The Chancellor of the Exchequer’s Autumn Statement

The Chancellor of the Exchequer’s Autumn Statement

Announced on 5th December 2013 were a range of measures aimed at individuals and business.

State Pension Age increased

State pension age will increase to 68 from mid-2030’s affecting many people who are currently in their 40s. And it will rise again to 69 from the late 2040’s affecting many people who are currently in their 30s.

The Chancellor also confirmed that the State Pension Age will be reviewed at 5 year intervals in line with increases in life expectancy, The 5 year reviews on the State Pension Age will be set with the aim of ensuring that people spend no more than one third of their expected lifespan drawing a pension. This is a clear signal that the goalposts may be moved several times before most people can reach retirement age.

The rise in the age trigger for the state pension makes retirement planning even more important for those who want to stop working or slow down, before their late 60’s.

 Income Tax changes

The personal allowance will increase to £10,000 from April 2014.

The higher rate tax band of 40% will therefore apply to income of £41,865 (£10,000 + £31,865) rather than the current £41,450 (£9440 + £32010). 

Transferable personal allowance

Married couples or civil partners will be able to transfer up to £1,000 of unused personal allowance provided the recipient is a basic rate taxpayer. For some this could be worth up to an extra £200 a year.

ISAs allowance rises

From April 2014 the ISA allowance is £11,880 of which £5,940 can go into a cash ISA. The Junior ISA allowance will also increase to £3,840.

Capital Gains Tax (CGT) exemption increased

The annual exemption for CGT will increase by £100 from April 2014 to £11,000 and will increase to £11,100 from April 2015.

  Principle Private Residence Relief

There were also changes to Principle Private Residence Relief. Previously if you moved out of a house that was your principle residence and sold the property within 3 years, you paid no CGT. From April 2014, this 3 year period will be reduced to 18 months.

 National Insurance Contributions

The Chancellor announced that there will be no employer National Insurance Contributions for employees under 21 on earnings up to the upper earnings limit from April 2015.

 Business partnerships with mixed membership

Partnerships where profits are allocated to a  corporate partner, where an individual partner can benefit, or where partnership losses are allocated to an individual partner instead of a corporate partner, to allow them to access certain loss reliefs will be subject to review.

HMRC let property campaign

Let Property Campaign, which was recently announced by HM Revenue & Customs (HMRC) as a way of recovering upwards £500m in tax from an estimated 1.5 million landlords who haven't paid tax on their rental income. All landlords will be targeted including those like you who only own one property, those who have holiday lets and those who let houses in multiple occupation. It is intended that the campaign will run for at least 18 months and during that time what HMRC wants landlords to do is tell it voluntarily about their untaxed rental income, pay any unpaid tax due on it as well as any interest and penalties. The advantage is that by volunteering the information during the campaign, you'll get any penalties due at a preferential rate which will be a lot lower than the maximum penalty which can be as much as 100% of the tax due.

As Marian Wilson, head of HMRC Campaigns points out: "It is always cheaper to come forward voluntarily and pay the tax you owe, rather than wait for HMRC to come calling."

If you don't voluntarily disclose the fact that you owe tax on your rental income and HMRC finds out about untaxed income and launches an inquiry or investigation into your tax affairs, you could face stiff penalties and a possible criminal conviction.

Marshall Smalley Accountants can help with the whole of this process and make the disclosure on your behalf.

We have a number of cases currently being processed.

Please call 0115 956 5171 to arrange a free no obligation meeting to discuss the process and how we can help.

Changes to The National Minimum Wage

From 1^st October 2013 The National Minimum Wage rates will change:

·         Adult rate for workers aged 21 & over will increase from £6.19 to £6.31 per hour

·         Rate for 18-20 year olds will increase from £4.98 to £5.03 per hour

·         Rate for 16-17 year olds will increase from £3.68 to £3.72 per hour

Apprenticeship rates

The rate for apprentices will increase from £2.65 to £2.68 per hour

This applies to:

·         Apprentices under the age of 19

·         Apprentices aged 19 or over, but in the first year of their apprenticeship

The new rates will need to be applied to all payments for work commenced on or after 1^st October 2013.

