Apr 2015
3
Childcare Voucher Scheme Vs New Tax-Free Childcare Scheme
The Childcare Voucher Scheme is a UK government initiative aimed at helping working parents to benefit from tax efficiencies in order to save money on childcare. The scheme is offered by many employers as a salary sacrifice scheme and implemented through the employer’s payroll. This means that parents who are in the scheme are able to sacrifice part of their salary (Tax and National Insurance free) in order to obtain childcare vouchers of an equal amount up to specified limits.
The employer also saves money because the amount each parent sacrifices from their salary is exempt from employers’ National Insurance Contributions. Employers can offer the scheme themselves or by using one of the voucher companies to do the administration for them. The fees these companies charge should be less than the savings the employer makes on National Insurance. Employers may also benefit from having a happier workforce and seeing a reduction in staff turnover.
Basic rate taxpayers can pay for up to £243 of childcare with vouchers each month. This can lead to an annual Tax and NI saving of up to £930 per parent. Higher rate tax payers can pay up to £121 per month and top rate tax players can pay up to £108 per month. The higher and top rate restrictions only apply to those who joined the scheme on or after 6 April 2011.
These vouchers can be used for any nursery, playgroup, nanny, childcare or au pair who is an Ofsted registered provider. These vouchers can be saved up by parents but are non-refundable.
New Tax-Free Childcare Scheme from Autumn 2015
From Autumn 2015 Tax-Free childcare will be available to nearly 2 million households to help with the cost of childcare, enabling more parents to go out to work. Unlike the childcare voucher scheme the new Tax-Free childcare scheme will not be available to parents who have a stay at home partner. The new Tax-free childcare scheme will give a 20% tax break to cover annual childcare costs of up to £10,000, providing savings of up to £2,000 per child.
Parents will be able to register and open an online account for the new Tax-Free childcare scheme by going to the GOV.UK website. Parents and others can then pay money into their childcare account as and when they like. They will also be able to withdraw money if they want.
The scheme will be available for children up to age of 12 (or children with disabilities up to the age of 17). To qualify parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year. Any eligible working family can use the Tax-Free childcare scheme as it does not rely on employers offering it. Unlike the current scheme, self-employed parents can use the Tax-Free childcare scheme.
Parents who sign up to the current childcare voucher scheme will be able to remain in the scheme and will not be disadvantaged by the proposed 2015 changes. However after Autumn 2015 the childcare voucher scheme will no longer be available for new entrants. The new arrangement will not provide any National Insurance savings for employers (currently worth up to 12% for basic-rate taxpayers).
Parents who sign up to the current childcare voucher scheme will be able to remain in the scheme. However, if they move to a new employer after Autumn 2015, they will be considered to have left the current scheme and be forced to switch to the new arrangements.
In general families with high childcare costs will be better off under the Tax-Free childcare scheme while families with low childcare costs will be better off remaining under the Childcare Voucher Scheme.
Mar 2015
16
HMRC explains disputed charges
HMRC says payroll managers must appeal disputed charges as soon as they receive them and has outlined a common reason they may occur.
Addressing delegates at Ceridian’s annual conference last week, Phil Nilson, from HMRC’s customer and stakeholder engagement team, explained that disputed charges may occur due to a misunderstanding by payroll managers.
He said: “We used to reconcile annually and you used to send us money during the year. You didn’t send any information relating to that money until the end of the year when you submitted your P14s and P35. Only at that point could we start reconciling the money with the information.
“Now, thanks to RTI we are doing that on a monthly basis, we are doing it tax month by tax month.
“Using tax month one as an examples from 6th April to 5th May, HMRC looks at all the Full Payment Submissions (FPS) you have sent in month one on either the 6th, 7th or 8th of May, and then starts the reconciliation process to try to determine the charge that is due.
“Once you’ve sent your FPSs, in an ideal world, they will be visible to you from the 12th of the following month on your dashboard. So in the example used that would be from the 12th of May. So, theoretically, you would send in your FPSs and then by the 12th of May you could go online and could see what we think is due from you.
“But, sometimes things come in late and you may need to send information about payments beyond the end of the tax month, but which relate to the earlier tax month.
“This is vital. If an FPS comes in between the 6th and 19th of May you can put it back into tax month one, where it should be, and the charge will be adjusted accordingly. However, if that FPS comes in after the 19th of the following tax month it won’t go into the dashboard for that month, of tax month one in this case, because the 19th is the cut-off date – the date we want the payment in.
“That may affect your view of what you think is due and we think is due.
“By looking at FPSs it gives us the total amount that is due – but to be taken away from that is anything you want to claw back by way of the Employer Payment Summary (EPS), that should be submitted by the 19th of the following month. So, for tax month one, that will be the 19th of May. In terms of looking at your online account, if you sent that EPS before the 12th of May it will be reflected by the 14th – you will see it within two days.
“I hope that helps you get a better understanding of what we do.”
