If you are a new parent, you can now claim Child Benefit via the HMRC app. However, high earners should note that some or all of the benefit may be clawed back via the High Income Child Benefit Charge.

Key dates

Child Benefit can be claimed from the day after that on which you registered the birth of your child, or once a child comes to live with you. Claims can be backdated for up to three months.

This note explains the nature of the child benefit, how to claim and the impact of the High Income Child Benefit Charge.

Nature Child Benefit

You will normally be eligible to claim Child Benefit it you are responsible for a child under the age of 16 (or under the age of 20 where your child has stayed in approved education or training). Child benefit is also available if you foster a child, as long as you are not receiving anything towards their accommodation or maintenance from your local council. If you adopt a child, you can apply as soon as the child comes to live with you – you do not need to wait until the adoption process is complete.

Only one person can claim child benefit. Consequently, it may be necessary to decide who claims.

For 2023/24 child benefit is payable at the rate of £24.00 per week for the first child and £15.90 per week for the second and any subsequent children. For two children, it is worth just over £2,000 a year.

Other advantages

Claiming Child Benefit confers advantages in addition to the actual payments. By claiming child benefit, you will receive National Insurance credits which will help you to build up qualifying years for state benefit purposes. This is particularly advantageous if you will not pay sufficient National Insurance for the year to be a qualifying year. This may be the case if you do not do any paid work, for example, if you are a stay-at-home parent, or if your earnings are less than the lower earnings threshold of £123 per week if you are an employee or, if you are self-employed, your profits are less than the small profits threshold of £6,725 a year. You need 35 qualifying years to earn a full state pension and at least 10 qualifying years for a reduced state pension. If you have at least one child, claiming child benefit will provide you with 16 qualifying years or more.

Claiming child benefit will also mean that your child is allocated a National Insurance number automatically when they reach the age of 16.

Consequently, it is always worth claiming Child Benefit, even if you elect not to receive the payments where they would clawed back by the High Income Child Benefit Charge.

Claiming Child Benefit

There are various ways in which a claim for Child Benefit can be made.

You can now claim via the HMRC app. If you do not already have the app you can download it from the App Store for iOS or from the Google Play Store for Android. You will need to sign into the app using your Government ID and password. If you do not already have one, you will be able to create one on the sign in page. The app has a dedicated Child Benefit section from which you will be able to make an online claim. Once you have made a claim, you will also be able to view your payments and other details.

You can also claim online via the Gov.uk website at www.gov.uk/child-benefit/how-to-claim.

To make a claim, you will need to have the following to hand:

• your child’s birth certificate or adoption certificate;
• your bank or building society details;
• your National Insurance number: and
• your partner’s National Insurance number if you have a partner.

Claims can also be made by post by completing child benefit form CH2 (available to download from the Gov.uk website at www.gov.uk/government/publications/claim-child-benefit-if-you-cannot-claim-online) and sending it to the address on the form.

You can also claim by calling HMRC’s Child Benefit helpline on 0300 200 3100.

As claims can only be backdated by three months, it is advisable to claim as soon as you are able so that you do not lose out.

High Income Child Benefit Charge

The High Income Child Benefit Charge (HICBC) is a tax charge that claws back some or all of the child benefit that you have received if either you or your partner have income of more than £50,000. Any maintenance from a former partner is not taken into account. Where both partners have income in excess of £50,000, the charge is levied on the person with the highest income.

It should be noted that your partner may be liable for the charge, even if they are not a biological parent of the child/children is respect of whom the child benefit is paid.

The charge claws back 1% of the child benefit paid for every £100 by which income exceeds £50,000. Once income reaches £60,000, the tax charge is equal to the child benefit paid in the tax year.

To avoid having to repay the benefit, you can elect not to receive it. However, it is still beneficial to make a claim to benefit from the associated National Insurance credits.

 

If you need to send a tax return for the 2021/22 tax year and have not sent one previously, you will need to register for Self-Assessment. This may be the case if you started a new business as a self-employed trader or as a partner in a partnership in 2021/22. You can register online.

