The following personal allowances will take place with effect from 6thApril 2019:
 

• Personal Allowance £12,500
• Point at which you pay higher rate tax £50,000
• Child Benefit starts to reduce from £50,000
• Point at which you start to lose your Personal Allowance remains at £100,000
• Additional rate tax commences at £150,000
• The point at which Company Directors and Sole Traders pay National insurance rises to £8,632

• Increasing the planned the point at which people pay tax to £12,500 (National Insurance has lower thresholds)
• Increasing Annual Investment Allowance to £1m for 2 years
• Freezing the VAT registration threshold for a further 2 years at £85,000
• Increasing living and minimum wages
• Confirming the planned reduction in Corporation Tax to 17% in 2020
• Confirming major changes to the IR35 regime

​The papers which support the budget often contain far more than what is actually said on the day and it is clear that there will be further consultations on VAT and the implementation of the IR35 changes.
 
I’ve also produced an audio recording of my commentary on the budget!

The new £50,000 does create somewhat of a cliff edge, as at £50,000 earnings you will:

• Pay higher rate tax
• Start to lose your child benefit
• Lose some savings allowance

 
The thresholds at which people pay National Insurance have not risen as significantly so employees and sole traders can still expect to pay National Insurance even if there is no tax to pay. The threshold will be £8,632.
 
Class 2 National Insurance (at £3 a week) will continue to be collected as part of the Self Assessment process and now will continue as the Class 3 alternative would have been costly to low earners.
 
Clients working for large organisations through ‘personal companies’ could see a major change in their taxation from April 2020 as HMRC seek to tax them as being employed rather than as a freelancer.  These rules were piloted within the public sector this tax year and will be rolled out to larger organisations.

The VAT threshold will continue at £85,000 – it is widely anticipated that following the UK’s departure from the EU, a taper system may be introduced for lower turnover businesses to start paying some VAT.

National Minimum and Living Wages will increase from April 2019.  


​The changes are as follows:

• Increase the living wage from £7.83 to £8.21 per hour
• increasing the rate for 21 to 24 year olds by 4.3% from £7.38 to £7.70 per hour 
• increasing the rate for 18 to 20 year olds by 4.2% from £5.90 to £6.15 per hour 
• increasing the rate for 16 to 17 year olds by 3.6% from £4.20 to £4.35 per hour
• increasing the rate for apprentices by 5.4% from £3.70 to £3.90 per hour

 
It is important you review all employees on the payroll to ensure you are compliant.  With ‘RTI’ payroll reporting in place it would be very easy for HMRC to spot non-compliant employers and indeed a number of businesses have already been fined, named and shamed.
 
There were changes to Employment Allowance but these are unlikely to affect most clients. It is vital if you are a single director company that you do not claim this (even if HMRC basic tools or your software allows it)as HMRC are now carrying out compliance checks in this area and are set to collect underpaid National insurance.  ​

I’ve been doing some work with a programme called ADVenture in Bradford which is designed to help businesses under 3 years old with:

• Training
• Funding
• Loans

I’m running a finance course in November but in the meantime if you’re looking to grow, the following link might be useful!
https://www.bradford.ac.uk/management/working-with-business/support-for-business/ad-venture/

Believe it or not the ICAEW’s latest statistics show that 82% of businesses are still logging onto the HMRC gateway to complete their VAT returns with the remainder filing directly from software.  

More worryingly around half of the businesses surveyed by the ICAEW had no idea this was changing.

From 1 April 2019 businesses caught by the rules will be required to:
​

• Maintain their accounting records digitally in a software product or spreadsheet, and
• Submit their VAT returns to HMRC using functional compatible software – i.e. not the gateway

The burning question therefore is, who and what does this apply to?

• Only VAT registered businesses;
• With turnover of more than £85,000 (so if you voluntarily registered this may not apply but you can elect to join in the scheme);
• Your first VAT return period starting on or after 1 April 2019.

 
Once your turnover in the preceding 4 quarters exceeds the £85,000 threshold then you need to join the scheme and if your turnover falls below the limit you don’t exit the scheme.  HMRC have prepared a list of software what is compatible with the new regulations:
https://www.gov.uk/government/publications/software-suppliers-supporting-making-tax-digital-for-vat/software-suppliers-supporting-making-tax-digital-for-vat
 
Income tax and Corporation tax will follow in a year or two’s time.
 
I’ve prepared a short video to help you prepare... See Below.

​The current weekly for 2018/19 is £2.95 and is based on whether profits are at least equal to the small profits threshold of £6,205 and the number of weeks of self-employment in the year.  This is paid alongside your tax bill on 31 January.  

