Tag Archives: budget

Autumn Budget 2017

Highlights

  • No Stamp Duty for first time buyers on homes costing < £300,000
  • Support for more housebuilding
  • Increases to the personal allowance and basic rate band
  • VAT limits frozen for 2 years
  • Support for businesses to cope with business rates revaluation
  • Improvements to R&D tax credits regimes

Autumn Budget 2017

The Chancellor’s Autumn Budget contained some significant announcements and confirmed a number of changes. Our summary provides an overview of the key taxation, business and financial measures announced in the Autumn Budget which could affect you and your business.

You can download our 2017 Autumn Budget Summary for free via the link below. We also have a handy 2017/18 Tax & Rates card which you can also download for free.

For advice on any of the topics covered within the Budget, and how they may have an impact on your business or personal finances, please do not hesitate to contact us on 01872 271655 or via email at enquiries@kelsallsteele.co.uk.

We supply far more than just the traditional tax and compliance services, and can advise on a comprehensive range of strategies designed to maximise your profitability, improve your personal wealth and minimise your tax liabilities.

Dividend Allowance Changes

Podcast: Listen Now

The new dividend tax regime was introduced by former Chancellor of the Exchequer George Osborne. This has only been in place since April 2016, but it is already to be amended in April 2018, following announcements in the Spring 2017 Budget.

Before April 2016, a basic rate taxpayer paid no tax on their dividend income. Only higher rate or additional rate taxpayers paid tax on their dividend income at an effective rate of 25% or 30.6% respectively.

Since April 2016 the first £5,000 of dividends has not attracted any tax liability and dividend income above £5,00 has been taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

In the recent Budget the new Chancellor announced that the tax-free dividend allowance of £5,000 will be reduced by £3,000  to just £2,000 for dividends paid on or after April 2018

So what will this mean to you?

Since April 2016, if you have no other income, you can earn up to £16,000 in dividends (£5,000 dividend allowance + £11,000 personal allowance) and pay no tax. Above this you have to pay divided tax.

But from April 2018, you will only be able to earn up to £13.500 in dividends (£2,000 dividend allowance + £11,500 personal allowance) and pay no tax, subject to the Autumn Budget.

This will mean shareholders will be worse off by £225 a year if they are basic rate taxpayers, £975 a year if they pay higher rate tax or £1,143 a year if they are liable at the additional rate. FOr a couple who share the running of their company, this is doubled to £450, £1,950 or £2,286 depending on the tax rate.

What should you be planning?

Provided your company has sufficient distributable profits, directors should consider accelerating dividend payments before 6 April 2018 to benefit from the current dividend tax-free allowance of £5,000 before it reduces.

If you would like more information on this subject, please get in touch on 01872 271655 or email neil.brittain@kelsallsteele.co.uk

Autumn Statement 2016

Highlights

  • Reduction in corporation tax confirmed
  • New £23bn National Productivity Investment Fund
  • Personal allowance to increase as planned
  • National Living Wage and National Minimum Wage to increase
  • Increase in insurance premium tax
  • Fuel duty frozen again

Autumn Statement 2016

The Chancellor’s Autumn Statement 2016 contained some significant announcements and confirmed a number of changes. Our summary provides an overview of the key taxation, business and financial measures announced in the Autumn Statement which could affect you and your business.

You can download our Autumn Statement 2016 Summary for free via the link below:

For advice on any of the topics covered within the Autumn Statement, and how they may have an impact on your business or personal finances, please do not hesitate to contact us on 01872 271655 or via email at enquiries@kelsallsteele.co.uk.

We supply far more than just the traditional tax and compliance services, and can advise on a comprehensive range of strategies designed to maximise your profitability, improve your personal wealth and minimise your tax liabilities.

Buy To Let Tax Relief

Buy To Let Tax Relief

  • Do you have a buy to let property?
  • Do you have a mortgage on it?
  • Will it still be a long term investment or a millstone around your neck?
  • Will your tax bill be larger than your profit for the year in future years?

