Despite much speculation, there was little detail regarding the restriction on travel and subsistence expenses, and a revision of IR35 in Wednesday’s Autumn Statement – the government will release more information on 9 December. All we know, is that changes on 6 April 2016 will affect workers engaged through an umbrella company, and individuals working through their own limited company, but caught by IR35.
Once further information has been released we will provide a more realistic insight into the changes and what it means for contractors and freelancers. In the meantime, we have summarised some highlights that we think are most interesting for the contracting community:
– The tax rate and allowance changes will be the same as announced in July 2015. Please read our article ‘What the summer budget means for you as a contractor’ for more information.
– Although the government is considering changes to Entrepreneurial Relief and will be issuing a consultation on companies’ distributions; restriction to Entrepreneurial Relief has not been mentioned in this Autumn Statement.
– Residential property investment has been put under the spotlight. On top of the mortgage interest relief restriction on buy-to-let announced in the summer budget, a 3% surcharge has been introduced on buy-to-lets and second homes. Please see Figure 1 and Figure 2 below:
Figure 1: Table showing the Stamp Duty Land Tax (SDLT) increase to be introduced April 2016
|Property or lease premium or transfer value||SDLT rate for
|SDLT rate for additional property|
|Up to £125,000||0%||3%|
|The next £125,000 (from £125,001 to £250,000)||2%||5%|
|The next £675,000 (from £250,001 to £925,000)||5%||8%|
|The next £575,000 (from £925,001 to £1.5 million)||10%||13%|
|The remaining amount (above £1.5 million)||12%||15%|
Figure 2: An example of the increased Stamp Duty (April 2016) on a £500,000 residential property
|Property or lease premium or transfer value||First property||Additional property|
|Up to £125,000.00 @ 0% / 3%||£0.00||£3,750.00|
|More than £125,000.00 @ 2% / 5%||£2,500.00||£6,250.00|
|£250,000.00 @ 5% / 8%||£12,500.00||£20,000.00|
Therefore, after the 5 April 2016, there will be an extra £15,000 stamp duty incurred when purchasing this £500,000 property.
– From April 2019, a payment on account of any Capital Gain Tax due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal (except for a property that qualifies for Private Residence Relief). It was previously required within 1 year. Draft legislation will be published for consultation in 2016.
– The government are investing £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed individuals and landlords will need to update HMRC via their digital tax account at least every quarter. The plan for this transformation will be published by the government for consultation in 2016.
As soon as more information is made available we will post an update. In the meantime if you require any further information or advice, please do not hesitate to give us a call on 0207 078 0211. Our experts are on hand and ready to assist you.