Uncategorized
Property Disposal Returns
Sneaking under the radar come the new tax year is the Property Disposal Return. These have been in place for non-resident landlords for a few years now but from the 6th April will affect all UK residential property owners making a disposal of a property that is not their main residence. The tax due remains unchanged ( subject to next month’s budget of course) but will be payable within 30 days of completion along with a Property Disposal Return. This means that where you had 9 months from the end of the tax year in which the disposal was made, tax will have to be paid within a month of the sale!
Back to Deadlines
Back now after a few days in Iceland. Amazing place. Very fortunate to see the Aurora so clearly. Back to VAT returns and everything else I put off until the end of January. Can’t wait!
Tax Planning Topics
Help To Buy ISA
The deadline for opening a help to buy ISA is 30th November. If you are between 16 and 39, don’t own your own home and haven’t yet opened one of these accounts, now is the time to do it.
You have up to 2030 to claim your bonus so don’t miss out. You only need £1 to open one of these accounts that you can claim up to £3,000 in government bonus for up to £12,000 saved.
MTD for VAT
We have now reached the registration dates for MTD for VAT. For VAT periods starting on or after 1st April 2019 all VAT registered businesses over the VAT registration threshold must register for MTD and submit their next return under the new rules.
If you are using software that is MTD ready you will still need to register. If you do not yet have software in place, now is the time to get that organised. It doesn’t have to complicated. You can still use spreadsheets with bridging software and despite all th myths, you will not be sending HMRC all your transaction data, just the same boxes on the returns as previously.
Election 2017: Uncertainly the new norm for business
With so much confusion and uncertainty surrounding the result, at least in the near future, any tax changes are likely to be simple and symbolic. The Tories’ reduced majority puts plans to cut the corporation tax rate to 17% in doubt – Labour and the Greens want to increase it and the SNP has voiced its opposition to any further cuts. The Lib Dems, meanwhile, want to draw the line at 20%.
At least the DUP, potential coalition partners for May’s beleaguered party, have a similar stance on business taxation, with its manifesto calling for a reduction in corporation tax to at least 12.5% in Northern Ireland (something allowed under the Corporation Tax (Northern Ireland) Act of 2015), and cuts in VAT for businesses in the tourism industry.
The VAT rate is another one of those “lockdown” items that would be ripe for review, but given the uncertainty around Brexit and the hugely differing attitudes towards VAT cuts from the different parties, it seems unlikely the rate will move anytime soon.
There is now more uncertainty over taxation than there has ever been. The dropping of so much from FA2017, and with no idea who will be in charge and who will be setting the next budget, it’s impossible to even speculate about sensible tax planning”.
With no party able to command an overall majority in the House of Commons we could have a new Prime Minister within the next few weeks, and could yet face the prospect of another election campaign, potentially as soon as the Autumn. One thing is we can be certain about is that UK businesses shouldn’t be banking on stability any time soon.
Looking ahead: key changes for 2017/18
The start of the new tax year sees the introduction of a raft of changes to tax and business legislation. Here we outline some of the key measures that take effect from April 2017.
Introducing the Apprenticeship Levy
The new Apprenticeship Levy comes into effect on 6 April, as part of a government target to create three million new apprenticeships in England by 2020. The Levy requires larger employers (those with annual pay bills over £3 million) to invest a percentage of their yearly pay bill in apprenticeships.
The government is introducing a new digital account system for such employers, and payments will be taken each month in order to pay training providers.
The Levy is 0.5% of a business’s ‘pay bill’, although an annual allowance of £15,000 is available. Employers are required to report and pay the Levy using the PAYE process. There will only be a need to report on the Levy if the employer:
- had a pay bill of £3 million in the previous tax year; or
- if the employer considers that the pay bill will be over £3 million during the current tax year.
Many businesses will have no liability to pay the Levy, and therefore no reporting requirements. Non-Levy paying businesses will still be required to contribute towards the cost of training their apprentices. However, some concessions may apply.
Changes to ISAs
From 6 April 2017, the new Lifetime ISA will be available to any adult under the age of 40. Individuals will be able to deposit up to £4,000 per tax year, and receive a 25% bonus from the government on any savings put into the account before their 50th birthday.
The tax-free savings and the government bonus can be put towards a deposit for a first home in the UK worth up to £450,000 at any time, from 12 months after having first saved into the account. Should an individual wish to make contributions towards their retirement, the funds, including the bonus, may be withdrawn from age 60 tax-free.
Lifetime ISA holders can also withdraw money before their 60th birthday for other purposes. However, a 25% government charge will be applied to the amount of the withdrawal, along with a ‘small additional charge’.
Meanwhile, from 6 April 2017 the overall annual ISA subscription limit rises from £15,240 to £20,000. Additionally, the annual Junior ISA subscription limit will increase from £4,080 to £4,128.
An individual will only be able to pay into one Lifetime ISA each tax year, as well as a Cash ISA, a Stocks and Shares ISA and an Innovative Finance ISA.
The Pensions Advice Allowance
Following consultation, the government is to introduce a new Pensions Advice Allowance (PAA) from April. First announced in the 2016 Autumn Statement, the PAA will allow individuals to withdraw up to £500 three times a year from their pension pots tax-free, to put towards the cost of receiving regulated retirement advice.