Buried in the detail of the Summer 2015 Budget was the announcement that when referring to the letting of residential property, income tax relief for finance costs such as mortgage interest, interest on loans to buy fixtures, equipment and furnishings or fees incurred when taking out or repaying loans will be progressively restricted from 6th April 2017.

So what does ‘’progressively restricted’’ mean? At present any of the above finance costs (but not capital repayments) ranks like any other expense in the letting of the property in order to arrive at the surplus or deficit for the year.

From 6th April 2017 however HMRC will not permit you to deduct the full amount of these finance costs and have introduced the following transitional arrangements:

Buy To Let Tax Deductible

After the deductible element of these costs has been determined, relief for a proportion of the non-deductible costs will be given as a basic rate (20%) deduction in a taxpayer’s income tax liability, of the LOWER of the following three options:

  1. The non deductible finance costs for the year
  2. The profits of the Property business for the year
  3. The taxpayer’s total income after deducting any savings or dividend income to the extent that this exceeds your Personal Income Tax allowance plus Blind Person’s Tax allowance for the year.

The objective of this move is to restrict relief for such finance costs to the basic rate of income tax, and is more likely to affect higher rate and additional rate taxpayers, although basic rate taxpayers could also be worse off because of the way in which relief is given on the lower of the three sums.

Complicated?

Depending on the level of rent received, and of course the finance costs affected, it is possible that with the disallowance of the costs referred to above, your effective rate of tax could be significantly higher than under the present regime.

A 40% taxpayer with £40,000 of rental income but with £30,000 of mortgage interest could from 2020/21 onward effectively have a tax rate of 140% on the actual surplus, simply due to the non-deductibility of the mortgage interest.

This could have a significant effect on your disposable income.

Can you afford to pay a tax bill that is larger than your actual net income from the property?

If you would like further information please contact our Tax Department on 01872 271655, or contact tax manager Martyn Gillingham, email martyn.gillingham@kelsallsteele.co.uk.

Budget Highlights

Further to the Chancellor’s recent Summer Budget, some of the key headlines for our small and medium businesses are as follows:

Corporation tax

  • The Annual Investment Allowance has been set at £200k from 1 January 2016 for an indefinite period, giving businesses a chance to plan their capital expenditure.
  • The rate of corporation tax will be reduced to 19% from April 2017 and to 18% from April 2020;
  • Corporation tax relief will be removed from companies who write off the cost of goodwill purchased on or after 8 July 2015.
  • Dividends paid out of company profits will see a change in the way they are taxed in the recipient’s hands; from April 2016 the dividend tax credit will be abolished and a new dividend tax allowance of £5,000 a year will be introduced. Dividend income above this allowance will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Payroll and National Insurance

  • The annual Employment Allowance for National Insurance Contributions will be increased from £2,000 to £3,000 from April 2016.  However, companies where the director is the sole employee will no longer be able to claim this allowance.
  • The National Minimum Wage (NMW) for employees over 21 will increase from 1 October 2015 to £6.70 per hour; from April 2016 a new National Living Wage (in the form of a premium on top of the NMW) will be introduced for workers aged 25 and above, initially set at £7.20 per hour, it is expected to rise to over £9 by 2020.
  • The personal allowance is set to rise from £10,600 in 2015-16 to £11,000 in 2016-17 and to £11,200 in 2017-18.

Other key proposals

  • Farmers will be allowed to average their incomes for tax purposes over five years rather than two from April 2016.
  • From 6 April 2017, landlords will no longer be able to deduct all of their finance costs from their residential property income, they will instead receive a basic rate deduction from their income tax liability for their finance costs.
  • Rent-a-room relief will be increased from April 2016 from £4,250 to £7,500.
  • Inheritance tax nil-rate band (NRB) will remain frozen at £325,000 until April 2021; with an additional NRB for the main residence if passed to a direct descendant of maximum value £100,000 in 2017/18, rising £25,000 per year until it is £175,000 in 2020/21. This NRB cannot exceed the value of the property, and is tapered away to £nil for estates exceeding £2m in value.  Any unused residence NRB can be transferred to the surviving spouse
  • From April 2017, IHT will be payable on all UK residential property owned by non-domiciles including property held indirectly through an offshore structure.
  • From April 2016, the Government will introduce a taper to the Annual Allowance (the limit of tax relieved pension saving that can be made by an individual or their employer each year) for those with adjusted annual incomes (including their own and employer’s pension contributions) of over £150k;
  • From April 2017, anyone who has been resident in the UK for more than 15 of the past 20 tax years will be deemed UK-domiciled for VAT tax purposes and be liable to UK tax on their worldwide income and assets;
  • Government to consult on improving the effectiveness of IR35 legislation to counter disguised employment.

