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Pension payments before 5 April 2012?

Posted by: edwinsmith on February 10th, 2012

From 6 April 2011 the rules changed on tax relief on pension savings. The annual allowance, which is the maximum amount of pension saving that benefits from tax relief each year, became £50,000 (£40,000 net of basic rate tax).

If you have been saving in a registered pension scheme since 6 April 2008 and your pension savings were less than £50,000 per annum in any of the tax years since then, then you will have an unused annual allowance to carry forward from that year/years. Unused allowances can only be carried forward for three years so the unused allowance from 2008/09 will not be carried forward after 5 April 2012. 

There is a strict order in which you use up your annual allowance. You use the current tax year annual allowance first, then use your unused annual allowance from earlier years, using the earliest tax year first. Hence, to use any unused allowance of 2008/09 you must have pension savings in excess of £50,000 for the current year.

If however, you have not been a member of a registered pension scheme in earlier years then you will not have unused annual allowance to carry forward.

If you are self-employed, contributed into a pension scheme in 2010/11 and have made no contributions so far in the current tax year, then your payments on account for 2011/12 are based on your 2010/11 position. If your 2011/12 total income is similar to 2010/11 and you do not make a pension contribution by 5 April 2012 then you may have a large balancing payment of tax due by 31 January 2013 together with a higher payment on account for 2013/14.

Your pension savings in a tax year is the total of the increase in value for each scheme of which you are a member. For personal pensions, the increase in value is the amount you have contributed in the period, grossed up to cover the basic rate tax added by HM Revenue & Customs (HMRC), for example if you pay £500 a month into a personal pension, this is grossed up to £625 a month and your pension savings for that scheme will be £7,500.

For workplace pension schemes, the value of contributions made by your employer is also included in your pension savings. Where the scheme is a money purchase/defined contribution scheme, the increase in value for the period is the gross amount you have contributed out of your pay together with amounts contributed by your employer. For defined benefits schemes, the amount of your pension savings is the increase in the value of your promised benefits over the pension input period ending in the tax year. The valuation is based on a notional ‘capital’ value broadly based on 16 times the amount of annual pension achieved to date and any additional separate lump sum. Your pension scheme administrator will be able to provide you with a pension savings statement if you think your savings will be over the £50,000 allowance.

There are a number of wrinkles in the general situation set out above that may apply in particular unusual situations, so you should always check with us before making decisions.

Filed under: Tax

PAYE codes 2012-13

Posted by: edwinsmith on January 23rd, 2012

HMRC are currently in the process of sending out revised tax codes for the 2012-13 tax year. Not everyone will receive a code - some codes are simply updated by the employer to reflect new levels of the personal allowance in accordance with instructions issued by HMRC.

Check your code to ensure it is correct and raise any problems with HMRC so that a correct tax code can be issued before the start of the 2012-13 tax year.

If you require help with your code then please contact us.

Filed under: PAYE, Tax

Capital expenditure before 31 March 2012 / 5 April 2012

Posted by: edwinsmith on January 16th, 2012

The Annual Investment Allowance (AIA), which enables businesses to claim full tax relief on most plant and machinery, reduces in April 2012 from £100,000 to £25,000.

Where a business has a chargeable period that spans the operative date of the decrease, the maximum allowance for that business’s transitional chargeable period comprises two parts:

(a) the AIA entitlement, based on the previous £100,000 annual cap for the portion of a year falling before the relevant operative date; and

(b) the AIA entitlement, based on the new £25,000 cap for the portion of a year falling on or after the relevant operative date.

However, capital expenditure qualifying for AIA in the period from 1 April 2012 / 6 April 2012 cannot exceed the entitlement for that period even though it is within the total available for the year.

If you are planning capital expenditure in an accounting period which straddles 31 March 2012 for companies or 5 April for businesses within the charge to income tax, then you need to consider carefully the timing of the expenditure to maximise full tax relief e.g., it may be more tax efficient to bring forward the timing of capital expenditure from May 2012 to March 2012. Please contact us for more information.

Filed under: Tax

More than one job? Are you paying too much National Insurance?

Posted by: edwinsmith on January 3rd, 2012

If you have more than one job you can avoid overpaying national insurance contributions by deferring some of your contributions if both of the following apply:

 

  • you pay Class 1 National Insurance contributions with two or more different employers
  • you expect to pay contributions on weekly earnings of at least £817 in one job or £956 in two jobs throughout the tax year

 

The deadline for applying for 2011/12 is 14 February 2012.

To apply you can complete form CA72A Application for deferment of payment of Class 1 National Insurance contributions or if you require further help please contact us.

The renewals for 2012/13 should be issued by HMRC shortly.

Filed under: PAYE, Tax

HMRC Now Using Faster Payments Service

Posted by: edwinsmith on December 22nd, 2011

HM Revenue & Customs (HMRC) can now accept payments made using the Faster Payments Service. This will allow taxpayers to make faster electronic payments, typically via internet or telephone banking, enabling them to be processed on the same or next day.

Taxpayers should contact their bank or building society before making a payment to confirm:

  • the services available
  • whether there are any single transaction or daily limits on the amount that can be paid
  • their latest cut off times for making a payment

When making a payment to HMRC please make sure you always use the correct bank account details and reference number. This will ensure that the payment is received, and will help to avoid incurring a penalty, interest or surcharge for late payment.

You can find further information by following the links below.

