New tax year ushers in key business and tax changes

New tax year ushers in key business and tax changes

With the beginning of the 2018/19 tax year, some significant changes to business and tax legislation are taking effect. Here, we take a look at some of the key measures that could affect your business or personal finances.

Increase in employers’ minimum auto-enrolment contributions

Currently the pension auto-enrolment legislation requires employers to contribute at least 1% on qualifying earnings. From 6 April 2018, employers may be required to increase the contribution they pay into their automatic enrolment workplace pension scheme. Affected employers will be required to pay a minimum of 2% from this time, with a further increase to 3% set to take place from 6 April 2019.

Reduction in the Dividend Allowance

The Dividend Allowance is set to reduce to £2,000 on 6 April 2018, from its current level of £5,000. The stated aim is to ‘address the unfairness associated with director-shareholders’ tax advantage’.

Rising National Living Wage (NLW) and National Minimum Wage (NMW) rates

From 1 April 2018, the NLW for employees aged 25 and over will increase to £7.83 per hour.

Meanwhile, the NMW will increase to £7.38 per hour for workers aged 21-24, and to £5.90 an hour for workers aged 18-20. For workers who are aged 16-17, the NMW will rise to £4.20 per hour, and for apprentices, the rate will rise to £3.70 an hour. An apprentice is an individual who is aged under 19, or 19 and over and in the first year of their apprenticeship.

Introduction of the new Welsh Land Transaction Tax (LTT)
1 April sees the introduction of the new LTT, which preserves the essential structure of Stamp Duty Land Tax (SDLT), but with some key differences, including a higher starting threshold for residential properties. For those seeking to purchase a residential property in Wales, there will be no tax to pay on a home worth up to £180,000.

The new Scottish income tax bands

From 6 April 2018, a raft of additional changes will take effect for taxpayers who are resident in Scotland. In the 2017 Scottish Budget, the Finance Secretary for Scotland, Derek Mackay, announced two new income tax bands, bringing the possible income tax rates payable up to five. The new Scottish income tax rates range from 19% to 46%.

Rise in the pensions Lifetime Allowance (LTA)

The LTA has increased in line with the Consumer Price Index (CPI), and for 2018/19 it will rise from £1,000,000 to £1,030,000.

For more information on the key changes set to take effect from April 2018, please visit the Hot Topics section of our website.

Congratulations to the Skipton Business Awards winners…

We were delighted to attend, and be involved in, the 2nd Skipton Business Awards ceremony – which took place on Thursday 22nd March.

The awards – which launched (with great success) last year – took place at the Rendezvous Hotel. The room was full to capacity with over 230 attendees – all keen to celebrate the great businesses our area has to offer!

We sponsored the Best Professional/Financial Services Business award… and we’d like to say “HUGE congratulations!” to the winners of the category, Walker Foster Solicitors!

The event was a triumph – expertly coordinated by Wendy Lawson of Skipton Chamber of Trade & Commerce.

Here’s to many more years of the Skipton Business Awards.

 

Picture credit: Stephen Garnett (who was the official photographer at the event).

Research suggests 70% of individuals ‘unaware of inheritance tax nil-rate band’

Research suggests 70% of individuals ‘unaware of inheritance tax nil-rate band’

Research carried out by Canada Life has suggested that a significant amount of individuals ‘do not know the threshold’ for the standard inheritance tax (IHT) nil-rate band. Canada Life found that 70% of those surveyed did not know the standard nil-rate band threshold, which currently sits at £325,000.

55% of those questioned do not know the rate at which assets above their available nil-rate band are taxed, the data also revealed.

Meanwhile, an additional 38% do not believe that their main home is liable for IHT. Canada Life has warned that many families in the UK could face ‘unexpectedly high’ tax bills as a result.

‘There is a disturbing lack of knowledge which will undoubtedly translate into unnecessarily high inheritance tax bills,’ said Karen Stacey, Head of Distribution Services at Canada Life.

‘Unless people learn more about taxes and actively plan the future of their estate, the government is in line for a large, ongoing and often unnecessary windfall.’

Meanwhile, Chancellor Philip Hammond has commissioned the Office of Tax Simplification (OTS) to review the UK’s IHT regime, and make suggestions as to ways in which the tax can be simplified.

In a letter to the Chair of the OTS, the Chancellor acknowledged that the IHT regime is ‘particularly complex’, and suggested that the review focus on the technical and administrative issues surrounding the tax.

Mr Hammond also said that the review should examine how existing gifts rules interact with the IHT system, and consider whether the current rules cause taxpayers to rethink their decisions when it comes to investments and transfers.

A ‘scoping document’ for the review into IHT will be agreed and published ‘in due course’, the OTS said.

As your accountants we can help you to plan to minimise the IHT due on your estate – please contact us for further advice.

Survey suggests two thirds of businesses ‘unprepared for GDPR’

Survey suggests two thirds of businesses ‘unprepared for GDPR’

A survey carried out by professional services firm EY has suggested that two thirds of businesses are ‘unprepared’ for the upcoming introduction of the General Data Protection Regulation (GDPR).

The GDPR is set to come into effect on 25 May 2018, and will strengthen the obligations on all businesses in regard to the safeguarding of individuals’ personal information. Firms have been urged to review their data privacy and security practices ahead of the introduction of the Regulation, to ensure that they are compliant.

Businesses who fail to take action in respect of the new Regulation will face severe financial penalties, with fines costing up to €20 million, or up to 4% of total annual worldwide revenue, whichever is the greater.

EY found that 78% of firms consider data protection and privacy to be a growing concern: however, only 33% of businesses stated that they have a plan in place for the implementation of the new GDPR.

