Tax Calendar

The following Tax Events are due on 19th July 2017:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th April 2017 to 5th July 2017.

This deadline is relevant to small employers and contractors only. As a small employer with income tax, national insurance and student loan deductions of less than £1,500 a month you are required to make payment to HMRC of the income tax, national insurance and student loan deductions on a quarterly basis.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

PAYE Student loan and CIS deductions due for the month to 5th July 2017.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions. Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.  

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

Class 1A NIC due for 2016/17.

This deadline is relevant for employers who have provided their employees with benefits for 2016/17. These benefits should have been reported by the 6th July and the amount of the Class 1A employer only NI liability due calculated on the form P11D(b).

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. Interest will be charged if payment is made late. Penalties may also apply. 

We have a Tax Calendar on our website so you never miss a deadline to see future deadlines please visit our calendar 

New £10 Note

New £10 Note

It has recently been revealed that the new £10 note will have the face of the famous writer Jane Austen featured on the front.

Production of the new note began last August, however it is due to be launched on the 200th anniversary of Jane Austen’s death, July 18th, and all notes are to be issued during September 2017.

The current £10 note is the oldest Bank of England bank note which is currently still in circulation and, due to developments in technology, the security features can now be updated.

New features

The new note will be made of the same polymer materials as the £5 note.

It will be slightly bigger than the polymer £5 note, however it will be smaller than the current £10 note that is still in circulation.

The polymer notes are being introduced as they are cleaner, more secure and also much more durable than the old notes.

There has been no date released for when the old £10 notes will leave circulation, however I am sure that this will be announced closer to the time.

Over 20 countries currently issue polymer banknotes which include Australia, who introduced them in 1998, New Zealand, Mexico, Singapore and Canada who introduced them in 2011.

September 2017 is nearly upon us, so just bear in mind that these new notes will be replacing the old notes shortly.

For more information please see The Bank of England website here or contact us.

Jessica Cooper, Accounts & Tax 

New Lifetime ISA

The Lifetime Individual Savings Account (ISA) is a longer term tax-free account that receives a government bonus. The accounts will be available from today (6 April 2017). HMRC have produced a helpful guide on the account. Some of which is reproduced below:

Opening a Lifetime ISA

You can open a Lifetime ISA if you’re aged 18 or over but under 40.

As with other ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within your Lifetime ISA.

Saving in a Lifetime ISA

You can save up to £4,000 each year in a Lifetime ISA. There’s no maximum monthly savings contribution, and you can continue to save in it until you reach 50. The account can stay open after then but you can’t make any more payments into it.

The £4,000 limit, if used, will form part of your overall annual ISA limit. From the tax year 2017 to 2018, the overall annual ISA limit will be £20,000.

Example – you could save:

£11,000 in a cash ISA

£2,000 in a stocks and shares ISA

£3,000 in an innovative finance ISA

£4,000 in a Lifetime ISA in one tax year.

Your Lifetime ISA won’t close when the tax year finishes. You’ll keep your savings on a tax-free basis for as long as you keep the money in your Lifetime ISA.

Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.

Government bonus

When you save into your Lifetime ISA, you’ll receive a government bonus of 25% of the money you put in, up to a maximum of £1,000 a year.


You can withdraw the funds held in your Lifetime ISA before you’re 60, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw.

A withdrawal charge will not apply if you’re:

using it towards a first home

aged 60

terminally ill with less than 12 months to live.

If you die, your Lifetime ISA will end on the date of your death and there won’t be a withdrawal charge for withdrawing funds or assets from your account.

Transferring a Lifetime ISA

You can transfer your Lifetime ISA to another Lifetime ISA with a different provider without incurring a withdrawal charge.

If you transfer it to a different type of ISA, you’ll have to pay a withdrawal charge.

Saving for your first home

Your Lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.

You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your Lifetime ISA provider.

If you’re buying with another first time buyer, and you each have a Lifetime ISA, you can both use your government bonus. You can also buy a house with someone who isn’t a first time buyer but they will not be able to use their Lifetime ISA without incurring a withdrawal charge.

