Brexit: impact on investments, pensions and tax

Brexit: impact on investments, pensions and tax

Brexit: impact on investment, pensions and tax

On 23rd June 2016 the UK voted to leave the European Union.

Brexit has created an air of uncertainty and no one really knows what’s coming next or what it could all mean in the long term; however, many individuals are rightly concerned about what the UK’s decision to leave the European Union may mean for their investments, pensions and overall personal finances.

For many, the UK’s decision to exit the European Union has raised more questions than it has answered.

It is important to stress at this point that the long term impact of Brexit on investments and pensions is extremely difficult to predict, and we recommend that you seek professional advice before taking any action. Much of what happens over the coming months and years will depend on the terms that the government is able to negotiate post-exit.

Investments

The markets were very volatile during the run-up to the EU referendum and, as predicted, the markets have now reacted to the UK’s Brexit vote. Uncertainty has created even greater volatility in the markets, not just in the UK but globally and investors cannot be blamed for feeling unnerved at the moment.

As expected, in the short term at least, it has also caused a weakening of the pound.

We understand this might be a cause of concern for investors, but it is important to stress that market volatility will not last and the markets should bounce back. At times like this it sensible to step back and focus on your long-term investment objectives – it is important to remember your reasons for investing in the first place.

Pensions

Whether you are approaching retirement or have only just started thinking about saving for the future, you may be wondering what implications Brexit will have on your pension pot.

As with investments, the uncertainty created by Brexit will inevitably lead to turbulent markets over the coming weeks and months, perhaps even longer. There is no immediate impact on pensions legislation.

The value of the state pension is currently protected by the triple lock, which guarantees they are uprated by a certain level. However, this is one area of UK legislation that the government could look to change in the near future. Whether any changes to the triple lock comes to pass, however, remains to be seen.

Tax

The EU has certainly had a significant influence on the UK tax system, perhaps most notably with regard to VAT. So what happens next? Will the Brexit vote result in a complete overhaul of UK tax as we know it?

Read our article on the potential tax implications of Brexit here.

In summary

Now Brexit is confirmed, we are entering a period of uncertainty and nobody really knows what the future holds. The key message for individuals looking to preserve their wealth is to stay calm and avoid taking any unnecessary risks.

In the meantime, we will continue to monitor events closely and keep up you updated on key developments.

Make sure you register for our e-news here to stay up-to-date with our articles.

Request a tailored financial review

We recommend that you take your time to understand your options now Brexit is confirmed, and seek sound and proactive independent financial advice as what you decide now will affect the rest of your life.

If you would like a financial review and recommendation of your individual situation following the UK’s vote to leave the European Union, we will carry out an extensive assessment of your personal financial circumstances and establish your financial planning requirements.

Please click here to request a meeting to discuss your financial review and recommendation.

Free initial meeting

Natasha Fathers, Director of HWM

Natasha Fathers

Director of Hawsons Wealth Management Limited, Sheffield

0114 229 6557
Brexit: significant implications for the charity sector?

Brexit: significant implications for the charity sector?

Brexit: significant implications for the charity sector?

Now Brexit is confirmed, many charities and non-for-profit organisations may be thinking about how the UK’s exit from the European Union may impact them.

The impacts for the charity sector on the back of Brexit will of course be wide ranging, depending on how individual organisations raise their money. As for many UK businesses, with so many questions remaining unanswered, it is difficult to predict what may happen over the coming months and years.

Most charities, however, will be rightly concerned about any negative impacts to the UK economy that Brexit will bring and how that will in turn impact the charity sector. This article looks at how charities could face a triple setback, with potential falls in donations, cuts in government funding and the loss of EU funding. On the flip side, we also look at how an exit from the European Union could bring about some positive changes for charities and not-for-profit organisations.

Fundraising

As well as yearly National Minimum Wage increases, the introduction of the new National Living Wage, the ongoing onset of auto enrolment and the forthcoming apprenticeship levy have led to employee wage growth being largely stagnated. The most recent statistics show that household disposable income has fallen by 0.6% in recent years.

Household disposable income is strongly linked to donations so this is a growing concern.

Charities themselves are also facing increasing input costs, partially due to the significant rises in employment costs and wage bills noted above. Brexit therefore brings potentially huge financial implications for many charitable organisations.

In the short term, as many individuals consider when and how they may be affected by the UK’s exit from the European Union, charities could see fewer donations. A strong and stable economy is essential for both individuals and businesses feeling able to donate or gift to charity. Those charities that rely heavily on public support through cash appeals and discretionary donations will be hit the hardest, and may have to look to additional income streams.

In the long term, much will depend on the terms the UK is able to negotiate post-exit.

EU and government funding

A large number of UK charities and not-for-profit organisations have received substantial EU funding over the last few years. The most recent figures show that the UK charity sector received over £200m from the EU in 2014.

The government could, in theory, continue to support the sector by matching all EU funding when the UK does leave. However, it is unlikely to do this given the uncertainty over public finances.

Instead, there are major concerns that charities could face further funding cuts from local councils on the back of the Brexit vote. The Chancellor, George Osborne, had said (prior to the result) that the government may need to cut public spending and increase taxes in an emergency Budget if the UK voted to leave the European Union. Whether this comes to pass remains to be seen – the government could of course increase charity sector funding.

