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Budget Nov 2017 summary

Autumn Budget 2017: What measures did the chancellor announce?

Philip Hammond promised “a balanced Budget”, one that would maintain fiscal responsibility but help families cope with the cost of living. What measures did he announce to achieve his Budget aim?

Philip Hammond promised “a balanced Budget”, one that would maintain fiscal responsibility but help families cope with the cost of living. What measures did he announce to achieve his Budget aim?

Economic forecasts of the OBR

Hammond shared the OBR’s forecasts for GDP growth over the coming years following slower growth than expected in 2017 so far. The OBR has revised down its forecast to 1.5% in 2017; 1.4% in 2018; 1.3% in 2019 and 2020; 1.5% in 2021; and 1.6% in 2022, leading the chancellor to state that productivity performance “continues to disappoint”, and has remained “stubbornly flat”.

Nevertheless, Hammond championed the 3m jobs created since 2010 and the shrinking deficit, although he warned that it “still remains too high”.

Technology and innovation

It was a Budget recognising the rapid pace of change led by technology and acceptance that a “dynamic and innovative economy” must be “at the heart of global Britain”.

To leverage innovation and support tech start-ups, Hammond promised £3.2bn investment in research and development, including an increase in the main R&D tax credit to 12%, and £500m on a range of initiatives to help businesses, including artificial intelligence and full-fibre broadband.

He also set aside £20bn of patient capital investment over the next 10 years to fund innovative growth by doubling the annual allowance for investment in knowledge-intensive companies through the Enterprise Investment Scheme (EIS), while highlighting that EIS schemes would not be used as “shelter for low-risk capital preservation schemes”.

Levies and duties

From April 2018, the VED rate on new diesel cars will go up by one band, and the current diesel supplement in company car tax will rise by 1%. The diesel levy will fund a new £220m clean air fund, which the chancellor said would “support the implementation of local air quality plans”.

High strength and low-value alcohol will also be hit, with duty on white cider products scheduled to increase by 2019. Other products will be subject to a duty freeze – including beer, wines, spirits and other ciders.

The chancellor has also frozen short-haul air passenger duty rates and long-haul economy rates.

Personal allowance and national living wage

To support individuals with rising prices, the chancellor has increased the personal allowance from April 2018 to £11,450, asserting that the basic rate taxpayer would be £1,075 a year better off as a result.

The national living wage will also rise to £7.50, up from £7.38 from April 2018.

Tax system

The chancellor vowed to crack down on tax avoidance and tax evasion schemes, yet failed to reveal details of these measures in the Budget speech. The government would continue its work, he said, collecting £4.8bn in revenue by 2022-23 with the new measures.

With regard to corporate tax, Hammond reiterated the government’s commitment to maintaining low corporate tax rates, but announced a measure to freeze corporate indexation allowance from 1 January 2018 to broaden the tax base and bring the system in line with personal capital gains tax.

The chancellor also said that more had to be done to reform the system to cope with the digital economy. From April 2019, income tax will be applied to royalties relating to UK sales in cases where the royalties are paid to a low-tax jurisdiction, “even if they do not fall to be taxed in the UK under our current rules”. The measure would raise £200m annually, indicating that more had to be done to tackle multinational tax avoidance.

Hammond also took aim at VAT fraud, by ensuring that all online marketplaces are jointly liable with sellers for VAT, addressing fraud that costs the taxpayer £1.2bn each year.

Elsewhere on VAT, the chancellor said that he was “not minded” to reduce the VAT registration threshold, as had been recommended by the Office of Tax Simplification, but would consult on the “design” of the system to incentivise growth. Yet, he committed to the threshold remaining at £85,000 for the next two years.

Business rates

On business rates, Hammond said he would bring forward the planned switch from RPI to CPI to April 2018, rather than in 2020 as originally planned. He also extended by one year the £1,000 discount for pubs with a rateable value of less than £100,000. The discount will now apply until March 2019.

Much concern has been raised about the revaluation system – in response, the chancellor announced that revaluations will take place every three years, rather than every five years – taking effect after the next revaluation.

Housing and stamp duty

The big news from the Budget was that Hammond will abolish stamp duty for first-time buyers purchasing properties up to £300,000. In addition, to help with high property costs in certain areas, stamp duty will be waived on the first £300,000 on properties with a value up to £500,000.

In other measures to address the housing challenge, Hammond committed to £44bn of capital funding, loans and guarantees over five years in a package to unlock new sites, and boost supply of skills and resources. The chancellor also said he would implement an urgent review of the gap between planning permissions and housing starts to address the high number of residential planning permissions that are currently unbuilt.

