March Budget 2016

[Freakbro]

What is the definition of a small business, is this an LTD, or do all self employed sole traders fall under this definition?
Assume it'll mean quarterly trips to the accountant for me instead of annually?

I would say its under their definition of small company

According to the UK's Companies Act 2006 a small company is defined as one that does not have a turnover of more than £6.5million, a balance sheet total of more than £3.26 million and not more than 50 employees

And yes, it's sole traders, self employed and landlords with over 10k income

I found this 35 page pdf from Jan 16 on google, and after a quick scan

researchbriefings.files.parliament.uk/documents/.../CDP-2016-0015.pdf

George Osborne announced in his Autumn statement the plan for self-employed and small businesses to have to file four tax returns a year rather than one as currently is done. Each self-employed individual and small business will have the added burden of additional red tape, accountancy fees and potential for fines. As a small business owner myself I already spend quite some time to get things in order once a year. There will be greater chance of errors as well. At the moment we pay £1200 a year in accountancy fees this figure will greatly increase. The Conservatives are not working for small businesses in bringing such legislation but adding burden."

The Government have published a response to the petition:

Making Tax Digital will not mean ‘four tax returns a year’. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.

These reforms will not mean that businesses have to provide the equivalent of four tax returns every year. Updating HMRC through software or apps will deliver a light-touch process, much less burdensome and time-consuming than it is today.

At the March 2015 Budget the government committed to transform the tax system by introducing simple, secure and personalised digital tax accounts, removing the need for annual tax returns. At the 2015 Spending Review the government announced it would invest £1.3bn in HMRC to make this vision a reality, transforming HMRC into one of the most digitally advanced tax administrations in the world.

So I'm not that much more the wiser Sure I see what they are saying, you just upload the data (That your accountant will have to input into the accounts program anyway) quarterly, and then I suppose finalise at the year end.

I guess the quarterly ones aren't 'binding' like the year end one, so adjustments can easily be made before you submit the next quarter.

Then I got this today on a budget analysis from an accounts firm

Making Tax Digital

From 2018 businesses, self-employed people and landlords who are keeping records digitally and providing regular digital updates to HMRC will be able to adopt pay-as-you-go tax payments. This will enable them to choose payment patterns that suit them and better manage their cash flow

Maybe the highlighted bit is a work around, most of my sole traders I just use a spreadsheet to analyse out their expenses, as they are so small, so if I'm not forced to use accounting software for them I might be able to avoid this

 

[Destination]

I wonder, I am 'self-employed' and a landlord of a single property, this is going to be messy, the bank usually takes several months to issue the end of year statements on mortgage interest, and my bills as in expenses are not remotely scheduled throughout the year, big indemnity bills for profession in nov and professional fees in dec, it will make the inputs looks rather haphazard, and will be interesting to see as I may make a loss in a single quarter when all expenses esp if tax bill hits at same time as other expenses.

I can understand what the taxman wants, but I would have thought most people use accountants rather than their own software to send HMRC the data, and as such, I will assume fees will go up, unless you come to a very good understand about what can be claimed in each quarter.

 

[Destination]

Abolition of ‘wear and tear’ allowance
Landlords of fully furnished residential lettings are currently able to claim
a deduction of, broadly, 10% of gross rents. This compensates for not
being able to claim any tax relief on the capital cost of fixtures and fittings.
As previously announced, this ‘wear and tear’ allowance is abolished for
2016/17, but is replaced by a deduction for the replacement cost of capital
items such as free-standing fridges, beds, etc. Unlike the wear and tear
allowance, this relief is also available for partly furnished properties.
Much greater record keeping will be required to track all such costs and to
show that the cost is for a replacement, rather than an initial asset; the latter
do not get any relief.

They really don't like small landlords at all now do they.

 

[Freakbro]

I can understand what the taxman wants, but I would have thought most people use accountants rather than their own software to send HMRC the data, and as such, I will assume fees will go up, unless you come to a very good understand about what can be claimed in each quarter.

Yea, but if you are inputting your own data into an accounts program and have a good knowledge of claimable expenses etc, what do you need the accountant for?

If I had to do this, I'd probably ditch my S/E clients as I cba with the hassle. I was only doing it on the side for friends with businesses but through word of mouth recommendation I've now got more clients than I particularly wanted anyway

They really don't like small landlords at all now do they.

It doesn't seem that drastic a change tbh, as the wear and tear allowance was optional anyway and only for fully furnished properties, so changing that to actual replacement costs and extended to part furnished doesn't seem that onerous.

 

[Rilot]

Well, I can't take advantage of the lifetime ISA due to being 40 now. Rubbish.

 

[Freakbro]

Well, I can't take advantage of the lifetime ISA due to being 40 now. Rubbish.

Yea, it's a bit ageist isn't it.

And I think I object to my taxpayers money being given out to people who obviously have enough of their own anyway, especially since I can't get any

 

[heeeed]

Well, I can't take advantage of the lifetime ISA due to being 40 now. Rubbish.

I would relax. It's a way for those <40 to offset the horrendous future pension changes that will be their legacy. Maybe allow those people to consider an earlier retirement than the usual minimum age of whatever it will be for them. If >40 you are going to be moderately protected by your age now anyway

 

[Tunney]

Well, I can't take advantage of the lifetime ISA due to being 40 now. Rubbish.

You had your chance to buy a house at a reasonable price.

