Tag Archives: Government

Autumn Statement 2014 Review

So you would all have seen some sort of media coverage of the Chancellors Autumn Statement but most of what is in the press is just the headline grabbing key items.  In fact as usual there was a vast array of tax areas covered.  A lot, in fact most, of the changes do not affect the majority of people hence you won’t have seen them mentioned in the press.

Here’s my review of the main topics that will cover most of you and the topics that will cover at least one of my clients but there was much more.

If there are any areas that anyone wants me to elaborate on please email me directly.

Income Tax        

The Personal Allowance for 2015/16 will increase to £10,600.

As this exceeds the age allowance this will apply to everyone born after 6 April 1938.

The Personal Allowance for those born before 6 April 1938 will be £10,660.  As this is only £60 more than the standard personal allowance, those whose income exceeds £27,700 will only lose £60 from the age allowance write down.

20% rate band increases to £31,785 meaning the 40% rate band starts at earnings from £42,385, a much needed increase.  Threshold for the 45% rate band remains at £150,000.

National Insurance

No rate changes for Class 1 & Class 4 but the upper earnings limit has been bought into line with the 40% income tax threshold of £42,385.

The rates for Class 2 & Class 3 will be increased.

Class 2 will be bought into the self assessment tax system and be paid with your tax bill from 2015/16 so no more monthly or quarterly direct debits for the self employed.

Employers will not have to pay secondary Class 1 NIC on the pay of employees under the age of 21 years unless they earn over £815 per week.  This is extended to apprentices under 25 years old.

Extension to the £2000 employment allowance which reduces employers secondary Class 1 contributions.  This will now also include domestic care and support workers.

Pensions

Abolition of the 55% charge on death.

  • When an individual dies before age 75, the pension fund may pass tax free to the nominated beneficiary.
  • When an individual dies over the age of 75, the pension fund, when withdrawn, will be taxed at the beneficiary’s marginal rate of income tax or 45% if taken as a lump sum.

This is extended to Annuities as well.

Overseas Matters

The proposal to restrict the personal allowance to non residents has been delayed until at least 2017.

Non-domiciliary  Remittance Basis Charge (RBC)

Resident in the UK but not domiciled here for:

  •    7 out of last 9 years – charge £30,000 per yr unchanged
  •  12 out of last 14 years –charge now £60,000 per yr
  •  17 out of last 20 years – charge now £90,000 per yr

Property Owners

Stamp Duty Land Tax on residential property has been reformed.  Before if you were buying a property which falls into the 3% bracket you would have to pay 3% on the whole value, now you just pay the appropriate % on the value over each threshold.  Rates as follows:

  • Upto £125,000                                 0%
  • £125,001 to £250,000                      2%
  • £250,001 to £925,000                      5%
  • £925,001 to £1.5m                         10%
  • £1.5m +                                          12%

Annual tax on enveloped dwellings (ATED)

Came into effect in 2013 and has raised 5 times more revenue than the government expected.

Applies to properties owned by ‘non-natural persons’ ie companies.  These businesses are structured in a way to avoid paying Stamp Duty on purchased and/or Capital Gains Tax on sale.  The ATED charge fills this gap.  Rates as follows:

  • Properties worth £2m to £5m       – charge £23,350
  • Properties worth £5m to £10m     – charge £54,450
  • Properties worth £10m to £20m   – charge £109,050
  • Properties worth £20m+                – charge £218,200

Business Owners

Intangible assets transferred on incorporation.  2 measures bought in to reduce the amount of tax relief available on incorporation of a business.

  • Entrepreneur’s relief will not be available on the disposal of goodwill where an individual or partnership incorporates their trade.
  • Corporation Tax relief is restricted on internally generated goodwill and customer-related intangible assets acquired from a related party on incorporation.

Employees

Simplification of expenses and benefits system.

Business Rates

The current doubling of Small Business Rate Relief will continue as will the 2% cap on the multiplier.

