Archive for the ‘Personal Tax’ Category

Have you accessed your Personal Tax Account?

Wednesday, July 6th, 2016

HMRC are advising employers that their employees may benefit from accessing their Personal Tax Account. These accounts allow taxpayers to view information about their tax affairs and advise HMRC online about changes that may affect the tax they pay. The services available through the Personal Tax Account include:

  • checking income tax estimates and tax codes
  • advising HMRC about changes affecting company cars
  • using the online forms available to claim tax deductible work expenses or a tax refund
  • checking the expected level of their state pension
  • renewing tax credits
  • advising HMRC of a change of address.

In a recent development the system for registering for this service has been revised and it is now possible to register using your National Insurance Number and P60 information. To register visit https://www.gov.uk/personal-tax-account

Employers may wish to promote the service to their employees as this should result in fewer enquiries being made by them to their payroll or HR departments

Internet link: Employer Bulletin

Tax and Interest implications of new accounting rules

Wednesday, May 4th, 2016

The introduction of a new accounting standard (FRS 102) means that some of the figures in your accounts may need to be restated and these changes may have tax implications.

Calculating Tax

The calculation of profits for tax purposes is based on the profits of the business computed in accordance with Generally Accepted Accounting Principles.

At Slaters & Co we will work with our clients to discuss these changes and seek to minimise the tax impact where possible.

 

Interest Free Loans

One of the areas where there may be a change in your company’s accounts is where you have received or made a loan that is interest free or at less than market rates. Unless the loan is repayable on demand the new accounting rules require the loan to be recorded in the accounts on an amortised cost basis.  For example this means that a £20,000 interest free loan repayable in two years time would be valued at £18,141 if the market rate of interest is 5%.

This method recognises that £20,000 today is worth more than £20,000 in two years time. If your company is borrowing the £20,000 then there would be finance expenses of £907 in year 1 and £952 in year 2 reflecting the initial £1,859 discount. These finance expenses would be deductible for corporation tax provided the lender is also charged to UK corporation tax on the interest. But if the interest free loan was from an individual such as a director there would be no tax deduction, a point clarified in the latest Finance Bill.

 

Paying Interest on Directors Loans

The new 32.5% rate on dividends received by higher rate taxpayers means paying interest on directors’ loan account credit balances is now more tax efficient than paying dividends, once the new £5,000 dividend allowance has been used. This will also avoid the accounting issue mentioned above if a market rate of interest is paid. Unlike bank interest the company is still required to deduct 20% basic rate income tax and pay this over to HMRC quarterly with form CT61. Remember that higher rate taxpayers can receive £500 interest income tax free from 6 April 2016.

 

Contact Us

If you want to discuss any of this in more detail with on our Tax experts then do not hesitate to Contact Us today on 01782 566101 or Contact@SlatersCA.co.uk

 

Personal allowances and tax bands

Monday, April 11th, 2016

For those born after 5 April 1938 the personal allowance is currently £10,600. Those born before 6 April 1938 have a slightly higher allowance. Legislation has already been enacted to increase the personal allowance to £11,000 in 2016/17. From 2016/17 onwards one personal allowance will apply regardless of age.

Not everyone has the benefit of the full personal allowance. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 which is £1 for every £2 of income above £100,000. So for 2015/16 there is no personal allowance where adjusted net income exceeds £121,200 (£122,000 for 2016/17).

Tax bands and rates

The basic rate of tax is currently 20%. The band of income taxable at this rate is £31,785 so that the threshold at which the 40% band applies is £42,385 for those who are entitled to the full basic personal allowance.

Legislation has already been enacted to increase the basic rate limit to £32,000 for 2016/17. The higher rate threshold will therefore rise to £43,000 in 2016/17 for those entitled to the full personal allowance.

The additional rate of tax of 45% remains payable on taxable income above £150,000.

Tax bands and personal allowance for 2017/18

The Chancellor has announced that the personal allowance will be increased to £11,500 and the basic rate limit increased to £33,500 for 2017/18. The higher rate threshold will therefore rise to £45,000 for those entitled to the full personal allowance.

