Personal tax changes for 2017-18

A number of changes to personal taxation have come into effect with the start of the 2017-18 tax year. These changes include the following:

National Living Wage and the National Minimum Wage rates

The new National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2017. This is the first time that the NMW and NLW rates have been uprated in parallel. The National Living Wage increased by 30p to £7.50. The National Living Wage is the minimum hourly rate that must be paid for those aged 25 or over.
The hourly rate of the NMW increased to £7.05 (a rise of 10p) for adults aged 21-24 year old. The rates for 18-20 year olds increased to £5.60 (a rise of 5p) and the rate for workers above the school leaving age but under 18 increased to £4.05 (a rise of 5p). The NMW rate for apprentices increased by 10p to £3.50.

Personal allowance

The personal allowance increased to £11,500 and the basic rate limit to £33,500. As a result the higher rate threshold increased to £45,000 from April 2017 in England, Wales and Northern Ireland. The Scottish Parliament voted to freeze the higher rate of Income Tax threshold at £43,000 for 2017-18. This means that for the first time some Scottish taxpayers will be paying more Income Tax than those living south of the Border.

Lifetime ISA

The new Lifetime ISA is designed to help those aged between 18 and 40 to save for a new home costing up to £450,000 or for their retirement. The government provides a bonus of 25% on yearly savings of up to £4,000 and these benefits continue until the saver’s 50th birthday. This could mean an extra £1,000 for every £4,000 saved annually from the age of 18 to 50. In total this could see savers who invest the maximum contributions of £128,000 receive a maximum government bonus of £32,000. The government bonus is paid annually at the end of the tax year. The total amount that can be saved in all ISAs in 2017-18 is £20,000.

Inheritance Tax new residence band

The new Inheritance Tax main residence nil-rate band (RNRB) came into effect on 6 April 2017. The RNRB is a transferable allowance for married couples and civil partners (per person) when their main residence is passed down to a direct descendent such as children or grandchildren after their death. The RNRB is on top of the existing £325,000 Inheritance Tax nil-rate band threshold. The RNRB will be phased in, starting at £100,000 this year, increasing to £125,000 in 2018-19, £150,000 in 2019-20 and £175,000 in 2020-21.

Commenting on the changes, Financial Secretary to the Treasury, Jane Ellison said:

‘From April, millions of people will see their take home pay increase because of our action to raise the Personal Allowance and lift the National Living Wage. This is part of our plan to build a stronger, fairer Britain and we want to back people’s ambition to work hard, save and support their families.’

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Case Studies

The Tax Man

Minimise the stress of an investigation and make use of our extensive experience in securing best outcome for our clients

Business Valuation in Distress

Take advantage of our impartial and rigorous due diligence procedures

FD in The Cupboard

Our innovative ideas are here to improve your business performance and secure appropriate and cost effective funding

The Tax Man

The Tax Man

A new client was introduced to us via a recommendation with whom we arranged to meet on a regular basis in order to determine a number of changes that we felt were needed to their business structure. The client was at the time operating as a husband and wife partnership. The business was flourishing and had a number of large contracts with big organisations.

At the start of the process they were still heavily immersed in their day to day operations so we can get a full flavour for their ambitions, aspirations and growth plans. We quickly recognised there were sufficient tax savings which can be achieved by changing the structure from a partnership to a corporate entity. We carried out a business valuation and disposed of the goodwill from the old to the new business. Unfortunately, as often is the case with efficient tax planning, HMRC got involved and disputed our valuation.

An HMRC investigation can be a very stressful time for any client, even for those best prepared. However, our client had minimal input in the HMRC communication as we dealt with this professionally behind the scene. As an added benefit, our client could rest on the security that all work was covered by insurance and therefore all costs and time in dealing with this enquiry were covered by the fee protection policy we had put in place.

The initial approach taken by HMRC was very aggressive and they tried to present an argument that there was no goodwill in the business. We challenged HMRC’s view that the goodwill was worthless. After lengthy correspondence and numerous telephone calls, HMRC agreed 100% with our original valuation, which preserved our original tax saving plan for the client. Tax savings on this case where in the region of £75K at the outset, with ongoing savings of £6,000 per annum. We are pleased to add another happy client to our portfolio.

Business Valuation in Distress

Business Valuation in Distress

Selling a business is never an easy process, but when disputes arise, the need for a reliable third party due diligence process is even greater.

Tearle & Carver have extensive understanding of the requirements for remaining objective when managing a potentially difficult company buyout. In one such case, we were approached by the courts to act as independent accountant for an acrimonious business sale in which one partner was exiting the business and selling shares to the other. Given the circumstances, both sides had totally polar views of what their business was worth.

After arranging an initial meeting with the company, we were thorough in ensuring we completed due diligence, validating the figures in the accounting records, carrying out adjustments where appropriate, and drafting a set of reliable management figures within the framework required by the court.

A draft version of the report detailing our findings and conclusions was submitted to both parties, giving them the opportunity to voice any queries or concerns and ensure all relevant factors had been taken into account.

Through this process, we were able to submit a final report to the courts that was both binding and acceptable to both parties, effectively resolving what could otherwise have been a time consuming and costly process for all sides.

FD in The Cupboard

FD in The Cupboard

For smaller companies, it is often not possible or cost effective to pay for a full-time Financial Director.
Many of our clients therefore make use of Tearle & Carver’s extensive expertise to provide the services of an FD as and when required.

In this case, we were approached by the management team of an organisation looking to acquire the existing business via an MBO (Management buy out). Their business plan had proved ineffective for securing funding, and what they needed was financial expertise from someone with a developed understanding of the company’s internal workings.

Tearle & Carver helped deliver the solution our clients were looking through utilising our bank contacts in order to make the MBO viable, while also building a robust business plan and preparing our client for the rigorous vetting process. To help with cash flow issues, we introduced factoring which led to improved cash flow management.

We advised on the appropriate business valuation and structure, and continued to prepare monthly accounts to track profgress once the management were fully in command of all the information they needed to move their business forward.

In order to best assist these clients through the crucial first year of ownership, we attended board meetings on a regular basis, a service that we continue to provide to date.

With our continually developing understanding of their business, this client is able to remain confident that Tearle & Carver can provide any financial support they may need, now and in the future.