Email: catherine@cba-services.co.uk    //   
Tel: 01258 840306
CBA Services
Self Assessment Tax Returns prepared and submitted from Sixpenny Handley, Dorset

Latest News in the Accounting World

Things to note

New Tax Year

Spring Budget 8th March 2017

Do you have money or assets abroad?

Autumn Statment 2016

Salary Sacrifice scheme

Things to note

By the time you will be reading this article over a nice cuppa, the school summer holidays will have come and gone, new uniform purchased and everyone excited about going back to school; perhaps you are starting to think about gathering your tax return information to pass to your accountant, or gathering the momentum to complete it yourself!

A few things just to note:

1. Making Tax Digital (MTD)

You may recall in my previous articles, I mentioned MTD was to commence from April 2018. However, I am glad to report that it was announced during July 2017 that this is now being pushed back a year to April 2019.

The new timetable for MTD is:

From an administration point if you are VAT registered and your VAT quarters do not fall in line with your accounting year end, it is recommended that you amend your VAT quarter.

2. Are you self employed?

I would recommend that you log on to your personal tax account with HMRC (go to www.gov.uk/government/publications/your-personal-tax-account/your-personal-tax-account ) and check that you have made sufficient Class 2 national insurance contributions whilst being self-employed.

As announced at the Budget 2016, Class 2 NICs will be abolished from 6 April 2018, so any outstanding NIC contributions from this date any outstanding contributions will need to be settled as Class 3 contributions.

3. Are you, or do you know someone who is, a sole director of a company and work for the public sector which includes:

Then please continue to reading...

From 6 April 2017 it will be the public sector authority that will be responsible for deciding whether or not IR35 applies to the particular engagement.

What is IR35 I hear you cry. IR35 was introduced a number of years ago. It is where the company is the “worker’s” own personal service company and usually consists of one or two Directors who are usually spouses/partners. There are normally no other employees and usually only one worker who is providing their services to the client.

The intermediary earns all, or the majority, of its income from supplying the services in circumstances that would be employment had the worker been contracted by the client. Confused... here is an example:

Under these new changes the employment rights will not be available to Bob Computer Limited from the NHS i.e. no employment obligations, no sick or holiday pay, no statutory maternity pay and no pension obligations!

So as I said at the beginning, please pass this information on if you know of someone in this position. There is also speculation that these rules will be being introduced in the private sector.

If you need any assistance with anything mentioned above, please do not hesitate to give me, Catherine, a call on 01258 840306.

Until next time...

If you need assistance with any accountancy or tax related matters, please contact Catherine at CBA Services Limited on 01258 840306/07895 913546/ . We offer evening and weekend appointments and there is no charge for the first meeting.

Whilst care has been taken in preparing this publication it is for information only. It is not, and should not be construed, as advice and accordingly no reliance should be placed on the information contained herein.


New Tax Year

Spring has arrived; a General Election is in sight, we have moved and the start of a new Tax Year… all since the last edition of the Downsman!

This month I thought I would just update you on the new tax rates and personal allowances from 6 April 2017:

You can choose which slice of income should be set against your personal allowance (£11,500) to achieve the best result.

Taxable income aboveMain RateRate on DividendsWhy, what and who
£11,50020%7.5%Basic rate and personal allowance used
£43,00040%7.5%Higher rate for Scottish taxpayers
£45,00040%32.5%Higher rate for other taxpayers
£100,00040%32.5%Personal allowance withdrawn by £1 for every £2 of income
£123,00040%32.5%Higher rate – personal allowance completely withdrawn
£150,00045%38.1%Additional rate

Above £45,000:

Above £150,000:

Both these thresholds can be expanded if you pay pension contributions or make gift aid donations in the tax year. Gift aid donations can also be carried back one year.

Inheritance tax

From 6 April 2017 the new “residential enhancement” rate band is in operation. This is the introduction of a special residence nil rate band when a home is passed on death to direct descendants of the deceased. The maximum amount of this new band will rise in stages to £175,000 in 2020/21 and any unused residence nil rate band will be transferable to a surviving spouse or civil partner.

