Tax Update – August 2022
Prime Minister Candidates and Possible Tax Cuts
With the departure of Boris Johnson, the contenders as leader of the Conservative Party and Prime Minister (PM) have now been whittled down to the last two – Rishi Sunak and Liz Truss.
Whoever wins will need to appoint a new chancellor and we await their tax policies with interest.
In the event of Liz Truss becoming PM, we are expecting her Chancellor to call an emergency Budget, with a flurry of tax reductions being announced.
In her campaign to win support from Tory members, Liz Truss has suggested that she would reverse the 1.25% Health and Social Care Levy. She would also cancel or reduce the scheduled rise in corporation tax to 25% from 1 April 2023 where company profits are in excess of £250,000 a year.
We are not currently expecting an emergency Budget under former chancellor Rishi Sunak. Sunak continues to promise tax cuts in the future, but only when inflation has been brought under control.
Attracting and Retaining Key Staff
In the increasingly competitive jobs market, it is important that employers are able to attract and retain talented people to help them grow their business. Within certain sectors, the opportunity to participate in the equity of the organisation that they work for is something that more employees are seeking and those employers that do not offer such opportunities could put themselves at a disadvantage when looking to retain and recruit…
To find out more about 100% HMRC Approved tax efficient schemes from Folkes Worton – CLICK HERE
Beware of ‘Rogue’ R&D Consultants
To view our Blog from 12th July 2022 on this subject – CLICK HERE
Making Tax Digital – UPDATE
Making Tax Digital (MTD) for VAT has been with us since April 2019, with the extension to all VAT registered businesses from April 2022.
The next roll-out will be the introduction of MTD for income tax which is scheduled to start in April 2024.
The obligation to keep records in a digital format and report information quarterly will apply to unincorporated businesses and property landlords with gross income from all business activities in excess of £10,000 a year.
Businesses operating MTD for VAT may already have ‘functional compatible software’ for income tax purposes but will need to get into a new routine for income tax reporting.
The changes will be more significant for property landlord businesses, most of whom are not VAT registered and so have not already been through MTD for VAT.
If you believe you need a new digital accounting system for your business, there are a number of MTD compliant accounting software packages on offer and we can advise you on the one that is most appropriate for your business. There are even relatively low-cost software packages specifically designed for property rental businesses.
More Details of MTD for Income Tax
REPORTING – HMRC are currently consulting on the precise details of what needs to be reported each quarter. As expected, it seems the accounting software will need to record and report income and expenditure in the same categories currently used for self-assessment.
The main categories are:
- Turnover/gross rents
- Costs of goods sold
- Wages and salaries of employees
- Sub-contractor costs
- Rent, rates, power and insurance
- Repairs and renewals
- Professional fees
- Telephone and other office costs
- Interest on bank and other loans
- Motor and travel expenses
HMRC also propose that those businesses with turnover below the £85,000 VAT threshold will only need to report the totals of income and expenditure each quarter which will be a welcome simplification for small businesses.
To read more about Making Tax Digital, please visit:
Making Tax Digital – Working Towards April 2024
New Penalties for Non-Compliance with Making Tax Digital
Making Tax Digital is now mandatory for VAT-registered businesses
Tertiary legislation for Making Tax Digital for Income Tax – GOV.UK (www.gov.uk)
Folkes Worton LLP Chartered Accountants
Accounting for the Future