January 2018

tax tips & finance e-newsletter

In this issue

Tax Update
Proposed Tax Rates and Allowances for 2018/19
Key Trends to Watch in 2018
Managing Change
New Apprentices

Tax Update

NEW YEAR RESOLUTIONS TO SAVE TAX

At this time of year we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5th April.

An obvious tax planning point would be to maximise your ISA allowances for the 2017/18 tax year (currently £20,000).

You might also want to consider increasing your pension savings before 5 April 2018 as the unused annual pension allowance is lost after three years.

For those looking to do some inheritance tax planning it would be a good time to review (or make) your Will in the light of the recent change in the IHT nil rate band.

PENSION PLANNING

For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Note also that for higher rate taxpayers the net cost of saving £10,000 in a pension is only £6,000, but this higher rate relief may not last for ever.

PASSING ON THE FAMILY HOME

New inheritance tax rules for passing on the family home started on 6 April 2017. This new relief should be taken into consideration when drafting your Will and we can advise you on ways to make sure your Will is tax efficient.

From 6 April 2017 an additional nil rate band of £100,000 is now available on death where your residence is left to direct descendants. This is in addition to the normal £325,000 nil rate band and will increase over the next 4 years to £175,000 in 2020. This additional relief is however restricted If your assets exceed £2 million. The rules are fairly complicated but we can review your personal circumstances to ensure that you take advantage of all the relief that you are entitled to.

WHAT ABOUT DOWNSIZING TO A SMALLER PROPERTY?

The new inheritance tax relief for passing on the family home is protected even when you downsize to a smaller property.

For example, if a married couple currently live in a large house worth £500,000 and downsize to a flat worth £250,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property. They could even sell up completely and move into a rental property and still get the inheritance tax relief!

CONSIDER MAKING REGULAR GIFTS OUT OF SURPLUS INCOME

Whilst on the subject of inheritance tax planning why not consider setting up a standing order to family members? Such regular gifts can be outside of the scope of inheritance tax provided they are made out of surplus income and not out of capital. It would be necessary to demonstrate that you are left with sufficient income after tax and living expenses to maintain your normal lifestyle. Unlike the £3,000 annual inheritance tax allowance there is no monetary limit for regular gifts out of income, provided the conditions are satisfied.

Again we can review your personal circumstances to see if you are able to take advantage of this tax relief.

TAX RELIEF FOR ENERGY SAVING TECHNOLOGY

For a number of years there has been a generous 100% tax break for businesses that install energy saving technology in their premises. This is in addition to the £200,000 annual investment allowance for plant and machinery.

The technology that qualifies for this 100% tax break includes energy-efficient boilers and energy-saving lighting systems. This is set out in the government's energy-saving technology list. The list is updated each year. It was announced in the Autumn Budget that new technologies were being added but also certain items such as Biomass fired warm air heaters would no longer qualify from 1 April 2018.

Note also that where the expenditure has the effect of creating or increasing a loss for corporation tax purposes, the company can obtain a repayable first year tax credit. This credit, based on the amount of the loss attributable to the energy-saving technology spend, reduces to 2/3 of the corporation tax rate from 1 April 2018. Thus the relief reduces from 19% to just 12.67% from 1 April 2018.

RELIEF FROM ADDITIONAL 3% STAMP DUTY LAND TAX CHARGE

Much of the focus in the Autumn Budget on Stamp Duty Land Tax (SDLT) concerned the abolition of the duty for first time buyers of property up to £300,000. There was also welcome news for those involved in other property transfers where the 3% supplementary SDLT charge potentially applies when an interest in a second property is acquired.

The 3% supplementary charge will not now apply where a court order issued on a divorce or dissolution of a civil partnership prevents someone from disposing of their interest in a main residence or a spouse buys property from their spouse. There are a couple of other situations where the 3% supplement does not apply. This is something to check with your solicitor.

Proposed Tax Rates & Allowances for 2018/19

As you may already be aware, many of the 2018/19 rates have already been announced, however these rates are not yet final. You may be planning ahead for 2018/19 and the proposed rates are a useful point of reference. Therefore we have created a PDF which explains the situation. The rates will be finalised at the Spring Statement which will take place on Tuesday 13th March. We will provide the finalised 2018/19 rates and allowances in the March edition of our e-news. In the meantime please do not hesitate to contact us if you require further advice.

Download the PDF

Key Trends To Watch in 2018

Technology and innovation are driving the evolution of most businesses these days. Here are some of the key business trends to watch out for in 2018.

Blockchain and Cryptocurrencies

A blockchain is a digital, decentralised, public ledger of all cryptocurrency transactions. Blockchain is a way of bringing trust and transparency to the way businesses operate online, while mitigating many of the weakest points in existing processes. Cryptocurrencies such as Bitcoin are receiving a lot of press coverage. These online, digital currencies use blockchain technology to facilitate payments. Both are likely to be a big trend in 2018 and beyond.

Artificial Intelligence (AI)

AI has developed in 2017 and looks set to continue to do so in 2018. Businesses are starting to find ways to utilise this technology in terms of automating tasks and creating efficiencies. Some are starting to use AI to automate document assembly or to analyse large data sets. Businesses are experiencing cost pressures and AI is front and centre when it comes to finding ways to deliver more with less cost.

Managing Change

In business, change is inevitable. The business landscape is constantly evolving and how effectively you manage change can determine the success or failure of your firm.

Communication is Key

Any time there is a major change in a business, there will be a natural dip in productivity levels as people react and adapt to something new. Explain what is happening to your team members, keep them up to date and encourage them to ask questions. This will help them to feel involved in the changes.

Be Patient

Give people time to adapt. As a manager, by the time you have announced a change, you have probably had an opportunity to work through the details. Your employees will not have had this opportunity so it may take time for them to reach the same conclusion as you - that the change is a good thing and / or is necessary.

Deal with Negativity

Your chances of getting everything 100% right are pretty slim. Be prepared for some people to react negatively to change and allow time for people to process the information. If you notice that some people have adopted a negative stance, chat with them with a view to addressing any problems. Ask for their view in terms of getting the changes over the line. They might be willing to share a few suggestions and this may encourage them to engage in the changed project in a positive way.

The Impact of Culture

Rather than trying to change the culture of your firm, you can draw energy from it. You and your management team can leverage the way your people think and work in order to provide a boost to your initiative. To do this, look for the elements of your firm’s culture that are aligned to the change, bring them to the foreground, and attract the attention of the people who will be affected by the change.

Apprentices

As a firm we embraced apprenticeship schemes in 2012 after changes in University fees led us to realise that quality students might opt for apprenticeships rather than degrees.

Since then, we have taken on two apprentices each year. In September 2017 we employed four new apprentices, Joshua Cottingham, Tim Russell and Tom Newton from Sussex Downs College who are based in our Eastbourne Office and Richard Cloake from Greater Brighton Metropolitan College, who works at our office in Hove. All four apprentices are studying towards their Accounting Technician qualification (AAT).

Partner Paul Potter says “Apprenticeship schemes help to boost local employment and for us this has promoted good relationships with the Colleges, who work closely with both the students and the employer to ensure the apprenticeship scheme benefits all those involved.”