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The Budget 2018: ''Austerity is coming to an End''

The Chancellor Philip Hammond has delivered his Autumn Budget 2018.

It was a budget which was not necessarily predicted to have any significant announcements in terms of taxation. Therefore as Mr Hammond or ‘Fiscal Phil’ continued through his speech this afternoon, the surprises started and continued.

This was a budget for the entrepreneurs, to keep Britain open for business, and with Brexit looming this budget was clearly aimed at small businesses. Furthermore, it was aimed at workers- with the unexpected increase in the personal allowance and higher rate tax threshold coming into effect earlier than expected.

Today, Spirare welcomed this budget.

We have summarized the key highlights as follows:

Personal Taxation

  • Personal allowance, the rate at which people start paying income tax, to rise from £11,850 to £12,500 in April 2019- a year earlier than planned
  • The higher rate income tax threshold to rise from £46,350 to £50,000 in April 2019- again a year earlier than planned
  • After that, the two rates will rise in line with inflation
  • National Living Wage increasing by 4.9%, from £7.83 to £8.21 an hour, from April 2019
  • IR35 private sector- extension of changes to the way self-employment status is taxed, from the public sector to medium and large private companies, from April 2020

Businesses

  • New digital services tax (2%) on UK revenues of big technology companies, from April 2020 (This will only apply to profitable companies with global sales of more than £500m) - Small tech start ups will not be subject to the new digital services sales tax
  • Private finance initiative (PFI) contracts to be abolished in future
  • Annual investment allowance to be increased from £200,000 to £1m for two years
  • Contribution of small companies to apprenticeship levy to be reduced from 10% to 5%
  • Business rates bill for companies with a rateable value of £51,000 or less to be cut by a third over two years. The measure is expected to benefit 90% of independent companies, cutting their bill by £8,000
  • Refunds arising from research and development claims will be restricted to the PAYE paid by the company. This will restrict the benefit of R&D claims by companies that do not have employees
  • VAT threshold of £85k turnover to remain the same for the next two years
  • Entrepreneurs’ Relief: minimum qualifying period - from 6 April 2019 the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months
  • Employment Allowance reform – From April 2020 the government will restrict access to employers with an employer National Insurance contributions (NICs) bill below £100,000 in their previous tax year. The EA provides businesses and charities with up to £3,000 off their employer NICs bill.
  • Capital allowances special rate reduction (8% to 6%) – from April 2019, the capital allowances special rate for qualifying plant and machinery assets will be reduced from 8% to 6% to more closely match average accounts depreciation
  • Corporate capital loss restriction –  the tax treatment of corporate capital losses will be brought into line with the treatment of income losses. From 1 April 2020, the government will restrict the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50%. The measure will include an allowance that gives companies unrestricted use of up to £5 million capital or income losses each year, meaning that 99% of companies will be unaffected
  • Intangible fixed assets regime – the government will seek to targeted relief for the cost of goodwill (the amount paid for a business that exceeds the fair value of its individual assets and liabilities) in the acquisition of businesses with eligible intellectual property from April 2019. With effect from 7 November 2018, the government will also reform the de-grouping charge rules, which apply when a group sells a company that owns intangibles, so that they more closely align with the equivalent rules elsewhere in the tax code

Property

  • All shared equity purchases of up to £500,000 to be exempt from stamp duty
  • Capital gains tax on the sale of let property –from April 2020 the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. The final period exemption will also be reduced from 18 months to 9 months. The government will consult on these changes. There will be no changes to the 36 months final period exemption available to disabled people or those in a care homes

Other Announcements

  • £675m to rejuvenate high streets
  • Beer, cider and spirits duties to be frozen
  • Cost of a bottle of wine duty to rise by 8p, in line with inflation, in February
  • Tobacco duty will continue to rise by inflation plus 2%
  • A packet of 20 cigarettes will go by 33p at 18.00 GMT
  • Fuel duty to be frozen for ninth year in a row
  • Remote Gaming Duty to increase to 21% for online gambling on "games of chance" from 2019
  • Structures and buildings allowance (SBA) – new non-residential structures and buildings will be eligible for a 2% capital allowance where all the contracts for the physical construction works are entered into on or after 29 October 2018
  • Lifetime allowance for pensions – the lifetime allowance for pension savings will increase in line with CPI for 2019-20, rising to £1,055,000
  • Starting rate for savings – the band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2019-20
  • Taxation of self funded work related training- the government is launching the National Retraining Scheme and skills pilots to help those in work, including the self-employed, develop the skills they need to thrive
  • New mandatory business rates relief for all lavatories made available for public use, whether publicly or privately owned
  • An extra £1bn for armed forces, for cyber-capabilities and the UK's new nuclear submarine programme
  • £10m for mental health care for veterans, to mark the centenary of World War One Armistice
  • £1.7m in Holocaust education programmes to mark the 75th anniversary of the liberation of Bergen-Belsen concentration camp, in northern Germany
  • Confirmation of an extra £20.5bn for the NHS over the next five years
  • A new tax on non-recycled plastic packaging (on manufacture and import of plastic packaging that is 30% recyclable or less)
  • No tax on takeaway coffee cups but this will be reconsidered if the industry doesn't make enough progress

Should you have any queries on the above, please do not hesitate to contact a member of the Spirare team.