The maximum amount for all years from 2017/18 onwards is as follows:

If, however, the home is passed on death to a trust then unfortunately this relief will not be available. Do you need therefore to amend your Will? Please speak to your Solicitor regarding this point. If you do not have a Will then please, if you take nothing else from this article, speak to a Solicitor to ensure this is rectified!

Marriage allowance

Where both spouses or civil partners pay tax at no more than 20%, and one of them doesn’t use all their personal allowance, that person can transfer £1,150 of their personal allowance to their partner. This saves tax of £230 in 2017/18. This marriage allowance can also be claimed for 2015/16 and 2016/17.

Children

A family that receives child benefit will have all the benefit clawed back as a tax charge if the highest earner in the family has income of £60,000 or more. Where this person has income of between £50,000 and £60,000, part of the child benefit is clawed back.

There are two ways to avoid this tax charge:

  1. arrange income sources so neither parent has total income over £50,000
  2. opt out of receiving child benefit

It is important to claim child benefit if you are eligible, even if you opt out of receiving the payment for a period. The benefit claim provides national insurance credits for the non-earning parent, which will help build up entitlement to the state pension.

Sundry income

Earning small amounts of extra income can be tax free up to these annual limits:

These allowances are set against the gross income in those areas. You pay tax on any excess income without deducting expenses. The alternative approach is to not claim the allowance, deduct allowable expenses from the income and pay tax on the profit.

Rent-a-room relief applies per home, so it is halved where there are joint homeowners. The other allowances apply per individual, but they can’t be set against income from your own company, a company that employs you or a partnership which you are a member of.

Again just a reminder - have you registered for your own Personal Tax Account (PTA)? By receiving your own PTA you are able to check and change your address through to completing your self-assessment tax return if you do not have an accountant or manger your tax credits. It is quick and straight forward. Go to: www.gov.uk/government/publications/your-personal-tax-account/your-personal-tax-account

Please contact Catherine at CBA Services Limited on 01258 840306 or 01725 552955, if you have any queries regarding the Budget or anything mentioned above or, if you need assistance with your bookkeeping, accountancy or tax issues.

Whilst care has been taken in preparing this publication it is for information only. It is not, and should not be construed, as advice and accordingly no reliance should be placed on the information contained herein.


Spring Budget 8th March 2017

Pundits are mixed in their interpretation of the prospects for the UK economy as we approach the formal Brexit disengagement.

They are keen to see encouragement for industry to invest and export rather than more of the same debt fuelled consumer expenditure.

Has Philip Hammond succeeded in meeting these demands, and will he be able to bank any hard-won savings for this financial year?

Our summary of a selection of specific tax changes and other budget announcements for 2017-18 and future years follow.

Personal Tax and miscellaneous matters

Personal Tax allowance

The personal allowances for 2017-18 is £11,500 (2016-17: £11,000).

Transferrable allowances

The maximum amount of free personal allowance that can be transferred between spouses is increased to £1,150 in 2017-18. Couples can only make a claim if one partner has spare personal tax allowance and the other is a basic rate tax payer.

Income Tax rate bands

The levels for 2017-18 are:

  • For 2017-18 - £45,000 (the UK apart from Scotland)
  • For 2017-18 - £43,000 (Scotland)

If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).

The threshold at which the 45% rate starts is unchanged at £150,000.

For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).

Dividend allowance to be reduced

From 6 April 2018, the tax-free dividend allowance of £5,000 is to be reduced to £2,000. Director shareholders of small companies that have adopted the strategy of minimising salary and maximising dividends will likely pay more Income Tax on their dividend income because of this change.

Capital Gains Tax (CGT)

There are no changes to the basic CGT rates for 2017-18. The CGT on the disposal of chargeable assets, apart from residential property, remains at:

  • 10% on disposals that form part of the basic rate band.
  • 20% on disposals that form part of the higher rate band.

The higher rates (18% and 28%) will continue to apply to disposals of residential property subject to this tax and carried interest. Gains on a disposal of your home will continue to be exempt. The annual exempt amount for 2017-18 is £11,300 (2016-17: £11,100).

Money Purchase Allowance reduced to £4,000 from £10,000

This will restrict the amount of tax relieved contributions that can be made by an individual, into a money purchase arrangement, who has accessed their pension savings from April 2017.

