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Budget – 3 March 2021

04/03/2021 By Emma Stevens

BUDGET HIGHLIGHTS

  • The main rate of corporation tax will be increased to 25% from April 2023 for companies with profits of at least £250,000. At the same time, a new small companies’ rate of 19% will apply to companies with profits of up to £50,000.
  • For the two years from April 2021, companies investing in qualifying new plant and machinery will benefit from a 130% first-year capital allowance.
  • The personal allowance will rise to £12,570 and the higher rate threshold will be £50,270 for 2021/22 and both will then be frozen for the next four years.
  • The capital gains tax annual exemption, inheritance tax rate nil rate bands and pensions lifetime allowance will all be frozen at their current levels until April 2026.
  • The exemption from stamp duty land tax on the first £500,000 of residential property value will be extended to 30 June 2021 and then replaced by a £250,000 exemption until 30 September 2021.
  • The coronavirus job retention scheme will be extended in full until 30 June 2021 and will be phased out over the following three months.
  • The self-employed income support scheme will also be extended at its current level with a fourth grant covering the period February to April. A fifth grant will cover the period May to September, but this will be at a lower level for those who have seen less than a 30% drop in turnover.
  • The business rates holiday for retail, hospitality and leisure businesses will be extended for three months and will then be reduced to a 66% relief until the end of March 2022.
Budget highlights1Value added tax11
Introduction2Tax avoidance and evasion12
Personal taxation and investments3Coronavirus measures14
Capital taxes7National insurance contributions16
Business taxes8  

@ Copyright 3 March 2021. All rights reserved. This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

Tax – text on wooden cubes, on wooden background. flower in a pot, all that’s left after taxes

INTRODUCTION

On some counts this Budget was Rishi Sunak’s 15th major announcement since his first Budget, just under a year ago. During this period, the pandemic has dominated the Chancellor’s actions and this was true of his latest Budget. To no small degree the framework for Mr Sunak’s latest appearance at the despatch box had been set by the data-dependent (but date-filled) road map outlined by the Prime Minister nine days before the Budget.

Mr Sunak extended the main employment support schemes to the end of September. The most significant of these, the coronavirus job retention scheme (CJRS – furlough scheme), was covering 4.7 million employments at the end of January with a cumulative cost of nearly £54 billion. According to the Chancellor, the government’s total pandemic-related spending during 2020/21 and 2021/22 will amount to £407 billion. To put that figure into context, it is £14 billion more than the total amount that income tax will produce over the same two years, according to the Office for Budget Responsibility (OBR).

Such spending has left a hole in the UK’s public finances that the Chancellor has regularly said must be addressed. However, many outside bodies, from the International Monetary Fund to the Institute for Fiscal Studies, have told him that now is not the time to raise taxes. Their argument is that he should only address the deficit (£355 billion in 2020/21) once the economic recovery is firmly entrenched. In this Budget, Mr Sunak has largely followed that cautious advice, initially limiting his tax rises to the old stealth option of freezing most personal tax allowances and bands until 2026. However, from 2023 he has been bolder, with no less than a 6% increase in the rate of corporation tax. More changes may be aired on 23 March 2021, so-called ‘Tax Day’.    

PERSONAL TAXATION

INCOME TAX

Main personal allowances and reliefs2021/222020/21
Personal allowance1£12,570£12,500
Married couple’s / civil partner’s transferable allowance£1,260£1,250
Married couple’s / civil partner’s allowance at 10%2maximum£9,125£9,075
(if at least one born before 6/4/35)minimum£3,530£3,510
Blind person’s allowance£2,520£2,500
Rent-a-room tax-free income£7,500£7,500
Registered pension schemes  
Lifetime allowance£1,073,100£1,073,100
Annual allowance3£40,000£40,000
Money purchase annual allowance£4,000£4,000

1 Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.
2 Reduced by £1 for every £2 of adjusted net income over £30,400 (£30,200 for 2020/21), until the minimum is reached.

3 Reduced by £1 for every £2 of adjusted income over £240,000 to a minimum of £4,000, subject to threshold income being over £200,000.

Income tax rates and bands2021/222020/21
UK taxpayers excluding Scottish taxpayers’
non-dividend, non-savings income
20% basic rate on first slice of taxable income up to£37,700£37,500
40% higher rate on next slice of taxable income over£37,700£37,500
45% additional rate on taxable income over£150,000£150,000
All UK taxpayers
Starting rate at 0% – on band of savings income up to4£5,000£5,000
Personal savings allowance at 0%: 
basic rate taxpayers
higher rate taxpayers
additional rate taxpayers
£1,000 £500
£0
£1,000 £500
£0
Dividend allowance at 0% tax – all individuals£2,000£2,000
Tax rates on dividend income:       
basic rate taxpayers
7.5%7.5%
higher rate taxpayers32.5%32.5%
additional rate taxpayers38.1%38.1%

4 Not available if taxable non-savings income exceeds the starting rate band.

Scottish taxpayers’ non-dividend, non-savings income2021/222020/21
19% starter rate on taxable income up to£2,097£2,085
20% basic rate on next slice up to£12,726£12,658
21% intermediate rate on next slice up to£31,092£30,930
41% higher rate on next slice up to£150,000£150,000
46% top rate on income over£150,000£150,000
Trusts                                                  2021/222020/21
Standard rate band generally£1,000£1,000
Dividends (rate applicable to trusts)38.1%38.1%
Other income (rate applicable to trusts)45%45%
High income child benefit charge: 1% of benefit per £100 of adjusted net income of £50,000 – £60,000.


PERSONAL TAXATION AND INVESTMENTS

Income tax

The personal allowance will rise to £12,570 and the higher rate threshold for 2021/22 will increase to £50,270, as previously announced. From 2022/23 to 2025/26, both the personal allowance and higher rate threshold will be frozen. In Scotland, the higher rate threshold for non-savings, non-dividend income will rise to £43,662 in 2021/22 as announced in the Scottish Budget.


SAVER

Don’t lose your personal allowance. Your personal allowance of £12,570 in 2021/22 is reduced by 50p for every pound by which your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.


National insurance contributions (NICs)

The NIC upper earnings limit and upper profits limit will remain aligned to the higher rate threshold at £50,270 for 2021/22 and through to 2025/26.

Taxation of payments under the self-employment income support scheme (SEISS)

Grants from the SEISS made on or after 6 April 2021 will be taxed in the year of receipt regardless of the accounting year end. Legislation in the Finance Bill will ensure this measure has effect for the tax year 2020/21 and for subsequent tax years.

Income tax exemption for employer-reimbursed COVID-19 tests

There will be an income tax exemption for payments that an employer makes to an employee to reimburse the cost of a relevant coronavirus antigen test in 2020/21 (retrospectively) and 2021/22. The corresponding NIC disregard is already in force for 2020/21 and will be extended to 2021/22.  

Easement for employer-provided bicycles exemption

There will be a time-limited easement to the employer-provided cycle exemption to remove the requirement that employer-provided cycles be used mainly for journeys to, from or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020. The easement will remain in force until 5 April 2022.

Mortgage guarantee scheme

A new residential mortgage guarantee scheme will run from April 2021 to December 2022, aimed at increasing availability of 91% to 95% loan-to-value mortgages. The maximum property value will be £600,000 and mortgages must be arranged on a repayment basis.

Extension of social investment tax relief (SITR)

The government will extend the operation of SITR to April 2023.

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2021/22 will remain at £20,000 and the corresponding limit for junior ISAs (JISAs) and child trust funds (CTFs) will stay at £9,000.


THINK AHEAD

The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2020/21 and 2021/22 – use it or lose it.


Green National Savings & Investments (NS&I) product

NS&I will offer a green retail savings product in summer 2021. It will be closely linked to the UK’s sovereign green bond framework, details of which are to be published in June 2021. The first green gilt will also be issued this summer.

Lifetime allowance

The lifetime allowance for pension savings will be frozen at £1,073,100 until April 2026.


THINK AHEAD

The lifetime allowance is frozen at £1,073,100 until April 2026. Regularly review the value of your pension benefits and any ongoing contributions.


Taxation of collective money purchase pensions

Legislation will ensure that collective money purchase pension schemes can operate as registered pension schemes for tax purposes. These are also known as collective defined contribution schemes (CDCs), to be introduced by the Pension Schemes Act 2021.

CAPITAL TAXES

Capital gains tax (CGT) annual exempt amount

The annual exempt amount for individuals and personal representatives will remain at £12,300 until 5 April 2026, and the amount for most trustees will likewise remain at £6,150 (minimum £1,230).

Inheritance tax (IHT)

The IHT nil rate band will remain at £325,000 until 5 April 2026. The residence nil rate band (RNRB) will likewise stay at £175,000 and the RNRB taper will continue to apply where the value of the deceased’s estate is greater than £2 million.

Stamp duty land tax (SDLT) temporary rates

The temporary increase to £500,000 to the SDLT nil rate band for residential property in England and Northern Ireland is extended until 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000 and will then return to £125,000.

Non-UK resident SDLT

As previously announced, there will be an SDLT surcharge on non-UK residents buying residential property in England and Northern Ireland from 1 April 2021. The surcharge will be 2% above the existing residential rates.

SDLT on slices of value (England & N Ireland)

Residential Property
To 30/06/202101/07/2021 – 30/09/2021From 01/10/2021%
Up to £500,000Up to £250,000Up to £125,0000
N/AN/A£125,000 – £250,0002
£500,001 – £925,000£250,001 – £925,000£250,001 – £ 925,0005
£925,001 – £1,500,000£925,001 – £1,500,000£925,001 – £1,500,00010
over £1,500,000over £1,500,000over £1,500,00012
Commercial Property
%
Up to £150,0000
£150,001 – £250,0002
Over £250,0005

First time buyers: 0% on first £300,000 for properties up to £500,000 from 1/7/21
Non-resident purchasers: 2% surcharge on properties £40,000 or more
Residential properties bought by companies etc. over £500,000: 15% of total consideration, subject to certain exemptions


THINK AHEAD

CGT reform remains on the agenda. Now may be a good time to review whether to realise your gains before the tax regime becomes harsher.


BUSINESS TAXES

Corporation tax, diverted profits tax and bank surcharge

The main rate of corporation tax will remain at 19% for the year beginning 1 April 2022 and will rise to 25% from April 2023 for businesses with profits of £250,000 and over. The rate for businesses with profits of £50,000 or less will remain at 19% and there will be a marginal taper for profits between £50,000 and £250,000.

These thresholds are proportionately reduced for the number of associated companies and for short accounting periods. The rate of diverted profits tax will increase to 31%. The government will review the bank surcharge rate of 8% in light of the corporation tax increase.

Loss relief

The period over which incorporated and unincorporated businesses may carry back trading losses will be extended temporarily from one year to three years.

This extension will apply to a maximum £2 million of unused trading losses made in each of the tax years 2020/21 and 2021/22 by unincorporated businesses. The same maximum will apply separately to companies’ unused trading losses, after carry back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and for periods ending between 1 April 2021 and 31 March 2022.

The £2 million cap will be subject to a group-level limit, requiring groups with companies that have the capacity to carry back losses above £200,000 to apportion the cap between their companies.


THINK AHEAD

Your business might be entitled to a valuable R&D tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.


Research and development (R&D) tax credits

As previously announced, for accounting periods beginning on or after 1 April 2021, the amount of payable R&D tax credit that a small and medium-sized enterprise (SME) can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and NIC liability.

Super-deduction for investment in plant and machinery and 50% first-year allowances

Companies investing in qualifying new plant and machinery between 1 April 2021 and 31 March 2023 will benefit from new first-year capital allowances. Investments in main-rate assets – those that qualify for 18% writing down allowance (WDA) – will be relieved by a 130% super-deduction, while investments in assets qualifying for 6% WDAs will benefit from a 50% first-year allowance.

Annual investment allowance (AIA) extension

As previously announced, the temporary £1 million limit for the AIA will be extended again – to 31 December 2021.

Freeports

Eight new English freeports have been announced: East Midlands Airport, Felixstowe and Harwich, Humber Region, Liverpool City Region, Plymouth, Solent, Thames and Teesside. Several tax reliefs will be available in designated tax sites within the freeports once these sites have been confirmed.

