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September 2011
Miniumum Wage to Change in October
The NMW rates are reviewd each year by the low pay commission and from 1st October 2011 the national minium wage will increase again:
|
Aged 21 and
over |
2011 £6.08 |
2010 £5.93 |
|
Aged 18 to 20 |
£4.98 |
£4.92 |
|
Aged 16 to 17 Apprentice
Rate |
£3.68 £2.60 |
£3.64 £2.50 |
The age at which you become entitled to the main rate was reduced from 22 to 21 on 1st October 2010. The apprentice rate was introduced on the same date.
Past NMW rates can be viewed on the Low Pay Commision Website.
March 2011
Click here for full information on the 2011/12 Budget
Faced with poor growth forecasts, high inflation, high fuel prices, conflicting economic data and the largest budget deficit in our history, it was hardly surprising that the Chancellor set out a fiscally neutral budget.
The Chancellor decided to reintroduce the idea of Enterprise Zones although there is now a slightly different approach to that taken in the 1980s in order to prevent the exploitation of the relief that was previously witnesses. The details of the new scheme are not yet known but it will focus on reliefs for business rates and enhanced capital allowances.
The Chancellor also focused on enhanced relief for business angels. Those investing money under the Enterprise Investment Scheme (EIS) rules will receive higher tax reductions and increase the amount that can be invested in such schemes.
In addition to this, it was announced that there would be a further increase in the lifetime allowance for Entrepreneurs Relief which now stands at £10million.
The Chancellor announced an increase in the Research and Development tax credits available to companies who carry out qualifying R&D. This will rise to 200% in 2011/12 and to 225% in 2012/13 for small companies.
The Chancellor confirmed that corporation tax rates for both small and large companies will be reduced from 1 April 2011. The rate for small companies will reduce to 20% as per previous announcements, however, the Chancellor announced that the rate for large companies would fall to 26% which is 1% more than previously announced. This rate will continue to fall by 1% per year to be 23% from 1 April 2014.
The Chancellor reiterated the government’s long term plan to simplify the UK tax system. He stated that the government would be consulting on the potential combination of National Insurance with Income Tax although it looks as though a merger is not on the immediate agenda.
It was announced that the personal allowance would increase further from 6 April 2012 to £8,105 (£7,475 from 6 April 2011). This is another large step towards the Liberal Democrats plan to raise this to £10,000.
The sting in the tail here comes from a reduction in the higher rate band. This is so that higher rate tax payers do not benefit from the increase. This will fall from £35,000 to £34,370 from 6 April 2012.
The Chancellor did reiterate that the 50% tax band was only a temporary measure and that he would ask HM Revenue & Customs how much tax it is actually generating.
The Capital Gains exemption will rise to £10,600 from 6 April 2012 (previously £10,100) and the rates remain at 18% and 28% (10% if Entrepreneur’s Relief applies).
The approved mileage rate has been reviewed for the first time in a while. The approved rate from 6 April 2011 will now be 45p per mile (previously 40p) for the first 10,000 miles and will remain at 25p thereafter.
If you are not already aware, from April 2011, all company tax returns and corporation tax computation must be submitted to HMRC in iXBRL format. iXBRL is a reporting language which ‘tags’ figures in your accounts so that these can be read by a computer.
Many accountancy firms and tax bodies have called for a delay in HMRC’s plans for compulsory iXBRL filing, these appeals have been rejected by HMRC but they have stated that they are willing to be lenient with companies who have made a reasonable attempt to file iXBRL complaint accounts.
We at David Cutter & Co are ready for processing accounts and tax computations in iXBRL format and are confident we will not need HMRC’s leniency.
If you are concerned about these changes and would like further information on iXBRL or the services we offer then please{contact us} .
Live PAYE Coding Notices and BACs
HMRC were planning to implement a live PAYE system in 2012, however this has now been delayed until 2013. HMRC plan to receive all payroll information, along with company car changes etc. on a real time basis throughout the year.
No decision has currently been made about how this system will be implemented but many people believe that the BACS system will be used to deliver this information to HMRC. This is because it is believed the current government gateway system could not handle this volume of data on a weekly basis.
David Cutter & Co is one of only 600 approved BACS bureaux within the country. We have had this accreditation for over 15 years and are experienced in using BACS.
Through us our clients are able to make use of the system to pay employees direct and make supplier payments. If this service is of interest to you or your company then please contact us.
More Pension Changes
Having simplified pensions rules in 2006, the government are now introducing more changes which add to the complexity of the system.
Significant changes are due to take place which affect both the tax relief on pension contributions and the options post-retirement.
From 6 April 2011, the current annual allowance will be reduced from £255,000 to just £50,000 although higher rate tax relief will remain. Any unused annual allowance can be carried forward for 3 years, something many people see as a move back towards a more complex system.
From 6 April 2012 the current lifetime allowance of £1,800,000 will be reduced to £1,500,000 with provisions for individuals who have already exceed the lower threshold.
There are further complexities for higher earning individuals and we urge anyone who thinks they may be affected by these tocontact us and we will help you.
New penalty changes for late tax returns
Subject to consultation, from 6 April 2011 there will be new late filing and payment penalties for personal, partnership and trust tax returns.
The existing penalties for a late filed
return are the lower of £100 and the balance of tax due.