Reminder for non-doms to be bought into the IHT net

A reminder, that from April 2017, Inheritance Tax will be charged on all UK residential property even when indirectly held by a non-domiciled person through an off-shore structure.

Excise duties

Duty on wine, beer, spirits and alcohol will increase in line with the Retail Prices Index from 13 March 2017. These measures will typically add 2p to the price of a pint of beer, 1p to the price of a pint of cider, 36p to a bottle of whisky and 10p to a bottle of wine.

Tobacco duty rates

Changes to excise duties mean that a pack of twenty cigarettes will increase by an average of 35p, an additional 17p per 10 grams of cigars, and a 35-gram pouch of tobacco by 42p.

Fuel duty

There will be no increase in fuel duties. At the end of 2017-18 this will be the 7th year fuel duty has been frozen.

New National Savings investment clarified

From April 2017, individuals aged 16 years or older will be able to invest in the new NS & I Investment Bond. It will be available for one year from April 2017. Minimum deposit is £100, maximum deposit allowed £3,000. The rate of interest applied is 2.2%.

Lifetime ISA previously announced

From April 2017, any person aged from 18 to 40 will be able to save into a new Lifetime ISA until the age of 50.

Up to £4,000 can be saved each year and savers will receive a government bonus of 25% – that is a bonus of up to £1,000 a year.

Some or all of the money can be used to buy a first home, or it can be kept until age 60.

Accounts will be limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together. If a saver has a Help to Buy ISA it can be transferred into the Lifetime ISA in 2017, or savers can continue saving into both, but it will only be possible to use the bonus from one to buy a house.

After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 25% charge.

ISA limit from April 2017

The ISA savings limit for 2017-18 is confirmed as £20,000.

Business tax changes

Corporation Tax rate

The main rate of Corporation Tax from 1 April 2017 will be reduced to 19%. A further reduction has been announced to 17% from 1 April 2020.

NIC increases for the self-employed

To narrow the perceived imbalance in NIC charges for the employed and self-employed, Philip Hammond announced increases in the self-employed Class 4 NIC contributions.

The increases are:

  • From April 2018, an increase from 9% to 10%, and
  • From April 2019, a further increase from 10% to 11%.

The earlier increase is timed to coincide with the cessation of Class 2 contributions.

Business tax changes

Making Tax Digital

The Chancellor announced a one year deferral from Making Tax Digital for Business for unincorporated businesses and landlords with turnovers below the VAT threshold. This means that businesses, self-employed people and landlords with income of less than the VAT threshold will not have to start quarterly reporting until 2019.

Changes to trading and property income allowances

The two previously announced £1,000 tax-free allowances for small scale trading or letting will still be introduced from April 2017, but will now include restrictions if the income or rents are generated by dealings with companies or partnerships of which the recipient is a participator or partner.


If you have money or other assets abroad, you could owe tax in the UK

If you have money or other assets abroad, you could owe tax in the UK

Things are changing – the tax world is becoming more transparent

  • HM Revenue & Customs (HMRC) is getting tougher on those not paying the right amount of tax across their offshore tax affairs.
  • From 2016, HMRC is getting new financial information about their customers from more than 100 jurisdictions – including details about overseas accounts, structures, trusts and investments.
  • HMRC is already using information supplied by overseas banks, insurers and wealth and assets managers to identify the minority who are not paying what they owe.

Are you confident that your UK tax affairs are up to date?

You need to regularly check that you have declared all of your UK tax liabilities and, if needed, bring your tax affairs up to date. This is your responsibility.

Personal circumstances change. For example, you may have recently inherited assets overseas. Tax laws change too. All of this means that previous advice can be out of date, with costly consequences.

  • If you are confident that your tax affairs are up to date and complete then you don’t need to do anything further.
  • If you find that you need to bring your tax affairs up to date, it can be easier than you think. You can choose to do this now using HMRC’s straightforward online disclosure facility at www.gov.uk/guidance/worldwide-disclosure-facility-make-a-disclosure. However if you are unsure, please give us a call to find out if you need to take action now.

