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Reducing Your Marginal Rate of Tax


Umbrella Vs Limited Company set-up


Treasury to clamp down on stamp duty avoidance


Growth in the market for contractors in the UK


Proposal to merge PAYE and National Insurance

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Saturday
Jan062018

Highlights Of The Year 2017

Here are our picks of the business news and highlights of the year 2017:

Summary

- The Budget 2017 provided good news for first time buyers with a stamp duty exemption up to £300,000. Landlords have been worse off over the past couple of years with restrictions on mortgage interest relief and allowable expenses.

- The 2017 Budget revealed a positive outlook for IT contractors. The Government has proposed to invest over £500m in a range of initiatives from artificial intelligence, to 5G and full fibre broadband.

- 2017 was a year of uncertainty for the UK economy with slow progress over Brexit negotiations throughout the year and little clarity over the likely outcome. Some large UK businesses have postponed their plans and some multinationals may move their headquarters abroad. Despite the uncertainty, business in the UK has continued to grow, particularly in the Tech sector, with stockmarkets hitting all time highs.

- The year 2017 started off with the election of Donald Trump as President of the United States. Trump received significant media coverage over decision made during his first term in office and statements made in his twitter campaigns.

- Conservative Prime Minister Theresa May heavily criticised for calling a snap general election in June 2017 only to lose seats and a Conservative majority following a weak campaign.

- The Pound weakened following the Brexit announcement in summer 2016 and continued at depressed levels against the Dollar and the Euro throughout the year. Businesses have been impacted by the rising cost of imports. Prior to Brexit, the Pound purchased $1.45 and €1.30, compared to $1.33 and €1.12 in December 2017.

- The Euro reported its strongest year against the dollar since 2003 as economies strengthened in Europe.

- UK stocks rose to all time highs with the FTSE 100 reaching a high of 7,697 in the year.

- Cryptocurrencies were the highest moving asset class with significant gains realised in 2017. Bitcoin in particular rose from $1,000 at the start of the year to a high of $20,000 in December 2017.

- The Bank of England raised the base rate of interest from 0.25% to 0.5% for the first time in 10 years.

- The Federal Reserve raised US interest rates 3 times in the year.

 

December 2017

- The year ends with a surge in the valuation of Cryptocurrencies. Bitcoin in particular increased from $1,000 at the beginning of the year to a high of $20,000 in December. The volatile currency has since reduced to $11,500 at the end of December.

- The Chicago Mercantile Exchange began trading in Bitcoin futures in December 2017.

- UK listed companies paid a record £94 billion in dividends to shareholders in 2017. It has been a good year for investors with both capital and dividends rising to record levels.

- Strong economic performance in the US has led the Federal Reserve to raise interest rates by 0.25 percent to a range of 1.25 percent to 1.5 percent.

- The British Pound ends the year at 1.13 against the Euro and 1.34 against the US dollar. The Pound has seen a downward trend since the Brexit vote in June 2016. Prior to that it was 1.30 against the Euro and 1.45 against the US dollar.

- Toys R Us announces that its UK operation has fallen into administration.

- Tech giants finished the year strongly with stocks in Amazon, Apple, and Facebook rising by over 50% in 2017.

- Disney acquires the entertainment business of 21st Century Fox for $52 billion.

 

November 2017

- UK Chancellor Philip Hammond announced his Autumn Budget 2017. First time buyers will no longer pay stamp duty for purchases up to £300,000.

- The Bank of England raised UK interest rates from 0.25% to 0.5%. This is the first increase in 10 years.

- FTSE 100 reaches all time high at 7,559.

- Monarch Airlines falls into administration.

- Details of confidential documents relating to offshore investments leaked in the Paradise Papers were made public on 5 November 2017.

- Apple launches iPhone X, its most expensive mobile phone to date, retailing at £1,000.

 

October 2017

- House prices in London fell for the first time since the financial crisis.

- EU orders Amazon to pay €200m in back taxes arising from illegal tax practices employed in its operations in Luxembourg.

- Apple launches iPhone X with all-screen display and wireless charging. The phone retails at £1,000. 

- Shares in tech giants Apple and Amazon reach all time high.

- Catalonia passes referendum for independence after heavy handed response from Spanish authorities.

- The EU commission demands that Ireland recovers additional €13 billion in taxes from Apple.

 

September 2017

- TFL rules that Uber is to lose its London licence, citing that the company’s practises are not “fit and proper”. Uber is appealing the decision.

- Ryanair cancels over 20,000 flights as the company failed to plan for pilot holidays.

- China regulators announce proposal to ban cryptocurrency trading, including the use of Bitcoin and Etherium.

- China bans initial coin offerings (ICO’s) as an illegal form of public financing.

 

August 2017

- UK inflation rose 2.9% in August

- Dow Chemicals to merge with Du Pont in $130 billion deal.

- Chem China acquires Syngenta for $44 billion.

 

July 2017

- Google fined a record €2.4 billion by the EU Regulator for unfair market practices in the web search market for favouring its own products in search rankings dating back to 2008.

