Archive for November, 2015

Business tax changes confirmed

Monday, November 23rd, 2015

The Summer Budget changes formally completed their progress through the legislative process and received royal assent on 18 November 2015.

We have summarised in this posting the main changes to business tax that are now enacted:

  1. Corporation tax rates will be reduced to 19% from 1 April 2017 and 18% from 1 April 2020.
  2. A new clause, not included in the Summer Budget, was added to the finance act. Any restitution interest paid by HMRC after 21 October 2015 will be taxable at a special 45% tax rate. No reliefs, such as losses, can be set off against this tax. It is likely that this new tax charge will be challenged in the courts.
  3. Tax relief is no longer available for the amortisation of goodwill acquired or created by a company on or after 8 July 2015.
  4. The annual investment allowance has been set at a new permanent level of £200,000. This new limit will apply from 1 January 2016.

Business tax measures that were not in the act, but will likely be introduced in future finance bills include:

  1. Large businesses will be required to publish their tax strategy and a voluntary code of practice will be introduced setting the standards that need to be observed.
  2. Larger companies, turnover in excess of £20m, will be required to speed up the payment of their corporation tax. Payment will need to be made in the third, sixth, ninth and twelfth months of their accounting period. Legislation is expected to introduce this change for all accounting periods starting after 1 April 2017.

Finally, there are a number of measures that were included in the summer finance bill that have been withdrawn and are now subject to consultation. They are:

  1. The abolition of the £8,500 threshold for benefits in kind.
  2. The introduction of a payrolling facility so employers can report and pay tax from benefits in real time.
  3. The replacement of the benefits in kind dispensation with an exemption for certain expenses.
  4. HMRC is also exploring changes to the IR35 legislation to make it more effective from the exchequer’s point of view.

This week, 25 November, George Osborne will be outlining his plans in the autumn statement.

New tax free child care scheme

Thursday, November 19th, 2015

 A reminder that delays created by legal action to block this new scheme mean that it will not be rolled out until early 2017, a year later than planned.

A top ten summary of the benefits of the new scheme are reproduced below:

1. You’ll be able to open an online account

You’ll be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK. Tax-Free Childcare will be launched from early 2017.

2. For every 80p you or someone else pays in, the government will top up an extra 20p

This is equivalent of the tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

3. The scheme will be available for children up to the age of 12

It will also be available for children with disabilities up to the age of 17, as their childcare costs can stay high throughout their teenage years.

4. To qualify, parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year

The scheme is designed to be flexible for parents if, for example, they want to get back to work after the birth of a child or work part-time.

5. Any eligible working family can use the Tax-Free Childcare scheme – it doesn’t rely on employers offering it

Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare. Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.

6. The scheme will also be available for parents who are self-employed

Self-employed parents will be able to get support with childcare costs in Tax-Free Childcare, unlike the current scheme (Employer-Supported Childcare) which is not available to self-employed parents. To support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the minimum income level.

The scheme will also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave.

7. If you currently receive Employer-Supported Childcare then you can continue to do so

You do not have to switch to Tax-Free Childcare if you do not wish to. Employer-Supported Childcare will continue to run. Parents won’t be able to register for Employer-Supported Childcare after Tax-Free Childcare is introduced, but those already registered by this date will be able to continue using it for as long as their employer offers it. However, Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported Childcare.

Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.

8. Parents and others can pay money into their childcare account as and when they like

This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays.

It’s also not just the parents who can pay into the account – if grandparents, other family members or employers want to pay in, then they can.

9. The process will be as simple as possible for parents

The process will be light-touch and as easy as possible for you. For example, you’ll re-confirm your circumstances every three months via a simple online process; and there will be a simple log-in service where parents can view accounts for all of their children at once.

10. You’ll be able to withdraw money from the account if you want to

If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.

More information will become available ahead of the scheme being introduced so parents making childcare decisions are able to consider all their options.

Rent hikes likely as landlords come to grips with tax changes

Tuesday, November 17th, 2015

Over the next few years changes announced by George Osborne in the Summer Budget 2015 may have profound effects on the level of rents and the availability of rental accommodation in the UK.