If you have not paid the right amount of tax and choose not to take action now, you should be aware that:

  • HMRC is getting an unprecedented amount of information about people’s overseas accounts, structures, trusts and investments from more than 100 jurisdictions worldwide, thanks to agreements to increase global tax transparency. This gives HMRC unprecedented levels of information to check that, as in more cases, the right tax has been paid.
  • Penalties are increasing for those who are not paying the right amount of tax on their offshore assets, and you can even face criminal prosecution. Under new rules, you could face further penalties based on the value of the asset as well as the tax due, resulting in potentially life changing consequences.

Remember: if you are confident that your tax affairs are up to date and you have declared all of your UK tax liabilities, then you don’t need to do anything further.

HMRC are already using early financial information to identify the minority who are not paying what they owe. If you need to bring your tax affairs up to date it is your responsibility do so – act now.

If you need assistance with any accountancy or tax related matters, please contact Catherine at CBA Services Limited on 01258 840306/07895 913546/Catherine@cba-services.co.uk

Whilst care has been taken in preparing this publication it is for information only. It is not, and should not be construed, as advice and accordingly no reliance should be placed on the information contained herein.


Autumn Statement 2016

Autumn Statement 23 November 2016

The new incumbent at number 11 Downing Street, Philip Hammond, had his first opportunity to show us what he had in mind for the UK economy when he presented his autumn statement on the 23 November.

The usual rash of speculation pointed to easing the predicament of the “just managing”, encouragement for businesses to invest, and an easing of the previous Chancellor’s aims of reducing our national debt mountain. And of course, his comments need to be considered in the light of our impending withdrawal from the EU.

One announcement that did surprise MPs was the switch to an autumn budget and a spring statement. This will mean that after the March 2017 budget and Finance Bill future budgets will be delivered in the autumn, the first taking place in autumn 2017 with the first spring statement the following March.

The notes set out below point to the tax and other business issues Mr Hammond has disclosed.

Announcements for businesses

Corporation Tax changes reaffirmed

The reduction to 17% will go ahead as previously announced by 2020.

Rural rate relief doubled

Businesses in rural areas with a population under 3,000 will benefit from a doubling of rate relief from 50% to 100% from April 2017. Businesses that will benefit are:
  • A village shop or post office with a rateable value of less than £8,500, and
  • A public house or petrol station with a rateable value up to £12,500.

Employer shareholder schemes – tax benefits withdrawn

Legislation will be enacted to remove the Income Tax reliefs on the receipt or buy-back of shares issued to an employee under an employee shareholder agreement made on or after 1 December 2016. It also removes the Capital Gains Tax (CGT) exemption relating to shares received as consideration for entering into an employee shareholder agreement on or after the same date. Shares received under agreements made before that date are not affected. Corporation Tax reliefs for employer companies are not affected.

National Insurance thresholds

From April 2017, the National Insurance thresholds for employees and employers will be aligned at £157 per week. There will be no cost to employees and the maximum cost to business will be an annual £7.18 per employee.

VAT Flat rate scheme changes

HMRC are to introduce an additional test that will determine the flat rate percentage used by traders. It would seem that HMRC presently consider the benefits obtained by certain businesses to be excessive and not in accord with the intentions of Parliament.

Traders that meet the new definition of a “limited cost trader” will be required to use a fixed rate of 16.5%. This will include traders who are already using the FRS scheme, and many at rates lower than 16.5%.

For some businesses - for example, those who purchase no goods, or who make significant purchases of goods – the outcome of the test will be self-evident. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.

Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.

100% tax allowance for provision of electric vehicle charging points

This new capital allowance will have effect for expenditure incurred on or after 23 November 2016. It will expire on 31 March 2019 for Corporation Tax and 5 April 2019 for Income Tax purposes.

It will provide a 100% first-year allowance (FYA) for expenditure incurred on electric charge-point equipment.

National Living Wage

From April 2017, the National Living Wage (NLW) for the over 25s is being increased to £7.50 per hour. This is an increase from the current NLW rate set October 2016 of £7.20 an hour. For the over 25s, this will represent a wage increase of just over 4%.