Key Tax Dates – March and April

Tuesday, March 1st, 2016

Here are some key dates to be aware of for March:

1 March  – Corporation tax for year to 31/5/15

16 March – Annual Budget to be announced.

19 March  – PAYE & NIC deductions, and CIS return and tax, for month to 5/3/16 (due 22 March if you pay electronically)

1 April  – Corporation tax for year to 30/6/15

5 April  – End of 2015/16 tax year, many tax actions need to be taken by this date (see above).

19 April  – PAYE & NIC deductions, and CIS return and tax, for month to 5/4/16 (due 22 April if you pay electronically)

HMRC reveal tax return statistics and worst excuses

Wednesday, February 10th, 2016

HMRC have revealed that 10.39 million Self Assessment tax returns were completed ahead of the 31 January deadline which is more than 92% of the total returns expected, and 150,000 more than last year.

More than 89% of taxpayers (9.24 million) filed their return electronically.

However the ten worst excuses for missing the 31 January Self Assessment deadline for 2013 to 14 have been revealed by HM Revenue and Customs (HMRC).

From broken kitchen appliances, hungry pets and arguments that last five years – some people will stop at nothing to pass the blame for their tardy timekeeping. Some of the excuses submitted included:

  1. My tax papers were left in the shed and the rat ate them
  2. I’m not a paperwork orientated person – I always relied on my sister to complete my returns but we have now fallen out
  3. My accountant has been ill
  4. My dog ate my tax return
  5. I will be abroad on deadline day with no internet access so will be unable to file
  6. My laptop broke, so did my washing machine
  7. My niece had moved in – she made the house so untidy I could not find my log in details to complete my return online
  8. My husband ran over my laptop
  9. I had an argument with my wife and went to Italy for 5 years
  10. I had a cold which took a long time to go

The excuses were all used in unsuccessful appeals against HMRC penalties for late returns.

 

An automatic £100 penalty applies to those failing to file their return by 31 January 2016 midnight deadline

Self assessment deadline approaching

Monday, January 18th, 2016

The deadline for sending 2014/15 tax returns to HMRC, and paying any tax owed, is 31 January 2016.

HMRC have reported that:

  • a record breaking 24,546 people submitted their tax return online on New Year’s Eve
  • more than 11,467 people sent off their self assessment tax return on New Year’s Day
  • and in excess of 2,000 taxpayers submitted their tax returns on Christmas Day.

Ruth Owen, Director General of Personal Tax, HMRC, said:

‘As we all enjoy the festive season it’s easy to see how completing your tax return can be forgotten, but the 31 January deadline will be here quicker than we think.’

Please contact us if you need help with your self assessment return.

 

 

 

Dividend Allowance and rates of tax

Monday, January 18th, 2016

Further details have been provided of the new rates of income tax on dividends and the new Dividend Allowance which will apply to dividends received on or after 6 April 2016.

The rates of income tax on dividends will be:

  •    7.5% for dividend income within the basic rate band (ordinary rate)
  •    32.5% for dividend income within the higher rate band (upper rate)
  •    38.1% for dividend income within the additional rate band (additional rate)

There will also be a new Dividend Allowance of £5,000 where the tax rate will be 0% – the dividend nil rate. The Dividend Allowance applies to the first £5,000 of an individual’s taxable dividend income and is in addition to the personal allowance.

Where an individual receives dividend income, from UK or non-UK resident companies, that would otherwise be chargeable at the dividend ordinary, upper or additional rate, and the income is less than or equal to £5,000, the dividend nil rate will apply to all of the dividend income. Where the dividend income is above £5,000, the lowest part of the dividend income will be chargeable at 0%, and anything received above £5,000 is taxed at the rate that would apply to that amount if the dividend nil rate did not exist.

In calculating the tax band into which any dividend income over the £5,000 allowance falls, savings and dividend income are treated as the highest part of an individual’s income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice.

The following example illustrates how the new Dividend Allowance and rates will work:

Patricia has a salary of £40,500 and dividend income of £7,000 in 2016/17. Her total income is therefore £47,500. The total of her personal allowance and basic rate band comes to £43,000. Therefore part of her dividend income would be taxed at the upper rate were it not for the operation of the new dividend nil rate.

So £5,000 will be taxed at 0% and £2,000 will be taxed at the upper rate of 32.5%

If you would like advice on how the new dividend rules will affect you please do get in touch.

 

 

 

Autumn Statement Summary

Tuesday, December 1st, 2015

Tax Credit U-Turn

In the Summer Budget the Chancellor proposed cutting the rates and thresholds for working and child tax credits. This would have reduced the income of many low-paid families significantly. The House of Lords blocked the legislation which was to have introduced this change.

