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2018

Following the introduction of tax-free childcare for all from February 2018 the childcare voucher scheme was due to close to new entrants in April 2018.

This  has now been extended by six months to October 2018.

The new Tax-free Childcare scheme began in 2017 and was opened to children of all ages on February 14, 2018.

The new scheme is available to the employed and self-employed where both parents are in paid work for more than 16 hours per week, regardless of whether the employer contributes.

The old scheme was only available to employed individuals

"The new scheme which parents contribute to and the Government tops up by 20% replaces employer childcare voucher schemes which will now remain open to new entrants for an extra six months until October 2018," said Peter Way-rider, tax manager at Ellis & Co. 

"Parents already registered at that time can continue to receive vouchers for as long as their employer offers them, or switch to tax-free childcare instead.

"There are arguments for and against each scheme but you now have a further period of time to consider which one suits you."

For further information about the childcare voucher scheme, or any other tax matter, contact Peter on 01244 343504. 

The tax free personal allowance will increase from April 6, 2018.

The increase will mean millions of people in the UK will be paying less tax as of next month.

The tax free personal allowance will rise from £11,500 to £11,850.

A typical taxpayer will be paying £1,075 less income tax than in 2010/11.

The threshold for higher rate tax will also increase to £46,350 from April (or £43,431 in Scotland).

For further information about this, or any other tax matter, contact Peter on 01244 343504.

Landlords are able to claim tax relief on money spent to replace 'domestic items' in their rental properties.

These include beds, carpets, crockery or cutlery, sofas, curtains, fridges and other white goods.

This only applies to items being replaced - not those bought for a property for the first time.

You can also only claim the amount for a like-for-like replacement.

For advice about this or any other tax matter, contact Peter Way-Rider on 01244 343504.

Tax-free Childcare is now open to all remaining eligible families; parents whose youngest child is under 12.

The HM Revenue and Customs (HMRC) led scheme, helps working parents with the cost of childcare with up to £2,000 per child a year, or £4,000 for disabled children.

As of February 14, 2018, parents with children under the age of 12 can apply online for TaxFree childcare.

Parents who are self-employed can also apply for this scheme.

HM Revenue and Customs has been gradually rolling out Tax-Free Childcare since April 2017.

The money can go towards a whole range of regulated childcare, including nurseries, childminders, after-school clubs and holiday clubs.

Since opening the service, through which parents can apply for both Tax-Free Childcare and 30 hours free childcare, more than 340,000 families have successfully applied.

“It is very important that working parents register for these schemes,” said Peter Way-Rider, tax manager at Ellis & Co.

“You apply online, and there is also a childcare calculator which will help you choose the best childcare scheme for you and your family.”

To find out more and how to apply visit https://www.childcarechoices.gov.uk or contact Peter Way-Rider on 01244 343504.

*Figures from HMRC. 

Marriage allowance lets you transfer £1,150 of your personal allowance to your husband/wife/civil partner.

In order to qualify you must:

  1. Be married / in a civil partnership
  2. One spouse/partner must earn less than £11,500
  3. Your partner’s income is between £11,501 and £45,000

This will reduce the overall tax bill by up to £230 every tax year.

“If you are eligible for marriage allowance on 2017/18 tax year you can back date your claim to April 6th, 2017 and reduce the tax bill even further,” said Peter Way-Rider, tax manager at Ellis & Co.

For further information about marriage allowance or any other tax matter, contact Peter on 01244 343504.

April 2018 will see a £3,000 reduction in the tax-free dividend allowance.

The allowance, for shareholders and directors of small private firms, will decrease from £5,000 to £2,000 from April 5, 2018.

According to HM Revenue and Customs (HMRC) the change will affect individuals and households who receive dividend income in excess of £2,000; It is estimated that this will affect around 2.27 million individuals in 2018 to 2019 with an average loss of around £315.*

The reduction was announced by The Chancellor Phillip Hammond during his Spring Budget Speech last year (2017).

