September 2016

tax tips & finance e-newsletter

In this issue

In this issue, we look at new proposed Apprenticeship Funding and the new national minimum wage.

Your Money looks at the Help to Buy ISAs. Finally in our Retirement planning, wills & inheritance tax section we comment on property wealth.

Apprenticeship funding proposals announced

Employers with 50 employees or fewer will have up to 100% of their apprenticeship training costs funded by the government. The government has announced more details about its apprenticeship programme and the funding that will be available to businesses that take on apprentices. The proposals relate to the reform of apprentice funding in May 2017. An apprenticeship levy of 0.5% of a company’s annual tax bill will be payable by companies with a pay bill of £3 million or more. 

Those employers too small to pay the levy (around 98% of employers in England) will have 90% of their training costs paid for by the proceeds. Extra support worth £2,000 per apprentice will also be available for those that take on apprentices that are 16-18 years old. Small employers will have 100% of their costs funded for taking on these apprentices. The final details will be confirmed in the autumn. Regular readers will recall our article on apprentices in InBusiness Issue 19. We would urge clients to investigate the scheme helping the youth of today into employment.

New national minimum wage rates from 1 October

New hourly national minimum wage (NMW) rates come into effect on 1 October 2016. Employers are already legally required to pay eligible workers who are 25 or over the national living wage (NLW) of £7.20 an hour.

AgeFrom Oct 2016Until Oct 2016
25 and over        £7.20£7.20
21-24£6.95 £6.70
18-20£5.55 £5.30
16-17£4.00 £3.87
Apprentices *£3.40 £3.30

* Apprentices aged 16-18 and those aged 19 or over who are in their first year

Working time includes:

  • time at work and being required to work or being on standby near the workplace
  • work-related travel (but not travelling between home and work)
  • training or travelling to training

The following payments should not affect NMW or NLW calculations:

  • income tax and national insurance contributions
  • advances on wages or loans
  • repaying wage advances or loans
  • repaying overpaid wages
  • home accommodation
  • penalties related to worker misconduct
  • anything the worker paid for voluntarily or are not needed to do their job such as meals.

Items a worker buys for a job but isn’t refunded for (such as uniform or equipment) should not be included as part of the minimum wage.

Employers who find out they’ve paid below the correct wage should pay any arrears straightaway. If HMRC discovers any errors, the employer will have to pay a fine and may be named by the government.

Employers need to keep proof that they have met their wage obligations (such as a payroll record) for 3 years.

HMRC Telephone Scams

We ask all clients to be aware that there are several telephone scams in circulation at present and to specifically watch out for phone calls claiming to be HMRC and that either:

  • a lawsuit is being filed against them; or
  • they ask for access to bank accounts;
  • or they claim to be a HMRC money laundering investigator.

If you cannot verify the identity of the person making the call, do not disclose any personal details.

You can also report any suspected scam calls at: www.actionfraud.police.uk/report_fraud

Your Money

Help to Buy ISAs cannot be used for house deposit at exchange of contract.

Contrary to what was first thought, the Help to Buy ISA bonus cannot be used for the deposit due at the point of exchange of the contract.

Instead it must be included with the funds consolidated at the completion of the property transaction. 

The government has stated:

  • When you are close to finishing your purchase, you should let your Help to Buy ISA provider know and then close your account;
  • Do not simply withdraw all the money - your ISA provider will need to provide you with a letter;
  • This letter should be given to your solicitor or conveyancer so that they can apply for your bonus.

Please note that the bonus cannot be used for solicitor costs, estate agent fees or any other indirect costs associated with buying a home.

MONEY FACTS

Current bank rate: 0.25%

Current inflation: 0.6%

Retirement Planning, Wills & Inheritance Tax

Property wealth exceeds savings & pensions

69% of over-45 homeowners say that their home is worth more than their pensions, savings and investments combined, research by Aviva has found.

Important findings:

  • 46% see their property wealth as a key part of their retirement income;
  • 23% are worried about paying off their loans;
  • 33% do not think they will have paid off their loans by the time they reach retirement age;
  • 56% think that their property wealth will be needed for care costs later on.

Property Wealth & Estate Planning

Of those surveyed, 61% see the equity tied up in their homes as an important part of their inheritance planning.

Currently an individual is entitled to pass on up to £325,000 of wealth tax-free on death, subject to gifts made in the last seven years of life.

Another option for passing on property wealth is gifting the property to your husband, wife or civil partner within your will, as it is inheritance tax free.

It is possible to pass on any unused allowance to a spouse or civil partner using the transferable Nil Rate Band (TNRB) - see our June 2016 e-news which also mentions the Residence Nil Rate Bank (RNRB).

If you require further information in connection with Inheritance Tax Planning please speak to one of our Trust and Estate Support Services team on 01273 775814

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