​Inheritance Tax (IHT) is a tax on the estate of someone who’s died – the rate can be as high as 40%.  We each have a ‘nil rate band’ of £325,000.  Married couples and civil partners are allowed to pass their estate to their spouse tax-free when they die and IHT is payable.

Spouses can also pass on their unused tax-free allowance to their surviving spouse. This combined allowance means that when she dies, her estate will only incur Inheritance Tax if it’s worth more than £650,000 (£325,000 + £325,000).

From 6 April 2017, everyone has an additional £100,000 (rising to £175,000 by 2020-21) tax-free allowance to use against the value of their home. Also known as the residence nil rate band.

Broadly speaking, you can only get this additional allowance if they leave your home to your children or grandchildren.  This allowance can also transfer to the surviving spouse if it isn’t used up already.

This means by 2020-21, a married couple could leave a combined estate of up to £1 million without incurring IHT.
The small print is far more complex than this article suggests and more detail can be found on THIS LINK

With new year’s resolutions not that far behind us, it might be well worth reviewing your will to ensure it can take advantage of this new relief.

As always, for help and advice with your business, tax matters or any other questions, please feel free to make contact with me and see what I can do for you.

​The flat rate was introduced to simplify accounting for smaller businesses – you simply pay a relevant proportion of your gross takings to HMRC each quarter and this varies by industry category.  The highest rate is currently 14.5%. 

As reported late last year, life is about to become a whole lot more complicated for businesses that supply largely services of labour where goods (and we are still awaiting the precise definition) comprise:

• less than 2% of their VAT inclusive turnover in a prescribed accounting period
• greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000)

 
So for example as a management consultant you invoice £100,000 per annum plus VAT of £20,000.  The flat rate currently applies is 14% so you pay 14% of £120,000 to HMRC i.e. £16,800.  You retain £3,200.
From 1 April 2017, if you do not meet the ‘goods’ test you would pay £19,800 retaining only £200 – 16.5% is a lot less kind than it first appears.

We do know that goods cannot comprise capital items, food and drink and motoring expenses.

There is of course the option to revert to normal standard accounting from 1 April 2017 but that does add complication to the preparation of VAT returns.

For help or advice concerning VAT and your business or any other accountancy questions you may have, why not contact me via the website?
​
Why not watch my short video below covering the flat rate of VAT?

​This week the Chancellor made his autumn statement – this is the first ‘budget’ since the Brexit vote in June.  

Many ‘think tanks’ had called for stability in the business taxation environment and this has largely been delivered. 



​There are however changes coming in the areas of personal taxation and self employment:

• Increasing the planned the point at which people pay tax (National Insurance has lower thresholds)
• Confirming the abolition of Class 2 National Insurance from 2018
• Stabilising the corporate tax environment and confirming that Corporation Tax will reduce to 17% by 2020
• Reform of the Vat flat rate scheme to include a new 16.5% rate
• An increase in Insurance Premium Tax from 10% to 12%

 
HMRC is to receive further investment to police the National Minimum and Living wages.  There are also likely to be further HMRC activity on the employment status of freelancers.  I will be reviewing my fee protection arrangements over the coming weeks and be communicating them to clients - it's never been more important to have something in place to ease the burden of a tax investigation!
 
Don't forget, this newsletter is designed to draw attention to specific topical issues and is in no way intended to provide advice tailored to your business - advice must always be sought before acting on any item featured.

What's New and What's Changed?

• Personal Allowances & National Insurance

• VAT Flat Rate

• Employing People

​
​The point at which people will pay income tax rises to £11,500 for 2017/18 which is some £500 higher than the current year. 

From April 2016, spouses and civil partners may transfer £1,150 of their personal allowance to each other.  The point at which people pay higher rate tax has risen and will be £45,000 for 2017/18.
 
The thresholds at which people pay National Insurance have not risen as significantly so employees can still expect to pay National Insurance even if there is no tax to pay – this will kick in at £157 per week (£8,164 per annum).  The Employment allowance continues at £3,000.  This excludes single director / employee companies who can't claim it.
 
Class 2 National Insurance continues to be collected as part of the Self Assessment process and will be abolished from 6th April 2018.  National Insurance entitlement will be included in the Class 3 or 4 contributions.  The Chancellor made reference to self employed individuals not paying equal taxes and it now would appear highly likely that the rate of Class 4 National Insurance could increase to 12% to align with employees.
 
