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Old Bank Accounts of HMRC Are Closing
All HM Revenue & Customs (HMRC) bank sort codes and account numbers changed during 2009 as HMRC moved its banking services to Citi and Royal Bank of Scotland Group from the Bank of England.
HMRC temporarily continued to accept payments made using the old Bank of England account details, however this will change during 2010 when the old accounts will be closed. If you’ve not yet set up your payments to go to the new accounts please do so now by reviewing the HMRC payment information.
If you pay by Bank Giro, please make sure you use one of the newly issued payslips including the new NatWest account details. If you only have payslips that contain HMRC's old Bank of England account details please contact the tax office that issued them to you and ask for replacements.
If you are paying HMRC by Direct Debit you don’t need to do anything. Your Direct Debit instruction remains active.
From 2010, if you make a payment using the old bank account numbers it may be returned. This could result in your payment reaching HMRC late, which in turn could lead to your being charged a late payment penalty, interest or surcharges.
Budget 2010
Budget Report 2010 main points in summary:
Income Tax
- basic rate will remain at 20%
- higher rate will remain at 40%
- additional rate will be set at 50%
The basic rate limit will remain at £37,400 and the starting rate limit for savings will remain at £2,440. The personal allowances will remain at their 2009-10 amounts.
From 2010/11 the amount of the personal allowance will be gradually withdrawn for all individuals (regardless of age) with "adjusted net incomes" above £100,000. The rate of reduction is £1 for every £2 above the income limit.
National Insurance
All NICs rates and thresholds are unchanged, except for two areas which are:
- the Lower Earnings Limit (LEL) which is linked to the basic State Pension will increase by £2 from £95 per week to £97 per week; and
- the special Class 2 rate for Volunteer Development Workers will increase by 10p from £4.75 per week to £4.85 per week, because this is linked to the LEL.
For 2011/12, in addition to the 0.5% increases already announced at PBR 2008:
- the main rates of Class 1 and Class 4 NICs will be increased by a further 0.5 per cent to 12 per cent and 9 per cent respectively;
- the employer rate for both Class 1A and 1B contributions will be increased by a further 0.5 per cent to 13.8 per cent;
- the additional rate of Class 1 and 4 NICs will be increased by a further 0.5 per cent to 2 per cent; and
- the primary threshold and lower profits limit will be increased by £570 to compensate the lowest earners.
Inheritance Tax
The Inheritance Tax (IHT) nil rate band will be frozen at its current level of £325,000 up to and including tax year 2014/15.
Capital Gains Tax
No change in the Capital Gains Tax rate of 18%.
Entrepreneurs relief increasing to £2 million from 6 April 2010.
Annual exemption of £10,100 remains the same.
Pensions
The 2010/11 Lifetime Allowance of £1.8 million and Annual Allowance of £255,000 will continue to apply at these levels for a further five tax years.
As announced at Budget 2009 there will be restricted tax relief on pensions savings with effect from 6 April 2011 for people with income of £150,000 or over but below £180,000 (although individuals with pre-tax income of between £130,000 to £150,000 may be caught by the legislation). The tax relief on pension contributions (including the value of employer contributions for those in employment) will reduce gradually from marginal rate to basic rate as income increases. Where income is £180,000 or over, tax relief on pension contributions will be restricted to basic rate. For the anti forestalling rules please refer to our previous news article 'Maximising tax relief on pension contributions – Special Annual Allowance'.
Stamp Duty Land Tax (SDLT)
On or after 25 March 2010 and before 25 March 2012 first time buyers will not pay any Stamp Duty Land Tax (SDLT) for property purchased up to £250,000.
A new SDLT rate of 5% will apply to residential property purchases for over £1 million on or after 6 April 2011.
Savers
As announced at Budget 2009, from 6 April 2010 the annual ISA investment limit for every adult is £10,200, up to £5,100 of which can be saved in cash.
VAT
The taxable turnover threshold, which determines whether a person must be registered for VAT, will increase from £68,000 to £70,000, from 1 April 2010.
The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £66,000 to £68,000.
Corporation Tax
For the Financial Year commencing 1 April 2010 the small profits rate of Corporation Tax remains at 21%.
The marginal relief fraction remains at 7/400ths for all profits.
For the Financial Year commencing 1 April 2010 the main rate of Corporation Tax remains at 28%.
Annual Investment Allowance (AIA)
The AIA from 1 April 2010 (for Corporation Tax) or 6 April 2010 (for Income Tax) will double to £100,000.
Please contact us at Edwin Smith if you would like to discuss the Budget Report 2010 in more detail.
This blog news page is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this web page.
End of Year Tax Planning
INCOME TAX
Whilst personal allowances, the basic rate of 20% and higher rate of 40% are not changing in 2010/11 there are changes for individuals with income over £100,000. If your income is over £112,950 your personal allowance will be reduced to nil. If your income is between £100,000 and £112,950 then your personal allowance will be restricted at the rate of £1 for every £2 of income above £100,000.
For individuals with income over £150,000 there is a new additional rate of tax of 50% for income other than dividend income and a new dividend additional rate of 42.5% (as opposed to 32.5%).
Any owner managed company whose shareholders may be facing the 50% rate of tax or a reduction in their personal allowance, may like to consider paying dividends prior to 6 April 2010 to take advantage of the current lower tax rates. Similarly any business with employees earning similar levels of income may wish to consider bringing forward any bonus payments to the current tax year.
Married couples and civil partners should review their positions as an income balancing exercise may produce tax savings.
