One of those decisions is whether you’ll form your own Limited Company and contract through it, or join an Umbrella company and contract under it. In this blog we will specifically be looking at contracting under an Umbrella company.

Getting started

Setting yourself up with an Umbrella company is an extremely quick and easy process, which is probably why many view it as such an attractive choice for first time contractors, or those who are returning to the industry and need a quick solution. As you’re not forming your own Limited Company you won’t need to choose your company’s name, register it with Companies House, decide on a share structure, or who your employees will be. There’s also no complicated paperwork, hidden fees or important decisions to be made. By using an Umbrella company none of this is needed, and the setup is far simpler and quicker.

How will you get paid?

After you’re signed up, you’ll effectively become an employee of the Umbrella company. The good news with becoming an employee is that you’re now entitled to the same employment rights as you would if you were employed by a regular employer. These include statutory maternity and paternity pay, sick and annual leave pay, workplace pensions, etc. You’ll also be paid through PAYE just as you would if you were a permanent employee.

To get paid you’ll need to complete a timesheet which will be signed by your end-hirer / client on either a weekly or monthly basis, which you’ll then pass onto your Umbrella company who will then use it to charge the client for the work completed. Once payment has been received the Umbrella then calculates the amount of tax and National Insurance Contributions (NIC) due, deducts that value from your salary, along with their service fee, and then pay you what’s left directly into your chosen bank account.

So there’s no worrying as to whether you’ve paid the correct amount of tax or if the taxman will come after you, as your Umbrella will have taken care of this all on your behalf. You also won’t need to keep up to date with any tax legislation or think about how you’d be affected, as you’ve already paid what’s due at source.

What about claiming expenses?

Whilst you’re technically classed as an employee, you’re still able to claim some expenses and tax relief when you choose to work under an Umbrella company. The ability to claim expenses is strictly monitored by HMRC, and so you’ll have to check with your Umbrella to make sure you’re eligible for those expenses before claiming them.

What if you decide you want to go Limited?

Not a problem! With SG Umbrella you get the best of both worlds. Contract under our Umbrella for a contract which is determined as ‘inside’ IR35 or if you’re just starting out and testing the waters. You can then switch over to our Limited Company services with SG Accounting when one of your future contract’s is deemed ‘outside’ IR35 or if you’re ready to form your own company. You will of course have to set up your own Limited Company, but our team of director-level accountants are specialists in serving the complex and demanding needs of Limited Company contractors, and will hold your hand throughout the entire process to ensure it runs as smoothly and as quickly as possible.

How to get started

Simply get in touch with our team of expert accountants here at SG Umbrella to discuss your contracting plans and how SG can help you achieve your goals. No question is too big or small, and we’ll take you through each process in a simple and easy-to-understand way, ensuring you’re crystal clear on how we work as an Umbrella and why our solution is perfect for when you’re just starting out.

The post Beginners tips for a first time Umbrella company contractor appeared first on SG Umbrella.

• Decrease in the additional rate threshold from £150,000 to £125,140 from 6 April 2023. The government is also fixing other personal tax thresholds within income tax, NICs and Inheritance Tax for an additional 2 years, until April 2028
• Reduction in the Dividend Allowance (currently £2,000 tax free but set to reduce to £500 from April 2024)
• Reduction in Capital Gains Tax Annual Exempt Amount (reducing to £6,000 from April 2023 and £3,000 from April 2024). The Personal Allowance will generally be available in addition to the reduced Dividend Allowance and Capital Gains Tax Annual Exempt Amount
• The income tax additional rate threshold will be lowered from £150,000 to £125,140 from 6 April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The ART for savings and dividend income will apply UK-wide.
• VAT registration and deregistration thresholds will be maintained at the current levels for an additional 2 years and will not change for a further period of 2 years from 1 April 2024.
• Confirmed Off-payroll working rules: maintain 2017 and 2021 reforms (also known as IR35)
• Reflecting the success of the transition to electric vehicles, the government will introduce Vehicle Excise Duty (car tax) on electric cars, vans and motorcycles from April 2025

The Autumn Statement 2022 – Full Report

On 17 November 2022, the government undertook the third fiscal statement in as many months, against a backdrop of rising inflation and economic recession. The Chancellor laid out three core priorities of stability, growth and public services. The government sought a balanced path to support the economy and return to growth, partially through public spending restraint and partially through tax rises.

Income tax

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This was to be accelerated so that it took effect from April 2023. However, whilst the government aims to proceed with the cut in due course, this will only take place when economic conditions allow and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely.

