17 Jan

January Tax Round-up

January Tax Round-up

At this time of year we think about New Year’s resolutions. January is also a good time to start planning your tax affairs before the end of the tax year on 5th April. We have started the year by rounding up some of the Tax highlights to think about at this time of year. Dont forget that our team are here to support you though all your tax requirements so get in touch if you would like to discuss anything with us. 

£12,300 CGT ANNUAL ALLOWANCE – USE IT OR LOSE IT

The CGT annual exempt amount reduces from £12,300 to just £6,000 for gains made in 2023/24. Remember that the 2022/23 allowance is lost if not used by 5 April 2023 and you might want to consider bringing forward disposals of chargeable assets where possible. Where a married couple who are higher rate taxpayers own a buy to let property, bringing forward the disposal from 2023/24 could potentially save £3,528 CGT (£24,600 - £12,000 @ 28%). It would be important to exchange contracts before 6 April 2023 as that is the critical date for CGT.

130% SUPER-DEDUCTION ENDS 31 MARCH 2023

The 130% super-deduction for the investment in plant and machinery was introduced in the March 2021 Budget. 

The enhanced tax deduction is available to limited companies that acquire new plant and machinery between 1 April 2021 and 31 March 2023. Companies should consider bringing forward plans to acquire new plant to benefit from this generous tax allowance. Note that the expenditure must be incurred before the 31 March 2023 deadline.

£1 MILLION ANNUAL INVESTMENT ALLOWANCE NOW PERMANENT

The 130% super-deduction referred to above only applies to limited companies, however the Annual Investment Allowance (AIA) is available to unincorporated businesses as well as limited companies.

In the recent Autumn Statement the Chancellor announced that the AIA for expenditure on plant and machinery would become a permanent £1 million allowance.

The annual limit was originally scheduled to revert to just £200,000 from 1 January 2021 and has been extended twice to 31 March 2023. Businesses will welcome the certainty that this provides.

NEW VAT PENALTIES FOR LATE RETURNS

A new points-based system for late VAT returns starts for return periods commencing on or after 1 January 2023. A financial penalty will apply when a number of points have been accumulated, which will depend on how frequently the returns should be submitted. For a trader preparing quarterly returns a penalty will be charged when four points have been accumulated.

ADVISORY FUEL RATE FOR COMPANY CARS

The table below sets out the HMRC advisory reimbursement rates for employees' private mileage using their company car from 1 December 2022. Where full reimbursement is made there is no taxable fuel benefit. The rates for the previous quarter, if different, are in brackets.

Engine Size

Petrol

Diesel

LPG

1400cc or less

 14p

(15p)

 

 10p

(9p)

1600cc or less

 

 14p

 

 

1401cc to 2000cc

 17p

(18p)

 

 12p

(11p)

1601 to 2000cc 

 

 17p

 

 

Over 2000cc

 26p

(27p) 

 22p

 

 18p

(17p)

Note that for hybrid cars you must use the petrol or diesel rate and for fully electric cars the rate is now 8p per mile (previously 5p per mile)

You can continue to use the previous rates for up to 1 month from the date the new rates apply.

MORE TIME TO PREPARE FOR MAKING TAX DIGITAL FOR INCOME TAX SELF-ASSESSMENT

The mandatory use of software for Making Tax Digital for Income Tax Self-Assessment is being phased in from April 2026.

Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) was due to be phased in from April 2024. However, the government, recognising the current economic environment and the significant change that a transition to Making Tax Digital represents, has pushed this back to April 2026. In addition, the previously announced £10,000 threshold for self-employment and property income has been raised, as detailed below.

Under MTD for ITSA, businesses, self-employed individuals, and landlords will keep digital records, and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. In response, they will receive an estimated tax calculation based on the information provided to help them budget for their tax. At the end of the year, they can add any non-business information and finalise their tax affairs. This will replace the need for a Self-Assessment tax return.

Making Tax Digital from April 2026 From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.

Making Tax Digital from April 2027 Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most customers will be able to join voluntarily beforehand, meaning they can eliminate common errors and save time managing their tax affairs.

Income below the £30,000 threshold The government has also announced a review into the needs of smaller businesses, particularly those under the £30,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further rollout of MTD for ITSA after April 2027.

Mandating of MTD for ITSA will not be extended to general partnerships in 2025 as previously announced.

See: Government announces phased mandation of Making Tax Digital for ITSA - GOV.UK (www.gov.uk)

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