- Amazon acquired upmarket US supermarket chain Whole Foods for $14 billion.

 

June 2017

- UK General Election results in Hung Parliament, with the Conservatives having a smaller majority than prior to the election. Theresa May criticised for weak campaign.

- The FTSE100 hits all time high due to a combination of low interest rates and strong economic confidence.

- The US central bank raised interest rates by 25 basis points to 1.25 per cent. BOE announce that UK rates to remain at 0.25%.

 

May 2017

- The Bank of England voted to leave interest rates on hold again at 0.25%.

- Donald Trump fires FBI director James Comey who was investigating him over allegations of links to Russia.

- The US state of Puerto Rico filed bankruptcy with debts of over $74 billion.

- The “WannaCry” ransomware attack affected 200,000 computers in 150 countries, including major disruption to the NHS. The attack was not confined to the UK, with a number of Russian businesses also affected. The attack exploited a vulnerability in the Microsoft system. The attackers demanded a ransom to be paid in Bitcoin.

- There are now over 900,000 employees on zero hours contracts in the UK.

- British Airways cancels flights over busy bank holiday weekend due to system error.

 

April 2017

- Teresa May announces a snap UK General election to take place in June 2017. It is anticipated that the Conservatives will strengthen their majority in advance of Brexit negotiations.

- The UK government’s ban on letting agents’ fees in England is effective from 6 April 2017.

 

March 2017

- Prime Minister Theresa May invoked Article 50 on March 29 2017 which leaves the UK with two years to negotiate an exit deal. Britain will officially leave the EU by April 2019.

- New 12 sided Pound Coin released into circulation in the UK.

- Conservatives make a U-Turn on the Budget with the reversal of the proposed increase in NI for self employed.

- Philip Hammond announces 2017 Budget which includes increased NI for self employed and reduction in the Dividend Allowance.

- FTSE100 breaks 7,400 to reach all time high.

- Snap, the owner of popular app Snapchat floated on the US stock exchange in March 2017. Its share price rose 44% shortly after the IPO.

 

February 2017

- Donald Trump bans all visitors travelling to the US without a VISA from 7 “Muslim” countries. The ban was rejected by Congress and led to protests around the globe.

- Philip Green agreed with the Pensions Regulator to pay £363m to fund the deficit in the BHS pension scheme.

 

January 2017

- Trump’s shock election victory is believed to have been impacted by the rise of fake news on social media. The impact of technology provides an added dimension to modern day politics.

- Tesco acquires Booker for £3.7 billion.

- Toshiba shares fell 30% after multi billion write down of its nuclear business. This is another blow to management who have not yet recovered from the accounting scandal in 2015.

- US and UK stockmarkets hit all time highs in January 2017 following the election of Donald Trump. The US stock exchange the Dow Jones rose above 20,000 in the month.

- Donald Trump pulls out of Trans-pacific partnership (TPP), a free trade deal between the US and countries including Mexico, Australia and Japan.

- BT issued a profit warning in January 2017 following an accounting scandal at one of its subsidiaries in Italy.

Monday
Jan012018

Self Assessment Tax Returns Due By 31 January 2018

The deadline for online Self Assessment Tax Returns for the fiscal year 2016/17 are due by 31 January 2018. Any income tax due must be paid by the 31 January deadline.

We recommend that individuals should leave sufficient time to complete their self assessment tax submissions due to the large number of users expected to log on at the last minute. This is especially important for individuals completing their self assessment online for the first time as you will need to register and apply for your username and password several weeks before the submission can be made.

Limited Company Contractors will note that all directors of UK businesses are required to submit a self assessment tax return regardless of whether they have drawn a dividend or not. If you have not prepared for this you must act now in order to ensure that you will have sufficient time to meet the deadline.

For Self Assessment enquiries, please contact Belsize Accountancy Limited on 0207 043 0052. Belsize Accountancy specialise in providing accountancy services to Limited Company Contractors in the UK.

 

Thursday
Dec072017

2017 Autumn Budget Update

UK Chancellor Philip Hammond announced the 2017 Autumn Budget. The Budget was hailed as business friendly by the Federation of Small Businesses with favourable announcements on business rates and the decision to hold the VAT registration threshold at £85,000 being the main highlights for small business owners. The budget also centred around housing with first time buyers benefiting from a stamp duty exemption on the first £300,000 when purchasing their first home.

The most significant changes announced in the 2017 Budget are detailed below:

 

Income tax Personal Allowance

The income tax Personal Allowance will rise from £11,500 to £11,850 in 2018/19. This is forecast to reach £12,500 by 2020.

The 20% basic rate band will increase from £33,500 to £34,500 in 2018/19.

Higher rate Threshold will increase from £45,000 to £46,350 from 6 April 2018.

The nil rate band for savings income will remain in line with 2017 at £5,000.

 

Dividends

The tax free dividend allowance of £5,000 will reduce to £2,000 from 6 April 2018. The dividend tax rates will remain at 7.5% for basic rate, 32.5% for higher rate and 38.1% for additional rate taxpayers.