Please refer to www.gov.uk/national-minimum-wage for further more comprehensive information.

HMRC Property Sales Compaign

HMRC have a property sales campaign currently running which is an opportunity for you to bring your tax up to date if you have sold a residential property, in the UK or abroad, that’s not your main home. If you made a profit but have not told HM Revenue & Customs (HMRC), you might not have paid the right amount of tax. To take advantage of the best possible terms you must voluntarily disclose your income or gains and pay what you owe by 6 September 2013.
After 6 September, HMRC will use the information it holds to target those who should have made a disclosure under this campaign and failed to do so. Should you be in a situation where you may have gains to declare please contact Marshall Smalley Accountants and we will be able to help and advise.

Parents on Higher income – Registrations for Self Assessment deadline 5th October 2013

Parents on higher incomes who have elected to continue to receive their Child Benefit after January 2013 should note that they must register for Self Assessment by 5 October 2013 to avoid any penalties in relation to the High Income Child Benefit Charge.

HM Revenue and Customs (HMRC) will be writing to around two million higher rate taxpayers during August, including those affected by recent changes to Child Benefit. The letter reminds them that if their income is over £50,000 and they or their partner have been receiving Child Benefit in 2012/13, they will need to complete a Self Assessment tax return for the 2012/13 tax year. They must register now with HMRC for Self Assessment if they have not already done so.

Tax Credits and Tax Credit Renewal Packs 2013

If you are required to complete a self-assessment tax return you should get all your information into your accountant as soon as possible to enable them to be processed on time to meet the tax credit deadline – no later than 31^st July.  You can estimate it but this means you may receive too little or too much and the tax credits will need to be adjusted at a later date.

If you have not already received your tax credit renewal packs you should expect to receive them by 28^th June 2013.  If you have not received them by this time you should contact the Tax Credit helpline Tel. 0345 300 3900 to request the renewal forms.  In the meantime, your payments will continue.  Please note you cannot obtain a pack online.

The future of childcare vouchers

In the recent Budget, the Government announced significant changes to childcare vouchers. Existing childcare voucher arrangements are due to be phased out from Autumn 2015, with a new childcare tax-break being introduced instead.

What does the change mean for parents?
The new scheme will allow parents to reclaim up to 20% of their childcare costs, up to a maximum of £1,200 a year per child for children up to age 5. Unlike the current scheme, the new arrangements will be open to the self-employed and to those on the National Minimum Wage. Over time the scheme will be extended to cover children up to age 12.
While the new scheme will offer increased savings to some parents, others would be better off under the current scheme. Some parents will be ineligible to join the new scheme, with the affected groups including additional-rate taxpayers, couples where one parent is out of work and parents of older children. Couples who have only one child in childcare will receive lower savings under the new arrangements, as will parents who have more modest childcare costs.
Parents who join the current childcare voucher scheme will be allowed to continue receiving childcare vouchers well beyond 2015, so there are still plenty of reasons to encourage parents to sign up for childcare vouchers.

What does the change mean for employers?
The Budget announcement transfers the onus of childcare support away from employers. Instead of relying on employers to set up a childcare voucher scheme, parents will be able to claim their tax relief direct from a childcare voucher provider of their choice. However, employers still have a vital role to play, both in continuing to offer childcare vouchers to pre-2015 members and in finding creative ways to support future parents.
For example, although the new tax relief will be available for parents to access direct, many parents appreciate the convenience of their childcare costs being deducted through payroll. With this in mind, we intend to offer employers a payroll deduction childcare scheme, which will be phased in as the current childcare voucher arrangements are phased out.
Unfortunately, the new scheme will not offer any National Insurance savings for either parents or employers. We know that employers greatly value their NI savings from childcare vouchers, so this change may lead to a hole in HR budgets. However, as the existing scheme will be phased out gradually, there will at least be time for employers to prepare.
The full details of the new scheme have not yet been agreed, but we remain in close contact with HMRC and will be addressing the remaining questions over the coming months.

