March 2023 | DSK Partners LLP

Transferring nil rate band for Inheritance Tax

Posted on March 23, 2023 by

The Inheritance Tax residence nil rate band (RNRB) is a transferable allowance for married couples and civil partners (per person) when their main residence is passed down to a direct descendent such as children or grandchildren after their death.

The allowance increased to the present maximum level of £175,000 from 6 April 2020. The allowance is available to the deceased person’s children or grandchildren. Any unused portion of the RNRB can be transferred to a surviving spouse or partner. The RNRB is on top of the existing £325,000 Inheritance Tax nil-rate band.

The allowance is available to the deceased person's children or grandchildren. Taken together with the current Inheritance Tax limit of £325,000 this means that married couples and civil partners can pass on property worth up to £1 million free of Inheritance Tax to their direct descendants.

The transfer does not happen automatically and must be claimed from HMRC when the second spouse or civil partner dies. This is usually done by the executor making a claim to transfer the unused RNRB from the estate of the spouse or civil partner that died first. This transfer can also happen even if the first spouse or civil partner died before the RNRB was introduced on 6 April 2017.

There is a tapering of the RNRB for estates worth more than £2 million even where the family home is left to direct descendants. The additional threshold will be reduced by £1 for every £2 that the estate is worth more than the £2 million taper threshold. This can result in the full amount of the RNRB being tapered away.

The RNRB maximum rate of £175,000 and the taper threshold are currently frozen until at least April 2026.

Source: HM Government Tue, 21 Mar 2023 00:00:00 +0100

Do you need to file a tax return

Posted on March 23, 2023 by

There are a number of reasons why you might need to complete a Self-Assessment return. This includes if you are self-employed, a company director, have an annual income over £100,000 and / or have income from savings, investment or property.

Taxpayers that need to complete a Self-Assessment return for the first time should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a Self-Assessment return needs to be filed.

HMRC has an online tool www.gov.uk/check-if-you-need-tax-return/ that can help you check if you are required to submit a Self-Assessment return.

The list of taxpayers that are usually required to submit a Self-Assessment return includes:

The self-employed (earning more than £1,000);
Taxpayers who had £2,500 or more in untaxed income;
Those with savings or investment income of £10,000 or more before tax;
Taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax;
Company directors – unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car;
Taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
Taxpayers who had income from abroad that they needed to pay tax on;
Taxpayers who lived abroad and had a UK income; or
Income over £100,000.

Source: HM Revenue & Customs Tue, 21 Mar 2023 00:00:00 +0100

Scottish Parliament approves 3% rent cap

Posted on March 23, 2023 by

The Scottish Parliament has approved a new 3% rent cap for most private renters that will come into effect from 1 April 2023 for an initial six-month period with the option to extend for another six-month period if required.

These changes follow a temporarily freeze on rent increases for private and social tenants, and for student accommodation, which comes to an end on 31 March 2023.

The changes to the Cost of Living (Tenant Protection) Act will mean that from 1 April 2023:

If a private landlord chooses to increase a tenant’s rent mid-tenancy, the increase will be capped at 3%.
Private landlords will alternatively be able to apply for a rent increase of up to 6% to help cover certain increases in costs in defined and limited circumstances.
Enforcement of evictions will continue to be paused for up to six-months except in a number of specified circumstances.
Increased damages for unlawful evictions of up to 36-months’ worth of rent will continue to apply.

The rent cap for student accommodation is to be suspended after the Scottish government recognised that this measure was having a limited impact on annual rents set on the basis of an academic year.

The Scottish Tenants' Rights Minister said:

“It is clear that many households in the private rented sector in particular continue to struggle, which is why we are capping in-tenancy rent increases in the private sector at 3% from next month, with safeguards in place recognising the effects the cost of living crisis may have on some landlords. Our restrictions on evictions will continue across all sectors, with the social sector rent cap being replaced with voluntary agreements from landlords to keep rents affordable.”

Source: The Scottish Government Tue, 21 Mar 2023 00:00:00 +0100

More time to top-up NICs

Posted on March 23, 2023 by

In some circumstances it can be beneficial to make voluntary National Insurance Contributions (NICs) to increase your entitlement to benefits, including the State or New State Pension.

Usually, HMRC allow you to pay voluntary contributions for the past 6 tax years. The deadline is 5 April each year. However, there is currently an opportunity for people to make up for gaps in their NICs for the tax years from April 2006 to April 2017 as part of transitional measures to the New State Pension. This deadline was set to expire on 5 April 2023 but has now been extended until 31 July 2023 after the government accepted significant public concern that many taxpayers would not meet the deadline.

