Tag Archives: Tax

Buy-to-let – the new rules are coming

shutterstock_229675555

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.

The PM+M tax team will be hosting seminars in Blackburn, Burnley and Bury to provide answers and insights into what buy-to-let landlords can do to protect their position.

For more information or to book a place, please click the button below or call 01254 679131.

button

Trivial benefits in kind exemption may not be so trivial

shutterstock_237809779

It’s Christmas and the annual minefield of gifts and Christmas parties for employers to navigate. If you are giving your employees gifts to create goodwill, the last thing you want to do is destroy that goodwill with an unexpected tax bill.

However, help is at hand from the new trivial benefits rules.

Previously, the rules were subjective. HMRC allowed exemptions for reasonable gifts but there were no clear thresholds, making it difficult to have certainty about tax treatment.

Under the new rules, benefits and gifts can be tax-free providing that:

-       They cost no more than £50 per benefit and
-       They are not cash or a cash voucher (gift vouchers e.g. for a shop, are allowed).

There is no limit on the number of trivial benefits that can fall into the new rules for employees, providing that they do not form part of the employee’s remuneration for their job or part of a salary sacrifice arrangement.

Special rules apply for directors to limit the overall total for a tax year to £300 of tax-free trivial benefits.

The new rules are good news for generous employers who can now have clarity about what is and is not tax-free, not just at Christmas, but throughout the year. Also, employers who were previously providing vouchers and paying the tax under a PAYE settlement agreement may no longer need to that.

And don’t forget the £150 per person tax exemption for events such as Christmas parties. But do be aware that the limit can only apply to one event, not spread across multiple ones and it includes the extras such as employer funded travel.

The VAT inclusive cost needs to be used when considering if the tax-free limit is reached for both trivial benefits and the annual events exemption.

For more information in trivial benefits, please contact our tax team by emailing tax@pmm.co.uk or by calling 01254 679131.

The Apprenticeship Levy

shutterstock_305418650The new apprenticeship levy will have its challenges but have you considered the benefits of this new legislation when it comes into effect in April 2017?

The Government have already made their mark by abolishing the employers’ National Insurance Contribution (NIC) for apprentices under the age of 25 back in April 2016. This new levy is part of their commitment to increase the quality and quantity of apprenticeships available in England  in order to reach their goal of 3 million by 2020.

The Levy will be payable on payroll bills of over £3 million per year at 0.5%. This will affect many businesses, who perhaps haven’t even considered apprenticeships for some time.

All employers will receive an allowance of £15,000 to be offset against the payment of the levy.  This levy “pot” is then to be used on apprenticeship training and assessments from an approved provider only.

The Government will top up levy contributions by 10%.

The payments for apprentices studying English and Maths will be paid direct to the providers and not taken from the levy payments.

This is essentially another tax. However, businesses can benefit from this by utilising the levy to upskill existing team members. There is a huge employment demand upon us with nearly 21,000 people due to retire in the next few years.

Don’t waste this opportunity – look into your options now and prepare.

If you’re not sure whether the levy will affect you and want advice on this or other payroll matters, please contact Julie Mason at julie.mason@pmm.co.uk or call 01254 679131.

 

Tax-free childcare scheduled to launch in 2017

shutterstock_334181882It’s good news for parents! Under the new Government scheme, they will be able to set up an online account with HMRC to pay childcare with a registered provider, tax-free.

The Government will top up the account by 20% up to a total of £10,000. The maximum payment will be capped at £2,000 per child up to the age of 12 and £4,000 for children with disabilities up to the age of 17.

To be eligible for the scheme, each parent needs to be in employment and earning a minimum of £115 per week each and a maximum of £100,000.00 individually.

There’s no minimum monthly payment requirement and the parents can make withdrawals if they wish. Payments can be made from their tax-free childcare accounts to their chosen provider’s bank account via BACS. All regulated and approved childcare providers will receive an invitation to register for the online service.

Any childcare providers who are not regulated and wish to benefit from the scheme will have to register with a regulator with their unique 10-digit tax reference number and this can often take up to 12 weeks.

For more information on the tax-free childcare scheme, please contact Julie Mason at julie.mason@pmm.co.uk or call 01254 679131.

The Tax Implications Of Brexit

shutterstock_122108053Setting aside the initial shock of the Brexit vote and the ensuing political instability, which shows no sign of settling down any time soon, one key area for businesses and individuals as we progress towards our exit from the EU is understanding what the tax implications will be.

There has been talk of an emergency Budget as a change in leadership could entail a new Chancellor, who will have their own idea of what needs to be done in the wake of Brexit, but this is unlikely to happen until the Autumn. George Osborne has already highlighted corporation tax cuts down to 15% as a possible carrot to incentivise international firms to do business in the UK. The Autumn Statement this year may be an even more important event than usual.

One immediate impact may lie with the long-awaited ‘Making Tax Digital’ discussions, which have experienced practical difficulties and may well be put on hold until a new Cabinet is appointed. The current Finance Bill is already running behind schedule and in the current political climate it could mean that the Finance Act, due to be passed in October, may be delayed.

In the longer term, the changes could be wide ranging. At present, UK companies benefit from the ability to pay and receive dividends, royalties and interest tax efficiently between companies in different EU countries. It remains to be seen whether participation in this will be possible post Brexit. This plus the possible imposition of trade tariffs may have significant consequences for the UK’s attractiveness as a base for inward investment as a footstep into European markets.

The tax which could change most significantly is VAT. VAT is an EU wide tax governed by EU law. Post Brexit, the UK will have the flexibility to amend and develop its own VAT law, without the current EU constraints, which could be positive. On the downside, the current cross EU reporting and refund mechanisms may no longer be accessible, potentially creating more of a compliance burden for UK companies trading in Europe.

