What is changing in the new tax year

We are one week into the new tax year, and new rates and regulations which are to be introduced. So how will this affect you?

Personal taxes

The income tax personal allowance (how much you can make without paying any income tax) is to increase to £11,500, and the threshold for the 40% higher rate of income tax is to increase to £45,000 (£43,000 in Scotland). The Government is committed to raising the income tax personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament (May 2020).  It is worth noting that the personal allowance is withdrawn for incomes over £100,000, and the High Income Child Benefit Charge remains in place for those earning more than £50,000.

Capital Gains Tax

The Capital Gains Tax annual exemption threshold is being increased to £11,300.

Inheritance taxes

The threshold for inheritance tax is currently frozen at £325,000 until April 2018. Coming into effect is a policy announced in George Osborne’s July 2015 Budget Statement, which details a tax-free allowance for inheritance tax on family homes, starting at £850,000 this year and rising by £50,000 until it reaches £1million.  Once the estate is worth over £2million, the £1million tax-free allowance is gradually tapered away.  However, all residential property indirectly held through an offshore structure will be liable to inheritance tax.

Individual savings accounts (ISAs)

The maximum limit of payment into an ISA will jump from £15,240 to £20,000 for the 2017-2018 tax year. A newly-introduced Lifetime ISA will allow under-40s to save up to £4,000 per year, with a 25% bonus from the government to fund first-time property purchase or to save for retirement.

Tax avoidance

In an effort to combat aggressive tax avoidance schemes, the Government is bringing in the serial tax avoider’s regime. Individuals using schemes that are defeated by HMRC after today, 6 April 2017, will be liable to sanctions such as penalties, restrictions to direct tax relief or public ‘naming-and-shaming’.  It’s more important than ever before to ensure that your assets are not held in an inappropriate or artificial scheme.

If you’d like to speak to the Greg Langley, the head of our tax department, about changes to personal or business tax structures, please call 0113 2449512.

Stuart Adam, Thomas Coombs

National Minimum Wage: How Does the Increase Affect You?

As the National Minimum Wage for young people in the UK has been increased by the government, we look at what the changes mean for employers, and some of the common mistakes made by business owners.

Firstly, what is the difference between the National Minimum Wage and the National Living Wage?

Very little – just that the National Living Wage applies to working people over the age of 25, whereas the National Minimum Wage concerns the earnings of those who are 24 and younger.

The new minimum wage rates are as follows:


  • £6.95 per hour for workers aged 21 – 24
  • £5.55 per hour for workers aged 18 – 20
  • £4.00 per hour for workers under the age of 18 who have finished compulsory education
  • £3.40 per hour for apprentices under 19 years old, or in the first year of their apprenticeship

One issue that can be easily avoided is a lack of information about wages for apprentices.


Small, owner-managed businesses have sometimes seen an apprenticeship scheme as a great way of giving a young person a start to their career, taking on young talent and paying a relatively low wage for the trouble.


When taking on an apprentice, many don’t realise that the minimum wage for an apprentice can rise significantly after one year, depending on age. If the apprentice is aged 16 when taken on, they can be paid the apprenticeship minimum wage until they turn 19.  However, if the apprentice is 19 when taken on, after a year of employment they would be entitled to £5.55 per hour, the minimum wage for workers aged 18 to 20.


Another fact which is often overlooked by business owners who take on an apprentice is that the apprentice must be paid for time spend training or studying for a relevant qualification, whether while at work or at a training organisation.


There are risks associated with underpayment of employees: there are knock-on effects such as a potential loss of motivation and productivity, and difficulty in hiring new workers and retaining existing ones. Furthermore, there is potential for the firm’s reputation to be damaged, especially by the government, which has the right to ‘name and shame’ those who underpay their staff.


If you’d like to discuss the National Minimum Wage changes, how to ensure that your business is conforming to regulations, or assistance on future wage planning, please feel free to speak to one of the Thomas Coombs team at 0113 2449512 or mail@thomascoombs.com.

