Making Tax Digital Delayed until 2020

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The Treasury have delivered what is potentially good news for many (yes, you have read that correctly).  Making Tax Digital, or MTD to give it its affectionate moniker, has been both delayed and reduced in terms of requirement.

For businesses that are VAT registered, VAT returns will still have to be submitted via MTD compatible software from 1 April 2019, but in terms of quarterly reporting for tax and national insurance (NI) purposes,  MTD has been delayed until at least April 2020.

The new timetable for income tax and NIC reporting is as follows, although the £85,000 small business threshold is subject to change.

Annual turnover

Old timetable

New timetable

Over £85,000

6 April 2018

At least April 2020

From £10,000 – £85,000

6 April 2019

At least April 2020 but on a voluntary basis

Companies

1 April 2020

At least April 2020

It appears that the Government have quite enough on their plate without launching MTD and undoubtedly many taxpayers will welcome the delay!

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Class 2 Voluntary Contributions

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Although the self-employed heaved a sigh of relief when the Chancellor reversed his decision to raise the rate of Class 4 NIC recently, other changes in the structure of National Insurance will give cause for concern, particularly for those with low earnings.

The abolition of the self-employed stamp (Class 2 NIC) from April 2018 means those who are currently below the Small Earnings Exemption and have been paying voluntary Class 2 contributions in order to secure contributory benefits will no longer be able to do so.  From that date they will have to pay Class 3 voluntary contributions which is currently £14.10 per week, compared to the Class 2 amount of £2.80 they are currently contributing.  In addition, the special rates for share fishermen (currently £3.45) and volunteer development workers (£5.60) will also be abolished, so they too will have to pay the higher Class 3 amount to maintain their contributions.

The situation is further complicated as in the past those with income below the Class 2 limit had to opt out of paying the stamp by applying for exemption, whereas now low earners have to opt in if they wish to make contributions – a fact many may not have been aware of, and may give rise to gaps in their records.

You can check your Class 2 record by logging onto your personal tax account at HMRC on-line, by post or by phone – details can be found here. If you have gaps in your contributions you can now backdate your Class 2 contributions for up to 6 years but you will need to do so before Class 2 is fully abolished.  You need 35 years of contributions paid or credited to be entitled to the full state pension.

If you would like to discuss your situation with one of the team at Green & Co, please contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Proposed NIC rise has been dropped!

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As mentioned in the recent Budget, the Chancellor had intended to increase the Class 4 National Insurance Contributions (NIC). The NI rate for the self-employed (Class 4) was meant to increase from 9% to 10% in April 2018, followed by another rise to 11% in April 2019. This would have brought NIC for the self-employed more in line with the employment rate, which is currently 12%.

Today, however, the Chancellor Philip Hammond has made a complete u-turn, announcing that the government will scrap the increase. This action has been taken because many feel the change would break the manifesto promise not to increase National Insurance, Income Tax or VAT.

Chancellor Hammond has explained that “it is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit of the commitments that were made. In the light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measure set out in the Budget.”

This means that the 4.8 million Britons who are currently self-employed  can rest assured that, for now, the Class 4 NIC rate will stay at 9%.

If you have any questions regarding this change, or any of the other changes announced in the Spring Budget, please don’t hesitate to contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

 

2017 Budget Review

Following on from the Chancellor’s first and last Spring Budget, we are pleased to provide you with our summary of the key announcements, along with our tax tables for the 2017/18 tax year:

Budget Summary

Tax Data
The main changes include:

  • The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
  • Class 4 national insurance contributions for self-employed workers will increase to 10% in April 2018 and rise again, to 11%, from April 2019.
  • Unincorporated businesses and landlords with a turnover below the VAT threshold will have until April 2019 before they are required to implement ‘Making Tax Digital’.

Among the key changes to note for this year are:

  • The Chancellor confirmed that corporation tax will be cut to a rate of 19% from April 2017 and it will be further reduced to 17% in 2020.
  • The personal allowance will rise to £11,500 in April 2017 and to £12,500 by 2020 and the higher rate income threshold will rise to £45,000, although special rules will apply in Scotland.
  • Individual landlords’ tax relief for finance costs will be restricted to basic rate tax – to be phased in over four years from April 2017.

More information on the Budget is available on our website or if you would like to speak to one of our team please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Ready For Your First Employee?

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For any small business, the need to hire an employee is a good sign that your business is moving in the right direction. However, there are various factors to consider in order to avoid unanticipated problems, and many business owners struggle to understand the real cost of bringing an employee on board.

Here are the three main points to consider if you are looking to employ for the first time:

1 – The recruitment process itself can be tricky, and many businesses hire a recruitment agency to find the ideal candidate. Of course this will not be free, a factor which should be considered beforehand.

2 – Calculating a salary can cause other pitfalls. The salary needs to ensure that a fair wage is met whilst ensuring that the ongoing business costs can still be covered. Many small business will often employ part time staff or offer a fixed term contract to assess the need and what works with the business cash flow. You need to be sure that you can afford to pay your employee every pay day.