It was a move designed to provide ‘fairness’ and ‘reduces a tax perk that had been enjoyed by those trading through limited companies and by private investors’.

“This measure will ensure that support for investors is more effectively targeted and that the total amount of income they can receive tax-free is fairer and more affordable, in light of increases to the tax-free personal allowance and the Individual Savings Accounts (ISA) allowance,” said HMRC.

“It will also partially reduce the tax difference between the self-employed and those working through a company.”

The Chancellor said that HMRC estimated the cost of people working through companies at £6bn a year: “It’s not fair and it’s not affordable,” said the Chancellor.

The move is expected to raise £2.63bn by 2021/22.

*Figures from www.gov.uk

2017

From April 2018 Wales will introduce Land Transaction Tax (LTT) its own version of Stamp Duty Land Tax (SDLT).

It is the first Welsh-only tax in almost 800 years.

Stamp Duty Land Tax (SDLT) is payable when you buy or lease a building or land over a certain price; the rate of tax due is calculated using a banding system.

Land Transaction Tax (LTT) uses the same banding system, however, instead of separating into residential and non-residential properties - LTT calculates tax owed based on residential banding only.

The Welsh Government has announced that nine out of 10 buyers will pay the same or less than they do at the moment; buyers of homes worth under £250,000 will pay £500 less in LTT, those buying up to £150,000 will pay no tax at all.

However, those one in 10 buyers will be paying thousands more than people in England, for example: LTT on a £750,000 house will cost £36,250 compared to Stamp Duty in England of £27,500.

The current rates*

  • Up to £125,000 no tax
  • Between £125k and £250k 2%
  • Between £250k and £925k 5%
  • Between £925k to £1.5m 10%
  • Above £1.5m 12%

The new rates in Wales (NB these rates relate to purchases, lease premiums or transfer values)*

  • Up to £150k no tax
  • Between £150k and £250k  2%
  • Between £250k and £400k 5%
  • Between £400k and £750k 7.5%
  • Between £750k to £1.5m 10%
  • Above £1.5m 12%

“Overall this is good news for buyers in Wales, but there will be some big winners and losers,” said Peter Way-Rider, tax manager at Ellis & Co.

“Some buyers will escape the tax bill completely, whereas the higher end buyers will end up paying more than those over the border.”

During last week’s Autumn Budget (2017) Stamp Duty Land Tax was abolished for first time buyers on homes under £300,000.

For further information about this or any other tax matter contact Peter on 01244 343504.

*www.gov.wales 

Did you know your staff Christmas party qualifies as a tax-free benefit?

There is an exemption from tax, National Insurance and reporting if you provide a party or similar function for employees as long as it meets the following three conditions:

  • £150 or less per head
  • annual, such as a Christmas party or summer barbecue
  • open to all your employees

When it comes to giving your staff a ‘little extra’ at Christmas you must report any bonuses or cash payments made to employees as this counts as earnings.

However you can give your staff a trivial benefit.

A trivial benefit (for example a box of chocolates or bottle of wine) is exempt from tax, and National Insurance payments and you do not have to inform HMRC of your purchase as long as it:

  • Cost you £50 or less to provide
  • Isn’t cash or a cash voucher
  • Isn’t a reward for their work or performance
  • Isn’t in the terms of their contract

You can also say thank you to your customers/ clients with an allowable tax deduction as long as:

  • The total cost of the gift does not exceed £50
  • The gift bears a conspicuous advert for the business
  • The gift is not food, drink, tobacco or exchangeable vouchers.

For further information about non-taxable payments or benefits, or any other tax matter contact Peter Way-Rider on 01244 343504. 

The secret to getting ahead is getting started, as the saying goes… and the season of the tax return is looming.

Personal Tax, Partnership Tax and Trust Tax Returns all need to be filed by January 31, 2018.

“January may seem a long way off, but filing your tax return sooner rather than later will give you more time to save or obtain finance for any tax claim,” said Peter Way-Rider, Tax Manager at Ellis & Co.