Autumn Statement 2016: What Will Change in Your Business?

This week Chancellor Philip Hammond issued his first Autumn Statement to Parliament, in which he set out the government’s fiscal policy objectives, including a £23 billion investment in infrastructure over the next five years to combat a lack of unaffordable housing, the UK’s low productivity and revised-down growth forecasts.

Flagship policies such as this are likely to have an indirect effect on SMEs in the UK, but the changes to taxation and regulation announced later in Philip Hammond’s speech are likely to have a more direct effect on the UK’s SME community.

Professional advisers’ guidance will be in high demand and here, Christopher Darwin of Leeds based Accountancy firm Thomas Coombs goes into detail about how the Autumn Statement is likely to affect small businesses.

Letting agency fees

“One of the most important announcements Philip Hammond made in the Autumn Statement is that letting agents will no longer be allowed to charge fees to tenants. The probable effect of this is that landlords will have to meet these charges and will then pass these costs on to the tenant in rent. It’s about promoting choice and market competitiveness – while tenants can’t shop around if a property is being looked after by a particular lettings agency, landlords can.”

Corporation tax

“The government’s commitment to lowering corporation tax from 20% to 17% in 2020 is encouraging, as a good proportion of small businesses are set up as limited companies, and stability is always welcome. In April, there was an increase in personal tax on dividends and this drop in corporation tax will help to partly offset the effect of that for business owners. We already have one of the lowest corporation tax rates in the developed world, so it’s an important incentive for foreign businesses looking to set up here.”

Employment taxes

“There have been changes to tax on salary sacrifice, where an employee exchanges part of his or her cash salary for certain benefits. These benefits have traditionally been taxed less than the cash salary would have been. This won’t apply to things like pensions or childcare, but the concern here is that if you sacrifice your salary you will still be taxed on the cash you sacrifice, irrespective of how tax advantaged the benefit would have been.

“Employers want to make their employees pay packets as tax-efficient as possible, but they could then end up with a situation in which two employees have the same package but they are taxed in different ways. The regulations are also being tightened so that fewer and fewer employee benefits are tax-free.

“The Chancellor said that National Insurance will be aligned between the employer and the employee, so the threshold for paying National Insurance will be the same for both. This is done for reasons of tax simplification.”


“In the Autumn Statement, the Chancellor of the Exchequer highlighted ‘the growing cost to the Exchequer of incorporation’.  He went on to say that ‘the government will consider how we can ensure that the taxation of different ways of working is fair between different individuals, and sustains the tax-base as the economy undergoes rapid change.’  It looks like we will see a review of the tax rules for companies and maybe higher taxation for those who choose to operate as a limited company.

“We have already seen more taxes being imposed on the owners of companies such as the new dividend tax, restrictions on capital gains tax, entrepreneurs’ relief and income tax on disposal of shares through liquidation involving ‘phoenixing’.

“Whilst there can be legitimate justification to stop abuse of the tax system, there is a high risk that changes may catch the innocent businessperson.  Also, additional tax charges can act as a disincentive to the use of limited companies even though they make good commercial sense as the vehicle of choice for most SMEs.”

Tax planning

“The government, amongst other bodies, is looking to close in on aggressive tax avoidance schemes. Last month, seven leading accountancy bodies in the UK have established new ethical guidelines for their members which prohibit them from recommending aggressive tax planning. Although the professional bodies aren’t recommending tax planning, Philip Hammond still thinks it’s necessary to penalise accountants if they do.

“There is also a suggestion from the government that taking reasonable care to do things properly will no longer preserve businesses from penalties. This will not only affect people using avoidance schemes but also, potentially, people who genuinely think that they have the correct processes in place.