Charities will be cautious about the prospects of an emergency Budget as no significant funding commitments have been given to the charity sector in recent months, even when the 2015 Autumn Statement and the 2016 Budget both presented opportunities for the government to pledge its support.

The potential positives…

Brexit has created an air of uncertainty and no one really knows what’s coming next or what it could all mean in the long term.

There are still many unanswered questions about Brexit but, on a more positive note, an exit from the European Union could lead to a reduction in legislative burden for the charity sector. The charity sector is affected by a range of EU legislation which, in theory, would no longer apply when the UK leaves the EU. A reduction in legislative burden would be a benefit to the sector, giving organisations more time and resources to support their beneficiaries.

Additionally, there could be some positive tax implications for the charities. The EU has certainly had a significant influence on the UK tax system, perhaps most notably with regard to VAT. Following Brexit, the UK will be free to decide which goods or services are eligible for reduced rates or exemptions. Read our article on the potential tax implications of Brexit here.

Much of this, however, will depend on the terms that the government is able to negotiate post-exit.

Action points for charities

Trustees have overall responsibility for how a charity is run, including how its finances are managed, and the key action point for many trustees will be to review current fundraising strategies and income streams.

Trustees therefore need to make sure that they understand what funding is in place to enable the charity to meets its objectives in the short, medium and long term. They also need to make the arrangements to enable a ‘plan b’ to be put in place if funding streams do dry up, be that individual donations or government funding. In particular, if your charity currently receives EU funding then you need to start planning now for how you will replace that revenue.

More from our charity experts

You can find all of our latest charity 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.

Simon Bladen Partner

Simon Bladen is the partner responsible for looking after the firm’s legal clients and has worked at Hawsons throughout his career. For more information or advice on anything covered in this article, please contact Simon on [email protected] or 0114 226 7141.[/author_info]

Brexit: tax implications as the UK votes to leave the EU

Brexit: tax implications as the UK votes to leave the EU

Brexit: tax implications as the UK votes to leave the EU

From the argument over selling bendy bananas to the threat of an emergency Budget, the EU referendum campaign has undoubtedly had its share of the headlines over the past couple of months.

The biggest headline now though is of course that the UK has voted to leave the EU.

So what happens next? Will the Brexit vote result in a complete overhaul of UK tax as we know it?

The purpose of this short article is to briefly explore some of the potential tax implications of the UK’s decision to leave the EU. It is important to stress that the impact of Brexit on UK taxes is extremely difficult to predict at this stage, since many questions remain unanswered.

VAT

The EU has certainly had a significant influence on the UK tax system, perhaps most notably with regard to VAT. VAT is essentially an EU driven tax and leaving the EU could result in significant changes to this area of tax.

Whilst the UK may no longer be obliged to have a VAT system once post-exit terms have been agreed, it is fairly safe to assume that VAT will not be abolished given its contribution to the Treasury.

The UK will, however be free to decide which goods or services are eligible for reduced rates or exemptions. Freedom from strict EU VAT rules could, for example, allow the government to remove the 5% VAT charge on domestic fuel that is currently required by the EU – a change proposed by the Vote Leave campaign during the referendum.

Even if no amendments are made to VAT law in the UK, there could be changes in how HMRC applies VAT legislation because interpretations of the VAT rules would no longer be bound by decisions made by the European Court of Justice.

It is unclear at this stage how the VAT treatment of the UK’s trade with the EU will be affected – this will depend on the terms the UK is able to negotiate post-exit. It may be that trade could continue in much the same way as before if the UK is able to obtain access to the single market, or alternatively UK exporters may be subject to EU import VAT and Customs duties.

The Brexit is likely to create winners and losers for both businesses and consumers.

Emergency Budget

During the lead up to the EU referendum, the Chancellor warned that an Emergency Budget would be necessary to plug a potential revenue gap in public finances following a vote to leave. An Emergency Budget could of course bring significant changes to the UK tax system and possible tax rises.

The Chancellor has previously spoken about a 2% rise in the basic tax rate (currently 20%) and a 3% rise in the higher rate (currently 40%). He also indicated that the rate of Inheritance Tax might rise by 5% (currently 40%).

However, there is also an expectation that the government’s focus will be on delivering an upbeat message on the UK economy, in an attempt to calm the markets and boost the UK’s attractiveness as a place for doing business. Therefore, instead of making any immediate tax rises, the government may perhaps look to extend the period of austerity beyond 2020.

Business owners would certainly welcome clear timeframes and roadmaps for future UK tax legislation to help them through what will undoubtedly be a period of certainty.

Other taxes

A total overhaul of UK taxes is unlikely to happen because of Brexit alone. A large proportion of the UK’s taxes are entirely domestic in nature, and the Brexit by itself won’t directly change any of these.

There may be small changes to the Gift Aid rules, which could affect UK taxpayers who wish to donate to EU-based charities. At present, UK taxpayers can make donations to EU charities and benefit from UK Gift Aid tax relief, however this approach could be changed post exit.

