Will Sage work with Windows 10?

Answer:

YES –  If you are using Sage Accounts 2013 (v19), 2014 (v20) and v21 and 2015 (v22)

NO –    If you are using Sage Accounts 2012 (v18) or below

If you have a recent version of sage:

Upgrading to Windows 10 should not cause any problems.

If you are using an older version of Sage:

Option 1 – Upgrade to the latest version of sage.

Torrwaterfield are registered sage dealers and can offer the best rates for upgrading your sage products.

Please contact a member of our team for the current price.

Option 2 – Stay on Windows 7 or 8.

You do not have to upgrade to Windows 10.  Stay with your current operating system and Sage will continue to work as normal.

What if you have already upgraded to Windows 10?

If you really like Windows 10 and want to stick with it, then unfortunately you will need to upgrade to the latest version of sage. Please contact a member of our team for a price.

Or, you can downgrade back to Windows 7 or 8 and continue as normal.

To do this, simply follow these steps:

Click the Start button in the bottom-left corner of your screen.

Click on Settings. It’s in the Start menu just above the power button.

In the Settings app, click on the Update & Security icon.

Now click on the Recovery option in the menu on the far left of your screen.

Now tap or click on the Go Back to Windows 8 or Windows 7.

Follow the on-screen prompts and you’ll be back on Windows 8 or Windows 7 in approximately 20 minutes.

Thanks, Stuart CaneyStuart Caney April 2012

New National Minimum Wage rates come into force

  • Over one million working people will receive a pay rise today when National Minimum Wage goes up
  • Apprentices get biggest ever rise
  • Over £1,000 increase in yearly pay packet for full time apprentice

The pay packets of thousands of Welsh workers will be boosted from today as the new National Minimum Wage rates come into force.

From Thursday 1 October 2015, the apprentice rate of the National Minimum Wage (NMW) goes up by 57 pence to £3.30 and the NMW rate for adult workers will rise by 20 pence from £6.50 to £6.70 per hour.

The boost for apprentices is the largest ever and means that those working 40 hours a week will now have £1,185 more in their pay packet over the year.

By implementing a rate higher than the Low Pay Commission’s (LPC) recommendation apprenticeships will deliver a wage that is comparable to other choices for work.

The 3% increase in the adult rate is the biggest real increase since 2006 and moves the NMW closer to the average wage than ever before. The new rate means that a full time employee, working 40 hours, will see the largest cash increase in their annual pay packets since 2008.

In Wales, some 80,000 jobs will be covered by the new adult rate.

The National Minimum Wage rates from 1 October 2015, as recommended by the Low Pay Commission (LPC), are:

From 1 October 2015:

  • the adult rate will increase by 20 pence to £6.70 per hour
  • the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour
  • the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour the apprentice rate will increase by 57 pence to £3.30 per hour
  • the accommodation offset increases from the current £5.08 to £5.35

Torrwaterfield’s Norfolk Coastal Walk

Our chosen Charity of the year is ‘Epilepsy Society’ and to raise some money for this amazing cause the Torrwaterfield team are taking on the ‘Norfolk Costal Walk’

The Challenge is to complete a 45 mile walk along the Norfolk Coast Path, from Hunstanton to Cromer.

The Team are doing this over the weekend,  Fri 18th to Mon 21st of September.The walk will be over 2 days.On Saturday they will be walking from Hunstanton to Wells-Next-The-Sea. On Sunday they will walk from Wells-next-The-Sea to the finish line at Cromer.

In the run up to the challenge the team have been doing lots of preparation such as training walks around the Leicestershire area and Stuart Caney has even been walking to work from Wigston !

It would be incredible if you could show some support for the team and make a donation small or large, Its all for a great cause. Please Click Here for our Just Giving page.

 

Summer Budget 2015

On 8 July 2015 George Obsorne presented his first Budget of this Parliament, and the first Conservative-only budget since 1996.

This Budget is aimed to not only balance the books, but remove some of the imbalances within the tax system.  Some of these changes were completely unexpected… The Chancellor has definitely thrown a few curve balls!

We will briefly cover the biggest and most radical changes here, plus the main tax proposals from the Summer Budget.  However if you would like a more detailed review of the Budget, including proposals already outlined in the March Budget such as the personal savings allowance, our full Budget summary can be found here.  While this blog covers the announcements made by the Chancellor, none of this is yet law so may be amended by the Finance Act.