“There are also more specific rules to counter areas where HMRC think the rules are being exploited. For example, take the VAT flat rate scheme. Companies receive VAT on their sales and pay VAT on their costs. Once a quarter, they add up all of the VAT they have received, subtract the VAT they have paid out and pay the difference to HMRC. The VAT flat rate scheme makes assumptions about that ratio for simplicity. In the freelance sector, whose VAT costs tend to be extremely low, the Chancellor has announced that they will have to use a special rate.   This is significant because a freelancer who makes, for example, £100,000 per year, used to keep £3,800 of their VAT per year. Following the changes in the Autumn Statement, they will now keep only £200. There is a question whether this is a proportionate response.”

Insurance premium tax

“The Autumn Statement included an increase in insurance premium tax, from 10% to 12%. Insurance premium applies to the payment consumers and businesses make to insurers. With respect to car insurance, Philip Hammond also announced that, due to a crackdown on fraudulent claims within the industry, the average motorist would save £40 per year on their premium. For the vast majority of drivers, this will outweigh the increase in insurance premium tax.”

IR35 and working for the public sector

“IR35 prohibits freelancers from forming a limited company so that they pay less tax on payments from their client, when their relationship in all other aspects is one of employer and employee.

“For freelancers who work for public sector clients, the government is going to continue with the idea that it is the client or agency that decides whether this particular tax applies to the freelancer, not the freelancer themselves. From April 2017, for those working in the public sector, the government will make it the decision of their agency or client to decide whether this legislation applies to them.

“There is also a suggestion of extending IR35 to the self-employed. This is a significant step, partly because it’s another extension of HMRC’s crackdown on perceived tax avoidance, and partly because it’s going to be extremely complicated to try to implement. The IR35 approach is to look at the underlying commercial substance: this is all very well in simple cases, but as the regime is extended it will catch more complex businesses, and become much harder to administer. It may be better to look at why there are differences between the employed, the self-employed, and small companies in the first place.”

Workplace Pension Auto-Enrolment

Did you know that the law states that employees must be able to obtain a Workplace Pension when working for an organisation in the UK? The first question that needs to be answered is ‘Who is entitled to a Workplace Pension?’

Any employee aged between 22 and the State Pension age, whose income is more than £10,000 a year within the UK, is entitled to a Workplace Pension. Automatic enrolment began in October 2012, starting with larger employers.  Over a period of six years, medium and small sized employers are joining the automatic enrolment.

When employers enrol on behalf of employees onto a Pension Scheme, the first thing to do is to make sure they send contact information to The Pension Regulator. These details should be for the most senior person within a company or organisation for example, a Chief Executive Officer or Managing Director.

Step two is to stage a date. This is when the new automatic enrolment duties come into force for a particular business.  It is dependent on whether enrolment of the staff is necessary in terms of eligibility for a pension and also the number of staff working for the company.

It is important to make sure that employers do not take action to jeopardise employees from enrolling in the pension scheme.

There are many penalties for those who do not comply with a Workplace Pension. There is a fixed penalty notice which is set at £400 as well as other penalties that vary in the size of the fine according to the number of employees within an organisation.  These penalties include:


  • An escalating penalty (ranging from £50 to £10,000 per day depending on number of staff)
  • A civil penalty (ranging from £5,000 to £50,000 on an individual or the business itself bases)
  • Prohibited Recruitment Conduct Penalty Notice (ranging from £1,000 to £5,000 depending on number of staff)

The Workplace Pension enrolment requires a significant level of information in order to register employees. You will have to give:


  • Company/Business name
  • Contact details for the business owner
  • The number of employees and a list of employees with their key information
  • Director identification documents (UK driving licence/UK passport)
  • Planned employee groups and company contributions.

Once you have auto-enrolled the appropriate employees in your organisation, a submission of a declaration of compliance to The Pensions Regulator must be undertaken.


Incidentally, auto-enrolment duties to the Workplace Pension do not apply if you are a Sole Trader, with no other staff.


If you would like to know more about how to enrol your staff to a workplace pension scheme, one of Thomas Coombs’s business advisors would be more than happy to help. Call now on 0113 2449512 or email mail@thomascoombs.com

Stuart Adam, Thomas Coombs

Late Payments: The Difference between Small and Large Firms

Recently, we published an article entitled Late Payments: How to Claim Interest, and we thought it might be appropriate to go into some more detail about situations in which claiming late payment is not the best tactic.

