2017 Autumn Budget: how will it affect me?

In this week’s blog, here at Tulip Thistle Accountancy, we take a closer look at some of the key highlights of Yesterday’s Autumn Budget 2017, for both individuals and businesses.

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The overall economic outlook has worsened with the Office for Budget Responsibility revising down its forecasts for growth: it expects GDP to grow by 1.5% in 2017 (down from 2% predicted at the Spring Budget in March) and 1.4% in 2018 (down from 1.6%).

Raising productivity is key to boosting economic growth and wages, but growth has “remained stubbornly flat” and continues to be an issue.

The Chancellor announced that over the period 2017-18 to 2020-21, the Scottish budget will be boosted by around £2bn in total. Of this £1.6bn is for capital spending & £0.4bn for resource spending (which covers day-to-day spending, e.g. pay & service delivery). Attached article by the “Fraser of Allandar” Institute at the University of Strathclyde provides further insights & clarifies what is covered by the “Capital Spending” pot of money.

For Scotland the challenge remains how to balance the resource budget with major commitments such as additional support for the NHS, increased funds for childcare and public sector pay increases all to be paid for.

Important to realise is also that two of the “corner stone” announcements, regarding introduction of a new relief for Stamp Duty Land Tax for most first-time buyers & an increased Higher Rate (40%) Tax Band, do not apply to Scotland. We will need to await the Scottish Government’s budget on 14 December to see what, if anything changes for Scotland.

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Individuals – Highlights:

  • Personal Tax Allowance: increases to £11,850 in 2018/2019 (£11,500 in 2017/2018)
  • Scottish Tax Bands: will be set by Scottish Government in its budget on 14 December 2017 (any changes to Tax Bands announced apply to England, Northern Ireland & Wales only)
  • National Living Wage (all increases apply from April 2018):
    • £7.83/hour (up 33p) for over 25s
    • £7.38/hour (up 33p) for 21 – 24 year olds
    • £5.90/hour (up 30p) for 18 – 20 year olds
    • £4.20/hour (up 15p) for 16 – 17 year olds
    • £3.70/hour (up 20p) for apprentices
  • Personal Savings Allowances of £1,000 for Base Rate Payer & £500 for Higher Rate Tax payers remain unchanged
  • Starting rate for Savings income will remain at £5,000 (assuming all other income does not exceed £16,500 in 2017/2018 and £16,850 in 2018/2019, up to £5,000 in interest income is tax free)
  • Dividend allowance will reduce to £2,000 (from £5,000) as previously announced in March 2017 Budget
  • Standard ISA annual subscription limit will remain at £20,000 per person, but  limits for Junior ISAs and Child Trust funds will increase to £4,620/year from April 2018
  • Lifetime allowance for Pensions will increase to £1,030,000
  • National Insurance: the implementation of the proposed reforms to the national insurance contributions (NICs) system, to include the abolition of class 2 NICs, will be delayed by a year and will now take effect from April 2019
  • Capital Gains Tax: the capital gains tax annual allowance will increase to £11,700 (up £400) for individuals and to £5,850 (up £200) for most trustees of a settlement from 6 April 2018.
  • The government’s intention to introduce a 30-day payment window for Capital Gains Tax payments due on the disposal of residential property (not main residence) will be deferred until April 2020.
  • From April 2018, diesel cars that don’t meet air quality standards will be hit by additional tax (excludes vans)
  • Fuel duty rise for petrol and diesel cars scheduled for April 2018 scrapped
  • Tobacco rate increases will apply that will see product costs increasing by 2% above Retail Price Index (RPI) inflation each year (equivalent to 28p on a pack of 20) until the end of the parliament. It was also announced that hand-rolling tobacco will rise by an additional 1% to 3% above RPI inflation rate
  • Duty on beer, wine, spirits and most ciders will be frozen, but duty on high-strength “white ciders” to be increased in 2019 via new legislation

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Businesses – Highlights:

