It is a tough time for both families and businesses, with higher prices and staff shortages causing difficulties that are witnessed every day, from supermarkets to airports. Those under fifty will struggle to remember such difficult economic times, with inflation at a 40-year high.
On 26th May, the Chancellor announced the introduction of several new tax-free payments to families to help them deal with the increased cost of living. These are being partly funded by a windfall tax on the energy companies, even though the Chancellor did not use the term. Many experts feel that further measures will be needed later in the year, unless there is an unexpected reduction in inflation.
The government announced the following payments.
- The Energy Bills Support Scheme will be doubled to a one-off payment to households of £400, which will no longer be repayable (as had been previously announced). This support is additional to the £150 Council Tax rebate for households in England in Council Tax bands A-D, which was announced in February and has already been received by millions of households.
- Individuals on means-tested benefits will receive a tax-free £650 Cost of Living Payment in two instalments, the first from July and a second in the autumn. No claim is needed: this sum will be paid directly into individuals’ bank accounts.
- Pensioner households will receive a one-off extra tax-free £300 Pensioner Cost of Living Payment as a top-up to their annual Winter Fuel Payment.
- In September, a tax-free £150 Disability Cost of Living Payment will be made to individuals who receive certain disability benefits, including the Disability Living Allowance and Attendance Allowance.
The Government is also providing an extra £500 million of local support, via the Household Support Fund, which is being extended from October 2022 to March 2023. The government will issue additional guidance to Local Authorities to ensure support is targeted towards those most in need of support.
Perhaps unsurprisingly, given all the business support schemes from the pandemic, the Chancellor has focussed his support on families rather than businesses, many of which are struggling due to higher energy costs and wages. However, there are many other issues that businesses need to be aware of currently, including imminent changes to National Insurance Contributions thresholds and, in future years, changes in the way that, and frequency with which, unincorporated businesses and landlords must report their profits to HMRC. We discuss these issues and many more in this newsletter.
With a Budget due in the autumn and the possibility of further announcements before then, please get in touch if you need to discuss any tax issues relating to your family or business.