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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