There are no changes to the new dividend tax and several references were made to ‘tax driven incorporations’ and ‘disguised employment’ so we can expect to see more HMRC activity in this area.

The government will introduce a new 16.5% rate from 1 April 2017 for businesses with limited costs, such as many labour-only businesses (‘limited cost traders’).  The highest rate is currently 14.5%. 



The definition of a limited cost trader is one whose VAT inclusive expenditure on goods is either:

• less than 2% of their VAT inclusive turnover in a prescribed accounting period
• greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000)

 
Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:
 

• capital expenditure
• food or drink for consumption by the flat rate business or its employees
• vehicles, vehicle parts and fuel (except where the business is one that carries out transport services - for example a taxi business - and uses its own or a leased vehicle to carry out those services)

 
These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.  As there are a number of flat rate clients, more detail can be found at the following link: VAT

​
National Minimum and Living Wages will increase from April 2017. 

Further funding has also been earmarked for HMRC to proactively compliance check higher risk employers. 




​The changes are as follows:
 

• Increase the living wage from £7.20 to £7.50 per hour

• increase the rate for 21 to 24 year olds from £6.95 to £7.05 per hour
• increase the rate for 18 to 20 year olds from £5.55 to £5.60 per hour
• increase the rate for 16 to 17 year olds from £4.00 to £4.05 per hour
• increase the rate for apprentices from £3.40 to £3.50 per hour 

 
There will also be changes made to the way in which things like salary sacrifice schemes work but this will exclude things like pensions and childcare where no changes are envisaged.

A van which is made available to an employee (or a Company Director) is considered by HMRC to be available for private use unless the terms on which the van is provided prohibit its private use and no private use is actually made of it (so it’s a good idea to check employment contracts).
 
This means that the mere prohibition of private use is not in itself sufficient to prevent a tax charge; it is also necessary to show that a van is not used for private motoring.

The charge is nil if both the following requirements are satisfied throughout the year (or part of the year depending on when the van is available to the employee):


• The van must only be available to the employee for business travel and commuting – it must not in fact be used for any other private purpose except to an insignificant extent, and 
• The van must be available to the employee mainly for the employee’s business travel

 
If one of the requirements is not met the charge for 2015/16 is £3,150 and for 2016/17 the benefit increases to £3,170 per van.  There is also a fuel benefit.

 
The word ‘insignificant’ is not defined, so takes its normal meaning of ‘too small or unimportant to be worth consideration’.  Private use is to be considered insignificant if for example an employee who uses a van:


• Takes an old mattress or other rubbish to the tip
• Regularly makes a slight detour to stop at a newsagent on the way to work 
• Calls at the dentist on the way home

 
Private use by an employee that is not insignificant (and would trigger the benefit charge) is for example:


• Using the van to do the supermarket shopping each week
• Taking the van away on a week’s holiday 
• Using the van outside of work for social activities


 
It’s also worth making sure that when an employee has a van its truly a van within the definition as if the vehicle is considered to be a car the likelihood is that it would trigger a much higher scale charge.

For more information on the rules surrounding this or anything else, please feel free to contact me

This is an area which can cause problems for owners of small limited companies.  It’s also going to get a lot more expensive in terms of tax if you do ‘accidentally on purpose’ take too much money.
Sometimes owner / managers of small limited companies ‘forget’ that the money in the company bank account does in fact belong to the company and not to them.  The company must always be able to pay its way including suppliers and its corporation tax bill before things like dividends are declared.  This can sometimes result in quite a detailed calculation each time the dividend is taken.

The lines can become blurred when owner / managers start to ‘use the funds as their own’ for things like the weekly shop, Christmas, and take ‘cash drawings’ when they need it as opposed to when the company can afford it.  If this is the case and there simply aren’t enough funds for the company to pay its way, then a ‘loan account’ is created.  This needs to be paid back (and not drawn back down!) within 9 months of the company’s year end to avoid a whacking 32.5% tax charge on the balance.

For example, you take £5,000 too much from the company and you can’t pay it back – the Company’s Corporation Tax bill is increased by £1,625.  In the event this is repaid to the company at some point then it is refundable but its likely HMRC will want to see evidence of physical repayment like a bank statement.