Your Lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.

If you have a Help to Buy ISA, you can transfer those savings into your Lifetime ISA or you can continue to save into both – but you’ll only be able to use the government bonus from one to buy your first home.

You can transfer the balance in your Help to Buy ISA into your Lifetime ISA at any time if the amount is not more than £4,000.

In 2017/18 only, you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA without affecting the £4,000 limit.

If you would like to discuss any of this further then please get in touch.  0116 2423400 or

Spring Budget 2017

I am sure that you have seen the headlines in the papers this morning about the Budget and for a detailed analysis please see the report on our website:

The items that have caught my attention and I think are relevant to most people are as follows:

National Insurance for the self-employed

At present, if self-employed, you pay class 2 National Insurance of £145.60 for a complete year, and class 4 at 9% based on your level of profits.  The Government do not think that this is fair as employees pay National Insurance at 12%.  To level this position, class 2 National Insurance will be abolished from 06/04/2018 and the class 4 element will increase to 10% from that date, and to 11% from 06/04/2019, thus bringing the self-employed more in line with the employed.

Dividend changes again …

From 06/04/2016 broadly the first £5,000 of dividend income is taxed at 0 % (Dividend Allowance).  This will continue until 05/04/2018.  However, from 06/04/2018 the Dividend Allowance will reduce to £2,000.  This will mainly affect the family company shareholder and increase their tax liability as follows:

Basic rate taxpayer – additional tax of £225

Higher rate taxpayer – additional tax of £975

Additional rate taxpayer – additional tax of £1,143

Individual Savings Accounts (ISAs)

 The overall limit is increasing from £15,240 to £20,000 on 06/04/2017.

Property and trading income allowances

Although this was mentioned last year it comes into play on 06/04/2017. It is as it says, so if you have property or trading income of £1,000 or less you will no longer need to declare this or pay tax on it.  This could cover small amounts of rent from Air ‘bnb’ activities or trading on ebay. 

New Childcare provisions

 If you are taking out new childcare provisions from 06/04/2017 then, instead of opting for a salary sacrifice scheme and receiving vouchers, for every 80 pence that you contribute the Government will contribute 20 pence. The maximum the Government will contribute will generally be £2,000.

Making Tax Digital

This will be introduced on 06/04/2018 for businesses, the self-employed and landlords who have profits chargeable to Income Tax and pay Class 4 National insurance Contributions where their turnover is in excess of the VAT Threshold, which will be £85,000 from 01/04/2017.

As this is a very new area please contact us for further information.

Salary Sacrifice

 From 06/04/2017 this is changing, but it is still beneficial for both the employer and employee to sacrifice salary in respect of employer provided pensions, childcare vouchers, workplace nurseries and cycle to work schemes. 

Construction Industry

The government are launching a consultation on 20 March 2017 to look at various areas, including the qualifying criteria for Gross Payment Status and options to combat VAT supply chain fraud in supplies of labour.

In addition to the above, certain other changes come into force on 06/04/2017 that have been mentioned in earlier Budgets namely:

Restrictions on residential property interest

Landlords will no longer be able to deduct all of their finance costs from their property income.

Inheritance Tax residence nil rate band

There will be an additional nil rate band for deaths on or after 06/04/2017 where an interest in a main residence passes to direct descendants.

As mentioned above I have only mentioned the areas that I believe will be most relevant to the majority of our clients but other areas can be found on our website.

Please contact us if you have a specific query. 0116 24243400

Julia Harrison, Tax ManagerJulia Harrison April 2012

VAT on Commercial Vehicles

You would think that it was easy to identify a commercial vehicle, such as a HGV or a transit van and in most cases it is. However vehicle companies are now manufacturing vehicles that have a dual purpose.

These vehicles are car derived vans which are sold as lifestyle vehicles that can also be used for private use, they may look similar to cars but the manufacturer will have altered the inside so it can be sold as a commercial vehicle. For example the rear seats and seat belts may have been removed.

HMRC have produced a list of dual purpose vehicles such as combi vans and double cab pick-ups which highlights which vehicles are classed as commercial and which are not.

