Business owners – are you ready for retirement?

Being a business owner, it’s likely that all your energy is expended on building a successful enterprise. You’ve provided for your family and created jobs, but have you protected your own future with a retirement plan? If the answer is no, now is the time to start.

Pension fund planning

Building a retirement fund through regular or one off pension contributions enables tax savings and inheritance tax advantages.

Business owners can benefit from pension schemes including small self-administered schemes (SSAS’s), which can be used to lend or invest in your business.

If selling your business is part of your long-term plan, making exceptional pension contributions from your company will save corporation tax while you own the company and reduce capital gains tax on the sale of the company.

Commercial property

 You or your company may own the building it trades from, it is an option is to sell the trade and retain the property.  This would immediately generate a lump sum and rental income over several years, providing long-term revenue.

Selling your business

If raising a retirement fund from the sale of your business is your intention, we recommend that your business is reviewed and tailored for sale to maximise the potential proceeds.

A family management buyout may provide a secure pension fund while providing future generations the opportunity to thrive.

The key to successful retirement is to start in good time and to ensure your advisors have the depth of experience to guide you through all the different aspects of planning.

Chancellors Spending Review

Chancellors Spending Review and Autumn Statement 2015: key announcements

 2014 Chancellors Budget images

The Spending Review and Autumn Statement has been set out to Parliament – here’s a summary of what was announced.

1. £4 trillion of spending has been allocated by the government over the next five years

The Spending Review sets out how £4 trillion of government money will be allocated over the next five years, so the government can invest in priorities like the NHS, defence and housing.

On average, departmental spending will fall at less than half the rate of the previous five years.

A full list of departmental spending settlements can be accessed at the bottom of this page.

2. A £10 billion surplus by 2019-20

Last year, the deficit was halved compared to its 2009 to 2010 level. Next year, it will be down by three quarters.

Over the next four years, the deficit will have been eliminated and the government will be running a surplus – raising more than is spent.

3.Tax credits

The government will borrow £8 billion less than forecast – making faster progress towards eliminating the deficit and paying down debt.

The improved public finances allow the government to reach the same goal of a surplus while cutting less in the early years, to smooth the path to the same destination. That means it can help on tax credits.

The government has had representations that these changes to tax credits should be phased in, and listened to the concerns, heard them and understood them.

And because the government has announced today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether. Tax credits are being phased out anyway as the government introduces universal credit.

What that means is that the tax credit taper rate and thresholds remain unchanged. The income rise disregard will be £2,500.

The government will propose no further changes to the universal credit taper, or to the work allowances beyond those that passed through Parliament.

On the figures published today (Wednesday 25 November), the government will still achieve the £12 billion per year of welfare savings promised.

4. Introducing London Help to Buy and Help to Buy: Shared Ownership

A new Help to Buy equity loan scheme for London will give buyers 40% of the home value from early 2016, as opposed to 20%, as the current scheme offers.

The government is also announcing a series of other schemes, including Help to Buy: Shared Ownership to help people get on the housing ladder.

From 1 April 2016 people purchasing additional properties such as buy to let properties and second homes will pay an extra 3% in stamp duty. Money raised from tax on people buying their second home will be used to help those struggling to buy their first home.

Read more about the Help to Buy announcements made at the Spending Review and Autumn Statement.

5. Protecting the police budget

The government will protect overall police spending in line with inflation – an increase of £900 million by 2019-20.

Additional funding will be provided for forces who have strong proposals to support efficiency and reform. The National Crime Agency’s budget will also be protected in cash terms to help cut organised crime.

This funding will also allow forces to adapt to changing crime threats and train more firearms officers to make sure the country can be protected from terrorist threats.

£1 billion will also be spent on 4G communications for police forces and other emergency services, allowing officers to take mobile fingerprints and electronic witness statements. This will free up officers’ time, saving around £1 million a day when fully operational.

6. Local councils will get control over local taxes and provide extra support for social care

Councils will be given even more powers over decision making in their local areas. They will be able to add 2% on council tax to pay towards social care in their areas, if they wish.

From 2020 they will be able to keep money from business rates collected from shops and businesses, to spend on local services like street repairs, libraries and transport.

Local police and crime commissioners will also have the ability to raise local council taxes. Council tax is currently made up from money that goes to local services like police and fire services as well as local councils. From next April, police forces will be able to increase the amount they require from council tax collections by 2%.

7. Half a trillion pounds for the NHS

NHS England will receive £10 billion more a year in real terms by 2020 than in 2014-15. This will fund:

  • 800,000 more operations and treatments
  • 5.5 million more outpatient appointments
  • 2 million more diagnostic tests • access to GP services in the evenings and at the weekend, and 7-day access to hospital services by 2020

By 2020, health and social care will be integrated across England, joining up services between social care providers and hospitals. This will mean that health and care will feel like a single service for patients.

Grants for health students will also be replaced by loans, and the cap on the number of nurses and midwives that can go into training each year will be removed, providing up to 10,000 more nurses and other healthcare professionals for the NHS. These students will be able to receive 25% more financial support during their studies as a result.

From 2020, people with suspected cancer will be diagnosed or given the all clear within 28 days of being referred by a GP, helping to save up to 11,000 lives a year.

Over £500 million will also be spent on new hospitals including in Cambridge, Brighton, and Sandwell.

8. The basic state pension will rise to £119.30 a week

From April 2016, the basic state pension will rise to £119.30 per week, an increase of £3.35. This will be the highest real terms increase to the state pension for 15 years.

9. Schools funding will be protected

Schools funding will be protected in line with inflation. £23 billion will be invested in school buildings, creating 600,000 extra school places and 500 free schools.

