Category: News

The non-domicile status entered the spotlight last month when it was revealed that Rishi Sunak’s wife had claimed non-domicile status.

However, despite the headlines and controversy surrounding her claim of non-domicile status, the truth is that is not a tax avoidance scheme.

Claiming non-domicile status is in fact something that should be considered if you are eligible. It is perfectly legitimate for those who meet the criteria, and with proper and optimal structures in place, has great benefits to the economy. Should the eligible non-dom person bring business to the UK, they are providing more employment, and with that comes more income tax paying citizens, thus helping the national economy, rather than deceiving it.

With that cleared up, here is all you need to know about the non-domicile status.

What is non-domicile status?

Non-domicile, or non-dom as it’s often referred to, is a tax status that allows people who were born in another country to only pay tax on their UK income.

The person is a UK resident, however, their permanent home – or domicile – is outside of the UK. With this comes the allowance to only pay UK tax on money that is earned in the UK, with any earnings made in different countries not being taxed within the UK – unless it enters a UK bank account.

There are two ways a person can become a non-dom.

If you are domicile of origin, meaning you were born outside of the UK, or if your father came from outside of the UK.

OR

If you are a domicile of choice, meaning you are over 16 and choose to leave the UK and live in another country indefinitely.

What are the rules for non-dom status?

You do not have to pay UK tax on your foreign income and gains if they are less than £2,000 per tax year, and if you do not bring them into a UK bank account.

If those two clauses apply, you do not have to do anything, and can freely have a non-dom status.

However, if your foreign income and gains exceed £2,000 per year, you can either pay UK tax, and sometimes be able to claim it back, or claim the ‘remittance basis’. This means that you only pay UK tax on the income you bring to the UK, but you lose your tax-free allowances for income and capital gains tax and must pay an annual charge if you have been a UK resident for a prolonged period.

If you have been in the UK for at least 7 of the last 9 years you must pay £30,000.

If you have been in the UK for at least 12 of the last 14 years, you must pay £60,000.

This can be a very complicated claim, and it is imperative to receive proper financial advice from your accountant before making your claim to ensure you are both compliant with UK tax laws, and that you are choosing the right option for your personal circumstances.

What if I work abroad and in the UK?

If you work both in the UK and abroad, there are different rules to adhere to.

If you receive the foreign worker exemption, you do not have to pay tax on foreign income. To qualify for the foreign worker exemption, your foreign income from an overseas job earns you less than £10,000, with your other foreign income, for example, bank interest less than £100. Furthermore, your UK and foreign income will combine to be within the basic rate income tax band, and all of your foreign income will be subject to foreign tax.

If you qualify for the foreign worker exemption, you do not need to make an application to claim, so long as your incomes fall within the above remit.

Non-domicile Tax Planning

Non-domicile status is complicated, making it difficult for tax planning if you are unfamiliar with the details and laws in depth.

Planning the right route for your non-domiciled status in the UK can help you achieve significant tax savings whilst still remaining fully compliant with UK tax laws.

However, because the advantages are so clear, some bad apples do try to slip through the net, which is why it is imperative you take time and consideration to make sure you are doing everything right.

It is important to keep up with the laws and compliance, as your status may be subject to change year to year, especially the longer you take up continued residence within the UK.

Non-domicile status and Inheritance Tax

Of course, the issue of foreign income naturally arises questions of inheritance and how it may be taxed.

Ultimately, your foreign wealth is not subject to Inheritance Tax until you are domiciled within the UK.

People are advised to place their foreign wealth into a trust before they become domiciled to stop their wealth from being subject to inheritance tax. Once assets are placed in a trust, they are ring-fenced from Inheritance Tax.

Consult a non-domicile expert

We cannot emphasise enough how imperative it is that you consult a financial expert when looking at claiming non-domicile status.

Incorrect dealings with non-dom status’ can lead you to face severe repercussions, such as hefty fines or even a prison sentence, if HMRC deems your status to be fraudulent.

Experts are on hand to make sure you are handing over the right details about your status and making the correct payments based on your residential status and level of income.

We are happy to advise on your domicile status, get in touch today to see how we can help at hello@shenward.com.

The cost of energy has risen significantly in recent months and whilst there’s a heavy focus on how individuals will cope, business owners are also in need of answers as to how to manage rising energy bills.

As a business, you cannot just ‘switch off’ to reduce your bills. You have a responsibility to create a comfortable working environment for both employees and customers. So, you need an alternative way to manage rising energy bills.

