The Ever Changing World of Tax

It’s All Change in the World of Tax

Jonathan-Hook-Norwich-Accountancy-Services

Let’s talk about something important.

Things are changing in terms of tax matters and indeed, they are also changing for us as a firm.

We have now closed our Prince of Wales Road office in Norwich and taken more space up at Castle Meadow in the city. We also currently have the builders in at our head office, London House, London Street, fitting out our new reception area and waiting room.

There’s also a new consulting room as we seem to be running low on them compared to the number of consultants we now have.

Whilst there’s no interruption in operations, the building work has been interesting in a number of ways. One client likened it to lighting a fire in your garden for a period of time and feeding it with £50 notes!

The problem is with this type of exercise that once you start; you can’t stop until it’s finished. There are always unforeseen hitches and delays. I feel I know London House very well since we moved in last January but I was surprised to learn there is a dumb-waiter hidden in a wall behind our boardroom.

Thinking about this I’m totally shooting myself in the foot by mentioning it – there’s a trendy bar downstairs and I can see some bright spark suggesting we start ordering drinks using it!

Anyway, as I say, let’s talk about something important.

The tax regime for limited companies has changed from the end of the tax year for those who haven’t heard (if you’re a director you should have heard of this by now!)

First, the dividend rate for those who earn between the personal allowance (currently £10,600) and £42,385 is changing. Dividends used to come with a 10% tax credit which effectively made them tax neutral; so no tax to pay. Under the new rules you’ll get the first £5,000 of dividends for free and then you’ll have to pay (yes, hand over, on top of) 7.5%.

Regarding the paragraph above relating to the dividends; it ought to be noted that a director taking a stipend wage can actually top up his salary to the personal allowance (£11,000 after April 6, 2016) and then take £5,000 of dividends tax free making a £16,000 tax free amount.

Also worth noting; the first £1,000 of interest is now also non-taxable. Although obviously anyone with enough money to earn £1,000 in interest is usually smart enough to have it somewhere with a higher return than a bank.

For those who have not yet done their 2014-15 tax return; there are even more fines coming. Starting in May, HMRC are going to be dishing out fines to anyone who hasn’t done the last return by then.

Because this article is in the property section it would be remiss not to mention some changes aimed directly at this sector. Pertinent to landlords in particular is the loss of the wear and tear allowance. This is currently available and is 10% of the net rent to those rented out, furnished properties.

Also the restriction to the tax relief on mortgage interest starts to kick in. In case you haven’t heard, for higher rate tax payers who would get a reduction to their 40% tax bill, they will have that restricted to 20%. This comes in over the next four years in effective 5% chunks. If you’re a basic rate tax payer, you don’t need to worry, this won’t affect you.

Jonathan