News

eNews – March 2018

In this month’s eNews we report on National Minimum Wage and National Living Wage increases together with increases in auto enrolment pension contributions.

We also report on tax relief for Scottish taxpayers on pension contributions following the introduction of five income tax bands. With new advisory fuel rates and a tribunal ruling on the tax status of a BBC journalist, there is lots to update you on.

Article Index

 

  • Tribunal rules BBC journalist is caught by ‘IR35’ legislation
  • Advisory fuel rates for company cars
  • Scotland’s five income tax bands and tax relief for pensions
  • Minimum Wage increases
  • Pensions Auto Enrolment reaches a million employers
  • Year end tax planning

Tribunal rules BBC journalist is caught by ‘IR35’ legislation

 

A First Tier Tribunal has ruled that Christa Ackroyd who presented BBC news programme Look North and was paid via a personal service company was caught by the IR35 rules resulting in additional tax and national insurance contributions being payable.

The IR35 rules in broad terms mean that those working via a personal service company have to consider whether, if the services were provided by the individual contractor directly to the client, there would be a contract of employment.

The tribunal looked at lots of factors pertinent to Ms Ackroyd’s engagement and considered it significant that the BBC could control what work she did. She was engaged for seven years on effectively a full time basis. Subject to any appeal and determination of final figures, the tax and NIC that Ms Ackroyd will be liable for amounts to around £420,000 before offset of corporation tax.

The IR35 rules were amended for Public Bodies (including the BBC) from April 2017 and the government has announced that it may make changes to the rules for the private sector as well in the future.

Internet link: ICAEW News

 

Advisory fuel rates for company cars

 

New company car advisory fuel rates have been published which take effect from 1 March 2018. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2018 are:

 

Engine size

Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 22p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 8p
Over 2000cc 13p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

 

HMRC guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars or
  • require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

If you would like to discuss your car policy, please contact us.

Internet link: GOV.UK AFR

Scotland’s five income tax bands and tax relief for pensions

 

Following the announcement of new income tax rates for Scottish taxpayers for 2018/19, the government is looking at ways of addressing the issue of the tax relief due on Scottish taxpayers’ pension contributions.

Tax relief on pension contributions is a complex matter and depends on the marginal tax rate of the individual concerned and whether or not the contributions are being paid with relief at source or under net pay arrangements. The following link details how relief will be given for 2018/19. If you would like help in this complex area please contact us.

The income tax rates for Scottish taxpayers on income other than savings and dividend income are now expected to be as follows:

 

Scottish Bands £ Band name Scottish Rate
0 – 2,000 Starter 19%
2,001 – 12,150 Basic 20%
12,151 – 31,580 Intermediate 21%
31,581 – 150,000 Higher 41%
Over 150,000 Top 46%

Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK which for 2018/19 is £11,850. The allowance is reduced by £1 for every £2 of adjusted net income in excess of £100,000. The bands and allowances are detailed in the P9X.

Internet links: GOV.UK pensions newsletter P9X 2018

Minimum Wage increases

 

The National Minimum Wage (NMW) and National Living Wage (NLW) are the legal minimum wage rates that must be paid to employees. Employers are liable to be penalised for not complying with the NMW and NLW rules.

There are different levels of NMW and NLW, depending on age and whether the employee is an apprentice. The rates are due to increase from 1 April 2018 as shown in the following table:

 

  Rate from 1 April 2017 Rate from 1 April 2018
NLW for workers aged 25 and over £7.50 £7.83
NMW main rate for workers aged 21-24 £7.05 £7.38
NMW 18-20 rate £5.60 £5.90
NMW 16-17 rate for workers above school leaving age but under 18 £4.05 £4.20
NMW apprentice rate * £3.50 £3.70

*for apprentices under 19 or 19 or over and in the first year of their apprenticeship

 

There are no exemptions from paying the NMW on the grounds of the size of the business.

If you would like help with payroll matters please get in touch.

Internet link: ACAS article

Pensions Auto Enrolment reaches a million employers

 

The Pensions Regulator has announced that the number of employers meeting their workplace pension duties has reached one million and that statistics show that approximately 9.3 million people are saving into a pension.

TPR’s Director of Automatic Enrolment, Darren Ryder, said:

‘I am delighted we have reached this important landmark, which shows how far we have come since the start of automatic enrolment.

By successfully meeting their responsibilities, employers have helped reverse the downward trend in workplace saving so that putting earnings into a pension has now become the norm.

The continued support of the pensions industry, including pension and payroll providers and business advisers has been crucial to the success of automatic enrolment. The industry has helped us ensure employers have the tools, information and services they need to comply with the law.

We are now focused on the challenges ahead so that employers continue to understand what they need to do so that staff receive the pensions they are entitled to.’

Minimum pension contributions are set to increase from 6 April 2018 and again in 2019.

 

Period Duration Employer minimum Total minimum contribution
1 Employer’s staging date to 5 April 2018 1% 2%
2 6 April 2018 to 5 April 2019 2% 5%
6 April 2019 onwards 3% 8%

 

Contact us if you would like help with auto enrolment.

Internet links: TPR press release TPR report TPR contributions increase

Year end tax planning

 

With the end of the tax year looming there is still time to save tax for 2017/18. We have set out some points you may want to consider.

  • Make full use of your ISA allowance – ISAs can offer a useful tax free way to save, whether this is for your children’s future, a first home or another purpose. Individuals may invest up to a limit of £20,000 for the 2017/18 tax year. A saver may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA and one Innovative Finance ISA per year. Savers have until 5 April 2018 to make their 2017/18 ISA investment.
  • Take advantage of capital allowances – By making the most of capital allowances, businesses may be able to write off the costs of capital assets against taxable profits. The Annual Investment Allowance allows businesses to claim a deduction of up to £200,000 of the year’s investment in plant and machinery (excluding cars). Businesses of any size and most business structures can make use of the AIA. However, there are provisions to prevent multiple claims.
  • Build a tax efficient retirement plan – Pension contributions must be paid on or before 5 April 2018 for them to be relieved against 2017/18 income. Annual contributions are limited to the greater of £3,600 (gross) or the amount of your UK relevant earnings may be eligible for tax relief. However, these will be subject to the annual allowance, which is generally £40,000. This is reduced for those whose income is above certain technical thresholds and has to be considered when both adjusted annual income is (their income plus both their own and their employer’s pension contributions) over £150,000 and ‘net’ income is at least £110,000. Net income broadly means an individual’s income less own gross pension contributions made. For every £2 of adjusted income over £150,000, a person’s annual allowance is reduced by £1 (down to a minimum of £10,000).

This is only a selection of options that you may wish to consider as part of your tax planning strategy. For more information, and for advice on how we can help you to minimise your tax bill, please contact us.

This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm. Please contact us for further information.

 

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