HMRC have revamped their web pages and the link is attached (unfortunately it still makes reference to the old rate of tax of 25%) For more information follow THIS LINK

For more information or for help with Directors Loan Account issues, please feel free to contact me for more information and assistance.
​

Change is afoot!
 
HMRC plans to ‘reduce’ the burden on SMEs by requiring them to report quarterly on line rather than one lengthy tax return.  A number of consultation documents are currently in circulation and businesses and professionals are being invited to express an opinion.  HMRC have recently released not one but six consultations on the proposals and these can be viewed (including a handy one page ‘myth buster’).  The consultations cover:
 

• Small businesses, the self employed and small landlords
• Bringing tax into the digital age
• Simplifying tax for unincorporated buisnesses
• Cash basis for unincorporated property businesses
• Voluntary pay as you go
• Tax administration

 
I’ll naturally be keeping you up to date with developments in this area but those wanting a sneak preview can view the detail on THIS LINK

• We now know that there will be no emergency budget – the next budget will be the regular ‘Autumn Statement’ on 25 November 2016
• Its becoming increasingly safe to say that retrospective changes to 2016/17 taxation already in place are looking less likely – but never say never so assume it’s ‘business as usual’ until we hear otherwise
• I think its fair to say a ‘new broom is likely to sweep clean’, so depending on how the economy is performing we might see further changes to business taxation to stimulate growth – if you recall last time, the key weapon against recession was the ‘Annual Investment Allowance’ and the reduction in the rate of Corporation Tax
• VAT will continue as normal until we exit the EU.  Despite having the reputation as being an EU based tax, it’s a huge revenue earner for the Treasury and we’re unlikely to see huge ‘give aways’ in this area – many non EU countries have ‘Goods and Services tax (GST)’ which is at similar rates to the UK

 
So for the time being it really is business as usual but I’m sure we will see some changes filtering through later this year.

As always, any questions or concerns to new or existing clients, please contact me and I'll always do my best to answer and help you with your enquiries.

Obviously this may still leave some of you with questions or you might just need some additional information. Here at Nigel Gosrki Consulting, I'm used to taking these calls and advising my clients on the best course of action for them. Please feel at ease to contact me for an informal chat.

If you or your business wish to find out more about Childcare and how it impacts the business financially, or if you have any questions, then why not contact us for a chat?

For small investors the start of the new tax year heralds some good news with some new tax free allowances in addition to any ISA allowances or ISA that income that you may have.
 
Interest:
 
Banks and Building Societies will no longer deduct tax on your interest from 6 April 2016.  Instead, you will receive your interest gross and not pay tax in certain circumstances:

• For basic rate tax payers the first £1,000 is tax free
• For higher rate tax payers the first £500 is tax free
• For additional rate tax payers there is no tax free allowance

 
Interestingly there is no ‘abatement’ of the allowance, so basically if your income is £1 over the basic rate limit, then you receive only the £500 allowance.
 
If you receive significant interest which has previously been taxed, then you need to be prepared to pay the tax and complete a Self Assessment.

Many clients may want to call me for a chat about this, or if you're busy and feel more comfortable, then contact us through the website here.

​Most of the business press has majored heavily on the negative impact of the dividend tax on small family owned businesses and to be fair it is going to be a new tax that some people are not used to paying which will come in one lump sum at 31 January 2018.

The one positive to draw from the new rules if you’re a family owned company is that there is no more ‘grossing up’ i.e. what is drawn goes directly to your tax return without being adjusted upwards from net to gross income which can cause confusion. 


This can be helpful for things like tax credits and drawing a bit more without losing child benefit – as a reminder the thresholds are:

• Personal Allowance £11,000
• The 40% rate starts at £43,000
• Child benefit continues to be clawed back from £50,000 (MORE INFORMATION HERE)
• You start to lose your personal allowance from £100,000

For the smaller investor the first £5,000 can be useful as it is tax free now and will not attract higher and additional rate tax unless dividends exceed this amount.  Any dividends above the £5,000 will be taxed as normal plus the new 7.5% dividend tax.

As usual, if you have any questions about Dividends, or anything else that concerns you, then please call us for a chat, or else contact us via the website here.

​Gift aid is a great way to help charities and donations are topped up by the Government with the charity reclaiming the tax. 

