***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE***

We are fast approaching the deadline for filing your Self-Assessment tax return, which is Tuesday 31 January 2023.

If you would like Cogent / CMEASY to prepare your tax return, please complete and return the Self-Assessment Tax Return Questionnaire for the tax year 2021/22 as soon as possible.

As we are close to the deadline, we cannot guarantee to complete the tax return to meet the deadline, so it is important that you complete the questionnaire as soon as possible.

Please also be aware that if we have already prepared your tax return, this will not be filed until our fee has been paid and the tax return approved.

Outstanding Balancing Payments for 2021/22 and the First Payment on Account for 2022/23 are also due and payable by 31 January 2023 and interest will be charged on late payment.

If you worked via Cogent for the period 06/04/21- 05/04/22, you can request a questionnaire for 2021/22 by emailing tax@cogentaccountants.co.uk

If you worked via CMEASY for the period 06/04/21 – 05/04/22, you can download a questionnaire for 2021/22 by logging into your secure portal at www.cmeasyauth.co.uk using your username and password and clicking ‘Documents’ and ‘Personal Taxes’.

If you cannot remember your password, please use the ‘Forgot Password’ button on the login page. If you experience any further difficulty logging into your secure portal, please email tax@cmeasy.co.uk

The standard charge, including VAT, for a basic tax return, is £240 as we have passed the deadline to receive this service at a discounted rate. Please note, more complicated tax returns, where additional work or supplements are required, will be subject to additional charges.

If you have a second shareholder, they may also need to file a tax return, even if they haven’t previously. For further advice, please contact our Tax Department.

Penalties for late filing of tax returns can be as much as £1,600, even when there is no tax due, so please ensure your tax return is filed on time, whether you ask Cogent / CMEASY to prepare it for you, or you have made other arrangements.

Due to postal delays arising from industrial action, please return your completed questionnaire together with any attachments by email only to our Tax Department – tax@cogentaccountants.co.uk if you are a Cogent client for the period or tax@cmeasy.co.uk if you were a CMEASY client for the period.

You are required to file a tax return if:

• You have been asked to file one by HMRC
• You have a tax liability for the year (e.g. additional and higher rate tax, student loan in repayments, high-income child benefit charge or if you have any income which has not been taxed at source)
• You have a new source of income that needs to be declared.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE***

How much are you and your services worth? Is it more or less than in previous years?

Almost across the board, businesses are increasing their fees for services and the price of goods, as they continue to grapple with the cost-of-living crisis.

As we enter a new year, now is a great time to review your costs and think about how much you should charge for the expertise that you offer.

How you can demonstrate value and improve your income

There are several ways that you can determine the value of the personal services that you supply and use this to improve the amount that you are paid.

Scarcity – How few are people in your position? Is there a demand for your expertise? The reality is that the fees charged for certain services increase exponentially based on their scarcity.

At the moment, many employers are facing a recruitment nightmare, particularly in highly skilled industries.

This has been reflected by rapidly rising wages for some employees and fees for consultants and contractors.

If you are in such a high-demand industry or role, then your fees should reflect the scarcity of skills and services.

If you haven’t reviewed what you charge in the last year, whether you are in a contract or looking for new work, then now is the time to consider requesting a higher fee.

Ask yourself, could they find a replacement for the same fee? If the answer is no, then you are undercharging, and it may be time to address new and existing relationships with businesses.

Experience – Every year we get a little bit older and gain more experience. To those looking to engage your services, there is a big difference between a person with five years of experience and 10 years of experience.

If you are more experienced, you have faced a wider range of scenarios and by remaining employed shows that your expertise has been valued for longer.

While qualifications are important to many businesses, experience is just as key. It is important you play upon this aspect and the value that it gives to your services.

In many cases, it is likely to be an important way of justifying your worth to potential engagers.

Differentiators – No two people are the same, whether that is in their approach to work, availability, skills or qualifications, so focus on the things that make you stand out.

Sit down and think about what previous clients have said about you and use these as your main selling points.

