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Summer Budget must provide stability and certainty, says CBI

Posted by Wellden User

The chancellor should use the Summer Budget on Wednesday 8th July to ensure that businesses of all sizes have the stability they need to drive growth, the Confederation of British Industry (CBI) has said.

The director general of the CBI, John Cridland, used a meeting with the chancellor to put forward a number of potential measures for inclusion in the Budget. The proposed measures are focused on boosting investing, sealing in deficit progress and creating jobs.

The CBI is calling for:

  • a plan to boost productivity through increasing firms access to long-term capital
  • the introduction of a business tax roadmap to provide clarity on the range of current business taxes
  • details on the fiscal rules regarding future deficit reduction
  • an increase in the Annual Investment Allowance to £250,000 from 2016.

John Cridland said:

“Firms of all sizes, especially ambitious, disruptive and growing ones, need to see the government build on welcome steps in the last Parliament to support investment.

“It should now act now to promote stability and certainty in tax policy through a commitment to introduce a roadmap which covers all business taxes.”

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HMRC relaxes PAYE late filing penalties

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HMRC will begin relaxing automatic late filing penalties for people who send PAYE information late, officials have indicated.

The revenue said it would take a ‘proportionate approach’ instead of issuing automatic penalties in the event that an employer reports PAYE information late.

Investigations will now be concentrated on ‘the more serious defaults on a risk-assessed basis’. The move will allow HMRC to focus on serious cases of non-compliance, and to invest resources in educating employers on compliance issues.

The decision reflects the conclusions of a policy document published by HMRC in February 2015. The report argues that small automated penalties are costly and resource intensive for the revenue to pursue, and detract from its ability to pursue serious compliance failures.

The news comes after a leaked HMRC memo revealed that the revenue would no longer be investigating each individual late filing of self-assessment returns. Officials will now waive the £100 late filing penalty if people provided a ‘reasonable excuse’ on appeal.

Colin Ben-Nathan, chairman of the Chartered Institute of Taxation’s Employment Taxes Sub-Committee, welcomed the announcement:

“The requirement on employers to send PAYE information in ‘real time’ has proved difficult for some employers to comply with, especially the smallest and those whose employees have unpredictable working hours. It has imposed new and sometimes onerous obligations on employers.

“HMRC are right to have taken a pragmatic approach so far to the levying of penalties, initially not imposing them at all for smaller firms and now promising to concentrate on the most serious defaults.”

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Business rates review must create ‘fair’ system, says CB

Posted by Wellden User

The government’s ongoing business rate review must aim to create a ‘simple, fair and competitive system’, the Confederation of British Industry (CBI) has said.

The business organisation argued that the current system limits investment and impedes competition. It said a new system should be refocused onto promoting investment-led growth.

The CBI is calling for:

  • More frequent property valuations
    This will create a fairer system capable of reacting quickly to the changing economic environment. The CBI suggests introducing a 3-year evaluation period.
  • Raising rates in line with the consumer price index (CPI) instead of the retail price index
    This will ensure that business rates do not rise faster than the official CPI inflation rate. According to the CBI, the change would save ratepayers £1.5bn.
  • Exempting properties with a rateable value under £12,000 from paying business rates
    This will remove the cost of business rates for many small businesses. The CBI also argues that this would also enable efficiency savings which could be reinvested into improving the system.

Katja Hall, deputy director general of the CBI, said:

“The current business rates system harms businesses by relying on a decades-old model that no longer reflects economic conditions. That’s made life tough for retailers in particular.

“These reforms are long overdue so it’s good that the government is following through on its commitment to look closely at how it can help alleviate the most onerous aspects of business rates.”

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Retired households face higher tax bills

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Retired households face an average annual tax bill of £6,500, research by Prudential has found.

Analysis of data from the Office for National Statistics reveals that pensioners pay thousands in direct and indirect taxes each year.

