Edwin Smith - Chartered Accountants
  • Home
  • About Edwin Smith
  • Accounting Services
  • Contact Edwin Smith

Budget 2012

Posted by: edwinsmith on March 22nd, 2012

Below are the 2012 Budget highlights.

  • Personal allowance to be increased to £9,205 in 2013/14, and the higher rate threshold reduced by £1,025 to £41,450.
  • Age allowance to be frozen from 2013/14 and then phased out.
  • Limit on maximum amount of income tax reliefs that can be claimed from 2013/14.
  • Additional rate of income tax reduced to 45% from 2013/14.
  • 7% SDLT rate for residential properties valued at over £2 million and new measures to counter ownership through corporate entities.
  • No changes to main pensions tax reliefs.
  • Restrictions on the tax relief available on benefits from regular premium life assurance policies.
  • Child benefit to be phased out where income is over £50,000.
  • Corporation tax main rate cut to 24% from April 2012 and to 22% by April 2014.
  • Voluntary cash basis based on turnover for tax on profits of small unincorporated businesses. In consultation but likely to start from 6 April 2013.
  • An increase from £120,000 to £250,000 in the individual grant limit for EMI schemes.
  • A further tightening of the car benefit rules through to 2016/17.

Please contact us if you would like to know more.  However, a more detailed analysis will be published soon.

Filed under: Budget Report

Electricians’ Tax Safe Plan Campaign

Posted by: edwinsmith on March 9th, 2012

HMRC have announced their latest campaign to target rule breakers and home in on tax evaders - the Electricians’ Tax Safe Plan (ETSP) campaign.  If you are an electrician and you've not yet told HMRC that you have started working for yourself or you've not disclosed all your income, you can use the ETSP to enable any unreported income to be declared and the related tax paid to. By making a disclosure under the ETSP you may benefit as follows:

  • you may only have to pay for a maximum of six tax years
  • you can tell HMRC how much penalty you should pay
  • you may be able to pay what you owe by instalments

If you owe tax in respect of anything else such as capital gains or rental income you can use the ETSP to tell HMRC about that too and make a full disclosure.

Under the ETSP an electrician is anyone who installs, maintains and tests electrical systems, equipment and appliances under stringent safety regulations.

If you wish to use the plan to bring your affairs up to date you will need to tell HMRC by 15 May 2012 that you intend to make a disclosure and follow this up with a full disclosure and payment of the tax liability by 14 August 2012.

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

Inheritance Tax Reminder

Posted by: edwinsmith on February 29th, 2012

Just a reminder of the current rates and reliefs. If you did not use your annual exemption of £3,000 in 2010/11 then this carries forward for one year only to add to the 2011/12 exemption of £3,000 available.

You should keep a record of your gifts with the relief available.

If you would like some further advice then please contact us.

 

Rates

 

2011-12
Nil rate band *

£325,000
Rate of tax on excess on death

40%
Lifetime rates on excess

20%
Spouse exemption limit for overseas domiciled spouse/civil partner

£55,000
Reliefs

 
Annual exemption per donor

£3,000
Small gifts per donee

£250
Regular gifts out of excess income

 
Gifts in consideration of marriage by:

 
Parent

£5,000
Grandparent

£2,500
Remote ancestor

£2,500
Party to the marriage

£2,500
Other person

£1,000
 

 
* Potentially increased if you are a surviving spouse or civil  partner

 
 

Potentially exempt transfers
Gifts to individuals and trusts for the disabled that are not chargeable transfers are potentially exempt transfers. No inheritance tax is payable on a potentially exempt transfer but if death occurs within 7 years, it becomes a chargeable transfer at the date of the gift and tax is calculated at the full death rates applying at the date of death after applying the available nil rate band with the excess subject to taper relief below.
 