Maintenance loans will also be available to higher education students who study part time from 2018.

10. The UK will meet its NATO target of spending 2% of national income on defence

The Ministry of Defence’s budget will be increased by more than £5 billion by 2020-2021.

£1.9 billion will also be spent on cyber security over the next five years, including on a new centre to protect the UK against attacks. Counter terrorism spending will increase by 30%, including providing 1,900 new intelligence staff.

11. The UK will continue to spend 0.7% of national income on aid

Aid funding will continue to be protected, including a new £1 billion global vaccine fund speed up the development of drugs to eliminate the world’s deadliest infectious diseases.

A new £500 million crisis reserve will also be set up so the UK can respond quickly and effectively to crises as they happen.

12. Part time season tickets and money back if your train is late

New flexible season tickets will soon be available on certain lines across the country, including C2C between London and Essex, and the Great Northern Route on Thameslink. This means that commuters will be able to buy part time season tickets, if they wish.

Better mobile connectivity will also be provided through a pilot scheme on commuter lines in London, the Midlands and the North.

Commuters will also soon be able to claim compensation from their rail tickets if their train is more than 15 minutes late.

13. More money for Scotland, Wales and Northern Ireland

Scotland, Wales and Northern Ireland will all receive more money to be spent on infrastructure projects, with each government deciding where this will be spent.

This will be an increase of around 14% for Scotland, 16% for Wales and 12% for Northern Ireland.

14. Tampon tax: VAT from the sale of tampons will go towards women’s charities

Around £15 million in VAT is collected each year on sanitary products. While EU rules mean that the government cannot remove all VAT on sanitary products, an annual fund will instead be set up equivalent to the yearly value of this tax.

The fund will be donated to women’s charities over this parliament, or until the UK can remove the tax from sanitary products.

15. Making the cost of going greener cheaper for households

The current Energy Companies Obligation runs until March 2017. This will be replaced from April 2017 with a new cheaper energy supplier obligation to reduce carbon emissions which will run for five years. The changes will mean that on average 24 million households will save £30 a year on their energy bills from 2017.

The Warm Home Discount scheme will also be extended to 2020-2021. This currently gives certain low-income households a one-off reduction of £140 on their electricity bill. People can apply for the scheme online through their supplier.

16. Further detail set out on the Apprenticeship Levy

At Summer Budget it was announced that three million new apprenticeships will be created by 2020, funded by a levy on large employers.

The apprenticeship levy will come into effect in April 2017, at a rate of 0.5% of an employer’s pay bill. A £15,000 allowance for employers will mean that the levy will only be paid on employers’ pay bills over £3 million.

Less than 2% of UK employers will pay the levy.

17. 300,000 homes better protected from floods

300,000 homes will be better protected from flooding by 2021, with £2.3 billion for over 1,500 flood defence schemes across the country.

This includes improvements to sea defences at Rossall in Lancashire which will reduce the risk of flooding for 7,500 homes, and money to protect 3,000 residential properties and 500 businesses in Leeds city centre.

18. Millions of pounds of investment in transport, arts and science in the North

A £400 million Northern Powerhouse investment fund will be created to help small businesses to grow. £5 million will also go to Manchester museum to create a new South Asia gallery in partnership with the British Museum, and £150 million to help make oyster style ticketing a reality across the whole of the North.

The government will also support the Rugby League World Cup bid for the UK in 2021 so matches can be held across the North. £1 million will go towards the Hull City of Culture programme for 2017.

19. Museums and galleries will remain free

Funding for museums and galleries will be maintained so they remain free to the public. To build on the success of the London Olympics and Paralympics in 2012, funding to the UK’s top athletes will be increased by 29% to support Team GB at Rio 2016 and Tokyo 2020.

20. People will no longer be able to get cash compensation for minor whiplash claims

To make it harder for people to claim compensation for exaggerated or fraudulent whiplash claims, the government is ending the right to cash compensation.

More injuries will also be able to go to the small claims court as the upper limit for these claims will be increased from £1,000 to £5,000.

This means that annual insurance costs for drivers could fall by between £40 to £50 a year.

Departmental settlements (£ billion)

Resource Departmental Expenditure Limits (DEL) excluding depreciation

Department 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Defence 27.2 27.8 28.5 29.2 30.0 31.0
Single Intelligence Account 1.8 1.8 2.0 2.1 2.2 2.3
Home Office 10.3 10.7 10.6 10.6 10.6 *
Foreign and Commonwealth Office 1.0 1.0 1.0 1.0 1.0 *
International Development 8.5 9.1 9.3 10.7 11.0 *
Health (inc. NHS) 111.6 115.6 118.7 121.3 124.1 128.2
Work and Pensions 5.8 6.1 6.3 5.9 5.4 *
Education 53.6 54.4 55.5 56.4 57.1 *
Business, Innovation and Skills 12.9 13.4 12.3 11.7 11.5 *
Transport 2.6 2.0 2.1 2.2 1.8 *
Energy and Climate Change 0.9 0.9 1.0 1.0 0.9 *
Culture, Media and Sport 1.1 1.2 1.2 1.2 1.1 *
DCLG Communities 1.5 1.4 1.4 1.3 1.2 *
Scotland 25.9 26.1 26.3 26.3 26.5 *
Wales 12.9 13.0 13.1 13.2 13.3 *
Northern Ireland 9.7 9.8 9.9 9.9 9.9 *
Justice) 6.2 6.5 6.3 5.8 5.6 *
Law Officers’ Departments 0.5 0.5 0.5 0.5 0.5 *
Environment, Food and Rural Affairs 1.5 1.7 1.6 1.5 1.4 *
HM Revenue and Customs 3.3 3.5 3.4 3.1 2.9 *
HM Treasury 0.2 0.2 0.2 0.1 0.1 *
Cabinet Office 0.2 0.3 0.3 0.3 0.2 *
National Citizen Service 0.1 0.2 0.2 0.3 0.4 *
Small and Independent Bodies 1.5 1.5 1.5 1.5 1.5 *
Resource DEL excluding depreciation is the Treasury’s primary control total within resource budgets and the basis on which Spending Review settlements were made.
As at all Spending Reviews baselines exclude one-off and time-limited expenditure. Cumulative real growth is calculated to 2019-20 from the 2015-16 baseline.
2020-21 departmental budgets have only been set for some departments. For the rest these budgets will be set in full at the next Spending Review.