  • VAT
    • Current VAT thresholds will remain unchanged, despite pressure on government to review the rules for VAT registration, as in the UK these are significantly higher than those of any other member state of the EU and Organisation for Economic Co-operation and Development (OECD).  The existing limits will remain in place for 2 years from 1 April 2018. However, in response to recommendations from the Office of Tax Simplification, the government will consult on the design of the thresholds.
    • Import VAT: the existing accounting for VAT set-up provides a Cash Flow benefit to businesses in that we do not have to account for VAT at the point of entry but as part of the relevant VAT return timescale. The government will now consider what changes are necessary following exit from the EU so that any Cash Flow implications are mitigated.
    • Payment with vouchers: the government is to consult on plans to ensure that when customers pay with vouchers, businesses will account for the same amount of VAT as they do for other means of payment
  • Making Tax Digital: no changes were announced to the making tax digital (MTD)
    timetable. See last week’s blog for more information.                                              HMRC new initiative: “Making Tax Digital” – what’s it all about?
  • Business Rates: more expected in the Scottish Government’s budget due on 14 December. Many of the recommendations of the Barclay report have already been accepted, including that business rates evaluations will be carried out every three years in future rather than every five years, and would be based on data from the previous year rather than from two years before
  • Corporation Tax rate: will remain at 19% from 1 April 2018
  • Company Van & Fuel benefit changes: from 6 April 2018, the van benefit charge will increase from £3,230 to £3,350 and the van fuel benefit charge will increase from £610 to £633.
  • Capital Allowances:
    • Annual Investment Allowance will remain at £200,000 for 2018-2019 & 2019-2020 Tax Years
    • The 100% first-year allowance for businesses purchasing zero-emission goods vehicles or gas refuelling equipment will be extended for a further 3 years (until 31 March 2021 for Corporation Tax & 5 April 2021 for income tax)
    • Energy saving first-year allowances scheme (which allows 100% of the cost of an investment in qualifying plant and machinery to be written off against the taxable income of the period in which the investment was made) has been updated, with new technologies added, some removed & several items modified
  • Removal of Capital Gain indexation allowance: when a company makes a capital gain on or after 1 January 2018, the indexation allowance that is applied in order to determine the amount of the chargeable gain will be calculated up to December 2017. (Without this measure, indexation allowance would be calculated up to the month in which the disposal of the asset occurs.)
  • IR35 / Off-payroll working in the private sector: The Government will consult in 2018 on whether to extend the off-payroll working rules that have applied to the public sector since April 2017 to the private sector (shifting burden of assessing IR35 status to employer)
  • Construction Industry: a new reverse charge will be introduced to tackle VAT fraud in labour supply chains in the construction industry. The responsibility for VAT accounting will shift to the recipient of services, from 1 October 2019
  • R&D Expenditure Tax Credit: From 1 January 2018, the rate of tax relief available to companies that carry out qualifying R&D and claim the research and development expenditure credit (RDEC) will increase from 11% to 12%.
  • Entrepreneur’s relief: the government will consult in spring 2018 on how access to entrepreneurs’ relief might be given to those whose holding in their company is reduced below the normal 5% qualifying level as a result of raising funds for commercial purposes by issuing new shares. Allowing relief in these circumstances would incentivise them to remain involved in their businesses after receiving external investment.

If you would like to discuss how the Autumn Budget 2017 may effect you or your business, please get in touch!

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Until the next time!

Charles Donkers (ACMA)

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HMRC new initiative: “Making Tax Digital” – what’s it all about?

Today in my blog, at Tulip Thistle Accountancy, I would like to make you aware of a government initiative on how Tax is going to be collected in future in the UK for both businesses and private individuals.

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What is this “Making Tax Digital” initiative?

Making Tax Digital is a government initiative to modernise “Her Majesty’s Revenue and Customs” (HMRC or “the tax people” to you and me) tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year. You can upload and update your tax account in real time.

Will it affect me?

If you own a business, you are self-employed and you pay income tax, national insurance, VAT or corporation tax then it is quite likely you will be affected. This means you could be required to keep track of your tax digitally using MTD compatible software, and then to update HMRC at least quarterly via your digital account. Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non-compliance.

What do I have to do?

You will need to open and log into your digital account. Everyone will be allocated one through the current Government Gateway. Then you will need to ensure that your accounting software can update this account at least quarterly. For most businesses, this means a move away from desktop and onto Cloud based accounting software. You will use digital (Cloud) software to maintain your business records and to provide updates directly to HMRC – quarterly updates will need to be submitted within a month of quarter end, and an end of year activity report will be due within 9 months of the end of the accounting year.

