The new tax year is upon us so we have penned a brief reminder of the main tax changes affecting individuals.
Last tax year we had three Finance Acts – no mean feat, and with almost 40 consultations currently ongoing, it is hard to stay on top of what changes are coming in and when. This article takes a look at the main changes that take effect in this new tax year.
Income tax rates and bands - Scotland
We now have a divergence in tax rates for Sottish taxpayers. The tax rates applicable to savings and dividend income continue to be set for the UK generally; the Scottish rates therefore apply only to other taxable income (e.g. wages, pensions, rental income, etc.). For more details, see here.
Optional remuneration arrangements (OpRA)
The OpRA rules came into force on 6 April 2017 and are, contrary to popular belief, considerably wider than traditional salary sacrifice arrangements.
During 2017/18 it became apparent that due to an oversight, the necessary PAYE Regulations had not been updated. This led HMRC to announce concessionary treatment for certain employers payrolling OpRA benefits in 2017/18 such that they do not need to report the benefits again on the P11D.
For those not covered by the concession we are now approaching the first deadline for employers to report OpRA benefits via the P11D process.
PAYE settlement agreements (PSAs)
From 6 April 2018, PSAs no longer have to be renewed annually. PSAs (enduring agreements) can now be agreed between the employer and HMRC and will remain in place for subsequent tax years unless varied or cancelled by the employer or HMRC.
HMRC report that they have started issuing P626s which will form the basis of the first enduring agreements. The P626s will invite employers to renew on the basis of the PSA that was in place for the tax year 2017/18. These should be issued by the end of April 2018.
Alternatively, employers will be able to set up an enduring agreement based on different criteria to the PSA agreed for tax year 2017/18, if this is more appropriate.
Employers will still be required to provide an annual calculation of the tax and NIC payable to HMRC.
Rental Property – Finance restriction
While this change came into effect from 6 April 2017, it is undergoing a phased introduction. This means that relief for 2018/19 is a combination of a deduction of 50 percent finance costs and a basic rate tax reduction in respect of the remaining 50 percent.
LTT in Wales
Mirroring developments in Scotland (where LBTT was introduced on 1 April 2015), land transaction tax (LTT) replaced UK stamp duty land tax (SDLT) in Wales from 1 April 2018.
There were two major changes on 6 April 2018:
The latter change means that, in cases where the employee does not work their full notice period, employers must calculate the part of a termination payment that represents ‘post-employment notice pay’ (PENP) and operate PAYE and NIC as appropriate. The Apprenticeship Levy will also be due where the employer is within the scope of that charge. This is intended to ensure that non-contractual PILONs (and comparable payments and benefits) are subject to income tax and NIC in the same way as contractual PILONs.
Any part of a termination payment that is not PENP, and is not otherwise subject to income tax or within the scope of an exemption, will be subject to income tax if, and to the extent that, it exceeds £30,000.
More information on the new regime is available here.
Partnership tax changes
Finance Act 2018 contained changes to the partnership legislation which aims to provide clarity over certain aspects of partnership taxation. It addresses the basis period and reporting rules where bare trustees or other partnerships are partners, a mechanism for the resolution of disputes between partners and a relaxation of the reporting requirements for investment partnerships. For more details, click here.
The sunset clause in Finance Act 2013 means that claims for disincorporation relief are no longer available on business transfers occurring after 1 April 2018.
Foreign protected trusts
As part of the suite of measures amending the taxation of non-doms, further anti-avoidance legislation came into effect from 6 April 2018 which seeks to prevent:
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