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Introduction
With ongoing concerns about the risks presented by a weak global outlook, proper forward planning remains
the best way of ensuring that you are on course to achieve your business and financial goals.
Planning for your business
A sound business tax strategy will include such things as:
• making the most of the available incentives, allowances and
reliefs
• choosing the most appropriate structure for your business
• claiming tax deductible expenses
• deciding on the best year end date
• minimising your liability to capital gains tax (CGT)
• optimising the roles of family members
• a tax-efficient business exit strategy.
Planning for your personal finances
A good personal tax strategy will focus on helping to ensure
that you, your family and your dependents are financially secure
in the long term. It will typically include such elements as:
• a tax-efficient remuneration package
• tax-efficient ways to extract profit from your business
• tax-efficient saving and investment strategies
• retirement planning strategies
• estate and inheritance tax (IHT) planning
• tax-efficient gifting strategies.
Recent tax and business measures
A number of significant measures affecting businesses and
individuals have recently taken effect.
All change for dividends
Historically, it has been favourable for a director-shareholder
to take dividends rather than a salary. A salary or bonus carries
up to 25.8% in combined employer and employee national
insurance contributions (NICs) and dividends are paid free
of NICs, and the low tax rates on dividends made them a
cheaper option.
The start of the tax year saw significant changes to the
taxation of dividends, and although the amount of tax saved
is likely to be reduced, there may still be a tax benefit for a
director-shareholder in taking a dividend over a salary. The
decision on whether to pay a dividend is complex and it is
important to consider the wider implications. Please speak to us
about the best course of action.
The new National Living Wage
The Government’s new compulsory National Living Wage (NLW)
has now come into effect, with the rate of pay for workers aged
25 and over initially set at a rate of £7.20 an hour. The NLW
is expected to rise to around £9 an hour by 2020. Alongside
the introduction of the NLW, tougher penalties have also been
introduced for non-compliance with payment of the NLW and
National Minimum Wage rates.
Single-tier State Pension
The new ‘flat rate’, or single-tier, State Pension has now come
into effect for those reaching State Pension age (SPa) on or
after 6 April 2016; those who had already reached SPa continue
to receive the Basic and Additional State Pensions. Weekly
payments have been set at a rate of £155.65. The new pensions
entitlement sees an end to the ability to contract out of the
Additional State Pension, leading to an increase in the NIC
liability for some.
Abolition of employer NICs for young
apprentices
The new tax year saw the introduction of a ‘zero rate’ for
qualifying apprentices on weekly earnings up to the Upper
Secondary Threshold, removing the requirement for employers
to pay Class 1 secondary NICs on earnings up to £827 for
apprentices aged under 25 who are in a government-recognised
apprenticeship within the UK.
Increase in the Employment Allowance
Most businesses, charities and Community Amateur Sports
Clubs can now reduce their Class 1 NICs by means of the
Employment Allowance, which for 2016/17 has been increased
from £2,000 to £3,000. However, companies where the director
is the sole employee are no longer able to claim the allowance.
The
3% stamp duty land tax (SDLT)
surcharge
1 April 2016 saw the introduction of a new additional 3% SDLT
surcharge on the purchase of additional residential properties
in England, Wales and Northern Ireland. The surcharge
applies to additional properties costing £40,000 or more,
such as buy-to-let properties and second homes. The Scottish
Government has introduced a similar 3% levy on top of the
existing Land and Buildings Transaction Tax (LBTT) in Scotland.
The new Personal Savings Allowance (PSA)
Many savers can now benefit from the new PSA, which allows
basic rate taxpayers to earn up to £1,000 each year in tax-free
savings income (such as interest on bank and building society
savings). Higher rate taxpayers can receive up to £500 before
paying tax, but the PSA is not available to additional rate
taxpayers.
We can help with all of your tax and financial planning needs.
For a strategic review of your finances, and expert advice on
taking your business forward, please contact us.