Tag Archives: income tax

Dividend Allowance Changes

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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

Tax Return Excuses

Whilst the majority of us manage to submit our tax returns in a timely manner, there are always a number of late filers, and with late filing normally comes an excuse!

HMRC have again released their list all time most bizarre excuses offered by taxpayers who left it a little late in filing their self assessment returns.

This year’s deadline for the completion and submission of your self-assessment tax return is 31st January 2017. Time is fast running out, so if you’ve been putting it off, now is the time to get your accounts in order and submit your tax return to the revenue. Failure to meet this deadline will result in an automatic £100 fine.

HMRC are always open to accept reasonable, legitimate excuses for the late filing of returns, however if you’re thinking of using any of the classic lines on this list, I would think again!

1. My tax return was on my yacht, which caught fire.

2. A wasp in my car caused me to have an accident and my tax return, which was inside, was destroyed.

3. My wife helps me with my tax return, but she had a headache for ten days.

4. My dog ate my tax return…and all of the reminders.

5. I couldn’t complete my tax return, because my husband left me and took our accountant with him. I am currently trying to find a new accountant.

6. My child scribbled all over the tax return, so I wasn’t able to send it back.

7. I work for myself, but a colleague borrowed my tax return to photocopy it and lost it.

8. My husband told me the deadline was the 31 March.

9. My internet connection failed.

10. The postman doesn’t deliver to my house.

*Source: http://economia.icaew.com/en/news/december-2016/the-top-ten-worst-late-tax-return-excuses


Self-employment Business start-ups – FAQ

Self Employment FAQ

Starting-up in business, becoming self-employed, can be a bit of a daunting process, especially if you are not sure of some of the steps you need to go through. There are a few ‘hoops’ you need to jump through so we have put together a few basic pointers for those who are thinking of making that move in self-employment.

We can help you at every step of the way, so please feel free to contact us if there is anything you would like further information on or help with.

  1. Do I need to tell HMRC?
    • You will need to register as self-employed with HMRC and the easiest way to do this is online at gov.uk. Tell them as soon as possible after your self-employment begins.
  2. What will they ask me?
    • Your National Insurance number, address, date of birth and details of the business including nature of the business, date it began trading and your business address. If you have previously registered as self-employed you would have had a 10 digit unique taxpayer reference number. They will ask for this if you have it.
  3. Do I need to register for VAT?
    • You only need to register for VAT when your sales exceed £83,000 in a rolling 12 month period. However, you may wish to voluntarily register to enable you to claim back the input VAT on your expenses. This does mean you have to charge output VAT on your sales so it’s only advisable to voluntarily register if this will not affect your competitiveness e.g. if your customers are VAT registered and can reclaim the VAT you charge them.

Don’t forget that if you become VAT Registered you will need to file VAT Returns online with H M Revenue & Customs. You will need to create a Government Gateway account and register to file VAT Returns online. Make sure you allow enough time for this process before your first VAT Return becomes due!

  1. Do I pay myself a salary?
    • No, the money you draw from your business is not classed as a salary and is not a business expense. You do not pay tax on the money you draw from the business, only on the business profits. You can of course employ other people and pay them a salary which is a business expense.
  2. When do I pay tax?
    • Your first tax return will run from the day you start self-employment up to the following 5 April. Any tax will be due on the 31 January following that e.g. if you start self-employment on 1 June 2016, your first tax return will run to 5 April 2017 and if you have made a taxable profit, you will pay tax on 31 January 2018.
  3. Do I need to register for national insurance?
    • When you register as self-employed you will automatically be registered to pay national insurance. If your income is high enough, you will pay national insurance at the same time as any income tax.
  4. What records should I keep?
    • You need to keep records of your business income and expenditure. This will include bank statements, sales invoices and purchase invoices, details of the entries on your VAT Return and payroll records if you employ people. Keep records for at least 5 years from the 31 January following the tax year e.g. you must keep your records for the year ended 5 April 2016 at least until 31 January 2022.
  5. What happens once I’ve registered as self-employed?
    • HMRC will issue you with a unique taxpayer reference number and send you a notice to complete a tax return. You will need to enter on this tax return all your business income and expenditure to calculate your taxable profit and any tax that may be due. The tax return needs to be filed by the 31 January following the tax year end date (e.g. tax returns for the year ended 5 April 2016 are due to be filed by 31 January 2017).
  6. Aren’t things changing soon?
    • Yes! Over the next few years the Government’s plans to ‘make tax digital’ (MTD) will be rolled out and, depending on the size of your business, you may have simpler rules to follow for reporting your income and expenditure. You will also have to report more regularly, probably 4 times a year. More details will follow as they come through!

