The Chancellor, George Osborne, delivered his Spending review and Autumn Statement Speech on 25 November 2015. This article outlines the changes relevant to small-business owners. The few ‘headlines’ were
- an extra 3% stamp duty land tax charge on the purchase of additional residential properties from 1 April 2016
- a requirement to make a payment on account in respect of capital gains tax within 30 days of the disposal of residential properties from April 2019
- the changes announced to tax credits in Summer Budget 2015 have been abandoned.
More information on the tax proposals scheduled for inclusion in Finance Bill 2016 will be published in the Government’s ‘Overview of Legislation in Draft’ on 9 December.
Making tax digital
As announced at Summer Budget 2015, the government wants to digitise the tax process. The aim is to modernise the tax system and provide a more real-time working basis of individual and business tax affairs, which one would expect, will lead to the advance of tax payments in many cases in due course. Key details so far are:
- digital tax accounts are to be introduced for all small businesses and individuals by 2016/17
- by 2020 most businesses, landlords and the self-employed will be required to update HMRC quarterly regarding their tax affairs. The details of how this will work in practice have not yet been decided
- the intention to consult on ways to simplify tax payments with suggestions of tax payable as profits arise (as announced for capital gains tax arising on the disposal of residential property with payment due 30 days after completion from April 2019).
Employees and pensioners will not be required to update their digital tax accounts quarterly unless they have secondary incomes of more than £10,000 per year.
The Government is to simplify the tax payment process for taxpayers within the Self-Assessment system where HMRC already holds all the data it needs to calculate the tax liability. Rather than requiring the taxpayer to file a return, instead HMRC will send a legally enforceable payment demand, which the taxpayer can challenge or appeal. This is expected to be introduced from 2016/17.
An additional 3% on top of current SDLT rates from 1 April 2016 will be charged on the purchase of additional residential property (e.g. buy to lets and second properties over £40,000), though exclusions to certain corporates and funds are expected.
Dividends for company owners
There was no further commentary with respect to the Summer Budget 2015 announcement regarding the increase in dividend tax rates and the dividend allowance due to apply from April 2016, so the expectation is that these will be introduced in the Finance Bill 2016 as previously announced
Further to the announcement at Summer Budget 2015, the Government has now consulted on fundamental changes to pension tax relief. One of the options is that instead of receiving tax relief on the contribution, the savings would work more like an ISA, with a Government top-up and tax-free extraction on retirement.
The Government will provide an update on this at Budget 2016.
Self-Assessment time limits
Draft legislation is to be published ahead of Finance Bill 2016 to clarify that the time allowed for making a self-assessment is four years from the end of the tax year. No further information is included in Autumn Statement documentation but it is possible that this has been prompted by a recent case on tax administration.
There wasn’t a great deal in the Autumn Statement that we didn’t know about, or expect. This article is not a comprehensive review, but concentrated on the issues relevant to small-business owners. If you’d like to know more you can read the government’s documents here. If you’re concerned that any of the changes mentioned may affect you please get in touch.