Blog Post

Changes to Isa's

J ARMSDEN • Mar 30, 2017

From 6 April 2017, the new Lifetime ISA will be available to any adult under the age of 40. Individuals will be able to deposit up to £4,000 per tax year, and receive a 25% bonus from the government on any savings put into the account before their 50th birthday.

The tax-free savings and the government bonus can be put towards a deposit for a first home in the UK worth up to £450,000 at any time, from 12 months after having first saved into the account. Should an individual wish to make contributions towards their retirement, the funds, including the bonus, may be withdrawn from age 60 tax-free.

Lifetime ISA holders can also withdraw money before their 60th birthday for other purposes. However, a 25% government charge will be applied to the amount of the withdrawal, along with a 'small additional charge'.

Meanwhile, from 6 April 2017 the overall annual ISA subscription limit rises from £15,240 to £20,000. Additionally, the annual Junior ISA subscription limit will increase from £4,080 to £4,128.

An individual will only be able to pay into one Lifetime ISA each tax year, as well as a Cash ISA, a Stocks and Shares ISA and an Innovative Finance ISA.

By J ARMSDEN 22 Jun, 2023
As annual inheritance tax receipts exceed £6bn a year, it is essential to follow some basic tax planning to protect your estate. Stevie Heafford, tax partner at HW Fisher, explains 1. When do I need to start planning? As early as possible as your circumstances and exposure to IHT will change over time. Early on, an insurance policy might be all that is necessary but more complex planning will be appropriate as wealth increases. 2. Can I afford to make lifetime gifts? A good tool is a professional cash flow forecast which is updated regularly. You can plan in major life events (such as marriage, holidays, care fees) and see what your overall position is. 3. Is planning only for the wealthy? No – many people have been pushed into the IHT net due to increases in property values. 4. What is the current nil rate band? The current nil rate band is £325,000 per person. This can be used against both lifetime transfers and transfers on death. It effectively ‘refreshes’ every seven years. Any unused nil rate band as at the date of death can be transferred to a surviving spouse for use on their death. 5. What is the residence nil rate band? This is a further nil rate band of up to £175,000 which is available if the residential property is passed to lineal descendants. It is only available against the death estate, but any unused relief can be passed to a surviving spouse. The relief is tapered for estates in excess of £2m. 6. Can I make lifetime gifts free of IHT? Yes, the nil rate band can be set against lifetime gifts as well as on death. There is also an annual exemption of £3,000 – this can be rolled forward up to one tax year. In addition to this, small gifts of up to £250 and gifts out of excess income can be made to anyone free of IHT. You can also make gifts of between £1,000 and £5,000 (depending on the relationship to the giftee) in consideration of marriage or civil partnership. 7. Is it tax efficient to make gifts to charity? Yes – gifts to charity are tax exempt and if you leave at least 10% of your net estate to charity, the rate of IHT is reduced to 36%. 8. I have a business. Will that be exempt? Business property relief of up to 100% is available for businesses and shares in certain companies, as well as some assets that are held personally, but used by the business/company. However, it is easy to taint this if investment assets or excess cash are held within a trading business. 9. Can I leave my estate to my spouse tax free? Yes, if the estate is left to a surviving spouse, this is tax free. The surviving spouse will also inherit any unused nil rate band and residence nil rate band. Bear in mind that this will increase the spouse’s estate for IHT so may only be delaying the problem. 10. Can I pass on my pension tax free? Yes, you can pass on a pension pot tax IHT free. It is therefore better to draw down on cash assets (bank accounts, ISAs, etc) in priority to the pension as those assets will be subject to IHT on death. In the Spring Budget, the Chancellor abolished the lifetime pensions allowance and the annual cap on tax-free pensions contributions was increased to £10,000 a year. These changes have made pensions potentially even more valuable for IHT planning as you can pay more into your pension, and still have access to your funds should something unexpected happen.  From 13 April, the rate of interest on overdue IHT increased from 6.50% to 6.75% – making it even more expensive to get this tax wrong. Once you have worked out what you can afford to give away, we’d recommend seeking professional advice. There are a number of possibilities and pitfalls in IHT planning and a professional is trained to evaluate the knock-on effects of other taxes – such as capital gains tax – which might be triggered by IHT planning.
By J ARMSDEN 08 Mar, 2023
