Autumn Budget – 29 October 2018

So, we already knew about some of the announcements before the chancellor, the Rt. Hon. Philip Hammond MP, spoke yesterday, so much so he even made a joke about toilets and leaks. As ever there was good news and bad news for taxpayers, a full summary is on our website but here are some good news/bad news highlights:

If you are a business…

Good news

  • Capital allowances – Annual Investment Allowance (AIA) increasing from £200,000 pa to £1million pa for 2 years from 1 January 2019
  • Capital allowances – a new Structures and Buildings Allowance (SBA) for non-residential buildings on eligible construction costs on or after 29 October 2018, this will enable business to claim 2% pa on cost
  • The corporation tax rate, as previously announced, will drop to 17% from 2020

Bad news

  • Capital allowances – the writing down allowance (WDA) on special rate pools, for things such as cars with CO2 emissions of over 130g/km, reducing from 8% to 6% pa
  • Capital allowances – discontinued 100% allowances for energy & water efficient equipment, although you will still be able to claim AIA’s
  • National Living Wage (previously National Minimum Wage) for over 25’s increasing from £7.83 per hour to £8.21 (which also has an effect on the auto-enrolment pension contribution cost)

And more bad news for larger companies

  • Digital Services Tax – for large digital companies (e.g. Amazon) – 2% on revenues linked to UK
  • Corporate capital loss restriction for large companies (from April 2020) – there is already a £5m cap on income losses, this is now extended to capital losses as well
  • Employment allowance restricted to businesses below £100,000 employers NIC
  • R&D tax credit (cashing in instead of reducing tax bill) capped at 3 times the PAYE & NIC liability
  • Off payroll working (IR35) currently in force for public companies will be introduced on private medium and large companies (although not until 2020) – PAYE and NIC will be deducted from the deemed employee and Employers National Insurance will be payable by the company.

If you are an Employee…

Good news

  • Personal allowance increasing from £11,850 to £12,500
  • Higher rate threshold increasing from £46,350 to £50,000 (these two increases will mean a basic rate tax payer will save £130 pa, a higher rate tax payer £860 pa and an additional rate taxpayer £600 pa)
  • National Living Wage for over 25’s increasing from £7.83 per hour to £8.21

Bad news

Other taxes…

Good news

  • Stamp Duty – First time buyers of a qualifying shared ownership in a property of £500,000 or less will get an exemption from SDLT and this is backdated to 22 November 2017 (i.e. you can claim a refund)
  • Stamp duty refunds – the time to make a claim for a refund on the 3% supplement on buying your new home before selling your old home, has been extended from 3 months to 12 months from the sale of your old home (although the filing deadline for SDLT returns is reduced to 14 days after the effective rate of transaction)
  • Capital Gains – annual exemption increased from £11,700 to £12,000 pa

Bad news

  • Rent a room relief – you will actually need to have shared the premises during part of the time you are claiming the relief, effectively excluding income from places like Airbnb
  • Entrepreneurs relief – to qualify, the minimum period is extended from 12 months to 24 months
  • Capital Gains – private residence relief final period exemption reduced from 18 months to 9 months
  • Capital Gains – lettings relief will only apply when the property is in shared ownership with a tenant, in reality this means very few people will qualify and therefore only get private residence relief on sale of their home, however this is subject to consultation and may well change

The above is only a brief summary of the proposed changes. For a more detailed breakdown please visit our website here.

If you have any questions about the budget, or how it will impact you or your business, please contact us on 0116 242 3400 and we will be happy to help.

Denise Burley

Self-employed Class 2 National Insurance will not be scrapped

The government has decided not to proceed with plans to abolish Class 2 National Insurance Contributions (NICs) from April 2019.

Class 2 NICs are currently paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more per year. The government had planned to scrap the Class 2 contribution and had been investigating ways in which self-employed individuals with low profits, could maintain their State Pension entitlement if this inexpensive contribution had been abolished.

In a written statement to MPs, Robert Jenrick, Exchequer Secretary to the Treasury, stated that:

‘This change was originally intended to simplify the tax system for the self-employed. We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue and further options for addressing any unintended consequences.’

‘A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the State Pension rise substantially. Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.’

If you want to discuss any of this further please get on touch, 0116 2423400 or info@torrwaterfield.co.uk 

Have you taken advantage of the Marriage Allowance?

A married couple or civil partnership can apply to transfer 10% of the income tax personal allowance from one to the other. Although called the marriage ‘allowance’, it is a transfer rather than an additional allowance.

To qualify for the allowance, neither of the partners can be higher rate taxpayers and cannot be claiming the married couple’s allowance. To benefit as a couple, one person should be earning below the personal allowance (£11,850 for 2018/19).