The figures show that the average retired household income rose to £21,800 in the 2012/13 tax year. However, the amount of tax paid by retired households also increased and pensioners are now paying over 30% of their income to the taxman.

In the 2012/13 tax year:

  • the average retired household paid £3,900 in indirect taxes and £2,600 in direct taxes
  • indirect taxes (including VAT and duties) accounted for 60.2% of the average retired household’s tax bill
  • direct taxes (including income tax and council tax) made up 39.8% of the average tax bill
  • VAT was the biggest tax item, accounting for 8.2% of the average tax bill
  • income tax accounted for 7.4% of the average tax bill.

The Treasury estimates that the newly introduced pension freedoms could lead to an increase in tax revenue of £320 million during the 2015-16 tax year and £1.22 billion in 2018-19. The research highlights this as further proof that people approaching retirement need to factor tax into their plans.

Stan Russell, retirement income expert at Prudential, said:

“Retired households make a major contribution to the Exchequer every year whether it is in direct or indirect taxes and clearly it is not possible to avoid all taxes simply because you’ve stopped working. It’s a stark reminder that not all the income you receive in retirement will be yours to spend as you like.

“Irrespective of the new pension rules and their tax implications, the fundamental principles remain true – the best way to secure enough income for a comfortable retirement is to save as much as possible as early as possible in your working life.”

We can help you minimise your tax liability in retirement. Contact us today

Employees value inclusive workplaces

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More than half of employees want their workplace to have an inclusive ‘family feel’, a survey by the Chartered Institute of Personnel and Development (CIPD) has found.

The latest Employee Outlook survey reveals that 55% of the 2,226 respondents prefer a workplace ‘with a family feel, held together by loyalty and tradition’, regardless of the business’s size.

Almost half of workers described their current workplace as a ‘formalised and structured place of work, where procedures govern what people do and hold people together’.

The survey also found:

  • 26% of respondents describe their current workplace as having a ‘family feel’
  • employee engagement is at a 3-year high, having risen from 35% in 2013 to 39% in 2015.

Jessica Cooper, research adviser at the CIPD, called the survey results a “defining moment” for employers:

“Employees want to work somewhere with a ‘family feel’, where they can really feel like they are part of something. Culture is one of the few things that can define a business and if organisations can get it right, it will give them a competitive edge and a strong foundation for business growth.

“Culture can’t change overnight, but organisations can start to think about ways in which they can make changes to better suit their talent’s preferences.”

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Company sick pay not available to third of workers

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More than a third of UK workers are not entitled to company sick pay, according to a survey by Liverpool Victoria.

The research shows that 34% workers are without an employer’s sickness cover due to a rise in the number of self-employed people and employees on zero-hours contracts.

Of all UK workers:

  • 9% are self-employed
  • 25% work for a company but would only receive statutory sick pay (SSP) of £88.45 a week if they became ill.

Of the workers receiving SSP, 15% are on zero-hours contracts and 10% have not worked for the company long enough to qualify for company sick pay.

The growing number of people working for small and medium-sized businesses (which provide less generous sick pay packages) has meant that many of those entitled to company sick pay do not get their full salary for an extended period.

Myles Rix, managing director of protection at LV=, said:

“The UK economy is changing, with zero-hours contracts, freelancing, contract work, and self-employment all becoming more common. As a result, fewer workers now qualify for company sick pay, meaning they could struggle to meet their financial commitments if suddenly unable to earn a salary due to accident or illness.

“A contingency plan such as income protection offers workers peace of mind so they can focus on recovering without worrying about whether they can pay their bills.”

We can help find the right income protection policy for you. Contact us to find out more.

Life insurance payouts fail to match mortgage costs

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Under-insurance is causing a ‘protection gap’ for UK families planning to use life insurance payouts to pay down their mortgage.

The ‘protection gap’ refers to life insurance payouts that fail to match the costs the policyholder was intending the cover to meet.

