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. ²Reduced 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
Class 1 (Employees)	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
Earnings limits or thresholds	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.

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 31^st 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 6^th April to 5^th April the following year. So, for 2016-17 the period covered is 6^th April 2016 to 5^th 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 2^nd 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 31^st January 2018 (paper versions must be filed by 31^st 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 31^st January following the end of the tax year (31^st 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 31^st 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 31^st January and 31^st July. If you still have tax to pay after you’ve made your payments on account this balancing payment is also due by 31^st 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 5^th October if you need to complete a tax return for the last tax year (5^th October 2017 for the tax year ending 5^th 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.

Expenses and employee benefits – how are they taxed and what do I need to do?

22/05/2017 By Emma Stevens

If you pay any expenses or offer employee benefits to your staff members, you must make sure that they are properly declared to HMRC and the right tax is paid on them. Many types of employee perks are taxable and if you don’t submit the right paperwork on time, you could end up with a hefty fine.

Some of the benefits and expenses that are included are:

Travel expenses
Entertainment expenses
Childcare costs
Company cars
Employee health insurance

Reporting and paying

Depending on the type of benefits or expenses you give your employees, different rules apply for reporting them and paying tax on them.

Normally, you’ll submit a form to HMRC for every employee you’ve given expenses or benefits. The form is called a called a P11D and has to be submitted at the end of every tax year.

There’s a further form called a P11D (b) and this needs to be completed if:

you’ve submitted P11D forms for any employees
you’ve paid any of your employees’ expenses through your payroll
you’ve been sent a P11D(b) form by HMRC

The P11D(b) just tells HMRC how much Class 1A National Insurance you must pay on the benefits and expenses you’ve given. You can let HMRC know that you don’t owe any Class 1A National Insurance by completing a declaration.

How to pay tax through the payroll

If you register with HMRC before 6th April it’s possible to deduct any tax on most employee benefits and expenses though the payroll. If you do this, and you pay tax on all of their benefits and expenses directly via payroll, you won’t have to fill in the P11D form. You’ll still have to complete and submit the P11D (b) to pay the Class 1A National Insurance.

What you need to report

Different types of expenses and employee benefits are all reported differently, and there’s an A-Z of different benefits available on the GOV.UK website which will help you choose the right way to report and pay it. https://www.gov.uk/expenses-and-benefits-a-to-z

For ‘minor’ expenses or employee benefits, you could be able make a one-off payment called a PAYE Settlement Agreement.

You can normally report using:

commercial payroll software
HMRC’s PAYE Online service
HMRC’s Online End of Year Expenses and Benefits service

You can also download and fill in forms P11D and P11D (b) and send them to HMRC.

Be careful: If you’re late filing the information you could get a penalty of £100 per 50 employees for each month or part month your P11D (b) is late.

There are also penalties and interest if you’re late paying.

For deadlines – go to: https://www.gov.uk/employer-reporting-expenses-benefits/deadlines

Keeping accurate records

It’s very important to make sure that you keep accurate records of everything you give your employees by way of expenses and benefits. You must be able to prove to HMRC that your reports are accurate and that your end of year forms have been properly completed. Sometimes HMRC ask to see evidence of this, too.

Things you’ll need to make a record of include:

dates and details of every expense or benefit you’ve given
information about how you worked out the amounts to put on your end-of-year forms
payments that your employees contribute themselves to an expense or benefit

You must keep these records for three years from the end of the tax year they relate to.

Exemptions

Some expenses and benefits don’t need to be reported, and they include;

business travel
telephone bills
entertainment expenses relating to business
tools or uniforms that are used for work

To qualify you must be paying a flat rate to your employee as part of their earnings – either a benchmark rate or a rate approved by HMRC, and paying the actual costs incurred by the employee.

For more advice and guidance, contact 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.

Rental income – what expenses can I offset?

24/04/2017 By Emma Stevens

The budget of summer 2015 announced changes to the tax relief that buy-to-let landlords can claim that may well affect your rental income long term. Until 2017, landlords can claim back all of their ‘financial costs’ incurred in renting out a property. This even includes mortgage interest.

