National Living Wage – The impact on care homes

National Living Wage – The impact on care homes

The government recently announced the introduction of a new National Living Wage (NLW) for working people aged 25 years and above. The impact of the National Living Wage will vary significantly across different businesses, but will be particularly significant for care homes, and comes after unprecedented regulatory changes have been implemented in across the sector.

What will the National Living Wage mean for care homes?

Scott Sanderson, Healthcare Partner, said: “In a year with significant regulatory changes, increasing compliance and funding burdens, this announcement places further pressure on care home owners to balance the books and keep an eye on their finances. This introduction will no doubt have to be factored into the annual budgets and, with the year ahead looking set to be another challenging one for care homes, it may have a significant impact on many operators.”

“With CQC now recognised as the financial regulator for the sector and an increased focus on the financial aspects of operators, this rise further compounds the need to prepare annual budgets and keep accounting records up-to-date, in order to monitor the home’s risks and ensure financial sustainability. One particularly important focus of care homes should be that of performance benchmarking, which can help highlight areas of concern or opportunities and, of course, highlight where your home is performing well. We should have details on the latest report in the coming weeks.”

Looking ahead in the care sector

The care sector continues to be challenging for operators, with significant regulatory changes coming into effect on 1 April 2015, coupled with increased compliance and funding pressures, and now the introduction of the National Living Wage.

The next 12 months promises to eventful for all involved in the sector, as we discussed in our Care Sector 2015/16 Outlook earlier this month.

More from our care sector experts

You can also find all of our latest care sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson

Scott Sanderson Partner

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.[/author_info]

Claiming the marriage allowance – updated guidance

Claiming the marriage allowance – updated guidance

Claiming the marriage allowance – updated guidance

The Low Incomes Tax Reform Group have published their updated guidance on how to apply for the new transferable personal allowance, known as the marriage allowance, for married couples and civil partners which came into effect on 6 April 2015.

The transfer of part of the personal allowance between spouses (or civil partners) allows eligible couples to save up to £212 tax in a year.

The marriage allowance enables an individual whose income does not allow them to make use of their full personal allowance, currently £10,600, to transfer 10% (£1,060) of this allowance to their partner. Their spouse or civil partner is then able to set their own personal allowance, plus the transferred part of their partner’s allowance, against their own income. This increase in usable allowances should result in a tax saving of up to £212 in a year for a couple (20% of £1,060).

The transfer can only be made if the spouse or civil partner who receives the transferred allowance is not a higher-rate taxpayer (meaning that in 2015/16 they have an income of more than £42,385.

Currently an individual can only claim to transfer the marriage allowance to their partner by registering online via GOV.UK. The individual will then be prompted to use GOV.UK’s Verify procedure to confirm their identity which requires the individual to have a UK passport or driving licence. A phone option is also available if the individual is unable to confirm their identity using Verify they will be advised to call HMRC’s PAYE helpline on 0300 200 3300.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Stephen Charles partner

Stephen Charles is a tax partner at the firm, specialising in corporate and business taxation. For more details and advice, please contact Stephen on [email protected] or 0114 266 7141.[/author_info]

Extension of farmers’ averaging to give greater flexibility

Extension of farmers’ averaging to give greater flexibility

Extension of farmers’ averaging to give greater flexibility

One of the important announcements in the March Budget was the extension of farmers’ averaging, where farmers who meet specific conditions can average their profits for income tax purposes, from two years to five years.

The unique tax rule, introduced to limit fluctuations in farmers’ tax bills, will be welcomed by farmers across the UK. This is a noteworthy change from the current two year averaging period and should grant farmers greater flexibility and help to ensure they do not pay excessive tax rates in good years.

Prior to the new rules coming into effect from April 2016, the Government also announced that they will hold a consultation later in 2015 to clarify details on the extension.