At the Mini Budget on 23 September 2022 the government announced a plan to abolish the 45% additional rate of income tax from April 2023. It was announced on 3 October 2022 that the government would not proceed with this plan.

From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

Income tax allowances

The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively.

The government will uprate the married couple’s allowance and blind person’s allowance by inflation for 2023/24.

Dividends

The government has also confirmed that, from April 2023, the rates of taxation on dividend income will remain as follows:

• the dividend ordinary rate – 8.75%
• the dividend upper rate – 33.75%
• the dividend additional rate – 39.35%.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

In addition, the government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024.

These changes will apply to the whole of the UK.

National Insurance contributions

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the government has:

• reversed the temporary increase in NICs and
• cancelled the Health and Social Care Levy completely.

More detail for employees and employers

The changes took effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) generally reduced from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) reduced from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

NICs thresholds

A similar principle to that outlined above for income tax thresholds will be followed in respect of the NICs upper earnings limit and upper profits limit. From July 2022, the NICs primary threshold and lower profits limit were increased to align with the personal allowance and will be maintained at this level from April 2023 until April 2028. The Class 2 lower profits threshold will also be fixed from April 2023 until April 2028 to align with the lower profits limit. They will again be £12,570 and £50,270 as appropriate.

In addition, the government will fix the lower earnings limit and the small profits threshold at 2022/23 levels in 2023/24, namely £6,396 and £6,725 per annum respectively.

The government will uprate the Class 2 and Class 3 NICs rates for 2023/24 to £3.45 per week and £17.45 respectively.

Finally, the government will fix the level at which employers start to pay Class 1 NICs for their employees at £9,100 from April 2023 until April 2028.

Capital gains

The government has announced that the capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

Inheritance tax

The inheritance tax nil-rate bands are already set at current levels until April 2026 and will stay fixed at these levels for a further two years until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000 and the residence nil-rate band taper will continue to start at £2 million.

Stamp Duty Land Tax

A number of changes were made to the Stamp Duty Land Tax (SDLT) regime earlier this year and these remain. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Higher rates may be payable where further residential properties are acquired.

Land Transaction Tax

The Welsh government also altered its rates in relation to land and buildings in Wales for transactions with an effective date on or after 10 October 2022.

Higher rates may be payable where further residential properties are acquired.

Business

Corporation tax rates

It had been previously announced that the expected increase in the rate of corporation tax for many companies from April 2023 to 25% would not go ahead. However the government announced on 14 October 2022 that this increase will now proceed and this has been confirmed.

This means that, from April 2023, the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

In addition:

• bank corporation tax surcharge changes will proceed, meaning that from April 2023 banks will be charged an additional 3% rate on their profits above £100 million and
• from April 2023 the rate of diverted profits tax will increase from 25% to 31%.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses.

The government will also extend the 100% first year allowance for electric vehicle chargepoints to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.

Research and Development

For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

VAT

The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2024, staying at £85,000 and £83,000 respectively.

Vehicles

The government will set the rates for the taxation of company car benefits until April 2028 to provide long term certainty for taxpayers and industry. Rates will continue to incentivise the take up of electric vehicles.

In addition, from 6 April 2023 car and van fuel benefits and the van benefit charge will increase in line with inflation.

Welfare, work and pensions

Cost of living payments

The government will provide households on means-tested benefits with an additional £900 cost of living payment in 2023/24. Pensioner households will receive an additional £300 and individuals on disability benefits will receive an additional £150.

Uprating of benefits

The government will increase benefits in line with inflation, including the state pension. The standard minimum income guarantee in pension credit will also increase in line with inflation from April 2023.

Raising the benefit cap

The benefit cap will be raised in line with inflation, so that more households will see their payments increase as a result of uprating from April 2023. The cap will be raised from £20,000 to £22,020 for families nationally and from £23,000 to £25,323 in Greater London. For single adults it will be raised from £13,400 to £14,753 nationally and from £15,410 to £16,967 in Greater London.

National Living Wage and National Minimum Wage uprating

The government will increase the National Living Wage (NLW) and National Minimum Wage from 1 April 2023 as follows:

• the rate for 23 year olds and over to £10.42 an hour
• the rate for 21-22 year olds to £10.18 an hour
• the rate for 18-20 year olds to £7.49 an hour
• the rate for 16-17 year olds to £5.28 an hour and
• the apprentice rate to £5.28 an hour.