​Any donations made by higher rate tax payers are also subject to additional relief via Self Assessment so its important to keep all of those ‘just giving’ receipts and notes of your direct debits.
 


Conversely given the changes to interest and dividend taxation above there will be people who no longer pay tax.  It’s therefore important to make sure you don’t tick the gift aid box and you review any direct debits as HMRC are quite entitled to come to you and ask for the tax back that the Charity has claimed. 

​This is particularly relevant to retired people who rely on investment income or those taking career breaks – with interest and dividends paid only periodically sometimes it’s too late when you realise that you’ve not paid any tax!

If you'd like to discuss any donations you've made and are interested to find our how this impacts you, then please call for a chat, or contact us via the website here.

From April 2017, there will be 2 new allowances – one for selling goods or providing services and the other for income from property you own.  Both are £1,000 and you can claim both of them.  

It’s important these are not in any way classed as trades.  Here are some practical examples:
 

• Land and property – renting part of your garden or say a spare garage for storage
• Goods and services – selling goods you have made online on websites such as Ebay

 
Technically until 5 April 2017, this income should be declared.  Don’t forget that this also sits over and above the rent a room relief which is currently £7,500, so its fine to have a lodger too within this scheme!  More details can be found by following this link. 

If you have any questions or need to talk to us about your allowances, please give me a call, or contact us through the website

Even the smallest companies must:

• Keep a register of those with significant control over them (the PSC Register);
• Take reasonable steps to identify those who are registrable on the PSC register;
• Enter the required information on the PSC Register and keep that information up to date;
• Make the PSC Register available for public inspection;
• File information about their PSC Register at Companies House on the new annual confirmation statement from 30 June onwards

More details can be found on the Government Website  by clicking here

For our clients who still have questions or concerns about this or any other matter, always feel free to give us a call or if it's easier, contact us here.

The commencement of 2016/17 sees major changes to the PAYE regime and new rules for the following:
 

• Travel expenses
• The abolition of P11D dispensations
• New trivial benefit rules – for employees and company directors

 
Where employees claim travel and subsistence it must only be for a qualifying journey and it cannot include travel to and from a permanent place of work.  This whole area has been subject to HMRC scrutiny over the years and has been further tightened particularly for certain contractors.  Where contractors are working through an ‘umbrella company’ (employment intermediaries) or through their own company where ‘control’ (or IR35) can be demonstrated applying HMRC’s tests the travel expenses to the site where they are contracting can no longer be claimed.
 
For those employees where the journey is ‘qualifying’ the following may be claimed:

If you’ve not got a receipt - one meal allowance per day paid in respect of one instance of qualifying travel, the amount of which does not exceed:
(a) £5.00 where the duration of the qualifying travel in that day is five hours or more;
(b) £10.00 where the duration of the qualifying travel in that day is 10 hours or more; or
(c) £25.00 where the duration of the qualifying travel in that day is 15 hours or more and is ongoing at 8pm.

New rules have been introduced which actually are more generous than the old rules.  An upper limit per benefit (which can include a party or lunch or say a bunch of flowers for a poorly staff member) including VAT of £50 has been introduced.  There is no limit on the number of individual benefits that can be made to employees as long as they’re not family members of directors of a family business (HMRC term this close company).  It’s important these ‘one offs’ are not paid in lieu of employment services and if the single benefit exceeds £50 then it is fully taxable.  Interestingly it appears that non cash vouchers are allowable.
 

​Directors (including family members who are also employees) are subject to an annual cap of £300 including VAT so that’s basically 6 lots of £50.
 
The annual function exemption of £150 per head (Christmas party allowance) still remains – don’t forget you mustn’t go over this or you lose it completely!

If you have any difficulties with these issues of if you have a concern. We're here to help our clients to make sense of these new changes and to provide guidance where necessary.

Call us today, or contact us to discuss your concerns and let us lay them to rest.

Thanks, Nigel.