It will be interesting to see how the UK’s existing commitment to international tax agreements will be affected, both in terms of corporate tax and increased transparency.

In summary

The UK tax system will probably remain largely unchanged following Brexit. The most significant changes are predicted to revolve about VAT, but most of these changes are expected to be gradually implemented and will emerge over time, as the UK negotiates post-exit terms. We will keep you updated.

The real, practical tax implications of the UK’s decision to leave the EU will vary from business to business.

We will continue to comment on Brexit as matters develop, focusing on the potential implications for individuals and employers, across a number of different UK sectors. You can find all of our Brexit related articles here.

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.

 

 

Craig Walker is a senior tax manager at the firm. He advises on all matters tax related, both corporate and personal, including income, capital gains and inheritance. For more details and advice, please contact Craig on [email protected] or 0114 266 7141.

Gift Aid rules 2016

Gift Aid rules 2016

Gift Aid Rules 2016

The Gift Aid scheme is now 25 years old and is worth a great deal to the charity sector. In its first year charities benefited from £10 million of tax savings but, with substantial increases, the savings were worth nearly £1.2 billion in 2014/15.

However, HMRC is concerned it might be paying Gift Aid to charities where a donor has not paid tax and, as a result, has changed the Gift Aid declaration wording that charities should use. This change to Gift Aid declaration wording came into force on 6 April 2016, but this article is a worthwhile reminder for charities and Gift Aid donors about the new rules.

Changes to the Gift Aid declaration wording

In April 2016, the new Gift Aid declaration rules came into force. The declaration is the means by which the taxpayer agrees that the donation comes within the scheme and allows the tax reliefs to flow through to the charity and the taxpayer.

The length of the HMRC model Gift Aid declaration wording is something that charities have complained about, stating it was too long and confusing for donors. As part of theses changes the wording has been simplified and shortened.

However, in doing so, the new Gift Aid declaration rules clarified that if an individual has not paid sufficient tax to cover the tax reclaimable by the charity on the donation, the individual is responsible for paying the difference to HMRC.

What charities need to do

The new Gift Aid declaration rules should have been in use from the 6 April 2016.

However, If an individual has signed an old style declaration form which covers multiple donations, there is no need for that individual to make a new declaration. Additionally, if a charity holds stocks of printed materials that were ordered and printed before 21 October 2015, that stock can continue to be used.

A declaration by a donor can alternatively be made verbally or online (e.g. via a website). All charities that make Gift Aid claims should update the wording and layout of all printed, web, text or other declarations.

Whichever format is used, charities need to ensure the updated format is used.

What donors need to do

Some donors may need to revoke their Gift Aid declarations.

Individuals who expect to pay little or no tax in 2016/17 need to be aware of the dangers of signing new declarations as well as the effects of having signed declaration forms which cover multiple donations. The standard wording on many declarations state ‘I want to Gift Aid my donation of £_____ and any donations I make in the future or have made in the past 4 years’.

Note the italicised words. Due to various changes in the personal tax regime in recent years – in particular the increases in the personal allowance and the introduction of a £1,000 savings allowance in 2016/17, there are many more individuals who will not be paying income tax in 2016/17. So, for example, if a non-taxpaying individual makes £80 of donations to a charity this tax year, the charity will claim £20 and the individual has a £20 liability to HMRC.

Such individuals need to get in touch with the charities to cancel the Gift Aid declarations. Cancellation will not affect Gift Aid donations already made but any further donations will not qualify.

There are also many higher or additional rate taxpayers who have signed declarations but have not claimed the difference between the rate they pay and basic rate on their donations. It is quite straightforward to do this, either through a Self Assessment tax return or by asking HMRC to amend their tax code.

More from our charity experts

You can find all of our latest charity 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.

Simon Bladen Partner

Simon Bladen is the partner responsible for looking after the firm’s legal clients and has worked at Hawsons throughout his career. For more information or advice on anything covered in this article, please contact Simon on [email protected] or 0114 226 7141.[/author_info]

P11D deadline reminder – are you ready for 6 July 2016?

P11D deadline reminder – are you ready for 6 July 2016?

Important reminder for employers: the P11D deadline is 6th July 2016.

The forms P11D, and where appropriate P9D, which report details of expenses and benefits provided to employees and directors for the year ended 5 April 2016, are due for submission to HMRC by 6 July 2016.

The process of gathering the necessary information can take some time, so it is important that this process is not left until just before the P11D deadline and that you start preparing now if you have not already done so.

Employees pay tax on benefits provided as shown on the form P11D, either via a PAYE coding notice adjustment or through the self assessment system. In addition, the employer has to pay Class 1A National Insurance Contributions (NIC) at 13.8% on the provision of most benefits. The calculation of this liability is detailed on form P11D(b).

The deadline for payment of the Class 1A NIC is 19th July (22nd for cleared electronic payment).

For help with the completion of your forms P11D or the calculation of the associated Class 1A NIC, please 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.

 

 

Craig Walker is a senior tax manager at the firm. He advises on all matters tax related, both corporate and personal, including income, capital gains and inheritance. For more details and advice, please contact Craig on [email protected] or 0114 266 7141.