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10/08/2023

Penalty interest rates on unpaid tax bills soars

INTEREST

The Bank of England’s base rate has increased by another 0.25% leading to a rise in HMRC’s interest rates. What are they and when will they apply?

From 14 August 2023 the following rates will apply:
Late corporation tax paid quarterly - 6.25%
Interest on overpaid corporation tax - 4.25%

From 22 August 2023, the rates for other taxes will apply:
Late payment interest - 7.75%
Interest on overpaid tax - 4.25%

The second payment on account for personal self-assessment tax for 2023/24 was payable on 31 July 2023. Late payments accrue interest daily. Any overdue tax should be settled as soon as possible to avoid further interest charges.

Remember, if you expect your 2023/24 self-assessment tax bill to be lower than that for 2022/23 you can ask HMRC to reduce your payments on account

09/06/2023

HMRC resource shortage spreads to self-assessment

SELF-ASSESSMENT

HMRC has announced that the general self-assessment helpline will be closed to taxpayers for several months. When will it reopen, and what should you do in the meantime?

HMRC’s self-assessment helpline (0300 200 3310) will be unavailable from 12 June until 4 September 2023. The agent dedicated line has previously been restricted (though the service resumed on 5 June), and the VAT registration helpline was also closed recently in an effort to divert staff to help clear backlogs in other areas. This latest move shows just how much pressure HMRC is under in relation to staffing. It should be noted that the summer is typically a quieter time for tax return filing, and the helpline will be open again in time for the traditionally busier autumn and winter months, but it's issued some guidance on where to find help online in the meantime, including:

Registration
Checking if a tax return is needed
Ordering paper self-assessment forms; and
Accessing the extra support team.
If you've been issued with a tax return but don’t meet the criteria that require one to be filed, you (or your authorised agent) need to formally request that it be withdrawn. This can’t be done online via the personal tax account, so you will either need to write a letter or use the HMRC webchat service.

08/06/2023

***HMRC launches online application for time to pay arrangements***

VAT

HMRC has launched an online application process for VAT time to pay arrangements. Is this option available for your business?

Due to the new service, eligible businesses no longer need to call HMRC and plead for, or justify, an extension to their VAT payment deadline. However, it is necessary to take action swiftly, if you are struggling to pay. A business can set up its VAT payment plan online if:

the latest VAT return has been filed
less than £20,000 is outstanding
the request is made within 28 days of the payment deadline
it does not have any other payment plans or debts with HMRC; and
it plans to pay off its debt within six months.

Ineligible businesses can still contact HMRC to agree a payment plan, but will likely need to justify the need to do so. Note that late payment interest will still be charged, and, as interest rates are increasing, paying sooner rather than later is recommended wherever possible.

24/03/2023

***ARE YOU AWARE OF THE IMMINENT CAPITAL GAINS CHANGES?***

It’s always a good idea to try to utilise your capital gains tax (CGT) annual exempt amount before the end of the tax year. However, the amount is being cut in less than two weeks; meaning it’s more important than ever to take advantage now. How might you do this?

The current annual exemption for CGT is £12,300. However, for disposals made on or after 6 April 2023 the exemption is being slashed to £6,000.

Worse still, it will be a meagre £3,000 from April 2024. The annual exemption is a wasting allowance - if you don’t use it, you lose it, so once the amount decreases there will be no way to utilise any unused amount from this year. Thankfully, with certain assets it's possible to plan disposals for efficiency. Probably the easiest assets to use for such planning are listed shares.

Assuming you have no other gains or losses to take account of, the simplest form of planning would be to look at the value of your shares each year and compare them to the historic cost. If you have at least some shares standing at a gain, you can sell just enough to realise gains of up to £12,300. This gives you tax-free cash. You can double the efficiency of this strategy by gifting some shares to a spouse or civil partner prior to them being sold. If you have an investment manager, check whether they already do this for you before making any transactions.

23/02/2023

***Self-assessment tax owing
Make sure you don’t miss the deadline for...***

pay any self-assessment tax owing for 2021/22
Avoid an automatic late payment penalty

The penalty is equal to 5% of any 2021/22 self-assessment income tax and capital gains tax that was due on 31 January 2023 which remains unpaid after midnight on 2 March 2022.

No penalty applies to any part of your 2022/23 self-assessment payment on account due on 31 January that is owing after 2 March.

HMRC will first allocate any payment you made against the tax owing for 2021/22 and then the balance against the 2022/23 payment on account.

Where payment is not possible by the deadline, HMRC will waive the penalty if a time-to-pay arrangement is agreed before the deadline passes.

21/02/2023

***HMRC shuts down repayment agent***

Repayment agent ads have become a common sight in recent years, particularly on social media. You’ll recognise them by their style, usually along the lines of “Do you wear a uniform to work? You could be owed £1,000s from HMRC…” or similar.

While many such agents are genuine, the industry has come in for criticism due to practices that are, at best, questionable, e.g. requiring refunds to be made directly to the agent’s account.

All tax agents (and other professionals, including accountants and solicitors) must comply with anti-money laundering regulations, including being registered with a supervisory authority. HMRC has found one agent, Tax Credits Limited, to have seriously breached these requirements and ordered the company to cease trading as a repayment agent.

It's estimated that around 11,000 individuals had commenced refund claims via the company. HMRC will now write to these individuals to update them. The refunds will be automatically made by HMRC, so you don’t need to do anything if you are one of those affected.

08/02/2023

PAYMENT INTEREST

A further increase in the Bank of England’s base rate means that HMRC’s late payment interest rates will rise again next week. What will the new rates be?