Budget 2016


  • Income tax personal allowance to rise to £11,500 for 2017/18
  • Introduction of a Lifetime ISA for under 40’s
  • Abolition of Class 2 NI
  • Reforms to corporate tax losses
  • Reduction in the Corporation Tax rate
  • Changes to Entrepreneurs’ relief

Budget 2016 Summary

The Chancellor’s 2016 Budget 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 2016/17, 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:

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

Marriage Tax Breaks

Marriage Tax Breaks

For those who want to leap into marriage this year (according to an old Irish legend, women are allowed to propose to men on 29th February) there are some financial breaks for taking the plunge:

Marriage Allowance

You may be able to claim marriage allowance to allow you to transfer 10% or £1,060 of your Personal Allowance to your husband, wife or civil partner (in 2016/17 this rises to £1,100). This reduces their tax bill by up to £212 in the tax year. To be of benefit, you as the lower earner should have an income of £10,600 or less.

Capital Gains Tax (CGT)

A couple can pass ownership of assets between them free of tax (unless you separated or didn’t live together at all in that tax year).  And if you are selling assets that would attract CGT, you will be taxed on any gains over £11,100 in 2015/16 but as both spouses have a CGT exemption, assets may be transferred and shared so that effectively a couple can realise gains of £22,200 before CGT is due.

Marriage gifts

If family are feeling generous, there may be no inheritance tax on wedding or civil partnership gifts worth up to £5,000 for a child, £2,500 for a grandchild or great-grandchild and £1,000 to anyone else.  The gift must be given on or shortly before the date of the wedding or civil partnership ceremony.

Inheritance Tax (IHT)

Your estate is exempt from IHT if you left everything to your husband, wife or civil partner (who lives permanently in the UK).  Again married couples and civil partners can give any value of gifts to each other during their lifetime without IHT being due on them.

There are more benefits to being married than you may have thought so maybe consider taking that leap! For more information on any of the points in this article you can contact Clare Vaughan at clare.vaughan@kelsallsteele.co.uk or 01872 271655

Marriage Allowance

Marriage Allowance

For all of those romantics out there who thought the only reason to get married or enter into a civil partnership was for tax reasons, you are in luck.  Registration has now opened for the new Marriage Allowance; a government scheme which will allow some couples to share part of their annual income tax allowance, helping them to save up to £212 a year.

How does the new allowance work?

Couples made up of one non-taxpayer and one basic-rate taxpayer will be able to share some of the non-taxpayer’s unused annual income tax allowance.

In normal circumstances each year, individuals can earn up to a set amount each year without facing an income tax bill. The individual personal allowance for 2014/15 is £10,000, but will rise to £10,600 from April 2015.

Anyone who earns less than that amount (taking into account income from all sources) does not pay any income tax. Under the new scheme, they will be able to transfer up to £1,060 of their unused allowance to their spouse or civil partner as long as he or she is a basic-rate taxpayer. From April 2015, that will mean they qualify if they earn between £10,601 and £42,385 a year.

Can anyone qualify?

Anyone who was born on or after 6 April 1935 and is married (or in a civil partnership) can qualify, as long as they meet the rules on earnings. If one member of the marriage or civil partnership was born before 6 April 1935, they can claim the Married Couple’s Allowance instead.

How much will it save us?

The transfer of unused allowances could save up to £212 a year in the first year.

From April 2015, anything you earn between £10,601 and £42,385 a year will be taxed at 20%. If your spouse or partner earns £7,500 a year, they effectively have £2,500 of their allowance that they are not using. Of this, they can transfer the full £1,060. This increases your tax-free allowance to £11,660, and the 20% saving on that extra bit is equal to £212.