The proposed penalties are:
For Late Filing
- £100 immediately on the day after the due date
- Further daily penalties of £10 if the return is not filed with 3 months of the due date (running for a maximum of 90 days)
- When a return is 6 months late and 12 months late, a further penalty of 5% of the tax due or £300 if greater
- If a return is over 12 months late and the individual has deliberately withheld information from HMRC a higher penalty of 70% of the tax due may be levied (100% if deliberate with concealment)
For Late Payment
- 5% surcharge of the amount unpaid, generally 1 month after the payment due date.
Further 5% penalties if the payment is not made within 6 months and 12 months
February 2011
How well kept are your records?
HMRC’s increased powers now state that an officer of HMRC may check that ‘statutory record keeping requirements are being met’ as part of any compliance check.
There are now potentially more serious issues at stake than a slap on the wrists for keeping poor records.
The key points to consider are
- If an officer believes that the quality of the records are poor enough to mean that the figures on the tax return cannot be relied upon then they could look to make an assessment for under declared profits.
- Record keeping can be used in the guidance of whether or not an individual has taken ‘reasonable care’. This term is used in many of HMRC’s new penalty regimes. Not taking ‘reasonable care’ can increase the percentage penalty that can be levied upon you along with increasing the potential period of assessment (from 4 to 6 years).
- By law, it is up to the business owner, however limited their abilities, to keep sufficient records to show that any tax return prepared by them is correct and complete.
January 2011
VAT Rate Change
From 4 January 2011, the standard rate of VAT
increased from 17.5% to 20%. There are specific rules for
services supplied during the rate change
but it is important to note the tax
point of each invoice you raise.
In addition to the standard rate of VAT change, companies using the flat rate scheme will also see an increase in the rate they use.
If you are unsure about anything regarding the VAT rate changes then we will be happy to help.
June 2010 - Emergency Budget Speech
After 7 weeks of the coalition government bracing us for higher taxes and lower spending the budget speech was, in the end, not as bad as many people had predicted.
There were some tax rises and inevitable spending cuts but there were some silver linings.
There will be an increase in personal allowance of £1,000 from April 2011 although higher rate taxpayers will not benefit. It is part of the Liberal Democrats big plan to raise this to £10,000 by the end of the coalition term in office.
The Chancellor announced plans to reform the current tax credit system with the aim to target lower income households over middle earners.
It was also announced that existing Furnished Holiday Letting (FHL) rules will remain in place until April 2011 and that they will consult over the summer about plans to change the tax treatment of FHLs from this date. One big advantage of these rules are that they allow individuals who generate losses from a rental property which meets the FHL criteria to offset them against other income from that tax year.
The Chancellor held back the gloom by announcing that new businesses outside London and the South East will be entitled to an exemption of up to £5,000 of class 1 employers National Insurance Contributions for up to 10 employees in their first year of business.
The basic NI threshold will increase by £21 per week above indexation but this does little to benefit people earning over £20,000 as the previously announced increase in the NI rate of 1% will still come into effect from April 2011.
As expected, capital gains tax was an easy target for the Chancellor although the rate increase was less than some people had predicted.
The Chancellor announced that gains for high earning individuals will rise by 10% to 28%, while individuals paying tax at the basic income tax rate will continue to pay 18% on any capital gains.
Entrepreneurs relief has been retained and in fact extended to the first £5m of qualifying gains for any individual lowering the effective rate to 10%.
The annual exemption will remain at £10,100 but is expected to increase with inflation in coming years.
Again as expected, VAT is set to rise to 20% from 4 January 2011 along with a corresponding rise in insurance premium tax.
The Chancellor announced large measures to support companies through the difficult times to come. Every company will see a reduction in corporation tax of 1% from April 2011, the main rate becoming 27% while the small companies rate will fall to 20%.
In addition, the plan was set out to reduce the main rate of corporation tax by a further 1% per annum until it reaches 24%.
However, with the good comes the bad! The annual investment allowance which gives companies 100% tax relief on qualifying capital expenditure is being cut from £100,000 to £25,000. In addition, the writing down allowances that companies receive on capital assets are being reduced by 2% to 18% and 8% for certain items.
Proposals for a landline duty have been dropped along with the Chancellor announcing that no new duties are proposed on alcohol or tobacco. In addition, cider drinkers can sleep a little easier now as the proposal to increase duties at 10% above inflation have been dropped!
Please see our special emergency budget tax facts for more information and rates.
March 2010 - Budget Speech
Income Tax
The Chancellor announced that most of the rates and allowances with remain unchanged for 2010/11. The main changes he announced were:
- The addition of the 50% tax rate (42.5% for dividends) for individuals earning above £150,000.
- The personal allowance will be gradually withdrawn for those individuals with income in excess of £100,000.
National Insurance
All main rates and bands are remaining static.
Capital Gains Tax
The annual exemptions and rates are remaining static.
The entrepreneurs' relief lifetime allowance has been increased from £1m to £2m.
Corporation Tax, VAT, Stamp Taxes and Inheritance Tax
All main rates and bands are remaining static.
The SDLT thresholds remain static with the exception that first time buyers can claim relief from SDLT on residential purchases of up to £250,000 until 25 March 2012.
The AIA available to companies when purchasing fixed assets has been increased from £50,000 to £100,000. Effectively this means that the majority of small and medium sized businesses will receive 100% tax relief on capital purchases in the year of purchase.
Supporting Small Businesses and Business Growth
The Chancellor announced his continuing support for small businesses by:
- Temporarily increasing small business rate relief
- Continuing to offer business payment support
- Increasing AIA and ER
For more information on the 2010/2011 budget please visit ourtax facts.
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