Budgets

Budget 2017 – the headlines

Posted by Abbey Tax on March 8, 2017
Posted in: Budgets. Tagged: , , , , , , .

Spreadsheet Phil delivered a bitter pill to the self-employed in the last ever spring budget today, increasing Class 4 National Insurance Contributions (NICs) to raise an extra £145m a year by 2021/22. In a budget heavy on gags but light on content, the Chancellor welcomed a better than expected growth and borrowing outlook and offered some respite to the planned business rate revaluations.

Tax and duty

  • The personal allowance will increase to £11,500 in 2017/18 as previously announced and up to £12,500 before the end of the Parliament.
  • The higher rate tax threshold will rise to £45,000 in 2017/18 and up to £50,000 by the end of this Parliament.
  • Corporation tax will still be cut to 17% by 2020.
  • On 8 March 2017, at 6pm, duty rates on all tobacco products will increase by 2% above RPI inflation.
  • From 13 March 2017, the duty rates on beer, cider, wine and spirits will increase by RPI inflation.
  • From 1 April 2017, Vehicle Excise Duty rates for cars, vans and motorcycles registered before April 2017 will increase by RPI inflation.
  • From 1 April 2017, the VAT registration threshold will increase from £83,000 to £85,000 and the deregistration threshold from £81,000 to £83,000.
  • From 20 May 2017, a Minimum Excise Tax for cigarettes is going to be introduced. The rate will be set at £268.63 per 1,000 cigarettes.

Changes to Class 4 National Insurance Contributions 

The rate of Class 4 NIC will climb from 9% to 10% in April 2018 and to 11% in April 2019 to reduce the gap in rates paid by the self-employed and employees. The Class 4 rate is levied on profits of more than £8,060 a year. All Class 4 earnings above £43,000 will be taxed at 2%. SCRAPPED ON 15 MARCH 2017

Forecasts

Borrowing

The borrowing forecasts have all been reduced since the Autumn Statement in 2016. The projection for 2016/17 has been reduced by £16.4bn.

Here are the latest estimates:

  • £51.7bn in 2016/17
  • £58.3bn in 2017/18
  • £40.8bn in 2018/19
  • £21.4bn in 2019/20
  • £20.6bn in 2020/21
  • £16.8bn in 2021/22

Britain’s debt now stands at £1.7trn, almost £62,000 for every household in the country. Each year £50bn is spent on interest payments servicing the debt, which is more than is spent on Defence and Policing combined.

Growth

The growth projections have also been revised, with an increase from 1.4% to 2% projected for this year. The forecast is downwards for 2018 to 1.6%, followed by 1.7% in 2019, 1.9% in 2020 and 2% in 2021.

Inflation

Inflation at 2.4% is forecast for 2017, followed by 2.3% in 2018 and 2% in 2019.

Business rates

  • No business losing small business rate relief will see their bill increase next year by more than £50 a month, and the subsequent increases will be capped at either the transitional relief cap or £50 a month, whichever is higher.
  • A £1,000 discount will be given to all pubs with a Rateable Value of less than £100,000.
  • Local authorities will be provided with a £300 million fund to deliver discretionary relief, to target hardship cases in their local areas.

Making Tax Digital

The government has decided to provide 3.1 million small businesses with more time to prepare for Making Tax Digital (MTD).

Businesses that have an annual turnover below the VAT registration threshold will have an extra year before they are required to keep records digitally and send HMRC quarterly updates. The extra 12 months will cost the Treasury £280 million.

Those businesses trading above the VAT threshold will still be required to keep digital records and send HMRC quarterly updates from April 2018.

The exemption threshold for MTD remains at £10,000.

Other headlines

  • The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018, to reduce the tax differential between the self-employed and employed, and those working through a company.
  • The government will amend legislation to ensure that all profits realised by offshore property developers developing land in the UK, including those on pre-existing contracts, are subject to tax, with effect from 8 March 2017.
  • To ensure that the State Pension remains sustainable and fair across generations, the government is carrying out the first statutory review of the State Pension age. A review will be published by 7 May 2017.
  • The government will shortly be rolling out Tax-Free Childcare for working families with children under 12, providing up to £2,000 a year for each child to help with childcare costs. From September 2017, the free childcare offer will double, from 15 to 30 hours a week for working families with 3 and 4 year olds in England, in total worth up to £5,000 for each child.
  • The NS&I Investment Bond announced at Autumn Statement 2016 will offer a rate of 2.2% over a term of 3 years and will be available for 12 months from April 2017. The Bond will be open to everyone aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000.

Consultations

From spring 2018, a Spring Statement will respond to the Office of Budget Responsibility’s forecasts and will provide the opportunity to launch consultations on future reforms.

