on residential property is changing!
New Pension Freedoms
One Stop Shop
pensions - auto enrolment
Tax Digital (MTD)
Digital (MTD) is HMRC's proposed new reporting system to replace the
current self assessment system for individuals, partnerships and
companies. It aims to improve HMRC's internal systems to create one account for each
taxpayer for all their different taxes within HMRC. Via their 'digital tax
account' taxpayers will be able to view all their payments, and
offset overpayments in one tax against underpayments in
Tax Digital will impose new
quarterly digital filing and potentially payment obligations for businesses
currently proposed that:
this will affect small unincorporated
sole traders and partnerships as well as landlords - from April
from 2019 VAT
returns will be submitted using the same mechanism.
Finally it will affect
companies from 2020.
A new late filing and
payment penalty system will eventually apply to quarterly returns and
claims that the annual tax return will be a thing of the past, businesses will still
need to prepare year end accounts in order to reconcile their
quarterly payments and claim various reliefs and make accounting
They will be
required to file a year end declaration, instead of a Self
Assessment or Corporation Tax return in addition to the quarterly
returns. The key difference
between the year end declaration and a tax return, seems to be that HMRC will pre-populate some of the return
figures, e.g. bank interest, income from employment, pension
income and so forth.
For the self
employed, it is assumed that HMRC might attempt to pre-populate
the year-end declaration with data submitted in the quarterly
return figures but this is not yet clear. In the meantime a
business will need to reconcile their
quarterly returns to their year-end accounts and then to the end of year declaration.
In the future all taxpayers will
need to check that pre-populated data is correct.
has consulted on changing the way that tax assessments interact with
accounting basis periods. This is still under review. It
is also reviewing simplification of cash accounting for both businesses
and landlords. Businesses that do not currently use smartphones, software
or computers will almost certainly be obliged to do so but free software
has been promised by HMRC.
MTD is likely to be
expensive for many micro and small businesses. HMRC have already
indicated that any business with a turnover below £10,000
annually will be exempt from the new regime and following the
consultation they have agreed to further review this limit.
new rules are still very much under review and HMRC are more than likely
going to change some of the timescales and thresholds, although they seem
clear that the start date of April 2018 for small businesses will remain.
can read more about their proposals at:
on residential property is changing!
There have been substantial
changes to the taxation of rental properties and second homes and there
are further changes in the pipeline.
Please consider each point and, if you feel any may be relevant to
you and you have any queries, please call Liz to make an appointment to
discuss your particular circumstances.
If you rent
out a room or rooms in your own home, there is a tax free allowance
per year. From 6th April 2016 this allowance increased to £7,500
and tear allowance
From 6th April 2016 this
allowance has been abolished. It has been replaced by ‘Replacement Furniture Relief’ - a system allowing all
landlords of residential property to deduct only the actual costs incurred
on replacing furnishings in the tax year. There
will be no allowance for the original purchase, only for the replacement.
Duty Land Tax
was announced in the Autumn Statement that from 1 April 2016, an additional
3% SDLT will be charged on purchases of residential properties over £40,000,
that are intended for use as buy to let properties or second homes. There
are provisions for those buying a new main home before they have sold
their current home, but the additional stamp duty will have to be paid and
then reclaimed when the original main home is sold.
6th April 2017 residential landlords will no longer be able to
deduct their finance costs from their property income to arrive at their
property profits. They will instead receive a basic rate reduction from
their income tax liability for their finance costs. This will be
introduced gradually over 4 tax years and will be fully implemented by
2020-21. This will have a significant effect on landlords with high
finance costs, and will push some basic rate taxpayers into higher rate
tax. It may also affect tax credit claims and the child benefit charge.
This measure will not affect Furnished Holiday Lettings. Individual advice
on this measure is advised.
is proposed that, from 2019, capital gains tax will have to be paid within
30 days of selling a property.