Late submission penalties HMRC is introducing new penalties for VAT returns that are submitted late. These replace the old default surcharge system. The penalties apply to all returns, even if it is a nil return or a return that claims a repayment from HMRC. This new regime will affect all VAT periods starting on or after 1 January 2023. The late submission penalties work on a points-based system. For each late return a penalty point is incurred, until the penalty point threshold is reached. When the threshold is reached, a penalty of £200 is incurred for each subsequent late return while the business is at the threshold. The penalty point threshold is set according to the frequency that the returns are submitted. Where annual returns are submitted, the penalty point threshold is two points. The threshold for quarterly returns is four points and five points for monthly returns. For example, a business submits quarterly returns, thus they have a threshold of four points. The business submitted three returns late. Consequently, it has accumulated three penalty points. When the next return is submitted late, it has reached the points threshold of four and incurs a £200 penalty. Any future late return will incur a £200 penalty. If the next return is submitted on time, it will remain on four points, but no penalty will be incurred. Details of any penalties can be checked on the business’s VAT online account . A review of the penalties can also be requested through the online account. Penalty point expiration Penalty points expire automatically. Where the deadline for a return was not the last day of a month, the penalty point expires on the last day of the month, 24 months afterwards. Where the deadline is the last day of the month, the points expire on the last day of the month, 25 months afterwards. Where the penalty points threshold has been reached, the penalty points can only be removed if both of the following apply. A period of compliance has been completed. This usually means that the next four VAT returns must be submitted on time if the business uses quarterly returns. All outstanding returns for the previous 24 months have been submitted. Late payment penalties Where a VAT payment is late, a penalty can be incurred. A first late payment penalty is incurred if the VAT payment is 16 or more days late. When the payment is 31 or more days late, the first late payment penalty increases and a second late payment penalty is incurred. The first late payment penalty is 2% of the VAT owed on day 15. Where the payment becomes 31 days or more overdue, the first late payment penalty is calculated at 2% of what was outstanding on day 15 plus 2% of what was still outstanding on day 30. The second late payment penalty is calculated at a daily rate of 4% per year on the balance outstanding and charged each day from day 31 until the outstanding balance is paid in full. The penalty can be reduced by paying off outstanding amounts. Penalties can also be reduced by making a Time to Pay arrangement with HMRC. Late payment interest In addition to the late payment penalty, interest is also charged on any unpaid amounts of VAT. It is charged from the first day that the payment is overdue until the VAT is paid in full. Interest is charged at the Bank of England base rate plus 2.5% on the outstanding amount.The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.
By J ARMSDEN 13 Jan, 2023
Corporation Tax is set to rise.
06 Oct, 2022
We are proud to announce that we are opening our new offices in the center of Syston. We have taken over the business formally known as Baker and Co. Baker and Co have been trading for over 20 years and have now retired and we wish them well. We open formally on Monday 10th October and our new members of staff Joe and Pheobe will be running our new offices on our behalf. Both Karen and I will be visiting on a regular basis and will also be available at our main office in Gaddesby. We will be running both offices side by side and if it is more convenient to call into our Gaddesby office, our staff here will be more than happy to help. Our new address is Unit 5, BrookBridge Court, Melton Road, Syston, LE7 2JT. The phone number of our new offices will be 0116 2640889 and we look forward to meeting you there.
By J ARMSDEN 25 Aug, 2022
HMRC revises car rates for company car owners.
29 Jul, 2022
HMRC has confirmed plans to modernise its direct debit payment system for employer PAYE so a recurring direct debit can be set up for the first time Currently employers can only set up a direct debit to collect a single payment, but not a recurring direct debit. As part of its payment modernisation programme, HMRC is going to offer a recurring direct debit to employers. This is part of a wider project to create a consistent set of payment methods for all taxpayers across the tax authority, rather than the current limited service, which varies depending on the type of tax payable. The service will be available from mid-September this year, HMRC said. Once available, there will be a change to the business tax account (BTA) and the employers’ liabilities and payments screens. There will be a new link for ‘set up a direct debit’. This will allow client companies to set up a direct debit instruction once, authorising HMRC to collect directly from their bank account based on their return submissions. After an employer has set up a direct debit, the link will change to ‘manage your direct debit’ and an employer will be able to view, change or cancel the direct debit online. Payments which will be covered by direct debit will show within employers’ liabilities and payment screens for both employers and agents. This service is not available for agents and only employers will be able to create, view, amend and cancel a direct debit. Employer PAYE liabilities and payments viewer update HMRC also confirmed that it has been extending employer PAYE for the agent online service on a rolling basis and that the expansion is ‘progressing well’. This service allows agents to see employer liabilities and payments records held by HMRC. All previous restrictions will be removed by the end of July and in future all agents will be able to access the service. This will include those with the assistant as well as administrative roles.
29 Oct, 2021