Voluntary contributions may also be paid if profits are below the threshold.  The original plan was to abolish Class 2 National Insurance from April 2019 and potentially merge them with Class 4 which runs at 9% of profits.  Class 4 does kick in at the higher level of £8,424.

There has however been a further announcement made (September 2018) by the Exchequer secretary to the Treasury that the government will not proceed with the Class 2 changes following a review of evidence concerning the impact on self-employed individuals with low profits.  In short, the weekly contributions will continue to be collected as part of your tax return.
 
The fear was that people who are below the threshold who still want to pay the £2.95 would have had to pay significantly more to access Class 3 National Insurance at £14.65 per week.

It’s important to note that the change is 1 April and not 6th April so wages and salaries change before the end of the tax year.  There have been some high profile ‘naming and shaming’ with resultant fines so it’s important to make sure you’re on top of this as you’ll not only have to pay the back pay but you could also be ‘named and shamed’ and be subject to a fine.
 
With increases over the rate of inflation, its also really important that you also check to see if an employee needs to be taken into a pension scheme as the £10,000 trigger remains unchanged which means more people are likely to qualify.  More detail can be found here:
 
http://www.thepensionsregulator.gov.uk/automatic-enrolment-earnings-threshold.aspx
 
April also marks the first time that minimum pension contributions will rise, so it’s important your payroll software or payroll provider is on board.  You’ll also note that you need to budget more for pension contributions.  More information can be found on the link below:
 
http://www.thepensionsregulator.gov.uk/doc-library/increases-in-minimum-contributions-automatic-enrolment.aspx
​

The thresholds at which people pay National Insurance have not risen as significantly so employees and sole traders can still expect to pay National Insurance even if there is no tax to pay.  Contributions start after earnings exceed £162 per week £8,424 per annum which is the amount many directors will pay themselves from 6 April 2018.
 
Class 2 National Insurance (£2.95 per week) continues to be collected as part of the Self Assessment process and will be abolished from 6th April 2019 – not 2018 as originally announced to allow further time to design the new process.
 
The reduction in the nil rate band for dividends to £2,000 (currently £5,000) will be implemented from 6th April 2018.  This will result in a tax charge of an additional £225 per annum for owner managers of small companies.

Not surprisingly it will be frozen at £85,000 for the next 2 years whilst a consultation takes place on what the threshold should really be. 

The current deregistration threshold is £83,000 and will continue to be the case.  Digital taxation for businesses which are VAT registered and trading above the threshold will be implemented as planned in April 2019.

​The changes are as follows:

• Increase the living wage from £7.50 to £7.83 per hour

• increase the rate for 21 to 24 year olds from £7.05 to £7.38 per hour
• increase the rate for 18 to 20 year olds from £5.60 to £5.90 per hour
• increase the rate for 16 to 17 year olds from £4.05 to £4.20 per hour
• increase the rate for apprentices from £3.50 to £3.70 per hour 

 
It is important you review all employees on the payroll to ensure you are compliant.  With the new ‘RTI’ payroll reporting in place it would be very easy for HMRC to spot non-compliant employers and indeed a number of businesses have already been fined, named and shamed.
 
The Chancellor also announced that there will be no benefit in kind for people who charge their electric cars at work and at the same time has made some changes to the taxation of company diesel cars.  He was clear to state this excludes vans.  The cash equivalent where a van is made available to an employee for private use will increase to £3,350 for 2018/19 with the fuel benefit set at £633.
 
The employment allowance continues at £3,000 and it is vital if you are a single director company that you do not claim this (even if HMRC basic tools or your software allows it) as HMRC are now carrying out compliance checks in this area and are set to collect underpaid National insurance.

Over the summer HMRC published some changes to Making Tax Digital which have ben warmly received by the businesses and professionals.
 

The government has said it believes that introducing a new digital tax system is still the right direction to move in.  However, it has made amendments to the businesses this impacts and the timescales for change. The amendments to Making Tax Digital now mean:

• Only VAT registered businesses will need to keep digital records and only for VAT purposes;
• They will only need to do so from April 2019;
• Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020 (the original dates had implementation from April 2019).

This is an area which can cause problems for owners of small limited companies.  With the arrival of the dividend tax it’s becoming increasingly important to document, declare and pay dividends correctly as the timing of these can influence your (and other shareholders’) tax bills.
I might have mentioned before but it really is unacceptable to simply take ‘drawings’ and hope it levels out at the year end!

​​With increasing benefit in kind charges on company cars there has been a move towards people running company vans and taking advantage of lower vehicle and fuel benefits. Here are the details...

