We’d like to wish all our staff, clients and business associates a very Murray Christmas! Thank you for all your support in 2017.
We are already looking forward to working with you as you grow your business in 2018.
Murray Christmas from everyone at Alexander Knight & Co.
We were pleased, alongside our friends Gresham Wealth Management, to bring some some much-needed Christmas cheer to children at Barnardo’s in Wythenshawe.
Alison and Murray dropped off boxes of presents, including food and toys for girls and boys, which will be distributed this week to vulnerable families supported by Barnardo’s in Wythenshawe.
Ragen Fallon, team manager at Barnardo’s Children’s Centres, said:
“We are delighted to receive these gifts which will go some way to bringing some festive cheer to some of the most vulnerable youngsters in our local community. We appreciate the support of local businesses like Alexander Knight & Co.”
The Chancellor Philip Hammond presented his first Autumn Budget on Wednesday 22 November 2017. His report set out a number of actions the government will take including support for more housebuilding.
His view is that the economy continues to grow and as a result the UK is creating more jobs.
The major attention-grabber was aimed at first time buyers who will not have to pay Stamp Duty Land Tax on homes costing up to £300,000.
Our summary focuses on the tax measures which may affect you, your family and your business.
Overall, it was a rather low-key budget for businesses. It’s a no-gain, no-loss budget for many of our clients. There was a lot of bluster about ‘looking at this’ and ‘thinking about that’, but not really much action, although this is really as we expected.
The increase in the research and development (R&D) tax credit scheme for large companies is good but an increase should have also been extended to SME’s who qualify. We wanted to see more incentives for SMEs not just the large corporates.
The uplift in EIS relief to £2m could be interesting to our entrepreneurial clients, although the application of more anti-avoidance measures may counter the benefit.
The raising of the basic and higher rate income tax threshold is positive for the economy and means more money can be spent on goods and services providing a tangible boost but it’s not major news.
Most SMEs will welcome a crackdown on the levels of taxation paid by multinational competitors operating outside UK jurisdictions.
On the negative side we want to see a reduction of red-tape for small businesses – the fact that the Chancellor is considering reducing the threshold at which small firms need to be registered for VAT is concerning. Any adverse changes to the VAT regime must be carefully considered.
The Budget proposals may be subject to amendment in the Spring Statement and subsequent Finance Act. You should contact us before taking any action as a result of the contents of this summary.
You can find our full summary of the Autumn Statement here.
Many of our clients are benefitting from the current R&D tax credits regime and this will continue.
It’s disappointing that the increase in R&D tax credits has only been extended to large businesses – rather than SMEs. However, the chancellor has confirmed a renewed campaign to alert SMEs to the fact R&D tax credits exists and we welcome this.
Corporation tax
Corporation tax rates have already been enacted for periods up to 31 March 2021. The main rate of corporation tax is currently 19%. As a reminder, the rate for future years is:
Class 2 National Insurance contributions (NICs)
The 2016 Budget announced that Class 2 NICs will be abolished from April 2018. The legislation to effect this measure was intended to be introduced this year.
In November 2017 the government decided to implement a one year delay so that Class 2 NICs will be abolished from April 2019.
The government is still committed to abolishing Class 2 NICs. The deferral allows time to engage with interested parties with concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits.
Class 4 NICs
The Chancellor announced in the 2017 Budget proposals to increase the main rate of Class 4 NICs from April 2018 but was forced to make a subsequent announcement that the increase would not take place and there will be no increases to NICs rates in this Parliament.
In July 2017, the government announced significant changes to the timetable and scope of HMRC’s digital tax programme for businesses. VAT will be the first tax where taxpayers will keep digital records and report digitally to HMRC.
The new rules will apply from April 2019 to all VAT registered businesses with turnover above the VAT threshold.
As with electronic VAT filing at present, there will be some exemptions from Making Tax Digital for VAT. However, the exemption categories are tightly-drawn and unlikely to be applicable to the generality of VAT registered businesses.
