Month: April 2017

The final matter we want to showcase for this month is the proposed reduction in the dividend allowance from April 2018. At present, shareholders with dividend income below £5,000 will pay no Income Tax on their dividend income. From April 2018, Mr Hammond looks set to reduce this to £2,000.

The average dividend yield for FTSE 100 shares is anticipated to fall to 3%. Based on this rate of return, investors would need a portfolio amounting to some £167,000 to create an annual dividend income of £5,000. From April 2018, only £67,000 would create tax-free income if the allowance drops to £2,000.

Affected investors should therefore consider other tax advantages options, including ISAs. From April 2017 the ISA limit is creased to £20,000.

Shareholders of non-listed private companies will face a tax increase due to this change. The present advantage posed by the low salary high dividend approach to profit extraction will still apply, but the overall Income Tax due will increase from April 2018.

Combined with changes to the taxation of benefits in kind, shareholder directors of smaller companies would be advised to revisit tax planning options for 2018-19.

1 April 2017 – Due date for Corporation Tax due for the year ended 30 June 2016.

19 April 2017 – PAYE and NIC deductions due for month ended 5 April 2017. (If you pay your tax electronically the due date is 22 April 2017)

19 April 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2017.

19 April 2017 – CIS tax deducted for the month ended 5 April 2017 is payable by today.

1 May 2017 – Due date for Corporation Tax due for the year ended 30 July 2016.

19 May 2017 – PAYE and NIC deductions due for month ended 5 May 2017. (If you pay your tax electronically the due date is 22 May 2017)

19 May 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2017.

19 May 2017 – CIS tax deducted for the month ended 5 May 2017 is payable by today.

31 May 2017 – Ensure all employees have been given their P60s for the 2016-17 tax year.

Clients often ask if working from home is going to create issues from a tax point of view. There are a number of scenarios to consider.

Employers’ obligations to employee homeworkers:

Equipment, services and supplies

Employers that provide equipment, services and supplies to an employee who works from home, don’t have to report or pay anything if they’re only used for business purposes, or any private use is insignificant.

Additional household expenses

If employers cover the cost of additional household expenses for an employee who works from home, there are no tax complications if all the following apply:

• Employees need to work from home, either because equipment they need isn’t available at your workplace, or their work means they have to live too far away from your workplace to travel there every day.
• The amount you give employee homeworkers is not more than their additional household expenses, and the amount you give them isn’t more than the current weekly limit (£4 a week or £18 a month – 2016-17).

Self-employed homeworkers:

This group can claim for the additional running costs of working from home based on the actual costs and space used, or a flat rate basis if you work more than 25 hours a month from home.

The current, published HMRC flat rates are:

• 25 to 50 hours a month £10 per month
• 51 to 100 hours a month £18 a month
• Over 100 hours a month £26 per month.

As long as the room(s) you use in your home have duality of use – i.e. that they have a private as well as a business function – you will be unlikely to suffer any capital gains tax charge when you sell your property.

Business rates:

According to HMRC, you don’t usually have to pay business rates for home-based businesses if you:

• use a small part of your home for your business, e.g. you use a bedroom as an office
• sell goods by post

You may need to pay business rates as well as Council Tax if:

• your property is part business and part domestic, e.g. if you live above your shop
• you sell goods or services to people who visit your property
• you employ other people to work at your property
• you’ve made changes to your home for your business, e.g. converted a garage to a hairdresser’s

Contact the Valuation Office Agency (VOA) to find out if you should be paying business rates. In Scotland, contact your local assessor.