From April 2022, in line with announcements made last month, National Insurance Class 1 contributions (that will affect employed persons and their employers) and Class 4 contributions (that will affect the self-employed), are increasing by 1.25%. These increases will affect all employed and self-employed workers that presently pay National Insurance. This increase will only apply to NIC rates for one year. From April 2023, the 1.25% increase will be removed from Class 1 and Class 4 NIC rates and a new tax is being created to be known as the Health and Social Care Levy (HSCL). The HSCL will appear as a separate item on payslips and tax statements for the self-employed. The Levy is the closest the UK will have to a hypothecated tax – a tax levied and applied to a specific funding objective, i.e., funds for the NHS and social care budgets. Whilst payroll software providers will already be making changes to their code to accommodate this new tax, it will be interesting to see if HMRC can adapt their systems in time for the April 2023 launch date. Many smaller company employers, those that can claim the £4,000 employment allowance, will likely escape payment of the 1.25% increase in employers’ Class 1 contributions. However, the increase will also apply to Class 1A NIC employer contributions and these are not covered by the employment allowance. Note: Class 1A NIC is payable on the value of taxable benefits provided by employers and is levied at the end of each tax year.

If you have been keeping up with announcements from Downing Street, you will know that from April 2022 the hybrid rates of Income Tax on dividend income are increasing by 1.25 percentage points.
The changes from April 2022 are:
• The first £2,000 of dividends received are free of any additional tax charge, no change here.
• If you are a basic rate tax payer, your dividend income in excess of £2,000 will be taxed at 8.75% (presently 7.5%).
• If you are a higher rate tax payer, any dividend income that falls into the higher rate band will be taxed at 33.75% (presently 32.5%).
• If you are an additional rate tax payer, any dividend income that falls into the additional rate band will be taxed at 39.35% (presently 38.1%).
Even with these increases, it is likely that director/shareholders adopting the high dividend, low salary strategy will still save on NIC costs.
Savers who have their funds in tax-exempt wrappers, ISAs for example, will be unaffected.
Other savers would need to have fairly significant portfolios outside tax exempt investments in order to pay any dividend tax. With average dividend yields running at approximately 3.5%, you would need to have a portfolio in excess of £57,000 to breach the £2,000 tax-free limit.

1 September 2021 – Due date for Corporation Tax due for the year ended 30 November 2020.
19 September 2021 – PAYE and NIC deductions due for month ended 5 September 2021. (If you pay your tax electronically the due date is 22 September 2021)
19 September 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2021.
19 September 2021 – CIS tax deducted for the month ended 5 September 2021 is payable by today.
1 October 2021 – Due date for Corporation Tax due for the year ended 31 December 2020.
19 October 2021 – PAYE and NIC deductions due for month ended 5 October 2021. (If you pay your tax electronically the due date is 22 October 2021.)
19 October 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2021.
19 October 2021 – CIS tax deducted for the month ended 5 October 2021 is payable by today.
31 October 2021 – Latest date you can file a paper version of your 2021 self-assessment tax return.

As most drivers of a company car will be aware, if you have any private use of the vehicle this will result in a significant Income Tax charge. The benefit charge is the way that HMRC levy tax on this benefit in kind; and the higher the CO2 footprint of your company car, the higher the Income Tax charge.
Which is why many company car drivers are now looking at electric vehicles – either plug-ins or self-charging hybrids – as a tax efficient alternative.
For example, if you presently drive a gas-guzzling petrol driven car with a CO2 rating of 145g/km you could drastically reduce your benefit in kind tax charge by switching to a hybrid or fully electric car with a CO2 rating as low as 0g/km. There would still be a tax charge, even at 0g/km, but it would be based on a minimum 1% of the list price of the car when new, rather than 33% if rated at 145g/km.
Company car drivers whose private fuel is paid for by their employer will pay an additional Income Tax charge based on the Car Fuel Benefit charge. This charge is calculated by applying the above percentage rate (33% in our example above) to a fixed figure, £24,600 for 2021-22. Accordingly, the Car Fuel Benefit charge added to the driver’s taxable income would be £8,118.
Interestingly, since 6 April 2018, there is no taxable car fuel benefit where electricity is provided for an electric car. Legislation was included in the Finance Act 2019 with retrospective effect where the recharge facilities are made available to all employees at the workplace.
If an employee recharges a company vehicle at home and is then reimbursed for the cost of the electricity used, this may be challenged as earnings. However, the employee could then make a claim for the electric cost using the advisory rates. Currently this is 4p per mile for fully electric cars.
A final point, employers would also benefit from a shift to an all-electric company car fleet. They are obliged to pay a 13.8% National Insurance charge on the total value of benefits provided (car and car fuel benefits); in which case converting to electric would be an additional bonus.