If you are claiming back the VAT on a commercial vehicle it is important to identify when it is being used for private use, as the VAT man will thoroughly check when this is occurring! If there is any private use then there may be a claw-back of VAT claimed. The VAT man will allow for occasional personal use of a commercial vehicle, but it is important to be able to prove it is only incidental use.

In essence, if you buy a commercial vehicle for your business you can normally reclaim the VAT in full. However, if it has a dual purpose and it is used significantly for personal use, there will be a restriction on the VAT that can be reclaimed.

If you require any further information on this please contact the office on 0116 242 3400.

Tom Luckett, Accounts & Tax

Have you paid your self-assessment bill?

Tax Payments – How late can you be?

With the madness of the January tax return deadline, it may have slipped some of your minds to actually pay your self-assessment bill. If this is the case then you may be wondering how you will be penalised for doing so.

For those that have filed their self-assessment tax return before the deadline but have not paid the bill, there will be interest accruing at 2.75% pa for the first 30 days.

However, after 30 days from the deadline the full amount of tax due will be subject to a 5% penalty. This means that if you had a liability of £5,000 unpaid by midnight on 2 March 2017, there would be an immediate fine of £250 added to your account.

Similarly, if after 6 and 12 months from the filing deadline you have not paid the full balance, then there would be additional 5% penalties on the tax outstanding at those dates.

Furthering the example above, should there still be an outstanding debt of £5,000 on 1 August 2017 then an additional £250 penalty will be accrued and if the debt has still not been settled by 1 February 2018 then another £250 will be added. This means that within just 12 months, a £5,000 tax bill will have penalties totaling £750.

On top of this there will also still be interest accruing on both the tax and penalties. Making the estimated amount owing on 1 February 2018 £5,887.

Sam Jefferson, Accounts & Tax 

If you need further help please contact us.

Autumn Statement 2016

On Wednesday 23 November 2016 our new Chancellor of the Exchequer, Philip Hammond, delivered his first (and last) Autumn Statement. 4221396001_5220447677001_5220145961001-vs

“No other major economy makes hundreds of tax changes twice a year, and neither should we” – this is perhaps the most welcome measure announced in the Autumn Statement.  In recent years the Autumn Statement has been a mini-Budget, meaning that many, sometimes significant, tax changes were being announced twice a year.  This has been problematic in terms of giving taxpayers a reduced degree of certainty regarding planning their tax affairs (plus it means I have to write an extra blog each year) so for this announcement alone, Philip Hammond gets a ‘thumbs up’ from me!

Following the spring 2017 Budget, the Budget will be delivered each autumn – spring will be reserved for a statement from the Office of Budget Responsibility to respond to their previous forecast.  The odd tweak of fiscal policy may be made each spring, if economic circumstances require it – personally I think this option has been retained so the Government are able to be more flexible in response to the future impact of Brexit (you can infer from that what you will…I’m taking it as that they have no idea what the impact will be).  I’m also hoping that an autumn Budget will give more time for us all to absorb the changes before they come into force the following April.

Our full Autumn Statement roundup can be found on our website here, but below are the main points that I think are relevant to our clients and their businesses.  A lot of the announcements aren’t new, but are instead Philip Hammond confirming that he plans to keep some of his predecessor’s policies.

Personal Tax Rates and Allowances

The personal allowance is currently £11,000 and will increase to £11,500 from April 2017.  The reduction in personal allowance for those with higher income (‘adjusted net income’ over £100,000) remains so that, from April 2017, there will be no personal allowance available where ‘adjusted net income’ is over £123,000. 

The higher rate threshold will increase from £43,000 currently to £45,000 from April 2017, for those who are entitled to the full personal allowance.

Philip Hammond confirmed his intention to keep George Osborne’s policy to increase the personal allowance to £12,500, and the higher rate threshold to £50,000, by the end of this Parliament.

Corporation Tax Rates and Allowances

The new corporation tax rates from April 2017 to March 2021 were announced at the Budget and have now been enacted – the rate will be reduced from 20% to 19% from April 2017 and a further 2% to 17% from April 2020, which will be welcomed by small and large businesses alike.