Keeping digital records will not mean businesses are mandated to use digital invoices and receipts but the actual recording of supplies made and received must be digital. It is likely that third party commercial software will be required. Software will not be available from HMRC. The use of spreadsheets will be allowed, but they will have to be combined with add-on software to meet HMRC’s requirements. In the long run, HMRC are still looking to a scenario where income tax updates are made quarterly and digitally, and this is really what the VAT provisions anticipate.
The government is investing a further £155m in additional resources and new technology for HMRC.
This investment is forecast to help bring in £2.3bn of additional tax revenues by allowing HMRC to:
There had been some speculation leading up to the Budget that the VAT registration limit would be significantly reduced. The Chancellor has announced that the VAT registration and deregistration thresholds will not change for two years from 1 April 2018 from the current figures of £85,000 and £83,000 respectively.
In the meantime, the government intends to consult on the design of the threshold.
During Budget 2017, it was announced that the government will legislate to encourage more investment in knowledge-intensive companies under the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs).
The Government will:
The changes will have effect from 6 April 2018. This measure is subject to normal state aid rules.
Venture Capital
The government will introduce measures to ensure venture capital schemes (the EIS, Seed Enterprise Investment Scheme and VCTs) are targeted at growth investments. The government has announced that relief under the schemes will be focussed on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’. Detailed guidance will be issued shortly after the publication of the Finance Bill.
VCTs
The government will legislate to limit the application of an anti-abuse rule relating to mergers of VCTs. The rule restricts relief for investors who sell shares in a VCT and subscribe for new shares in another VCT within a six-month period, where those VCTs merge.
This rule will no longer apply if those VCTs merge more than two years after the subscription, or do so only for commercial reasons. The change will have effect for VCT subscriptions made on or after 6 April 2014. The government will also legislate to move VCTs towards higher risk investments by:
The personal allowance is currently £11,500. The personal allowance for 2018/19 will be £11,850.
We remind you that not everyone has the benefit of the full personal allowance. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000, which is £1 for every £2 of income above £100,000. So for 2017/18 there is no personal allowance where adjusted net income exceeds £123,000. For 2018/19 there will be no personal allowance available where adjusted net income exceeds £123,700.
Tax bands and rates
The basic rate of tax is currently 20%. The band of income taxable at this rate is £33,500 so that the threshold at which the 40% band applies is £45,000 for those who are entitled to the full personal allowance.
In 2017/18 the band of income taxable at the basic rate for income (other than savings and dividend income) is different for taxpayers who are resident in Scotland to taxpayers resident elsewhere in the UK.
The Scottish Government set the band of income taxable at the basic rate at £31,500 so that the threshold at which the 40% band applies is £43,000. The additional rate of tax of 45% is payable on taxable income above £150,000 (other than dividend income) for all UK residents.
Tax bands and rates 2018/19
The government has announced that for 2018/19 the basic rate band will be increased to £34,500 so that the threshold at which the 40% band applies is £46,350 for those who are entitled to the full personal allowance. The additional rate of tax of 45% remains payable on taxable income above £150,000.
Dividends
Dividends received by an individual are subject to special tax rates. Currently the first £5,000 of dividends are charged to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the £5,000 allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed. Reduction in the Dividend Allowance The Chancellor has confirmed the Dividend Allowance will be reduced from £5,000 to £2000 from 6 April 2017.
The government expect that even with the reduction in the Dividend Allowance to £2,000, 80% of ‘general investors’ will pay no tax on their dividend income. However, the reduction in the allowance will affect family company shareholders who take dividends in excess of the £2,000 limit. The cost of the restriction in the allowance for basic rate taxpayers will be £225 increasing to £975 for higher rate taxpayers and £1,143 for additional rate taxpayers.
For specific advice on your tax affairs speak to our team now on 0161 980 8788.
