20% discount on your Sage stationery order…

Sage

From laser invoices to payslips, Sage provides stationery for all your business needs. The simple layouts are designed with security and increased business productivity in mind.

For 20% off your next stationery order, just order through us (your Sage Business Partner) and quote the code: STATIONERY20

For further information or to order your stationery, please contact Claire Richardson on 0191 285 0321 or email claire.richardson@taitwalker.co.uk.

Calling all manufacturers, join BBC’s Steph McGovern and the AMF to talk ‘skills’ in Manufacturing…

aMF

Join AMF at their STEM Skills in Manufacturing event on Wed 19th August, 2015 from 12:00 – 2:00pm.

Steph McGovern, BBC Breakfast’s face of business, has been announced as guest speaker for the August event, which will be taking place at South Tyneside College.

The event will also feature pupils and engineering apprentices from Career College North East and Zenith People’s Rising Star programme.

The meeting will end with the Manufacturers’ Round-up – an opportunity to benchmark and network with other manufacturers.

To find out more, or to book your place, please email jack.rae@advancedmanufacturingforum.co.uk

Northern Society of Chartered Accountants has welcomed a new President and team for 2015-16…

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Rob Tindle is the new President of The Northern Society of Chartered Accountants (NorSCA) for the 2015-16 year. NorSCA is the membership body that represents 4,000 ICAEW Chartered Accountants and ACA students across the North East and Cumbria.

Having previously served as Deputy President, Vice President and Honorary Treasurer, Rob assumed the voluntary role of President at the recent AGM and will serve in office for the next 12 months. He takes over from Andrew Jackson.

Rob is a Partner at Tindle’s Chartered Accountants, specialising in Business Advice to SME clients. He is a member of the ICAEW Review Committee and is Charmain of the Teesside General Practitioner Group (GPG).

He will be supported during 2015/16 by his fellow Northern Society Office Holders who were also elected at the AGM. They are:

  • Deputy President – David Arthur (Tait Walker, Chartered Accountants)
  • Vice President – Karen Muir (Homes and Communities Agency)
  • Honorary Treasurer – Peter Longmore (Kaplan Financial)
  • Honorary Secretary – Chris Soan (Newcastle University Business School)
  • Immediate Past President – Andrew Jackson (National Audit Office)

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The office holders are part of the General Committee of Northern Society which is the volunteer team who arrange events and support the work of local chartered accountants.

Summer Budget 2015 – New tax regime for dividends

One of the major changes from the Summer Budget is that the taxation of dividends will be reformed from 6 April 2016.

The 10% dividend tax credit is abolished and, in its place, individuals will have a £5,000 dividend tax allowance. An individual will pay no income tax on dividend income received up to that amount. However, dividend receipts in excess of £5,000 will be taxed at:

  • 7.5% for basic rate taxpayers (previously 0%)
  • 32.5% for higher rate taxpayers (previously 25%)
  • 38.1% for additional rate taxpayers (previous 30.56%)

The new dividend allowance will represent a significant tax increase for owners of small companies who have been able to extract profits from their business with a tax-efficient mixture of salary and dividends.

Example

In 2015/16, Alan takes a dividend of £27,000 net (£30,000 gross) from his personal company. His only other income is salary equivalent to his personal allowance. He pays no income tax on this combination of salary and dividend because it’s all covered by his personal allowance and basic rate band.

In 2016/17, Alan takes a dividend of £27,000 (gross, no tax credit) from his company and a salary equal to his personal allowance. He pays tax at 7.5% on £22,000 of that dividend after deducting the dividend tax allowance of £5,000. In 2016/17 he will pay income tax of £1,650 on the dividend.

The ‘tax lock’ prevents the Chancellor from raising the rate of income tax. The tax rise illustrated above is achieved by reducing the rate of tax on dividends from 10% to 7.5% while simultaneously removing the tax credit that balanced the 10% tax charge.

