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A review of the changes introduced for the new tax year 2018/2019

17 April 2018 • HMRC News

If you cast your mind back to last March when Chancellor Philip Hammond delivered his Spring Budget, you may recall he made changes to various tax allowances which have now come into effect. Our tax team have highlighted the main changes that may affect you and your business.

Personal Allowance

This year, most tax payers will see an increase in their personal allowance; the basic rate of 20% has risen from £11,500 to £11,850, whilst the higher rate threshold has increased from £45,000 to £46,350.

The point at which higher earners lose their personal allowance entirely has also increased in line with the higher personal allowance.

Class 4 NIC Increase

For anyone self-employed, there is now have a higher threshold for Class 4 NIC’s which sees the income level at which you must pay this class of national insurance increase from £8,164 to £8,424.

Dividend Allowance

From this April, the dividend allowance is dropping from £5,000 to £2,000, allowing shareholders to receive only £2,000 per year as a dividend before paying tax.

Auto Enrolment

For those with employees, several of the new changes introduced include the rise in the living wage to £7.83 and auto enrolment may mean higher costs for your business.

The Government has raised the statutory contribution you as an employer must make to each employees’ pension fund from 1% to 2%. You may also want to factor in that this will increase again to 3% in 2019.

If you want to discuss how these of any of the above might affect you or your business, please do not hesitate to contact one of our tax specialists on 020 7731 6163.

Highlights from the Spring Statement

14 March 2018 • HMRC News

Philip Hammond’s new style of Spring Statement was aimed at making a statement on the health of the economy and not as a forum to announce tax changes or spending announcements. Mr Hammond was keen to stress that the economy had performed better than expected, with a predicted growth of 1.5%, plus the expected reduction in inflation during the coming year should produce real wage growth in 2018/19.

Following his speech yesterday, our tax team here at Warrener Stewart has analysed the information to share any points of interest that might affect SME business owners. Most notably, he used the Spring Statement to announce bringing forward the introduction of the next business rates valuation to 2021, plus assistance to increase production in small businesses. He also spoke about measures designed to eliminate late payment, certainly a welcome intervention for many business owners in light of recent failings like Carillion.

Rather than announcing tax changes the Chancellor did announce the start of several consultation documents to help shape future taxes. Amongst these is the consultation on reducing tax on the least polluting vans, and ways to tackle single use plastic waste. There is also going to be a consultation on the role of cash within our ever-growing digital economy, including looking at continuing with 1p and 2p coins, and £50 notes.

The Chancellor has asked business owners to share their views on whether the £85,000 VAT registration threshold is helping them or creating a burden. Likewise, the government is keen to know what business owners think about their revisions to their proposals on corporate tax for the digital economy. They will also be holding a series of collaborative workshops to review alternative methods of VAT collection.

Commenting on the Spring Statement, Warrener Stewart’s tax director Ryan Lane said; “The main purpose of the Statement seems to have been a reassurance to the country that we are on track and to engage with businesses on their future via the many consultations they announced.”

HMRC introduce new rules on providing pay and tax information over the phone

27 July 2017 • HMRC News

It may be summer and whilst you might not want to cloud your days with thoughts of the frantic rush in January to complete your tax return, as Ryan Lane, head of personal client services at tax specialists Warrener Stewart, cautions new rules mean it might be a good time for some tax housekeeping.

“HMRC has just tightened up on their regulations relating to request from agents like us, for information on taxpayers details of employment income and tax deductions over the phone,” notes Ryan. “This means that we can no longer phone up and request instant information on behalf of clients to assist in the preparation of last minute tax returns.”

Due to a growing number of security issues, HMRC has recently introduced a policy whereby taxpayers may continue to request the information over the phone, however, the data will now be sent directly to the taxpayer by post which could take several days or even weeks.

“January is normally a busy month as people rush to collate all the information needed to submit their personal tax return,” Ryan continues. “With the introduction of these new measures we need to build in additional time, up to at least three weeks, to factor in information requests to HMRC to be able to submit an individual’s tax return if their P60 or P45 documentation has gone astray. Whilst summer is not the most traditional time to think of tax returns, a few moments spent now submitting a request for your 2016/2017 information or sending on the P60 to us now could mean filing on time in January!” 