Reaction

As many suspected, it was Budget without surprise, as Hammond sought to avoid the furore that followed the national insurance contributions changes in March. Housing was the hot topic, yet the chancellor’s focus on technology and innovation showed that the government is planning to leverage digital transformation to boost productivity and drive growth.

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Government Gateway – why you need one and how to get it

Hello taxpayers!

This is the face of your future communication with HMRC on any kind of tax. They would like us all to communicate online, via a GOVERNMENT GATEWAY NUMBER.

From there you can set up an online account called a Personal Tax Account, so you can access at any time your tax position.

You can also use it to register for self-employment, including the range of taxes that may then be applicable. You can monitor these taxes through your Business Tax Account, including making your regular payments.

You can apply for a GG number HERE.
You’ll need personal details – your NIC number, your passport.
You must take note of the number when they tell you to 🙂 because there’s no way to access it again after that.
HOWEVER you can set up another GG number if you lose, or can’t remember your first one.

Q&Q comments: your important reference is your NIC number, or your UTR (Unique Tax Reference) number if you’ve registered for self-employment. You’ll keep these numbers all your life, and they’ll never change.

If you have an accountant, you can authorise them to handle this online access on an ongoing basis, which is what I do for most of my clients.
You can still have access to your records, of course, but your accountant can also monitor what’s due / paid / upcoming for you.

Self Employed National Insurance – info for 2019/2020

NEWS on the application of National Insurance rates from Accounting Web:

Classes 2 and 4 NIC were to be merged from 6 April 2018, with class 2 NIC abolished from that date. This merger will now take place from 6 April 2019.

Delay

In a written statement to the House of Commons released late yesterday, it was announced that the abolition of class 2 national insurance contributions (NIC) would be delayed by one year to 6 April 2019. This delay was justified by a need to consult more fully with interested parties in respect of the effect of the abolition of class 2 NIC on lower earners.

It’s true that self-employed individuals with profits below the small profits threshold (£6,025 for 2017/18) can currently protect their rights to the state pension and certain other state benefits by paying voluntary class 2 contributions. According to the Office of National Statistics 967,000 people had an annual income from self-employment below the small profits threshold in 2015/16, so it is a significant problem.

Individuals with profits between the class 2 and class 4 threshold (£8,164) pay class 2 NIC at the modest level of £148.20 per year to gain a full year’s NI credit. Paying class 4 NIC currently provides the taxpayer with no NI credits, as it is a pure tax on profits.

Earlier consultation

The proposals to abolish class 2 NIC, and to reform class 4 NIC so it carries all the contributory benefits currently attained with paying class 2, were put forward in the 2015 Budget, and fully consulted on in early 2016.

The Low Incomes Tax Reform Group (LITRG) pointed out in their response to that consultation, that low earning taxpayers would have to pay the more expensive class 3 NIC (£714 for 2017/18), to retain entitlement to the same state benefits. Although there would be a system of NI credits provided for no payment where the individual has profits between the current class 2 threshold and the higher class 4 threshold.

The ATT suggested in its response to the consultation that the need to make a separate class 3 NIC payment would raise barriers for lower earners and discourage them from protecting their state benefit entitlements.

It appears that these questions will now be examined in greater detail by the government, which is a welcome development, but why wait until this late hour? The policy had apparently been decided and all we were waiting for was an announcement of the new (probably higher) rate of class 4 NIC, as part of the Budget on 22 November.

No NIC rises?

Perhaps Philip Hammond got cold feet. After all the last time he announced an increase in class 4 NIC in his Spring 2017 Budget, he had to backtrack as it was perceived as undermining the Conservative manifesto promise not to raise the rates of income tax, national insurance or VAT. Since then we have had another general election during which no similar manifesto promises of freezing tax rates were made, so Hammond should be free to raise the rates of NIC as he wishes.

Of course the retention of class 2 NIC does not mean that the rate of class 4 NIC will not be increased from 9% to 11% or 12%, but it would be a very brave of the chancellor to try.

 

From Accounting Web / Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.
3rd Nov 2017

 

 

National Insurance – check your state pension

NATIONAL INSURANCE PAYMENTS are part of all taxpayers’ lives. As they’re currently under governmental review in some areas, let’s look at some of the overall information from the HMRC website.

Use this service to find out:

  • how much State Pension you could get (this amount is also known as your State Pension forecast)
  • when you can get it
  • how to increase it, if you can

The State Pension age is under review and may change in the future.

You can’t use this service if you’re already getting your State Pension or if you’ve delayed (‘deferred’) claiming it.

Q&Q comment: THIS IS AN INTERACTIVE REQUEST SO FIRST CHECK CAREFULLY YOU HAVE EVERYTHING YOU NEED.

