‘Budget 2017’

Budget 2017 – employed and self employed taxes

Wednesday, March 8th, 2017

Self Employed

Making Tax Digital

employed and self employed taxes – Following concerns from tax professionals and taxpayers alike on the tight implementation timeframe, the government will delay the introduction of quarterly reporting for unincorporated businesses and landlords with turnover below the VAT threshold until April 2019.

In addition, the cash basis entry threshold will be increased to £150,000 and exit threshold to £300,000, and will extend the use of the cash basis to unincorporated landlords. The government will also seek to simplify the rules on capital and revenue expenditure within the cash basis, to make it easier for businesses to work out whether their expenditure is deductible for tax.

National Insurance

The government had already announced that Class 2 NICs would be abolished from April 2018. This is the fixed rate national insurance paid by the self-employed.

This measure further increased the differential between the rates of National Insurance paid by employees and that paid by the self-employed.

To help reduce the differential and to reflect more equal pension entitlement, the Chancellor announced that the main rate of Class 4 NICs will increase from 9% to 10% in April 2018, and to 11% in April 2019.

However it is worth noting that after taking into account the end of Class 2 NIC only self-employed individuals with profits above £16,250 will have to pay more NICs under the new system.

Employment

The way in which employers remunerate their staff has been under the government’s spotlight recently including particular focus centred on salary sacrifice.

The government is now looking at how to further make the tax system fairer and simpler amongst employees and employers including looking at the taxation of benefits in kind and employee expenses.

The Government will publish consultations on the following:

  • Exemptions and valuations methods used for the tax and employer NICs treatment of benefits in kind.
  • The tax treatment of employer-provided accommodation. This will include proposals for when accommodation should be exempt from tax and help for taxpayers during any transition.
  • Employee expenses: The government will look at the use of the income tax relief for employees’ expenses, including those that are not reimbursed by their employer.

Personal Taxation

NS&I Investment Bond

The Budget confirmed the rate on the NS&I Investment Bond announced at Autumn Statement 2016. The Investment Bond will offer a rate of 2.2% over a term of 3 years and will be available for 12 months from April 2017. The Bond will be open to everyone aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000.

ISAs

As previously announced, a new Lifetime ISA will be introduced this April. The Lifetime ISA allows adults under the age of 40 to save up to £4,000 each year and receive a bonus from the government of up to £1,000 a year on their contributions. The funds can then be withdrawn tax-free to put towards a first home or when they turn 60.

Rent a Room Relief

Individuals have seen a welcomed increase to the annual allowance from £4,250 in 2015-16 to £7,500 in the current tax year. The government will now also consult on proposals to redesign the relief, to ensure it is better targeted to support longer-term lettings. This will help to align the relief more closely with its original intended purpose to increase supply of affordable long-term lodgings.

Tax free Childcare

As previously announced the government’s new tax-free childcare scheme will be phased in from next month. The new scheme will allow eligible working parents to claim up to £2,000 per child towards the cost of childcare per year

The existing childcare vouchers scheme will start to be phased out in 2018 with no new entrants being able to join a childcare voucher scheme from April 2018. Employees who are already a member will be able to continue receiving childcare vouchers for the time being.

Curo offers a range of tax services covering employed and self employed taxes. HMRC website has some guidance on the various obligations placed on individual taxpayers including rent a room relief.

employed and self employed taxes

employed and self employed taxes

 

Budget 2017 – business rates

Wednesday, March 8th, 2017

Business Rates

As widely publicised, changes to business rates were expected and several measures were announced today to provide £435m of further support.

  • Small business support to those businesses losing their Small Business Rate Relief to cap the increase in their bills to £600 or the real terms transitional relief cap.
  • Provide £300m of discretionary relief to English local authorities to support individual hardship cases.
  • A £1,000 business rate discount for public houses with rateable values of up to £100,000.
  • More frequent business valuations of properties, at least every 3 years.

To discuss how we can help you and your business, please call Helen Sewell on 01527 558539 or email [email protected].

https://curoca.co.uk/curo-services/business-services/

business rates

Budget 2017 – corporation tax

Wednesday, March 8th, 2017

Corporation Tax

With the UK having the lowest corporate tax rate in the G20 and rates set to reduce to 19% from April this year and a further reduction to 17% in April 2020, there was no surprise at this stage that no further major announcements were made in respect of corporate tax, as current policies support the business tax road map.