Figures from the Association of British Insurers (ABI), the Bank of England (BoE) and the British Bankers’ Association (BBA) show that the gap between average mortgage costs and average life insurance payouts is growing.

BoE figures show that the average outstanding mortgage costs £83,000 while ABI stats reveal the average life insurance payout is £51,500. This is a shortfall of £31,500 and would only cover 62% of the costs of the average mortgage.

The gap between life insurance cover and new mortgages is even greater. BBA figures show that the average new mortgage is £167,000. A payout of £51,500 would only cover 31% of the costs of a new mortgage and is a shortfall of £115,500.

Insurance provider SunLife conducted a survey of their customers and found that 29% buy life insurance cover when they take out a mortgage.

Dean Lamble, managing director at SunLife, said:

“People are treating life insurance like a type of mortgage protection. Of course, if for example the breadwinner in a family was to die, being able to pay off the mortgage would be a big help. But, while that would take a significant burden off the family, it wouldn’t leave any money to pay the ongoing household bills, provide an income or mean the everyday things could carry on.”

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Families could miss out on IHT relief

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Up to 3,000 families may miss out on the government’s proposed changes to inheritance tax (IHT), according to analysis by NFU Mutual.

The Conservatives outlined their plans to raise the IHT threshold to £1 million in their election manifesto. A ‘residence allowance’ of £175,000 would enable married couples to transfer a property of up to £1 million to their children without having to pay IHT.

The £175,000 residence allowance will enable homeowners to extend their current £325,000 IHT threshold to £500,000. Married couples can combine these to give an overall IHT threshold of £1 million.

However, NFU Mutual’s research has revealed that thousands of families could miss out on the tax break because the family home has already been sold.

Data from HMRC shows that thousands of ineligible estates without property must pay IHT bills each year.

The Chancellor is widely expected to officially announce the plans during his Summer Budget in July.

Sean McCann, chartered financial planner at NFU Mutual, said the plans will “stick in the craw” of those who have already sold their houses:

“These proposals are acknowledgement from the government that the existing inheritance tax threshold is far too low. However, it would be much fairer to apply an overall increase rather than tinker with the rules around who can benefit and who can’t.

“Under the new proposals, we could soon start to see more elderly people reluctantly house-sitting for the next generation or even upsizing to make the most of this potential tax break. The wider effects on the property market could be significant.”

Contact us today to discuss your IHT planning.

Small employers begin auto-enrolment process

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Small and micro businesses employing fewer than 30 employees have begun auto-enrolling their staff onto workplace pension schemes.

The process will last until April 2017 and the exact timing of business’ staging dates will depend on the last 2 characters of their PAYE reference numbers.

Firms employing between 40 and 49 workers will stage in August 2015 while those with 30-39 members of staff will start complying in October 2015.

The auto-enrolment process has been ongoing from October 2012, with all large and medium-sized firms now having passed their staging dates and enrolled their employees onto a company scheme.

Figures from the Pensions Regulator show that around 769,000 small and micro firms will pass their staging dates by April 2017.

Up to 14,000 businesses with fewer than 30 employees will begin the process from June 2015, according to the Federation of Small Businesses (FSB).

John Allan, national chairman of the FSB, said the process will present a “major challenge” for small businesses:

“Awareness of the impending changes has picked up, but many have still yet to put into place plans to meet their duties.

“Small business owners are not pension experts and a significant number will not have any staff saving into an existing workplace pension scheme. These businesses require a clear and simple process, and readily available impartial advice and support.”

Talk to us today about complying with auto-enrolment.

Employers want auto-enrolment contribution increase

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More than three quarters of employers think that auto-enrolment pension contributions should be increased, according to research by Jelf Employee Benefits.

Employers operating auto-enrolment workplace pension schemes are required by law to pay a minimum of 1% into employees’ pension pots. This is due to rise to 2% from 1 October 2017 and 3% from 1 October 2018.

