We are waiting for official confirmation, but it seems the changes to IR35 have been delayed until April 2021.
The Spring Budget 2020 was largely overshadowed by reaction to the economic impact of coronavirus and there was no attempt at major tax reform. You can read about the measures for corona virus here
Our key points are below:
As expected the personal allowance will remain at £12,500 in the 2020/21 tax year
There are no changes to the £5,000 savings rate band, £2,000 dividend allowance or the £1,000 savings allowance
Capital Gains Tax allowance will increase by £300 to £12,300 from April 2020
The threshold above which National Insurance becomes payable will be raised from £8,632 to £9,500
The rate of Corporation Tax will remain at 19% for 2020/21
This will be restricted by reducing the Lifetime Limit from £10 million to £1 million
Investments & Property
ISAs: From 6 April 2020 the annual subscription limit for ISAs remains at £20,000 but the limit for Junior ISAs and Child Trust Funds will be increased from £4,368 to £9,000
Investment Bonds: Amendments will be made to the legislation on Top-slicing Relief to clarify how allowances and reliefs can be set against life insurance policy gains. This measure will apply to all relevant gains occurring on or after 11 March 2020
Tax Advantaged Investments: There are no changes to SEIS, EIS, VCT or IHT Business Relief investments
Stamp duty: From April 2021 there will be a 2% surcharge for non-UK residents purchasing UK residential property
From 6 April 2020 the adjusted income and threshold income limits will be increased by £90,000 to £240,000 and £200,000 respectively. Individuals whose threshold income is below £200,000 will not be affected by tapering. Their annual allowance will only start to be tapered when this £200,000 threshold is breached and their adjusted income exceeds £240,000
The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000. This means that all those with adjusted income of £312,000 or over will have an annual allowance of £4,000
With the country heading for a no-deal Brexit, it’s important to highlight the importance of EORI numbers (Economic Operator Registration and Identification number).
Previously these numbers have only be relevant for imports and exports of goods (not services) outside the EU. That will change with a no-deal Brexit. Confusingly there will be two types of EORI numbers, a UK EORI number and a EU EORI number. The same business will be able to hold both UK and EU EORI numbers depending on its circumstances.
- If a UK business either exports or imports goods, it will need a UK EORI number.
- An EU EORI number will be needed if a UK business has operations in another EU country and imports stock into that country.
The UK EORI number will no longer be good enough for this purpose after we leave the EU.
An application for an EORI number takes only ten minutes online using this link (and will usually be issued within three working days.
Frank owns a hot dog business and has branches in the UK and Germany. He is VAT registered in both countries, regularly transferring stock from the UK to Germany. Frank will need a UK EORI number to get the goods out of the UK and an EU EORI number to get the goods into Germany because he is acting as importer in Germany and exporter in the UK.
Important point: Frank’s EU EORI number will be valid in all 27 EU countries but the UK EORI number will only be relevant to getting goods into and out of the UK.
At WLCA we love new technology. Did you know that you can now use the Excel app on Android and iOS to import spreadsheets and tables into the app using the camera?
Microsoft Excel can now import spreadsheets and tables into the app by using a camera. You take a photo of a printed data table and it will convert it into a fully editable table in the app.
So you’ll be able to import a paper document by taking a photo intpo the mobile Excel app and then carry on editing it at your desk.
The app optical character recognition (OCR) alongside machine learning to convert paper-based data into a digital table. The image recognition will automatically detect financial spreadsheets, work schedules, task lists, timetables, and other tables.
With the prospect of a no deal Brexit now more likely, every UK business needs to understand the impact of leaving the EU without a deal in place at 11pm on 29th March.
If your business has exposure to any of the areas below:
- movement of goods to and from the EU
- relies on a supply chains with EU
- uses UK or EU product standards or compliance
- has contracts of services with EU companies or provides them
- employ EU nationals in the UK
- holds EU trademarks, domain names
- is exposed to currency risk
Then a no-deal Brexit could have a significant impact.
The best resource to start evaluating the impact to your business is the Government published guidance: “UK government’s preparations for a no deal scenario” This site puts the government’s technical notices in context and outlines the overall approach to no deal. It is continually updated and therefore is an invaluable guide.
Businesses that buy or sell from the EU are going to be heavily impacted by a no deal Brexit. The high level approach is that businesses will need to start treating trading with the EU in the same way as trading with the rest of the world. The video below explains the impact on importing goods from the EU.
One of the biggest changes will be with VAT and the government have provided guidance via the link below:
For example if you export to EU customers then distance selling arrangements will no longer apply and sales will be zero rated. EU states could then treat the goods in the same way as with other non-EU countries and charge import VAT and customs duties on arrival in the EU.
If you have any concerns about the impact of a no-deal Brexit on your business, please contact WLCA to discuss further.