Advisory Fuel Rates from 1 September

Advisory Fuel Rates from 1 September 2015

GOV.Uk image 2727733_orig

Advisory Fuel Rates (AFR) for company car users, when you can use them, and how they are calculated.

These rates apply from 1 September 2015. You can use the previous rates for up to 1 month from the date the new rates apply.

Engine size Petrol – amount per mile LPG – amount per mile
1400cc or less 11 pence 7 pence
1401cc to 2000cc 14 pence 9 pence
Over 2000cc 21 pence 14 pence

 

Engine size Diesel – amount per mile
1600cc or less 9 pence
1601cc to 2000cc 11 pence
Over 2000cc 13 pence

Hybrid cars are treated as either petrol or diesel cars for this purpose.

  1. Current rates

Current rates start from 1 September 2015.

  1. When you can use the mileage rates

The rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances. If you use them correctly you will not need to apply for a dispensation to cover the payments you make.

2.1 Reimburse employees for business travel in their company cars

If you pay a rate per mile for business travel no higher than the AFR, for the particular engine size and fuel type, HM Revenue and Customs (HMRC) will accept there is no taxable profit and no Class 1A National Insurance to pay.

You can use your own rates which better reflect your circumstances if, for example, your cars are more fuel efficient, or if the cost of business travel is higher than the guideline rates.

If you pay rates that are higher than the advisory rates and can’t demonstrate the fuel cost per mile is higher, there is no fuel benefit charge if the mileage payments are solely for miles of business travel. Instead, you will have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes.

2.2 Require employees to repay the cost of fuel used for private travel

If you have correctly recorded all miles of private travel and used the correct rate (or anything higher) to work out the cost of fuel used for private travel that the employee must repay to you, HMRC will accept there is no fuel benefit charge.

The advisory rates will not be binding where you can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile.

  1. How rates are calculated

Rates are calculated based on fuel prices and adjusted miles per gallon figures.

  1. Previous rates

Previous rates are available to check from 1 March 2011.

These rates only apply to employees using a company car.

These Advisory Fuel Rates (AFR) are calculated from the fuel prices in the tables below.

Petrol

Engine size (cc) Mean MPG Applied MPG Fuel price (per litre) Fuel price (per gallon) Pence per mile AFR
Up to 1400 53.74 45.7 114.6 520.9 11.4 11
1401 – 2000 43.52 37.0 114.6 520.9 14.1 14
Over 2000 29.03 24.7 114.6 520.9 21.1 21

Diesel

Engine size (cc) Mean MPG Applied MPG Fuel price (per litre) Fuel price (per gallon) Pence per mile AFR
Up to 1600 64.91 55.2 112.0 509.4 9.2 9
1601 – 2000 55.52 47.2 112.0 509.4 10.8 11
Over 2000 45.42 38.6 112.0 509.4 13.2 13

LPG

Engine size (cc) Mean MPG Applied MPG Fuel price (per litre) Fuel price (per gallon) Pence per mile AFR
Up to 1400 43.0 36.5 59.4 270.0 7.4 7
1401 – 2000 34.8 29.6 59.4 270.0 9.1 9
Over 2000 23.2 19.7 59.4 270.0 13.7 14

Notes

Mean MPG – miles per gallon – from manufacturers’ information, weighted by annual sales to businesses (fleet audits average, 2011 to 2013).

Applied MPG – adjusted downwards by 15% to take account of real driving conditions and lower fuel economy for older cars.

For LPG, MPG is assumed to be 20% lower than for petrol due to lower volumetric energy density.

Figures are shown to one decimal place. Figures ending in .5 are rounded downwards to the nearest whole penny for the AFR when the precise figure is less than .5 and upwards to the nearest whole penny for the AFR when the precise figure is .5 or greater.

Department for Energy and Climate Change latest petrol and diesel prices (17 August 2015), LPG (UK Average) from Automobile Association (AA) website (July 2015).

Guidance

Advisory Fuel Rates 1 March 2011 to 31 August 2015

Updated 27 August 2015

Contents

  1. AFR 1 June 2015 to 31 August 2015
  2. AFR 1 March 2015 to 31 May 2015
  3. AFR 1 December 2014 to 28 February 2015
  4. AFR 1 September 2014 to 30 November 2014
  5. AFR 1 June 2014 to 31 August 2014
  6. AFR 1 March 2014 to 31 May 2014
  7. AFR 1 December 2013 to 28 February 2014
  8. AFR 1 September 2013 to 30 November 2013
  9. AFR 1 June 2013 to 31 August 2013
  10. AFR 1 March 2013 to 31 May 2013
  11. AFR 1 December 2012 to 28 February 2013
  12. AFR 1 September 2012 to 30 November 2012
  13. AFR 1 June 2012 to 31 August 2012
  14. AFR 1 March 2012 to 31 May 2012
  15. AFR 1 December 2011 to 29 February 2012
  16. AFR 1 September 2011 to 30 November 2011
  17. AFR 1 June 2011 to 31 August 2011
  18. AFR 1 March 2011 to 31 May 2011

Detail

These rates only apply to employees using a company car.