Shops, pubs, cafes & restaurants with a rateable value of less than £50,000 will see their current £1000 discount rise to £1500 pa.

Corporation Tax

The main rate will be bought into line with the small profits rate – both will be 20% from 2015/16.

Capital Gains Tax

Threshold increases to £11,100 for 2015/16

Inheritance Tax

No changes, it’s expected the current nil rate band will stay frozen until at least 2018/19.

ISAs

The annual savings allowance will increase to £15,240, currently £15,000.

ISAs are currently exempt from inheritance tax if passing to a surviving spouse but are taxable in the hands of the spouse.  Now the spouse will receive a tax free allowance to cover the ISA amount so no income or capital gains tax will be payable.

Travel Expenses for Local Authority Councillors

Mileage allowance will now be capped at the Approved Mileage Allowance Payment rates.

Peer to Peer Lending

Growing in popularity due to various new websites

New relief to offset losses from bad debts against other P2P profits.

Other

Numerous other areas which have had some reform, if you want to know more please contact me.

  • Non tax-advantaged share schemes
  • Anti-Avoidance, Fee income on fund managers
  • Special Purpose Share Schemes
  • Miscellaneous Loss Relief
  • General anti-abuse rule (GAAR)
  • Serial tax avoiders
  • Offshore tax penalties – now 200%
  • Disclosure of tax avoidance schemes (DOTAS)
  • Venture Capital schemes
  • High risk promoters
  • HMRC direct recovery of debts and the power to close aspects of an enquiry.
  • Research and Development relief schemes

VAT

VAT on Prompt Payment Discounts – you normally calculate vat assuming customer will take the prompt payment discount.  Now you will have to account for vat on the amount actually paid so will have to re-invoice for the extra vat if discount wasn’t taken.

VAT refunds for search & rescue and air ambulance charities, hospices, various government departments and the Highways Agency which will shortly be replaced by a government owned company.

Air Passenger Duty exemption for under 12 year olds, extending to 16 year olds in 2016.

Fuel duty of 7.9p per litre put on Aqua Methanol.

 

Data from Tolley via Association of Accounting Technicians

Picture courtesy of Unsplash

Autumn

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New Annual Tax Statements

So October is just a handful of days away, and this October not only allows us to throw our car tax discs away but for some of you lucky folk October also brings you the New Annual Tax Statement.

One of the Coalitions promises back in 2010 was that every tax payer would be sent a statement of their tax position, including National Insurance and where the money is spent. Four years on and they are nearly here – but not for everyone.

Initially the statements will only cover your tax position for 2012/13 and will only go out to those paying tax under self assessment and are registered for HMRCs online services; or if you pay PAYE and receive a P2 Notice of Coding or a P800 tax calculation.

If you do receive one of these you don’t need to do anything with it, as it’s just for information purposes but it would be good to check through it.

One very handy use for this statement will be to check your NI contributions. There are new State Pension rules coming into effect in April 2016 and to receive the full State Pension you need to have paid the correct amount of NI contributions for 35 years. You will be able to check that you have paid enough with these statements.

We await their arrival!!

tax disc

Funny Tax Laws from around the world

A collection of amusing tax laws, past and present.

Peter the Great introduced a beard tax. Any Russian wanting to remain beardy had to pay an annual amount and was issued with a beard token which he had to carry with him in public to prove he had paid.

Roman Emperor Nero introduced a tax on the collection of urine. Back then it was used to prepare animal skins – and you thought today’s taxman was taking the piss!

In Canada children’s breakfast cereal is tax exempt if it includes a free toy. The free toy must not be beer, liquor or wine – yes, they actually thought they needed to clarify that, imagine Coco Pops with a free beer toy!!

In Sweden there is a tax for naming your baby something that is not already in use. It is also applied to the misspelling of names and names like ‘Apple’ regardless of income, status and tax bracket.

Scaredy-cat tax was introduced by Henry I for English knights that didn’t want to go to war. It was originally very low and meant as a deterrent but King John later raised it by 300% and even collected it when not at war. This led to the formation of the Magna Carter.