The maximum tax saving in 2018/19 is £237.00 (10% of the £11,850 personal allowance at 20%).

 

How to apply

 The application for the transfer is made by the person who wants to transfer part of their allowance to their partner. It is absolutely fundamental that the recipient of the allowance does not make the claim.

If your income is predictable, you can apply during the tax year here. If you apply during the tax year, the claim is in place until withdrawn or through either death or divorce.

If your income is unpredictable, because you are self-employed for example, you can make an application after the tax year on your Self-Assessment Tax Return. This claim must be done each year – it does not remain in place for future years.

 

Backdated claims

 Currently, you can backdate marriage allowance claims to include any tax year since 5 April 2015 if you were eligible. This means you could claim back as much as £662 if you can claim for 15/16, 16/17 and the 17/18 tax year.

 The Married couple’s allowance

 If either you or your partner were born before 6 April 1935 you may benefit more from the Married Couple’s Allowance instead, which you can read more about here.

For further information or help on the above, please call the office on 0116 242 3400 or email us at info@torrwaterfield.co.uk

Aiden Hyett, Accounts & Tax 

Is your child about to collect their GCSES? – You need to tell the Tax Man

(A-levels, further education or an approved training course, you MUST tell the taxman if you’re claiming child benefit or risk losing out on thousands of pounds a year)

June was a busy period for students throughout the UK as they completed their GCSE and A-Level exams, but what happens to your child benefits afterwards?

Your Child Benefit stops on 31 August on or after your child’s 16th birthday if they leave education or training. It continues if they stay in approved education or training, but you must tell the Child Benefit Office.

You’ll be sent a letter in your child’s last year at school asking you to confirm their plans.

You must report any change of circumstances to the Child Benefit Office.

‘What If my child continues education or training?’

Use the online service to tell the Child Benefit Office that your child is staying in approved education or training after age 16.

Approved education:

Education must be full-time (more than an average of 12 hours a week supervised study or course-related work experience) and can include:

  • A levels or similar – eg Pre-U, International Baccalaureate
  • Scottish Highers
  • NVQs and other vocational qualifications up to level 3
  • home education – if started before your child turned 16
  • traineeships in England

Courses are not approved if paid for by an employer or ‘advanced’, eg a university degree or BTEC Higher National Certificate.

Approved training should be unpaid and can include:

  • Foundation Apprenticeships or Traineeships in Wales
  • Employability Fund programmes or Get Ready for Work (if started before 1 April 2013) in Scotland
  • United Youth Pilot, Training for Success, Pathways to Success or Collaboration and Innovation Programme in Northern Ireland

Courses that are part of a job contract are not approved.

‘What if my child decides to leave education or training?’

Use the online service (CH459) to tell the Child Benefit Office that your child aged 16 or over has left approved education or training.

When your child leaves approved education or training, payments will stop at the end of February, 31 May, 31 August or 30 November (whichever comes first).

 Temporary breaks

 If there has been a break in your child’s education or training (for example if they change college), you might get Child Benefit during the break. In this case you should tell the Child Benefit Office.

 Apply for an extension

You could get Child Benefit for 20 weeks (called an ‘extension’) if your child leaves approved education or training and either:

  • registers with their local careers service, Connexions (or a similar organisation in Northern Ireland, the EU, Norway, Iceland or Liechtenstein)
  • signed up to join the armed forces

To qualify for this, your child must:

  • be 16 or 17
  • work less than 24 hours a week
  • not get certain benefits (eg Income Support)

You must have been entitled to Child Benefit immediately before they left the approved education or training and apply for it within 3 months of them leaving.

Apply for the extension online

If you have any queries regarding this information please feel free to contact a member of TorrWaterfield on 0116 242 3400

Sam Koelling, Accountant

Why has my tax code changed?

“How do I know if my tax code is correct?”

Your tax code is used by your employer to calculate how much tax needs to be deducted from your pay. HMRC tells your employer which code to use to collect the right amount of tax from you. You can check your income tax online to see what your tax code is, how your tax code has been worked out and how much tax you have paid and are likely to pay in the coming months.

“What does my tax code actually mean?”

Your tax code represents how much tax free income you have for that tax year, for example the standard tax code for the 2018/19 tax year is 1185L and this means you have a tax free income of £11,850.

“What does the letter in my tax code mean?”

The letter in your tax code represents your situation and how that affects your tax free income, for example:

  • L = You’re entitled to the standard tax free allowance.
  • M & N = Marriage Allowance, this means you have either transferred or received personal allowance to or from your partner.
  • 0T = Your personal allowance has been used up or you’ve started a new job and your employer doesn’t have all of your starter details.

To see the full list on the HMRC website please click here.

“Why is there a W1/M1 at the end of my tax code?”

