Mike Tombs's Blog

This blog provides information about tax, accounting and other issues affecting small owner-managed businesses in the UK. It is intended as a general source of information but you should not assume that everything applies to your specific circumstances. We are always happy to discuss providing tailor-made solutions to suit your individul needs. Visit www.tlaservices.co.uk to sign up for our free monthly Tax Tips and News newsletter.

Monthly Archives: April 2017

Increase in the cash basis threshold

As announced at the 2017 Spring Budget, the threshold for traders using the cash basis for accounting purposes is increasing from 6 April 2017. This change forms part of the Government’s initiative for simplifying tax paid by unincorporated businesses and runs alongside the Making Tax Digital project.

Under the cash basis, small businesses are taxed on the basis of the cash that passes through their books, rather than being asked to spend their time doing calculations designed for big businesses. General partnerships may use the cash basis – as long as the partnership meets the receipts and other entry criteria, the partners are all individuals, and either there is no individual treated as controlling the partnership, or any such individual would be eligible to use the cash basis if they were conducting the business as a sole trader.

Amendment to the existing legislation (currently contained in ITTOIA 2005, Part 2, Chapter 3A) takes effect from 6 April 2017 (operative for 2017/18 onwards) and increases the threshold for the cash basis from £83,000 to £150,000. This measure is expected to have a significant impact on businesses. An estimated 135,000 additional small businesses will be eligible to choose the cash basis for their business, with 87,000 estimated to take up that choice.

The exit threshold will continue to be set at double the entry threshold, so it will increase to £300,000 from the same date.

The entry and exit threshold for self-employed Universal Credit claimants will continue to equal the exit threshold of non-Universal Credit claimants and will increase to £300,000.

Registration for tax-free childcare opens

The long-awaited tax-free childcare scheme launches on 28 April 2017 and will be rolled out during the course of the year. In conjunction with this, the government’s new Childcare Choices website is now operative, allowing parents to find out about available support. The website includes a childcare calculator for parents to compare all the government’s childcare offers and check what works best for their families, including the new 30-hour free childcare offer, tax-free childcare or universal credit. Through the website, parents can also pre-register for email alerts that will notify them when they can apply, as well as providing details of existing government childcare offers.

It is currently estimated that some two million working families will be eligible for tax-free childcare. It will be gradually rolled out, with parents of children under two invited to enter the scheme first. By the end of the year, all eligible parents will be able to receive government top-ups of £2 for every £8 that a parent pays into their tax-free childcare account, up to a maximum of £2,000 per child (or £4,000 for disabled children). This will be open to all working parents across the UK with children under 12, or under 17 if disabled.

30 hours free childcare

From September 2017, the new 30 hours free childcare offer for working parents of three and four year olds in England will double the current 15 hours of free childcare currently available, saving eligible working families up to £5,000 a year.

Eligible parents will be able to apply online through the childcare service. They will receive a code – this will allow parents to arrange their childcare place ahead of September 2017. Parents can take their code to their provider or council, along with their National Insurance Number and child’s date of birth. Their provider or council will check the code is authentic and allocate them a free childcare place.

Parents will be able to apply for tax-free childcare and the 30 hours offer in one go through the government’s new digital childcare service. Eligible parents can benefit from both tax-free childcare and 30 hours free childcare at the same time.