Budget 2017 and the changes for small business

Moore Accountancy were not overly enamoured about “Spreadsheet Phil’s” Budget and it’s effects for our small business clients.

Positives included no negative changes to pensions, £2bn more for social care and a delay in Making Tax Digital (MTD) for small self-employed businesses under the VAT threshold.

Negatives include the increase in Class 4 NICs from 9% to 11% by April 2019 and the reduction of the 0% dividend band from £5k to £2k.

Some of these points are further discussed in our Budget newsletter which can be read here –Tax-Newsletter-UK-March-2017.

If you wish to discuss anything from the budget then please drop us an email at info@mooreaccountancy.co.uk

 

Emergency Budget – July 2015 Moore Accountancy Top 10 Points

There have been many changes in George Osborne’s “Emergency Budget” today, 8/7/15, many of which we at Moore Accountancy did not expect.
Below are our top 10 things to consider for small businesses and Individuals:

PERSONAL ALLOWANCE INCREASES
Individual’s personal allowances will increase from £10,600 to £11,000 in April 2016. Moore Accountancy had been expecting a rise of £200 to £10,800. It does bring things in line with the planned £12,500 allowance by 2020.
The level at which higher rate kicks in has also increased more than expected from a current £42,385 to £43,000 next year. Hopes are that £50,000 will be the eventual threshold but no timescales have yet been provided for this.

LIVING WAGE INTRODUCED
From April 2016 a new living wage will be introduced for employees aged 25 and over. This will be at £7.20 (versus current minimum wage of £6.50). By 2020 it is set to reach £9ph. Whilst this is great news for low income earners, small businesses may have to evaluate their costs and it may restrict the ability for SMEs to expand.

MORTGAGE RELIEF FOR BUY TO LET LANDLORDS
Moore Accountancy has numerous clients who have rental property portfolios and this change is bad news for many of them.
At present, finance costs, such as mortgage interest, are fully tax deductible against rental profits. But from tax year 2017/18 this will begin to be limited for higher rate tax payers.
The proposal is that income will be taxed at your marginal rate, but whereas the mortgage expense is currently also expensed at the marginal rate, in the future they will be restricted to the basic rate of 20%.
Our clients will need to evaluate their portfolios and if highly geared, may be less likely to meet mortgage liabilities.
Further changes were made to the wear and tear allowance that landlords of furnished property can claim. From 6/4/16, this will be withdrawn, to be replaced by a tax deduction when the expense is incurred.

PENSIONS FOR ADDITIONAL RATE TAX PAYERS
As expected, George Osborne has put a restriction on pension tax relief for individuals earning over £150,000 of £10,000 compared to the £40,000 currently in place.

TAXES ON DIVIDENDS
At present, dividends is the most tax efficient way of taking funds from a company, especially for many of Moore Accountancy contractors and one person companies. If you are a basic rate taxpayer, then there is no further tax to pay. Even if you are a higher rate, you only pay a marginal rate of 32.5%.
From 6/4/16, the first £5,000 of dividend income is tax free but anything above this will be taxed at 7.5%, 32.5% or 38.1% depending on your tax bracket.
This means shareholders of owner managed companies will be paying a lot more tax going forward and it may be in their best interests to bring forward dividend payments into the current tax year.

CORPORATION TAX RATES
These have come down over recent years to 20% for all companies. Surprisingly, further cuts in the tax rate will take place from 1/4/17 with the rate dropping to 19%. From 1/4/20 the rate will drop further to 18%.
This is good for UK businesses and also for encouraging overseas investment in the UK

ANNUAL INVESTMENT ALLOWANCE (AIA)
This allowance allows businesses to claim 100% of the cost of qualifying plant and machinery in the year of purchase.
It had been indicated that it would reduce from the current rate of £500,000 to £25,000 but George Osborne announced today it would be set at a new level of £200,000 from 1/1/16.

EMPLOYERS’ ALLOWANCE
Currently all employers running a PAYE scheme receive a £2,000 allowance to offset their employer Class 1 NIC liabilities.
This is increasing by 50% to £3,000 from 6/4/16. However this will be withdrawn from companies with one director/employee. This is not good news for many of Moore Accountancy owner managed businesses. Further information as to how this will be recorded is still to come.

