Team Bennetts, Author at Bennetts Accountancy

Making Tax Digital

13th July 201828th June 2018 by Team Bennetts

Overview

Over the past few years the government has been setting out its plans to transform the tax system, known as Making Tax Digital (MTD).

The proposals introduce digital record keeping and quarterly updating to HMRC by businesses, the self-employed and landlords for Income Tax Self Assessment, VAT and Corporation Tax.

Timescales

The MTD requirements will apply to VAT registered businesses (where their turnover is over the compulsory registration threshold of £85,000) from April 2019. For Income Tax Self Assessment and Corporation Tax it will not be before April 2020 at the earliest.

What does this mean for your business

MTD for VAT will mean businesses must keep their VAT records digitally and provide their return information to HMRC via MTD compatible software. The software will need to link with HMRC so that information can be exchanged both ways. Spreadsheets will be classed as digital record keeping but will not be able to link with HMRC without bridging software. It is therefore expected many small businesses will need to move their record keeping across to compatible software in time to meet the requirements.

Where can we help

At present detailed information of what will be required is limited and many software providers are still working on making their software compliant. We will be communicating with our clients via post, telephone and in person (as well as through further posts on here) to keep you updated as things progress. We are talking with our software providers about what they will be providing as well as familiarising ourselves with what we expect will be the most commonly used pieces of software.

The service we provide will vary according to each clients requirements and we will be discussing this in the coming months. In the mean time if you have any questions on MTD please feel free to contact us.

Privacy Policy

16th July 201820th March 2018 by Team Bennetts

We have now inserted a link through to our privacy policy at the foot of every page on our web site.

Dividend Tax Changes – Reminder

21st March 2016 by Team Bennetts

For those of you running your business through a Limited Company, just a reminder that the new tax on dividends starts on 6.4.16.

Each person will receive a tax free allowance of £5000 for dividends. Tax rates will then be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers, and 38.1% for additional rate taxpayers.

Consider taking a dividend before 6.4.16 but be careful that this doesn’t push you into the higher rate in 2015/16, as you could end up paying 25% in 2015/16 as opposed to 7.5% in 2016/17.

Chancellors Budget 16th March 2016

16th July 201821st March 2016 by Team Bennetts

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

9th July 2015 by Team Bennetts

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

9th July 2015 by Team Bennetts

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.

Flat Rate VAT – Can you benefit?

31st March 2015 by Team Bennetts

We have recently worked with a few of our clients to help make VAT registration work for them.

As a small business VAT registration whether compulsory or voluntary can be a daunting task but what if you could vastly reduce the work involved and even profit from registering?

If your turnover is less than £150,000 then you can use the flat rate scheme. Under the scheme you still charge VAT to your customers in the normal way but instead of knocking off VAT on your purchases a percentage of your VAT inclusive turnover is paid to HMRC. The flat rate percentage varies by trade but for example using a 10% flat rate, on £1,000 of sales, VAT of £200 would be charged and only £120 would be payable to HMRC, therefore retaining £80.

If you are below the VAT registration threshold but most of your sales/services are to other VAT registered businesses then you could benefit the most.

Please contact us to discuss this further if it is of interest.

Employers NI – Under 21s

27th March 2015 by Team Bennetts

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

27th March 2015 by Team Bennetts

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

24th March 2015 by Team Bennetts

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%.