If you know that you have a different work ethic or perhaps have knowledge that is in short supply and valuable to a particular client, sell this to them. Make them aware that they can’t afford to not work with you.

Be selective – If, having reviewed the points above, you think you have quite a good case for higher pay, it is worth seeking out contracts with a higher value that are, ideally, outside of the IR35 rules.

While we all have concerns about where the next contract may come from, if you have researched and identified the value that is inherent in your skills, experience and scarcity, you should be free to choose the type of work you commit yourself to.

Competition – Be clear with potential engagers of your services about the competition that they face from other businesses for your expertise. Make them understand the challenges that they may face in obtaining someone with the same knowledge and experience.

Highlight the scarcity of people in your position and make them understand why you are worth more than others.

Don’t sell yourself short. While there might be a temptation to help out struggling contacts or support businesses in need, ultimately you have a definable worth and shouldn’t be swayed otherwise.

Do your research, calculate the value of what you provide and deliver a competitive proposal, keeping in mind your own realistic goals for how much you want to earn and your flexibility for work.

If a business tells you they can get your services and expertise for less elsewhere, let them. In the current skills-driven economy, you can find work that meets your true worth.

Rishi Sunak’s government has, for the foreseeable future, shelved plans to regulate the umbrella industry.  The government had previously announced plans to establish a single enforcement body (SEB), however we understand this will no longer be the case.

The single enforcement body would have unified the three bodies which currently police compliance across areas of employment, providing regulatory reform for umbrella companies and their employees.

The SEB was a manifesto pledge made by the former Prime Minister, Boris Johnson, in the run-up to the last general election.

Speaking to MPs on 13th December, Grant Shapps – the Secretary of State for Business, Energy and Industrial Strategy – confirmed that the employment bill as a whole is no longer “on the cards” for the current government.

There are currently three bodies which enforce compliance with employment laws and regulations: HMRC National Minimum Wage Enforcement, the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority.

However, these bodies do not regulate the umbrella sector, leaving umbrella workers unprotected from tax avoidance schemes and rogue operators.

Failure to conduct due diligence when appointing an umbrella company could see contractors unknowingly operating via a tax avoidance scheme.

Contractors should note that just because an umbrella company is being promoted by your agent or regulated by an umbrella body, it doesn’t mean they aren’t a rogue outfit.

We have had a number of contractors approach us with the most horrendous issues so it is important to remember it is your head on the ‘’chopping block’’ and you must always satisfy yourself that the umbrella being promoted is right for you.

HMRC recovers unpaid taxes from scheme participants rather than scheme operators, and thousands of contractors have been hit with retrospective tax bills as a result.

Such schemes disguise pay in non-taxable forms, such as loans, in order to avoid paying the taxes owed. HMRC’s approach to recovering these taxes has been the introduction of the Loan Charge, which handed contractors tax bills totalling in the region of £3.2 billion.

Finally, remember you don’t have to work through an umbrella.  A Personal Service Company (PSC) is a perfectly legitimate, legally compliant and often commercially sensible option for many contractors, and anyone working through an umbrella may want to look for an ‘outside IR35’ contract in order to work through their own PSC. Please contact us for help or advice.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE***

If you would like Cogent / CMEASY to prepare and file your 2021/22 tax return and you have not yet sent us your completed Self-Assessment Tax Return Questionnaire, you will need to do so by 31 December 2022 to benefit from our discounted fee.

If you have a second shareholder, they may also need to file a tax return, even if they haven’t previously. For further advice, please contact our Tax Department.

The standard charge including VAT for a basic tax return is £240. Questionnaires received by 31 December 2022 will receive a 50 per cent discount on the basic tax return, charged at £120.

Any questionnaires received after 31 December 2022 will be charged at the full rate of £240.

Please note, more complicated tax returns where additional work or supplements are required, will be subject to additional charges.

Our deadlines have been set so that we can complete your return in time to meet the HM Revenue & Customs’ (HMRC) online filing deadline of 31 January 2023.

