Archive for the ‘RTI’ Category

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.

April – Monthly Round Up

Tuesday, April 7th, 2015

Budget 2015

George Osborne presented the final Budget of this Parliament on Wednesday 18 March 2015.

In his speech the Chancellor reported ‘on a Britain that is growing, creating jobs and paying its way’.

Towards the end of 2014 the government issued many proposed clauses of Finance Bill 2015 together with updates on consultations. Due to the dissolution of Parliament on 30 March some measures have been legislated for in the week commencing 23 March, whilst others will be enacted by a Finance Bill in the next Parliament (depending on the result of the General Election).

The Budget proposed further measures, some of which may only come to fruition if the Conservative Party is in power in the next Parliament.

The articles which follow summarise some of the key changes.

Internet link: GOV.UK Budget

Personal tax rates and allowances

For those born after 5 April 1938 the personal allowance will be increased to £10,600. For those born before 6 April 1938 the personal allowance remains at £10,660.

The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction 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.

Tax bands and rates for 2015/16

The basic rate of tax is currently 20%. The band of income taxable at this rate is being decreased from £31,865 to £31,785 so that the threshold at which the 40% band applies will rise from £41,865 to £42,385 for those who are entitled to the full basic personal allowance.

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

Dividend income is taxed at 10% where it falls within the basic rate band and 32.5% where liable at the higher rate of tax. Where income exceeds £150,000, dividends are taxed at 37.5%.

Starting rate of tax for savings income

From 6 April 2015, the maximum amount of an eligible individual’s savings income that can qualify for the starting rate of tax for savings will be increased from £2,880 to £5,000, and this starting rate will be reduced from 10% to 0%. These rates are not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit.

This will increase the number of savers who are not required to pay tax on savings income, such as bank or building society interest. Eligible savers can register to receive their interest gross using a form R85.

Internet link: GOV.UK Budget

Proposed personal allowances to come

The Chancellor announced that the personal allowance will be increased to £10,800 in 2016/17 and to £11,000 in 2017/18. The Transferable Tax Allowance will also rise in line with the personal allowance, being 10% of the personal allowance for the year.

The higher rate threshold will rise in line with the personal allowance, taking it to £42,700 in 2016/17 and £43,300 in 2017/18 for those entitled to the full personal allowance.

Personal Savings Allowance

The Chancellor announced that legislation will be introduced in a future Finance Bill to apply a Personal Savings Allowance to income such as bank and building society interest from 6 April 2016.

The Personal Savings Allowance will apply for up to £1,000 of a basic rate taxpayer’s savings income, and up to £500 of a higher rate taxpayer’s savings income each year. The Personal Savings Allowance will not be available for additional rate taxpayers.

These changes will have effect from 6 April 2016 and the Personal Savings Allowance will be in addition to the tax advantages currently available to savers from Individual Savings Accounts.

The Personal Savings Allowance will provide basic and higher rate taxpayers with a tax saving of up to £200 each year.

Internet link: GOV.UK News

Help to Buy ISA

The government has announced the introduction of a new type of ISA, the Help to Buy ISA, which will provide a tax free savings account for first time buyers wishing to save for a home.

The scheme will provide a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings.

Help to Buy ISAs will be subject to eligibility rules and limits:

  • An individual will only be eligible for one account throughout the lifetime of the scheme and it is only available to first time buyers.
  • Interest received on the account will be tax free.
  • Savings will be limited to a monthly maximum of £200 with an opportunity to deposit an additional £1,000 when the account is first opened.
  • The government will provide a 25% bonus on the total amount saved including interest, capped at a maximum of £3,000 which is tax free.
  • The bonus will be paid when the first home is purchased.
  • The bonus can only be put towards a first home located in the UK with a purchase value of £450,000 or less in London and £250,000 or less in the rest of the UK.
  • The government bonus can be claimed at any time, subject to a minimum bonus amount of £400.
  • The accounts are limited to one per person rather than one per home so those buying together can both receive a bonus.
  • As is currently the case it will only be possible for an individual to subscribe to one cash ISA per year. It will not be possible for an account holder to subscribe to a Help to Buy ISA with one provider and another cash ISA with a different provider.
  • Once an account is opened there is no limit on how long an individual can save into it and no time limit on when they can use their bonus.

