April 2016 signalled the beginning of a new tax year, meaning that a wide range of government changes to UK tax policy have now come into effect. Turner Little explains the key tax changes small businesses should be aware of heading into the new fiscal tax year.
Increase in personal allowance
Your personal allowance threshold, the percentage of your income you do not pay income tax on, has been raised from £10,600 to £11,000. Therefore as of this fiscal year, you and your staff are now entitled to receive £11,000 tax-free income every year.
On the subject of income tax, if your business is based in Scotland you need to be aware of a major change. You will now need to pay the Scottish rate of income tax (10%) on the majority of your taxable income, including your wages and pension. However, you will pay the same overall income tax rate as the rest of the country. Read the government’s resource on Scottish income tax to find out more.
New student loan plans
Whitehall has introduced an alternative threshold for a new type of student loan deduction. This ‘Plan Type 2’ threshold applies to any of your staff who began their academic course on or after 1st September 2012 and whose home address was in England or Wales when they first applied for a student loan. This will exist alongside Plan Type 1, the current threshold for student loan deductions.
If you employ staff who are eligible for student loan deductions, you will need to indicate which plan you are required to operate for each employee via your payroll software. The Student Loans Company has compiled a guide explaining this issue in more detail and you can also find information at gov.uk.
The National Living Wage
As Turner Little already noted, The National Living Wage went into effect on 6th April 2016. From this point on, you are required to pay all staff aged 25 and over a minimum salary of £7.20 per hour. If you fail to implement The National Living Wage, your company could face significant financial penalties and be added to Whitehall’s public register of firms which have not adhered to the new policy.
Raising VAT threshold
The government has raised the Value Added Tax (VAT) registration threshold to £83,000. You will not be required to register your firm for VAT until your sales reach or eclipse this limit during any 12 month period. Also, the de-registration limit has been increased to £81,000. If your venture is already registered for VAT and your sales fail to hit £81,000 during any 12 month period you can de-register for VAT. You must be confident, however, that your sales will also fail to eclipse £81,000 in the following 12 month period to be eligible to de-register for VAT.
Employment allowance alterations
Employment allowance (£2,000 for the majority of employers during the 2015 fiscal year) is a reduction businesses can set against their National Insurance costs. This has been raised to £3,000 but the allowance no longer applies to company directors who are their firm’s sole employee. This means that even if you were eligible for this allowance before, you may no longer be able to receive it now. Read the government’s guidance on employment allowance to learn more.
Employer National Insurance contributions for apprentices
Do you employ apprentices aged under 25 who earn under £3,583 per month or £43,000 every year? You are no longer required to pay employer National Insurance contributions on these apprentices’ earnings; they now fall under a new National Insurance category, ‘H.’ Update any eligible apprentices NI details on your payroll software, making sure you select ‘H’ as their category letter, to implement this change within your company.
Dividend taxation changes
Turner Little has already explained that UK dividend taxation law has changed; specifically it will be replaced with a new ‘dividend allowance.’ You will pay 0% tax on your first £5,000 of dividend income per annum. However as a UK resident, you will pay tax on any extra dividend income at three separate rates; find out more on the government website’s dividend taxation page.
Turner Little
With the implementation of new policies, your company’s tax obligations may have changed. If this is the case, it is vital that you invest in the infrastructure required to handle your finances. Turner Little can provide you with advice on setting up UK bank accounts, so you can capitalise on the first-rate financial services required to handle your companies tax matters throughout the year ahead.
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider. You can receive our monthly newsletter by signing up using the form below.
