The government has also published its intention to change a number of other tax reporting issues. Some of the more impactful for smaller businesses and Self Assessment tax payers are reproduced below:
1. Simple Assessment – legislation will be introduced in Finance Bill 2016 to provide a new power to allow HMRC to make an assessment of a person’s Income Tax or Capital Gains Tax liability without them first being required to complete a Self Assessment return where it has sufficient information about that individual to make the assessment. This measure will have effect on and after the date of Royal Assent to Finance Bill 2016.
2. PAYE – ‘On or Before’ Reporting Obligation Review – HMRC have carried out a review of the ‘On or Before’ reporting obligations for employers who use the Real Time information payroll filing process. Currently, existing micro employers (with 9 or fewer employees) using Real-Time PAYE may take advantage of a reporting relaxation to report all payments they make in a tax month ‘on or before’ the last payday in the tax month rather than ‘on or before’ each and every payday. This is a 2 year temporary relaxation which is legislated to come to an end on 5 April 2016: this measure confirms the temporary relaxation will end, as planned, aligning the treatment of existing micro employers with all other employers.
3. Capital Gains Tax: payment on account – from April 2019 a payment on account of any Capital Gains Tax (CGT) due on the disposal of residential property will be required to be made within 30 days of completion of the disposal. Taxpayers will be able to reconcile their payment on account with their total CGT liability for the year, after the year end. Legislation will be introduced in Finance Bill 2017 and the government will publish draft legislation for consultation in 2016.
4. Student loan repayments – As announced at Autumn Statement: From April 2016 the income threshold for loans taken out on or after 1 September 2012 is frozen at £21,000 until 5 April 2021, and from April 2019 employers will be asked to start deducting repayments from borrowers of postgraduate loans, at a rate of 6% alongside undergraduate repayments at the existing rate of 9%
5. Data-gathering from Electronic Payment Providers and Business Intermediaries – Legislation will be introduced in Finance Bill 2016 to identify businesses who are not complying with their tax obligations by extending HMRC’s current data gathering powers. The extended powers will include business intermediaries who facilitate transactions, particularly online and electronic payment service providers who operate digital wallets, thereby future-proofing legislation to include emerging new data sources.
6. Stamp Duty Land Tax: changes to the filing and payment process – As announced at Autumn Statement, the government will consult in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017 to 2018.

George Osborne and his team seem to have a grudge against landlords and second home owners. From 1 April 2016, Stamp Duty Land Tax (SDLT) payable on the acquisition of residential property – where the property is a second home or a buy-to-let investment – will see a significant increase in the amount of SDLT payable.
At present, this will only apply to properties purchased in England and Wales. In Scotland, the new Land and Buildings Transaction Tax applies.
For example:
Andy Jones is considering a further acquisition for his Midlands based buy-to-let property business of £300,000. What are the SDLT implications of buying before or after 1 April 2016?
Completion date 1 March 2016 – SDLT payable would be £5,000.
Completion date 1 May 2016 – SDLT payable would be £14,000.
The virtual tripling in SDLT due is a result of the 3% increase in SDLT rates from 1 April 2016. For acquisitions after 1 April 2016 the new rates are:
£0 to £40,000 no SDLT is payable
£40,000 to £125,000 – 3% on total cost of acquisition
£125,001 to £250,000 – 5% on this band only
£250,001 to £925,000 – 8% on this band only
£925,001 to £1.5m – 13% on this band only
Over £1.5m – 15% of the property price above this amount
Will this fuel a rush to buy before rates increase on 1 April 2016? Prospective buyers may want to consider this option, but don’t buy in haste and repent at leisure!

1 January 2016 – Due date for Corporation Tax due for the year ended 31 March 2015.
19 January 2016 – PAYE and NIC deductions due for month ended 5 January 2016. (If you pay your tax electronically the due date is 22 January 2016.)
19 January 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2016.
19 January 2016 – CIS tax deducted for the month ended 5 January 2016 is payable by today.
31 January 2016 – Last day to file 2014-15 Self Assessment tax returns online.
31 January 2016 – Balance of Self Assessment tax owing for 2014-15 due to be settled today. Also first payment on account for 2015-16 due today.
1 February 2016 – Due date for Corporation Tax payable for the year ended 30 April 2015.
19 February 2016 – PAYE and NIC deductions due for month ended 5 February 2016. (If you pay your tax electronically the due date is 22 February 2016.)
19 February 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2016.
19 February 2016 – CIS tax deducted for the month ended 5 February 2016 is payable by today.

