Increase in Rent-a-Room Relief

If you rent out a room in your only or main home, you can currently claim up to £4,250 in rent-a-room relief.

This means that you can receive up to £4,250 per year tax free income from letting out furnished accommodation in your home.

However, from 6th April 2016, this relief is set to increase by over 75% to £7,500 per year, giving an opportunity for householders with spare rooms to generate additional tax free income.

See here for further information regarding the Rent a Room scheme.

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New Permanent Annual Investment Allowance

HMRC’s Annual Investment Allowance (AIA) allows you to claim tax relief of up to 100% on the purchase of assets for use in your business.

This can enable you to claim tax relief on many common business assets such as vans, office equipment, furniture, and machinery.

In a Tax Tip last December, we advised that the qualifying expenditure limit was due to drop from £500,000 to just £25,000 from 1st January 2016.

However, in the recent Budget, HMRC announced that instead, the AIA will be set at a more generous £200,000, on a permanent basis.

This will assist businesses in planning their capital expenditure, as there will no longer be the potential for a temporary allowance to be withdrawn.

Employment Allowance Increase

Many employers have been enjoying the benefits of the Employment Allowance, which started in April 2014.

Currently, employers can reduce the amount of National Insurance contributions they pay for their employees by up to £2,000. The good news is that it was announced in the recent Budget that with effect from April 2016, the allowance is set to increase to £3,000.

The bad news is that the allowance will no longer be able to be claimed by companies whose only employee is the sole director.

Personal Allowance Increase

The Personal Allowance is to be increased once again for the 2016-17 tax year.

This is currently set at £10,600 per annum, however, it’s due to increase by a further £400, to £11,000, edging it closer to the Government’s current target of £12,500.

This will mean that taxpayers may be able to earn an additional £400 tax free, which could save basic rate tax-payers as much as £80 per year in tax.

Changes to The Non-Resident Landlord Scheme

HMRC have recently changed the process for dealing with landlords who are resident overseas, but own and let property in the UK.

Letting agents within the UK must release details of income received by non-resident landlords to HMRC, and they must also deduct basic rate tax from the receipts, before paying it over to the landlord.

As well as this, the agent (or tenant) must submit an annual return to both HMRC and the landlord by 5th July each year, despite the fact that HMRC will no longer be sending out these annual return forms!

The form can be downloaded here, if needed.

Timing Your Capital Expenditure

If your cash flow allows it, consider carefully the date on which you invest in new items of plant and machinery or other items qualifying for capital allowances.

A purchase date just before your accounting year end can mean that you get tax relief a full 12 months earlier than if a purchase was made at the beginning of the following accounting year.

Also, the Annual Investment Allowance currently gives 100% tax relief on qualifying expenditure of up to £500,000, but this is due to reduce to just £25,000 at the end of December 2015.

So if you have any capital expenditure planned, take advice to ensure you do this at the most beneficial time for your business.

Register your interest in the Marriage Allowance

If your total income during the tax year 2015/16 is (expected to be) less than £10,600, you may be able to reduce your spouse or civil partner’s tax bill!

The new Marriage Allowance may allow you to transfer some of your unused personal allowance to your partner and save them up to £212 on their tax bill.

For further information, and to be notified of the new allowance (which will be available later this year), please follow the link below:

https://www.gov.uk/marriage-allowance

Stamp Duty Changes

Since 3rd December 2014, the government have changed the rates of stamp duty on purchases of property and the way it is calculated.

Rather than paying an exact percentage on the entire price of your property, buyers will now pay in separate bands:

  • Up to £125,000 : 0%
  • £125,001 to £250,000 : 2%
  • £250,001 to £925,000 : 5%
  • £925,001 to £1.5m : 10%
  • Above £1.5m : 12%

This means that if you bought a home for £200,000, you would pay stamp duty at the following rates:

0% on the first £125,000 and 2% on the remaining £75,000. This equates to £1,500, rather than the £4,000 you would have paid previously.

Maximising Statutory Maternity Pay

In a family business it may be beneficial to pay a bonus to your employee/female director before their maternity leave begins.

As paying Statutory Maternity Pay (SMP) is not optional, if your employee qualifies for it, you must pay it. However, if your business is classed as a small business, (a business that pays less than £45,000 in Class 1 NICs in a year is classed as small for this purpose) you can recover 103% of the SMP paid from HMRC!

If your employee earns at least £111 per week, the employer must pay SMP at 90% of the employee’s average weekly wage, for the first six weeks of the Maternity period, and the lower of either the 90% rate or £138.18 per week for the remaining maternity time.

By paying a bonus before the maternity period begins, you can increase the average weekly wage and increase the amount recovered from HMRC.

The timing of the bonus is crucial to maximise benefits, so please let us know if you need any further advice in this respect.

Personal Allowance Increase

The new standard personal allowance (the amount you can earn each year free of tax) will be increasing from 6th April 2015.

The standard personal allowance for 2014-15 is currently £10,000, which is due to increase to £10,600 for 2015-16.

However, the personal allowance for those born before 6th April 1938 remains frozen at £10,660.

As well as the increase to the personal allowance, from 6th April 2015, married couples and civil partners will be able to transfer up to £1,060 of their unused personal allowance to their partner, provided that their partner’s total income does not exceed the basic rate threshold.