Other ways to apply

If you’ll reach your State Pension age in more than 30 days, call the Future Pension Centre and ask for a statement.

You can also fill in the BR19 application form and send it in the post.

You’ll get your statement within 10 working days.

If you’re already getting your State Pension or have delayed claiming it

To get information about your State Pension, contact the Pension Service if you’re in the UK or the International Pension Centre if you live abroad.

If you’ve worked and paid National Insurance in the Isle of Man

Contact the Future Pension Centre to get information about your State Pension.

 

From HMRC website: https://www.gov.uk/check-national-insurance-record

 

 

National Insurance – check your NIC record

NATIONAL INSURANCE PAYMENTS are part of all taxpayers’ lives. As they’re currently under governmental review in some areas, let’s look at some of the overall information from the HMRC website.

Check your National Insurance record

You can check your National Insurance record online to see:

  • what you’ve paid, up to the start of the current tax year (6 April 2017)
  • any National Insurance credits you’ve received
  • if gaps in contributions or credits mean some years don’t count towards your State Pension (they aren’t ‘qualifying years’)
  • if you can pay voluntary contributions to fill any gaps and how much this will cost

Your online record doesn’t cover how much State Pension you’re likely to get.

Q&Q comment: THIS IS AN INTERACTIVE REQUEST, SO FIRST CHECK CAREFULLY YOU HAVE EVERYTHING TO HAND.

Before you start

You’ll need a Government Gateway account to check your National Insurance record online – you’ll be able to set one up if you don’t have one.

Personal tax account

Signing in to the ‘Check your National Insurance record’ service activates your personal tax account. You can use this to check your HMRC records and manage your other details.

If you’ve paid National Insurance in the Isle of Man

Your record won’t show National Insurance contributions from the Isle of Man if you reach State Pension age after 5 April 2016.

Email the National Insurance office in the Isle of Man to find out how much you’ve paid.

Isle of Man National Insurance office
nationalinsurance.itd@gov.im

You can also write to the office.

National Insurance contributions
Income Tax Division
Government Office
Bucks Road
Douglas
Isle of Man
IM1 3TX

Other ways to apply

You can request a printed National Insurance statement:

  • online
  • by phone

You’ll need to say which years you want your statement to cover. You can’t request statements for the current or previous tax year.

You can also write to HM Revenue and Customs (HMRC).

National Insurance contributions and Employers Office
HM Revenue and Customs
BX9 1AN

 

From HMRC website: https://www.gov.uk/check-national-insurance-record

 

 

National Insurance – current rates and how to pay

NATIONAL INSURANCE PAYMENTS are part of all taxpayers’ lives. As they’re currently under governmental review in some areas, let’s look at some of the overall information from the HMRC website.

How much you pay

The amount of National Insurance you pay depends on your employment status and how much you earn.

If you’re employed

You pay Class 1 National Insurance contributions. The rates for most people for the 2017 to 2018 tax year are:

Your pay Class 1 National Insurance rate
£157 to £866 a week (£680 to £3,750 a month) 12%
Over £866 a week (£3,750 a month) 2%

You’ll pay less if:

  • you’re a married woman or widow with a valid ‘certificate of election’
  • you’re deferring National Insurance because you’ve got more than one job

Employers pay a different rate of National Insurance depending on their employees’ category letters.

How to pay

You pay National Insurance with your tax. Your employer will take it from your wages before you get paid. Your payslip will show your contributions.

If you’re a director of a limited company, you may also be your own employee and pay Class 1 National Insurance through your PAYE payroll.

If you’re self-employed

You pay Class 2 and Class 4 National Insurance, depending on your profits. Most people pay both through Self Assessment.

There are special rules for people with specific jobs (such as examiners or people who run businesses involving land or property) who don’t pay Class 2 National Insurance through Self Assessment.

If you’re employed and self-employed

You might be an employee but also do self-employed work. In this case your employer will deduct your Class 1 National Insurance from your wages, and you have to pay Class 2 and 4 payments for your self-employed work.

How much you pay depends on your combined income from all your jobs. HM Revenue and Customs (HMRC) will let you know how much National Insurance is due after you’ve filed your Self Assessment tax return.

Directors, landlords and share fishermen

There are different National Insurance rules for:

  • company directors
  • landlords running a property business
  • share fishermen for example you’re working on a British fishing boat but not under a contract of service

You can apply to HMRC to check your National Insurance record and claim a refund if you think you’ve overpaid.