Stamp Duty Land Tax – Individuals

04 July 2016 • HMRC News, Tax Videos

 

As of 1 April 2016, those acquiring an additional property will need to be aware of higher rates of Stamp Duty Land Tax. Buyers are required to pay 3% on top of the normal bands which can be as high as 15%.

Conditions - There are four conditions for the higher rate to apply for individuals. These include the value of the interest, the number of interests owned including non-UK dwellings and whether the property is going to be a main residence, as the higher rate does not usually apply to replacing your home.

Pitfalls – There are certain pitfalls to try and avoid including:

  • Where a property is bought jointly, if one purchaser is subject to the higher rate tax, the entire transaction will be too. 
  • If the property is purchased by an individual, their spouse or civil partner are treated as a joint purchaser, and each of their interests in dwellings are combined, increasing the potential of the transaction being higher rate.

Multiple transactions - If two or more dwellings are purchased in a single or linked transaction, the buyer could be entitled to Multiple Dwellings Relief. This works out the mean consideration of each dwelling in the transaction and is subject to a minimum rate of tax of 1%. Where six or more dwellings are purchased in a single transaction, the purchaser can choose whether to apply the non-residential rates of SDLT.

Stamp Duty Land Tax - Companies

For Companies, Stamp Duty Land Tax is charged at 15% on residential properties costing more than £500,000.

Where a transaction would not trigger the 15% rate, it will still be subject to the additional 3% even if it is the only residential property that the company owns. There are no special exemptions from the higher rate for companies. This said, the higher rate does not apply to non-residential or mixed use properties, transactions with a consideration of less than £40,000 and caravans, houseboats and mobile homes.

Reliefs - There are SDLT reliefs available from the 15% rate for certain types of properties including rental properties or properties acquired for development, redevelopment or trading. There is no similar relief from the higher rate tax. Tax relief, however, can be clawed back if, for example, within 3 years the use of the property changes from the relief initially claimed or a connected person occupies the property.

Annual Tax on Enveloped Dwellings

This is a daily tax, paid annually, by Companies, at the beginning of the financial year for companies owning residential properties valued at over £500,000. The current valuation date is 1 April 2012 however this will move to 1 April 2017 for the next chargeable year. The charge is dependent on the value of the property, and a return needs to be filed and the tax paid annually by 30 April.

Reliefs - Like with Stamp Duty Land Tax, similar reliefs are available from the ATED charge, however the ATED reliefs are fully changeable. Some properties including hotels, care homes and prisons are not considered dwellings and are exempt.

Charity accounts - know your obligations

25 April 2016 • HMRC News

Recent research conducted by the Charity Commission into the quality of annual reports completed by smaller charities concluded that many smaller charities were not aware of their reporting obligations.

This observation and the commission’s recent research outlined on Gov.uk comes as no surprise to Warrener Stewart’s Gary Chapman, the Fulham based Chartered Accountants includes several charities as clients; “We work with a number of charities completing both audits and independent examinations, together with assisting with financial reporting. For the charity sector it is imperative to maintain clear and transparent financial records. We would be happy to hear from any charities who would like our assistance with their financial reporting obligations.”

The Charity Commission’s research revealed the following findings:

Small charities not up to scratch

The research showed that just under half of the annual report and accounts that were provided to the commission by small charities met a minimum, basic standard. Many small charities do not appear to be aware of their reporting obligations - 1 in 5 sent some other form of report, 1 in 6 did not send the commission any form of report at all, and several small charities only sent their annual report and accounts after the commission had provided further explanation of the requirements to them.

However those charities that use both the commission’s annual report and accounts templates showed a significant improvement on the others, with 71% producing reports and accounts of acceptable quality.

Larger charities are improving

The larger charities report shows their accounts are improving. It tells a more positive story, with over three quarters of charities producing sets of accounts that met a minimum basic standard in 2013-14, up from just over half in 2011-12. Looking at the 3 documents that make up a set of accounts:

90% of annual reports covered either the charity’s purposes and its activities to carry them out or its reserves policy: most included both

90% of independent scrutiny reports were of the correct type, either audit or independent examination, for the charity’s size

93% of accounts met a basic integrity standard and all of the charities that were required to prepare accruals accounts had done so

But some larger charities continue to produce accounts with major flaws

Charities continue to file sets of accounts with the commission with major flaws, such as a chairperson’s statement instead of an annual report, an accountant’s report instead of an independent examiner’s report, or accounts that don’t balance. They also file annual reports that look well-presented but are not transparent about what the charity does, or about how the trustees are dealing with financial risks shown in the accounts.