HM Revenue and Customs review rates quarterly on 1 March, 1 June, 1 September and 1 December.

You should check to make sure you understand when you can use the rates.

 

Changes to National Insurance

Changes to National Insurance

 

Fact Sheet

 

from:    Lisa Kennery

The Government has recently introduced a number of changes to national insurance and further measures affecting both employers and individuals are in the pipeline.

 

This factsheet provides an overview of some key changes, as well as offering advice on a range of strategies to help minimise your national insurance bill.

National Insurance shutterstock_15678070

EMPLOYMENT ALLOWANCE

 

The Employment Allowance was introduced in April 2014, with the aim of reducing the employer national insurance liability for businesses and charities, and encouraging businesses to expand and take on new staff.

 

While a small number of exclusions apply, most businesses, charities and Community Amateur Sports Clubs are entitled to claim an annual reduction of up to £2,000 in their employer national insurance contributions (NICs) bill.

 

There are rules to limit the Employment Allowance to a total of £2,000 where there are ‘connected’ employers. For example, two companies are connected with each other if one company controls the other company.

 

The employer’s payment of PAYE and NICs is reduced each month to the extent it includes an employer Class 1 NIC liability until the £2,000 limit has been reached.

 

The allowance can be claimed via payroll software or HM Revenue & Customs (HMRC) Basic PAYE Tools.

 

Do contact us if you believe you are entitled to the allowance as it is possible to claim up to four years after the end of the tax year in which the allowance applies.

 

There are some exceptions for employer Class 1 liabilities which can be covered by the Employment Allowance including liabilities arising from:

 

  • a person who is employed (wholly or partly) for purposes connected with the employer’s personal, family or household affairs
  • the carrying out of functions either wholly or mainly of a public nature (unless charitable status applies), for example NHS services and General Practitioner services
  • employer contributions deemed to arise under IR35 for personal service companies.

With effect from 6 April 2015 Employment Allowance has been extended to those employing care and support workers.

 

If you need guidance on this area please do get in touch so that we can offer specific advice.

 

From April 2016 the Employment Allowance will increase to £3,000.

 

However, companies where the director is the sole employee will no longer be able to claim this allowance.

 

Who will benefit

 

The Government announced the increase in the Employment Allowance in recognition of the fact that the new National Living Wage (NLW) may increase costs for some businesses.

 

Up to 90,000 employers are expected to see their employer NICs liability reduced to zero, allowing businesses to employ up to four full time workers on the new NLW from next year, without paying any NICs.

 

SCRAPPING NICs FOR UNDER-21s

 

Apprentices shutterstock_152179931

From 6 April 2015 employer NICs for those under the age of 21 are reduced from the normal rate of 13.8% to 0%. For the 0% rate to apply the employee will need to be under 21 when the earnings are paid.

 

This exemption will not apply to earnings above the Upper Secondary Threshold (UST) in a pay period.

 

The UST is a new term for this new NIC exemption. It is set at the same amount as the Upper Earnings Limit (UEL), which is the amount at which employee NICs fall from 12% to 2%.

 

The weekly UST is £815 for 2015/16 which is equivalent to £42,385 per annum.

Employers will be liable to 13.8% NICs beyond this limit.

 

In the Second Budget it was confirmed that the UEL will increase in line with the income tax higher rate threshold. This will increase to £43,000 in 2016/17 and to £43,600 in 2017/18.

 

The new rules apply to both existing employees and employers taking on new staff.

 

They do not affect an individual’s entitlement to the State Pension or contributions based benefits such as Statutory Sick Pay or Statutory Maternity Pay. The employee NICs due are unaffected and remain payable by the employee.

 

ABOLISHING NICs FOR APPRENTICES UNDER-25s

 

The Government will abolish employer NICs up to the UST for apprentices aged under 25 with the stated aim of encouraging the employment of younger workers and boosting the economy by bridging the skills gap.

 

From April 2016, employers who engage apprentices under the age of 25 will be able to claim exemption from employers’ NICs on the cost of the apprentice’s salary up to the UST.

 

Detailed regulations will be issued on the NICs for apprentices including the definition of an apprentice.

 

Who will benefit

 

The new measure is expected to save employers an estimated £105 million in employers’ NICs during its first year of operation.

 

NEW CLASS 3A NICs

 

With effect from 6 April 2016, a new single-tier State Pension will replace the existing two-part system plus various means-tested benefits, for those reaching State Pension Age on or after 6 April 2016.

 

The Government is providing a one-off opportunity to allow existing pensioners and those reaching State Pension Age before 6 April 2016 to top up their additional State Pension, by up to £25 per week by paying Class 3A voluntary NICs.

 

How it works

Each unit of Class 3A contributions will result in £1 per week of additional State Pension. The price of Class 3A is based on an actuarially fair rate with prices varying between £127 and £934 per unit depending on the purchaser’s age.

 

Those wishing to take advantage of the Class 3A contribution must meet the following conditions:

 

  • They must be entitled to a UK State Pension
  • They must reach State Pension Age before 6 April 2016.

The facility will apply from 12 October 2015 to 5 April 2017, for eligible individuals.

 

The new Class 3A contribution will not replace the existing Class 3, and those taking up the new Class 3A will be advised to consider making Class 3 contributions where appropriate.

 

Applications and payments relating to Class 3A contributions will be dealt with by HMRC.

 

Who will benefit

 

The transitional measures are likely to be of particular benefit to those with low earnings, particularly women and carers, who tend to have low Additional State Pension entitlement, and also the self-employed who are excluded from the State Earnings Related Pension Scheme (SERPS) and the State Second Pension.

