Tax changes from April 2016

Tax changes from April 2016 – what’s new?

There are many changes being implemented in UK taxation and accounting rules this year.  This is a very brief summary aimed at owners of small businesses, sole traders and sole directors.

Personal tax allowances and tax bands

  • The income tax personal allowance increases to £11,000 and the basic rate limit increases to £43,000.
  • Married couples’ can share part of their allowance, for low income families.
  • Income tax remains at 20% (basic rate) 40% (higher rate) and 45% (upper rate).
  • The capital gains tax (CGT) exempt amount is £11,100.
  • CGT rates remain at 18% (basic rate taxpayers) 28% (higher rate taxpayers).

Savings

  • There is a 0% savings tax band of £5,000 and a new 0% personal savings allowance of £1,000 for basic rate payers and £500 for higher rate payers.
  • There is a new range of ISAs savings including a right to buy ISA and it is anticipated a crowdfunding ISA will be launched.

Dividends

  • A new tax regime for dividends begins from April 2016.
  • Dividends will be taxed at 0% for the first £5,000, then 7.5% (basic rate), 32.5% (higher rate) and 38.1% (upper rate).

Employers

  • The compulsory National Living Wage (NLW) is being introduced from 1 April 2016. It is the legally required minimum level of pay for workers aged 25 and over.  The penalty for failure to pay either the NLW or the NMW of these will also increase from 100% of the underpayment to 200% of the underpayment on 1 April 2016.
  • National Minimum Wage increases have been announced for October 2016.Age 25 and over: £7.20 – (This is the National Living Wage effective from April 2016 and so will not increase in October 2016)Age 21 – 24: from £6.70 to £6.95

    Age 18 – 20: from £5.30 to £5.55

    Age 16 – 17: from £3.87 to £4.00

    Apprentice rate: from £3.30 to £3.40

    Please note – from 2017 the date for all minimum wage increase will be changed from October to April each year. This is to bring National Minimum Wage increases in line with National Living Wage increases.

 

Trivial Benefits

There will be a new exemption from income tax and national insurance for trivial benefits up to £50, with an annual cap of £300 for office holders of close companies and their families or households.   The exemption is an ‘all or nothing’ exemption: if the value of the benefit is £60 then the full amount of £60 is taxable, not just the £10 excess.   Examples of trivial benefits include things like birthday/wedding/Christmas gifts and workplace refreshments (coffee, tea, biscuits).

 

Workplace Pensions

Auto-enrolment continues to be rolled out. This is a compulsory change for everyone paying workers, and there are strict deadlines and procedures to meet.  I have arranged for a cost-effective solution for my payroll clients, and will be speaking to everyone in due course. If you process your own payroll, make sure you check your staging date on the Pensions Regulator website, and start preparing in plenty of time.

RTI (real time information)

The temporary relaxation in RTI reporting for micro employers will end as planned on 5 April 2016. The concession allowing employers to submit returns up to three days late without being subject to late filing penalties is withdrawn.

National Insurance

From 6th April there will be no Employers’ NIC on wages paid to apprentices aged under 25 or employees under 21 earning up to the Upper Earnings Limit of £43,000.

The Employers’ NICs allowance increases to £3,000 but is no longer available for companies where the sole director is the only employee.

 

 

For more information on any of the above please get in touch.

 

 

Payroll changes 2014-15

Payroll changes 2014-15Payroll changes 2014-15 are the usual updates to tax codes, tax rates and NIC rates.  Good news includes a delay in the implementation of late filing penalties under the RTI system, and a £2,000 reduction to employer’s NIC.  On the downside, employers will no longer be able to reclaim SSP paid to employees.

 

RTI LATE FILING PENALTIES

The penalties for late filing of the FPS files which were due to commence April 2014 have been postponed until October 2014.

The FPS files are the Real Time Information (RTI) reports sent each pay period and are due on or before the pay date. The fines are per late FPS and depend upon the number of staff you have:

Staff Monthly Penalty

  • 1 to 9 employees  £100
  • 10 to 49 employees £200
  • 50 to 249 employees £300
  • 250 or more employees £400

The penalty notices will only be sent out quarterly ,so the bill could be quite high when you receive it.  Payment is due within 30 days of the notice.

Where an FPS is late for more than 3 months and the information is not included on a later submission a further charge is made – 5% of the Tax/NICs which should have been on the submission.

SSP RECLAIM ABOLISHED

From April 2014 the reclaim of SSP will be abolished. You still need to keep a record of SSP paid in the normal way but there will be no reclaims at all. Reclaims for SMP, SPP and SAP remain the same.

TAX RATES 2014-15

The new standard tax code is 1000L

Tax Bands:

  • 20% £1 to £31,865
  • 40% £31,866 to £150,000
  • 45% £150,001 and above

NIC Thresholds 2014-15:

Payments start from the primary threshold: weekly pay of  £153, monthly £663, annual £7,956

Employees deductions are 12% on amounts above the primary threshold, up to £805 weekly/ £3,489 monthly then 2% on all other earnings

Employers liability: 13.8% on all earnings above the secondary threshold (values are the same as the primary threshold mentioned above).

The threshold for statutory payments is £111 per week.

SSP rate £87.55 per week

SMP/SPP/SAP standard rate £138.18

Student loans are recovered at 9% on earnings above: weekly £325.19 , monthly £1,409.16 or annual £16,910.00.

£2,000 NIC ALLOWANCE

HMRC are introducing a £2,000 Employers Allowance to be offset against your Employer’s NIC. Most employers are eligible for this and we will be taking it into account on your monthly PAYE Summaries.

There are a small number of employers who are not eligible and you can check your entitlement by logging on to the following website:

https://www.gov.uk/employment-allowance-up-to-2000-off-your-class-1-nics