You might want to consider making voluntary NICs if:

You are close to State Pension age and do not have enough qualifying years to get the full State Pension.
You know you will not be able to get the qualifying years you need to get the full State Pension during the remainder of your working life.
You are self-employed and do not have to pay Class 2 National Insurance contributions because you have low profits.
You live outside the UK but want to qualify for certain benefits.

If you fall within any of these categories, it may be beneficial to get a State Pension forecast and examine whether you should consider making voluntary NICs to make up missing years, known as topping up. Not everyone will benefit from making voluntary NICs and a lot depends on how close you are to retirement age and your NIC payments to date. If you think this opportunity may be relevant to your circumstances, please be in touch.

Source: HM Revenue & Customs Tue, 21 Mar 2023 00:00:00 +0100

Changes in VAT penalties

Posted on March 23, 2023 by

The first monthly returns and payments affected by HMRC’s new VAT penalty regime were due by 7 March 2023. The new VAT penalty rules apply to the late submission and / or late payments of VAT returns for VAT return periods beginning on or after 1 January 2023.

Under the new regime, there are separate penalties for late VAT returns and late payment of VAT as well as a new methodology to the way interest is charged. This replaces the old default surcharge regime and for most taxpayers should represent a fairer system.

The new system is points-based. This means that taxpayers will incur a penalty point for each missed VAT submission deadline. At a certain threshold of points, a financial penalty of £200 will be charged and the taxpayer will be notified. The threshold varies depending on the required submission frequency (monthly, quarterly, annual). For quarterly VAT returns, the penalty points threshold will be 4 points. The penalty points will reset to zero following a period of compliance, for quarterly returns this requires 12-months of compliance. There are also time limits after which a point cannot be levied.

The new regime also sees the introduction of two new late payment penalties. A first payment penalty of 2% of the unpaid tax that remains outstanding 16-30 days after the due date. The second payment penalty increases to 4% of any unpaid tax that is 31 or more days overdue. To help with the introduction of the new system, HMRC has confirmed that it will not be charging a first late payment penalty for the first year of the new regime (1 January – 31 December 2023) once the debt is paid in full within 30-days of the payment due date or if a payment plan is agreed.

Late payment interest will be charged from the date a payment is overdue, until the date it is paid in full. Late payment interest is calculated as the Bank of England base rate plus 2.5%.

Source: HM Revenue & Customs Tue, 21 Mar 2023 00:00:00 +0100

Keep talking

Posted on March 22, 2023 by

During recent disruptions to trade, ascribed to Brexit, COVID, the war in Ukraine or other global economic challenges, we have become used to online meetings and facetime calls to keep in touch with business associates, staff and friends.

Now that restrictions are easing it is worth reconsidering the value of face-to-face conversations.

Experts agree that communication is more engaging when employees meet in person and that virtual meetings are less effective at building trust.

Psychologists would point to the non-verbal cues that are lost when we are distanced from those with whom we communicate.

Perhaps we should keep talking and re-establish face-to-face contact with our business contacts?

Keeping in touch, face-to-face, may help us relax and sharing problems, common experiences and figuring out how those problems can be solved may lead to more productive outcomes than those afforded by15-minute conversations online.

For example, in a business context, if you can call on customers to discover their challenges this may reveal opportunities for you to step in and offer a solution.

On the flip side of these arguments, virtual meetings can afford significant cost savings. And many jobs are now advertised where working at home is permitted for part of the week. Perhaps what we need is a sensible combination of the two processes. Key meetings where expected outcomes are required may benefit from sitting at a common table. Follow-up clarifications being settled online.

Source: Other Wed, 22 Mar 2023 00:00:00 +0100

Spring Budget 2023 – Social investment tax relief to end

Posted on March 16, 2023 by

It was confirmed as part of the Spring Budget announcements that the Social investment tax relief (SITR) scheme will end as planned on 5 April 2023. New investments made on or after 6 April 2023 will no longer qualify for Income and Capital Gains Tax relief. The scheme was initially introduced to encourage individuals to support social enterprises and charities access new sources of finance.

For any investments made before 6 April 2023, the lifetime maximum amount of investment social enterprises can raise through the SITR is £1.5 million. This includes any money received by subsidiaries, former subsidiaries or businesses that have been acquired.

Individuals making an eligible investment in a SITR of up to £1,000,000 can deduct 30% of the cost of their investment from their Income Tax liability for the relevant later year in which the investment is made or the previous tax year. Qualifying investors can also benefit from Capital Gains Tax hold-over relief. To qualify for this relief, a Social enterprise must have been a community interest company, a community benefit society, with an asset lock or a charity.

