The last few weeks have been filled with speculation about what the Chancellor’s expected October budget would contain and everyone was braced for increased tax rates in some shape or form. However, with the budget now pushed back to the Spring of 2021 the Chancellor instead delivered his Winter Economy Plan with a range of measures to support jobs and businesses over the next few months.
The plan covers additional support with VAT payments and extension of the reduced VAT rate as detailed here as well as the introduction of the Job Support Scheme and increased flexibility around the repayment of various lending facilities.
For individual taxpayers, the Plan also allows further deferral of Income Tax liabilities. The July 2020 payment on account has already been deferred, interest-free, until 31 January 2021 although HM Revenue & Customs (“HMRC”) were keen to point out that for tax-payers whose income had not been impacted by Covid-19, the expectation was that the July payment would be made in full and on time. Now, individuals with Income Tax liabilities of up to £30,000 due on 31 January 2021, will be able to enter a time to pay arrangement with HMRC to spread the amount due over the following 12 months. This £30,000 limit includes:
- The July 2020 payment on account for the 19/20 tax year
- The January 2021 balancing payment for the 19/20 tax year
- The January 2021 first payment on account for the 20/21 tax year
Time to pay arrangements with HMRC normally attract interest, however, rates are low and currently set at 2.6%.
The Self Employment Income Support Scheme (“SEISS”) has also been extended, although at a much reduced rate. A lump sum payment will be available to cover the three months from November 2020 to January 2021 and is worth 20% of average monthly profits up to a maximum grant of £1,875. Eligibility conditions are the same as before and set out here.
An additional grant will also be available to cover the three months from February to April 2021 but the value of that grant will be announced at a later date.
It is worth noting that the second tranche of grant funding under SEISS, worth up to £6,570, closes on 19 October 2020.
Should you wish to discuss this further, please get in touch with your usual AAB contact Jill Walker, Private Client Tax Director