  • Companies investing in plant and machinery will qualify for a 100% enhanced capital allowance. This will have effect for investment incurred on or after their designation as tax sites until 30 September 2026.
  • An enhanced 10% rate of structures and buildings allowance will be available for constructing or renovating non-residential structures and buildings. The structure or building will have to be brought into use by 30 September 2026.
  • Full relief from SDLT will apply until 30 September 2026 to the purchase of land for qualifying use in freeport tax sites in England once they have been designated.
  • Full business rates relief will be available to all new businesses and certain existing businesses that expand, until September 2026. Relief will apply for five years from when the business first receives relief.
  • Subject to parliamentary process, an employer NIC relief will be available for eligible employees from April 2022 until at least April 2026 and possibly up to April 2031.

Plant and machinery leases

Certain parts of anti-avoidance legislation affecting leases extended as a result of COVID-19 will be turned off. This will restore eligibility to claim capital allowances to the position as originally intended immediately before the date of the change in consideration due under the lease.

The change will affect leases only where a relevant change in consideration is implemented between 1 January 2020 and 30 June 2021. Either party may choose not to apply this treatment, the election for which will be binding on both parties. 

Off-payroll working

A technical change will address an unintended widening of the definition of an intermediary company in the off-payroll working rules legislation.

Changes to the rules regarding the provision of information by parties in the labour supply chain will make it easier for parties in a contractual chain to share information relating to the off-payroll working rules. The changes will allow an intermediary, as well as a worker, to confirm if the rules need to be considered by the client organisation.

The government will also amend a provision relating to fraudulent information to allow HMRC to take action against any UK-based party in the labour supply chain providing fraudulent information.


THINK AHEAD

If you want to take advantage of Time to Pay, make sure that you have adequate records to justify your claim to HMRC.


Withdrawal of London Inter-Bank Offered Rate (LIBOR)

References to LIBOR in certain leasing provisions will be replaced by ‘incremental borrowing rate’ as defined by generally accepted accounting practice (GAAP). A time-limited power will be introduced to allow any unintended tax consequences arising from the transition away from LIBOR and other benchmark rates to be addressed in secondary legislation. 

Landfill tax

The standard and lower rates of landfill tax will rise in line with RPI, rounded to the nearest five pence with effect from 1 April 2022.

Plastic packaging tax

A new plastic packaging tax will start on 1 April 2022 to encourage the use of recycled plastic instead of new plastic in packaging. As previously announced, the rate will be £200 per tonne of plastic packaging that contains less than 30% recycled plastic content.


THINK AHEAD

If COVID-19 has left your business with tax losses, you could benefit from the temporary facility to carry back trading losses for up to three years.


Tax treatment of business rates repayments

The repayments of business rates relief by some businesses will be deductible for corporation tax and income tax, as previously announced.

Interest and royalties

The legislation that gives effect to the EU Interest and Royalties Directive will be repealed. This legislation currently provides an exemption from withholding tax on intra-group interest and royalty payments between UK and EU companies. From 1 June 2021 withholding taxes will apply to payments of annual interest and royalties made to EU companies, subject to the terms of the relevant double taxation agreement.

Enterprise management incentives (EMI)

As previously announced, the government will extend until 5 April 2022 the time-limited exception ensuring that employees continue to meet the working time requirements for EMI schemes if they are furloughed or working reduced hours because of COVID-19.

VALUE ADDED TAX

Registration and deregistration thresholds

Until 31 March 2024 the VAT registration threshold will remain at £85,000 and the deregistration threshold will stay at £83,000.

VAT deferral new payment scheme

As previously announced, businesses that deferred VAT payments due between 20 March and 30 June 2020 will be able to pay them in 8 to 11 interest-free equal monthly instalments up to 31 March 2022.

Businesses may opt into the scheme until June 2021 and the number of instalments depends on the date of opting in. Businesses that do not choose this option must pay deferred VAT by 31 March 2021. A penalty will be charged where the deferred VAT is not paid or there is no arrangement to pay.

Tourism and hospitality

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions is extended until 30 September 2021. A new reduced rate of 12.5% will apply from 1 October 2021 to 31 March 2022, at which point the rate will revert to the 20% standard rate.

Making tax digital (MTD)

MTD will be extended to all VAT registered businesses with effect from 1 April 2022, as previously announced.


THINK AHEAD

VAT rules on cross-border trading have changed following the end of the EU exit transition period. Make sure you understand how your business has been affected.


TAX AVOIDANCE AND EVASION

Self-employment income support scheme (SEISS)

A 100% tax charge can be levied on individuals who receive SEISS payments to which they are not entitled. The provisions are being extended to enable HMRC to recover payments where an individual was entitled to the grant at the time of claim but subsequently ceases to be entitled to all or part of the grant.

Late submission and late payment of tax

The penalty regime for VAT and income tax self-assessment (ITSA) will be made points-based, so that a financial penalty will only be issued when the relevant threshold is reached. The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. Interest charges and repayment interest on VAT will be aligned with other tax regimes. These reforms will come into effect for:

  • VAT payers – from periods starting on or after 1 April 2022.
  • Taxpayers in ITSA with business or property income over £10,000 a year – from accounting periods beginning on or after 6 April 2023.
  • All other taxpayers in ITSA – from accounting periods beginning on or after 6 April 2024.

Electronic sales suppression (ESS)

The possession, manufacture, distribution and promotion of ESS software and hardware will become an offence. New ESS-specific information powers will enable HMRC to identify developers and suppliers in the ESS supply chain and access software developers’ source code.

Promoters of tax avoidance

A package of measures will strengthen existing anti-avoidance regimes and tighten the rules designed to tackle promoters and enablers of tax avoidance schemes.

Follower notice penalties

As previously announced, the rate of penalty that may be charged to people receiving follower notices as a result of using tax avoidance schemes will be reduced from 50% to 30% of the tax in dispute. A further penalty of 20% will be charged if the tax tribunal decides that the recipient’s continued litigation against HMRC is unreasonable. The changes will take effect from Royal Assent.

Tax conditionality

The renewal of certain licences will be conditional on applicants completing checks that confirm they are appropriately registered for tax, as previously announced. The licences concerned are those needed to drive taxis and private hire vehicles, operate private hire vehicle firms and deal in scrap metal. In Northern Ireland this will apply only to taxi licences.

The change will take effect from 4 April 2022 in England and Wales and from April 2023 in Scotland and Northern Ireland.

Unauthorised removal of goods

From the date of Royal Assent, a civil penalty will apply to traders who remove goods that have been seized from the trader’s premises or ‘in situ’ without prior authorisation from HMRC.

OECD reporting rules for digital platforms

The government will consult in summer 2021 on the implementation of OECD rules that will require digital platforms to send information about the income of their sellers to both HMRC and the sellers themselves.

OECD mandatory disclosure rules

The government will consult on the implementation of OECD rules to combat offshore tax evasion by facilitating global exchange of information on certain cross border tax arrangements.

Amendments to HMRC civil information powers

A new Financial Institution Notice will require financial institutions to provide information to HMRC about any specific taxpayer, without the need for approval from the independent tax tribunal.

Investment in HMRC

Additional government investment will enable HMRC to improve its IT systems to make the collection of tax and payments to taxpayers easier, to recruit additional compliance staff and to continue to fund compliance work.

CORONAVIRUS MEASURES

Coronavirus job retention scheme (CJRS)

The CJRS (furlough scheme) will be extended to run until 30 September 2021, providing employees with 80% of their current salary for hours not worked. Up to the end of June, the current 80% government payment level will be maintained (capped at £2,500 a month), with employers responsible for NICs and pension payments. The government payment will then drop to 70% in July and 60% in August and September (with the monthly cap reducing proportionately).

Self-employed income support scheme (SEISS)

The SEISS will also be extended to September 2021. A fourth SEISS grant will run from 1 February to 30 April, worth 80% of three months’ average profits (capped at £7,500). This grant will be claimable from late April.

A fifth grant, claimable from late July, will cover the period May to September. It will be worth 80% of three months’ average profits where the claimant’s turnover has dropped by 30% or more. Where the fall in turnover is less, the grant will be limited to 30% of profits (capped at £2,850). Eligibility for both grants will be extended to include those who were self-employed in 2019/20 and who have filed a tax return for that year.

Universal credit

The temporary £20 a week increase in universal credit will continue to be paid until 30 September 2021. The suspension of the minimum income floor (MIF) for self-employed claimants will continue until the end of July 2021. The MIF will be gradually reintroduced from August, but the DWP will use discretion not to apply it on an individual basis where a claimant’s earnings continue to be affected by COVID-19 restrictions.

Those claiming working tax credits will receive a one-off payment of £500.

Recovery loan scheme

From 6 April 2021, a new recovery loan scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. The scheme will be open to all businesses, including those that have already received support under the existing COVID-19 guaranteed loan schemes.

Restart grants

The government will provide restart grants in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gyms. Local authorities in England will be given an additional £425 million of discretionary business grant funding.

Business rates reliefs

The 100% business rates relief for eligible retail, hospitality and leisure properties in England will continue to 30 June 2021. It will be followed by 66% business rates relief from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties. Nurseries will also qualify for relief in the same way as other eligible properties.

NATIONAL INSURANCE CONTRIBUTIONS

NATIONAL INSURANCE CONTRIBUTIONS

  Class 1 Employees2021/222020/21
EmployeeEmployerEmployeeEmployer
NICs rate12%13.8%12%13.8%
No NICs for employees generally on the first£184 pw£170 pw£183 pw£169 pw
No NICs for younger employees/veterans1 on the first£184 pw£967 pw£183 pw£962 pw
NICs rate charged up to£967 pwNo limit£962 pwNo limit
2% NICs on earnings over£967 pwN/A£962 pwN/A

1 Employees generally under 21 years and apprentices under 25 years. Veterans in first 12 months of civilian employment from April 2021.

Employment allowance2021/222020/21
Per business£4,000£4,000

Not available if the sole employee is a director or employer’s NIC for previous year £100,000 or more.

 Earnings limits and thresholds2021/222020/21
WeeklyAnnualWeeklyAnnual
Lower earnings limit£120£6,240£120£6,240
Primary threshold£184£9,568£183£9,500
Secondary threshold£170£8,840£169£8,788
Upper earnings limit
(and upper secondary thresholds2)
£967£50,270£962£50,000

2 Employees generally under 21 years, apprentices under 25 years and veterans in first 12 months of civilian employment from April 2021.

Class 1A Employers2021/222020/21
Most taxable employee benefits13.8%13.8%
Class 2 Self-employed2021/222020/21
Flat rate£3.05 pw 
£158.60 pa
£3.05 pw 
£158.60 pa
Small profits threshold:
No compulsory NICs if profits do not exceed

£6,515 pa

£6,475 pa
Class 4 Self-employed2021/22%2020/21%
On profits£9,568–£50,270 pa9£9,500–£50,000 pa 9
 Over £50,270 pa 2Over £50,000 pa 2
Voluntary2021/222020/21
Class 3 flat rate£15.40 pw 
£800.80 pa
£15.30 pw 
£795.60 pa

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Budget 2021 – Key points

03/03/2021 By Emma Stevens

To the casual observer, the first Budget of 2021 appeared to have been fully revealed before the Chancellor even reached the despatch box. The relentless flow of pre-Budget rumours, kite-flying and red herrings makes it is all the more important to forget what was said before 12.30 on 3 March and concentrate on what Rishi Sunak did deliver in his speech.

Businessman removes wooden blocks with the word Tax. The concept of reducing the tax burden. Tax avoidance. Costs and expenses of the business. Taxation. Pay off debt. Freedom from illegal taxes

The real – as opposed to rumoured – announcements included:

  • The main rate of corporation tax will be increased to 25% from April 2023 for companies with profits of at least £250,000. At the same time, a small profits rate of 19% will be introduced for companies with profits below £50,000.
  • For two years from April 2021, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance.
  • The coronavirus job retention scheme (CJRS) will be extended in full until the end of June 2021 and then phased out over the following three months.
  • The self-employed income support scheme will also be extended at its current level with a fourth grant covering the period February to April. A fifth grant will cover following three months, but this will be at a lower level for those who have seen less than a 30% drop in turnover. Eligibility for the SEISS will be extended to include those who became self-employed in 2019/20.
  • The personal allowance and higher rate threshold will rise to £12,570 and £50,270 for 2021/22 and will then be frozen for the next four years.
  • The capital gains tax annual exemption, the inheritance tax rate nil rate band and the lifetime allowance will all be frozen at their current levels until April 2026.
  • The business rates holiday for retail, hospitality and leisure businesses will be extended for three months and then reduced to a 66% relief until the end of March 2022.
  • The temporary 5% VAT rate for hospitality, hotel and holiday accommodation and admission to certain attractions will be extended to the end of September 2021 and then replaced by a 12.5% rate until 31 March 2022.
  • The exemption from stamp duty land tax on the first £500,000 of residential property value will be extended to 30 June and then replaced by a £250,000 exemption until 30 September 2021.
  • A new residential mortgage guarantee scheme will run from April 2021 to December 2022, aimed at increasing availability of 91%-95% loan-to-value mortgages. The maximum property value will be £600,000 and mortgages must be arranged on a repayment basis.
  • Fuel duty was frozen again this year, alongside alcohol duties which are frozen for the second year running.