You may be aware of the supplier’s right to claim interest in the case of non-payment from a customer, and the steps of communication that can make this simple right a powerful tool for incentivising timely payment.

However, for larger customers, who don’t tend to have the same issues with cashflow, the motivation for late payment is unlikely to be that they simply don’t have enough money in the bank this month, or that there is a queue of creditors to work through before they can pay your invoice.

Key to managing relationships with larger business customers is understanding how they work. Big businesses do not generally have to schedule their payments to suppliers to fit in with payments coming in – they won’t be waiting for their customers to pay them before they can address your invoices.  Instead, there is more likely to be a fixed system in place, and your invoice goes through this system before payments come out of the other end.

In this situation, it can be more effective to try to understand the system and work out how to make sure your invoices are dealt with promptly, rather than charging interest to a customer who, due to their size, may be key to your business’s success. Are your invoices clear?  Are they being sent to the right person within the customer’s company? Crucially, do you have a purchase order reference?

The problem that many smaller business owners have is that a) they often don’t look at the terms of business well enough, and b) they aren’t aware of the importance of getting the right documentation to the right people at the right time.

If you would like to learn more about improving your cashflow, one of Thomas Coombs’s business advisers would be more than happy to help. Call now on 0113 2449512 or email mail@thomascoombs.com.

Late Payments: How to Claim Interest

For SMEs in all industries, late payments for goods and services can be a real issue. Cashflow is harder to manage for smaller suppliers, and SME owners can often feel helpless when dealing with larger customers.  A question on the lips of many SMEs we’ve spoken to is “What tools can I leverage to ensure speedy recovery of payments?”

One method by which SMEs can push for payment of invoices is by claiming interest on late payments. The statutory right to interest and compensation applies to all contracts and, as the interest on payments accumulates, it provides a powerful deterrent to late payment.

The law gives the supplier the right to charge interest at 8% above the Bank of England’s base rate – however, although the Bank of England has recently changed that rate to 0.25%, SMEs can continue to charge at 8% over the old rate of 0.5% until 31 December 2016. This is because the rates are fixed for six-month periods; the rate on 31 December is valid for the period of 1 January to 30 June, and the rate on 30 June is valid for the period of 1 July to 31 December.

In many cases, the rate of interest dictated by Bank of England base rate plus 8% will be more expensive for a late-paying customer (who is effectively borrowing from you) than overdraft money from the bank. This incentivises timely payment.

You may think that claiming interest on late payments may seem to be adverse to good customer relationships, but by having a clear system in place, suppliers can actually avoid awkward situations.

Communication with late payers is key, and can be distilled into three steps:

  1. State agreed payment dates on all invoices and your intention to exercise the right to charge interest on late payments.
  2. If the invoice is not paid by the agreed payment date, inform customers of the interest that they are now accruing.
  3. Once the payment has been received, issue a bill to the payer informing them of how the interest was calculated and how much was paid.

This communication is an effective tool for ensuring timely payment with a minimum of friction between supplier and customer, and no undue surprises for the customer.

If you would like to know more about how to deal with late payments, one of the Thomas Coombs business advisers would be more than happy to help.  Call now on 0113 2449512 or email mail@thomascoombs.com

Stuart Adam, Thomas Coombs

Thomas Coombs sends warning to businesses not paying the new National Living Wage

Leeds-based accountants Thomas Coombs is reminding businesses that the penalties for not paying the new National Living Wage and the minimum wage have gone up from the start of this month.

Whilst the majority of businesses will have focused on making sure their employees are being paid the correct statutory wage, many may not have realised that failing to do so now carries much harsher penalties than before.

Under the changes that have come into force businesses can now be fined 200 per cent of the total underpayment, while pay reference periods that began before 1 April 2016 will still face the previous 100 per cent penalty.

This means business could be fined between minimum payments of £100 up to a maximum payment of £20,000.

