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We are fast approaching the end of another tax year, 5 April 2022.

To benefit from tax relief for 2021-22 you will need to make any top-up payment on or before this date.

To help you reach a decision, we have summarised the present tax rules that set out how much you can pay into your fund and still claim tax relief on the contributions made:

Annual allowance

Most taxpayers can pay up to £40,000 a year into their pension schemes. However, this allowance may be reduced if you have a high income or if you have flexibly accessed your pension pot.

Three-year carry back

If you use all of your annual allowance for 2021-22, you might be able to carry over any annual allowance you did not use from the previous three tax years. Which means that for 2021-22 once the annual allowance is exhausted you could use unused allowances for 2018-19, 2019-20 and 2020-21.

What if you pay more than your annual allowance?

The short answer to this question is that you or your pension provider will have to pay tax.

Exceptionally, this would not apply in the year you retired due to ill health, or if you died…

What about your State Pension?

While you are considering your pensions’ funding, don’t forget that it is now possible to check your State Pension forecast online.

You can use this service to find out how much State Pension you could get, when you can get your pension, and how to increase your pension, if you can.

You will need to prove your identity by signing in via your Government Gateway.

To login go to https://www.gov.uk/check-state-pension

Planning note

For 2021-22, if you are obliged to defer contributions until after the end of this tax year, perhaps due to cash flow issues, don’t forget that any unused relief for the tax year 2018-19 will be lost under the three-year carry back rule. If feasible, you may want to consider going the extra mile to fund a top-up before 5 April 2022 to at least utilise your annual allowance for 2021-22 and any unused allowance for 2018-19.

Ultimately, the amount you can invest will depend on your personal financial circumstances and will be best discussed and agreed with your pension’s advisor.

HMRC is waiving late filing and late payment penalties for Self-Assessment taxpayers for one month – giving them extra time, if they need it, to complete their 2020-21 tax return and pay any tax due.

HMRC is encouraging taxpayers to file and pay on time if they can, as the department reveals that, of the 12.2 million taxpayers who need to submit their tax return by 31 January 2022, almost 6.5 million have already done so.

HMRC recognises the pressure faced this year by Self-Assessment taxpayers and their agents. COVID-19 is affecting the capacity of some agents and taxpayers to meet their obligations in time for the 31 January deadline. The penalty waivers give taxpayers who need it more time to complete and file their return online and pay the tax due without worrying about receiving a penalty.

The deadline to file and pay remains 31 January 2022. The penalty waivers will mean that:

· anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file online by 28 February,

· anyone who cannot pay their Self-Assessment tax by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April 2022.

Interest will be payable from 1 February 2022, as usual, so it is still better to pay on time if possible.

Since Monday 17 January, people with COVID-19 in England can end their self-isolation after 5 full days, as long as they test negative on day 5 and day 6.

The decision has been made after careful consideration of modelling from the UK Health Security Agency and to support essential public services and workforces over the winter.

It is crucial that people isolating with COVID-19 wait until they have received 2 negative rapid lateral flow tests on 2 consecutive days to reduce the chance of still being infectious.

The first test must be taken no earlier than day 5 of the self-isolation period, and the second must be taken the following day. If an individual is positive on day 5, then a negative test is required on day 6 and day 7 to release from isolation.

It is essential that 2 negative rapid lateral flow tests are taken on consecutive days and reported before individuals return to their job or education, if leaving self-isolation earlier than the full 10-day period.

For instance, if an individual is positive on day 5, then a negative test is required on both day 6 and day 7 to release from self-isolation, or positive on day 6, then a negative test is required on days 7 and 8, and so on until the end of day 10.

Those who leave self-isolation on or after day 6 are strongly advised to wear face coverings and limit close contact with other people in crowded or poorly ventilated spaces, work from home if they can do so and minimise contact with anyone who is at higher risk of severe illness if infected with COVID-19.

The default self-isolation period continues to be 10 days, and you may only leave self-isolation early if you have taken 2 rapid lateral flow tests and do not have a temperature in line with guidance.

The changes would appear to be an attempt to return key workers to their workplace as soon as possible.

With rare exceptions, once the end of the tax year has passed, tax planning options to reduce liability are no longer possible.

For Income Tax and Capital Gains Tax purposes, this means that the majority of the tax reduction options will cease unless actioned before 6 April 2022, the start of the next tax year.

Which means individuals and the self-employed have just over two months to consider their options.

If you fall into any of the following categories, please contact us so we can discuss your options:

• Your annual income is approaching £100,000, perhaps for the first time.
• You claim Child Benefit and the income of either parent is likely to exceed £50,000 for the first time during 2021-22.
• You have not yet considered topping-up pension contributions for 2021-22.
• You are self-employed with a 31 March 2022 year-end.
• You are self-employed and considering a significant purchase of equipment including commercial vehicles.
• You are the director/shareholder of a limited company and have not yet considered voting final dividends or bonuses for 2021-22.
• You have experienced, or are contemplating, a change in your personal status (single, married, separating, joining, or dissolving a civil partnership).

