Category Archives: Client News

Making Tax Digital (MTD) removed from Finance Bill 2017

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Following the Prime Minister’s announcement of a general election, legislation to implement the Making Tax Digital (‘MTD’) initiative has been removed from the Finance Bill 2017.  MTD is the plan for businesses to submit quarterly uploads of accounting information to HMRC, with the first wave of businesses due to be affected from 1 April 2018.

Although postponed for the short term, there has been no change to the MTD proposal, and it is likely that the initiative will return following the general election as part of the Government’s commitment to a fully digital tax system.

As a result of the deferment, it is not known whether HMRC will push back the implementation date of 1 April 2018 for unincorporated businesses with a turnover above £85,000.

We will continue to follow the progress of MTD and keep you up to date with any changes. As always if you have any queries please do not hesitate to contact one of our dedicated MTD advisers.

If you have any concerns or if you would like any more information, please contact our tax team by emailing tax@pmm.co.uk or by calling 01254 679131.

Who Wants To Work Forever?!

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Hardly a month goes by without the Government releasing another report on pensions and the past few weeks have been no exception. Analysis by the Department of Work and Pensions has suggested that people under the age of 30 may not get a pension until age 70. A second report by John Cridland CBE for the Department for Work and Pensions has recommended that those under the age of 45 may have to work a year longer to age 68.

The root cause of the problem is that life expectancy seems to be ever increasing with the average retiring worker now spending twenty plus years in retirement. When the State Pension was first introduced in 1908, retirement age was set at 70. However, only one in four people reached that age and life expectancy was only 79.

So, how do you avoid working until you are 70? Of course, the answer is to save more! As a rough rule of thumb take the age you start your pension and halve it, and this is the percentage of your salary you should set aside each year until you retire.

The above is of course simple in theory but much more difficult in practice, as life, children and mortgages get in the way! It is always better to be saving something rather than nothing and the magic of compound growth should not be ignored. For example, if you save £100 per month for thirty years and with an average growth of 6%, you should have a retirement fund of £104,608.

For further information on pension planning contact Antony Keen, PM+M Wealth Management Director, by phone on 01254 604303 or by email at antony.keen@pmm.co.uk.

Making Tax Digital (MTD) Update

shutterstock_508146895Following the spring budget, the chancellor has announced that MTD for unincorporated businesses and landlords with an annual turnover between £10,000 and £85,000 will now take effect from April 2019 as opposed to the original implementation date of April 2018. This delay will no doubt be a welcome postponement for smaller businesses.

Unincorporated businesses and landlords who have turnover exceeding £85,000 will need to submit quarterly returns digitally to HM Revenue & Customs from April 2018. There is no change to the scheduled start date of April 2020 for limited companies.

If you have any questions on how MTD will affect you, please do not hesitate to contact one of our dedicated MTD team.

Andrew Cowking - New Website
Andrew Cowking
Partner
Email: andrew.cowking@pmm.co.uk 
Telephone: 01254 679131

Julie Walsh - New website
Julie Walsh 
Tax Manager
Email: julie.walsh@pmm.co.uk
Telephone: 01254 679131

Jill Morris - New Website
Jill Morris
Run My Business Director
Email: jill.morris@pmm.co.uk 
Telephone: 01254 679131

Lucy O Gorman - New wesbite
Lucy O’Gorman
Run My Business Manager
Email: lucy.ogorman@pmm.co.uk
Telephone: 01254 679131

 

 

 

 

 

The Chancellor makes a U-turn on National Insurance Tax Rise

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Plans to increase National Insurance (NI) levels for self-employed people announced in the Budget last week have been dropped.

A pledge to not increase NI was made in a manifesto back in 2015. The Chancellor broke that pledge last week during the Budget but, after the announcements last week, Philip Hammond has had a change of heart by announcing “There will be no increases in…rates in this Parliament.”

What does this mean?