On 2 February, the Bank of England announced that it would increase the base rate of interest by 0.5%, to 4%. This is the tenth successive increase since December 2021. As HMRC’s late payment and repayment interest rates are linked to the base rate, they are also set to increase. From 13 February 2023 the following rates will apply:

Late corporation tax paid quarterly - 5%
Interest on overpaid corporation tax - 3.75%

From 21 February, the rates for other taxes will apply:
Late payment interest - 6.5%
Interest on overpaid tax - 3%

If your tax payment is outstanding, make the payment as soon as possible to avoid higher interest charges. Note that these will apply even if you agreed a time to pay arrangement with HMRC, so it's still more efficient for you to pay as much as you can sooner.

***TAX RETURNS***The deadline for filing a self-assessment tax return for 2021/22 is 31 January 2023.Late filing penalty...
27/01/2023

***TAX RETURNS***

The deadline for filing a self-assessment tax return for 2021/22 is 31 January 2023.

Late filing penalty is £100 however the following also applies;

Where a self-assessment liability is paid later than the normal due date HMRC will charge interest (currently at 6% simple per annum).

HMRC can also charge late payment penalties equal to 5% of any tax outstanding for more than a year from the date that the balancing payment was due.

Normally, this applies if payment of the previous year’s tax liability is made later than 1 March.

25/11/2022

***Self Assessment tax payment looming and need time to pay?***

Agreeing a time to pay (TTP) arrangement used to involve calling HMRC and convincing it that you were struggling to pay.

Agreement was often made grudgingly. This stance has softened in recent years, and there may be no need to make a call at all. What do you need to know?

TTP arrangements are informal agreements between the taxpayer and HMRC in situations where the self-assessment bill can’t be paid in full by the deadline. Instead, the TTP arrangement allows the bill to be spread across monthly instalments by direct debit.

Previously, TTP arrangements could only be set up by calling the self-assessment helpline, explaining the circumstances, and making a case for it. Taxpayers would often find HMRC reluctant to agree a payment period of more than a few months. The advent of the pandemic and the cost of living crisis has changed this.

It's now possible to set up a TTP arrangement online using your Government Gateway account with no need to make a call. This will be possible if you:

- have filed your tax return
- are within 60 days of the payment deadline
- owe less than £30,000; and can pay in full within twelve months.

Late payment interest will be charged, but no late payment penalties. As interest rates are steadily increasing, paying sooner rather than later is recommended wherever possible.

24/11/2022

Do you drive a company provided EV?

Latest advisory rates bring welcome boost for EV owners

Employers can reimburse their staff for business travel in company cars. Until now, the rate for wholly electric cars has been fixed at 5p, but that will change from 1 December. What’s the full story?

Advisory fuel rates for company cars are published by HMRC on a quarterly basis. The benefit to using the rates is that there will be no benefit-in-kind charge to the employee.

It's possible to use a higher rate, but you must show that the actual fuel cost per mile is greater than the advisory rates. HMRC has just published the advisory rates applicable from 1 December 2022, and these include a welcome announcement for employees using wholly electric vehicles (EVs).

Going forward, the rate for EVs will be reviewed quarterly in the same way as those for petrol, diesel and LPG vehicles. The rate from 1 December will increase from 5p to 8p - a 60% jump reflecting the inflated price of energy. Note that hybrid cars do not qualify as EVs, so the appropriate petrol or diesel rate should be used instead.

23/11/2022

****Further increase to HMRC late payment interest****

LATE PAYMENT

Late payment interest rates will increase again in November because of a further hike in the Bank of England base rate. Will you be affected?

As HMRC’s late payment and repayment interest rates are linked to the base rate, they are also set to increase. From 14 November 2022 the following rates will apply:

Late corporation tax paid quarterly - 4%
Interest on overpaid corporation tax instalments - 2.75%
From 22 November, the rates for other taxes will apply:

Late payment interest - 5.5%
Interest on overpaid tax - 2%

If your 2021/22 tax return is outstanding you should calculate your tax liability as soon as possible to ensure you can meet the payment deadline, to avoid (or minimise) interest charges.

18/11/2022

***Chancellor announces tax increases***

INCOME TAX

What key changes did Chancellor Jeremy Hunt announce in the Autumn Statement?

Income tax. The Chancellor was quick to point out that there are no increases to the headline rates of tax. However, this does not mean that individuals won’t pay more income tax, quite the opposite in fact.

The threshold at which the 45% rate of income tax kicks in will be reduced from £150,000 to £125,140 from 6 April 2023.

The personal allowance will remain at the current level until April 2028. As wages are increasing, albeit at a lower rate than inflation, this means that some low earners will start to pay income tax. The freeze on the threshold at which the 40% rate of tax is paid has also been extended by two years to 2028. The tax-free dividend allowance will be cut to £1,000 from April 2023 then to £500 the following year.

National Insurance. The employment allowance will remain at the current level of £5,000. The main NI thresholds will also be held at the current level until April 2028.

Capital gains tax (CGT). There is no change to the CGT rates, but the annual exempt amount will be cut from £12,300 to £6,000 from 6 April 2023, and then to £3,000 the following year.

Other announcements.

The nil rate band which is the amount an individual can leave tax free on death, will be frozen at £325,000 for a further two years until 2028.
Electric vehicles will no longer be exempt from vehicle excise duty from April 2025.
The energy profits levy will increase to 35% from 25% and extended from four to six years.
National living wage to increase to £10.42 per hour from 1 April 2023

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