Tax Newsletter | February 2020

UK Budget

The new Chancellor Rishi Sunak has confirmed that the Budget will go ahead on 11 March 2020. Although there haven’t been many specific details in the Government’s manifesto, they have been hinting at radical changes. So, what might these be, and should you be looking to do any tax planning before the budget?

National Insurance

It is expected that the threshold for national insurance will be raised in the Budget giving a tax saving to many.

Pensions

Mr Javid proposed a restriction to the current pension relief rules for those earning more than £50,000. While Mr Sunak may not include this in his Budget, if you are earning over £50,000 and are considering a pension contribution before the tax year-end on 5 April, it may be wise to go ahead before 11 March.

Capital gains tax

There has been talk that there would be changes to Entrepreneur’s relief that may even see it completely scrapped. For further analysis please see our article here.

IHT 

There has been huge speculation about changes to the longstanding IHT rules which could see the rate cut from 40% to 10%, however, almost all reliefs could be abolished. If you are considering making any gifts you may wish to complete these before the budget. Further information can be found here, or please contact us at IHT@hlca.co.uk to discuss your options.

Corporation Tax 

During the election, Boris stated that the 2% drop to 17%, which was due to take effect from April 2020, will no longer happen. 


Scottish Budget

The Scottish budget was announced this month by Kate Forbes following the resignation of Derek Mackay. The budget saw little change to the income tax regime with only inflationary increases to the starter and basic rate bands. In addition, we saw a new 2% rate of LBTT on non-residential leases over £2m. For a detailed look at the proposed spending see our full analysis here


Inheritance Tax Videos

In light of the proposed changes to the Inheritance Tax rules the IHT team have been looking at the current rules and what can be done before a possible change. As a part of this, we have produced a series of videos which look at ways of limiting your liability to both Income & Inheritance tax and planning for the future.


Get in touch

To discuss any of the issues highlighted within this newsletter, or any other matter you require our help with, please contact us by using the form below.

Scottish Budget 2020-21: Key Points

Scotland’s Minister for Public Finance and Digital Economy, Kate Forbes set out tax and spending plans for the coming year at Holyrood yesterday, following the resignation of Finance Secretary, Derek Mackay.

We have summarised the key points below.


Income Tax

  • The budget makes no changes to rates and does not introduce or remove any bands but the thresholds where the two upper rates kick in will not rise with inflation
  • The starter rate of 19% applies to the first £2,085 of income above the personal allowance
  • The Scottish basic rate of 20% will then be paid on the next £10,572 of income
  • An intermediate rate of 21% will then apply up to £43,430, with a higher rate of 41% and a top rate of 46% for those earning more than £150,000

Land and Buildings Transaction Tax (LBTT)

  • Land and Buildings Transaction Tax (LBTT) for residential property will be unchanged
  • There will be a new 2% band for non‑residential leases, applying to transactions where the net present value (NPV) of rental income over the period of the lease is above £2m

NHS and Social Care

  • Investment in health and care services will increase by more than £1bn
  • Frontline services funding for NHS boards will increase by £333m, with a further £121m increase for improving patient outcomes
  • There will be an investment of £117 million in mental health for all ages and stages of life
  • Additional support for social care goes up from £120m to £220m
  • The total Scottish health portfolio budget will be just over £15bn for the first time

Environment and Climate Change

  • There will be £1.8bn of investment in low emission infrastructure, including a package of over £500m of investment specifically designed to increase efforts to respond to the global climate emergency;
  • A total of £461.8m will be spent on the environment, climate change and land reform – an increase from £426.6m
  • Marine priorities include to safeguard and monitor marine and fisheries activity in Scotland’s seas, coasts, rivers and ports – with spending increasing to £65.5m

Childcare and Education

  • The budget will invest around £645m in the expansion of early learning and childcare
  • There will be funding to establish the ‘game‑changing’ Scottish Child Payment which, when fully rolled out in 2022, will help an estimated 30,000 children out of poverty
  • There will be an investment of more than £180 million in raising attainment in schools, including £120m delivered to headteachers to spend on closing the attainment gap

