As part of a number of measures to support the country during the coronavirus (COVID-19) pandemic, Working Tax Credits payments will be increased by £1,045 to £3,040 per year from 6 April 2020 until 5 April 2021.

The amount a claimant or household will benefit from will depend on their circumstances, including their level of household income. But the increase could mean up to an extra £20 each week.

If you claim Working Tax Credits, you don’t have to take any action or contact HMRC – the increase in your payments will start from 6 April 2020.

If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to:

• defer the payment until a later date

• pay the VAT due as normal

It does not cover VAT MOSS payments. HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement. You will still need to submit your VAT returns to HMRC on time. HMRC will continue to process VAT reclaims and refunds as normal during this time.

If you choose to defer paying your VAT

If you choose to defer your VAT payment as a result of coronavirus (COVID-19), you must pay the VAT due on or before 31 March 2021. You do not need to tell HMRC that you are deferring your VAT payment.

Payments made by Direct Debit

If you normally pay by Direct Debit you should contact your bank to cancel your Direct Debit as soon as you can, or you can cancel online if you’re registered for online banking.

After the VAT deferral ends

VAT payments due following the end of the deferral period will have to be paid as normal. Further information about how to repay the VAT you’ve deferred will be available soon.

For Income Tax Self-Assessment, payments due on the 31 July 2020 may be deferred until 31 January 2021.

Eligibility

You are eligible if you are due to pay your second self-assessment payment on account on 31 July. You do not need to be self-employed to be eligible for the deferment. The deferment is optional. If you are still able to pay your second payment on account on 31 July you should do so.

How to access the scheme

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment until January 2021.

Businesses furloughing staff during the coronavirus outbreak will receive further financial support – with the costs of employer national insurance and pension contributions being covered by the government.

Under the scheme, employers can claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500 a month.

New guidance on the Coronavirus Job Retention Scheme published by the government also confirmed that those made redundant after 28 February can be reemployed and placed on furlough.

Those on furlough will also be permitted to volunteer for the NHS without risking their pay.

HMRC changes coronavirus business helpline number to increase capacity

HMRC has set up a helpline for businesses and self employed who are concerned about paying their tax due to Covid-19.  The updated helpline number is 0800 024 1222 and is open 8am – 4pm Monday to Friday.

Support to the self employed

In the latest step to protect individuals and businesses, Rishi Sunak has set out plans that will see the self-employed receive up to £2,500 per month in grants for at least 3 months.

Millions of people across the UK could benefit from the new Self-Employed Income Support Scheme, with those eligible receiving a cash grant worth 80% of their average monthly trading profit over the last three years.

Self-employed people who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant, using a simple online form, with the cash being paid directly into people’s bank account. The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.

To qualify, more than half of their income in these periods must come from self-employment.

To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.

The income support scheme will cover the three months to May and grants will be paid in a single lump sum instalment covering all 3 months at the beginning of June.

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

Notes

• further information and details of the scheme will be shared shortly by HMRC

• HMRC will use the average trading profits from tax returns in 2016-17, 2017-18 and 2018-19 to determine the size of the grant

• this scheme also applies to members of partnerships

• before grant payments are made, the self-employed will still be able to access other available government support for those affected by coronavirus including universal credit and business continuity loans where they have a business bank account.

Businesses to be given an additional 3 months to file accounts

A joint initiative between the government and Companies House means that businesses will from today be able to apply for an additional 3 months to file accounts. The move is designed to help companies avoid penalties as they deal with the impact of COVID-19. As part of the agreed measures, those citing issues around COVID-19 will be automatically and immediately granted an extension. Applications can be made through a fast-tracked online system which will take just 15 minutes to complete.

HMRC to manage job retention scheme

Chancellor Rishi Sunak has announced that the Government will pay the wages of employees unable to work due to the coronavirus pandemic, paying 80% of the salary of staff retained by their employer up to £2,500 a month. The move, which covers gross pay, will be backdated to the start of March and last for three months. Mr Sunak said the coronavirus job retention scheme, which will be run by HMRC, would be extend the “if necessary”.

