Tax Questions and Answers
What is the Marriage Allowance?
The marriage allowance allows you to transfer 10% of your personal allowance to your husband, wife or civil partner. This will reduce the tax bill of the recipient by making that additional amount of their income tax-free. The transfer is made from the lowest earning spouse, and is only beneficial for the couple as a whole if their income is near or below the personal allowance.
To qualify for the Allowance, throughout a tax year (6th April to the following 5th April) both you and your spouse must be:
• Not higher or additional rate taxpayers,
• UK resident and domiciled,
• Married or in a civil partnership with one another;
• Born on or after 6th April 1935
If you and your partner are eligible for Marriage Allowance, you can register your interest in claiming the allowance with HMRC online. You will get an email from HMRC confirming your application. You can backdate your claim to include any tax year in which you were eligible for Marriage Allowance since 5th April 2015.
It is still possible to claim for any qualifying years, even if your spouse has subsequently died. If you were the lower earner, you can make a claim by calling 0300 200 3300. If your spouse was the lower earner, then the person responsible for managing their affairs will need to make the call.
My business is growing well, and I’m concerned that I might need to register for VAT soon. What is the VAT registration threshold?
If your turnover in any 12 month period exceeds the VAT registration threshold, it is mandatory for a business to register for VAT. A business must also register if it expects to exceed the threshold in the next 30 days alone. It is possible for businesses with turnover below the threshold to register voluntarily, but you should take professional advice before deciding to do so. The VAT registration threshold is currently £85,000.
Once a business is registered for VAT, it must charge VAT on its sales of goods or services. Most will be subject to the standard rate of VAT, which is currently 20%. Some goods and services are charged at lower rates of 5% and 0%. Some items are also exempt from VAT entirely. Whilst not comprehensive, a list of common goods and services, along with the rate that applies to them, can be found on the HMRC website: tinyurl.com/p6s8r65. The business can calculate VAT due as a percentage of their VAT-inclusive turnover (the Flat Rate scheme) or by deducting their purchase VAT from their sales VAT (the standard scheme). There are also a handful of specialised schemes for particular businesses.
A note of caution applies to businesses with exempt sales. They may appear to be identical to sales at 0%, as neither result in VAT being added to the sale price. However, VAT on expenses related to 0% sales can be claimed, whereas VAT on expenses related to exempt sales cannot.
As noted in last issue’s report on the Spring Statement, the VAT registration threshold is to be frozen at £85,000 until 31st March 2020. This is intended to give businesses some certainty, allowing them to plan for how the Making Tax Digital (MTD) timeline will affect them.
MTD is HMRC’s plan to change the records that are kept and how individuals and businesses interact with them. Under current proposals, businesses that are VAT-registered due to exceeding the threshold will have to be MTD-compliant from 1st April 2019. This means they must submit their figures directly from MTD-compliant software, instead of entering figures on the HMRC website as many do now. Businesses below the threshold but voluntarily registered for VAT will still have the option to continue using the existing arrangement.
If a business is already using MTD-compliant software, they should not notice much difference to how they communicate with HMRC. However, if a business is still using a cashbook, spreadsheets or software that does not meet the standards required for MTD, they will almost certainly need to change their systems.
I have a small team and have heard that the hourly rates I have to pay my staff are due to go up in April 2018 – could you please tell me by how much?
The National Living Wage and the National Minimum Wage are the minimum pay per hour almost all workers are entitled to by law. The rates below apply from 1st April 2018:
• Aged 25 and above – £7.83
• Aged 21 to 24 inclusive – £7.38
• Aged 18 to 20 inclusive – £5.90
• Aged under 18 (but above compulsory school leaving age) – £4.20
• Apprentices aged under 19 – £3.70
• Apprentices aged 19 and over, but in the first year of their apprenticeship – £3.70
The £7.83 hourly rate is referred to as the National Living Wage. The other rates are referred to as National Minimum Wage rates.
There are also concessions regarding Employer’s National Insurance contributions for the younger members of staff and apprentices. In order to benefit from these concessions, you must ensure that the right National Insurance letter is being applied to their income. For staff under the age of 21, letter M should be used. For apprentices under the age of 25, letter H should be used.
• For assistance with these, or any other tax or accounting matters, call Steve Brown at Coleman Webb on 01424 211800 to arrange a free, no-obligation appointment to discuss your needs.
Discaimer: Advice shared in this article is intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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