Main Budget Tax Proposals

Brand new taxation system for dividends received by individuals

  • Restriction of relief for interest payments on buy to lets
  • Extension to the inheritance tax nil rate band for homes

Other Tax Changes

  • Changes in the Annual Investment Allowance for businesses
  • Removal of tax relief on the acquisition of certain intangible assets
  • Increase in the NIC Employment Allowance

Personal Tax

Personal Allowance

As part of the Government’s plan to bring the personal allowance up to £12,500 by the end of this Parliament, a small increase in the personal allowance was announced.  For the current year (2015/16) it is £10,600 but will be going up to £11,000 in 2016/17 and £11,200 is 2017/18.  The tapered reduction of the personal allowance for individuals with adjusted net income over £100,000 remains.

Dividend Tax Allowance

This was the major surprise of the budget for us as there had been no hint of any changes in this area!

Historically, dividends have attracted a notional tax credit which meant that for basic rate taxpayers, there was no tax to pay on these.  Higher rate tax payers would pay 25% on the net dividend and additional rate taxpayers would pay 30.56%.  This is in recent years…. if you go further back, the tax on dividends was more than 80% for some!

From 6 April 2016 the Government will abolish the dividend tax credit and replace it with a new Dividend Tax Allowance of £5,000 per year.  Dividends will then be taxed in the basic rate band at 7.5%, the higher rate band at 32.5% and in the additional rate at 38.1%.

This makes more sense through an example.  Say you operate through a limited company and normally take £8,000 salary and £30,000 dividends – under the current rules you would not pay any income tax (assuming this is your only income) – your “take home pay” would be £38,000.  Now contrast this to the new rules from April 2016…. the income tax would be £1,650 and your “take home pay” would be £36,350.  If you took an £8,000 salary with a £150,000 dividend, you would pay £8,000 more tax under the new rules!

There are a couple of saving graces to this…… firstly a cut in corporation tax and secondly an extension of the basic rate band so that higher rate tax only kicks in at £43,000, or £48,000 if you include the dividend allowance.  Equally, because there will be no grossing up of dividends like there was in the past so the amount being taxed (even though you have drawn the same amount) will be lower, even if the applied rate is higher.

The other bonus is that though these changes are coming, they aren’t effective until April.  Therefore we will be speaking to our affected clients so together we can plan around this as much as we can.  This may mean taking more dividends in the current year and less next year, but this needs to be reviewed on an individual basis as there are complex factors at play, such as cash flow, payments on account, differing tax rates and tapering away of personal allowances.

The idea with these changes is to remove the preferential tax treatment for this well-established method of profit extraction for small businesses through incorporation.  While it is an admirable idea to address imbalances in the system, a little warning would have been nice Mr Chancellor, as this is the go-to remuneration strategy for the majority of small companies!  The Treasury’s plan is to reduce “Tax motivated incorporation”.  Let’s not forget that it was tax policy that ‘forced’ (note the inverted commas) businesses to incorporate back in 2002 when the first £10,000 of profits were free of tax.  To be fair though, that was Gordon Brown, so it’s one thing we can’t blame on George Osborne.  Even though this rebalancing act reduces the tax savings from operating as an incorporated entity, it may still save a significant amount of tax, just not as much perhaps.  Of course there are more reasons to incorporate, outside of the tax treatment – if you would like to discuss the benefits and drawbacks of incorporation, get in touch.

Restricted Loan Interest Relief on Buy-to-Lets

The basic principles of calculating how much profit to tax, whether it be from a trade or property, has always been that you add up all the income, take off all the expenses, adjust for any tax jiggery-pokery (as required by tax law of course) and that’s the profit you pay tax on.  Well, when it comes to residential property, it’s being turned upside down!

From April 2017 higher and additional rate taxpayers will no longer be able to deduct all the finance costs they incur (mortgage interest and fees) against their rental income.  There will be gradual reduction over the next 4 years so that the finance costs are only a deduction at basic rate of tax, not higher or additional rate.

People are being taxed on income at one rate and getting relief on expenses at another (lower) rate.  In a budget that is supposedly about addressing imbalances, this doesn’t seem fair (I know… life’s not fair!) and seems to specifically insert an imbalance that wasn’t even there in the first place.