At present smaller businesses are required to file accounts once a year with HMRC when their Self Assessment or Corporation Tax returns are filed.
HMRC are now moving towards the provision of a digital account for business owners, a portal that will allow taxpayers to manage their tax affairs online. In the draft notes for the Finance Bill 2016 there is further clarification of the way in which HMRC will expect this digital account to be used.
Here’s what they have to say:
“Making Tax digital – As announced at Autumn Statement, the government will invest £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.”
This declaration is likely to have wide ranging implications. For example, will HMRC use this data to require taxpayers to pay their tax quarterly instead of twice yearly (if self employed), or annually if incorporated? Will tax due be based on current year earnings instead of prior year profits?
As stated, HMRC will be consulting on the detail this year. We will be keeping a careful eye on the outcome of their deliberations. Readers should be aware that these changes are unlikely to be implemented before 2020.

One of the more obscure filing deadlines for Self Assessment purposes relates to a claim to have your tax underpaid for a year recovered by an adjustment, an increase, in the PAYE stopped from your salary in a future tax year.
For underpayments year to 5 April 2015, the filing deadline is fast approaching, 30 December 2015.
You will not be able to request this type of settlement if:
you don’t have enough PAYE income for HMRC to collect it
you’d pay more than 50% of your PAYE income in tax
you’d end up paying more than twice as much tax as you normally do
Underpayments that are agreed to be settled in this way for 2014-15 will be adjusted in your code number for 2016-17.

On the 8 July 2015, George Osborne announced a number of changes to the taxation of property businesses. Without a doubt the most impactful change is the loss of higher rate tax relief for finance charges, which includes mortgage interest. What he didn’t explain was the not so gentle push of many landlords, who were previously basic rate tax payers, into the higher rate tax band.
Consider the fate of Joe who has built his property rental business by maximising the use of low interest rate mortgages – in accountant speak he is highly geared.
He has built up his rental business profits (after deducting costs excluding mortgage interest) to £120,000 a year. All his mortgages are interest only and the annual interest charges are £100,000. He is content to manage on the modest £20,000 income that this provides as he is in the business for the long term – nursing long term growth in the capital value of his property portfolio.
Up to the tax year 2016-17 he can deduct the £100,000 from the £120,000 and pay tax on the difference. For 2016-17 this will amount to just £1,800.
After 5 April 2017, new legislation will disallow an increasing percentage of the mortgage interest as a business expense, until by 2020-21 none of the £100,000 will be allowed as a deduction when computing tax payable. At a stroke, and with no change in property income and outgoings, Joe’s taxable profits from his property business will increase from £20,000 to £120,000.
In this way Joe will become a higher rate tax payer and lose much of his personal tax allowance as his income exceeds £100,000.
Relief for his mortgage interest payments will be given by a basic rate tax credit. For 2020-21 this will amount to £20,000 (£100,000 x 20%).
Unfortunately, even with this tax credit taken into account, Joe’s Income Tax liability for 2020-21 will rise to £19,500 (based on current information available). This is a massive increase and it will consume most of Joe’s property business cash flow.
Fortunately, there is time to plan. We will be working with all our property business clients to mitigate the downside effects of these tax changes. Readers who would like our support should call for an initial consultation sooner rather than later.

The following information is extracted from the Government’s help sheet:
New accounts will be available for 4 years, but once you have opened an account there’s no limit on how you long you can save for.
Accounts will be available through banks and building societies from Autumn 2015.
You can make an initial deposit of £1,000 when you open the account – in addition to normal monthly savings.
There is no minimum monthly deposit – but you can save up to £200 a month.
Accounts are limited to one per person rather than one per home – so those buying together can both receive a bonus.
Only available to individuals who are 16 and over.
The bonus is available to first time buyers purchasing UK properties.
Minimum bonus size of £400 per person (a minimum of £1,600 savings are required to qualify for any bonus).
Maximum bonus size of £3,000 per person.
The bonus will be available on home purchases of up to £450,000 in London and up to £250,000 outside London.
The bonus will be paid when you buy your first home.
Two further points to be considered. Savings can be withdrawn for any other purpose, but then no bonus is payable, and there are complications if you want to open a Help to Buy and a Cash ISA in the same tax year.

To ask any question about the new flat-rate State Pension scheme seems to suggest a straightforward answer. Everyone will get the same amount won’t they?

