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Chancellors Budget 16th March 2016

Tax year 2016/17

Income Tax
Tax rates are:
0% between £0 and £11000
20% between £11000 and £43000
40% between £43000 and £150000
45% above £150000

Personal allowance is £11000 for everyone.

Note 1 – where income exceeds £100000 the personal allowance is reduced by £1 for every £2 of income above £100000.

Note 2 – the amount that married couples and civil partners can transfer to their spouse increases to £1100 (only applicable if both don’t pay above the 20% rate). Please use the following link if you would like to register for this www.gov.uk/marriage-allowance

National Insurance

Self-employed

Class 2’s £2.80 per week but can be exempt if profits below £5965 (class 2’s for 2015/16 to be paid in January 2017 by way of the tax return)
Class 4’s  9% between £8060 and £43000
Class 4’s  2% above £43000

Employees

Class 1’s  12% between £155 and £827 per week
Class 1’s  2% above £827 per week

Employers

Class 1’s  13.8% above £156 per week

Corporation Tax

Gradual reduction from 20% in 2016/17 to 17% by 2020/21.

VAT

Compulsory registration if taxable supplies are above £83000 within the previous 12 months or the next
30 days alone.

The flat rate scheme can be opted for where turnover is less than £150000. You must leave the scheme if turnover goes above £230000.

The cash accounting scheme can be used where turnover is less than £1.35m. You must leave the scheme if turnover goes above £1.6m.

Capital Allowances

The annual investment allowance is £200000 for the calendar year 2016.

Writing down allowances remain at 18%.

Cars with CO2’s up to 75 g/km      100% (but only up to 50 g/km from April 2018)
Cars with CO2’s between 75 g/km and 130 g/km    18% (but only up to 110 g/km from April 2018)
Cars with CO2’s above 130 g/km    8% (but 110 g/km from April 2018)
Leased cars – disallowance of 15% if above 130 g/km (110 g/km from April 2018)

Capital Gains Tax

From 6.4.16, the higher rate of CGT will be reduced from 28% to 20%, and the lower rate will reduce from 18% to 10%. The 28% and 18% rates will continue to apply to chargeable gains on residential property.

The allowance remains at £11100.

Entrepreneurs Relief remains at 10% with a lifetime limit of £10 million.

Inheritance Tax

The allowance remains at £325000 per person (£650000 for married couples and civil partners).

 

 

 

 

Dividend Tax Changes

As announced in the budget on 8th July 2015 changes to the way dividends are taxed will be introduced from 6 April 2016.

The old system of the dividend tax credit will be abolished and there will be the introduction of a new dividend tax allowance of £5,000 a year. The new rates of tax on dividends above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

This change obviously has an impact on owner managed limited companies where dividends are used as part of remuneration. We will therefore need to look at each case individually to assess the impact and advise how this may be reduced.

The Second Budget 2015

On 8th July 2015 the Chancellor presented his first budget of this Parliament.

Business Tax
Corporation Tax will be reduced by 1% to 19% for the years beginning on 1.4.17, 1.4.18 and 1.4.19. A further 1% reduction will apply from 1.4.20 making the rate 18%.

Annual Investment Allowance has been changed with the rate set at £200,000 per year commencing from 1.1.16. The current allowance of £500,000 remains in place until 31.1.15.

Personal Tax
The personal allowance will increase to £11,000 on 6.4.16 and £11,200 on 6.4.17.

The higher rate (40% tax) threshold will increase to £43,000 on 6.4.16 and £43,600 on 6.4.17.

A new personal savings allowance will be introduced from 6.4.16 and will mean basic rate taxpayers can receive up to £1,000 of savings income tax free while higher rate tax payers can receive £500.

From 6.4.16 a change to the way dividends are taxed will be introduced. The current tax credit will be removed and replaced with a £5,000 dividend allowance. Dividends above £5,000 will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate (45%) taxpayers. Please see our separate article to follow.