In 2017, however, changes will come into effect that mean landlords can only claim relief at the basic income tax rate of 20 per cent, even if they are higher rate taxpayers. If you’re a landlord in one of the higher tax brackets, you could lose over 50 per cent of your tax relief by 2020, when the changes will be completely in effect.

Although it’s tempting to panic about losing rental income, it’s also wise to make sure that you are actually claiming everything you’re entitled to before the changes come in. That way, when the reductions in tax relief hit, there’s some extra income to soften the blow.

Mortgage Interest

From April 2017 over a four-year period implementation of the new claims on relief for finance costs (e.g. mortgage interest rates) incurred on the property of all landlords of residential property in or outside the UK will be phased in as follows:

2017/2018: the deduction from property income will be restricted to 75% of finance costs with the remaining 25% available at the basic rate.
2018/2019: 50% of finance costs available for full tax relief and the remaining 50% available at the basic rate.
2019/2020: 25% of finance costs available for full tax relief and the remaining 75% available at the basic rate.
2020/2021: all financing costs incurred by a landlord will be given as basic rate tax reduction.

The restrictions being imposed on the finance costs are likely to affect landlords of residential properties paying tax at the higher and additional rates, however excluding those with qualifying furnished holiday lets.

Letting agent fees

These are tax-deductible – considering you could be looking at fees of 10-15 per cent of your rental charges for a traditional letting agent, that’s something you need to add into your tax return as an expense.

The costs of

advertising
drafting tenancy agreements
credit checking and referencing tenants
deposit protection fees and
inventory costs,

can also be offset if you’re not letting through an agent.

Maintenance and repairs

You can’t claim for home improvements or renovation but you can offset the cost of fixing any problems and general maintenance of the property. The type of repairs you can claim for are:

interior and exterior painting and decorating
treating damp and rot
mending broken doors, windows, lifts, furniture and appliances.
re-pointing
stone cleaning
replacing roof slates, flashing and gutters
Wear and tear

From April 2016, a new system is replacing the wear and tear allowance. This new system will affect all landlords of furnished residential properties. In the past, the wear and tear allowance allowed landlords to claim back broadly 10 per cent of the annual rent. The new allowance will be a system allowing for landlords of residential property to deduct only the actual costs incurred of replacing furnishings in the tax year. Capital allowances for furnished holiday lets will not be affected.

Council tax and utility bills

If you pay any of the property’s utility bills on the tenant’s behalf, you can claim the whole cost of this back.

You can also claim back one-off costs like the cost of travelling between properties.

If you’re not sure about which expenses you can claim back against tax, ask an accountant’s advice – it’s also tax-deductible!

Is my business ready for a HMRC inspection?

17/04/2017 By Emma Stevens

Nobody relishes the idea of a HMRC inspection. Since 2010 the chances of any business being inspected by HMRC have risen, due to a pledge by the then government to recoup some of the deficit in public finances. Although larger businesses are being looked at more carefully by HMRC, small businesses aren’t escaping the scrutiny of the tax office either. Keeping accurate records is paramount if you want to avoid potential issues in the future.

What happens in a HMRC inspection?

If your business is selected for a tax inspection, HMRC will want to take away all of your business records for the past tax year and come back to ask you questions about them. Should they find that you haven’t paid some of the tax that’s due, they can fine you £100 plus make you pay any tax they believe is owed.

If you’ve just made a simple mistake, they might be lenient, but if they suspect there’s something other than an honest omission going on they could ask you for five years of business records rather than just the one year that’s usual. Most of the time they won’t find anything, and although there’s no penalty, it can cause a lot of inconvenience and worry.

Small firms are often hit hardest by the stress of an HMRC inspection. It can take a while for them to come back to you and confirm that all is OK, while asking you questions, and while you’re in limbo, it can be unsettling.

What triggers a HMRC inspection?

There is a small percentage of random checks every year, but in the vast majority of cases HMRC only triggers an inspection if they think there might be something going on.