 

From HMRC website: https://www.gov.uk/national-insurance/how-much-you-pay

 

National Insurance – the classes

NATIONAL INSURANCE PAYMENTS are part of all taxpayers’ lives. As they’re currently under governmental review in some areas, let’s look at some of the overall information from the HMRC website.

National Insurance classes

The class you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.

National Insurance class Who pays
Class 1 Employees earning more than £157 a week and under State Pension age – they’re automatically deducted by your employer
Class 1A or 1B Employers pay these directly on their employee’s expenses or benefits
Class 2 Self-employed people – you don’t have to pay if you earn less than £6,025 a year (but you can choose to pay voluntary contributions)
Class 3 Voluntary contributions – you can pay them to fill or avoid gaps in your National Insurance record
Class 4 Self-employed people earning profits over £8,164 a year

 

 

From HMRC website: https://www.gov.uk/national-insurance/national-insurance-classes

 

 

 

National Insurance – an overview

NATIONAL INSURANCE PAYMENTS are part of all taxpayers’ lives. As they’re currently under governmental review in some areas, let’s look at some of the overall information from the HMRC website.

Overview

You pay National Insurance contributions to qualify for certain benefits and the State Pension.

You pay National Insurance if you’re 16 or over and either:

  • an employee earning above £157 a week
  • self-employed and making a profit of £6,025 or more a year

You need a National Insurance number before you can start paying National Insurance contributions.

If you earn between £113 and £157 a week, your contributions are treated as having been paid to protect your National Insurance record.

National Insurance classes

There are different types of National Insurance (known as ‘classes’). The type you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.

When you stop paying

If you’re employed, you stop paying Class 1 National Insurance when you reach the State Pension age.

If you’re self-employed you stop paying:

  • Class 2 National Insurance when you reach State Pension age
  • Class 4 National Insurance from 6 April (start of the tax year) after you reach State Pension age

 

 

From HMRC website: https://www.gov.uk/national-insurance

 

 

Tax is coming!

 

Are you a sole trader? Company director?

Have you sorted out your self-assessment tax return yet?

31 Jan 2018 is the deadline for 2016/2017, but please take pity on your poor beleaguered accountant and prepare your records before Jan 30! 🙂

Simple tax assessments from next year?

I have several clients who are pensioners with a small amount of taxable income – whether or not they pay tax on it, depending on the amount – who are still being asked for a self-assessment return. I think this new initiative from HMRC may cover that more satisfactorily in future, though I’m cautious if (i) it would override any actual tax calculation, and (ii) it means a return to paper communication.

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 From accountingweb.co.uk:

As yet there is still no detailed guidance available on gov.uk concerning simple assessments, but we expect some guidance to appear in the next two weeks.

The policy paper for simple assessments suggests that this new procedure will be used where the taxpayer’s main source of income is taxed under PAYE, but he or she also has up to £10,000 of other taxable income or gains. This income threshold has not been included in the legislation.

Not a tax return

A simple assessment is a tax assessment made by HMRC, not by the taxpayer, so it is the opposite of a self assessment made alongside an SA tax return. If the taxpayer has received notice to file an SA tax return, HMRC must withdraw that notice before issuing a simple assessment to the taxpayer. HMRC has up to four years from the end of the tax year to issue a simple assessment.

Who receives a simple assessment 

The aim of the simple assessment procedure is to take the taxpayer out of the SA system, where they have only a small amount of income or gains which is not taxed under PAYE.

We understand that for 2016/17 the simple assessment procedure will mainly be used for taxpayers whose tax underpayment cannot be coded out. These taxpayers will be the first to receive a simple assessment from mid-August 2017.

Taxpayers who reached pension age in 2016/17 will be notified in August or September whether they will be within the new regime for 2016/17, then, if required, the simple assessment form PA302 will be issued in October 2017.

Pensioners with income which just exceeds their personal allowance will remain in SA for 2016/17 but will be taken out of SA and put into the simple assessment regime for 2017/18.

Appeal period

The taxpayer has 60 days to query the simple assessment or such longer period as HMRC allows. It is very important that the taxpayer reacts to the simple assessment within this period, as once the assessment becomes binding, the tax liability becomes payable and there is little the taxpayer can do to challenge it. The simple assessment is not a “determination” which can be replaced by submitting a tax return.

Paying the tax

The normal tax payment date applies, so for 2016/17 the tax due is payable by 31 January 2018. Although if the simple assessment is issued after 31 October following the tax year, the tax will be payable three months after the date of the assessment. The taxpayer doesn’t have to make payments on account after receiving a simple assessment.

Not digital

The simple assessment powers are entirely separate to the requirements for individuals to report income through their digital tax account under MTD. It is expected that the simple assessment will be an entirely paper procedure.

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