Owner managed businesses should consider their cash flow requirements as withdrawing capital and reinvesting it as a loan to give tax relief could be beneficial. Careful structuring is required so please contact us if you wish to discuss this.
CAPITAL GAINS TAX
The annual exempt amount for individuals for the current year is £10,100 and gains above this amount are taxed at 18% in the current year. Have you used your annual exemption? The exempt limit and rates for 2010/11 have not yet been set.
INHERITANCE TAX
The Inheritance Tax annual exemption still stands at £3,000 per individual and can be carried forward for one year only. If an individual has not made any gifts since 5 April 2008 then they have an allowance of £6,000 to use before 6 April 2010. For a married couple or civil partners who have made no gifts they have an exempt amount of £12,000 between them.
INDIVIDUAL SAVINGS ACCOUNTS (ISAs)
The amount savers aged 50 or over in the current tax year was increased to £10,200 this year. Any saver born on or before 5 April 1960 can invest the full £10,200 in a stocks and shares ISA with one provider or up £5,100 can be saved in a cash ISA with one provider with the remainder being saved in a stocks and shares ISA with either the same or another provider. For savers who were born after 5 April 1960 the limit is £7,200 in a stocks and shares ISA with up to £3,600 being saved in a cash ISA.
From 6 April 2010 the higher limit of £10,200 applies to all savers with £5,100 maximum into a cash ISA.
Please contact us for your end of tax year planning advice to discuss your individual circumstances.
This blog news page is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this web page.
VAT Cheque Payments By Post
HM Revenue and Customs (HMRC) has announced that from 1 April 2010 all cheque payments by post for VAT will be treated as being received by them on the date upon which the cleared funds reach HMRC’s bank account.
In practice, this means that you must allow enough time for the payment to reach HMRC and to clear into HMRC’s bank account no later than the due date shown on your VAT return. If your cheque payment does not clear by the due date shown on your VAT return you may be liable to a surcharge for late payment.
A cheque takes three bank working days to clear and so excludes Saturdays, Sundays and bank holidays. Cheque payments made by bank giro are not affected by this change.
Electronic payment methods are recommended by HMRC as this is safe and secure and, in most cases, gives you up to seven extra calendar days to pay or, if you pay by Direct Debit, at least ten extra calendar days.
Those who must file their VAT returns online are required to pay electronically and so will not be affected by this change.
The VAT payment methods available are listed on the HMRC website.
Maximising tax relief on pension contributions – Special Annual Allowance
From 6 April 2011, higher rate tax relief on pension contributions will be restricted. In advance of this the government introduced anti forestalling rules to prevent individuals from making significant contributions now in order to take advantage of the higher rate tax relief prior to this date.
These measures apply to tax payers whose relevant income is in excess of £130,000 in any of the three tax years 2007/2008, 2008/2009 and 2009/2010.
For these tax payers, higher rate tax relief on pension premiums in the current and following tax year will be limited to the special annual allowance which is set at £20,000 for most tax payers (up to £30,000 for some) unless those contributions were considered to be ‘regular’ contributions in place prior to 22 April 2009.
If your total pension contributions exceed £20,000 (or up to £30,000 if you are eligible for the increased limit), a tax charge will be levied on those contributions which are not classed as regular and will effectively reduce the rate of tax relief given on the excessive pension contributions to the basic rate of tax.
If you do fall within the measures to reduce the tax relief available, are considering increasing your pension contributions in the future, and do not currently utilise the maximum special annual allowance available to you, then you may wish to ensure that you maximise your relief prior to 5 April 2010 by making additional pension contributions up to the special annual allowance.
If your employer makes contributions into your pension, then you should contact us for additional advice.
There are too many rules to consider fully in this article but if you believe that your personal circumstances may fall within the above measures, then please contact us at Edwin Smith as we can assist with applying the rules to your individual circumstances.
The Business Inspector sponsored by HMRC
A new TV series called ‘The Business Inspector’ is sponsored by HM Revenue & Customs (HMRC). The programme will raise awareness among small businesses that they need to keep good records, maintain cashflow and market their business effectively.
The Business Inspector is a four part series that will be broadcast weekly on Five at 8pm from 17 March 2010 and is presented by Hilary Devey, an award winning entrepreneur and multimillionaire.
Hilary Devey visits eight small firms that are struggling to survive or grow and advises them on how to improve their businesses.
HMRC are hoping that the programme will help small businesses realise the benefits of taking better care of their records and paperwork such as improved cashflow.
In addition, HMRC have also launched a new fact sheets series called ‘Tax help’ that provide straightforward advice and information. The first fact sheet deals with record keeping requirements.
HMRC Phishing emails
Following the deadline for submission of the self assessment tax returns, there is a new wave of HM Revenue & Customs (HMRC) phishing emails circulating. These emails have the subject of ‘tax refund notification’ and are sent from ‘autorefund@hmrc.gov.uk’.
To the unsuspecting recipient, this email may appear genuine as it contains the HMRC logo and the Business Link and Directgov logos in the footer. The email contains a link which asks you to click to submit your refund request which will take you to a fake website where you will be asked to complete further personal details which will then be captured and used by the fraudster.
There are plenty of other HMRC phishing emails which have been reported to HMRC and a full list can be viewed by clicking the link provided. We have reported this current version to HMRC and so the list may be updated shortly.
For the avoidance of doubt, HMRC do not send tax refund notifications by email. If you do receive such an email and are concerned, or if you have already acted on such an email, please contact your normal adviser at Edwin Smith.
