7:30pm on Saturday saw the start of a crazy night out away from the office for the team at Numeric Accounting. It was agreed that an 80's Summer Party on board a disco boat with Blue Funnel, out of Ocean Village, Southampton, was definitely worth a go. And it turned out to be a fantastic fun time for everyone.
The evidence has now emerged and please see for yourself:
Now that the 2017 finance act has been published we are happy to confirm the tax rates, bands and allowances to be used for individuals, for the current tax year ended 5 April 2018.
The personal allowance has been increased to £11,500 but as in previous years, the allowance is reduced by £1 for every £2 by which income exceeds £100,000 i.e. those with income of £123,000 or more will loose theirs. The marriage allowance, which allows people to transfer 10% of their personal allowance to their spouse/civil partner as long as the recipient is not a higher or additional rate taxpayer, is therefore £1,150. Claiming the marriage allowance is worthwhile where not to would mean personal allowance is wasted. The allowance give a total £230 saving for the one benefiting.
The married couples allowance (which is not the same thing as the marriage allowance) is available to married couples and civil partners where one or both were born before 6 April 1935. The allowance is set at £8,445, but reduced by £1 for every £2 by which income exceeds £28,000 until it reaches £3,260.
The tax-free savings allowance remains at £1,000 for basic rate taxpayers and at £500 for higher rate taxpayers. Those paying tax at the additional rate do not receive a savings allowance.
The new rules for the taxation of dividends (from April 2016) saw all taxpayers being entitled to a dividend allowance regardless of the rate at which they pay tax. This allowance is unchanged at £5,000, however we now know the plan is to reduce it to £2,000 from 6 April 2018.
Moving on to tax rates & bands for 2017/18 it is worth noting that basic rate income tax remains at 20%, higher rate at 40% and the additional rate is still 45%. For the UK (but excluding Scotland) the basic rate band is set at £33,500 and the additional rate of tax applies to taxable income exceeding £150,000.
Finally dividends in excess of the dividend allowance (above) are still taxed at 7.5% where they fall within the basic rate band, 32.5% at higher rate and 38.1% if within the additional rate band.
Capital gains tax
It is good news all around for CGT with the annual exempt
amount increasing to £11,300 for the tax year ended 5 April 2018. In addition to this the new favourable tax rates remain unchanged at 10% to the extent that total income and gains do not exceed the
basic rate band, and 20% where total income and gains exceed the basic
rate band. Unfortunately the higher
rates of 18% and 28% respectively which apply to gains on residential property remain unchanged also.
If you need advice in this area then we are here to help.
Having completed John O'Groats to Land's End on a bike in 11 days in 2015 in aid of Salisbury Hospice, 2016 was a year off from any serious biking challenges (apart from the odd 100 miler or two!).
2017 is a different story! In just under 2 weeks time I will be embarking on a 4 day 140 mile trek off road through the Lake District, taking in some stunning scenery and seriously challenging climbs (roughly 16,000 feet in total!) and descents over some very rugged terrain that will test both bikes and riders to their limits. This will be done carrying all clothing and gear for the expedition - there is no support vehicle!
The ride is being done in aid of the Yorkshire Cancer Centre Appeal which raises funds for St James's Institute of Oncology (Jimmy's) in Leeds, which provides specialist medical equipment, research and development and patient ‘home comforts’ for cancer patients.
If anyone feels able to sponsor me for the event I will be extremely grateful. You can make a donation via the following Just Giving link. This link also provides a bit more information on the charities and the crazy fools who have taken up the challenge!
Watch out for details of Bournemouth to Paris in aid of Julia's House later this year!
Thanks for your continued support.
During the March budget the Chancellor announced measures to limit the rise in tax-driven incorporation. The £5,000 tax free dividend allowance introduced by George Osborne will now be reduced to just £2,000 from 6 April 2018. Mr Hammond claimed that many smaller owner-managed businesses have incorporated as limited companies mainly for tax reasons. Typically the director/shareholders of such businesses have paid themselves in dividends and paid less tax than similar unincorporated businesses.
Currently, once the dividend allowance has been used the remaining dividends are taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate. There are rumours that these dividend rates may also be increased in future years.
Although the cut in the tax-free dividend allowance is clearly aimed at owner managed companies, it will also impact on those with substantial share portfolios. Mr Hammond reminded us in his speech that the annual ISA investment limit increases to £20,000 from 6 April 2017 and that dividends on shares held within an ISA continue to be tax free.
There are significant changes from 6 April 2017 for workers in the public sector supplying their services via their own personal service companies or other intermediaries.
From 6 April 2017 the public sector employer or agency that engages the worker will have to review the employment status of the worker and decide whether or not to deduct tax and national insurance from payments to the worker even though he or she invoices for the services through their own company.
An online tool called “The Employment Status Service” has been made available by HMRC and can help them make that decision. The tool can be used if the worker uses either an employment agency, or other third-party to get work.
These changes come on top of the restrictions on the tax deductibility of travelling expenses for IR35 workers that came into effect on 6 April 2016.
Please contact us if you want to discuss whether or not these rules affect you or your organisation.
