Thursday 9 March 2017
— Jennifer Williamson BSc (Hons) ACA
Accounts, Tax and Outsourcing Partner
Corporation tax
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• Example – Profits of £500,000
Year 2010/11… 2016/17 2017/18 2020/21
Main rate of
Corporation tax
28% 20% 19% 17%
Year 2010/11… 2016/17 2017/18 2020/21
Corporation tax £122,500 £100,000 £95,000 £85,000
Employers
• National living wage £7.50 from April
• £3,000 employment allowance continues
• Apprenticeship Levy from 1 April
– 0.5% charge on employers’ payroll
– Kicks in on payrolls over £3 million
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Levelling the playing field?
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• Increase in Class 4 NI contributions
Earnings* 2016/17
Below £8,060 0%
£8,060 - £43,000 9%
• Class 2 NIC scrapped from 5 April 2018
• Dividend Allowance reduces from £5,000 to £2,000 from 5
April 2018
Over £43,000 2% 2% 2%
2019/20
0%
11%
2018/19
0%
10%
* 16/17 tax bands shown
Example Profits of £100,000
2016/17
Employee Class 1 NIC
Class 4 NIC
Class 2 NIC
Income tax
Corp tax
Company
shareholder /
director
14,570
18,400
32,970
Self employed
4,285
146
29,200
33,631
Employee
5,333
29,200
34,533
Example Profits of £100,000
2019/20
Employee Class 1 NIC
Class 4 NIC
Class 2 NIC
Income tax
Corp tax
Company
shareholder /
director
15,094
17,480
32,574
Self employed
4,983
-
29,200
34,183
Employee
5,333
29,200
34,533
Class 1 NIC £12,688 - -
Levelling the playing field
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• Harder to get capital gains tax
treatment
• Increased penalties for borrowing money from your
company
• Personal service companies assessed to PAYE
Business rates
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• Small Business Rate Relief from 1 April
2017:
• 100% for rateable value < £12,000
• Tapered relief where rateable value
between £12,000 - £15,000
• However, revaluation from 1 April 2017
• Cap on rates increase for businesses losing small
business rate relief
• Local authorities fund to provide targeted relief
Timing is everything
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AIA Main rate Special rate
Capital Allowances £200,000 p.a. 18% 8%
• Limitless 100% relief for “environmentally beneficial” plant &
machinery – www.eca.gov.uk
• Applies to all businesses
Don’t forget… tax relief based on
CO2 emissions
Is your (new) car green?
- From April 18
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Emission Tax relief Full relief after
≤ 75g/km 100% 1 year
76 – 130g/km 18% WDA 15 years
Over 130g/km 8% WDA 31 years
Leased Cars
• ≤ 130g/km no restriction
• > 130g/km 15% restriction
• From 1 April 17 – additional first year RFL levy on new vehicles
Don’t forget… tax relief based on
CO2 emissions
Is your (new) car green?
- From April 18
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• From 1 April 17 – additional first year RFL levy on new vehicles
Emission Tax relief Full relief after
≤ 50g/km 100%(*) 1 year
51 – 110g/km 18% WDA 15 years
Over 110g/km 8% WDA 31 years
Leased Cars
• ≤ 110g/km no restriction
• > 110g/km 15% restriction
Research & development
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SME
Current relief 230%
Repayable credit 14.5%
• Only available to companies
• No minimum spend
• Patent Box – reduced rate of tax on profits from Patent
Pit stop round up
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• Corporation tax rates reducing
• Capital allowances – as you were, except on cars
• Check your state pension entitlement
• Window of opportunity to review your business rates
position
• Review your business structure
Clive Relf FCA
Private Client Tax Partner
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Personal tax - agenda
• Nuts and bolts
• Further buy-to-let change
• Two new tax free allowances
• Impact of dividend tax changes
• Inheritance tax changes
• New tax free childcare
• Pensions
• Savings update
• Making tax digital
• Pit stop roundup
*both subject to 8% surcharge on gains arising from residential properties
Nuts and bolts
Income tax 2016/17 2017/18 2020/21
Tax free amount £11,000 £11,500 £12,500
Basic rate band £32,000 £33,500 £37,500
Rates 20%, 40%, 45% 20%, 40%, 45% ?
Capital gains tax 2016/17 2017/18 2020/21
Exemption £11,100 £11,300 ?