Faster Payments

How to make a payment to HMRC

HMRC bank accounts

Filed under: PAYE, Tax, VAT

[Archive] Tax on Christmas Gifts and Parties

Posted by: edwinsmith on December 12th, 2011

There are various tax implications to consider on gifts and parties that you may be providing to your employees at this time of year. The points detailed below are a general overview and cover the most common situations that arise.

Cash gifts or bonuses - These are treated as normal pay and subject to PAYE and Class 1 National Insurance contributions (NIC) in the normal way. The payment should be put through the payroll. This also applies to any vouchers you give that can be exchanged for cash (see below for PSA arrangements for small cash gifts).

Gifts to employees - Gifts that can be considered trivial benefits such as a turkey, ordinary bottle of wine or box of chocolates will not need to be declared on form P11d. There is no set monetary limit below which benefits are deemed to be trivial but common sense and judgement needs to be applied in assessing these items. For the purposes of gifts then probably any amount less than £20 per employee would be considered trivial.

Any gifts of a higher value (and classed as non trivial) such as cases of wine/hampers would be subject to tax and NIC and declarable either as a benefit on form P11d or the tax/NIC could be paid on these gifts by arranging a PAYE settlement agreement (PSA).

If declared on P9d or P11d (directors and employees earning over £8,500 pa) forms then non trivial gifts are subject to tax (for the employee) and Class 1a NIC is payable by the employer on items declared on the P11d.

A PSA is voluntary arrangement that on the part of the employer made with HMRC to account for tax/NIC for minor, irregular or impractical items subject to tax/NIC.

If a PSA is arranged then the employer effectively pays the tax due and relieves the employee of any tax liability on the gift. Although there is the extra cost of the tax/NIC a PSA cuts down on the paperwork and record keeping.

Money’s worth benefits such as Store gift vouchers (exchangeable for goods) cannot be treated as trivial benefits. For practical purposes small cash and money’s worth benefits can be included in a PSA. If not dealt with on PSA then Store gift vouchers should be declared on form P9d or form P11d (if employee earns over £8,500) to account for tax. For NICs the cost of providing the vouchers should go through the payroll at the time given to employee.

Christmas parties (and summer events) - Tax and NICs are not due on any annual function if the cost to you is less than £150 per head (including employees partners). The cost per head is the total cost of putting on the function – accommodation, food, drink etc divided by the total number of guests including the non-employees.

If the cost per head is greater than £150 then the whole amount would be subject to tax and Class 1a NICs and should be declared on form P11d in section N e.g. if the cost of an event is £175 per head the employee (with a partner) is taxed on a benefit of £350.

Please contact us for any further advice.

Filed under: PAYE, Tax

HMRC Tax Catch Up Plan for tutors and coaches campaign

Posted by: edwinsmith on November 8th, 2011

HMRC have announced the Tax Catch Up Plan for tutors and coaches to enable any unreported income to be declared and the related tax paid to target rule breakers and home in on tax evaders. If you are paid for providing coaching, instruction or tuition and tax is not deducted and you don't include that income on a tax return or you don’t have an adjustment already in your tax code, then you need to use this plan to tell HMRC about that income now. By making a disclosure under the Tax Catch Up Plan you will benefit from the best possible terms. If you owe tax in respect of anything else such as capital gains or rental income you can use the Tax Catch Up Plan to tell HMRC about that too and make a full disclosure.

You will need to tell HMRC by 6 January 2012 that you intend to make a disclosure and follow this up with a full disclosure and payment of the tax liability by 31 March 2012.

HMRC is using legal powers to obtain information about payments made to tutors and coaches from various sources, including the academic, sport, leisure and other sectors. After 6 January 2012, when the deadline to notify has passed, HMRC will use data from an extensive range of sources to identify those who have failed to come forward and notify their intent to make a full declaration. HMRC uses advanced IT tools such as 'web robot' software which helps identify people who have failed to pay the right tax. Those identified face substantial penalties or even criminal prosecution.

If you think that you have not paid the correct amount of tax or would like advice please contact us.

Filed under: HMRC campaigns, Tax

Reminder – new penalties for self assessment from 6 April 2011 and tax return deadlines

Posted by: edwinsmith on October 10th, 2011

New penalties for late filing of a tax return and late payment of tax apply for tax years 2010/11 onwards. This applies to personal, trust and partnership tax returns.

Please see our previous article on New penalties for self assessment from 6 April 2011 for more information.

Penalties will apply for late filing of returns even if the tax has been paid. The deadline for completing a 2011 paper return is midnight on 31 October 2011 and to file an online return is midnight on 31 January 2012. However, if you owe tax of less than £2,000, have income taxed under PAYE and file your online return by 30 December 2011, you can ask for the tax to be collected through PAYE in 2012/13.

The HMRC website has information on whether you need to complete a return.

Please contact us if you would like us to help you complete your return.

Filed under: Tax

Changing HMRC Addresses

Posted by: edwinsmith on August 5th, 2011

Since May 2011 HMRC have commenced changing the addresses shown on PAYE/Self assessment forms and letters to submit correspondence for Individuals (PAYE, self assessment etc.) and Employers.

These changes are being made after consultation with customers and HMRC hope this will enable them to provide a faster and more efficient service when responding to customer correspondence.

The HMRC addresses for correspondence are being centralised and PO boxes will be used in future. The use of different tax office names and addresses will no longer reflect the way HMRC handles customers’ tax affairs.

If you need to write to HMRC then you should use the address shown on the most recent correspondence from HMRC. If no correspondence received prior to May 2011 then the relevant addresses can be found on the link HMRC Contact us. 

Please contact us if you have any queries concerning HMRC addresses.

Filed under: PAYE, Tax
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