3 – On top of the salary cost is the additional cost of National Insurance which can lead to serious penalties if not paid to HMRC. At this point it may be prudent to use the services of an accountant or bookkeeper to ensure the legal requirements are met.

In conclusion, if you feel your business is ready to expand and take on an employee, make sure you have thought of everything, even the timing. Choosing the right time to recruit is imperative – too early, and you might experience cash flow problems, too late, and you may be unable to meet demand and fulfill your businesses potential.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

It’s HMRC On The (Mobile) Telephone

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Once again we find ourselves in P11D season, that joyous time in the tax calendar where expenses and benefits provided by employers to their employees are dissected for inclusion on the P11D.

Employers will no doubt have the same conversations they have with their accountants each year concerning the chargeability of benefits and expenses and one such conversation will centre around mobile phones.

If an employer provides an employee (or director) with a mobile phone it will only be exempt from tax and national insurance if the employee is provided with only one mobile phone or sim card and the contract is between the employer and the supplier. This can prove an issue for small companies that have transferred from sole trades where the proprietor has kept the contract in their name on becoming a director.

If the employer reimburses anything more than itemised business calls and the contract is between the employee (or director) and the supplier then a benefit in kind will be assessed on both employee and employer and tax and NIC will be due.

The expenses and benefits system is currently undergoing a re-haul and if you’re unsure of any existing or new procedures it is advised that you speak to your tax adviser.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

New Tax Year – New Rules!

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So, the 6th of April brings in the new tax year with new rules, but what are the changes?

  • Personal Allowance – increases to £11,000.
  • Personal Savings Allowance – if you are in the 20% band for income tax, you will pay no tax on the first £1,000 of interest you get from savings. If you are a 40% taxpayer, you are allowed to earn £500 of interest tax-free ,rather than £1,000.
  • ISA limits
    • ISA – £15,240
    • Junior Isa limit- £4,080
    • Child trust fund limit- £4,080
  • National living wage – 25 and overs are now entitled to a minimum pay of £7.20 per hour.
  • Dividend Allowance – The first £5,000 you receive in dividends is tax free. Above £5,000, basic-rate taxpayers will pay 7.5% tax, higher-rate taxpayers 32.5%, and additional rate taxpayers 38.1%.
  • Employment Allowance – The new amount of £3,000 can be reclaimed against employers NI.
  • Tax on Loans to Directors -The 25% tax charge on loans to directors, etc. increases to 32.5%.
  • Capital Gains Tax – The higher rate of capital gains tax is reducing from 28% to 20% and the basic rate from 18% to 10%. However, the new rates will not apply to residential property that does not qualify for private residence relief.
  • Vat Registration – The thresholds increase to £83,000 for registration and £81,000 for deregistration.
  • Landlords and Second-home Owners – Will have to pay an extra 3% in stamp duty for second properties bought after 1 April 2016. This is on top of the normal rates (0% on the first £125,000; 2% for £125,001 to 250,000; 5% for £250,001 to £925,000; 10% for £925,001 to £1.5m, and 12% above £1.5m).

If you have any questions regarding the changes, please do not hesitate to contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of gubgib at FreeDigitalPhotos.net

National Insurance Contributions Top Up Scheme

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Those people who reach state pension age prior to 6 April 2016 are being offered the chance to make voluntary national insurance contributions to boost their state pension. The contributions are known as class 3A and the scheme through which the contributions will be collected commenced12 October 2015.

It is open to people who reach state pension before 6 April 2016 as they are ineligible for the new state pension that launches on this day.

The class 3A contributions can increase the state pension up to a maximum of £25 per week and the cost to the individual will depend on their age. The contribution level also takes into account average life expectancy.

An extra £10 of state pension a week will cost a 65 year old £8,900 and for a 75 year old it will cost £6,740.  In most cases surviving spouses/civil partners will be able to inherit at least 50% of the extra pension.

The scheme closes 5 April 2017.

More information on the scheme and an online calculator can be found at: www.gov.uk/statepensiontopup.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Happy Holidays From Green & Co

20151218_133025232_iOSAs we take our Christmas break at the end of another productive year, we would like to take this opportunity to thank you, our loyal blog readers! Whether you are already a client, a prospective client, or just like to read our informative articles each week, it is you who keeps this blog going.

Working with our clients in 2015, has also helped to grow Green & Co’s services, allowing us to assist our clients in both setting and achieving their goals. Our services span from general accounts to business goal setting and much more…

  • Year-end and management accounts
  • Tax returns and tax planning
  • Auditing
  • VAT and bookkeeping
  • Payroll (Including Auto Enrolment)
  • Construction Industry Scheme (CIS)
  • Sage Training
  • Business forecasting and goal setting
  • Exit strategies
  • Profit improvement
  • Profit extraction
  • Corporate re-structuring
  • Inheritance tax review and estate planning
  • Virtual office services

Green & Co also specialise in accounting for a number of fields:

  • Doctors
  • Property developers
  • Independent financial advisors
  • Solicitors
  • Insurance brokers
  • And of course, farming!

If you would like to know any more about any of the above, please give our friendly team a call on 01633 871122 once we are back from our Christmas break – refuelled and recharged to combat another year together!

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