Employment Allowance, Living Wage, Inheritance Tax, PSA and HMRC Campaigns

Sep 21, 2015   //   by Ralph   //   Latest News

As I write this there is a distinctly Autumnal feel in the air. Last month I gave some highlights of the budget and how it affected businesses, whereas this month I intend to focus on those measures that relate to the individual. I will however start with one piece of good news for business.

Employment allowance increased. As from the 6th April 2016 the employment allowance increases from £2,000 to £3,000 per annum. In effect this is extra to help towards the increase to the living wage for those employees who are over 25. How much it will contribute depends of course on the age profile, number, and current pay rates of your workforce.

Minimum wage/Living wage rates. As from the 1st October 2015 the minimum wage rate for those aged 21 and over is £6.70. From 1st April 2016 those over 25 are entitled to £7.20 per hour.

Inheritance tax changes. For those lucky enough to have assets over £325,000 as an individual, there will be an inheritance tax charge of 40% of any value over this amount, subject to certain exemptions and reliefs for business assets and gifts to charity.  As from April 2017 there will be an additional £100,000 available in respect of the main residence of the deceased being left to a direct descendant. This will increase at £25,000 per year to £175,000 in 2020/21 and then increase in line with inflation. This could give a couple as much as £1million as long as their home is worth £350,000.

Personal savings allowance. This is being introduced and all basic rate taxpayers will be able to receive up to £1000 in interest from non-ISA bank and building society accounts tax free. Tax will not be deducted by banks and building societies from the 5th April 2016. This also applies to peer to peer lending. If you are a higher rate taxpayer the allowance is £500 and top rate tax payers (45%) don’t get any allowance. This could also be used to pay interest tax free to you from your company if you have a credit balance on your director’s loan.

Latest HMRC campaign. The taxman has launched a campaign targeted at the beauty industry to ensure compliance with the minimum wage legislation. According to statistics 42% of apprentices in the industry are underpaid. Employers in this sector should check their records and ensure compliance as there can be penalties of up to 100% of the amount of the underpayment. By rectifying the position before HMRC discover it by making up back pay etc. the penalty can be avoided, as well as being added to the list of employers not paying the minimum wage.

IR35 being reviewed – again. In the budget the Chancellor stated that the IR35 legislation for intermediaries was ineffective. HMRC does not want to abolish it but make it easier to comply with the legislation without “disproportionate burdens on business or individuals”. There is no intention to widen the scope of IR35.

The author Ralph Robson FCCA is based at TA Gittins & Company’s Wrexham office and can be contacted on 01978 264846 or via email on ralph.robson@tagittins.co.uk

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