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 - March 2017


Welcome to the March tax newsletter which includes a brief report on the budget and year end planning. These newsletters are designed to keep you informed of the latest tax issues.

Please contact us if you need further information on any of the topics covered.

Peter McDaid CTA ATT TEP
Director


Budget 2017

ABORTIVE ATTACK ON THE SELF EMPLOYED

The Chancellor announced that Class 4 national insurance (NICs) currently at 9% will increase to 10% from 06 April 2018 and to 11% from 06 April 2019. This broke an election promise by the Tory party and after a great outcry he has bowed to pressure and carried out a very public and humiliating U Turn. This has been cancelled.

TAX FREE DIVIDEND ALLOWANCE

The Chancellor also announced measures to limit the rise in tax-driven incorporation. The £5,000 tax free dividend allowance will be reduced to just £2,000 from 6 April 2018.

Currently, once the dividend allowance has been used the remaining dividends are taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate. There are rumours that these dividend rates may also be increased in future years.

CORPORATION TAX RATES

The current corporation tax rate Is 20% and It has been announced that the corporation tax rate will be reduced to 19% from 1 April 2017 and then to 17% from 1 April 2020.

NEW VAT LIMITS

The VAT registration limit increases by £2,000 to £85,000 from 1 April 2017. At the same time the de-registration limit increases to £83,000.

BUSINESS RATES RELIEF FOR SMALL BUSINESSES

There has been much lobbying from the small business sector to reduce business rates. The Chancellor stated that 600,000 small businesses currently benefit from small business rates relief. He also announced that no small business that is coming out of small business rates relief will pay more than £600 more in business rates this year than they did in 2016/17. In order to support the licensed trade, from April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.

START OF DIGITAL REPORTING DELAYED FOR SMALLER BUSINESSES

The Government is committed to the "Making Tax Digital" (MTD) project which is scheduled to start in April 2018 with the first quarterly updates being submitted by the self-employed and property landlords in July 2018. Many business owners, professional advisors and the Treasury select committee had expressed concerns about the timescale for the introduction of MTD. The Chancellor announced that there will be a one year deferral in the start date to 2019 for self-employed businesses and property landlords with gross income below the VAT registration limit.

TAX FREE CHILDCARE SCHEME STARTS 2017

The chancellor announced that the new tax-free childcare scheme is due to start in 2017. The scheme will provide up to £2,000 a year in childcare support for each child under 12 where the parents save in a special account. If they save £8,000 the government will top up the account with 20% to a total of £10,000 which can then be used to pay for childcare costs.





YEAR END PLANNING

DON’T LOSE YOUR PERSONAL ALLOWANCE!

For every £2 that your adjusted net income exceeds £100,000, the £11,000 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

The restriction applies between £100,000 and £122,000 adjusted net income. Another way that you could avoid this trap would be to agree with your employer to sacrifice some of your salary in exchange for a tax-free benefit in kind. These rules are changing from 6 April 2017 but employer pension contributions and childcare vouchers will continue to be effective.

YEAR END CAPITAL TAX PLANNING

Have you used your 2016/17 £11,100 annual capital gains exemption? Consider selling shares where the gain is less than £11,100 before 6 April 2017. Also, if you have any worthless shares, consider a negligible value claim to establish a capital loss. As far as inheritance tax (IHT) planning is concerned, all individuals have a £3,000 annual allowance which means that gifts up to that amount each year are exempt from IHT. If you haven’t used your £3,000 allowance from 2015/16 you can make gifts of up to £6,000 without the gift being liable to IHT.

CONSIDER OTHER TAX EFFICIENT INVESTMENTS

If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme (EIS)? These investments in certain qualifying companies allow you to set off 30% of the amount invested against your tax bill as well as capital gains tax (CGT) deferral. An even more generous tax break is available for investment in a qualifying Seed EIS company where income tax relief at 50 per cent is available.

In addition, it is possible to obtain relief against your 2016/17 capital gains. Both EIS and Seed EIS also provide a CGT exemption when the shares themselves are sold after three years. A 30% income tax break is also available by investing in a Venture Capital Trust.

BUY NEW EQUIPMENT BEFORE 6 APRIL?

If you are running a business and making up accounts to 5 April, consider buying plant and machinery to take advantage of the Annual Investment Allowance (AIA) of £200,000. The AIA provides a 100% tax write off for equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems. There is also 100% tax relief if you buy a new car that emits no more than 95g CO2 per kilometre and an increasing number of cars now fall below that limit.

HAVE YOU USED YOUR 2016/17 ISA ALLOWANCE?

Your maximum annual investment in ISAs for 2016/17 is £15,240. Your investment needs to be made before 6 April 2017. In addition, have you thought about investing for your children or grandchildren by setting up a Junior ISA? In the 2016/17 tax year, you can invest £4,080 into a Junior ISA for any child under 18.




TAX DATES AND PAYMENTS


Date What's Due
1st April Corporation tax payment for year to 30/06/16 (unless quarterly instalments apply).
5th April End of 2016/2017 tax year. Many tax actions need to be taken by this date (see above).
19th April PAYE & NIC deductions, and CIS return and tax, for month to 05/04/2017 (due 22 April if you pay electronically).
1st May Corporation tax payment for year to 31/07/16 (unless quarterly instalments apply).