This list is by no means complete. If your tax affairs are complex pick up the phone. There is no joy in being advised after the tax year end, 5 April 2022, that if you had acted on or before that date you may have reduced your tax liabilities.

If politicians have it right, we may be approaching the end of the major disruption to economic activity of the past two years.

Which is great news for those trades badly affected by continuing lockdown and other restrictions.

Unfortunately, rapid growth following a long period of depressed trading conditions can prove to be disastrous.

The danger arises if you offer your customers more generous trading terms than your suppliers and you have very little left in your bank accounts.

Consider that you have £1,000 in your current account and have no chance of overdraft or loan support from your bank. Your sales for January 2022 are excellent, £20,000, but to secure these sales you were obliged to offer customers 60 days to pay their bills.

You were able to supply goods from stock so there is no need to immediately re-stock. However, in the month of January, you need to settle past VAT and Corporation Tax liabilities amounting to £10,000 and in January and February general overheads (wages, rent, transport costs etc.) totalling a further £9,000.

The terms you have offered customers mean that the sales you have achieved in January will not generate cash-flow until March and you are faced with fending-off HMRC (£10,000) and other creditors (£9,000) for two months with just £1,000 in your bank account.

Business owners facing this dilemma need to consider their options and creating a simple cash-flow forecast will reveal the peaks and troughs in your bank balances and give you time to consider your choices.

Please call if you need help in drawing up suitable cash-flow forecasts.

1 February 2022 – Due date for Corporation Tax payable for the year ended 30 April 2021.

19 February 2022 – PAYE and NIC deductions due for month ended 5 February 2022 (If you pay your tax electronically the due date is 22 February 2022).

19 February 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2022.

19 February 2022 – CIS tax deducted for the month ended 5 February 2022 is payable by today.

1 March 2022 – Due date for Corporation Tax due for the year ended 31 May 2021.

2 March 2022 – Self-Assessment tax for 2020-21 paid after this date will incur a 5% surcharge unless liabilities are cleared by 1 April 2022, or an agreement has been reached with HMRC under their time to pay facility by the same date.

19 March 2022 – PAYE and NIC deductions due for month ended 5 March 2022 (If you pay your tax electronically the due date is 22 March 2022).

19 March 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2022.

19 March 2022 – CIS tax deducted for the month ended 5 March 2022 is payable by today.

HMRC has confirmed that four million out of twelve point two million taxpayers have yet to file their 2020-21 self-assessment tax returns. Which means that an equivalent proportion of taxes due 31 January 2022 will remain unpaid; at least for the foreseeable future.

We have reported on our blog earlier in January 2022, that HMRC will allow a further month, until 28 February 2022, for unfiled 2020-21 returns to be filed without incurring a late filing penalty.

And further, anyone who cannot pay their tax liabilities by the 31 January 2022 deadline will not receive a late payment penalty if they pay their tax in full, or set up a time to pay arrangement, by 1 April 2022.

Which begs the question, why bother filing a return earlier in the tax cycle?

Two reasons for filing – or preparing a return for filing – earlier in the tax cycle, are:

• Preparing a 2020-21 return quantifies any income tax or NIC that will need to be paid on 31 January 2022. In a nut-shell, taxpayers who prepare their returns shortly after the end of the relevant tax year, will have more time to save funds to clear tax due the following January. In theory you could prepare your 2020-21 return during April 2021 which would give you nine months to save for any tax due.
• The 2020-21 return will reveal any balance of taxes due for 2020-21 and also set the amount of any payments on account for 2021-22 (these payments on account are due 31 January and 31 July 2022). If you consider that taxable earnings in 2021-22 are going to be lower than those during 2020-21, you can elect to reduce payments on account for the later year.

The four million taxpayers, who we are advised are still to file for 2020-21, may be in for a shock when their liabilities are finally revealed in the coming month. Although HMRC have been generous in forgoing late filing and late payment penalties for restricted periods, interest will still be charged on tax paid after due dates.

We have all suffered from the impact of the pandemic to some degree, either personally or in a business capacity in the last two years, but the old maxim, be prepared, still holds water; and we would advise all taxpayers to adopt the sooner rather than later approach when they come to consider tackling their self-assessment tax returns for 2021-22.

In between the other political distractions of the last few weeks, England has returned to the COVID measures set out in Plan A. This means:

• The government is no longer asking people to work from home if they can. People should now talk to their employers to agree arrangements to return to the office.
• Face coverings are no longer advised for staff and pupils in secondary school and college classrooms.
• Face coverings are no longer advised for staff and pupils in communal areas of secondary schools, nor for staff in communal areas of primaries.
• There is no longer a legal requirement to wear a face covering. The government suggests that you continue to wear a face covering in crowded and enclosed spaces where you may come into contact with other people you do not normally meet.
• Venues and events are no longer required by law to check visitors’ NHS COVID Pass. The NHS COVID Pass can still be used on a voluntary basis.