Rates 10%* & 20%* 10%* & 20%* ?
Residential property… buy-to-lets
Tax relief restriction on finance costs for landlords
• Gradual abatement from April 2017
• Impacts higher rate taxpayers only
• Relief changes from a deduction against income to a basic
rate tax reduction
• Time to sell up? Your level of gearing could make that
decision for you
Residential property… an interest example
X, a higher rate taxpayer, has net rental
income of £10,000 before deducting
£4,000 of interest costs. During 2016/17
he’s taxed at 40% on £6,000 profits, with
a tax bill of £2,400.
In future:
Tax year ended Tax bill
April 2018 £2,600
April 2019 £2,800
April 2020 £3,000
April 2021 £3,200
Two new tax free allowances Both coming in April 2017
Property £1,000 p.a.
• Most valuable for those with no relevant expenditure
otherwise not “pain free”
Trading £1,000 p.a.
• To cover sundry bits and bobs… again those with minimal
expenditure will benefit most
Further changes to dividend taxation
• £5,000 p.a dividend allowance
available since April 2016
• Historic tax credit removed
• Allowance falling to £2,000 p.a in
April 2018
Taxpayer Effective rate
basic 7.5%
higher 32.5%
additional 38.1%
Dividend tax example (1)
Mr Jackman, a 40% taxpayer has a
salary of £65,000 and receives
a dividend of £10,000.
The tax on this dividend would be;
Tax increase of £975 come 2018
Today From April 2018
Tax liability £1,625 £2,600
Dividend tax example (2)
Mrs Wilson is a basic rate taxpayer
with a pension of £12,000 and
dividend income of £10,000.
The tax on this dividend would be;
Tax increase of £225 come 2018
Today After April 2018
Tax liability £375 £600
Inheritance tax (IHT)
• Nil rate band of £325,000 remains
frozen until April 2021
• Unchanged since April 2009 and
IHT “take” now at all time high!
• Rate remains at 40%
• New residence nil rate band
introduced from April 2017…
…but not for everyone
New residence nil rate band
• Impacts deaths after 5 April 2017
• Initially worth an extra £100,000
tax free per individual in certain
circumstances
• Gradually increases to extra
£175,000 tax free over
period to April 2021
• Don’t qualify if estate on death exceeds £2 million
New nil rate band The small print
• Only available where deceased
leaves their home (or cash
from earlier sale) to close
descendent
• So son, granddaughter okay
but not niece, cousin or parent
• Also not available where property left to a trust!!
• New relief is complex so caveat emptor
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New tax free childcare
• First announced in 2013 and being phased
in (at last) from April 2017
• Operates online and worth up to £2,000 p.a for each child
under 12 years of age
• Government contributes 20p for each 80p an individual
spends on qualifying childcare
• Available to self employed for the first time
• Parents MUST be working
• Not available if either parent has income > £100,000 p.a
Pensions
UNCHANGED
• Availability of tax free cash @ 25% of fund
• Tax relief available at marginal income tax rate
• Maximum annual premiums of £40,000 but restricted for HNWI
• Lifetime allowance remains at £1 million
CHANGED
• Money purchase annual allowance falls to £4,000 from £10,000 (for some)
• New 25% tax charge (from today) on transfers to QROPs
Savings
Lifetime ISA
• ISA allowance increasing from £15,240 p.a to £20,000 from
April 2017
• NEW lifetime ISA… for those aged > 18 and < 40
• Max saving of £4,000 p.a with Government addition at 25%
• Withdraw to buy first home OR leave alone until 60 years
of age
NS&I Bond
• New NS&I bond from April paying 2.2% gross… but only
on maximum of £3,000… 3 year lock in.
Making tax digital
HMRC’s goal
• To reduce the 12 million SA tax returns
submitted in 2015 to nil by 2020
The mechanics
• Introduction of quarterly reporting from
April 2018… deferred to 2019 for those
with gross incomes > £85,000 and
exemption for those < £10,000 p.a.
Things to do
• Access your personal tax account to familiarise yourself
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The pound in your pocket
• Duty frozen for seventh year
• Excise duty uplifted by inflation
• New sugar tax from 2018
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Pit stop round up
• Review your will to ensure eligibility
for new £100,000 IHT exemption
• Stress test your buy-to-let properties
• Dust off your pension pot and take advice
• Are you maxing your ISAs?
• Access your personal tax account
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