Archive for December, 2017

Do you need to submit a self-assessment tax return

Friday, December 8th, 2017

According to HMRC, you are required to send in a tax return in the last tax year if:

  • you were self-employed – you can deduct allowable expenses
  • you got £2,500 or more in untaxed income, for example from tips or renting out a property
  • your income from savings or investments was £10,000 or more before tax
  • your income from dividends from shares was £10,000 or more before tax
  • you made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax
  • you were a company director – unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car
  • your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit
  • you had income from abroad that you needed to pay tax on
  • you lived abroad and had a UK income
  • your taxable income was over £100,000
  • you were a trustee of a trust or registered pension scheme
  • you had a P800 from HMRC saying you didn’t pay enough tax last year – and you didn’t pay what you owe through your tax code or with a voluntary payment
  • your State Pension was more than your Personal Allowance and was your only source of income – unless you started getting your pension on or after 6 April 2016

Certain other people may need to send a return (for example religious ministers or Lloyd’s underwriters). Usually, you won’t need to send a return if your only income is from your wages or pension.

There are penalties for non-submission of returns, so if you are at all uncertain that you should submit a return, please call, we would be delighted to offer an opinion.

The Budget – personal tax considerations

Thursday, December 7th, 2017

Notable changes are listed below:

  • First-time buyers will pay no stamp duty on homes costing no more than £300,000. First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property purchase. 80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.
  • The personal allowance for 2018-19 is £11,850 (2017-18 £11,500). According to HMRC, this means that an average taxpayer will pay £1,075 less tax than in 2010-11.
  • The income tax bands for 2018-19 have been increased. They are: basic rate band increased to £34,500 (2017-18 £33,500); higher rate band £34,501 to £150,000 (2017-18 £33,501 to £150,000); additional rate, no change, applies to income of more than £150,000.
  • There is no change in income tax rates, and the tax rates applied to dividend income. Readers should note that the present £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.
  • There is a small increase in the marriage allowance from £1,150 to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer. From 29 November 2017, the government will also allow marriage allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.
  • New railcard is to be introduced for the 26 to 30 age group. Government will work with the rail industry to introduce the new railcard from spring 2018.
  • The duty on beer. wine, cider and spirits is to be frozen. However, cheap, high strength cider will be subject to a new band of duty.
  • The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation.

Please call if you need more information on any of these changes.

The Budget – small business update

Thursday, December 7th, 2017

Notable changes are listed below:

  • Although there is no change to the rate of corporation tax, maintained at 19%, HMRC is to freeze indexation allowance on corporate capital gains for disposals after 1 January 2018.
  • From April 2018, business rate rates will rise by any increase in the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years. Historically, the RPI has tended to be higher than the CPI.
  • Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year.
  • Changes are to be made to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts. The aim is to target Venture Capital Schemes on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’. EIS and VCTs will also see increased limits for investments in knowledge-intensive companies.
  • The diesel car supplement is to be increased from 3% to 4% from 6 April 2018. This will increase the company car tax and car fuel benefit charge (for company cars provided with an element of private use).
  • The VAT registration threshold is to be maintained at £85,000 until 31 March 2020.

Please call if you need more information on any of these changes.

Private pension tax relief

Tuesday, December 5th, 2017

There was much speculation prior to the budget last month, that the tax relief for higher rate tax payers was going to be scrapped, or reduced. Many pundits were expecting a flat-rate tax deduction of 33% rather than tax relief for higher rate taxpayers of 40%.

Fortunately, for those who may have been affected by a reduction, this change was conspicuous by its absence.

Presently, therefore, the annual tax-free allowance continues to be £40,000 a year. You can top-up this allowance with any unused allowance for the previous three tax years.

You may also be liable to pay tax if the combined value of all your pension pots is worth more than £1m. What counts towards your lifetime allowance depends on the type of pension you are paying into:

  1. Defined contributions schemes are valued as the money in pension pots that goes towards paying you, however you decide to take the money.
  2. Defined benefit schemes are usually valued at 20 times the pension you get in the first year plus your lump sum.

There are also certain protected policies where the expected retirement age is lower than the usual age 55 years limit, for example professional dancers and sportspersons. If this lower retirement age is written into pension plans, then the £1m lifetime allowance is reduced proportionately.

Now there is more certainty regarding the tax benefits of contributing into a pension, readers still making contributions should consider a consultation with their pensions advisor before the end of the current tax year (5 April 2018). Shifting potentially taxable income into a tax-free pension fund still makes good financial sense in appropriate circumstances.

Company capital gains relief is frozen

Monday, December 4th, 2017

Before the Autumn Budget, the capital gains tax (CGT) calculations of companies included a relief called the indexation allowance. Basically, this allowed a company to increase the acquisition cost of an asset by the annual rate of inflation.

Without this relief, any CGT payable on the sale of the asset would increase. Instead of deducting the cost plus the inflation proofed indexation allowance, companies would only be able to claim the historical cost.

This allowance has effectively been axed in the budget last week.

Assets owned prior to 1 January 2018

Companies that currently own assets that will be subject to a CGT payment when they are sold, will have any indexation relief capped at the RPI for December 2017. Accordingly, they will still get a measure of relief up to this date.

Assets acquired on or after 1 January 2018

Assets acquired on or after 1 January 2018 will no longer be able to claim indexation relief.

Companies should therefore be aware that if inflation continues to rise they will be paying tax on the inflationary value of the chargeable asset sold.

According to HMRC:

The measure aligns the treatment of capital gains by companies with that for individuals and non-incorporated businesses for whom indexation allowance was abolished in 2008. It will also align the treatment of capital disposals with disposals of similar assets as part of a company’s trading activities.

In addition, it will simplify tax computations and remove a source of potential errors.

What this measure will do, is to increase the corporation tax of companies that dispose of assets subject to CGT.

 

Switch to our mobile site