The National Minimum Wage (NMW) will also increase from the same date to:

  • For 21 to 24 year olds – from £6.95 to £7.05 per hour
  • For 18 to 20 year olds – from £5.55 to £5.60 per hour
  • For 16 to 17 year olds – from £4.00 to £4.05 per hour
  • For apprentices – from £3.40 to £3.50 per hour

The government will also be spending an additional £4.3m to ensure that employers are complying with their legal obligation to pay the NMW.

Announcements for property owners

New home builds

Funding of £1.4bn is being provided to build up to 40,000 affordable homes by 2020-21. These will include properties for rent or shared ownership. The government are also allocating £1.7bn to speed up the construction of homes on public sector land. Additionally, funding of £2.3bn will support infrastructure projects – new roads and water connections - to provide services for up to 100,000 new homes in areas with the most need.

Agent’s letting fees

In a welcome move for tenants, not so good for landlords, upfront renters fees charged in England are to be banned. At present tenants are being charged an average of £223 for these fees.

The government will be consulting with interested parties.

Tax increase enveloped dwellings

The Annual Tax on Enveloped Dwelling will increase in line with inflation from April 2017.

If you need assistance with any accountancy or tax related matters, please contact Catherine at CBA Services Limited on 01258 840306/07895 913546/Catherine@cba-services.co.uk

Whilst care has been taken in preparing this publication it is for information only. It is not, and should not be construed, as advice and accordingly no reliance should be placed on the information contained herein.

Announcements for individuals

Personal tax allowance

From April 2017, the personal tax allowance is due to increase from the present £11,000 to £11,500. From the same date, the amount you can earn at the basic rate of tax will rise from £43,000 to £45,000.

The Chancellor also committed to increasing the basic personal allowance to £12,500, and the higher rate tax threshold to £50,000, by 2020-21.

Salary sacrifice schemes to be taxed more fairly

From April 2017, most salary sacrifice schemes will be taxed as if cash income.

There were some notable exceptions:

  • Pension payments, pensions advice, childcare, cycle to work and ultra-low emission cars will be exempt
  • Schemes in place before April 2017 will be protected for one year, and
  • Schemes for cars, accommodation and school fees will be protected for up to 4 years.

These three points do offer opportunities to benefit from this strategy if implemented before the end of the current tax year.

Insurance premium tax (IPT) increase

IPT will increase from 10% to 12% from 1 June 2017.

Undoubtedly this will increase insurance premiums although it is up to insurance companies to determine if they pass on the increase.

Fuel duty frozen

For the seventh year, fuel duty is not to be increased. This could, on average, save drivers £130 a year.

Reimbursing employers for benefits in kind

It has been confirmed that the promised legislation to allow employees to reimburse their employers for benefits provided, and thereby avoiding a tax charge, will be included in the Finance Bill 2017. Employees will need to make the reimbursement before 6 July following the end of the tax year.

Money purchase annual allowance (MPAA)

The MPAA that can be saved into a pension is to be reduced from £10,000 to £4,000 from April 2017. This measure has been put in place to prevent inappropriate ‘double tax relief’ by those aged 55 and over who have already taken money from their pension pots. The government will consult on the details of the change.

Changes to in-work benefits

To lessen the impact of benefit reductions, changes are proposed to Universal Credits that reduce the rate at which benefits are lowered when claimants start work. This should allow claimants to retain an extra 2p for every £1 they earn. At present, the Universal Credit taper reduces benefits received by 65p for every £1 earned above an income threshold. This will be reduced to 63p from April 2017.

New National Savings Bond

From spring 2017, the NS&I will be offering a new three-year investment bond with an indicated rate of 2.2% gross. The bond will be available to the over 16s with investments available from £100 to £3,000.

Bank fines given to charities

More than £102m of LIBOR banking fines are to be given to various projects that support armed services personnel and their families. Charities that support children’s hospitals, air ambulances, museums and memorials will also benefit.


September 2016

A client and I have recently been discussing whether it is still worthwhile offering a Salary Sacrifice scheme. After the various discussions I have had, I thought it would be an interesting article for this month’s edition of the Downsman.

Salary Sacrifice – still worthwhile? Read the article below!

Under a salary sacrifice arrangement the employee gives up part of his or her cash pay in return for a non-cash benefit. This can be very beneficial for both the employer and the employee.