Penalties for late filing of tax returns can be as much as £1,600, even when there is no tax due, so please ensure your tax return is filed on time, whether you ask us to prepare it for you, or you have made other arrangements.

If you worked via Cogent for period 06/04/21 – 05/04/22, you can request a questionnaire for 2021/22 by emailing tax@cogentaccountants.co.uk  

If you worked via CMEASY for period 06/04/21 – 05/04/22, you can download a questionnaire for 2021/22 by logging into your secure portal at www.cmeasyauth.co.uk using your username and password and clicking ‘Documents’ and ‘Personal Taxes’. If you cannot remember your password, please use the ‘Forgot Password’ button on the login page. If you experience any further difficulty logging into your secure portal, please email tax@cmeasy.co.uk 

Due to postal delays arising from industrial action, please return your completed questionnaire together with any attachments by email only to our Tax Department – tax@cogentaccountants.co.uk – if you are a Cogent client for the period or tax@cmeasy.co.uk if you were a CMEASY client for the period.

You are required to file a tax return if:

• You have been asked to file one by HMRC
• You have a tax liability for the year (e.g. additional and higher rate tax, student loan in repayments, high income child benefit charge or if you have any income which has not been taxed at source)
• You have a new source of income that needs to be declared.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE***

In our last newswire, we covered some of the steps that you could take to keep a closer eye on your money.

If you have followed them, hopefully by now you have a better appreciation of how current inflationary pressures are affecting your finances, but what steps can you take to reduce the cost of living?

Unfortunately, there is no single solution to ease the cost-of-living crisis, but here are some steps that everyone can take to reduce the impact of this ongoing period of economic difficulty.

Revaluate your mortgage – If you have a mortgage then it is likely to be one of your biggest monthly outgoings. In recent months mortgage rates have shot up as the Bank of England’s base rate has increased. Those on non-fixed mortgage rates will have seen the amount they pay each month rise quite drastically as a result.

However, since the markets have calmed down in recent days, lenders have begun dropping their fixed-rate mortgage rates, with further falls anticipated into the new year.

If you have been experiencing higher mortgage costs as a result of recent events, then it might be worth seeking independent advice to see what options are available to you and which approach is best for your future.

Can you get cashback? – If you spend a lot on credit or debit cards, as many of us do, you might be able to make use of the cashback function offered by many High Street banks.

While this will not entirely solve the problems created by rising inflation, it will mean that you can recuperate some of the cost from your spending.

Some bank accounts offer cashback on the bills you pay, while others will cover any spending, including cashback of up to 15 per cent of your purchase at certain retailers!

Do not forget your future – With the cost-of-living crisis affecting a wide range of expenses, it might be tempting to cut back on your savings and pensions. However, by reducing the amount you pay, you will lose out in the long run as your savings will not benefit as much from the effect of compound interest. This works best when you have more in your account for interest to build on.

If you decide to stop paying into a private pension or your savings, then you may find that you have to work for longer or suffer an inferior standard of living in retirement. In many ways, it may make sense to live more frugally now while you are working, rather than tolerate a lower quality of life in retirement when you have more time to enjoy your hobbies and passions.

Next steps

It is easy to do nothing and hope for the best when things seem out of your control. But failing to act now could have long-term consequences on your wealth and prosperity.

In the last year, Inheritance Tax receipts have risen sharply – soaring from £0.5bn to £4.1bn year-on-year between April and October.

This rate is likely to climb higher and higher due to rising house prices, inflation and the Chancellor’s decision to freeze Inheritance Tax allowances, such as the nil-rate band and residence nil-rate band, until 2028.

None of us wants to pass on a tax burden to our beneficiaries through our estate, but for more and more people it is becoming a reality, in large part due to the rising value of the homes that we own.

While there are many ways to mitigate a potential Inheritance Tax bill, with Christmas just around the corner, what better time of year than to look at the rules around gifting?