In 1988 a stripper in the US called ‘Chesty Love’ successfully claimed her boob job as a business expense. This paved the way for anyone in the adult entertainment industry to claim cosmetic surgery expenses if it would lead to more work.

In UK tax law biscuits and cakes are deemed necessities and are exempt VAT but cover biscuits jaffacakein chocolate and they are luxuries that have 20% vat added to them. So Jaffa Cakes – are they biscuits or cakes? McVities invented them and they make biscuits so they were forced to go a tribunal and prove they are cakes – they won so they are non vatable chocolate covered cakes.

In the Netherlands tax deductions are allowed on training in magic and witchcraft after an actress claimed £1500 tax relief for a year long course in potion making, spell casting & crystal ball reading.

Cow Flatulence Tax – This is a new tax being introduced in EU countries. Cow farts cause 18% of global warming. Large clouds of methane hang in the air over slaughter houses where they store thousands of cows causing negative effects on air quality. Ireland tax $18 per cow while Denmark charges $110.

Late Payments

Late payers are never good for business. They can cause huge problems for companies cash flow and for the self employed it can make the difference between you being able to pay your mortgage or not.

Late payment legislation for business to business transactions was updated in March 2013 to implement a European Directive to simplify the procedures across the EU. This legislation is not just for Limited companies, it is for all businesses so here’s what you can do.

Payment Terms

It is always best practice to agree payment terms with a client before commencing work, however this is not always possible and now you don’t have to.

Unless agreed otherwise a payment is late if not paid after 60 days for business to business or 30 days for business to public sector transactions.

Charging Interest on Late Payments

You can charge statutory interest at 8% above the Bank of England base rate. If the debt becomes late in the 1st 6 months of the year you use the base rate issued on 31st December, the 2nd 6 months of the year use the base rate issued at 30th June. It’s currently 0.5% so you can charge 8.5%.

Calculating Late Payment Interest

Use the following formula:

Debt x Interest rate % x number of days late ÷ 365 =

Additional Charges

Fixed fees can be added to the debt

  •         £40 for debts up to £999.99
  •         £70 for debts from £1000 to £9999.99
  •         £100 for debts of £10k and above

If your costs for chasing your payment are more than the fixed fees above, you can claim the extra expense as ‘reasonable costs’ so you should never be out of pocket.Paid-stamp

References & more detailed guidance can be found:

  • Directive 2011/7/EU on combating late payment in commercial transactions.
  • Dept for Business Innovation and Skills.
  • Base Rates found on Bank of England Website.

Where Exactly Does Your Tax Money Go

 

So I guess I should be doing a blog about the budget but there really wasn’t much in it that you wouldn’t already know about, so I thought I’d share something I saw in an accounting magazine the other day which I thought was interesting.

You can check this out yourself at http://wheredoesmymoneygo.org/ click on The Daily Bread then move the slider to how much you earn and it tells you where every penny of tax you pay gets spent.

Apparently the average full time UK worker pays £11,019 of tax per year or £30.18 a day.

Of that £30.18 the NHS receives the biggest portion at £7.36, that’s a lot more than the premiums for a private scheme would cost the average person.

Pensioners get £5.12 of the average tax payer’s daily wages which represents by far the biggest cost in the Social Security budget.  By comparison the sick & disabled get £2.10, families & children get £1.31 and unemployed people get 53p.

£2.56 goes on paying interest on the UK’s spiralling debt.

£1.93 goes on education.

 

Average Joe then pays £1.03 to top level government which is more than goes to front line services that only get 72p for transport, 27p for police and a meager 2p for fire services.

Other interesting beneficiaries are:

  • Defence £2.06
  • Overseas Aid 38p
  • Environment 29p
  • Sports & recreation 9p
  • Prisons 28p
  • Courts 40p
  • Media 23p !?!? – and the fire service only get 2p

Which still leaves £3.50 that goes to a multitude of other places such as Health & Safety, Research, Community Admin and the EU.

Interesting.