The good news is, there are options for businesses looking to manage rising energy bills, meaning you may in fact be able to alleviate some of that financial pressure.

Let’s explore.

Check-in with your current energy provider

With prices rising, many providers are finding ways to work with their customers to retain their loyalty through this difficult period. You may be able to arrange an alternative payment plan to spread out the cost of your energy bills over an extended period. 

Also, some providers do offer schemes or grants to help businesses facing hardship, so it’s definitely worth picking up the phone and seeing what your provider can do to help you. 

Shop around for lower prices

Whilst prices are rising for all providers, it could be smart to shop around and see if you can reduce your energy bills by switching providers. 

The commercial sector doesn’t offer price caps like seen in domestic energy, but because many providers offer perks to new customers such as newcomer discounts, it may still be worth shopping around to see what offers are out there. 

Price comparison websites offer a comprehensive list of suppliers and their prices, but they are subject to change, so it is worthwhile checking different comparison websites.

Improve energy efficiency in your business

Improving your business’s energy efficiency isn’t only great for the environment, but the more energy efficient your business is, the less you will spend on your energy bills. 

There are larger and more timely investments you can make to strive toward energy efficiency and lower your carbon emissions, which we will move on to, but in the meantime, there are quick and easy measures you can take to immediately alter your energy efficiency: 

Reduce your thermostat by 1C: Reducing your thermostat by as little as 1C, can drastically improve your energy bill. Many buildings run at a higher temperature than necessary to work in a comfortable environment, and overheating is costly. The Carbon Trust found that increasing your thermostat by just 1C can in fact increase your bill by 8%! 

Switch light bulbs: Old filament light bulbs are notoriously less energy efficient, but unfortunately many people are unaware of this. Particularly for businesses, where people may operate in buildings at all hours, lighting is a large proportion of your energy consumption. Making a simple move to LEDs or halogen light bulbs is much more energy-efficient, and lasts longer too, making them more cost-effective. 

As well as considering switching light bulbs, it’s also important to switch off lights. Not all rooms need to be lit all the time. Bathrooms and utility rooms, for example, may only be used for a minimal portion of the day, meaning having them turned on is a huge waste. 

Installing sensors is a great idea, or simply encouraging people to turn off the light when they leave a room will help reduce your business’s energy consumption. 

No more standby: It’s easy to place equipment on standby when they are not in use. For example, putting computers on standby in the office overnight – but doing so is costly. Making sure everything is turned off after use is a good way to ensure no energy is being wasted. To put it into perspective, keeping a computer on overnight can cost a business £11 a year per computer, which for a larger office is a huge expense. 

Seek Government support

Of course, we have already addressed that the government has not offered any immediate support to help with rising energy prices, but other grants and schemes are available that can in fact help fund energy. 

Regularly check what grants are available in your area, to find out what additional support your business is eligible for. There are currently grants and schemes available across different regions to help with energy efficiency. For example, many regions such as the West Midlands, Suffolk, and Tynes Valley regions currently have respective grants available of between £20,000 and £100,000 to fund energy efficiency audits, as well as grants for the installation and purchase of works to aid in lowering emissions and energy consumptions. 

New grants and schemes are added regularly, so checking to see what is available in your region could drastically help your business not only save money on energy bills but become more sustainable. 

Visit the government website to search for options near you.

Lower carbon emissions 

Energy efficiency is intrinsically linked to reducing carbon emissions. Though it is a long process in working to become a zero-emission business, it is something we should all be working towards collectively. 

The government is actively incentivising businesses to reduce their carbon footprint in line with the UK’s goals to be net-zero by 2050. To help businesses work towards this goal, there is government assistance available. For example, many businesses can claim capital allowance when purchasing equipment which will help your business lower their carbon emissions. 

This will not only help the environment, but they will seek to lower your energy bill as well as being more tax efficient. 

We can help you too

We know that managing your energy bill is a stressful task, particularly because of rising costs across the board. 

But as you can see above, there are many options you can take to help manage and lower your energy bill both immediately and in the future with investment. 

At Shenward, we are always here to help, whether it’s to discuss overheads or to find eligible grants. Contact us today at hello@shenward.com to receive dedicated support.

Last week, Chancellor Rishi Sunak delivered the Spring Budget 2022 to the commons and as expected, it’s been widely reported on.

Amid rising inflation and cost of living, some of the points highlighted in his statement were highly anticipated – many had already speculated what Sunak would announce and hoped for good news to alleviate some of the financial burden put upon the British public.