“Be sure not to miss the deadline date of Wednesday, January 31,2018, or you could be joining millions of others in the UK and incur an automatic fine of £100.

“Failing to file your tax return on time will cost you £100, you will pay more the later it gets.”

The penalties for late tax returns are:

  • 1 day late an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time.
  • 3 months late, additional daily penalties of £10 per day, up to a maximum of £900. This is as well as the fixed penalty.
  • 6 months late, a further penalty of 5% of the tax due or £300, whichever is greater; this is additional to the penalties above.
  • 12 months late, another 5% or £300 charge, whichever is greater. This is additional to the penalties above.

There are also additional penalties for paying tax late of 5% of the tax unpaid at 30 days, 6 months and 12 months.

“At Ellis & Co we will prepare your Self-Assessment Tax return for you and submit it promptly," added Peter.

“We will help you structure your affairs for maximum tax efficiency, while protecting you from the penalties every taxpayer dreads.

“We can also advise on short term finance if required.”

For further information about Tax Returns or any other tax matter contact Peter on 01244 343504.

Payments made to HMRC via the Post Office will be stopping on December 15, 2017.

Tax bills including: Self-Assessment, PAYE tax and NI contributions and Corporation tax will not be accepted after December 15.

Over-the-counter payments will still be accepted at your bank.

Payments can also be made online. 

If you rent out property then you have an obligation to report the property income and expenses to HMRC (click here to do so)

You will need to tell HMRC that you are receiving income from property by January 31 after the end of the tax year in which the income is received.

You may need to complete a Tax Return, in which case HMRC will notify you of the need to file a Return.

However, if you have PAYE earnings, you may be able to have any tax due collected via an adjustment to your PAYE code.

“Even if you make a loss it is to your advantage to report this to HMRC,” said Peter Way-Rider, tax manager at Ellis & Co.

“Without reporting the rental losses, you are losing out on being able to set these losses against future income from property, meaning that you will pay more tax than you should.

“So if you register these losses now, you will be able to take them forward and offset them in future years if profits are made,” he added.

For further information about property income or any other tax matter contact Peter Way-Rider on 01244 343504. 

The Government has launched two new childcare schemes this year in order to help working parents with childcare costs.

  • Tax-Free Childcare account: Topped up £2 by the Government for every £8 that is paid in. Open to children who will be aged 4 on August 31, 2017. Can be used by all working parents, including the self-employed.
  • 30 hours free childcare: Starting in September 2017 parents of 3-4 year-olds can apply for 30 hours of free childcare (via a childcare provider).

Parents can apply for both schemes, only a single application needs to be made for both.

Tax-Free Childcare will cut childcare costs by up to £2,000 per year for each child under 12 years old, or £4,000 per year for disabled children under 17 years old.*

This new scheme has been designed to replace the Childcare Vouchers Scheme.

“It is very important that working parents register for these schemes, the 30 hours free childcare is worth £5,000 per child,” said Peter Way-Rider, tax manager at Ellis & Co.

“To qualify you need to earn a minimum of £120 per week and less than £100,000 a year (joint income if you have a partner).

“The Tax-Free Childcare scheme cannot be used at the same time as childcare vouchers, Universal Credit or tax credits; the 30 hours free childcare can be used alongside any of the schemes,” he added.

To find out more and how to apply visit https://www.childcarechoices.gov.uk or contact Peter Way-Rider on 01244 343504.

*Figures by HMRC. 

Do you pay Corporation Tax?

If yes then read on - as you may be eligible to claim Research and Development (R&D) Tax Relief.

R&D tax relief came into effect in 2010 with the aim to encourage UK based companies to spend more on Research and Development.

If your business spends money developing new or enhancing products or services in science or technology then you could receive a cash payment or a reduction on your Corporation Tax liability.

“Many businesses don’t know they can claim R&D tax relief, or how to go about it,” said Peter Way-Rider, tax manager at Ellis & Co.