Budget 11 March 2020

13/03/2020 By Emma Stevens

budget 2020
colorful waving national flag of great britain on a pounds money banknotes background. finance concept

BUDGET HIGHLIGHTS

  • The Chancellor announced a £12 billion “temporary, timely and targeted” coronavirus stimulus on top of an £18 billion increase in general public spending, but tax measures were relatively few.
  • The pension annual allowance thresholds will each be increased by £90,000 from 2020/21, removing taper as an issue for most people with incomes under £200,000.
  • The capital gains tax entrepreneurs’ relief lifetime limit has been cut from £10 million to £1 million with immediate effect.
  • The annual investment limit for Junior ISAs and child trust funds will be increased to £9,000 from 2020/21.
  • The national insurance contributions employment allowance will increase from £3,000 to £4,000 from April 2020.
  • There will be a review of the taxation of funds to make the UK more attractive for fund management. It will also consider the VAT treatment of fund management fees.
  • From April 2021, only zero-emission vehicles will get 100% first-year allowances. Cars with emissions up to 50g/km will have an 18% a year writing down allowance; for higher emitters, the allowance will be 6% a year.
  • From April 2022, red diesel (and rebated biofuels) will only be available to users for agriculture, rail and non-commercial heating.
  • E-publications (e-books, e-newspapers, e-magazines and academic e-journals) will be VAT zero-rated from 1 December 2020.

CONTENTS

Budget highlights 1 Business taxes 11
Introduction 2 Value added tax 15
Personal taxation 3 Tax avoidance and evasion 17
Pensions, savings and investments 7 National insurance contributions 19
Capital taxes 9    

@ Copyright 11 March 2020. All rights reserved. This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

INTRODUCTION

“….get it done” was a recurrent phrase in the Budget speech of the new Chancellor, Rishi Sunak. It could equally have been “get it spent” or “get it borrowed” as Mr Sunak announced a raft of spending initiatives with few supporting tax increases.

His performance did not follow the standard playbook for the first Budget after a general election. Such set pieces have generally been when a Chancellor takes advantage of his distance from the next visit to the polls to deliver the bitter medicine of tax rises. However, with the threat to the global economy caused by the coronavirus pandemic, these were not normal times. The Office for Budget Responsibility (OBR) was expected to cut projected UK economic growth even before the virus emerged. Its pre-measures forecasts were all closed by 25 February, meaning that the coronavirus effect was “largely confined to a modestly weaker outlook for growth in world trade and the UK’s export markets”.

Mr Sunak had the benefit of seeing what happened since that date and clearly decided that the medicine required was a large dose of tonic, rather than tax. He announced a total package of fresh spending for 2020/21 of £30 billion, of which £12 billion was directly attributed to countering the impact of coronavirus on the UK economy and NHS finances.

Total government borrowing was increased for the next five years by over £110 billion as a result of decisions taken in this Budget. But this is not the end of the story, as another Budget is due in the autumn. By then the consequences of coronavirus should be clearer and we may see other topics addressed, such as inheritance tax reform, which were understandably put on hold this time around.

PERSONAL TAXATION

Main personal allowances and reliefs 2020/21 2019/20
Personal allowance1 £12,500£12,500
Married couple’s/civil partner’s transferable allowance£1,250£1,250
Married couple’s/ civil partner’s allowance at 10%2
(if at least one born before 6/4/35)
maximum
minimum
£9,075
£3,510
£8,915
£3,450
Blind person’s allowance£2,500£2,450
Rent-a-room tax-free income£7,500£7,500
Registered pension schemes
• Lifetime allowance£1,073,100£1,055,000
• Annual allowance3 £40,000£40,000
• Money purchase annual allowance£4,000£4,000

1 Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.
2 Reduced by £1 for every £2 of adjusted net income over £30,200 (£29,600 for 2019/20), until the minimum is reached.
3 Reduced by £1 for every £2 of adjusted income over £240,000 (£150,000 for 2019/20) to a minimum of £4,000 (£10,000 for 2019/20), subject to threshold income being over £200,000 (£110,000 for 2019/20).

Income tax rates and bands 2020/21 2019/20
UK taxpayers’ excluding Scottish taxpayers’ non-savings income    
20% basic rate on the first slice of taxable income up to £37,500 £37,500
40% higher rate on next slice of taxable income over £37,500 £37,500
45% additional rate on taxable income over £150,000 £150,000
All UK taxpayers    
Starting rate at 0% – on the band of savings income up to4 £5,000 £5,000
Personal savings allowance at 0%: basic rate taxpayers £1,000 £1,000
  higher rate taxpayers £500 £500
  additional rate taxpayers £0 £0
Dividend allowance at 0% tax – all individuals £2,000 £2,000
Tax rates on dividend income: basic rate taxpayers 7.5% 7.5%
  higher rate taxpayers 32.5% 32.5%
  additional rate taxpayers 38.1% 38.1%
4 Not available if taxable non-savings income exceeds the starting rate band.  
Scottish taxpayers’ non-dividend, non-savings income 2020/21 2019/20
19% starter rate on taxable income up to £2,085 £2,049
20% basic rate on next slice up to £12,658 £12,444
21% intermediate rate on next slice up to £30,930 £30,930
41% higher rate on next slice up to £150,000 £150,000
46% top rate on income over £150,000 £150,000
Trusts 2020/21 2019/20
Standard rate band generally£1,000 £1,000
Dividends (rate applicable to trusts) 38.1% 38.1%
Other income (rate applicable to trusts) 45% 45%

High income child benefit charge: 1% of benefit per £100 adjusted net income of £50,000 – £60,000.

PERSONAL TAXATION

Income tax

The personal allowance will remain at £12,500 and the higher rate threshold will stay at £50,000 for 2020/21, as announced in the 2018 Budget. In Scotland, the higher rate threshold for non-savings, non-dividend income will also be unchanged at £43,430.

Off-payroll working (IR35)

From April 2020 the responsibility for operating the off-payroll working rules in the private and third sectors will move from individual workers to the organisation, agency or other third party engaging them. The change applies to services carried out from 6 April 2020.

Car benefit

The car benefit scale charge percentages for 2020/21 will be restructured, taking account of the recently introduced Worldwide Harmonised Light Vehicle Test Programme (WLTP) emissions standards. The scales for 2020/21 are as follows:

All zero CO2 emission vehicles: 0%

Petrol and diesel hybrids with CO2 emissions 1-50g/km

Range – electric-only miles < 30 30 – 39 40 – 69 70 – 129 130 +
Registered pre-6/4/20 (NEDC) 14% 12% 8% 5% 2%
Registered post-5/4/20 (WLTP)  12% 10% 6% 3% 0%
All non-diesel cars over 50 g/km CO2  51-54 55 & over
Registered pre-6/4/20 (NEDC) 15% 16%*-37%
Registered post-5/4/20 (WLTP) 13% 14%*-37%
All diesels that do not meet RDE2 standards: add 4% to the above, subject to a maximum 37% scale charge.

*Increased for every extra 5g/km by 1% up to the maximum 37%

The rates will increase by 1% in 2021/22 and a further 1% in 2022/23 before being frozen until 2024/25.

Increasing the flat rate deduction for homeworking

From April 2020 the maximum flat rate income tax deduction available to employees to cover additional household expenses will increase from £4 per week to £6 per week, where they work at home under homeworking arrangements.

Tax treatment of welfare counselling provided by employers

The scope of non-taxable counselling services will be extended from April 2020 to include related medical treatment when it is provided to an employee as part of an employer’s welfare counselling services.

Employment allowance

The employment allowance will be increased from £3,000 to £4,000 a year for 2020/21, as previously announced. But it will be restricted to employers with an employer Class 1 national insurance contributions (NICs) bill below £100,000 in 2019/20.

National insurance contributions

The primary threshold (employee contributions) for Class 1 NICs and the lower profits limit for Class 4 NICs will rise to £9,500 for 2020/21, as announced in January 2020. However, the secondary threshold (employer contributions) will not move in parallel, but instead it will increase to £8,788.


SAVER

Don’t lose your personal allowance. Your personal allowance of £12,500 in 2020/21 is reduced by 50p for every pound by which your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.


budget 2020
A still life of Uk tax return objects, including a calculator, cash and pen.

PENSIONS, SAVINGS AND INVESTMENTS

Tapered annual allowance for pensions 

The two tapered annual allowance thresholds for pensions will each be raised by £90,000 from 2020/21. The ‘threshold income’ figure will therefore be £200,000 and the ‘adjusted income’ figure will be £240,000. This will help many people, such as medical consultants, who have faced large tax bills on extra pay. While the rate of taper is unchanged, the minimum annual allowance for the highest earners from April 2020 will be reduced from £10,000 to £4,000 ­– at an ‘adjusted income’ of £312,000 or more.

Lifetime allowance for pensions 

The lifetime allowance for pension savings will increase to £1,073,100 for 2020/21, in line with inflation.

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2020/21 will remain at £20,000. However, the annual subscription limit for Junior ISAs (JISAs) and child trust funds (CTFs) will more than double, from £4,368 to £9,000.

Top slicing relief on life insurance policy gains

In response to the Silver First-Tier Tribunal case, the legislation will specify how allowances and reliefs must be set against life insurance policy gains. This measure will apply to all relevant gains occurring on or after 11 March 2020.

Review of the UK funds regime

A review of the UK funds regime will be undertaken during 2020, covering direct and indirect tax, as well as relevant areas of regulation. A consultation paper will examine whether there are “targeted and merited” tax changes that could help to make the UK a more attractive location for companies used by funds to hold assets. The review will also consider the VAT treatment of fund management fees and other aspects of the UK funds regime. 

Call for evidence on pension tax administration

Depending on how their pension scheme administers tax relief, people earning around or below the level of the personal allowance may or may not benefit from a top-up on their pension savings equivalent to the basic rate of tax.

A review of the options for addressing the differences will begin shortly with a call for evidence on pensions tax relief administration.

Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

The venture capital limits and reliefs remain unchanged, as detailed below.

Venture capital allowances and reliefs  2020/21 2019/20
Venture capital trust at 30% £200,000  £200,000 
Enterprise investment scheme at 30%1 £2,000,000   £2,000,000
– EIS eligible for capital gains tax deferral relief No limit No limit
Seed EIS (SEIS) at 50%    £100,000 £100,000
– SEIS capital gains tax reinvestment relief 50% 50%

1 Investment above £1,000,000 must be in knowledge-intensive companies


THINK AHEAD

The pension lifetime allowance will rise by £18,100 from 6 April 2020. If you plan to draw from your pensions and already have funds exceeding the current £1,055,000 lifetime allowance limit, you may want to wait before taking your pension benefits.


THINK AHEAD

The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2019/20 and 2020/21 – use it or lose it.


CAPITAL TAXES

Capital gains tax (CGT): annual exempt amount

The annual exempt amount for individuals and personal representatives will rise to £12,300 for 2020/21, while the amount for most trustees will increase to £6,150 (minimum £1,230).

Entrepreneurs’ relief

For disposals on or after 11 March 2020, the lifetime limit on gains eligible for Entrepreneurs’ Relief, which offers a reduced 10% rate of CGT on qualifying disposals, will be reduced from £10 million to £1 million. There will be rules that apply to forestalling arrangements entered into before Budget day.

Private residence relief

From 6 April 2020, lettings relief of up to £40,000 will only apply where the owner of the property shares occupancy with the tenant. The final period exemption for CGT will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled individuals or people in a care home.

Inheritance tax (IHT)

The IHT nil rate band will remain at £325,000 for 2020/21.

The residence nil rate band (RNRB) will increase to £175,000 from 6 April 2020, as set out in existing legislation.