This is great news in the short term but this almost certainly won’t be the end of the story.

This leaves a rather curious situation entering the build up to the Autumn Budget. There’s obviously no way of predicting what the Chancellor will have in store for us, but the Treasury may be facing a new problem – the increase in NI rate was due to raise over £2bn by 2022. We can expect some changes in the Autumn as it was heavily briefed that the rise in NI was a way to pay for social care and business rate support spending commitments.

It’s worth noting that there’s no backtrack on dividend allowance reduction.

Salary Sacrifice Changes From April 2017

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New rules are coming in on 6 April 2017 for certain benefits in kind where they are provided by salary sacrifice.

If you provide benefits to your employees in exchange for salary sacrifice or have a flexible benefits package where your employee can choose a benefit or cash, or where you provide benefits but offer your employee a cash alternative then you need to know about these changes.

Benefits impacted are those which are currently taxable, like cars and white goods, and those currently tax exempt, like mobile phones and workplace parking.

You don’t need to do anything if your employees are only sacrificing salary for:

  • Pensions or pensions advice,
  • childcare vouchers,
  • workplace nurseries,
  • directly employer contracted childcare,
  • cycle to work or
  • ultra-low emission company cars (emissions of or under 75 g CO2 / km).

The new rules start on 6 April 2017. Salary sacrifice contracts entered on or before 5 April 2017 will be protected up until the contract hits a trigger point. From 6 April 2017, the normal trigger point is when the salary sacrifice contract renews, auto-renews, starts, ends or is modified or changed. At this point you must use the new rules. This should align with your normal contractual arrangements.

If an employee starts a contract on or after 6 April 2017, then you will need to immediately use the new rules for that employee. This will apply to any new recruits who adopt the arrangements.

For a better understanding of what is changing and what you need to do next, please click the button below to view our help sheet.

HELPSHEET

PM+M Helps East Lancs Box Co. Limited Secure Six Figure Lancashire Growth Fund Grant

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L-R: Andrew Cowking (PM+M), David Ingham, Peter Ingham, Amy Ingham & Neil Harrison

Andrew Cowking and the PM+M team have helped East Lancashire Box Co. secure a £120,000 grant from the Lancashire Growth Fund which will see the creation of 12 new jobs.

East Lancashire Box Co. was established in 1981 and is headquartered in Rishton near Blackburn. It manufactures bespoke cardboard box packaging and products. It offers a complete service, from initial concepts to the final product and handles all elements of design, print and production. The company’s product range is visible on the shelves of all the major supermarkets both within the UK and overseas.

The grant will be used to purchase new equipment including a state-of-the-art printer and a die cutter. The aim is to create a colour printing facility under one roof in 16,000 sq ft of new production space at the Junction 7 Business Park in Clayton-Le-Moors with the capacity to meet current and expected demand. The 12 new jobs will include apprenticeship and production positions.

Andrew Cowking – partner at PM+M – handled the forecasts for the grant application whilst Neil Harrison of The Harrison Partnership coordinated all elements of the grant application process, which was completed in just over 3 weeks from starting the application to the making of the offer.

Peter Ingham – director of East Lancashire Box Co. – said: This is a significant investment for the company and is an exciting milestone in our history. The grant will help to support our growth plans and will ensure that we are able to develop our offering and provide a bespoke service to all our customers – from small businesses to multinationals.

Andrew Cowking added: “East Lancashire Box Co. is a forward thinking family-owned business and one of the region’s most entrepreneurial companies. We were delighted to help them secure the grant and we look forward to seeing how it aids their expansion over the coming years.”


Buy-to-let – the new rules are coming

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If you cast your mind back to the 2015 summer budget, you may remember the significant changes that will impact all landlords. The implementation date of these changes is drawing ever closer and it will eat into landlords’ profits and, in some cases, may wipe them out completely.

With the slashed tax relief and added stamp duty, you may feel that someone has got it in for buy-to-let landlords. The question is what can you do about it?