But was everything announced really that supportive? And what does it really mean for businesses?

Let’s take a look.

National Insurance Contributions… To rise or not to rise?

There have been many calls for the chancellor to scrap the increase in National Insurance and Dividend Tax that was planned to be implemented from April 2022.

However, in the Spring Budget 2022, Sunak actually announced that the plan to increase both taxes by 1.25% points will still go ahead. And, it’s on track to become the norm as The Health and Social Care Levy at some point in 2023.

National Insurance wasn’t completely left out of the statement though, with Sunak announcing that the threshold for Class 1 and 4 National Insurance will increase from April 2022.
This means that the threshold for National Insurance Contributions will be £12,570, in line with the Income Tax Threshold – a slight improvement for employees.

Fuel Crisis help

Sunak acknowledged the rising cost of fuel in the Spring Budget 2022 and announced that the fuel duty will be cut by 5p per litre until March 2023.

Whilst this has been announced to help alleviate the cost of fuel that is ever rising, experts have warned that this will only help the British public if gas retailers do not use it as an opportunity to make more profit on the fuel – keeping costs high. We for one would like to see some regulations in place to ensure this doesn’t happen.

VAT for energy efficient equipment

Perhaps the most talked about announcement following the budget; homeowners installing energy efficiency materials such as solar panels, heat pumps, or insulation will see VAT cut on these items from 5% to zero for the next five years.

Support for businesses

Much of the statement focused on the cost of living and therefore was more relevant to personal income as opposed to businesses. However, Sunak gave certain insights into his plan for continuing to help businesses out of the unprecedented times they have faced.

The Chancellor announced that the employment allowance will be increased to £5,000 from April, up from £4,000. This will help businesses and sole traders with one or more employees who are liable for Class 1 National Insurance Contributions, in the hope of alleviating business owners’ rising liabilities. We’d certainly have appreciated additional measures being introduced for our clients. But perhaps the future holds further announcements?

Looking to the future

The Spring Budget 2022 put a greater emphasis on deferred plans set to take effect from Autumn, as opposed to this April. This suggests we must keep looking forward and hope that further opportunities and support will arise for businesses.

In other positive news, Sunak did announce his plan to cut income tax by 2024. The plan would cut the basic rate income tax to 19%, down from 20%. Whilst this appears to be a minimum cut, it could benefit 30 million people who could each save £175.

Furthermore, Sunak announced his intention to overhaul the Research and Development credits to help create a “new culture of enterprise”. The plans will seek to help incentivise UK businesses to innovate in a more globally appealing manner. Moving forward, data, cloud computing and pure maths will be eligible within the schemes. Again, this change is most likely to come into effect following the Autumn Budget.

Our reaction

As expected, the NI hike from April 2022 will be implemented however the impact will be largely offset by the increase in the NI threshold. This will mean that anyone earning less than £35k per year will pay less NI – which is around 70% of workers.

Those who earn more will see a tax rise, albeit smaller than expected. Employees earning £20k per year will see an NI cut of £180 instead of an increase of £90, which is positive.

Unfortunately, this relief does not extend to employers, whose payroll costs will increase by 1.25% of all salaries over £9,100 at a time when they are already struggling with labour shortages and wage inflation, raw material price inflation and the escalating cost of energy.

The 1% reduction in the basic rate of income tax before the end of Parliament, in our view, is largely political. There are several variables that need to land safely before this will be substantively enacted.

There will be significant additional spend on HMRC compliance activity, targeted in particular towards large and medium sized businesses. This is projected to raise £3 billion in extra tax over a 5-year period. However, under the badge of simplification and fairness, a review will be undertaken of tax reliefs and allowances – the implication being that some of these may be abolished. As a firm, we were not expecting any changes to the capital gains tax regime, but we were aware that a number of people were concerned about it. Fortunately, the 20% capital gains tax rate and the £1m Business Asset Disposal Relief limit remain intact for now, although this could be one of the reliefs that is ‘reformed’ to pay for the income tax cut in 2024.

Final thoughts

We know the immense pressure that businesses are under right now, especially amid the ongoing and upcoming changes.

The Spring Statement may not have been delivered with the business owner in mind, but with Sunak’s future plans outlined, we can continue to plan for the future with hope that support is on the horizon.

As always, if you require any support with these upcoming changes, do not hesitate to contact us at hello@shenward.com.