Wear and Tear Allowance

There is a bit of a sweetener in store for some property lessors though.  In the past, there has been no relief for expenses incurred on fixtures and fittings (including carpets and white goods) on properties that aren’t fully furnished.  While fully furnished properties were eligible for an allowance for wear and tear at 10% of rent income, this was not available for partly furnished properties.  Well the wear and tear allowance is disappearing and all properties, whether furnished or unfurnished (including partly) will benefit from relief for the actual costs incurred of replacing furnishings.

Pension Relief

Currently there is a £40,000 annual allowance for pension contributions (both personal and employer).  From April 2016 there will be a taper of this allowance for those with adjusted net income of over £150,000.  The allowance will be reduced by £1 for every £2 of income, down to a minimum of £10,000.  This is to pay for the increased inheritance tax nil rate band (see later) but the Government are in consultation about pensions in the longer term and are reviewing whether there is a case to be made for widespread changes to pensions relief, so watch this space!

Business Tax

Corporation Tax Rates

You would be forgiven for thinking “Hang on, didn’t corporation tax rates just go down?!”.  The reason you would be forgiven is that you would be totally correct!  The large company and small company rates were as recently as April 2015 aligned at 20% and yesterday the Chancellor announced a further reduction to 19% from April 2017 and 18% from April 2020.  For the next few years the rates will be in line with the small company rate from 10 years ago, although you may remember that the large company rate was 30% then, so there is a significant saving for larger companies.  This reduction in the rate is likely (call me cynical) a peace offering over the minimum wage changes which will be detailed later.

Annual Investment Allowance

You’re probably aware of the Annual Investment Allowance which was introduced in 2008 which allows businesses to write off the cost of most plant and machinery (not cars) against profits, up to a total annual limit.  Well since then we have been riding the AIA wave (figuratively, of course) as the rates have gone up and down, and up, and up, and then threatened to come crashing down… Currently it is set at £500,000 however it was originally planned to plummet (yes, it’s dramatic isn’t it!) down to £25,000 in January 2016.  Fear not! From January 2016 the level is set permanently at £200,000 p.a.  (I say permanently, is anything ever permanent in tax?!).  This will apply to all purchases after 1 January 2016 and as you would expect, the transition rules are pretty complicated!  If you are thinking of purchasing any large equipment, please do get in touch because the timing may be critical to how much accelerated tax relief you can get.

Corporation Tax Relief for Goodwill

George Osborne seems to have a thing about goodwill!  You might remember that in the Autumn Statement of 2014 he removed corporation tax relief on goodwill acquired from a related business, such as when a sole trader ore partnership incorporated into a limited company.  Well this time he’s gone one step further and withdrawn relief for all goodwill and customer related intangible asset purchases, being from a related party or a third party, even in an arm’s length transaction.  Previously, the write off the asset in accordance with the company’s accounting policy was deductible for tax purposes but no more!  Relief will continue to be allowed for historical purchases of these intangible assets, but the new rules will prohibit release for any acquired after 8 July 2015.

Capital Taxes

Capital Gains Tax

Despite widespread speculation, capital gains tax has escaped from the Budget unscathed!  There had been concerns about the possible withdrawal or reduction in Entrepreneur’s relief, whereby sale of business investments are taxed at the low rate of 10% but there was no announcement of this.  Perhaps the announcements on dividends and goodwill were enough for small, owner-managed businesses to cope with in one Budget!

Inheritance Tax Nil Rate Band

This was the shock of the Budget….. no actually, it wasn’t as it’s been circulating in the media for weeks.  An additional nil-rate band will be introduced where a residence is passed onto direct descendants, such as children or grandchildren.  This will be initially £100,000 (on top of the standard £325,000 nil-rate band) from April 2017, rising to £175,000 from April 2020.  This effectively means that an individual with over £175,000 of their estate value being their residence will have a nil-rate band of £500,000.  Subject to a technical consultation (which roughly translates to: ‘we haven’t quite thought this through yet’) the allowance will still be available when a person downsizes or ceases to own a home from 8 July 2015 and assets of the equivalent value (such as cash) are transferred to descendants instead.

As one of the key manifesto promises of the Conservatives, this was always going to be introduced pretty quickly.  While critics will complain that this benefits the super-rich, the measures are expected to keep the same amount of estates within inheritance tax at the same levels as in 2014/15 of around 37,000.  House price rises have meant that without the introduction of this additional allowance, 63,000 estates would be expected to fall into inheritance tax by 2020/21.  Plus, the extra allowance will be withdrawn on a sliding scale for all estates over £2m.