 From April 2017, landlords will see an increase in their annual tax bills. The increase may be significant in some cases.

 Why should we be concerned?

Many landlords are content to break even initially – rents received equal outgoings including mortgage repayments – the idea being that they benefit from rising property values, and an increasing cash surplus as mortgages as paid down. Any increase in their tax may mean that their annual outgoings exceed their rents received.

 So what is changing?

From April 2017, the government has declared its intention to deny private landlords higher rate tax relief on their finance costs to purchase residential property for letting. Instead of claiming tax relief at 40% or 45% on mortgage and other finance costs they will be restricted to a basic rate tax credit of 20%.

The change may not sound that punitive but many landlords who presently pay tax at the basic rate on all their income may suddenly find themselves higher rate tax payers with no change in income and outgoings.

This is because the largest expense for landlords with hefty mortgages is mortgage interest. Increasingly, from April 2017, this deduction will be disallowed in favour of the basic rate tax credit. Consequently, on paper at least, their profits will increase. Once the income (before mortgage interest) exceeds the basic rate tax band higher rate taxes at 40% will kick in.

 From a cash flow point of view this will leave many landlords with an unpalatable choice: increase rents or sell their buy-to-let property.”

If this analysis is correct, neither option for landlords will be good news for tenants. Whilst an increase in properties to the private sector may be desirable many let properties are still beyond the reach of many first time buyers. And who wants to pay more rent?

Dividend Tax changes April 2016

Monday, November 16th, 2015

 It was bound to happen some time…

At present there are considerable savings in National Insurance contributions to be made if a minimal amount is paid as salary and any balance of a remuneration package is paid as dividends (particularly for shareholder directors of private limited companies).

From April 2016, the NIC status of dividends is not changing and therefore this strategy is still valid. Unfortunately, the income tax position of dividend income is changing and this may have a direct impact on the overall savings in NIC and income tax that can be achieved.

 What’s changing?

From 6 April 2016, the way dividends are being taxed will change. The 10% tax credit is being abolished and each individual will have available a flat rate dividend allowance of £5,000. Any dividends received by an individual in excess of £5,000 will be taxed as follows:

  • 7.5% if your dividend income is within the standard rate (20%) band
  • 32.5% if your dividend income is within the higher rate (40%) band, and
  • 38.1% if your dividend income is within the additional rate (45%) band

 Without the tax credit, a dividend income of £30,000 received in 2016-17 would create the following, additional income tax liabilities.

 Comparison of tax payable on dividend income of £30,000:



Income tax due if dividend received  is £30,000



Dividend is within the standard rate band



Dividend is within the higher rate band



Dividend is within the additional rate band



 Based on these figures:

  • if your dividend income is within the standard rate band you would have extra tax to pay for 2016-17 of £1,875;
  • if your dividend income is within the higher rate band you would have extra tax to pay for 2016-17 of £625, and
  • if your dividend income is within the additional rate band you would have extra tax to pay for 2016-17 of £358.

As you can see, this new tax on dividends will impact standard rate tax payers the most. In all cases any tax liabilities for 2016-17 will be collected 31 January 2018. At the same time, HMRC will also add 50% of the tax liability to your first self assessment payment on account for 2017-18, also due 31 January 2018 with a further 50% due at the end of July 2018.

We advise all readers to take professional advice to see how these changes will affect their personal tax for 2016-17. You will not need to pay addition tax due until 31 January 2018, but there may be planning options that could be employed to lessen the blow.

Emails from the tax office

Friday, November 13th, 2015

Generally speaking, HMRC will communicate with you by sending a letter or calling you. It will never ask for personal details by email. Accordingly, you can disregard any emails you receive from HMRC that do ask for personal information, particularly bank details, as they will likely be scams…

However, HMRC is starting to send out more information by email. In particular:

Employer Bulletin 56 – email

HMRC sends informational emails several times a year to employers who have registered to receive them. These emails never ask you to provide personal or financial information.

The latest batch of emails issued by HMRC was sent 14 October 2015. The emails are titled ‘Important information for employers’ and refer to Employer Bulletin 56. The emails include links which direct recipients to pages on the HMRC website, including advice about online security.

