Jul 14, 2015 | News
The new dividend allowance will represent a significant tax increase for owners of small companies who have for some years been able to extract profits from their business with a tax efficient mixture of salary and dividends.
Dividend Example
In 2015/16 Paul takes a dividend of £18,000 net (£20,000 gross) from his own company. His only other income is a small salary below the tax and national insurance limits. Currently he pays no tax on both the salary and dividends.
In 2016/17 Paul takes a dividend of £18,000 (gross, no tax credit) and a similar salary to 2015/16 above. He pays tax at 7.5% on £13,000 after deducting the dividend allowance of £5,000, resulting in a tax liability of £975.
Annual Investment Allowance
This allowance is the maximum amount a business can spend on equipment in one year and get full tax relief in that year. The allowance will be increased to £200,000 from 1 January 2016.
Corporation Tax
From 1 April 2015, the main rate of corporation tax is 20% and this will continue for the 2016/17 financial year. The main rate will then be reduced as follows;
- 19% for the financial years beginning 1 April 2017, 1 April 2018 and 1 April 2019
- 18% for the financial year beginning 1 April 2020.
Employment Allowance
From April 2016, the government will increase the National Insurance Employment Allowance from £2,000 to £3,000 a year. The increase will mean that businesses will be able to employ four workers full time on the new National Living Wage without paying any national insurance.
To ensure the Employment Allowance is focussed on businesses and charities that support employment, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.
If you require any further information on how the budget affects you and your business please give us a call.
Jul 14, 2015 | News
Personal Allowance
The Chancellor announced that the personal allowance will be increased to £11,000 for 2016/17 and to £11,200 for 2017/18. The government plans to raise the allowance to £12,500 by the end of this parliament.
Personal Savings Allowance
From 6 April 2016 all bank and building society interest will be paid gross, without deduction of tax. The personal savings allowance will be introduced from this date and will apply for up to £1,000 of savings income (£500 for a higher rate taxpayer) resulting in a tax saving of £200.
Dividends
The dividend tax credit will be abolished from 6 April 2016 and a new Dividend Tax Allowance of £5,000 will be introduced. Dividend income received in excess of the allowance will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers. This will significantly affect owner managed businesses who remunerate themselves through a combination of salary and dividends.
Individual Savings Accounts (ISAs)
In 2015/16 the overall ISA limit is £15,240. From 6 April 2016, ISA savers will be able to withdraw and replace money from their cash ISA without it counting towards their annual ISA subscription.
National Living Wage
From April 2016, all employees aged 24 or over will have to paid a national living wage (NLW) of £7.20 per hour. The national minimum wage will continue to apply to younger workers. The government hopes that the NLW will reach £9 per hour by 2020.
Tax Credits
From April 2016, the income threshold for tax credits will reduce from £6,420 to £3,850 per year. Once claimants earn above the threshold, their award will be reduced at 48% (previously 41%) for each £1 claimed.
From April 2017, the child element of tax credits and universal credits will no longer be awarded for third and subsequent children.
Inheritance Tax
The government is introducing a new extra allowance to be applied only to the value of a home left on death to a direct descendant of the deceased. The allowance will start at £100,000 per person from April 2017 and increase over four years to £175,000 per person, allowing a couple to eventually pass on a family home worth up to £1m (Includes the current inheritance allowance of £325,000 per person) with no tax payable.
Capital Gains Tax
No changes were announced in respect of capital gains tax rates or the annual exemption.
May 18, 2015 | News
The law on workplace pensions has changed. Every employer with at least one member of staff now has new duties, including putting those who meet certain criteria into a workplace pension scheme and contributing towards it. This is called automatic enrolment. It’s called this because it’s automatic for your staff – they don’t have to do anything to be enrolled into your pension scheme. But it’s not automatic for you. You need to take steps to make sure they’re enrolled. Click on the link below for more information;
http://www.thepensionsregulator.gov.uk/automatic-enrolment.aspx
If you run a limited company and do not have any staff, you can claim exemption from auto-enrolment. Follow the instructions on the link below;
http://www.thepensionsregulator.gov.uk/employers/what-if-I-dont-have-any-staff.aspx
Act now to ensure you are meeting your legal obligations!
May 18, 2015 | Budget, News
The Treasury confirmed on Saturday that Chancellor George Osborne will present the second budget of 2015 on 8 July.