In-work conditionality for Universal Credit claimants

The government will bring forward the nationwide rollout of the In-Work Progression Offer, starting with a phased rollout from September 2023, to support individuals on Universal Credit (UC) and in work to increase their earnings and move off benefits entirely. This will mean that over 600,000 claimants on UC whose household income is typically between the equivalent of 15 and 35 hours a week at the NLW will be required to meet with a dedicated work coach in a Jobcentre Plus to increase their hours or earnings.

Energy

The Autumn Statement sets out reforms to ensure businesses in the energy sector who are making extraordinary profits contribute more. From 1 January 2023, the Energy Profits Levy will be increased to 35% and extended to the end of March 2028 and a new, temporary 45% Electricity Generator Levy will be applied on the extraordinary returns being made by electricity generators.

The Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000.

The government is also setting a national ambition to reduce energy consumption by 15% by 2030, delivered through public and private investment, and a range of cost-free and low-cost steps to reduce energy demand.

The post The Autumn Statement 2022 Full Report – what it means for contractors appeared first on SG Umbrella.

As part of his ‘Growth Plan’, Kwarteng had set out a number of tax cuts designed to support the growth of the British Economy. However, following widespread criticism and instability in financial markets, Mr Kwarteng was replaced with Jeremy Hunt who has scrapped all of the growth plan changes bar the planned cut to stamp duty and National Insurance.

Repeal of the IR35/off-payroll working legislation had come as welcome news for our industry, with optimism that the UKs self-employed workforce would flourish. So this u-turn on a u-turn is very disappointing, with the end client being responsible for determining the IR35 status of their contractors. So, business as usual, but not as we would wish for our contractor clients.

The post BREAKING NEWS – Repeal of IR35 reforms and back track on Corporation Tax appeared first on SG Umbrella.

Well that was a big U-TURN affecting the contracting industry! The (not so) mini-budget delivered by new Chancellor, Kwasi Kwarteng last Friday, had a lot more in it than anyone expected.

Repeal of the IR35/off-payroll working legislation from April 2023 is welcome news for our industry. Since 2017 for the Public Sector, and 2021 in the Private Sector, the end client has been responsible for determining the IR35 status of their contractors, with many taking a risk-averse approach to doing so, to the extent of banning Limited Company contractors altogether in some cases. However, from April 2023, the responsibility will return to the contractor, leading to an opening up of the market. At SG, we can support you with your Limited Company needs, if you decide to go down that route in the future, with our sister company SG Contractor Accounting.

On top of this big IR35 news we’ve also summarised the other changes below:

• Corporation Tax planned increase from 19% to 25% has been scrapped
• Basic rate of income tax reduced from 20% to 19% from April 2023
• Reversal of the 1.25% increase in the dividend tax rate from 2023
• Additional rate of income tax of 45% has been scrapped
• NI (health and social care levy) increase of 1.25% has been repealed from 6th November 2022
• AIA remains at £1m indefinitely
• Stamp duty 0% threshold increased to £250,000. This is a saving of £2,600 on an average house costing £312,000
• Freeze on energy bills
• Rules on bankers’ bonus limits are to be scrapped
• IR35-off-payroll rules to be repealed from April 2023. Reverting to pre-2017 rules

For a more detailed look at the mini budget and what was announced, please take a look below.

Chancellor reveals his plan for growth

The week leading up to Chancellor Kwasi Kwarteng’s ‘Mini Budget’ may have been a short one due to the Queen’s funeral but the new government managed to fill it with a stream of policy announcements.

Before Mr Kwarteng stood up to make his statement on ‘The Growth Plan’ much of what he had to say about energy support for businesses and households, bankers’ bonuses, investment zones and reversals to NICs had already been announced. The government also said that the Chancellor’s statement would not be subject to a forecast from the Office for Budget Responsibility. However, this did not stop the media from dubbing this event a Mini Budget.

The Growth Plan set out a new approach to the economy built around three central priorities:

• reforming the supply-side of the economy
• maintaining a responsible approach to public finances
• cutting taxes to boost growth.

National Insurance contributions

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the new Chancellor has decided to:

• reverse the temporary increase in NICs from November and
• cancel the Health and Social Care Levy completely.

The Health and Social Care Levy was expected to raise around £13 billion a year to fund health and social care and the Chancellor has confirmed that funding will be maintained at the same level as if the Levy was in place, funded from general taxation.

More detail for employees and employers

The changes take effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) will generally reduce from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) will reduce from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

Income tax

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This is now being accelerated so that it takes effect from April 2023.

In addition, to ‘incentivise enterprise and hard-work and simplify the tax system’, the government will abolish the 45% additional rate of income tax from April 2023. Consequently, there will be a single higher rate of income tax of 40%.

