This month’s newsletter includes articles covering: Philip Hammond has been appointed Chancellor, action required by certain buy-to-let landlords, a recent court of appeal case, and lesser known facts about the Employment Allowance.
Philip Hammond has been appointed Chancellor of the Exchequer as George Osborne returns to the backbenches.
Mr Hammond has already confirmed that there will be no emergency budget, and he will be presenting the usual Autumn Statement later in the year and a new Finance Bill March 2017.
The immediate impact for UK tax payers is therefore business as usual. The Finance Bill 2016 will continue its progress towards Royal Assent and we will continue to offer advice to clients based on current legislation.
The press, of course, are speculating on the options that Mr Hammond has when he does turn his mind to the Finance Bill 2017. These include a deferral in the introduction of tax changes for non-doms, a possible reduction in Corporation Tax rates to encourage businesses to stay in the UK (rates as low as 12% have been mooted), and other measures to encourage savings and investment.
Buy-to-let landlords need to start considering their options, in particular, those who have borrowed heavily in order to build their property portfolio. As we have mentioned previously in this newsletter, from April 2017 deductions for finance charges will be progressively reduced and replaced by a 20% tax credit. This will promote a number of landlords into the higher rates of Income Tax and increase most buy-to-let landlords’ tax bills where annual finance charges are significant.
Consider Jane. She has purchased a number of buy-to-let properties and her total rental income is £120,000 a year. Her expenses, excluding mortgage and loan interest are £15,000 and her mortgage interest £85,000. Jane has no other income.
Her Income Tax bill for 2016-17, based on these figures, is estimated to be £1,800 leaving her with disposable income from her property business of £18,200.
With no changes in her rents and expenses her Income Tax bill will gradually increase until 2020-21 (when the changes to tax relief on finance charges are fully implemented). Her tax bill for 2020-21 will increase to £13,500, leaving Jane with a much reduced disposable income of £6,500.
Landlords affected need to start to consider their options now. There are a number of practical changes that could be made. For example, Jane could:
If you have borrowed heavily in order to build your buy-to-let business, better to consider your options now than to be forced into less effective restructuring as the transitional period progresses.
If you leave your entire estate to charities, will you be turning in your grave if disinherited relatives mount a challenge to break your last will and testament, and succeed?
In a 2015 case heard by the Court of Appeal, a disinherited daughter challenged her deceased mother’s Will.
The background to the case is illuminating. The daughter had not been in touch with her mother since she left home at age 17, some 26 years prior to her mother’s death. The mother had made no provision for her daughter in her Will and left the majority of her estate to animal charities.
Aggrieved, the daughter brought a claim under the Inheritance (Provision for Family and Dependents) Act 1975. After many court appearances and appeals, the Court of Appeal has ruled that the daughter is entitled to share in approximately a third of her mother’s estate. It should also be pointed out that the daughter’s financial circumstances were somewhat straitened.
The charities that stand to lose out in this process are making a further appeal to the Supreme Court…
The Courts, therefore, have the power to over-rule the testamentary wishes of a deceased person if it feels that the needs of relatives prevail over and above the needs of non-related beneficiaries.
NIC Employment Allowance (EA)
For 2016-17, the EA is set at £3,000. This means that if you are eligible, you will not have to pay employers’ Class 1 contributions up to this amount. The following set out some of the less well known facts about this allowance:
Tax Diary August/September 2016
1 August 2016 – Due date for Corporation Tax due for the year ended 31 October 2015.
19 August 2016 – PAYE and NIC deductions due for month ended 5 August 2016. (If you pay your tax electronically the due date is 22 August 2016.)
19 August 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2016.
19 August 2016 – CIS tax deducted for the month ended 5 August 2016 is payable by today.
1 September 2016 – Due date for Corporation Tax due for the year ended 30 November 2015.
19 September 2016 – PAYE and NIC deductions due for month ended 5 September 2016. (If you pay your tax electronically the due date is 22 September 2016.)
19 September 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2016.
19 September 2016 – CIS tax deducted for the month ended 5 September 2016 is payable by today.
Hire a Chartered Certified Accountant in London and Essex, UK and forget all worries of managing financial assets of your firm.
Read more.. Recent Newsletters