09/21 Introduction of Making Tax Digital for Income Tax for Individuals
The introduction of making tax digital for income tax for individuals has been postponed. It will now commence on 6 April 2024 for businesses and landlords with business income over £10,000 per annum. General partnerships will not be required to join until April 2025, while the date other types of partnerships will be required to join will be confirmed in the future. This was announced by the financial secretary to the treasury to parliament on 23 September 2021.
01/21 Third Self-Employment Income Support Scheme
The deadline for filing a claim for the third Self-Employment Income Support Scheme is 29 January 2021. To make a claim for the third grant your business must have had a new or continuing impact from coronavirus between 1 November 2020 and 29 January 2021, which you reasonably believe will have a significant reduction in your profits. The third taxable grant is worth 80% of your average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £7,500 in total.
03/20 Coronavirus Job retention Scheme
Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months, and can include workers who were in employment on 28 February.
To claim under the scheme employers will need to:
- designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
- HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. Business that need short-term cash flow support, may benefit from the VAT deferral announced below and may also be eligible to apply for a Coronavirus Business Interruption Loan.
09/19 – Domestic Reverse Charge for VAT for Construction Services
HMRC has issued Revenue and Customs Brief 10 (2019) to announce that the introduction of the domestic reverse charge for construction services will be delayed for a period of 12 months until 1 October 2020.
It has become clear that many businesses in the construction industry sector are not ready to implement the VAT domestic reverse charge for building and construction on 1 October 2019.
07/17 – Making Tax Digital for Business (MTD)
The Treasury has announced that businesses will not be compelled to use the MTD system until April 2019, the revised timetable is detailed below:
- ‘only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes;
- ‘they will only need to do so from April 2019; and
- ‘businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.’
05/17 – Making Tax Digital for Business (MTD)
Although the MTD legislation has been put ‘on hold’ until after the general election, The Financial Secretary to the Treasury has confirmed that the government will legislate for the remaining provisions of the finance bill (which includes MTD) at the earliest opportunity, at the start of the new parliament.
The current timetable for the implementation of MTD for businesses is:
- Businesses and landlords with gross income of less than £10,000 will be exempt from the requirements to keep digital records and update HMRC quarterly.
- Businesses and landlords with total gross income in excess of the VAT limit (currently £85,000 from 1 April 2017) will move to digital record keeping from the start of the first accounting period on or after 6 April 2018.
- Businesses and landlords with total gross income between £10,000 and the VAT threshold will begin keeping digital records from the start of their first accounting period starting on or after 6 April 2019.
- Limited companies will not come into MTD for corporation tax until April 2020.
- VAT : From April 2019 all VAT registered businesses (including limited companies) will have to file their VAT returns directly from accounting software. The current online VAT return will cease to be available.
06/16 – Making Tax Digital for Business (MTD)
The way you interact with the tax system is changing. From 6 April 2018 the tax system will become increasingly digital and most businesses, the self employed and landlords will need to use software or apps to keep their business records, and to update HMRC quarterly with these records. HMRC have advised that the underlying tax rules will be simplified to support these changes.
HMRC have published consultation documents aimed at the self employed, landlords and all businesses which are not limited companies. Companies will be covered by a separate consultation later this year. It is envisaged that MTD will come into effect for limited companies from April 2020.
07/2015 – July Budget
The real issue that affects small incorporated businesses is the announcement of the taxation on dividends from April 2016. Whereas currently dividends in the basic rate band are effectively tax free, the change means that dividends in the basic rate band are taxed at 7.5% (after an allowance of £5,000). It seems therefore that for a director/shareholder taking a £35K dividend, he/she will be paying an extra £2,025 in tax. There are also dividend tax rates of 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
Corporation tax will be cut from 20% to 19% in 2017 and to 18% in 2020. Also the annual investment allowance which was due to fall to £25,000 in January 2016 will be set at £200,000 for the life of this parliament. The employment allowance on employers national insurance contributions will increase from £2,000 to £3,000 per annum next year. However single person companies will no longer qualify for this allowance.
