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November 2016

  1. Restriction of tax relief on finance costs for individual landlords
  2. NMW increases take effect
  3. Help-to-Save
  4. Self-assessment and disclosure
  5. November questions and answers
  6. November key tax dates

Restriction of tax relief on finance costs for individual landlords

New provisions will take effect from April 2017, which will see tax relief for finance costs on residential properties being gradually restricted over a period of three years, until, by 2020/21, all financing costs incurred by a landlord will be restricted to the basic rate of income tax.

Such finance costs include mortgage interest, interest on loans for furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan.

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NMW increases take effect

New rates for the National Minimum Wage (NMW) took effect on 1 October 2016, and employers must ensure that they implement them accordingly. The rates are as follows:

  • 25 and over – £7.20 per hour;
  • 21- to 24-year-olds – £6.95 an hour;
  • 18- to 20-year-olds – £5.55 an hour;
  • 16- to 17-year-olds £4.00 an hour; and
  • Apprentice rate – £3.40 an hour.

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Help-to-Save

The Savings (Government Contributions) Bill is currently making its way through Parliament, having had its second reading in the House of Commons on 17 October 2016. Broadly, if enacted, the Bill will introduce two new schemes—the lifetime ISA and Help-to-Save – both of which are designed to support more people as they try to save for the future.

Help-to-Save will target working families to help them build up their savings. The scheme will be open to some 3.5 million adults in receipt of Universal Credit with minimum weekly household earnings equivalent to 16 hours at the National Living Wage, or those in receipt of Working Tax Credit. It will work by providing a 50% government bonus on up to £50 of monthly savings into a Help-to-Save account. The bonus will be paid after two years with an option to save for a further two years, meaning that people can save up to £2,400 and benefit from government bonuses worth up to £1,200. Savers will be able to use the funds in any way they wish.

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Self-assessment and disclosure

Finance Act 2016, which became law on 15 September 2016, contains provisions designed to help clarify the time allowed for making a self-assessment.

The time limit is four years from the end of the tax year to which the self-assessment relates. This is the same time limit as for assessments by HMRC. The provisions will have effect on and after 5 April 2017, although there are transitional arrangements for years previous to this, as follows:

  • for tax years prior to 2012/13, taxpayers have until 5 April 2017 to submit a self- assessment;
  • for 2013/14, the deadline is 5 April 2018;
  • for 2014/15, the deadline is 5 April 2019; and
  • for 2015/16, the deadline is 5 April 2020.

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November questions and answers

Q. I have recently set up my own business after having been employed for many years. Although I am hopeful that I will eventually make a profit, I anticipate that I am likely to make a small loss in each of my first three years of trading. What is the best way for me to utilise these losses for tax purposes?
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Q. My wife and I are both directors of a company and we are soon to relocate to another part of the country to set up a new branch. The existing branch will continue to be run by the two other company directors. Will be both be entitled to the £8,000 relocation expense exemption?
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Q. I use the Flat Rate Scheme for VAT purposes. Can I claim back the VAT I have recently paid on some new equipment I have bought for the business?
Answer

November key tax dates

2 – Last day for car change notifications in the quarter to 5 October – Use P46 Car
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/11/2016

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