 

Please note that receiving extra Additional State Pension could impact on certain state benefits. It is important to consider a number of areas when deciding whether to make Class 3A contributions. Please contact us for further advice.

 

ADDITIONAL FUTURE MEASURES

 

Abolishing Class 2 and reforming Class 4 NICs

 

The Coalition Government previously introduced significant changes to Class 2 NICs, resulting in the introduction in April 2015 of new provisions for the collection and payment of Class 2 NICs via self-assessment, rather than direct debit generally on a monthly or six monthly basis.

 

From 6 April 2015 liability to pay Class 2 NIC will arise at the end of each year. The amount of Class 2 NICs due will still be calculated based on the number of weeks of self-employment in the year, but will be determined when the individual completes their self-assessment return.

 

It will therefore be paid alongside their income tax and Class 4 NICs. For those who wish to spread the cost of their Class 2 NICs, HMRC will retain a facility for them to make regular payments throughout the year.

 

Those with profits below the stated threshold no longer have to apply in advance for an exception from paying Class 2 NICs. Instead they will have the option to pay Class 2 NICs voluntarily at the end of the year so that they may protect their benefit rights.

 

The Government has announced that Class 2 NICs will be abolished in this Parliament and it will reform Class 4 NICs to include a contributory benefit test.

 

MINIMISING THE NIC BILL

 

We can work with you on a range of ideas for saving employer and/or employee NICs.

 

Dividends instead of salary/bonus

 

For limited companies you should consider paying dividends rather than a salary/bonus.

 

Where directors are in receipt of a salary/bonus from a company, the NIC cost may be such that part of the payment could be more cost effectively made as a dividend. There are special rules for some companies providing personal services.

 

The decision on whether to pay a dividend is complex because doing so may influence the value of the company’s shares and therefore increase the liability to capital gains tax and inheritance tax. There is also a maximum amount that may be paid, based on the company’s results.

 

Further strategies you may also want to consider:

 

  • Increasing the amount the employer contracts to contribute to company pension schemes.
  • Share incentive plans (shares bought out of pre-tax and pre-NIC income – this is a specialist area. Please get in touch for advice).
  • Salary sacrifice arrangements in respect of tax-free benefits in kind, such as the provision of childcare.

 

For further advice on national insurance contributions, please contact us. We have expertise in all areas of running a business and would be delighted to assist you

 

 

 

Changes to National Insurance

 

From The Tax Team and The Payroll Team at Pierce

Changes to National Insurance

National Insurance shutterstock_15678070

The Government has recently introduced a number of changes to national insurance and further measures affecting both employers and individuals are in the pipeline.

We provide an overview of some key changes, as well as offering advice on a range of strategies to help minimise your national insurance bill.

 

New Staff shutterstock_221213821

EMPLOYMENT ALLOWANCE

The Employment Allowance was introduced in April 2014, with the aim of reducing the employer national insurance liability for businesses and charities, and encouraging businesses to expand and take on new staff.

While a small number of exclusions apply, most businesses, charities and Community Amateur Sports Clubs are entitled to claim an annual reduction of up to £2,000 in their employer national insurance contributions (NICs) bill.

There are rules to limit the Employment Allowance to a total of £2,000 where there are ‘connected’ employers. For example, two companies are connected with each other if one company controls the other company.

The employer’s payment of PAYE and NICs is reduced each month to the extent it includes an employer Class 1 NIC liability until the £2,000 limit has been reached.

The allowance can be claimed via payroll software or HM Revenue & Customs (HMRC) Basic PAYE Tools.

Do contact us if you believe you are entitled to the allowance as it is possible to claim up to four years after the end of the tax year in which the allowance applies.

There are some exceptions for employer Class 1 liabilities which can be covered by the Employment Allowance including liabilities arising from:

  • a person who is employed (wholly or partly) for purposes connected with the employer’s personal, family or household affairs
  • the carrying out of functions either wholly or mainly of a public
  • nature (unless charitable status applies), for example NHS services and General Practitioner services
  • employer contributions deemed to arise under IR35 for personal service companies.

With effect from 6 April 2015 Employment Allowance has been extended to those employing care and support workers. If you need guidance on this area please do get in touch so that we can offer specific advice.

 

Under 21's shutterstock_134992751

SCRAPPING NICs FOR UNDER-21s

From 6 April 2015 employer NICs for those under the age of 21 are reduced from the normal rate of 13.8% to 0%. For the 0% rate to apply the employee will need to be under 21 when the earnings are paid.

This exemption will not apply to earnings above the Upper Secondary Threshold (UST) in a pay period. The UST is a new term for this new NIC exemption. It is set at the same amount as the Upper Earnings Limit, which is the amount at which employee NICs fall from 12% to 2%. The weekly UST is £815 for 2015/16 which is equivalent to £42,385 per annum. Employers will be liable to 13.8% NICs beyond this limit.

The new rules apply to both existing employees and employers taking on new staff. They do not affect an individual’s entitlement to the State Pension or contributions based benefits such as Statutory Sick Pay or Statutory Maternity Pay.

The employee NICs due are unaffected and remain payable by the employee.

Who will benefit

The Government expects that this change will lift around 1.5 million young people out of employer NICs completely, with an average saving of £355 per employee. The rules mean that employing someone on an annual salary of £12,000 will be at least £500 cheaper, while paying an individual £16,000 per annum will cost at least £1,000 less.

 

Apprentices shutterstock_152179931

ABOLISHING NICs FOR APPRENTICES UNDER-25s

The Government will abolish employer NICs up to the UST for apprentices aged under 25 with the stated aim of encouraging the employment of younger workers and boosting the economy by bridging the skills gap.

