Spring 2022 – not the Budget

The Chancellor has said previously that he prefers a ‘once-a-year’ approach to tax changes. Volatile circumstances have not helped him stick to this resolution.

The Spring Statement is not when significant changes are supposed to be rolled out. However the measures which go some way towards helping with the rising cost of living during such uncertain times are welcome. Fuel duties have been immediately reduced. NIC thresholds for employees change in July so that a larger amount of income is free of NIC, similar to the personal allowance for income tax. However this is against a backdrop of rising NICs, with the new Health and Social Care Levy, effectively an extra form of NIC, to come.

One thing he did seem confident to pre-announce was a planned income tax cut in 2024. So that will be a crowd pleaser, just in time for the next general election. Some things apparently never change.

Arts Council ACE grants announced as taxable

Very close to this 31 January’s deadline for 2021 income tax returns, HMRC suddenly – and rather casually – indicated that ACE Emergency Fund payments were now to be treated as taxable.

ACE grants were specifically confirmed in Parliament back in June 2020 to be non taxable, with no need to provide any details in the tax return for the year ended 5 April 2021. The maximum award was £2,500. There is also an well-established agreement between HMRC and the Arts Council, dating back to the 1970s, that ‘time to work’ Arts Council grants (so general assistance grants, no those for a specific named project) are exempt from tax. My approach when preparing tax returns for clients was therefore to treat the ACE grants as exempt.

The Arts Council itself has also written to some recipients of the ACE grant, but it is apparent that many have heard nothing about this. Quite apart from going against the longstanding principle that changes will not be made to tax retrospectively or without new legislation being passed, I believe this is incorrect.

I am challenging this in principle, with the help of the Chartered Institute of Taxation’s technical department, but this will take some while and while I am hopeful, success is not guaranteed.

I am advising all clients who received an ACE relief grant from the Arts Council to pay a relevant amount of extra tax and national insurance as a precaution. Any client who received an ACE award who has not been in touch with me should please contact me as soon as possible.

I am not suggesting rushing to declare this in an amended 2021 tax return, but instead, adding a note that an ACE grant was received and the treatment is being challenged. If HMRC’s position does not change back, an amendment to the return to include the extra tax could be done at any time up to next January. If the challenge is successful and HMRC backs down, affected clients have paid some of their next tax due up front.

Nothing about this difficult situation has any effect on SEISS. Furlough payments are also unaffected. There is no impact either on the treatment of any receipts from the Arts Council before April 2020.

Tax payment links January 2022

Self Assessment income tax and national insurance can be paid here.

Have your 10-digit tax reference (UTR) ready and a note of the amount of tax you are paying. You do not have to log into your HMRC Gateway ‘tax account’ unless you wish to. Select Self Assessment. When the various payment options are offered, the one which transfers payment to HMRC the quickest is the first one, pay by bank account

Government Gateway usually takes about 3 days after a tax return is submitted to show the tax payable, and the same time after a payment is received to show this. (It does not mean that the return or payment were not received.)

It is possible for taxpayers to set up their own Time to Pay arrangement online, or to request this by phone.

There is general information on payment of tax here.

Where tax is not paid by 31 January, interest is charged. It is worth making a part payment if full payment is not possible, or and estimated payment if the tax return is not submitted by 31 January, or includes any provisional figures.

January concessions

HMRC has announced that where 2021 tax returns are filed before the end of February 2021, no £100 late filing penalty will be charged.

Late-paid tax is still subject to interest – the current rate is 2.75% per annum. However no extra late payment penalties will be charged this year where tax is fully paid by the end of March, or where a ‘time to pay’ arrangement has been set up by then.

As last year, this is a pragmatic step, which not only helps taxpayers whose time and finances have been impacted by the Covid situation, but will also save HMRC having to process a huge volume of February late-penalty appeals.

No concession has been announced for VAT returns. Returns for the quarter ended 31 December 2021 are due with payment by 7 February.

Where any taxpayer’s return is delayed beyond the end of February, or a VAT return is late, for personal reasons – whether related to the pandemic or not – it will still be possible to appeal a late penalty in the usual way, asking HMRC to consider the circumstances and decide whether they will waive the penalty.

Autumn 2021 Budget

With more leaks than a rusty colander, there was little ‘news’ about tax specifics in today’s Budget speech.