Some initial reactions from commentators were that people would switch back to paying salary instead of taking dividends. However, we ran calculations for different levels of Income Tax and NIC and it is still beneficial to take a dividend rather than salary, although the saving has been reduced. The saving is still particularly pronounced for a dividend if employee’s NIC would be payable on any salary at 12%, rather than at the 2% rate.

We are also exploring other options for profit extraction such as charging interest on credit balances on directors’ loan accounts and employer pension contributions. There can be a requirement to deduct 20% tax at source on interest payments by the company. Tax relief on pension contributions in respect of higher income individuals is to be restricted, but with the new pension freedom rules, pension contributions are more popular than they have been for some time.

When we prepare tax returns for clients for the year ended 5 April 2015, we will discuss the additional tax that they would have had to pay if the level of any dividends received had been taxed at the rates applicable from 6 April 2016. This will give them a good guide based on their own income profile in regards to how the increase in income tax payable on dividends is likely to affect our clients from 2016-17, if they decide to keep the same income profile going forward.

The effect of this tax hike is likely to be felt at 31 January 2018 when the self-assessment balancing payment for 2016/17 will be due for payment.

Depending on individual circumstances and future income needs, some clients may decide to stockpile a certain level of dividend income before the end of this current tax year ending 5 April 2016, in advance of the increase in the effective rate of tax payable on dividends. This will typically only be beneficial if a certain level of dividend income is already taxed at the current effective higher and additional rates of 25% and 30.56% respectively.

In summary, taking a higher salary is still not likely to be beneficial in tax terms under the proposed tax regime. The low salary with the balance of income requires being taken by dividend is still the cheapest option, however the overall Income Tax and National Insurance contributions savings will not be as great as they have been once the new rules are introduced.

Please feel free to discuss the effect of these changes with your usual contact at Tait Walker.

Summer Budget 2015 – tax changes

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Our Tax Associate, Chris Hodgson shares his thoughts on the tax changes announced in yesterday’s Budget…

In the first majority Conservative Budget since November 1996, George Osborne set out his stall on the direction of travel for taxation and welfare over this Parliament. There are a large number of changes, many of which are inter-related.

The Tax Lock will mean that in addition to VAT, rates of Income Tax and National Insurance will not change during this Parliament. However, the amount of income that you have to earn before paying 40% tax is to increase by about £600 for 2016/17. On the other hand, the amount of NIC payable will increase and so the net effect is a saving of about £5 per month.

The introduction of the National Living Wage and the increase in personal allowance will increase the net pay for a low income family, but the reduction in tax credits will offset against that extra income.

This places a greater financial burden on employers who will be paying the National Living Wage. To try to help those companies the Employment Allowance, which subsidies the cost of employer’s NIC, is to increase by £1,000 per annum. In addition, the rate of corporation tax is to fall from 20% to 18% by the end of this Parliament.

The Chancellor mentioned several times that this is to be a One Nation government and there was further evidence of those with the broadest shoulders being asked to bear a large proportion of the financial pain. Pension tax relief for 45% of taxpayers is to be restricted, loan interest relief for buy to let landlords is to be limited and the additional nil rate band for Inheritance Tax will not benefit those with estates worth more than £2.7 million.

Families receiving tax credits who are already paid more than the proposed National Living Wage will also suffer from this Budget, as the loss of tax credits is likely to exceed any benefit from the increase in personal allowance.

Overall, this is a more balanced Budget than might have been expected and it gives an indication that the government may be trying to benefit the whole nation.

For further advice regarding the tax announcements in yesterday’s Budget, please contact Chris Hodgson on 0191 285 0321 or email chris.hodgson@taitwalker.co.uk

July Budget – what does it mean for employees?

Today’s Budget saw some good news for employees with an increase in the tax-free personal allowance, as well as an increase in the higher rate income tax threshold.