• Confirming the point at which people pay tax (National Insurance has lower thresholds which are unchanged) from 6 April 2016 rises to £11,000
• Further reducing Corporation Tax to 17% by 2020
• Confirming marriage allowance at £1,100 for 2016/17
• Increasing the ISA limit to £20,000 per annum from 6 April 2017
• Implementing a new Lifetime ISA with a 25% government backed bonus for adults under 40 who save upto £4,000 per annum
• Confirming the Annual Investment Allowance is now permanently £200,000
• The scrapping of Class 2 National Insurance (currently £2.80 per week) 6 April 2018
• Scrapping this year's planned fuel duty increase which should help keep costs down!
• Reducing Capital Gains Tax to 10% for basic rate tax payers and 20% for higher rate tax payers - this does not apply to residential property

I will be uploading a new digital version of my 2016/17 tax card to my refreshed website by 17.00 tomorrow, so you're welcome to download it to your device.  In the meantime the new tax pages feature business and personal tax rates for 2016/17.  Alternatively the tried and tested hard copies will be available later this week!

As always, this newsletter is designed to draw attention to specific topical issues and is in no way intended to provide advice tailored to your business - advice must always be sought before acting on any item featured.

Best wishes
Nigel

If you're in business, then I'm sure you've tuned in already to the  Budget 2016 today. What does it all mean though, I hear you ask! Well here are a couple of nuggets to help explain the budget for business in a little more detail.

​The £200,000 Annual Investment allowance is now permanent.  To recap, this gives up front tax relief for the vast majority of investments made by clients.  Don't forget this applies to vans but not to cars - some 'green' cars continue to benefit from a 100% First Year Allowance. 

​The £3,000 NI employer's NI exemption comes into force from 6 April 2016.  It no longer applies to single director single employee companies and should no longer be claimed.  New travel and subsistence rules also come into force and these will be the subject of my next newsletter.

The living wage commences 6 April 2016.

It's also worth remembering that over the next year or so small employers will be required to provide a pension to the vast majority of employees so the combination of the increase in minimum wage and the impact of the cost of providing pension schemes need to be factored in.  More information is available via the Pensions Regulator's website.  You can also check your staging date by using your PAYE reference.

​The VAT registration threshold will rise to £83,000 with effect from 1 April 2016.

​My software should be updated in the next few days and I'm now taking bookings for 2015/16 tax returns.  Those wishing to have an early view of their tax affairs are welcome to get in touch to book an appointment!

​The point at which people will pay income tax rises to £11,000 for 2016/17 which is some £400 higher than the current year.  This increases to £11,500 from 2017/18.  The Chancellor has continued to increase thresholds for those on the higher rate tax and the point at which higher rate tax will be paid from 6 April 2016 will be £43,000 and £45,000 from 6 April 2017.  The thresholds at which people pay National Insurance have not risen as with employers National Insurance kicking in at £156 per week.  This is very similar for those who are self employed with the point at which the 9% class 4 contributions become due being £8,060.

A new dividend tax commences 6 April and this was the subject of a detailed newsletter a few months ago.  The first £5,000 is tax free and any dividends above this are taxed at an additional 7.5%.  Planning around tax year end and declaring dividends properly and 'not just taking drawings' is critical as this is likely to be an area where HMRC are aggressive.  He also took the opportunity to close the final 'loophole' to manage dividend income by increasing tax on 'directors' loans to 32.5%.

In recent months more and more clients have bought a second property as an investment and are considering more properties.  As a reminder when you let property it needs to go onto your Self Assessment tax return even if you make a loss, as HMRC are getting pretty skilled at spotting let properties!  This also applies to making sure you complete the Capital Gains Section of your tax return when you come to sell it!

There have been subtle changes in the way let properties are taxed over recent years and more are to come:

• Unfurnished Properties - The renewals basis for things like white goods was abolished 6 April 2013 for unfurnished property leaving landlords with no relief against expenditure on things like fridges and cookers (unless built in) - ironically they could be rented and this would be allowable!

• Furnished Properties (remember these properties need to be ready to move into - not just a table and a bed!) - Landlords currently enjoy a 10% wear and tear allowance on rents received. This will be abolished from 6 April 2016 and landlords will only be allowed to claim the actual amount of any items replaced

​

• All properties - at present full tax relief is available for interest on a loan used to fund a property or improvements.  From April 2017, tax relief on property loans (including mortgages on single properties) will be restricted so that by 2020, interest will not be an allowable expense but it will receive tax relief at 20%.  For those people paying 40% with high mortgages some careful planning will be required

• Rent a room - good news here this rises to £7,500 from April 2016

For more information or to see how this may affect you or your business, contact me for details