Non-UK resident stamp duty land tax (SDLT) surcharge

A 2% SDLT surcharge will be introduced from 1 April 2021 for non-UK residents purchasing residential property in England and Northern Ireland.

Annual tax on enveloped dwellings (ATED)

The ATED for 2020/21 will be increased in line with inflation.

Property value Charge for tax year
2020/21
Charge for tax year
2019/20
More than £500,000 but not more than £1m £3,700 £3,650
More than £1m but not more than £2m £7,500 £7,400
More than £2m but not more than £5m £25,200 £24,800
More than £5m but not more than £10m £58,850 £57,900
More than £10m but not more than £20m £118,050 £116,100
More than £20m £236,250 £232,350

THINK AHEAD

IHT simplification remains on the agenda. Now maybe a good time to review making lifetime gifts before the tax rules are ‘simplified’ into something less generous.


BUSINESS TAXES

Corporation tax rate

The rate of corporation tax will remain at 19% and will not fall to 17% in 2020, as had been planned.

Structures and buildings allowance

The annual rate of capital allowances for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%, from 1 April 2020 for corporation tax and 6 April 2020 for income tax.

Research and development (R&D)

The rate of R&D expenditure credit will increase from 12% to 13% from 1 April 2020.

The government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.

The introduction of the PAYE cap on the payable tax credit in the R&D schemes for SMEs will be delayed until 1 April 2021, following consultation last year. There will be further consultation on changes to the cap’s design to ensure it targets abusive behaviour, while also ensuring that eligible businesses can access the relief.

First year allowances for business cars

Only zero-emission vehicles will qualify for first-year allowances from April 2021. The main rate of writing down allowance (WDA) of 18% will be given for cars with emissions up to 50g/km. The 6% WDA rate will apply to cars with emissions above 50g/km. First-year allowances for zero-emission goods vehicles and natural gas and hydrogen refuelling equipment will be extended until 2025.

Corporate capital loss restriction

The proportion of annual capital gains that can be relieved by brought forward capital losses will be restricted to 50% from 1 April 2020, on similar lines to the corporate income loss rules. An allowance will give companies unrestricted use of up to £5 million capital and/or income losses each year. Certain companies in liquidation will be excluded from the scope of the restriction.

Non-UK resident companies with UK property income

Non-UK resident companies will be charged corporation tax on their UK property income from 6 April 2020, under legislation enacted in Finance Act 2019. Further legislation will ensure these rules work as intended to provide a smooth transition of the taxation of UK property profits from income tax to corporation tax.

Digital services tax

A new 2% tax will be charged from April 2020 on the revenues of certain digital businesses that derive value from their UK users. The tax will apply to revenues generated from the provision of search engines, social media platforms and online marketplaces, where those activities are linked to the participation of UK users and will be subject to an annual allowance of £25 million.

The tax will only apply to groups that generate global revenues from in-scope business activities of more than £500 million a year. It will include a safe harbour provision that will exempt loss makers and reduce the effective rate of tax on businesses with very low profit margins.

Private use of company vehicles

The fuel multiplier for 2020/21 will be £24,500 for cars. For vans, the fuel chargeable amount will be £666.

For zero-emission vans, the van benefit charge will be nil from April 2021.

From 6 April 2020, fuel benefit charges and the van benefit charge will increase in line with the consumer prices index (CPI) rather than the retail price index (RPI).

Intangibles

The pre-2002 exclusion from the Intangible Fixed Assets regime will be removed. This means that tax relief for the cost of acquiring corporate intangible assets from 1 July 2020 will be provided under a single regime subject to restrictions to prevent tax avoidance.

Business rates

The Budget included several reliefs from business rates, some of them temporary in response to coronavirus.

  • The retail discount for properties with a rateable value below £51,000 in England will be increased to 100% for 2020/21 and will be expanded to include hospitality and leisure businesses for 2021.
  • There will be a discount of £5,000 for pubs in England with a rateable value below £100,000 for one year from 1 April 2020.
  • The £1,500 discount for office space used by local newspapers in England will be extended until 31 March 2025.
  • A fundamental review of business rates will call for evidence in the spring and report in the autumn.

Time to Pay

Tailored arrangements will be available to give a business the time it needs to pay HMRC. The aim is to support the business’s recovery while operating through any temporary financial challenges that occur, for example as a result of the coronavirus pandemic. HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties because of coronavirus in trying to contact HMRC or pay taxes.

Enterprise management incentives (EMI) scheme

The EMI scheme will be reviewed to ensure it provides support for high-growth companies to recruit and retain the best talent.

Plastic packaging tax

A new tax will be introduced from April 2022 to incentivise the use of recycled plastic in packaging. The rate will be £200 per tonne of plastic packaging that contains less than 30% recycled plastic. It will apply to the production and importation of plastic packaging.

Red diesel

The entitlement to use red diesel and rebated biofuels will be removed from April 2022 except for agriculture (including horticulture, pisciculture and forestry), rail and non-commercial heating.

Tax guidance for self-employed people

To make it easier for self-employed individuals to navigate the tax system, the government will this summer launch new interactive online guidance for taxpayers with non-PAYE income.


THINK AHEAD

Your business might be entitled to valuable research and development (R&D) tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.


THINK AHEAD

If you want to take advantage of Time to Pay, make sure that you have adequate records to justify your claim to HMRC.


THINK AHEAD

Company car tax rules change from 6 April 2020. Make certain you – and anyone you employ – are aware of the consequences.


VALUE ADDED TAX

Registration and deregistration thresholds

The taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 until April 2022. The deregistration threshold will stay at £83,000 for the same period.

E-publications

The zero-rate of VAT on printed books, newspapers, magazines and academic journals will be extended to their electronic counterparts from 1 December 2020. The government will consult on the details of the legislation ahead of its implementation.

Postponed accounting

Postponed accounting for VAT will apply from 1 January 2021 to all imports of goods, including from the EU. The measure is aimed at helping VAT-registered UK businesses that are integrated in international supply chains as they adapt to the UK’s position outside the EU.

VAT on call-off stock

Simplified rules will be introduced for the VAT treatment of intra-EU movements of call-off stock, allowing businesses to delay accounting for VAT until the goods are called off. The legislation will be backdated to goods removed from a Member State on or after 1 January 2020.

Long-term cross-border goods policy

The government will consult informally with stakeholders on the VAT treatment of goods crossing UK borders after the EU exit transition period.

Women’s sanitary products

The zero rate of VAT will be charged on tampons and other women’s sanitary products from 1 January 2021.

Agricultural flat rate scheme

New entry and exit rules for the agricultural flat rate scheme will be introduced from 1 January 2021. Businesses will be able to join the scheme when their annual turnover for farming-related activities is below £150,000.

They must deregister from it once such turnover exceeds £230,000 and register for VAT instead. Businesses with a turnover that exceeds £85,000 for non-farming activities will be ineligible for the scheme and will have to register for VAT.


SAVER

The flat rate VAT scheme for small businesses can save some traders money and administration costs. Take advice on whether it is right for you, as some businesses pay more VAT under the scheme.


THINK AHEAD

VAT rules on cross-border trading may change after the EU exit transition period. Take advice periodically on how exit from the EU might affect your business.


TAX AVOIDANCE AND EVASION

Construction Industry Scheme (CIS) abuse

The legislation will be introduced in the Finance Bill 2020-21 to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled. The government is also launching a consultation that considers options on how to promote due diligence in the supply chain.

A domestic reverse charge for building and construction services

The implementation of the VAT domestic reverse charge for building and construction services will be delayed until 1 October 2020, as previously announced.

Conditionality for granting business licences

Legislation in Finance Bill 2020-21 will make the renewal of licences to drive taxis and private hire vehicles (PHVs), operate PHV firms, and deal in scrap metal conditional on applicants completing checks that confirm they are appropriately registered for tax. This measure will take effect in England and Wales in April 2022. The government is considering extending this reform to Scotland and Northern Ireland in the future and will work with the devolved administrations to this effect.

In the spring a discussion document will be issued seeking views on the wider application of tax conditionality.

Loan charge

The forthcoming Finance Bill will legislate to implement the recommendations of the Independent Loan Charge Review that the government has accepted. A call for evidence on further action to stamp out disguised remuneration schemes will be issued shortly.

HMRC’s promoter strategy

HMRC will publish a new strategy for tackling the promoters of tax avoidance schemes in addition to the legislative changes in Finance Bill 2020-21.

A call for evidence will be published in the spring about raising standards for tax advice.

Large business notification

From April 2021 large businesses will be required to notify HMRC when they take a tax position that HMRC is likely to challenge.

Clarifying the treatment of Limited Liability Partnership (LLP) returns

The government will legislate prospectively and retrospectively in Finance Bill 2020 to put beyond doubt that LLPs should be treated as general partnerships under income tax rules.

Money laundering levy

The government intends to introduce a levy to be paid by firms subject to the Money Laundering Regulations to help fund new action to tackle money laundering. A consultation on the levy will be published later this spring.

Stamp duty and stamp duty reserve tax – transfer of unlisted securities to connected companies 

The targeted market value rule is intended to prevent the artificial reduction of the tax due on share acquisitions when listed shares are transferred to a connected company. The rule is being extended to unlisted shares. The measure will be in Finance Bill 2020. As part of this change, the government will amend legislation to prevent a double tax charge arising on certain company reorganisations.

NATIONAL INSURANCE CONTRIBUTIONS

Class 1 (Employees) 2020/21 2019/20
Employee Employer
Employee

Employer
NIC rate 12% 13.8% 12% 13.8%
No NICs for younger employees1 on the first £183 pw £962 pw £166 pw £962 pw
No NICs for employees generally on the first £183 pw £169 pw £166 pw £166 pw
NICs rate charged up to £962 pw No limit £962 pw No limit
2% NICs on earnings over £962 pw N/A £962 pw N/A

1 Employees generally under 21 years and apprentices under 25 years.

Employment allowance 2020/21 2019/20
Per business – not available if the sole employee is a director or employer’s NICs for 2019/20 £100,000 or more. £4,000 £3,000

Earnings limits or thresholds

2020/21

2019/20
Weekly
Annual

Weekly
Annual
Lower earnings limit £120 £6,240 £118 £6,136
Primary threshold £183 £9,500 £166 £8,632
Secondary threshold £169 £8,788 £166 £8,632
Upper earnings limit (and upper secondary thresholds)2
£962
£50,000
£962
£50,000

2 Employees generally under 21 years and apprentices under 25 years.

Class 1A (Employers) 2020/21 2019/20
On car and fuel benefits and most other taxable benefits provided to employees and directors 13.8% 13.8%
Class 2 (Self-employed) 2020/21 2019/20
Flat rate £3.05 pw £158.60 pa £3.00 pw £156.00 pa
Small profits threshold:
No compulsory NICs if profits do not exceed
£6,475 pa £6,365 pa
Class 4 (Self-employed) 2020/21 2019/20
On annual profits of £9,500 – £50,000: 9% £8,632 – £50,000
9%
  Over £50,000:
2%
Over £50,000:
2%
Voluntary 2020/21 2019/20
Class 3 flat rate £15.30 pw £795.60 pa £15.00 pw £780.00 pa

2018 Budget Summary

28/11/2018 By Emma Stevens

2018 BUDGET SUMMARY CONTENTS

 

Budget highlights 1 Business taxes 8
Introduction 2 Property taxes 11
Personal taxation 3 Value added tax 12
Pensions, savings and investments 5 Avoidance, evasion and unfair outcomes 13
Capital taxes 6 National insurance contributions 16

@ Copyright 29 October 2018. All rights reserved. This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

INTRODUCTION 

“…austerity is coming to an end – but discipline will remain” were the words the Chancellor, Philip Hammond, used to summarise his October Budget speech. That balance between continued cuts and excessive borrowing was evident in the measures announced today. The Office for Budget Responsibility (OBR) forecast that borrowing in 2018/19 will be £11.6 billion less than it forecast in March. But the Chancellor’s net tax giveaway for 2019/20 was only marginally higher at £15.1 billion, rising to over £30.5 billion by 2023/24. A large slice of that apparent generosity is down to increased NHS expenditure, which starts at £7.35 billion in 2019/20, rising to £27.6 billion by 2023/24.

Mr Hammond was helped by the OBR increasing growth forecasts for the next two years, although it left the 2018 figure unchanged at 1.3%. A good example of Mr Hammond’s balanced approach was bringing forward the £50,000 higher rate threshold and £12,500 personal allowance to 2019/20 rather than 2020/21, as originally promised in the 2017 Conservative manifesto. Accelerating these changes only gives rise to a one-year cost because the personal allowance and higher rate threshold will be frozen in 2020/21.