Marshall Smalley 2013 Budget Overview

 

The Budget delivered on 20 March 2013 was business tax friendly with few surprises.

We hope this is a useful summary of some of the main changes.

 

BUSINESS TAXES

Corporation Tax: from 1 April 2015, the main rate of corporation tax will be reduced to 20% so the rate will be the same for all companies whatever their taxable profits.

Small companies’ rate: as previously announced, this will be 20% from 1 April 2013 with the full rate being 23%.  The effective rate of tax for profits between £300,000 and £1,500,000 is 23.75% for the year ending 31 March 2014.

Capital allowances: the rates and thresholds of the main capital allowances from April 2013 are an 18% writing-down allowances and the Annual Investment Allowance (AIA) cap is £250,000.

Employment allowance: the significant announcement for employers is that from 6 April 2014 £2,000 each tax year can be offset against Class 1 NI contributions.

Loans to participators: the rules that tax loans to a shareholder in close companies are being tightened to restrict the repayment relief so it only applies were there has been a genuine repayment. .

PERSONAL TAXES

Income tax: as previously announced in the Autumn Statement, the personal allowance increases to £9,440 from 6 April 2013 and the basic rate tax band will be reduced to £32,010. The additional rate of tax chargeable on income over £150,000 reduces to 45% for 2013/14 tax year. Budget 2013 has announced that, from 2014/15, the personal allowance will be increased to £10,000 and the basic rate limit reduced to £31,865.

National insurance: from 6 April 2013 the employee’s national insurance rate is 12% below the upper earnings limit and 2% above that, the rate of employer’s national insurance contributions is 13.8%.

Inheritance tax: the £325,000 threshold for the nil-rate band is frozen until 2017/18.

Capital Gains Tax: the annual exemption for 2013/14 is increased to £10,900.

Entrepreneurs Relief (ER): from 6 April 2013, the lifetime limit of gains which can benefit from ER remains at £10m.

Individual Savings Accounts: the annual limit is to be increased to £11,520 for 2013/14, up to half of which can be saved in cash deposits.

Childcare voucher scheme: the Government have announced a consultation aimed at extending tax relief to employees whose employers do not offer childcare tax vouchers and the self employed too. The new system planned to start from Autumn 2015 will operate through an online account with the Government matching every 80p of parental contribution with 20p up to a maximum total of £1,200 each year.

VAT

Registration and de-registration thresholds: whilst the VAT rates remain unchanged the registration threshold will increase to £79,000 and the de-registration threshold to £77,000; both changes apply from 1 April 2013.

Council Tax and Empty Properties – change of rules 1st April 2013

From 1^st April no discount will be given for empty properties and the full amount of council tax will be chargeable on:

·         Second homes and furnished rented accommodation between tenancies

·         Empty unfurnished properties including any undergoing major repairs

Exemptions will still apply to:

·         Where a person enters long term residential or hospital care

·         Following the death of the tax payer

·         Following the taxpayer going to prison

The Government has also introduced a new charge for properties that remain fully empty for more than two years.  Owners of these properties will be charged an additional premium of 50% meaning they will have 150% of the normal council tax to pay.

Personal Tax Planning Review Checklist 2012/13

The purpose of this checklist is to suggest strategies you may wish to consider as we approach the end of the 2012/13 tax year or planning opportunities available thereafter.