Key dates

The deadline for registering for Self-Assessment for 2021/22 is 5 October 2022. You will need to file your return online by 31 January 2023. You can file a paper return if you wish, but you must do this by the earlier date of 31 October 2022. If you have an underpayment of £3,000 or less that you would prefer to be collected through you PAYE code, you must file your return by 30 December 2022.

This note explains what you need to do to register for Self-Assessment.

Register if you are self-employed

If you are self-employed and need to send a tax return for 2021/22 and have not sent one before you will need to register for both Self-Assessment and Class 2 National Insurance contributions. It is important that you do this by 5 October 2022, as you may be fined if you miss this deadline.

If you only have once source of income from self-employment and your turnover is £1,000 or less, you will benefit from the trading allowance and do not need to register. If, however, your income from self-employment is more than £1,000, you must complete a return and report it to HMRC.

Register online

If you already have a business account with HMRC, you will be able to register for Self-Assessment through your business account. To do this, you simply need to sign into your business account using your Government ID and password. You will then be able to add Self-Assessment to the list of services that you can use.

If you do not have a business tax account or a Government Gateway ID and password, you will need to set one up. Guidance on how to set up a Government Gateway account can be found on the Gov.uk website at https://www.gov.uk/government/publications/access-our-services-using-government-gateway/use-a-government-gateway-account. You can add a business account to your Government Gateway account.

Once you have registered for Self-Assessment you will receive a letter within 10 days containing your 10-digit Unique Taxpayer Reference (UTR).

You will also receive a letter before the filing deadline reminding you to file your return.

Filed a return previously?

If you did not file a tax return for 2020/21 but you have filed one online in the past, you will need to re-register online for Self-Assessment and Class 2 National Insurance. You can do this by completing form CWF1 online. You will need to sign in at https://www.access.service.gov.uk/login/signin/creds and will need your 10-digit UTR.

Previously filed a paper return?

If you have previously filed a paper return but want to file online, you can sign up for Self-Assessment through your business account. If you do not already have a business account or a Government Gateway account, you will need to set these up first.

Partner in a partnership?

If you are a partner in a partnership, you will also need to register for Self-Assessment by 5 October 2022 if you need to file a 2021/22 tax return.

If you need help with any of the issues raised above please call us on 01242 370298.

A Personal Tax Account is an online account with HMRC which is essentially a ‘one-stop shop’ for your personal tax needs. You can use the account to manage your tax affairs and to undertake a number of tasks, such as filing your self-assessment tax return and checking whether you owe any tax. The account can be accessed online. There is also an app.

This update explains how to set up, access and use your account.

What can you use a Personal tax Account for?

You can use your Personal Tax Account to check your records and manage the details that HMRC hold about you. You can also use the account to do the following:

• view a personal tax return;
• find your National Insurance number;
• tell HMRC about a change of name or address;
• check your tax code;
• check how much tax you owe;
• view your annual summary;
• claim a tax refund;
• check the income that you received from work in the previous five tax years;
• check how much income tax you paid in the previous five years;
• check your state pension forecast;
• check and manage your tax credits;
• track any forms that you submitted online;
• check or update your marriage allowance; and
• update HMRC about any benefits-in-kind that you receive through work, such as a change of company car.

How to set up an account

If you do not already have one, you will need to set up an account online. You can do this at https://www.gov.uk/personal-tax-account. If you have a Government Gateway account, you can sign in using your Government Gateway user ID and password. You will have a Government Gateway account already if you have used an HMRC online service previously. If you are self-employed, you will have created a Government Gateway account when you registered as self-employed. Don’t worry if you have forgotten your user ID and/or password as you will be able to trigger reminders.

