Budget Breakfast Briefing March 9th 2017 Speakers today are: Geoff - - PowerPoint PPT Presentation

Budget Breakfast Briefing March 9th 2017

Speakers today are: Geoff Fraser Phil Sampson Paul McCarthy

Report on the 8th March 2017 Budget Geoff Fraser – Head of Taxation

2017/18 (2016/17)

Increase Personal Allowance £11,500 (£11,000) £500 It is a stated intention to raise the personal allowances to £12,500 by the end of this parliament. * In addition the personal allowance is reduced by £1 for every £2 of income over £100,000 (£100,000). Effective tax rate between £100,000 and £123,000 (£122,000) of 60%. Income Tax - Rates and Allowances

Income Tax - Rates and Allowances cont’d

Married Allowance £1,150 ( £1,100) Effectively 10% of an unused personal allowance can be transferred to their spouse or civil partner provided they are not liable to tax at the higher or additional rate. Married Couples Allowance For those born before 6 April 1935 £8,445 maximum £3,260 minimum with income limit abatement. Savings Income No deduction of tax at source on savings income from 6 April 2016 . New £1,000 tax free savings allowance for basic rate tax payers (£500 for higher rate and £0 for additional rate payers). In addition to £5,000 0% savings band for lower income individuals.

Income Tax - Rates and Allowances cont’d

Basic Rate 20% on income up to £33,500 (£32,000) Higher Rate 40% on income up to £150,000 (£150,000) No change Additional Rate 45% on income over £150,000 (£150,000) No Change Rate of tax on dividends 7.5%/32.5%/38.1% (0%/25%/30.6%) New £5,000 0% band, however, the dividend 0% band will reduce to £2,000 from April 2008. Trust Rate 45% No Change Extraction of profits from a corporate entity by way

• f dividend continues to be the most tax efficient.

New Dividend Regime

2015/16 2016/17 SALARY 8,000 8,000 DIVIDEND 31,500 31,500 TAX CREDIT 3,500

• 43,000

39,500 11,000 @ 0%

• 11,000 @ 0%
• 32,000 @ 10%

3,200 5000@ 0%

• 3,200

23,500 @ 7.5% 1,763 TAX CREDIT

• 3,200

TAX CREDIT

• NIL

£1,763 NET CASH £39,500 NET CASH £37,737

New Dividend Regime

2015/16 2016/17 SALARY 8,000 8,000 DIVIDEND 82,800 82,800 TAX CREDIT 9,200

• 100,000

90,800 11,000 @ 0%

• 11,000 @ 0%
• 32,000 @ 10%

3,200 5000@ 0%

• 57,000 @ 32.5%

18,525 27,000 @ 7.5% 2,025 47,800 @ 32.5% 15,535 21,725 17,560 TAX CREDIT

• 8,900

TAX CREDIT

• £12,825

£17,560 NET CASH £77,975 NET CASH £73,240

BONUS V DIVIDEND

PROFITS 100,000 PROFITS 100,000 SALARY

• 8,060 SALARY
• 87,873

CORPORATION TAX

• 17,468 EMPLOYER NIC
• 12,127

DISTRIBUTION 74,472

• TAX

TAX 11,500 @ 0%

• 11,500 @ 0%
• 5,000 @ 0%
• 33,500 @ 20%

6,700 28,500 @ 7.5% 2,137 42,873 @ 40% 17,149 29,472 @ 32.5% 9,578 £11,715 £23,849 NIC

• NIC

£5,090 NET CASH £70,817 £58,934

National Insurance

2017/18 Basic Rates and Thresholds – Employment Income (2016/17 in brackets)

Lower earnings limit (0% and no contribution below limit) £113 per week (£112) £490 per month / £5,880 per annum (£485 / £5,825) Primary threshold (0% but with contribution) £157 per week (£155) £680 per month / £8,165 per annum (£672 / £8,060) Upper earnings threshold 12% (12%) on income above primary threshold) £866 per week (£827) £3,584 per month / £45,000 per annum (£3,584 / £43,000) 2% (2%) on all income above upper earnings threshold New £1,000 exemption on property and trading income

National Insurance cont’d

Employers

Secondary earnings threshold 0% (0%) on earnings up to the secondary earnings threshold £157 per week (£156 per week) and 13.8% (13.8%) on earnings above the secondary earnings threshold

Employment Allowance

From 6 April 2017 an allowance of up to £3,000 (£3,000) can be claimed to offset the employers national insurance liability. Anti avoidance rules apply.

