The Department for Business, Innovation and Skills (BIS) is advising employers to begin preparing for the introduction of the National Living Wage (NLW) which comes into effect from 1 April 2016. The rate is £7.20 an hour and applies to employees aged 25 and over.

Businesses are being advised to prepare early for the changes on 1 April 2016, when the new wage will become law, and make sure they follow these 4 simple steps:

• know the correct rate of pay – £7.20 per hour for staff aged 25 and over
• find out which staff are eligible for the new rate
• update the company payroll in time for 1 April 2016
• communicate the changes to staff as soon as possible.

Business Minister Nick Boles said:

‘The government’s new National Living Wage will provide a direct boost to over two-and-a-half million workers in the UK – rewarding and providing security for working people.’

‘I am urging businesses to get ready now to pay the new £7.20 rate from 1 April 2016. With just under 4 months left, there are some easy steps employers can take to make sure they are ready.’

‘By taking these measures, companies will be able to properly reward their staff and avoid falling foul of the law when it takes effect.’

Please contact us if you would like help with payroll matters.

Internet link: GOV.UK news

Income tax

The Scottish Government set out tax and financial plans for the future in their draft Budget on 16 December 2015. The Deputy First Minister and Cabinet Secretary for Finance, Constitution and Economy, John Swinney, announced that the Scottish Rate of Income Tax (SRIT) would be set at 10p in the pound for 2016/17. The effect of this is to ensure that Scottish Taxpayers will pay tax at the same rates as their counterparts in the rest of the UK, at 20%, 40% and 45%.

Income tax bands for the basic and higher rates are the same in Scotland as in the rest of the UK.

The Scotland Act 2012 granted the Scottish Parliament landmark new powers to set a separate annual rate of income tax for Scottish taxpayers. The Scottish rate of income tax (SRIT) comes into effect in April 2016 and represents a fundamental change to the UK tax system.

Land and Buildings Transaction Tax

As well as paving the way for the changes to income tax outlined above, the Scotland Act 2012 also resulted in the introduction of Land and Buildings Transaction Tax (LBTT) in Scotland from 1 April 2015. This replaces Stamp Duty Land Tax which applies in the rest of the UK. The draft Budget proposes changes to LBTT with the introduction of a LBTT supplement on purchases of additional residential properties, such as buy-to-let properties and second homes. This supplement will be 3 percentage points of the total price of the property for all relevant transactions above £40,000 and will be levied in addition to the current LBTT rates.

The Scotland Bill 2015 proposes the further devolution of additional tax and spending powers to the Scottish Parliament. The Scotland Bill 2015 is still subject to consideration and amendment by the UK Parliament.

Internet link: GOV.UK news SRIT

On Wednesday 23 November the Chancellor Philip Hammond presented his first, and last, Autumn Statement along with the Spending Review.

His speech and the supporting documentation set out both tax and economic measures. Some of the pertinent tax and employee welfare measures announced were:

• the government reaffirming the objectives to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament
• a reduction of the Money Purchase Annual Allowance for pensions to £4,000
• a review of ways to build on Research and Development tax relief
• tax and National Insurance advantages of salary sacrifice schemes to be removed
• anti-avoidance measures for the VAT Flat Rate Scheme including the introduction of a higher 16.5% rate for some businesses
• autumn Budgets commencing in autumn 2017
• National Living Wage to rise from £7.20 an hour to £7.50 from April 2017
• Universal Credit taper rate to be cut from 65% to 63% from April 2017.

Read our Autumn Statement Review.

Internet link: GOV.UK autumn statement documents

The Pensions Regulator is reminding employers and their advisers, that they need to comply with their auto enrolment duties or face penalties:

‘Being ill or short-staffed isn’t a good enough excuse for your clients failing to comply with their legal duties. Our latest compliance and enforcement report shows that the number of small and micro employers receiving fines has risen after tribunal judges rejected what the employers claimed were ‘reasonable excuses.

As with any other business activity, if an employer is too unwell to complete their AE duties, they’ll need to find someone else who can. Automatic enrolment is ultimately the employer’s legal responsibility, so whether it’s due to pension provider failings or illness, a judge won’t consider an excuse to be ‘reasonable’, if there’s something they or someone else could have done to remedy the situation in time.’

TPR’s latest ‘Compliance and enforcement Quarterly bulletin’ reports that instances of penalties have risen but so have the amount of employers who are ‘staging’ for auto enrolment.

They have also sent over 6,000 letters to employers reminding them that their deadline for compliance is 31 December 2016.

Please contact us if you would like any help with your duties.

Internet link: TPR bulletin

Over the summer HMRC published six consultation documents on Making Tax Digital. The six consultations set out detailed plans on how HMRC propose to fundamentally change the method by which taxpayers, particularly the self-employed and landlords, send information to HMRC. Two key changes proposed are:

• From April 2018, self-employed taxpayers and landlords will be required to keep their business records digitally and submit information to HMRC on a quarterly basis and submit an End of Year declaration within nine months of the end of an accounting period (accounting periods are typically 12 months long).
• HMRC will make better use of the information which they currently receive from third parties and will also require more up to date information from some third parties, such as details of bank interest. Employees and employers will see the updating of PAYE codes more regularly as HMRC use the data received from the third parties.

HMRC received over 3,000 responses to their consultations which are now closed.

The government has announced it will publish its response to the consultations in January 2017 together with provisions to implement the changes.

Meanwhile HMRC’s Tax Assurance Commissioner Jim Harra has written to the Financial Times stating HMRC’s point of view that ‘Digital tax should not be a burden to businesses’ in a move to allay the concerns that changes will place an additional burden on businesses and their agents.

We will keep you informed of developments.

Internet links: GOV.UK MTD GOV.UK Speech