If you are the director of a limited company there can be tax advantages of making pension contributions directly from the company rather than personally.
For directors that can take a mix of salary and dividends from their limited company, the amount of pension contributions you can receive tax relief for personally is restricted to the salary taken. This is because dividends don’t form part of “relevant UK earnings” for calculating tax relief.
However your limited company can contribute company income before corporation tax to your pension. Because an employer contribution counts as an allowable business expense, your company receives tax relief against corporation tax so the company will save up to 19% in corporation tax.
A further benefit is that there is no National Insurance charge on employer pension contributions. The National Insurance rate for 2018/19 is 13.8%, so by the company contributing directly into your pension rather than paying the equivalent in salary, you can save up to a further 13.8%.
This means that in total your company can save up to 33.8% by paying money directly into your pension rather than paying money in the form of a salary.
For a higher rate tax payer, compared with making personal deductions this can work out as an extra £5.33 saving per £100 in the scheme whilst for a standard rate tax payer the savings are £5.08 per £100 contributed.
The Autumn Budget 2018 was heralded by the government as the end of austerity. With less than six months to go until Brexit, borrowing still increasing and the terms of a deal still not reached that is an ambitious statement. However the budget was a sensible one with some important savings for individual taxpayers and businesses.
Our key points are below:
There was positive news for tax payers with an earlier than expected increase in the personal allowance bands (the income that can be earned before tax is paid).The basic rate tax threshold will be raised from £11,850 to £12,500 and the higher rate from £46,350 to £50,000 from April 2019-20. The threshold will remain at the same level in 2020-21.
The planned abolition of Class 2 National Insurance contributions and reforms to Class 4, which were due to take effect from 6 April 2019, will now not go ahead
The National Insurance Employment Allowance for smaller businesses was tweaked . From 2020/21, the £3k Employment Allowance will only be available to employers with a National Insurance bill in the previous tax year of £100,000 or less.
National Living Wage
The living wage was increasing by 4.9%, from £7.83 to £8.21 an hour from April 2019.
This was a big, expected change that’s been mooted for almost 20 years, but finally HMRC are bringing the rules into the private sector on the same basis it’s applied to public sector contracts. What does this mean? It basically means that any medium or large business that engages contractors employed through personal service companies will become responsible for assessing the contractor’s employment status. If they are deemed to be employed then income tax and NI will be deducted from any payments made to them. This makes contracting less attractive as it means higher tax bills without the same access to benefits that employees receive. One bit of good news is that the changes won’t be applied retrospectively by HMRC.
Some notable highlights here are:
- The annual investment allowance to be increasing from £200,000 to £1m for two years
- Business rates bill for firms with a rateable value of £51,000 or less to be cut by third over two years
- Tweaks to Entrepreneurs Relief , there will now be a new minimum two-year period of ownership required for sales made on or after 6 April 2019
Looking forward to speaking at the Southport ICAEW Members’ Forum on “The Digital Practice – building a modern accountancy firm” on 12 September. It’s going to be a great session, so if your interested in coming along please book using the link below. #digitization #howto #modernism #icaew
While most turn to contracting for the benefits it brings like flexibility in working hours, high day rates and income, it’s also true that Contractors lose out on a lot of the benefits that being ‘traditionally employed’ offers. Benefits like sick pay, contribution to your pension and cover for legal liabilities.
There is, however, one benefit you do gain when you run your own LTD company: it’s called Relevant Life Insurance.
Essentially, Relevant Life Insurance was put in place to afford small businesses the opportunity to benefit from the same tax breaks large corporations enjoy through group life schemes. More simply, it’s life insurance that’s tax efficient for Directors (or employees) of LTD companies.
To unpack the value that Relevant Life Insurance brings, let’s use the example that you own your own company and pay £100 a month from your own pocket and post-tax income for life insurance. The likelihood is that it’s costing your company more than it should.
If you’re a 40% taxpayer, there’s income tax and 2% employee national insurance contribution, plus 13.8% employers’ national insurance contribution.
In fact, after 19% corporation tax relief, the net cost to your company works out at £158.93 per month for you to pay for the policy personally.
With Relevant Life Insurance you can make some serious savings in what you are paying by expensing your life insurance through your company. If you pay £100 a month for a Relevant Life Plan you won’t pay any national insurance contributions or income tax on the premiums but you still get the 19% corporation tax relief, making the net cost only £81 per month.
That’s a huge saving of £77.93 a month or £935.16 over the year
Not only that, if you are nearing the end of your tax year and have profits in your company that could be taxed, paying for your life insurance in one lump sum can help to reduce your corporation tax bill.
With the savings that can be made, it is well worth investigating if Relevant Life Insurance is right for you as a LTD company director.