Tax Strategies 2016/17

Posted on June 22, 2016

Planning for your business

A sound business tax strategy will include such things as:

• making the most of the available incentives, allowances and reliefs
• choosing the most appropriate structure for your business
• claiming tax deductible expenses
• deciding on the best year end date
• minimising your liability to capital gains tax (CGT)
• optimising the roles of family members
• a tax-efficient business exit strategy.

Planning for your personal finances

A good personal tax strategy will focus on helping to ensure that you, your family and your dependents are financially secure in the long term. It will typically include such elements as:

• a tax-efficient remuneration package
• tax-efficient ways to extract profit from your business
• tax-efficient saving and investment strategies
• retirement planning strategies
• estate and inheritance tax (IHT) planning
• tax-efficient gifting strategies.

2016/17 Reminders

Posted on May 11, 2016

6 April 2016 marked the date when a raft of employment tax changes came into force. Existing dispensations for expenses are obsolete. There are new restrictions on tax relief for travel and subsistence expenses under arrangements involving employment intermediaries. The existing rebate for employers with contracted out salary related (defined benefit) pension schemes came to an end, along with the £8,500 threshold that separates lower and higher paid employees for benefit in kind purposes.
The new regime for taxing dividends will apply with an initial £5,000 annual exemption. Lifetime and annual allowance restrictions take effect. The new exemption for trivial benefits comes into force. Employers have until 5 April 2016 to register for payroll online, specifying which benefits to payroll and to which employees receiving those benefits payrolling will apply. There will be a zero rate of employer’s class 1 NICs for apprentices under 25.

May Diary Dates

Posted on April 27, 2016

1 May
Start of daily penalties for 2015 online Tax Return not yet filed. Additional penalties may apply for further delay.
3 May
Submission date for P46 (Car) for quarter to 5 April.
31 May
Last day to issue 2015/16 P60s to employees

New Tax Measures to Consider

Posted on April 27, 2016

A number of key changes to tax legislation have come into effect, following the start of the new tax year. Here we outline some of the measures affecting businesses and individuals.
Business
National insurance for apprentices
6 April 2016 saw reforms to the rules on national insurance, with employers no longer required to pay Class 1 secondary (employer) national insurance contributions (NICs) on earnings paid to qualifying apprentices under the age of 25. This is effected through the new ‘zero rate’ for ‘relevant’ apprentices on weekly earnings up to the Upper Secondary Threshold (UST), which is set at £827 for 2016/17.
The exemption has been largely welcomed by the business community. Dr Adam Marshall, British Chambers of Commerce (BCC) Acting Director General, stated: ‘Abolishing employer contributions will encourage more businesses to hire young apprentices, at a time when the UK is faced with a growing skills shortage’.
Employment Allowance
Additionally, the Employment Allowance for employer NICs has increased from £2,000 to £3,000. However, companies where the director is the sole employee will no longer be able to claim this allowance. The Government hopes the higher allowance will help businesses with the increased costs associated with the National Living Wage (NLW), which came into force on 1 April for workers aged 25 or over and has been set at a rate of £7.20 an hour.
Individuals
The new tax year also heralds a number of additional changes affecting individuals, with significant reforms to savings, pensions and dividends now in effect.
Personal Savings Allowance
From the 2016/17 tax year onwards an estimated 95% of savers will no longer pay tax on their savings income, following the introduction of the new Personal Savings Allowance (PSA). The PSA allows basic rate taxpayers to earn up to £1,000 each year in tax-free savings income (such as interest), while higher rate taxpayers can receive up to £500 before paying tax on their savings income. The PSA does not apply to additional rate taxpayers.
ISAs
Those saving into an Individual Savings Account (ISA) can now benefit from increased flexibility. Under new rules, from 6 April 2016 savers can replace cash they have withdrawn from their ISA account earlier in a tax year without this replacement counting towards the annual ISA subscription limit.
New State Pension
The much-anticipated new ‘flat rate’, or ‘single tier’ State Pension has also now come into effect. The rate of payment has initially been set at £155.65 per week – however, this may vary in accordance with an individual’s national insurance record.
Annual allowance
Meanwhile, from 6 April those with adjusted annual incomes over £150,000 will have their pensions annual allowance reduced by £1 for every £2, down to a minimum of £10,000. In addition, the lifetime allowance has fallen from £1.25 million to £1 million.
Changes to dividends
Other significant changes include the introduction of new rules on the taxation of dividends. The 10% dividend tax credit has been abolished from the 2016/17 tax year onwards, and a new Dividend Tax Allowance of £5,000 a year has been introduced. Dividend tax headline rates have also been reformed: the new rates of tax on dividend income exceeding the allowance will be set at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Personal Tax Planning

Posted on April 27, 2016

You might not have millions stashed away in offshore funds but the fact remains that sensible tax planning within the law remains an important part of your financial planning strategy. By making use of the allowances and reliefs that have been made available, you can remain on course to achieve your business and personal goals. We can help you with this process.

Business Taxpayers Quarterly Reporting

Posted on April 5, 2016

HMRC intend that businesses (corporates, the self-employed and partnerships), and including both trading businesses and landlords, will be required to keep track of their tax affairs online, updating HMRC at least every three months via a digital tax account. The rules will not apply to employees or pensioners unless they have secondary income from self-employment or property of more than £10,000 a year. This requirement will be phased in starting from 2018/19 for self-employed businesses and landlords.
There is little detail as yet as to how this quarterly reporting will operate in practice, in particular, what information will be required, and whether it will fully replace the tax return.
It is not clear whether earlier payments and/or more frequent payments will also be needed in respect of business and rental income, but a discussion paper on this subject issued alongside the Making Tax Digital roadmap sets out HMRC’s initial thinking on this matter. Budget 2016 confirmed that a ‘pay-as-you-go’ option for tax payments will be made available by 2018.

