Autumn Statement Update 2016

Business Matters_Steve Woods via Dreamstime

Business Matters_S Woods (Dreamtime)

It was Phil Hammond’s first Autumn Statement since becoming Chancellor and it will be his last, as the usual spring budget is moving to the autumn from 2017.

There was lots of talk about productivity and where our gross debt is at present, but for you – our small business and individual clients, here are Moore Accountancy’s main highlights:

Increase in Personal Allowance (PA) and Higher Rate Tax (HRT) threshold

For 2016/17, the PA is £11,000 and the HRT is currently for income levels over £43,000.

Next year (2017/18) this shall rise to £11,500 and £45,000 and the eventual aim is to ensure that the PA increases to £12,500 and the HRT to £50,000 by 2020. After this point the PA is planned to rise in line with the Consumer Price Index.

An increase to these allowances is always good news for both individuals and small business owners.

 

National Living Wage

This was introduced last year and is separate to the National Minimum Wage. This will go up from £7.20ph to £7.50p from April 2017. Read our previous article about the differences between the two.

This is a positive thing for the country and should boost the flow of cash in the economy, although it will be an added burden for micro businesses.

Salary Sacrifice Schemes to be removed

From April 2017, any salary sacrifice schemes (aside from schemes relating to pensions, cycle to work, low emission cars and childcare) will be abolished. These include gym memberships, school fees, private health insurance, accommodation, company cars and car parking.

This does not affect many of our owner managed businesses, but if you are an employee of a large organisation, then we suggest you take up salary sacrifice schemes before April 2017 and benefit for a further year of reduced NIC and tax. After April 2018 these will no longer be protected.

 

Savings

Those individuals who have been prudent over the years and saved their pennies have been hit hard over the last couple of years with interest rates at a record low.

The government will be launching a new National Savings & Investment bond which allows savers to save up to £3000 over a 3 year period. It aims to offer a market leading rate. It should be launched in the spring.

In addition to this, those savers who are basic rate with more than £1,000 worth of gross interest, or higher rate with more than £500 worth of interest should continue to look at utilising ISAs. The threshold has been increased to £20,000 per annum effective from 6/4/17.

 

Corporation Tax rates

The chancellor confirmed that he would not change George Osborne’s plans to reduce Corporation Tax from the current rate of 20% to 19% (from 1/4/17) down to 17% (from 1/4/20). This is welcome news for all businesses in the UK as it shows that the Government’s plan to have the lowest tax rate in the G20 is still on the agenda.

 

VAT changes

Many small businesses have been using the Flat Rate Scheme (FRS) as a simplified way of accounting for their VAT liabilities each quarter.

Unfortunately from 1/4/17 a new VAT rate of 16.5% will be introduced for many labour only businesses who have limited costs (to be known as a “limited cost trader”) and we understand that this will supercede any existing rates which may have been used by existing VAT registered businesses.

The details have not yet been finalised but we believe that a trader whose VAT inclusive expenses on goods (not services) are < 2% of their VAT inclusive turnover or <£1,000 will fall into this category. Note that the expenses used in the calculation will also exclude: capital expenditure, food and drink consumed by the business and vehicle and fuel expenses.

This will affect many of our smaller VAT registered clients, so please ensure you contact us to discuss this further for your specific situation.

 

Making Tax Digital

This is the Government’s current plans to move all small businesses and Landlords to a quarterly reporting and filing regime and away from the current once a year filing.

Many bodies, including the ICAEW have contributed to the consultations which have taken place over the last few months to discuss what HMRC and the Government want from businesses and how they expect businesses to cope with the onerous requirements.

The Government intend to publish its response to these consultations in January 2017 and we shall of course update our clients as to what it will mean for you at that point.

 

More support for Research and Development (R&D) and finance for growing firms

The Government plan to provide a further £400m boost for venture capital funds.

They may also review the tax position of companies who undertake R&D in order to make the UK more competitive in this area.

Many companies may be eligible for R&D tax relief, and whilst this is not a speciality of Moore Accountancy, we have contacts we can pass you on to for further guidance, so please get in touch if you think you may benefit.

 

Letting agent fees

These have been banned which is a cash flow benefit for many renters as it will reduce any up-front costs required when taking out a tenancy.

For landlords however, agreements with agencies should be reviewed to see whether the costs will now be passed onto landlords instead. It will therefore be necessary for landlords who use agents to review their income and costs to ensure they are not disadvantaged significantly.