In a change from predictions, the Chancellor did not mention salary sacrifice. However, it has been stated that those earning £150,000 will have their annual tax-free pension allowance tapered from the current limit of £40,000 per year to a minimum of £10,000. This impacts significantly on retirement and tax planning and further highlights the need for comprehensive financial planning.

In addition, dividend tax credits have been replaced with a tax-free allowance of £5,000 for all taxpayers. This is good news for Pension & ISA savers as their funds remain exempt from the changes and will remain tax-free.

From 2017 there will be an additional £175,000 inheritance tax allowance for properties on top of the current £325,000 standard allowance, supporting those who wish to leave their homes to their children and grandchildren. This relief will taper for those with estates of more than £2m, so now is the perfect time to consider Inheritance Tax Planning.

 

Tait Walker Wealth Management is a trading style of Tait Walker Financial Services Limited which is authorised & regulated by the Financial Conduct Authority.

Summer Budget – A reaction from the North East

Andrew-Moorby

Andrew Moorby, managing partner at Tait Walker

The scope of the changes planned for the coming years is so wide reaching that at this stage it’s difficult to assess who the winners and losers are.

That said, the Budget was distinctly lacklustre when it came to the issues pressing to the North East. Any discussion of the Chancellor’s “Northern Powerhouse” was short of mentions for our region, whilst Yorkshire and Lancashire featured heavily. I have real concerns that our influence as a key player in the UK’s economy is being overlooked and that we are being left behind.

With the interaction of Corporation Tax changes, wage increases, income tax, dividend taxation and welfare cuts, it will be difficult for SMEs and other businesses to assess the impact on them and their employees until everything is in force.

Most changes are set for next year and beyond, therefore giving the region and businesses time to assess and plan for what will undoubtedly mean increased business costs and issues for employees at the lower end of the pay scale.

As a region we have high numbers of workers on benefits, so the cuts will be more keenly felt across the North East. If the government is able to pass welfare costs on to the employer with wage rises etc. then businesses need to plan for increased cost.

Mini Budget Predictions – the proposed inheritance tax (IHT) changes

Britain's Chancellor of the Exchequer Gordon Brown holds his briefcase as he leaves Downing Street to unveil his Budget in the House of Commons in London, March 17, 2004.   REUTERS/Stephen Hird

Our Tax Associate, Chris Hodgson shares his predictions ahead of tomorrow’s Mini Budget….

Having been heavily featured in the media, the extra nil rate band for Inheritance Tax for homes is almost certain to be included in tomorrow’s emergency Budget.

It will also be interesting to see whether the second half of the proposed changes that were leaked in March (when there was a Coalition government) will be implemented. That proposal, which was to help to pay for the extra nil rate band, would see the nil rate bands of persons with more than £2 million of assets being tapered away. If these rules are implemented, there will be no nil rate band for those who have assets of more than £4 million.

Tapering away the nil rate band would make sense – to help hard working families whilst putting government finances back on track. However, to avoid heaping more tax on to people who might be seen as being the natural constituency of the Conservative Party, this part of the proposal may not be included in the Budget.

For tax advice, please contact Chris Hodgson on 0191 285 0321 or email chris.hodgson@taitwalker.co.uk

The new Community Amateur Sports Club (CASC) rules – does your club continue to qualify? HMRC are now actively reviewing CASC clubs’ qualifying status

HMRC have recently announced that they are starting the process of writing to registered CASCs to ask clubs to self assess whether they continue to qualify under the revised rules which were introduced with effect from 1 April 2015.

To briefly recap, the CASC rules are very beneficial for sports clubs because they provide mandatory reliefs from business rates, can provide corporation tax exemptions and can also enable clubs to claim Gift Aid on donations from individuals. The CASC rules are intended to provide a range of tax benefits which provide a funding boost to clubs across a broad range of sports.

However, the CASC rules were changed on 1 April 2015 and so now have additional criteria which will require many clubs who want to remain within the CASC scheme to alter either their membership packages, heir club structure, or potentially both.