Buying a car through your limited company sounds like a great way to save tax. But in most cases, it’s more tax-efficient to buy the car privately and claim mileage. In this blog, we’ll explain why this is and what you can claim. To keep things simple, this blog only applies to company directors buying cars. If you’re buying a van or commercial vehicle, or if you’re a sole trader, things are different. The same goes for taxis, driving instructors and cars bought for self-drive hire. In any of these circumstances, you should contact us for advice. As a company director, you have two options when it comes to buying a car: you can buy or lease it yourself and claim business mileage as an expense; or the company can buy or lease the car and get a tax break on some of the costs. The first option, claiming mileage, is usually more tax-efficient, unless you’re buying a fully electric car, or a hybrid with very low emissions (as explained below). Why shouldn’t I buy my car through my company? The main problem here is that directors are classed as employees and are therefore subject to “benefit in kind” tax for their private use of any car owned by the company. You can use HMRC’s calculator to get an idea of what the benefit in kind tax on a car might be. You’ll need details including the car’s list price, fuel type and CO2 emissions. For hybrids, you’ll also need the “pure electric range”. Moreover, the company will have to pay employer’s NI on the value of the benefit. Although the company can reclaim some running costs and a portion of the purchase cost, thereby reducing its corporation tax, the benefit in kind tax and employer’s NI on company cars mean that it’s almost always more tax efficient for a director to buy or lease their car privately and claim mileage. Benefit in kind tax and employer’s NI apply to leased cars as well. So even if the company leases the car rather than buying it, claiming business mileage is usually your best bet. However, there are exceptions. Is it ever worth buying a car through my company? The rules for benefits in kind on electric and hybrid cars changed from April 2020. This means that if you’re buying an electric car with no CO2 emissions or a hybrid with very low CO2 emissions and a high “pure electric range”, it may be more tax efficient to buy it through your company rather than buying it privately and claiming mileage. Everyone’s situation is different, so if you’re considering this sort of car, it’s worth contacting us to crunch the numbers. If the car is a pool car, you should buy it through the company. A pool car is a car that is available to all employees, that no employee can use for personal use, and which is parked at the business premises, not an employee’s or director’s home address. How do I claim business mileage? As discussed, if you’re going to use the car for private and business travel, it’s easier and almost always more tax efficient to buy it privately and claim business mileage. This works as follows. 1. You buy (or lease) the car privately, just as you would if you weren’t a company director. 2. You keep a log of your business travel. This is simply the number of miles you drive in your car for business purposes. Trips to clients, suppliers, conferences, training days and your accountant all count as business travel. Your daily commute to work doesn’t. You can use an app such as MileIQ to track your mileage, but a spreadsheet listing your business journeys and the distance travelled would also be fine. 3. Multiply the number of business miles you’ve done by HMRC’s business mileage claim rates. Currently these are 45p per mile for the first 10,000 miles annually, and 25p per mile for any further miles. For example, say in one year you do 16,000 business miles. 10,000 x 0.45 = £4,500 6,000 x 0.25 = £1,500 Adding these together gives £6,000. 4. Your company reimburses you for this amount and puts it through on its accounts as a business expense, reducing its profits and therefore its corporation tax bill. There’s no benefit in kind tax for you. It’s that simple. NB, If you use the mileage method, then the cost of the vehicle, maintenance, fuel, insurance and road tax all have to be paid for privately by the director. You can’t claim these as an expense for the company. You can only claim the mileage. If you have any questions about buying cars, vans or other vehicles through your company, don’t hesitate to get in touch. .
22 Oct, 2021
There is no simple answer. It depends on a number of factors such as how many properties you hold, whether you need the income quickly and how long you want to hold the properties for and your individual circumstances. Limited companies are not affected by the new mortgage interest relief restriction which came into effect from April 2017. Interest for limited companies is classed as a business expense and fully deductible against income. Companies pay Corporation Tax at a fixed rate irrespective of the size of the profits. The Corporation Tax rate is currently at 19% This makes the tax rate very attractive compared to 40% for higher rate tax payers and 45% for additional higher rate taxpayers. The question is how the money in the company is passed to the individual. If the money is taken out of the company as a dividend, then the first £2,000 of dividend income is tax free. Any dividends taken out in excess of this will either be charged at 7.5% for a basic rate taxpayer 32.5% for a higher rate taxpayer or 38.1% for an additional higher rate taxpayer. This tax is after the corporation tax at 19% has been paid. The money could be taken as a salary, however the company would have to operate PAYE and pay Employers National Insurance contributions on any salaries paid. This usually (in most circumstances) works out more expensive than paying dividends. Companies also do not benefit from the annual allowance of £12,300 against capital gains. So extracting the money for a sold