Greater flexibility and stability to farming accounts

Martin Wilmott, partner at Hawsons commented on the greater flexibility the extension may give farmers: “The Chancellor’s announcement that farmers’ tax bills will now be applied over five consecutive years, rather than two, is likely to give farmers greater flexibility, particularly during periods of fluctuating profits. The change to this valuable relief is going to assist farmers in dealing with ongoing fluctuations, such as a poor harvest due to bad weather, and will make it much easier for farmers to budget and plan ahead.”

Martin added: “The new rules are a real positive for the farming community and will help reduce excessive tax bills that may arise from fluctuations, especially as a good year can often be followed by a poor one. This is a particularly important announcement given the current volatility in farmers’ earnings and should help offset the impact of farmers’ variations in earnings, and give better stability to farming accounts.”

More from our agriculture experts

You can find all of our latest agriculture sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Martin Wilmott is a partner at Hawsons

Martin Wilmott acts as lead engagement partner for a wide range of corporate and non-corporate clients in the Doncaster office, especially in the Legal and professional, agricultural, transport, property and construction, manufacturing, healthcare and hospitality sectors. For more information or advice on anything covered in this article please contact Martin on [email protected] or 01302 367 262.

Clarification on automatic enrolment and directors

Clarification on automatic enrolment and directors

Clarification on automatic enrolment and directors 

As automatic enrolment continues to take stride across the UK, with the latest wave of firms with fewer than 30 employees being phased in, there are still many cloudy areas surrounding the regulation.

In particular, the circumstances regarding automatic enrolment and directors is one that can be confusing.

In this article, we cover some of the frequent questions surrounding automatic enrolment for directors that you have been asking.

If I am the sole director of my own company, do automatic enrolment duties apply to me?

This is certainly a question which has been raised before.

Directors of a company are classified as officeholders, meaning they are usually not considered as workers for automatic enrolment purposes. If you are the sole director and you have no other staff working for you, then the company is not considered for automatic enrolment purposes. In this case, the company will not be considered as an employer.

If I am a director within my own company and the other people working at the company are directors, do automatic enrolment duties apply to me? 

or

If I am a director within my own company and the other directors do not have contracts of employment, but two other workers do, do automatic employment duties apply to me?

As with the answer above, directors are not usually considered as workers for automatic enrolment purposes.

However, if a director and any other worker at the company has a contract of employment with that company, then the director is a worker and is therefore classified as a worker for automatic enrolment purposes. In this case, they may need to be automatically enrolled.

Running through a few examples may make this clearer.

Example

Company A has 5 directors and none of them have a contract of employment. In this example, the company does not have automatic enrolment duties.

Example

Company B has 5 directors and one of them has a contract of employment. In this example, the company does not have automatic enrolment duties.

Example

Company C has 5 directors and two or more have contracts of employment within the company. In this example, the company does have automatic enrolment duties to the directors who have contracts of employment.

Example

Company D has 2 directors, who neither have contracts of employment, and one member of staff, who has a contract of employment within the company. In this example, the company does have automatic enrolment duties to the member of staff.

Example

Company E has 2 directors and one of them has a contract of employment, and one member of staff, who also has a contract of employment within the company. In this example, the company does have automatic enrolment duties to the member of staff and the director who has a contract of employment.

Example

Company F has 2 directors, who neither have contracts of employment, and two members of staff, who both have contracts of employment within the company. In this example, the company does have automatic enrolment duties to the two members of staff.

Example

Company G has 3 directors and none of them have a contract of employment. At this stage, the company does not have automatic enrolment duties. The company then employs a new director, who is given a contract of employment. At this stage, the company still does not have automatic enrolment duties. The company then employs a member of staff, who is also given a contract of employment. Here, at this stage, the company now does have automatic enrolment duties to the member of staff and the director who has a contract of employment.

In summary

As you can see, the duties of directors can be quite confusing in regards to automatic enrolment, particularly if circumstances change over time. If you do not apply for automatic enrolment duties you must write to The Pensions Regulator or submit a notification informing the regulator online.