Next steps

We expect there to be further announcements and consultations over the next couple of years as the details of the system evolve. In particular consultation documents are expected to be published in 2016 covering the following:
 Further details of quarterly reporting
 The tax administration framework
 Access to third party data
 Tax payment dates
We will of course keep clients updated as more information becomes available.
 

Chancellor presents a Budget 'for the next generation'

Posted on March 16, 2016

16 Mar 2016
Chancellor George Osborne delivered his eighth Budget to the House of Commons, dubbing it a ‘Budget for the long term’ but warning that ‘the storm clouds are gathering again’.
Having proclaimed that the British economy is ‘fit for the future’ and that the Government remains on course to achieve a budget surplus of £10.4bn in 2019/20, the Chancellor warned that a growing tide of global economic gloom threatens to overshadow the UK.
With low productivity and a weak global outlook continuing to present a ‘dangerous cocktail of risks’, the Chancellor revealed that the Office for Budget Responsibility (OBR) has significantly revised down its economic forecasts for the next five years, with UK economic growth forecast to be just 2% in 2016.
Official figures also revealed that the Chancellor has missed his target to reduce debt as a share of GDP. Borrowing forecasts have been revised upwards to £55.5bn for 2016/17, and the Chancellor announced the need for deeper spending cuts, with £3.5bn of additional savings to be made by 2019/20.
With an EU referendum fast approaching the Chancellor was keen to point out that the OBR’s forecasts were predicated on there being no Brexit, and to share its misgivings that leaving the EU could usher in a ‘period of uncertainty’ for the UK.

Business tax roadmap

The Chancellor revealed a package of business tax measures, announcing that the Small Business Rate Relief threshold will rise from £6,000 to £15,000 from April 2017 and promising further radical changes, with the uprating of business rates set to change from RPI to CPI. Greater London will see the complete devolution of business rates from next April.
In additional measures for SMEs, stamp duty on commercial property has been reduced for lower value purchases with effect from midnight, while corporation tax will see another reduction, reaching 17% by April 2020.

Measures for individuals

Meanwhile, for individuals, building on the recent announcement of a new Help to Save scheme, the Chancellor unveiled a new Lifetime ISA for the under-40s, which will allow individuals to save up to £4,000 a year towards buying a home or financing their retirement, which the Government will top up by 25%.
Other key announcements on personal taxation included the next step in the Government’s drive to increase the income tax personal allowance, which will rise to £11,500 from April 2017, at which time the threshold for higher rate tax will also rise to £45,000.
Capital gains tax rates will also be cut, with the headline rate falling from 28% to 20% and the basic rate from 18% to 10% with effect from 6 April.
Fuel duty will remain frozen for the sixth consecutive year, while tobacco duties will rise above inflation, and from 2018 a new sugar levy on the soft drinks industry will aim to combat the problem of childhood obesity.
Other significant measures include additional investment in the nation’s infrastructure, further measures towards the ‘devolution revolution’ and plans to turn every school in England into an academy.

No Pension Tax Relief Changes

Posted on March 16, 2016

The Chancellor has announced there will be no changes to tax relief on pensions.

Should I incorporate?

Posted on March 6, 2016

Deciding whether or not to incorporate your business is something that is often dismissed as too complicated and not worth the effort. In fact, it isn’t that bad and can lead to tax savings and a greater level of control over your income and the taxes due.
There is paperwork to complete but don’t let this put you off if incorporating your business is right for you. VAT registrations can be transferred and PAYE schemes can be set up and all of this is relatively straight forward.
Deductions
The accounting principles used to prepare accounts should be the same for all businesses but certain deductions may be allowed or disallowed for tax purposes where the business is conducted through a particular medium.
For example, companies are permitted to makes the following deductions, which are or will be restricted for an unincorporated business:

• Interest and finance costs for letting residential property (restricted from April 2017).
• Payments to your pension scheme.

Companies are not permitted to use the cash basis of accounting or fixed rate deductions (also called simplified expenses), which may make a difference to the level of taxable profit.
Administrative costs
The additional costs and hassle involving in running a company should not be underestimated. For example, when operating as a company the business owner will need to:

• Operate separate bank accounts for the company and maintain records of payments made to the business owners.
• Draw-up and submit annual accounts that comply with company law to Companies House.
• Submit an annual return to Companies House, including a filing fee.
• Tag figures in the accounts and tax return to submit both online to HMRC.

A company will normally have to operate a PAYE scheme to report salary and benefits paid to its director(s). This will require monthly RTI reports, unless the directors are paid only annually. As a sole trader or partnership you are not required to operate a PAYE scheme if you have no employees.
Tax reliefs
The following reliefs are perhaps beyond the scope of a typical sole director limited company. Nonetheless they are available and it is worth seeing if there is anything you can take advantage of. The tax reliefs only available to companies include:

• Enhanced reliefs for research and development (R&D tax relief).
• Reduced tax on income from exploiting patents (Patent Box).
• Enhanced reliefs for the creation of films, TV programmes, video games or theatre productions.
• Tax reliefs for investors using the Enterprise Investment Scheme (EIS), or Seed Enterprise Investment Scheme (SEIS) or Social Investment Tax Relief (SITR). SITR is available to unincorporated charities.

Pensions: George Osborne to drop tax relief plans

Posted on March 5, 2016

From BBC News UK