Thursday 9 March 2017 Jennifer Williamson BSc (Hons) ACA Accounts, - - PowerPoint PPT Presentation

Thursday 9 March 2017

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Jennifer Williamson BSc (Hons) ACA Accounts, Tax and Outsourcing Partner

Corporation tax

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• Example – Profits of £500,000

Year 2010/11… 2016/17 2017/18 2020/21 Main rate of Corporation tax 28% 20% 19% 17% Year 2010/11… 2016/17 2017/18 2020/21 Corporation tax £122,500 £100,000 £95,000 £85,000

Employers

• National living wage £7.50 from April
• £3,000 employment allowance continues
• Apprenticeship Levy from 1 April

– 0.5% charge on employers’ payroll – Kicks in on payrolls over £3 million

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Levelling the playing field?

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• Increase in Class 4 NI contributions

Earnings* 2016/17 Below £8,060 0% £8,060 - £43,000 9%

• Class 2 NIC scrapped from 5 April 2018
• Dividend Allowance reduces from £5,000 to £2,000 from 5

April 2018

Over £43,000 2% 2% 2% 2019/20 0% 11% 2018/19 0% 10%

* 16/17 tax bands shown

Example Profits of £100,000

2016/17 Employee Class 1 NIC Class 4 NIC Class 2 NIC Income tax Corp tax Company shareholder / director 14,570 18,400 32,970 Self employed 4,285 146 29,200 33,631 Employee 5,333 29,200 34,533

Example Profits of £100,000

2019/20 Employee Class 1 NIC Class 4 NIC Class 2 NIC Income tax Corp tax Company shareholder / director 15,094 17,480 32,574 Self employed 4,983

• 29,200

34,183 Employee 5,333 29,200 34,533 Class 1 NIC £12,688

Levelling the playing field

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• Harder to get capital gains tax

treatment

• Increased penalties for borrowing money from your

company

• Personal service companies assessed to PAYE

Business rates

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• Small Business Rate Relief from 1 April

2017:

• 100% for rateable value < £12,000
• Tapered relief where rateable value

between £12,000 - £15,000

• However, revaluation from 1 April 2017
• Cap on rates increase for businesses losing small

business rate relief

• Local authorities fund to provide targeted relief

Timing is everything

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AIA Main rate Special rate Capital Allowances £200,000 p.a. 18% 8%

• Limitless 100% relief for “environmentally beneficial” plant &

machinery – www.eca.gov.uk

• Applies to all businesses

Don’t forget… tax relief based on CO2 emissions

Is your (new) car green?

• From April 18

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Emission Tax relief Full relief after ≤ 75g/km 100% 1 year 76 – 130g/km 18% WDA 15 years Over 130g/km 8% WDA 31 years Leased Cars

• ≤ 130g/km no restriction
• > 130g/km 15% restriction
• From 1 April 17 – additional first year RFL levy on new vehicles

Don’t forget… tax relief based on CO2 emissions

Is your (new) car green?

• From April 18

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• From 1 April 17 – additional first year RFL levy on new vehicles

Emission Tax relief Full relief after ≤ 50g/km 100%(*) 1 year 51 – 110g/km 18% WDA 15 years Over 110g/km 8% WDA 31 years Leased Cars

• ≤ 110g/km no restriction
• > 110g/km 15% restriction

Research & development

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SME Current relief 230% Repayable credit 14.5%

• Only available to companies
• No minimum spend
• Patent Box – reduced rate of tax on profits from Patent

Pit stop round up

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• Corporation tax rates reducing
• Capital allowances – as you were, except on cars
• Check your state pension entitlement
• Window of opportunity to review your business rates

position

• Review your business structure

Clive Relf FCA Private Client Tax Partner

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Personal tax - agenda

• Nuts and bolts
• Further buy-to-let change
• Two new tax free allowances
• Impact of dividend tax changes
• Inheritance tax changes
• New tax free childcare
• Pensions
• Savings update
• Making tax digital
• Pit stop roundup

*both subject to 8% surcharge on gains arising from residential properties

Nuts and bolts

Income tax 2016/17 2017/18 2020/21 Tax free amount £11,000 £11,500 £12,500 Basic rate band £32,000 £33,500 £37,500 Rates

20%, 40%, 45% 20%, 40%, 45% ?