What does the loss of tax relief mean?

This is one of the biggest changes to buy-to-let and now means that people buying to let residential property will no longer be able to claim tax relief on their mortgage interest payments at their marginal rate of tax. Before the changes this meant that basic rate taxpayers would get 20% tax relief, but those at a higher rate would receive 40% or 45% in tax relief.

What’s changing?

The changes mean that the tax relief will be a flat rate of 20%. Basic rate taxpayers, in most cases, will not see any changes, but those on higher incomes will find themselves losing much more in mortgage interest payments.   Also, more landlords may find themselves unexpectedly moving up into the higher rate tax bracket because of the way the new rules work.

To provide some perspective, here’s an example:

A landlord with a £150,000 buy-to-let mortgage on a property worth £200,000, with a monthly rent of £800, would currently have a net profit after tax of around £2,160 a year. With the lower tax relief, the net after-tax profit would be reduced £960.

Overall, the higher the interest you pay, the more you will feel the changes.

However, the full impact of the new rules is not felt immediately, as these changes will be gradually phased in from 6 April 2017, with transitional rules in place until April 2020. During the transition, the amount of interest directly deductible from rents will reduce and the proportion deducted as a fixed 20% credit will increase. This means in the transitional period landlords will be able to claim:

Tax year Interest deductible from profits Interest at fixed basic rate credit
2017/18 75% 25%
2018/19 50% 50%
2019/20 25% 75%

Income tax on property gains!

New rules announced last year, designed to target non-resident companies and individuals from escaping UK tax on profits made from the sale of UK properties, could inadvertently impact UK landlords. The new rules seek to charge the profits on selling UK property to UK income tax rather than CGT when the ownership of the property is more in the nature of a trade than a fixed investment.

When the changes were announced, there was widespread concern that UK landlords could be affected.

HMRC have now addressed this by releasing a 64-page guidance document to help clarify how they will seek to operate the rules.  In the guidance, they state that the new rules will not apply to businesses which buy properties in order to generate rental income, even if these businesses also enjoy an uplift in market value of the property. So the average UK buy-to-let landlord should not be subject to income tax on the gains he makes when he sells properties which were acquired for letting.

Whilst this is good news, it is only HMRC guidance and not law. For those particularly concerned about this new legislation, the position can be clarified with HMRC under their non-statutory clearance application process.

 

 

Inheritance Tax And The New Residence Nil Rate Band

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Much of my time is spent advising clients on inheritance tax, both the current liability on their estates, and what can be done to address it. It’s an emotive subject, with many clients feeling aggrieved that the wealth they have created over their lifetime is being taxed again on death.

In response to this, the former Chancellor, George Osborne introduced additional measures to potentially reduce the tax take for the treasury, and allow people to pass on more of their money to their families on death.

On death, if you leave assets to anyone other than your spouse, inheritance tax is paid at a rate of 40% on any assets you hold above the nil rate band; this currently stands at £325,000 each (£650,000 for couples).

It has long been the objective of the Conservative Party, to increase the point at which inheritance tax becomes payable by couples to above £1 million. The simplest way to address this would have been to increase the nil rate band to £500,000 each. However, for political and financial reasons this was not the solution George Osborne devised.

An additional nil rate band was created of up to £175,000 each, relating to the family home.  This will be phased in over 4 years from 6 April 2017, starting at £100,000 each and increasing by £25,000 per year over 3 years. This is in addition to the existing nil rate band. Thus, if you as a couple have a home worth £350,000, you may eventually be able to pass on a joint estate of £1 million without being subject to inheritance tax.