If you do not yet have a Government Gateway account, you can register for one with HMRC. This will take around ten minutes. You can set up an online account at https://www.gov.uk/log-in-register-hmrc-online-services. You will need to enter your personal email address; a 12-digit authorisation code will be sent to the email address provided. You will need to enter this code, then enter your full name and set up a password and a recovery word. You will then be issued with a Government Gateway ID (which you should note down). You can then add further security and decide where you want your access code to be sent, such as by text to your phone. Once the access code has been entered, you will need to confirm your full name, National Insurance number and date of birth, and also prove your identity, either from your passport or driving licence or by answering multiple choice questions. The account will then be ready to use.

Accessing your Account

Once your account has been set up, you will be able to sign in using your Government Gateway ID and password. You will also need the access code sent to your phone or by email (depending on the option chosen). You can also access your personal tax account by using the dedicated app, which you can download from either the App Store (for iOS) or the Google Play Store (for Android).

Since July 2020, the rate of VAT that has applied to many services supplied by hospitality trades was reduced from 20% to just 5%. This reduction was extended to 30 September 2021.

From 1 October 2021 to 31 March 2022, the 5% rate will be replaced by a 12.5% rate.

Affected VAT registered traders will need to update their VAT software to account for this rate change.

The 12.5% rate is a new VAT rate. For the first time we have four rates of VAT; 0%, 5%, 12.5% and 20%.

From 1 April 2022, it is assumed that rates for the hospitality sector will return to 20%.

However, during these turbulent times, we can take nothing for granted.

Please call us on 01242 370298 if you need advice on the above matter.

A summary of the changes announced to increase funding for the NHS and social care budgets from April 2022.

NIC changes

• From April 2022, employees, employers and the self-employed will see increases in their Class 1 (employers and employees) and Class 4 (the self-employed and business partners) contributions of 1.25%.
• From April 2023, assuming that HMRC can adapt their system in time, this increase will be renamed the Health and Social Care Levy and will be shown as a separate deduction on payslips and self-assessment statements.
• From April 2023, the new Levy will also be payable by individuals who continue to work above the State Pension Age. Presently, pensioners who fall into this category pay no NIC deductions.
• Class 2 and Class 3 NIC deductions will not be affected by these changes.
• Most employers will not pay the 1.25% increase in their Class 1 contributions for 2022-23 or the new Levy from April 2023, as both will be covered by the present employment allowance (£4,000 in 2021-22). It is estimated that 70 per cent of the money raised from businesses will come from the largest one per cent of businesses – those with at least 250 employees.

Dividend tax changes

Director/shareholders should note that a similar 1.25% hike in the rates of tax they pay on dividends will also apply from April 2022.

From April 2022, the dividend tax increases will apply as follows:

• Basic rate taxpayers will see an increase from the present 7.5% to 8.75%.
• Higher rate taxpayers will see an increase from 32.5% to 33.75%.
• Additional rate taxpayers will see an increase from 38.1% to 39.35%.

This change will apply UK-wide. It will be confirmed as part of the next Budget and legislated for in the next Finance Bill.

The present £2,000 tax-free dividend allowance will continue, and due to the £2,000 tax-free dividend allowance and the personal allowance, around 60 per cent of individuals with dividend income outside of ISAs are not expected to pay any dividend tax or be affected by this change in 2022-23.

The change will affect director/shareholders who have adopted a high dividend, low salary approach to reduce their NIC footprint.

Need more information?

Please call us on 01242 370298 if you need more information regarding these changes.

 

If you are still claiming support via the Furlough Scheme, what are your options when the scheme ends 30 September 2021?

The Coronavirus Job Retention Scheme (CJRS), commonly referred to as the furlough scheme, has proved to be the most effective government support for employers struggling to keep their teams together during the current, unprecedented COVID disruption.

Unfortunately, we are now entering the final quarter for claims as the furlough scheme is closing 30 September 2021.

How have you been affected by COVID disruption?

There are two extreme positions:

1. Your business has been severely affected by recent events and with no continuing financial support from the furlough scheme you will need to consider redundancies.
2. The markets have been kinder to you, and you will be able to maintain your present workforce with no changes.

And there will be businesses that sit between these bookends.