The W1/M1 means that the tax code is non-cumulative; in these cases tax will be calculated purely based on the taxable pay for that pay period. Each pay day is treated as if it is the first week or month of the tax year. All previous pay and tax are ignored.

There are a few reasons you may have been put on this type of code, for example:

  • Started a new job
  • Getting Company benefits or state pension
  • Becoming employed after being self employed

These tax codes are generally temporary and you or your employer can update this.

“How do I change my tax code?”

 You can use the HMRC online services to tell HMRC about any missing or incorrect information. They will then update this by sending you and your employer a P6 tax coding notice. If you can’t use the online services you can call HMRC on 0300 200 3300 and they will help guide you through and get your tax code updated.

If you would like to discuss this further then please get in touch on 0116 242 3400.

Polly Dennis, Payroll Assistant 

The following Tax Events are due on 19th April 2018.

The following Tax Events are due on 19th April 2018:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th January 2018 to 5th April 2018.

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.

Postal payments for month/quarter ended 5 April should reach your HMRC Accounts Office by this date.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 20th April 2018 unless you are able to arrange a ‘Faster Payment’ to clear on or by Sunday 22nd April.

Penalties apply if payment is made late.

PAYE, Student loan and CIS deductions are due for the month to 5th April 2018.

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.

Postal payments for month/quarter ended 5 April should reach your HMRC Accounts Office by this date.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 20th April 2018 unless you are able to arrange a ‘Faster Payment’ to clear on or by Sunday 22nd April.

Penalties apply if payment is made late.

Automatic interest is charged where PAYE tax, Student loan deductions, Class 1 NI or CIS deductions for 2017/18 are not paid by today. Penalties may also apply if any payments have been made late throughout the tax year.

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.

Deadline for employers’ final PAYE return to be submitted online for 2017/18.

This deadline is relevant to employers.

This is the last day by which your final Full Payment Summary (FPS) for the 2017/18 tax year should be sent to HMRC.

You will not be able to file an FPS relating to 2017/18 after 19th April. If you need to make an amendment or correction to the details reported on a 2017/18 FPS you will need to submit an Earlier Year Update (EYU).

Please be aware that if we deal with the payroll on your behalf that we will ensure that this matter is dealt with on a timely basis.

If you would like to discuss this any further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk 

We send monthly reminders about all upcoming tax deadlines and other important business related deadlines. If you would like to receive these email notifications please register here https://www.torrwaterfield.co.uk/registration/register 

 

 

How do you complete a Monthly CIS Return?

What is CIS?

The Construction Industry Scheme is a method of deducting tax from subcontractors in the building sector. Contractors deduct a percentage of the money owed on their payments to subcontractors and pass it over directly to HMRC. The amounts are effectively taxed at source as the sub-contractor does not get the money.  The deducted CIS tax counts as advance payments towards the tax and National Insurance contributions that will be calculated upon completion of the subcontractor’s self-assessment tax return.

What do I need to complete a return?

Monthly CIS returns need to be submitted by the contractor to HMRC to disclose the amount of CIS which has been deducted and is therefore due to be paid over to HMRC.

The contractor needs from the subcontractor an invoice which states the money they are owed.

The invoice should split out the materials and labour with CIS only being deductible on the labour element of the invoice. CIS is deducted at 20% providing the subcontractor has a UTR (unique tax reference) number which should be displayed on the invoice. If there is no UTR number then CIS will be deducted at 30%.

How do I do it?

CIS periods run from the 6th of the month to the 5th of the month following – for example, 6th March – 5th April. The CIS return then needs to be submitted and the liability paid over within two weeks of the period end – 19th April for example in order to avoid facing late filing charges. The return can be manually entered under the contractor’s logon on the HMRC website or it can be submitted via numerous accounting software programmes. The CIS is payable to HMRC upon payment of the invoice and not the date the invoice is issued, so it should only be included on the CIS return at this point. Once the return has been submitted to HMRC, statements should be sent out to all subcontractors for their own records.

If you wish to discuss any of this further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk

Brook Lucas, Accounts & Tax 

With effect from 6 April 2018, all PILONs will be chargeable to Income Tax and Class 1 National Insurance Contributions (NICs)

With effect from 6 April 2018, all PILONs will be chargeable to Income Tax and Class 1 National Insurance Contributions (NICs), whether or not they are contractual payments. Payments or benefits paid in connection with the termination of a person’s employment will be split into two elements. The first element, post-employment notice pay (PENP) received is taxable as general earnings and will be subject to Class 1 NICs from 6 April 2018. The PENP represents the earnings that the employee would have received had they been given and worked their full and proper notice and on which they would ordinarily have paid tax and Class 1 NICs.