Again, this was announced in the Budget but has been kept by the new Chancellor – corporate losses (excluding capital losses) arising after 1 April 2017, when carried forward, will be able to be used against future profits from other streams.  Currently there are restrictions on how the losses can be relieved, which is restrictive for certain types of business.

National Insurance Contributions (NIC)

Previously payable by the self-employed, Class 2 NIC is being abolished from April 2018 – we knew this was coming, however what we didn’t know was how self-employed taxpayers would get entitlement to basic state pension and other contributory benefits and allowances, as payment of Class 4 NIC (also paid by the self-employed) has not in the past been ‘contributory’.  From April 2018, Class 4 NIC will become ‘contributory’ and those paying it will be entitled to state pension etc.  Those with income below the Small Profits Limit (£5,965 in 2016/17) will be able to pay Class 3 NIC, currently £14.10 per week to ‘top-up’ their entitlement.  There will no longer be the option for these individuals of voluntarily paying Class 2 NIC, for which the current rate is a mere £2.80 per week!

The Office for Tax Simplification are tasked with – you guessed it – making tax simpler.  One of their recommendations that is being implemented is the alignment of the thresholds at which employees and employers pay Class 1 NIC.

Other Payroll Matters

Having only been increased in October 2016, The National Living Wage is increasing from £7.20 to £7.50 from April 2017 and smaller increases to the National Minimum Wage are also coming in – full details on our website here

I mentioned in a blog post on 11 October 2016 that the Government have been consulting on the use of salary sacrifice schemes and on Wednesday, the Chancellor outlined the changes to be introduced from April 2017.  Salary sacrifice arrangements (other than relating to pensions, childcare, cycle to work and ultra-low emission cars) entered into after this date will no longer enjoy tax and national insurance savings – however agreements entered into before this date will remain tax and NI-free until April 2018, so subject to the administrative hurdles that have to be jumped for an effective salary sacrifice, there’s still some mileage left in them yet!

Philip Hammond continues George Osborne’s assault on company car drivers with a further 2% increase in the percentage applied to each band of company car from April 2018, and a further 3% from April 2019.  From April 2017, pure electric cars will be charged at 9%, rising to 13% in April 2018 and 16% in April 2019 – a huge increase from the 7% benefit in kind in the current year.  I can only assume this is a reaction to the amount of employers who have provided these cars to employees, and benefited from the low rate.  I do find it a little disappointing that tax incentives are introduced to encourage certain behaviours (such as the provision of electric cars) and then as soon as people actually take the Government up on their offer, it effectively gets withdrawn – this is especially harsh when it relates to company cars as many of these will be leased over a number of years and therefore the business and employees are stuck with the cars that no longer afford them the low tax charges that were in place when the vehicles were first provided.

VAT Flat Rate Scheme Anti-Avoidance

 Businesses registered for VAT under the flat rate scheme pay over VAT at a specific rate (currently between 4% and 14.5%) as determined by their type of business – it simplifies the accounting for VAT as these businesses pay VAT over to HMRC at a lower rate than the 20% they charge to customers, but do not reclaim VAT on most expenses.  For many small businesses, this can be both time-saving and money-saving.  From April 2017 a new 16.5% rate will apply to businesses with limited costs (i.e. labor-only businesses) using the flat rate scheme.  The details on which businesses will be affected by this are on our full Autumn Statement update here

Making Tax Digital

HM Revenue & Customs are consulting on various measures intended to bring the UK tax system into the digital age.  A major change is that from April 2018, most self-employed taxpayers and landlords will be required to keep their records digitally, update HMRC at least quarterly, plus submit a year end declaration.  While HMRC are keen to emphasis that this does not mean five tax returns per year, we eagerly await the details on how the proposals will work in practice when HMRC issue their response to the consultations in January 2017.

If you want to discuss any of this further then please get in touch here.