However, the Government are unhappy about salary sacrifice arrangements. While they have yet to ban them, they are considering what to do with them and some of the newer exemptions do not apply where the benefit in question is provided by means of a salary sacrifice arrangement.

Making the most of an exemption

Salary sacrifice arrangements are frequently used to take advantage of the tax exemptions, such as that for childcare vouchers. The employee gives up taxable and NIC-able salary in return for childcare vouchers, which are exempt from both tax and National Insurance. The employer also saves employer National Insurance contributions.

Example

Holly is a basic rate taxpayer. She swaps salary of £55 per week for childcare vouchers. The childcare vouchers are exempt from tax and National Insurance. This saves her tax of £11 per week (£55 @ 20%) and National Insurance of £6.60 per week (£55 @ 12%) – a total savings of £17.60 a week, or £915.20 per year. Her employer also saves employer’s National Insurance of £7.59 per week – an annual saving of £394.68.

Until 2017, employer Childcare Voucher schemes remain the best way for working parents to reduce the rising cost of childcare. Many parents will not be able to claim under the new Government scheme so perhaps should join an employer scheme before the Childcare Vouchers scheme closes to new entrants from April 2018. Parents can remain on the Childcare Vouchers scheme beyond 2018 and for as long as they require.

The government have proposed a Tax-Free Childcare (TFC) scheme to start from 2017. The new scheme will allow some working parents (where both parents are working or are single parents) to claim up to £2,000 per child towards the cost of childcare per year.

It has been proposed that for every 80p parents transfer to a dedicated online account and spend on regulated childcare, the Government will top this up with 20p, which is capped at up to £2,000 of savings per child per year. Parents will be able to use the vouchers with any Ofsted regulated childcare provider in England.

Those who are not eligible for the new scheme include any couples where one parent is not working and parents who claim for children older than 12 years old. The proposed scheme will only be open to some working parents (where both parents are working or single parents) and the parent is not already getting support through the existing Childcare Voucher scheme. To be eligible, parents must be earning less than £100,000 annually, working a minimum of 16 hours per week and not be receiving support through tax credits. Under the new proposals, parents will be able to sign up for employer supported Childcare Vouchers until April 2018 and they can then continue to order vouchers beyond 2018, making tax and National Insurance savings, for as long as their employer continues to run the scheme or until their child is 15 years old (or 16 years old if disabled), whichever is sooner.

Employee NIC savings

Salary sacrifice arrangements are also effective even if the benefit is not exempt. Most benefits in kind are liable to employer-only Class 1A National Insurance contributions rather than Class 1.

Contributions payable by both the employee and the employer. Swapping cash salary for a benefit in kind swaps the liability from Class 1 to Class 1A, saving employee contributions.

Example

Naomi is a basic rate taxpayer. She gives up £300 of her salary in return for private medical insurance, which costs her employer £300 a year. Although she is taxed on the benefit of the private medical insurance, she saves National Insurance of £36, which she would have paid on the £300 of salary. Although the employer does not save any money, there is a cash flow benefit as Class 1A National Insurance is not payable until after the year end.

Keeping it effective

To benefit from the advantages offered by salary sacrifice arrangements, the salary sacrifice must be effective. This means that the reduction in salary must be contractual. It should be noted that a salary sacrifice arrangement cannot reduce the employee’s salary below the National Living Wage (or National Minimum Wage for employees under the age of 25). It may also impact on the employee’s entitlement to contributory benefits.

Limited opportunity

Salary sacrifice arrangements are under the HMRC radar. Some tax exemptions, such as those for trivial benefits, qualifying paid and reimbursed expenses and workplace meals, do not apply where the benefit is provided under a salary sacrifice arrangement. Further restrictions are expected. The message is to take advantage of salary sacrifice arrangements while you can.

The evenings are now getting darker! It looks as though the summer has finally left us. Hopefully you will now be able to sit down and gather all your tax return/accounts information and give them to your accountant (or if you need a hand, please do not hesitate to give Catherine a call).