Planning for changes

If your business has been adversely affected by recent events and you cannot see how you can survive financially beyond 30 September without shedding staff, before you make any decisions, consider your options.

For example, what are your projections for the next year in respect of:

• Sales
• What staff do you need to meet these sales forecasts?
• Direct costs
• Other overheads
• Loan repayments
• Capital investments

Without considering all these issues you may make the wrong decisions.

We can help

Let us help you prepare a business forecast for at least the next year. This will enable you to try out different options and decide which is the strongest candidate to take your business forward as we start to emerge from – what is hopefully – the worst of COVID lockdown disruption.

Pick up the phone and call us on 01242 370298. Making informed decisions will be your best choice to surviving the coming year and minimising any reduction in your present workforce.

Determine COVID effect on profits for 2020-21 and if lower than previous year reduce tax payment due 31 July 2021.

Many of us have been personally impacted by the COVID outbreak, financially and some health-wise. This alert is being sent to all our clients that submit a self-assessment tax return and are due to make a second payment on account for the tax year 2020-21 on or before 31 July 2021. You may have an opportunity to reduce how much you need to pay.

How have you been affected financially by COVID disruption?

The self-assessment tax payment you are due to make 31 July 2021 is presently based on the profits/income you earned during 2019-20. As we all know, COVID disruption started early 2020. Accordingly, many of us have seen a reduction in taxable income in the following tax year 2020-21.

In which case, could you have payments on account rebased on what has happened in 2020-21 rather than the previous tax year? The answer, of course, is yes you can.

Let’s complete your tax return sooner this year

The most effective way to rebase your 2020-21 tax payments on actual data is to complete and file the 2020-21 tax return before 31 July. In this way we can apply – as part of the tax return submission process – to reduce payments on account due 31 July 2021.

But what if you can’t file your tax return before 31 July 2021

If you can produce a realistic estimate of your income for 2020-21, we can lodge a formal request to HMRC to reduce your tax payments for 2020-21 without actually filing your tax return. The downside of this process is that if your subsequent tax return shows higher income levels than the estimate, then interest charges may be applied by HMRC.

What about the first payment on account for 2020-21 made 31 January 2021?

If your taxable income for 2020-21 is lower than that for 2019-20, then any payment on account you may have made in January 2021 my have been too much. By rebasing your income on actual earnings for 2020-21, and if applicable, applying for both payments on account due January and July 2021 to be reduced, any overpayment made in January will automatically be included in the recalculated payment due 31 July. In some cases, this may result in a tax refund.

What to do next

If you have suffered a reduction in income – for 2020-21 compared to 2019-20 – call us now on 01242 370298 or email us office@wfrancisandco.co.uk so we can get organised. There is no point in paying over hard-won cash reserves to HMRC if it is unnecessary.

This applies to any person taxed as a self-employed trader during 2020-21 – it includes non-incorporated property businesses (buy-to-let owners for example).

Did you make a loss or suffer reduced profits during 2020-21?

If you are self-employed and suffered a loss or reduction in profits taxable during the 2020-21 tax year, we need your co-operation to access your accounting records as soon as possible.

The trading year applicable will be the year ending 31 March 2021 (5 April 2021) or if your trading year is not the end of March, then the records for the year ending between April 2020 and March 2021, for example, 31 December 2020.

Why we are making this request

There are two reasons for making this request:

1. If your taxable, self-employed earnings are less for the tax year 2020-21 – as compared to 2019-20 – we may be able to file an election with the tax office to have any self-assessment tax payments due 31 July 2021 reduced or possibly eliminated. We may also be able to recover some or all of any payment on account you made 31 January 2021.
2. If you actually made a tax loss during 2020-21, we may be able to carry the tax loss back and recover tax paid in earlier years.

 What we need from you

If you keep manual records, perhaps on a spreadsheet, let us have the information you usually send as soon as you can. The year we need to cover is to 31 March 2021 or the trading year that ends during the tax year 2020-21.

If your accounts are kept on a computer, and we have access to the data, we will just need your confirmation that all transactions are completed for the relevant year.