Summer Budget 2015

Highlights

  • Income tax personal allowance to rise to £11,000 in April 2016
  • New National Living Wage from April 2016
  • Future cut in Corporation tax to 18%
  • Annual Investment Allowance set to £200,000 from Jan 2016
  • Permanent non-dom status abolished from April 2017
  • Employment Allowance increased to £3,000 from April 2016
  • Pension tax relief annual allowance to be reduced from next year

Summer Budget 2015 Summary

The Chancellor’s Summer Budget 2015 contained some important announcements and confirmed a number of changes planned for the new tax year. Following this, we have put together a Budget Summary PDF which contains the latest tax and financial information, which we trust you will find useful.

There is also a handy Tax Data Card for 2015/16, giving details of all the allowances and limits you’ll need to know. You can download both the PDFs for free via the links below:

Summer Budget 2015

Our summary goes into more detail on all of the points raised in the budget, aimed to give you a clearer picture of the announcements and how the changes will affect you and your business. however, as always, if there is anything you would like to discuss, please do not hesitate to contact us on 01872 271655 or via email at enquiries@kelsallsteele.co.uk

Autumn Statement 2014

The Chancellor delivered his Autumn Statement on 3 December 2014. Here is our guide to some of the key points announced in the Autumn Statement 2014.

Personal Allowance and Tax Bands

The personal allowance for 2015/16 was originally scheduled to increase to £10,500 but it was  announced that this will now be £10,600, so the tax free amount will now be £883 per month. If re-elected the Chancellor stated that this would be increased to £12,500 by 2020. The point at which higher rate tax (40%) becomes payable will be £42,385 for 2015/16, meaning that the basic rate band will be £31,785. The Chancellor “promised” that this threshold would increase to £50,000 by 2020. The 45% rate will continue to apply to taxable income over £150,000. Remember that the personal allowance is reduced where the taxpayer’s adjusted net income exceeds £100,000. The reduction is £1 of allowance for every £2 of excess income, resulting in a marginal tax rate of 60%. For 2015/16 this restriction is even wider than before with the increase in personal allowance to £10,600:

Taxable income Marginal rate
£100,000 to £121,200 60%
£121,201 to £149,999 40%
£150,000 + 45%

Transfer of Personal Allowance

As previously announced, 2015/16 sees the introduction of a transferable personal allowance for married couples and civil partners. As the amount that may be transferred is 10% of the basic personal allowance, this will now be £1,060. The recipient must not be liable to tax above the basic rate and is eligible to a tax reduction of 20% of the transferred amount, in other words £212.

ISA Limit Changes in 2015/16

The annual limit for savings in an ISA increases by £240 to £15,240 for 2015/16, but remember that the 50% restriction on cash was removed with effect from 1 July 2014.  For Junior ISAs the limit will increase by £80 to £4,080, the same as the Child Trust Fund subscription limit. There was an important announcement about the treatment of ISA savings on death in the Autumn Statement. It is proposed that the ISA savings will not lose their tax free status on death but, if transferred to the spouse, can be added to their tax free ISA savings.

Corporation Tax Rates

 

Profits     31/3/15(FY2014) 31/3/16(FY2015)
First £300,000 20% 20%
Between £300,000 and £1.5m  21.25%  20%
Over £1.5m 21% 20%

As previously announced there will be a single 20% rate of corporation tax regardless of the level of the company’s profits from 1 April 2015 onwards. Although a 20% rate will generally apply to corporate profits from 1 April 2015, a new “diverted profits tax” charge at 25% will apply to profits that are artificially shifted from the UK to an entity in a low tax country. This is part of a number of measures to counter tax avoidance by multi-national companies. It will be interesting to see if the new measures will bring in additional tax revenue from such companies.