If you need assistance with any accountancy or tax related matters, please contact Catherine at CBA Services Limited on 01258 840306/07895 913546/Catherine@cba-services.co.uk

Whilst care has been taken in preparing this publication it is for information only. It is not, and should not be construed, as advice and accordingly no reliance should be placed on the information contained herein.

May 2016

By the time you will be reading this, the new tax year will be only a few days away, so hopefully you have considered the tax planning ideas I mention in my last article.

The Chancellor made his Budget 2016 Speech on 16 March and I thought I would outline a number of the topics which you can read about below.

Personal Tax

Personal Allowances for years ended
5th April 2017 £11,000
5th April 2018 £11,500

Stamp Duty Land Tax

Additional properties

From 1 April 2016 when purchasing asecond home the stamp duty land tax will be increased by 3% above the normal rate.

Tax Rates for year ended 5th April 2017
£0 - £32,000 at 20%
£32,001 - £150,000 at 40%
£150,000+ at 45%

Tax Rates for year ended 5th April 2018
£0 - £33,500 at 20%
£33,501 - £150,000 at 40%
£150,000+ at 45%

Personal savings allowance

From 6 April 2016 basic rate (20%) taxpayers/higher rate (40%) taxpayers will not pay tax on the first £1,000/£500 of savings income. Additional rate (45%) taxpayers will not qualify for the allowance.

Automatic deduction of savings income tax

From April 2017 savings income tax will no longer be automatically deducted from income received from certain investments.

Taxation on dividends

From 6 April 2016, the way in which individuals are taxed on dividends from UK, and some non-UK companies, will change
The new rates will be:
£0 - £5,000 at 0%
£5,001 - £32,000 at 7.5%
(if the total income is within the basic rate band)
£32,001 - £150,000 at 32.5%
(if the total income is within the higher rate band)
£150,001 + at 38.1%

Capital Gains Tax

The tax rates for capital gains tax were reduced to:
Rates from 6 April 2016:
Higher rate 20%
Basic rate 10%

However for gains on residential property which is your second property will be:
Higher rate 28%
Basic rate 18%

Business Tax

National Insurance

The annual employment allowance for National Insurance Contributions will be increased to £3,000 from April 2016. Not available for single director companies.

From April 2018 Class 2 NIC will be abolished completely.

Corporation Tax Rate for years beginning
1 April 2017 19%
1 April 2018 19%
1 April 2019 19%
1 April 2020 17%

Apprenticeship levy

From April 2017 an apprenticeship levy will be set at a rate of 0.5% of an employer’s pay bill. Each employer will receive an allowance of up to £15,000.

Trading income received in non-monetary form

Where trading receipts take the form of non-monetary assets eg reciprocal exchange of services, these are brought into account for tax purposes at their market value.

Other matters which were raised that may be of interest:

Inheritance Tax

From 6th April 2017, for taxpayers who pass their main residence to direct descendants on death, a new ‘main residence nil-rate’ band has been introduced in addition to the usual nil-rate band.

The following new main residence nil-rate band will apply for years ending:
5th April 2018 £100,000
5th April 2019 £125,000
5th April 2020 £150,000
5th April 2021 £175,000
The existing nil-rate band is to be frozen at £325,000 until year ended 5th April 2021.

From 6th April 2016 the tax rate applicable on lump sum amounts paid from the pension of someone who dies aged 75 and over, will reduce from 45% to the recipient’s marginal rate.
Note: marginal rate is a recipient’s personal tax rate for a tax year.

Other Information

Savings

New “Lifetime ISA” from April 2017. Adults below 40 can contribute up to £4,000 each year and the government will provide a 25% bonus.

Normal ISA subscription limit increases to £20,000 from 6 April 2017.

Help to save scheme

New property and trading income allowance

Where turnover is below £1,000, will be no need to declare/pay tax on this income.

For turnover exceeding £1,001 will have a choice of deducting the allowance or calculating taxable profit in the normal way.

From April 2016 a new allowance will apply to residential landlords to provide relief for the cost of replacing furnishings.

‘Rent-a-Room’ relief will be increased from £4,250 to £7,500.

Whilst care has been taken in preparing this publication it is for information only. It is not, and should not be construed, as advice and accordingly no reliance should be placed on the information contained herein.