Welcome to the February 2016 Newsletter from Reynolds and Co
Following the announcement of a new apprenticeship levy in the 2015 Autumn Statement, the Confederation of British Industry (CBI) has revealed a four-point plan to help ensure that the levy operates 'effectively'. Despite initially voicing its opposition to the measure, the organisation has now written an open letter to the Business Secretary, outlining its suggested plan of action.
Meanwhile, with the end of the tax year looming, now is the ideal time to consider a range of tax-saving opportunities to enact before 6 April. With various changes to legislation coming into effect in the 2016/17 tax year, we have compiled some planning strategies to help you to make the most of your business and personal finances.
CBI sets out four-point plan for new apprenticeship levy
The Confederation of British Industry (CBI) has set out its proposals for an 'effective' apprenticeship levy, despite initially being opposed to the new measure. CBI Director-General Carolyn Fairbairn wrote to Business Secretary Sajid Javid with a four-point plan for the levy, which was first announced in November's Autumn Statement.
The new apprenticeship levy will come into effect in April 2017 and will be set at 0.5% of an employer's paybill. It is a key measure intended to help meet Chancellor George Osborne's target of creating three million apprentice starts by 2020. It is also expected that the levy will raise nearly £3 billion a year by this time.
In her letter to the Business Secretary, Ms Fairbairn called for a particular focus on SMEs and smaller levy payers, asking for a reduction in the system's administrative burden. She wrote: 'The apprenticeship levy is a significant step. Its introduction is not an approach the CBI supported.
'However if it is to be successful in providing the higher rates of training we all want to see, the levy system must ensure training is relevant and valuable for businesses and that it helps individuals build their careers.'
The four points set out by the CBI were:
- That the system must be 'driven by economic and business need'
- That there should be flexibility in the system for different sectors and sizes of firm
- That the system should 'fund quality and reward commitment'
- That there should be 'relevant and simple apprenticeship standards across all parts of the UK'.
Every employer will receive a £15,000 allowance to offset against the apprenticeship levy, and the Government claims that 98% of employers - and all businesses with salary costs of less than £3 million - will pay no levy at all.
In a response to the letter, Business Secretary Sajid Javid stated: 'Employers need to be in charge of driving up the quality of apprenticeships so that our young people get the skills they need. We will continue to work with the CBI and others to turn round the 20-year decline in training investment.
'The apprenticeship levy will ensure that businesses invest in skills and training and will act as a much-needed shot in the arm for the country's productivity.'
We can help with all aspects of running a business - why not visit the Your Business section of our website to access a range of handy guides and tips, or contact us to find out more.
Tax-saving strategies to implement before the 5 April year end
Implementing some key financial planning strategies ahead of the year end on 5 April will help to ensure that both your business and personal finances are as tax-efficient as possible. Here we review some of the planning strategies that could be utilised before 6 April 2016.
Making use of personal allowances
Each individual has their own tax-free personal allowance for income tax purposes. For 2015/16, this is set at £10,600 for those born after 5 April 1938, and £10,660 for those born before 6 April 1938. If a spouse or partner has little or no income, it may be useful to transfer income or income-producing assets to them, to make the most of their personal allowance. It is important to bear in mind the settlements legislation governing 'income shifting', as well as the legal implications of transfers.
You should also beware the 'hidden' income tax rate. In 2015/16, the 40% rate of tax begins when your taxable income exceeds £31,785. However, personal allowances are clawed back by £1 for every £2 by which your adjusted net income exceeds £100,000, leaving you open to an effective tax rate of 60%! A number of strategies may allow you to reduce your taxable income for 2015/16, such as delaying income into the next tax year, or increasing pension payments.
Taking advantage of tax-efficient savings
You have until 5 April 2016 to make your 2015/16 ISA investment. Adult savers may invest in a combination of cash or stocks and shares up to the overall annual subscription limit of £15,240 for 2015/16. Individuals may only pay into a maximum of one Cash ISA and one Stocks and Shares ISA each year.
Extracting profit from your business
The decision of whether to take a salary or bonus, rather than a dividend, requires careful consideration. Currently, a dividend is paid free of national insurance contributions (NICs), while a salary or bonus can carry up to 25.8% in combined employer and employee contributions. However, a salary or bonus is generally tax deductible for the company, unlike dividends. With landmark new rules applying to dividend taxation with effect from April 2016, you may wish to consider increasing your dividends before 6 April 2016, although there may be other tax issues to consider, such as loss of the personal tax allowance if your total 'adjusted net income' exceeds £100,000. Please talk to us before taking action.
For more information on tax-saving strategies to implement before the year end, please do not hesitate to contact us.
ESSENTIAL TAX DATES FOR FEBRUARY
£100 penalty if 2015 Tax Return not yet filed online. Additional penalties may apply
for further delay. Interest starts to accrue on 2014/15 tax not yet paid.
Submission date of P46 (Car) for quarter to 5 January.
Last date (for practical purposes) to request NIC deferment for 2015/16.
QUOTE OF THE MONTH
'Because of the role that the NHS occupies in national life, all of us working in the NHS have a responsibility not just to support those who look after patients, but to also draw attention to and make the case for some of the wider changes that will actually improve the health of this country.'
WEBSITE OF THE MONTH
Up-to-date business, political and economic news stories from around the world.
ON OUR WEBSITE
Key tax advice for you and your business
For effective tax planning advice for both you and your business, visit the Tax Strategies section of our website.
Useful information for individuals
Our informative guides provide useful tips and strategies on minimising your tax bill, as well as managing your wealth. Visit the Your Money section of our website today.
In the News
- 'Significant rise' in buy-to-let mortgage lending ahead of new surcharge
- Data from the Council of Mortgage Lenders has revealed that buy-to-let mortgage lending increased by 35% during November compared with a year earlier.
- Auto-enrolment is putting firms 'under pressure', claims FSB
- In a new survey by the Federation of Small Businesses, three in four business owners who responded claimed that pensions auto-enrolment has 'put too much pressure' on them.
- Levels of interest on savings accounts reach 'new low'
- Recent data from the Bank of England has revealed that interest rates on savings accounts have plummeted to a new low.
- Savers receiving 'inadequate pension information', MPs warn
- MPs have warned that millions of pension savers may be planning their retirement based on incorrect information.
- Airport retailers face crackdown on VAT discounts
- Airport retailers could be forced to pass on VAT discounts to those travelling to non-EU destinations after the Government announced a review into the issue. Airport retailers could be forced to pass on VAT discounts to those travelling to non-EU destinations after the Government announced a review into the issue.