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Slaters & Co Accountants April 2017 News Bulletin - 01782 566101.
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April 2017 News Bulletin

We report on changes to the VAT Flat Rate Scheme which take effect from the start of April. We also consider minimum wage rises,  and the roll out of tax free childcare. We also report on three pertinent Budget announcements including the Class 4 NICs u-turn, changes to Making Tax Digital and the reduction in the Dividend Allowance.

If you have any questions or need to speak to a member of our team then please do not hesitate to contact us on 01782 566101 or Contact@SlatersAccountants.co.uk


Making Tax Digital for Business update
Extensive changes to how taxpayers record and report income to HMRC are being introduced under a project entitled Making Tax Digital for Business (MTDfB) .

MTDfB is to be introduced in stages and the government has confirmed in the Budget the deferral of some of the obligations for one year. The result of this announcement is that unincorporated businesses and unincorporated landlords with annual turnover:



 
Minimum wage rises again
Employers need to ensure they are paying their employees at least the appropriate National Minimum Wage (NMW) or National Living Wage (NLW) rate. The rates increase from 1 April 2017.

 
  From
1 Oct  
2016
From
1 April
2017
NLW rate for workers aged 25 and over £7.20* £7.50
main rate for workers aged 21-24 £6.95 £7.05
18-20 rate £5.55 £5.60
16-17 rate for workers above school leaving age but under 18 £4.00 £4.05
apprentice rate ** £3.40 £3.50

* introduced and applies from 1 April 2016
**for apprentices under 19 or 19 or over and in the first year of their apprenticeship
Going forward the NMW and NLW rates will be reviewed annually in April.

What are the penalties for non-compliance?

The penalties imposed on employers that are in breach of the minimum wage legislation are 200% of arrears owed to workers. The maximum penalty is £20,000 per worker. The penalty is reduced by 50% if the unpaid wages and the penalty are paid within 14 days. HMRC also name and shame employers who are penalised.
Tax-Free Childcare to be rolled out from 28 April 2017
Tax-Free Childcare, the new government scheme to help working parents with the cost of childcare, will be launched from 28 April 2017.

For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply for disabled children.

To qualify for Tax-Free Childcare all parents in the household must generally meet a minimum income level, based on working 16 hours a week (on average £120 a week) and each earn less than £100,000 a year.

Click below to read our article for more details:

VAT Flat Rate Scheme - Limited cost trader
Changes are being made to the Flat Rate Scheme (FRS) which take effect from 1 April 2017. These changes may mean that the FRS is less attractive to some businesses and this may result in these businesses deciding to no longer operate under the FRS. In some cases where a trader has voluntarily registered for VAT it may be appropriate to deregister from VAT.

A new higher 16.5% rate will apply from 1 April 2017 for businesses with limited costs, such as many labour-only businesses, using the Flat Rate Scheme. Businesses using the FRS, or considering joining the scheme, will need to decide if they are a 'limited cost trader'.



Class 4 National Insurance u-turn
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 from 9% to 10% from April 2018 with a further increase planned from 10% to 11% from April 2019.

The Chancellor subsequently 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.
Reduction in the Dividend Allowance
It was announced in the Budget that the Dividend Allowance will be reduced from £5,000 to £2,000 from April 2018.

Dividends received by an individual are subject to special tax rates. The first £5,000 of dividends are charged to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:
 
  • 7.5% for basic rate taxpayers
  • 32.5% for higher rate taxpayers
  • 38.1% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the £5,000 allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

The government expect that even with the reduction in the Dividend Allowance to £2,000, 80% of ‘general investors’ will pay no tax on their dividend income. However, the reduction in the allowance will affect family company shareholders who take dividends in excess of the £2,000 limit. The cost of the restriction in the allowance for basic rate taxpayers will be £225 increasing to £975 for higher rate taxpayers and £1,143 for additional rate taxpayers.
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