If your records are computerized and we do not have access to the data, please send us copies of the reports we usually receive from you.

Support grants received during 2020-21

Do not forget that any support grants received during the last year will be taxable. For example, payments received under the Self-Employed Income Support Scheme.

We can help

Please call if you feel that this applies to your circumstances, but you are unsure what information we require, or if you need clarification of the information we need.

We look forward to hearing from you.

 

Since April 2020, all UK residential properties disposed of by UK resident taxpayers – that create a taxable gain for Capital Gains Tax (CGT) purposes – will have to be reported to HMRC within 30-days of the disposal. Any CGT payable will have to be paid over to HMRC in the same 30-day window. Generally, this will include sales of second homes and buy-to-let property.

What if I sell a property and don’t make a taxable profit?

The new 30-day disclosure deadline only applies, in practice, to property disposals that create a taxable gain. For example, if you sell a buy-to-let property and make a loss on sale you will not have to make a return within the 30-day window.

Does this mean I have to submit a tax return every time I sell a property?

Effectively, yes it does, although restricted to details of any property disposal that creates a chargeable gain. Penalties may apply if you file outside the 30-day window.

How do I work out how much tax is payable?

As part of the 30-day submission to HMRC, you are required to estimate the amount of CGT payable based on your present understanding of the factors that affect this liability. As your other earnings will determine if the CGT you pay is at 18% or 28% – or a mix of the two – estimating these other earnings and getting the number crunching right will be no mean feat.

During the 30-day window you will need to: prepare a formal computation and a calculation of the CGT due, and submit both to HMRC, and pay any CGT this computation reveals.

At the end of tax year during which you made the disposal you will also need to include the computation again as part of your actual return. This annual confirmation of the gain may result in an over or under payment of tax as the annual return will be based on actual data and not the estimated data used to comply with the 30-day rule.

We can help. Read the section that follows.

Advise us in advance if you intend to sell a chargeable property

1. Prior to the completion date, advise us which property is to be sold and the estimated selling price and sales costs.
2. We will immediately draw together the data we have about the property and confirm with you that this is correct. This will not only include the purchase price, but also improvements made since you bought the property.
3. We will use this information to prepare a draft computation (based on our prior knowledge of your tax affairs) and advise you of the possible CGT payable 30-days after the sale completes.
4. When the sale does complete, we can then adjust the numbers for any final changes in the sale particulars and agree the computation with you.
5. Once agreed, we can file the CGT computation with HMRC and advise you when and where you should pay any tax due.

To meet these relatively new reporting regulations, we will need to move quickly to meet the 30-day deadline and would request that you contact us immediately if you are planning to sell.

You will be contacted by HMRC – here’s why…

If you commenced self-employment after 5 April 2019

If you started your self-employment after 5 April 2019, you were initially denied support under the Self-Employed Income Support Scheme (SEISS) and the first three quarterly pay outs to 31 January 2021.

Thanks to a change in the recent Budget, you may be eligible – for the first time – to grants that will be made available for the quarter end 30 April 2021 and a final period to 30 September 2021.

 HMRC are adding a further security check

To counter fraudulent use of the SEISS scheme, HMRC have decided to contact taxpayers who became self-employed during 2019-20, and who submitted a self-assessment return for that period.

What will the letter say?

The letter will tell you to expect a telephone call on the number provided on your tax return. If our contact details were added to your return, HMRC will ask us to pass on your contact number.

On this occasion we cannot deal directly with HMRC and they will need to speak with you to obtain proof of identity and evidence of trade in the form of bank statements.

Why a letter and then a phone call?

Here’s what HMRC said:

We are aware of increased scam activity related to HMRC’s coronavirus support schemes. The purpose of the letter is to explain to you that this is a genuine call, and to give customers details on how to recognise it as such.

Worried about HMRC calling you?

HMRC’s reason for this added layer of security seems to be to exclude fraudsters from making claims. but if you have any concerns regarding this process, please call us on 01242 370298.