This all sounds good news but it should be noted that not everyone will qualify.  Here are a few key points:

  • If your estate is worth more than £2m your entitlement to the residence nil rate band starts to disappear;
  • The rules stipulate that homes must be passed on to direct descendants, by which it means children and grandchildren;
  • I’ve had to inform clients who are leaving all their assets to nephews and nieces that they won’t get this additional relief;
  • Step-children and adopted children are counted in the definition as children so that is welcome;
  • If leaving the property into a trust, it must be one that creates a fixed entitlement to the property to a direct descendant, it can’t be wholly discretionary;
  • If one spouse doesn’t use their residence nil rate band, it can be passed on to the other spouse to use on the second death in the same way as the ‘normal’ nil rate band;
  • It can only be claimed against one property so two properties totalling £350,000 may require you to claim this relief against the higher value property only; and
  • There are also a myriad of rules relating to downsizing, which will probably require further revision by the Government to ensure they work in the way intended.

Inheritance tax is an area where many people will require advice. If you wish to receive advice on the Residence Nil Rate Band or any other inheritance tax matter, please get in touch.

Written by Richard Hesketh
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Richard Hesketh 
Client Manager
Email: richard.hesketh@pmm.co.uk
Direct: 01254 604340

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Jane Parry 
Managing Partner & Head of Tax
Email: jane.parry@pmm.co.uk 
Direct: 01254 604329

 
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PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.

Trumping the market!

shutterstock_353116961The vote is in and Donald Trump has been voted President, words perhaps few people expected to read this morning and a deja vu feeling of Brexit!

Whilst investors and markets would undoubtedly have preferred the more stable influence of Hilary Clinton, Trump as President might not be a disaster. It is worth noting that the power of the President’s Office is limited by the Constitution, through the chambers of Congress and the Supreme Court. The Federal Reserve also remains independent.

So what does Trump mean for investors?  Initially, as we saw with Brexit, markets are likely to be volatile and we have already seen falls in the Asian markets overnight; the FTSE is currently down 1.2%. During volatile markets, and especially when you may be showing some short-term losses on investments, it is tempting to sell and wait for the markets to improve before reinvesting.

It is perhaps useful to look at market patterns and history before making the decision to sell.  According to Fidelity International, an investor who invested in the FTSE All Share Index for the last fifteen years, but missed the best ten days would have achieved an annualised return of 1.46%, against 5.69% by those investors that remained invested. Missing the best forty days reduced your annualised return to -5.62!

Often the largest returns are achieved shortly after these falls, so the message is simple. Provided you have a clear investment strategy and review process in place, you should hold your nerve and investments, and over the medium and longer term you will be rewarded.

Like a game of Top Trumps, if you hold the quality cards you win over the longer term.

For a review of your pension and investments, please contact Antony Keen by emailing antony.keen@pmm.co.uk or by calling 01254 679131.

PM+M Christmas Present Appeal 2016

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We know – Bonfire night hasn’t even been and gone yet but it’s hard not to notice that Christmas decorations are starting to pop up in shops and on the high street already! So we thought, why not launch our annual Christmas present appeal a little earlier this year? Let’s make it our biggest one yet!

This year, the PM+M team are collecting gifts for Blackburn, Burnley and Bury Children’s Services. As our team is growing, it’s only fitting that our appeal should grow too so that more children can benefit from the incredible generosity the appeal receives.

If you are able to spare a little time and money, we know your donations will be greatly appreciated. For some children, this could be the only gift they receive this Christmas. Gifts can be for children of any age or gender and we have included a few guidelines below:

  • Gifts should be to the value of around £10
  • Gifts must be new
  • Please either deliver gifts wrapped or unwrapped
  • If wrapped, gifts should be clearly marked with gender and age range
  • Gifts should not contain confectionery or alcohol

Gifts can be dropped off at our any of our offices between 8:30am and 5pm before Friday 9 December.

The PM+M team would like to take this opportunity to thank you for your kindness and generosity and we do hope that as many of you as possible will join us in supporting such a worthy cause.

A reminder of our addresses is below but should you require any further information, please get in touch with our Marketing team on 01254 679131.

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