If you wish for a more thorough review then please read our newsletter update.

Please contact Sid at Moore Accountancy (info@mooreaccountancy.co.uk) if you think any of the above changes will affect you and we can arrange a call or meeting to discuss any tax implications.

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.

Budget 2014 – Highlights

piggy bank

Yesterday, George Osborne announced his 5th annual budget, hailed as a savers BUDGET; here are some of the highlights.

Whilst there is not much for micro and small businesses, we have been urged to “export more, build more, invest more and manufacture more”.

Business in enterprise zones (of which nearby is Manchester Airport City Enterprise Zone) will see their business rates discounted. Furthermore, business rates will continue to be cut or held with small company relief being extended to April 2015.

The Annual Investment Allowance has been increased to £500,000, great news for those companies that are looking to invest in new plant and machinery as they can now receive 100% tax relief on the qualifying expenditure. This will result in nearly every business in the UK paying no upfront tax when they invest in the future.

The Chancellor made a pre-announcement about the new NIC Employment allowance of £2,000 which starts in April 2014. This will remove the first £2,000 for employer’s NIC bill for every UK business. Furthermore, from 2015 there will be no employer national insurance for under 21s (unless they earn the upper earnings limit).

Class 2 NIC collections for self-employed will move into self-assessment (currently £2.75 pw) from April 2016.

Research and Development tax credit for loss-making small businesses from 11% to 14.5%.

For those of us that work within a social enterprise framework, you are now entitled to 30% Tax Relief. And if you work within the film industry, the film tax credit has been extended.

Company car tax to increase by 2% in 2017/2019 and 2018/2019 however the discount on low emission cars is to be increased.

Personal allowance has been raised to £10,000, increasing further to £10,500 next year, resulting in the average tax payer £800 pa better off. Furthermore, the higher rate threshold will rise to £41,865 next month then by a further 1% to £42,285 next year.

The annual limit for ISA’s is set to be raised to £15,000 pa, with Junior ISA’s raising to £4,000. This means that you could potentially save up to £19,000 pa tax free from July 2014.

Further tax free investments can be made in Premium Bonds increasing the amount you can invest from £30,000 to £40,000 in June, and to £50,000 next year.

The 10% tax on savings (for those earning less than £13,000) is to be scrapped being replaced with 0% on savings up to £5,000 – benefiting pensioners and stay at home parents.

Tax restrictions on access to pension pots to be removed, resulting in no requirement to buy an annuity. This will mean that you can chose to take your money when you want it and pay the marginal rate of income tax.

In another step to help us keep the money that we have worked hard for, the increase in total pension savings that pensioners can take as a lump sum has been raised to £30,000 (from £18,000). This will give more flexibility to retirees.

Furthermore, a new pensioner bond will be available from January 2015, supplied by NS&I with market leading rates for over 65s.

If you are in the unfortunate position of being accused of using a tax avoidance scheme and are now appealing, tax liabilities are now due up front whilst appealing, rather than collected after the decision has been made.

The economy is expected to grow by 2.7 % in 2014, higher than originally expected and whilst the Chancellor has promised “no quick fixes” he has forecasted “jobs up, growth up and defecit down”.

These are the highlights that we feel are of interest to you, should you feel that there is anything that you would like to discuss further then please do not hesitate to contact us on 07542 299247 or email us at info@mooreaccountancy.co.uk

I hope you’ve found this interesting, if you like a tipple can I suggest Scotch Whiskey or Cider, both of which have seen their duties frozen!

2012/13 tax year – will the granny and pasty tax budget changes affect small businesses and individuals?

The 2012 Budget, a few weeks ago didn’t really surprise anyone. We knew what many of the income tax and corporation tax levels were going to be for 2012/13. We received further clarifications on some things and the Government have managed our expectations for the 2013/14 tax year.

Budget Image courtesy of Tax Credits

It will be remembered as the “pasty tax” and “granny tax” budget due to the VAT changes on hot food and the change in the pensioners personal tax thresholds.

Below are some of the key points summarised – please bookmark this post for future reference – and if you or anyone you know needs an Accountant in South Manchester (Altrincham) then get in touch!