HMRC are interested in the ratio analysis – if they notice that your figures change a lot from one year to the next. If inspectors notice any unusual fluctuations in income or expenses on your tax return, they might be a cause for concern, and this can set off what’s called an aspect enquiry where they will want to know more about why the figures have changed so much. Although this is still a worry, it’s less stressful than a full blown enquiry and if they don’t find anything or you can adequately explain the reasons for any differences, it should be fine.

One way to avoid arousing suspicion if there’s a good reason for a big change in your figures is to use the extra space on your tax return form to explain any unusual fluctuations in the businesses turnover or profit.

If you declare everything and keep your records accurately, you should theoretically have nothing to fear from HMRC, although be warned, ignorance is no defence if you’re found to have been routinely making mistakes. Ideally you should make sure that your tax returns are filed on time and in full, so that HMRC doesn’t have any cause for concern.

Keep transparent records

HMRC has the power to obtain information from third parties now, and there are even increased powers to search premises. If your business does come under scrutiny you’ll have to make sure that everything is in order. HMRC also has software it can use to analyse tax returns and compare them to the average for your sector.

Make sure that you have records of absolutely everything that relates to the business – don’t throw anything out. If you don’t keep paper copies of business bank statements, you may have to obtain them from your bank if HMRC decides to inspect you. If you are missing any important information, speak to your accountant to see if there’s anything you can do to fill any information gaps.

Honesty is the best policy

If you know there is an issue with your tax return, it’s best to tell HMRC straight away, explaining why things went wrong or weren’t recorded properly. If you try to cover up glaring omissions or errors, the chances are HMRC will find them anyway and when they do, you’ll face stiffer penalties or even a criminal investigation.

The top three ways to make sure that your business is inspection ready (and avoid being inspected wherever possible) are:

Make sure you always submit your returns on time
Make your tax returns accurate and complete – ask an accountant for help if you need to
Explain any changes from one year to the next on your return. Significant changes in your turnover or gross profits will make HMRC wonder what’s going on, especially if drawings taken from the business or the remuneration paid don’t look right.

If you need help keeping your business records organised contact Emma Stevens at Emma Stevens Accountancy.

Spring Budget 2017

09/03/2017 By Emma Stevens

The Chancellor’s first – and last – Spring Budget

The Spring Budget 2017 will be the last of its type. Probably.

The publication of the Finance Bill in the spring/summer of this year will presage a change in Parliamentary proceedings. A second Budget in autumn 2017 followed by a Spring Statement in 2018 marks the start of a process enabling Parliament to scrutinise tax changes well before the tax year where most will take effect.

As if the domestic ‘flip-flopping’ of a long-standing timetable wasn’t enough, the Chancellor, Philip Hammond, delivered his first Budget speech against a backdrop of Brexit uncertainty.

Before he stood up, punters could have obtained long odds about witnessing a wise-cracking ‘Spreadsheet Phil’, as he has become known, standing at the despatch box (the joke-o-meter registered seven during his hour-long address).

But beyond the laughs from the government benches combined with Opposition scowls, the Chancellor sent out some fairly serious messages.

Fairness?

For starters, as part of a fiscally-tight Budget there was the Chancellor’s decision to target the self-employed, company owners and investors in a bid to raise billions of pounds and provide a “strong and stable platform” for the UK’s negotiations as it navigates a path away from the EU.

He also proposed to enhance the fairness in the UK’s tax system with a view to transforming the economy into one that works for everyone.

With ISA allowances set to be worth £20,000 from April 2017 and a reduction from £5,000 to £2,000 in the tax-free dividend allowance from April 2018, here are two opportunities offering professional advisers the chance to demonstrate their expertise admirably to clients.

Throw in the need for businesses to seek out rates advice on their premises following the impending changes to the system, combined with the relief measures announced by the Chancellor, and the Spring Budget could prove a Spring-board to the forging of robust relationships between advisers and clients.