Katie Kettle, Chartered Certified Accountant

Technical Manager

 Katie Kettle Colour

VAT on Company Vehicles

If you are looking to buy a car through your VAT registered business then there are several things to consider; it can be a great tax saving idea however you must consider all of the implications. The most important point is that the VAT on the purchase of the vehicle can only be claimed back if it is used 100% for business purposes, meaning no private usage at all.

A good example of this would be a pool car. A pool car is available for use by any employee for solely business purposes during working hours and is kept on site when not in use.

You may also be able to claim all the VAT on a new car if it’s mainly used:

  • as a taxi
  • for driving instruction 

The same rules apply for commercial vehicles such as vans, lorries and tractors. As long as they are solely used for business use then the VAT can be reclaimed.

If the vehicle is not used 100% for business then you need to consider the other tax consequences such as a personal tax benefit in kind and an employer National insurance charge.

Please note a daily commute to your regular place of work is not considered as business use according to HMRC guidance.

Leasing a car

If you lease a car, you can usually claim back 50% of the VAT. You may be able to reclaim all the VAT if the car is used only for business and is not available for private use, or is mainly used as a taxi or for driving instruction.

Self-drive hire cars

If you hire a car to replace a business car that’s off the road, you can usually claim 50% of the VAT on the hire charge.

Additional costs

You can usually reclaim the VAT for:

  • all business-related running and maintenance costs, eg repairs or off-street parking
  • any accessories fitted for business use

You can do this even if you can’t reclaim VAT on the vehicle itself.

If you are considering buying a vehicle for your business or would like more details then please feel free to contact us. 

Calum Ainge, AccountantDSC_5428

Thinking of buying commercial property?

Before any purchase takes place you should always take advice as tax sacommercial-buildings-5-1508697.jpgvings are there to be made. In many cases the contract drawn up by solicitors will need to be worded carefully to ensure tax savings can be considered.

The Capital Allowances Act 2001 entitles a purchaser to claim tax relief in respect of the proportion of the expenditure that relates to eligible assets – known collectively as fixed “plant and machinery”.

Here are a few key points:

  • Capital allowances are available on second-hand property.
  • Optimising capital allowances improves cash flow.
  • Failure to comply with the rules can mean that qualifying expenditure is nil.

Capital allowances give tax relief for property owners. There are several types of allowances, applicable to different asset categories. The principal forms, found in all commercial properties are plant and machinery and integral features.

All too often, capital allowances are left unclaimed for several years. The reason for this may be a lack of awareness (by both clients and their advisers). This is not the case at Torr Waterfield, so whenever you are thinking about buying commercial property contact your account manager   before any purchase takes place so we can ensure you don’t miss out on potential tax savings.

If you would like to discuss this further please contact us. 

Mark Cunnold, Accountant & Client Manager Mark Cunnold 2 April 2012

Budget 2016: Move over Ranieri, there’s a new “Tinker Man” in town!

On Wednesday 16 March 2016, George Osborne delivered his eighth Budget.  I will be the first to admit that I was expecting this to be a spending- rather than tax-focussed budget.  In fact, I was wondering how much there would be for me to write a blog about, particularly as we have the “tax lock” where the Government have promised not to raise the rates of the major taxes!  It seems though (it happens occasionally) that I was wrong!  There were some surprising giveaways for both individuals and companies alike; of course balanced by a couple of sneaky rises for some.  Our full, official (and slightly less cynical) Budget Summary is available on our website, but the key tax developments are summarised below.

Personal Tax

The Government’s plan is to get the Personal Allowance (the tax free amount most individuals get to use against income) to £12,500 over the course of this Parliament, with the higher rate threshold at £50,000 – this took a major step forward in the Budget.  We already knew that from 6 April 2016 there will be a personal allowance of £11,000 and the higher rate limit will be £43,000, however the limits from 6 April 2017 increase to £11,500 and £45,000, respectively – we are definitely heading in the right direction here.