Legislation to introduce Making Tax Digital (MTD) was planned to be included in the Finance Bill 2017, however Theresa May's announcement of the general election for the 8th June has meant it is currently withdrawn until it can be properly debated. The Government is still very much committed to MTD which is still scheduled to start in April 2018 with the first quarterly updates being submitted by the self-employed and property landlords in July 2018.
Many business owners, professional advisor's and the Treasury select committee had expressed concerns about the timescale for the introduction of MTD. The Chancellor therefore announced that there will be a one year deferral in the start date to 2019 for self-employed businesses and property landlords with gross income below the VAT registration limit.
Another way of delaying the start of Making Tax Digital (MTD) would be to change the year end of your business. The proposed legislation currently specifies that MTD will apply to accounting periods commencing on or after 6 April 2018.
This means that if you currently prepare accounts to 30 April then the first quarterly update to be submitted to HMRC will be for the period to 31 July 2018. However, if you changed the accounting date of your business to 31 March then the first quarterly update would be for the period from 1 April to 30 June 2019.
There will be no late filing penalties in the first year of the new system and the deadline for finalising taxable profit for a period will be the earlier of:
• 10 months after the last day of the period of account, or
• 31 January following the year of assessment in which the profits for that period of account are chargeable
Businesses and property landlords with a turnover up to £150,000 will be able to prepare accounts on a cash basis
Digital quarterly reporting for companies and larger partnerships will not be introduced until April 2020. These changes will have a significant impact on how you keep your business accounts and communicate with HMRC and in most cases it is highly recommended that people take on a suitable accounting software package, such as Xero, to get over the hurdle.
Please contact us to discuss the impact of these changes on the way that you keep your accounts and the best possible solution's to help.
During his first Budget on 8th March, new Chancellor Phillip Hammond announced to the world that he would level the playing field between employees and
the self-employed by increasing Class 4 National Insurance Contributions from 9% to 10% from April 2018 and then to 11% from April 2019. In justifying this change he explained that the self-employed are now entitled to more generous State
Benefits than in the past, and thus the NIC rate should be increased towards the
12% Class 1 NIC rate paid by employee's.
was in fact contrary to the Conservative Party manifesto pledge not to raise income tax, national
insurance contributions and VAT during the life of the Parliament and since the announcement the Government
have bowed to political pressure and decided not to proceed with this proposal. However with the next general election set for 8th June we will wait with bated breath for a possible increase shortly after!
announced, flat rate Class 2 NIC contributions, now £2.85 a week, cease on 5
Hopefully your tax return was in by the end of last month! If not, what excuse will you give? Paperwork destroyed in a yacht fire and wasp attack in a car were apparently among the top ten excuses that HMRC received last year to explain late tax returns. Another was 'I could not complete my tax return because my husband left me and took the accountant with him.' Nothing to do with us I should add!!!
The Chancellor has announced that from 6 April 2016 there will no longer be a notional tax credit associated with dividends received and the following rates will apply after a £5,000 tax free dividend allowance (which will be treated as a nil rate band):
- Basic rate taxpayers - 7 ½%
- Higher rate taxpayers - 32 ½%
- Additional rate taxpayers - 38.1%
This will mean that from 2016/17 individuals will be able to receive up to £17,000 tax free:
- Personal allowance £11,000
- Tax free interest £1,000
- Tax free dividends £5,000
A common strategy that we often advise to family company director/shareholders is that they extract profits from their company by way of dividends instead of paying themselves a salary. This is because there are no national insurance contributions on dividend payments and where the dividend income falls within the basic rate band (up to £42,385 for 2015/16) there is currently no income tax on dividends.
Where both husband and wife are directors and shareholders they will be able to pay themselves a salary of £11,000 each for 2016/17 and then dividends of £5,000 each tax free. However the next £27,000 of dividends up to the new £43,000 higher rate threshold would be taxed at 7 ½ % resulting in income tax of £2,025 each being payable for 2016/17. Under the current rules there would be no tax on such dividends up to £42,385.
This measure has been introduced to counter tax-motivated incorporation to level the playing field between trading via a company versus an unincorporated business. Note that dividends received in excess of the £43,000 higher rate threshold will be taxed at 32.5 % but without a notional credit thus increasing the effective rate from the current 25% to 32.5%.
In most cases it is still most tax efficient to draw dividends rather than an increased salary.
As mentioned last month the Chancellor has confirmed the introduction of an additional inheritance allowance that will be available in addition to the current £325,000 nil rate band which will, when fully phased in, allow a couple to pass on the family home tax free up to a value of £1,000,000.
The additional allowance, which will also be transferrable to the surviving spouse, will start at £100,000 for 2017/18. The allowance will then increase to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21.
Unfortunately the Chancellor also announced that the inheritance tax nil rate band will be frozen at £325,000 until 6 April 2021.
The main residence nil band is subject to a taper where the amount being left is more than £2,000,000 with £1 of the family home allowance being lost for every £2 of estate value over £2,000,000. This clawback is based on the value of the estate before reliefs such as business property relief and agricultural property relief and may result in some additional complications and redrafting of Wills.
If this change is likely to affect your family circumstances you may wish to arrange a meeting with us to consider the impact on your family’s inheritance tax position.