Abbey

Chartered Tax Advisers
Old Bishops' College
Churchgate
Cheshunt
Hertfordshire
EN8 9XP

T: 01992 642024

E: abbey@abbeyaccountants.com

Smiling businessmen and women

  TAX E-NEWS - April 2016


Welcome to our monthly tax newsletter designed to keep you informed of the latest tax issues. In this issue we focus on some of the tax changes announced in the March 2016 Budget and other measures taking effect from 6 April 2016.

We hope you enjoy reading the newsletter and remember we are here to help you so please contact us if you need further information on any of the topics covered.

Peter McDaid CTA ATT TEP
Director

PERSONAL ALLOWANCES


The personal allowance for 2016/17 will be £11,000. The March Budget announced that this will increase to £11,500 for 2017/18. Please remember that if your taxable income exceeds £100,000 the personal allowance is reduced by £1 for every £2 over £100,000 giving an effective rate of 60% on income between £100,000 and £122,000 for 2016/17.

INCOME TAX BANDS

The 20% basic rate band for 2016/17 will be £32,000 and for 2017/18 it was announced that this will be £33,500. This means that you will pay 40% tax if your taxable income exceeds £43,000 for 2016/17 and the threshold will be £45,000 for 2017/18. The 45% top rate continues to apply to taxable income over £150,000 for 2016/17.

£1,000 SAVINGS INCOME TAX FREE 2016/17

From April 2016, a tax-free allowance of £1,000 (or £500 for higher rate taxpayers) will be introduced for the interest that people earn on savings. If they are a basic rate taxpayer and have a total income up to £43,000 a year, they will be eligible for the £1,000 tax-free savings allowance. If they are a higher rate taxpayer and earn between £43,000 and £150,000, they will be eligible for a £500 tax-free savings allowance, but those with income in excess of £150,000 a year will be taxed in full on their interest income.

As a result of these changes banks and building societies will pay interest gross from 6 April 2016.

NEW DIVIDEND RULES START 6 APRIL 2016

As covered in previous newsletters, from 6 April 2016 there is an across the board increase in tax on dividends of 7.5%. The first £5,000 of dividends received will be taxed at 0%. Any excess of dividends above this figure will be subject to tax. This means that basic rate taxpayers will pay 7.5% tax on dividend income, higher rate taxpayers 32.5% and additional rate taxpayers 38.1%.

Also as from 6 April 2016 dividends will no longer carry with them a 10% notional credit. This means that unlike previous years, for 2016/2017 it is the amount of dividend that is actually received which is added to a taxpayers income and which tax is calculated on.

TAX ON LOANS TO DIRECTORS/SHAREHOLDERS

Where a company, which is controlled by its directors or by 5 or fewer shareholders, makes a loan to one of those persons, the company is required to pay an extra corporation tax charge. From the 6 April 2016 the rate of this tax charge increases from 25% to 32.5% in line with the dividend rate for higher rate taxpayers.

This tax charge is not payable if the loan is cleared within 9 months of the end of the accounting period.

If the loan is not cleared within this time limit the tax charge is payable but can be reclaimed from HM Revenue and Customs when the loan is repaid. However, there can be a lengthy delay in recovering this tax charge as it will not be recoverable until 9 months after the end of the accounting period in which the loan has been repaid.

CAPITAL TAX RATES

An unexpected announcement was a reduction in the rate of capital gains tax (CGT) from 6 April 2016 down from 18% to 10% for basic rate taxpayers and 28% down to 20% for higher rate taxpayers.

However, gains made on disposals of buy-to-let properties and second homes will still be subject to the old rates of CGT rate of 18% and 28%.


ENTREPRENEURS’ CGT RELIEF

Entrepreneurs’ relief (ER) will be extended to external investors in unlisted trading companies. This new investors’ relief will apply a 10% rate of CGT to gains accruing on the disposal of ordinary shares held by individuals. These shares must be subscribed for by the claimant and acquired for new consideration on or after 17 March 2016. The shares must have been held for a period of at least three years starting from 6 April 2016 and there will be a lifetime cap of £10 million.

FURTHER CHANGES TO ISAs

The current £15,240 ISA limit and £4,080 Junior ISA limit is frozen for 2016/17. The Chancellor announced that the ISA allowance will increase to £20,000 from 6 April 2017 and that from the same date there will be a new “Lifetime ISA” account where investors aged between 18 and 40 who save up to £4,000 a year will have 25% (up to £1,000) added by the government. Those who have been saving in the new “Help to Buy” ISA will be able to transfer their savings to this new account and use the savings to help them buy their first home or use them to provide an additional pension.

SDLT CHANGES

The rules for calculating the Stamp Duty Land Tax (SDLT) charged on purchases of non-residential properties and transactions involving a mixture of residential and non-residential properties changed with effect from Budget Day to bring them more into line with the mechanism for charging SDLT on residential property. On and after 17 March 2016, SDLT will be charged at each rate on the portion of the purchase price which falls within each rate band. The new rates and thresholds for freehold purchases and leases premiums are:

Purchase price

SDLT rate,  cumulative

Up to £150,000

NIL                           NIL

£150,001 - £250,000

2%                      £2,000

£250,001 and over

5%          (no maximum)


Note also that the additional 3% SDLT charge on additional residences commences on 1 April 2016.

VAT REGISTRATION LIMIT £83,000

The VAT registration limit has been increased by £1,000 to £83,000 from 1 April 2016. The de-registration limit also increased by £1,000 to £81,000.

NON TAX - EMPLOYERS INSURANCE

We have a number of husband and wife owned companies i.e. where they are both the only directors and shareholders of their own company and normally have no other employees. It has come to our attention that there is a requirement for them to have employers liability insurance.

Even if only one of the directors is paid a salary, and the other is not, the second director falls into the definition of an employee within insurance law and triggers this requirement.

We strongly suggest that you review the position and take advice as failure to comply could result in a fine of £2,500.

TAX DATES AND PAYMENTS


Date What's Due
19 April

Final RTI FPS due by this date. Indicate that this is the Final Submission for the Tax Year

19 April PAYE & NIC deductions, and CIS return and tax for month to 05/04/2016 (due 22 April if you pay electronically).
1 May Corporation tax for year to 31/07/15
19 May PAYE & NIC deductions, and CIS return and tax for month to 05/05/2016 (due 22 May if you pay electronically).