Budget 2016: everything you need to know

Last week George Osborne, the Chancellor of the Exchequer, delivered a Budget that delivered tax cuts for businesses and individuals. Here are the key points:

Personal tax – As expected, Osborne raised the lower threshold for income tax to £11,500 and the higher threshold to £45,000 – a larger increase than expected. These new thresholds will come into effect in April next year.

More surprising was the cut in Capital Gains Tax. The basic rate CGT was cut from 18% to 10%, with the higher rate cut from 28% to 20%.

Osborne also announced that Class 2 National Insurance contributions will be abolished, with will give self-employed workers a tax cut of more than £130 when it comes into force in 2018.

It wasn’t all cuts, however. Insurance premium tax was increased from 9.5% to 10%. This increase will be used to fund improvements in flood defences.

Business tax – Some good news for small businesses: the annual threshold for 100% small business rate relief increased from £6,000 to £12,000. The higher rate threshold will rise from £18,000 to £51,000. The headline rate of Corporation Tax is also being cut to 17%.

He also snuck in a rise in tax on loans to participate, up from 25% to 32.5%, which follows on from the Dividend Tax and will inevitably hit small businesses harder.

Pensions and savings – The biggest announcements were around ISAs: the annual ISA limit will increase from £15,240 to £20,000. A new ‘lifetime ISA’ for the under 40s will be introduced from April next year, with the government putting in £1 for every £4 saved. The Chancellor said that this is an alternative to a pension fund for the young, who find pensions “confusing.”

Over 85% of contractors are already sending HMRC their CIS returns online, but from April 2016 everyone will have to use the online service.  HMRC will no longer be accepting any paper forms from that date.

To increase filing accuracy, this change will see the introduction of online amendments, online messaging and alerts.

HMRC are also improving the online verification service for contractors, as from April 2017 everyone will also have to use the online service, HMRC will no longer accept telephone verifications from that date.

For contractors currently sending paper returns, you’ll need to register for HMRC’s online services as an ‘Organisation’ ahead of the April 2016 deadline.  To register online you’ll need your HMRC employer reference and Accounts Office (AO) reference.

 Alternatively, Jet Accountancy can submit your CIS return online on your behalf, contact us for more information.

In April 2016 the Government’s new National Living Wage will become law.

If you’re working and aged 25 or over and not in the first year of an apprenticeship, you’ll be legally entitled to at least £7.20 per hour. That’s an extra fifty pence per hour in your pocket. The Government is committed to increasing this every year.

If you’re an employer, you’ll need to make sure you’re paying your staff correctly from 1^st April 2016, as the National Living Wage will be enforced as strongly as the current National Minimum Wage.

Or remember, remember the 31^st of January!

31 January 2016 is the date by which you not only have to complete your self assessment tax return, if you are self-employed or have other income to declare, but it is also the date by which you have to pay any outstanding tax.

Don’t be burnt by penalties and let Jet Accountancy complete and file the return on your behalf, relieving you of this burden!

Contact us today on 07806 792211 or email us info@jetaccountancy.co.uk for a free no obligation quotation.

 

From 2015-16 onwards, the collection of Class 2 contributions will be through the self-assessment system. This means that Class 2 NICs can now be paid together with income tax and Class 4 NICs in one chunk on the 31 January following the end of the relevant tax year. In the past, most people have paid Class 2 contributions monthly by direct debit. Following the final payment in July 2015, HMRC have cancelled such direct debit payments, ready for the switch over to the new system of payment under self-assessment. However, those who wish to continue paying their contributions more regularly can set up a Budget Payment Plan (assuming they are up to date with their self-assessment payments) and make payments weekly or monthly by direct debit in advance of the payment deadlines.   For those who do not opt to use a Budget Payment Plan, the payment date for the 2015-16 liability (£145.60) will be due on 31 January 2017. Self-employed traders will need to budget for this lump sum payment accordingly.

 

New National Minimum Wage Rates

• 21 and over – increase of 20 pence to £6.70 per hour
• 18 to 20 year olds – increase of 17 pence to £5.30 per hour
• Under 18 year olds- increase of 8 pence to £3.87 per hour
• Apprentice rate – increase by 57 pence to £3.30 per hour

This latest increase to the National Minimum Wage is the largest increase since 2007, and is set to benefit more than 1.4 million of Britain’s lowest paid workers.