The Chancellor has now announced that the rates and thresholds for tax credits will be frozen for 2016/17 at the 2015/16 levels. There is one exception – the disregard of rising income is to be brought in line with the disregard for falling income. Both will be set at £2,500 for 2016/17.

The Government is also proposing to review the rules concerning making single or joint claims for tax credits as this is an area where claimants are easily confused and many mistakes are made.

Property Investors hit with stamp duty and land tax increases

In the Summer Budget the Chancellor announced a restriction on the deductibility of interest from rental income for individual landlords of residential property. This restriction will be phased in from 2017/18 to 2020/21, and it may make letting uneconomic for landlords whose businesses are relatively highly geared. The latest attack on property investors is a proposed 3% increase in Stamp Duty Land Tax.

Landlords who can buy properties to let without a mortgage are not affected by the interest restriction. To discourage such cash-rich individuals from purchasing multiple properties to let or to hold as second homes, particularly in holiday areas like Cornwall, an additional SLDT charge of 3% will be payable by individual purchasers of residential properties worth over £40,000 from 1 April 2016. This supplemental SDLT charge won’t be payable by corporate purchasers (15 properties or more) or by funds such as Real Estate Investment Trust (REITS). The proposed rates are:

Purchase priceSDLT rate,  cumulative
Up to £125,0003%                      £3,750
£125,000 – £250,0005%                    £10,000
£250,000 – £925,0008%                    £64,000
£925,000 – £1,500,00013%                £138,750
£1,500,001 and over15%

SDLT is currently payable within 30 days of the completion of the purchase and the SDLT return must be filed within the same period. The Government is proposing to reduce the payment and filing period to just 14 days from the completion date of the sale, sometime in 2017/18.

Capital Gains Tax changes

CGT is normally payable by individuals by 31 January after the end of the tax year in which the gain arose. This gives the taxpayer between 10 and 22 months from receipt of the proceeds to calculate the tax due and pay it over to HMRC. From 6 April 2015 non-resident taxpayers have had a shorter time frame in which to report the sale of UK residential property and pay the tax due – only 30 days from the completion of the disposal. HMRC now propose to extend the 30 day reporting and CGT payment deadline to all UK taxpayers who make taxable gains when selling residential properties for disposals on or after 6 April 2019.

ISA Limits for 2016/2017 to stay the same

The annual limit for savings in an ISA has been frozen at £15,240 for 2016/17. The Junior ISAs limit has been frozen at £4,080.

Car and Fuel benefit charges

Diesel company cars currently carry a 3% supplement on the percentage of list price used to calculate the taxable benefit. This diesel supplement was to be removed from 6 April 2016, but it will now stay in place until 2020/21.

Employees and directors with company cars, and who also have some or all of their private fuel paid for by their employers, are subject to the fuel benefit charge – determined by multiplying a notional list price by the appropriate percentage for the car, based on its CO2 emissions. The car fuel notional list price will increase from £22,100 to £22,200 with effect from 6 April 2016. For a company car emitting between 111 to 115g CO2 per km, the scale charge would be 20% of £22,200 and this would result in taxable fuel benefit of £4,440 and £1,776 income tax for a 40% taxpayer. At 11p per mile the employee would need to drive 16,145 private miles to make having private fuel paid for worthwhile.

Private use of company vans

Where employees are provided with a company van, the taxable benefit increases from £3,150 to £3,170 for 2016/17 and there will be an additional taxable benefit of £598 where private fuel is provided by their employer.

Note that this charge does not apply to all company van drivers, only those who use the van for private journeys.

Company Car advisory fuel rates

Not part of the Autumn Statement, but you need to know that some of the rates are reduced from 1 December 2015 (previous rates are shown in brackets where there was a change):

engine sizepetroldieselLPG
1,400 cc or less11p7p
1,600 cc or less9p
1,401cc to 2,000cc13p (14p)9p
1,601cc to 2,000cc11p
over 2,000cc20p (21p)13p13p (14p)

National Insurance Rates frozen for 2016/2017

There will be no increase in the rates of national contributions (NICs) for employers, employees nor the Class 4 rate for the self-employed for 2016/17, although the Upper Earnings Limit for employee contributions and Upper Profits Limit for Class 4 contributions will be increased to £43,000, in line with the higher rate tax threshold.

Employees’ contributions will be payable at 12% on earnings between £155 per week and £827 per week and 13.8% employers contributions will start at £156 per week. The employment allowance increases to £3,000 for 2016/17 and will continue to be deductible from employers’ NIC, although it will no longer be available to one man companies.