Here we give the basic facts and explain how they might affect you:
Freedom over how investors take tax-free cash
Most people can take up to 25% tax-free cash from their
pension. You can either take the tax-free cash all in one go or have a portion of any withdrawals you make paid tax free. So, someone with a pension worth £100,000 will have the choice of:
a. Taking the £25,000 tax-free cash all at once, with any subsequent withdrawals taxed as income;
b. Making a series of withdrawals over time and receive 25% of each withdrawal tax free.
The second option could be attractive because it could help you manage your tax liability.
In addition, whilst your money is in the pension, it can remain invested. So, if your investments perform well you could end up with more money available to withdraw over time. Conversely, if your investments perform badly you could end up with less money available to withdraw.
Anybody with a defined contribution pension – e.g. individual or group personal or stakeholder pensions, Self Invested Personal Pensions (SIPPs), some Additional Voluntary Contribution (AVC) schemes, etc. – could benefit. However, option b (above) will not be available when using the pension fund to buy an annuity. Investors aged 55 or over
who have not yet taken their pension should be able to take advantage of the increased flexibility.
Flexible access to pensions from age 55
From April 2015 pension investors aged at least 55 have had total freedom over how they take an income from their
pension, over and above any tax-free cash. They can choose to:
a. Take the whole fund as cash in one go;
b. Take smaller lump sums, as and when they like;
c. Take a regular income via income drawdown – where they draw directly from the pension fund, which remains invested
d. Take a regular income via an annuity – where they receive a secure income for
life but lose access to the capital.
Any withdrawals in excess of the tax-free amount will be taxed as income at your marginal rate. So, if you are a basic-rate (20%) taxpayer, any income you draw from your pension will be added to any other income you receive (e.g. your salary) and this could push you into the higher (40%) or even
additonal rate (45%) tax bracket.
Choosing to take the pension out in stages, rather than in one go, could help you manage your tax liability. It should also be possible to take the tax-free cash straightaway and the taxable income via income drawdown at a later date.
Restrictions on how much you can contribute to private pensions
Pension contributions are subject to a £40,000 annual allowance and specific contribution rules. However, if you make any withdrawals from a defined contribution
pension in addition to any tax-free cash, further contributions to defined contribution plans could
be restricted to £10,000 (£4,000 from April 2017). Please contact your pensions adviser for further information on the
55% pension ‘death tax’ abolished
This tax charge has been abolished. The tax treatment of any pension you pass on will depend on your age when you die.
If you die before age 75, your beneficiaries can take the whole pension fund as a lump sum or draw an income from it tax free,
using income drawdown or an annuity.
If you die after age 75, your beneficiaries have three options:
a. Take the whole fund as cash in one go: the pension fund will be subject to
the beneficiary’s or beneficiaries’ marginal rate of income tax.
b. Take a regular income through income drawdown or an annuity : the income will be subject to income tax at your beneficiary’s or beneficiaries’ marginal rate.
c. Take periodical lump sums through income drawdown: the lump sum payments will be treated as income, so subject to income tax at your beneficiary’s or beneficiaries’ marginal rate.
Anybody who has a defined contribution pension – e.g. individual or group personal or stakeholder pension, Self Invested Personal Pensions, Additional Voluntary Contribution schemes, etc. will be affected.
Access to impartial guidance
Everyone taking pension
benefits will be entitled to free, impartial pensions
advice, which will be provided by impartial organisations. Your pensions
adviser will be obliged to tell you about the impartial guidance.
Transferring a 'final
Anyone with a 'final
salary' pension scheme outside the public sector will be able to transfer
the benefits to a defined contribution scheme (ie a SIPP) and then take
advantage of the flexibility of the new rules. However, valuable benefits
of the final salary scheme may be lost and independent financial advice
must be sought.
Retirement age set to
The minimum age at which
you can draw your pension is currently 55. This will rise in 2028 to 57
and then rise in line with any rise in the state pension age. It will
therefore remain 10 years below the state pension age. This does not apply
to Firefighters, Police or the Armed Forces.
One Stop Shop (MOSS)
is the HMRC online portal which UK businesses should use to