The answer to the latter question is no. The amount you will get will depend upon a number of factors including:

• how many qualifying years you have on your National Insurance (NI) record
• how many years you have built up an entitlement to the additional State Pension under the current system
• how many years you may have been paying lower NI contributions because you have been in a salary-related workplace pension scheme or you received NI rebates which went into a personal pension plan. Either of these scenarios had the effect of ‘contracting out’ a person from full entitlements under the State Pension scheme.

The new State Pension scheme applies to everyone who reaches State Pension age on or after 6 April 2016. The full State Pension has been set at £155.65 per week. People who have no contribution record under the current system will have to obtain 35 qualifying years of NI credits on their record to give them the flat-rate amount.

However, for individuals who have already built up a NI record (which is nearly everyone reading this article) there are transitional provisions which take into account the NI record accrued up to 5 April 2016. This is a very reasonable complication to have in moving to the new system. Otherwise, people who have accrued a substantial entitlement under the current system of basic and additional State Pension would be treated very differently depending on whether they reach State Pension Age on the 5 April 2016 (and thus receive a pension under the current system) or on the 6 April 2016 (and therefore receive a pension under the new system).

Under the transitional provisions, your NI record before 6 April 2016 is used to calculate your ‘starting amount’ for the new system at 6 April 2016. Your starting amount will be the higher of either:

• the amount you would get under the current State Pension rules (which includes basic State Pension and additional State Pension)
• the amount you would get if the new State Pension had been in place at the start of your working life.

 

For many of those reaching State Pension age in the near future, the transitional provisions offer the best of the current and new systems. Employees who have built up a significant entitlement to the additional State Pension will retain their entitlement. People who have been self-employed for most of their working lives may have little or no entitlement to the additional State Pension and thus will benefit from the new State Pension rules.

Example – self employed

Joe will reach his State Pension age in October 2020 (the State Pension will have risen from 65 to 66 by then). He has been self-employed except for the early part of his working life and he has no entitlement to additional State Pension. He has 32 qualifying years on his NI record.

His starting amount on 6 April 2016 (based on current figures) will be:

• under the existing rules – 30 years NI record would give a full entitlement the basic State Pension of £119.30 a week
• using the new rules – Joe would get £142.31 a week (£155.65 x 32/35).

 

Therefore his starting amount is £142.31. As his starting amount is less than the full rate of the State Pension, if he continues working for three years after 6 April 2016 he will accrue sufficient additional pension rights under the new system to bring him up to the full rate of £155.65.

Example – employed

Maureen will reach her State Pension age in October 2020. On 6 April 2016, Maureen has 35 qualifying years on her NI contribution record. During her working life, Maureen has had short periods when she was contracted out of the additional State Pension.

Her starting amount on 6 April 2016 will be:

• under the existing rules – her 35 years NI record would give her a basic State Pension of £119.30 a week plus £86 additional State Pension but a deduction for her contracted out period of £32. (This will be computed by the Department of Work and Pensions.) This totals £173.30.
• using the new rules Maureen would get £155.65 less a deduction of £32. This totals £123.65.

 

Maureen’s starting amount will be the higher of these two amounts, which is £173.30 a week. As her starting amount is more than the full rate of the State Pension, she cannot accrue additional pension rights under the new system.

How do you get a state pension forecast?

You can get a forecast in some cases online – in other cases you need to ask for a forecast by post. Go to www.gov.uk/state-pension-statement to find out.

Announcements for businesses

Support for smaller businesses

The Chancellor reported that the UK’s Small and Medium sized Enterprises now employ 15.6 million people, up from 13.7 million in 2010. Over the last two years the number of small businesses employing someone other than the owner has grown by 100,000.

The government understands that small businesses need tailored support. Already, Start-Up Loans have provided £180 million of funding to 33,600 entrepreneurs and in the last Parliament, the government cut the cumulative burden of regulation by over £10 billion.

Other support for smaller businesses that have previously been announced include:

• From April 2016 the Employment Allowance will rise to £3,000, benefiting over 1 million employers, and helping many businesses take on their first employee.
• The cancellation of the planned September 2015 fuel duty increase means a small business with a van will have saved £1,357 by the end of 2015-16 compared to plans inherited by the government at the start of the last Parliament.
• The government will meet its commitment to 75,000 Start-Up Loans by the end of this Parliament.

Apprenticeship levy

Earlier this year it was announced that three million new apprenticeships would be created by 2020. To fund this target a levy is to be made on large employers.

The details of this levy have now been quantified.