The personal tax allowance will increase to £11,000 from 6 April 2016 and the introduction of the new national living wage of £7.20/hr from 6 April 2016.
Rent a room allowance goes up from £4,250 to £7,500 from 6 April 2016.
The new IHT relief for transfer of family homes to lineal descendants will be introduced in April 2017 for deaths on or after that date. It will be phased in starting at £100,000 in 17/18 and rising to £175,000 by 20/21. For a couple, the £175,000 plus the existing £325,000, each, making the £1m maximum quoted by the government. In a welcome move, the relief will be available where a person has sold a main residence in order to downsize or to realise a capital sum, for example to pay for care home fees. The main residence nil rate band can be used against assets in the estate of an equivalent value to the home which was sold. The relief will be tapered away for estates with a net value over £2m.
Buy to let properties – new rules will be phased in which will restrict interest tax relief for higher rate taxpayers who use loans to finance buy-to-let properties. Relief will be restricted to basic rate only, so to 20%, by April 2020. This restriction will be phased in over 4 years, starting from April 2017 and will be legislated in the summer Finance Bill 2015. In April 2016, landlords who let out furnished property will loose the 10% wear & tear allowance, which will instead be replaced by a new system that only allows them to get tax relief when they replace furnishings.
02/2015 – Registration opens for new married couples tax break
Registration for the new Marriage Allowance for married couples and those in civil partnerships opened on 20 February 2015. From 6 April 2015, the allowance can be claimed by a spouse or civil partner who doesn’t pay tax ie is not earning at all or is earning below the basic rate threshold of £10,600 for 2015/16. The allowance works by the eligible individual transfering up to £1,060 of their personal tax-free allowance to a spouse or civil partner, as long as the recipient doesn’t pay more than the basic rate of income tax. Couples can register their interest to receive the allowance online at http://www.gov.uk/marriage-allowance. From April, HMRC will contact those who have already registered for the Marriage Allowance to apply. People can register at any point in the tax year and still receive the full benefit of the allowance.
To transfer part or all of the allowable £1,060 personal allowance, one person in an eligible couple will apply online to transfer the allowance to their spouse or civil partner, HMRC will then amend the PAYE code of the recipient. The new Marriage Allowance results in a tax saving of £212 for the eligible couple (£1,060 at 20%). For a self employed recipient the tax saving would be claimed through their self assessment tax return.
12/2014 – Chancellor’s Autumn Statement
A summary of the changes affecting individuals and small businesses:
Income Tax – personal allowance increased to £10,600 for 2015/16, higher rate threshold to be increased to £42,385 from April 2015. Please also remember the new 0% ‘starting rate’ of tax for savings income for 2015/16 (see 03/2014 below). This means that anyone with total income of less than £15,600 for 2015/16 will not pay any tax on their savings.
Employers and employees – from April 2015 the £2,000 annual NI ’employment allowance’ is extended to households that employ care and support workers.
Stamp Duty – The old rules whereby the rate of SDLT on residential property would be determined by the purchase price of the property and applied to it in full (known as the ‘slab’ system) has been abolished with effect from 4 December 2014. The new rules introduce a banding system whereby the SDLT is determined by the rate applicable to the amount of the overall purchase price which falls within a given band.
Capital Gains Tax – Entrepreneurs Relief (ER) will no longer be available on the disposal of goodwill on transfer of a sole trader or partnership business to a related close company on incorporation. This change has effect for transfers on or after 3 December 2014. Gains will be taxed at the CGT rate applicable for basic or higher rate taxpayers. This change to ER does not affect other CGT reliefs such as hold over relief or gift relief.
Business Rates – Small business rate doubled to 100% for a further year to 31 March 2016 on properties with a rateable value of £6,000 or less. The ‘high street discount’ for eligible retail and food and drink premises such as drycleaners, hairdressers, cafes and shops increased from £1,000 to £1,500 from April 2015 to March 2016.
There are also changes to rules on inherited pensions and transfer of ISA benefit on death. Please contact me if you require any further information on these areas.