Anyone expecting significant tax rises to be rolled out may have been surprised that there was no ‘windfall’ wealth tax, nor indeed any announcement of significant tax rises to balance some of the spending and tax reliefs announced. But the harsher news on benefits and tax had generally been preannounced or leaked. In particular, the withdrawal of the extra £20 in Universal Credit, a 1.25% rise in National Insurance from April 2022, higher tax on dividends above the £2,000 threshold, and an increase to Corporation Tax rates. This left today’s speech with more palatable headlines: tax and business rate reliefs for businesses engaging in research and development, concessions for various cultural and hospitality organisations, and a reduction in the taper applied to Universal Credit for those earning above a certain amount (although this does not help the lowest-income claimants).

Much was made of ‘simplification’, particularly in relation to duties on alcohol. But a consultation is being opened on an  online sales tax – another new tax, and one likely to fall eventually on ordinary consumers.

Also previously announced and recently postponed, from April 2024, Making Tax Digital for income tax will mean that taxpayers who are self employed, or landlords, will need to keep digital records (spreadsheet, or software packages) and provide quarterly updates to HMRC instead of just an annual tax return. Traders who do not use 31 March or 5 April as their accounting date will be pushed towards changing to using the tax year for their accounts.

Key rates and allowances for personal tax can be seen here:


I shall be adding detail in the coming days as I look at the detail in the Budget documents.


Self employed grant 5

SEISS 5 is now open to claims until 30 September.

Claimants must have a continuing self employment (or intending to continue as soon as possible), must have traded during the years to 5 April 2020 and 2021, and must have submitted their 5 April 2020 tax return by 2 March this year, showing self-employed profits which were £50,000 or less and which represented at least half of their total income. If the 5 April 2020 return does not meet these criteria, HMRC will look at an average of the four returns back to the year ended 5 April 2017.

If you qualified for SEISS 4 but chose not to claim, that does not prevent a claim for SEISS 5.

HMRC have contacted some (but not all) taxpayers who meet the tests listed above.

SEISS 5 relates to 1 May 2021 to 30 September 2021. To be eligible for any payment under SEISS 5, you must believe at the time you claim that your self-employed profits 1 May 2021 to 30 September 2021 (including any partnership profits) will be ‘significantly reduced‘ because of the pandemic. You must also keep evidence to support this. This might be for example details of booked or pencilled engagements that were cancelled because of Covid restrictions, venues where you routinely work that were closed for some of this time, or details of work missed because you had to self isolate. Where any client is very unsure whether profits are likely to be reduced between those dates, I suggest waiting until mid September to decide whether they are eligible. The claim declaration asks whether the claimant reasonably believes that profits from May to September will be significantly reduced. If someone claims at a time they reasonably believe this, they are not obliged to repay any grant if that does not turn out to be the case. But they must be able to demonstrate that their belief was reasonable when they were claiming.

In order to claim, two sets of turnover figures (self-employed income, ignoring any SEISS or local grant and without deducting any expenses) are needed. The total turnover for the year to 31 March or 5 April 2021 needs to be compared to the total for either the previous year, or if that year was lower than typical, the one before that. The turnover is the amount at the top of your self-employed accounts page, and is shown on page SE1 of the tax return in box 15. The difference (how much the most recent year’s turnover is lower than the earlier year) affects the level of SEISS payment available. If the turnover to April 2021 is down by 30% or more compared to the earlier year, you qualify for a higher SEISS amount. If it is down by less than 30%, you qualify for a lower SEISS amount.

The latest year’s turnover needs to be given in the SEISS 5 claim. HMRC will check turnover figures in some cases.

Other income such as pension income, employment income taxed under PAYE,rent received from a tenant or savings income like bank interest, are all ignored both when considering May-September 2021 profits and also when finding total turnover.

The grant payable is based on three months’ average profits from the last four tax years (or fewer years for new traders). This three-month amount is multiplied by 80% for a ‘higher’ SEISS claim, capped at £7,500. Or the three-month amount is multiplied by 30% for a ‘lower’ SEISS claim, capped at £2,850.

As with the other SEISS grants, any amount received will be subject to income tax and national insurance and will need to be included in the relevant tax return.

There is an option to pay some SEISS grant back, for taxpayers who find hat they have claimed in error, or who simply wish to pay something back for any reason.