Almost three million people have moved off the furlough scheme since March as the economy began to bounce back and businesses reopened, according to new statistics.
This is unsurprising as employers are now expected to cover 20% of any hours not worked with government providing 60%.
It will be sobering to see how the final closing of the furlough scheme on 30 September will affect unemployment rates.
Readers who are still undecided how to respond to these changes will need to make possibly agonising decisions in the coming month.
We can help. Please call so we can help you consider your options

If you do not pay your tax bill on time and cannot make an alternative arrangement to pay, HMRC can take ‘enforcement action’ to recover any tax you owe.
You can usually avoid enforcement action by contacting HMRC as soon as you know you have missed a tax payment or cannot pay on time.
They may agree to let you pay what you owe in instalments, or give you more time to pay.
Otherwise, there are a number of enforcement actions HMRC can take to get the tax you owe. They can:
• collect what you owe through your earnings or pension
• ask debt collection agencies to collect the money
• take things you own and sell them (if you live in England, Wales or Northern Ireland)
• take money directly from your bank account or building society (if you live in England, Wales or Northern Ireland)
• take you to court
• make you bankrupt
• close down your business
If you do not pay your tax on time, you’ll probably have to pay interest on the outstanding amount. You may also have to pay a penalty or surcharge.

In a recent news story published on the GOV.UK website, HMRC confirmed that nearly 1.8 million married couples and those in civil partnerships are claiming the Marriage Allowance to save up to £252 a year in Income Tax.
The allowance enables married couples or those in civil partnerships to share their personal tax allowances if one partner earns an income under their Personal Allowance threshold of £12,570 and the other is a basic rate taxpayer.
They can transfer 10% of their tax-free allowance to their partner, which is £1,260 in the 2021-22 tax year. It means couples can reduce the tax they pay by up to £252 a year. Couples can also backdate their claims for any of the four previous tax years, which could be worth up to £1,220.
If you are eligible, and still not making a claim, you can complete an application online at https://www.gov.uk/apply-marriage-allowance.

1 August 2021 – Due date for Corporation Tax due for the year ended 31 October 2020.
19 August 2021 – PAYE and NIC deductions due for month ended 5 August 2021. (If you pay your tax electronically the due date is 22 August 2021)
19 August 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2021.
19 August 2021 – CIS tax deducted for the month ended 5 August 2021 is payable by today.
1 September 2021 – Due date for Corporation Tax due for the year ended 30 November 2020.
19 September 2021 – PAYE and NIC deductions due for month ended 5 September 2021. (If you pay your tax electronically the due date is 22 September 2021)
19 September 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2021.
19 September 2021 – CIS tax deducted for the month ended 5 September 2021 is payable by today.

If you sell second-hand vehicles and you were not charged VAT when you purchased the vehicle, using the Margin Scheme will save you money.
If you did not use the VAT Margin Scheme, you would have to account for VAT on the full selling price of each vehicle. However, if you use the Margin Scheme, you can account for VAT on the difference between the price you paid for a second-hand vehicle and the sales price when you sell the car.
If you sell a vehicle for less than you paid for it, you will not have to account for any VAT on the sale.
You do not have to use the Margin Scheme, it is optional.
If you decide to use it, there are conditions you will have to meet. If you cannot meet all the conditions, you cannot use the scheme. The main conditions published by HMRC are:
• the vehicles must be eligible,
• you must have acquired the vehicles in eligible circumstances – in most cases, this means that you have obtained eligible vehicles for resale in circumstances where VAT was not chargeable,
• you must calculate the margin in accordance with the rules of the scheme, there are special rules about how to calculate your buying price, your selling price and your margin under the scheme, your margin may not be the same as your profit margin,
• you must meet the record-keeping rules of the scheme, there are special rules about invoicing and stock records.

You can claim up to £1,000 each tax year in tax-free allowances for property or trading income. If you have both types of income, you will qualify for a £1,000 allowance for each.
If your annual gross property income is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on a tax return. You may be required to complete a tax return for other income.
Likewise, if your annual gross trading income is £1,000 or less, from one or more trades you may not have to tell HMRC.
If your annual gross trading or property income, from one or more trades or businesses is more than £1,000 you can use the tax-free allowances instead of deducting any expenses or other allowances.
This would be useful if your actual expenses were lower than the £1,000 allowances. However, you cannot use the allowances to create a trading loss. You can deduct up to £1,000, but not more than the amount of your income. This is known as ‘partial relief’.
If your expenses are more than your income it should be beneficial to claim expenses instead of the allowances.
You cannot use the allowances in a tax year, if you have any trade or property income from:
• a company you or someone connected to you owns or controls,
• a partnership where you or someone connected to you are partners,
• your employer or the employer of your spouse or civil partner.
You cannot use the property allowance if you:
• claim the tax reducer for finance costs such as mortgage interest for a residential property,
• deduct expenses from income from letting a room in your own home instead of using the Rent a Room Scheme.