And that’s before the Chancellor even deigns to delve back into his joke book to help buff up his Autumn Budget announcements…

BUDGET HIGHLIGHTS

A reduction in the dividend allowance from the current £5,000 to £2,000 from 2018/19.
A 1% increase in the main Class 4 NIC rate to 10% for 2018/19 and a further 1% addition to 11% for 2019/20.
A one year deferral in the start date for Making Tax Digital (MTD) for unincorporated businesses and landlords whose turnover is below the VAT threshold (£85,000 from 1 April 2017).
An increase in the personal allowance for 2017/18 to £11,500 and a corresponding rise in the higher rate threshold to £45,000, although in Scotland the latter figure will only apply to savings and dividend income.
A new 25% tax charge on transfers to qualifying recognised overseas pension schemes (QROPS), other than for those who have ‘a genuine need’ to transfer.
Three measures to help small businesses cope with the changes to business rates, due to take effect in April 2017, starting with a new £50 a month cap (in 2017/18 only) for businesses that lose Small Business Rate Relief.
The publication later in the year of a green paper examining the funding of social care, although the Chancellor ruled out the rumoured ‘death tax’. In the interim an additional £1bn is to be made available for social care funding in 2017/18.

Download the full budget guide

A great review of Emma Stevens Accountancy!

25/07/2016 By Emma Stevens

Wesley Clark of Ktchns Limited (www.ktchns.co.uk) gave Emma Stevens Accountancy a great review this week! Its been a pleasure to work with Wesley over the last 18 months helping him to set up his business and watching it grow into a very successful small business! Keep up the good work Wes!

Wesley wrote:

After 10 years in the Kitchen industry I decided to look into the possibilities of setting up my own kitchen business. After extensive research and planning, one of the main things stopping me from ‘making the move’ was the accounting side of things. I have always been a bit scared of Tax, VAT, and HMRC in general and this was the main delay in my decision. I had heard of Emma Stevens locally and thought I’d drop her an email to find out what she could do to help. During our meeting Emma gave me some very helpful information and tips on how to get everything up and running. This was before we’d even discussed me using Emma as my accountant. The advice she gave made me so much more confident about what I was doing and she could see that I could be onto something good. After leaving the meeting with Emma I decided to go ahead and make that big move. Emma has made it all so very simple. She now manages my PAYE, my VAT and TAX Returns so I don’t have to worry. Every time I have had a question, she replies within a few minutes. I am now running what I would call a growing successful business. I wouldn’t be enjoying it half as much if I didn’t have Emma there to back me up and help where needed.

Can we help you too?

This is the reason I love what I do. It is so wonderful to be able to support small businesses to grow and expand. So if you have a great business idea but you don’t know what to do next why not get in touch and see what we can do to help you.

Emma Stevens Accountancy

01442 831462

info@emmastevensaccountancy.co.uk

VAT Flat Rate Scheme

09/12/2015 By Emma Stevens

Changes have coming in since this post was written so please check out https://emmastevensaccountancy.co.uk/changes-flat-rate-vat-scheme-1-april-2017/ for the latest update on the scheme

The VAT flat rate scheme is available for small companies with a turnover of £150,000 or less. The Flat Rate Scheme involves paying a fixed rate of VAT to HMRC. You can then keep the difference between what you charge the customers and what you pay HMRC. You can’t reclaim the VAT on your purchases except for certain capital assets over £2,000.

The scheme has several advantages to the small business. It is very simple to administer as you simply need to total up your sales invoices (including the VAT charged on them) for the quarter and multiply the total by your flat rate percentage to give the amount payable to HMRC. It is also useful for small businesses with low overheads as they may find they are better off financially through the VAT Flat Rate Scheme than by using the traditional method of calculating VAT.

How to Join

You can join the scheme via 2 ways. Firstly, you can register online for the Flat Rate Scheme when you complete your initial VAT registration. Alternatively, if you apply for the scheme after you become VAT registered you need to complete the form VAT600FRS.

4116273

Eligibility

To be eligible for the scheme you must be a VAT registered business with an expected VAT taxable turnover of £150,000 or less over the next 12 months. You can’t use the scheme if you left the scheme in the last 12 months or if you committed a VAT offence in the last 12 months (eg VAT evasion).

Leaving the scheme

You must leave the scheme if on the anniversary of joining your turnover in the last 12 months was more than £230,000 (including VAT) or if you expect it to be in the next 12 months.

