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Wilson Sandford
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Reporting PAYE information 'on or before' paying employees

HMRC have announced that the relaxation which has permitted some employers with no more than nine employees to report their PAYE information for the tax month 'on or before' the last payday in the tax month, instead of 'on or before' each payday, is to be withdrawn from April 2016.
Guidance on the limited situations where pay details may be provided late can be found at www.gov.uk/running-payroll/fps-after-payday. If you would like any help with payroll matters please contact us.
Internet link: GOV.UK Employer Bulletin 57

Digital quarterly updates

Following concerns raised in response to the government's proposals to 'Make Tax Digital' the government has issued a myth buster which hopes to lessen the fears of many regarding the government's proposals for quarterly updates.
We will keep you informed of developments.
Internet link: GOV.UK Making Tax Digital - Myth Buster

New National Living Wage to boost living standards

The government is reminding employers that a new National Living Wage (NLW) is being introduced from 1 April 2016 and advising employers to get ready for this change.
The NLW rate will be payable to workers in the UK who are 25 or over. For workers currently being paid the National Minimum Wage (NMW) this will mean a 50 pence increase in their hourly earnings.
The government expects over a million workers in the UK aged 25 and over to directly benefit from the increase, which sees the current minimum rate of £6.70 increase by 50p. Many will see their pay packets rise by up to £900 a year.
Business Secretary Sajid Javid said:
'The government believes that Britain deserves a pay rise and our new National Living Wage will give a direct boost to over a million people. We are building a more productive Britain and giving families the security of well-paid work.
This is a step up for working people, so it is important workers know their rights and that employers pay the new £7.20 from April 1 this year.'
The government has launched an advertising campaign to highlight the new wage. More details are available at: livingwage.gov.uk.
The government is encouraging employers to ensure they are ready to pay the new wage on 1 April 2016. As part of this, it has published a four-step guide for businesses on the living wage website, asking employers to:
Check you know who is eligible in your organisation.
Take the appropriate payroll action.
Let your staff know about their new pay rate.
Check your staff under 25 are earning at least the right rate of NMW.
HMRC will have responsibility for enforcing the new NLW in addition to the NMW.
For those not affected by the NLW the following NMW rates apply:
£6.70: for 21s and over
£5.30: for 18 to 20-year-olds
£3.87: for under 18s
£3.30: for apprentices (the rate applies to all apprentices in year 1 of an apprenticeship, and 16-18 year old apprentices in any year of an apprenticeship)

HMRC reveal tax return statistics and worst excuses

HMRC have revealed that 10.39 million Self Assessment tax returns were completed ahead of the 31 January deadline which is more than 92% of the total returns expected, and 150,000 more than last year.
More than 89% of taxpayers (9.24 million) filed their return electronically.
An automatic £100 penalty applies to those failing to file their return by 31 January 2016 midnight deadline. Use the following link for more information about HMRC Self Assessment deadlines.
HMRC have also revealed the top 10 worst tax return excuses for 2014. They include:
'I had an argument with my wife and went to Italy for 5 years'
Ruth Owen, HMRC Director General of Personal Tax, said:
'Untidy family members and hungry pets are very unlikely to be accepted as a legitimate excuse for completing your tax return late.
We understand that life can be unpredictable and for those customers who have a genuine excuse for missing the 31 January deadline, such as the flooding, help is on hand. My advice would be to contact us through our helplines or online, as soon as possible. But for those who are trying to play the system, while the rest of us do the right thing, the message is clear: submit your tax return online by 31 January or face a fine. We're here to help people in genuine distress, but not to act as a free lender to people who can't meet their responsibilities to pay their tax.'
The deadline for sending 2014/15 tax returns to HMRC, and paying any tax owed, was 31 January 2016.
If you need help getting your tax affairs up to date please contact us.
Internet link: GOV.UK Top 10 Worst Tax Return Excuses for 2014

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Pensioners 'to gain' from new single tier state pension but younger people 'worse off'

A new single tier state pension is to be introduced for those reaching state pension age from 6 April 2016 onwards. According to research by the Department for Work and Pensions (DWP) many pensioners will receive a boost from the new single tier pension following its introduction from 6 April 2016.
Under the 'flat-rate' system, new pensioners could receive up to £155.65 per week, compared to the current state pension entitlement of £119.30.
The press release states:
'The data shows the long-term impact of the new State Pension on people's pensions, with 75% of people set to gain in the first 15 years.
The move to the new system will provide a boost to the State Pension for many women, with over 3 million women receiving an average of £11 more per week by 2030 as a result of the changes, - helping to address the gender inequalities that have persisted under the old scheme.'
To find out what your pension entitlement is visit www.gov.uk/state-pension-statement

Apprentices and employer National Insurance

From 6 April 2016, if you employ an apprentice you may not need to pay employer Class 1 national insurance contributions (NICs) on their earnings up to £827 a week (£43,000 per annum). To be eligible for this relief the apprentice should be under 25 years old and be following an approved UK government statutory apprenticeship scheme.
If the apprentice meets the conditions, then the employer needs to have evidence to allow them to apply the relief, by adjusting the employee's NIC category. The evidence required will be either
a written agreement between you, the apprentice and a training provider, which meets the conditions, or
in England and Wales, evidence that the apprenticeship receives government funding.
When the apprenticeship stops or the apprentice turns 25 you will need to start paying the relevant NICs. For full details visit the link below.
The relief does not apply to employee's NICs, it is only the employer who benefits but the employee's entitlement to social security benefits will not be affected.


