Tax Facts KW&G tax facts 28/2/07 04:17 Page 2015-2016 1 · PDF fileTAX FACTS CONTENTS 2...

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Transcript of Tax Facts KW&G tax facts 28/2/07 04:17 Page 2015-2016 1 · PDF fileTAX FACTS CONTENTS 2...

  • Tax Facts2015-2016KW&G tax facts 28/2/07 04:17 Page 1

    Chartered Accountants

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    This booklet is prepared for guidance only. We recommend that you contact us for advice before acting on any information contained in the booklet and we cannot accept responsibility for any action taken without such advice.

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    TAXFACTS

    CONTENTS

    2 Personal Taxation

    4 Employee Taxation

    6 Investment Reliefs

    8 Capital Gains Tax (CGT)

    9 Trusts

    10 Tax Credits, Universal Credit and Child Benefit

    11 National Insurance Contributions (NIC)

    11 Inheritance Tax (IHT)

    12 Business Tax

    13 Corporation Tax

    14 Property Taxes

    15 Value Added Tax (VAT)

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    PERSONAL TAXATIONMain personal allowances 2015/16 2014/15

    Personal income tax allowance (PA) a) 10,600 10,000

    CGT annual exemption 11,100 11,000

    Blind persons allowance 2,290 2,230

    Marriage allowance b) 1,060 nil

    Age allowancesPersonal allowance (PA)

    Born 6.4.38-5.4.48 10,600 10,500

    Born before 6.4.38 c) 10,660 10,660

    Minimum age allowance 10,600 10,000

    Married couples allowance (MCA) 2015/16 2014/15

    Born before 6.4.1935 8,355 8,165

    Minimum c) 3,220 3,140

    Income Limit d) 27,700 27,000a) Allowance is reduced if adjusted net income (ANI) exceeds 100,000. ANI is total taxable income less qualifying pension contributions and Gift Aid donations. PA is reduced by 1 for every 2 of ANI over 100,000, so is nil when ANI is 121,200 or more.b) Married couples and civil partners born after 5 April 1935 can transfer this portion of their personal allowance to their spouse/ partner as long as the recipient is not taxed at more than 20%.c) Age allowances are reduced by 1 for every 2 by which ANI exceeds the income limit. PA is reduced first until it reaches the minimum; then MCA is reduced until it reaches the minimum.d) Amount depends on age of older spouse and is given at 10%.

    Income tax rates 2015/16 2014/15

    Basic rate band (BRB) 31,785 31,865

    Higher rate band 31,786-150,000 31,866-150,000

    Additional rate over 150,000 over 150,000

    2015/16 and 2014/15

    Allocation of rate bands: other income savings dividends

    Basic 20% 20% 10%

    Higher 40% 40% 32.5%

    Additional 45% 45% 37.5%

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    If taxable general income is less than 5,000 (2014/15: 2,880), savings income is taxed at a starting rate of nil (2014/15: 10%) until total taxable income exceeds that limit. This starting rate band is part of the BRB.

    Extension of basic and higher rate bandsPayments of gift aid donations or personal pension contributions increase the basic and higher rate bands by the grossed up equivalent of the payment. There are restrictions on the amount of tax relief for pension contributions (see Investment Reliefs).

    Filing of return and paymentThe 2015/16 personal tax return if a notice to file is issued is due by:

    31 January 2017 (online) or 31 October 2016 (paper).Penalty for late return:

    100 (even if no tax is due); further penalties for more than 3, 6 or 12 months late.The 2015/16 tax is payable under PAYE each month for tax on employment income, or deducted at source for the basic rate liability on savings and dividends. The balance of tax due under self assessment (SA) is payable as:

    payments on account by 31 January 2016 and 31 July 2016, based on 2014/15 SA income tax and NIC; and

    Any balance, plus any CGT, by 31 January 2017, with the first payment on account for 2016/17.

    Missing any payment date leads to interest; missing the balancing payment date by 30 days will lead to a 5% penalty. Further 5% penalties apply when the balancing payment is 6 months late and 12 months late.

    Main personal reliefsRent-a-room exemption for letting out part of the taxpayers only or main residence: gross income of 4,250pa.

    Gift aid: on a cash gift to charity, the charity can reclaim 20/80 (25%) of the donation from HMRC if the donor makes a declaration. The donor increases the basic rate band by the gross gift (i.e. donation x 100/80). The market value of gifts of land or quoted shares can be deducted from taxable income for full tax relief, and the charity pays no tax on the gift received. Also the Give As You Earn payroll giving scheme allows charitable gifts to be made from pre-tax pay, which reduces tax paid under PAYE.