Annual Exempt Gifts

You can give away a total of £3,000 worth of gifts each tax year without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can give gifts or money up to £3,000 to one person or split the £3,000 between several people. You can carry any unused annual exemption forward to the next tax year – but only for one tax year.

You can give as many gifts of up to £250 per person as you want each tax year, as long as you have not used another allowance on the same person.

You can also give a larger wedding gift to a child worth £5,000 or more prior to their nuptials and certain payments to help with a family member’s living costs, such as school fees, may be exempt as well.

Birthday or Christmas gifts you give from your regular income are exempt from Inheritance Tax.

The Seven Year Rule

Taper relief or as it is more commonly known, The Seven Year Rule, applies tax to gifts you have made in the seven years prior to your death on a sliding scale.

If there is Inheritance Tax to pay, it is charged at the full 40 per cent on gifts given in the three years before your death. However, the rate of tax paid on gifts made three to seven years before your death is taxed at different rates as follows:

• 3 years or less – 40 per cent
• 3 to 4 years – 32 per cent
• 4 to 5 years – 24 per cent
• 5 to 6 years – 16 per cent
• 6 to 7 years – 8 per cent
• 7 or more – 0 per cent

While you cannot usually plan the date of your death, it is important to understand how this mechanism works and plan lifetime gifts accordingly.

Charitable Gifts

Any money or assets that you give to a qualifying charitable body, whether during your lifetime or in your will via a legacy donation, is exempt from Inheritance Tax.

What’s more, if you leave more than 10 per cent of your net estate to a charity after you die the rate at which tax is paid on the rest of your estate is reduced from 40 per cent down to 36 per cent.

Planning for later life should include a clear pension, savings and investment strategy, but ought to also consider your estate after you are gone.

It is highly advised that you seek independent advice if you anticipate paying Inheritance Tax as there is a lot that can be done to reduce the amount that is paid.

The message from the Chancellor, Jeremy Hunt, in the days before he rose to the despatch box in the House of Commons to deliver the Autumn Statement was clear; he would be outlining billions of pounds of tax rises and spending cuts.

These spending cuts and tax rises, he said, would affect everybody and were necessary to re-establish the markets’ trust in the future health of the public finances.

What was less clear was exactly who the announcements would affect the most and how they would be impacted.

Of course, the challenges for the Chancellor extended well beyond winning the trust of the markets in relation to his stewardship of the public finances. He will also have been thinking about inflation, the cost-of-living crisis, interest rates and promoting economic growth, not to mention the political optics.

These are competing but intricately related pressures; action to address the cost of living carries with it the risk of further inflation; action to reassure the markets brings the twin dangers of not addressing the cost-of-living crisis or promoting economic growth. Different economic considerations do not exist in a vacuum.

Further underscoring the scale of the challenge, just a day earlier, the Office for National Statistics announced that inflation had reached a 41-year high of 11.1 per cent.

This followed warnings from the Bank of England’s Monetary Policy Committee, as it increased interest rates to three per cent in early November, that the UK faces a “prolonged” recession.

The only real questions concerned the detail of what the Chancellor would do. Which taxes would be affected? Will they rise now or in the future? Would tax rates rise? Would the focus be on freezing thresholds? How much pain would there be? Who would bear the brunt?

And, most importantly, would it work?

• Public finances
• Personal tax
• Business tax
• National Living Wage, Energy and Pensions
• Conclusion

Public finances

Addressing the Office for Budget Responsibility’s (OBR) economic forecasts, the Chancellor said that the economy is now in recession and is expected to shrink by 1.4 per cent in 2023/24 before growing in 2024/25.

Meanwhile, he said unemployment is expected to rise to 4.9 per cent in 2024, up from 3.6 per cent now, before falling to 4.1 per cent the next year.

Borrowing this year stands at 7.1 per cent of GDP, according to the OBR. Debt as a percentage of GDP is expected to peak at 97.6 per cent in 2025/26 before falling to 97.3 per cent in 2027/28.

Personal tax

Beginning with personal tax, the Chancellor said that the threshold for the additional 45p rate of Income Tax will fall from £150,000 to £125,140 from April 2023.