However we have seen further announcements to strengthen current policies being followed.

Business Structure

In April 2016 we had the introduction of the increased 7.5% dividend rate on dividends to remove the tax gap between unincorporated and corporate business and to refrain individuals from incorporating.

Further announcements today to reduce the dividend allowance from £5,000 to £2,000 from April 2018 will further reduce the gap to ensure we see less incorporations moving forward.

 

Research and Development

The results of the Industrial Strategy green paper indicated the current R&D regime to be effective and internationally competitive as the government continues to drive forward reliefs for innovation.

Administration changes will shortly be announced which will clarify and simplify the claims procedure in addition to promoting the relief the tax credits aspect to SME businesses.

This relief is far wider reaching than most businesses perceive and with the new advanced assurance facility in place will give further comfort to businesses claiming R&D tax relief.

 

Substantial Shareholding Exemption (SSE)

Legislation will be introduced to remove the investing company requirement from the SSE rules. This will increase the number of transactions qualifying for the exemption on the sale of shares.

 

Withholding Tax on Interest

With Brexit around the corner it is not entirely unexpected that we start to see legislation to encourage investment in the UK.

To ease the position for businesses to raise finance the Double Taxation Treaty Passport scheme will extend administrative simplifications which allows access for reduced withholding tax rates on interest in UK treaties with other countries.

In addition there will be an exemption from withholding tax for interest on debt traded on a Multilateral Trading Facility which removes barriers to entry on the UK debt markets.

 

Tax Avoidance

As is custom now at each Budget we see further measures to tackle tax avoidance. Since 2010 HMRC has secured £140 billion in additional tax revenue through tackling avoidance, evasion and non- compliance with the UK’s tax gap being one of the lowest in the world.

  • Promoters of Tax Avoidance Scheme (POTAS) – New rules to ensure promoters cannot organise their business affairs to avoid the POTAS .
  • Tax Avoidance Sanctions and Deterrents – A new penalty is being introduced for a person who has enabled another party to use a tax avoidance scheme which is later defeated by HMRC.
  • Tax Treatment of Appropriations to Trading Stock – The conversion of capital losses into trading losses on appropriations will be removed from 8 March 2017. In future an election under s.161 TCGA1992 can only be made where there is a gain.

Compliance

Image Rights – HMRC will be looking at image rights paid under separate contractual arrangements from employment income, which are popular for sporting individuals. New guidance will shortly be issued to clarify the treatment.

Employers Allowance – HMRC is currently monitoring the allowance as it has come to their attention  businesses have been using avoidance schemes to avoid paying the correct amount of NICs.

 

Budget 2017 – changes we already knew about

Wednesday, March 8th, 2017

Income tax and national insurance

Pre-Budget, we were expecting the personal tax allowance for April 2017/18 to increase to £11,500. The threshold above which you pay tax at 40% is set to rise from £43,000 to £45,000.

The government’s aim is that the personal tax allowance increases to £12,500 per annum during the course of this parliament.

National Insurance Contributions (NI)

The rate is set to remain at 12% for employees but the weekly threshold is due to increase to £157 (£8,164 pa).

ISA limits to increase

Currently, up to £15,240 can be invested in an ISA tax free each year. This will increase to £20,000 from April.

National Minimum Wage

Employers need to ensure they are paying the new or risk penalties. The rates are age-dependent, starting at £3.50 for the apprentice rate. The National Living Wage is £7.50 from April 2017.

Probate fees

Probate fees (or ‘death taxes’ are they are being called) are due to increase from May 2017 and charges will apply on a sliding scale, based on the value of the estate.

Business Rates

Businesses are still looking for some reassurance negating the significant impact of proposed changes due. The new rates come into effect on 1 April 2017.

Corporation Tax

The rate of corporation tax is due to fall to 19% from 1 April 2017.

Buy to Let Landlords

In his Summer Budget 2015, George Osborne announced that tax relief on mortgage interest would be reduced for buy to let landlords who pay tax at the higher rate. The relief will be gradually reduced to 20% phased in from April 2017 to April 2020.

Inheritance Tax

An additional IHT relief on main residence will be phased in from April 2017. This starts at £100,000 per person, increasing to £175,000 in 2020/21. Per couple, this presents a maximum IHT-free estate of £1m when the nil rate band of £325,000 per person is taken into account.

Making Tax Digital

This has been in the news quite a bit recently. Reporting under Making Tax Digital is now due to begin in April 2019.