Article taken from www.payrollworld.com
Feb 2015
24
Marriage Allowance
HMRC have this week released more details on how the Marriage Allowance (previously referred to as Transferable Allowances for Married Couples and Civil Partners) will operate from April 2015. The allowance means a spouse or civil partner who does not pay tax, or does not pay tax above the basic rate of income tax, can transfer up to £1,060 of their personal tax-free allowance to a spouse or civil partner, as long as the recipient of the transfer does not pay more than the basic rate of income tax. This could represent a saving of up to £212 per year for eligible couples.
Registering for marriage allowance is simple and quick – and it is all done at www.gov.uk/marriage-allowance. There’s guidance for couples to check their eligibility for the new allowance, and registration only takes about three minutes. From April, HMRC will begin inviting those customers who have registered their interest to be among the first to apply using the new online service. Customers who choose not to register early, however, will not lose out. Instead, they will be able to make an application later in the 2015-16 tax year and still receive the full annual allowance.
To support the change, both the transferor and recipient’s tax codes will be amended. This will in turn introduce two new tax code suffixes as follows:
• M will be used for the spouse/civil partner receiving the transferred allowance
• N will be used for the spouse/civil partner transferring the allowance
These new tax suffixes will not be used on tax codes prior to April 2015, but will be used on P6 coding notices from April and, in due course, P9 and P9X uprating notices.
For more information on the above, HMRC’s announcement ‘Registration opens for new married couples tax break’ can be viewed at:
https://www.gov.uk/government/announcements?departments%5B%5D=hm-revenue-customs.
Feb 2015
10
Transferable Personal Allowance – will you benefit?
On 6th April 2015, a new tax break will come into effect which is expected to benefit four million married couples in the UK.
The new measure will allow a spouse or civil partner who is not liable to income tax above the basic rate to transfer up to £1,060 of their personal allowance to their spouse/civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate.
The transferred personal allowance will primarily benefit single earner households, where the personal allowance of a non-earning spouse was previously wasted, and will act as a tax reducer for the recipient with a reduction in income tax of up to £212.
Married couples or civil partnerships who are eligible to claim the Married Couples Allowance i.e. at least one of the spouses or civil partners was born before April 6, 1935, however, will not be able to make a transfer.
Additionally, it will not be available to non-UK domiciled individuals who elect to pay tax on the remittance basis of taxation or non-UK residents who would be higher or additional rate taxpayers if their worldwide income was within the scope of UK tax.
A simple online eligibility checker and initial registration process is due soon from the HMRC.
Jan 2015
14
HMRC simplifies end of year payroll submissions
Under RTI employers running payroll are required to report their employees’ pay and deductions to HMRC in regular Full Payment Submissions (FPS) through the year. A final end of year FPS (or EPS) must be submitted by 19 April.
Employers will no longer be required to answer extra questions on the payroll submissions they make to HMRC at the end of the tax year.
The seven extra questions, which are only included on the final FPS of the year, were inherited from the old P35 form, which had a submission deadline of 19 May. This gave employers and agents much more time to ascertain the correct answers to the questions, such as whether any special payments have been received in the year from third parties.
Removing the requirement to submit this information at year end will significantly reduce burdens on employers but will most definitely reduce burdens on agents and bureaux, and make a busy time of the year just a little less frantic by removing the mandatory need for the employer (client) to provide confirmation to the answers to seven questions.
The change is expected to take effect from 6 March 2015, avoiding the need to complete the checklist for the 2014/15 tax year.
From 6 March 2015 HMRC will accept a final FPS or EPS for 2014/15 and 2015/16 with or without a completed checklist, but employers should still report the Final Submission for Year indicator.
Dec 2014
18
HMRC Helplines - Which? Survey
The tax office helpline has been branded a 'lottery' with almost a third of callers cut off before they even get to speak to an adviser, according to new research, the DailyMail wrote.
The average waiting time to speak to a real person was 18 minutes - with one person left hanging on the line for 41 minutes.
Consumer champions Which? tested Her Majesty's Revenue and Customs (HMRC) helplines ahead of the self-assessment tax return deadline on January 31st.
Which? researchers made 100 calls to HMRC's self-assessment and general enquiries helplines to see how easy it is to get through to an adviser.
Nearly a third of the calls (29 per cent) were cut off by the automated system before the caller could speak to anyone, with callers being told it was because the helpline was 'very busy'. In the 71 calls where researchers did manage to get past the automated system, they were then put on hold. On average it took 18 minutes to speak to a real person, but one caller was left waiting for 41 minutes.
The Which? researchers found the later in the day they called, the longer the wait and the more likely they were to be cut off.
The automated system also struggled with certain words and phrases. A query about 'my tax code' was fine but when asked 'Do I need to pay tax on premium bond winnings?' it asked if the caller was changing a name, or asking about a VAT surcharge notice.
In a separate survey of more than 1,000 Which? members, one in five (20 per cent) who had contacted HMRC in the last year said they found contacting them difficult, compared with 15 per cent of those who contacted the Department of Work and Pensions, 12 per cent who contacted their local authority and eight per cent who contacted the DVLA.