The government intends the Help to Buy ISA scheme to be available from autumn 2015 and investors will be able to open a Help to Buy ISA for a period of four years.

Internet link: GOV.UK factsheet

Pension freedoms for those with annuities

The Chancellor has announced a new flexibility for people who have already purchased an annuity. From April 2016, the government will remove the restrictions on buying and selling existing annuities to allow pensioners to sell the income they receive from their annuity for a capital sum.

Individuals will then have the freedom to take that capital as a lump sum, or place it into drawdown to use the proceeds more gradually.

Income tax at the individual’s marginal rate will be payable in the year of access to the proceeds.

The proposal will not give the annuity holder the right to sell their annuity back to their original provider. The government has begun a consultation on the measures that are needed to establish a market to buy and sell annuities and who should be permitted to purchase the annuity income.

The government recognises that for most people retaining their annuity will be the right choice. However, individuals may want to sell an annuity, for instance to pay off debts or to purchase a more flexible pension income product.

We will keep you informed of developments.

Internet link: GOV.UK News

National Minimum Wage rises

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2015:

From 1 October 2015:

  • the adult rate will increase by 20 pence to £6.70 per hour
  • the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour
  • the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour
  • the apprentice rate will increase by 57 pence to £3.30 per hour

Penalties

Penalties may be levied on employers where HMRC believe underpayments have occurred and HMRC ‘name and shame’ non-compliant employers.

If you have any queries on the NMW please get in touch.

Internet links: GOV.UK News

Our summary of the latest tax updates

Tuesday, March 10th, 2015

As there are so many small things to update you on in March, we’ve pulled them all together into one post:

Avoid losing your personal allowance

For every £2 that your adjusted net income exceeds £100,000, the £10,000 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

Get ready for the new flexible pension rules

For those aged 55 and over and with a SIPP or other money purchase schemes, the new flexible pension rules commence on 6 April 2015. The new rules allow such pensioners to withdraw as much or as little income as they like from their fund but the income drawn will be taxed at their marginal tax rate.

Those affected should discuss the options with an Independent Financial Adviser who will need to work closely with us as the tax payable on the pension will depend upon their level of other income.

Make charitable payments under gift aid to save more tax

Higher rate taxpayers should make any charitable payments under Gift Aid so that you obtain additional tax relief. The charity will also be able to reclaim the basic rate tax from HMRC.

 

Year end capital gains tax planning

Have you used your 2014/15 annual exemption of £11,000? Consider selling shares where the gain is less than £11,000 before 6 April 2015. Also, if you have any worthless shares consider a negligible value claim to establish a capital loss. You may even be able to set off the capital loss against your income under certain circumstances.

Take advantage of your 2014/2015 ISA allowances

Your maximum annual investment in ISAs for 2013/14 is £15,000. Your investment needs to be made before 6 April 2015. In addition, have you thought about investing for your children or grandchildren by setting up junior ISAs or pensions? In the 2014/15 tax year, you can invest £4,000 into a Junior ISA for any child under 18 who does not have a Child Trust Fund.

 

Other tax efficient investments

If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme (EIS), which offers income tax relief of 30 per cent as well as capital gains tax relief when you buy shares in certain qualifying companies? An even more generous tax break is available for investment in a qualifying Seed EIS company where income tax relief at 50 per cent is available. It is possible to shelter 50% of your capital gains in 2014/15 and there is a capital gains tax exemption when the shares are sold. Note however that qualifying Seed EIS companies tend to be risky investments so professional advice should be taken.
A 30% income tax break is also available by investing in a Venture Capital Trust.

Inheritance tax planning before 6 April 2015

Have you made use of your annual inheritance tax exemptions? The general annual exemption is £3,000 per donor (plus last year’s £3,000 exemption if you did not use it). Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT.

The £2,000 employment allowance continues for 2015/16

The £2,000 “employment allowance” introduced in 2014/15 continues to be available for 2015/16.

Click here to read full story

Maximise tax relief for capital expenditure

Those running a business should take advantage of the temporary increase in the Annual Investment Allowance (AIA) to £500,000. 5th April 2015 is not relevant for this tax break as the limit continues until 31 December 2015 when it is scheduled to reduce to just £25,000. AIA provides a 100% tax write off for plant and equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems.

