IFS states high earners ‘increasingly hit by lack of indexation’

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The Institute for Fiscal Studies (IFS) recently published a report which revealed that more people are being ‘dragged into higher rates of tax’ as a result of tax thresholds failing to rise in line with the rate of inflation.

The report states that, in 2007, the year before the top income tax threshold of £150,000 was announced, there were 319,000 individuals with income above this level. The IFS suggested that, as a consequence of the threshold not having moved since it was first announced, there are now 428,000 taxpayers with income above this level.

The report also stated that other tax thresholds being frozen in nominal terms include: the inheritance tax (IHT) threshold, at £325,000; the VAT registration threshold at £85,000, which is set to remain at this level until 2022; and the £110,000 and £150,000 thresholds at which the annual limit on tax-privileged pension saving begins to be reduced. Additionally, the £100,000 threshold at which eligibility for Tax-Free Childcare is removed is not adjusted for inflation.

Paul Johnson, Director of the IFS, commented: ‘Recent governments have, rather stealthily, increased the tax rates on high earners. If the government thinks there is a case for more high-income people to pay more tax, it should be upfront about that view.’

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Business groups react to ‘flexible extension’ of Article 50

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Business groups, including the British Chambers of Commerce (BCC) and the Confederation of British Industry (CBI), have reacted to the six-month ‘flexible’ extension of Article 50, granted to the UK by EU leaders.

The new Brexit deadline of 31 October 2019 has stopped the clock on the UK’s potential no-deal withdrawal from the EU, which had been set for 11pm on 12 April 2019.

Reacting to the news, the BCC stated that the flexible extension will be ‘preferable’ for most businesses. It said: ‘The prospect of a messy and disorderly exit on Friday has again been averted. Businesses will be relieved, but their frustration with this seemingly endless political process is palpable.

‘Politicians must urgently agree on a way forward. It would be a disaster for business confidence and investment if a similar late-night drama is played out yet again in October.’

The CBI said that UK businesses will be ‘adjusting their no-deal plans’ as opposed to cancelling them. Carolyn Fairbairn, Director General of the CBI, said: ‘This new extension means that an imminent economic crisis has been averted, but it needs to mark a fresh start. For the good of jobs and communities across the country, all political leaders must use the time well.’

Meanwhile, the Federation of Small Businesses (FSB) said that Brexit deadline extensions ‘provide no comfort’ that there will be an end to the debating. Mike Cherry, National Chairman of the FSB, said: ‘By October 31, a third of the planned transition period will have been lost. Unless we get a political consensus, all a further extension does is create even more uncertainty, which is driving small firms to despair.’

IMF downgrades global growth forecast

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The International Monetary Fund (IMF) has downgraded its global growth forecast for 2019 to its ‘lowest level’ since the financial crisis.

In its latest World Economic Outlook document, the IMF downgraded its global growth forecast to 3.3% for 2019, and 3.6% for 2020. According to the IMF, the UK, the US and the Eurozone could be adversely affected by slowing global economic growth.

The IMF also stated that global growth could slow ‘even further’ as a result of trade tensions and the ‘uncertainty surrounding Brexit’.

In its report, the IMF said: ‘Amid waning global growth momentum and limited policy space to combat downturns, avoiding policy missteps that could harm economic activity needs to be the main priority.’

Commenting on the matter, Gita Gopinath, Chief Economist at the IMF, said: ‘This is a delicate moment. What we are seeing is a slowing global economy. We’ve reduced our forecast for growth for 2019, and at the same time we are expecting a recovery in 2020.’

TUC states shared parental leave scheme needs ‘overhauling’

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The Trades Union Congress (TUC) has stated that the shared parental leave and pay scheme needs ‘overhauling’, and has urged the government to take action.

The scheme was introduced four years ago, and allows parents to share up to 50 weeks of leave and up to 37 weeks of pay between them.

Research published by the University of Birmingham recently revealed that just 9,200 new parents took shared parental leave and pay in 2017/18.

According to the TUC, one of the reasons for the low take-up is that the scheme is ‘low-paid’: in the 2018/19 tax year, parents were entitled to just £145.18 per week. This amount rose to £148.68 per week for 2019/20. The TUC said that this makes the scheme ‘unaffordable for most fathers’.