Several other headline-grabbing measures also have a temporary effect on closer examination. The one-third cut to business rates for some retail properties will last for just two years, as will the increase in the annual investment allowance (AIA) to £1 million.

The rosier outlook from the OBR might change by the time the Chancellor is next due to present a fiscal set piece – his Spring Statement. As he said in his speech, he was “reserving the right to upgrade the Spring Statement to a full fiscal event” if “the economic or fiscal outlook changes materially in-year”.

PERSONAL TAXATION

Main personal allowances and reliefs 2019/20 2018/19
Personal allowance1 £12,500 £11,850
Married couples’ / civil partner’s transferable allowance £1,250 £1,190
Married couples’/ civil partners’ allowance at 10%2

(if at least one born before 6/4/35)

maximum £8,915 £8,695
minimum £3,440 £3,360
Blind person’s allowance £2,450 £2,390
Rent-a-room tax-free income £7,500 £7,500
Registered pension scheme
·         Lifetime allowance £1,055,000 £1,030,000
·         Money purchase annual allowance £4,000 £4,000
·         Annual allowance3 £40,000 £40,000

1 Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.

2 Reduced by £1 for every £2 of adjusted net income over £29,600 (£28,900 for 2018/19), until the minimum is reached.

3 Subject to 50% taper down to £10,000 if threshold income is over £110,000 and adjusted income is over £150,000.

Scottish taxpayers’ non-dividend, non-savings income5 2019/20 2018/19
19% starter rate on income up to TBA £2,000
20% basic rate on next slice of income up to TBA £12,150
21% intermediate rate on next slice up to TBA £31,580
41% higher rate on next slice up to TBA £150,000
46% top rate on income over TBA £150,000
Income tax rates and bands    
UK excluding Scottish taxpayers’ non-savings income 2019/20 2018/19
20% basic rate on income up to £37,500 £34,500
40% higher rate on income over £37,500 £34,500
45% additional rate on income over

 

£150,000

 

£150,000

 

All UK taxpayers
Starting rate at 0% on savings income up to4 £5,000 £5,000
Savings allowance at 0% tax: basic rate taxpayers £1,000 £1,000
higher rate taxpayers £500 £500
additional rate taxpayers £0 £0
Dividend allowance at 0% tax – all individuals £2,000 £5,000
Tax rates on dividend income: basic rate taxpayers 7.5% 7.5%
higher rate taxpayers 32.5% 32.5%
additional rate taxpayers 38.1% 38.1%
4 Not available if taxable non-savings income exceeds the starting rate band.

 

5 To be announced – Scottish Budget to be published on 12 December 2018.

 

Trusts                                                                            2019/20            2018/19
Standard rate band generally                                       £1,000               £1,000
Dividends (rate applicable to trusts)                            38.1%                38.1%
Other income (rate applicable to trusts)                       45%                   45%
Child benefit charge: 1% of benefit per £100 of income between £50,000 and £60,000.

PERSONAL TAXATION

Income tax

The personal allowance will increase to £12,500 and the higher rate threshold will rise to £50,000 for 2019/20. From 2021/22, the personal allowance and higher rate threshold will increase in line with inflation. The Scottish tax bands and rates for non-savings, non-dividend income will be announced in the Scottish Budget, due on 12 December.


saver

Don’t lose your personal allowance. Your personal allowance of £12,500 in 2019/20 is reduced by 50p for every pound that your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.


Off-payroll working in the private sector

Following consultation and the roll-out of reform in the public sector, responsibility for

operating the off-payroll working rules in the private sector will move from individuals to the organisation, agency or other third party engaging the worker. The change will take effect from April 2020, with an exemption for small organisations.

Rent-a-room relief

Following consultation, there will be no new ‘shared occupancy test’ for rent-a-room relief and the existing qualifying test of letting in a main or only residence will remain.

Employment allowance

From April 2020, the employment allowance of £3,000 a year will be restricted to employers with an employer national insurance contributions (NICs) bill below £100,000 in their previous tax year.

National insurance contributions

As announced in September, Class 2 NICs will not be abolished during this Parliament. Reforms to the treatment of termination payments and income from sporting testimonials will be legislated for in the National Insurance Contributions Bill, with changes taking effect from April 2020.

Car benefit scale

The petrol car benefit charge for 2019/20 is based on CO2 emissions in grams per kilometre and the car’s list price when new. For diesel vehicles, add 3% to the scale up to 37% maximum. The scale for 2019/20 is as follows:

CO2 g/km 0-50 51-75 76-94 95 and above
Charge 16% 19% 22% 23% + 1% for each extra 5g/km over 95g/km up to max. 37%

Short-term business visitors

Eligibility for the special PAYE tax and administrative treatment of short-term business visitors from overseas branches of UK-headquartered companies will be widened from April 2020, and the deadlines for reporting and paying tax will be extended.

PENSIONS, SAVINGS AND INVESTMENTS

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2019/20 will remain at £20,000. The annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) for 2019/20 will rise to £4,368.

Lifetime allowance for pensions

The lifetime allowance for pension savings will increase to £1.055 million for 2019/20. There is no change to the annual allowances.

Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

The rules for approved EIS funds will be amended to require approved funds to focus on knowledge-intensive companies with effect from April 2020. The funds will also have a longer period in which to invest capital. Investors in these funds will be allowed to set this income tax relief against their liabilities in the year before the fund closes.

The venture capital limits and reliefs remain unchanged, as detailed below.

Venture capital allowances and reliefs                                                                  2019/20            2018/19
Venture capital trust at 30%                          £200,000          £200,000
Enterprise investment scheme at 30%1      £2,000,000       £2,000,000
  – EIS eligible for capital gains tax deferral relief

No limit            No limit

Seed EIS (SEIS) at 50%                                   £100,000          £100,000
  – SEIS capital gains tax reinvestment relief                                                                                                                                               50%                    50%

1 Investment above £1,000,000 must be in knowledge-intensive companies

Pensions for the self-employed

This winter the Department for Work and Pensions will publish a paper setting out the government’s approach to increasing pension participation and savings persistency among the self-employed. The paper will focus on expanding evidence through a programme of targeted interventions and partnerships.


think ahead

The lifetime allowance will rise by £25,000 from 6 April 2019. If you plan to draw from your pensions and already have funds exceeding the current £1.03 million lifetime allowance limit, you may want to wait before taking your pension benefits.


think ahead

The dividend allowance and personal savings allowance will be frozen for 2019/20. Your ISA allowance is £20,000 in 2018/19 and 2019/20.


CAPITAL TAXES

Capital gains tax: annual exempt amount

The annual exempt amount for individuals and personal representatives will rise to £12,000 for 2019/20, while the amount for most trustees will increase to £6,000 (minimum £1,200).

Entrepreneurs’ relief

From 6 April 2019, the minimum period throughout which the qualifying conditions for the relief must be met will increase from 12 to 24 months.

From 29 October 2018, shareholders claiming entrepreneurs’ relief must be entitled to at least 5% of the distributable profits and net assets of a company, in addition to the current requirements on share capital and voting rights.

As announced at the 2017 Autumn Budget, individuals can qualify for entrepreneurs’ relief where their shareholding is diluted below the 5% qualifying threshold by fund-raising events after 5 April 2019.

Private residence relief

From April 2020, lettings relief will only apply where the owner of the property is in shared occupancy with the tenant.

The final period exemption will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled individuals or to those in a care home.

Inheritance tax (IHT)

The IHT nil rate band remains at £325,000 for 2019/20.

The residence nil rate band (RNRB) will increase to £150,000 from 6 April 2019 as already legislated. From 29 October 2018, minor technical amendments to the RNRB will take effect relating to downsizing provisions and the definition of ‘inherited’ for RNRB purposes.


think ahead

IHT simplification is on the agenda. Now may be a good time to review making lifetime gifts before the tax rules are ‘simplified’ into something less generous.


BUSINESS TAXES

Corporation tax rate

The government has confirmed that the rate of corporation tax will fall to 17% in 2020.

Annual investment allowance

The AIA will be increased from £200,000 to £1 million for all qualifying investments in plant and machinery from 1 January 2019 until 31 December 2020.

Special rate writing down allowance

The capital allowances special rate for qualifying plant and machinery, such as long-life assets, will be reduced from 8% to 6% from April 2019.

Structures and buildings allowance

A 2% capital allowance will apply to qualifying capital expenditure on new non-residential buildings and structures where all the contracts for the physical construction works are entered into on or after 29 October 2018. Relief will not be available for the costs of land or dwellings.

Corporate losses

The tax treatment of corporate capital losses will be brought into line with the treatment of income losses from 1 April 2020. The proportion of annual capital gains that can be relieved by brought-forward capital losses will be limited to 50%. However, companies will have unrestricted use of up to £5 million capital or income losses each year.

Amendments will be made to the existing loss relief legislation to ensure that it works as intended and prevents relief being claimed for excessive carried-forward losses.

Digital services tax

A new 2% tax will be charged from April 2020 on the revenues of certain digital businesses that derive value from their UK users. The tax will apply to revenues generated from the provision of search engines, social media platforms and online market places where those activities are linked to the participation of UK users, subject to an annual allowance of £25 million.

The tax will only apply to groups that generate global revenues from in-scope business activities of more than £500 million a year. It will include a safe harbour provision that will exempt loss-makers and reduce the effective rate of tax on businesses with very low profit margins.

Company vehicles

Fuel benefit charges will increase in line with the retail prices index (RPI) and the van benefit charge will increase in line with the CPI from 6 April 2019. The fuel multiplier for 2019/20 will be £24,100 for cars. For vans, the fuel chargeable amount will be £655.

Intangible fixed assets regime

A targeted relief will be introduced from April 2019 for the cost of goodwill in the acquisition of businesses with eligible intangible property. With effect from 7 November 2018, a de-grouping charge will not arise where the de-grouping is the result of a share disposal that qualifies for the substantial shareholding exemption.

Offshore receipts in respect of intangible property

From April 2019, income from intangible property held in low-tax jurisdictions will be taxed to the extent that it can be referred to UK sales. The tax will be collected by directly taxing offshore entities that realise intangible property income in low-tax jurisdictions. There will be a de minimis UK sales threshold of £10 million and exemptions for income that is taxed at appropriate levels or supported by sufficient local substance.

Enhanced capital allowances (ECAs)

The ECA for companies investing in electric vehicle charge points will be extended to 31 March 2023. ECAs and first-year tax credits for technologies on the Energy Technology List and Water Technology List will end in April 2020. The savings will be reinvested in an Industrial Energy Transformation fund to support significant energy users to cut their energy bills and move UK industry to a low-carbon future.

Charity taxes

The upper limit for trading that charities can carry out without incurring a tax liability will rise from £5,000 to £8,000 where turnover is under £20,000, and from £50,000 to £80,000 where turnover exceeds £200,000.

Charity shops using the Retail Gift Aid Scheme will be allowed to send letters to donors every three years when their goods raise less than £20 a year, rather than every tax year.

The individual donation limit under the Gift Aid Small Donations Scheme will increase from £20 to £30. This applies to small collections where it is impractical to obtain a Gift Aid declaration.

These changes will take effect from April 2019.

Plastic packaging

A tax on the production and import of plastic packaging will be introduced in April 2022. Subject to consultation, it will apply to plastic packaging that does not contain at least 30% recycled plastic. The Packaging Producer Responsibility System will be reformed to provide an incentive for producers to design packaging that is easier to recycle and penalise the use of difficult to recycle packaging, such as black plastics.

Apprenticeship levy

Levy-paying employers will be able to transfer up to 25% of their funds to pay for apprenticeships training in their supply chains.

The co-investment rate for apprenticeship levy will halve to 5%.


think ahead

Your business might be entitled to a valuable research and development (R&D) tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.


think ahead

Automatic enrolment pension minimum contributions increase significantly again from 6 April 2019. Make certain you – and anyone you employ – are aware of the consequences.


 PROPERTY TAXES

Business rates – retail

Business rates bills will be reduced for two years from April 2019 by one-third for retail properties with a rateable value below £51,000, subject to state aid limits. This will benefit up to 90% of retail properties.

Business rates – self-catering and holiday let accommodation

The government will consult on the criteria under which self-catering and holiday lets become chargeable to business rates rather than council tax.