There are a number of tax consequences which stem from these changes. One of them is the amount of tax relief given at source on pension contributions and Gift Aid donations. This is currently given at the basic rate of 20%. The government has stated that there will be a four-year transition period for Gift Aid relief to maintain the income tax basic rate relief at 20% until April 2027. This will support almost 70,000 charities and is worth over £300 million. However, there was little comment on pension contributions other than that there will also be a one-year transitional period for Relief at Source pension schemes to permit them to continue to claim tax relief at 20%.

Dividends

From April 2023:

• the dividend ordinary rate of 8.75% will reduce to 7.5%
• the dividend upper rate of 33.75% will reduce to 32.5% and
• the dividend additional rate will be abolished.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, it will also reduce to a 32.5% charge for loans made on or after 6 April 2023.

These changes will apply in Scotland as the rules on dividends apply to the whole of the UK.

Business

Corporation tax rates

It had been previously announced that the rate of corporation tax would increase for many companies from April 2023 to 25%. This change will now not go ahead, leaving the rate of corporation tax at 19% for the majority of companies.

In line with this change, the Bank Corporation Tax Surcharge will remain the same, as will the Diverted Profits Tax.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery, including cars with zero emissions, up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses. Interestingly, these allowances were not mentioned, other than minor amendments to the current rules, so it appears the scheduled withdrawal of them will occur in 2023.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

Investment Zones aim to encourage rapid development

As part of the government’s plan to drive economic growth and encourage development the Chancellor confirmed that Investment Zones will be established across the UK.

These zones will benefit from lower taxes and liberalised planning frameworks to encourage business investment.

The government is already in discussions with 38 local authorities to establish investment zones in England. In addition, it says it will work closely with the devolved administrations to offer the same opportunities in Scotland, Wales and Northern Ireland.

Businesses in designated areas in investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.

In addition, businesses will receive full Stamp Duty Land Tax relief on land bought for commercial or residential development and a zero rate for employer NICs on new employee earnings up to £50,270 per year.

There will also be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.

As well as time-limited tax benefits there will be designated development sites that will release more land for housing and commercial development in the zones. The need for planning applications will be minimised and streamlined.

Stamp Duty Land Tax

A number of changes are made to the Stamp Duty Land Tax (SDLT) regime. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold is increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief is increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief is increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Residential rates may be increased by 3% where further residential properties are acquired.

Other comments

There were a number of other interesting comments made by the Chancellor which suggest future policies and changes, although lacking detail at the moment.

IR35 and off-payrolling

Over the last 20 years, there have been numerous changes to the tax system to try and address ‘disguised employment’ and to generate additional tax and NICs accordingly. In a surprise announcement, the government has stated that it will repeal the off-payroll working rules from 6 April 2023. From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.

Infrastructure

The Chancellor announced plans to accelerate new roads, rail and energy infrastructure with new legislation which will cut barriers and restrictions. This will make it quicker to plan and build new roads, speeding up the deployment of energy infrastructure such as offshore wind farms and streamlining environmental assessments and regulations.

State benefits

Universal Credit claimants who earn less than the equivalent of 15 hours a week at the National Living Wage will be required to meet regularly with their work coach and take active steps to increase their earnings or face having their benefits reduced, broadly from January 2023. Jobseekers over the age of 50 will also be given extra time with Jobcentre work coaches, to help them return to the job market.

VAT-free shopping areas

The government will introduce a modern, digital, VAT-free shopping scheme with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors. The delivery will include modernising the scheme that currently operates in Northern Ireland and introducing a new digital scheme in Great Britain. The new VAT-free shopping scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.

Alcohol duties

Reforms to modernise alcohol duties will also be taken forward and the government has published a consultation response on these plans. The reforms will be implemented from 1 August 2023. The government is also freezing the alcohol duty rates from 1 February 2023 to provide additional support to the sector.

Further announcements

Over the next few weeks, the government will set out further details of plans to speed up digital infrastructure, reform business regulation, increase housing supply, improve our immigration system, make childcare cheaper, improve farming productivity and back the financial services sector.

Government announces plans to help cut energy bills for businesses

On 21 September 2022 the government announced a new scheme, the Energy Bill Relief Scheme, which is designed to cut energy prices for non-domestic energy customers, such as businesses, charities and public sector organisations. The new scheme is in addition to the recently announced Energy Price Guarantee for households.

The scheme will apply to fixed contracts agreed on or after 1 April 2022 in addition to deemed, variable and flexible tariffs and contracts. Running for an initial six-month period, the scheme will apply to energy usage from 1 October 2022 to 31 March 2023. According to the government, savings will first be seen in businesses’ October bills.