09/2014 – New late filing penalties for payroll RTI returns
HMRC have announced that the start date for automatic in-year filing penalties for late submission of an RTI return will be delayed until 6 March 2015 for PAYE schemes that have fewer than 50 employees. The start date for late filing penalties for employers with 50 or more employees is 6 October 2014.
During September, HMRC will send an electronic generic notification notice (GNN) to every employer so each will now when penalties will start for them. The GNN will also outline how the new online appeals system will work.
08/2014 – Abolition of Renewal Basis for Landlords
From 5 April 2013, the tax concession which allowed landlords of unfurnished properties to claim for the replacement of white goods in an unfurnished property has been withdrawn. HMRC have stated that if the white goods are integral in a fitted kitchen then the replacement could be reclaimed as a repair but there is no tax relief for replacing them on a stand alone basis.
This change in policy may come as a surprise to many landlords as they complete their 2013/14 tax returns. Should you have any queries with this please contact me.
07/2014 – Increased ISA Allowance
From 1 July 2014 you can now save up to £15,000 in an ISA for the 2014/15 tax year. To find out more or to top up your cash ISA contact your ISA provider. The new ISA is now called NISA. The ISA limit is increased to £15,240 for the year 2015/16.
06/2014 – Simpler Income Tax – HMRC Cash Basis Scheme
You can use cash basis if you are a small self employed business eg sole traders and partnerships and have a turnover of £81,000 or less a year (this is the threshold when you have to register for VAT). You can start using the cash basis from the 2013/2014 tax year. Limited companies and limited liability partnerships can’t use the cash basis.
Income & expenses under cash basis
With cash basis you only count the money you’ve actually received in a tax year. Any money you are owed isn’t counted until you receive it.
Cash basis doesn’t change the types of expenses you can claim just when you can claim them. You only count expenses that you have actually paid. Money you owe insn’t counted until you pay it.
If your business grows
If you are using the cash basis and your business grows during the tax year you can stay in the scheme up to a turnover of £162,000. Above that you will need to use traditional accounting for your income tax return for the next tax year.
If you have any queries or wish to discuss the cash basis scheme in more detail please contact me.
04/2014 – Employment Allowance & Statutory Sick Pay
From 6 April 2014, some employers can claim the employment allowance to reduce their employer class 1 national insurance contributions (Employers’ NICs) by up to £2,000 each tax year. To determine whether or not your business is eligible please consult the http://www.gov.uk/employment-allowance-up-to-2000-off-your-class-1-nics guide.
Also from 6 April 2014, employers will no longer be able to reclaim Statutory Sick Pay (SSP) as the Percentage Threshold Scheme has been abolished.
03/2014 – Budget 2014: 10% tax rate on savings income abolished
The government has announced in Budget 2014 that from April 2015 it is abolishing the 10% ‘starting rate’ of tax for savings income. From April 2015 the 10% ‘starting rate’ of tax for savings income will be replaced with a new 0% rate. The budget also increased the amount of savings that the new 0% rate applies to, from £2,880 to £5,000. This means that anyone with a total income of less than £15,500 will not pay any tax on their savings. From April 2015, the basic tax-free personal allowance will be £10,500. Non-savings income is always taxed before savings income. So the tax-free £5,000 savings band will only apply if you earn less than £15,000, or if some of your savings income falls into the £5,000 that sits on top of the personal allowance (following Autumn statement in Dec 2014, 2015/16 personal allowance will be £10,600)
12/2013 – Autumn Statement 2013 : overview of tax announcements
Personal Allowance – As announced in Budget 2013, people born after 5 April 1948 will be entitled to a basic personal allowance of £10,000 for 2014/15. The ‘higher rate threshold’ will be £41,865. As the personal allowance will be £10,000 for 2014/15, this means that the basic rate limit will be £31,865. The rates of tax will be confirmed in Budget 2014.
Recognising Marriage in the tax system – From April 2015, a spouse or civil partner who is not liable to income tax or not liable above the basic rate for a tax year will be entitled to transfer £1,000 of their personal allowance to their spouse or civil partner provided that the recipient of the transfer is not liable to income tax above the basic rate. The spouse or civil partner receiving the transferred allowance will be entitled to a reduced income tax liability of up to £200. This will be beneficial where one spouse or civil partner is not using their full personal allowance.