Richard Lloyd, Which? executive director, said: 'We've found people could face lengthy waits or even be cut off when trying to get assistance from HMRC's helplines. 'With large numbers of people soon to be seeking help with their self-assessment tax return, we want to see HMRC doing more to monitor and improve their call-waiting times.'
Which? said it had shared its findings with the Treasury and HMRC and have also briefed the Public Accounts Committee.
Hopefully this might help them to improve their automated and phone systems in time for the Tax Deadline on the 31st of January.
Nov 2014
14
Ever Wonder Where Your Money Goes?
Have you ever wondered how the government spend tax paid by you? In a bid to make tax more transparent and easier to understand, the government introduced Annual Tax Summaries which allow you to do just that.
Although first introduced in Budget 2012, HMRC began issuing the first Annual Tax Summaries on 3rd November 2014. Over 24 million people will receive their tax summary within the next 7 weeks, which will explain:
• How their National Insurance contributions were calculated for the 13/14 tax year
• How this money was spent by the government
Around 24 million individual taxpayers will receive a personal tax summary in this first year. 16 million tax summaries are being sent by post to PAYE taxpayers who received a tax coding notice from HMRC for 2013 to 2014. A further 8 million taxpayers who complete self-assessment tax returns will be able to access their tax summary online.
The tax summaries are for information only and therefore recipients do not need to do anything or contact HMRC about them.
Click here for more information on Annual Tax Summaries.
Oct 2014
18
Greater pension flexibility announced for UK
Pensioners will be offered new freedoms to dip into their retirement cash.
In the latest phase of the biggest shake-up of private pensions in a century, the over-55s will be able to withdraw several lump sums from their pension pots instead of just one.
George Osborne’s move raises the prospect of pensioners using their funds almost like bank accounts to invest in property or shares, pay off debts or help children and grandchildren.
The 55 per cent tax charge on pensions left to children and grandchildren is being abolished altogether.
Up until now, retirees were able to take 25 per cent of their pension tax free – a sum fixed on the day they first dipped into their pots.
If you had a £100,000 pot at the age of 55, the maximum you could take tax-free was £25,000. The rest typically went into an annuity.
However, in the Pensions Bill, the Chancellor will announce you can dip into your fund multiple times and have 25 per cent of each slice tax free. The balance would remain invested and grow, again tax free – giving savers an incentive to keep their money invested in the stock market.
Mr Osborne said: ‘People who have worked hard and saved all their lives should be free to choose what they do with their money, and that freedom is central to our long-term economic plan.
‘From next year they’ll be able to access as much or as little of their defined contribution pension as they want and pass on their hard-earned pensions to their families tax-free".
Oct 2014
16
HMRC Awarded new powers to deduct tax from pay packets come 2015
HMRC will be able to deduct up to £17,000 a year from high earners salaries to recover tax debts under new rules that came into affect recently. From April 2015 tax codes will be issued to recover money from those believed to have underpaid income tax, capital gains or National Insurance contributions.
Deductions of £17,000 would only affect those earning over £90,000 and HMRC confirmed it would not deduct more than half the salary of those liable, and it does not affect those earning less than £30,000. HMRC is required to send a letter to the taxpayer explaining their intention to withdraw debts from the taxpayer’s salary, but a taxpayer cannot prevent this from happening unless they make other arrangements to pay. Letters are expected to be issued from January next year.
A spokesperson from HMRC said: “Taxpayers welcome the option to have tax debt collected by instalment. This is a very longstanding feature of the payroll system but the increase n the current threshold will allow more tax debts to be aid in this way.”
The changes are expected to raise £115m in the 2015-16 tax year.
Oct 2014
8
Do you wear a uniform to work?
Uniform tax rebate is not yet widely known, yet it affects almost 43% of the British public. It is a rebate scheme introduced by the HMRC for people who wear a uniform or protective clothing to work. Under the rebate scheme, qualifying employees may be able to reclaim tax from the past four years.
To be able to claim the tax relief, ALL of the following must apply:
· You wear a recognisable uniform that shows you've got a certain job, like a branded T-shirt, nurse or police uniform.
· Your employer requires you to wear it while you're working.
· You have to purchase, clean, repair or replace it yourself. However, you can't claim if your employer washes your kit, provides facilities to do so (even if you don't use them) or pays you for doing this maintenance.
· You paid income tax in the year you are claiming for.
The amount of tax relief an employee can claim will depend on the industry. For tax year 2014/15, the standard flat rate expense allowance (FREA) for uniform maintenance is £60. Therefore basic rate taxpayers can claim £12 back and higher rate payers £24. Some occupations have more specific limits, often where specialist uniforms are required. A full list of occupations and their corresponding allowances can be viewed here.
Employees wishing to claim this tax relief for the first time can do so by filling in form P87 online, printing it out and posting to:
HM Revenue & Customs
Pay As You Earn
PO Box 1970
Liverpool
L75 1WX
Employees should allow five weeks for HMRC to process their claim, who will then confirm in writing how much you are entitled to.