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    EMPLOyEE TAXATIONTax rates and paymentEmployment income is charged to both income tax (as general income) and to Class 1 National Insurance Contributions. Tax and NIC are normally paid by the employer through the PAYE system, under which the notice of coding makes adjustments for tax reliefs due and some tax due on other income. An employee who has overpaid or underpaid tax at the end of the year should complete a tax return and settle the liability as described in Personal Taxation, or claim a repayment.If the tax underpaid is up to 3,000 and the 2014/15 tax return is submitted by 31 October 2015, or e-filed by 30 December 2015, the underpayment can be settled through PAYE for 2016/17 rather than being collected on 31 January 2016.

    Class 1 NIC rates 2015/16Employers and employees both contribute at rates dependent on the level of earnings during a weekly, monthly or annual earnings period. week month year

    LEL: lower earnings limit 112 486 5,824

    PT: primary threshold 155 672 8,060

    ST: secondary threshold 156 676 8,112

    UAP: upper accrual point 770 3,337 40,040

    UST: upper secondary threshold 815 3,532 42,385

    UEL: upper earnings limit 815 3,532 42,385No NIC are payable by employee or employer on earnings up to the PT (employees) or ST (employer). No NIC are payable by the employer on earnings up to the UST for employees aged under 21 at the date of the payment. Earnings between the LEL and the PT must be reported by the employer, and the employee receives credit towards the State Pension, but no employee NIC are payable.Rates of NIC on earnings above the PT/ST depend on whether the employee is within the State Second Pension or is contracted out as a member of a salary-related pension scheme.

    Employee Employer In Out In Out

    PT/ST - UAP 12.0% 10.6% 13.8% 10.4%

    UAP - UEL 12.0% 12.0% 13.8% 13.8%

    Above UEL 2.0% 2.0% 13.8% 13.8%A person with more than one employment can defer the payment of some employee NIC until after the end of the tax

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    year. The total amount payable is then checked and limited such that the full 12% rate is only applied to income between the PT and the UEL. Many employers can claim an annual reduction in NIC of up to 2,000, regardless of the number of employees on the payroll. The employees NIC is unaffected.

    Employee benefitsEmployee benefits are usually valued at a cash equivalent and are then charged to income tax on the employee and Class 1A NIC (at 13.8%) on the employer. Employee contributions for private use usually reduce the taxable amount. The cash equivalent is generally based on the cost to the employer of providing the benefit, but the following are charged according to a statutory formula. Cars provided by the employer: a percentage of the original list price of the car, depending on the CO2 emissions rating of the car.

    g/km

    5% of list price 0-50

    9% of list price 51-75

    13% of list price 76-94

    14% of list price 95-99

    1% addition for every extra 5g/km 100-209

    max 37% benefit 210 and aboveFor diesel cars add 3% (min. is 8%, max. still 37%, reached at 195g/km).Fuel provided by the employer for private use in a company car is charged without reduction for contributions unless all private fuel is paid for by the employee, in which case there is no benefit.To calculate the taxable amount, the percentage used to calculate car benefit is applied to a standard figure of 22,100.Vans provided by the employer for an employees use are charged at a flat rate of 3,150. If fuel is provided as well, an additional 594 is charged. If private use of a van is restricted to home-to-work travel, there is no tax charge. The taxable benefit of using an electric van for private journeys is 630.Use of other assets is charged at 20% of the original cost of the assets to the employer, or the value when first made available to the employee.Loans of money that exceed 10,000 at any point in the tax year are charged on the excess of the official rate (3% from 6.4.2015) over any interest actually paid by the employee to the employer.

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    Main exempt benefitsMany employee benefits are not charged to tax. A full list cannot be given here, but some of the principal ones are:

    providing one mobile phone, even with private use subsidised meals available to all employees in a staff restaurant or canteen (subject to conditions)

    the provision of green transport such as works buses or the use of a bicycle for commuting

    trivial benefits (e.g. flowers) worth up to 50 per employee pension contributions up to annual limit (see Investment Reliefs)

    payments of up to 5 a night for incidental overnight expenses when staying away (10 if abroad)

    Exempt mileage allowances: employees own car First 10,000 business miles Extra miles Each passenger

    45p 25p 5pIf the business journey is completed on a motorcycle or pedal cycle the tax-free mileage rates are 24p and 20p per mile respectively.

    Exempt fuel-only allowances: company carThe 45p mileage rate is for business use of an employees own car. Where the employer provides the car, HMRC publish advisory mileage rates which are accepted as covering the cost of fuel for different engine sizes and fuel types. They change four times a year, so the current rates have to be checked at https://www.gov.uk/gov