BUDGET 2018: A BUSINESS WORKS SUMMARY

The Budget, what does it mean for businesses and the taxpayer?

Personal Allowance

The personal allowance threshold and the higher rate income tax threshold are both to increase from April 2019.

• The personal allowance threshold will rise from £11,850 to £12,500, when 20% income tax is paid. This will be maintained in 2020.
• The higher rate income tax threshold, for those paying 40% tax, will increase from £46,350 to £50,000.

National Insurance

The National Insurance (NI) threshold will also rise.  NI is paid by those 16 years or over.

National Living & National Minimum Wage

The national living wage will increase by 4.9% and the national minimum wage from between 3.5% and 5.5% dependant on age.

Business

• Business rates bills for premises with a rateable value of £51,000 or less will be cut by 1/3 over 2 years. This will help 90% of independent shops, pubs and restaurants to cut bills by £8,000.
• The Annual Investment Allowance will increase from £200,000 to £1 million to assist businesses invest and grow from 1 January 2019 to 31 December 2020.
  • From October 2018 businesses can deduct 2% of the cost of any new non-residential structures and buildings off their profits before they pay tax.
• From April 2019 large businesses will be able to invest up to 25% of their apprenticeship levy to support apprentices. With the apprenticeship levy reducing from 10% to 5% for small companies and the government paying the remaining 95%.  Further details of this will be given in early 2019.

For further information regarding the 2018 Budget then go to http://bit.ly/BWBudget2018hmrc

Despite the economic uncertainty, Companies House have released figures showing that the number of new business start-ups last year increased to 663,272. This is up by 5.7% from the downturn of 2017, which saw a 4.6% drop.

Though the capital saw the largest increase, cities throughout the country including Birmingham, Manchester, Leeds and Bristol also saw a sharp increase in new ventures being started.   London saw an increase of 5.2% to 216,204.  Birmingham recorded 18,590 business formations for last year up from 13,165 the previous year.  In Scotland, Glasgow and Edinburgh saw a decrease in new business start-up. Glasgow was ahead of Edinburgh, for the third year running, with 6,396 formations compared to 5,439 in Edinburgh.  Thus, indicating that Glasgow is still the business hub of Scotland.

“It is encouraging to see formation numbers recover and hit a new high”, says Matt Smith, director of the Centre of Entrepreneurs.  “These figures demonstrate the resilience and confidence of entrepreneurs across the country.”

However, though The Organisation for Economic Co-operation and Development ranked the UK as thirds for start-ups, it fell to thirteenth in the world for scale-ups in 2017.  An early-stage investor, Malcolm Evans, says “Scale-ups, which are what matter, require changing the shape of the commercial world around you by showing precision and human flair. It’s quality over quantity.”

Source: Centre for Entrepreneurs/The Sunday Times

The minimum pension contributions are increasing from 6 April 2019 for both the employees and employers.

So how does this effect business?

• If you have eligible employees in an auto enrolment pension scheme, you will have to ensure that the minimum amount is paid by both yourself, the employer and your employee(s). You can pay more than the minimum if you so wish.
• If none of your employees are eligible for an auto enrolment pension scheme, then you need take no further action.

From 6 April 2019

• The employee’s contribution will be increasing from 3% to 5%
• The employer’s contribution will be increasing from 2% to 3%

Therefore, the total minimum contribution will be 8% when the new rates come into effect.

Under the Pensions Act 2008 it is the employer’s responsibility to ensure that the correct minimum contributions are paid.  If you pay above the minimum contribution, then you do not need to do anything unless you wish to increase the amount yourself.  As an employer you should inform your staff of the increases that will be taking place.

Also, you have an ongoing responsibility in relation to auto enrolment duties.  Each time you pay your employees you need to assess whether they meet the necessary auto enrolment criteria. If they do, they will need to be enrolled into the pension scheme, unless they decide to opt out.

If you wish to discuss auto enrolment and how we can help, then please call on 0113 286 4486.

With just a few weeks to go before the deadline, is it important that you file your self-assessment tax return online (for tax year 2017/18) by the 31^st January 2019.  In addition, if you need to pay any tax due by the dates required.  If you miss any of these deadlines, then penalties will apply.

The deadline for paying any tax owed for the 2017/18 tax year along with your first payment on account for the 2018/19 tax year is also 31^st January 2019.  Your second payment on account being due on 31^st July 2019.

If you are late in filing your self-assessment, you will face penalty fees and interest charges.

