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.

 

 

RTI – Real Time Information

Real Time Information (RTI) has been introduced to improve the PAYE system by assisting HMRC in gathering critical data on a more frequent basis.  It begins on your first pay date after 6th April 2013, so it is important to act very soon to ensure you can meet the requirements.

This change applies to your business if you have any employees, including those paid below the tax/NIC threshold, those paid just once a year, casual and temporary workers (unless they are paid by an agency). The main changes being implemented are:

  1. Reporting to HMRC: currently your payroll data is reported to HMRC annually on the  Employer’s End of Year Return (P35).  The 2012/13 tax year is the last time this will be done.  From 6th April 2013, employers will report their payroll data to HMRC every time they pay employees,
  2. Employees paid below the tax/NIC threshold must now be added to your PAYE scheme,
  3. It will no longer be necessary to file P46 and P45 starter and leaver forms: however, new starter information is still needed, and the employee must still be provided with a P45 when he/she leaves.

One of the first things you need to do to, before you even begin to consider the impact of RTI on your business, is talk to your existing software provider. It is important that you find out whether or not your software is currently RTI compliant or will be compliant before April 2013. This is when most employers will start operating the new PAYE process.

Collins Accountancy Ltd uses fully compliant software and provides a full payroll service. If you prefer to process payroll in-house please ask for software recommendations, some options are free.

RTI and payroll

The biggest exercise you may need to do is the data cleansing process and what HMRC refers to as ‘payroll alignment‘.

To minimise rejection due to a mismatch with HMRC records, it is important that the payroll records are reviewed for any missing and incorrect compulsory data. Where this data is not available, it must be obtained from the employee. The next step would be to transfer the amendments onto your computer system using your payroll software.

Using Collins Accountancy Ltd as your RTI provider

The introduction of RTI needs to be properly managed.  It is important to know that:

  • once the return has been filed there can be no more changes to the pay run,
  • All of the data needed for new starters must be obtained on a timely basis or the new starter may not get paid (in practice this may put you in a difficult position as you may have a legal and contractual duty to pay your employees).

Get help and advice with RTI

For information on Real Time Information visit the HMRC website and select the link which states ‘I confirm that I want to view guidance on operating PAYE in real time’. HMRC publications, such as the Employer Bulletin are usually worth reading too.

If we can help with any of the above please contact us.

 

RTI, pension auto-enrolment and minimum wage 2012

RTI. Auto-enrolment to pension schemes.  An increase to the minimum wage.

There have been a few changes in the news recently. The important ones for employers are the changes to national minimum wage, the introduction of RTI reporting, and the introduction of automatic enrollment of workers to pension schemes.

National Minimum Wage

From 1st October 2012 the minimum wage rates are:

  • £6.19 an hour for workers aged 21 and over (an increase of 11p)
  • £4.98 an hour for workers aged 18-20
  • £3.68 an hour for workers aged below 18 who are no longer of compulsory school age
  • £2.65 per hour for apprentices under 19, and 19 or over in their first year of apprenticeship

Payroll changes – RTI

HM Revenue and Customs (HMRC) is changing the way employers report tax and national insurance (NIC) liability.  Currently, you (or your payroll provider), calculate tax and NIC on a regular basis. You pay your employees their net wage or salary. You then pay the tax and NIC to HMRC monthly or quarterly.  At the end of the tax year, a P35 report is filed with HMRC.  The P35 confirms the amounts of tax each employee has paid, and the total tax and NIC deducted and paid to HMRC by the employer.

Under the new system – RTI (real time information) employers send a report to HMRC when every payroll run is completed.   Each report will contain employees’ personal and payment details.  So there will no longer be a year-end return to file.  HMRC will no longer require P46s and P45s to be filed, but you will still need the same information from starters and must give P45 information to leavers.

To prepare for the change you’ll need to make sure your software can file RTI reports, and check that all of your employee details are accurate.  If you use a payroll provider, or bureau, they should handle the change for you.

The payroll software that we use is fully compliant with the new regime, so clients can expect to see little difference in the work they need to do.

More information is on HM Revenue and Customs website, or please contact us for help with your payroll.

Pension Auto-enrolment

The introduction of compulsory pension schemes for jobholders has been in the news recently.  Currently only large companies must make sure all eligible workers are enrolled onto a qualifying pension scheme.  It will be extended to all employers by 2017.

Employers will have to deduct a proportion of the jobholder’s pay, and make an additional employer contribution.

The dates from which employers must start (the staging date), depend on the number of employees you have and your PAYE reference.  More information what you need to do, when you’ll need to do it, and what you must not do, can be found on the Pensions Regulator website:

When the time comes to set up your scheme, please talk to an independent financial advisor to find the most cost effective scheme for you and your workers.  If you would like help in finding a good financial advisor please contact us.