5 Things every business owner should know about Making Tax Digital

5 Things every business owner should know about Making Tax Digital

In 6 months time, taxation will finally be keeping-up with the rest of us, and will be becoming digital. Now, 6 months seems like a lifetime away, doesn’t it? But, with the kids back at school, already everyone’s focus has shifted to Christmas. The days are whizzing past rather fast and, truth is, (much to my utter dismay) we will all be singing jingle bells in silly jumpers before we know it….and only a few months after the big ‘C’, we will have to be ready for the Making Tax Digital (MTD) extravaganza on the 1st of April – joy to the world!

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Autumn Statement 2016 - how will it affect you and your business?

Personal Taxes:

As previously announced in the budget, the personal allowance will increase from the current amount of £11,000 (16/17) to £11,500 (17/18).

The Basic Rate Limit will increase from £32,000 for (16/17) to £33,500 in 17/18.

Therefore, the higher rate threshold will be as follows:

                                                             16/17                                    17/18

Personal Allowance                         £11,000                                 £11,500

Basic Rate                                       £32,000                                £33,500

Higher Rate threshold                    £43,000                               £45,000

There were no changes announced to the Dividend Tax which came into effect from 6th April 2016 and if you require any tax planning or information on how much it will cost you personally to take dividends out of a limited company, then please contact us.

Hobby Traders: Another point that was also mentioned in the budget earlier in the year, which has now been confirmed, is that there will be two new income tax allowances for “hobby traders”.

These will cover trading income and property income of up to £1,000. Individuals with income below this new allowance will not need to declare this on a tax return and pay no taxation on the income.

Salary Sacrifice Scheme: Mr Hammond announced that Salary Sacrifice Schemes (SSS) will be taxed “more fairly” from April 2017.

A SSS is when an employees exchanges some of their salary for a non cash benefit with both the employee and employer making a tax a saving.

There will, however, still be some items that will be exempt from the new rules and they are:

-          Pensions and advice, Childcare, Cycle to Work schemes and ultra-low car emissions schemes.

Also, there is an arrangement for schemes in existence prior to April 2017 will be protected for up to a year and arrangements in place for cars, accommodation and school fees will be protected for up to 4 years.

Temination payments over £30,000 which are subject to income tax after April 2018 will also be subject to employer National Insurance Contributions

Businesses Taxes:

Corporation Tax: The government again confirmed that they still intend to reduce the Corporation Tax rate to 17% by 2020. The current rate is 20% and this will reduce to 19% by 31 March 2018 with further 1% decreases each year to 2020.

VAT: The VAT threshold will stay at £83,000 but there were changes announced to the Flat Rate Scheme. From 1 April 2017 there will be a new rate of 16.5% for businesses with limited costs, such as providing services. So there could be a potential increase from the consultancy rate of 14.5% for some companies.

Details of this have now been published by HMRC on https://www.gov.uk/government/publications/tackling-aggressive-abuse-of-the-vat-flat-rate-scheme-technical-note/tackling-aggressive-abuse-of-the-vat-flat-rate-scheme-technical-note

If you think that this could affect your business, feel free to contact us.

R&D: There will be a review of the Research and Development (R&D) tax scheme reliefs available for companies. No specific details of this have been announced as of yet but more money has been promised for this area.

Business Rates: from April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. There will be a tapered rate of relief on properties worth up to potentially £18,000, but this has not been confirmed.

Non Resident Companies: The government is considering bringing all non-resident companies receiving taxable income from the UK into the Corporation Tax regime. Details of this will be announced in the 2017 budget after a consultation has been launched.

The Insurance Premium Tax (IPT) will rise to 12% from the current rate of 10% from 1 June 2017.

Company Car Taxation: In an effort to encourage the purchase of ultra-low emission vehicles, new company car tax bands for the lowest emitting cars will be introduced for the 2020/21 tax year. The percentage for cars with emissions greater than 90g.km will also increase by 1% in 2020/21.

