MARTIN LEVIN & CO
Taxation Practitioners - Accountants & Auditors
Gordon Avenue - Highams Park - London E4 9QU
Telephone (Skype): Martin.Levin1066
Web Site www.MartinLevinABC.co.uk
NEWSLETTER FOR AUTUMN 2015
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Budget Statement 08.07.15
As the General Election of 07.05.15 saw a change from a Coalition Government to a Conservative majority, wide ranging changes came into the second Finance Bill of 2015, the most relevant to YOU as a client would seem:
* Enhanced Capital Allowances of 100% on (alleged) low emissions goods vehicles (Toyota Prius, Gold Buggies, Milk Floats)
* Goodwill on incorporation of a Limited Liability Company from 03.12.14 will no longer be tax deductible.
* Research & Development Relief has been under-claimed by lack of publicity. To encourage those “mad professors” seeking weird and wonderful inventions that can become winners, a generous tax cash claim can be obtained. However, there has been abuse by the “big boys” on this.
* Employment Allowance is to be increased from £2,000 to £3,000 from 1st April 2016. The “minimum salary” used by Director Controlled Limited Companies (around £8,000), could be replaced by around £10,600 which, admittedly, would produce a small liability in National Insurance. This could be considered to qualify for this cash sum.
* Class 2 National Insurance is intended to be abolished (about time too), but this will likely result in Class 4 being increased. We are not told of the proposed rate, but it could be 12% if some commentators’ predictions are right.
* Diverted Profits Tax – one for the big boys, and the media – but the “right of appeal” has been forced upon the Government.
* Abolishing the £8500 threshold for Benefits-in-Kind –as this figure has become meaningless
* Using Umbrella Companies for Travel & Subsistence expenses – to avoid Agency Workers using their own Limited Companies, while working away from home
* Rent-a-Room – is increased from April 2016 from £4,250 to £7,500* Buy-to-Let Changes – The amount able to be deducted for Interest will be reduced from April 2017 where the property is let domestically, and by a sole trader (or a couple).
This is severe, as the reduction is being phased in over the next four years until in the year ended 5 April 2021 it becomes “zero”. Frightening calculations can reveal that the amount of tax that will become payable could reach 144.4% of the “real” rental profit.
Clients should consider their own tax position where they have Rented Profit which is mortgaged. Please ask us for advice.
*Rented Property – Wear & Tear Allowance – this comes to an end on 5 April 2016. After that, what is actually spent will be used as a tax deduction (with conditions).
*Dividend Taxation – a “Nil” Rate Band of up to £5,000 will apply. So those working through their own Limited Companies need careful calculations – and a re-think?
*Savings Allowance of £1,000 for Basic Rate taxpayers is to be introduced in 2016. At current commercial rates of interest (less than 1%) that would mean that an individual would need a substantial cash investment to lose the benefit of this “Allowance” and incur a tax bill.
*Incorporation into a Limited Company – the break-even point would seem to be around, perhaps, £50,000 of Profit before this ought to be considered, as the factors of: Compliance Costs, Class 2/4 National Insurance, Corporation Tax Rates, Income Tax Rates, all need to be considered.
*Non Domiciled status – those who live abroad, but derive rent from a UK Property, should consider getting a Valuation as at 5 April 2015 as soon as possible. If they sell the property, their Capital Gains base is triggered at that date, and any Capital Gains tax will have to be paid within 30 days of selling the property.
*Charity Gift Aid – a reclaim of tax on small cash donations up to a maximum of £8,000 a year (previously £2,000) from April 2016.
*Tax Credit Changes – following the outrage illustrated on BBC Television’s Question Time on 15.10.15 there has been pressure on the changes proposed on the cut-backs. Examples show that a couple with 2 children on a £20,000 salary/wage will have their “awards” reduced by almost £2,000