Business rates – public lavatories

A 100% business rates relief will be introduced for all public lavatories to help keep these amenities open.

Stamp duty land tax (SDLT)

First-time buyers’ relief in England and Northern Ireland will be extended so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. The change will apply to transactions with an effective date of 29 October 2018 and will also be backdated to 22 November 2017.

The government will publish a consultation in January 2019 on an SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.

Non-UK residents’ gains

Gains that accrue to non-UK residents on non-residential property will be subject to tax. Non-UK residents will also be subject to tax on gains in diversely-held companies, those widely-held funds not previously included, and life assurance companies. They will also be taxed on gains on interests in UK property-rich entities, such as shares in companies that derive at least 75% of their value from UK land. The measures which have been previously announced will take effect for disposals made after 5 April 2019 and there will be an anti-forestalling rule for arrangements entered into after 21 November 2017.

Annual tax on enveloped dwellings

The annual tax on enveloped dwellings (ATED) for 2019/20 will be increased in line with inflation, as detailed in the table below:

Property value Charge for tax year
2018/19
Charge for tax year
2019/20
More than £500,000 but not more than £1m £3,600 £3,650
More than £1m but not more than £2m £7,250 £7,400
More than £2m but not more than £5m £24,250 £24,800
More than £5m but not more than £10m £56,550 £57,900
More than £10m but not more than £20m £113,400 £116,100
More than £20m + £226,950 £232,350

think ahead

Three-quarters of any interest tax relief for personal buy-to-let borrowing will be limited to a 20% tax credit from 2019/20. Make sure you understand the impact of this latest change on your overall tax position.


think ahead

From 6 April 2020, CGT on residential property will be payable within 30 days of sale. If you are thinking of selling buy-to-let property, the existing rules can give you up to almost 21 months before any tax bill arrives.


VALUE ADDED TAX

Registration and deregistration thresholds

The taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 until April 2022, two years longer than previously announced. The deregistration threshold will stay at £83,000 for the same period. The government will look again at the possibility of introducing a smoothing mechanism once the terms of Brexit are clear.

Vouchers

The Finance Bill 2018-19 will implement EU legislation to ensure that the correct amount of VAT is charged on what the customer pays, irrespective of whether payment is with a voucher or by other means.

Labour provision in the construction sector

A VAT domestic reverse charge will be introduced to prevent VAT losses through ‘missing trader’ fraud when traders collect VAT on their sales but go missing before passing the VAT onto HMRC. The new rules will shift responsibility for paying VAT along the supply chain and will take effect from 1 October 2019.

Alternative method of VAT collection

The government is considering a ‘split payment’ model to reduce online VAT fraud by third country sellers and to improve how VAT is collected on cross-border e-commerce. An industry working group will be established to address some of the main challenges associated with this policy.


think ahead

Making Tax Digital (MTD) will start to apply to VAT for certain businesses from 1 April 2019. Consider taking advice on how you are affected and what your options are to deal with this major change.


AVOIDANCE, EVASION AND UNFAIR OUTCOMES

Profit fragmentation

As announced in last year’s Budget, the Finance Bill will legislate to prevent UK businesses from avoiding UK tax by arranging for their UK-taxable business profits to accrue to entities resident in territories where significantly lower tax is paid than in the UK. The taxable UK profits will be increased to the actual, commercial level.

R&D tax relief for small and medium-sized enterprises

From 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year.

 Stamp taxes on shares: consideration rules

The government will consult on aligning the consideration rules of stamp duty and stamp duty reserve tax (SDRT) and introducing a general market value rule for transfers between connected persons. The aim will be to simplify stamp taxes on shares and to stop contrived arrangements being used to avoid tax. To prevent forestalling, from 29 October 2018, a targeted market value rule will be introduced for listed shares transferred to connected companies.

VAT grouping

Certain non-corporate entities will become eligible to join a VAT group from 1 April 2019. In addition, revised VAT grouping guidance will be issued:

  • to amend the definition of ‘bought-in services’ to ensure that such services are subject to UK VAT; and
  • to provide clarity to businesses on HMRC’s protection of revenue powers and treatment of UK fixed establishments.

Unfulfilled supplies

The VAT treatment of prepayments will change from 1 March 2019 to bring all prepayments for goods and services into the scope of VAT, where customers have been charged VAT but have not collected what they have paid for and have not received a refund.

VAT Regulation 38

Stricter rules will be introduced on how and when adjustments to VAT should be made following a price reduction and will ensure customers are issued with credit notes.

Electronic sales suppression

The government will consult later in the year on the misuse of electronic point of sale functions (i.e. till systems) to hide or reduce the value of individual transactions and the corresponding tax liabilities.

HMRC preferential creditor status 

From 6 April 2020, when a business enters insolvency, HMRC will be treated as a preferential creditor in respect of taxes collected and held by businesses on behalf of other taxpayers (VAT, PAYE income tax, employee NICs, and construction industry scheme deductions). The creditor rules will remain unchanged for taxes owed by businesses themselves, such as corporation tax and employer NICs.

Tax abuse and insolvency

Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixing will be jointly and severally liable for company tax liabilities where there is a risk that the company may deliberately enter insolvency.

Conditionality: hidden economy

Following consultation, the government will consider introducing in Finance Bill 2019-20 a tax registration check linked to renewal processes for some public sector licences. Applicants would need to provide proof they are correctly registered for tax in order to be granted licences.

International tax enforcement: disclosable arrangements

Legislation is being enacted to allow the introduction of international disclosure rules about offshore structures that could avoid tax or could be misused to evade tax.

Offshore tax compliance strategy

The government will publish an updated offshore tax compliance strategy.

NATIONAL INSURANCE CONTRIBUTIONS

Class 1 (Employees) 2019/20 2018/19
Employee Employer Employee Employer
NIC rate 12% 13.8% 12% 13.8%
No NICs for younger employees1 on the first £166 pw £962 pw £162 pw £892 pw
No NICs for employees generally on the first £166 pw £166 pw £162 pw £162 pw
NICs rate charged up to £962 pw No limit £892 pw No limit
2% NICs on earnings over £962 pw N/A £892 pw N/A
1 Employees generally under 21 years and apprentices under 25 years.

 

Employment allowance 2019/20 2018/19
Per business £3,000 £3,000
Not available if the sole employee is a director.

 


Earnings limits or thresholds
2019/20 2018/19
Weekly Annual Weekly Annual
Lower earnings limit £118 £6,136 £116 £6,032
Primary earnings limit £166 £8,632 £162 £8,424
Secondary earnings threshold £166 £8,632 £162 £8,424
Upper earnings limit and
Upper secondary earnings threshold (under 21)2
£962 £50,000 £892 £46,350
2 Employees generally under 21 years and apprentices under 25 years.

 

Class 1A (Employers) 2019/20 2018/19
Most taxable employee benefits 13.8% 13.8%
     
Class 2 (Self-Employed) 2019/20 2018/19
Flat rate £3.00 pw £156.00 pa £2.95 pw £153.04 pa
Small profits threshold:

 

£6,365 pa £6,205 pa
Class 4 (Self-Employed) 2019/20 2018/19
On profits £8,632 – £50,000 pa   9% £8,424 – £46,350 pa   9%
Over £50,000 pa   2% Over £46,350 pa   2%
Voluntary 2019/20 2018/19
Class 3 flat rate £15.00 pw £780.00 pa £14.65 pw £761.80 pa

 

2018-19 Tax Tables

14/03/2018 By Emma Stevens

Please find our new Tax Tables here for the 2018/19 tax year. These tables are up-to-date with everything announced in the Spring Statement, giving you all the key numbers in one place.

Key changes for the forthcoming 2018/19 tax year include:

  • Increases to the personal allowance, and basic and higher rate tax thresholds.
  • New income tax bands and rates for Scotland.
  • A cut in the dividend tax allowance from £5,000 to £2,000.
  • Revised company car tax scales, with an increase in the diesel levy.
  • The first increase in the lifetime allowance since 2010.
  • An increase in the maximum tax relievable investment in Enterprise Investment Schemes.

If you have any questions about the contents of your Tax Tables or how any aspects of your tax and financial planning may be affected by the Budget, please call us to discuss them.

Spring Statement 2018

14/03/2018 By Emma Stevens

After two full Budgets in 2017, this Spring Statement was a less dramatic affair, with no announcements of tax changes. These will come in the Autumn Budget.

The Chancellor launched a number of consultations and other papers about future proposals. The subjects ranged from ways to squeeze more tax from international digital businesses to a proposal for extending entrepreneurs’ relief to some shareholders whose holdings drop below the qualifying 5% level. He has also been mulling the possibility of lowering the VAT threshold.

April will see the usual changes to the income tax rates and allowances as well as national insurance contributions. This year there will also be a cut in the dividend allowance and some special new tax rates for Scottish taxpayers. The tax increases on company cars may look relatively modest, but their cumulative impact could be significant for some people.

Many employees will see the extra net income from the tax changes eaten up by their higher minimum auto-enrolment pension contributions. The lifetime allowance for pensions has been raised. Less welcome for some will be the changes to employee termination payments and the new rules for enterprise investment schemes.

If you have any questions about how the Spring Statement affects you, please get in touch.

Did you know?…… Use of home as office

08/12/2017 By Emma Stevens

use of home as officeAs a limited company director, you can claim money from the company for use of home as office. You, personally, will not need to pay tax on this money and the company can claim tax relief for paying it.

You can claim for things to do with your work e.g. business telephone calls or the extra cost of gas and electricity for your work area. You can’t claim for things you use for both private and business use such as rent or broadband access.

You do not need to provide evidence for claims of up to £4 a week (£18 a month). For claims over this amount you will need to provide evidence of what you spent and how you calculated the proportion charged to the company.

For more details on use of home as office and other tax savings you can make contact Emma Stevens

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Autumn Budget 2017

23/11/2017 By Emma Stevens

Autumn Budget  2017 – 22 November 2017

BUDGET HIGHLIGHTS

  • First time buyers of residential property outside Scotland will pay no stamp duty land tax on the first £300,000 of the purchase price for a home, provided its value does not exceed £500,000.
  • The personal allowance will rise to £11,850 and the higher rate tax threshold for the UK (excluding non-savings, non-dividend income in Scotland) will rise to £46,350 for 2018/19.
  • The pension lifetime allowance will be increased from £1 million to £1.03 million from April 2018. There will be no change to the annual allowance.
  • Venture capital trusts, enterprise investment schemes and seed enterprise investment schemes will be required to focus more on companies where there is a real investment risk.
  • The diesel supplement for company cars will be increased from 3% to 4% from April 2018.
  • Online marketplaces will become jointly and severally liable for unpaid VAT of UK traders as well as overseas traders.
  • There will be several changes to business rates, notably dealing with the ‘staircase tax’ and introducing valuations every three years.

 

@ Copyright 22 November 2017. All rights reserved. This summary has been prepared very rapidly and is for general information only. The proposals are in any event subject to amendment before the Finance Act. You are recommended to seek competent professional advice before taking any action on the basis of the contents of this publication.

 

INTRODUCTION

First budgets of a new parliament are traditionally the dramatic ones in which the Chancellor dispenses the unpalatable medicine of tax increases, because they are at the furthest point from the next election. However, for a variety of reasons, Mr Hammond did not follow the norm. Far from increasing the Exchequer’s income, the Budget Red Book reveals a net tax giveaway of just under £1.6 billion in the coming tax year.

His main headline-grabbing move was to give first time buyers an exemption from stamp duty land tax on the first £300,000 of consideration for properties worth up to £500,000. Some move on this front had been widely expected, and it accounts for over a third of the giveaway.

The Chancellor was less generous on the income tax front, increasing both the personal allowance and the higher rate threshold by 3% – the standard inflation-linked increase

e. He gave nothing away to individual savings account (ISA) investors, freezing the main ISA and lifetime ISA investment limits. Pension savers were luckier, with an increase in the lifetime allowance – the first since 2010 – and no changes to the annual allowance.

 

Venture capital schemes were again in the firing line, with a raft of measures designed to introduce a greater emphasis on risk investment to venture capital trusts, enterprise investment schemes and seed enterprise investment schemes. However, he took no action on inheritance tax business relief, which had been expected in some quarters.

If commentators suggest that this was a dull Budget, Mr Hammond will probably be pleased. After his national insurance U-turn following his March Budget, a steady-as-she-goes, broadly neutral Budget was likely to be his goal.

