May 2017

tax tips & finance e-newsletter

In this issue

In this issue, we look at the rises in National minimum and living wages from 1 April 2017 and the business rates revaluation that took effect on 1 April 2017.

‘Your money’ reviews the important dates and changes for April 2017. Finally in our ‘Retirement planning, wills and inheritance tax’ section we take a quick look at downsizing or disposing of your property and Lasting Powers of Attorneys (LPAs).

National minimum and living wages rise from 1 April

The national living wage (NLW) is now £7.50 an hour.

Most workers, who are aged 25 and over and not in their first year of an apprenticeship are entitled to the new rate. The national minimum wage (NMW) rates for various ages have also increased. The following rates now apply:

AgeFrom 1st April 2017
25 and over£7.50
21 to 24£7.05
18 to 20£5.60
16 to 17£4.05
Apprentices*£3.50

*Apprentices rate for those aged 16-18 and 19 or over in their first year.

A poll of more than 1,400 workers earning less than £15,000 found:

  • 69% are unaware that they should be paid for travel time between appointments
  • 57% didn’t know that money deducted from wages to cover uniform costs is unlawful if it takes their earnings below the hourly rate they are entitled to
  • 48% are unaware that tips can’t be used to top up pay to the legal minimum.

Checks and calculations

It is a legal requirement for all employers to check if their employees are eligible for the NLW or NMW. Failure to do so will result in a fine and being named by the government.

Employers need to keep proof that they are paying their staff the correct wage. All records have to be kept for 3 years.

Business rates revaluation takes effect

The business rates revaluation took effect on 1 April 2017.

This means that businesses in England and Wales will pay rates that reflect the changes in their local property market.

The government has said that nearly 75% of businesses will see no change or a fall in their bills.

Small business rate relief has permanently doubled as of 1 April 2017. Eligible properties with a rateable value of £12,000 and below will receive 100% relief if the business uses 1 property.

Businesses with a rateable value between £12,000 and £15,000 will also get tapered relief.

Further changes

Further support has been confirmed for smaller businesses affected by the business rates revaluation.

No businesses coming out of small business rate relief will see their bills increase by more than £600 in 2017/18. Any increases will be capped at £50 a month or at the transitional relief cap.

Local authorities in England will also have funding to support businesses most affected by the revaluation.

 

Calculating your rate

You can check the rateable value of your property to calculate your current business rates. This is set by the Valuation Office Agency.

For those in Scotland, rates are worked out using the rateable value set by the local assessor and the poundage rate (a proportion of your rateable value) set by the Scottish government.

The following link may be of use: https://www.gov.uk/correct-your-business-rates

 

Your Money

As another new tax year has begun, here are some important tax dates and changes to be aware of.

1 April

Auto-enrolment staging dates

Auto-enrolment staging date for employers who don’t have a PAYE scheme.

Business rates

Ratepayers that occupy a single property with a rateable value of £12,000 or less will pay no business rates.

 

Corporation tax

Corporation tax reduced from 20% to 19%.

VAT

The VAT registration threshold increased from £83,000 to £85,000. The deregistration threshold increased from £81,000 to £83,000.

 

6 April

Income tax

The personal allowance increased from £11,000 to £11,500.

A £1,000 allowance for property income and a £1,000 allowance for trading income came into effect 6 April.

You won't need to declare or pay tax if you have income from either source of less than £1,000.

If you have income above £1,000, you will be able to deduct expenses in the usual way or deduct the £1,000 allowance.

Inheritance tax

An additional nil-rate band of £100,000 was introduced for property passed down to a direct descendant.

ISAs

The annual investment limit increased from £15,240 to £20,000. The limit for a Junior ISA rose from £4,080 to £4,128.

MAY'S MONEY FACTS

Current bank rate: 0.25%

Current inflation: 2.3%

 

The Lifetime ISA

A new type of ISA – the Lifetime ISA – is available for adults under the age of 40.

Individuals will be able to contribute up to £4,000 a year and will receive a 25% bonus from the government.

These savings can be used to purchase a first home once the account has been open for a year.

Alternatively, savings can be withdrawn for any reason from the age of 60. Withdrawing the funds at other times may lead a withdrawal charge of 25%.

Be aware that currently there are some teething problems with this new savings account.

  • No cash LISAs are currently on the market, only stocks and shares versions are available
  • Many providers are stating that the rules are too complex for customers to understand.

Retirement Planning, Wills & Inheritance Tax

Downsizing or disposing of a property and going into a Care Home?

The new residential nil rate band (RNRB) which we have mentioned in previous e-news came into effect on 6 April 2017.

The basic rule is:

An estate will be entitled to the RNRB if the individual died after 5 April 2017 either owning a home (or having downsized to a less valuable home or sold or given away their home after 7 July 2015) and leaving that home to direct descendants such as children or grandchildren.

For deaths in the following tax years the RNRB will be:

  • £100,000 in 2017 to 2018
  • £125,000 in 2018 to 2019
  • £150,000 in 2019 to 2020
  • £175,000 in 2020 to 2021

Please note if the estate is worth more than £2 million the relief is tapered.

We would suggest that anyone considering downsizing or disposing of a property to move into a care home ensures that copies of all sale documents be kept with their other important documents. The reason for this is that in due course it may be necessary for the executors to review these documents to consider the availability of using the RNRB thereby potentially reducing the amount of Inheritance tax payable by the estate.

If you require further information,
please contact Sue Pocklington.

Lasting Powers of Attorney

Lasting Powers of Attorney (LPAs) are on the rise. An LPA is a legal document which enables you to appoint one or more people, known as your attorneys, to help you make decisions, or make certain decisions on your behalf.

There are two types of LPA:

  • Health and welfare
  • Property and financial affairs

You can choose to have either one or both.

Health and welfare attorneys are able to make decisions such as:

  • Medical care
  • Your daily routine, i.e. washing, dressing etc.
  • Moving into a care home
  • Life-sustaining treatment

Your attorney is only able to make these decisions when you are unable to.

Property and financial affairs attorneys are able to make decisions such as:

  • Paying bills
  • Managing a bank or building society account
  • Collecting pensions or benefits
  • Selling your home

As soon as your attorney is registered (and with your permission), they are able to make the above decisions.

You must register an LPA with the Office of the Public Guardian (OPG) before they are able to make any decisions on your behalf.

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