New rules on inheritance tax (IHT)
April 2017 sees the introduction of the new ‘residence nil-rate band’ (RNRB) for each individual, to enable a ‘family home’ to be passed wholly or partially tax-free on death to direct descendants such as a child or grandchild.
The amount of relief will be phased in over four years and will initially be £100,000 in 2017/18, rising each year thereafter to reach £175,000 in 2020/21.
The RNRB may only be used in respect of one residential property which does not have to be the main family home but must at some point have been a residence of the deceased. Restrictions apply where estates are in excess of £2 million.
The RNRB is in addition to an individual’s own nil-rate band and any unused nil-rate band may be transferred to a surviving spouse or civil partner.
Salary sacrifice
From April 2017 the tax and employer national insurance advantages of many salary sacrifice schemes will be removed.
This will mean that employees swapping salary for benefits will pay the same tax as individuals who buy them out of their post-tax income. However, certain benefits will be exempt from the changes. These include: pension contributions and arrangements (including pensions advice); childcare vouchers; workplace nurseries; Cycle to Work schemes; and ultra-low emission cars with CO2 emissions of up to 75 g/km.
Arrangements made before April 2017 will be protected until April 2018. Arrangements put in place for cars, educational fees and accommodation will be protected until April 2021.
VAT flat rate scheme
A new 16.5% rate will be introduced for businesses with limited costs, such as many labour-only businesses. The new rate comes into effect from 1 April 2017, although anti-forestalling provisions are also in force.
A ‘limited cost trader’ is defined as one that spends less than 2% of its VAT inclusive turnover on goods in an accounting period. A firm will also be defined as a limited cost trader if its expenditure on goods is greater than 2% of its VAT inclusive turnover but less than £1,000 a year.
Autumn Statement Lowlights
Chancellor Phillip Hammond has delivered his first (and probably last) Autumn Statement.
Autumn Statement
Brexit – what are the likely implications for business?
The new Secretary of State for Exiting the European Union, David Davis, has recently indicated that formal Brexit negotiations could begin by the start of 2017 – so what could this mean for UK businesses?
It is important to note that in the short to medium term (until 2018 at least), there will not be any changes to tax and employment laws as a result of the vote.
VAT
However, once Britain’s withdrawal is complete, VAT (which is operated in line with EU law) could be subject to some significant reforms. In theory, the UK could even decide to replace VAT with a sales tax on goods and services, although many experts agree that this is highly unlikely.
The UK currently faces restrictions from the EU over its ability to reduce VAT rates on certain goods and services such as domestic fuel and power. If the UK is no longer obliged to comply with the EU VAT Directive, the UK Government could choose to amend the legislation to apply different rates to goods and services without constraint.
If VAT were to be applied to items that were previously exempt, or if there are changes to the rates of VAT, the financial implications for business could be sizeable. Some commentators have also argued that potential changes to VAT law could lead to more obligations and complexities, and business owners may need to invest time and money adapting their procedures and processes accordingly.
Importing and exporting
The potential restrictions on the free movement of goods between the UK and its EU neighbours could also trigger significant changes to how businesses import and export.
For example, currently when a UK firm buys goods from an EU business it makes an ‘acquisition’. The transaction does not result in any VAT being payable – a book entry in a VAT return being the only consequence, unless the UK business makes exempt supplies. However, following Brexit, the transaction is likely to be treated as an ‘import’ and import VAT would be paid to HMRC at the time of importation. Although this would be reclaimed by the business on the next VAT return (unless the business makes exempt supplies), the changes could have implications for the firm’s cash flow.
Business reliefs
Once Britain leaves the EU, the UK Government could have greater control over business reliefs such as R&D tax credits for SMEs, which currently have constraints placed upon them due to EU State Aid rules. Britain may also gain more flexibility over the rules governing the Enterprise Investment Scheme and Venture Capital schemes.
Employment laws
With much employment legislation derived from Brussels, concerns have been raised over whether this is another area that could be open to reform. However, while the UK Government could choose to amend working rights, many experts have suggested that significant reforms are unlikely.
Other regulations
In a recent blog on the Conservative Home website, David Davis suggested that he will seek to cut red tape with the aim of making ‘Britain a better place to do business’. He claimed the ‘regulation already in place will stay for the moment,’ but he added that the ‘flood of unnecessary market and product regulation’ will be halted. With fewer regulations to comply with, this could be good news for business owners.
A new Chancellor, a new economic policy
With a new Prime Minister and Chancellor at the helm, there could be significant changes to Britain’s economic and fiscal policies in the months and years ahead.
The Government has already axed its plans to achieve a budget surplus by 2020, while the former Chancellor George Osborne suggested that corporation tax rates could be cut further to encourage investment. Of course, this may now change following the appointment of the new Chancellor, Philip Hammond, although we will have to wait until the Autumn Statement for further details on the Government’s latest economic strategy.
Property Allowance
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If your allowable expenses against property income is less than £1,000 you can elect to use the property allowance as partial relief against the income. This allows you to deduct £1,000 from your rental income and is beneficial if your costs are minimal. If the property is owned jointly then each of the joint owners can claim the allowance. If your rents are minimal (less than £1,000) then you can claim full relief and may not even need to complete a self assessment return. You can’t create a loss from the property allowance to carry forward but might be worth considering depending on your circumstances.
https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income
This entry was posted in News and Comments, Personal Taxes, Uncategorized.