This budget has begun to adopt that approach with several consultations announced. These include:

  • Taxation of benefits in kind – the government will publish a call for evidence on exemptions and valuation methodology for the income tax and employer NICs treatment of benefits in kind, in order to better understand whether their use in the tax system can be made fairer and more consistent.
  • Accommodation benefits – a consultation will be published with proposals to bring the tax treatment of employer-provided accommodation and board and lodgings up to date. This will include proposals for when accommodation should be exempt from tax and to support taxpayers during any transition.
  • Rent-a room relief – the government will consult on proposals to redesign rent-a-room relief, to ensure it is better targeted to support longer-term lettings. This will align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings.
  • Alcohol – the government will consult on introducing a new duty band for still cider just below 7.5% abv to target white ciders and the impact of introducing a new duty band for still wine and made-wines between 5.5% and 8.5% abv.
  • Large business risk review – HMRC will work with businesses and interested parties to consult over the summer on its process for risk profiling large businesses and promoting stronger compliance.

Avoidance and evasion

Since 2010, HMRC has secured around £140 billion in additional tax revenue through tackling avoidance, evasion and non-compliance, with further action planned.

Promoters of Tax Avoidance Schemes (POTAS) – New legislation will ensure that promoters of tax avoidance schemes cannot circumvent the POTAS regime by re-organising their business by either sharing control of a promoting business, or putting a person or persons between themselves and the promoting business. This will ensure that HMRC can apply the POTAS regime as intended.

Strengthening tax avoidance sanctions and deterrents – As announced during Autumn Statement 2016, the government will introduce a new penalty for a person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC. The government will also remove the defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for a person or business that uses such arrangements.

Image rights – The government is aware that some employers pay image rights in respect of employees under separate contractual arrangements to employment income. HMRC will publish guidelines for employers who make payments of image rights to their employees to improve the clarity of the existing rules.

Employment Allowance – HMRC is actively monitoring National Insurance Employment Allowance compliance following reports of some businesses using avoidance schemes to avoid paying the correct amount of NICs.

Author: Guy Smith – Head of Technical Research

E mail: g.smith@abbeytax.co.uk

 

Budget 2016 – Bullet point headlines

Posted by Abbey Tax on March 16, 2016
Posted in: Budgets. Tagged: , , , , .

Allowances and Rate Bands

  • The Personal Allowance will increase from £11,000 in 2016/17 to £11,500 in 2017/18.
  • The Basic Rate Limit will increase from £32,000 in 2016/17 to £33,500 in 2017/18.
  • The Higher Rate Threshold will increase from £43,000 in 2016/17 to £45,000 in 2017/18.
  • From 1 April 2016, the VAT registration threshold will increase from £82,000 to £83,000. The deregistration threshold will increase to £81,000.

Capital Gains Tax

  • With effect from 6 April 2016, the current rates of 28% and 18% are to be reduced to 20% and 10% respectively, except in relation to chargeable gains accruing on the disposal of residential property not qualifying for private residence relief and carried interest.

Class 2 National Insurance Contributions

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

Corporation Tax

  • The Corporation Tax rate will fall to 17% from 1 April 2020.

Duties

  • Fuel duty has been frozen.
  • The duty on beer, spirits and most ciders has been frozen. The duty on most wines and higher strength cider will increase by RPI from 21 March 2016.
  • Duty rates on all tobacco products will increase by 2% above RPI from 6pm on 16 March 2016. £31m is going to be invested in a new group of Border Force and intelligence officers, who will specialise in seizures of illicit tobacco being smuggled into the UK.

HMRC Customer Service

  • £71m is going to be invested to make it quicker and easier for individuals and small businesses to deal with HMRC. A new secure email service, phone lines and Webchat, open 7 days a week, are promised from April 2017.

Insolvency Analytics

  • HMRC’s predictive analytics capability is going to be developed to identify emerging insolvency risk, enabling targeted debt recovery action to minimise losses before taxpayers become insolvent.

Insurance Premium Tax

  • The standard rate will increase from 9.5% to 10% with effect from 1 October 2016.

ISAs

  • The overall annual limit will rise from £15,000 to £20,000 from 6 April 2017.
  • A new Lifetime ISA will be available from April 2017 for adults under the age of 40. They will be able to contribute £4,000 per year and receive a 25% bonus from the government. Funds can be used to buy a first home from 12 months after the account opening and be withdrawn from the age of 60.

Making Tax Digital

  • From 2018, businesses, self-employed people and landlords who are keeping records digitally and providing regular digital updates to HMRC will be able to adopt pay-as-you-go tax payments.

Soft drinks sugar tax levy

  • The levy will be charged from April 2018 on volumes according to total sugar content, with a main rate charge for drink above 5 grams of sugar per 100 millilitres and a higher rate for drinks with more than 8 grams of sugar per 100 millilitres.

