Do you have a company car? Then be warned. From April this year, all company cars will generate a benefit in kind charge. Even electric cars will be taxed on 5% of their list price. The taxable benefit for other low emission vehicles (51-75g/kg) will leap from 5% to 9% of the vehicle’s list price. The taxable benefit for all other cars will also increase by two percentage points, even for high emission cars, as the maximum taxable benefit is increasing to 37% of the list price.
National insurance contributions
Class 2 National Insurance contributions (NICs)
The government is planning to abolish Class 2 NICs in the next Parliament and will reform Class 4 to introduce a new contributory benefit test. Campaigners for the low paid have welcomed the announcement but are warning that the link with the self employed contribution record must not be affected.
Currently 30 years of contributions are needed for a full basic state pension, but this will rise to 35 years when the new “single-tier” pension is introduced in April 2016.
The “employment allowance” relief is now available to individuals who employ care and support workers. Employers are entitled to deduct up to £2,000 per annum from their liability to pay secondary Class 1 National Insurance contributions.
From April 2016 this allowance will increase to £3,000 per annum. However it is proposed to make the allowance unavailable where the only employee is the director.
Residential furnished lettings: replacing wear and tear allowance
HMRC are consulting until 09/10/2015 on replacing the 10% wear and tear allowance for residential furnished letting with relief for the actual costs of like-for-like renewals and replacements effective April 2016.
The proposals will give greater consistency and fairness across the residential property letting sector and reduce the number of tax rules applying to the sector.
Scope of the new replacement furniture relief
The relief will apply to landlords of unfurnished, part-furnished and furnished properties. The relief will not apply to ‘furnished holiday letting’ businesses and letting of commercial properties because these businesses receive relief through the capital allowances regime.
The new replacement furniture relief will only apply to the replacement of furnishings. The initial cost of furnishing a property would not be included. It will apply to the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use in the dwelling house, such as:
- moveable furniture or furnishings, such as beds or suites
- fridges and freezers
- carpets and floor-coverings
- crockery or cutlery and
- beds and other furniture
Fixtures integral to the building that are not normally removed by the owner when the property is sold would not be included because the replacement cost of these would, as now, be a deductible expense as a repair to the property itself. Fixtures include items such as:
- boilers and
- fitted kitchen units
TIP: Defer renewals of furniture to 2016-17 if you can.
The existing Employer Supported Childcare regime will cease for all new entrants in early 2017, but will still be available for existing recipients.
For the new scheme parents will be able to open an online account, into which they can pay to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK.
For every 80p a parent or someone else pays in, the government will top up an extra 20p. The government will top up the account to a total of £10,000: the equivalent of up to £2,000 support per child per year (£4,000 for disabled children).
The scheme will be available for children up to the age of 12 years (currently 16 years). It will also be available for children with disabilities up to the age of 17 years, as their childcare costs can stay high throughout their teenage years.
To qualify, parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year.
Any eligible working family can use the scheme. It doesn’t rely on employers offering the scheme, unlike the current employer-supported childcare scheme.
Self-employed parents will be able to get support for childcare costs in tax-free childcare, unlike the current scheme, which is not available to them.
Parents on the current scheme do not have to switch to tax-free childcare as long as their employer continues to offer it.
Parents and others (such as grandparents, other family members or employers) can pay into their childcare account as and when they like, building up a balance to be used when they need it e.g. over the summer holidays.
The process will be as easy as possible for parents. Their circumstances will be re-confirmed every three months via a simple online process. There will be a simple log-in service where parents can view accounts for all of their children at once.
If circumstances change or a parent no longer wants to pay into the account, then they will be able to withdraw the money they have built up. Similarly the government will withdraw their corresponding contribution.
TIP: Employers need to set up the Employer Supported Childcare scheme before April 2017 if they want the old scheme. Similarly parents need to join before this time.
Marriage relief registration opens online
Taxpayers can now sign up online for the new tax break for married couples and people in civil partnerships.
Web users can register at any point in the tax year and still receive the full benefit of the relief, which took effect from April. It permits a person who does not pay tax to transfer up to £1,060 (10% of standard personal allowance) to a spouse or civil partner. An individual can claim relief if all the following conditions apply:
- he or she is married or in a civil partnership
- he or she has an annual income of less than £10,600 including pensions, savings and investments
- his or her spouse or civil partner has an annual income of between £10,601 and £42,385
- both partners were born on or after 06/04/1935
Only one half of a couple should make an application. HMRC will then inform the recipient of the transfer of a change to his or her PAYE code.
TIP: One director/shareholder companies could make use of this if the director takes a low salary and the remainder in dividends e.g. salary £8,000 dividends £30,000 – no tax due. Therefore the transfer of part of the director’s personal allowance is allowable provided their spouse or civil partner pays tax at the basic rate.
With thanks to The Professional Training Partnership
Fernhill Accountants Limited accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of the material in this blog post.