Business and Economy

  • The Scottish National Investment Bank to be operational in 2020, supported by the £150m Building Scotland Fund and a further £220m indirect investment in 2020-21
  • Research and development spending will continue to increase towards the 2025 target of £1.7bn, doubling spending over a 10-year period

Communities and Local Government

  • The Affordable Housing Supply Programme spending will increase to £843m
  • Spending on measures to reduce fuel poverty and improve energy efficiency will increase from £119.6m to £137.1m
  • The Scottish Child Payment which will be introduced paying £10 per week, per child every four weeks to eligible families with children under six

Transport, Infrastructure and Connectivity

  • Spending on rail services will go up from £989m to £1,259.1m
  • Investment in concessionary fares and bus services will be increased by £16m, taking the total investment in 2020‑21 to nearly £290m
  • Motorways and trunk road spending will fall from £833.1m to £748.9m
  • There will be an increased investment of £5.5 million in active travel

Justice

  • There will be an increase in the police budget from £1,180.1m to £1,222.3m
  • Spending on the fire service will increase from £327.2m to £333.3m
  • There will also be £6.5m of additional investment in support for community justice, to reduce re-offending

Please note that these proposals are due before Parliament in March 2020 for a vote. If an agreement cannot be reached these proposals may change.

If you have any queries, please speak with your MHA Henderson Loggie contact or email info@hlca.co.uk


Get in touch

Tax Newsletter | December 2019

Merry Christmas from our tax team


Here are some important areas of tax for you to consider and some of the changes that will be coming in 2020…



Scottish Income Tax

In 2018/19 the rates of tax differed in Scotland for the first time since The Scottish Rate of Income Tax (SRIT) came into force from 6 April 2016.  While the tax bands were already different from those for the rest of the UK, 2018/19 was the first year in which the rates were altered.  This means those on the lowest incomes pay slightly less in Scotland while most on higher incomes pay more in Scotland. 


What income does the SRIT affect?

The SRIT only affects non-savings income which includes employment, pensions, self-employment and property income.  All savings and investment income remain taxable at the rates and tax bands set by the UK Government and is expected to remain so for the foreseeable future.


2019/20

In 2019/20 the rates in Scotland are:

Starter rate 19%                                                           £0 – £2049

Basic rate 20%                                                             £2,049 – £12,433

Intermediate rate 21%                                                £12,433 – £30,930

Higher rate 41%                                                           £30,930 – £150,000

Additional rate 46%                                                    £150,000 +


The personal allowance along with the other allowance such as savings and dividends are set by the UK Government and apply to Scottish taxpayers on the same basis as all UK taxpayers. 


2020/21

Due to the December 2019 election and the announcement from Scottish Finance minister Derek Mackay that he will only announce the Scottish budget after the UK budget.  The UK budget is due in the first hundred days from 13 December so could be as late at March 2020 which means for the Scottish budget to be later, the Scottish parliament will then have to pass a budget before the start of the new tax year on 6 April 2020.


How to define a Scottish taxpayer?

If you live full time in Scotland you will be a Scottish taxpayer.  If you split your time between Scotland and elsewhere in the UK you need to look closely at the definition of a Scottish taxpayer.  Contrary to speculation, this is not based on the number of days in Scotland.  It is based on a number of factors in which the number of days can play a part.  The main deciding factor is where your home is.   The home or main residence is determined by where your family is based, where your main ties are such as your doctor, dentist and any other indicators that show a property is your home.  This catches those living in Scotland and working in London.


Tax planning

Where individuals have the ability to choose how they take income, such as those with their own company who can choose between salaries and dividends, there is careful planning that can be done. If an individual has more than one home throughout the UK it is important to consider the position personally to ensure you are taxed on the correct rates. Gift aid & pension contributions still receive relief based on the UK rates at 20%.


What should you do next?

If after reading this you think you may be a Scottish taxpayer or you are a Scottish taxpayer and would like to know more about how this affects you personally, please get in touch with Barbara McQuillan (bam@hlca.co.uk) or Lucy Crow (luc@hlca.co.uk).



Conservative Government Corporation Tax Consequences


The Conservative party winning the election by the largest margin since the 1980s, clarifies the United Kingdom’s corporation tax plans going forward.