However, the research reveals that the majority of employers think this should rise further. The survey of 200 HR and finance experts found that 76% want minimum contribution rates to increase. Just 15% thought that no increase was needed.

The research found:

  • 85% of respondents said employers should bear part or all of the contribution increases
  • 14% thought employees should pay for increased contributions
  • 4 in 10 said they would raise contributions ahead of legislated increases to spread the cost over several years.

Steve Herbert, head of benefits strategy at Jelf, said:

“Frankly, we were a little surprised at these results. Many employers are yet to reach their staging date for auto-enrolment, and a significant proportion of those who have already staged are not yet at the full contribution rate. It is therefore somewhat surprising that employers appear so supportive about a further increase to their pension contribution costs already.”

Auto-enrolment minimum contribution schedule

Employer’s staging date

 Employer minimum contribution Total minimum contribution
To 30 September 2017

1%

2%
1 October 2017 to 30 September 2018

2%

5%
1 October 2018 onwards

3%

8%

Contact us today to discuss what the workplace pension reforms mean for you and your business.

Childcare most costly aspect of raising children

Posted by Wellden User

Raising a child costs parents around £35,000 in the first 5 years of its life, research by Aviva has found.

The survey of more than 2,000 parents with children aged between 0-5 shows they spend an average of £7,026 a year on their child.

This works out at £586 a month and a total of £35,000 by the time they reach their fifth birthday.

The study reveals the most costly expenses associated with raising a child:

  • childcare has the biggest impact on parents’ wallets, costing an average £95 a month or £1,140 a year
  • parents spend £62.30 each month or£747.60 every year on equipment
  • clothes cost £58 every month or £696 each year.

The research also shows that many parents are planning for their children’s financial futures:

  • 52% have set up a savings account in their children’s names
  • 37% have opened a Junior ISA or child trust fund
  • 8% have begun saving for a house deposit for their children
  • 8% have started saving into a university fund.

Louise Colley, protection director for Aviva, said:

“As every parent knows having children can be an expensive business, but it’s incredible to see how this stacks up over the years! This is why it’s so important for parents to consider how they might cover the cost of raising a child if they were to unexpectedly lose an income through illness or even worse, bereavement.”

Are you planning to start a family? Contact us today for financial advice.

Directors call for fiscal discipline

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The majority of company directors want the government to press ahead and achieve a budget surplus by the end of the parliament, an Institute of Directors (IoD) member survey has found.

Members of the IoD have listed their top priorities for the new government, which include a reduction of the deficit, increased spending on infrastructure and the lowering of taxes for businesses and individuals.

A majority of 85% support the government’s goal of eliminating the budget deficit by 2020. 12% of respondents want to achieve this entirely through spending cuts while just 1% said tax rises should be the only means of getting the deficit down. A fifth thought an equal mixture of spending and tax rises would be the preferable way of achieving a surplus.

Of the 1,211 IoD members surveyed:

  • more than half opposed a rise in national insurance, income tax and business rates
  • 56% want the government to invest in the country’s broadband infrastructure
  • 55% said there should be more investment in energy generation
  • many want the government to spend more on developing transport infrastructure: railways (50%), roads (44%) and airports (34%)
  • 89% support a crackdown on tax avoidance.

Simon Walker, director general of the IoD, called on the government to stick to its pre-election plans to reduce spending:

“Returning the budget to surplus must be the overriding goal in this parliament, but businesses want the emphasis to be on finding further reductions in spending, not significantly raising taxes.

“If we do not even begin to deal with the pile of debt, the situation will only be more dangerous if we encounter another economic shock.”

Walker also urged the government to implement “much more fundamental [tax] reforms”:

“A hugely complex tax code also remains a barrier to growth for many businesses.

“Businesses want national insurance brought down, business rates reformed and a tax code which encourages investment and entrepreneurialism. This will not be achieved by tinkering at the edges.”

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