 

Strategies	Comment
Selling assets by 5 April ·         Can you use the available £10,600 CGT annual exemption(s)? ·         Inter spouse transfer to fragment gains? ·         Stagger disposal to double up use of exemptions? ·         Bed and spouse quoted investments to uplift base cost? ·         Any negligible value claim for assets that have fallen significantly in value? ·         Have you claimed your entitlement to Entrepreneurs Relief? ·         If your Company has ceased trading have you considered making a capital distribution?
Making gifts ·         Are you using your IHT annual exemptions? a.     Gifts £3,000 pa or double? b.    Small gifts same person £250 c.     Unlimited regular gifts from surplus income d.    Marriage gifts up to £5,000 depending on relationship ·         If there are potentially exempt transfers have you considered insuring against IHT? ·         Are there certain assets at a low value that may be transferred with minimum CGT? ·         Is your will up to date and do you have a lasting power of attorney? ·         Have you considered your exposure to IHT? ·         Have you written life assurance policies into trust to avoid IHT? ·         Is there scope to release equity in investment property by borrowing and gifting the cash? ·         Have you claimed gift aid on your self assessment tax return? ·         Any scope for a deed of variation on a deceased relative’s estate?
Second homes ·         Principal private residence election made within two years? ·         Considered varying any election?
Pensions ·         Have you considered maximising contributions before 6 April? ·         Have you claimed higher rate income tax relief on your self assessment? ·         Is there scope to put business property into a self administered scheme?
Tax efficient investments ·         Have you used your ISA allowance? ·         Considered EIS or VCT investments? ·         What about minimising income in pursuit of capital growth by investing in an investment trust? ·         How about buying gilt edged stock at a discount to produce a tax free profit on maturity?
Maximising use of income tax allowances and bands ·         Wages for spouse? ·         Tax efficient Partnership profit shares? ·         Transfer investments to any non/lower earner? ·         Joint ownership with spouse or civil partner to share income? ·         Considered replacing earnings with dividends?
Avoiding 50% or 45% income tax ·         Have you considered the tax advantages of incorporation to open up more tax planning possibilities, including the potential sale of goodwill? ·         Can you defer bonuses or dividends into 2013/14? ·         Potential for income splitting? ·         Are there assets that may be sold to the Company at low CGT rates? ·         Considered your Company holding investments to avoid higher income tax rates? ·         Could you limit income to accumulate capital that could be charged at lower CGT rates? ·         How about using loans paying refundable S455 tax and being taxed on the interest free benefit? ·         What about using salary sacrifice to take earnings below £100k?
Employment taxes ·         Consider NI deferral if more than one job or both employed and self employed? ·         Would you change your company car for a more tax efficient vehicle? ·         If you are taxed on car fuel benefit do you have a very high mileage? ·         Have you claimed the maximum authorised mileage rates for business use of your private car? ·         If your employer doesn’t pay the maximum mileage rates have you claimed a deduction for the shortfall on your self assessment? ·         What about using the HMRC approved enterprise management incentive scheme to retain or recruit key employees or help with succession? ·         Were your tax codes correct for 2012/13?
Tax management ·         Have you negotiated time to pay arrangements with HMRC to ease cash flow? ·         Have you applied to reduce self assessment payments on account where appropriate? ·         Will you need to ask HMRC to code out income tax underpayments up to £2,000? ·         Have any non taxpayers registered to receive interest from savings gross?

Time to Reconsider a CIS Gross Payment Application?

The advantages of obtaining CIS gross payment approval from HMRC include the following:

·         Customers and cash flow- apart from the positive impression on potential customers your cash flow will be boosted annually by 20% of the labour you invoice,

·         Invoicing- if you are approved for gross payment status your invoicing will be easier as you won’t need to separately show your charges for labour and materials on your invoices and

·         Simpler administration- this will simplify your payroll processing and you will not have to chase HMRC repeatedly to refund any CIS tax overpaid for a tax year, typically this takes six months.

For these reasons Marshall Smalley suggest you reconsider your position and apply for CIS gross payment status.

In order to obtain CIS gross payment status there are HMRC turnover and compliance tests that need to be satisfied. However, there is a right of appeal if HMRC decline an application on compliance grounds. 

If this is of interest please contact Marshall Smalley and  we can help you apply to HMRC for CIS gross payment status.