 

 

General:

  • Child benefit will be fall by 1% for every £100 earned over £50,000. Only earners with more than £60,000 will lose all the benefit
  • Stamp duty on properties over £2m is now at 7%
  • Increase in fuel duty of 3.02p per litre from 1 August 2012

Individuals:

  • Personal Allowance to be £8,105 from April 2012 (Higher rate effect from £42,475 (PA + £34,370) for under 65’s
  • Personal Allowance to be £9,205 from April 2013 for under 65’s
  • Personal Allowance to be £10,500 from April 2012 and to remain the same for 2013/14 for 65-74 year olds
  • Personal Allowance to be £10,660 from April 2012 and to remain the same for 2013/14 for over 75 year olds
  • In April 2013, the top rate of Income Tax will be reduced from 50 per cent to 45 per cent
  • NI Class 2 rates increased to £2.65pw (small earnings exemption at £5,595)
  • NI Class 4 rates remain at 9% on profits over £7,605 (£7,225 2011/12)
  • CGT level remains at £10,600

Small Business – general:

  • VAT registration threshold increased to £77,000
  • No new regulations for firms with less than 10 staff continues for next few years (aside from public safety)
  • Consultation on simplifying tax for small firms with a turnover of up to £77,000

Limited Companies:

  • Main rate of Corporation Tax 24% from April 2012
  • Small rate of Corporation Tax remains at 20%
  • Tax credit to be introduced for video games, animation and high end TV industries

There have obviously been many other changes in the 2012 budget for small businesses and individuals which are not as relevant to the majority – if you feel there is something you require more information on then please get in touch with Moore Accountancy – South Manchester Accountants.

Budget 2011 Update

Updates from Chancellor’s budget and previous announcements which take effect from April 2011.

Key budget changes for Individuals and Small Businesses

General:

  • Fuel Duty to be cut by 1p per litre from 23 March 2011, 6pm
  • Planned increase in fuel duty of 3.02p per litre deferred until 1 January 2012.The 2012/13 increase will be deferred until 1 August 2012
  • No reduction in VAT on fuel
  • Tobacco rates unchanged in Budget, but due to go up by 4p beer, 15p bottle of wine, 54p bottle of spirit
  • Council Taxes to be frozen or reduced in 2011/12
  • No increase in passenger air duty for 2011/12
  • Road tax to increase by inflation only

Individuals:

  • Personal Allowance is £6,475 until April 2011 (Higher rate takes effect from £43,875 (PA + £37,400)
  • Personal Allowance to be £7,475 from April 2011 (Higher rate effect from £42,475 (PA + £35,000)
  • Personal Allowance to be £8,105 from April 2012
  • NI Class 2 rates increasing from £2.40pw to £2.50pw
  • NI Class 4 rates increasing from 8% to 9% on profits over £7,225 from 2011/12
  • Consultation on merging income tax and National Insurance Contributions
  • CGT level increasing from £10,000 to £10,600
  • Approved Mileage rate increasing from 40p per mile to 45p per mile for first 10,000 mile (from 6/4/11)

Small Business – general:

  • VAT registration threshold increasing to £73,000 from April 2011
  • No new regulations for firms with less than 10 staff for next three years (aside from public safety)
  • Small Business Rate Relief holiday for small firms extended for 1 year from 1 October 2011 (for properties with rateable value &lt; £6,000)
  • 21 “enterprise Zones” to be created in England, including:
  • Greater Manchester (Manchester Airport Zone)
  • Birmingham and Solihull
  • Leeds City Region
  • Sheffield City Region
  • Liverpool City Region (Wirral Waters)
  • West of England
  • Tees Valley
  • North Eastern
  • The Black Country
  • Derby, Derbyshire, Nottingham and Nottinghamshire (Boots Campus)
  • London (Royal Docks)
  • Funding for 80,000-100,000 new work experience placements, and 50,000 apprenticeships over next 4 years
  • Time To Pay remains in place for Businesses experiencing temporary financial difficulty
  • Capital Allowances – Annual Investment Allowance is reduced, but the short life election has increased from 4 to 8 years
  • Lifetime limit for Entrepreneur’s Relief doubling to £10 million, so disposals of business assets only attract 10% CGT
  • Launch of “Start Up Britain” scheme to encourage entrepreneurs

Limited Companies:

  • Main rate of Corporation Tax 28% until April 2011
  • Main rate of Corporation Tax 26% from April 2011
  • Main rate of Corporation Tax 25% from April 2012
  • Small rate of Corporation Tax 21% until March 2011
  • Small rate of Corporation Tax 20% from April 2011

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