INHERITANCE TAX – MAIN RESIDENCE
This had been publicised already by the Conservative government.
Currently everyone has a £325,000 nil rate band after which Inheritance tax (IHT) is payable. The new relief adds a further £100,000 (from 6/4/17) up to £175,000 by (6/4/20) to the IHT exemption level to be used against a residential property.
By 2020, everyone will have £500,000 or £1 million for couples.
There are further tweaks in place, such as if someone downsizes and a reduction in relief for estates exceeding £2million but for the majority of people, this is a welcome relief.

BENEFITS
Proposals will affect many people in the UK.
Tax credit (and the new Universal credit) will be restricted for families with more than 2 children; only affecting those born after April 2017.
Many benefits will be frozen for the next four years, but maternity pay and disability benefits should be exempt from this.
Local Authority/Housing Association tenants who earn more than £30,000 will lose their subsidised housing. They will have to start paying the market rate for their property. The income level will be £40,000 for those in London.
Young people will no longer be able to automatically claim housing benefit. There will be a new “earn to learn” scheme put in place.

This budget had lots to give, but lots to take away too.
Many of the changes have different implications depending on your personal and business situation and if you would like further advice to discuss any of these with Moore Accountancy, then please contact us at info@mooreaccountancy.co.uk , on 07542 299 247 or via twitter at @sidmooremanc

UK Budget 2015 – Moore Accountancy’s Top 10 Highlights

Today’s Budget was always going to have significant political influences with the General Election a couple of months away; but despite that, there were some useful changes brought in by George Osbourne.

Budget 2015 Scrabble image

Photo by LendingMemo.com

Here are Moore Accountancy’s Top 10 Highlights (in no particular order!)

  1. Basic rate savers will receive the first £1,000 interest earned tax free. This is up to £500 for higher rate tax payers – effective April 2016.
  2. Creation of a new “Help to Buy” ISA for first time buyers. You can save up to £200 pcm towards your first home. The government will boost it by 25%, so if you save £200, the government will top up by £50, up to a maximum of £3,000.
  3. New Flexible ISA – This will enable individuals to withdraw money out of their ISA and put it back (in the same tax year) without losing tax free status.The current ISA limit is £15,240 pa in 2015/16.
  4. Personal Tax free allowance for individuals will be £10,600 for 2015/16, rises to £10,800 in 2016/17 and up to £11,000 by 2017/18. This is combined with increases to the higher rate threshold, which will start at £42,385 in April 2015, increase to £42,700 in 2016/17 and up to £43,300 in 2017/18.
  5. Minimum wage will rise to £6.70 in October 2015 for adults with the biggest increase for apprentices who will be earning £3.30 (up from current rate of £2.73)
  6. Fuel duty increase has been cancelled, which means that it has been frozen for 5 years. This will help motorists, but it is important to ensure that the government is still focusing on UK public transport too. The Budget did announce a new transport strategy for the North to help create a “Northern Powerhouse”.
  7. Pensions lifetime allowance will be cut from £1.25m to £1m from April 2016, but from 2018 this level will be index linked to protect existing pension pots.
  8. From April 2016, annuity owners will be able to sell on their annuity and pay their usual rate of income tax instead of the current 55%. This will enable more flexibility for pensioners and follows both last year’s Budget and the Autumn Statement 2014 which began the process of “giving more freedom to pensioners to spend their pension cash as they please”.
  9. Annual paper tax returns to be abolished. Details will be uploaded automatically online. The devil will be in the detail, as we are not sure yet if this will mean more work for small businesses who may have to file monthly or quarterly instead of annually.
  10. Business rates receipts devolved to Manchester, meaning the area will retain 100% of business rates raised.

There are a number of other changes including gift aid for Charities and corporation tax for companies, but these were our favourites. Get in touch with Moore Accountancy at info@mooreaccountancy.co.uk or on 07542 299 247 if you want to find out more information as to how the Budget 2015 will affect you or your business.

And for those who wish to have some bedtime reading with the details of the above then please find the official link to the 124 page Budget 2015 document here.

Christmas Entertaining

baubles

At this time of year, we are often asked whether Christmas parties are tax deductible or not?

Unfortunately, as with anything to do with tax the answer is not the same for everyone!

If you are a sole trader or in a partnership then the simple answer is no.

Legally, you are the business and you can’t entertain yourself. You also need to eat to live and whether you eat in a Manchester restaurant or at home, it is your choice – the cost would count as drawings if you tried to put it through the accounts.