“There are a number of costs that qualify for R&D including employee costs, materials, utilities and software.

“The normal time limit for making your claim is two years after the end of the relevant Corporation Tax accounting period.

“This means that event though you may have already filled a Corporation Tax return, you can amend this to reflect any relevant R&D expenditure as long as the amended return is filled within the time limits.”

Ellis & Co can tell you if you are eligible for R&D relief, the full list of expenditure allowable and how much you can claim.

To find out more contact Peter Way-Rider on 01244 343504. 

The new Lifetime ISA (LISA) commenced on April 6, 2017.

The basic rules are as follows:

You must be over the age of 18 and you can save up to £4,000 each tax year as long as you don’t exceed the annual overall ISA limit ( £20,000 for the current tax year).

The Government will give you a 25% bonus on the total amount you pay in (excluding interest or investment growth).

Money transferred into a Lifetime ISA from another ISA is also eligible for the government bonus.

You may have to pay back the bonus if you withdraw from your Lifetime ISA unless

(a)    The funds are used to purchase a first home up to a value of £450,000

(b)   You become terminally ill

(c)    You reach the age of 60

For further information on the new Lifetime ISA or any other tax matter contact Peter Way Rider, tax manager at Ellis & Co on 01244 343504. 

As of this month (April 2017) the government is introducing Tax Free Child Care to help working parents.

The existing child care scheme will remain open to new entries until April 2018 to support the transition between the two schemes.

Both of these are in addition to the free child care entitlement which will rise from 15 hours to 30 hours a week for working families with three and four year olds from September 2017.

Marriage allowance lets you transfer £1,100 of your personal allowance to your husband/wife/civil partner.

In order to qualify you must:

  1. Be married / in a civil partnership
  2. One spouse/partner must earn less than £11,000
  3. Your partner’s income is between £11,001 and £43,000

This will reduce the overall tax bill by up to £220.

“If you are eligible for marriage allowance on 2016/17 tax year you can back date your claim to April 6th, 2016 and reduce the tax bill even further,” said Peter Way-Rider, tax manager at Ellis & Co.

Is your husband or wife a non-earner?

Did you know that one of the most substantial government tax giveaways is investing in a pension for a spouse?

All non-earning UK residents, under the age of 75, can contribute up to £2,880 into a pension.

The government then automatically adds a further £720.

These payments can be made for a non-tax payer, contributions can also be made on behalf of a child.

 

Personal Tax, Partnership Tax and Trust Tax Returns all need to be filed by January 31st 2017, if not there is an immediate £100 penalty, and additional penalties will be imposed for further delays. 

Liabilities for the year ending April 5th, 2016 and first payment on accounts for 2016/17 also need to be paid on or before January 31st, 2017. 

If not interest at the rate of 3% (per annum) will be charged on a daily basis, and any tax outstanding as of February 28th, 2017 will incur a 5% surcharge.

2016

Cars do not qualify for the annual investment allowance. However, it is possible to obtain full relief for expenditure on a car in the year of purchase if you buy a low emission car that qualifies for a first year allowance (FYA) of 100%.

If the expenditure is incurred between 1 April 2015 and 31 March 2018, the FYA is available for cars with CO2 emissions of up to 75g/km. Expenditure on cars with CO2 emissions in excess of 75g/km do not qualify for a FYA, only the writing down allowance.

For more information on this matter please contact Peter Way-Rider, Tax Manager on 01244 343504.

If your business is able to claim the Employment Allowance, we would suggest an annual salary of £11,000 with dividends of £32,000 giving a total remuneration package of £43,000, meaning only basic rate tax is payable (see below).

Gross salary  £11,000
Dividends £32,000
Total Gross Income  £43,000
Employees Nat. Ins. £355
Tax on dividends £2,025
Net cash taken home £40,620

If you are unable to claim the Employment Allowance (as you are a single director/employee limited company), the most suitable route provides for a gross salary of £8,040 which protects your entitlement to the State Pension and benefits plus dividends of £34,960. This again provides for a total salary/dividend package of £43,000.

