In this month’s eNews we report on the new rules on the taxation of dividends, the NLW, latest ICO fines and HMRC’s advance assurance for R&D. We also advise on the self assessment deadline and the HMRC tax helpline for those affected by flooding.
Please do get in touch if you would like any further guidance on any of the areas covered.
Dividend Allowance and rates of tax
Further details have been provided of the new rates of income tax on dividends and the new Dividend Allowance which will apply to dividends received on or after 6 April 2016.
The rates of income tax on dividends will be:
- 7.5% for dividend income within the basic rate band (ordinary rate)
- 32.5% for dividend income within the higher rate band (upper rate)
- 38.1% for dividend income within the additional rate band (additional rate)
There will also be a new Dividend Allowance of £5,000 where the tax rate will be 0% – the dividend nil rate. The Dividend Allowance applies to the first £5,000 of an individual’s taxable dividend income and is in addition to the personal allowance.
Where an individual receives dividend income, from UK or non-UK resident companies, that would otherwise be chargeable at the dividend ordinary, upper or additional rate, and the income is less than or equal to £5,000, the dividend nil rate will apply to all of the dividend income. Where the dividend income is above £5,000, the lowest part of the dividend income will be chargeable at 0%, and anything received above £5,000 is taxed at the rate that would apply to that amount if the dividend nil rate did not exist.
In calculating the tax band into which any dividend income over the £5,000 allowance falls, savings and dividend income are treated as the highest part of an individual’s income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice.
The following example illustrates how the new Dividend Allowance and rates will work:
Patricia has a salary of £40,500 and dividend income of £7,000 in 2016/17. Her total income is therefore £47,500. The total of her personal allowance and basic rate band comes to £43,000. Therefore part of her dividend income would be taxed at the upper rate were it not for the operation of the new dividend nil rate.
So £5,000 will be taxed at 0% and £2,000 will be taxed at the upper rate of 32.5%
If you would like advice on how the new dividend rules will affect you please do get in touch.
Internet link: GOV.UK dividend
National Living Wage – employers advised to get ready
The Department for Business, Innovation and Skills (BIS) is advising employers to begin preparing for the introduction of the National Living Wage (NLW) which comes into effect from 1 April 2016. The rate is £7.20 an hour and applies to employees aged 25 and over.
Businesses are being advised to prepare early for the changes on 1 April 2016, when the new wage will become law, and make sure they follow these 4 simple steps:
- know the correct rate of pay – £7.20 per hour for staff aged 25 and over
- find out which staff are eligible for the new rate
- update the company payroll in time for 1 April 2016
- communicate the changes to staff as soon as possible.
Business Minister Nick Boles said:
‘The government’s new National Living Wage will provide a direct boost to over two-and-a-half million workers in the UK – rewarding and providing security for working people.’
‘I am urging businesses to get ready now to pay the new £7.20 rate from 1 April 2016. With just under 4 months left, there are some easy steps employers can take to make sure they are ready.’
‘By taking these measures, companies will be able to properly reward their staff and avoid falling foul of the law when it takes effect.’
Please contact us if you would like help with payroll matters.
Internet link: GOV.UK news
Scottish Budget – income tax and LBTT
Income tax
The Scottish Government set out tax and financial plans for the future in their draft Budget on 16 December 2015. The Deputy First Minister and Cabinet Secretary for Finance, Constitution and Economy, John Swinney, announced that the Scottish Rate of Income Tax (SRIT) would be set at 10p in the pound for 2016/17. The effect of this is to ensure that Scottish Taxpayers will pay tax at the same rates as their counterparts in the rest of the UK, at 20%, 40% and 45%.
Income tax bands for the basic and higher rates are the same in Scotland as in the rest of the UK.
The Scotland Act 2012 granted the Scottish Parliament landmark new powers to set a separate annual rate of income tax for Scottish taxpayers. The Scottish rate of income tax (SRIT) comes into effect in April 2016 and represents a fundamental change to the UK tax system.
