Gary Perrens answers some of your tax and business related questions in his March Question & Answers
I’ve heard Wear & Tear Allowance is coming to an end. What should I be doing?
Under current proposals, from next year the annual Wear and Tear Allowance will be removed. The Wear and Tear Allowance serves to reduce property income and is available against lettings of furnished, residential properties. It was intended to account for the deterioration of the fixtures and fittings. It does not cover fixtures that are deemed to be “integral” to the building, such as baths, toilets, etc.
Instead of the Wear and Tear Allowance, landlords will be able to deduct the actual costs they incur on replacing furnishings in the property; but no tax relief will be available on the initial cost of furnishing a property. The new relief will be available to unfurnished and part-furnished properties, as well as fully-furnished.
If you are planning significant refurbishments, you may wish to postpone spending too much until after April 2016 to take advantage of the new relief. Alternatively, if your properties need very little upkeep from year-to-year, you may unfortunately find you are worse off under the new relief.
There are a number of recent and forthcoming changes that affect the tax treatment of rental income. If you would like to discuss your affairs in more detail, please get in touch
I’ve heard about these dividend tax changes coming in. I run my own limited company, should I be doing anything about it?
Under the present rules, dividends have been the preferred way for business owners to pay themselves because they are paid net of a notional 10 per cent tax credit. This tax credit effectively meant basic rate taxpayers could enjoy their dividends tax-free.
But in the Summer Budget, it was announced that from April 2016 the tax credit would be replaced by a Dividend Tax Allowance of £5,000. Dividend income over the Allowance will be liable for tax at the basic rate of 7.5 per cent, 32.5 per cent for the higher rate and 38.1 per cent for the additional rate.
Even under the new regime, dividends are still taxed at lower rates than other income and will continue not to attract National Insurance. But many people will see a rise in their tax bill.
The effects of the dividend allowance are far reaching and planning what your company will pay you from April 2016 requires much more care and planning. I would therefore strongly encourage you to seek the advice of a professional, such as your local TaxAssist Accountant.
One of the immediate things to consider, is whether it might be worth declaring some of your dividends in this tax year before the change kicks-in. Although it might meant you have a higher tax bill this year, the tax rates in force are likely to be lower.
What is the employment allowance for 2016/17?
The Employment Allowance was introduced in April 2014, for the purpose of supporting businesses and charities in helping them to grow by cutting the cost of employment. Eligible employers can claim the allowance, which reduces their Employer's National Insurance bill. Previously the allowance has been £2,000, but from April 2016 it will rise to £3,000.
Unfortunately, simultaneously the Employment Allowance will no longer be available to limited companies with a single director, and no other employees.
If you would like any support in managing your payroll, please get in touch. Gary and his team will be happy to help, and they're already geared up for the new Workplace Pensions laws.
What is the difference between the National Minimum Wage and the National Living Wage?
The National Minimum Wage rate per hour depends on your age and whether you’re an apprentice - you must be at least school leaving age to get it. Since October 2015, adults aged 21 and over have been entitled to £6.70 per hour but the rates can be viewed on gov.uk here.
From April 2016, the National Living Wage is also being introduced. All workers aged 25 and over will be legally entitled to the National Living Wage which will initially be £7.20 per hour. The minimum wage will still apply for workers aged 24 and under though.
So both the National Minimum Wage and the National Living Wage will co-exist but an employee's entitlement will depend on their age.
If you would like any support in managing your payroll, please get in touch.
If you'd like to ask any further questions, Gary is more than happy to answer these or any other query you may have. He also offers a free initial consultation, so do drop him an email
Member since: 17th March 2014
Hello! I'm Penny from thebestof Sudbury, shouting about the best local businesses from Hadleigh through the Clare. When I'm not doing that, you'll find me knitting socks or tending to my 6 chickens