National Cloud Accountant and Bookkeeping Service | 246 Godstone Road, Whyteleafe, Surrey, CR3 0EF | 0845 388 2298 | 01883 819 568 | info@cloudbookkeeper.co.uk

Changes to tax relief for residential landlords

The tax relief that landlords of residential properties get for finance costs will be restricted to the basic rate of income tax, this will be phased in from April 2017.

The amount of income tax relief landlords can get on residential property finance costs will be restricted to the basic rate of tax.

The changes will:

  • affect your clients if they let residential properties as an individual, or in a partnership or trust
  • change how they receive relief for interest and other finance costs
  • be gradually introduced over four years from April 2017

Finance costs won’t be taken into account to work out taxable property profits. Instead, once the Income Tax on property profits and any other income sources has been assessed, your client’s income tax liability will be reduced by a basic rate ‘tax reduction’. For most landlords, this’ll be the basic rate value of the finance costs.

Who’ll be affected?

Clients will be affected if they are a:

  • UK resident individual that lets residential properties in the UK or overseas
  • non-UK resident individual that lets residential properties in the UK
  • individual who let such properties in partnership
  • trustee or beneficiary of trusts liable for Income Tax on the property profits

All residential landlords with finance costs will be affected, but only some will pay more tax.

Clients won’t be affected by the introduction of the finance cost restriction if they’re a:

  • UK resident company
  • non-UK resident companies
  • landlord of Furnished Holiday Lettings

They will continue to receive relief for interest and other finance costs in the usual way. The restriction will be phased in gradually from 6 April 2017 and will be fully in place from 6 April 2020.

Tax year Percentage of finance costs deductible from rental income Percentage of basic rate tax reduction
2017 to 2018 75% 25%
2018 to 2019 50% 50%
2019 to 2020 25% 75%
2020 to 2021 0% 100%

Tax-Free Childcare

Tax-free child care is a new government scheme to help working parents with the cost of childcare. Tax-Free Childcare will be launched from early 2017 and it will be offered gradually to families, with parents of the youngest children eligible to apply first. For every £8 a parent pays in, the government will pay in £2. Parents can receive up to £2000 per child, per year, towards their childcare costs, or £4000 for children with disabilities.

Company Director Jailed over £147,000 Tax Fraud

Richard Hotchin, the director of Qube Specialist Maintenance Solutions LTD, inflated the value of his purchases and drew up invoices for equipment he had never bought. Hotchin pleaded guilty in court on the 22nd of June 2016 and was sentenced to 21 months in prison. Confiscation proceedings are underway to recoup the proceeds of his crime.

VAT Post Brexit

The VAT act 1994 and The VAT regulations 1995 will need updating after the referendum. One key issue raised by the leave campaign during the referendum is the possibility of changing the VAT rate for domestic fuel and power from 5% to 0%. This hasn’t been decided upon yet and is unlikely to happen but the UK will now have the right to apply the reduced and zero rates.

RTI Penalties – Payroll

HMRC has updated its guidance on what happens when employers fail to report their business’s payroll information on time.

All employers (including those with nine or fewer employees) must now submit their completed and accurate RTI forms to HMRC online either on or before their staff’s payday. Failure to do this could result in penalties, which start at £100 per month.

If you’re an employer, this means that it’s more important than ever to file your payroll on time.

Xero Files

Are you using Xero files ? At your year end e.g March , a good way to ensure cloud bookkeeper have access to all your necessary documents is to upload them to the Xero files. This could include things like dividend paperwork or any purchase invoices for fixed assets that rant already uploaded.

Xero files are also a great way to declutter your office. Upload and store any documents you need of easy access anywhere and to save on space recycling the paper copies. HMRC and other tax authorities accept electronic copies as being equivalent to paper copies.

Stamp Duty Rises 3% – April 2016

Stamp duty is going up for landlords and those buying second homes: They will face a 3 per cent surcharge on the existing price bands from 1 April 2016. (See the box opposite for the full list of charges.)