Reminder for Second Payment On Account

How to pay your Payment On Account by 31 July 2018

As you are aware, the self-assessment second payment on account deadline of 31 July 2018 is fast approaching. Here are ways to pay before the deadline to ensure you avoid any unnecessary penalties. This is of course assuming you have not made a claim to reduce your payment on account due to a reduction in earnings.

 

By debit or credit card or by BACS

If you wish to pay via debit or credit card online or over the phone you will need your 10-digit unique taxpayer reference (UTR) followed by the letter ‘K’. This will be on your tax return and computation.

It is important to note HMRC will no longer accept payments from personal credit cards, so if you are paying with a credit card ensure it is a business account.

The debit or credit card link is as follows (you will incur a fee if you pay by credit card):

https://www.tax.service.gov.uk/pay-online/self-assessment

 

Alternatively, you can pay by BACS as follows (assuming your account is UK based)

 

Sort Code   Account Number     Account Name

083210            12001039                    HMRC Cumbernauld

OR

083210            12001020                    HMRC Shipley

 

Your bill should advise you which account to use, but if you are unsure, use HMRC Cumbernauld.

 

At your bank or building society

You can only pay at your branch by cash or cheque if you both:

·         still get paper statements from HM Revenue and Customs (HMRC)

·         have the paying-in slip HMRC sent you

Make your cheque payable to ‘HM Revenue and Customs only’ followed by your reference number - this is your Unique Taxpayer Reference (UTR). Followed by the letter ‘K’. You’ll find it on your paying-in slip.

By cheque through the post

You can send a cheque by post to HM Revenue and Customs (HMRC).

HMRC 
Direct 
BX5 5BD 

Please allow 3 working days for your payment to reach HMRC.

In the envelope you should include:

A cheque payable to ‘HM Revenue and Customs only’, followed by your Unique Taxpayer Reference (UTR). You’ll find this on your paying-in slip.

Include the paying-in slip HMRC sent you (if you still get paper statements). Don’t fold the paying-in slip or cheque or fasten them together. If you don’t have a paying-in slip you can print a slip to use to pay by post. However, you won’t be able to use this at a bank.

 

If you still need assistance regarding your second payment on account, or you need to confirm the amount, please contact one of the team at Spirare.

National Minimum Wage Increases 1 April 2018

 

National Minimum Wage Increases Effective from 1 April 2018

The National Minimum Wage has increased with effect from 1 April 2018.

The National Minimum Wage increases are as follows:
 

Year                  25 and over       21 to 24        18 to 20        Under 18      Apprentice

April 2018                £7.83                 £7.38                £5.90                £4.20             £3.70

April 2017                £7.50                 £7.05                £5.60                £4.05             £3.50



It is important to note that there are some individuals that do not qualify for the NMW. These include those who are self employed, voluntary workers, company directors, and family members who live in the home of the employer and do household chores. 

If you are an employer, please ensure that you have advised your employees and updated their gross pay accordingly.
 

If you would like more information on the National Minimum Wage increases please contact one of the team at Spirare.

 

How to pay your Self-Assessment by 31 January 2018

As you are aware the self-assessment deadline of 31 of January 2018 is fast approaching, here are five ways to pay before the deadline to ensure you avoid any unnecessary penalties.

Listed below are the methods you can use to pay your tax liability.

 By debit or credit card or by BACS

If you wish to pay via debit or credit card online or over the phone you will need your 10-digit unique taxpayer reference (UTR) followed by the letter ‘K’. This will be on your tax return and computation.

It is important to note HMRC will no longer accept payments from personal credit cards, so if you are paying with a credit card ensure it is a business account.

The debit or credit card link is as follows (you will incur a fee if you pay by credit card):

 

https://www.tax.service.gov.uk/pay-online/self-assessment

 

Alternatively, you can pay by BACS as follows (assuming your account is UK based)

 Sort Code   Account Number     Account Name

 

083210            12001039                    HMRC Cumbernauld

 

OR

 

083210            12001020                    HMRC Shipley

 Your bill should advise you which account to use, but if you are unsure, use HMRC Cumbernauld.