 

 

PERSONAL TAXATION

Income tax allowances and reliefs                                                  2018/19            2017/18
Personal (basic)                                                                                               £11,850                  £11,500
Personal reduced by £1 for every £2 of net income over                       £100,000               £100,000
Transferable tax allowance for married couples/civil partners            £1,185                     £1,150
Married couples’/civil partners’ (minimum) at 10%1                              £3,360                   £3,260
Married couples’/civil partners’ (maximum) at 10%1,2                           £8,695                   £8,445
Blind person’s allowance                                                                              £2,390                   £2,320
Rent-a-room tax-free income                                                                      £7,500                   £7,500
Venture capital trust (VCT) at 30%                                                            £200,000             £200,000
Enterprise investment scheme (EIS) at 30%                                            £1,000,000         £1,000,000
  – EIS knowledge intensive companies at 30% additional amount     £1,000,000          N/A

– EIS eligible for capital gains tax deferral relief                                      No limit                 No limit

Seed EIS (SEIS) at 50%                                                                                  £100,000              £100,000
  – SEIS capital gains tax reinvestment relief                                              50%                      50%
Registered pension scheme
•  annual allowance3                                                                                         £40,000                £40,000
•  money purchase annual allowance                                                            £4,000                  £4,000
•  lifetime allowance                                                                                          £1,030,000          £1,000,000
1 Where at least one spouse/civil partner was born before 6/4/35.

2 Reduced by £1 for every £2 of income over £28,900 (£28,000 2017/18), until the minimum is reached.

3 50% taper down to £10,000 if threshold income is over £110,000 and adjusted income is over £150,000.

Rates 2018/19 2017/18
Basic rate of 20% on income up to: UK excluding Scotland £34,500 £33,500
Scotland4 TBA5 £31,500
Higher rate of 40% on income over: UK excluding Scotland £34,500 £33,500
Scotland4 TBA5 £31,500
Additional rate of 45% on income over: UK excluding Scotland Scotland4 £150,000

TBA5

£150,000

£150,000

Starting rate at 0% – on savings income up to6 £5,000 £5,000
Savings allowance at 0% tax: basic rate taxpayers £1,000 £1,000
higher rate taxpayers £500 £500
additional rate taxpayers £0 £0
Dividend allowance at 0% tax – all individuals £2,000 £5,000
Tax rate on dividend income: basic rate taxpayers 7.5% 7.5%
higher rate taxpayers 32.5% 32.5%
additional rate taxpayers 38.1% 38.1%
4 For non-dividend, non-savings income only: otherwise apply UK (excl. Scotland) bands.

5 To be announced – Scottish Budget to be published 14/12/17

6 Not available if taxable non-savings income exceeds the starting rate band.

 

Trusts                                                                                  2018/19           2018/19
•  standard rate band generally                                          £1,000               £1,000
•  dividends (rate applicable to trusts)                               38.1%                38.1%
•  other income (rate applicable to trusts)                          45%                   45%
Child benefit charge: 1% of benefit per £100 of income between £50,000 and £60,000.

 

Income tax

The personal allowance will increase to £11,850 and the higher rate threshold will rise to £46,350 for 2018/19. The Scottish tax bands and rates for non-savings, non-dividend income will be announced in the Scottish Budget due on 14 December.

Private sector off-payroll working

Following reform in April 2017 of the off-payroll working rules (IR35) for public sector engagements, the government will consult on extending the legislation to the private sector.

National insurance contributions (NICs) 

The government will delay the implementation of the NIC reforms by one year as previously announced. Consequently, Class 2 NICs will continue to be payable in 2018/19.

Employment status

The government will publish a discussion paper in response to Matthew Taylor’s review of employment practices in the modern economy. The paper will examine the case and options for longer-term reform to make the employment status tests clearer for both employment rights and tax.

Benefits in kind: charging electric vehicles

From April 2018, there will be no benefit in kind tax charge on electricity that employers provide where employees recharge their personally-owned electric or hybrid vehicles at their workplace.

Taxation of employee business expenses

There will be several changes to the taxation of employee expenses:

  • The government will consult on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs.
  • From April 2019, employers will not have to check receipts when reimbursing employees for subsistence using scale rates.
  • HMRC will improve the guidance on employee expenses, particularly on travel and subsistence, and the process for claiming tax relief on non-reimbursed employment expenses.

Termination payments: foreign service relief

Employees who are UK resident in the tax year their employment is terminated will not be eligible for foreign service relief on their termination payments. Reductions for foreign service will be retained for seafarers. The changes will have effect from 6 April 2018 and will apply to those who have their employment contract terminated from that date.

Rent-a-room relief

The government will call for evidence to establish how rent-a-room relief is used and to ensure that it is better targeted at longer-term lettings.

Mileage rates for landlords

With retrospective effect from 6 April 2017, individuals operating unincorporated property businesses can opt to use a fixed rate deduction for every mile they travel for business journeys by car, motorcycle or goods vehicle.

Gift aid donor benefit rules

The donor benefit rules that apply to charities that claim gift aid tax relief on donations will be simplified from April 2019. There will be two percentage thresholds: the benefit threshold for the first £100 of the donation will remain at 25%; for larger donations charities will be able to offer benefits worth up to 5% of the amount above £100. The total value of the benefit must not exceed £2,500.

Taxation of trusts

A consultation document will be published in 2018 on how to make the taxation of trusts simpler, fairer and more transparent.


saver

Don’t lose your personal allowance. Your personal allowance of £11,850 in 2018/19 is reduced by 50p for every pound your income exceeds £100,000. Make a pension contribution or a charitable gift to bring your income below £100,000.


PENSIONS, SAVINGS AND INVESTMENTS

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2018/19 will remain unchanged at £20,000 and the lifetime ISA (LISA) annual subscription limit will stay at £4,000. The annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) for 2018/19 will rise to £4,260.

Lifetime allowance for pensions

The lifetime allowance for pension savings will increase to £1.03 million for 2018/19. There is no change to the annual allowance.


think ahead

The lifetime allowance will rise by £30,000 from 6 April 2018. If you plan to draw from your pensions and already have funds exceeding the current £1 m lifetime allowance limit, you may want to wait before taking your pension benefits.


Life assurance and overseas pension schemes

From 6 April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be extended to cover policies where an employee nominates an individual or registered charity to be their beneficiary.

Venture capital trusts (VCT) and enterprise investment schemes (EIS)

A range of changes were announced to VCTs, EISs and seed enterprise investment schemes (SEIS):

  • Risk to capital condition Legislation in the Finance Bill 2017-18 will ensure that VCTs, EISs and SEISs are targeted at growth investments. Relief under the schemes will be focused on companies where there is a real risk to the capital being invested, and will exclude investments in companies and arrangements intended to provide capital preservation. The changes will have effect from Royal Assent.
  • Increased limits for investments in knowledge-intensive companies The maximum an individual may invest under the EIS in a tax year will double to £2 million, where an amount of over £1 million is invested in one or more knowledge-intensive companies. The annual investment limit for knowledge-intensive companies receiving investments under the EIS, and from VCTs, will also double to £10 million, but the lifetime limit will remain at £20 million. Knowledge-intensive companies will be allowed to use the date when their annual turnover first exceeds £200,000 to determine the start of the initial investing period, instead of the date of first commercial sale. The changes will have effect from 6 April 2018, subject to state aid rules.
  • Relevant investments Current rules exclude certain investments made by VCTs and EISs before 2012 from counting towards the lifetime funding limits for investee companies. These provisions will be scrapped from 1 December 2017, subject to state aid rules.
  • Effect of anti-abuse provisions on commercial mergers of VCTs Legislation in the Finance Bill 2017-18 will limit the application of an anti-abuse rule relating to mergers of VCTs. This rule will no longer apply if VCTs merge later than two years after a subscription, or do so only for commercial reasons. The change will have effect for VCT subscriptions made on or after 6 April 2014, subject to state aid rules.
  • Other VCT reforms Several other changes will be made to move VCTs towards higher risk investments. For example, the proportion of VCT funds that must be held in qualifying holdings will rise from 70% to 80%; and 30% of the funds raised in an accounting period must be invested in qualifying holdings within 12 months of the end of the accounting period.

Master trust tax registration

From 6 April 2018, HMRC will have powers to register and deregister master trust pension schemes and pension schemes for dormant companies.


think ahead

The dividend allowance will be cut to £2,000 from 2018/19. Take advantage of the increased ISA allowance of £20,000 in the new tax year.


 CAPITAL TAXES

Capital gains tax (CGT): annual exempt amount

The annual exempt amount for individuals and personal representatives will rise to £11,700 for 2018/19, while the amount for most trustees will increase to £5,850 (minimum £1,170).

CGT payment window

The introduction of the 30-day payment window between a capital gain arising on a residential property and the payment of the relevant CGT will be deferred until April 2020.

Inheritance tax

The inheritance tax nil rate band remains at £325,000 for 2018/19. The residence nil rate band will increase to £125,000 from 6 April 2018.


don’t forget

The inheritance tax residence nil rate band rises to £125,000 from 6 April 2018. Make sure your estate planning is reviewed to take account of this important change, which could save up to £140,000.


 

BUSINESS TAXES

Research and development (R&D)

The rate of the tax credit for (R&D) expenditure will rise from 11% to 12% from 1 January 2018. A new advance clearance service will be piloted for claims for R&D expenditure credit, to provide pre-filing agreement for three years.


think ahead

Your business might be entitled to a valuable R&D tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.


Corporate indexation allowance

The indexation allowance for corporate chargeable gains will be frozen for disposals from 1 January 2018 at the amount based on the retail prices index (RPI) for December 2017.

Substantial shareholding exemption

The substantial shareholding exemption legislation and the share reconstruction rules will be amended to avoid unintended chargeable gains being triggered where a UK company incorporates foreign branch assets in exchange for shares in an overseas company.

Gains on branch incorporation

An anomaly is being corrected whereby a postponed tax charge may have become payable when a new holding company was inserted directly above an overseas company, to which a UK company had previously transferred the trade and assets of a foreign branch in return for shares. The change applies to disposals from 22 November 2017.

Partnership tax

Legislation effective from 2018/19 will clarify the circumstances where the current rules for partnerships are seen as creating uncertainty. It will reduce the scope for non-compliant taxpayers to avoid or delay paying tax. The draft legislation published on 13 September 2017 has been revised to be more compatible with commercial arrangements for allocating profit, and to avoid additional administrative burdens.


saver

Check that you are still trading through the most appropriate vehicle for your circumstances. Incorporation makes sense for some people – but changes to dividend tax rules and NICs are altering the picture.


Disincorporation relief

The disincorporation relief introduced in 2013 for five years will not be extended beyond the 31 March 2018 expiry date.

Corporate tax and the digital economy

The government has published a position paper setting out its proposed approach to addressing the challenges posed by the digital economy.

Withholding tax: royalties

Withholding tax obligations will be extended to royalty payments and payments for certain other rights that are made to low tax or no tax jurisdictions in connection with sales to UK customers. The rules will take effect from April 2019 and will apply regardless of where the payer is located.

Hybrid mismatch rules

Some aspects of the corporation tax rules that apply to arrangements involving hybrid structures and instruments – because of differences in tax treatment between two jurisdictions – will be amended to clarify how and when they apply and ensure they operate as intended.

First year tax credits

The first year tax credit scheme will be extended until the end of this parliament to encourage loss-making companies to invest in energy-efficient technology. The credit rate will be set at two-thirds of the rate of corporation tax.

Zero-emission goods vehicles

The government will extend the first year allowances for zero-emission goods vehicles and gas refuelling equipment to March/April 2021.

Company cars and vans

The company car benefit in kind diesel supplement will rise from 3% to 4% with effect from 6 April 2018, except for cars that meet the real driving emissions step 2 (RDE2) standards. The fuel benefit charge and van benefit charge will increase by the September 2017 RPI from 6 April 2018.

Air passenger duty

Short-haul air passenger duty rates for 2019/20 will remain frozen. The long-haul rate for economy passengers will be frozen at the 2018/19 levels. The charges for premium economy, business and first class will increase by £16 and will increase by £47 for those travelling by private jet.

National insurance contributions employment allowance

From 2018, HMRC will require upfront security from employers with a history of avoiding paying NICs by abusing the employment allowance, often by using offshore arrangements.

Disguised remuneration

Disguised remuneration avoidance schemes used by closely held companies will be countered by the introduction of the close companies’ gateway from April 2017. All employees and self-employed individuals who have received a disguised remuneration loan will be required to provide information to HMRC by 1 October 2019.