Self Employed

Class 4 9% (9%) on earnings between £43,000 (£42,385) and £8,060 (£8,060) and 2% (2%) on profits in excess of the upper limit. Class 2 £2.80 per week (and to be abolished from April 2018) However, from April 2018 the Class 4 rate will increase to 10%, 11% from April 2019.

• From 6 April 2017
• 0.5% of employer’s pay bill
• Report liability each month if:
• Annual wages in previous tax year was more than £3m
• Employer believes wage bill in current tax year will be greater

than £3m

• Wages = all payments liable to Class 1 secondary NIC including

earnings below threshold, employees under 21 and apprentices under 25

Apprenticeship Levy

Rent a room relief Was increased to £7,500 from 6 April 2016 and remains unchanged Wear & Tear Allowance This was abolished from 6 April 2016 and new replacement basis has been introduced for all residential lettings including unfurnished Restriction of finance cost relief for individual landlords Relief for finance costs on residential properties to be reduced to basic rate only. Phased in from 6 April 2017, as below. Stamp Duty land Tax A higher rate of SDLT, 3% above current rates on purchases of additional residential property was introduced from 1 April 2016 ATED The threshold for the annual tax on enveloped dwelling was reduced to £500,000 from 1 April 2016.

Rental Property Changes

Restriction of finance cost relief for individual landlords

2016/17 2017/18 2018/19 2019/20 2020/21 Rental Inc 10,000 10,000 10,000 10,000 10,000 Finance Costs (8,000) (6,000) (4,000) (2,000) (-) £2,000 £4,000 £6,000 £8,000 £10,000 Tax at 40% 800 1,600 2,400 3,200 4,000 BR Restriction - (400) (800) (1,200) (1,600) Tax Liability £800 £1,200 £1,600 £2,000 £2,400

Stamp Duty Land Tax on additional residential properties

Threshold Existing Additional Property £0 -£125k 0% 3% £125k - £250k 2% 5% £250k - £925k 5% 8% £925k - £1,5m 10% 13% £1.5m + 12% 15%

Reduction in rates of Corporation Tax from 1 April 2017 From 1 April 2017 19% (to 31 March 2020) From 1 April 2020 17% Increase in rate of tax on loans to participators from 25% to 32.5% For new loans made on or after 6 April 2016. Changes to loss relief rules on carried forward losses for losses arising

• n or after 1 April 2017

Corporation Tax

R&D for tax purposes takes place when a project seeks to achieve an advance in science or technology. The activities that directly contribute to achieving this advance in science or technology through the resolution of scientific or technological uncertainty are R&D. An advance in science or technology means an advance in a overall knowledge or capability in a field of science or technology (not a company’s own state of knowledge or capability alone). This includes the adaptation of knowledge or capability from another field of science or technology in

• rder to make such an advance where this adaptation was not readily

deducible. Research & Development Tax Credits

• What is the nature of R&D undertaken?
• What is the scientific or technological advance?
• What scientific or technological uncertainties were encountered?
• How and when where the uncertainties overcome?
• Why wasn’t the knowledge being sought readily deducible by a

competent professional? Research & Development Tax Credits

Qualifying expenditure £10,000 Total deductible amount at 230% = £23,000 Relief at 20% = £4,600 (46%)

• r

Tax Credit claim £23,000 * 14.5% = £3,335 (33.35%) We have successfully claimed relief on over £2m of additional expenditure ranging from software, engineering products, nutritional drinks to growing Chilli plants SME – R&D Reliefs Example

Advanced Assurance

• Prior application => Certainty
• If approved => Certainty for following three years
• Will involve discussion with HMRC technical
• Not open to companies with:
• Turnover > £2m
• More than 50 employees
• Involved in tax avoidance
• Previous claim

Research & Development Tax Credits

Capital Allowances Key Issues

• Annual investment allowance remains at £200,000 from 1 January 2016,
• Integral features and fixtures in commercial property, the purchase

document MUST deal with capital allowances.