At present it is too early to start to plan with any certainty. It’s going to be a case of watch this space as events unfold over the next few months.

If you would like advice or are concerned about any aspects of your affairs, don’t hesitate to get in touch with our expert tax team on 01254 679131.

The Low Incomes Tax Reform Group Urges Taxpayers to Reclaim Tax on Interest

shutterstock_294562187

The Low Incomes Tax Reform Group (LITRG) is urging people to claim back tax deducted from savings income in recent years now that they have received their P60s.

Up until 6 April 2016, financial institutions had to deduct 20% basic rate tax from interest paid to individuals’ bank accounts. The only exception was if you were a non-taxpayer and had registered to have interest paid gross.

Under the new savings regime introduced from 6 April 2016, financial institutions are no longer required to deduct basic rate tax from most interest payments. However, basic rate taxpayers can now have tax-free savings income of £1,000, while if their total taxable income is £17,000 or less, they will not pay any tax on their savings income.

Jane Parry, Managing Partner & Head of Tax, commented: “Anyone who has had a low income and been able to reclaim tax on their interest income should make sure that they do so for the 2015/16 tax year and any earlier years not yet claimed. The rules have now changed, but it’s important not to forget that you can still claim for the period up to 6 April 2016.”

For more information, please contact our tax team at tax@pmm.co.uk or call 01254 679131.

Pre-Tax Year End – Things To Think About

shutterstock_216955000

The tax year end is almost upon us, so the PM+M tax and wealth management teams have put together some useful tax, pension and investment tips for individuals.  Some of them are things you should be thinking about before 6 April some, such as pension contributions, need consideration before the Budget on 16 March.

Click on the buttons below to read through the help sheet and should you have any questions, please give us a call.

TAX PLANNING 1

TAX PLANNING 2

As regards the Budget on 16 March, we will be setting out a summary of the Chancellor’s announcements on our website.  We are also holding two free seminars on Thursday 17 March to explain the key points – breakfast in Blackburn and lunchtime in Burnley.  They are free to attend.  To book your place, please email seminars@pmm.co.uk 

Jane Parry – Managing Partner & Head of Tax

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

Calling All Landlords…

shutterstock_309255455There have been a lot of changes recently involving tax allowable expenditure and various legislation changes that could have landlords paying hefty fines for non-compliance.

The latest regulation changes landlords are facing are the new ‘right to rent’ checks. This means that from 1 February landlords risk a fine of up to £3,000 per tenant if they let a property to a prospective tenant without first checking they have the right to reside in the UK.

These checks have to meet the following requirements:

- Conducted within 28 days before the start of the tenancy;
- Conducted as specified by the Government and an appropriate record kept.

The Government has recently launched an online checking tool which can be used by landlords to conduct the right to rent checks and can be found here: http://buff.ly/1Wq9EaZ

So what if you’re considering becoming a landlord but are put off by the strict regulations you have to adhere to? Whilst the Government are introducing more and more legislation of late, it is important to remember there are still some benefits of becoming a landlord.

If you’re a landlord worried about the impending changes to the legislation, or if you’re considering becoming a landlord and would like to understand what is involved, please get in touch with Jonathan Cunningham (jonathan.cunningham@pmm.co.uk) or call 01254 679131.

We are running a Buy-To-Let seminar to guide you through the recent changes and how you can maximise your tax efficiency with simple and practical advice. To book, please click the button below.

BOOK BUTTON

Have You Completed Your Personal Tax Return?

shutterstock_276568649Christmas is now a distant memory and time is running out for completing your tax return before the 31 January deadline.

If we do your tax return and you have not yet sent us your information, please do so as soon as possible in order to ensure you don’t incur a £100 late filing penalty.

If you prepare your own tax return and are already registered with HMRC’s online service, we recommend you log on and prepare your return sooner rather than later.  The HMRC portal is likely to get very busy as we get closer to 31 January.  Also, you may find when you sit down to prepare your return that you are missing some information or need some advice, both of which may take time to resolve.

The bad news for those who have not already registered for self-assessment is that it’s currently taking HMRC 6 weeks to issue UTR (unique taxpayer references). However, if you apply now and make a reasonable effort to register well before the deadline HMRC may exercise some leniency. They may not be so keen to set aside late filing penalties if you do not apply until 30 January.

If you need help with your tax return or this is your first time completing a tax return online and are worried about meeting the deadline, please get in touch with Julie Walsh (Tax Manager) at julie.walsh@pmm.co.uk or call 01254 679131.

HMRC Plan To Scrap Business Record Checks

shutterstock_141007105HMRC have announced their intentions to scrap the Business Records Checks that have been consistently criticised by the Chartered Institute of Taxation for being ineffective.

The checks were originally introduced to allow HMRC to visit and confirm that a business is keeping sufficient information on its income and expenses in order to produce an accurate tax return. For businesses with inaccurate records, there is currently a potential £3,000 fine on top of any unpaid tax, interests and penalties.

Julie Walsh, Tax Manager at PM+M, said; “The reduction in unnecessary HMRC interventions is great news for businesses, but business owners should not forget that it remains crucial for businesses of all sizes to keep records up to date and in good order to protect themselves against any HMRC enquiries and tax demands.”

HMRC investigations can be very costly even if companies have up to date records. One way that we support our clients with this is in providing fee protection insurance to cover any professional fees that may be incurred in the event of an unexpected investigation or HMRC intervention.  This means we can spend time helping clients through the process and defending against HMRC challenges without the client facing a bill for our time.

For more information or advice on protecting your business, or for a fee protection quote, please get in touch with our tax team by emailing tax@pmm.co.uk or calling 01254 679131.