Dental Specialist Financial Adviser, Paul Griffiths, for Wesleyan Financial Services, outlines the new tax rates, new allowances and other changes that have come into effect and explains what these will mean to dentists.
Specialist Dental Financial Adviser, for Wesleyan Financial Services, Stephen Barry, shares his insights on estate planning and how planning sooner rather than later can be beneficial.
We had two Budgets and three Financial Bills in 2017, which for many, was more than enough! The Spring Statement lasted a grand total of 25 minutes, and was essentially a review of the public finances. It was also an opportunity to publish consultations before any announcements in the Autumn Budget.
So, nothing headline grabbing, but here’s a glance over the Spring Statement and how it may relate to your business.
VAT
From April, the VAT threshold will remain at £85,000 for the next two years, as per a previous announcement. Mr Hammond said he would consult on whether growth could be incentivised by looking again at how VAT is structured.
Digital payments
Payments/settlements systems (including the Bank of England’s) are to be renewed in order to harness the power of the latest technologies. The government pledged its support to these changes, and it will be consulting on them.
On a related note, views will also be sought on how online platforms could help users comply with their tax obligations.
Entrepreneur’s relief
If an individual now owns less than 5 per cent interest in a company, because the company has issued trade to raise capital, they should be able to claim Entrepreneur’s relief, says the government.
Business rates
Views had previously been sought on this topic. It was announced that the first of more frequent, three-yearly revaluations for business properties would be in 2021.
Self-funded work-related training
Have you – or a colleague – undertaken this? Well, the government is going to look at how tax relief can be extended and how the system can be both simplified and protected from misuse.
Coming up in April…
No new tax measures were introduced, but some previously announced changes are coming into force in April. The personal allowance is rising to £11,850 (for basic rate, to £34,000 and higher rate, £46,350). This excludes Scotland, who will have five new tax bands for 2018/19. If you are on a higher rate in Scotland, this isn’t great news as the threshold is going to start at £2,920 below the rest of the UK. As previously announced, the dividend tax allowance will be reduced to £2,000.
The national insurance contributions (NICs) threshold is also increasing by 3 per cent and Class 2 NICs will now be phased out for 2019/20.
If you have a company car, tax will rise for all by the highest emission vehicles.
The residence nil rate band for Inheritance tax (IHT) will rise; the main rate band will remain unchanged. There could be changes afoot by the Autumn Budget, however, a review of IHT conducted by the Office of Tax Simplification is due to report around then.
As for pensions, the minimum contributions for workplace pensions under automatic enrolment will increase. The lifetime allowance will rise in line with inflation (it’s been on a downward path since 2012).
Finally, both income tax and NICs will apply on all payments in lieu of notice (PILONs) in 2018/9.
Other dental accountants also available. Nasdal.
Lansdell & Rose on 020 7376 9333,
Or visit www.lansdellrose.co.uk
New allowances mean that there is now the opportunity for some people to have up to £17,000 of savings income, tax-free. Along with the new £5,000 dividend allowance, that’s potentially up to £22,000 of tax-free income. So, how can you get on board?
The defined order for taxing income can make a difference. Earnings/non-savings income (such as rent) is taxed first. This is followed by savings income, then dividends.
The 0 per cent starting rate band for 2016/17 is £5,000. This is given on savings income as long as it does not exceed the personal allowance of £11,000. So if you have earnings/non-savings income of up to £11,000, you could receive £5,000 of savings income, tax-free. Dividends income does not affect your entitlement to the starting rate tax band. This gives you the option of having thousands in dividends, but also continuing to enjoy £5,000 of savings income taxed at zero.
April 2016 saw the introduction of the new personal savings allowance (PSA).
A basic-rate taxpayer will be able to earn up to £1,000 in savings income, tax-free; for a higher rate taxpayer this figure is £500. Using the PSA, a basic-rate taxpayer could take advantage of the £11,000 personal allowance, plus £5,000 taxed at 0 per cent, plus the £1,000 savings income allowance. This means a potential total of £17,000 in tax-free savings income.
Not only is basic-rate tax no longer deducted at source on bank/building society accounts since April, but the first £5,000 of a person’s dividends income is also tax-free. Why not look at how family members can be used to maximise the benefits available? For a couple, one partner may be lower earner or have less in pensions. If they hold the assets that generate the savings income and dividends, this can help the family qualify for the new opportunities.
Everyone wants to know how to maximise their tax efficiency and enjoy tax-free income. With the pressures of being a dental practice owner, it pays to get expert advice so you can get on with the business of providing high-quality care and a great place to work. Lansdell & Rose are specialists in providing tax-planning advice to dental and medical professionals, as well as business advice. Get professional support to maximise your tax efficiency – there are opportunities for tax-free income out there if you know where to look.
To find out more, call Lansdell & Rose on 020 7376 9333,
Or visit www.lansdellrose.co.uk
If you are incorporated as a limited company or incorporation is something you are considering here’s important information about dividend tax changes in April 2016. Changes also apply if you are an associate trading as a limited company.
The majority of earnings are likely to be paid out of the company via dividends. Currently, UK dividends are paid with a notional 10 per cent tax credit; as of April 2016, the dividend tax credit is being scrapped and replaced with a tax-free dividend allowance of £5,000 per year for each shareholder. Additionally, the income tax attributable to dividends is increasing by 7.5 per cent within each income tax band, including the basic rate band – which was previously tax free.
Hayley Hudson ACA, Manager for PFM Townends LLP, says: “There are a number of beneficial reasons to incorporate as part of a tax planning scheme, however, there are many factors to consider. Incorporation should be analysed on a case-by-case basis to ensure it is indeed the best course of action.
“At PFM Townends we always proactively discuss all the advantages and disadvantages with our clients.”
For more information visit www.pfmdental.co.uk