The process of submitting an online notification is easier than sending a written letter and you will receive a confirmation email much quicker.

You will also not have to complete the Declaration of Compliance if you do not apply for automatic enrolment duties.

If your circumstances change, as shown in the example with company G, then you must write to The Pensions Regulator and inform them as soon as possible. Penalties may be levied on those who are seen to mislead or provide false information to avoid automatic enrolment duties.

For more help with automatic enrolment please contact us or register for one of our free Auto Enrolment Workshops.

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Natasha Fathers

Director of Hawsons Wealth Management Limited, Sheffield

0114 229 6557
Dividend income shake-up: your questions answered

Dividend income shake-up: your questions answered

Dividend income shake-up: your questions answered

The Chancellor, George Osborne, announced in the Summer 2015 Budget a shake-up in the way dividend income is taxed from April 2016.

As the announcement has added to the complexity of the current dividend system the reaction has been, unsurprisingly, one of confusion over how the new tax will work in practice. In this article we answer the questions you have been asking.

Please click here for the latest developments on dividend changes 2016.

How will the new tax work?

Following the announcement, all taxpayers will have, when the new tax comes into effect, a tax-free dividend allowance of £5,000 a year. The first £5,000 of dividend income in each tax year will be tax-free, and dividend income above this allowance will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers.

This will replace the current system, where those receiving dividends benefit from a tax credit. The tax credit means that basic-rate taxpayers are currently taxed at 0%, higher-rate taxpayers at 25% and additional-rate taxpayers at 30.6%.

The changes are highlighted in the table below:

Dividend income changes April 2016

It is also worth noting that the allowance will not completely exempt £5,000 of dividend from tax. Although no tax will be charged on the first £5,000 of dividend income, it will still count towards total income in determining which tax band applies to any additional dividends.

When does the new dividend tax come into force?

The new tax takes effect on April 6, 2016.

Will the new dividend rules impact personal allowance?

The personal allowance is unaffected by the £5,000 new dividend allowance, and remains available for use against all types of income (including dividends).

As personal allowances are set to rise again, to £11,000 in April 2016, this will mean that a basic-rate taxpayer could potentially have tax-free income of up to £17,000 (including £1,000 personal savings allowance) in the 2016/17 tax year.

Will everyone be worse off under the new regime?

No. While it’s true that the new system will see many pay more, a new £5,000 allowance for all taxpayers and the removal of tax credits will create both winners and losers.

The biggest losers may be those basic-rate taxpayers who receive more than £5,000 in dividends a year, large-scale investors and business owners who currently mix their remuneration between salary, bonus and dividend.

The winners, on the other hand, will be small-scale investors who receive less than £5,000 dividends in a tax year and higher-rate taxpayers who have a dividend income below £21,667.

The examples below shows how the new system will work and, crucially, how basic-rate taxpayers who receive dividends of more than £5,000 will lose, and those higher-rate taxpayers whose dividends do not exceed £21,667 will benefit.

Example 1

Dividends example 3

Example 2

Dividends example 5

I am an owner-manager of my own company. How does this affect my remuneration and profit extraction planning?

Many people in this position are paid a small salary by the company and receive further income by way of dividend. These changes will significantly reduce the tax advantage of taking dividends rather than salary, but for most people it is still likely to be more efficient. Other factors may also be relevant, so this may be a good time to review the planning and timing of extracting income from your company.

What should I do now?

As the new tax rules bring challenges to many, they also bring opportunities – tax planning opportunities – and it is crucial you carefully consider your options in regards to ISAs, pensions, VCTs and how you structure your overall income.

  • Review investments after proper investment advice to maximise the use of the £5,000 exemption.
  • Review dividend policy in your owner-managed business with us well before April 2016.
  • Consider moving shares around the family to maximise the use of the £5,000 exemption.
  • Possibly advance dividends to before the rule change in April 2016 if necessary.

For more information following the changes to how dividend income is taxed get in touch.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.