More charities are talking about the public benefit that their activities provide - but not nearly enough

The public benefit report showed that whilst the number of charities meeting the public benefit requirement has improved, just over 40% of charities in their 2013/14 annual reports compared to just over a quarter in 2011/12, the numbers still need to improve significantly. Meeting this requirement is more than just discussing a charity’s activities. It also requires an assessment of how a charity’s activities have led to benefit for its beneficiaries and a statement that the trustees have had regard to our guidance on public benefit.

Spring Budget 2016 Highlights

16 March 2016 • HMRC News

Today’s Budget Statement introduced a broad range of new measures and changes to the tax landscape.  The headline announcements - and a reminder of the measures coming in from April 2016, April 2017 and beyond - are highlighted below.

Measures introduced from April 2016

Property taxation

From 1 April 2016, the purchase of buy-to-let residential property will attract a 3% surcharge over and above the usual rates of SDLT on purchases of second homes (“additional residential properties”).
In addition, the 10% “wear & tear” allowance is also to be abolished from 6 April.
For commercial property, a new SDLT rate system is to be introduced from midnight tonight.  The first £150,000 will be at 0%; the next £100,000 at 2% and above £250,000 will be 5%.

Tax on Dividends

The major change to the taxation of dividends announced last year will come into effect from 6 April 2016.  The rates of tax applicable to dividend income will increase by 7.5% at all income levels, although this is mitigated to a certain extent by a new £5,000 tax-free allowance for dividends.

Reduction in Capital Gains Tax rates

From 6 April 2016, the rates of Capital Gains Tax will reduce from 18% to 10% for basic rate taxpayers, and from 28% to 20% for higher rate taxpayers.  It is important to highlight, however, that the old rates of 18% & 28% respectively will continue to apply to gains on residential property.  

Loans to participators

The tax payable by close companies on new loans or advances (made on or after 6 April 2016) will increase from 25% to 32.5%, in line will the new tax rate on dividends for higher rate taxpayers.

Pension Allowance

As previously announced the annual pension allowance is to remain at £40,000, however, for those earning more than £150,000 per annum, the pension allowance will be tapered down to a maximum of £10,000 for those earning £210,000 or more.

Entrepreneurs Relief for Investors

Entrepreneurs’ Relief is to be extended for long term investors who subscribe for new shares (after 17 March 2016) in unlisted trading companies and hold these for three years.  There is to be a separate lifetime allowance of £10M available.

Employee Share Schemes

A restriction has been introduced to the CGT exemption on the disposal of ESS shares, acquired after midnight tonight, to a lifetime exempt amount of £100,000.

Proposed measures from April 2017

Property taxation

A restriction on the tax-deductibility of mortgage interest payments for private landlords will be introduced from April 2017 and is to be phased in over four tax years up to 2020/21.

Savings

A new Lifetime ISA is to be introduced for adults under 40 at 6 April 2017.  Individuals will be able to save up to £4,000 per annum and receive a 25% bonus from the Government up to the age of 50.

Corporation Tax 

The corporation tax rate is set to fall to 19% from April 2017 onwards.

In addition, new measures will come into effect from April 2017 onwards applicable to large corporations (i.e. those with profits in excess of £5M per year), restricting the deductibility of losses from earlier years and also the deductibility of interest costs that are allowable. 

Measures for the future

Property taxation

From April 2019, where capital gains tax is due on the disposal of a residential property, payment of the tax will be due within 30 days of completion. This is a significant change from the current Self-Assessment system, under which individuals have up to 22 months until CGT is payable, depending on the time of year of the disposal.

Employment

It is proposed that from April 2018, Employers National Insurance contributions will be payable on termination payments where the amount exceeds £30,000.

National Insurance

From 2018 Class 2 NIC for self-employed will be abolished.  There will be a consultation regarding Class 4 NIC, which are also paid by the self-employed, to consider how to build entitlement to the State Pension and other contributory benefits which used to be covered by the payment of Class 2 contributions.

Corporation Tax

The corporation tax rate is set to fall to 17% from April 2020.  It was previously announced that corporation tax would reduce to 18% from April 2020.

If you would like to explore what today’s Budget Statement could mean for you and your business, please call 020 7731 6163 to talk to one of our tax team. 

 

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