PAYE notices and reminders

If you’ve set up email reminders and notifications using one of the options available in HMRC’s PAYE Online Service you’ll automatically get sent an email when there’s something new for you to view.

HMRC has also started to send electronic reminders if you don’t send your payroll submissions on time, or you’re late making payments to HMRC.

You may also receive email warning notices if HMRC hold records for you, and where you have yet to submit any PAYE reports to HMRC in real time. These messages will inform the employer that they need to act now to avoid incurring penalties, and they should either advise HMRC if they no longer employ anyone, or start reporting in real time.

VAT emails

 VAT Returns – email reminders

HMRC will send an email to customers to remind them when their VAT return is due if they have registered to receive email reminders. The emails are entitled ‘Reminder to file your VAT Return’ and contain links to a further information page and a link to the sign in page on GOV.UK. These emails will never ask you to provide personal or financial information.

VAT Registration – email

HMRC will send an email to customers who have registered for VAT using HMRC online services. HMRC will use the email address customers have provided to advise that they need to log into their online tax account in order to view a message in the secure messaging area. These emails will never ask you to provide personal or financial information.

Appeal against HMRC penalties

Friday, November 6th, 2015

 You can appeal to HMRC against a penalty for:

  • Late filing of a return
  • Paying tax after the due date
  • Failing to pay all the tax you owe
  • Unable to demonstrate that you have kept adequate records to underpin your tax returns
  • Filing an incorrect return

Your penalty will be cancelled or amended if you have a reasonable excuse.

The latest definitions of what does, and what does not constitute a reasonable excuse are set out below.

What counts as a reasonable excuse

A reasonable excuse is normally something unexpected or outside your control that stopped you meeting a tax obligation, for example:

  • your partner died shortly before the tax return or payment deadline
  • you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
  • your computer or software failed just before or while you were preparing your online return
  • service issues with HM Revenue and Customs (HMRC) online services
  • a fire prevented you from completing your tax return
  • postal delays that you couldn’t have predicted

You must try to send your return or payment as soon as possible after your reasonable excuse is resolved.

What’s unlikely to be a reasonable excuse

The following aren’t usually accepted as a reasonable excuse:

  • you relied on someone else to send your return and they didn’t
  • your cheque bounced or payment failed because you didn’t have enough money
  • you found the HMRC online system too difficult to use
  • you didn’t get a reminder from HMRC

If you have a disability

If you have a disability and claim to have a reasonable excuse that prevented you from meeting a deadline, HMRC will consider whether you made a reasonable effort to meet your obligation on time.

UK tax gap falls to 6.4%

Thursday, November 5th, 2015

The government has announced that the tax gap for 2013/14 was 6.4% of tax due.

The tax gap, which is the difference between the amount of tax due and the amount collected, has fallen from 8.4% in 2005/06. The government estimates that this reduction in the percentage tax gap since 2005/06 represents an additional £57 billion in cumulative tax collected over the eight-year period.

According to HMRC the largest reduction is in the corporation tax gap which has halved since 2005/06, from 14% to 7% of tax liabilities. The downward trend applies to all sizes of businesses, with the overall reduction driven mainly by large businesses.

David Gauke, Financial Secretary to the Treasury, said:

‘The UK has one of the lowest tax gaps in the world, and this Government is determined to continue fighting evasion and avoidance wherever it occurs.

If the tax gap percentage had stayed at its 2009/10 value of 7.3%, £14.5 billion less tax would have been collected.

There is understandable anger when individuals or companies are perceived not to be contributing their fair share, but we can reassure the public that the proportion going unpaid is low and this Government is dedicated to bringing it down further.’

Work Place Pensions and Auto Enrolment

Thursday, November 5th, 2015

The Department of Work and Pensions and the Pensions Regulator have launched a new advertising campaign promoting auto enrolment which aims to change the country’s perception of pensions in the workplace.

Workie, ‘a striking physical embodiment of the workplace pension’, will be seen visiting people in different work environments over the coming months, asking them not to ignore him.

The advertisements come with a message, whilst automatic enrolment into workplace pensions has been rolling out across the UK since 2012, it is only now that 1.8 million small and micro employers need to act. In a phased process over the next three years, every employer will have to enrol their eligible staff into a pension scheme, by reference to their staging date.