The family home and Inheritance Tax




The government has announced the introduction of a new transferrable nil rate band for the family home. The additional band will apply where a residence is passed on death to direct descendants such as a child or a grandchild. This will initially be £100,000 in 2017/18, rising to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21. The additional band can only be used in respect of one residential property which has, at some point, been a residence of the deceased.

The allowance is in addition to the inheritance tax nil rate band which is currently set at £325,000. By 2020/21 the total individual nil rate band will therefore total £500,000.

Any unused nil rate band may be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil rate band, are passed on death to direct descendants. This element will be the subject of a technical consultation and will be legislated for in Finance Bill 2016.

There will also be a tapered withdrawal of the additional nil rate band for estates with a net value (after deducting any liabilities but before reliefs and exemptions) of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.
The IHT nil rate band is currently frozen at £325,000 until April 2018. This is to remain frozen until April 2021.


Annual Investment Allowance certainty




The Chancellor announced that Annual Investment Allowance will be set permanently at £200,000 from 1 January 2016 providing certainty for businesses. The AIA provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business, up to an annual limit and is available to most businesses.

The AIA was increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. However it was due to reduce to £25,000 after this date. The level of the maximum AIA will now be set permanently at £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.

Where a business has a chargeable period which spans 1 January 2016 there are transitional rules for calculating the maximum AIA for that period and there will be two important elements to the calculations:
a calculation which sets the maximum AIA available to a business in an accounting period which straddles 1 January 2016
a further calculation which limits the maximum AIA relief that will be available for expenditure incurred from 1 January 2016 to the end of that accounting period.

It is the second figure that can catch a business out as demonstrated by the following example:
If a company has a 31 March year end then the maximum AIA in the accounting periods to 31 March 2016 will be:
9 months to December 2015 three quarters of £500,000
£375,000
3 months from January 2016 one quarter of £200,000
£50,000
Total annual AIA using first calculation
£425,000

This is still a generous figure. However if expenditure is incurred between 1 January and 31 March 2016 the maximum amount of relief for will only be £50,000. This is because of the restrictive nature of the second calculation. Alternatively, the business could defer its expenditure until after 31 March 2016. In the accounting period to 31 March 2017, AIA will be £200,000. However tax relief will have been deferred for a full year.

Please contact us for specific advice for allowances for your business.


Changes for Buy to Let Landlords

It was announced in the Budget that the government will restrict the amount of income tax relief landlords can claim on residential property mortgage interest costs to the basic rate of income tax.
This means that landlords will no longer be able to deduct all of their finance costs from their property income. They will instead be restricted to the basic rate. To give landlords time to adjust, the government will introduce this change gradually from April 2017, over four years.

This restriction will not apply to landlords of furnished holiday lettings and will not impact on basic rate tax paying landlords.

From April 2016 the government will replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings.

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#Budget2015 - Other matters
Budget 2015 – Other matters




Tax lock

The government will legislate to set a ceiling for the main rates of income tax, the standard and reduced rates of VAT, and employer and employee Class 1 NIC rates, ensuring that they cannot rise above their current levels. The tax lock will also ensure that the NIC Upper Earnings Limit cannot rise above the income tax higher rate threshold and will prevent the relevant statutory provisions being used to remove any items from the zero rate of VAT and reduced rate of VAT for the duration of this Parliament.

National Living Wage

The government will introduce a new National Living Wage (NLW) for workers aged 25 and above, by introducing a premium on top of the National Minimum Wage (NMW). From April 2016, the NLW will be set at £7.20 an hour. This rate is 70p higher than the current NMW rate, and 50p above the NMW increase coming into effect in October 2015.
Employment allowance

From April 2016, the government will increase the NIC Employment Allowance from £2,000 to £3,000 a year. The increase will mean that businesses will be able to employ four workers full time on the new National Living Wage (NLW) without paying any NIC.
To ensure that the NIC Employment Allowance is focussed on businesses and charities that support employment, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.

Tax avoidance

A raft of HMRC compliance initiatives are to be launched over the next few years. To quote the Chancellor:
‘We’re boosting HMRC’s capacity with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders they pursue for prosecution – raising £7.2 billion in extra tax.’

Tax credits

A number of changes to tax credits and Universal Credit are announced as part of the welfare reforms aimed at reducing the growing expenditure in this area.
Key changes include:
From April 2016 the government will reduce the level of earnings at which a household’s tax credits and Universal Credit award starts to be withdrawn for every extra pound earned. There will also be an increase in the taper rate which applies to any excess income further reducing the tax credit award.
Limiting the Child Element of both tax credits and Universal Credit to two children so that any subsequent children born after April 2017 will not be eligible for further support. Some claimants will be protected from these changes.
Those starting a family after April 2017 will not be eligible for the Family Element in tax credits and equivalent in Universal Credit.
In addition tax credit allowances (with the exception of disability elements) will be frozen

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