​Recently I’ve been prompted to compose a blog post about the service I provide to the County. To say that I was prompted is an understatement. I was press ganged into writing this by two regular clients who you’ll hear from later. So… let’s do this then…

Many reports over the weekend suggested that as we move to an Autumn Budget from this year onwards, that this budget would be a bit of a non event.  With so many changes in the offing already a ‘non event’ would have offered some breathing space however there some new changes which will affect almost every reader in the next year or two!  I’ve therefore decided to pull together a refresher of the changes that we already know about plus the new things announced in the budget:

​

• Increasing the planned the point at which people pay tax (National Insurance has lower thresholds)
• Making tax digital – some relaxation of the timescales
• Corporation Tax reductions to 17% by 2020
• The VAT registration threshold rises to £85,000 from April
• Increasing Self Employed Class 4 National Insurance from 6 April 2018 to 10%, then to 11% in the following year
• Reducing the new £5,000 dividend allowance to £2,000 from April 2018
• 2 new useful allowances for trading and property
• Reform of the Vat flat rate scheme to include a new 16.5% rate – I’ve mentioned this a couple of time already but it is an important change
• Minimum Wage reminder

​Whilst very little was said about it, undoubtedly the biggest area of focus over the next 12 months will be ‘making tax digital’ which will bring a major shift in the way in which we file tax returns and submit data with much tighter deadlines.  This has to date been running very much under the radar but will bring ‘VAT return’ type processes to tax returns to many sole traders and ultimately companies.  My recommendation to sole traders is initially is to start ‘shadowing’ this process during the next tax year and move record keeping to apps and software as its very unclear what free software will be available from HMRC.
 

Personal Allowances & National Insurance
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 2017, 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 and then the increase in Class 4 takes effect.  If you’re self employed and plan to take maternity pay, this new collection process has caused some issues in gaining full entitlement to SMP and it is worth speaking to HMRC early and paying your Class 2 contributions up front.

​Making Tax Digital
 
This is the biggest step change self employed people will have seen for many years.  The new quarterly reporting regime for self employed people earning has been relaxed by 1 year for businesses with sales less than the VAT threshold - £85,000 from 1 April.  This will be the subject of a future newsletter and I will be actively working to prepare clients for the change which will ultimately affect all businesses with sales over £10,000.  As I mentioned above, you should consider shadowing this process with appropriate accounting software.

​A Tale Of 2 Allowances
 
Two useful £1,000 allowances come into force from 6th April:
 

• one for trading and
• one for property income

 
Where the allowances cover all of the income (no expenses are ever allowed) then they you no longer have to declare or pay tax on this income.  In its simplest form if you rent out your garage to someone for £60 a month then this would no longer need to be put on your tax return.  There is quite a bit more to this particularly where people have a main sole trade and a ‘hobby business’ and the detail can be found on the following link HERE

​VAT Flat Rate - Reminder

Announced in the Autumn Statement, a change to the flat rate scheme will come into force 1 April 2017.  This is likely to affect almost 30% of businesses using the scheme.  I have prepared a handy guide to the changes which can be found by watching below or clicking on this link.

HMRC updated their VAT Notice earlier this month and the link can be found here. 

​Minimum Wage Reminder
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.

As always... If any of my clients have any questions, please feel free to contact me or call to discuss your concerns. Or if you like many others are looking for a local and friendly accountant to help you cut through the red tape, I'd love to hear from you.

​Now that the 31 January deadline is over, its only a few weeks until the end of the tax year so now's the time to start planning.

Take a look at the helpful check list below to see what you could do for you and for your business:


​

• Review your pension contributions with your financial advisor, if you’re a higher rate tax payer consider further gift aid payments
• Top up those ISAs to the statutory limit with spare funds
• Consider if Marriage Allowance could be helpful – it could save upto £220 in tax https://www.gov.uk/marriage-allowance/how-it-works
• If you are likely to earn more than £50,000 for the first time this tax year, familiarise yourself with the Higher Income Child Benefit Charge rules https://www.gov.uk/child-benefit-tax-charge/overview
• For company owners, consider the timing of dividend payments to stay within tax bands – remember midnight to 5th April 2017 counts as income for 2016/17
• Consider purchasing plant and equipment for your business to reduce tax liabilities
• Get ready for RTI payroll year end and determine if you need to issue any P11Ds - penalties are unlikely to be waived for late submissions!

As always with the Year End, with Tax, or with any other matter that you think may involve your business, please feel free to get in contact with me via the website.

If you'd like to hear more about the Tax Year End or maybe see the highlights, why not watch my short video below?

​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