Apprenticeship levy from 2017

A new apprenticeship levy will be introduced from 6 April 2017. Although all employers will be required to pay this new levy, set at 0.5% of their annual payroll cost, each employer will also have an annual credit equivalent to £15,000 to set against the levy, which means only the largest employers with payrolls of £3 million or more will actually pay the levy. Based on an average salary, this means that only employers with more than around 100 to 120 employees will be affected. It is not clear at this stage as to what is meant by payroll.

Employers who take on apprentices will receive vouchers funded by the apprenticeship levy to set against the cost of those apprentices.

Announcements for businesses

Support for smaller businesses

The Chancellor reported that the UK’s small and medium sized enterprises now employ 15.6 million people, up from 13.7 million in 2010. Over the last two years the number of small businesses employing someone other than the owner has grown by 100,000.

The government understands that small businesses need tailored support. Already, Start-Up Loans have provided £180 million of funding to 33,600 entrepreneurs and in the last Parliament, the government cut the cumulative burden of regulation by over £10 billion.

Other support for smaller businesses that have previously been announced include:

  • From April 2016 the Employment Allowance will rise to £3,000, benefiting over 1 million employers, and helping many businesses take on their first employee.
  • The cancellation of the planned September 2015 fuel duty increase means a small business with a van will have saved £1,357 by the end of 2015-16 compared to plans inherited by the government at the start of the last Parliament.
  • The government will meet its commitment to 75,000 Start-Up Loans by the end of this Parliament.

 

Small business rate relief

English firms can claim the small business rates relief if they only use one property and its rateable value is less than £12,000. This relief was due to end on 31 March 2016.

The Chancellor has announced today that the relief will be extended for a further year. Businesses will now get 100% relief until 31 March 2017 for properties with a rateable value of £6,000 or less. This means you won’t pay business rates on properties with a rateable value of £6,000 or less.

The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.

Car benefit diesel supplement

The 3% supplement added to the benefit in kind charge for drivers of diesel powered company cars is to continue beyond April 2016 and will now cease to apply from April 2021.

Announcements for home owners

London help to buy loan scheme

The present help to buy loan scheme that applies across the UK, provides a 20% contribution from government, requires a 5% deposit from the buyer, with the balance funded by a 75% mortgage.

As house prices are running at much higher levels in London, from early 2016 qualifying buyers in London will still need to find a 5% deposit, but government will contribute up to 40% with the required mortgage funding dropped to 55%.

These government equity loans will now be available until 2021.

Help to buy shared ownership scheme to be extended

Shared ownership allows families in England, on lower incomes, to buy an interest in their home and rent the rest. People can buy between 25% and 75% of a home in this way.

The rent charge won’t be more than 3% of the non-purchased part of the property.

The qualifying income limits are to be changed. Current restrictions will be lifted from April 2016. Anyone who has a household income of less than £80,000 outside London, or less than £90,000 inside London, will be able to participate.

First time buyers’ starter homes discount

200,000 new homes are to be designated Starter Homes and developers will be able to offer them to first time buyers aged under 40 at a 20% discount.

Stamp duty increase for second homes and buy-to-lets

From 1 April 2016, individuals buying a second home or a buy-to-let property will face an extra 3% stamp duty charge above the current stamp duty land tax rates.

Housing Association tenants

Rights to buy to be extended to Housing Association tenants during 2016. Potentially, this could give 1.3 million households the opportunity to buy their own home.

Capital Gains Tax (CGT) on sale of residential property

From 2019, the government intends to require a payment on account, within 30 days of a sale, of any CGT due on the disposal of a residential property.

This will not apply where no CGT is payable, for example if covered by Private Residence Relief.

Announcements for individuals

Tax credits

As announced in the introduction to this statement the intended reduction in tax credits next year has been withdrawn. For 2016-17:

  • The rate at which a claimant’s award is reduced over the income threshold, will remain at 41% of gross income.
  • The income threshold will remain at £6,420.
  • The income threshold for child tax only claimants will remain at £16,105.
  • The income disregard will reduce from £5,000 to £2,500.

As the other elements that make up the payment of tax credits are also unchanged claimants should find their benefits from this source unchanged from April 2016, unless their personal circumstances or income levels have changed.

The Chancellor did comment that tax credits are being phased out in any event and replaced by universal credits.