Businesses are not required to take action or apply for the scheme, support will be automatically applied to bills.

The government intends to conduct a review of the scheme in three months to assess:

• how effective it has been in giving support to vulnerable, non-domestic customers
• which groups of non-domestic customers remain vulnerable to energy price rises
• the extent to which the scheme could either be extended or further targeted.

Support after 31 March 2023 will be determined following the review.

Energy Price Guarantee plan caps household bills

Prime Minister Liz Truss announced the Energy Price Guarantee (EPG) for households on 8 September 2022 which will apply from the start of October 2022. The EPG means that an average household will pay no more than £2,500 per year for each of the next two years. It comes in addition to the £400 Energy Bill Support Scheme and will save the average household at least £1,000.

The EPG limits the price suppliers can charge customers for energy supplies. This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.

Under the plan, those households who do not pay directly for mains gas and electricity, such as those living in park homes or on heat networks, will be no worse off and will receive support through a new fund.

The government estimates that the EPG will deliver substantial benefits to the economy, boosting growth and curbing inflation by four to five percentage points, which will in turn reduce the cost of servicing the national debt.

The government will provide energy suppliers with the difference between this new lower price and what energy retailers would charge their customers if this were not in place. Schemes previously funded by green levies will also continue to be funded by the government during this two-year period to ensure the UK’s investment in homegrown, secure renewable technologies continues.

New plan for patients aims to tackle NHS backlog

Health and Social Care Secretary Thérèse Coffey unveiled the government’s new ‘Our plan for patients’ on 22 September 2022, which aims to tackle NHS backlogs.

The centrepiece of the plan is the expectation that everyone who needs an appointment at a GP practice should get one within two weeks, with patients with the most urgent needs being seen the same day.

The plan also includes changing funding rules to recruit extra support staff so that GPs can focus on treating patients. The government says this will free up over one million appointments per year.

There will also be ‘more state-of-the art telephone’ systems to make it easier for patients to get through to their GP surgeries. In addition, more information will be available for patients, with appointments data published at a practice level for the first time ever.

Pharmacies will help ease pressures on GPs and free up time for appointments by managing and supplying more medicines without a GP prescription and taking referrals from emergency care for minor illnesses.

The post MINI BUDGET SEPTEMBER 2022 appeared first on SG Umbrella.

In this blog we explore your options for both solutions, to help you decide which is the best for you.

Understanding PAYE

Just like employees who are in permanent employment, PAYE (Pay As You Earn) is a way of ensuring HMRC are paid the Income Tax and National Insurance Contributions (NICs) they’re due, then you’re paid the remaining net amount. By receiving PAYE through either your Umbrella Company or recruitment agency, you effectively become an employee of them, and therefore also receive employment rights such as maternity and sickness pay.

The amount of NICs and tax you’ll pay whether you’re using a recruitment agency or an Umbrella Company are exactly the same, so what’s makes them different? Keep reading to understand fully.

Agency PAYE

Once you’ve signed up to agency PAYE you will become an employee, and it’s their job to support you should you have any issues regarding any element of your employment, just as your employer did when you were in permanent employment.

Traditionally they do not charge a fee for their services, but you may receive slightly less than you would if you used an Umbrella Company as an agency may charge you a larger admin fee.

Once you’ve decided to use an agency you’ll only need to submit your signed copy of your contract before you begin a new position, and submit your weekly or monthly timesheet. Once the client has paid the agency they will then deduct your tax and NICs, ensuring you’ll never be on the wrong side of the taxman.

Why might agency PAYE not be right for you?

If you have multiple contracts throughout the year or have the possibility to work on more than one at any time, then choosing an agency may not be the right option for you. This is because when you contractor via agency PAYE they tend to only favour contracts they source themselves from certain clients, which of course can dramatically reduce your freedom to choose who you work for, and thus removing the freedom of contracting.

Agency PAYE is considerably easier than using an Umbrella Company and offers you a quick fix solution if you’re just starting out, but certainly carries reduced benefits. If you’re looking for a solution that is better suited to your needs and is able to offer greater benefits, then using an Umbrella Company may be the right solution for you.

Umbrella Companies

Just as per agency PAYE an Umbrella becomes your employer, and will pay your PAYE on your behalf. When you use an Agency PAYE system you may only be able to choose contracts which are available through that agency, whereas by using an Umbrella you’re free to choose contracts from multiple clients and sources.