National Insurance – Two reliefs will be particularly welcome to small business employers:
- The New Employment Allowance – This allows employers to deduct £2,000 from the cost of their employers NIC, which can be claimed through the RTI system from April 2014.
- From April 2015 employers will no longer be required to pay Class 1 secondary NIC on earnings paid up to the Upper Earnings Limit to any employee under the age of 21.
Capital Gains Tax – The annual exempt amount will be £11,000 for the year 2014/15, 2015/16 and subsequent years.
Capital Gains Tax Private Residence Relief – Final Period Rule – The final period exemption applies to a property that has been a person’s private residence at some time even though they may not be living in the property at the time they dispose of it and they may be claiming private residence relief on another property at the same time. From 6 April 2014 the final period exemption will be reduced from 36 months to 18 months.
Business Rates – Business Rates have featured prominently in the Autumn Statement.
- The RPI increases in business rates in 2014/15 will be capped at 2%
- Small Business Rate Relief (SBRR) is currently doubled, so allowing 100% relief from business rates. The doubling of this relief was due to end in April 2014, but it is now being extended until April 2015.
- For 2014/15 and 2015/16, there will be a discount of £1,000 off business rates bills on retail premises which have rateable value up to £50,000.
- From 1 April 2014, business rates bills can be spread over 12 months rather than the existing 10 months.
- There are also other reliefs which include small businesses currently receiving SBRR which want to expand by taking on additional property and 50% discounts from business rates for occupants of previously empty retail property for 18 months.
Community Amateur Sports Clubs (CASCs) – The CASC regime is being reformed. The rules for which clubs qualify and the related record keeping are being tightened up. In addition, from April 2014 donations by companies of gifts of money to CASCs will be eligible for corporate Gift Aid.
Partnerships Review : Partnerships with mixed membership – The government has announced 5 measures to help tackle tax avoidance which have immediate effect. These measures include a partnerships review which will affect mixed membership partnerships where partnership profits are allocated to a non-individual partner in circumstances where an individual member may benefit from those profits. A second review will affect cases where partnership losses are allocated to an individual partner.
10/2013 – HMRC Let Property Campaign
HMRC has launched a campaign to get people with undeclared rental income to come forward. This is the latest in HMRC’s programme of campaigns, or disclosure opportunities. These are designed to encourage voluntary disclosure : the obligation is on the taxpayer to come forward and meet their obligations by a set deadline. The campaigns offer a carrot and stick approach: the best available terms for those who come forward, but a tough approach to those who do not.
HMRC will use information it holds about property rental in the UK and abroad, along with information already held on HMRC’s digital intelligence system Connect, to identify people who have not paid what they owe. Those that don’t come forward could get a penalty of 100% of the tax due and a possible criminal prosecution.
From next year, HMRC may contact any landlord that it thinks has not declared all their rental income. Those contacted will not then be able to make use of the opportunity offered as part of this campaign.
Further information on the scheme will be posted as and when it is published by HMRC.
07/2013 – MY TAX RETURN CATCH UP
HMRC are offering you a quick and straight forward way to bring your tax affairs up to date. This campaign is for you if HMRC have sent you a Self Assessment tax notice or tax return for any year up to 2011-12 and you have not yet taken any action. By taking part you will receive the best terms available.
To take part in My Tax Return Catch Up there are three easy steps:
- first, tell HMRC that you want to join the campaign
- next, complete and submit all your outstanding returns
- and finally, pay what you owe or claim a repayment that might be due.
Once you have notified HMRC that you want to take part in this campaign, you will need to complete and submit your tax returns by 15 October 2013. If you require any further information on the scheme or would like help completing and submitting your returns please contact me.
06/2013- SUBMISSION UNDER REAL TIME INFORMATION (RTI) REPORTING
HMRC has announced on 13 June 2013 that its concession to relax the strict timing of submission under Real Time Information (RTI) reporting will now be extended until April 2014.