At the same time, National Insurance, Inheritance Tax and Income Tax thresholds and Allowances will be frozen at their current levels for a further two years to 2028.

He said the Dividend Tax Allowance will fall from its current level of £2,000 to £1,000 in 2023/24 and then to £500 in 2024/25.

Turning to Capital Gains Tax, the Chancellor said the current Annual Exempt Amount will fall from £12,300 to £6,000 in 2023/24 and then to £3,000 in 2024/25.

He then turned his sights to electric vehicles, saying that a road tax will apply to them from 2025.

Finally, on personal tax measures, he said that the Stamp Duty Land Tax (SDLT) cuts announced by his predecessor, Kwasi Kwarteng, in September 2022 will end on 31 March 2025 and will not be permanent.

Business Tax

Turning to business taxes, the Chancellor said he would reduce the enhanced deduction rate for Research & Development (R&D) Tax Relief for SMEs from 130 per cent to 86 per cent of qualifying expenditure from April 2023. The tax credit for loss-making SMEs will fall from 14.5 per cent to 10 per cent.

On Business Rates, he said that the revaluation exercise will go ahead as planned in April 2023. £13.6 billion of support will be provided over five years to help businesses transition to the new bills.

He said the Business Rates multipliers will be frozen in 2023/24 and there will be extended and increased relief for businesses in the retail, hospitality and leisure sectors. That relief will increase to 75 per cent.

The National Insurance Secondary Threshold will remain at £9,100 until April 2028.

National Living Wage, Energy and Pensions

Turning to the National Living Wage (NLW) and National Minimum Wage (NMW), the Chancellor announced he would increase the rates for those aged 23 and over by 9.7 per cent to £10.42 an hour from 1 April 2023.

Meanwhile, the rate of NMW for those aged 21 and 22, 18 to 20, and 16 and 17 will rise to £10.18, £7.49, and £5.28 an hour respectively. The apprentice rate will also rise to £5.28 an hour.

Moving to address energy costs, the Chancellor said the current Energy Price Guarantee (EPG) will remain in place until April 2023, limiting typical energy bills to £2,500 per year. From April 2023, the EPG will rise to £3,000 for the typical household.

Concluding his speech with pensions, the Chancellor said that the State Pension Triple Lock will remain in place, meaning the State Pension will rise in April 2023 in line with September 2022’s rate of CPI – 10.1 per cent.

Conclusion

The economy is a complex and dynamic system, and there are limits to what can be known about how it will respond to any particular intervention – it is the sum of the ever-changing actions of millions of individuals.

What is more, the Chancellor only has his hands on some of the levers of economic influence, not all of them, and moving one of the levers he controls can stop him from moving another.

Mr Hunt will be hoping he has pulled the right levers by the right amount and that the factors out of his control move in the direction he wants them to.

For businesses and business owners, the impact of the changes is likely to vary considerably and a renewed focus on tax planning is likely to be needed.

Link: Autumn Statement 2022

Following the elation within the contracting sector about the Government’s decision to repeal the 2017 and 2021 reforms to IR35, we are extremely disappointed the new Chancellor has chosen to reverse the measures.

IR35 was among a number of policies targeted by Jeremy Hunt in his emergency fiscal statement this month, which undid the tax cuts announced in his predecessor’s mini-Budget.

While this change is frustrating, it doesn’t materially change the reality of working as a freelancer or add further restrictions to the existing rules.

If you continue to work outside of the off-payroll legislation then you should be largely unaffected, but for those currently deemed inside, this may be a wake-up call to review current opportunities and to see what is out there that might offer more favourable terms.

Unemployment is, after all, at a historic low and many organisations have skills gaps that require filling – the ball is in your court.

Rishi Sunak has now been announced as the new Prime Minister following the resignation of Liz Truss after 45 days in office. Hopefully he will look favourably upon the contracting world.

As always, we will be here to guide you come what may, offering advice and support that makes your life easier.