From April 2016, employers who engage apprentices under the age of 25 will be able to claim exemption from employers’ NICs on the cost of the apprentice’s salary up to the UST. Detailed regulations will be issued on the NICs for apprentices including the definition of an apprentice.

Who will benefit

The new measure is expected to save employers an estimated £105 million in employers’ NICs during its first year of operation.

 

Pensioners

NEW CLASS 3A NICs

With effect from 6 April 2016, a new single-tier State Pension will replace the existing two-part system plus various means-tested benefits, for those reaching State Pension Age on or after 6 April 2016.

The Government is providing a one-off opportunity to allow existing pensioners and those reaching State Pension Age before 6 April 2016 to top up their additional State Pension, by up to £25 per week by paying Class 3A voluntary NICs.

How it works

Each unit of Class 3A contributions will result in £1 per week of additional State Pension. The price of Class 3A is based on an actuarially fair rate with prices varying between £127 and £934 per unit depending on the purchaser’s age.

Those wishing to take advantage of the Class 3A contribution must meet the following conditions:

  • They must be entitled to a UK State Pension
  • They must reach State Pension Age before 6 April 2016.

The facility will apply from 12 October 2015 to 5 April 2017, for eligible individuals.

The new Class 3A contribution will not replace the existing Class 3, and those taking up the new Class 3A will be advised to consider making Class 3 contributions where appropriate.

Applications and payments relating to Class 3A contributions will be dealt with by HMRC.

Who will benefit

The transitional measures are likely to be of particular benefit to those with low earnings, particularly women and carers, who tend to have low Additional State Pension entitlement, and also the self employed who are excluded from the State Earnings Related Pension Scheme (SERPS) and the State Second Pension.

Please note that receiving extra Additional State Pension could impact on certain state benefits. It is important to consider a number of areas when deciding whether to make Class 3A contributions.

 

ADDITIONAL FUTURE MEASURES

Abolishing Class 2 and reforming Class 4 NICs

The Coalition Government previously introduced significant changes to Class 2 NICs, resulting in the introduction in April 2015 of new provisions for the collection and payment of Class 2 NICs via self assessment, rather than direct debit generally on a monthly or six monthly basis.

From 6 April 2015 liability to pay Class 2 NIC will arise at the end of each year. The amount of Class 2 NICs due will still be calculated based on the number of weeks of self employment in the year, but will be determined when the individual completes their self assessment return.

It will therefore be paid alongside their income tax and Class 4 NICs. For those who wish to spread the cost of their Class 2 NICs, HMRC will retain a facility for them to make regular payments throughout the year.

Those with profits below the stated threshold no longer have to apply in advance for an exception from paying Class 2 NICs. Instead they will have the option to pay Class 2 NICs voluntarily at the end of the year so that they may protect their benefit rights.

The Government has announced that Class 2 NICs will be abolished in this Parliament and it will reform Class 4 NICs to include a contributory benefit test.

 

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MINIMISING THE NIC BILL

We can work with you on a range of ideas for saving employer and/or employee NICs.

Strategies you may also want to consider:

  • Shareholder dividends instead of salary/bonus
  • Increasing the amount the employer contracts to contribute to company pension schemes.
  • Share incentive plans (shares bought out of pre-tax and pre-NIC income – this is a specialist area. Please get in touch for advice).
  • Salary sacrifice arrangements in respect of tax-free benefits in kind, such as the provision of childcare.

For further advice on national insurance contributions, please contact us. We have expertise in all areas of running a business and would be delighted to assist you.

 

 

 

R&D Tax Credits – Are you missing out?

By: Tom Wilkinson   Research and Development Tax Specialist

 

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R&D Tax Credits

….. Are You Missing Out?

 

Many trading businesses often do not realise they are or have previously undertaken Research & Development (‘’R&D’’) activities in their business.  We are successfully securing R&D tax credit claims for clients.  The credits are generous and allow small and medium sized businesses to claim 230% (from April 2015) of actual R&D costs incurred for up to the past 2 financial years.

So, if you have incurred R&D expenditure of say £100,000 on a project then you can claim £230,000 as a credit against profits in the particular year(s) incurred.  This could generate a refund or tax saving of £46,000.

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Our fees are entirely success based and we will be happy to discuss these further.  Pierce have a good working relationship with HMRC’s specialist R&D tax units and have a 100% track record with all claims.
We have helped our clients claim over £2 million of qualifying Research & Development relief and we could help yours.

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The definition of R&D is quite wide and it is worth considering if you have….

  • Made bespoke products or customised products
  • Developed any new products or involved with introducing them
  • Made any environmental improvements to your processes
  • Consistently made manufacturing processes improvements
  • Carried out design work in-house or sub-contracted design
  • Carried out prototyping or made models, patterns or tooling
  • Developed or improved any in-house software
  • Changed the composition of your products in response to changes in legislation
  • Consider yourself to be a market leader in a product, process or technology
  • Regularly problem solving to meet your customers’ needs

Many companies are unaware of the activities that can qualify for R&D relief.  Pierce C. A. Limited have specialist skills and knowledge of the R&D tax system and are able to help you identify qualifying projects and formulate a successful claim.

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Client Testimonials

From David Baxendale at Promedics Orthapaedic Limited

Tom Wilkinson from Pierce proactively found and recommended corporation tax savings for our company that resulted in a 2 year corporation tax refund. He worked under his own initiative and ensured that HMRC agreed with his calculations. Tom’s drive and professionalism was first class and we would highly recommend his and Pierce’s services.”

From Richard Mottram at Hills Panel Products Limited

Pierce compiled an extremely detailed and comprehensive Research and Development Tax claim on the company’s behalf which lead to a significant corporation tax saving.