Introduction of National Living Wage

The new National Minimum Wage (NMW) rates come into effect ahead of the planned introduction of a new National Living Wage (NLW) of £7.20 an hour for over 25 year olds from April 2016. The NMW rates will still apply for workers aged 24 and under. The NLW will be raised incrementally and is expected to reach £9 an hour by 2020.

If you have any questions about National Minimum Wage, or any of the changes which are due to come into effect next April then please get in touch with us at Jet Accountancy.

We would like to say a huge thank you to all our clients who helped us raise money for Race for Life’s Cancer Research UK.  A very hot but enjoyable 5K endured on 21 July 2015!  If you wish to sponsor next year’s event please visit http://www.justgiving.com/louisescott76

Budget 2015 key points: At-a-glance summary

• New national living wage will be introduced for all workers aged over 25, starting at £7.20 an hour from April 2016 and set to reach £9 by 2020 – giving an estimated 2.5 million people an average £5,000 rise over five years

• Inheritance tax threshold to increase to £1m, phased in from 2017, underpinned by a new £325,000 family home allowance

• Personal allowance, at which people start paying tax, to rise to £11,000 next year. The government says the personal allowance will rise to £12,500 by 2020, so that people working 30 hours a week on the minimum wage do not pay income tax

• The point at which people start paying income tax at the 40p rate to rise from £42,385 to £43,000 next year

• Tax credits and Universal Credit to be restricted to two children, affecting those born after April 2017

• Income threshold for tax credits to be reduced from £6,420 to £3,850

• Working-age benefits to be frozen for four years – including tax credits and local housing allowance, but maternity pay and disability benefits exempted

• The amount people can contribute to their pension tax-free to be reduced for individuals with incomes over £150,000

• Corporation tax to be cut to 19% in 2017 and 18% in 2020

• Permanent non-dom status to be abolished – from April 2017, anyone who has lived in the UK for 15 of the past 20 years will pay same level of tax as other UK citizens, raising an estimated £1.5bn

• £7.2bn to be raised from clampdown on tax avoidance and tax evasion with HMRC budget increased by £750m

• Bank levy rate to be gradually reduced over the next six years and a new 8% surcharge on bank profits introduced from 2016

• Cap on charges imposed by claims management companies and an increase in insurance premium tax to 9.5% from November

• New apprenticeship levy for large employers

• Climate Change Levy exemption for renewable electricity to be removed

• National Insurance employment allowance for small firms to be increased by 50% to £3,000 from 2016

• Dividend tax credit to be replaced with a new tax-free allowance of £5,000 on dividend income. Rates of dividend tax to be set at 7.5%, 32.5% and 38.1%.
• Annual investment allowance will be fixed permanently at £200,000 from January 2016

Have you received a letter from The Pension Regulator (TPR) telling you to “ACT NOW” to prepare for auto-enrolment? The letter gives you just a few weeks to nominate a contact to receive communications about auto-enrolment, with the threat of fines or prosecution if you don’t take action. The “staging date” for your business will be stated in the letter. This is the date by which you must have a pension scheme ready for your employees to join, if you do indeed need one. A large number of small companies will be exempt from auto-enrolment, if they don’t technically have any “workers” at their staging date. A company director is not a “worker” if he or she does not have a contract of employment with the company. A company with no staff other than directors has no obligations under auto-enrolment if any of the following apply:

– It has only one director; or

– It has a number of directors, but none of those have an employment contract; or

– It has a number of directors, only one of whom has an employment contract.

TPR doesn’t know which directors in which small companies have employment contracts. If you receive a TPR letter asking for a contact to be established for auto-enrolment, you can get TPR off your back with one email to: customersupport@autoenrol.tpr.gov.uk . This should open a structured email in which you need to insert your: PAYE reference, Companies House reference and the letter code from the TPR letter. If your company does have staff other than its directors, contact us at Jet Accountancy so we can discuss what preparations you need to make to get ready for auto-enrolment.

HMRC have announced new rates which apply from 1 March 2015: 

Engine size	Petrol	LPG
1400cc or less	11p	8p
1401cc to 2000cc	13p	10p
Over 2000cc	20p	14p

Engine size	Diesel
1600cc or less	9p
1601cc to 2000cc	11p
Over 2000cc	14p

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