Meanwhile, a report published by software technology company Senzing suggested that businesses are ‘sleepwalking towards a GDPR abyss’. Senzing believes that 24% of businesses should be deemed ‘at risk’ of receiving significant fines for failing to comply with the new Regulation, and a further 36% are ‘challenged’ when it comes to complying with the obligations.

Worryingly, Senzing’s report also found that 30% of firms believe GDPR fines and penalties ‘will have no impact at all’ on their business, and an additional 15% ‘don’t know’ if fines will have an impact.

Commenting on the findings, Jeff Jonas, CEO of Senzing, said: ‘The fines that can be levied for non-compliance will be potentially terminal to some organisations, and even the largest companies – and certainly their shareholders – will feel a significant impact.

‘A huge number of companies simply don’t understand the dangers of non-compliance, with smaller firms apparently particularly unaware.’

To find out more on this issue, please visit the Hot Topics section of our website

Government outlines VAT proposals for post-Brexit Britain

Businesses groups have voiced concerns over government proposals to amend the way in which EU imports will be treated following the UK’s withdrawal from the EU in 2019.

Plans to change the VAT rules are included in the Taxation (Cross-Border Trade) Bill 2017-19, which is currently making its way through Parliament. The proposals could see UK businesses being required to pay VAT upfront in cash to HMRC.

Currently, goods imported from the EU are treated as ‘acquisitions’ for tax purposes, meaning that VAT is not paid until the products have been sold to the end consumer. However, if the UK exits the Customs Union, goods from the EU will be treated in a similar way to other imports.

The British Retail Consortium (BRC) has warned that the proposed changes could create ‘additional burdens’ for UK businesses. Commenting on the Bill, the BRC stated: ‘If the Bill becomes law without any commitment to inclusion within the EU VAT area, UK businesses will become liable to pay upfront import VAT on goods being imported from the EU27 for the first time.

‘Liability for upfront import VAT will create additional cashflow burdens for companies, as well as additional processing time at ports and border entry points attached to the customs process.’

Meanwhile, the Chair of the Treasury Select Committee, Nicky Morgan, has written to the head of HMRC, Jon Thompson, urging him to address the BRC’s concerns.

Ms Morgan stated: ‘I have written to HMRC to seek clarification on the costs to businesses and consumers arising from this legislation, the options being considered to mitigate these costs and the likelihood of the UK participating in the EU VAT area as part of its end-state relationship with the EU.’

As your accountants, we can help you with your VAT obligations. Please contact us for advice and assistance.

Strategies for saving tax ahead of the 5 April year end

With the end of the 2017/18 tax year approaching, now may be the ideal time to think about strategies to help mitigate your tax liability. There are many different options to consider so do contact us for further advice.

Reducing your personal tax liability…

Are you making the most of your tax-free personal allowance (PA)? Individuals are entitled to their own PA, which is set at £11,500 in 2017/18. Therefore, if your spouse or partner has little or no income, you could stand to benefit by spreading your income more evenly to ensure that each PA is being fully utilised.

Some married couples may also be eligible to transfer 10% of their PA to their spouse under the Transferable Tax Allowance, or ‘Marriage Allowance’. It means £1,150 may be transferred in 2017/18, which could help to reduce a couple’s tax liability by up to £230 in this financial year. Certain rules apply.

And despite relatively low interest rates, for many individuals ISAs are still an attractive tax-free way to save. For 2017/18, the overall subscription limit for ISAs is £20,000, of which no more than £4,000 can be deposited into a Lifetime ISA. With a range of ISAs to choose from, you have until 5 April 2018 to make your 2017/18 ISA investment.

… and your business’s tax bill

Are you maximising claims for capital allowances? The majority of businesses are able to claim a 100% Annual Investment Allowance on the first £200,000 of expenditure on most types of plant and machinery (except cars). In many cases, a purchase made just before the end of the current accounting year will mean that the allowances are available a year earlier than if the purchase was made just after the year end.

Business owners may also wish to consider tax-efficient ways in which they can extract profit from their business. There are many ways to achieve this. Some may opt to take dividends instead of a salary or bonus, as these are paid free of national insurance contributions. Others may wish to talk to us about incorporating their business, while employer pension contributions can be another tax-efficient means of extracting profit.

As always, it is important to seek our advice before taking action. For more information on tax-saving strategies to implement ahead of the 5 April 2018, please visit the Hot Topics section of our website.

Government proposes replacing self assessment penalties with new points-based system

The £100 penalty regime for filing a late tax return could be scrapped and replaced with a new ‘driving licence-style’ points system, HMRC has revealed.

Under the current system, taxpayers who fail to submit their tax return by the 31 January deadline are liable to an instant £100 fine, with further penalties applying for prolonged delays.

Under new plans being considered by the tax authority, taxpayers who miss the self assessment filing deadline could receive points instead of an immediate fine. Only those taxpayers accruing too many points would then be penalised. Individuals would also see points wiped from their record after a set period of time.

It is thought that around 840,000 taxpayers missed the filing deadline in the last tax year.

The new ‘holistic’ approach is intended to focus on taxpayers who persistently break the rules rather than those who make genuine errors of judgement.

The proposals are included in the Treasury’s Red Book, which states: ‘The government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments’.

HMRC intends to consult on the plans, and must seek approval from Parliament. If approved, the new points-based system could undergo a phased introduction for different taxes.

However, some experts have warned that the abolition of the £100 late filing penalty could have ‘unintended consequences’.

The Association of Taxation Technicians (ATT) warned that a new points system could generate anomalies, and has urged the government to ensure that the consultation details exactly how the new system would work, in order to avoid such anomalies.

We can help to ensure that your tax returns are filed accurately and on time – please contact us for further assistance.