 

At your bank or building society

You can only pay at your branch by cash or cheque if you both:

·         still get paper statements from HM Revenue and Customs (HMRC)

·         have the paying-in slip HMRC sent you

Make your cheque payable to ‘HM Revenue and Customs only’ followed by your reference number - this is your Unique Taxpayer Reference (UTR). Followed by the letter ‘K’. You’ll find it on your paying-in slip. 

 

Direct Debit

If you wish to pay via Direct Debit you will need to set up a Direct Debit through your HM Revenue and Customs (HMRC) online account to make single payments for 31 January. If you will need to make a payment on account, then you will also need to set up another debit before 31st July.

 

You’ll also need to use your 11-character payment reference. This is your 10-digit Unique Taxpayer Reference (UTR) followed by the letter ‘K’.

 

Please Allow 5 working days to process a Direct Debit the first time you set one up. It should take 3 working days the next time if you’re using the same bank details.

 

By cheque through the post

 You can send a cheque by post to HM Revenue and Customs (HMRC).

HMRC 
Direct 
BX5 5BD 

Please allow 3 working days for your payment to reach HMRC.

In the envelope you should include:

A cheque payable to ‘HM Revenue and Customs only’, followed by your Unique Taxpayer Reference (UTR). You’ll find this on your paying-in slip.

Include the paying-in slip HMRC sent you (if you still get paper statements). Don’t fold the paying-in slip or cheque or fasten them together. If you don’t have a paying-in slip you can print a slip to use to pay by post. However, you won’t be able to use this at a bank.

Through your tax code

You could have paid your Self-Assessment bill through your PAYE tax code providing you met the following criteria:

·         you owe less than £3,000 on your tax bill

·         you already pay tax through PAYE, for example you’re an employee or you get a company pension

·         you submitted your paper tax return by 31 October or your online tax return online by 30 December

How it’s set up;

HM Revenue and Customs (HMRC) will have automatically collected what you owe through your tax code if you met all 3 conditions. unless you’ve specifically asked them not to (on your tax return).

If you’re not eligible, you wouldn’t have been able to pay this way. You aren’t legible if:

·         you don’t have enough PAYE income for HMRC to collect it

·         you’d pay more than 50% of your PAYE income in tax

·         you’d end up paying more than twice as much tax as you normally do

Give the Gift of Tax Relief this Christmas: Trivial Benefits and Christmas Parties

 

With the festive season fast approaching, Christmas parties and gifts for employees and customers will no doubt be on the minds of many businesses. However, if tax relief is to be achieved there are many rules and regulations to be followed.

Gifts to Employees

All gifts will be tax deductible as an expense for the business. If the gift is a cash gift, the employee will have tax deducted as though the gift is regular earnings, and employers NIC is payable on the gross amount of the cash gift, and the employee will have national insurance and tax deducted on that gift. For example, if you give a cash bonus of say £100 to a basic rate employee, this will cost you as an employer £113.80 (less the corporation tax), and the employee will only receive £68 (after employees NI and tax).

However, you may wish to consider a non-cash gift known as a Trivial Benefit. The benefit is exempt from being taxed as employment income if all the following conditions are satisfied:

 

  • the cost of providing the benefit does not exceed £50
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

 

 
This could be, for example, in the form of a hamper or a shop voucher. A good example of this is a voucher which can only be exchanged for goods but may be used in many stores, for examples of such vouchers please see the following link: https://www.one4allgiftcard.co.uk/

By comparison, providing a trivial benefit of say a John Lewis Voucher of £50 would cost you as an employer £50 (less the corporation tax) and the employee would receive £50 as a voucher, and not be subject to employees national insurance or tax. Likewise the employer would not be subject to employers national insurance.

It may also be interesting to note that trivial benefits may be used at any time of the year and there are no limits on the amount of times these may be provided to employees in the year, for example for staff birthdays.

Directors count as employees, but they may only receive a maximum of £300 per year in these trivial benefits. Therefore this is as equally beneficial for Directors.

Gifts to Customers

Gifts to customers are only allowable as a tax deduction if:

 

  • the total cost of gifts to any one individual per annum does not exceed £50
  • if the gift bears a conspicuous advert for the business
  • the gift is not food, drink, tobacco or exchangeable vouchers.

 

However, samples of a trader’s product are allowable even if they are food, drink or tobacco.

Christmas Parties

Christmas parties are tax deductible as long as they meet the following criteria:

 

  • £150 or less per head
  • Annual, such as a Christmas party or summer barbecue
  • Open to all of your employees

This allowance applies to ‘annual parties’, therefore if you have already entertained your staff during the year, the amount must still be kept under £150 in total to ensure the amount remains tax deductible. If the total annual expense for the employee exceeds £150, the total cost of the event is no longer tax deductible, not just the cost that exceeds the £150. All of the costs become taxable as a benefit in kind, requiring a P11D submission to HMRC for your employee.