What are HMRC doing now to check Clubs’ status?

HMRC have indicated that they are writing to CASCs in June/July 2015 to ask that the clubs “self assess” whether they meet the new rules and the self assessment will give the clubs three options:

1.     If the club is confident that it still qualifies under the new conditions without need for action, then the club can complete the self-assessment checklist and return the checklist to HMRC.

2.     If the club considers that it no longer qualifies under the new conditions then either,

(a)    complete the self-assessment checklist and return it to HMRC indicating that the club does not wish to remain a CASC (and so the club will voluntarily deregister from CASC status) or;

(b)   complete the self-assessment checklist and return it to HMRC explaining that the club does not meet the requirements to meet the new CASC rules but wishes to make changes to remain in the scheme. The club will need to then make the necessary changes before the 1 April 2016, after which HMRC will write to you to check that you have made the required changes.

Why is it important that clubs consider this letter carefully when it is received?

Firstly, the letter should not be ignored! The letter is giving the club a prompt that the CASC rules are beneficial and that clubs should seek to stay within the regime if possible. The additional business rates cost alone which would arise from ceasing to be a CASC can be substantial! However, if the club ignores the letter it will indicate to HMRC that the club will not meet the requirements from April 2016 (and so ignoring the letter may lead to a club being deregistered erroneously).

Secondly, the club should carefully consider whether they continue to meet the rules, but if the conclusion is that the new rules are not met, for what reasons? Typically where a club cannot meet the new rules this is due to having membership packages that do not meet the new requirements, having too much income from non-members, or not having enough “participating” members. In each of these scenarios the issues can normally be resolved by the club, for example by changing the clubs membership fee structure or creating a trading subsidiary.

The transitional period to April 2016 is intended to allow clubs to make the changes they need to qualify. As the CASC provisions are intended to help clubs, not hinder them, clubs should aim to stay within the rules if possible.

If your club has received a CASC self assessment letter from HMRC, we offer a no-obligation review process to enable you to understand how you should respond.  If you would like a free review for your club, please contact sara.andrews@taitwalker.co.uk or alastair.wilson@taitwalker.co.uk or call 0191 285 0321.
http://www.taitwalker.co.uk/wp-content/uploads/2015/02/CASCs-Are-you-Ready-for-the-Changes.pdf

Energy Saving Opportunity Scheme (ESOS) – what you need to know

The Energy Saving Opportunity Scheme (ESOS) is the UK implementation of new EU legislation, requiring a mandatory programme of energy audits for “large enterprises”. This blog post will provide answers to some key questions about the new legislation.

Who does it apply to?

ESOS applies to any “large enterprise”, which is a business with more than 250 employees, a turnover exceeding 50m euros and a balance sheet exceeding 43m euros (these criteria should be met from 31st December, 2014).

It is also important to be aware that companies viewed as standalone SMEs can also be applicable if they are part of a UK or EU group containing other UK entities which are large.

What do you have to do to comply with ESOS?

You must perform an audit of 90% of total energy use for a one year period and identify/evaluate efficiency opportunities, informing the Environment Agency of these.

Your first energy audit must be conducted by 5th December,2015. The approximate cost to each business will be £6,600 over a four-year cycle.

You will also need to appoint a ‘Lead Energy Assessor’ – this person will need to be registered through an approved professional body.

What will happen if you do not undertake an ESOS assessment?

Failure to notify the Environment Agency of compliance will result in a penalty of up to £50,000 and/or an additional daily penalty of £500 for each day that your business remains non-compliant. These details may also be publicised.

Important points:

  • Plan ahead – there is a greater risk of penalty if you leave it until the last minute and it will also be more difficult to find and book in a lead assessor. Use your assessor early in the process to find out the best way to save time and money.
  • The penalty is final – failure to comply will result in the penalty as outlined above. You cannot simply pay a fine to void non-compliance.

For further advice regarding ESOS, please contact us on 0191 285 0321.

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