Wear and tear allowance is going: The allowance allowed landlords to offset 10 per cent of their rental income against tax for maintenance, regardless of whether they carried out any repairs or not. From April 2016, they will only be able to claim for maintenance they can prove has taken place. That means that careful record keeping of receipts and invoices is essential. The government says the measure will have effect for expenditure incurred on or after 1 April 2016 for corporation tax payers and 6 April 2016 for income tax payers.

Screen Shot 2016-04-06 at 17.48.22

New tax year

As the new tax year looms upon us , its important that sole traders and the self employed empower themselves by starting the new tax year in an organised way. We can help at Cloud Bookkeeper to take away the stress, worry , errors and time of doing your tax return and organise your financials from the very begining of the Tax year.

CIS takes to the cloud and goes digital.

 

Following consultation in 2014, the latest set of changes decided upon by HMRC are about to take effect, writes Howard Royse.

By far the most significant of these is the move to mandatory online filing of monthly CIS 300 returns. There has been a steady move away from the submission of paper returns by contractors and now HMRC has decided that the minority must comply with the norm. To be fair though, disputes over late-submitted returns have tended to involve paper versions. Therefore around 20,000 contractors (or potentially, their agents) ought to have made preparations for this new method, or need to act very quickly.

Budget Highlights March 16th 2016

The chancellor has presented his budget to parliament, we’ve outlined some of the highlights below.

 

Lifetime ISA: a new £4,000 ISA that you can use to save for retirement or to buy your first home

From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money.

Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home.

The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017.

 

Personal Allowance will increase to £11,500, and the higher rate threshold will rise to £45,000 in April 2017

The Personal Allowance is the amount of income you can earn before you start paying Income Tax. This is currently £10,600 – it will already rise to £11,000 in 2016, and will now increase further to £11,500 in April 2017.

The point at which you pay the higher rate of Income Tax will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017

 

tax allowances for money earned from the sharing economy

From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one income from property you own.

People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income.

In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.

 

Making sure large companies can’t artificially shift profits out of the UK

Some large companies use excessive interest payments to reduce the tax they pay on their profits in the UK. Relief on interest payments will now be capped at 30% of UK earnings, with exceptions for groups with legitimately high interest payments.

Over the next 5 years, the government will raise nearly £8 billion from large companies and multinationals through changes to the rules on interest and other measures, including:

  • introducing rules to prevent multinational companies avoid paying tax in any of the countries they do business in, a technique called hybrid mismatches
  • taxing outbound royalty payments better – these are fees for using intellectual property like patents and copyrights – meaning multinationals pay more tax in the UK
  • making sure offshore property developers are taxed on their UK profits

 

Tax support worth £1 billion for the oil and gas industry

This includes effectively abolishing Petroleum Revenue Tax (a tax on profits from oil fields approved before 1993) and dramatically reducing the supplementary charge on oil and gas extraction.

 

Cutting business rates for all rate payers

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates.

Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less.

There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.

 

Capital Gains Tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates

Capital Gains Tax is a tax on the gain you make when you sell something (an ‘asset’) that has gone up in value. It is paid at a basic or higher rate depending on the rate of Income Tax you pay.

From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.

There will be an additional 8 percentage point surcharge to be paid on residential property and carried interest (the share of profits or gains that is paid to asset managers).

Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out).

 

Employers will pay National Insurance on pay-offs above £30,000 from April 2018

From April 2018 employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due.

For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.

 

Corporation Tax will be cut again to 17% in 2020

The main rate of Corporation Tax has already been cut from 28% in 2010 to 20%, the lowest in the G20. It will now be cut again to 17% in 2020, benefitting over 1 million businesses.

 

Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018

Currently, self-employed people have to pay Class 2 NICs at £2.80 per week if they make a profit of £5,965 or over per year. They also pay Class 4 NICs if their profits are over £8,060 per year.

From April 2018, they will only need to pay one type of National Insurance on their profits, Class 4 NICs.

Paying Class 2 NICs currently enables self-employed people to build entitlement to the State Pension and other contributory benefits.

After April 2018, Class 4 NICs will also be reformed so self-employed people can continue to build benefit entitlement.