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Reading Time | < 1 min 25 Feb 2016

Investors expect dividend cuts

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56% of personal investors are concerned that businesses may cut their dividends, according to research by The Share Centre (SC).

2,000 investors responded to the research which was undertaken shortly before a number of FTSE 100 companies announced that they are planning to cut their dividends income by as much as 75%.

SC found that 70% of investors are looking for income from their savings, either as the principal goal (15%) or in a balanced portfolio alongside growth (55%).

Investors nearing retirement and looking to collect income from their savings have been effected by low interest rates. Cash savings have also delivered little income, leading to investors to use stock markets as an alternative, and riskier, source of revenue.

Richard Stone, chief executive of SC, said:

“As investors turn their attention to ISAs and making the best use of their ISA allowances, with little prospect of returns on cash increasing and with dividends coming under pressure, those seeking income are left with an uncomfortable choice. 

“The danger is that investors, in their quest for income, are tempted by the returns offered by riskier activities such as crowdfunding or peer-to-peer lending.”

Dividend tax changes

For investors, the 10% tax credit will be replaced with a new dividend tax allowance of £5,000 from April 2016. The annual allowance will not reduce total income for tax purposes and will only apply to dividend income.

Income exceeding the annual allowance will be taxed at the following rates:

basic rate – 7.5%

higher rate – 32.5%

additional rate – 38.1%

Talk to us today to discuss your dividend income.

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Reading Time | 2 mins 24 Feb 2016

Learnings From Leicester City FC’s Success Over The Last 12 Months?

Reading Time • 2 minsBefore the Barclays Premiership battle even started in 2015, most people had already written off Leicester City. By the middle of September however, things were looking up for the Foxes – though of course, it was too early at that stage to make any predictions.
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Reading Time | < 1 min 24 Feb 2016

Retired household income remains steady

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Retired household income was largely unaffected by the economic downturn, according to the Office for National Statistics (ONS).

However, state pension income activity has changed over the last 16 years with retired households now receiving their retirement income from private pensions and annuities

The ONS found that state pension was the largest source of income for retired households until 1999/2000. The proportion of retirement income coming from cash benefits including the state pension decreased from 65% in 1977 to 47% in 2015. Conversely, the proportion coming from private pensions and annuities increased from 45% to 80% between 1977 and 2014/15.

Between 2007/08 and 2014/15, the median income of retired households rose by £1,500 (7.7%) while in contrast, non-retired households income remained at £900 (3.1%) below its level in 2007/08.

Since the economic downturn in 2007/08, incomes of retired households increased in comparison to non-retired households. 

Median income for retired households rose to £21,000 in 2014/15, £1,500 more than in 2007/08. In contrast, income for non-retired households was £2,600 lower in 2012/13 than in 2007/08.

Since 2012/13, the value of income for non-retired households has risen to £28,300, but remains £900 below the economic downturn levels (£29,200).

Talk to us today to discuss your retirement income.

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Reading Time | < 1 min 23 Feb 2016

Stamp duty tax changes concern for joint buyers

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The 3% higher rate stamp duty land tax (SDLT) on second homes and buy-to-lets coming into effect 1 April 2016, could adversely impact parents buying jointly with their children to help them into the housing market.

The Chartered Institute of Taxation (CIOT) commented ahead of the changes that joint buyers who are not replacing their main property will face the 3% charge on the entire price. 

CIOT focused on the higher SDLT rates on additional residential properties sold for more than £40,000. 

Key points were:

  • the increased complexity of the higher rates will fall on landlords who may not have tax expertise
  • imposing higher rates on joint purchases that have a clear social value could be inequitable
  • the valuation of a lease on property interest worth less than £40,000 may present difficulties. 

CIOT have suggested a carve out from the new rates for joint buyers who are parents buying a home for their children.

Brian Slater, chair of the CIOT’s property taxes sub-committee, said: 

“Life is complex and there are many situations where parents want to support their adult children in buying a home. 

“Taking even a small interest (while owning another property) means that the extra three per cent is payable on the whole of the purchase price. This will substantially increase the SDLT bill, but there are cases - like supported living – where it is absolutely right for parents to have an equity interest.”

Contact us today to find out about the upcoming stamp duty changes.

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Reading Time | < 1 min 22 Feb 2016

Businesses respond to EU reform deal

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Business leaders have commented on the Prime Minister’s reform deal on the future of the UK’s relationship with the European Union (EU).

The referendum on Britain’s membership of the EU takes place on 23 June 2016. Key points from the reform deal include:

  • protecting British economic interests and currency
  • protecting businesses from discrimination outside the EU
  • making Europe more competitive for creating jobs and improving financial security
  • business access to trading and finance through the free-trade single market
  • reducing costs of EU red tape for small businesses.

Reaction to the deal 

Carolyn Fairbairn, director general of the Confederation of British Industry, said:

"These reforms protect the UK’s place and influence inside this important market and a renewed focus on EU competitiveness will help British firms succeed in creating jobs and economic growth at home in the years ahead. Firms will particularly welcome a commitment to reduce unnecessary regulation.”

However British Chambers of Commerce director John Longworth questioned the certainty of the deal:

"There is no certainty at this stage whether the deal’s outcomes are legally enforceable and irreversible. What’s more, the deal falls well short of the business expectations we set out nearly a year ago”

Mike Cherry, policy director for the Federation of Small Businesses, said:

“Small firms seek measures to boost cross-border trade and economic growth - the completion of the single market, simplification of VAT, a smarter approach to regulation and protection of the opt-out under the Working Time Directive.”