It is also important to note that the cost is per employee, therefore if partners of employees are invited to the Christmas party, the cost of the partners will have to be absorbed within the £150 limit per employee.

For further information, please feel free to contact the team at Spirare.

The Budget 2017: A Summary

The Autumn Budget 2017: A Summary

 

The Chancellor Philip Hammond has announced his 2017 Autumn Budget, with first time buyers being the key winner from today’s budget.

In a Budget that was expected to raise funds for housebuilding, there were surprises to incentivize first time buyers in the form of stamp duty reductions. Effective from today onwards, first time buyers will pay £5,000 less on purchases between £300,000 and £500,000.

Other highlights included the rise of the National Living Wage from April 2018 onwards, maintaining the VAT threshold (despite concerns that this was going to be reduced), tax free benefits for electric company cars and a confirmed increase in the higher rate tax band and personal allowance for 2018/19.

For businesses, this was a mixed budget, with relatively little to comment on that would have a material impact. Key items including the VAT threshold which was confirmed as set to remain at £85k for the next two years, the rise in business rates to now be based on CPI not RPI, and the abolition of the indexation allowance for companies’ capital gains to be abolished from January 2018. Allowances for EIS and further research and development were more advantageous highlights for businesses, but this will impact the few rather than the many.

We have summarised the key highlights as follows:


Personal Taxation

  • Stamp duty to be abolished immediately for first time buyers purchasing properties costing up to £300,000. To help those in London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by all first-time buyers will be exempt from stamp duty
  • 100% council tax premium to be levied on empty properties for second home owners
  • The personal tax free allowance will rise to £11,850 in April 2018, an increase from £11,500 for 2017/18, while the higher rate threshold will start from £46,350, an increase from £45,000 for 2017/18
  • Short-haul air passenger duty rates and long-haul economy rates to be frozen (paid for by an increase on premium-class tickets and on private jets)
  • National Living Wage to rise in April 2018 by 4.4%, from £7.50 per hour to £7.83 per hour
  • Young person's railcard extended to 26-30-year-olds

 
Businesses

  • VAT threshold for small businesses to remain at £85,000 for the next two years
  • £500m support for 5G mobile networks, fibre broadband and artificial intelligence
  • £540m to support the growth of electric cars, including more charging points
  • For electric car drivers, charging cars at work will not be considered a benefit in kind for tax purposes
  • A further £2.3bn allocated for investment in research and development
  • Rises in business rates to be linked to CPI measure of inflation, not higher RPI. The Chancellor will also extend the £1,000 discount for small pubs to March 2019
  • The indexation allowance for companies’ capital gains will be abolished to bring the corporate tax system in line with personal capital gains tax. The indexation allowance takes inflation into account when calculating the chargeable gains of companies. The allowance will be frozen until January 2018 
  • The Chancellor is to double allowances for the Enterprise Investment Scheme (EIS) for "knowledge" businesses, although he said the enhanced perk would not allow the scheme to be used as a tax shelter for low-risk assets
  • Digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction to be subject to income tax as part of tax avoidance clampdown

 
Other Announcements

  • Long-term goal to build 300,000 homes a year by the mid-2020s
  • £44bn in government support, including capital funding and loan guarantees, to boost housebuilding
  • Review into delays in developments given planning permission being taken forward
  • Tobacco will continue to rise by 2% above Retail Price Index (RPI) inflation while the minimum excise duty on cigarettes introduced in March will also rise
  • Duty on hand-rolling tobacco will increase by additional 1%
  • Duty on beer, wine, spirits and most ciders will be frozen
  • But duty on high-strength "white ciders" to be increased via new legislation
  • Fuel duty rise for petrol and diesel cars scheduled for April 2018 scrapped
  • Vehicle excise duty for diesel cars that do not meet latest standards to rise by one band in April 2018
  • Tax hike will not apply to van owners
  • Existing diesel supplement in company car tax to rise by 1%
  • Proceeds to fund a new £220m clean air fund
  • £40m teacher training fund for underperforming schools in England. Worth £1,000 per teacher
  • 8,000 new computer science teachers to be recruited at cost of £84m
  • Secondary schools and sixth-form colleges to get £600 for each new pupil taking maths or further maths at A-level or core maths at an expected cost of £177m
  • £320m to be invested in former Redcar steelworks site
  • Second devolution deal for the West Midlands
  • £1.7bn transport fund for city regions to be spent by mayors
  • £2bn for Scottish government, £1.2bn for Welsh government and £650m for Northern Ireland executive
  • Scottish police and fire services to get refunds on VAT from April 2018
  • £2.8bn in extra funding for the NHS in England
  • £350m immediately to address pressures this winter, £1.6bn for 2018-19 and the remainder in 2019-20
  • £10bn capital investment fund for hospitals

 
Should you have any queries on the above, please do not hesitate to contact a member of the Spirare team.