• Writing down allowances are currently at 18% and 8% per annum.

Talk to us about the purchases of commercial properties BEFORE exchange

Purchase Cost £400,000 Qualifying Costs @ 15% = £60,000 Sale Proceeds £600,000 Corporation Tax Relief on capital allowances @ 19% = £11,400 Corporation Tax on chargeable gain @ 19% = £38,000 Gain made £200,000 and net tax paid £26,600 = 13.3%!! Capital Allowances cont’d

Capital gains tax

Rate of capital gains tax on non-business disposals 20%/10% (28%/18%)* * But the 28%/18% rates continue to apply for residential property Rate of capital gains tax – Entrepreneurs relief 10%** (10%) No change ** This rate applies to lifetime qualifying gains of £10m. Also now available to ‘long-term investors’ Annual capital gains tax allowance for individuals £11,300 (£11,100) for trusts £5,650 (£5,550) * Rates of capital gains tax are linked to marginal rate of income tax.

Speak to us about advanced planning to ensure efficient use of tax rates and exemptions.

Nil Rate IHT Band until 5 April 2021 £325,000 Additional Nil-Rate Band where residence is involved*: From 1 April 2017 £100,000 From 1 April 2018 £125,000 From 1 April 2019 £150,000 From 1 April 2020 £175,000 Tapered by £1 for every £2 if estate greater than £2m. Special Downsizing Relief rules introduced Don’t forget and always protect reliefs that are available!

Inheritance Tax

• Businesses which are not exempt must keep digital

records

• Businesses will be required to update HMRC

quarterly

• Annual accounts normally within 10 months
• Digital account will show estimated tax based on

submissions

• ‘Prompts’ and ‘nudges’ to encourage and support

filing on time!

Making Tax Digital

• Exempt bodies
• Charities but not trading subsidiaries of charities
• CASC’s
• Unable to engage digitally

Certain religious beliefs Age Disability Certain Trusts and large partnerships

Making Tax Digital (Cont’d)

• Businesses and Landlords start of first accounting

period beginning after 5 April 2018

• For 30 April year end => 1 May 2018
• Landlords => 6 April 2018
• Smaller businesses (below VAT Threshold) => 6 April

2019

• Limited Companies => April 2020

Making Tax Digital (Cont’d)

• Initially no penalties for errors in quarterly reporting
• Spreadsheet will not meet requirements
• Approved software will be required
• Not yet available
• Plans to simplify tax for unincorporated businesses!

Making Tax Digital (Cont’d)

• Certain non-domiciliaries now treated as UK domiciled
• Potential effect on offshore trusts
• New £1,000 allowance for trading and property income
• NIC on termination payments above £30,000
• Off-payroll working in public sector
• New employment status indicator tool
• Changes to tax treatment of foreign pensions
• Changes for offshore property developers (land in UK)
• Reform substantial shareholdings exemption
• CT deduction contributions to grassroot sports
• Restriction of corporate interest expense
• Changes to appropriation to trading stock rules
• Vat threshold £85,000
• Image rights guidelines

Other Measures

Budget Report

These slides as part of the whole presentation are provided strictly for general consideration only. No action must be taken or refrained from based on these slides or the words supporting them without taking professional advice. Accordingly, neither Thompson Jenner LLP nor any of its partners, officers or employees can accept any responsibility for any loss occasioned through any such action or inaction. Registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Thompson Jenner LLP is a limited liability partnership registered in England and Wales No. OC352756 whose registered office is at 1 Colleton Crescent, Exeter, Devon EX2 4DG.

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