This payment applies to each worker who has been underpaid, not the total payment for all workers.

In the most serious cases of non-compliance with the national minimum wage legislation a business owner may be criminally prosecuted by HM Revenue & Customs (HMRC). The potential penalty on conviction is an unlimited fine.

HMRC has also taken a more active role in recent years of naming and shaming the worst offenders, regardless of their size, which could have a significant impact on a business’s reputation.

Stuart Adam, Partner at Thomas Coombs, said: “I suspect the majority of businesses have prepared their payroll to ensure that workers over the age of 25 are now receiving the new National Living Wage of £7.20 an hour.

“However, there may still be some out there that haven’t done this and it is integral that this is rectified immediately to ensure they are not penalised or prosecuted. An effective and carefully managed payroll system can prevent a business ever being penalised and seeking professional advice on setting up such a solution could pay dividends in the long run.”

Stuart Adam added that the National Living Wage is set to go up incrementally to £9 an hour by 2020 and that the national minimum wage for those between the ages of 21 – 24 is also due to go up by 25p to £6.95 this October along with the wages of 18 – 20 which will go from £5.30 to £5.55 per hour.

If you would like assistance with your payroll Thomas Coombs can help. To find out how, please contact Stuart Adam.


Thomas Coombs say the Budget is a step in the right direction for SMEs, but has a sting in the tale for some

Leeds-based accountancy firm Thomas Coombs has today said that the Chancellor’s latest Budget Statement is on the whole positive for SMEs, but that caution should be applied to certain elements.

George Osborne set out from the start of his Budget statement to show that he is on the side of the small business owner by quickly announcing changes to the Business Rates Threshold.

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. This relief is currently only available to businesses that occupying a property with a rateable value of £6,000 or less.

However, the new threshold will mean that a tapered rate of relief will be available for properties with a rateable value of £15,000, meaning 600,000 businesses will pay no rates at all.

On the back of this Mr Osborne also announced that from April 2016, the higher rate of Capital Gains Tax (CGT) will be cut from 28 per cent to 20 per cent and the basic rate from 18 per cent to 10 per cent. These moves will be particularly beneficial to those wishing to sell their business.

Entrepreneurs’ relief will also be extended to long term investors in unlisted companies, providing them with a 10 per cent rate of CGT for gains on newly issued shares in unlisted companies purchased on or after 17 March 2016, provided they are held for a minimum of three years from 6 April 2016, and subject to a separate lifetime limit of £10 million of gain. This will be extremely beneficial for businesses seeking outside investment and also helpful to those wishing to sell their business.

The Chancellor also announced that corporation tax will be cut to 17 per cent by 2020, which represent a helpful saving for companies. He also announced changes that will reduce commercial Stamp Duty Land Tax for the majority of SMEs buying new property and proposed a new micro entity tax exemption, which in particular will help online hobby traders and small traders who may not have previously declared their income.

Christopher Darwin, Partner at UK200Group member firm Thomas Coombs, said: “For small businesses and their owners this is a relatively well rounded and positive Budget, but there are a few things that they need to consider that have not been so openly publicised by the Chancellor.

“One of the groups likely to be most upset by the Budget is buy-to-let investors, who have already been battered by the Chancellor’s previous statements.”

Christopher Darwin pointed out that while the majority of businesses would benefit from the cuts to CGT, buy-to-let investors will still pay the current rates of 28 per cent and 18 per cent.

He also said that businesses needed to be cautious about how they lent money to their owners, as the loans to participators tax rate will be increased from 25 per cent to 32.5 per cent in April 2016, affecting loans, advances and arrangements made on or after 6 April 2016.

This follows on from changes to tax on dividends announced in the Autumn Statement, which have increased tax liabilities for company owners when they share in the profits, with effect from April 2016.

Christopher Darwin added: “While there are a number of big ticket items that will excite SMEs there are things in the Budget that need to be treated with care.

“The government’s approach appears to be quite stealthy and businesses need to be aware of the changes made outside of the main headlines. In the majority of cases it might be best to seek professional advice.”