Non-Domiciles
A very political area of tax…. crackdowns are being made in this area to prevent the likes of Roman Abramovich avoiding (not evading, that would be illegal and we wouldn’t allege such a thing) tax.  Individuals who have been resident in the UK for 15 out of the last 20 years will not be able to use the “domicile” rules which affect capital gains tax, inheritance tax and income tax.  Historically, they have been able to pay tax on the “remittance basis” i.e. only pay UK tax on foreign income and gains, the proceeds of which are brought into the UK.  Going forward, worldwide income and gains for these people will be taxable in the UK, even if not remitted into the UK, and they will be subject the UK inheritance tax.

Other Matters

 

National Living Wage

This is not a new concept, as it has been reported in the media and by opposition politicians for a while.  It would appear the Government has accepted that the minimum wage isn’t really enough for most people to live on and for April 2016 there will be a National Living Wage (NLW), which will be 50p higher than the National Minimum Wage (NMW) at that point.  It will operate as a premium on top of the NMW and will only be applicable to those aged over 25.  Apparently, people over 25 working 35 hours a week will see their gross pay increase by around a third compared to 2015/16 (over £5,200 in cash terms).  While great news for employees, this will no doubt mean additional costs for employers, large and small, but there is a silver lining….

Employment Allowance

In order to absorb some of the additional costs that the NLW will be incurred by employers, the Employment Allowance will be increased from April 2016 to £3,000 per year.  You may remember the £2,000 allowance being introduced in April 2014 which can be used against Employers’ National Insurance (NI) contributions as due through the payroll.  It’s free money, so we’re not complaining!  Remember that related businesses may only be entitled to one allowance between them, so do get in touch if you think this might apply to you.  Also from April 2016 companies where the director is the sole employee will not be eligible to claim the allowance, however many probably aren’t anyway as they are likely taking a wage that is below the NI threshold, and topping up with dividends…. (if this is you, you may wish to read the “Dividend Tax Allowance” section above).

That’s a pretty thorough roundup of the key points of the budget, but if you want more detail, please head to our full summary here.

If you have any queries, please get in touch on 0116 242 3400

Katie Kettle – Technical Manger
Katie Kettle Colour

A new Register required for every limited company, and a few other legal changes that will actually “cut red tape”!

Mercia Group Blog - Topical news and stories for accountants

Last year I wrote a Mercia Blog post on what was then called the “Small Business, Enterprise and Employment Bill” – the statistics show that this was one of the least read posts ever written but, given the excitement of that title, this would surprise no-one! 

The Bill received Royal Assent on 26 March 2015 and soon its effects will be felt. No attempt is being made in this blog to show any particular detail but we are merely outlining a small number of the most important issues.

View original post 373 more words

HMRC Tax Repayment Scams

Over the past week we have seen the following HMRC Tax Repayment scams sent to a client and an employee. 

Our employee received the following to her personal email address:

Dear Taxpayer,

*Refund Amount : GBP 390.34

>> Your *Refund Reference Number is: Ref/83900/2014 <<

*************************
Account ID: 748200162
E-mail ID: 930155328
*************************

NOTE: If you’ve received an Income Tax ‘repayment’ it will either be following a claim you’ve made or because
HM Revenue & Customs has received new information about your taxable income or entitlement to allowances.
The refund may come through your tax code or as a payment and could relate to the current tax year or earlier years.

CLICK HERE to submit your tax refund request

Thank you,
HM Revenue & Customs

A client also received a similar email below:

Dear Customer,
After the last annual calculations of your fiscal activity we have discovered
that you are eligible to receive a tax refund of GBP 193.55.
Kindly complete the tax refund request and allow 1-3 working days to process it.

Please download the document attached to this email and confirm your tax refund.

A refund can be delayed for a variety of reasons.
For example: Submitting invalid records or applying after the deadline.

Yours sincerely,
Edward Troup
Tax Assurance Commissioner.

Please do not reply to this e-mail as this is only a notification. Mail sent to this address cannot be answered.

This email had an attachment which most likely contained a virus, if you receive any emails similar to these please delete them and do not open any attachments. HMRC will never send details of a tax rebate, or ask you to disclose information, by email. Report scam emails here: http://ow.ly/zo66o 

Budget 2015

George Osborne presented the final Budget of this Parliament on Wednesday 18 March 2015.