The report and associated computations were a significant improvement from our previous R&D tax advisers and was also undertaken in a very timely manner”

 

Emergency Budget – Holiday Reading

The Emergency Budget – HOLIDAY READING!

By: Anne Wilson

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Tax advisors and MPs will have a little light holiday reading to enjoy following George Osborne’s emergency budget which will take place on 8th July.  Having shaken off the Lib Dems, the government is keen to make its mark on tax policy as soon as possible.

What announcements can we expect based on the Conservative’s manifesto?

Tax Lock

One promise was the introduction of a “tax lock” to prevent increases in VAT, National Insurance Contributions or Income Tax during the life of the parliament.  Why does this commitment need to be legislated for; are politicians so untrustworthy as to break a promise!

The Personal Allowance and the Minimum Wage

The personal allowance will be increased so that by 2021 this will be £12,500.  The personal allowance will be linked with the minimum wage so anyone earning the minimum wage and working for 30 hours a week should not pay any tax.  This suggests that the minimum wage will be £8 an hour by 2021.

Higher Rate Band for Higher Income Only

Alongside these measures is the target to raise the basic rate band so that by the end of the parliament no one with income of less than £50,000 will pay tax at the higher rate.  The basic rate band has been eroded over the years, in 1994/95 approximately 2m people were paying tax at the higher rate compared with 4.6m people now.

Transferable Inheritance Tax Relief

A new transferable inheritance tax relief will be introduced to enable a couple to pass an additional £175k each of value in their main residence to their children so that potentially they could leave £1m to their children without inheritance tax.

The relief tapers away where the estate is worth more than £2m.  This seems likely to add fuel to the fire of the north/south debate as this is will be of far greater benefit to taxpayers in high property value areas.

For example a couple whose only asset is a property worth £1m could leave this to their children free of inheritance tax.  Contrast this with a couple with a property worth £200k and investments worth £800k, their estate would suffer inheritance tax of £140k!  It is unclear at present if the £175k is the top slice of the estate and how it will interact with the nil rate band.

Limit Pension Contribution Tax Relief for High Earners

There is also a proposal to limit tax relief for pension contributions for high earners.  It is thought that relief will be  restricted for those with incomes of between £150k and £210k with the current contribution limit of £40k tapering away so that the maximum someone with income of £210k can contribute to a pension scheme and claim tax relief on will be £10k.

The Child Benefit Anomoly

These are the manifesto pledges but we can expect to see other changes, it is possible that the child benefit high income withdrawal will be calculated by reference to a couple’s income.  This will correct an anomaly,  currently  a couple with income of £49k each can still claim benefit whereas a couple with one  earner who has income of £60k loses the allowance in full.

Capital Gains Tax

There are question marks over the top rate of Capital Gains Tax which was not included in the tax lock announced in the Queen’s speech.  It would also be useful for businesses to know sooner rather than later what the annual investment allowance for capital allowances will be on 1 January 2016.

Up the Chancellors Sleeve

We shall have to wait and see what other surprises the Chancellor has in store.

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The Budget 2015 in full

The Budget 2015 in Full

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Read the Budget document in full.

Download our detailed budget report as a pdf.

UPDATE: Download the presentation slides from our budget breakfast review.

The Chancellor has presented his Budget to Parliament – here’s a summary of what was announced.

1. The UK had the fastest growth in the G7 in 2014

The UK economy had the fastest annual growth among G7 economies in 2014, and the strongest annual growth since 2007. At the end of 2014, employment had reached its highest ever level, unemployment has been falling in every region across the UK, and inflation is at a record low.

But risks still remain and there is still more to do to support businesses and boost p

Read the Budget document in full.

2. Debt will be falling as a share of GDP in 2015-16

Debt will be falling as a share of GDP from 2015-16. This is a year earlier than forecast at Autumn Statement.

By 2014-15, the deficit is forecast to have fallen by half, from 10.2% at its peak in 2009-10, to 5% in 2014-15.

In 2018-19, the government will have a surplus (will raise more in taxes than is being spent) of £5.2 billion.

Access the Treasury’s set of Budget infographics, explaining some of the key announcements.

3. The tax-free personal allowance is being increased in April 2017, to £11,000

To make work pay and ensure families keep more of the money they earn, the tax-free personal allowance – the amount people earn before they have to start paying tax – will rise to £10,800 in 2016-17, and £11,000 the year after.

The increases to the personal allowance from £6475 in 2010, to £11,000 in 2017-18 will save a typical taxpayer £905.

To make sure the full benefits of the personal allowance increase are passed on to higher rate taxpayers, the government will also increase above inflation the point above at which higher earners start paying 40% tax. It will increase by £315 in 2016-17, and by £600 in 2017-18 – taking it to £43,300 in 2017-18.

4. A new Personal Savings Allowance will take 95% of taxpayers out of savings tax altogether

From April 2016, a tax-free allowance of £1,000 (or £500 for higher rate taxpayers) will be introduced for the interest that people earn on savings.

If they are a basic rate taxpayer and have a total income up to £42,700 a year, they will be eligible for the £1,000 tax-free savings allowance.

If they are a higher rate taxpayer and earn from £42,701 to £150,000, they’ll be eligible for a £500 tax-free savings allowance.

Access the Treasury Personal Savings Allowance one page explainer factsheet.

5. Introducing the Help to Buy ISA – every £200 people save towards their first home, the government will put in an extra £50, up to a maximum bonus of £3000

The government has already helped people to buy a home with Help to Buy, which allows people to purchase a home with just a 5% deposit.

The government is now going further. To help first time buyers save for a deposit, it is introducing a Help to Buy ISA.