Land and Buildings Transaction Tax
As well as paving the way for the changes to income tax outlined above, the Scotland Act 2012 also resulted in the introduction of Land and Buildings Transaction Tax (LBTT) in Scotland from 1 April 2015. This replaces Stamp Duty Land Tax which applies in the rest of the UK. The draft Budget proposes changes to LBTT with the introduction of a LBTT supplement on purchases of additional residential properties, such as buy-to-let properties and second homes. This
supplement will be 3 percentage points of the total price of the property for all relevant transactions above £40,000 and will be levied in addition to the current LBTT rates.
The Scotland Bill 2015 proposes the further devolution of additional tax and spending powers to the Scottish Parliament. The Scotland Bill 2015 is still subject to consideration and amendment by the UK Parliament.
Internet link: GOV.UK news SRIT
Self assessment deadline approaching
HMRC have reported that:
- a record breaking 24,546 people submitted their tax return online on New Year’s Eve
- more than 11,467 people sent off their self assessment tax return on New Year’s Day
- and in excess of 2,000 taxpayers submitted their tax returns on Christmas Day.
Ruth Owen, Director General of Personal Tax, HMRC, said:
‘As we all enjoy the festive season it’s easy to see how completing your tax return can be forgotten, but the 31 January deadline will be here quicker than we think.’
The deadline for sending 2014/15 tax returns to HMRC, and paying any tax owed, is 31 January 2016.
Please contact us if you need help with your self assessment return.
Internet link: GOV.UK news
HMRC introduce Advance Assurance for R&D
HMRC have introduced Advance Assurance for companies that claim Research and Development (R&D) tax relief.
If a company carries out R&D for itself or other companies, it could qualify for Advance Assurance. This means that for the first three accounting periods of claiming for R&D tax relief, HMRC will allow the claim without further enquiries.
Internet link: GOV.UK guidance
Tax helpline for those affected by severe weather and flooding
HMRC have set up a helpline (number is 0800 904 7900) and will enable anyone affected to get practical help and advice on a wide range of tax problems they may be facing. HMRC will also:
- agree instalment arrangements where taxpayers are unable to pay as a result of the floods
- agree a practical approach when individuals and businesses have lost vital records in the floods
- suspend debt collection proceedings for those affected by the floods
- cancel penalties when the taxpayer has missed statutory deadlines.
Internet link: GOV.UK news
Nuisance call companies warned to expect more fines
The Information Commissioner’s Office (ICO) is warning companies making nuisance calls to expect more fines in 2016.
The ICO has reported that they imposed more than £1,000,000 worth of penalties for nuisance calls and text messages in 2015, and anticipates they will issue a similar amount in early 2016.
The fines issued in 2015 included:
- £295,000 of fines for companies offering call blocking or nuisance call prevention services
- an £80,000 fine to a PPI claims firm that sent 1.3 million text messages
- a £200,000 fine to a solar panels company that made six million nuisance calls
- a £130,000 fine to a pharmacy company that was selling customer details to postal marketing companies
In addition the ICO report that the fines related to nuisance marketing in 2015 amounted to £1,135,000. These included £400,000 fines for nuisance texts, £575,000 fines for nuisance calls and a £130,000 fine for selling customer records for marketing. Details of the businesses penalised and fined can be found by using the hyperlink.
Andy Curry, ICO Enforcement Group Manager, said:
‘Nuisance marketing calls frustrate people. The law is clear around what is allowed, and we’ve been clear that we will fine companies who don’t follow the law. That will continue in 2016. We’ve got 90 on going investigations, and a million pounds worth of fines in the pipeline.’
According to the ICO, PPI claims prompted the most complaints, followed by accident claims. Areas identified as emerging sectors for nuisance calls and texts included call blocking services, oven cleaning services and industrial hearing injury claims.
Internet link: ICO news
This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm. Please contact us for further information.