A number of the points announced in the Chancellor’s budget 2013 have now come into effect and will influence tax treatments for 2013-14. Below is a summary of some of the tax changes which may apply to you and your Limited Company.
Employer NIC allowance
Beginning in April 2014 all businesses, including charities, will be eligible for a tax deduction of £2,000 from their employer NIC payments for the year. This new allowance can be claimed by employers as a part of their usual payroll procedures using the real time information (RTI) process. This allowance was brought in primarily with the intention of encouraging smaller businesses to take on more staff. It is not linked to the specific number of employees though, so will also have some impact on the wider business community. This is a welcome change, of course, though it’s too early to say what impact this will have for Limited Company contactors. However, it’s possible that it may mean that more contractors take on an employee – perhaps just part-time – to support them in running their businesses.
For some people their income allowance will remain the same, as the changes announced do not apply to those born on or before 5 April 1948. This marks the beginning of the phasing out of age related allowances.
For those born after 5 April 1948 the personal tax allowance will increase to £9,400 for 2013/14. A further increase will come into effect in 2014/15 which will raise the allowance to £10,000.
For higher rate tax payers, from 6 April 2013 the additional rate of income tax will be reduced from 50% to 45% and the additional rate for dividends will be reduced from 42.5% to 37.5%.
Changes to definition of tax residence
From 6 April 2013 the definition of ‘home’ for tax purposes has changed. From this date a Statutory UK Residence Test came into effect. The new test still includes the original ‘183 days in the UK’ rule but now also considers other factors to determine ‘home’ and residency for tax purposes. These additional considerations are more open to interpretation and include elements such as owning property or having business interests in the UK. So far there has been a lukewarm response to the new legislation as the exact meaning of terminology, in many instances, is not clearly defined. This makes it more likely that these points will be clarified over time through cases being taken to court.
Benefit in kind allowance
From April 2014 the tax free allowance for company employee benefits will increase to £10,000. This applies to items including employee season ticket loans where no interest – or lower than ‘official rate’ interest – is paid by the employee. Once again this is a welcome move which will give Limited Company contractors a bit more room to manoeuvre regarding receiving benefits through their own companies.
Contact your Intouch personal accountant for expert advice if you are un-clear on how any of these latest changes may affect you and your business.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.