When using an Umbrella you’re also classed as an employee, so regardless of how many contracts you may have at any one time, you’ll still have just the one employer. Plus, as you effectively ‘keep’ your employer during this process, your tax code won’t be negatively affected and also simplifies your tax as a whole, as with only one tax code and one P60 it’s much easier to prove your income should you need to (such as when applying for a mortgage for example).

What does it cost to use an Umbrella Company?

Umbrella Companies charge a fee for their services, as they’re traditionally run by specialist accountants who understand the complex needs of contractors and freelancers. This fee also covers the cost of their administrative duties, such as managing any expenses you have, processing payroll and raising invoices with your clients. As you’re also an employee they must provide pension contributions, paternity and maternity pay, sickness and annual leave pay, and other employee benefits.

The Umbrella will deduct their fee prior to your pay being taxed, which is usually between £20 and £35 per week. Here at SG Umbrella we only charge £20 per week, or £78 per month, so our fees are well priced against our competitors. Whilst the additional cost of having someone manage your PAYE could be seen as an ‘extra’ you might not need, it’s worth understanding the value using an Umbrella Company can provide, and the fact that the cost to ensure your PAYE and other obligations are taken care of, along with ensuring you get what you’re entitled to, is well worth the investment in finding one that works well for your personal and professional needs. Take a look at what SG Umbrella offers its Umbrella clients, and how we can help you.

Stay safe – always use an FCSA accredited Umbrella Company

Tax avoidance schemes amongst Umbrella Companies are rife, and it’s easy to see why people fall for their charms. With the promise of reduced tax and unusually high rates of take home pay, for a new contractor it can offer the answer they’re looking for, without providing all the necessary information.

So how do you tell the real umbrellas from the fake? The FCSA (Freelancers and Contractors Service Association) is the UK’s leading membership body that’s dedicated to raising standards and promoting supply chain compliance for the temporary labour market. When an Umbrella Company is FCSA accredited it has been annually audited to ensure it’s compliant with UK tax law and regulations, so you can rest assured knowing that it follows the highest levels of compliance, and has met the FCSA’s rigorous standards to provide contractors with a reliable and compliant service. Here at SG Umbrella we are proud to say that we are FCSA accredited, and you can read more about it here.

How can SG Umbrella help?

If you decide to use an Umbrella Company over an Agency PAYE, then we can help. With FCSA accreditation, fast payments, complete compliancy and unlimited direct advice from our expert contractor accountants plus the ability to switch to our Limited Company services whenever needed, we really do have everything you need in one place, to become a contracting success. Find out more today.

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IR35 is the short name used for the ‘intermediaries legislation’, which is a set of tax rules that apply to you if you work for a client through an intermediary – which can be a limited company or “personal service company” which is how many contractors operate.

Contractors in a labour supply chain, operating through a PSC (or another form of intermediary), will receive a status determination from the client together with reasons for the determination at the start of the contract. If the client determined that the contractor should be taxed as if they were employed (i.e. off payroll legislation applied), then the client would be obliged to either ensure that contractor is “on-payroll” (either employed directly or through an umbrella company) or that employment taxes are deducted before paying contractor’s ltd company.

What is an umbrella company?

Our umbrella company is a PAYE payroll service for contractors. The contractor will become an employee of the umbrella company and will be paid by us, minus deductions including Income Tax, National Insurance Contributions (NIC) and Apprenticeship Levy. Using an umbrella company is widely accepted as being the easiest way to get paid as a contractor.

How does an umbrella company work?

SG Umbrella Ltd will officially become your employer once you have completed the registration process, consisting of a new starter form and identity checks. Once registration is complete, you will become an employee of our umbrella company and receive your salary from us through PAYE. The appropriate deductions, including Income Tax and National Insurance Contributions (NIC) will be made on your behalf. As an employee, you will be eligible for employee benefits including Sick Pay, Statutory Maternity/Paternity Pay and Annual Leave.

SG Umbrella Ltd will sign a contract with your recruitment agency. Your client will pay your recruitment agency their agreed rate, the recruitment agency will then pay SG Umbrella Ltd, and finally, the umbrella company will pay you your wages (minus deductions).

Am I self-employed when using an umbrella company?

No. Whilst you are contracting through the umbrella company, you will become our employee and will have access to employee benefits including Sick Pay.  This also helps with having continuous employment with things like mortgage applications.

How will I be paid when working through an umbrella company?

All SG Umbrella Ltd employees are paid by faster payment.

How often will I be paid by an umbrella company?

Payment to our employees is dependent on receipt of funds from the agency.  Once we have received cleared funds from them then we have a number of pay runs every week to ensure our employees are not waiting a long time for their wages.  To ensure there are no delays it’s important to keep your timesheets up to date.  We have an online portal for you to manage all of this.