Additionally, the business group stated that many fathers are on zero-hour contracts, or are agency workers: such workers are not eligible for shared parental leave. It also highlighted the fact that self-employed parents ‘don’t get any shared leave whatsoever’.

The TUC has called for the scheme to be extended to those who are self-employed, those on a zero-hour contract and to agency workers. It also advocates increasing the rate of pay to ‘at least the minimum wage level’.

Commenting on the issue, Frances O’Grady, General Secretary of the TUC, said: ‘Without better rights to well-paid leave, many new parents will continue to miss out on spending time with their children. And mums will continue to take on the lion-share of caring responsibilities.’

Government commits to implementation of pensions dashboard initiative

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The government has confirmed that it intends to implement its proposed pensions dashboard initiative, which will allow those saving for retirement to view information from multiple pensions in one place.

According to the government, pensions dashboards will ‘open up pensions to millions’, and ‘provide an easy-to-access online view of a saver’s pensions’.

The Department for Work and Pensions (DWP) has confirmed that it intends to put forward primary legislation that will ‘require pension schemes to make consumers’ data available to them through their chosen dashboard’.

‘The government’s commitment to compel pension schemes to share data with platforms through primary legislation is particularly welcome,’ said Mike Cherry, National Chairman of the Federation of Small Businesses (FSB).

‘Some urgency is now required, and we question the three to four-year timeframe for schemes to prepare data for dashboards. Hopefully once the Brexit impasse is resolved we can move back to addressing more critical domestic issues like this one, not least the UK’s late payment crisis, the spiralling costs of doing business and a regressive business rates regime.’

Business leaders urged to ‘do more’ to help prevent cyber-attacks

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Following the publication of the government’s 2019 Cyber Security Breaches Survey, business leaders are being urged to ‘do more’ to protect their firms from cyber-attacks and cybercrime.

The survey showed that 32% of businesses reported experiencing a cyber security breach or attack in the last 12 months. This represents a reduction when compared to last year’s figure of 43%. The reduction has been attributed to the implementation of stringent new data laws, which form the General Data Protection Regulation (GDPR).

The survey also revealed that the average number of security breaches has risen from four in 2018 to six in 2019.

Where a breach resulted in a loss of data or assets, the average cost was £4,180. The most common attacks came via phishing emails, viruses or other malware, including ransomware. Instances of criminals impersonating organisations online were also rife.

Commenting on the survey, Margot James, Minister of State for the Department for Digital, Culture, Media and Sport, said: ‘Following the introduction of new data protection laws in the UK, it’s encouraging to see that business and charity leaders are taking cyber security more seriously than ever before. However, with less than three in ten of those companies having trained staff to deal with cyber threats, there’s still a long way to go to make sure that organisations are better protected.’

Business and charity leaders are being encouraged to follow the ‘ten steps to cyber security’ guidance, which can be found on the National Cyber Security Centre (NCSC) website.

Older workers ‘may be paying unnecessary tax on State Pension’, research suggests

 

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Research carried out by insurer Royal London has suggested that half a million older workers could be ‘paying unnecessary tax’ on their State Pension.

Royal London stated that this is because older workers have ‘failed to take up the option of deferring their State Pension until they stop work’. Consequently, the whole of their State Pension is taxed.

The research revealed that, in 2017, 1.1 million people aged 65 or over were working. 950,000 of these individuals were combining paid work with taking a State Pension.

According to Royal London, 520,000 individuals were ‘earning enough to take them over the tax threshold’, meaning that the entirety of their State Pension was taxed.

‘There has been a huge increase in the number of people working past the age of 65, and this research finds that most of these people are claiming their State Pension as soon as it is available,’ said Steve Webb, Director of Policy at Royal London.

‘For around half a million workers, this means every penny of their State Pension is being taxed, in some cases at the higher rate.

‘If their earnings are enough to support them, it makes sense to consider deferring taking a State Pension so that less of their pension disappears in tax.’

As your accountants, we can help you to minimise your tax liability. For more information, please contact us.