The apprenticeship levy will commence in April 2017 at a rate of 0.5% of the employers’ pay bill. To exclude smaller employers a £15,000 allowance can be claimed. In this way only employers with a pay bill in excess of £3 million will contribute to the levy.

In some cases this levy may cancel out the intended reductions in Corporation Tax for larger employers.

Small business rate relief

English firms can claim the small business rates relief if they only use one property and its rateable value is less than £12,000. This relief was due to end on 31 March 2016.

The Chancellor has announced today that the relief will be extended for a further year. Businesses will now get 100% relief until 31 March 2017 for properties with a rateable value of £6,000 or less. This means you won’t pay business rates on properties with a rateable value of £6,000 or less.

The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.

Car benefit diesel supplement

The 3% supplement added to the benefit in kind charge for drivers of diesel powered company cars is to continue beyond April 2016 and will now cease to apply from April 2021.

Announcements for home owners

London help to buy loan scheme

The present help to buy loan scheme that applies across the UK, provides a 20% contribution from government, requires a 5% deposit from the buyer, with the balance funded by a 75% mortgage.

As house prices are running at much higher levels in London, from early 2016 qualifying buyers in London will still need to find a 5% deposit, but government will contribute up to 40% with the required mortgage funding dropped to 55%.

These government equity loans will now be available until 2021.

Help to buy shared ownership scheme to be extended

Shared ownership allows families in England, on lower incomes, to buy an interest in their home and rent the rest. People can buy between 25% and 75% of a home in this way.

The rent charge won’t be more than 3% of the non-purchased part of the property.

The qualifying income limits are to be changed. Current restrictions will be lifted from April 2016. Anyone who has a household income of less than £80,000 outside London, or less than £90,000 inside London, will be able to participate.

First time buyers’ starter homes discount

200,000 new homes are to be designated starter homes and developers will be able to offer them to first time buyers aged under 40 at a 20% discount.

Stamp duty increase for second homes and buy-to-lets

From 1 April 2016, individuals buying a second home or a buy-to-let property will face an extra 3% stamp duty charge above the current stamp duty land tax rates.

Housing Association tenants

Rights to buy to be extended to Housing Association tenants during 2016. Potentially, this could give 1.3 million households the opportunity to buy their own home.

Capital Gains Tax (CGT) on sale of residential property

From 2019, the government intends to require a payment on account, within 30 days of a sale, of any CGT due on the disposal of a residential property.

This will not apply where no CGT is payable, for example if covered by Private Residence Relief.
Announcements for individuals

Tax credits

As announced in the introduction to this statement the intended reduction in tax credits next year has been withdrawn. For 2016-17:

• The rate at which a claimant’s award is reduced over the income threshold, will remain at 41% of gross income.
• The income threshold will remain at £6,420.
• The income threshold for child tax only claimants will remain at £16,105.
• The income disregard will reduce from £5,000 to £2,500.

As the other elements that make up the payment of tax credits are also unchanged claimants should find their benefits from this source unchanged from April 2016, unless their personal circumstances or income levels have changed.

The Chancellor did comment that tax credits are being phased out in any event and replaced by universal credits.

Basic State Pension increase announced

From April 2016, the basic weekly State Pension will increase to £119.30, an increase of £3.35.

Part-time rail season tickets and money back…

Two new features to be introduced:

1. Commuters will be able to buy part-time season tickets on selected routes, and
2. Commuters will be able to claim money back if a train is more than 15 minutes late.

VAT raised on sales of women’s sanitary products

The UK is unable to zero rate VAT on these products under existing EU rules. Whilst representations are being made the Chancellor is to redirect the VAT revenue raised to selected women’s charities.

George Osborne said:

“300,000 people have signed a petition arguing that no VAT should be charged on sanitary products. We already charge the lowest 5% rate allowable under European law and we’re committed to getting the EU rules changed.

Until that happens, I’m going to use the £15 million a year raised from the Tampon Tax to fund women’s health and support charities. The first £5 million will be distributed between the Eve Appeal, SafeLives, Women’s Aid, and The Haven – and I invite bids from other such good causes.”

Warm home discount scheme extended

The present £140 discount from electricity bills for certain low income households is to be extended and can be claimed from suppliers to 2020-21.

Minor whiplash claims to be curtailed

In an attempt to curtail exaggerated whiplash claims the government is ending the right to claim cash compensation.

More injuries will be able to go to the small claims court as the upper limit is to be increased from £1,000 to £5,000.

This may reduce the cost of insurance for motorists – estimated falls of £40 to £50 a year can be expected