Basic state pension increase announced

From April 2016, the basic weekly state pension will increase to £119.30, an increase of £3.35.

Part-time rail season tickets and money back…

Two new features to be introduced:

  1. Commuters will be able to buy part-time season tickets on selected routes, and
  2. Commuters will be able to claim money back if a train is more than 15 minutes late.

VAT raised on sales of women’s sanitary products

The UK is unable to zero rate VAT on these products under existing EU rules. Whilst representations are being made the Chancellor is to redirect the VAT revenue raised to selected women’s charities.

George Osborne said:

“300,000 people have signed a petition arguing that no VAT should be charged on sanitary products. We already charge the lowest 5% rate allowable under European law and we’re committed to getting the EU rules changed.

Until that happens, I’m going to use the £15 million a year raised from the Tampon Tax to fund women’s health and support charities. The first £5 million will be distributed between the Eve Appeal, SafeLives, Women’s Aid, and The Haven – and I invite bids from other such good causes.”

Warm home discount scheme extended

The present £140 discount from electricity bills for certain low income households is to be extended and can be claimed from suppliers to 2020-21.

Minor whiplash claims to be curtailed

In an attempt to curtail exaggerated whiplash claims the government is ending the right to claim cash compensation.

More injuries will be able to go to the small claims court as the upper limit is to be increased from £1,000 to £5,000.

This may reduce the cost of insurance for motorists – estimated falls of £40 to £50 a year can be expected.

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.

Annual Tax on Enveloped Dwellings (ATED) updated procedures

Wednesday, September 9th, 2015

Since 2013 a range of measures have been introduced to discourage the holding of residential property in the UK via companies, partnerships and collective investment schemes. In summary, these measures are:

  • Stamp Duty Land Tax (SDLT) is payable at 15% on the acquisition on or after 20 March 2014 of properties costing more than £500,000
  • an Annual Tax on Dwellings (ATED) applies at a fixed amount depending on value and
  • Capital gains tax (CGT) at 28% is payable on a proportion of gains for the period that the property has been subject to ATED.

There are specific reliefs and exemptions for certain types of properties.

Changes in limits

Prior to 1 April 2015 the lower property value threshold for ATED was a value of more than £2m on 1 April 2012, or at acquisition, if later. With effect from 1 April 2015, residential properties valued at more than £1m and up to £2m on 1 April 2012, or at acquisition if later, were brought into the charge.

From 1 April 2016 another new valuation band comes into effect for properties valued at more than £500,000 but less than £1 million.

The threshold for ATED-related CGT disposal consideration has also reduced from £2m to £1m from 6 April 2015 and will further reduce to £500,000 from 6 April 2016.

ATED Procedures

ATED is reported and the tax paid through an annual return. The return periods run from 1 April to 31 March each year.

Normally an ATED return must be made within 30 days of the date on which the property first comes within the charge to ATED for any chargeable period. Where the property is within the scope of ATED on 1 April each year, the return must be filed by 30 April in the year of charge. Payment of the tax is due with the return.

There is a special rule for properties coming within the scope of ATED from 1 April 2015 under the lower threshold of £1m detailed above. The rule is that returns for the chargeable period beginning 1 April 2015 must be filed by 1 October 2015 if the property was held on 1 April 2015 or within 30 days of acquisition if this is later. Payment of the tax is due 31 October 2015.

The chargeable person must submit an ATED return for any property that is within the scope of ATED for the relevant chargeable period. There are reliefs available which may reduce the liability in part or to zero. However, all claims for reliefs must be made in a new ‘relief declaration return’ and these new returns to claim relief have now been made available.

Returns for properties falling within the lower band of £500,000 are due for the chargeable period 1 April 2016 to 31 March 2017. The normal filing dates apply to properties within this new band. For example, if you hold a property valued at more than £500,000 on 1 April 2016, you must file your return and pay the tax by 30 April 2016.

Returns

In addition, a new ‘relief declaration return’ is introduced. Broadly, for each type of ATED relief being claimed, the company can submit a relief declaration return stating that a relief is being claimed in respect of one or more properties held at that time. No details are required of the individual properties or the number of properties eligible. Where a property is acquired in-year which also qualifies for the same type of relief, the existing return is treated as also having been made in respect of that property.

A normal ATED return will still be required in respect of any property which does not qualify or ceases to qualify for a relief i.e. where tax is due.

ATED and the reliefs available are a complex area. Please contact us if you would like specific advice.

More information is available from the Government Website