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Spring Finance Bill sets shape for tax changes to come
You‘ve probably digested the main news by now from the Spring Budget. Now comes the next stage:the Spring Finance Bill. The bill was published on 14 March, ensuring that the measures announced in the Budget take their next steps towards becoming reality.
Whenever a government announces new taxation in a Budget or Spring or Autumn Statement, these plans require statutory (or legislative) authority. A number of tax changes will now be enshrined into law if the bill passes as expected.
Cuts to National Insurance contributions and the abolition of so-called ‘non-dom‘ tax breaks were among the biggest headline grabbers in Jeremy Hunt‘s Budget. The changes to National Insurance, which will take effect on 6 April 2024, for employees and self-employed people, are being legislated through a separate Bill.
The Bill received its first reading in Parliament on 13 March. It will now follow the normal passage through Parliament, with a second reading on 17 April.
The Bill also legislates for several tax changes that have been previously announced and consulted upon, including maintaining the current rates for income tax and corporation tax and the Starting Rate for Savings.
A summary of the major announcements from the Budget:
– Cut to property capital gains tax
– Rise in VAT registration threshold
– Full expensing to apply to leased assets
– New British ISA
– Rise in child benefit threshold
– Freeze on fuel duty
Plans to close HMRC helpline for half a year halted
You may have seen somewhat of a furore breaking out in the media towards the end of the month, as HMRC announced its tax helpline would shut down for half of the year. Rather than use the phone line, anyone seeking help from HMRC officials would be faced with using online services such as a chatbot instead. The proposal meant the Self-Assessment line would be closed from 8 April to 30 September. It follows a trial last year.
However, the Chancellor Jeremy Hunt, appeared to step in and order HMRC to scrap the plan. HMRC has since announced a pause to the idea. It has begun a consultation to look into the impact that shutting the helpline would have for small businesses and taxpayers.
HMRC Chief Executive Jim Harra said: “Making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity.
“Our helpline and webchat advisers will always be there for those taxpayers who need support because they are vulnerable, digitally excluded or have complex affairs.
“However, the pace of this change needs to match the public appetite for managing their tax affairs online. We’ve listened to the feedback and we’re halting the helpline changes as we recognise more needs to be done to ensure all taxpayers’ needs are met, whilst also encouraging them to transition to online services.”
Will the plan still go ahead eventually? We’ll likely hear the outcome in the coming weeks.
Bumper IHT receipts set to be new record high
We‘ve seen plenty of speculation before the last two Budgets that Inheritance Tax would see major reforms. Yet nothing materialised. And the latest figures released by the Treasury show perhaps why there might be some reluctance to change the rules, with the amount of tax received hitting a record high.
The latest stats have shown that the Treasury looks set to collect £7.54bn in the 2023/24 tax year. That‘s higher than the previous record of £7.1bn, which was recorded in the 2022/23 tax year.
The Treasury has brought in £6.8bn in IHT receipts from April 2023 to February 2024 – £400m more than the same period last year.
The latest batch of statistics released by the Government showed a number of other forms of taxation also reeled in higher intake than previously.
VAT collected was significantly higher in the first 11 months of the 23/24 tax year. The figure reached £160bn – £9bn more than the previous year.
Officials reported that Income Tax, CGT, & NICs receipts for April 2023 to February 2024 were £430.3 billion. That was £23.2 billion higher than the same period last year.
PAYE Income Tax and NIC1 receipts for April 2023 to February 2024 were £369.1 billion, which is £23.4 billion higher than the same period last year.
However, there was a slightly lower figure for the amount of Income Tax Self-Assessment. The figures for receipts for April 2023 to February 2024 showed that number reached £42.1 billion, a fall of £0.1 billion compared to the same period in the previous year.
Online live funerals receive VAT exemption
Funerals that are broadcast online for well-wishers unable to attend in person are becoming exempt from VAT. During the COVID pandemic, streaming funerals became commonplace due to restrictions on the number of people gathering. Now, there has been an update to the rules around VAT which means any funerals shown live over the web will not face the charge.
The update also includes live streaming of a cremation or burial. If VAT has been charged in the past, then an adjustment can be made on future VAT returns.
This has been added to a list of services that are always exempt from VAT if they are “provided by an undertaker or funeral director after the body of the deceased has been released by the mortuary (if applicable),” HMRC says.
These services are:
– embalming
– use of a rest
– digging, preparation, and the refilling of graves
– burial or cremation
– the interment of ashes
However, the VAT update is not applicable for a third-party supplying the live streaming event,as opposed to being provided by the undertakers.