We are in unprecedented times as energy bills, food costs, mortgage rates and inflation continue to rocket upwards.

The latest Consumer Price Index, which is the official mark of inflation in the UK, hit 10.1 per cent this month, driven up in large part by the cost of food.

Given the propensity for the current cost-of-living crisis to get worse, now is a great time to get your financial affairs in order.

While we can’t tell you best place to invest or save, here are a few simple tips to consider:

Managing and monitoring costs

Have you reviewed your outgoings recently? While there is very minimal scope to switch deals or cut costs, you would be amazed at how many people are on legacy contracts or terms that make their regular costs, such as broadband, higher.

Even small changes could add up to big savings overall, so it is worth taking the time to look at what costs can be cut, with the least effort and impact.

Taking advantage of tax reliefs

There is a wide range of personal tax reliefs available to all of us that we might not take advantage of that could reduce the amount of tax paid.

This is just one example, but if you are married and your partner earns less than the personal allowance (£12,570) and doesn’t pay any income tax you could use the Marriage Allowance to transfer £1,260 of their allowance to you. This could reduce the tax you pay by up to £252 in the tax year.

Re-evaluating existing contracts

Have you been working under the same contract for some time? Does your fee take into account inflationary pressures?

If your current contract isn’t making ‘ends meet’ then perhaps it is time to look elsewhere or seek a new contract with the same engager at a higher fee.

Given the shortage of skills within many industries, some businesses may be willing to meet in the middle or even match your requests given the cost of recruiting and onboarding a potential replacement.

An increasing number of retirees are looking to return to the workplace to supplement their pensions and reconnect with careers that they loved.

The new world of flexible working has never made it easier to choose when, where and how often you work.

If you have previously been a contractor or want to give it a go following a career in regular employment, what do you need to consider:

Changing job requirements

If you have been out of work for some time, it is important that the roles you are applying for align with your needs and skills.

Some jobs may require you to be up to speed on new standards or have different qualifications.

This can even be the case if you have done the job previously, as professional bodies and industries constantly update their policies.

If the role involves technology or certain types of software, you may also need to brush up on new programmes and processes.

If you have considerable experience in a certain field, but do not meet all of the requirements, some businesses may be willing to accommodate any needs that you have.

Costs of work

Although going to work is primarily about getting paid, many roles also incur costs. This can range from investment in new equipment or training to everyday costs, such as commuting, or if you work from home, your electricity and gas.

With the price of everything going up, you really do need to consider whether the fees you charge merit the costs you will encounter.

If you only end up slightly better off, it may not be worth the expense and effort in some cases.

However, this will rarely be the case in most roles, and returning to work could really boost your income during these challenging times and support a higher standard of living during your retirement.

Get connected

If you only recently retired, you may still be quite active on platforms like LinkedIn or have existing connections and contacts that you can rely on to secure new work.

However, if you have been out of work a little longer then you may need to refresh your online profile and build new connections within your industry.

People retire, move on and, more frequently, change the industries they work within. The pandemic saw a huge shake up to where and how people worked, so you can’t assume that your old contacts will still be around.

That is why it is important to put yourself out there and build relationships with agencies and potential engagers of your services.

How much and for how long are you willing to work?

If the return to work is not out of necessity, and you just want a little bit of additional income, you may need to think about how long and for how many hours each week you want to work.

While contracting does offer greater flexibility, there will still be certain expectations within each role and a certain amount of work that will need completing.

If you have got used to the extra free time in retirement, you need to consider the impact that returning to work will have on your life.

Nevertheless, freelancing still gives you greater freedom to decide how often and for how long you work.

Enjoy it

If you have retired and find yourself milling around the house or you miss the busy days of going to work and daily interaction with colleagues, then the return to work can be really enjoyable.

What’s more, you are likely to be in a position where you can choose contracts that are appealing to you, with less concern about how much they pay.

Speak to us

If you are genuinely considering a return to work then we are here and ready to help you with all your tax and accounting requirements, so get in touch if you need support.