Mr Sunak also announced that VAT payments will be deferred until the end of June, while self-assessment income tax payments for July 2020 are to be deferred for six months. The Universal Credit standard allowance for the next 12 months has been increased by £1,000 a year, as has the Working Tax Credit basic element. The Chancellor said HMRC is working to ensure the first grants are available within weeks, with businesses able to apply for relief from Monday

Small firms set to see £250k loans

Banks are set to pledge interest-free loans of up to £250,000 for small businesses, with it reported that Chancellor Rishi Sunak’s emergency coronavirus loans will initially take the form of overdrafts that could be available within 48 hours. The Mail on Sunday says SMEs will be able to borrow a quarter of a million pounds from one of 40 lenders without having to secure the loan against assets.

Small firms will be able to apply for loans of up to £5m under the Government’s business interruption loans programme, but these are expected to take longer to arrange and may need to be secured against assets.

Chancellor under pressure to save the self-employed

The Chancellor Rishi Sunak is under further pressure to help self-employed people since Boris Johnson’s crackdown as many fear the new restrictions will prevent them from earning an income. Mr Sunak has already been accused of leaving the self-employed behind with the support measures he introduced last week. The Times reports that Mr Sunak is expected to announce measures at the end of the week as officials work to overcome significant “technical barriers”.

HMRC Budget 2020 measures which support businesses and employers on COVID-19: The Chancellor set out a plan to support public services, individuals and businesses that may be affected by COVID-19.  These include:

• For businesses with fewer than 250 employees, the cost of providing 2 weeks of COVID-19 related statutory sick pay per employee will be refunded by the government in full. This will provide 2 million employers with up to £2 billion to cover the costs of large-scale sick leave. HMRC will provide further details in due course on how employers can access the rebate. More information about this and regular updates can be found on GOV.UK.

• A dedicated helpline has been set up to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs. Through this, businesses may be able to agree a bespoke Time to Pay arrangement. If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

Further HMRC related Budget 2020 measures:

• Capital Gains Tax annual exempt amount is increased from £12,000 to £12,300

• NIC Class 1 primary threshold is increased to £183 per week, equivalent to £9,500 per year. The Class 4 lower profits limit is also increased to £9,500

• NIC employment allowance for employers is increased from £3,000 to £4,000 per year, but it is also worth mentioning that the allowance is being separately reformed, also from 6 April 2020, to restrict the allowance to employers whose NICs liability in the previous tax year was less than £100,000.

• Pension lifetime allowance is increased in line with inflation to £1,073,100 for 2020/21.

• There will be an increase to the Research & Development Expenditure Credit from 12% to 13%.

• The off-payroll working rules ensure that individuals who work through an intermediary (usually a personal service company) and would have been an employee had they provided their services directly, pay the same Income Tax and National Insurance Contributions as other employees. The government seeks to address non-compliance with the off-payroll working rules (IR35) by extending similar reform to medium and large sized organisations across all sectors from April 2020.

• From 6 April 2020 the government will increase the maximum flat rate deduction available for employees under homeworking arrangements from £4 to £6 per week.

• From 1 April 2021 there will be a 2% surcharge on Stamp Duty on non-UK residents purchasing residential property in England and Northern Ireland.

• The Entrepreneurs’ Relief lifetime limit has been reduced from 10 million to £1 million. This will apply to qualifying disposals made on or after 11 March 2020 and to certain disposals made before 11 March 2020.

• There will be an increase in Structures and Building allowance for capital allowances from 1 April 2020 from 2% to 3%. The SBA was introduced last year for non-residential structures and buildings and provides relief on eligible expenditure on a straight-line basis.

The following rate increases are to be applied from April 2020:

•Aged 25 and over will be entitled to £8.72 per hour (previously £8.21)

•21 to 24 year olds will be entitled to £8.20 per hour (previously £7.70)

•18 to 20 year olds will be entitled to £6.45 per hour (previously £6.15)

•16 and 17 year olds will be entitled to £4.55 per hour (previously £4.35)

•Apprenticeship rate increases to £4.15 per hour (previously £3.90)

The Apprentice rate is applicable for those on an apprenticeship aged under 19 years of age or if they are in their 1st year of the apprenticeship.

