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Business and Tax Round-up - news article image

Business and Tax Round-up

1 Jun 2017

4 minute read

Bank cheques ‘to clear in a day’

New technology set to be introduced later this year will allow cheques paid into bank accounts to be cleared within one working day. The Cheque and Credit Clearing Company – the organisation that manages the cheque-clearing system – has suggested that a new image clearing system will ‘revolutionise how cheques are cleared in the UK’.

Instead of the current paper-based system, a digital image of the cheque will be used instead. This should significantly speed up the process. The changes will be phased in from October 2017, with all UK banks and building societies able to offer the new service by the second half of 2018.

Salary sacrifice scheme advantages removed

Effective from April, the tax and employer national insurance advantages of many salary sacrifice schemes have been removed. Employees swapping salary for benefits are now required to pay the same tax as individuals who buy them out of their post-tax income.

Certain benefits are, however, exempt from the changes. These include: pension contributions and arrangements (including pensions advice); childcare vouchers; workplace nurseries; Cycle to Work schemes; and ultra-low emission cars with CO2 emissions of up to 75 g/km.

Arrangements made before April 2017 will be protected until April 2018. Arrangements put in place for cars, educational fees and accommodation will be protected until April 2021.

New rules on inheritance tax take effect

From 6 April 2017, a new Residence Nil-Rate Band (RNRB) for inheritance tax (IHT) has been introduced. The band enables a ‘family home’ to be passed wholly or partially tax-free on death to direct descendants, such as children or grandchildren.

The RNRB is in addition to an individual’s own nil-rate band, and is initially set at £100,000 in 2017/18, before rising in a series of stages to reach £175,000 in 2020/21. Up to £1 million of a married couple’s estate could eventually be taken outside of the scope of IHT, providing the full nil-rate bands are available to each spouse.

The band can only be used in respect of one residential property. This must have been a residence of the deceased at some point. Buy-to-lets will not, therefore, be eligible for the relief. There is a tapered withdrawal of the RNRB for estates with a net value (after deducting any liabilities but before reliefs and exemptions) of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

For more information on the new RNRB, please contact us. We would be happy to assist you.

New Tax-Free Childcare scheme introduced

The government’s new Tax-Free Childcare scheme is currently being rolled out, starting with parents of the youngest children.

The scheme, which is intended to help parents with the cost of childcare, is worth a maximum of £2,000 per child (£4,000 for a disabled child). Tax relief of up to 20% is available for childcare costs, up to a total of £10,000. Children aged under 12 are eligible for the scheme, as well as disabled children aged up to 17.

Eligible parents are required to open an online account, into which they can contribute money towards the cost of childcare. The government will then ‘top up’ these payments at a rate of 20p for every 80p contributed by parents or family members.

To qualify for Tax-Free Childcare, all parents in a household must meet a minimum income level based on working 16 hours per week at the National Living Wage and earn no more than £100,000 each per year. Parents should not already be receiving support through Tax Credits or Universal Credit.

Unlike the current Employer-Supported Childcare scheme, self-employed parents will be able to benefit from Tax-Free Childcare. To support newly self-employed parents, the government is introducing a 'start-up' period, during which time a newly self-employed parent will not have to earn the minimum income level.

All eligible parents will be able to apply for Tax-Free Childcare by the end of 2017.

The existing Employer-Supported Childcare scheme will remain open to new entrants until April 2018. Those who already benefit from this scheme can choose to remain in this system, assuming their employer continues to offer it, or they can switch to Tax-Free Childcare.

Insurance Premium Tax on the rise

As announced in the 2016 Autumn Statement and confirmed in the 2017 Spring Budget, the standard rate of Insurance Premium Tax (IPT) is set to rise from 10% to 12% with effect from 1 June 2017.

The latest increase means that the rate of IPT will have doubled in just over 18 months. IPT rose from 6% to 9.5% in November 2015, and then again by a further 0.5% to reach 10% in October 2016.

The Association of British Insurers (ABI) previously warned that many insurers may pass on the additional tax burden to their customers in the form of higher premiums, rather than bear the extra cost themselves.

It calculated that the rises in both 2015 and 2016 could have added more than £100 to the annual insurance costs of a typical family.

Business and Tax Round-up - news article image

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