How much does it cost to join or leave an umbrella company?

SG Umbrella Ltd apply no charges for this, in short no joining or exit fees.

How much does it cost to use your umbrella company?

We just have one low price to keep things simple.  Click here for our prices depend on if you are paid monthly or weekly.

What will an umbrella company deduct from my pay?

You will be paid as a Pay As You Earn (PAYE) employee and will have Income Tax, National Insurance Contributions (Ee’s and Er’s NICs) and Apprenticeship Levy deducted from your salary (and paid to HMRC), as well as the umbrella company’s margin/fee.

What does Pay As You Earn (PAYE) mean?

Pay As You Earn (PAYE) is a process used by employers when paying their employees’ wages. As the employer we will make the correct deductions to the employees’ pay, including tax and National Insurance Contributions (NICs), then pay the employee the net value.

How much money will I take home using an umbrella company?

As a compliant UK based umbrella company, we will make statutory deductions to your pay plus margin fees.  Take home pay will depend on hours/days, rate, tax coding and any other voluntary deduction, ie employer pension contribution.  Pay illustrations are available on request.  There are some unscrupulous umbrella companies that claim to increase your take home pay through convoluted schemes (payments via loans or offshore schemes).  Be wary of these types of arrangements – they are constantly being closed down by HMRC leaving the contractors with large tax bills and the scheme operators nowhere to be seen.  All umbrella companies should provide the same take home pay figure if they are doing things correctly – and the comparison should be made based on margin deducted and service etc rather than a artificially low take home pay figure.

Are umbrella companies compliant with HMRC legislation?

Not every umbrella company is compliant with HMRC legislation. For example, umbrella companies that promise you an alarmingly high percentage of take home pay are more than likely encouraging you to avoid tax.

Be fully assured that SG Umbrella Ltd operate in full compliance with HMRC legislation and are regularly audited to ensure our processes are correct and up to date.  We are an FCSA accredited member giving you peace of mind that we have been doing this a long time, acting for thousands of contractors and doing things properly.

What information will I need to provide when I join an umbrella company?

When you join our umbrella company, we will need you to complete the online new start form and supply ID documents. This is usually a one off process that will require you to provide us with the following information:

• Title
• Full name
• Date of Birth
• Address
• Phone Number
• Email Address
• Passport/ID Number and country of issue
• Residence permit if applicable
• Utility bill
• National Insurance Number
• P45 or Starter Declaration
• Student Loan
• Bank/Building Society Name
• Account Number and Sort Code
• Recruitment Agency Name
• Assignment Start Date
• Rate

What administration will I need to carry out?

When you use our umbrella company, your administrative responsibilities are kept to a minimum. Once the registration process is complete and you have signed a contract with the umbrella company, you will be required to submit your signed timesheets and allowable expense claims.  You will do all of this through our online portal.

How do I submit my timesheets?

This can be done directly via our online portal.

Will I receive payments such as sick pay and holiday pay?

When you work through an umbrella company you are entitled to the same benefits as those who are in full-time employment. You are entitled to Holiday Pay, Sick Pay, Maternity Pay and Paternity Pay.

How is holiday pay calculated?

As an employee of the umbrella company, you are entitled to Statutory Annual Leave, which is equal to 5.6 weeks per year. This is equivalent of 12.07 percent of the hours you have worked.

What are employer pension contributions and how are they a benefit?

Employer pension contributions can give you the benefit of significant tax relief on your earnings dependant on rate and contribution up to a maximum of £40K per year, deducted from your pay at source and paid onto the provider of your choice.

What is auto enrolment?

Auto Enrolment is a government initiative and requires every employer of staff normally working in the UK to put their qualifying employees into a workplace pension scheme and to make contributions towards their employee’s pension, although each employee can make an independent decision to opt out.

Can I pay into a pension with SG Umbrella?

Under SG Umbrella you have 3 options:

1. Opt out of all pensions under auto enrolment
2. Pay pensions contributions into the NEST scheme under auto enrolment
3. Pay into your own pension scheme – we can help with setting one up for you or we can pay the pension into an existing scheme you have. Keeping things all in one place.

What insurances are provided?

SG Umbrella Ltd will ensure their employees are protected with Employers’ Liability Insurance, Public Liability Insurance and Professional Indemnity Insurance. These are issued to your agency, will be included in your contract with our umbrella company and do not cost you anything extra.

What is Employers’ Liability Insurance?