VAT flat rate

The VAT rate you use will be dependent on your business type. Details of the various rates can be found here. For your first year as a VAT-registered business you can reduce your VAT flat rate percentage by 1%. The reduced rate lasts until the day before your registration anniversary.

How to calculate what you pay

A management consultant has a flat rate percentage of 14%. He bills a client £500, adding VAT at 20% to make a total bill of £600. To calculate the VAT due on the Flat Rate Scheme you multiply the total bill of £600 by 14% giving the amount due to HMRC as £84.

It is always advisable to seek professional advice when deciding if the flat rate scheme is suitable for you.

Tax Rates and Allowances for 2015-16

23/11/2015 By Emma Stevens

Explaining the complete list of tax rates and allowances for 2015-16, plus any changes to the rules in this year would take more than a blog post – that’s what accountants are for, after all. We’ve put together a quick guide to some of the most important taxes that affect you as an individual and as small business owner.

Your actual income will be affected not only by the tax rates, but also by changes in personal allowances. For help with tax and any other financial issues, feel free to contact Emma Stevens Accountancy.

Tax bands and thresholds for 2015-16

Tax bands for 2015-16 haven’t changed a great deal, except for the 10 per cent savings band which has been replaced with a £5,000 nil-rate band for people on a low income.

Income Tax Rates

Income tax for self-employed people is only paid on the profits, not the gross income; deduct business expenses, capital allowances and losses to find your profit.

First £31,785 of taxable income 20%
£31,786 to £150,000 40%
Excess over £150,000 45%

Personal Allowances

Individuals born after 5 April 1938 £10,600
Individuals born before 6 April 1938 £10,660

Annual investment allowance

The current annual investment allowance is £500,000 until December 2015, when it will be reduced. You can spend up to £500,000 on business-related capital assets in this tax period, and offset it against your income tax bill.

Expenses you can claim

You can deduct the costs of anything bought for your business when you work out taxable profits and get immediate tax relief for the full amount spent unless it’s an item that counts as a capital asset- such as a computer which is accounted for under different rules.

Running costs of a car or vehicle, including petrol, car tax, insurance, repairs and servicing – depending on the proportion of mileage that was business-related.
Running costs of your business premises – or if you work from home, your home office costs
Salaries and benefits of any employees

National Insurance

National Insurance bands and rates can be confusing because they are different for employees, sole traders and limited company directors. For self-employed business people;

Class 2 National Insurance contributions

For profits up to £8,060 in 2015-16, you have to pay Class 2 contributions at £2.80 a week. You can claim exemption if your annual profits are below £5,965 in 2015-16.

Class 4 National Insurance contributions

If your profits are more than £8,060 in 2015-16, you will have to pay Class 4 contributions. This is calculated at 9% on profits between £8,060 and £42,385 in the 2015-16 tax year.

On profits above £42,385, the rate drops to 2%.

If your business is a limited company, even if you’re the only employee, you are counted as employed and so the employee income tax rules will apply.

Value Added Tax (VAT)

If your turnover is over £82,000 in 2015-16 you also have to register for VAT and pay quarterly. You can also register voluntarily if your turnover is less than £82,000, and it maybe worth doing so if you have to pay VAT on things bought for your business, as you get to claim the VAT back if you’re registered. It depends on your consumer as you will need to add VAT to your sales.

If you charge more VAT on the goods or services you sell than you pay in items you buy for your business, you will have to pay HMRC the balance.

If your turnover is less than £150,000, you could also benefit from using the flat-rate scheme. The scheme calculates your VAT payments as a percentage of your VAT-inclusive turnover, which makes it good value for small businesses as well as simplifying admin.

VAT Rates

The standard rate of VAT is 20%.

There is a list of VAT flat rates available for different types of business on the HMRC website.

Marriage Allowance

This year, married couples and civil partners can transfer up to £1,060 of ‘unused’ tax allowance to each other. If one of your incomes is below their allowance, they can transfer up to £1,060 of the excess, as long as their spouse pays tax at 20% – this can help save up to £212 a year in tax.

For more information and a full list of all personal and business tax allowances and changes, see the HMRC website.