Annual CGT Exemption

This is set to be £11,100 in 2015/16, so is worth a useful £3,108 for higher rate taxpayers for whom the 28% rate applies.

CGT on Non-Residents Disposal of UK Residential Property

Following consultation during Summer 2014, the Government is proceeding with the introduction of a capital gains tax charge from 6 April 2015 on non-residents disposing of UK residential properties. Such individuals will not be able to treat the property as their Principal Private Residence, and thus are potentially exempt, unless there are substantial periods of residence in the property. The proposal is that the individual must spend 90 nights there each year to qualify for the relief, however we await further details.

Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) has often been referred to as a “slab” tax as there are significant increases in the tax payable at the £250,000 and £500,000 price points causing a cliff edge effect and  distortions in the property market. This was particularly relevant around £250,000 as at that purchase price the rate went up from 1% to 3%, which meant £2,500 if the purchase price was £250,000 but an extra £1 meant a further £5,000 SDLT was payable. Where residential property is purchased from 4 December 2014 onwards, the rates will be as follows.

Purchase price SDLT rate  Cumulative
Up to £125,000 NIL NIL
£125,001 – £250,000 2% £2,500
£250,001 – £925,000 5% £36,250
£925,001 – £1,500,000 10% £93,750
£1,500,001 and over 12%

The Government considers that this will create a much fairer system and those buying residential property up to £937,500 will pay less SDLT, about 98% of all purchasers. For example, where the purchase price is £275,000 (the average price of a family home) the SDLT reduces from £8,250 to £3,750.  This is 2% on £125,000 to £250,000 = £2,500 plus 5% on £250,000 to £275,000 = £1,250. The new rules apply to transactions on or after 4 December 2014 but if you’ve already exchanged on a property you’ll have a choice about whether to use the old or new rules.

National Insurance Rates

There will be no increase in the rates of national insurance contributions (NICs) for employers, employees nor the Class 4 rate for the self-employed  for 2015/16, although the thresholds will be increased. Employee contributions will be payable at 12% on earnings between £155 per week and £815 per week and 13.8% employers contributions will start at £156 per week instead of £153 for 2014/15. The £2,000 employment allowance will continue to be deductible from employers’ NIC for 2015/16. The Class 2 NIC weekly contribution for the self-employed increases to £2.80 from 2015/16. As previously announced, from April 2015 employers NIC for those under the age of 21 will be abolished. This exemption will not apply to those earning more than the Upper Earnings Limit (UEL), Employers NIC will be charged as normal beyond this limit. In addition, to encourage apprenticeships there will be no employers NIC payable in respect of wages paid to apprentices under the age of 25 from 6 April 2015.

R&D Tax Credits

In order to further encourage innovation in the UK, the Government has announced an increase in R&D tax relief for the SME sector from 225% to 230% from 1 April 2015. In addition, the credit for larger non-SMEs will be increased from 10% to 11%. An advance assurance scheme for small businesses making their first claim to R&D tax credits will be introduced along with new guidance.

No Tax Relief on Write Off of Goodwill on Incorporation

One of the anti-avoidance measures announced in the Chancellor’s Autumn Statement was a proposal to block the corporation tax deduction for goodwill and other intangibles transferred to a limited company on incorporation. This was potentially available where intangibles were created or acquired by the individual or a partnership after 1 April 2002 and then transferred to a company that they controlled. Furthermore, it will no longer be possible to claim CGT entrepreneurs’ relief against the gains arising on the sale of such assets to the company. Both of these measures will be included in the 2015 Finance Bill and, if enacted, will apply to transactions on or after 3 December 2014.

Relief from Business Rates

Many small businesses will welcome the news that the doubling of Small Business Rate Relief will be extended to April 2016. This means that around 385,000 of the smallest businesses will continue to receive 100% relief from business rates until April 2016, with around a further 190,000 benefiting from tapering relief. High street retailers will be grateful for the increase in the business rates discount for shops, pubs, cafes and restaurants with a rateable value of £50,000 or below, from £1,000 to £1,500 in 2015/16, benefiting an estimated 300,000 properties and helping such small business compete with internet retailers.

