Monthly Archives: March 2017

The VAT Flat Rate Scheme (FRS) is a simplified scheme for small businesses.   It is a popular scheme with businesses that incur very little vatable expenditure.   Currently there are a number of different sectors, with rates ranging from 4% to 14.5%.

Following on from the Autumn statement, the Chancellor announced the introduction of a new 16.5% VAT flat rate for businesses with limited costs, known as ‘limited cost traders’.  This new rate will take effect from 1 April 2017, and will affect many of the smaller business within the consultancy and contracting sector.

Is my business a limited cost trader?

A limited cost trader is defined as one whose VAT inclusive expenditure on goods is either;

• less than 2% of their VAT inclusive turnover in a prescribed accounting period
• greater than 2% of their VAT inclusive turnover, but less than £1,000 per annum if the prescribed accounting period is one year.

For this purpose, goods must be used exclusively for the purpose of the business, but do not include the following;

• Capital expenditure e.g. laptops, mobiles phones, office equipment etc. 
• Food or drink for consumption by the flat rate business or its employees
• Vehicles, vehicle parts and fuel and or travelling.

If, after excluding the above items, expenditure on goods for your business is less than 2% of VAT inclusive turnover or £250 per quarter, then the new 16.5% flat rate will apply to your business from 1 April 2017.  If a VAT period straddles 1 April 2017, the new rate will then apply to the relevant proportion of the VAT period.  Read More

The National Minimum Wage is the minimum pay per hour almost all workers are entitled to. The National Living Wage is higher than the National Minimum Wage – workers get it if they’re over 25.

It doesn’t matter how small an employer is, they still have to pay the correct minimum wage.

It’s a criminal offence for employers to not pay someone the National Minimum Wage or National Living Wage, or to fake payment records. Employers who discover they’ve paid a worker below the correct minimum wage must pay any arrears immediately.

As from April 2017 NLW and NMW rates will increase as follows:

For more information on this, any other payroll or auto enrolment queries please contact Gillian Niven on 01324 441280 or email gillian.niven@drummondlaurie.co.uk

Do not miss out on the opportunity for tax savings.  

There is still time to act and put measures in place before the tax year end of 5th April 2017.

The tax year-end provides an excellent opportunity to take stock and plan for the future.

• Marriage tax allowance, in a nutshell one of you must be a non-taxpayer and one of you must be a basic-rate taxpayer. Worth £220 but can be backdated so could be up to £432.
• Maximising pension contributions for the current year will save you current year tax. This is particularly relevant for larger contributions. The annual limit for 2016/17 is £40,000 but where the carry forward rules can be utilised, the contribution level could be much higher.
• Giving to charity attracts tax relief through the gift aid system. Consideration needs to be given to the timing of donations and when the tax relief is claimed.
• For sole traders and partnerships, consider what relief may be available for any losses arising in the current year against other income.
• Individuals have an annual exemption from capital gains tax of £11,100. Ensure that this is not wasted.
• Spreading income around families to ensure allowances, exemptions and lower tax bands are used.

Have a chat with your usual contact at Drummond Laurie or email adviser@drummondlaurie.co.uk to discuss how to take advantage of the tax year-end opportunities.

We recently talked about the Budget and detailed the announcements made on Budget Day 8 March 2017.

One of the significant announcements Chancellor Philip Hammond made on Budget Day was the proposed increases to the main rate of Class 4 National Insurance Contributions (NICs) paid by self-employed individuals. The rate was to increase from 9% to 10% from April 2018 with a further increase planned from 10% to 11% from April 2019.

The Chancellor has announced that the government will not now proceed with the proposed increase in Class 4 NICs rates. Self-employed individuals currently pay Class 2 and Class 4 NICs. Class 2 NICs are to be abolished from April 2018.

Chancellor Phillip Hammond delivered his first and last Spring budget on Wednesday of this week.  In future, budgets will be delivered in the Autumn and so we have another one to look forward to later in 2017!  This was also the first budget since the historic Brexit vote in June 2016 and it is clear that the immediate implications on the UK economy have not been as dire as was feared in the immediate aftermath of the vote.  In his Autumn statement the Chancellor predicted that the UK deficit in the 2016/17 year may run as high as £68bn.  His latest prediction on Wednesday was that this will now be “only” £51bn.

However, he was not tempted to use this to create a “giveaway” budget.  Rather, he appears to be anticipating a large exit charge being imposed by the EU and has taken the opportunity to raise taxes in certain areas to build up some reserves to pay this charge.  Unfortunately, some of these measures are likely to affect almost all of our clients who are either self-employed or shareholders in their own limited companies.

The headline changes announced this week were as follows;

• Class 4 National Insurance paid by those in self-employment is to increase in 2018 from 9% to 10% and then again in 2019 to 11%.  This will bring the national insurance paid by those in self-employment very close to that paid by those in employment (12%).
• The annual Dividend Allowance is being reduced in 2018 from £5,000 to £2,000.  This will cost basic rate tax payers an additional £225 per annum and higher rate tax payers £975 per annum.
• We received confirmation that the corporation tax rate will fall to 19% in April 2017 and remain at this level until April 2020 when it will fall further to 17%.   It is worth remembering that as recently as 2010 the main rate of corporation tax in the UK was 28%.
• From 2018 all payments in lieu of notice (PILON’s) will be subjected to income tax and Class 1 National Insurances.
• We were reminded that the National Living Wage for workers aged over 25 will rise to £7.50 per hour from April 2017 and will be increased annually at this time.  National Minimum Wages rates are also rising next month and annually thereafter at this time.

We hope that you find our budget summary here of interest and should you wish to discuss any aspect of the budget further please do not hesitate to get in touch with me or one of your other Drummond Laurie contacts.

David Wheeler

Partner