In this case the overall return is as follows:

Gross salary £8,040
Dividends £34,960
Total Gross Income £43,000
Employees Nat. Ins. £ Nil
Tax on dividends £2025
Net Cash taken home  £40,975

Overall, it would appear that there still remains some confusion as to which option is the most suitable, as option 2 obtains less Corporation tax relief due to the lower salary level. Please contact Ellis & Co.’s Tax Manager, Peter Way-Rider, to discuss which option is best for you.

Business owners are coming to terms with controversial dividend tax changes that came into effect on April 6 this year.

Under the changes, the notional 10% tax credit on dividends was abolished and a £5,000 tax free dividend allowance introduced.

While this is fine for those individuals who dabble in shares, the impact on many owners of SMEs has been considerably less welcome.

That explains why there was a surge in dividends taken from companies in the lead up to the April change.

As of April 6:

  • The first £5,000 of any dividend tax is free.
  • Lower rate tax-payers pay tax at 7.5% instead of 0%.
  • Higher rate tax-payers pay tax at 32.5% instead of 25%.
  • Upper rate tax-payers pay tax at 38.1% instead of 30.55%.

Owners of SMEs have rightly reacted with dismay to the changes. Many believe the measures are intended to hit small companies which pay a small salary to preserve entitlement to the State Pension, followed by a significantly larger dividend in order to reduce National Insurance costs.

For example, a couple splitting combined income of £100,000 a year will find themselves worse off by more than £3,000.

Peter Way-Rider, Ellis & Co’s Tax Manager, said: “There is a feeling among many owners of small businesses that this is a tax on entrepreneurialism. It is the business owners who are taking the risks, investing in their communities and creating jobs.

“There was a lot of anger when the change was first announced with over 60,000 people signing a petition against it, but now that the measures have taken effect there is unlikely to be any going back.

“Despite the changes, remuneration through dividends will in most cases remain a more tax efficient option than taking a full salary.”

For advice on this and any other business tax issue, contact Peter Way-Rider on 01244 343504 or email: peterway-rider@ellis-uk.com

Do you rent out your spare room? Are you making the most from your property?

The ‘Rent-A-Room’ relief scheme is an optional tax exemption scheme that allows property owners who let out spare furnished rooms in their only or main home to receive up to £7,500 per annum gross and not be subject to tax.

If the rent received exceeds £7,500, the first £7,500 is tax free, income tax being paid on the balance. This obviously covers income from lodgers and may also be applied to bed and breakfast or guest houses which would usually be assessed as a trade.

The exemption limit of £7,500 is reduced to £3,750 if, during the tax year, someone else receives income from letting from the same property.

The £7,500 limit is not reduced if the room is let for less than 12 months. The same amount applies, therefore, even if the room is rented for only one month or just in term time.

The owner and lodger must occupy the property for at least part of the letting period in each tax year of claim.

"This is an excellent way of obtaining rental income without having to purchase a 'buy to let' property", said Peter Way-Rider, Tax Manager at Ellis & Co.

If you have a question about the scheme, please contact Peter on 01244 343504 or email: peterway-rider@ellis-uk.com

We are now beginning to approach the Christmas season, so perhaps now is a timely reminder that for personal taxpayers, any tax due in respect of the year ended 5 April 2016 needs to be paid to HM Revenue and Customs by 31 January 2017, along with the first payment on account for the year ending 5 April 2017.

For limited companies with year ends of 31 March, the liability for the year ended 31 March 2016 needs to be settled by 1 January 2017 (New Year’s Day).

If any tax is paid late, HMRC will charge interest and for individuals, in addition to interest, a surcharge of 5% will be imposed on any tax still outstanding at 28 February 2017.

If you require assistance in settling any tax liability you may be able to agree to pay by instalments by calling the Business Support Helpline.

For advice on this and any other business tax issue, contact Peter Way-Rider on 01244 343504 or email: peterway-rider@ellis-uk.com