Changes have already been made to Class 2 National Insurance payable by self employed individuals, in that from 2015/16 it will be collected via Self Assessment, rather than direct debit.  This was a welcome simplification, and George has simplified it further by scrapping it altogether from April 2018.  The issue is that Class 2 NI gives self employed people entitlement to state benefits, such as state pension, and therefore Class 4 NI (the other form of NI paid by the self employed) will need to be updated to ensure the self employed continue to be entitled to those benefits.  I wouldn’t rule out a rise in the rate of Class 4 NI to compensate for the lack of Class 2 NI in the future, though – watch this space!

A new ISA has been introduced (yes, another one!) being the Lifetime ISA.  Operating in a similar way to the Help to Buy ISA, individuals between 18 and 40 can open one of these accounts from April 2017, put in up to £4,000 per year and receive a 25% bonus from the Government, plus tax-free interest.  The savings can be used towards purchasing a first home, or drawn out tax-free after turning 60.  Early withdrawals will forfeit the 25% bonus (and any interest/growth on this) and be subject to a 5% charge.  It’s free money though, and I like free money!

Over the course of this Parliament, slowly but surely, George Osborne has taken small amounts of various types of income out of tax completely, examples being the Personal Savings Allowance and Dividend Allowance which both come into effect 6 April 2016.  Well he’s come up with another one!  From April 2017 there are two new £1,000 allowances for property and trading income.  Individuals with income below the level of the allowance will no longer need to declare or pay tax on that income.  Those with income over £1,000 can simply deduct the allowance rather than calculating their exact expenses (the choice, as they say, is yours!).  Some people that will benefit from this include those selling small amounts of handmade goods at a craft fair or goods on eBay, those renting their houses for small amounts of time via Airbnb, and those with expenditure of less than £1,000.

Corporate Tax

The Chancellor announced last year that the corporation tax rate would be cut over the course of this parliament.  When the Conservatives came to power in 2010, the rates of corporation tax were 21% and 28% for small and large companies, respectively.  By 2020, the current flat rate of 20% for all companies will be down to 17%, giving the UK the lowest corporate tax rate in the G20 (in comparison, in the US they pay 40%, so we get off pretty lightly here!)

Following the dividend tax revolution in last year’s Summer Budget, George has increased the tax due on “loans to participators” from 25% to 32.5% – this isn’t a surprise, as the tax is designed to mirror the effective rate of tax on dividends for higher rate taxpayers in order to make loans from close companies less attractive.  What this broadly means is that director/shareholders borrowing money from their companies either in the form of a loan, or as an overdrawn director’s current account, will have to pay 32.5% as a withholding tax if the loan is not repaid to the company within 9 months of the year end – ouch!

An unexpected giveaway is that corporation tax losses incurred after 1 April 2017 will be able to be offset against different types of income streams (for example trading loss against rental profit) – this so called “sideways loss relief” is only currently available for current year, rather than brought forward losses.  This is only applicable in a small number of situations, but nevertheless will be useful for some.

Capital Gains Tax

George Osborne hiked Capital Gains Tax after coming into office in 2010, introducing a two-tier system for basic and higher rate taxpayers, where previously there had been a flat rate.  While basic rate taxpayers with small gains that kept them in basic rates were not affected, higher rate taxpayers suffered an extra 10% tax on their gains.  In this Budget, George has retained the two-rate system, but dropped both of the rates by 8% to 10% and 20%, respectively.  There is however, a big but!  It’s become pretty clear over the past year that landlords of residential property aren’t at the top of George’s Christmas card list, and this measure is a continuation of his assault on the buy-to-let industry because the lower rates will not apply to gains on residential property – the current rates of 18% and 28% will apply.  It isn’t yet clear how this will work in practice if there are multiple gains in the year, taxable at different rates, however I am hopeful (sometimes I can be positive) that we will be able to utilise the annual exemption against the gains that are taxable at the highest rate first, reducing the overall tax due.  The measure (along with the extension to Entrepreneurs’ Relief coming next) is designed to provide an incentive for individuals to invest in companies, rather than residential property.

