PLANT AND MACHINERY

The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.

Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building, computers, cars, vans and similar equipment used in a business.

There are special rules for cars and certain ‘environmentally friendly’ equipment.

Plant and machinery allowances may be available to owners of commercial property which is let out to a business.

The Annual Investment Allowances (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.

Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.

Structures and Buildings Allowance is introduced from 29 October 2018 at a rate of 2% on a straight line basis.

AIA

Special rules apply to accounting periods straddling the dates shown in the tables below.

The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies:

AIA limits – sole traders and partnerships:

OTHER PLANT AND MACHINERY ALLOWANCES

Expenditure upon which AIA is not given/claimed will obtain relief through the ‘Main rate pool’ or the ‘Special rate pool’ rather than each item being dealt with separately.

The annual rate of WDA is 18% in the main rate pool and 6% in the ‘Special rate pool’. The 8% WDA is reduced to 6% from April 2019. Special rules apply to accounting periods straddling this date.

A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

CARS

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.

AIA is not available on any car but a 100% first year allowance may be available on certain cars. To qualify for first year allowance, the car must be purchased new.

Cars acquired from April 2018:

There are annual tax free allowances (the ‘annual exempt amount’) for individuals, trustees and PRs. Companies do not have an annual exempt amount.

For individuals net gains are added to ‘total taxable income’ to determine the appropriate rate of tax. The standard rate applies only to the net gains which, when added to total taxable income do not exceed the ‘basic rate band’.

Gains which qualify for ‘Entrepreneurs’ Relief’ or ‘Investors’ Relief’ are charged at 10% for the first £10m of qualifying gains.

The higher rate applies to higher rate and additional rate taxpayers.

Additionally, higher rates of 18% and 28% may apply to the disposal of certain residential property.

IHT may be payable when an individual’s estate is worth more than the IHT nil rate band when they die.

Lifetime and death transfers between UK domiciled spouses are exempt from IHT.

For 2019/20, a further nil rate band of £150,000 (2018/19 – £125,000) may be available in relation to current or former residences.

The IHT threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the previous death.

There are reliefs for some business and farming assets which reduce their value for IHT purposes.

IHT may also be payable on gifts made in an individual’s lifetime but within seven years of death.

Some lifetime gifts are exempt.

Transfers of assets into trust made in an individual’s lifetime may be subject to an immediate charge but at lifetime rates.

There are also charges on some trusts.

THRESHOLD

Standard nil rate band: £325,000

RATES

RELIEFS FOR LIFETIME GIFTS

Annual Exemption: £3,000

Small Gifts: £250

Marriage: The amount of relief depends on who the gift is from…

REDUCED CHARGE ON GIFTS WITHIN SEVEN YEARS OF DEATH

National Minimum Wage rates apply to employees up to the age of 24.

National Living Wage rates apply to employees 25 and over.

The Apprentice rate applies to apprentices under 19, or 19 and over in the first year of apprenticeship.

Penalties apply to employers who fail to pay minimum wages.

CLASS 1

Employees start paying Class 1 NIC from age 16 (if sufficient earnings).

Employers pay Class 1 NIC in accordance with the table below.

Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 13.8% to 0% up to the Upper Secondary Threshold.

Employees Class 1 NIC stop when they reach their ‘State Pension age’. The employer’s contribution continues.

EMPLOYEES

2019/20:

Entitlement to state pension and other ‘contribution-based benefits’ is retained for earnings between £118 and £166 per week

2018/19:

Entitlement to state pension and other ‘contribution-based benefits’ is retained for earnings between £116 and £162 per week

EMPLOYERS

2019/20:

2018/19:

OTHER NATIONAL INSURANCE PAYABLE BY EMPLOYERS

Class 1A

13.8% on broadly all taxable benefits provided to employees.

Class 1B

13.8% on PAYE Settlement Agreements.

CLASS 2 AND 4 (SELF-EMPLOYED)

A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits).

Class 2 NIC stop when a person reaches State Pension age.

Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

2019/20:

2018/19:

1. No Class 2 is due if the amount of trading profits assessable to income tax and Class 4 NIC is below this figure. However, a person might decide to carry on paying Class 2 voluntarily to accrue entitlement to the State Pension and entitlement to other benefits.

CLASS 4

2019/20:

2018/19:

CLASS 3

A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.

Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Flat rate per week: £15.00 (2018/19: £14.65)

TAX RELIEF ON PENSION CONTRIBUTIONS

Tax relief available for personal contributions is the higher of £3,600 (gross) or 100% of relevant earnings.

Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual.

The limit may be reduced to £4,000 once money purchase pensions are accessed.

Where the £40,000 limit is not fully used it may be possible to carry the unused amount forward for three years.

The annual allowance is tapered for those with adjusted income over £150,000. For every £2 of income over £150,000 an individual’s annual allowance will be reduced by £1, down to a minimum of £10,000.

Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’ for the purposes of the business. The tax relief for large contributions may be spread over several years.

PENSIONS AUTOMATIC ENROLMENT

Auto enrolment places duties on employers to automatically enrol ‘workers’ into a work based pension scheme. Employers are required to automatically enrol all ‘eligible jobholders’ into a qualifying pension scheme and pay pension contributions on their behalf.

PHASING IN OF CONTRIBUTIONS

Where the employer does not make the total minimum contribution the employee is obliged to pay the balance.

STATE PENSIONS

The basic State Pension is a regular payment from the government that an individual may be entitled to when they reach ‘State Pension age’.

The basic State Pension depends on the number of years an individual has paid National Insurance or got National Insurance credits, eg while unemployed or claiming certain benefits.

To receive the basic State Pension an individual must have paid or been credited with National Insurance contributions (NIC).

In 2016 the State Pension was reformed into a single-tier new State Pension. In order to benefit from the full amount the individual will need 35 years, rather than the previous 30 years of NIC or credits for the full amount, with pro-rating where 35 years is not achieved. You will usually need 10 qualifying years to get any State Pension. The amount an individual receives can be higher or lower depending on their National Insurance record. It will only be higher if you have over a certain amount of Additional State Pension.

Currently an individual may also be entitled to the Additional State Pension. How much an individual gets depends on the number of qualifying years of NIC, the amount of earnings and whether the individual has been contracted out of the scheme.

STAMP DUTY

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction. If you buy shares electronically Stamp Duty Reserve Tax (SDRT) is payable. For shares purchased using a stock transfer form, you will pay Stamp Duty if the transaction is over £1,000.

STAMP DUTY LAND TAX

SDLT is payable on land and property transactions in England and Northern Ireland.

Property transactions in Scotland are subject to Land and Buildings Transaction Tax (LBTT).

Property transactions in Wales are subject to Land Transaction Tax (LTT).

RESIDENTIAL PROPERTY

The rates apply to the portion of the total value which falls within each band.

These rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

FIRST-TIME BUYER RELIEF

First-time buyers may be eligible for first time buyer relief on purchases of residential property up to £500,000. The rates apply to the portion of the total value which falls within each band.

NON-RESIDENTIAL PROPERTY

The rates apply to the portion of the total value which falls within each band.

LAND AND BUILDINGS TRANSACTION TAX

Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland.

RESIDENTIAL PROPERTY

The rates apply to the portion of the total value which falls within each band.

Rates may be increased by 4% (3% prior to 25 January 2019) where further residential properties, costing over £40,000, are acquired.

First-time buyer relief raises the zero tax threshold for first-time buyers from £145,000 to £175,000.

NON-RESIDENTIAL PROPERTY

The rates apply to the portion of the total value which falls within each band. Different rates and bands applied prior to 25 January 2019.

LAND TRANSACTION TAX

Land Transaction Tax (LTT) is payable on land and property transactions in Wales.

RESIDENTIAL PROPERTY

The rates apply to the portion of the total value which falls within each band. Rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

NON-RESIDENTIAL PROPERTY

The rates apply to the portion of the total value which falls within each band.

Payments may be required from an employer if an employee is not at work for a variety of reasons.

There are detailed conditions for an employee to qualify for any of these statutory payments.

Employees are only eligible for a statutory payment if they have sufficient average weekly earnings of at least the lower earnings limit.

2019/20:

Average weekly earnings £118 or over.

With the exception of Statutory Sick Pay, statutory payments may be payable at 90% average weekly earnings throughout the payment period in certain circumstances. This applies where 90% weekly earnings are less than the standard rate of £148.68.

2018/19:

Average weekly earnings £116 or over.

With the exception of Statutory Sick Pay, statutory payments may be payable at 90% average weekly earnings throughout the payment period in certain circumstances. This applies where 90% weekly earnings are less than the standard rate of £145.18.

STATUTORY SICK PAY

Payments may be required from an employer if an employee is too ill to work.

SSP is generally payable for a period up to 28 weeks.

STATUTORY MATERNITY PAY

Payments may be required from an employer when an employee takes time off to have a baby.

SMP is payable for a period up to 39 weeks.

STATUTORY PATERNITY PAY

Payments may be required from an employer when an employee takes time off during their partner’s Statutory Maternity Pay period.

Payment is for a period of either one or two complete weeks.

SHARED PARENTAL PAY

Payments may be required from an employer when an employee takes time off following the curtailment of the period of SMP by the mother.

Payment is for up to a maximum of 37 weeks and is dependent on the mother’s unused SMP period.

STATUTORY ADOPTION PAY

Payments may be required from an employer when an employee takes time off when they adopt a child.

Payment is for a period up to 39 weeks.

ENTERPRISE INVESTMENT SCHEME (EIS)

The Enterprise Investment Scheme (EIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. Individuals are entitled to relief on investments in certain unquoted trading companies through EIS. A junior version of EIS the SEIS is also available.