Under the terms of HMRC’s relaxation arrangements employers are able to make submissions under RTI when they complete their main payroll run, providing that is on or before the last day of the tax month (5th). See 03/2013 ‘RTI Rules Relaxed’ below for further information on the relaxation.
03/2013 – BUDGET MARCH 2013
New Employment Allowance – The Chancellor announced, at the end of his speech, what he described as the largest tax cut in the Budget: an employment allowance for businesses and charities. From April 2014, all businesses and charity employers will be able to offset an annual allowance of £2,000 against their Employer’s Class 1 National Insurance contributions liability. The employment allowance is intended to be simple to administer and will be delivered through HMRC’s RTI system. It is envisaged that the £2,000 allowance will be deducted from each month’s NIC liability until the allowance is used up. The scale of the allowance means that 450,000 of the UK’s small businesses will no longer pay any employer NICs. The detail will reveal whether this allowance is tax free or whether the chancellor will clawback some of his gift through corporation tax or income tax for unincorporated employers.
Budget Changes to Personal Tax Allowances – The Chancellor announced that the basic income tax personal allowance will be £10,000 in the tax year 2014/15 ie from 6 April 2014. The 2013/14 basic allowance will be £9,440, as previously announced. As announced in the 2012 Autumn Statement, the higher rate income tax threshold, which equals the sum of the personal allowance and the basic rate limit, will be increased by 1% to £41,865 in 2014/15. Therefore the basic rate limit will be £31,865 in 2014/15.
Corporation Tax – From April 2015 there will be just one rate of corporation tax in the UK, 20%. The main rate of corporation tax from 1 April 2013 is 23%, the main rate from 1 April 2014 will be 21% as announced in the Autumn statement and the main rate from 1 April 2015 will be 20%. the Small profits rate for companies with profits up to £300,000 will remain at 20%.
Simpler Income Tax For Small Businesses – From 2013, unincorporated businesses with income below the VAT threshold will be able to pay income tax based on their income actually received less their expenses. The cash basis will be compulsory for anyone who claims universal credit. The draft legislation with more details of the scheme will be published in the Finance Bill 2013 on 28 March 2013.
Budget tax data cards confirming all the rates and allowances for 2013/2014 will be sent out to clients shortly.
03/2013 – RTI RULES RELAXED FOR SMALL EMPLOYERS
HMRC announced on 19th March a relaxation of Real Time Information (RTI) reporting arrangements for small businesses in the first six months of the new system. HMRC says: ‘ Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC on the date of their regular payroll run but no later than the end of the tax month (5th).’ This may help small, owner managed business who operate their own weekly payroll, during periods when the owner is away on holiday and is unable to submit a weekly return. Please remember that this relaxation is only valid until 5 October 2013, after which RTI returns must be made on or before the date the employee is paid. HMRC has announced on 13 June 2013 that this concession will be extended until April 2014.
02/2013 – PAYE REAL TIME REPORTING (RTI)
From 6 April 2013 employers must start sending PAYE information to HMRC in real time. This means sending details to HMRC electronically every time you pay an employee, at the time you pay them.
If you run your own payroll system, you need payroll software that is ready for RTI in order to send your PAYE information to HMRC online, every time you pay an employee. You can do this in three ways:
- Using commercial payroll software, upgrading your existing software if necessary (your provider can advise on this).
- Using a payroll service provider, such as an accountant or payroll bureau, who will do it for you.
- If you employ nine or fewer people, you can use one of the free payroll software packages or HMRC’s free Basic PAYE Tool.
You need to get prepared by making sure you hold accurate and up-to-date information about all your employees (name, date of birth, gender, address and valid national insurance number). If you are planning to submit the returns yourself, you need to register for PAYE Online to get your PAYE login details.
Should you have any queries with RTI filing or wish to discuss the different options for submitting the returns, please do not hesitate to contact me.
12/2012 – AUTUMN STATEMENT SUMMARY
Personal Tax Allowances – The Chancellor announced a further increase to the allowance for 2013-14 of £235 to that previously planned. The personal allowance from April 2013 is now £9,440.