If you have any employees then the exemption described below can be used for them, but not for you.

Limited Companies

If you are a director of a limited company, however, you can claim an exemption to cover the cost of an annual function of up to £150 per employee per annum.

This could be split over a summer event and a winter one but they should be annual and the cumulative cost of both must be below £150 for it to be allowable.

Usually a Christmas (or summer) party would be classed as a benefit in kind and would be taxable on the employee (like company cars) but if the following is met there is not issue:

  • Must be annual event
  • All employees must be invited
  • Total cost (Inc. VAT) must not exceed £150 per guest. If it is £152 the whole amount will be chargeable as a benefit in kind

A way around this is to get a contribution from employees on the excess and just claim the £150 per head.

Entertaining clients and subcontractors

You can’t claim tax relief on entertaining anyone who is not an employee or guest of an employee. So any such expenses will be classed as business entertaining and you will not reduce the amount of profit and hence tax that needs to be paid.

Networking at Christmas

This is a grey area regarding whether it is just eating lunch and hence something that would “normally have been done at that time” (i.e. going out with a group of friends), or whether the main purpose and intention is for finding new business connections and having the opportunity to learn about other businesses and potential leads, then they are potentially allowable.

The intention is the key to deciding whether the expense is deductible or not.

Gifts to client

You can make a gift to a client up to £50 in any tax year.

There are some limits to allow it to be tax deductible – if not met it will be classed as entertaining

  • Must be business related (i.e. calendar, pens)
  • Cannot be alcoholic drink, food or tobacco
  • It must clearly show your business name (advertising)

Gifts to staff

All gifts are benefits in kind unless they are “trivial”.

These can be a bottle of wine, box of chocolates or a turkey, but not a case of wine or  hamper for example.

Any Christmas bonuses must go through payroll system as normal.

We did say that it was not straight forward, if you have any questions at all then please do not hesitate to contact us, our office is closed from Friday 20th December, reopening Monday 7th January.

We hope you all have a good Christmas and we look forward to working with you in 2014.

One simple way to avoid getting stung by the HMRC task force

We’ve all heard the story of the huge multi-national corporate companies that whilst operating very successfully in the UK pay little or no tax.

The latest company to come to light is Facebook, where it has been reported that despite making an estimated £200 million from its UK operations it paid no corporation tax last year!  And whilst Facebook tell us “We take our tax obligations seriously..to ensure compliance with local law”, it is tax avoidance in many people’s eyes. And many of us feel it is well, immoral.

HMRC

But it’s not just huge multi-nationals that are guilty of tax avoidance and the HMRC came up with the idea of launching a series of Task Forces to crack down on tax evasion throughout the UK.

Working in what they describe as “short, sharp, bursts” these task forces are focusing on targeted areas of the country, and in what they are describing as “high risk” industries.

One such Task Force is looking at the property rental market and here at Moore Accountancy we have had first-hand experience in dealing with such a case. We were contacted by a very worried landlord who had been guilty of perhaps not declaring everything as efficiently as they should. With our experience, however, we were able to handle the case with ease.

This is what they had to say

‘We recently engaged Moore Accountancy to resolve our previously undisclosed income from a flat we have been renting out for several years. Sid was wonderful, visiting us at home, spending lots of time going over our books and sorting everything out quickly and efficiently. She liaised with HMRC, and made what was quite a worrying situation into just a blip!!.  She kept us informed at all times, without us having to push for info. All in all, even having had to spend money!! it was made almost painless.!!. ‘

It’s not just landlords that have been targeted, so far they have looked at health professionals, the fishing industry in Scotland, taxi drivers in London, hauliers in the West Midlands and the holiday industry throughout the UK, to name but a few, and they have plenty more planned.

How can we help?

We feel that when dealing with the HMRC it is imperative that you get professional advice from the outset and working with a practice like Moore Accountancy is the right place to start. We have not only had experience in working with the HMRC task force but are confident that we can offer you the best advice for your situation.

There’s no getting away with it, yes you will have to pay the tax. But by doing it before the tax man cometh means that you could avoid a heavy fine and the possibility of a criminal prosecution, not to mention a very invasive investigation.

Get in touch with us today, we have a wealth of experience in dealing with the HMRC and therefore understand the process impeccably, it could save you a massive headache and tax bill in the long run.