Rate of Corporation Tax

The party’s U-turn will see the rate of corporation tax maintained at 19%, instead of the previously indicated decrease to 17%. The party states that this will give the Government an extra c£6bn a year more revenue than it would have with the reduced 17% rate.


Research and Development (R&D) tax credit

The Conservative party have stated that they will increase the R&D tax credit rate from 12% to 13%. This is a relief available to large companies. The definition of a large company depends on three criteria: headcount, turnover and gross assets. If your company employs 500 staff or more and have either turnover of more than €100m or €86m in gross assets them you will fall into the scheme.



Making Tax Digital


Making Tax Digital is already in place for VAT but not yet for income tax.  It was scheduled to come in from April 2020 but is now pushed back to 2021 at the earliest.  While it has been pushed back it is still expected to be implemented in the future.  We have been helping our clients navigate the new digital VAT service and we are currently working with software providers and updating our website to ensure we and our clients are ready when Making Tax Digital arrives for income tax.



Get in touch


To discuss any of the issues highlighted within this newsletter, or any other matter you require our help with, please contact us by using the form below

Alan Davis

Alan is Chairman of Henderson Loggie, he is also Head of Tax for the Firm and leads our award winning VAT team. He covers all four offices providing specialist advice on technical VAT compliance and advisory, training and development.

Having spent 16 years with HM Revenue & Customs carrying out VAT assurance visits for a wide range of businesses – from small retailers to local authorities, Alan has gained considerable experience of HM Revenue & Customs inspections. He can help with planning opportunities for VAT efficiency, and can advise our clients on retrospective reclaim opportunities, securing significant VAT repayments.

Alan can also advise on other indirect taxes e.g. landfill tax, aggregates levy, climate change levy, and also offers in-house technical updates to the legal profession.

In addition to his tax specialism, Alan leads our Education Sector Group, ensuring that that team meets all the needs of the sector – from audit, to advisory and across all the services the firm provides.

Barbara McQuillan

Barbara has worked in taxation and specialised in the owner-managed business sector for over 30 years. During that time she has dealt with a wide range of clients in a variety of sectors ranging from the initial establishment of new businesses, through the growth years and then to retirement or sale. Throughout the life cycle of any business, a great variety of tax challenges arise and Barbara has provided pro-active and practical tax advice at every stage.

Barbara is a member of the firm’s Life Sciences Sector Group and with the team provide a wide range of skills and experience to service an important and substantial sector in the Scottish economy. Barbara is involved in running Corporate and Tax Clinics for one of our major Universities, assisting early-stage companies.

Barbara was for a number of years a Director of MHA Henderson Loggie Financial Planning.

Lucy Crow

Lucy is Chartered Tax Advisor qualified and has worked in tax for over 12 years specialising in personal tax.  She works with a wide range of personal tax clients from small sole traders to high net worth individuals and partnerships. She advises clients on all aspects of their personal tax affairs from the preparations of their tax returns to advice on tax planning and capital gains tax.

Lucy is also an affiliate member of STEP (Society of Trust and Estate Practitioners) and works closely with clients and their families on Inheritance tax planning. This ranges from a simple review to look at the potential inheritance tax through to tax planning and retirement planning as well as Trusts and Estate planning and administration.

She works with many clients in the Agricultural and Rural sector ranging from small farms to large estates. In this area Lucy has experience with all taxation issues that can arise from the day to day income tax on farms and estates to the inheritance tax and succession planning

Avril Craig

Avril Craig is manager of the Payroll Department in Dundee, covering payroll and automatic enrolment processes for our payroll bureau clients, and payroll support for clients who handle their own payroll. She oversees the timely delivery of weekly, fortnightly and monthly payroll and automatic enrolment pension processing, RTI submissions and net salary payments for a large variety of clients ranging from two employees to several hundred.

Having spent the vast majority of her career working in accountancy practice, she has specialised in payroll for the last twelve years, and in more recent times, automatic enrolment pensions.

Avril has experience in a large variety of industries and particular enjoys supporting employers in complying with the requirements of HMRC and The Pension Regulator.