Capital gains tax 2016/17 2017/18 2020/21 Exemption £11,100 £11,300 ? Rates

10%* & 20%* 10%* & 20%* ?

Residential property… buy-to-lets

Tax relief restriction on finance costs for landlords

• Gradual abatement from April 2017
• Impacts higher rate taxpayers only
• Relief changes from a deduction against income to a basic

rate tax reduction

• Time to sell up? Your level of gearing could make that

decision for you

Residential property… an interest example

X, a higher rate taxpayer, has net rental income of £10,000 before deducting £4,000 of interest costs. During 2016/17 he’s taxed at 40% on £6,000 profits, with a tax bill of £2,400. In future:

Tax year ended Tax bill April 2018 £2,600 April 2019 £2,800 April 2020 £3,000 April 2021 £3,200

Two new tax free allowances

Both coming in April 2017 Property £1,000 p.a.

• Most valuable for those with no relevant expenditure
• therwise not “pain free”

Trading £1,000 p.a.

• To cover sundry bits and bobs… again those with minimal

expenditure will benefit most

Further changes to dividend taxation

• £5,000 p.a dividend allowance

available since April 2016

• Historic tax credit removed
• Allowance falling to £2,000 p.a in

April 2018

Taxpayer Effective rate basic 7.5% higher 32.5% additional 38.1%

Dividend tax example (1)

Mr Jackman, a 40% taxpayer has a salary of £65,000 and receives a dividend of £10,000. The tax on this dividend would be; Tax increase of £975 come 2018

Today From April 2018 Tax liability £1,625 £2,600

Dividend tax example (2)

Mrs Wilson is a basic rate taxpayer with a pension of £12,000 and dividend income of £10,000. The tax on this dividend would be; Tax increase of £225 come 2018

Today After April 2018 Tax liability £375 £600

Inheritance tax (IHT)

• Nil rate band of £325,000 remains

frozen until April 2021

• Unchanged since April 2009 and

IHT “take” now at all time high!

• Rate remains at 40%
• New residence nil rate band

introduced from April 2017… …but not for everyone

New residence nil rate band

• Impacts deaths after 5 April 2017
• Initially worth an extra £100,000

tax free per individual in certain circumstances

• Gradually increases to extra

£175,000 tax free over period to April 2021

• Don’t qualify if estate on death exceeds £2 million

New nil rate band

The small print

• Only available where deceased

leaves their home (or cash from earlier sale) to close descendent

• So son, granddaughter okay

but not niece, cousin or parent

• Also not available where property left to a trust!!
• New relief is complex so caveat emptor

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New tax free childcare

• First announced in 2013 and being phased

in (at last) from April 2017

• Operates online and worth up to £2,000 p.a for each child

under 12 years of age

• Government contributes 20p for each 80p an individual

spends on qualifying childcare

• Available to self employed for the first time
• Parents MUST be working
• Not available if either parent has income > £100,000 p.a

Pensions

UNCHANGED

• Availability of tax free cash @ 25% of fund
• Tax relief available at marginal income tax rate
• Maximum annual premiums of £40,000 but restricted for HNWI
• Lifetime allowance remains at £1 million

CHANGED

• Money purchase annual allowance falls to £4,000 from £10,000 (for some)
• New 25% tax charge (from today) on transfers to QROPs

Savings

Lifetime ISA

• ISA allowance increasing from £15,240 p.a to £20,000 from

April 2017

• NEW lifetime ISA… for those aged > 18 and < 40
• Max saving of £4,000 p.a with Government addition at 25%
• Withdraw to buy first home OR leave alone until 60 years
• f age

NS&I Bond

• New NS&I bond from April paying 2.2% gross… but only
• n maximum of £3,000… 3 year lock in.

Making tax digital

HMRC’s goal

• To reduce the 12 million SA tax returns

submitted in 2015 to nil by 2020 The mechanics

• Introduction of quarterly reporting from

April 2018… deferred to 2019 for those with gross incomes > £85,000 and exemption for those < £10,000 p.a. Things to do

• Access your personal tax account to familiarise yourself

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The pound in your pocket

• Duty frozen for seventh year
• Excise duty uplifted by inflation
• New sugar tax from 2018

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Pit stop round up

• Review your will to ensure eligibility

for new £100,000 IHT exemption

• Stress test your buy-to-let properties
• Dust off your pension pot and take advice
• Are you maxing your ISAs?
• Access your personal tax account

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