When is all this happening?

Making Tax Digital starts with businesses above the VAT threshold limits (currently £85,000) for accounting periods commencing on or after 6 April 2019. Those affected will be required to keep digital records for VAT purposes. By 2020 it is most likely all other businesses will have to comply.

So is there any good news?

Contact your accountant to start a discussion now; more than 1 year away may feel like a long period of time, but updating your systems, choosing a new (Cloud based) accounting software package, associated set-up & data transfer all take time. And you don’t want to have to make these decisions in a rush.

Proactively looking at Cloud-based accounting software, such as QuickBooks or Xero, will not only put you in a good position insofar as making tax digital is concerned , but will also allow you to explore other benefits & efficiencies these products can offer your business.

QuickBooks – how can it help my business?

If you would like a demonstration to see what these systems can do, please get in touch*

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Here at Tulip Thistle Accountancy we are also able to offer you advantaged rates on your QuickBooks subscriptions & offer all inclusive packages for all the professional accounting and tax services that you may need.

Until the next time!

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* As you will get most benefit from this demonstration on a face-to-face basis, we have to limit this offer to businesses located in the Peeblesshire, Lothians or Lanarkshire  Regions of Scotland

Welcome to my blog – what can you expect?

Let’s start with an introduction: my name is Charles Donkers and I am a Member in Practice of the Chartered Institute of Management Accountants (CIMA MiP), and the owner of Tulip Thistle Accountancy, a practice based near Broughton in the Scottish Borders.

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The aim of this blog is to make Accounting & Taxation a more approachable and less intimidating subject. Whether you are a private individual having to complete a Self Assessment Tax Return, or a Business Owner trying to understand your business financial management and changes in reporting requirements, help is at hand.

Not only do I want to keep you informed of upcoming changes in the world of Accounting and Tax, but I also intend to provide some insights as to what you can do to simplify your approach to financial management.

From handy checklists for Self Assessment through to an insight into accounting software packages aimed at Small and Medium businesses, we are going to cover it all.

If you have any suggestions for subjects you would like to see covered, please get in touch, I would love to hear from you.

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Personally I am a great believer in simplification: embracing the new technology currently being developed at great pace in our subject area. An example are the Cloud based accounting software packages such as QuickBooks and Xero, which are transforming the way businesses can maintain their records, and help them to know exactly what their accurate financial position is at any point in time. As Cloud based products, you can access these products from anywhere in the world and at any time of the day (as long at you have an internet connection). Access is available through your PC, or laptop, but also tablets and smartphones (using an easy to use App). You could be doing your invoicing on the way back from a meeting with your customer! See attached link for some more information.

QuickBooks – how it can help my business

Another interesting development I want to highlight in this context is data extraction  which “auto-captures” information from invoices, receipts and statements and loads it directly into your Cloud based accounting software. Gone are the days of manual input & re-keying. You take a photograph with the dedicated App and the rest is automated….

Please get in touch if you want to find out more or would like a demonstration of any of these systems – once you have seen them in action I am sure you will agree that these Cloud based accounting packages are easy to use, will save you time & will get you paid quicker too!

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The Role of the Accountant is also changing just now: whilst you still need Annual Accounts, Accurate & on-time Tax & Companies House returns etc., your accountant will want to help & support you to identify ways to simplify the financial management of your business and provide insights into your financial information.

Key Questions on this journey:

  • What Key Performance Indicators do you manage on a daily/weekly/monthly basis?
  • Do you know who your most profitable customers are, and what are you doing to retain them or secure more business with them?
  • Do you have written down performance goals for your business, financial as well as non-financial e.g.
    • turnover
    • profitability
    • new market entry goals
    • customer retention
    • product development
  • Are you monitoring your progress against the targets you have set yourself, and what do you do if you are off-track?
  • Can you see the profitability & cash flow of your business immediately?

If you have established a relationship based on trust with you accountant, and recognise that a good accountant can offer so much more than just compliance type work, we can help you unlock further potential in your business and become a trusted adviser.

Until the next time!

Charles

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