On buy to let properties the amount of income tax relief on finance costs will be restricted to the basic rate. This will be phased in from 6.4.17 over the following four years. The restriction will not apply to furnished holiday lettings. Also from 6.4.16 the Wear and Tear allowance on furnished residential property will be replaced by the actual costs of replacing furnishings. There will also be an increase in Rent-a-Room relief from £4,250 to £7,500 from 6.4.16.

Inheritance Tax
An additional nil rate band where a residence is passed down to direct descendants will be introduced. From 6.4.17 this will be £100,000, from 6.4.18 £125,000, from 6.4.19 £150,000 and from 6.4.20 £175,000. These allowances can be transferred to the surviving spouse or civil partner. This potentially increases the the IHT nil rate band to £1 million for a couple from 6.4.20.

Other Changes
From 6.4.16 a new minimum wage will be introduced for those aged 25 and above. This will be set at £7.20 per hour.

The Employment Allowance will increase from 6.4.16 to £3,000 per year but will no longer be available to companies where the director is the sole employee.

Employers NI – Under 21s

With effect from 6 April 2015 every employer with employees under the age of 21 will no longer pay Class 1 secondary National Insurance contributions on earnings up to the upper earnings limit (£815 per week).

If you operate your own payroll and have employees under 21 please ensure the correct NI category letter is used to reflect these changes.

Marriage Allowance

From 6 April 2015 married couples and civil partners will be able to transfer some of their personal allowance to their spouse or civil partner.

Where a spouse or civil partner does not pay tax (their earnings are below £10,600) they can transfer up to £1,060 of their personal allowance to the other spouse or civil partner as long as they are within the basic rate of income tax.

If the full £1,060 of allowance is transferred then tax of £212 can be saved.

You can register your interest before April using the following https://www.gov.uk/marriage-allowance and HMRC will then contact you.

Chancellors Budget 18 March 2015

Tax Year 2015/16

Income Tax

Tax rates are:

0% between £0 and £10,600
20% between £10,600 and £42,385
40% between £42,385 and £150,000
45% above £150,000

Personal allowance:

£10,600 aged under 75
£10,660 aged 75 and over

Note 1 – where income exceeds £100,000 the personal allowance is reduced by £1 for every £2 of income above £100,000
Note 2 – from 6.4.15 married couples and civil partners will be able to transfer up to £1,060 of their personal allowance to their spouse where both people don’t pay above the 20% rate. Please use the following link if you would like to register for this www.gov.uk/marriage-allowance

National Insurance
Self-employed
Class 2’s £2.80 per week but can be exempt if profits below £5,965
Class 4’s 9% between £8,060 and £42,385
Class 4’s 2% above £42,385
Employees
Class 1’s 12% between £155 and £815 per week
Class 1’s 2% above £815 per week
Employers
Class 1’s 13.8% above £156 per week

Please note that self-employed class 2’s for 2015/16 will be paid in January 2017

Corporation Tax

From 1 April 2015 there will be a single rate of corporation tax of 20%

VAT

Compulsory registration if taxable supplies are above £82,000 within the previous 12 months. The de-registration threshold is £80,000
The flat rate scheme can be opted into where turnover is £150,000 or less and the scheme must be left if turnover goes above £230,000
The cash accounting scheme can be used where turnover is less than £1.35m and the scheme must be left if turnover goes above £1.6m

Capital Allowances

The annual investment allowance remains at £500,000 until 31.12.15. The chancellor will announce the new allowance in the autumn statement
Writing down allowances remain at 18%
There are special rules for cars:
Cars with CO2’s up to 75g/km                                       100%
Cars with CO2’s between 75g/km and 130g/km      18%
Cars with CO2’s above 130g/km                                   8%
For leased cars above 130g/km there is a 15% disallowance for tax

Capital Gains Tax

The annual allowance for individuals increases to £11,100 from 6.4.15
The CGT rates are as follows:
Where normal income + gains are less than £42,385              18%
Where normal income + gains are more than £42,385            28%
For sales of businesses up to £10m of lifetime gains                 10%

Inheritance Tax

The nil rate band of £325,000 (£650,000 for married couples and civil partners) remains the same. The rate of tax remains at 40%.

