2016 is the year where the government has finally seen sense and changed the expenses dispensation regime. Previously if an employee had been reimbursed for a business expense such as a train ticket this should have been reported on a P11d even if there was no tax implication. To avoid this a dispensation could have been agreed with HMRC and there was a form P11dx to agree standard dispensations with HMRC.
From April 2016 this is no longer the case. Dispensations are abolished and certain expense reimbursements will just be treated as exempt from PAYE and NIC. Employers will be responsible for checking that the expense is an exempt expense and that the employee has actually incurred the expenditure. This means the P11dx is now history and the system works how many people would have imagined it already works!
There was a little used form P9d for employees who were paid under £8500. This has now been abolished too.
There is a new trivial benefit exemption of up to £50 an employee per benefit that does not need to be reported.
Lastly there is a resonably significant change in that most benefits (for example health insurance) will now be able to be put through the payroll removing the need to submit P11ds entirely for many employers.
Full details of the current regime is available here: https://www.gov.uk/government/publications/480-expenses-and-benefits-a-tax-guide
If you would like any help with employee benefits or payroll please do not hesitate to give us a call.
In the Summer Budget in July 2015 the government dropped a bombshell on Landlords. Starting in April 2017 the tax relief on interest and other finance costs on the rental of residential will be reduced dramatically. Along with the increase of 3% on Land and Buildings Transaction Tax this is going to fundamentally change the economics of buy to let.
The way in which this will work is that instead of getting tax relief on the payments directly the landlord will get a 20% tax reduction for these costs. There are two imediate effects of this. Firstly higher rate taxpayers will not receive 40% or 45% tax relief on their interest payments. Secondly some lanmdlords who are currently basic rate taxpayers will end up as higher rate taxpayers and/or lose their child benefit.
The changes are getting phased in. The schedule is as follows:
2017/18: 75% Deducted as normal, 25% as Basic Rate Reduction
2018/19: 50% Deducted as normal, 50% as Basic Rate Reduction
2019/20: 25% Deducted as normal, 75% as Basic Rate Reduction
2020/21: 0% Deducted as normal, 100% as Basic Rate Reduction
To give an example, this means that in 2020/21 a higher rate tax payer who was receiving £20,000 in rental income and deducting £10,000 in interest will have thier tax change from £4,000 currently to £6,000 under the new regime.
This change only applies to residential property, not commercial or holiday lets. It also doesn’t apply to Companies that own residential property.
Clearly landlords should be planning ahead for these changes. There are a number of ways that this extra tax bill could be mitigated. Among others some examples are:
- Transferring property to a spouse with a lower income
- Selling Property
- Transferring Property to a Company
- Increasing Personal Pension Contributions
- Increasing the rent to cover the additional tax bill
All of these options have pros and cons. This is going to be a complex decision for landlords with consequences that could last for decades. If you would like to discuss your options please give us a call.
Autoenrolment, the word that strikes fear into small business owners across the land. And 2016 is the year that it is going to happen for a huge amount of small businesses in the UK. According to this document https://www.thepensionsregulator.gov.uk/docs/automatic-enrolment-employer-staging-forecast.pdf from a base level of a few thousand businesses staging a quarter last year there are over 100,000 businesses staging each quarter this year peaking at over 200,000 in January-March 2017.
This means one thing. That it is not going to go smoothly! (In fact as I write this I can not access the pension regulator’s website which appears to have crashed!).
For those who don’t already know about autoenrolment (AE) the Pensions Act of 2008 brought in the obligation that all workers will have to opt out of an occupational pension plan of their employer, rather than opt in. This is referred to as automatic enrolment, and moves a significant amount of responsibility onto the employer to ensure that their employees are enrolled in a workplace pension scheme.
Employers are required to initiate automatic enrolment into their workplace according to a date referred to as a staging dates based on the number of employees in the company. The Pension Regulator will be writing to all businesses with a PAYE scheme giving them this date. There are penalties for companies who are not compliant by their staging date.
The only exception to Companies having to comply with the Autoenrolment rules is that Companies with only one Director and no staff, or multiple Directors none of whom have employment contracts. These companies can notify the Pension Regulator that they are not an Employer as far as Autoenrolment is concerned by completing an online form. Details are here: https://www.thepensionsregulator.gov.uk/en/employers/what-if-i-dont-have-any-staff.aspx
The minimum contribution up to April 2018 is 1% from the Employee and 1% from the Employer. The Employer can cover the Employee’s contribution but not the other way round. Details of the minimum contributions are here: https://www.thepensionsregulator.gov.uk/employers/contributions-funding-tax.aspx
We at Sutherland Black sent a considerable amount of time assessing the best way forward for our clients and already have helped a number of clients get to compliance. Firstly a suitable pension scheme needs to be set up if there is not already one in place. Then the next administrative hurdle is that all employees need to be assessed every month to check their eligibility and a complex set of rules applied. Letters to employees need to be generated and an upload of data is needed to the pension provider to inform them of the correct contributions for each employee. For clients where we carry out the payroll for an additional fee we can provide all the necessary admin. We will be recommending that clients who do their own payroll check that the software they use will carry out the AE functions and do the requisite upload to their pension provider.
We will be contacting all of our clients to check that they are compliant, but if you have any questions please give us a call.