As expected, higher rate taxpayers will not benefit from the full amount of the increased allowance as the higher rate threshold will again be lowered. From April 2013 the higher 40% tax rate threshold will reduce from £42,475 to £41,450.
Corporation Tax – The main rate of corporation tax will fall from 24% to 23% from 1 April 2013 and to 21% from April 2014. The small companies tax rate for profits up to £300,000 remains at 20%.
Annual Investment Allowance – The annual investment allowance for all qualifying investments in plant and machinery made on or after 1 January 2013 will increase from £25,000 to £250,000 for 2 years.
Pension Contributions – From April 2014 the annual allowance of pension contributions that can be made tax free will reduce from £50,000 to £40,000. The lifetime allowance for pension contributions will also reduce from £1.5m to £1.25m.
Shares in return for reduced employment rights – The chancellor announced that a new capital gains tax-free share scheme is intended to come into effect in April 2013. Draft legislation is expected to be published on 11 December 2012.
Small Business Rate Relief – The temporary doubling of the small business rate relief in England will be extended for a further 12 months from 1 April 2013.
09/2012 – CHILD BENEFIT INCOME TAX CHARGE – Legislation has been introduced that imposes a new charge on a taxpayer who has adjusted net income over £50,000 in a tax year, where they, or their partner, is in receipt of Child Benefit for the year. This will have effect from 7 January 2013. If both partners have adjusted net income over £50,000, the partner with the higher income is liable for the charge.
The income tax charge will apply at a rate of one per cent of the full Child Benefit award for each £100 of income between £50,000 and £60,000. The charge on taxpayers with income above £60,000 will be equal to the amount of child benefit paid.
Individuals with net taxable income of £50,000 or more will shortly receive a letter from HMRC explaining the Child Benefit income tax charge and Child Benefit claimants will be able to decide not to receive Child Benefit if they or their partner do not wish to pay the new charge. If this affects you it is important to make a claim for the child benefit, even if you decline to receive it, as the claim can help entitlements to the state pension for a non-working parent and ensures the child receives a NI number. More information is available here
If you are affected by the High Income Benefit Charge, there is also a link on my ‘Clients’ page if you wish to submit an online application not to receive Child Benefit payments.
03/2012 – BUDGET 2012 – The Chancellor delivered his budget speech on Wednesday 21 March 2012. A couple of points to note for small businesses and individuals. Although the main company tax rate has been reduced to 24% from 1 April 2012, the small profit rate (for profits up to £300,000) remains at 20% for the financial year commencing 1 April 2012.
The increased personal allowances announced in the budget take effect from 6 April 2013, the 2012/13 personal allowance remains at £8,105 (2013/2014 £9,205).
Following a review of small business tax, the Government will introduce a new cash basis for small unincorporated businesses from April 2013. This is likely to apply to any business that is below the VAT registration threshold. Details can be viewed here.
The Goverment has also announced that it will be commencing a consultation on introducing a disincorporation relief, which may be attractive to some small companies.
11/2011 – Intracom VAT Registry Scam – HMRC is aware of a new scam requesting payment to register on the Intracom VAT registry. In this case a newly incorporated company receives a fraudulent letter asking it to pay £320 by credit card to register on the ‘Intracom VAT Registry’. The form and style of the letter suggests to the recipient that it has the official backing of the UK or EU tax authorities. There is a link on the client page to a section of the HMRC website where further examples of current dodgy dealings can be viewed.
10/2011 – Clients are still receiving bogus emails promising tax refunds. These bogus emails are sent in an effort to get your bank account details. Please be aware of these bogus emails and delete them. HMRC will never contact you by email regarding tax refunds.
10/2011 – The Annual Investment Allowance (AIA) enables businesses to claim full tax relief on most plant and expenditure in the year it is incurred. the AIA is reducing from £100,000 to £25,000 from 1 April 2012 for businesses within the charge to Corporation tax and 6 April 2012 for businesses within the charge to income tax. Regardless of your end date the change of the AIA in 2012 may affect the tax relief available on any large plant & machinery purchases. Please contact me to discuss this matter further.The