Newsletter – August 2018
In this month’s news we report on Making Tax Digital for VAT and the Bank of England interest rate rise. Meanwhile the Scotland Parliament introduces a tax relief for first-time buyers and the UK government has published the next round of draft tax legislation. With reminders that the Marriage Allowance and Tax-Free Childcare are under claimed there is lots to update you on.
- Making Tax Digital for VAT
- Bank of England raise interest rate
- Scotland introduces relief for first time buyers
- Next round of tax draft tax legislation published
- One million couples still eligible for £900 tax boost
- Consultation on pensions cold calling ban
- Use Tax-Free Childcare over the summer holidays
Making Tax Digital for VAT
HMRC has published further information on Making Tax Digital for VAT (MTDfV). The VAT notice sets out some further details of the MTDfV regime, which will ultimately require taxpayers to move to a fully digital tax system.
Under the rules, businesses with a taxable turnover above the VAT threshold (currently £85,000) will be required to keep digital records for VAT purposes using ‘functional compatible software’ and provide their VAT return information to HMRC via an application programming interface.
This notice explains:
- the digital records businesses must keep and the ways to record transactions digitally in certain special circumstances
- what counts as ‘functional compatible software’, and when software programs do and do not need to be digitally linked where a combination of programs is used.
The new rules have effect from 1 April 2019, where a taxpayer has a ‘prescribed accounting period’ which begins on that date, and otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019.
Please contact us for advice and support on the introduction of MTDfV.
Bank of England raise interest rate
The Bank of England has raised the interest rate from 0.5% to 0.75%. The quarter of a percentage point rise sets the rate at its highest level since March 2009.
The rise in the interest rate will no doubt increase the interest costs of residential mortgages that have variable or tracker rates. It will be interesting to see if the rise in the rate is passed on to savers.
In response to the increase in the rate Alpesh Paleja, CBI Principal Economist, said:
‘This decision was in line with our expectations. The case for another rate rise has been building, with inflationary pressures being stoked by a tight labour market and many indicators now suggesting that weak activity in the first quarter of 2018 was a blip.’
‘The Monetary Policy Committee has signalled further rate rises over the next few years, if the economy evolves as they expect. These are likely to be very slow and limited, particularly over the next year as uncertainty around Brexit takes its toll on business investment.’
Scotland introduces relief for first time buyers
First-time buyers in Scotland will be helped to purchase their first home through a new tax relief which applies to Scottish Land and Buildings Transaction Tax (LBTT).
According to the Scottish Parliament approximately 80% of first-time buyers will pay no LBTT once the LBTT First Time Buyer relief takes effect. The change sees the zero-rated LBTT threshold raised to £175,000 for first-time buyers. Those purchasing property at a higher value will have their tax reduced by a maximum of £600. The Scottish Parliament expect that around 12,000 first-time buyers will benefit each year.
Minister designate for Public Finance and Digital Economy Kate Forbes said:
‘From today, around 80% of first-time buyers will pay no LBTT, helping thousands of people across the country buy their first home.’
Next round of tax draft tax legislation published
The government has published draft legislation for Finance Bill 2018-19 which is currently open for consultation, and ‘continues the government’s commitment to a competitive and fair tax system’.
The draft legislation could affect a range of taxes, from Stamp Duty Land Tax (SDLT) to income tax.
The draft legislation also outlines the government’s approach to the Making Tax Digital (MTD) penalty system, with HMRC outlining its intention to utilise a two-tier penalty model for businesses and individuals who fail to pay their tax on time.
The July publication of the Finance Bill 2018-19 draft legislation forms part of the government’s new fiscal timetable.
The consultation on the draft legislation will run until 31 August 2018. The final contents of ‘Finance Bill 2018-19’ will be subject to confirmation at Budget 2018, expected later this year in November.
We will keep you informed of developments.
One million couples still eligible for £900 tax boost
HMRC has highlighted that three million UK couples have already taken advantage of Marriage Allowance but a million more are still eligible for the tax break.
The Marriage Allowance allows certain couples, where neither pay tax at more than the basic rate, to transfer 10% of their unused personal allowance to their spouse or civil partner, reducing their tax bill by up to £238 a year in 2018/19. The allowance was introduced in 2015 and it is possible to backdate the claim to earlier tax years.
Please contact us if you would like to know more about this allowance and whether you are eligible.
Consultation on pensions cold calling ban
HMRC has launched a consultation on draft proposals to ban pensions cold calling.
Under the proposals, unsolicited marketing calls relating to pensions could be banned, alongside cold calls that offer a ‘free pension review’.
The government also outlined its intention to ban cold calls that promote retirement income products, such as drawdown.
The consultation closes on 17 August 2018.
Use Tax-Free Childcare over the summer holidays
The Government is reminding ‘stressed out parents’ that help may be available for childcare costs during the summer holidays. According to a YouGov poll, 31% of parents feel stressed trying to arrange childcare for the school holidays.
The poll, for HMRC, also found that around 30% of parents worried about balancing their job and school holiday childcare. With 54% admitting they look forward to their children returning to school in September.
HMRC is reminding working parents with summer childcare costs, that they can use Tax-Free Childcare (TFC), which is worth up to £2,000 per child per year, to pay for regulated holiday clubs during the school holidays. Parents are advised that it is possible to pay into their account regularly and ‘save up’ their TFC allowance and use it for childcare during school holidays.