Car Fuel Benefit Charge

Employees and directors with company cars and who also have some or all of their private fuel paid for by their employers are subject to the fuel benefit charge – on an all or nothing basis. The benefit charge is determined by multiplying a notional list price by the appropriate percentage for the car, based on its CO2 emissions. The car fuel notional list price will increase from £21,700 to £22,100 with effect from 6 April 2015, notwithstanding the actual fall in fuel prices in the current tax year, so this is another attempt to stop employers providing any private use fuel. For a company car emitting between 121g to 125g CO2 per km the scale charge would be 20% of £22,100 and this would result in taxable fuel benefit of £4,420 and £1,768 income tax for a 40% taxpayer. At 11p per mile the employee would need to drive 16,073 private miles to make having private fuel paid for worthwhile.

Private Use of Company Vans

Where employees are provided with a company van the taxable benefit increases from £3,090 to £3,150 for 2015/16 and there will be an additional taxable benefit of £594 where private fuel is provided by their employer. Note that this charge does not apply to all company van drivers, only those who use the van for private journeys.

Reduction in Company Car Fuel Rates

Not part of the Autumn Statement, but you need to know that some of the rates are reduced from 1 December 2014  (previous rates in brackets where there was a change):

Engine size Petrol Diesel LPG
1,400 cc or less 13p (14p) 9p
1,600 cc or less 11p
1,401cc to 2,000cc 16p 11p
1,601cc to 2,000cc 13p
over 2,000cc 23p (24p) 16p (17p) 16p

The Gov.uk website contains full details of the Autumn Statement 2014 and it’s key announcements. Alternatively feel free to contact Neil Brittain on 01872 271655 or email at neil.britain@kelsallsteele.co.uk should you require any further information or clarification on any of the points detailed in this article.

Budget 2014

Highlights

  • Income tax personal allowance to rise to £10,500
  • Annual Investment Allowance doubled to £500,000
  • New £15,000 ISA, combining cash and stocks & shares elements
  • Retirees granted more power over their pension pot
  • Tax-free childcare of of up to £2,000 for working families
  • 10p starting rate for savings income abolished

Budget 2014 Summary

We have put together a Budget Summary report which you can download for free via the link below. There is also a handy Tax Data Card for 2014/15, detailing all the allowances and limits you’ll need to know:

Kelsall Steele Budget Report 2014Tax_Data_2014_thumb

Our summary goes into more detail on all of the points raised in the budget, aimed to give you a clearer picture of the announcements and how the changes will affect you and your business. however, as always, if there is anything you would like to discuss, please do not hesitate to contact us on 01872 271655 or via email at enquiries@kelsallsteele.co.uk

Autumn Statement – The Key Points

Our guide to some of the key points announced in the 2013 Autumn Statement.

Income tax and National Insurance contributions

Transferable tax allowances for married couples
From 2015-16 spouses and civil partners will be able to transfer £1,000 of their income tax personal allowance to their spouse or civil partner. Couples where neither partner is a higher or additional rate tax payer will be eligible to transfer. The transferable amount will be increased in proportion to the personal allowance.

Employer National Insurance contributions for the under 21s – The government will abolish employer NICs for those under the age of 21 from April 2015, with the exception of those earning more than the Upper Earnings Limit, which is £42,285 a year (£813 per week) in 2015-16. Employer NICs will be liable as normal beyond this limit. This will be legislated for in the NICs Bill currently before Parliament.

Tax exemption for employer-funded occupational health treatments – As announced at Budget 2013 the government will introduce a tax exemption for amounts up to £500 paid by employers for medical treatment for employees. In response to consultation the government will extend the exemption to medical treatments recommended by employer arranged occupational health services in addition to those recommended by the new Health and Work Service.

Income tax relief for qualifying loan interest – From April 2014, the income tax relief for interest paid on loans to invest in close companies and employee-controlled companies will be extended to investments in such companies resident throughout the European Economic Area (EEA).

