With the announcement of the UK general election and Making Tax Digital dropped from the Finance Bill, there is plenty going on affecting individuals, self-employed and business, not to forget changes to managing Tax codes, impact of Brexit as well as preparing for P11D. In this newsletter we share:
1. Self Employed – Making Tax Digital – What does it mean?
As the UK enters the run-up for the general election on the 8 June, the government removed Making Tax Digital (MTD) from the Finance Bill 2017. Depending on the outcome of the election, albeit without a shock result, it is expected plans will remain for the implementation of MTD.
What is MTD? In time, it will affect individuals and businesses, but in the short-term for those working as self-employed and earning more than £85,000 will “potentially” need to file quarterly tax returns and an end of year statement, so increasing from what is one time per year now to five times. Government figures estimate this is to impact 400,000 un-incorporated self-employed and landlords by April ’18 and then from April ’19 affect 3.2m un-incorporated self-employed and landlords with more than £10,000 but less than £85,000 annual turnover.
So, what can you do now? If you fall into one of the groups mentioned above, then to prepare, consider today how you are maintaining records for your book-keeping and accounting. Excel spreadsheets in the normal form will not be allowed from recent understanding and it is recommended to explore online accounting solutions such as QuickBooks Online, to help best manage finances day to day. For more information on how to prepare, please talk to your accountant.
2. Self-Employed – Last in the queue on pensions
What’s your plan for retirement, all sorted? In a recent survey on the self-employed by Aegon financial services company, the UK featured bottom of the list from across 15 countries. The research found that 52% of self-employed do not have a retirement plan, and just 44% have made plans for retirement, compared with 60% globally. The survey established that many self-employed people will still be working after the age of 65 with only 20% confident they will be comfortable in retirement.
When compared against individuals employed, the self-employed also found it continuously difficult to secure mortgages and insurance products to help them in business and personally. There is help at hand and for more information regarding plans for retirement or additional financial services then please discuss with your financial advisor or accountant for support.
3. Employees – Remember it’s P11D time
For director and employees, it is time to prepare P11D in which tax is paid on company benefits and taken as part of the Pay as your Earn PAYE scheme, through self-assessment. The P11D is due for HMRC submission by 6th July ’17 and on expenses reporting, the Class 1A National Insurance Contributions at 13.8% will have to be paid as an employer and the deadline is 19th July.
If you need support in preparing for this, please contact your accountant and for more information please visit HMRC guidance 3
4. Employees – Is your PAYE Tax Code always accurate?
In many individual cases, the PAYE Tax Code is not always accurate and can have an impact on take home pay for employees and individuals. As a means to improve, HMRC announced in a Policy Paper that from May ’17 they will be adopting (RTI) real time information to make changes to employee tax codes within the year when needed. In doing so, HMRC believe this will offer more certainty to employers and their employees, reduce instances of unexpected tax bills arising and make sure more employees are paying the correct amount of tax at year end.
This is an attempt to improve the current approach whereby individual tax codes are adjusted after the tax year end, coding any adjustments for over or underpayment via the following tax year. The new approach will mean that once HMRC acknowledge an employee’s circumstances have changed, the tax code will change and the individual/employee will be notified along with their employer.
If you require support with understanding your tax code and its accuracy then please contact your accountant.
5. Small Business – Revaluation of business rates
Many businesses face collapse after receiving soaring business rates bills with the revaluation in April ’17. But firstly, what does this mean?
– Business rates for property are set in proportion to latest rentable value of the property.
– Rates are normally reassessed every five years. The underlying property values used to calculate the rates are from the two years before.
– The rateable value is then combined with a “multiplier” figure to establish the actual rates payable.
– The re-evaluation is based on rentable values on 1 April 2015 and came into effect on 1 April 2017.
In places such as London the values for property rental have increased with a potential impact to business’ bottom line. In parallel, there are rates bills being lowered in parts of the country where property prices may have decreased. The changes have been introduced with a cap to help ease the transition, to avoid a sudden shock in rate rise.
If landlords oppose the renewal of a business tenancy benefiting from security of tenure, under the Landlord and Tenant Act 1954 Act, the tenant may be entitled to compensation.
Although there is a new system of appeals called Check, Challenge, Appeal which seeks to resolve disagreements at an early stage, this has hit gridlock with thousands of businesses trying to appeal against the charges but the computer meltdown means many have been unable to register their complaint.
Please contact your accountant for advice if this directly affects your business. 4
6. Small Business – FSB warns EU funding gap impact
In a new report from the Federation of Small Businesses (FSB) warns that many small businesses in less economically developed regions, could be at risk in the event the UK is unable to replace the billions of investment from EU funding with Brexit. It is understood, according to the FSB report that the EU supported small business in the UK between 2014-20 providing £3.6bn. The fear raised now on Brexit is to how the government will find this shortfall to prevent potential impact to comparatively disadvantaged areas of the UK, being at most risk of financial support.
Regions most likely to apply for EU-funded Businesses schemes:
▪ Yorkshire – 25%
▪ North East – 22%
▪ North West – 22%
The FSB report goes onto conclude in urging the Government that before the Brexit process completes, to launch a growth fund dedicated for this reason, with Wales, Scotland and Northern Ireland Governments controlling the allocation of funds into their regions.
For more advice on funding and supporting your business, please contact your accountant.
7. Small Business – VAT fuel updated
Starting from May ’17, VAT fuel scale charges have been updated by HMRC. To check the details please visit here and contact your accountant for additional advice on this matter.