• 1 day late, a penalty of £100 is applied, even if no tax is due.
• Up to 3 months late, there is a daily charge of £10 per day, up to a maximum of £900. In addition to the initial fine above.
• 6 months late, the penalty is 5% of the tax due or £300, whichever is greater. In addition to the penalties above.
• 12 months late, is a further 5% of the tax due or £300, whichever is greater. Again, in addition to the penalties above.
• In particularly serious cases, you may be fined 100% of the tax due, thereby doubling your tax bill.

If you are in a business partnership, you will also need to complete a partnership tax return.  Again, penalties apply to both the late submission of the partnership return and the individual partner’s returns.

Late payment penalties:

• Interest will be charged from the date the payment was due. Check the HMRC website for current rates.
• A 5% surcharge will be levied if any tax remains unpaid by 28 February 2019
• An additional 5% imposed if it is still unpaid by 31 July 2019.

It is your responsibility to declare all sources of income on your self-assessment tax return.  If you do not, you could face penalties, possible court action or even criminal convictions.

HMRC offers a wide range of help during this period. Help and advice is available from the GOV.UK website or the Self-Assessment helpline on 0300 200 3310 (open Monday to Friday 8am to 8pm, Saturday 8am to 4pm and Sundays 9am to 5pm).

If you are concerned about your tax return and require any assistance call us on 0113 2864486.

Source: Which

Here at Business Works we are ready for Making Tax Digital (MTD) for our clients with all our accountants now qualified as QuickBooks Making Tax Digital ProAdvisor’s.

MTD is for those businesses whose turnover is £85,000 or above, the current VAT threshold.  Our earlier blog provides more detailed information http://bit.ly/BWMTD.  MTD is to help reduce business tax administration errors as well as increase productivity for your company with less time spent on the former.

HMRC have sent out about 200,000 letter informing businesses of the new MTD service and how VAT records and submissions will be changing from April 2019.  Have you received yours?

If your business has received a letter from HMRC, then you will need to comply with MTD.  Therefore, you will need to keep your records digitally and submit the VAT data via a functional compatible software e.g. QuickBooks, Sage, Xero etc.

We would encourage all businesses to start using a bookkeeping software package as this will ensure that your records are up to date and therefore MTD compliant.

If you need further information about MTD or bookkeeping software, then please get in touch on 0113 2864486.

The Advisory Fuel Rates (AFR) from 1 December will be,

Engine size                                         Petrol – amount per mile                             LPG – amount per mile

1400cc or less                                     12 pence                                                           8 pence

1401cc to 2000cc                                15 pence                                                         10 pence

Over 2000cc                                        22 pence                                                        15 pence

Engine size                                         Diesel – amount per mile

1600cc or less                                     10 pence

1601cc to 2000cc                                12 pence

Over 2000cc                                        14 pence

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

The Advisory Electric Rate (AER) which was introduced in September for 100% electric cars will remain the same at 4p per mile.  Electricity is not a fuel for car fuel benefit purposes.

The AFR and AER are deemed to be tax and National Insurance free.

Both rates can be applied for fuel per mile,

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

If your employee does not repay the private fuel used during the tax year then you will need to,

• report on their P11D
• pay Class 1A National Insurance on the value of the fuel benefit

If you travel as a result of running your business (other than home to work) and

• are unsure on what you can claim
• are considering your options regarding the company purchasing a vehicle
• want to understand the rules around company car benefits in kind
• or anything else associated with business travel

Please contact us so that we can ensure the advice you are given is specific to your circumstances on 0113 2864486

Source: HMRC

Class 2 NIC will not be abolished from 6 April 2019 as previously announced by the Treasury.

National insurance contributions (NIC) are complicated for the self-employed, having 2 classes (2 and 4) paid on different bands of income and at different rates.

Class 2 NICs is paid by the self-employed if the annual profit is over £6,205 and costs a maximum of £153.40 per year (2018/19).  It provides some entitlement to the state pension and other state benefits.  Class 4 costs more, with no upper limit, and provides no right to state benefits.  It is just a tax on profits.

The Treasury realised that changes needed to occur back in July 2013, and some streamlining has taken place.  Class 2 is now collected, alongside Class 4, with tax due under self-assessment.  The aim was to merge the 2 classes to make it even simpler from 6 April 2019 (put back from April 2018!).  However, this will not now be the case.

The reasons for this are unclear and whatever they are, the NIC system will remain as is at present and we shall have to wait to see if further changes will be made in future.

If you would like further assistance or guidance on this then please contact us on 0113 2864486.

