Newsletter - May 2018
Welcome to this month's newsletter,
Our newsletter this month includes: tax planning opportunities if you intend to live in the border areas of Scotland or Wales; a change in the tax treatment of certain payments in lieu of notice; details of who can or cannot qualify for the minimum wage; and circumstances that may change your entitlement to tax credits.
Our next newsletter will be published on Thursday, 7th June 2018.
Location is everything
Who qualifies for the minimum wage
Why tax credit payments can change
Payments in lieu of notice
Tax Diary May/June 2018
STAMP DUTY / Location is everything
Now that Wales and Scotland have devolved powers for taxation purposes, residents that live and work in the border areas with England have more planning options.
Wales have their own stamp duty regime from April 2018, the Land Transaction Tax (LTT), and Scotland, from April 2015, the Land & Building Transaction Tax (LBTT). Scotland have devolved powers to set their own rates of Income Tax.
Regarding property purchases, this can create interesting differences for individuals buying in the border areas of Wales/England and Scotland/England. For example:
Consider Llanymynech, a village that straddles the border between Powys (Wales) and Shropshire (England). The amount of stamp duty payable on an identically priced house, say £179,000, would cost the buyer £1,080 in Stamp Duty Land Tax if bought in the English side of the village, but no Land Transaction Tax would be payable for an equivalently priced house on the Welsh side of the village. A definite incentive to buy in this price bracket the Welsh side of the border.
If you live in the Scotland/England border areas and you are contemplating the purchase of an expensive property and your budget is £1m, you may want to consider the following numbers:
- Buying in Scotland would cost you £78,350 in Land & Building Transaction Tax, and
- Buying in England would cost you a mere £43,750 in Stamp Duty Land Tax.
PAYROLL / Who qualifies for the minimum wage
|As you would expect there are a range of conditions that affect the answer to this question. We have reproduced below a summary of the main conditions to be observed.
Workers must be at least school leaving age to get the National Minimum Wage. They must be 25 or over to get the National Living Wage.
Contracts for payments below the minimum wage are not legally binding. The worker is still entitled to the National Minimum Wage or National Living Wage.
Workers are also entitled to the correct minimum wage if they are:
TAX CREDITS / Why tax creit payments can change
|If you are claiming tax credits make sure that you keep an eye on changes that may affect the amount you receive.
Your payments can go up if:
Your payments can go down or stop if:
EMPLOYMENT LAW / Payments in lieu of notice
|Up to 5 April 2018, certain payments in lieu of notice were not taxable, primarily, those not contractually required to be made.
This is no longer the case.
Employers will now need to pay Income Tax and Class 1 National Insurance contributions (NICs) on an element of all termination payments from 6 April 2018, whether or not they are contractual payments.
The element that is now chargeable to Income Tax and NIC is the amount of the termination payment that represents payment in lieu of notice (PILON). This change applies to payments, or benefits received on, or after, 6 April 2018 in circumstances where the employment also ended on, or after, 6 April 2018. This follows an announcement at Budget 2016 that government would introduce rules to prevent employers from manipulating the system.
This measure is intended to bring fairness and clarity to the taxation of termination payments by making it clear that all PILONs, rather than just contractual PILONs, are taxable earnings.
All employees will pay Income Tax and Class 1 NICs on the amount of basic pay that they would have received if they had worked their notice in full, even if they are not paid a contractual PILON.
This means the tax and NIC consequences are the same for everyone and are no longer dependent on how the employment contract is drafted or whether payments are structured in some other form, such as damages.
TAX DIARY - May/June 2018
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DISCLAIMER - PLEASE NOTE: The ideas shared with you in this newsletter are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.