It is possible that some of the proposals outlined in the Budget will not come to fruition unless the Conservative Party is in power after the election, although Ed Balls has indicated that there was nothing in the “pretty empty” Budget that Labour would reverse if it won power.

Our blog focuses on the main issues likely to affect you, your family and your business. If you have any questions please do not hesitate to contact us for advice.  For our full Budget summary, visit our website here.

Main Budget tax proposals

  • Increased personal allowances
  • The introduction of a new Personal Savings Allowance
  • Changes to ISAs including the introduction of a new type of ISA for First Time Buyers
  • Changes to pensions
  • Entrepreneur’s Relief – changes to qualifying conditions

Personal tax

The personal allowance for 2015/16

For those born after 5 April 1938 the personal allowance will be increased to £10,600. For those born before 6 April 1938 the personal allowance remains at £10,660.  The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 that was brought in a few years ago will continue. This is only a small increase in the personal allowance from the current levels.  We weren’t expecting much of a change, as the personal allowance increased so much early on in the Coalition’s Parliamentary term.

Starting rate of tax for savings income

From 6 April 2015, the maximum amount of an eligible individual’s savings income that can qualify for the starting rate of tax for savings will be increased from £2,880 to £5,000, and this starting rate will be reduced from 10% to 0%. These rates are not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit, so mainly affects the older generations with modest pension income.  It is also a useful tax break for director-shareholders who extract their share of profits from a company by taking a low salary and the balance in dividends.  This is because dividends are taxed after savings income and thus are not included in the individual’s ‘taxable non-savings income’.

Personal Savings Allowance

The Chancellor announced that legislation will be introduced in a future Finance Bill to apply a Personal Savings Allowance to income such as bank and building society interest from 6 April 2016.  The Personal Savings Allowance will apply for up to £1,000 of a basic rate taxpayer’s savings income, and up to £500 of a higher rate taxpayer’s savings income each year, but will not be available for additional rate taxpayers.  The Personal Savings Allowance will provide basic and higher rate tax payers with a tax saving of up to £200 each year and will be in addition to the tax advantages currently available to savers from Individual Savings Accounts (ISAs).  In reality, this means that most people will pay no tax at all on their interest come.

The end of tax deduction at source on interest

As a result of the above Personal Savings Allowance proposals, and wider changes to the tax return system, from April 2016 the automatic deduction of 20% income tax by banks and building societies on non-ISA savings will cease.  It is as yet unclear how this will work in practice, such as how the tax will be collected if not at source by the bank, if it is in fact due.  We eagerly await further information from the Government/HMRC.

Transferable Tax Allowance

From 6 April 2015 married couples and civil partners may be eligible for a new Transferable Tax Allowance whereby a fixed amount of the personal allowance (up to 10%, being £1,060) is transferred from one spouse to another.  Unfortunately, the option to transfer will only be available to couples where neither pays tax at the higher or additional rate.  For those couples where one person does not use all of their personal allowance the benefit will be up to £212 (20% of £1,060).  Eligible couples can now register their interest for marriage allowance at GOV.UK/marriageallowance.

Help to Buy ISA

The government has announced the introduction of a new type of ISA, the Help to Buy ISA, which will provide a tax free savings account for first time buyers wishing to save for a home.  For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings.  Though, as an ISA, this will benefit from tax-free status, the likelihood is that individuals who will benefit from this scheme will have savings income of less than £1,000 and it would therefore be covered by the Personal Savings Allowance anyway.  Help to Buy ISAs will be subject to eligibility rules and limits, which are included in detail on our full Budget summary.

Pensions saving

There is an overall limit, known as the lifetime allowance, on the total amount of tax relieved pension savings that an individual can have over their lifetime. The Chancellor has now announced that for tax year 2016/17 onwards the standard lifetime allowance will be reduced from £1.25 million to £1 million.  Fixed and individual protection regimes will be introduced alongside the reduction in the lifetime allowance to protect savers who think they may be affected by this change.  The lifetime allowance will be indexed annually in line with CPI from 6 April 2018.