If your partner’s earnings are much closer to £10,600, they can still share the leftover bit of their allowance. Say they earn £10,000; they can give you the remaining £600. In this case you will save £120 a year.

When will we get our tax refund?

The reduction in your tax liability will be reflected every month in your pay packet. The partner who is receiving the allowance will have their tax code altered to reflect their larger personal allowance. If you are employed, you will have less of your earnings taken off you each month before you are paid.

Although you can register now, you don’t need to do so to get the benefit for the full year.

How do I register?

You can register your interest in Marriage Allowance on the HM Revenue & Customs website, HMRC will then get in touch to tell you when you can make a formal claim.

Unfortunately, couples who cohabit rather than are married or in a civil partnership miss out on the allowance, regardless of how much they earn or how long they have been together.

Self Assessment 2014 – don’t miss the deadline!

Self Assessment 2014

Welcome to January – a time for new beginnings, resolutions, dieting and for thousands of people, it is also time for that last minute panic to complete and file their tax return by the deadline of 31 January. And as accountants, don’t we know it!

If you still haven’t gathered together your income and expenditure records for the year ended 5 April 2014 then this does need to be done sooner rather than later. Remember, if H M Revenue & Customs have issued you with a Tax Return, you do need to submit one, regardless of whether you have anything to report on it.

A penalty of £100 per late Return will be charged whether you have any tax to pay or not, and for partnerships, this can prove quite expensive as it is £100 per partner for a late partnership Tax Return plus £100 for each personal Tax Return.

The information that needs to go on your Tax Return would be the following (where applicable):


  • Self employment income, expenses and details of purchases of any capital items relating to the accounts year ending in the 2013-14 tax year;
  • Employment income, tax deducted and any benefits in kind;
  • Pension income and tax deducted;
  • Rental income and associated expenses;
  • Savings income and dividend income and tax deducted;
  • Capital gains from the sale of assets;
  • Total amount of Child Benefit received by you and your partner (including details of the number of children you received the Benefit for)


  • Personal pension and annuity contributions;
  • Interest paid on loans used for a qualifying purpose;
  • Charitable donations made under the Gift Aid scheme.

If you are not sure if you have been issued with a Tax Return or if you need any help at all in completing the Return, please do not hesitate to contact us.

Tax Investigations

Tax Investigations

It’s always a relief to get your Tax Return finalised and submitted to HM Revenue and Customs. We’ve met the deadlines, paid the tax and avoided any chance of being charged with any penalties. Now everyone can relax for a few months before the whole merry-go-round starts again. But can we?

HMRC is coming under ever increasing ministerial pressure to increase tax compliance within each tax year.

This means that when the HMRC have a Tax Return they run automated computer checks that will identify inconsistencies with previous tax returns and other data the Revenue holds.

Warning Signs

The automated checks can raise ‘warning signs’ that might suggest the possibility of tax avoidance or evasion. These warning signs are reviewed by a tax inspector who may decide to launch a tax investigation.

Warning signs can include:

• Over generous expenses claims
• Reduced gross profit margins
• Bigger than usual changes in declared income from one year to the next
• Wages paid to the spouse of the owner that the Revenue might consider inappropriately high
• Sharply increased debtors
• Increased repair expenses

Any – or all – of these items could have a simple explanation and be honest and legitimate declarations. They may have come about because of a change of circumstance to the trading activities or personal circumstances. For example, the failure of a product would lead to a sharply reduced gross profit rate.

Avoiding a tax investigation

It is important to include full and detailed explanations on the Tax Return of any anomalies that may potentially be a warning sign to HMRC. There may be the need to discuss the Tax Return with HMRC at some point, so it is important that you and your Accountant have a clear understanding of the accounts and business activity during the financial year.

If you do not, an investigation may be triggered. It may only start with a simple ‘aspect’ enquiry but that can then lead to a full, lengthy, time-consuming and expensive investigation.

Talk to us about insurance against the costs of such an enquiry and about how best to avoid an investigation in the first place. You can contact the office on 01872 271655

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.