If you would like advice on any of the subjects raised in the Budget Statement, please Christopher Darwin.

Owners and shareholders need to be ready for the change to dividends

Accountants Thomas Coombs are encouraging business owners and shareholders to reassess their position on dividends ahead of changes to the way they are taxed next month.

At present there are considerable savings to be made in National Insurance contributions if a minimal amount is paid as salary and any balance of a remuneration package is paid as dividends.

From 6 April 2016, the way dividends are being taxed will change and the 10 per cent tax credit currently available to taxpayers will be abolished.

Instead, each individual will have available a flat rate dividend allowance of £5,000. Any dividends received in excess of this allowance will be taxed as follows:

  • 7.5 per cent if dividend income is within the standard rate (20 per cent) band
  • 32.5 per cent if dividend income is within the higher rate (40 per cent) band
  • 38.1 per cent if dividend income is within the additional rate (45 per cent) band

These changes are likely to have a direct impact on the overall savings in NIC and income tax that can be achieved by those who receive dividends and some people may find it beneficial to reassess their remuneration policy.

Last week, the House of Lords Economic Affairs Committee said that HM Revenue & Customs (HMRC) had poorly communicated these changes and that the changes were complex, confusing to the majority of tax payers.

In light of this, Thomas Coombs is worried that some people may still be caught out by the changes and might end up paying more in tax than they need to.

Christopher Darwin, Partner at Leeds-based accountants Thomas Coombs, said: “It would seem that HMRC have done a poor job of communicating the changes to dividends to taxpayers and there are likely to be many people out there who are in the dark about how this will affect their affairs.

“These changes represent a significant change to the rules and those who are not aware or don’t understand the changes need to act quickly to get the help they need.”

Dividend recipients also needed to be aware that HMRC had amended the tax codes of many owners, directors and shareholders to “code out” an estimated amount, added Christopher Darwin.

The deduction in the PAYE code will be labelled ‘dividend tax’, as part of HMRC’s goal to move the payment of tax forward.

“To work out whether the deduction for “dividend tax” is approximately correct the estimate for your total income tax liability for 2016/17 will need to be checked, including funds received through savings and investments,” said Christopher Darwin.

“Failing to get your PAYE code correct could have a significant effect on the amount of tax you pay in the following year, so ensuring that it is right is vital. Those who are unsure should seek professional assistance to help them with their dividend affairs.”

If you would like help to make sense of the changes to dividends then our team at Thomas Coombs can help. To find out more, please contact Christopher Darwin.

Are you ready for the National Living Wage?

With just a month left before the new National Living Wage is introduced, Leeds based accountants Thomas Coombs are encouraging employers to get the correct payroll processes in place.

From 1 April 2016 employees over the age of 25 who are currently earning the minimum wage rate of £6.70 per hour will see a 50p increase in their pay, bringing it to £7.20 per hour.

The average full-time worker in this pay bracket, working 35 hours a week, will see their pay packets rise by more than £900 a year.

This rate looks set to increase further over the next four years, eventually reaching £9 per hour by 2020.

This significant increase in workers’ pay is likely to have a substantial impact on business’s wage costs and will is also likely to place an additional burden on their payroll systems.

Christopher Darwin, Partner at Thomas Coombs, said: “Paying your employees the correct wage is extremely important.

“Failing to pay the correct wage will not only create animosity amongst your workforce, but could also land you with a hefty fine and lead you to be named and shamed by the Department for Business, Innovation and Skills, which could do significant reputational damage to your firm.

“It is inevitable that this new wage increase will have a significant effect on your business’s profits in the months and years to come, so now is the time to assess where savings can be made within your company.”

Christopher Darwin added that certain industries such as the care sector, retail and hospitability, which employ a large number of low paid staff, would be affected most by the changes and would need to consider what actions need to be taken to ensure their ongoing success.

If you would like to know more about Thomas Coombs’s range of payroll and accountancy services, please Christopher Darwin.