Month: April 2016
Start of daily penalties for 2015 online Tax Return not yet filed. Additional penalties may apply for further delay.
Submission date for P46 (Car) for quarter to 5 April.
Last day to issue 2015/16 P60s to employees
A number of key changes to tax legislation have come into effect, following the start of the new tax year. Here we outline some of the measures affecting businesses and individuals.
National insurance for apprentices
6 April 2016 saw reforms to the rules on national insurance, with employers no longer required to pay Class 1 secondary (employer) national insurance contributions (NICs) on earnings paid to qualifying apprentices under the age of 25. This is effected through the new ‘zero rate’ for ‘relevant’ apprentices on weekly earnings up to the Upper Secondary Threshold (UST), which is set at £827 for 2016/17.
The exemption has been largely welcomed by the business community. Dr Adam Marshall, British Chambers of Commerce (BCC) Acting Director General, stated: ‘Abolishing employer contributions will encourage more businesses to hire young apprentices, at a time when the UK is faced with a growing skills shortage’.
Additionally, the Employment Allowance for employer NICs has increased from £2,000 to £3,000. However, companies where the director is the sole employee will no longer be able to claim this allowance. The Government hopes the higher allowance will help businesses with the increased costs associated with the National Living Wage (NLW), which came into force on 1 April for workers aged 25 or over and has been set at a rate of £7.20 an hour.
The new tax year also heralds a number of additional changes affecting individuals, with significant reforms to savings, pensions and dividends now in effect.
Personal Savings Allowance
From the 2016/17 tax year onwards an estimated 95% of savers will no longer pay tax on their savings income, following the introduction of the new Personal Savings Allowance (PSA). The PSA allows basic rate taxpayers to earn up to £1,000 each year in tax-free savings income (such as interest), while higher rate taxpayers can receive up to £500 before paying tax on their savings income. The PSA does not apply to additional rate taxpayers.
Those saving into an Individual Savings Account (ISA) can now benefit from increased flexibility. Under new rules, from 6 April 2016 savers can replace cash they have withdrawn from their ISA account earlier in a tax year without this replacement counting towards the annual ISA subscription limit.
New State Pension
The much-anticipated new ‘flat rate’, or ‘single tier’ State Pension has also now come into effect. The rate of payment has initially been set at £155.65 per week – however, this may vary in accordance with an individual’s national insurance record.
Meanwhile, from 6 April those with adjusted annual incomes over £150,000 will have their pensions annual allowance reduced by £1 for every £2, down to a minimum of £10,000. In addition, the lifetime allowance has fallen from £1.25 million to £1 million.
Changes to dividends
Other significant changes include the introduction of new rules on the taxation of dividends. The 10% dividend tax credit has been abolished from the 2016/17 tax year onwards, and a new Dividend Tax Allowance of £5,000 a year has been introduced. Dividend tax headline rates have also been reformed: the new rates of tax on dividend income exceeding the allowance will be set at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
You might not have millions stashed away in offshore funds but the fact remains that sensible tax planning within the law remains an important part of your financial planning strategy. By making use of the allowances and reliefs that have been made available, you can remain on course to achieve your business and personal goals. We can help you with this process.
Now we are in a new tax year you can now put up to £15,240 into a cash ISA for tax free savings income.
What typically happens is a mad panic at the end of the tax year to put funds in to use up the allowance but this tends to result in one being opened with whoever you bank with personally and these are often at the poorest rates of interest sometimes as low as 0.5% or 0.75%.
Shopping around you can achieve higher rates. This may come at the cost of tying up the funds for a number of years but not always. £15,000 at 0.75% would give you a gross interest of £112.50 whilst at 2.5% that increases to £375.00.
You can of course open different types of ISAs but for cash ISAs you might want to do some simple research to get a better deal. http://www.moneysavingexpert.com/savings/best-cash-isa would be a good place to start.
Marriage Allowance lets you transfer £1,100 of your Personal Allowance to your husband, wife or civil partner.
This can reduce their tax by up to £220 every tax year (6 April to 5 April the next year).
To benefit as a couple, your partner will need to have unused personal allowances that can be transferred to you (or visa versa). We’ll check this with you before completing your 2015/16 self assessment return.
HMRC intend that businesses (corporates, the self-employed and partnerships), and including both trading businesses and landlords, will be required to keep track of their tax affairs online, updating HMRC at least every three months via a digital tax account. The rules will not apply to employees or pensioners unless they have secondary income from self-employment or property of more than £10,000 a year. This requirement will be phased in starting from 2018/19 for self-employed businesses and landlords.
There is little detail as yet as to how this quarterly reporting will operate in practice, in particular, what information will be required, and whether it will fully replace the tax return.
It is not clear whether earlier payments and/or more frequent payments will also be needed in respect of business and rental income, but a discussion paper on this subject issued alongside the Making Tax Digital roadmap sets out HMRC’s initial thinking on this matter. Budget 2016 confirmed that a ‘pay-as-you-go’ option for tax payments will be made available by 2018.
We expect there to be further announcements and consultations over the next couple of years as the details of the system evolve. In particular consultation documents are expected to be published in 2016 covering the following:
Further details of quarterly reporting
The tax administration framework
Access to third party data
Tax payment dates
We will of course keep clients updated as more information becomes available.
The intention is that all individual taxpayers will have access to an individual tax account by April 2016. This will contain details of relevant tax information already available to HMRC. Individual personal tax accounts are already available for many taxpayers, and contain payroll and pension information where relevant. Bank and building society interest are expected to be gradually made available from 2016. As more HMRC systems become aligned more tax information will be available on these accounts, and they will also be able to be used for other services, for example information regarding the state pension. Taxpayers who complete their returns on the HMRC online filing system will find this information already entered on their tax return pages.
Individuals will be able to access their tax account through their HMRC online self-assessment record, although an additional layer of verification will be needed. Those who do not have an online self-assessment record will be able to access the account directly through a new service ‘Gov.uk verify’. A note giving details of personal tax accounts is being included with employee Notices of Coding being sent out prior to the start of the 2016/17 tax year.
In due course it is expected that agents will be able to access clients’ tax accounts, and therefore we will be able to obtain details of information on the accounts directly, so that clients will not need to provide this information to us. However, this facility has not yet been fully developed and at present we will continue to ask clients to provide all tax return information to us directly.
HMRC previously announced that they intend to move to a ‘digital tax system’ over the next few years. There has been a lot of debate in the press about exactly what this will mean for taxpayers, although as yet there is limited practical detail of how the new system will work. This note explains what we know so far and how we expect the changes to affect our clients.
HMRC’s main proposals are set out in the ‘Making Tax Digital’ roadmap published in December 2015 following the original announcement in the March 2015 Budget. This document confirms that the intention of the digitalisation is to make tax administration “more effective, more efficient and easier for taxpayers”.
By 2020, HMRC intend to have moved to a fully digital tax system where:
Form filling is eradicated – taxpayers should never have to tell HMRC information it already knows.
Unnecessary time delays are eliminated – the tax system should operate on more of a ‘real-time’ basis, which should reduce errors and under-reporting.
Taxpayers have access to digital tax accounts, with the information HMRC has automatically uploaded.