Are you aware of the Child Benefit arrangements that began in 2013?  If not, then you are not alone, 100,000 families have been hit by the High Income Child Benefit Charge for “over-claiming” on their Child Benefit.

Child Benefit is payable to parents who are responsible for 1 or more children under 16 (or under 20 if in approved education or training).  £20.70 per week is payable for the eldest or only child and £13.70 per week per child payable for additional children.  So, for a family with 2 children, this is £1,788.80 per year.

From 2013, the Government introduced changes where one of the individuals in a household has an income over £50,000. In these circumstances, a High Income Child Benefit Charge may apply.  The joint income is not relevant i.e. if a couple earn £49,000 each per year they are not affected by the charge.

If you or your partner earn between £50,000 and £60,000 per year, then the charge you pay is 1% of the Child Benefit you receive for every £100 of income over £50,000 a year i.e. if you earn £55,000 per year then the Child Benefit charge would be 50%.  When you earn £60,000 per year the charge is 100% of the Child Benefit.

So, if you or your partner have an income of between £50,000 and £60,000, it is still beneficial to claim the Child Benefit and recommended that you register for self-assessment.  Once either income rises to £60,000 per year then it may be best to decide not to receive Child Benefit payments (as you will need to repay this).  As a note you can choose not to receive the Child Benefit at any time!

HMRC still recommend you complete the Child Benefit claim form, in the first instance when your child/children are born, even if you decide not to take the payments as,

• It helps you receive National Insurance credits which in turn go towards the State Pension
• It will mean that your child is registered to get a National Insurance number when they are 16 years of age.

Finally, it is you or your partners responsibility to ensure the above is followed otherwise you may have to pay back any Child Benefit that you should not have received plus charges may apply if this occurs.

If you need assistance with this or completing a Self-Assessment then please call us on 0113 286 4486.

Trivial benefits were introduced in April 2016 and are tax-free to the employee with the employer not needing to notify HMRC on a P11D. A trivial benefit is,

• The cost of providing a benefit so long as it is no more than £50 (if above £50 then the full amount is taxable, not just the excess above £50)
• The benefit is not cash or a cash voucher
• It isn’t in the terms of the contract to receive the benefit
• It is not a reward for their work or performance.

It is the cost per employee that is trivial whether the employer gives it to one or 300 employees and not the total cost of the benefit to the employer.  The £50 is also inclusive of VAT if the benefit given includes it, regardless of whether the employee recovers the VAT.

If the employer cannot work out the exact cost per employee when given to a large number of employees, then the average cost per employee must not exceed £50 for it to be classed as trivial.  The only stipulation is that the other conditions must apply.

The employer must use a common sense approach with HMRC giving examples.

If a group of 5 employees were out for a meal together and the total bill is £240 then HMRC will accept that this is an average of £48 per employee.

However, if say 25 employees are given bottles of wine for Christmas and the total bill comes to £1,000, with some costing £15 per bottle for employees and others £140 per bottle for the directors. In this situation it is practical to determine the cost of the individual benefit per employee and director.  The £15 bottle is trivial whereas the £140 bottle will need to be full declared.

If you would like any further assistance and guidance on this, please do not hesitate to contact us on 0113 286 4486.

As from 1 September 2018 HMRC have announced an Advisory Electric Rate (AER) for 100% electric cars for the first time of 4 pence per mile.  Electricity is not a fuel for car fuel benefit purposes.

The Advisory Fuel Rate (AFR) and the new AER can be applied for fuel per mile,

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

If your employee does not repay the private fuel used during the tax year then you will need to,

• report on their P11D
• pay Class 1A National Insurance on the value of the fuel benefit

The AFR rates from 1 September will be,

Engine size                                         Petrol – amount per mile                             LPG – amount per mile

1400cc or less                                      12 pence                                                          7 pence

1401cc to 2000cc                                 15 pence                                                          9 pence

Over 2000cc                                         22 pence                                                         13 pence

Engine size                                         Diesel – amount per mile

1600cc or less                                     10 pence

1601cc to 2000cc                                12 pence

Over 2000cc                                        13 pence

AFR and the new AER are deemed to be tax and National Insurance free.

If you travel as a result of running your business (other than home to work) and

• are unsure on what you can claim
• are considering your options regarding the company purchasing a vehicle
• want to understand the rules around company car benefits in kind
• or anything else associated with business travel

Please contact us so that we can ensure the advice you are given is specific to your circumstances on 0113 2864486

Source: HMRC & AccountingWeb