Tag Archives: finance bill

Tax confusion due to Finance Bill changes

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The original Finance Bill 2017 published in March amounted to 762 pages and contained draft legislation on a whole range of tax changes which were due to take effect from 1 April this year for companies and 6 April this year for individuals.  However, the imminent general election has caused all that to change.

Vast swathes of legislation have been dropped from the Bill –  72 out of 135 clauses and 18 out of 29 schedules have been dropped.  The volume of the bill has effectively decreased by over 80%. This is to allow time for the Bill to be debated and passed before parliament shuts down in the run-up to the General Election.

This has caused confusion and uncertainty for many taxpayers who were expecting to be affected by tax changes taking effect from 1 or 6 April or who were hoping to use the new legislation to carry out tax planning transactions.

Some of the key pieces of legislation removed from the Bill were:

  • Making tax digital – the Government has reaffirmed its commitment to making tax digital but it is not known whether the intended start date of 1 April 2018 will be delayed.  This is an enormous project and uncertainty for taxpayers is increasing as we get nearer to 1 April 2018 with no clear idea of what the requirements of the new system will be.
  • Changes to corporate loss relief – new rules were due to take effect bringing increased flexibility for brought forward tax losses and restrictions on the use of losses for large companies.  It is not now clear when those rules will take effect and this is causing uncertainty for many companies as to their tax position.
  • Restrictions to corporate interest deductibility – due to commence on 1 April 2017 but now uncertain.
  • The relaxation of the Substantial Shareholdings Exemption which allows the tax-free sale of qualifying shareholdings by companies – a major widening of these rules was due to commence on 1 April 2017 and a number of groups of companies were planning to restructure their holdings utilising the new rules.
  • The reduction of the dividend allowance from £5,000 to £2,000 due in 2018/19 – as yet there is no indication that this will change.
  • The £1,000 tax-free allowance for property and sundry income which was due to come into effect on 6 April 2017.
  • First year allowances on electric vehicle charging points – due from 1 April 2017.

Assuming no major surprises in the election result, it is expected that the government will legislate at their earliest opportunity at the start of the new parliament.  However, it is unlikely that such legislation will be retrospective in respect of the proposals due to start on 1 April 2017 but this has not been confirmed.  In the meantime, our advice is to hold fire on any planning under the new rules and keep a close eye on developments.

For further advice on any of the above issues contact Claire Astley on Claire.astley@pmm.co.uk or Jonathan Cunningham on jonathan.cunningham@pmm.co.uk

The Queen’s Speech

shutterstock_114857485Last week at the state opening of Parliament 2015, the Queen made her speech outlining the proposed legislation of the new government.

As expected an EU referendum by 2017 is on the agenda along with free childcare, an income tax freeze and the extension of the right to buy scheme for housing association tenants. There are also a number of bills that have been proposed.

The Enterprise Bill will incorporate measures to reduce regulation on small businesses and help them develop, in a bid to boost job creation. The Enterprise Bill will also contain measures to create a conciliation service, to help settle disputes over late payment practices between small and large businesses. There are also plans in place to improve the business rates system ahead of 2017.

There were various tax pledges made by the Conservatives during the General Election and they are set to keep their promises in the Finance Bill as the Queen announced that there would be no rise in income tax rates, VAT or national insurance before 2020. It was also announced that anybody working 30 hours on the minimum wage or anybody earning below £12,500 will not have to pay any income tax.

Jane Parry, Managing Partner and Head of Tax at PM+M, says “The follow up on election promises is welcomed but, interestingly, there was no mention in the Queen’s speech of the proposed inheritance tax relief for houses passed down in the family.  Hopefully it will appear in the Budget speech on 8 July.”

In his second Budget speech of the year, George Osborne will reveal the Government plans to cut £12bn from the UK’s welfare bill, as well as hopefully firming up on his tax proposals. Nothing substantially damaging to businesses is expected to be announced but, as always, there could be a few curve balls in the Chancellor’s announcements regarding measures to clamp down on tax avoidance. This budget should provide some clarity on what will happen to the Business Annual Investment allowance from 1 January, as the Chancellor was keen to avoid giving a commitment on this in his first Budget speech.

To find out what this means for you and your business, we would like to invite you to our post-election Budget breakfast seminar on Thursday 9 July.

For more information about our free seminar or to book, please click the button below or call Daniel Hill on 01254 679131.

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Pension Reform: Huge changes to retirement benefits

July saw the Finance Bill 2014, proposed in the Spring Budget, come into effect. This bill introduced major changes to how retirement benefits can be taken from your pension. The biggest change was the proposal to allow individuals aged 55 or above to take the whole of their pension pot as a cash lump sum from April 2015.

The way we take our pensions has been evolving for a number of years. The option to take 25% of the fund as a tax free cash lump sum has been with us for some time and it hasn’t changed. Commonly, those without a final salary pension would use the rest of their accumulated pension pot to make the one-off purchase of an annuity – an annual retirement income that is paid to them for the rest of their life.

However, falling annuity rates and the increased desire to phase retirement saw the introduction of income drawdown whereby you could draw your income directly from your pension fund, deferring a decision on annuity. Whilst this arrangement worked well for many, income available under drawdown remained restricted. Under the new rules, these income restrictions will go and you now have the choice of how much you wish to take. After you have taken the 25% tax free cash you will be able to access all the balance of the fund but it will be taxed at normal income tax rates. You can also elect to take just the tax free lump sum and draw no income – perhaps using the lump sum to pay down a mortgage or to meet children’s university fees.

Of course, such decisions are dependent on individual circumstance therefore we recommend that you seek professional advice before deciding on such a course of action. After all, a pension is designed to give you an income in retirement – stripping the fund prematurely may have repercussions for your lifestyle later on! If you’re looking to develop a retirement plan, it is likely you will need guidance as to what represents the best path.

Even at their current levels, annuities do provide a certainty of income and may still be your best option. However, you must be aware of the rates on offer;

  • You may qualify for an enhanced annuity if you have a condition that affects your life expectancy.
  • Perhaps you possess a policy that contains a valuable guaranteed annuity rate?

Similarly, drawdown may be more appropriate for your situation. However;

  • You may need to change your pension plan as many older contracts will not offer drawdown as an option.
  • What may have been the best available pension vehicle when you set it up is unlikely to be the best option for you going forward. It could be time for a review.

Whatever your circumstances, we can help. If you have any questions about these new changes to pension benefits contact the Wealth Management team on 01254 679138.

Richard Hesketh – PM+M Wealth Management

During 2014-15 PM+M will be running a number of important FREE seminars aimed at helping people plan their financial futures and achieve peace of mind.  Click here to find out more and book your place.