Introduced back in 2008 by the then Chancellor, Gordon Brown, Entrepreneurs’ Relief made capital gains on “entrepreneurial assets” e.g. goodwill in unincorporated businesses and shares in personal companies, subject to a preferential rate of tax, effectively 10%.  The amount of gain that can benefit from this reduced rate has increased from £1m when introduced by Labour to £10m under the Conservatives (they do stress that they have a wider policy of supporting enterprise and entrepreneurship).  The 2016 Budget extends this 10% rate to long-term investors in unlisted companies (not just those who are directors/employees and 5% shareholders in those companies, as is the current rule).  The relief only applies to new shares issued after 17 March 2016 that have been held for at least 3 years after 6 April 2016.

Property Tax

Back in 2014, the Chancellor changed the calculation of Stamp Duty Land Tax (SDLT) on residential property from the slightly bizarre “slab” system (paying at one rate on the total price of the property) to one where buyers pay tax on the amount between bands.  This was a welcome change, as it removed the cliff-edge effect which skewed property sales around each limit, but it was always a bit odd that the change only applied to residential property.  Don’t get me wrong, SDLT rates are different between residential and non-residential purchases, but wouldn’t it at least make sense to calculate them on the same basis? My wish was George’s command!  While the rates have increased from 17 March 2016, they are only payable on the amount of the purchase price that falls within the band, so that buyers of commercial property worth up to £1.05m will pay less SDLT.

It was announced in the Autumn Statement that a 3% supplement would be payable on purchases of “additional residential property” – while I am focussing this blog on the changes announced yesterday, this warrants a comment on the basis that we actually have a bit more information now!  The additional 3% will apply to both individuals that, at the end of the day of a transaction, will own more than one residential property, and also companies.  The unintended (I would hope) consequence of this is when there is a gap between purchasing your new home and selling your old one – if this is the case, you will have to stump up the extra 3%, but the good news is that if you sell the old property within 36 months, you can have a refund (isn’t George kind?!).  For companies, the concept of “additional residential property” doesn’t apply, and the purchase of the first residential property by a company will be subject to the charge.  The Government are going to consult on possible relief for large-scale investors.

Company Cars

I’m pretty sure I’ve mentioned this previously, but the Government consistently say they want to encourage use of Ultra Low Emissions Vehicles and general energy efficient machinery.  When people go out and buy these ULEVs and get the generous tax rates associated with them, the Government don’t like it as it’s costing them money!  They constantly move the goal posts of what is deemed to be low emission, making it harder each year to benefit from the low tax rates.

For example, a car with CO2 emissions of 75g/km would give rise to the following benefit in kind charges (on list price) over the coming years:

  • 2015/16 – 9%
  • 2016/17 – 11%
  • 2017/18 – 13%
  • 2018/19 – 16%
  • 2019/20 – 19%

So over the course of 5 years, the company car tax will double on the same car! A car that previously gave a very low income tax charge suddenly becomes a lot more expensive.

The same is the case with Capital Allowances when a business purchases a car – at the moment a “dirty car” is one that has emissions of over 130g/km (not too long ago this was 160g/km), but from April 2018 this will be reduce to 110g/km – the implication is that cars over this attract just an 8% rather than 18% allowance each year, and it takes a very long time to write off the cost of a car at 8% a year, on a reducing balance basis.  The 100% First Year Allowance for new cars that is currently available for cars with less than 75g/km will drop to 50g/km from April 2018, so get your order for that new car in way before then!

Closing Thoughts

The problem with a lot of the measures that were announced is that they are long-term, relating to events happening way in the future.   With the amount of tinkering that George is doing each Budget, who is to say that the measures outlined above won’t be repealed in one of his future Budgets, or for the very long-term items (such as the Lifetime ISA) who will even be in Government when you are planning for the measure to benefit you!  We don’t have any stability in tax at the moment, which makes it very difficult to do meaningful long term planning.  Perhaps that’s the intention – the Government currently seems to be against tax planning, likening it to tax avoidance (which is completely legal) and even tax evasion (definitely not legal!).

It’s not all doom and gloom though… the duty on beer, cider and Scottish whisky was frozen….. I’ll drink to that! Cheers!

If you want to discuss any of this further then please get in touch.

Katie Kettle, Technical Manager Katie Kettle Colour