By Claire Lea, Director, Head of Advisory TaxDirector, Head of Advisory Tax, Prime Accountants Group
A leading Midlands accountancy firm has shed some light on tax reliefs that businesses and individuals could make use of in light of the chancellor Rishi Sunak’s announcement last Thursday (May 26).
Claire Lea, director at Prime Accountants Group, which has offices in Birmingham, Coventry and Solihull, said with inflation at a 40-year high, it was important to understand how the £15 billion budgeted by the government will help with the spiralling cost of living.
She said: “We learned from the announcement that the previously-announced energy bill loan has increased from £200 to £400, to be paid to every household in October.
“In addition, lower income families will receive a one-off payment of £650 and pensioners will receive £300. A very specific levy was also announced to be targeted at energy firms which will help fund the increased spending.”
Claire outlined further tax reliefs for businesses and individuals specifically, laid out here:
Business tax reliefs
In light of the newly-introduced super deduction tax, Claire said companies should consider accelerating plans for investment and make use of the temporary tax relief at 130 per cent for qualifying plant and machinery until March 31, 2023.
Companies, sole traders and partnerships can also claim 100 per cent tax relief when investment is made in qualifying plant and machinery under an annual investment allowance. The limit has temporarily increased to a generous £1 million, but is set to revert to £200,000 after March 31, 2023.
Furthermore, the research and development tax relief under a SME scheme can provide tax reliefs up to 230 per cent and Claire said that if the company is loss making, the loss can be surrendered for an immediate cash payment to assist with cash flow or further investment.
Finally, to encourage everyone to ‘go greener’, the government has set low charges for electric cars. For the 2022/23 tax year the charge is only two per cent of the list price, which in turn results in a lower liability for the employer. Businesses can also claim 100 per cent capital allowances on the purchase of new electric cars which Claire says more employers should make use of.
Personal tax reliefs
Claire said individuals still have time to claim working from home expenses for the 2021/22 tax year, which can provide tax relief of up to £125. Employers can continue to pay their employees £6 per week tax free to reimburse the extra costs associated with home working, provided they are carrying out their duties under ‘homeworking arrangements’ – a tax-effective way for employers to ease the burden of the rise in living costs for their employees.
Claire added: “If you are able to do so, I’d strongly suggest increasing contributions to your pension schemes, which will definitely provide income tax relief. Where a salary sacrifice arrangement is used, you and your employer can both save National Insurance and can help mitigate the rise in rates. “However, ensure contributions do not exceed the annual allowance of £40,000, and £4,000 for higher earners.”