Pension savings can be tax efficient as contributions to registered pension schemes, attracting tax relief up to certain limits. Limit on tax relief Tax relief is available on private pension contributions to the greater of 100% of earnings and £3,600. This is subject to the annual allowance cap. Tax relief may be given automatically where your employer deducts the contributions from your gross pay (a ‘net pay scheme’). Alternatively, if you pay into a personal pension yourself or your employer pays contributions into the scheme after deducting tax, the pension scheme will claim basic rate relief (‘relief at source’). Thus if you pay £2,880 into a pension scheme, your scheme provider will claim basic rate relief of £720, meaning your gross contribution is £3,600. If you are a higher or additional rate taxpayer, the difference between the basic rate tax and your marginal rate can be reclaimed from HMRC via your self-assessment return.

Annual allowance

The pension annual allowance caps tax-relieved pension savings – contributions can be made to a registered pension scheme in excess of the available annual allowance, but they will not attract tax relief. The annual allowance is set at £40,000 for 2019/20; although this may be reduced if you have high earnings. The annual allowance taper applies where both your threshold income is more than £110,000 (broadly income excluding pension contributions) and your adjusted net income (broadly income including pension contributions) is more than £150,000. Where the taper applies, the annual allowance is reduced by £1 for every £2 by which adjusted net income exceeds £150,000 until the annual allowance reaches £10,000. This is the minimum amount of the annual allowance. Only the minimum allowance is available where adjusted net income is £210,000 or more and threshold income is more than £110,000. The annual allowance can be carried forward for up to three tax years if it is not used, after which it is lost. The current year’s allowance must be used first, then brought forward allowances from an earlier year before a later year.

Example

Harry has income of £100,000 in 2019/20. He has received an inheritance and wishes to make pension contributions of £60,000. In the previous three years he has used £10,000 of his annual allowance, leaving £30,000 to be carried forward for up to three years. To make a contribution of £60,000 for 2019/20, Harry will use his annual allowance of £40,000 for 2019/20 and £20,000 of the £30,000 carried forward from 2016/17. The £10,000 remaining of the 2016/17 allowance will be lost as cannot be carried forward beyond 2019/20. The unused allowances of £30,000 for 2017/18 and 2018/19 can be carried forward to 2020/21.

Reduced money purchase annual allowance

A lower annual allowance of £4,000 (money purchase annual allowance (MPAA)) applies to those who have flexibly accessed pension contributions on reaching age 55. This is to prevent recycling of contributions to secure additional tax relief.

Lifetime allowance

The lifetime allowance places a ceiling on your pension pot. For 2019/20 it is set at £1,055,000. A tax charge will apply if you exceed the lifetime allowance.

The high-income child benefit charge (HICBC) applies to claw back child benefit from either the claimant or his or her partner where at least one of them has income of £50,000 or more. The charge is perhaps one of the more unfair tax charges in that the person who suffers the liability may not be – and often isn’t – the person who received the child benefit.

Nature of the charge

The charge may apply to an individual with income over £50,000 where either they or their partner has received child benefit in the tax year. It may also bite where someone else gets child benefit for a child who lives with you and they contributed an equal amount to the child’s upkeep. It does not matter whether the child living with the individual is theirs or not. It is important to note here that ‘partner’ does not have to be a spouse or civil partner – the charge also applies to unmarried couples living together as spouses or civil partners. The measure of income for the purposes of the charge is ‘adjusted net income’. Broadly, this is income after taking account of Gift Aid donations and pension contributions and, for the self-employed, trading losses. Where both partners each have income in excess of £50,000, the charge is levied on the higher earner; if their income is the same, it is the person who receives the child benefit who pays the charge.

How the charge is calculated

The charge claws back 1% of child benefit for every £100 by which adjusted net income exceeds £50,000.  Where adjusted net income is £60,000 or more, the charge is 100% of the child benefit received in the tax year.

Paying the charge

Where a person is liable for the HICBC, they must declare it on their self-assessment tax return. The tax can be paid via self-assessment. Alternatively, if the tax return was filed by 30 December 2019 and the underpayment for the year in total is less than £3,000 it can be collected through PAYE via an adjustment to the tax code.

Worth stopping the claim?

Where the charge is equal to the full amount of the child benefit, it may seem easier not to claim it, rather than claiming it only to have to pay it back. However, child benefit paid for a child under 12 comes with National Insurance credits, helping to build up entitlement to the state pension. If the claimant does not otherwise pay sufficient National Insurance for the year to be a qualifying year, failing to claim may adversely affect their state pension. The solution is to claim but elect not to receive the benefit.