Pension auto-enrolment. We can set up your pension scheme for a one off fee of £200 plus VAT. Let us take away the hassle.

Buy to let property purchases 3% stamp duty increase

The Chancellor stated in his recent Autumn Statement that an additional 3% stamp duty will be charged on individuals purchasing second homes which are usually rented out to produce an income and a potential capital gain.This is part of a campaign to tax landlords more after previously announcing that tax relief will eventually be restricted to basic rate on allowable interest payments.

This change comes into effect on the 6th of April 2016 so if you are in the process of buying or considering buying a property make sure you exchange contracts before this date.

One solution is to form a limited company and purchase the property in the company name. However this is not without drawbacks.Obtaining a mortgage in the company name is more restricted and the interest rate charged is usually higher. There will also be the compliance costs of submitting annual accounts to Companies House.

So potential and existing landlords if you wish to further discuss these issues in more detail please contact us.

Changes to the Employment Allowance

Since 6 April 2014, employers have been able to utilise the employment allowance to reduce the amount of National Insurance Contributions (NICs) that they pay on employees wages by up to £2,000.

From April 2016, the employment allowance will increase to £3,000, meaning that a business will be able to employ four individuals full-time on the National Living Wage without incurring any employer’s NIC.

However, the employment allowance will be withdrawn from companies where the director is the sole employee. This is because the policy behind the employment allowance was to encourage and support businesses in recruiting staff, rather than to help individuals mitigate their own tax liabilities.

It is currently unclear whether making a spouse or civil partner an unpaid director or an employee for low-level administrative duties would allow access to the allowance, but further details should be released by HM Revenue & Customs in due course.

Dividend tax changes in 2016

This article explains the workings of the proposed dividend allowance and features HMRC’s examples from its own factsheet.

Proposed changes: the key facts

• From April 2016, notional 10% tax credit on dividends will be abolished.
• A £5,000 tax free dividend allowance will be introduced.
• Dividends above this level will be taxed at 7.5% (basic rate), 32.5% (higher rate), and 38.1% (additional rate)
• Dividends received by pensions and ISAs will be unaffected

Impact

The proposed changes are aimed to tax small companies who pay a small salary designed to preserve entitlement to the State Pension, followed by a much larger dividend payment in order to reduce National Insurance costs. It appears that the government is anti-small companies, preferring workers to be self-employed.

This measure will have a very harsh effect on those who work with spouses in family companies. A couple could be over £5,000 p.a. worse off.

How does this work?

HMRC has now published its Dividend Allowance Factsheet, a few days after providing the ICAEW with examples of the new dividend tax.

HMRC examples are as follows:

Assuming for 2016/17 a personal allowance (PA) of £11,000
A basic rate (BR) threshold of £32,000
A higher rate (HR) threshold of £43,000