Company car tax rises take effect

Company car tax rises take effect

The company car has continued to be an important benefit for many employees, despite increases in the taxable benefit rates in recent years.

However, April 2018 saw the introduction of further changes affecting employer-provided cars, which could have a significant impact on your business motoring costs.

Benefit-in-kind rates

Company cars are essentially taxed as a benefit-in-kind (BiK) by multiplying the list price of the car (including most accessories) by the ‘appropriate percentage’. This is set by reference to the car’s fuel type and level of CO2 emissions.

In 2017/18, a reduced BiK rate of 9% applied for vehicles emitting no more than 50 g/km of CO2, but from April 2018 these rates have started to increase significantly.

Cars with CO2 emissions of 0-50 g/km are now liable to a rate of 13%, with similar rises applying to cars with higher levels of emissions.

Diesel cars

April 2018 also saw an increase in the additional diesel car supplement, which has risen from 3% to 4%. The maximum cap of 37% still applies (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard).

Capital allowances

Changes have also been made to the tax relief for business expenditure incurred on or after 1 April 2018. The 100% first year allowance for expenditure on cars now applies where emissions are less than 50 g/km, reduced from the previous level of 75 g/km. In addition, the limit for attracting an 18% writing down allowance has fallen from 130 g/km to 110 g/km.

Electric charging points

There is perhaps more welcome news for those employers providing charging points for electric or hybrid cars, as HMRC intends to exempt employer-provided electricity from being taxed as a BiK, to apply retrospectively from 6 April 2018.

Further changes to company cars are due to take effect in 2019 and beyond, including additional increases in the BiK rates and the introduction of a new range of bands for ultra-low emission vehicles (ULEVs).

We can help you to plan ahead and decide on the most tax-efficient option for your business motoring needs.

For more information, including the latest tax rates, visit the Tax Strategies area of our website.

OTS calls for ‘urgent review’ into how UK tax system affects businesses

MTD

OTS calls for ‘urgent review’ into how UK tax system affects businesses

In a new report, the Office of Tax Simplification (OTS) has called for the government to carry out ‘urgent work’ in order to simplify the business tax system for UK firms.

The OTS report focused on businesses owned by individuals and families, and examined how the tax system affects firms at each of the key stages of their development, from starting-up to disposal or cessation. The OTS’s stated aim was to ‘highlight the complexity entrepreneurs face when seeking to establish or grow a business’.

In the report, the tax reliefs and charges that apply to new and growing businesses were examined in order to ascertain how well they operate and whether they achieve their objectives.

The OTS concluded that the reliefs and charges would ‘benefit from an overhaul to reduce complexity’, which would help to make reliefs ‘more accessible’ to firms.

The regulatory body has urged the government to consider streamlining or simplifying a number of key reliefs in order to better help entrepreneurs in starting up and expanding their businesses.

The OTS has highlighted 12 key observations, focusing on two main areas: the operation of the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes; and Entrepreneurs’ Relief (ER), capital gains tax (CGT) gift relief and inheritance tax (IHT) reliefs for business.

The organisation has invited the views of businesses and the industry, and will ‘consider some of the areas touched upon in more depth in the future’.

Paul Morton, Tax Director at the OTS, said: ‘This paper takes a significant first step towards meeting the pressing need to undertake a detailed review of the tax system as it operates across the business lifecycle.

‘It is aimed at helping the businesses that are the lifeblood of the UK economy to maximise their opportunities and to make the system clear and simple to understand and use.’

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.

Recommended App – TAX READY

TAX READY

With cloud-based technology becoming a feature of everyday life, businesses are wise to implement good, modern software and apps where possible. The right apps can simplify your life and work; improving efficiency and profitability (time is money)!

So, continuing with our regular app recommendations, this month we’d like to recommend TAX READY – our very own, brand new app!

What is it?

Tax Ready is a smartphone app (available on Apple, Android and Windows devices). It has been designed with business owners and managers in mind; providing a range of useful tools to help with the operational aspects of running a business.

How much does it cost?

£0 – it’s free!

What are its features?

  • Tax calculators – there’s a calculator for almost everything but, as an example, the income tax and NI calculator enables you to work out the gross cost of employing a new staff member – or help your employees to understand their net pay.
  • Tax tables – quick access to up-to-date tax rates.
  • Key tax dates – keep track of deadlines and easily add them to your phone’s calendar (just one-click and the reminder’s there) .
  • News – regular news articles on a variety of useful topics.
  • Mileage and expense recording – keep track of your mileage and expense claims whilst on the move, then download them as a spreadsheet when required.

Why do we recommend it?

Although somewhat biased, we genuinely believe the app is a useful resource for our clients and contacts. We think it’s easy to navigate, has a fresh, modern design, and it’s free!

How do I get the app?

To add the app to your device, search ‘Tax Ready’ in your app store … then download and enjoy exploring the features.