Maximum investment per annum: £1,000,000

Additional investment limit where investing in knowledge-intensive companies: £1,000,000

Income tax relief: 30%

CGT treatment on disposal if held for 3 years: Exempt

Capital gains from the disposal of other assets may be deferred by making an EIS investment.

SEED ENTERPRISE INVESTMENT SCHEME (SEIS)

The Seed Enterprise Investment Scheme (SEIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. SEIS is a junior version of EIS.

Maximum investment per annum: £100,000

Income tax relief: 50%

CGT treatment on disposal if held for 3 years: Exempt

An individual who makes a capital gain on another asset and uses the amount of the gain to make a SEIS investment will not pay tax on 50% of the gain (subject to certain conditions).

SOCIAL INVESTMENT RELIEF (SIR)

Social Investment Relief (SIR) is designed to encourage private individuals to invest in social enterprises including charities. Individuals are entitled to relief on their investment:

Maximum investment per annum: £1,000,000

Income tax relief: 30%

CGT treatment on disposal if held for 3 years: Exempt

Capital gains from the disposal of other assets may be deferred by making a SIR investment.

(All reliefs are subject to detailed conditions being met.)

VENTURE CAPITAL TRUSTS (VCTS)

Venture Capital Trusts (VCTs) are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies. VCTs operate by indirect investment through a mediated fund. In effect they are very like the investment trusts that are obtainable on the stock exchange, albeit in a high-risk environment. Individuals are entitled to relief on investments in VCTs.

Maximum investment per annum: £200,000

Income tax relief: 30%

Dividend income: Exempt

Capital gains treatment on disposal: Exempt

(All reliefs are subject to detailed conditions being met.)

Registered businesses charge Value Added Tax (VAT) on their sales. This is known as output VAT and the sales are referred to as outputs.

Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.

There are three rates: standard which applies to most goods and services, reduced rate for some goods and services such as home energy and zero rate goods and services, for example, most food and children’s clothes.

Some supplies are exempt from VAT for example postage stamps, financial and insurance transactions.

A business is required to register for VAT if the value of taxable supplies exceeds the annual registration limit.

The government has frozen the VAT registration and deregistration limits for two years from 1 April 2018.

RATES

Standard: 20% (unchanged from 2018/19)

Reduced: 5% (unchanged from 2018/19)

LIMITS

Annual Registration Limit (1.4.19 to 31.3.20): £85,000 (unchanged from 2018/19)

Annual Deregistration Limit (1.4.19 to 31.3.20): £83,000 (unchanged from 2018/19)

CAR BENEFIT

The car benefit is calculated by multiplying the car’s list price, when new, by a percentage linked to the car’s CO₂emissions.

For diesel cars generally add a 4% supplement (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard). The overall maximum percentage is capped at 37%.

The list price includes accessories.

The list price is reduced for capital contributions made by the employee up to £5,000.

Special rules may apply to cars provided for disabled employees.

For cars registered before 1 January 1998 and cars with no agreed CO₂ emissions the charge is based on engine size.

2019/20:

2018/19:

Note…

1. Round down to nearest 5gm/km for values above 95

CAR FUEL BENEFIT

Car fuel benefit applies if an employee has the benefit of private fuel for a company car.

The benefit is calculated by applying the percentage used to calculate the car benefit by a ‘fuel charge multiplier’.

The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.

Fuel charge multiplier: £24,100 (2018/19: £23,400)

VAN BENEFIT

Van benefit is chargeable if the van is available for an employee’s private use.

A fuel benefit may also be chargeable if an employee has the benefit of private fuel paid for in respect of a company van.

The charges do not apply to vans if a ‘restricted private use condition’ is met throughout the year.

A reduced benefit charge may apply to vans which cannot emit CO₂ when driven.

Van benefit: £3,430 (2018/19: £3,350)

Fuel benefit: £655 (2018/19: £633)

ADVISORY FUEL RATES FOR COMPANY CARS

Advisory rates only apply where employers reimburse employees for business travel in a company car or require employees to repay the cost of fuel used for private travel in a company car. If the rate paid per mile of business travel is no higher than the advisory rate for the particular engine size and fuel type of the car, HMRC will accept that there is no taxable profit and no Class 1 NIC liability.

FROM 1 MARCH 2019:

Petrol

Diesel

LPG

NOTES…

1. Hybrid cars are treated as either petrol or diesel cars for this purpose.

MILEAGE ALLOWANCE PAYMENTS (MAPS) FOR EMPLOYEES

MAPs represent the maximum tax free mileage allowances an employee can receive from their employer for using their own vehicle for business journeys.

An employer is allowed to pay an employee a certain amount of MAPs each year without having to report payments to HMRC.

If the employee receives less than the statutory rate, tax relief can be claimed on the difference.

2019/20 AND 2018/19: