March 2019

tax tips & finance e-newsletter

In this issue

Spring Statement 2019
Don’t Lose Your Personal Allowance!
Year End Pension Planning
Consider Tax Efficient Investments
Year End Capital Tax Planning
New Workplace Pension Limits From 6 April 2019
Buy New Equipment Before 6 April?
"No Deal" Brexit Planning Checklist
Keeping Your Website Up To Date For Google Searches

Spring Statement 2019

Philip Hammond presented his Spring Statement on Wednesday 13 March 2019. So, what exactly did the Chancellor say and, more importantly, what did it actually mean?  
 
A summary of this year’s Spring Statement is now available.

Download the Spring Statement

The Chancellor responded to the Office for Budget Responsibility’s economic forecasts, as well as reaffirming the fundamental taxation changes which will affect businesses and individuals in the new tax year. We have included informative comments to help you assess the likely effect that the proposed changes may have on you personally and their significance.
 
We hope the summary will provide you with a useful update and allow you to get to grips with the changes. If you have any questions in understanding how the changes to tax affect you, please do get in touch.

Don’t Lose Your Personal Allowance!

For every £2 that your adjusted net income exceeds £100,000 the £11,850 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

The restriction applies between £100,000 and £123,700 adjusted net income. Another way that you could avoid this trap would be to agree with your employer to sacrifice some of your salary in exchange for a tax free benefit in kind. These rules changed from 6 April 2017 but employer pension contributions, bicycles, and employer provided childcare would continue to be tax effective.

Year End 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, but then lapses if unused. Hence the unused pension allowance for 2015/16 will lapse on 5 April 2019 if unused. Note that under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000 but there continue to be rumours that this generous relief may be reduced in the future.

Consider Tax Efficient Investments

If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme (EIS)?

These investments in certain qualifying companies allow you to set off of 30% of the amount invested against your income tax bill as well as the ability to defer Capital Gains Tax (CGT) until the shares are sold.

An even more generous tax break is available for investment in a qualifying Seed EIS company where income tax relief at 50 per cent is available and in addition it is possible to obtain relief against your 2018/19 capital gains.

Both EIS and Seed EIS also provide a CGT exemption when the shares themselves are sold after 3 years. Note however that qualifying EIS and Seed EIS companies tend to be risky investments so professional investment advice should be taken.

A 30% income tax break is also available by investing in a Venture Capital Trust.

Year End Capital Tax Planning

Have you used your 2018/19 £11,700 annual capital gains exemption?

Consider selling shares where the gain is less than £11,700 before 6 April 2019. In addition, if you have any worthless shares, consider a negligible value claim to establish a capital loss. You may even be able to set off that capital loss against your income under certain circumstances which could save income tax of up to 45% of the loss. As far as Inheritance Tax (IHT) planning is concerned, all individuals have a £3,000 annual allowance which means that gifts up to that amount each year are exempt from IHT.

If you have not used your £3,000 allowance from 2017/18 you can make gifts of up to £6,000 before 6 April 2019 without the gift being liable to IHT. Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT. Gifts out of your surplus income are not subject to IHT if properly structured and we can assist you keeping the necessary documentation.

New Workplace Pension Limits From 6 April 2019

The amounts that employers and workers will be required to pay into workplace pensions are due to increase from 6 April unless the worker opts out. The new limits will be 5% from the worker and 3% from the employer. The total minimum contribution will therefore increase from the current 5% overall to 8%.

In some schemes, your employer has the option to pay in more than the legal minimum. In these schemes, you can pay in less as long as your employer puts in enough to meet the total minimum contribution of 8%.

Buy New Equipment Before 6 April?

Your business year end, not 5 April, is relevant for capital allowances purposes. If however you are running a business and making up accounts to 31 March or 5 April, you should consider buying plant and machinery to take advantage of the Annual Investment Allowance (AIA). Note that the AIA was increased from £200,000 to £1 million on 1 January 2019, so the allowance for year ended 31 March 2019 would be £400,000, not the full £1 million (£200,000 x 9/12 plus £1 million x 3/12).

The AIA provides a 100% tax write off for equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems. AIA does not apply to motor cars but there is a special 100% tax relief if you buy a new car that emits no more than 50g CO2 per kilometer.

“No Deal” Brexit Planning Checklist

Whilst we are not sure what deal or no deal the UK Government will or will not achieve with the EU, we are nearing a “No Deal” scenario and as such have produced a “No Deal” planning checklist.

Download the Checklist

This checklist should not be relied upon as comprehensive guidance but as a reminder of some of the key planning questions and resources for businesses in the event of a “no deal” Brexit. No responsibility for loss occasioned to any person acting or refraining from action as a result of the material in this document can be accepted by the authors or Humphrey & Co. 

Keeping Your Website Up To Date For Google Searches

Google is still the world’s most popular search engine. Google’s search engine algorithm is continuously being updated so how do you keep your firm’s website up to date so that you show up in online searches?

More than 2.3 million Google searches are conducted every single minute. The top 5 search results on Google get over 70% of the click through traffic. There is no point in being on the second or third page of search results - people don’t tend to look that far. Your firm needs to be in the top half of the first page in order to allow potential customers to find your business online.

Mobile search is also on the rise - 88% of smart-phone users are searching on Google. As such, you should make sure that your firm’s website is optimized for smart-phone screens as well as computers and tablets.

Google offers a free service called Google Search Console. This service allows you to submit your website to Google for indexing.

You can also use the tool to identify any potential search related errors on your site, view the kinds of search queries that are driving traffic to your site, etc.

You can also link your firm’s website to Google My Business. This can help your website to appear in relevant geographic search results. Google will then send a postcard to verify your business’s physical address and your firm will show up if people are searching for a business like yours in the local area.

The speed at which your website loads also affects the way it is ranked by Google. Google ranks faster loading sites higher than slow websites. You can make your site load faster by minimising the size of image files and using fast hosting services.

Finally, ensure that you use relevant keywords in your page titles, meta descriptions, URLs and throughout your actual content. Don’t use too many keywords as this can actually have a negative effect on your site’s Google ranking. If in doubt, consider hiring in an external consultant to help you.