Buy to Let property could be less tax efficient than holding the property as an individual. As you have to pay the 19% Corporation Tax on any gain, no annual allowance is given and you have to pay tax on extracting the money from the company, whereas even a higher rate taxpayer only pays 28% on any gain from the sale of a buy to let as an individual. Companies also have to prepare accounts to be filed with company’s house and prepare and file corporation tax returns which can be more onerous than Self Assessment returns. Interest rates charged on mortgages to companies have historically been higher than to individuals so further investigation of the comparison of the rates charged should be considered alongside the tax implications. Transferring a current Buy to Let property into a limited company can trigger stamp duty and capital gains tax charges at the time of transfer so advice should be sought before undertaking such a transaction. Due to the complexities of this area it is essential that you seek proper professional tax advice before you proceed.
20 Oct, 2021
Yes. The income you receive as rent is taxable. You need to declare any rent you receive as part of your Self Assessment tax return. The tax on your income is then charged in accordance with your income tax banding (20% for basic rate taxpayers, 40% for higher rate, and 45% for additional rate). However, you can minimise the tax you have to pay by deducting certain ‘allowable expenses’ from your taxable rental income. Allowable expenses include: Interest on buy to let mortgages and other finance charges (but see below) Council tax, insurance, ground rents etc Property repairs and maintenance – however large improvements such as extensions etc will not be income tax deductible. They will be added to the cost of the property when it is sold and be deductible against any capital gain. Legal, management and other professional fees such as letting agency fees. Direct costs such as phone calls and advertising for new tenants Travelling to and from the property to inspect or manage the property Other property expenses including buildings insurance premiums New rules for tax relief on interest payments came into force from April 2017 which restrict the tax relief given on interest payments. The restriction is being phased in over 4 years with the aim to only give basic rate tax relief from April 2020. If you need any further advice, please dop not hesitate to contact us on 0116 2697222.
19 Oct, 2021
Professional Fee Protection is a optional scheme to cover accountancy fees for tax enquiries and disputes. The Importance of Cover HMRC has wide ranging inspection powers across all taxes. No reasons have to be given for opening enquiries and often they can be triggered for no apparent reason. Some of the risks faced are: • Full HMRC enquiries into accounts or returns – companies and individual taxpayers – including a small number of random enquiries • Enquiries arising from HMRC “task forces” in specific sectors or area • “Aspect” enquiries into part of a return • Disputes from VAT and PAYE inspections • IR35 disputes • ‘Interventions’ – HMRCs powers to inspect records and businesses outside of traditional enquiries • Cross tax enquiries – where HMRC looks at VAT, Income Tax, PAYE and Corporation Tax together • Surprise visits – HMRC can visit business premises to review records, with no prior arrangement • HMRC intelligence, eg HMRC targeting credit card companies to supply details of all merchants, ebay to provide details of traders and similar • Even if HMRC find nothing to assess, the fees to defend such enquiries and reviews can be substantial; because of their unpredictability our fixed fee agreements cannot cover Tax Disputes. Introducing R H Ball & Co’s Fee Protection Scheme In conjunction with Croner taxwise, one of the country’s leading tax companies, we offer a Professional Fee Protection Service to cover our fees, which would otherwise be payable by you, as the client; participating clients have cover for up to £100,000 of our fees or those of an Croner taxwise approved consultant for the following events: • Attendance at any face-to-face meeting with or dealing with any enquiry correspondence from HMRC • Income & Corporation Tax Self Assessment Full & Aspect and Schedule 36 Enquiries • Business Record Checks, VAT & Employer Compliance inspections (the actual meeting even prior to any possible disputes) and any resulting disputes (for example PAYE/P11D/P9D/NIC/IR35/CIS) Some costs are not covered by this service, notably the following: • Outstanding taxes, fines, penalties, interest or any amounts due to HMRC • Pre-existing enquiries or disputes • Claims arising from tax returns submitted outside statutory time limits i.e. late returns • The defence of criminal prosecutions and investigations • Routine Compliance work i.e. fees incurred in respect of preparing records for a PAYE or VAT inspection – the actual inspection, and any dispute arising from it, are covered. There is no excess payable, so full cover exists on all claims. For Companies and Partnerships there is automatic private individual cover for all directors or partners and their spouses for their Personal tax returns (as long as we are the Appointed Tax Agent and any other income is less than £15k pa for Self Employment or £50k pa for rentals. As a further service enhancement, Croner taxwise include a direct access Employment Law and Health & Safety Legislation helpline service – this is vital in order to help protect businesses from unwanted costs or litigation in these complex affairs. The 2021 scheme runs from 20th December 2021 to 19th December 2022. For details or to join our scheme please contact us.
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