Firstly a big thank you to all my clients over the past 12 weeks.  You have enabled me to continue to trade and I am very grateful for that.

It has been a busy period with much focus on supporting business clients with help and advice on the various Government grants and schemes to help you through this difficult period.  It would be nice to now focus on recovery and resilience for the future.

Our office front door is now open, our intercom is up and running and we have made the office safe for visitors wishing to visit.  As always I would request that you let me know when you intend visiting and I can ensure I am here to greet  you.

My business is built on personal contact.  I miss you all and I look forward to meeting face to face again.

As always, feel free to contact me by phone or email and my main message is that my business is open for all of you if you need me.

Lots of provisions in the Budget to try to minimise the economic effects of Coronavirus.  Otherwise the main changes affecting my clients were as follows:-

Personal

Tax bands – no change in the tax free personal allowance of £12,500 and basic rate tax band of £37,500

National Insurance threshold – the level at which employees pay NIC will increase from £8,632 to £9,500 resulting in a tax cut of around £104 for employees and £78 for the self employed.  However the employers NIC has only increased to £8,788.  Thus the tax efficient salary for one man companies will be £732 pm (up from £719pm).

Tapered annual allowance for pensions

The thresholds of £110,000 and £150,000 will increase by £90,000 meaning that the annual allowance will only begin to taper down for individuals who have “adjusted income” above £240,000 (previously £150,000).  However those with income of over £300,000 will only be able to contribute £4,000 to their pensions before tax relief if clawed back (previously £10,000).

Home workers – the HMRC rate to cover household expenses will rise from £4 to £6 per week

Capital gains annual exemption limit – this has increased from £12,000 to £12,300

Inheritance tax – the nil rate band remains at £325,000 but the residence nil-rate band has increased to £175,000 (as previously announced).

Business

Corporation tax remains at 19%

Entrepreneurs relief –  the lifetime limit on gains which qualify for the 10% tax rate under entrepreneurs’ relief is reduced from £10m to £1m.  Gains above this limit will be charged at the standard rate of 20%.  80% of entrepreneurs selling their businesses are unlikely to be affected by this.

Off payroll reforms from 6 April 2020 – there was no movement on this.  There will be a duty on the client to determine whether a contractor is inside or outside of IR35 and HMRC have issued guidance on this.  It remains to be seen how it will operate in reality.

Employment allowance – this will increase from £3,000 to £4,000

VAT threshold – remains at £85,000

Capital gains tax

April 2020 will see the implementation of new capital gains tax (CGT) rules, including the introduction of new stand-alone CGT return for disposals of UK residential property. From this date, the returns will have to be submitted and tax paid within 30 days of the completion date of the disposal.

This may take many property owners by surprise and we can only hope that solicitors/conveyancers handling the sale draw it to the attention of the seller.  This is very different to the current method of declaring the sale on the tax return which can often be many months after sale.  It should be noted that sales will still need to be reported on the annual tax return even if a stand alone CGT return has been submitted.

Making Tax Digital

Although there are no major changes expected until 2021, businesses need to prepare for the new requirement for digital links from April 2020. From this date, all data exchanged between different software programs will need to be via a digital link.

IR35

April 2020 will also see the new off-payroll working rules bringing the private and the public sectors in line. The new process will impact personal service companies as well as businesses engaging contractors through personal service companies.

For more information contact jayne@stratfordtaxstudio.co.uk

From April 2020, a new method of measuring CO2 emissions for car benefit purposes is being phased in to link the tax cost of a company car with its environmental impact.

The new rules will affect any cars registered from 6 April 2020 when their CO2 emissions will be determined by the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). This will replace the existing method of calculating CO2 emissions,. The WLTP test is designed to reflect real world driving conditions and will, on average, increase the reported CO2 values and thus the tax costs for employer and employee.

To phase in the impact of the changes, the percentage used to calculate the benefit in kind determined by the emissions under WLTP will be reduced by 2% in 2020/21 and then 1% in 2021/22. This means that the full effect of any increase in the stated CO2 emissions figures on the benefit in kind will not take effect until 2022-23.

For  zero-emission vehicles, a new 0% rate will be introduced (even those zero emission cars registered before 6 April 2020) for 2020/21, which will increase to 2% by 2022-23.

All other company cars registered before 6 April 2020 will still be classified under the existing method. This means existing company cars will not be affected, but employers and employees should consider the impact of the new CO2 emissions test on future replacement vehicles.

In his Budget Philip Hammond announced that the “era of austerity is finally coming to an end but discipline will remain”.  It was a budget with no nasty surprises which is a relief.  All we need now is a good Brexit deal!  I have highlighted below some of the main headlines which will affect my clients.  The Finance Bill will be published on 7 November 2018 we will provide further detail.

Business taxes

Annual Investment Allowance (AIA) – The amount of qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020 will go up from £200,000 to £1m.

Digital service tax – from 2020 a new 2% tax will apply to digital businesses with annual UK revenues above £25m.  About time!

Employment allowance – From 2020 only employers with NIC bills below £100,000 in the previous tax year will be eligible for EA, which provides up to £3,000 of relief.  This is good news and better targeted at smaller businesses instead of wasting money giving it to large corporations.

Entrepreneurs’ Relief – For disposals from 6 April 2019 the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months.  In addition to the current requirements on share capital and voting rights, for disposals from 29 October 2018 shareholders must also be entitled to at least 5% of the distributable profits and net assets of a company to claim the relief.  This is a tightening up of ER.

Property tax

Capital gains tax and private residence relief – from April 2020 the final period exemption will be reduced from 18 months to 9 months.  Lettings relief will be limited to properties where the owner is in shared occupancy with the tenant.  More detail is needed on this as it effectively seems to remove the relief in all but the most limited circumstances!

Business rates –  Bills will be cut by one-third for retail properties with a rateable value below £51,000 for 2 years from April 2019 (until the next rate revaluation).

Personal tax

Personal Allowance (PA) and higher rate threshold – The PA and higher rate threshold will rise to £12,500 and £50,000 respectively from April 2019, one year earlier than planned. Both will remain at the same level in 2020-21 and then the PA will increase by Consumer Price Index (there is no corresponding commitment in relation to the higher rate threshold).

Off-payroll working in the private sector – In line with public-sector bodies and agencies, the IR35 extension rules will be applied in the private sector from April 2020. Responsibility for operating the charge will move from individuals to the organisation, agency or other third party engaging the worker, though small organisations will be exempt.  It will apply to Large and medium-sized businesses who are generally defined as those with 50 employees or more and those with either turnover or assets of €10m or more.  This needs to be confirmed.  There will be a further consultation on coming months which is expected to be published in Summer 2019 and HMRC will provide support and guidance ahead of implementation.  Yet more red tape!

Indirect taxes

VAT registration threshold – The current level of £85,000 will remain for a further two years until April 2022. The government will look again at the possibility of introducing a smoothing mechanism to avoid the ‘cliff-edge effect’ for small businesses once the terms of EU exit are clear.

Avoidance and evasion provisions

Insolvency – Taxes collected and held by businesses on behalf of other taxpayers (VAT, PAYE Income Tax, employee NICs, and Construction Industry Scheme deductions) will get preferential treatment on insolvency from 6 April 2020 (the rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs). Further, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.