PENP is calculated by applying a formula to the total amount of the payment or benefits paid in connection with the termination of an employment. The second element is the remaining balance of the termination payment, or benefit, is not a PENP. This is taxable as specific employment income to the extent that it exceeds £30,000 and is treated in the same way as other payments and benefits taxable under section 403 Income Tax (Earnings and Pensions) Act 2003.

PENP calculations should not be applied to statutory and non-statutory redundancy payments. These payments are always taxable as specific employment income and subject to the £30,000 exemption where appropriate. As an employer, you will be required to apply the PENP formula to the total amount of relevant termination payments, or benefits. You should operate PAYE to deduct income tax and Class 1 NICs from the amount of PENP from 6 April 2018. You should then apply the £30,000 exemption, where applicable, to the second element of the relevant termination payment and deduct income tax (but not NICs) accordingly. Detailed guidance on how and to what payments you should apply the PENP formula to will be published in the Employment Income Manual in due course

Foreign Service relief

Foreign Service relief on termination payments is being removed for UK residents. Employees whose employment is terminated on, or after, 6 April 2018 and who receive a payment or benefit in connection with that termination will not be eligible for tax relief in respect of any period of foreign service undertaken as part of their office or employment if they are UK resident for the tax year in which their employment is terminated. This change is subject to parliamentary approval. Foreign Service relief will be retained for seafarers.

If you would like to discuss any of this further please get in touch 0116 2423400 or info@torrwaterfield.co.uk

Employer Update March 2018

National Living/Minimum Wage Changes from 1 April 2018

From 1 April 2018 the National Living/Minimum Wage rates will increase as follows:

  • £7.83 an hour for workers aged 25 and over – previously £7.50
  • £7.38 an hour for workers aged 21 to 24 – previously £7.05
  • £5.90 an hour for workers aged 18 to 20 – previously £5.60
  • £4.20 an hour for workers aged 16 to 17 – previously £4.05
  • £3.70 an hour for apprentices under 19 or in their first year – previously £3.50

If you are paying any employees with reference to the National Living/Minimum Wage you will need to amend the hourly rates accordingly.

Auto-enrolment: Minimum contributions increase with effect from 6 April 2018.

Under auto-enrolment all employers have to automatically enrol certain employees into a pension scheme and make minimum contributions into that scheme. From 6 April 2018 these minimum contributions will increase as part of the phasing in, and employers need to take steps now to ensure they comply with this change.

If the qualifying earnings basis is being used, the current minimum contribution until 5 April 2018 is 2% with at least 1% from the employer.

Between 6 April 2018 and 5 April 2019 the minimum contribution is 5% with at least 2% from the employer, so contributions should be reviewed now in readiness for this.

Looking ahead, from 6 April 2019 the minimum contribution will be 8% with at least 3% from the employer.

For more information see The Pensions Regulator contribution levels guidance here.

If you have any questions on the above, please do not hesitate to contact me.

Regards

Rebecca Edwards, Payroll Manager

Tax Free Allowances – Are you making the most of them?

With the self-assessment tax return deadline now well passed, we can start to look forward to 2017-18’s income and consider whether you are fully utilising your tax free allowances.

Using the following to their full potential can often be the most tax efficient way of accessing the income in your company or savings.

Personal Allowance

This is a tax free amount that everybody starts with which can be used against any type of income. For 2017-18 the personal allowance is £11,500, however, this figure may be reduced should your income go above £100,000.

If you are not using the entire personal allowance, then it may be an option to transfer 10% of this to your spouse under the marriage allowance. This can only be done though if they’re a basic rate tax payer. It means that they would receive an additional £1,150 of personal allowance thus saving them £230 in tax.

Starting Rate

For those that have a fairly minimal salary but a lot of savings income, the starting rate is something that can be used. It is an additional 0% rate band if the first £5,000 of taxable income (i.e above the personal allowance) is savings. This could be especially useful for those with large credit balances on director’s loans in limited companies as they can charge interest on this which would not only be tax free for the individual but tax deductible for the company.

Dividend Allowance

Changes in the 2016-17 tax year meant that the traditional method of receiving tax credits on dividends were scrapped and replaced instead with the ‘Dividend Allowance’. This is a £5,000 tax free band on dividends for everyone regardless of their other income. For those with a limited company this could be utilised by a spouse shareholder, regardless of if the work elsewhere, to get an additional £5,000 tax free income.

Personal Savings Allowance

The final tax free allowance is the personal savings allowance which you receive regardless of if you earn from other sources. These do however vary based on the tax band you are in as follows:                   

Basic rate £1,000
Higher rate £500
Additional rate Nil

These could potentially be utilised in the same way as the starting rate by charging a limited company interest on credit director’s loan account balances.

As each case is different, please contact us on 0116 242 3400 if you wish to discuss tax free allowances any further.

Sam Jefferson, Accounts & Tax