October 2022

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Government abandons plan to scrap 45p top rate of income tax

The government has abandoned its plan to abolish the 45% top rate of income tax due to the negative reaction it has received.

It has not yet been confirmed whether the same reversal applies to the top rate of income tax on dividends.

Chancellor outlines growth measures at Mini Budget

Chancellor Kwasi Kwarteng used the 2022 Mini Budget to announce a series of tax cuts for businesses and individuals.

The Chancellor confirmed that the 1.25% rise in national insurance contributions (NICs) that came in this year will be reversed from 6 November, while the Health and Social Care Levy has been cancelled.

The planned rise in corporation tax to 25% will be scrapped and the rate maintained at the current 19%. The basic rate of income tax will be cut to 19p in April 2023, a year ahead of schedule.

Additionally, the level at which homebuyers will start to pay Stamp Duty Land Tax (SDLT) in England and Northern Ireland has been doubled from £125,000 to £250,000. First-time homebuyers will pay no SDLT on homes worth up to £425,000, up from the previous price of £300,000.

For businesses, Investment Zones will be established across the UK that benefit from lower taxes and liberalised planning frameworks to encourage business investment.

The cap on bankers' bonuses, which limited rewards to twice the salary level, will be axed.

The Chancellor also committed to repealing the off-payroll legislation. The IR35 reforms, which rolled into the public and private sectors in 2017 and 2021 respectively, will no longer apply from April 2023 and responsibility for determining employment status where a personal service company is used will return to the worker.

Government caps business energy bills

Wholesale energy prices for businesses will be capped at 'less than half' of the anticipated winter levels under the government's support package.

The Energy Bill Relief Scheme offers discounts for all firms for six months from 1 October.

Hospitals, schools and other settings such as community halls and churches will also get help.

Under the scheme, revealed by the Department for Business, Energy and Industry (BEIS), wholesale prices are expected to be fixed for all non-domestic energy customers at £211 per MWh for electricity and £75 per MWh for gas.

Firms do not need to contact suppliers as the discount will automatically be applied to bills.

The scheme applies to fixed contracts agreed on or after 1 April and variable and flexible tariffs and contracts.

The announcement followed the launch of the Energy Price Guarantee for households. This will also cap the unit price of energy so that the typical UK household will now pay up to an average £2,500 a year on their energy bill for the next two years.

Speaking at the Mini Budget, Chancellor Kwarteng confirmed that the two schemes would cost a combined £60 billion for six months.

VAT businesses must be ready for Making Tax Digital filing by November

HMRC is reminding businesses that they will no longer be able to use their existing Value Added Tax (VAT) online account to submit VAT returns from 1 November.

By law, all VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use compatible software to keep their VAT records and file their returns.

According to HMRC, more than 1.8 million businesses are already using the MTD for VAT service. Over 19 million returns have been successfully submitted through MTD-compatible software so far, the tax authority adds.

From November, businesses who file their VAT returns on a quarterly and monthly basis will no longer be able to submit them using their existing VAT online account, unless HMRC has agreed they are exempt from MTD.

If businesses do not file their VAT returns through MTD-compatible software, they may have to pay a penalty. Even if a business currently keeps digital records, they must check their software is MTD compatible and sign up for MTD before filing their next return.

SMEs facing recruitment struggles

Eight in ten small businesses are finding it difficult to recruit staff, according to a report published by the Federation of Small Businesses (FSB).

The FSB's 'Scaling up Skills' report found that over 80% of small firms are flagging a lack of relevant qualifications, skills and experience among candidates as a problem, while 60% say a lack of applicants is also an issue.

More positively, five in six small employers provided training for themselves and/or their staff in the previous 12 months, with seven days of training and development per staff member on average.

Though critical to future sustainable growth, only a quarter of small employers say they have undertaken leadership and management training over the same period.

HMRC raises late payment interest from 11 October

HMRC will raise interest rates on tax debt from 11 October following the 0.5% increase in the base rate.

This means that the late payment interest rate will increase to 4.75% from 11 October 2022. The rate last increased to 4.25% on 23 August. This is the highest rate since the height of the financial crisis in January 2009.

Late payment interest is payable on late tax bills covering income tax, national insurance contributions (NICs), capital gains tax (CGT), Stamp Duty Land Tax (SDLT) and stamp duty reserve tax (SDRT). The corporation tax self assessment rate also increases to 4.75%.

The repayment interest rate will also be increased from the current 0.75% repayment interest rate to 1.25%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rise to 3.25%, up from 2.75% from 3 October 2022 (with the higher rate above applying from the normal due date).

The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments rises to 2% from 1.5% from 3 October 2022.

Action Fraud warns scammers are exploiting cost-of-living crisis

Action Fraud has warned that criminals are using the ongoing cost-of-living crisis to target the public with energy rebate scams.

Action Fraud revealed that more than 1,500 reports have been filed with the National Fraud Intelligence Bureau (NFIB) regarding scam emails purporting to be from energy regulator Ofgem, offering customers energy rebates.

In order to protect themselves from scams, Action Fraud has advised individuals to contact an organisation directly if they have doubts about an email; refrain from using numbers or addresses in the message and instead use the details on the company's official website; and forward suspicious communications to report@phishing.gov.uk