Employers’ Liability Insurance will protect our umbrella company against compensation claims made by contractors in regards to illness or injury obtained in their place of work. It is a legal requirement.

What is Public Liability Insurance?

Public Liability Insurance will protect us against claims from the public if you have caused a personal injury or damage to property when working.

What is Professional Indemnity Insurance?

Professional Indemnity Insurance will protect us if somebody claims you have not provided the appropriate level of service as agreed. This can include what is perceived as poor quality work and inaccurate advice.

Can I claim expenses using an umbrella company?

Unfortunately, from 6 April 2016, HMRC confirmed that contractors working through umbrella companies were no longer able to claim tax relief on travel and subsistence expenses if they were subject to supervision, direction or control. In the eyes of HMRC, this was done to level the playing field and make things fair between full time employees and contractors (because full time employees are unable to claim travel and subsistence expenses).

You can still claim travel and subsistence expenses through an umbrella company if you are not subject to supervision, direction or control when carrying out your assignment or if they are billable back to the agency/client.

We provide a comprehensive expenses policy for reference.

Am I subject to supervision, direction or control?

HMRC believe a majority of contractors are under supervision, direction or control (SDC) in their place of work.  SG Umbrella ltd have an assessment process in place to make the correct determination on an individual basis.

What is supervision, direction or control (SDC)?

HMRC states that if a contractor is subject to supervision, direction or control, they are not eligible to claim tax relief on travel and subsistence expenses.

Supervision – when you are being overlooked at your place of work to make sure you are carrying out your tasks in accordance to your contract. If you are receiving assistance, advice or help from anyone in your place of work, this can also count as supervision.

Direction – when you are being given clear instructions, guidance or assistance on how to carry out your tasks.

Control – when you are directly being dictated to in the workplace and you must do as asked in order to correctly carry out your assignment. If you are asked to move from location to location (whether inside an office or externally), you are under control.

Do I need to keep the receipts for expenses that I am eligible to claim for?

You must keep all receipts that you are claiming expenses for.

Can I use an umbrella company even though I have a limited company?

You can use an umbrella company and have a limited company at the same time. Whilst you are using an umbrella company, your limited company will become dormant and no payments can be put through it for the same assignment.  The SG Umbrella service is included free of charge for all SG Accounting clients – meaning we can manage your ltd company and umbrella contracts all under one roof.

I recently was provided with a pay illustration from another provider offering a very high percentage take home pay, are they legitimate?

If you see a company offering you the chance to take home a high percentage of your pay, alarm bells should be ringing and you should be extremely wary.  HMRC is continuously looking to catch contractors that are using offshore intermediaries to lower their tax burden. You could be required to pay back all of the tax you owe, as well as pay significant fines.

Do I need to submit a personal tax return when using an umbrella company?

Usually, contractors using an umbrella company do not need to submit a personal tax return to HMRC because they receive PAYE and the tax and National Insurance Contributions (NICs) have already been made and recorded by your umbrella provider. However, you will be required to submit a tax return if you have an income of over £100,000, you have additional income (for example, from a rental property or investment) and if HMRC has personally requested you to do so.

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 An inside status determination doesn’t mean you’ll have to reject the contract or go permanent, and working under an Umbrella company could be the best option for the duration of your contract.

So what does an Umbrella company actually do?

The Umbrella creates an overarching contract of employment between yourself and the end-hirer / client, therefore you effectively become an employee of the Umbrella. They then deal with paying your National Insurance Contributions (NIC), PAYE and correct tax due, along with taking their fee from your gross pay, so your take home pay is then what’s left – your net pay. They also liaise directly with invoicing the end-hirer / client on your behalf.

Whilst working under an Umbrella will mean you won’t be entitled to the same tax benefits as you would be if you were ‘outside’ IR35 through your Limited Company, you’ll still be able to contract confidently, knowing that absolutely everything has been taken care of on your behalf by your chosen Umbrella. Plus on the positive side, now that you’re classed as an ‘employee’ you’ll now be entitled to sickness, holiday, maternity and paternity pay!

How can SG help?

He at SG we offer the best of both worlds, with the ability to use our Limited Company accounting services with SG Accounting when ‘outside’ IR35, then switch over to SG Umbrella when your contract commands it. Regardless of which service you’re using, you keep your trusted accountant, your Limited Company would keep running in the background ready for your next ‘outside’ IR35 contract, and your accountant will have complete visibility over your finances, both for when contracting under the Umbrella and through your Limited Company.

Find out more today on what we can offer you, and how our Umbrella services are here whenever you need them. SG – helping you navigate IR35 by making it as simple as possible.

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