Talk to us today to discuss about the changes affecting your business.

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Reading Time | < 1 min 19 Feb 2016

Personal savings allowance difficult to understand

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Taxpayers will have difficulty understanding the tax-free savings allowance which is being introduced from 6 April 2016, according to the Low Incomes Tax Reform Group (LITRG).

Basic rate taxpayers will be able to earn up to £1,000 tax-free from savings income or interest, while higher rate taxpayers can earn up to £500.

The group believes that changes will simplify the tax position for people with modest savings income, but how it works with other rates and allowances is complex.

In particular, the changes may prove difficult for those with fluctuating incomes or individuals who fall within the higher rate band for the first time.

Taxpayers may be unaware of the need to check the level of their savings income and understanding the correct tax rate that applies to them. 

People will also need to keep HMRC up to date with changes to the value of their savings or risk financial charges.

Anthony Thomas, LITRG chairman, said:

“The highly complex operation of the savings allowance must be addressed to improve its clarity and avoid people feeling that they face arbitrary and unjust tax bills. A savings allowance that works similarly to the dividend allowance would potentially be much simpler to understand and use and seriously should be considered.

“People should keep an eye on their level of savings income to ensure they do not stray into a different taxable band. They should also continually check data received from HMRC.”

Contact us today to find out more about the personal savings allowance.

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Reading Time | < 1 min 18 Feb 2016

Record business rates collection for councils

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Local councils are expected to collect a record £23.5 billion in business rates by 2017.

The government plans to devolve control over business rates to local areas, allowing councils to retain all the income they collect in rates and gain new powers to vary rates under certain conditions.

The British Chambers of Commerce (BCC) is calling for the government to introduce a reformed business rating system with the following features:

  • annual revaluation regimes to stop businesses being hit by an increase every 5 years
  • removal of plant, machinery and micro-generation 
  • removal of the annual uplift multiplier 
  • a business taxation review with forward plans to reducing share of business rates income as a proportion of overall business taxation.

Dr Adam Marshall, executive director of policy at BCC, said:

“The recent focus on changing ‘who controls what’ is the wrong approach when the government has still failed to address deep-seated problems with the current model.

“Business rates hit companies hard before they turn over a single pound, and discourage investment in premises improvements, plant and machinery at a time when we should be encouraging investment in supporting future growth.”

Contact us today to find out more about business rates.

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Reading Time | < 1 min 17 Feb 2016

Small Business, Enterprise and Employment Act timetable released

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The Small Business, Enterprise and Employment Act, which received Royal Assent in March 2015, will be implemented over the course of 2016.

The new measures will have an impact on companies and LLPs coming into force from 6 April 2016. The government is keen to stress that all companies operating in the UK will be affected in some way.

The measures will change legal requirements including filing with Companies House, effecting company systems and processes. The act will provide valuable information for businesses to grow and trade within their respective sectors. The changes that will have the highest impact will be introduced last.

Among the upcoming changes included in the act are:

Director disputes

From April 2016, measures will be put in place to provide a simpler mechanism for removing the details of falsely appointed directors from the register. 

People with significant control (PSC)

Companies and LLPs will need to keep a record of people with significant control (PSC) in preparation to file their ‘confirmation statement’ at Companies House from 30 June 2016.

A PSC includes people within a company or LLP who meet the following conditions:

  • owns more than 25% of the company’s shares
  • holds more than 25% of voting rights
  • holds the right to appoint or remove company directors
  • exercise influence or control of the company.

Corporate directors

Prevention on appointing corporate directors will take place with limited exceptions, from October 2016. A company with an existing corporate director will need to take action explaining the conditions for an exception, or give notice to the registrar that they’ve ceased to be a director.

More changes may still happen as secondary legislation continues to pass through Parliament.

Contact us today to talk about how the act will impact your business.

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Reading Time | < 1 min 16 Feb 2016

Pension ISA tax relief could lower savings

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The potential pension ISA tax relief currently being considered by the government could lower savings by a sixth, according to research by the Association of British Insurers (ABI).

Based on calculations by the National Institute of Economic and Social Research, ABI found that along with 30% added contributions from the government, a move to a pension ISA over a 20 year period could:

  • reduce average annual contributions by £383
  • reduce average wages by £1,284 per year
  • increase average annual mortgage bills by £466
  • cut the size of the economy by 6%

In relation to the government’s 30% contribution and pension tax revenue, a move to a pension ISA could create a fiscal deficit of over £5bn a year for future generations.

Yvonne Braun, Director of Long Term Savings at the ABI said:

"The pension ISA would hit today’s savers and could create a fiscal time bomb for future generations. Many savers would be worse off and it would also damage the economy more widely because of its impact on saving and investment. 

“It’s superficially attractive because of the savings it can deliver in the short term - but as the IFS have said, this is no more than a ‘temporary windfall’.

According to the Institute for Fiscal Studies (IFS) pensions are still the most tax-efficient form of saving money.

Favourable schemes for individuals to saving money are private pensions and workplace pension schemes such as auto-enrolment.

Tax treatments such as NICs relief as well as a 25% tax-free lump sum have proved beneficial for individuals – as an employee receives as much pension income as if they had saved in an ISA with only 70% of the cost in upfront income.

Talk to us today to discuss about your pension plan.

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