Some Tax Planning Pointers
At TAG Accountants we like to take a pro-active approach to tax planning, highlighting changes to rules, regulations, and tax rates to ensure our clients can maximise their position. In this article, we highlight some areas well worth planning for, including state pension entitlement, corporation tax rises, charity grants and the revised business energy support scheme.
Check your State Pension entitlement now!
If you are expecting to claim the UK state pension, we would recommend you check your national insurance (NI) record before 5 April 2023, as currently voluntary contributions can be made to plug gaps in contributions dating back to April 2006, but this concession will end from April 2023.
To qualify for the maximum “new” state pension (relating to those retiring on or after 6 April 2016) a person must have 35 qualifying years of NI contributions. To qualify for part payment of the “new” state pension you must have contributed for at least 10 years. If your NI record started before 6 April 2016, different rules may apply, for instance, the number of required years of NI contributions/credits to get the full state pension may be higher.
To protect your state pension and other benefits it may be beneficial for you to make voluntary NI contributions to top up your contribution history, thereby increasing the state pension you will receive. It is worth taking financial advice when deciding if this is appropriate as, amongst other factors, it requires predicting what contributions will be made before you reach state retirement age.
Normally, it is only possible to make voluntary contributions covering the past six tax years, but there is an extension in place enabling you to fill gaps in your NIC history from 6 April 2006 to now by making voluntary contributions. But, from 6 April 2023, the timeframe for making voluntary contributions will revert back to the normal six years.
You can check your current NI record here – https://www.gov.uk/check-national-insurance-record
Corporation Tax rate rises from April 2023
Just a reminder that the Corporation Tax main rate will increase to 25% from 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will also be introduced from the same date for companies with profits of up to £50,000 meaning companies in this profit band pay the same rate as currently.
Where profits fall between £50,000 and £250,000 a marginal rate of Corporation Tax will apply that falls between the lower and upper rates. The lower and upper limits are reduced proportionately for shorter accounting periods of less than 12 months and, where there are associated companies.
The marginal relief means that the effective rate of Corporation Tax gradually increases from 19% where profits exceed £50,000 to 25% where profits exceed £250,000. Within this profit band, the marginal rate of corporation tax will be 26.5%.
The amount of Corporation Tax payable is calculated by multiplying taxable profits and gains by the main rate of 25% and deducting marginal relief. For the fiscal year 2023, the marginal relief fraction will be 3/200. Note that HMRC also has an online calculator that you can use to check basic eligibility for marginal relief.
For certain businesses, it may be worth reconsidering associated company relationships before April 2023 as the bandings are divided by the number of associated companies e.g., if there are four associated companies the 25% rate kicks in on profits over £62,500 as the £250,000 is divided by 4.
Grant available for small specialist charities – apply by 3 March.
Small and local charities, working with people facing complex issues and barriers, can apply for grant funding from Lloyds Bank Foundation for England and Wales but the deadline for application is 3 March 2023.
To qualify you must be a charity with an annual income between £25,000 and £500,000 and you can apply for a three-year, unrestricted grant of up to £75,000.
The Lloyds Bank Foundation will support charities that understand the complexity of the issues people face and are best placed to make a genuine difference in people’s lives covering areas such as Addiction, Asylum Seekers and Refugees, Care Leavers, Domestic Abuse, Homelessness, Offending, Sexual abuse and exploitation and Trafficking & Modern Slavery.
To find further details go to https://www.lloydsbankfoundation.org.uk/funding/specialist-programme
New business Energy Bills Discount Scheme from April 2023
A new business Energy Bills Discount Scheme will replace the current Energy Bill Relief Scheme which ends on 31 March 2023. The new scheme, which will run from 1 April 2023 to 31 March 2024, will support eligible non-domestic energy customers, including UK businesses, the voluntary sector – such as charities – and the public sector – for example, schools and hospitals.
It is designed to help support businesses whilst at the same time limiting the taxpayer’s exposure to volatile energy markets. A cap on the support has been set at £5.5 billion based on estimated volumes.
Under the new scheme, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill with a price threshold of £107 per MWh and a unit discount of up to £19.61/MWh applied to their electricity bill with a price threshold of £302 per MWh. Note that the relative discount will only be applied if wholesale prices are above the stated price thresholds.
Higher level support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. They will receive a gas and electricity bill discount (which will only apply to 70% of energy volumes) based on a supported price which will be capped by a maximum unit discount of £40/MWh for gas (with a price threshold of £99 per MWh) and £89/MWh for electricity (with a price threshold of £185 per MWh).
For all eligible non-domestic customers, energy suppliers will apply bill reductions automatically.
So, what should you do if you need help with any of that?
As always, our friendly tax services team is here to help.
If you would like to explore how our experts may be able to help you take advantage of these and many other tax planning opportunities, just book an appointment with one of our specialists here at TAG Accountants Group, Wolverhampton by calling 01902 783172 or alternatively, just click HERE to contact us via our website.
We look forward to speaking with you.
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