Personal Savings Allowance
On 6 April 2016 a tax-free Personal Savings Allowance (PSA) will be introduced for savings income (such as interest) paid to individuals. Broadly, this means that basic rate tax payers will be able to receive up to £1,000 of savings income, and higher rate taxpayers can receive up to £500 of savings income, without any tax being due. The PSA will not be available to any saver with additional rate income. Alongside the introduction of the PSA, banks, building societies and NS&I will cease to deduct tax from account interest they pay to customers.
So there we have it, the Chancellor has presented the 2016 budget to the house of commons. With the OBR revising down the growth forecasts will the Chancellor be able to deliver on his targets?
George Osbourne has begun to present his 2016 Budget; follow comments and updates on social media through the links at the top of the page or the hashtag #LAStax.
Tax Simplification and Making Tax Digital
George Osbourne’s plan to see the end of the Self-Assessment Tax Return has moved a step closer with HMRC revealing how they intend to “simplify” tax and move towards a digital tax system.
Tax simplification appears to mean making businesses and tax payers update HMRC four times a year with quarterly tax accounts, instead of once a year under the current system. Tax simplification also appears to mean tax payers and businesses paying tax to HMRC quarterly during the tax period, as opposed to nine months after the end of the tax period.
HMRC believe that these changes will be less burdensome for businesses and tax payers. They go on to say that businesses and tax payers would prefer to pay their tax more frequently. HMRC have cited research conducted by interviewing 40 businesses, probably not a sample size large enough to be classified as representing all businesses and tax payers.
We disagree with HMRC and believe that this could result in more inaccuracies in reporting. We further believe that the additional reporting will become more time consuming for tax payers and owner-managed businesses.
One change we do welcome is that HMRC will become more open and transparent about the information it already has on tax payers from banks, employers and other sources.
HMRC are currently consulting on these changes and will announce the results of their consultation in due course. We will endeavour to keep you updated with this process.
Landlords: Wear and Tear Allowance
HMRC consultation on replacing the wear and tear allowance concluded in September and the results of the consultation was published in December 2015.
As from 6 April 2016 the wear and tear allowance, which allowed landlords of fully furnished properties to claim 10 per cent of the net rent received to be written off for notional wear and tear against their rental profits, will be replaced with tax relief for replacing furnishings in let residential property.
The new relief will only apply to the replacement of furniture and the initial cost of furnishing a property will not be included. The government has decided that moving to a system where capital allowance would be available would introduce an administrative burden for landlords.
The introduction if the reform was announced in the draft finance bill 2016 and is expected to be included in the Finance Bill 2016. The results of the consultation as well as a summary of the governments responses can be found at the following link.
Changes in Minimum Wages
From Thursday 1 October 2015, the adult rate of the National Minimum Wage (NMW) will rise by 20 pence from £6.50 to £6.70 per hour, as recommended by the Low Pay Commission (LPC) in March 2015 this year.
The government has rejected the LPC’s recommendation for the apprentice rate. The new apprenticeship rate will be set at £3.30 and represents a rise of 57 pence, the largest ever increase in the National Minimum Wage for apprentices. By implementing a rate higher than the LPC’s recommendation, the government intends that apprenticeships will deliver a wage that is comparable to other choices for work.
Business Secretary Vince Cable is also planning to launch the National Minimum Wage Accelerator - an online tool which will make it easier to compare rates of pay across regions, sectors and occupations. It will take data from the annual survey of hours and earnings and display information about pay so that people are able to compare wages with others in their sector and region
From 1 October 2015:
This is the largest real-terms increase in the National Minimum Wage since 2007, and more than 1.4 million of Britain’s lowest-paid workers are set to benefit.