Source: HM Treasury Thu, 16 Mar 2023 00:00:00 +0100

Spring Budget 2023 – Capital allowances

Posted on March 16, 2023 by

Designed in part to help offset the increased Corporation Tax main rate, the Chancellor announced the introduction of a new ground-breaking 100% first-year capital allowance for qualifying plant and machinery assets. This measure is also expected to help boost business investment and growth.

The new measure, known as full expensing, will initially apply from 1 April 2023 until 31 March 2026 although the Chancellor suggested that it may be made permanent in due course. The measure builds on the success of the super-deduction which ends on 31 March 2023. Under full expensing, for every pound a company invests, their taxes will be cut by up to 25p.

To qualify for full expensing, expenditure must be incurred on the provision of “main rate” plant or machinery. It should be noted that full expensing is available to companies subject to Corporation Tax only.

Plant and machinery that may qualify for full expensing includes (but is not limited to):

machines such as computers, printers, lathes and planers
office equipment such as desks and chairs
vehicles such as vans, lorries and tractors (but not cars)
warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers
tools such as ladders and drills
construction equipment such as excavators, compactors, and bulldozers
some fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential property.

For “special rate” expenditure, that doesn’t qualify for full expensing, a 50% first-year allowance (FYA) can be claimed instead. The 50% FYA was introduced alongside the super-deduction and was due to end on 31 March 2023. It will now be extended by three years to 31 March 2026.

Businesses can also continue to use the Annual Investment Allowance (AIA) to claim a 100% tax deduction on qualifying expenditure on plant and machinery of up to £1m per year. This includes unincorporated businesses and most partnerships.

Source: HM Treasury Thu, 16 Mar 2023 00:00:00 +0100

Spring Budget 2023 – Energy Price Guarantee

Posted on March 16, 2023 by

The Chancellor had previously announced that the energy price guarantee cap, which will see the average household have their energy bills capped at £2,500 a year, would remain in place until the 31 March 2023. It was announced as part of the Spring Budget measures that this cap will now be extended for a further 3-months until 30 June 2023.

From 1 July 2023 (rather than 1 April 2023 as previously announced), this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500). The government will also adjust the energy price guarantee scheme from 1 July 2023 to bring charges for comparable direct debit and Prepayment meter (PPM) customers into line until April 2024 when the scheme is set to end. This measure will help over four million households on prepayment meters.

No changes were announced to the previously announced business Energy Bills Discount Scheme that will replace the current Energy Bill Relief Scheme from 31 March 2023. The new scheme will offer support to eligible non-domestic energy customers, including UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals from 1 April 2023 – 31 March 2024. A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries.

Source: HM Treasury Thu, 16 Mar 2023 00:00:00 +0100

Spring Budget 2023 – Pension changes

Posted on March 16, 2023 by

One of the key measures of the Spring Budget was the announcement that the £40,000 cap on annual pension contributions will be increased by 50% to £60,000 from 6 April 2023. Tax relief for contributions to pension schemes is given at a taxpayer’s marginal rate of Income Tax and is subject to the increased underlying limits. Taxpayers will continue to access carry-forward, unused annual allowances for the last three tax years if they have made pension savings in those years.

The lifetime allowance is the maximum amount of pension and/or lump sum that benefits from tax relief. Although it was expected that the lifetime allowance would increase, the Chancellor made the unexpected announcement that the lifetime allowance of £1,073,100 is being abolished from 6 April 2023. Both of these changes are intended to incentivise older employees to continue in work whilst continuing to build additional pension savings.

The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023. Those earning over £260,000 (from 6 April 2023) will begin to see their £60,000 annual allowance tapered. For every complete £2 income exceeds £260,000 the annual allowance is reduced by £1. The annual allowance cannot be reduced to be less than £10,000 (2022-23: £4,000). The Money Purchase Annual Allowance will also increase to £10,000 (2022-23: £4,000) from 6 April 2023.

There will be other incentives to help get over 50’s back to work including expanding the DWP’s “Mid-life MOT” Strategy. This helps people to access financial, health and career guidance ahead of retirement. There will also be a new kind of apprenticeship targeted at the over 50s who want to return to work, called Returnerships.

Source: HM Treasury Thu, 16 Mar 2023 00:00:00 +0100

Month: March 2023

Transferring nil rate band for Inheritance Tax

Do you need to file a tax return

Scottish Parliament approves 3% rent cap

More time to top-up NICs

Changes in VAT penalties

Keep talking

Spring Budget 2023 – Social investment tax relief to end

Spring Budget 2023 – Capital allowances

Spring Budget 2023 – Energy Price Guarantee

Spring Budget 2023 – Pension changes

Explore More

Newsletter SignUp