April Questions and Answers
Q: I’m a property owner, and I’m considering renting one of my houses out for people to use for vacations. What are the tax rules I need to understand?
A: It‘s a timely question, and unfortunately for you, there was a change announced in the Budget that will mean you can no longer benefit from a certain type of tax relief in the future.
At the moment, there are tax breaks for second homeowners letting to holiday makers in the shape of the Furnished Holiday Lettings (FHL) regime.
Among the advantages of the scheme is the fact that property owners can deduct the full amount of finance costs, such as mortgage interest, from FHL income. And when selling the property, business asset disposal relief may be available. That results in a 10% capital gains tax rate applying.
But the FHL scheme is to be disbanded, Jeremy Hunt has revealed. Currently, the tax breaks make it more profitable for second homeowners to let out their properties to holiday makers rather than to residential tenants to rent, raising concerns over the availability of long-term rental housing for local people.
According to HMRC, if you rent properties that qualify as FHLs, you can get the following benefits:
– you can claim Capital Gains Tax reliefs for traders (Business Asset Rollover Relief, Entrepreneurs‘ Relief, relief for gifts of business assets, and relief for loans to traders)
– you‘re entitled to plant and machinery capital allowances for items such as furniture, equipment, and fixtures
Furthermore, the profits count as earnings for pension purposes,meaning tax-advantaged pension contributions can be made.
If the change takes effect and is passed into law, the existing rules will be scrapped from April 2025. But you would have one year during which you could benefit from the current scheme. If you‘d like to understand more about the tax implications of property ownership, please get in touch.
Q: I’m a self-employed electrician. I want to undertake some training to help me run my business, but it’s quite an expense. Is there any way I can claim back the costs of training?
A: There are absolutely times when, as a sole trader or self-employed individual, you will be able to count the costs of training as an allowable business expense. It does depend on the circumstances and details. In March, HMRC published updated guidance on retraining tax deductibility to help people understand this area better.
HMRC says its latest guidance “ensures that updating existing skills, maintaining pace with technological advancements, or changes in industry practices are allowable costs when calculating taxable profits.”
It‘s helpful to look at a few examples to try to understand better what is or is not allowable. In your case, let‘s say it‘s a bookkeeping course you want to do at the local college. An electrician‘s day to day work doesn‘t entail bookkeeping, of course. But as a sole trader, you need to understand accounts and how to run your business efficiently. So, a course on bookkeeping would be relevant and an allowable expense.
But if you wanted to learn a new skill to start a totally new business, that‘s where it wouldn‘t qualify. The skills training has to be relevant to your existing business.
And, when someone is learning skills in a different field, they‘re likely to not qualify. So, one example: a painter and decorator decides they want to change their business completely by going into taxi driving instead. They want to claim the costs of a taxi driving course, but as the costs will not relate to the purpose of the existing business,i.e. painting,it can‘t count as an expense.
Q: I’m about to become a father in the next few months, with our baby arriving in late June. Am I entitled to any kind of Government help as a dad taking paternity leave?
A: There are changes just about to take effect that could be beneficial to you. Already, fathers receive a statutory weekly rate of Paternity Pay worth £172.48, or 90% of their average weekly earnings (whichever is lower). However, from this month (April 6 2024), fathers and partners can take Paternity Leave in separate blocks, rather than having to take the full two weeks in one go. At the moment you‘re only entitled to one block of two weeks, but you‘ll be able to split this out in the future. You will be able to choose to take your leave and pay at any point during the first year after the birth. It also applies if you are adopting a child too. And the amount of notice you have to give your employer is also changing – just four weeks. Paternity pay will be paid out on your usual salary slip, with both income tax and National Insurance taken off.
April Key Dates
6th
– New tax year begins; new tax codes take effect.
6th
– Introduction of a new tax band (in Scotland only) named the Advanced rate.
6th
– High Income Child Benefit Charge (HICBC) threshold will rise.
6th
– Employee NICS cut from 10% to 8%; Self-employed NICS will go from 9% to 6%.
6th
– Property capital gains tax cut from 28% to 24%.
19th
– For employers operating PAYE, this is the deadline to send an Employer Payment Summary (EPS) to claim any reduction on what you’ll owe HMRC.
22nd
– Deadline for employers operating PAYE to pay HMRC. This is also the quarterly deadline for businesses that pay per quarter. For those paying by post, the deadline is 30 April.
30th
– Corporation Tax Returns are due for companies with year-end of 30 April.
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