 

High Street traders and businesses in the hospitality and entertainment sectors will welcome these changes as they are desperate to return to pre-COVID trading conditions.

 

Regional variations

 

Wales

From 28th January changes are:

• nightclubs will be able to re-open
• COVID Pass needed for large indoor events, nightclubs, cinemas, theatres, and concert halls
• working from home remains important but moves from law to guidance
• in hospitality, no restrictions on meeting people and no requirement for table service or 2 metre physical distancing
• face coverings still required on public transport and in most indoor public places

 

Scotland

Current published regulations are:

• get the vaccine or the vaccine booster,
• if you don’t have symptoms take regular lateral flow tests – especially before mixing with other people and visiting hospitals and care homes,
• if mixing with others keep gatherings small – keep your distance from people not in your group,
• if you have symptoms – self isolate and book a PCR test,
• wash your hands regularly, and cover your nose and mouth if coughing or sneezing,
• open windows when meeting indoors,
• a mixture of home and office working is allowed,
• use the apps: COVID status (vaccine passport), Protect Scotland and Check-in Scotland.

 

Northern Ireland

The current range of COVID-19 regulations for Northern Ireland are best reviewed on the https://nidirect.gov.uk website.

Paying someone to act as your nanny, housekeeper or gardener may result in you being considered an employer. In turn, this may involve you needing to meet statutory employment rights and deducting any tax or National Insurance contributions from their wages.

These obligations will not apply if:

• They are self-employed, or
• Paid through an agency.

Au pairs

Au pairs usually live with the family they work for and are unlikely to be classed as workers or employees. They are not entitled to the National Minimum Wage or paid holidays.

They’re treated as a member of the family they live with and get ‘pocket money’ instead – usually at least £90 a week.

Carers and personal assistants

You are classed as an employer if you pay a carer or personal assistant directly, even if you get money from your local council or the NHS to pay for them.

There are organisations that can help with your employer responsibilities, such as recruiting and paying your carer.

Employee rights

Anyone you employ must:

• have an employment contract
• be given payslips
• not work more than the maximum hours allowed per week
• be paid at least the National Minimum Wage

 

If they meet the eligibility requirements, they are also entitled to:

• Statutory Maternity Pay
• Statutory Sick Pay
• paid holiday
• redundancy pay
• a workplace pension

 

Tax issues

As an “employer” you are required to comply with the following tax obligations:

• check if the person can work in the UK
• have employers’ liability insurance
• register as an employer
• set up and run payroll, or pay someone else to do it on your behalf (even if you pay the employee in cash)
• pay statutory benefits, for example maternity pay and sick pay
• deduct and pay the employee’s Income Tax and National Insurance contributions

If you employ a nanny and you are eligible for Tax-Free Childcare, you can use your childcare account to pay their Income Tax and National Insurance contributions.

HMRC make it clear that you cannot ask your employee to become self-employed to avoid these obligations as an employer.

A reminder that business in the hospitality, leisure and accommodation sectors in England may be due support funding from their local authority.

Recently, local authorities were reminded by government that they needed to process grants quickly. Extracts from a letter sent to authorities is reproduced below:

“As you will know, the spread of the Omicron variant is creating further challenges for businesses and workers. The virus has had a particular impact on the hospitality, leisure, and accommodation sectors, with declining footfalls and a growing number of cancellations.

“This is why we have announced a £1 billion support package, including hundreds of millions of pounds in further grant funding. Eligible businesses in the hospitality, leisure and accommodation sectors will be able to apply for one-off grants of up to £6,000 per premises, depending on rateable value:

• Businesses with a rateable value of £51,000 or above: £6,000,
• Businesses with a rateable value between £15,000 and £51,000: £4,000,
• Businesses with a rateable value of £15,000 or below: £2,667.

 

“The Government has chosen to provide generous grants of the same value as those given to hospitality businesses when they were fully closed last year – despite businesses still being able to trade. In total, we are providing £635 million directly to businesses across the UK, with councils being responsible for processing applications and distributing the funds.

“On top of this, we are also providing over £100 million in top-up funding for the Additional Restrictions Grant (ARG), introduced last year to help businesses. This is intended to help other businesses impacted by Omicron, such as those that supply the hospitality and leisure sectors.

“Local authorities will have discretion to allocate this funding to businesses most in need. I have personally written to those local authorities who have more than 5 per cent of previous funds left over, instructing them to distribute the money to those that need it.”

The message is clear enough, and if you are a business in one of the affected sectors or you are a supplier to those sectors and have been affected by recent disruption, call your local authority now to ensure you receive any grants to which you may be entitled.