Archive for March, 2017

One week to go

Thursday, March 30th, 2017

Next week sees the end of the 2016-17 tax year. On the 6 April 2017, any action you take to minimise your tax liabilities for 2016-17 will be largely ineffective. So what, if anything, can you still action this week?

Capital gains tax (CGT)

The amount of tax free gains you can make during 2016-17 is £11,100. This exempt allowance is available to all UK resident tax payers, accordingly, married couples and civil partners both qualify.

If you have no gains chargeable to CGT thus far during 2016-17, there is still an opportunity to crystallise gains during this coming week, up to the annual exemption limit, and no tax will be payable. For example, if you have a shareholding that you have been considering for disposal, and you could sell a sufficient quantity of shares before 6 April 2017, the disposal would utilise your allowance without creating a tax liability.

The important matter to note is that this annual exemption is lost if you don’t use it; it cannot be carried forward and used in later years.

Inheritance tax (IHT)

There are a number of annual reliefs that you can use without creating a chargeable event for IHT purposes. For example, the exempted annual gifts you can make are:

You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year – but only for one year.

Each tax year, you can also give away:

  • wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
  • normal gifts out of your income, for example Christmas or birthday presents – you must be able to maintain your standard of living after making the gift
  • payments to help with another person’s living costs, such as an elderly relative or a child under 18
  • gifts to charities and political parties

You can use more than one of these exemptions on the same person – for example, you could give your grandchild gifts for her birthday and wedding in the same tax year.

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you haven’t used another exemption on the same person.

Company car users

If your employer pays for your private fuel this will create a fairly significant income tax charge for 2016-17. You may save money if you calculate the cost of the fuel provided and reimburse your employer. For 2016-17, you need to do this before 6 April 2017. (For 2017-18, the rules are being relaxed slightly and you will have until 6 July 2018 to make an equivalent reimbursement for 2017-18).

To make the calculation you will need your private mileage for 2016-17 and multiply this by the advisory fuel rate for your vehicle. These range from 7p to 22p per mile. See the published list at https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-from-1-march-2016

These are just a few of the actions you could take to minimise your tax payments during what’s left of 2016-17. If you are unsure what your options may be, please call, we would be delighted to help.

New childcare funding choices

Tuesday, March 28th, 2017

The government have launched a new website aimed at parents who may be able to claim for support with childcare costs.

The web address is https://www.childcarechoices.gov.uk/.

How Tax-Free Childcare works

Working parents will be able to apply, through the childcare service, to open an online childcare account. For every £8 that families or friends pay in, the Government will make a top-up payment of an additional £2, up to a maximum of £2,000 per child per year (or £4,000 for disabled children). This top up is added instantly and parents can then send electronic payments directly to their childcare providers.

All registered childcare providers – whether nannies, nurseries or after school clubs – can sign up online now to receive parents’ payments through Tax-Free Childcare. Once childcare providers have signed up they will appear on the Childcare Provider Checker. This allows parents to check whether childcare providers have already signed up for Tax-Free Childcare.

How 30 hours’ free childcare works

Eligible parents will be able to apply online through the childcare service. They will receive a code – this will allow parents to arrange their childcare place ahead of September 2017. Parents can take their code to their provider or council, along with their National Insurance Number and child’s date of birth. Their provider or council will check the code is authentic and allocate them a free childcare place.

Parents can quantify the amount that they may be able to claim using the Gov.uk childcare calculator at https://www.gov.uk/childcare-calculator

Follow companies for free

Thursday, March 23rd, 2017

If you want to keep an eye on documents filed with Companies House for a particular company, you can register for a new service that will do just that at Companies House. The new service is called “Follow” and it allows you to receive email alerts.

Follow lets you receive email alerts of company transactions. The alert tells you instantly what has been filed as soon as it has been accepted. The email will contain a link to the filing history of the company where you’ll be able to download a copy of the document for free.

You will also receive an email alert when Companies House remove a transaction.

Follow this link to register for the Companies House Service if you want to be advised of new filings for specific company transactions.

Who to follow

You can follow any company registered at Companies House. For added security, you could choose to follow your own company.

How to follow

To begin following companies:

  • sign in once you’ve registered an email address and password
  • search for a company to follow
  • select the company
  • click on ‘Follow this company’

To see all the companies, you have chosen to follow click ‘Companies you follow’. To stop receiving email alerts for a company choose to ‘Unfollow’.

 

 

Reduction in the dividend allowance

Tuesday, March 21st, 2017

Unless there are further political objections, one of the few remaining revenue raising changes in the recent spring budget was the reduction in the £5,000 dividend allowance from April 2018.

From this date the allowance will drop to £2,000.

This measure will increase the tax charge for investors with significant, quoted share portfolios and the director/shareholders of private companies who minimise their tax and National Insurance by taking a low proportion of their remuneration as salary and any balance as dividends.

A person with annual dividends of £5,000 may see the following amounts added to their tax bill for 2018-19, dependant on where the dividends sit in their basic, higher and additional rate income tax bands:

  • Basic rate tax payers – an increase of £225.
  • Higher rate tax payers – an increase of £975, and
  • Additional rate tax payers – an increase of £1,143.

The current average dividend yield for FTSE 100 companies is close to 3%. Based on this estimate, holders of portfolios in excess of £67,000, may see an increase in their tax bill next year. There has been speculation in the press suggesting that affected investors (in quoted companies) may be able to use ISAs to shelter some of their dividend income from an income tax charge.

Director/shareholders who have adopted to the low salary high dividend approach will suffer a tax increase, but it is likely that the benefits of this strategy will still outweigh the tax and NIC cost of being self-employed.

 

Making Tax Digital – a step closer

Thursday, March 16th, 2017

Another matter that received some clarification last week was the government’s move to implement MTD for the self-employed from April 2018.

When the scope of MTD was first published it was proposed that the self-employed (including unincorporated property businesses) would need to commence the quarterly upload of summarised accounts data, direct to HMRC’s digital accounts, from April 2018.

In the budget last week, a relaxation of this deadline was introduced. Only self-employed businesses with taxable income in excess of the current VAT registration limit (£85,000 for 2017-18) will be required to comply with MTD uploads from April 2018. Those with income below the VAT threshold will now have until April 2019 to comply.

Whilst this is a welcome reprieve for smaller businesses, none of the other regulations regarding MTD have been relaxed. In particular, the need to comply with the quarterly uploads if income exceeds £10,000.

It was hoped that government would increase this threshold as it does require very small businesses into a compliance regime that seems out of proportion with their size. For example, a self-employed person with taxable income of just over £10,000 will have to comply with MTD from April 2019 even though their personal tax allowance will eliminate any tax liability for the year.

Clearly, MTD is a major change in the assessment of tax, probably the most impactful since the introduction of self-assessment 20 years ago. Readers affected, should ensure that they are ready to comply and in particular have identified a suitable format for keeping their business records that will facilitate the electronic transfer of data to HMRC.

If you are unsure which software or process to use, please contact us, we can help.

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