Reduced charge on gifts within seven years of death
Years before death

0-3

3-4

4-5

5-6

6-7
% of death charge

100

80

60

40

20
Filed under: Tax

Revised advisory fuel rates 1 March 2012

Posted by: edwinsmith on February 29th, 2012

H.M. Revenue and Customs (HMRC) have published the latest advisory fuel rates relating to mileage payments for business travel in company cars. These are as follows: 

Engine size Petrol LPG
1400cc or less 15p 10p
1401cc to 2000cc 18p 12p
Over 2000cc 26p 18p

 

Engine size Diesel
1600cc or less 13p
1601cc to 2000cc 15p
Over 2000cc 19p

The changes this quarter is the increase of 1p per mile in diesel for engines sizes of 1600cc or less and over 2000cc.

The new rates will be effective from 1 March 2012. However for the first month employers may continue to use the previously published rates if they choose to.

These rates will be reviewed again in May 2012 and any changes made will be effective from 1 June 2012.  The revised fuel rates will be published on the fuel rates page on the HMRC website when they are released.

Advisory fuel rates can be used to calculate the following:

  • Reimbursement to employees of fuel used for business travel in a company car
  • Repayment by employees of fuel used for personal travel in a company car
  • Allowable input VAT on business mileage claims

A more detailed explanation of the use of these rates is on the HMRC website.

The rates applying for earlier periods are also on the HMRC website.

If you have any questions regarding the use of advisory fuel rates or mileage payments please contact us.

Filed under: PAYE, VAT

Flat Rate Expenses for Employees and Tax relief for specialist tools and clothing

Posted by: edwinsmith on February 29th, 2012

As an employee you may be able to get tax relief if you spend money on any tools or specialist clothing you need to perform your job and your employer doesn’t reimburse you. You can go back several years and the time limit depends on whether you have previously submitted self assessment tax returns (see link – on ‘how to claim’ below).

Specialist clothing and Tools

As a general rule an employee can’t get tax relief for the cost of clothing they wear to work but there are certain exceptions dependent on the industry sector e.g. where you require protective clothing (building trade) or your job requires a specific uniform like a nurse or fire fighter. See HM Revenue & Customs: Tax relief for specialist tools or clothing for full details.

If you must pay for the cost of replacing, repairing or cleaning the specialist clothing then you are entitled to relief but you cannot claim the initial cost of buying this clothing.

If as an employee you have to buy – out of your own money – the tools you need to be able to do your own work then you are entitled to tax relief e.g.  As a hairdresser your employer might require you to provide your own scissors or a plumber your own tools. The tax relief also applies to the cost of maintaining and replacing tools.

Flat Rate expenses

If you have to spend money on tools or specialist clothing for your job you may be entitled either tax relief for the actual amounts you spend or a ‘flat rate deduction’.

Flat rate deductions are amounts that have been agreed with HM Revenue & Customs (HMRC). The deductions cover what's typically spent each year by employees in different trades. For example, someone working in the clothing industry can get a deduction of £60 each year or stone mason £120. You'll also benefit from less paperwork - you won't have to keep a record of all the individual amounts you spend. Follow the link below to see a table of agreed flat rate expense deductions Flat rate expense deductions .

If your industry is not listed on the table, you can still claim a standard amount of £60 for the laundry costs of uniforms or protective clothing.

How to claim tax relief

If you do not complete a self assessment tax return then you will need to contact HMRC by letter or phone and provide HMRC with various details about your employment, expenses being claimed for, industry sector, occupation etc. See HM Revenue & Customs: How to get allowances and reliefs - employees or directors for full details on making a claim and time limits for getting tax relief.

Please contact us if you require any assistance.

Filed under: PAYE, Tax

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

PAYE and cancelling your payment booklet if you no longer need one

Posted by: edwinsmith on January 9th, 2012

If you pay at a bank, Post Office counter or by cheque in the post you need a PAYE payment booklet. However you don't need one if you pay HM Revenue & Customs (HMRC) electronically.

You can advise HMRC online to stop issuing further payment booklets by following the relevant link to your HMRC Accounts Office below.

Cancel Cumbernauld accounts office payment booklet

Cancel Shipley accounts office payment booklet

Filed under: PAYE

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
« Previous Page — Next Page »