 

National Insurance

From 2018/19, Class 4 National Insurance will apply from £8,424 to £46,350 at 9% for the self employed and 12% for employees.

Class 2 National Insurance contributions for the self employed to be abolished from 6 April 2019.

 

Directors Loans

The Section 455 tax on Directors’ loans will remain at 32.5%.

 

Corporation tax rates and bands

The main rate of corporation tax to continue at 19% in April 2018. It is forecast to be cut to 18% in 2019 and 17% in 2020.

From 1 April 2017 the utilisation of corporate tax losses will be restricted where profits are above £5m. Losses can be offset against the first £5m per annum. For the portion of profits over £5m, the losses will be subject to a 50% restriction.

From 1 April 2017 new rules were introduced over the deductibility of corporate interest. Interest can be deducted up to the higher of £2m or 30% of tax EBITDA.

Indexation allowance on companies’ chargeable gains frozen from 1 January 2018.

Disincorporation relief will be discontinued after 31 March 2018.

 

Annual Investment Allowance

The Annual Investment Allowance for companies will continue at £200,000.

 

Business Losses

From 1 April 2017 any unused losses arising from one trade may be carried forward and set off against profits from other trades in later years. If the accounting period of your business spans 1 April 2017, the loss will need to be apportioned to take advantage of the new rules.

 

Royalties

It is proposed that from April 2019, digital companies will be subject to a tax on royalties paid to low tax jurisdictions in connection with sales to UK customers. The rules will apply regardless of where the payer is located.

 

Research and development

R&D tax credits for large companies increased from 11% to 12% from 1 January 2018.

 

Business rates

From April 2018, Business rates will rise by 3% instead of 4% as initially proposed. Non domestic property valuations will take place every 3 years rather than 5.

The controversial staircase tax on small businesses has been removed. Prior to the changes, businesses operating over several floors within the same property were assessed separately to business rates for each occupied floor, rather than billed for their premises as a whole.

 

Capital Gains tax

The annual exemption for capital gains tax will increase from £11,300 to £11,700 from 6 April 2018.

The main rates of capital gains tax will continue at 10% basic rate and 20% for the higher rate with the exception of gains on residential property which are taxed at 18% and 28% respectively.

 

VAT

The VAT registration threshold will remain at £85,000 and will be frozen for 2 years to 2020. The deregistration remains unchanged at £83,000.

 

Property

Landlords can claim mileage at 45p per mile from 6 April 2017.

From April 2020 non-resident companies with UK property income will be liable to corporation tax and gains arising on the disposal of UK property will be charged to corporation tax rather than capital gains tax.

From 6 April 2017 a restriction will be applied to the tax deductibility of mortgage interest against landlords’ profits. In 2017/18, interest can be deducted up to 75% of rental income. This will reduce to 50% in 2018/19.

 

Annual Tax on Enveloped Dwellings (ATED)

The ATED charge will increase by 3% from 1 April 2018. The ATED applies to properties above £500,000.

 

Entrepreneurs’ relief for investors

Proposals are in place to enable Entrepreneurs’ relief for individuals whose shareholding falls below the 5% qualifying limit.

 

National Living Wage

The National Living Wage will increase in April 2018 from £7.50 an hour to £7.83 for the over 25’s.

 

Proposed changes to IR35 and Intermediary Rules

HMRC is consulting on the possibility of extending the amended IR35 rules for intermediaries in the public sector to those in the private sector.

 

Stamp Duty

A stamp duty exemption will be available to first time buyers who will pay no tax on the first £300,000 when purchasing their first home. The exemption is available for houses up to a value of £500,000. The potential saving for taxpayers is £5,000. The stamp duty exemption will apply to property transactions effective from 22 November 2017.

 

Pensions

The pensions lifetime allowance will increase from £1,000,000 to £1,030,000 from 6 April 2018.

The annual pension allowance will remain at £40,000. Individuals who have withdrawn money from their pensions will only be able to contribute £4,000 per annum in line with prior year.

 

Individual Savings Accounts (ISA’s)

The ISA Allowance will remain at £20,000 which can be apportioned between cash and share ISA’s.

The annual subscription limit for junior ISAs will rise from £4,128 to £4,260 in 2018/19.

 

Savings allowance

The personal savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers will remain in line with prior year.

 

Vehicle Excise Duty

A Vehicle Excise Duty (VED) diesel supplement will be introduced for diesel cars registered after 1 April 2018. The first year rate of VED for a new diesel car will go up by one band.  

 

Making Tax Digital

Government proposals to introduce quarterly reporting for all businesses under Making Tax Digital have been postponed till 2020. Quarterly digital reporting will be required for VAT registered businesses from April 2019.

 

Summary

In summary, there are no major surprises in the Budget. Overall, the budget provided some favourable changes for small businesses. Contractors and self employed will continue to be impacted by higher tax rates following the change in taxation of dividends last year and the tightening of IR35 tax rules in the public sector. Landlords continue to be worse off.

Belsize Accountancy are specialist accountants for contractors and small businesses.