Employers National Insurance Allowance

Just a reminder that from April 2014 the first £2,000 of employers NI is exempt. Directors of limited companies currently drawing salary at the NI threshold may benefit from increasing their salary. Please contact us for guidance.

The allowance will be claimed through the EPS as part of normal payroll procedures.

Chancellors Budget 19.03.2014

Income Tax and National Insurance – please see our pre-budget update.

Corporation Tax – from 1.4.14 the small companies rate remains at 20% (on the first £300k of profits). The large companies rate drops from 23% to 21% from 1.4.14, and 21% to 20% from 1.4.15. Large companies are those where profits exceed £1.5m. There are marginal rates of tax on profits between £300k and £1.5m.

VAT – from 1.4.14 the registration limit increases from £79k to £81k.

Capital Allowances – the annual investment allowance will increase from £250k to £500k in April 2014 but is planned to drop to £25k in January 2016. Writing down allowances remain at 18% (main rate including cars with 96-130g/km) and 8% (lower rate including cars over 130g/km). Cars up to 95g/km will attract 100% first year allowance.

Capital Gains Tax – the annual allowance for individuals increases to £11,000 from April 2014. The CGT rates remain the same at 18% (or 28% for gains above the basic rate band). The entrepreneurs relief rate stays at 10% for the sale of businesses for the first £10m of lifetime gains.

Inheritance Tax – the nil rate band of £325k (£650k for married couples and civil partners) remains the same. The rate of tax remains at 40%.

Business Mileage – rates remain the same at 45p/mile for the first 10,000 miles and 25p/mile on the excess.

ISA’s – from 1.7.14 the limit will be £15,000 per annum.

Pensions – from April 2015 individuals will not have to buy an annuity and will have freedom in how they access their pension pot.

Pre-budget Update

Following the Autumn Statement and subsequent releases changes for the tax year 2014/15 have been outlined as below

National Insurance Contributions

Self-employed class 2 will be £2.75 per week

Self-employed class 4 will be payable between £7956 and £41865 at 9%, above £41865 the additional rate is payable at 2%

Employee’s class 1 is due between £153 to £805 per week at 12%, above £805 per week the additional rate is payable at 2%

Employer’s class 1 is due above £153 per week at 13.8%

Note: From April 2014 the first £2000 of employers NI is exempt from payment.

It has also been proposed that from April 15 employers will not have to pay the employer’s class 1 NICs on the wages of employees aged under 21 where the employee earns less than £813 per week.

Sick Pay Support

Currently employers can recover statutory sick pay (SSP) paid to employees where the total paid exceeds 13% of total class 1 NICs of the same month. This is to be abolished from 6 April 2014 therefore making SSP an unrecoverable cost for all employers.

Income Tax Allowances

The standard personal allowance will increase to £10,000

The personal allowance for those aged 65-74 will remain at £10,500

The personal allowance for those 75 and over will remain at £10,660

Note: The age related allowance will reduce to the standard allowance if total income exceeds £27,000.

The income tax bands will be as follows

Basic rate (20%) up to £31,865 (over personal allowance ie £41,865 in total)

Higher rate (40%) from £31,866 to £150,000

Additional rate (45%) over £150,000

Note: The personal allowance will again reduce where income exceeds £100,000

Married Couples Allowance

From April 2015 married couples and civil partners will be able to transfer up to £1000 of their personal allowance to their spouse but this can only be applied if both members of the couple are basic rate taxpayers or pay no tax in the year.

Capital Gains Tax

Where you sell a property that has at some point in time been your main home any gain on the period occupied is free from tax as is the the last 36 months of ownership. From 5 April 2014 any disposals made will only receive a final tax free period of 18 months.

Once the budget has been announced on the 19 March 2014 our normal update will be made with any revisions.

HMRC scam emails

Please be aware of emails purporting to be from HMRC stating you are entitled to a tax refund.

HMRC do not advise any tax position by email so please be very cautious of any email of this nature.

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