006, but this will be curtailed from April.

National insurance contributions are typically made by employed and self-employed individuals based on their earnings. Individuals may also receive NI credits if they are eligible. These NI contributions or credits make up a person’s NI history, which may affect their entitlement to the state pension as well as other benefits, such as employment and support allowance.

In general, to qualify for the maximum ‘new state pension’  a person must have 35 qualifying years of NI contributions. For part payment of the ‘new state pension’ a person must have contributed for at least 10 years.

If individuals have not contributed enough prior to reaching state pension age, they may not be able to claim state pension, or may only receive a proportion.

To protect state pension and other benefits it may be beneficial for people to make voluntary NI contributions to top up their contribution history, potentially increasing the amount of state pension they will receive.

Normally, it is only possible to make voluntary contributions for the past six tax years. Currently, there is an extension in place and individuals can fill gaps in their NIC history from 6 April 2006 to the present date by making voluntary contributions.

However, from 6 April 2023, the timeframe for making voluntary contributions will revert to the normal six years.

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 alan.long@thelongpartnership.co.uk.