Intangible fixed assets: related party step-up schemes

The intangible fixed asset rules will be updated with immediate effect, so that a licence in respect of intellectual property between a company and a related party is subject to the market value rule. The market value rule will also apply where consideration is not in cash.

Depreciatory transactions

The six-year time limit within which companies must adjust for transactions that have reduced the value of shares being disposed of in a group company, has been removed for disposals of shares or securities in a company from 22 November 2017. This is intended to ensure that any losses claimed are in line with the actual economic loss to the group.

Carried interest

The transitional commencement provisions have been removed with immediate effect to prevent avoidance of the legislation designed to ensure that asset managers receiving carried interest pay CGT on their full economic gain.

Corporate interest restriction

Technical amendments will be made to the corporate interest restriction rules to ensure that the regime works as intended. Some of these amendments will be backdated to 1 April 2017 and the remainder will have effect from 1 January 2018.

Extension of security deposit legislation

Existing security deposit legislation will be extended to corporation tax and construction industry scheme deductions from 6 April 2019.

Double taxation relief

From 22 November 2017, a restriction has been introduced to the relief for foreign tax incurred by an overseas branch (permanent establishment) of a company, where the company has already received relief overseas for the losses of the branch against profits that are not those of the branch. This ensures that the company does not get tax relief twice for the same loss. The double taxation relief targeted anti-avoidance rule will also be amended to remove the requirement for HMRC to issue a counteraction notice, and extend the scope to ensure it is effective.

With effect from Royal Assent to the Finance (No 2) Act 2017 on 16 November 2017, the powers giving effect to double taxation arrangements have been amended to allow implementation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS).


think ahead

Automatic enrolment pension minimum contributions increase significantly from 6 April 2018. Make certain you – and anyone you employ – are aware of the consequences.


 

PROPERTY TAXES

Stamp duty land tax (SDLT)

A new relief from SDLT will raise the price at which a property becomes liable for SDLT to £300,000 for first-time buyers. Those claiming the relief will pay no SDLT on the first £300,000 of the consideration. No relief will be available where the total consideration is more than £500,000. The relief applies to transactions with effect from 22 November 2017.

The operation of the higher rates of SDLT for additional properties will be amended to give relief for various people including: those increasing their share of their own home, families affected by a divorce court order, spouses buying property from their spouse and cases where properties are held in trust for children subject to Court of Protection orders. A new rule will target the abuse of relief for the replacement of a purchaser’s only or main residence by requiring the purchaser to dispose of the whole of their interest in their former main residence to someone who is not their spouse. These changes take effect from 22 November 2017.

The previously announced reduction in the SDLT filing and payment window from 30 days to 14 days will apply from 1 March 2019.

Business rates in England

Businesses that occupy more than one floor in a building that have been affected by the so-called ‘staircase tax’ will be able to ask for their valuations to be recalculated so that they are based on previous practice backdated to April 2010. This will include those who lost small business rate relief.

The switch in indexation from RPI to consumer price index (CPI) is being brought forward to 1 April 2018. The £1,000 business rate discount for public houses with a rateable value of up to £100,000 will continue for one year from 1 April 2018. This is subject to state aid limits for businesses with multiple properties. Non-domestic properties will be revalued every three years following the next revaluation due in 2022.

Annual tax on enveloped dwellings (ATED)

The ATED annual charges will increase by 3% from 1 April 2018 in line with the September 2017 CPI.

Gains by non-residents on UK property

All gains on non-residents’ disposals of UK property will be brought within the scope of UK tax. This will apply to gains accrued from April 2019. There will be targeted exemptions for such institutional investors as pension funds.

Taxation of non-resident companies’ UK property income and gains

Non-UK resident companies’ income from UK property will be chargeable to corporation tax rather than income tax from 6 April 2020. From the same date, gains that arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than CGT.


think ahead

Half of any interest tax relief for personal buy-to-let borrowing will be limited to a 20% tax credit from 2018/19. Make sure you understand the impact of this latest change on your overall tax position.


 

VALUE ADDED TAX

Registration and deregistration thresholds

Until 31 March 2020, the taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 and the deregistration threshold will stay at £83,000. The registration and deregistration thresholds for relevant acquisitions from other EU member states will remain at £85,000. The government will consult on the design of the VAT threshold.

Online VAT fraud

Three measures aimed at tackling online VAT fraud will take effect from Royal Assent in spring 2018:

  • HMRC’s existing powers to hold online marketplaces jointly and severally liable for the unpaid VAT of overseas traders on their platforms will be extended to include UK traders.
  • Online marketplaces will also be jointly and severally liable for VAT of a non-UK business that sells goods on their platform and fails to account for the tax. This will apply where the business was not registered for VAT in the UK and the online marketplace knew (or should have known) that the business should be registered for VAT in the UK.
  • Online marketplaces will have to ensure that VAT numbers displayed for businesses operating on their website are valid. They will also have to display a valid VAT number when they are provided with one by a business operating on their platform.

The government is consulting on further measures to prevent non-compliance among users of digital platforms.

VAT fraud in labour provision in the construction sector

A VAT domestic reverse charge will be introduced from 1 October 2019 to prevent VAT losses in construction labour supply chains. This will shift responsibility for paying VAT along the supply chain to remove the opportunity for it to be stolen. The government will publish and consult on the legislation and guidance during 2018.

Vouchers

Changes will be made to simplify the VAT treatment of vouchers from 1 January 2019, including the point at which they will become subject to VAT and, in some cases, their value for taxation.


saver

The flat rate VAT scheme is changing for ‘limited cost traders’ from 1 April. Take advice on what your options are to counter an effective tax increase.


TAX ADMINISTRATION AND COMPLIANCE

Making Tax Digital (MTD)

No business will be required to use MTD until April 2019. From that date, only those with turnover above the VAT threshold (£85,000) will have to use MTD, and then only for VAT obligations. The scope of MTD will not be widened until the system has been shown to work well, and not before April 2020 at the earliest. Businesses, self-employed individuals and landlords within MTD will have to keep digital records and update HMRC quarterly.

Late submission penalties and late payment interest 

The penalty system for late or missing tax returns will change to a points-based approach. The government will consult on simplifying and harmonising penalties as well as interest on late payments and repayments.

Closure of Certificate of Tax Deposit scheme

The Certificate of Tax Deposit scheme is closed for new certificates from 23 November 2017. Existing certificates will be honoured for six years.

Recovery of self-assessment debt

HMRC will use new technology to recover additional self-assessment debts in closer to real time by adjusting the tax codes of individuals with pay as you earn (PAYE) income. This will take effect from 6 April 2019.

Extending offshore time limits

Following a consultation in spring 2018, assessment time limits for non-deliberate offshore tax non-compliance will be extended, so that HMRC can always assess at least 12 years of back taxes without needing to establish deliberate non-compliance.

Hidden economy

The government will consult further on how to make the provision of some public sector licences conditional on being properly registered for tax.

 

NATIONAL INSURANCE CONTRIBUTIONS 

Class 1 (Employees) 2018/19 2017/18
Employee Employer Employee Employer
NIC rate 12% 13.8% 12% 13.8%
No NICs on the first:
  Under 21* £162 pw £892 pw £157 pw £866 pw
  21 & over* £162 pw £162 pw £157 pw £157 pw
NICs rate charged up to £892 pw No limit £866 pw No limit
2% NICs on earnings over £892 pw N/A £866 pw N/A
* 25 years for apprentices

 

Employment allowance 2018/19 2017/18
Per business £3,000 £3,000
Not available if the sole employee is a director.

 

 

Earnings limits or thresholds

2018/19 2017/18
Weekly
£
Annual
£
Weekly
£
Annual
£
Lower earnings limit 116 6,032 113 5,876
Primary earnings limit 162 8,424 157 8,164
Secondary earnings threshold 162 8,424 157 8,164
Upper earnings limit and
Upper secondary earnings threshold (under 21)*
892 46,350 866 45,000
* Under 25 years for apprentices

 

Class 1A (Employers) 2018/19 2017/18
Most taxable employee benefits 13.8% 13.8%
     
Class 2 (Self-Employed) 2018/19 2017/18
Flat rate £2.95 pw £153.40 pa £2.85 pw £148.20 pa
Small profits threshold £6,205 pa £6,025 pa
Class 4 (Self-Employed) 2017/18 2017/18
On profits £8,424-£46,350 pa 9% £8,164-£45,000 pa 9%
Over £46,350 pa 2% Over £45,000 pa 2%
Voluntary 2018/19 2017/18
Class 3 flat rate £14.65 pw £761.80 pa £14.25 pw £741 pa

 

Did you know? …. Marriage Allowance

09/11/2017 By Emma Stevens

Marriage allowance allows you to transfer £1,150 of your personal allowance to your husband, wife or civil partner, reducing their tax by £230.

marriage allowance

Who will benefit? If you earn less than £11,500 a year and your partner earns between £11,501 and £45,000 you could be better off by applying for marriage allowance. You need to be married or in a civil partnership to apply.

You can apply for the marriage allowance online via www.gov.uk/apply-marriage-allowance If successful the change will be backdated to the beginning of the tax year (6 April) and the change will be reflected in your tax code.

If you complete a tax return you can opt for marriage allowance for 2016/17 via your personal tax return which is due for filing by 31st January 2018.

If your circumstances change you, such as your partner earning more than £45,000 or you earning more than £11,500 then you can apply to cancel your marriage allowance online.

If you need any advice on tax please get in touch with Emma Stevens at Emma Stevens Accountancy.

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Self Assessment Tax Return

14/08/2017 By Emma Stevens

A Self-assessment tax return is the form an individual completes to report to HMRC their income for the year and to calculate how much tax is due on that income. In the UK, the tax year runs from 6th April to 5th April the following year. So, for 2016-17 the period covered is 6th April 2016 to 5th April 2017. Not all UK residents are required to do a tax return. If your only income is as an employee you don’t need to worry about it. However, there are some situations which do require the completion of a return and this article should guide you through them.

Do I need to do one?

You are required to complete a Self-assessment tax return if you come under the following categories:

·         Self employed.

·         Have untaxed income such as rental income exceeding £2,500

·         Your income from shares, savings or investments exceeds £10,000

·         You’re a company director

·         You made a chargeable gain such as selling a 2nd home

·         Your income is over £100,000 (or £50,000 and you/your partner claims child benefit)

·         You have income from abroad or you live abroad and have UK income

What do I need to do?

If you fall into one of the above categories you must complete a tax return each year by 31 January. So, for tax year ending 5 Apr 2017, your tax return must be completed and sent to HMRC, online, by 31st January 2018 (paper versions must be filed by 31st October).

 You need to include all your income on your tax return, not just the income which hasn’t been taxed

When do I pay

HMRC must be paid the balance of tax due by 31st January following the end of the tax year (31st January 2018 for the tax year ending 5 April 2017).

If you owe under £3,000 in tax and pay tax through the PAYE scheme you can ask HMRC to collect the tax owed through your pay code, as long as you submit your tax return by 31st December following the end of the tax year. HMRC will only apply this if you have enough PAYE income for it to be collected.

You will be required to make a payment on account towards your tax bill for the following year if your self-assessment bill is more than £1,000. Each payment on account is half your previous year’s tax bill. These payments are due on 31st January and 31st July. If you still have tax to pay after you’ve made your payments on account this balancing payment is also due by 31st January.

 I need to do a tax return how do I tell HMRC

How you register depends on the reason you are registering. If you are registering because you are self-employed you need to complete the form CWF1 online. If you’re not self-employed you need to complete the form SA1. You must register by 5th October if you need to complete a tax return for the last tax year (5th October 2017 for the tax year ending 5th April 2017).

How can an accountant help me?

An accountant can help you in many ways with your tax return. Firstly, they will save you the time and hassle of doing it yourself. A good accountant will also know what you can and can’t claim against your taxable income and they will advise you accordingly. An accountant will register as your agent and can speak to HMRC on your behalf, saving you hours of waiting on hold if you have a problem! To find out more contact Emma Stevens

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.
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  • I’ve started to work self employed. What do I need to do?
  • How do I pay my Corporation Tax?
  • How do I pay my Employer’s PAYE?
  • How do I pay my personal tax return?
  • How do I pay my VAT return?
  • When is my personal tax return due?
  • Why do I need to pay a payment on account?

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