The National Living Wage, for those aged 25 or over, will increase from £7.20 to £7.50 per hour with effect from April 2017. The government also announced the following rates for all other age categories:

16 – 17 year olds              £4.05 per hour

18 – 20 year olds              £5.60 per hour

21 – 24 year olds              £7.05 per hour

Apprentice rate                £3.50 per hour

Please view our youtube videos for the main points for business or individuals:

Businesses : https://www.youtube.com/watch?v=ojLwLSKHX9s

Individuals: https://www.youtube.com/watch?v=02zn7OXNWs8

Details on the main changes of the Autumn Statement can be found at:

https://www.gov.uk/government/news/autumn-statement-2016-some-of-the-things-weve-announced

Budget 2016

The Budget 2016 –

How will it affect you and your business?

Personal Taxes:

The personal allowance will increase from the current amount of £11,000 for the next tax year (16/17) to £11,500 for 17/18.

The Basic Rate Limit will increase from £32,000 for the next tax year (16/17) to £33,500 in 17/18.

Therefore, the higher rate threshold will be as follows:

                                                           16/17                                    17/18

Personal Allowance                         £11,000                                 £11,500

Basic Rate                                       £32,000                                £33,500

Higher Rate threshold                    £43,000                                £45,000

 Dividend Tax:

Although not a new announcement in this budget, from April 2016 there will be a new taxation rules on how dividends will be taxed on shareholders self assessment returns. The new rules are as follows:

1)      The notional 10% tax credit will be abolished, (therefore there will no need to gross up any dividends when including these on your self assessment return).

2)      Everyone will receive a £5,000 tax free dividend allowance. This will be used after any utilising any of your spare Personal Allowance in the year.

3)      Dividends will now be subjected to income tax at the basic rate level. This will be charge at a taxable rate of 7.5%. Higher Rate tax payers will be still pay the 32.5% and there is an additional rate of 38.1%.

4)      Dividend income will be treated as top band of income and anyone receiving £5,001 of dividends will now have to complete a self assessment tax return from 6 April 2016.

For more information and some worked examples of this, please see our dividend blog at:

http://www.colmerwinchester.com/blog-five/2015/11/2/new-dividend-income-rules

Capital Gains Tax:

One of the biggest changes in the budget was the reduction in Capital Gains Tax with effect from 6 April 2016 but there is an exception. The exception is for chargeable gains accruing on the disposal of residential property not qualifying for private residence relief and carried interest. The changes for qualifying gains are:

                                                            15/16                                     16/17

Basic Rate %                                       18%                                       10%

Higher Rate %                                    28%                                       20%

Businesses Taxes:

Corporation Tax will be cut to 17% but this will not place until 2020. This is an increase on the reductions promised in the Summer 2015 budget, and includes a drop to 19% from 1 April 2017.

The VAT threshold will increase from £82,000 to £83,000 with the deregistration threshold being £81,000 from 1 April 2016.

Insurance Premium Tax will increase to 10% from 9.5% from 1 October 2016.

Business Rates: from April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. There will be a tapered rate of relief on properties worth up to £15,000.

Other Personal Taxes:

Class 2 National Insurance contributions are set to be abolished from April 2018.

The ISA annual limit will rise to £20,000 from £15,240 from 6 April 2017. Also, a new Lifetime ISA will be available from April 2017 for adults under 40. They will be able to contribute £4,000 per year and receive a 25% bonus from the government.  The amount can be saved until you are 70 and used as retirement income, or you can withdraw it to help buy your first home.

There will be a new tax allowance for money earned from the sharing economy from April 2017. One for selling goods or providing services, and one for income from property you own. People who make up to £1,000 from occasional jobs, such as sharing power tools, providing a lift share or selling goods that they have made, will no longer need to pay tax on that income.

In the same way, the first £1,000 of income from property, such as renting a driveway or loft storage, will be tax free!

The full government budget statement can be found at:

https://www.gov.uk/government/news/budget-2016-some-of-the-things-weve-announced

Finally the good news is that whilst struggling to go through the above, duty rates on beer, spirits and most ciders will be frozen this year.

Improving your record keeping

Improving your record keeping

In the last budget, Mr Osborne announced that by 2020 small businesses would be completing quarterly tax returns rather than annual ones.

I know what you are all thinking “It will make my life so much easier. I can keep on top of my tax returns as by completing them more regularly I only have 3 months’ worth of information to submit rather than a whole year!”

No? I thought not....

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