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.

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Dividends – What Isn’t Changing?

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The way they are taxed may be changing, but the other rules and procedures surrounding dividend payments have not. Here is a brief re-cap of the key actions and considerations to bear in mind when making dividend payments:

  • There must be distributable reserves in the business that cover the dividend payments. This is company law and must be adhered to. The distributable profits cannot be ascertained simply by checking the financial statements and the Companies Act outlines the necessary adjustments to accounting profit and defines distributable profits.
  • The dividend must be declared. Typically this should be done at a meeting held by the directors, but private companies are able to pass an ordinary resolution in writing. Further procedures for declaring dividends may be set out in the company’s Articles of Association.
  • Dividend vouchers should be drawn up for every dividend voted containing all the necessary entries. A single voucher can be produced which covers a tax year and it is now possible to produce electronic vouchers. Again, the Articles of Association should be adhered to if any procedures are outlined within them.
  • The date of the dividend is important, especially as the taxation is changing. Whether the dividend is final or interim will affect the date of payment and again, the company’s Articles may outline any applicable procedures.

Best practice concerning dividend payments is paramount as, in the event of an enquiry, HMRC can challenge the tax status of payments made.

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

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Ways To Save Tax Ahead Of The 5 April Year End

UntitledThe end of the tax year of 5 April is fast approaching, and this is always a good time of year to think about ways to structure your business and personal finances so that they are as tax-efficient as possible. With new rates and various legislative changes due in the 2016/17 year, here are some of the planning strategies you may wish to consider.

Click here to read our ways to save tax ahead of the 5 April year end.

 

 

Green & Co Feature In Torfaen Business Voice

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Read Green & Co’s article on the important changes to the affect dividends from April 2016, featuring in this month Torfaen Business Voice February edition.

Last year the budget brought with it unwelcome news for directors of private limited companies who extract most of their income via dividends. The Government is abolishing the dividend tax credit as we know it, and introducing a new dividend taxation system.
If you haven’t already done so, now is the time to sit up and take notice. From April 2016, the current rules on grossing up your net dividend (the amount you receive) by 9/10 will cease.

Click here to read the full article in the Torfaen Business Voice February 2016.

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

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New Tax Year – New Dividend Rules…

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From 5 April 2016 the taxation of Dividends is changing and this is likely to significantly increase the tax that you have to pay. The good news is that you do not have to pay tax on the first £5,000 of your dividend income, no matter what other income you have.

However the tax you pay on dividends over £5,000 is increasing by 7.5% and will be at the following rates:

  • 7.5% on dividends within the basic rate band
  • 32.5% on dividends within the higher rate band
  • 38.1% on dividends within the additional rate band

If you would like to discuss the changes and its implications to the way you draw dividends, please get in touch with our tax department.

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

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Winter 2015 Newsletter

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With winter fast approaching, take the weight off your feet and chill as we bring you up to date on everything you need to know this season!

Green & Co Winter 2015 Newsletter

This edition focuses on:

  • Property Tax Relief: Winners And Losers
  • All Change For Dividends
  • Pension Allowances: The Next Steps
  • Tax Round Up
  • Tax Tip
  • Reminders For Your Winter Diary

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Will Dividends Still Pay Dividends?

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And in the blue corner we have the Chancellor delivering another heavy hit on incorporation!

The latest budget brought with it unwelcome news for directors of private limited companies who extract dividends as well as individuals with vast shareholdings, as the Government has abolished the dividend tax credit as we know it and introduced a new dividend taxation.

From April 2016 there will be a £5,000 tax free dividend allowance for all taxpayers and then dividends received in excess of allowances will be taxed at 7.5% for basic rate taxpayers, 32.5% if you’re higher rate and 38.1% for those paying tax at the additional rate.

The corporation tax rate will fall gradually until it reaches 18% in 2020; however it is doubtful that this will counter the effects of the new dividend taxation for those extracting regular dividends from owner managed businesses.

Exact details of the measure will not be known until the Finance Bill is published, but small business owners need to re-evaluate the way that profit is extracted from companies prior to the changes to ensure tax efficiency.

In addition, those with significant investment portfolios who are in receipt of dividends in excess of £5,000 need to consider the implications. One such consideration is whether they need to register for self-assessment from April 2016.

For further information please contact Green & Co.

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

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3 Pointers For Passing Your PAYE Inspection

PAYE compliance visits can be a tricky business and should your business be selected, HMRC will delve into not only the payroll records but also the expenses and reimbursement procedures, benefits in kind, employment status and shareholder-director dividends.  Should they discover errors they can go back up to four years in order to track them.

The initial interview with the payroll administrator will seek to identify any weaknesses in procedures. It is vital at this stage to understand what HMRC are trying to uncover, so that you can provide answers that prove adequacy of procedures. Here are three tips that, if adhered to, can help appease the inspector:

  1. Director’s Tax Returns: If the company pays for the completion of the director’s tax returns then this should go onto the P11D as a benefit in kind, upon which tax and NIC will be payable. It is therefore advisable to enquire whether your accountant’s invoices can show the tax return preparation fee as a nominal amount (potentially a loss leader for the main company work). The nominal amount should then be declared on the P11D.
  1. Self-Employed Status: As businesses can save on PAYE and NIC costs through hiring a self employed person, HMRC will ensure that certain criteria are met in order satisfy themselves that a worker is indeed self employed rather than an employee. It is therefore vital that the conditions under which that person works meet the self-employment criteria, and in addition to this, contracts should be in place between not just employer and employee, but also contractor and sub-contractor.
  1. Dividends: You cannot pay a dividend from the company unless there are sufficient profits to do so. Company law prohibits this and therefore the inspector will check to ensure that this has been observed. Maintaining a spreadsheet which shows the distributable profits and the dividends paid is a good way of indicating that the company is abiding by this rule.

These pointers will not guarantee success in a PAYE inspection, however they are certainly key areas of preparation. And remember, fail to prepare – prepare to fail. 

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

Will you lose your child benefit?

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Child benefit will be withdrawn for high income taxpayers from January 2013.

The threshold for this tax change is £50,000 and will be tapered on income from this figure up to £60,000 when no child benefit will be due.

The change has been the subject of much controversy. Take two families both with two children. Family A have only one earner whose income is £66,000. As this exceeds the limit of £60,000 no child benefit is due. Family B have both parents working with one parent earning £45,000 and the other £21,000. Although their combined income exceeds the limit they are still entitled to child benefit. This is because their incomes are not aggregated for child benefit purposes and as neither earns more than the limit on their own, full benefit is due.

The Government expects this change to affect 1.2m families. Are you one of them?

Is there anything you can do to ensure the benefit is retained.

There are some planning points that can be considered.

It would be beneficial to ensure that both spouses earn less than £50,000. Pension contributions could be made to reduce the level of income.

It may be possible to shift income by way of dividends.

Consider gift aid donations.

Should you require any further information please contact barbara@greenandco.com

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

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