The Spring edition of the newsletter leads on changes to the VAT flat rate scheme
In this edition there are articles on Brexit, auto enrolment and cyber security for businesses.
This Budget Report was written immediately after the Chancellor delivered his Budget speech and offers general overview
The Spring newsletter contains an interesting article regarding profit extraction issues for directors/shareholders.
The current newsletter includes an article about changes to the reliefs available for property income and other topics
In this edition there are articles on Annual Investment Allowance and spreading income around the family business
Chancellor announces a major reform to dividend taxation.
This Budget Report was written immediately after the Chancellor delivered his Budget speech and offers general overview
The government has introduced new requirements for all private and voluntary sector employers of over 250 people relating to equal pay reporting from April 2017.
The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (SI 2017/172) mean that large employers must calculate and publish the difference in mean and median pay and bonuses between the men and women they employ. In addition, information must be given about the proportion of men and women receiving a bonus payment and the proportions of men and women in each quartile of their pay distribution.
Key stages for this are:
Organisations might choose to add some narrative with the results, but this is not part of the requirement.
Internet link: GOV.UK gender pay gap
Employers need to ensure they are paying their employees at least the appropriate National Minimum Wage (NMW) or National Living Wage (NLW) rate. The rates increase from 1 April 2017.
From 1 October 2016
From 1 April 2017
|NLW rate for workers aged 25 and over||£7.20*||£7.50|
|the main rate for workers aged 21-24||£6.95||£7.05|
|the 18-20 rate||£5.55||£5.60|
|the 16-17 rate for workers above school leaving age but under 18||£4.00||£4.05|
|the apprentice rate **||£3.40||£3.50|
* introduced and applies from 1 April 2016
**for apprentices under 19 or 19 or over and in the first year of their apprenticeship
Going forward the NMW and NLW rates will be reviewed annually in April.
The penalties imposed on employers that are in breach of the minimum wage legislation are 200% of arrears owed to workers. The maximum penalty is £20,000 per worker. The penalty is reduced by 50% if the unpaid wages and the penalty are paid within 14 days. HMRC also name and shame employers who are penalised.
Internet link: GOV.UK NMW
One of the significant announcements Chancellor Philip Hammond made on Budget Day was the proposed increases to the main rate of Class 4 National Insurance Contributions (NICs) paid by self-employed individuals from 9% to 10% from April 2018 with a further increase planned from 10% to 11% from April 2019.
The Chancellor subsequently announced that the government will not now proceed with the proposed increase in Class 4 NICs rates . Self-employed individuals currently pay Class 2 and Class 4 NICs. Class 2 NICs are to be abolished from April 2018.
Internet link: BBC news
Extensive changes to how taxpayers record and report income to HMRC are being introduced under a project entitled Making Tax Digital for Business (MTDfB).
MTDfB is to be introduced in stages and the government has confirmed in the Budget the deferral of some of the obligations for one year. The result of this announcement is that unincorporated businesses and unincorporated landlords with annual turnover:
Companies (and partnerships with a turnover above £10 million) will not come within MTDfB until April 2020.
The government has decided how the general principles of MTDfB will operate. Draft legislation has been issued on some aspects and more is contained in Finance Bill 2017.
Under MTDfB, businesses, self-employed people and landlords will be required to:
DTAs are like online bank accounts - secure areas where a business can see all of its tax details in one place and interact with HMRC digitally.
Businesses, self-employed people and landlords with turnovers under £10,000 are exempt from these requirements.
Internet link: GOV.UK MTDfB
It was announced in the Budget that the Dividend Allowance will be reduced from £5,000 to £2,000 from April 2018.
Dividends received by an individual are subject to special tax rates. The first £5,000 of dividends are charged to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:
Dividends within the allowance still count towards an individual's basic or higher rate band and so may affect the rate of tax paid on dividends above the £5,000 allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.
The government expect that even with the reduction in the Dividend Allowance to £2,000, 80% of 'general investors' will pay no tax on their dividend income. However, the reduction in the allowance will affect family company shareholders who take dividends in excess of the £2,000 limit. The cost of the restriction in the allowance for basic rate taxpayers will be £225 increasing to £975 for higher rate taxpayers and £1,143 for additional rate taxpayers.
Internet link: GOV.UK dividend allowance
The Lifetime Individual Savings Account (ISA) is a longer term tax-free account that receives a government bonus. The accounts will be available from 6 April 2017. HMRC have produced a helpful guide on the account. Some of which is reproduced below:
You can open a Lifetime ISA if you're aged 18 or over but under 40.
As with other ISAs, you won't pay tax on any interest, income or capital gains from cash or investments held within your Lifetime ISA.
You can save up to £4,000 each year in a Lifetime ISA. There's no maximum monthly savings contribution, and you can continue to save in it until you reach 50. The account can stay open after then but you can't make any more payments into it.
The £4,000 limit, if used, will form part of your overall annual ISA limit. From the tax year 2017 to 2018, the overall annual ISA limit will be £20,000.