Tax Allowances for the sharing economy

  • From April 2017, there will be two new tax-free £1,000 allowances – one for occasionally selling goods or providing services, and one for income from property. People who earn up to £1,000 from occasional work will no longer need to pay tax on that income. The first £1,000 of income from property, such as from renting a driveway, will also be tax-free.

Tax Avoidance and Evasion

  • HMRC’s yield target has increased to £27bn for 2016/17.
  • Summer consultations are going to take place to tackle the Hidden Economy. These will involve discussion surrounding new powers for HMRC to gather data held by Money Service Businesses, the principle of making access to licences or services for businesses conditional on them being registered for tax and, finally, on sanctions for those who repeatedly and deliberately participate in the Hidden Economy.
  • New legislation will allow HMRC to raise an assessment of a person’s Income Tax or Capital Gains Tax liability without them first being required to file a Tax Return, where it holds sufficient information about that individual to make the assessment.

Author: Guy Smith, Tax Investigations Manager

Email: contact@abbeytax.co.uk

Summer Budget 2015 – key points

Posted by Abbey Tax on July 8, 2015
Posted in: Budgets, Tax Avoidance, Tax Evasion. Tagged: , .

George Osborne promised a big Budget and he certainly delivered on the volume, with a raft of substantive tax changes and policy announcements.

Here are the headlines:

Tax rates

  • The personal allowance will rise to £11,000 in 2016/17 and £11,200 in 2017/18.
  • The 40% higher rate threshold will rise to £43,000 in 2016/17 and £43,600 in 2017/18.
  • Corporation tax will drop from 20% to 19% in 2017 and fall again to 18% in 2020.
  • Income tax rates remain unchanged.

Legislation is going to be brought in which sets a ‘tax lock’ on the main rates of income tax, standard and reduced rates of VAT and employer and employee NIC rates, to ensure they cannot rise above their 2015/16 level.

Inheritance tax

  • The inheritance tax nil-rate band of £325,000 will remain frozen until April 2021.
  • An additional nil-rate band is to be introduced when a residence is passed on death to direct descendants. This rate will be £100,000 in 2017/18, £125,000 in 2018/19, £150,000 in 2019/20 and £175,000 in 2020/21.
  • From April 2017, inheritance tax will be payable on all UK residential property owned by non-domiciles, regardless of their residence status for tax purposes, including property held indirectly through an offshore structure.
  • Individuals, who are born in the UK to parents who are domiciled here, will no longer be able to claim non-domicile status whilst they are resident in the UK.

From April 2017 anybody who has been resident in the UK for more than 15 of the past 20 tax years will be deemed to be domiciled in the UK for tax purposes.

Insurance premium tax

  • From 1 November 2015, the standard rate of IPT will go up from 6% to 9.5%. From this date all premiums received by insurers using the IPT cash accounting scheme will be charged at 9.5%.
  • For insurers using the special accounting scheme, there will be a 4 month concessionary period that will begin on 1 November 2015 and end on 29 February 2016, during which premiums received that relate to policies entered into before 1 November 2015 will continue to be liable at 6%.
  • From 1 March 2016 all premiums received by insurers will be taxed at the new rate of 9.5%, regardless of when the policy was entered into.

Property

  • Rent-a-room relief will increase to £7,500 from £4,250, with effect from April 2016.
  • The Wear and Tear Allowance which has been available to landlords to claim, regardless of whether they actually replaced furnishings, will be succeeded by a new relief. The relief will allow a deduction for the actual costs when furnishings are replaced. Again this change becomes effective from April 2016.
  • Landlords will no longer be able to deduct all of their finance costs, such as mortgage interest, from their property income. Instead, they will receive a basic rate deduction from their income tax liability. This change will be introduced gradually from 6 April 2017.
  • In 2017/18 the deduction from property income will be restricted to 75% of the finance costs, with the remaining 25% being available as a basic rate tax reduction.
  • In 2018/19, 50% of the finance costs will be allowed as a deduction and 50% given as a basic rate tax reduction. In 2019/20, the rates are 25% and 75% respectively, before all financing costs incurred by landlords are given as a basic rate tax reduction from 2020/21.