 

[Jez]

Well, I can't take advantage of the lifetime ISA due to being 40 now. Rubbish.

To be fair though being 40 meant you have had a long time to have a lot of property wealth (even if just on paper)

People buying first homes these days...this will never offset the levels at which the market has grown.

 

[VincentHanna]

Yes and no

I have a realistic opportunity to double my pay in the next 4-6 years if I stay put, or I can get a 20-25% pay rise by moving jobs now. Moving jobs now puts me into 60% tax, which reduces the short-term payoff, and doesn't guarantee me a shot at the big (ish) bucks that I have at my current company.

If the short-term gain was higher, like if the tax rate wasn't so unreasonable, I would have cut and run already.

Who the hell pays 60% tax?

If you meant 40%, you do realise you only pay 40% on the figure over 42,500 (now 45k as of 2017)

 

[Mucky_Pup]

Who the hell pays 60% tax?

If you meant 40%, you do realise you only pay 40% on the figure over 42,500 (now 45k as of 2017)

Anyone inbetween £100-120k I believe, I don't know the ins and outs of how it works, but I've heard about it before.

Edit: http://www.ft.com/cms/s/0/4ee32fd8-d16d-11e4-98a4-00144feab7de.html#axzz43AC43Q8P

 

[SpeedFreak]

Anyone inbetween £100-120k I believe, I don't know the ins and outs of how it works, but I've heard about it before.

Edit: http://www.ft.com/cms/s/0/4ee32fd8-d16d-11e4-98a4-00144feab7de.html#axzz43AC43Q8P

Personal allowance unwinds at a rate of £1 for every £2 earned above £100k. This is in addition to the 40% tax you already pay on that income.

 

[cheesyboy]

Who the hell pays 60% tax?

If you meant 40%, you do realise you only pay 40% on the figure over 42,500 (now 45k as of 2017)

People who have two kids and start to earn between £50k and £60k.

Interestingly, those who have 8 or more kids will pay a marginal rate of more than 100% on earnings between £50k and £60k. Basically, a pay rise in that bracket actually reduces your net pay

 

[Rilot]

You had your chance to buy a house at a reasonable price.

Nope. I don't own anything. Not been in a position to do so.

 

[joeyjojo]

People who have two kids and start to earn between £50k and £60k.

Interestingly, those who have 8 or more kids will pay a marginal rate of more than 100% on earnings between £50k and £60k. Basically, a pay rise in that bracket actually reduces your net pay

Where can I find the information on this number of children thing? I can't find anything about it on gov.uk.

Personal allowance unwinds at a rate of £1 for every £2 earned above £100k. This is in addition to the 40% tax you already pay on that income.

This personal allowance thing just causes the overall tax rate to converge to 40%, it can't push it above that (let alone to 60%).

It's not "in addition" to anything, it's basic rate on more (and more) of the allowance amount.

 

[Danthus]

Osborne borrowed an additional £50 billion yesterday on the quiet.

 

[cheesyboy]

Where can I find the information on this number of children thing? I can't find anything about it on gov.uk.



This personal allowance thing just causes the overall tax rate to converge to 40%, it can't push it above that (let alone to 60%). It's not "in addition" to anything, it's basic rate on more of the allowance amount.

https://www.gov.uk/child-benefit-tax-charge

 

[joeyjojo]

https://www.gov.uk/child-benefit-tax-charge

Thanks. You said 2 children and £50-60k get a tax rate of 60%? I was confused about this so will run through the numbers.

Child benefit for 2 children is about £1823 from that calculator. It's paid back at 1% for every £100 over £50k. I.e. earn £60k and you lose 100% of it (£1823). Note that in a couple, only one person is responsible for paying it (the one with the higher earnings). You don't get hit twice.

So the tax on that +£10k is the regular higher rate (40%) plus 18.23% from lost child benefit = 58.23%, quite close to 60% as you put it.

Your answer to VincentHanna was a bit confusing but I see now that you meant the marginal tax on income between 50 and 60k.

For reference, the total income tax on £60k would be about £13,400 (22.3%), so the total tax including the lost child benefit is only slightly higher, effectively 25.4%.

 

[cheesyboy]

Thanks. You said 2 children and £50-60k get a tax rate of 60%? I was confused about this so will run through the numbers.

Child benefit for 2 children is about £1823 from that calculator. It's paid back at 1% for every £100 over £50k. I.e. earn £60k and you lose 100% of it (£1823).

So the tax on that +£10k is the regular higher rate (40%) plus 18.23% from lost child benefit = 58.23%, quite close to 60% as you put it.

Your answer to VincentHanna was a bit confusing but I see now that you meant the marginal tax on income between 50 and 60k.

For reference, the total income tax on £60k would be about £13,400 (22.3%), so the total tax including the lost child benefit is only slightly higher, effectively 25.4%.

You forgot the 2% NI charge, which takes that figure just over 60%.

Average tax isn't very interesting in the real world, though, as we're talking career progression or incentive to push on - I don't care that my average tax increases by just a few percent, but I do care that a £10k pay rise only nets me £330 a month. Hence why such huge marginal rates are problematic.

 

[Mr Jack]

The IFS have published their distributional analysis of the budget. No big surprise as the budget is a big give away for the rich with precious little for the poor. Together with the pre-announced changes it adds up to more big hits for the poor while the rich face relatively small changes in both cash and %age terms.