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April 2017

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To our Tax Tips & MYOB News for April 2017.

Phoning Us
As we have mentioned, we are currently away in Canada (doing some research on Acclivity amongst other things!). 9am in the UK is 4am here, so please call us in the afternoon! Ring our office number: 01422-847500.  Or .  And we will call you back if you like.

For questions about payroll, please can you ring George at Tax Assist directly on 01904 414411, or email her at .

Spring Budget
All our past newsletters are available in our newsletter archive. Please have another look at the Spring Budget Newsletter and feel free to ask us any questions.
April 2017
· Recommended Salary Rates for 2017/18
· Who gets my Pension when I Die?
· Dividends – are they still a good option?
·Quarterly change of the rate of Sterling
· April questions and answers
· April key tax dates
Recommended Salary Rates for 2017/18
Who gets my Pensions Pot when I die? top

We are now resetting our advice for our clients on salaries for the forthcoming year.  As last year, if you are able, we recommend your first £5000 should be paid in the form of dividend (see article below).  After this there are two options.

Option 1: For most companies we recommend you pay Director salaries at the NI primary threshold of £8,164pa. 

At that salary level you won’t be using £3,386 of your tax free personal allowance, unless you have other income to cover it. Assuming you don’t, pay a further £3,386 of dividend.  This will not be subject to the dividend tax, because your personal allowance hasn’t yet been used. 

This strategy means individuals receive an NI credit towards their state pension, but don’t actually pay any tax or NI. If there are only Directors you will not have the hassle of having to pay any PAYE/ NI to HMRC each quarter. You will not be auto-enrolled into a pension scheme (though you can choose to join).

Option 2: Where Employment Allowance will offset any Employers NI due, you could consider paying Director Salaries at the personal allowance, £11,500pa.  This will apply to small companies with at least two working Directors. But you would have to make employee NI payments each quarter & you will be auto enrolled into your workplace pension at your Company’s staging date. 

Using either option you should now have received £16,500, with no tax paid.  After this pay yourself in the form of dividends – subject to the dividend tax at 7.5% for a further £33,500pa in dividends.  After this furthur dividends are taxed at 32.5%.

Most of our remaining smaller employers/clients come up for ‘autoenrolment’ this coming tax year.
Our service includes setting up a workplace  pension scheme for our clients with the ‘People’s Pension’.

We have been asked what happens to a pension pot for a staff member in The Peoples Pension if they were unfortunate enough to die whilst still working. You can make sure your loved ones and/or a favourite charity receive your retirement savings if you die before you take them. To do this you need to nominate your beneficiaries.  The lump sum is paid at the discretion of the Trustee (ie the People’s Pension), and therefore falls outside your estate and is generally free from inheritance tax.

The Peoples Pension will gather information about potential beneficiaries, but will normally be guided by any expression of wish held on record. It’s important that you keep your expression of wish details up-to-date to help the Trustee (this is done by completing a People’s Pension nomination form).

If you die before you’re 75, your beneficiaries can receive your remaining pension pot as a lump sum – as long as your total pension savings are less than the lifetime allowance (currently £1m). If you die after you’re 75, your beneficiaries will have to pay tax on any cash sum paid.  The key point is that the occupational pension scheme doesn’t get the pension pot!
Dividends – are they still a good option?

The government is nailing the door shut on the tax benefit that used to exist on incorporation (dividends).  Say your salaries, rents, self employment profits, earnings and dividends force you into permanent 40% higher rate tax band.  Worse imagine you end up in the 60% rate band that effectively applies when you are at £100k and personal tax allowances are whittled away.  Well now the government will make it worse still.  The dividends are added to your income, and there is now an extra tax of 7.5%.

Do not forget that a dividend has already been taxed.  20% Corporation tax has already been charged on the profits which fund a dividend (whether or not the business can even afford to give the owner the surplus).  20% on the gross and 7.5% on the residue comes to 26% overall.  That’s for a basic rate taxpayer.  Now dividends are in the top tier of tax.  The Higher rate taxpayer loses 46% and the ‘whittled away’ taxpayer suffers 59%.  Aargh.

This high tax will not go away and is anti small business.

It means that large dividends are not the economic methods of repayment they once were.  In particular you must avoid dividends which take you into the £100k ‘whittled away’ band.  Salaries are now only marginally better than dividends, particularly if the Employment Allowance doesn’t apply.

To compensate for all this, the government gave a £5000 dividends tax free exemption last year.  For something that was previously not subject to an extra tax, this is not much of a concession.  But nevertheless we need to take advantage.  Please plan so that dividends of £5k are paid for each shareholder for 16/17 if possible.

We then have to think how we declare a dividend under the new regime.  A £5k dividend has an odd effect on your tax return.  It appears to be treated as an extra personal tax allowance, a disregard.  We appear not to be declaring the £5k income at all!  Odd.

Beyond the £5,000 dividend we may be in the special position of having to make a supplementary return, because the HMRC tax calculation software appears to be broken.  I wish I was joking, but see this article

The big news from the current budget is that even this window will shut after the forthcoming tax year.  The £5000 disregard will drop to just £2000 in 18/19.  At this point paying a salary and a dividend will become roughly equivalent.  This is because Chancellor Phillip Hammond wants to ‘address the unfairness’.

Quarterly Change of the rate of Sterling top
April questions and answers top
If you use multicurrency, it is important to keep your currency up to date in Accountedge / MYOB.  Look at lists\ Currencies.  Enter the pence for each unit of the foreign currency you buy or sell in. 

The rates are currently : 
79.575p USD
86.422p Euro
59.466p Canada
0.719p Japan
1.223p India

Q. I have recently become aware that one of my employees has been selling my stock and pocketing the cash. As the money has never gone in the till, do I have to account for VAT on it? Answer

Q. I have recently sold a buy-to-let property in the UK, which generated a capital gain. Can I off-set this gain against a rental property development in Spain? Answer

Q. Can I reclaim VAT on the purchase of a new car for my business? Answer
April key tax dates top
5 – End of 2016/17 tax year. Last day to use up your annual exemptions for capital gains tax, inheritance tax and ISA’s

6 – Start of the 207/18 tax year

14 – Return and payment of CT61 tax due for quarter to 31 March 2017

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/4/2017 or quarter 4 of 2016/17 for small employers. Interest will run on any unpaid PAYE/NIC for the tax year 2016/17

30 – Additional daily penalties of £10 per day up to a maximum of £900 for failing to file self-assessment tax return due on 31 January 2017
Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Clearbooks.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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