PAYE and RTI Penalties

Tuesday, March 10th, 2015

PAYE end of year – pay on time reminder

HMRC are reminding employers that with the end of the 2014/15 tax year approaching they will soon need to make their final 2014/15 PAYE (RTI) submission.

For most employers, the final submission will be their final Full Payment Submission (FPS) which advises HMRC about the very last employee payments for 2014/15 and this needs to be made on or before 5 April 2015. Details of how to make the final submission can be found on the GOV.UK website using the link below. Alternatively if you would like help with your payroll please do get in touch.

HMRC are also advising employers to take extra care as the deadline for electronic payment of 22nd March falls on a Sunday.

HMRC are advising that employers should ensure their payment reaches HMRC on time, which means that cleared funds should be in HMRC’s account by the 20th unless employers are able to arrange a Faster Payment. For more details about paying HMRC electronically visit Pay PAYE tax.

 

HMRC concession for late RTI returns and payments

HMRC have announced that employers will not incur penalties for delays of up to three days in filing RTI returns. There is no change to the filing deadlines and employers should generally file their full payment submissions (FPS) ‘on or before’ each payment date unless a concession applies.

HMRC are also advising any employer that has received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015 and was 3 days late or less, to appeal online by completing the ‘Other’ box and add ‘Return filed within 3 days’.

In addition, to prevent unnecessary penalties being issued, HMRC will be closing around 15,000 PAYE schemes next month that have not made a PAYE report since April 2013 and which appear to have ceased.

HMRC will write to the affected schemes to tell them about the planned closure and what to do if they are, or should be, operating PAYE.

Employers with fewer than 50 employees are reminded that PAYE late filing penalties will apply to them from 6 March.

PAYE end of year – pay on time reminder

Tuesday, March 10th, 2015

HMRC are reminding employers that with the end of the 2014/15 tax year approaching they will soon need to make their final 2014/15 PAYE (RTI) submission.

For most employers, the final submission will be their final Full Payment Submission (FPS) which advises HMRC about the very last employee payments for 2014/15 and this needs to be made on or before 5 April 2015. Details of how to make the final submission can be found on the GOV.UK website using the link below. Alternatively if you would like help with your payroll please do get in touch.

HMRC are also advising employers to take extra care as the deadline for electronic payment of 22nd March falls on a Sunday.

HMRC are advising that employers should ensure their payment reaches HMRC on time, which means that cleared funds should be in HMRC’s account by the 20th unless employers are able to arrange a Faster Payment. For more details about paying HMRC electronically visit Pay PAYE tax.

Year end tax planning 2014-15

Thursday, February 26th, 2015

The 2014-15 tax year finishes midnight, 5 April 2015. There are a number of tax planning opportunities that need to be considered before this date. Only a few weeks to go. If you have not already done so we recommend you speak with your professional advisor without delay.

Who should be concerned?

Tax year end planning should be considered by:

  • Anyone in business
  • Individuals who are paying income tax at the 40% or 45% rate, and
  • Individuals with multiple sources of taxable income.

All tax payers in these groups should consider their tax planning options before 6 April 2015.

What should you consider?

It is beyond the scope of this blog posting to cover all the planning issues that may be of benefit. The following list is for general information only. The strategies outlined may or may not benefit your situation as everyone’s circumstances are unique. There is no substitute for a conversation with your tax advisor.

  1. High income earners should consider options to reduce their income for tax purposes in 2014-15. For example, if your income exceeds £100,000 you will not only be paying income tax at 40%, but you will suffer a reduction in your personal tax allowance. There are a number of strategies you could consider to avoid this.
  2. If you are in business, and your accounting year end coincides with the tax year end, generally 31 March 2015, there are a number of timing issues to consider:
  1. Are you planning a significant capital purchase (equipment etc) that would qualify for the 100% write off by claiming under the Annual Investment Allowance? Would the expenditure win you more tax relief by being delayed until after 31 March?
  2. In a similar vein, should you defer significant revenue expenditure?
  1. If your business is incorporated what is the best way to extract profits in order to minimise corporation tax for your company and income tax for shareholders and directors?

 

Once the 5 April deadline passes numerous planning opportunities lapse. Please call if you would like to discuss strategies that may benefit your tax position.