People will be able to open an ISA, save up to £200 a month towards their first home, and the government will boost it by 25%. That’s a £50 bonus for every £200 people save, up to £3000.

Access the Treasury’s Help to Buy: ISA one page explainer factsheet.

6. People will have complete freedom to take money out of an ISA and put it back in later in the year

ISAs are being reformed so that instead of being able to put up to £15,240 in the 2015-16 tax year into an ISA in total, people can take out their money and put it back in within the same year, without losing their ISA tax benefits – as long as the repayment is made in the same financial year as the withdrawal.

7. £1.25 billion for children’s’ mental health services

An extra £1.25 billion will be spent on mental health services for children and new mums – helping more than 110,000 people.

8. Cancelling the fuel duty increase scheduled for September

Fuel duty will be frozen again; since 2011, the government has cut and frozen fuel duty, saving a typical motorist a total of £675 by the end of 2015-16.

By the end of 2015-16 fuel duty will have been frozen for five years, resulting in the longest duty freeze in over 20 years.

9. Cutting beer duty for the third year in a row

There will be another penny off a pint, a 2% cut for spirits and most ciders, and a freeze on duty on wine.

10. Up to five million pensioners will be given the freedom to sell their annuity for a cash lump sum

From April 2016, people who already have an annuity will be able to now effectively sell it on, so that they too can benefit from the pension freedoms announced at last year’s Budget.

Currently, people who have bought an annuity are unable to sell it without having to pay at least 55% tax on it. From April 2016, the tax rules will change so that people who already have income from an annuity can sell that when they choose and will pay their usual rate of tax they pay on income, instead of 55%.

11. Charities will be able to claim more gift aid on small donations

The amount of small donations charities can get an extra 25% top up payment on in gift aid without needing any paperwork is increasing from £5,000 to £8,000 a year.

The government expects 6,500 charities to claim in full the higher new cash boost of £2,000 a year – nearly double the current amount.

12. Farmers will have more time to average their profits for income tax

This extends the period from two to five years, and will give farmers additional security as they typically have volatile profits due to uncontrollable factors such as the weather.

13. We will abolish the annual tax return

Millions of individuals will have the information HMRC needs automatically uploaded into new digital tax accounts. Businesses will feel like they are paying a simple, single business tax – and again, for most, the information needed will be automatically received.

14. Support for all regions across the UK

Working with Transport for the North, the government will look at rolling out better roads, quicker journeys and improved rail connections between the major cities of the north, as part of the government’s plan to build a Northern powerhouse.

The government is also giving even more powers to local areas, with a new devolution deal for things like transport, business support and skills for West Yorkshire, and more planning powers for London.

Ten Enterprise Zones across the country are also being supported to go further to create growth and jobs.

The government is also working on a Cardiff city deal and opening negotiations on the Swansea Bay Tidal Lagoon.

15. Making sure banks pay their fair share

The government is increasing the rate of the bank levy (one of the taxes that banks pay) from 1 April 2015.

This will raise an additional £900 million a year.

16. Increased support for the oil and gas sector

The oil and gas sector provides highly-skilled jobs, energy security and makes a significant contribution to the UK economy.

To encourage further investment in the North Sea, the government will introduce a new Investment Allowance and reduce the supplementary tax charge on oil and gas companies further, from 30% to 20%, from 1 January 2015.

The rate of Petroleum Revenue Tax paid on older oil and gas fields will also be reduced from 50% to 35%.

These changes are expected to increase oil production by around 15% by 2019, and drive £4 billion of new investment over the next five years.

17. Faster broadband and better mobile networks

The government is investing up to £600 million to deliver better mobile networks, and is announcing a new ambition that ultrafast broadband of at least 100 megabits per second should become available to nearly all UK premises in the country.

18. Introducing postgraduate research loans

Loans up to £25,000 will be available for postgraduate PHD and masters research students.

The government will also conduct a review into how the government can strengthen its funding for postgraduate research.

19. Further investment in science and innovation

Future economic success depends on future science success. The government is investing £140 million in world class research on the infrastructure and cities of the future, and £40 million in research into what is known as the Internet of Things. This is the next stage of the information revolution, connecting up everything from urban transport to medical devices to household appliances.

The government is also launching a new UK research initiative into the future potential of digital currency technology, supported by a £10 million increase in funding in this area.

20. The government will consult on a tax relief for local newspapers

Local newspapers are a vital part of community life, but they’ve had a tough time – so the government is announcing a consultation on how to can provide them with tax support.

 

Company Car Mileage Rates slashed

Company Car Mileage Rates slashed following dramatic reduction in fuel prices

From: Ben Davies

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HM Revenue & Customs has recently announced that the advisory fuel rates (AFR), used to reimburse drivers of company cars for business travel, are to be slashed by up to 18%.  The new AFR will apply from 1 March 2015 to bring them in line with the reduction to fuel prices seen at the pumps.

The new rates are:

Engine size Petrol LPG
1400cc or less 11p 8p
1401cc to 2000cc 13p 10p
Over 2000cc 20p 14p

 

Engine size Diesel
1600cc or less 9p
1601cc to 2000cc 11p
Over 2000cc 14p

 

You can however use the old rates for up to 1 month from the 1 March.

If you drive a hybrid vehicle then you should use the petrol rates for a petrol hybrid vehicle and the diesel rates for a diesel hybrid vehicle.

The advisory fuel rates are reviewed every quarter by HM Revenue & Customs and are calculated based on the average fuel prices at the time.  The latest rates can be found on the HMRC website here.

Where you are not using a company car but your own private car you should instead use the Approved Mileage Allowance payments, known as AMAPs.