Social investment tax relief – The government will introduce a new tax relief for equity and certain debt investments in social enterprises with effect from April 2014. Organisations which are charities, community interest companies or community benefit societies will be eligible. Following consultation, investment in social impact bonds issued by companies limited by shares will also be eligible. The government will publish a roadmap for social investment in January 2014.

Venture Capital Trusts (VCTs): changes to scheme – Following a consultation over the summer, investments that are conditionally linked in any way to a VCT share buy-back, or that have been made within 6 months of a disposal of shares in the same VCT, will not qualify for new tax relief. This change will take effect from April 2014. The government will also consult further on potential changes to VCT rules to address the use of converted share premium accounts to return capital to investors where that return does not reflect profits on the VCT’s investments. To continue to facilitate use of VCTs by different types of retail investors, the government will change the VCT rules so that investors can subscribe for VCT shares via nominees

Taxation of pensions and savings

Tax relief on loans to purchase life annuities – Following a consultation launched at Budget 2013, the government has decided not to legislate to withdraw relief for interest on loans taken out to purchase life annuities by people aged 65 or over before 1999.

Announcement of new ISA annual subscription limits – The government will uprate the ISA, Junior ISA and Child Trust Fund annual subscription limits in line with CPI. The 2014-15 ISA limit will be increased to £11,880 (half of which can be saved in a cash ISA). The Junior ISA and Child Trust Fund limits will both be increased to £3,840.

Class 3A voluntary National Insurance – In October 2015 the government will introduce a new class of voluntary NICs to allow pensioners who reach State Pension age before 6 April 2016 an opportunity to top up their Additional Pension records.

Capital gains tax

Capital gains tax (CGT): private residence relief – The government will reduce the final period exemption from 36 months to 18 months from April 2014.

CGT: non-residents – The government will introduce CGT on future gains made by non-residents disposing of UK residential property, from April 2015. A consultation on how best to introduce the new CGT charge will be published in early 2014.

Employee ownership

Employee ownership – Following a consultation launched at Budget 2013, the government will introduce 3 new tax reliefs to encourage and promote indirect employee ownership:

  • from April 2014, disposals of shares that result in a controlling interest in a company being held by an employee ownership trust will be relieved from CGT
  • transfers of shares and other assets to employee ownership trusts will also be exempt from inheritance tax (IHT) providing certain conditions are met
  • from October 2014, bonus payments made to employees of indirectly employee-owned companies which are controlled by an employee ownership trust will be exempt from income tax up to a cap of £3,600 per annum

Share Incentive Plans and Save As You Earn limits – The Share Incentive Plan annual limits will increase to £3,600 per year for free shares and to £1,800 per year for partnership shares. The maximum monthly amount that an employee can contribute to Save As You Earn savings arrangements will increase from £250 to £500. These changes will take effect from April 2014.

Inheritance tax and trusts

Simplification of trusts – Following consultation announced at Budget 2013, the government will legislate to simplify filing and payment dates for IHT relevant property trust charges. It will also introduce legislation to treat income arising in such trusts which remains undistributed for more than 5 years as part of the trust capital when calculating the 10-year anniversary charge. The government will consult on proposals to split the IHT nil rate band available to trusts with a view to delivering this change alongside simplification of the trust calculations in 2015.

Vulnerable Beneficiary trusts – The government will extend with immediate effect from 5 December 2013 the CGT ‘uplift’ provisions that apply on the death of a vulnerable beneficiary and extend from 2014-15 the range of trusts that qualify for special income tax, CGT and IHT treatment. The government will consult further on ways to reform the tax treatment of trusts established to safeguard property for the benefit of vulnerable people.

Inheritance Tax (IHT) online – During 2015-16, HMRC will provide an online service for IHT, reducing administrative burdens for customers and agents.

The Gov.uk website contains full details of the Autumn Statement and it’s key announcements. Alternatively feel free to contact Neil Brittain on 01872 271655 or email at neil.britain@kelsallsteele.co.uk should you require any further information or clarification on any of the points detailed in this article.