Tax Avoidance and Evasion

  • The government is going to invest £800m to support HMRC’s work on non-compliance and tax evasion over the course of this Parliament.
  • £300m is to allow HMRC to tackle non-compliance by small and mid-sized businesses, public bodies and affluent individuals.
  • £60m is to enable HMRC to step up criminal investigations into serious and complex crime, particularly focused on wealthy individuals and corporate entities.
  • £36m is to tackle non-compliance by trusts, pension schemes and non-domiciled individuals.
  • HMRC is to extend its Customer Relationship Model to target individuals with a net worth of between £10-£20m. The government also intends to consult on enhancing the information reported to HMRC by wealthy individuals and trustees.
  • Large business compliance work is going to be widened, with a consultation launched to consider new measures to increase transparency in relation to large business tax strategies. These measures will include the introduction of a regime to tackle businesses that persistently adopt highly aggressive behaviour surrounding tax planning arrangements.
  • Legislation will be introduced in Finance Bill 2016, following a consultation, to target serial avoiders who repeatedly enter into tax avoidance schemes which are defeated.
  • HMRC’s powers are to be extended to acquire data from online intermediaries and electronic payment providers to find those operating in the hidden economy.
  • A new digital disclosure channel is going to be created to make it simpler for taxpayers to disclose unpaid tax liabilities.

Coming soon

  • The government will legislate to require financial intermediaries, including tax advisers, to notify their clients about the Common Reporting Standard, the penalties for evasion and the opportunities to disclose.
  • A consultation will start this autumn to consider abolishing Class 2 NIC and reforming Class 4 NIC for the self-employed.
  • A roadmap will be published before the end of the year showing how the government will transform tax administration for individuals and small businesses over the course of this Parliament.
  • Another roadmap will follow by April 2016, setting out the government’s plans for business taxes over the rest of the Parliament.

Author: Guy Smith, Tax Investigations Manager

Contact: contact@abbeytax.co.uk

Budget 2014: Duties

Posted by Abbey Tax on March 19, 2014
Posted in: Budgets. Tagged: , , , , , , .

Budget headlines at-a-glance

Air passenger

  • From 1 April 2015, the number of destination bands are going to be reduced from four to two, resulting in long haul flights being charged duty at a lower rate. For example, a family of four visiting relatives in the Caribbean or India, flying in economy class, will pay £56 less in duty.

Alcohol

  • From 24 March 2014, beer duty will be cut by 1p a pint.
  • The duty on spirits and ordinary cider will be frozen for 2014/15.
  • From 24 March 2014, the duty rates for wine and sparkling cider exceeding 5.5% in strength will be increased by the rate of inflation, based on the Retail Price Index (RPI). This means an increase of 8p to the price of high strength sparkling cider and 6p to the price of a bottle of wine.

Bingo

  • The rate of bingo duty will be reduced in half to 10%.

Fuel

  • The fuel duty rise planned for this September will not happen.

Machine games

  • From 1 March 2015, a new 25% rate of duty will be due on the net takings from gaming machines where the charge payable for playing can exceed £5. This is expected to impact on bookmakers and casinos.

Tobacco

  • From 6pm today, duty will rise by 2% above inflation adding 24p to the price of 20 cigarettes, 8p to the price of a pack of five small cigars, 23p to the price of a 25g pouch of hand-rolling tobacco and 13p to the price of a 25g pouch of pipe tobacco.
  • Duty will continue to rise at 2% above the rate of inflation (based on RPI) for each year up to and including 2019/20.

Author: Guy Smith, Senior Tax Consultant on the ReSource Tax & VAT Consultancy Team.

E mail: contact@abbeytax.co.uk

Budget 2014: Personal allowances and tax rates

Posted by Abbey Tax on March 19, 2014
Posted in: Budgets. Tagged: , , , , .

Budget headlines at-a-glance

Personal Allowance

  • From April 2014, the tax free personal allowance will be increased to £10,000 a year.
  • From April 2015, the allowance will rise to £10,500 a year.

Married Couples Allowance

  • From April 2015 spouses and civil partners can transfer 10% of their personal allowance to each other, which means £1,050 in 2015/16.
  • To be eligible to make or receive the transfer, neither party must be liable to tax at the higher or additional rate.

40% rate band

  • From April 2014, the threshold for the 40% rate band will rise to £41,865.
  • From April 2015, the threshold will rise to £42,285.

Savings rate

  • From April 2015, the starting rate of tax for savings income will be reduced from 10% to nil.
  • The maximum amount of taxable savings income that can be eligible will rise to £5,000.
  • This means that anyone with total income of less than £15,500 per annum will no longer pay any tax on their savings income.

ISA limits

  • From 1 July 2014, cash and shares ISAs are to be merged into a New ISA – NISA – with an annual tax-free savings limit of £15,000. Savers will now have complete flexibility over the cash and shares mix within the overall limit of £15,000.

Premium Bonds

  • From 1 June 2014, the cap on Premium Bonds will rise from £30,000 to £40,000, increasing further to £50,000 in 2015/16.
  • From August 2014, two £1 million prizes per month will be on offer, instead of the current one.

Author: Guy Smith, Senior Tax Consultant on the ReSource Tax & VAT Consultancy Team.

E mail: contact@abbeytax.co.uk