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

Thursday 9 March 2017

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

Corporation tax 2010/11… Year 2016/17 2017/18 2020/21 Main rate of 28% 20% 19% 17% Corporation tax • Example – Profits of £500,000 2010/11… Year 2016/17 2017/18 2020/21 Corporation tax £122,500 £100,000 £95,000 £85,000 3

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 4

Levelling the playing field? • Increase in Class 4 NI contributions Earnings* 2016/17 2018/19 2019/20 Below £8,060 0% 0% 0% £8,060 - £43,000 9% 10% 11% Over £43,000 2% 2% 2% * 16/17 tax bands shown • Class 2 NIC scrapped from 5 April 2018 • Dividend Allowance reduces from £5,000 to £2,000 from 5 April 2018 5

Example Profits of £100,000 2016/17 Employee Self employed Company shareholder / director Employee Class 1 NIC 5,333 Class 4 NIC 4,285 Class 2 NIC 146 Income tax 14,570 29,200 29,200 Corp tax 18,400 34,533 33,631 32,970

Example Profits of £100,000 2019/20 Employee Self employed Company shareholder / director Employee Class 1 NIC 5,333 Class 4 NIC 4,983 Class 2 NIC - Income tax 29,200 29,200 15,094 Corp tax 17,480 34,533 34,183 32,574 Class 1 NIC £12,688 - -

Levelling the playing field • Harder to get capital gains tax treatment • Increased penalties for borrowing money from your company • Personal service companies assessed to PAYE 8

Business rates • 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 9

Timing is everything 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 10

Is your (new) car green? Don’t forget… tax relief based on CO2 emissions - From April 18 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 • From 1 April 17 – additional first year RFL levy on new vehicles Leased Cars • ≤ 130g/km no restriction • > 130g/km 15% restriction 11

Is your (new) car green? Don’t forget… tax relief based on CO2 emissions - From April 18 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 • From 1 April 17 – additional first year RFL levy on new vehicles Leased Cars • ≤ 110g/km no restriction • > 110g/km 15% restriction 12

Research & development 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 13

Pit stop round up • 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 14

Clive Relf FCA Private Client Tax Partner 15

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

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 20%, 40%, 45% 20%, 40%, 45% ? Rates Capital gains tax 2016/17 2017/18 2020/21 Exemption £11,100 £11,300 ? 10%* & 20%* 10%* & 20%* ? Rates *both subject to 8% surcharge on gains arising from residential properties

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 otherwise 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; Today From April 2018 Tax liability £1,625 £2,600 Tax increase of £975 come 2018

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; Today After April 2018 Tax liability £375 £600 Tax increase of £225 come 2018

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 26

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 of age NS&I Bond • New NS&I bond from April paying 2.2% gross… but only on 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 30

The pound in your pocket • Duty frozen for seventh year • Excise duty uplifted by inflation • New sugar tax from 2018 31

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 32