September 2017

tax tips & finance e-newsletter

In this issue

In this issue, we look at Making Tax Digital and how businesses should prepare for the upcoming data protection changes.

‘Your money’ reviews the problems caused for SMEs by the rising National Living Wage. In our ‘Retirement planning, wills and inheritance tax’ section we take a quick look at retirement saving requirements for the young and Inheritance tax planning regarding gifts out of surplus income.

Plus we have launched our Free Tax App!

All your key financial dates & tax info, tools and features at your fingertips.

Businesses prepare for data protection changes

Businesses are preparing for the General Data Protection Regulation, which comes into force from 25 May 2018.

All businesses holding personal data will need to ensure their procedures are fit for purpose and compliant when the new rules take effect next year.

Those businesses found non-compliant may face fines of up to €20 million – or 4% of annual global turnover.

The legislation will allow individuals greater control over their personal data, including the right to fully close accounts or data to be erased.

Some of the proposals outlined in the Bill include:

  • making it simpler for people to withdraw consent for the use of their personal data
  • allowing people to ask for their details to be deleted
  • requiring companies to obtain ‘explicit’ consent when they process sensitive personal data
  • making it easier for people to require firms to disclose the personal data they hold on them.

Preparation

The Information Commissioner’s Office are urging businesses to prepare for the changes by taking the following steps:

  • holding information – organise the personal data your business holds, where it’s sourced from and who it is shared with
  • privacy – review privacy notices and plan for further changes
  • consent – review how you seek, record and manage consent and whether you need to make any changes
  • data breaches – make sure the right procedures are in place to detect and report data breaches
  • data protection officer – designate a Data Protection Officer to take responsibility for data protection compliance.

For further information from the ICO click here.

Your Money

Rising national living wage hits SME profits

64% of small and medium-sized enterprises (SMEs) are seeing profits fall as a result of the national living wage (NLW) rise, according to research.

The NLW increased from £7.20 to £7.50 per hour on 1 April 2017.

Out of 835 businesses surveyed by the Federation of Small Business (FSB), 39% have put up prices to cope with the NLW increase.

Almost one in four (24%) firms either cancelled or downscaled investments, while 22% reduced working hours and 19% hired fewer employees.

43% of businesses increased wages in line with the NLW, suggesting the majority of owners are already paying their workers above the new rate.

Penalties

If you fail to pay staff the NLW, you will face a fine based on the underpayments.

The penalty for firms who do not comply with the NLW is 200%, although this will be halved if employers pay within 14 days. The overall maximum penalty is £20,000 for every underpaid worker.

Money Facts

SEPTEMBER'S MONEY FACTS

Current bank rate: 0.25%

Current inflation: 2.6%

 

Retirement Planning, Wills & Inheritance Tax

Young People to save 18% of salary for Retirement

A new report from the International Longevity Centre UK suggests that young people in the UK will need to save 18% of their salary to have an ‘adequate’ retirement. The report states that the current UK pension system is ‘sustainable but inadequate’ leaving the younger generations facing savings challenges.

The savings challenges are enhanced by the following factors:

  • Low interest rates
  • Low investment returns
  • Slow wage and economic growth
  • Gradual decline of defined benefit schemes

If you would like further information and advice regarding adequate pension savings for the future you should speak with your IFA.

Inheritance tax planning

HMRC collected record inheritance tax (IHT) receipts of £5.1 billion in the year ended May 2017. This highlights the increasing need of planning your estate to minimise the IHT liability borne by your family on your death.

There are several IHT exemptions and reliefs available to include the annual exemption, gifts on marriage, and transferring IHT allowances between spouses.

Relief for gifts out of surplus income (also known as normal expenditure out of income) is another valuable relief but one that involves careful planning and keeping of detailed records in your lifetime. However, for those in the fortunate position of not having to spend all of their income, if you are willing to maintain the necessary paper trail which will help your executors claim the relief on your death,  it can prove a very valuable way of benefitting your loved ones. They benefit both in your lifetime by way of the gifts and then on your death as no IHT is payable by your estate on gifts made out of surplus income, even if you die within 7 years of making such gifts.

For more information please contact Sue Pocklington of our Trust & Estate Support Services team on 01323 730631.

 

Free Tax App

Humphrey & Co is one of the very first accountancy firms in East Sussex to launch a free mobile Tax App.

The great news is that this App can be downloaded onto your iPhone, iPad or Android devices. It’s packed full of really useful Tax Tables, Calculators and cloud accounting software, all of which you will be able to access, anywhere if you have an internet connection on your device.

For more details about the benefits of our new Tax App and the link to download it for free click here.