Example - you could save:
Your Lifetime ISA won't close when the tax year finishes. You'll keep your savings on a tax-free basis for as long as you keep the money in your Lifetime ISA.
Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.
When you save into your Lifetime ISA, you'll receive a government bonus of 25% of the money you put in, up to a maximum of £1,000 a year.
You can withdraw the funds held in your Lifetime ISA before you're 60, but you'll have to pay a withdrawal charge of 25% of the amount you withdraw.
A withdrawal charge will not apply if you're:
If you die, your Lifetime ISA will end on the date of your death and there won't be a withdrawal charge for withdrawing funds or assets from your account.
You can transfer your Lifetime ISA to another Lifetime ISA with a different provider without incurring a withdrawal charge.
If you transfer it to a different type of ISA, you'll have to pay a withdrawal charge.
Your Lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.
You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your Lifetime ISA provider.
If you're buying with another first time buyer, and you each have a Lifetime ISA, you can both use your government bonus. You can also buy a house with someone who isn't a first time buyer but they will not be able to use their Lifetime ISA without incurring a withdrawal charge.
Your Lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.
If you have a Help to Buy ISA, you can transfer those savings into your Lifetime ISA or you can continue to save into both - but you'll only be able to use the government bonus from one to buy your first home.
You can transfer the balance in your Help to Buy ISA into your Lifetime ISA at any time if the amount is not more than £4,000.
In 2017/18 only, you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA without affecting the £4,000 limit.
The Chancellor Philip Hammond presented the last Spring Budget on Wednesday 8 March 2017.
In his speech the Chancellor was keen to point out that he wanted the tax system to be fair, particularly in relation to the distinction between employed and self-employed individuals.
'But a fair system will also ensure fairness between individuals, so that people doing similar work for similar wages and enjoying similar state benefits pay similar levels of tax.'
In the Budget speech the Chancellor announced that he has requested a report to be delivered in the summer on the wider implications of different employment practices. Also the Budget included changes to NICs and the Dividend Allowance.
In December and January the government issued a number of the clauses, in draft, of Finance Bill 2017 together with updates on consultations.
The Budget updates some of these previous announcements and also proposes further measures. Some of these changes apply from April 2017 and some take effect at a later date.
Our summary focuses on the issues likely to affect you, your family and your business. To help you decipher what was said we have included our own comments. If you have any questions please do not hesitate to contact us for advice.
Our summary concentrates on the tax measures which include:
Previously announced measures include:
Our Budget 2017 summary focuses on the issues likely to affect you, your family and your business. To help you decipher what was announced we have included our own comments. If you have any questions please do not hesitate to contact us for advice.
New company car advisory fuel rates have been published which took effect from 1 March 2017. The guidance states: 'You can use the previous rates for up to one month from the date the new rates apply'. The rates only apply to employees using a company car.
The advisory fuel rates for journeys undertaken on or after 1 March 2017 are:
|1400cc or less||11p|
|1401cc - 2000cc||14p|
|1400cc or less||7p|
|1401cc - 2000cc||9p|
|1600cc or less||9p|
|1601cc - 2000cc||11p|
Other points to be aware of about the advisory fuel rates:
If you would like to discuss your car policy, please contact us.
Internet link: GOV.UK AFR
With the end of the tax year looming there is still time to save tax for 2016/17. We have set out some points you may want to consider.
ISAs can offer a useful tax free way to save, whether this is for your children's future, a first home or another purpose. Individuals may invest up to a limit of £15,240 for the 2016/17 tax year. A saver may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA and one Innovative Finance ISA per year. Savers have until 5 April 2017 to make their 2016/17 ISA investment.
By making the most of capital allowances, businesses may be able to write off the costs of capital assets against taxable profits. The Annual Investment Allowance allows businesses to claim a deduction of up to £200,000 of the year's investment in plant and machinery (excluding cars). Businesses of any size and most business structures can make use of the AIA. However, there are provisions to prevent multiple claims.
Pension contributions must be paid on or before 5 April 2017 for them to be relieved against 2016/17 income. Annual contributions are limited to the greater of £3,600 (gross) or the amount of your UK relevant earnings may be eligible for tax relief. However, these will be subject to the annual allowance, which is generally £40,000. This is further reduced for those with net income over £110,000 and adjusted annual income (their income, plus both their own and their employer's pension contributions) over £150,000. For every £2 of adjusted income over this figure, a person's annual allowance is reduced by £1 (down to a minimum of £10,000).
This is only a selection of options that you may wish to consider as part of your tax planning strategy. For more information, and for advice on how we can help you to minimise your tax bill, please contact us.
HMRC have released a list of the most outlandish items which have been claimed as expenses. These include:
Ruth Owen, HMRC Director General of Customer Services, said:
'Year after year we receive a number of ludicrous expense claims, ranging from international holiday flights to expensive designer clothing, which we would never uphold. Why should the honest taxpayer pick up the bill for others? HMRC will only accept those claims which are genuine, such as legitimate travel expenses or the cost of tools for the job.'
For help with your tax affairs please do get in touch.
Internet link: GOV.UK news