1. Personal Allowance to rise to £10,000 from 6 April 2014
This will help those on low income and clients / contacts who live overseas but remain taxable on UK rental income. Of course this will not benefit those earning above £118,880 for 2013/14 who since 6 April 2010 no longer qualify for the personal allowance and whose tax liability actually goes up due to the consequent reduction in the basic rate band.
2. Changes to tax relief for Childcare
Income tax relief via a new childcare account will be introduced from Autumn 2015 for up to 20% of childcare costs or £6000 per child @ 20% = £1,200. The self employed and non taxpayers will now get some help. However this may mean some losers who are presently claiming per parent at the top rate and use cost-effective childcare voucher providers like that offered by our sister business – DIY Childcare Vouchers – http://www.diychildcarevouchers.co.uk/
3. Increase in Inheritance Tax (IHT) limits for “Non Dom” husbands and wives
Currently if one spouse is not from the UK and is thus non-domiciled only the first £55,000 of capital passing from one spouse to another is exempt from IHT. As previously announced this will increase to the same as the IHT nil rate band – currently £325,000. Non-domiciled spouses will also be able to make an election to be treated as UK domiciled for IHT purposes from April 2013.
4. Capital Gains Tax benefits of the Seed Enterprise Investment scheme to be extended to 5 April 2014
For gains reinvested in the two tax years to 5 April 2014 relief will be available for half the reinvested gain instead of all of the gain as presently.
5. New Employment allowance of £2,000 off payroll costs
Small businesses and charities will be entitled from April 2014 to a reduction of £2000 per year from their Employers Class One National Insurance bill – currently 13.8% of gross pay.
Of course there were many other matters covered in the budget. There are some good summaries from the BBC budget site or on the HMRC site here. Please seek advice before taking action as a result of this note.
I have recently started doing more work again on reduced rate applications submitted to the Foreign Entertainers Unit at HMRC. Along with many other countries, in the UK income arising to non UK entertainers and sportspeople is subject to Withholding Income Tax at 20% (22% before 5 April 2008). This is charged even if the artiste provides their services through a corporation.
Under the terms of most UK double tax treaties there is a clause excluding the services of entertainers and sportspeople from the “independent services” provision. This means they are taxable here even if they are not tax resident in the UK and do not have a permanent establishment or place of business here.
However many people are still not aware that it is possible to approach the Revenue authorities beforehand to agree that the withholding is based on the projected profit rather than the gross income. This will usually mean that the artiste has no further income tax to pay and probably will not be asked to complete a UK tax return.
The artiste will usually obtain tax credit for the FEU UK deducted through his or her overseas tax return. However under many countries’ domestic tax legislation the tax payer is required to mitigate his or her liability as far as possible otherwise they will only get credit for the tax that was due in the UK not just the possibly higher amount they actually did pay on gross turnover. It is not enough therefore just to pay the tax and expect to get credit for it back in the home country. Relief may be restricted.
I have over ten years experience in this area with major and upcoming artistes and would pleased to help any clients legitimately reduce their UK tax liabilities.