Pensions – changes to access to pension funds

The Taxation of Pensions Act has recently been enacted.  It provides that individuals aged 55 or over can access their money purchase pension savings as they choose from 6 April 2015.  The legislation gives the flexibility to either purchase an annuity or draw down periodically on the pension fund.  The fundamental tax planning point arising from the changes is that a person can decide when to access funds depending upon their other income in each tax year.

Pension freedoms to be extended to people with annuities

The Chancellor announced just before the Budget a new flexibility for people who have already purchased an annuity.  This aims to give those who have already purchased an annuity the flexibility that comes from the new rules.  From April 2016, the government will remove the restrictions on buying and selling existing annuities to allow pensioners to sell the income they receive from their annuity for a capital sum.  Individuals will then have the freedom to take that capital as a lump sum, or place it into drawdown to use the proceeds more gradually, in the same way as those under the new rules.

Business tax

Corporation tax rates

As announced a number of years ago, from 1 April 2015 the main rate of corporation tax, currently 21%, will be reduced to 20%.  As the small profits rate is already 20%, the need for this separate code of taxation disappears. The small profits rate will therefore be unified with the main rate.

Annual Investment Allowance (AIA)

The AIA provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business up to an annual limit and is available to most businesses.   The maximum annual amount of the AIA was increased to £500,000 April 2014 until 31 December 2015, however it was due to return to £25,000 after this date. £25,000 has been considered by us to be a very low figure and many small businesses have capital expenditure in excess of this annually.  Thankfully, the Chancellor announced that following conversations with business groups, this would be addressed in the Autumn Statement and would be set at a much more generous rate.

Research and Development (R&D) tax credits

As previously announced, the government will increase the rate of the ‘above the line’ credit from 10% to 11% and will increase the rate of the SME scheme from 225% to 230% from 1 April 2015.  We work closely with an R&D specialist to decide whether your business is eligible to claim the credits, and to ensure that any claim is maximised.  If you think that the activities you undertake could qualify, please get in touch and we will be able to advise further.

Construction Industry Scheme (CIS) improvements

At Autumn Statement the government announced it would make a number of changes to the CIS. The aim of the changes is to reduce the administrative burden and related cost burden on construction businesses, which of course we welcome!  From 6 April 2015 the requirement for a contractor to make a return to HMRC even if the contractor has not made any payments in a tax month is removed.  No nil returns will need to be filed – great news.  From 6 April 2016 mandatory online filing of CIS returns will be introduced.  We can’t see this making a major difference as most CIS returns that we come across with clients are already filed online, through third party software such as Sage, or on the HMRC website.

Class 2 National Insurance contributions (NIC)

From 6 April 2015 liability to pay Class 2 NIC will arise at the end of each year as part of the tax return, based on the number of weeks self-employed.  Those with profits below a threshold will no longer have to apply in advance for an exception from paying Class 2 NIC.  Instead they will have the option to pay Class 2 NIC voluntarily at the end of the year so that they may protect their benefit rights.

Corporation tax relief for goodwill on incorporation

An anti-avoidance measure was announced at Autumn Statement, and is effective from 3 December 2014, to restrict corporation tax relief where a company acquires internally-generated goodwill and certain other intangible assets used in a business from ‘related persons’.  In addition, individuals will be prevented from claiming Entrepreneurs’ Relief (ER) on disposals of goodwill when they transfer the business to a related company.  Capital gains tax will be payable on the gain at the normal rates of 18% or 28% rather than 10%. This had previously been a lucrative tax planning point for small businesses, so it is a shame to see it taken away, however the government considered that it was unfair to a business that had always operated as a company.  The annual exemption on capital gains will still be available, so approximately £11,000 of goodwill sold to a company will remain tax-free, as long as there are no other capital gains in the year.

Digital tax accounts

The government has announced some initiatives to ‘transform the tax system over the next Parliament’ by introducing digital tax accounts and removing the need for annual tax returns.  A digital tax account will supposedly enable individuals and small businesses to see and manage their tax affairs online.  This is probably the most surprising and controversial announcement for us.  As something that’s never been even hinted at before, it’s a complete curveball!  It is worth noting that this is only a suggestion currently – there has been no consultation as yet about how this would work for self-employed individuals or those with more complex tax affairs, rather than those simply with PAYE income and bank interest.  There is a lot of work to be done on the Government’s part to get a digital tax account in place even for those who aren’t currently in self-assessment, let alone those that complete a tax return.  We will just have to wait and see what develops with this one!

Katie Kettle Colour

Katie Kettle

Chartered Certified Accountant
Technical Manager

Autumn Statement 2014

Yesterday, George Osborne presented what was possibly the most important Autumn Statement of his time as Chancellor.

Many of the changes outlined were, as expected, highly political and therefore may not be relevant to the majority of taxpayers. Those measures will not be explored here as we will focus on the items that are more likely to be relevant to you.  Our full round-up of the Autumn Statement can be found here.

Personal Tax

From 6 April 2015 the personal allowance (tax free amount for individuals) will increase from the £10,000 it is currently, to £10,600.  The Chancellor had previously announced in March’s budget that the allowance would be £10,500 which in real terms is worth £20 to each person.

At the same time, the income level at which higher rate tax becomes payable will increase from £41,865 to £42,385 which is worth £104 to higher rate taxpayers.

Married couples and civil partners can transfer 10% of their unused personal allowance to their spouse, if neither are a higher or additional rate taxpayer.  This means the transferrable amount will increase to £1,060 for 2015/16 – potentially a benefit of £212 to couples in those circumstances.

ISAs were repackaged into NISAs in July 2014 and from 6 April 2015 the maximum tax free investment increases £240 from £15,000.  George also announced that surviving spouses will be able to invest inherited ISA funds from their deceased partner into their own ISA and maintain the tax free status.

Peer-to-peer loans are something that is increasing in popularity, particularly due to low levels of bank lending and the economy being in a position where growth is possible.  Unfortunately, not all businesses that are lent to will prosper and could result in the loan debt “going bad” for the lender.  From 6 April 2015, individuals will be able to obtain relief for these losses against any peer-to-peer income they have.

Major changes are ahead for pensions! A lot of this was announced previously by the Chancellor and the theme is that you will have choice and flexibility over what you do with your pension.  There is no longer a requirement to purchase a lifetime annuity.  There is an option to allocate part of a pension fund into a “flexi-access drawdown account” from which any amount (which would be subject to tax) can be taken at any time, or to take a series of lump sums directly from the pension fund.  The rules relating to pensions are complex so we recommend you speak to an independent financial advisor.  If you do not have a financial advisor, please get in touch and we will introduce you to our preferred advisors.

Business Tax

In line with the plan that has been in place for a number of years now, from 1 April 2015 the main rate of corporation tax will be reduced from 21% to 20% – this means that effectively we will have a flat rate of corporation tax across all sizes of company.

Relief on research and development for companies will increase from 225% to 230%.  While this increase is fairly insignificant, it serves as a reminder that huge tax breaks are available for companies undertaking R&D activities.  This is a highly specialist area and we can help you to maximise the amount you could claim under the scheme.  R&D relief may be available to you if you work on projects that are aiming for a technological or scientific improvement on what is already out there.  If you think you may qualify for this generous relief, please get in touch.

One of the major announcements for those in the construction industry is improvements to the operation of the Construction Industry Scheme (CIS).  We welcome the proposals to simplify and improve the compliance and turnover tests that will allow more subcontractors to access and keep gross payment status (this is to receive money from their contractors without CIS deduction).  For companies, getting a refund of the CIS suffered is a lengthy process, so it will be a great thing if more subcontractors can be paid gross.

From 6 April 2015 self employed persons will pay their Class 2 National Insurance along with their income tax and Class 4 National Insurance through their tax return, based on the number of weeks of self employment.  For those that wish to spread the cost (currently Class 2 NI can be paid monthly by direct debit), HMRC will retain a facility for this.  Those with income of less than the relevant threshold will no longer have to apply for an exception, reducing the paperwork burden on self employed people with low income.

One of the announcements that could have a detrimental effect on small business is the abolition of corporation tax relief for goodwill on incorporation.  Currently, when a sole trader or partnership transfers their business to a limited company, the goodwill in the business is sold to the company.  The company then gets corporation tax relief as the goodwill is written off over the years, and the individual(s) pay capital gains tax at the Entrepreneur’s rate of 10% of the sale proceeds (after deducting the annual exemption).  Both of these preferential treatments are being taken away – companies will no longer get corporation tax relief and individuals won’t get Entrepreneur’s Relief so will pay Capital Gains Tax at 18% or 28%, depending on their level of income.  The justification for this is that the Government feel the old system was unfair to businesses that had always operated as companies.

Employment Taxes

From 6 April 2015, employers will no longer have to pay Employer NIC on employees aged under 21 on amounts paid to them under £42,385 per annum.  As most 21 year olds are paid much less than this, this is a real saving for employers that would ordinarily have to pay 13.8% on earnings over approximately £150 per week.

Another Employer NIC break was announced for apprentices up to 25 years old on earnings in the same way as above, however this will not come into force until 6 April 2016.

The Employer Allowance which can be offset against the first £2,000 of Employer NIC remains in force for next year.  If you have not yet claimed the allowance for the current tax year, please contact us, it’s not too late!

Capital Taxes

As mentioned in the Business Taxes section, a major change that affects small businesses going forward is the removal of Entrepreneur’s Relief when transferring from a sole trade or partnership to a limited company.

A positive step in this area is that gains which are eligible for Entrepreneur’s Relief but are deferred through Enterprise Investment Scheme or Social Investment Tax Relief will remain eligible for the Entrepreneur rate when the gain is realised.

Another, and probably the headline announcement of the Autumn Statement is the major reform of Stamp Duty Land Tax (SDLT).  From today (4 December 2014) each new SDLT rate will be payable only on the proportion of the property value which falls within each band.  This is a huge step in the right direction as it removes the distortion in the current system, where the amount of tax due jumps at each at the thresholds.  Where contracts have been exchanged but not completed on or before 3 December 2014, the purchaser will have the option of the old or new structure.  Anyone purchasing a property under £967,000 (which is the majority of buyers) will benefit from these changes.  For example, a purchase of £130,000 will give a saving of £500, and a purchase at £275,000 will give a saving of £4,500!  This is great for buyers and sellers alike – while the buyers benefit from the lower tax, sellers will benefit too as buyers will no longer be put off purchasing just above one of the limits, as the cliff edge approach will no longer apply.

Other Matters

A major headline that was expected was the devolution of many tax powers to Scotland.  The Chancellor went further and announced proposals for devolution to Northern Ireland and Wales also, albeit not as devolved as Scotland.

A particularly relevant announcement is the Direct Recovery of Debts (DRD) powers given to HMRC.  Under this they will be able to recover outstanding debt directly from the bank accounts of taxpayers.  As scary as that sounds, we are assured there are a number of safeguards in place to protect taxpayers including a minimum debt limit of £1,000, a guarantee that all debtors will receive a face-to-face visit from HMRC before the debt is considered for DRD, that HMRC will not take any more debt than would leave the taxpayer with less than £5,000 in the bank and thankfully, the option of appeal to County Court.  HMRC say they will use this power only in a small minority of cases (approximately 17,000 per year out of 400,000 debt cases – around 4%).  If you are struggling with tax debt, please get in contact with us – we can help you work with HMRC to come to an agreement which would hopefully avoid them resulting to these powers.

Mark and Mike’s Half Marathon 2014

Mark Torr and Mike Waterfield completed Leicester’s Half Marathon on 26.10.2014 supporting torr waterfield’s chosen charity of the year ‘Keep The Beat’. They completed the half marathon in 2 hours and 6 minutes crossing the line together. It would be great if you would congratulate their sucess and make a donation small or large; it’s all going to a great charity that fully deserve it. You can donate via the just giving website here or if you prefer you can donate by SMS, simply text: ‘MMLM47’ followed by the amount you wish to donate to ‘70070’.

eg,  To donate £10:                         To donate £20:

MMLM47 £10  to 70070           MMLM47 £20  to 70070 Marathon correct

Many thanks for your kind support.

National Minimum Wage Changes from 1 October 2014

From 1 October 2014 the National Minimum Wage will increase as follows:

• £6.50 an hour for workers aged 21 or over – previously £6.31
• £5.13 an hour for workers aged 18 to 20 – previously £5.03
• £3.79 an hour for workers aged 16 to 17 – previously £3.72
• £2.73 an hour for apprentices under 19 or in their first year – previously £2.68

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

Annual Tax Summary
HMRC will be sending Personalised Tax Summaries to around 24 million UK taxpayers from October 2014 onwards.
The new tax summary is only for information. You and your employees don’t need to contact HMRC to check it.
The Annual Tax Summary includes information about personal taxes that either:
• HMRC have records for e.g. through PAYE or
• reported on a tax return

If you have any questions on either of the above issues, please do not hesitate to leave a comment and we will answer any queries.