Pensions Minister, Baroness Altmann, said:

‘We have made great strides forward by automatically enrolling more than 5 million people into a workplace pension – now the challenge is to make sure hardworking people with every type of employer get to enjoy this major financial benefit.

This is a fun and quirky campaign but behind it lies a very serious message. We need everyone to know they are entitled to a workplace pension – and we need all employers to understand their legal responsibility to their staff, but also to feel more positive about engaging with workplace pensions.

This government is committed to providing security for working people at every stage of their lives, and that includes giving people the chance to plan for a financially secure retirement. Automatic enrolment is a big part of that.

Since 2012, more than 5.4 million workers have been automatically enrolled into a workplace pension by almost 61,000 employers. By the time the process is complete in 2018, it is estimated that around 9 million workers will either be newly saving or saving more into a workplace pension thanks to the policy.

The new campaign will include radio, print, online and outdoor advertising and will run for the remainder of this year and into 2016. It is being coordinated jointly by the Department for Work and Pensions and The Pensions Regulator.’


Getting you ready for Auto Enrolment

Slaters have teamed up with local pension and investment specialists Richard Jacobs to offer Slaters clients more information on Auto Enrolment.

Our next workshop on Auto Enrolment will be in February 2016*.

The workshop will start at 9.00am until approx. 11.30am, and is designed to :

  • Provide you with all you need to know about Auto Enrolment
  • Take you through 9 easy steps to get you prepared
  • Give you an opportunity to discuss your requirements in more detail

Click here to register your interest

State Pension ‘top up’ scheme

Thursday, November 5th, 2015

A new scheme is being launched offering anyone reaching State Pension age before 6 April 2016 a chance to increase their State Pension by up to £25 a week.

People are eligible if they are entitled to a UK State Pension and have already reached their State Pension age or reach it before 6 April 2016. This includes men born before 6 April 1951 and women born before 6 April 1953.

The scheme will remain open for 18 months and those who think they can benefit will be able to buy additional State Pension, worth up to £1,300 a year. In most cases, surviving spouses and civil partners will be able to inherit at least 50% of the extra pension.

Minister for Pensions, Baroness Altmann said:

‘This government’s commitment is to provide security for working people at every stage of their lives, and that includes giving people the chance to enjoy a financially secure retirement. We have already committed to protecting pensioner incomes with the triple lock – uprating the basic State Pension by at least 2.5% each year of this Parliament. The new State Pension, coming in from April 2016, will ensure a simpler, more sustainable State Pension for the pensioners of tomorrow.

Top up is an opportunity for people already retired, or reaching State Pension age before April 2016, to boost their later life income. It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you. But it could be particularly attractive for those who haven’t had the chance to build significant amounts of State Pension, particularly many women and people who have been self-employed.’

Anyone who thinks they might benefit should seek advice and can use the online calculator to help them find out more. More information on State Pension top up and how to apply is available at

Autumn Statement 2015 predictions

Thursday, November 5th, 2015

The Chancellor will make his 2015 Autumn Statement on Wednesday 25 November, but here are our predictions:

Tax credits have been in the news and this is one issue the Chancellor George Osborne is expected to review in the Autumn Statement. The House of Lords voted to reject the Statutory Instrument which contained the cut backs to tax credits.

He has promised to ‘continue to reform tax credits…while at the same time lessening the impact on families during the transition’.

The key changes originally proposed were:

  • lowering the income threshold for Working Tax Credits from £6,420 to £3,850 a year from April 2016
  • increasing the rate at which those payments are cut. Currently, for every £1 claimants earn above the threshold, they lose 41p. It was proposed that from April 2106, the taper rate would accelerate to 48p.

There are some tax issues which may also be progressed in the Autumn Statement these include:

  • IR35 – following a period of discussion proposals are expected to be announced to reform the system and operation of taxation which applies to personal service companies.
  • Pensions tax relief – limiting the amount of tax reliefs for pensions. The government has been consulting to establish whether the tax relief system provides incentives for individuals to save and that the costs of pension tax relief are affordable.