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Personal Taxation

Childcare Vouchers and Tax- Free Childcare

Childcare voucher schemes allow an employee to receive childcare vouchers in lieu of up to £55 per week of their wages and no tax or national insurance will be paid on this.  However, this scheme was closed to new applicants with effect from 4th October 2018 (although the scheme continues to run for successful applicants prior to that date, provided certain conditions are met).

The government has introduced a new childcare scheme, called Tax-Free Childcare.   This could provide up to £500 every 3 months, up to £2000 per year, to help with childcare costs for each child.  The funds must be used for approved childcare.  Therefore, the childcare provider must be signed up to the scheme.

To qualify for Tax-Free Childcare, the claimant and partner must be in work for 16 hours a week. Single claimants may also apply. It is possible to claim if on sick leave, annual leave or parental leave (although it is not possible to claim for the child for whom the parental leave is being taken).   If the claimant is not working but the partner is, then it may still be possible to qualify if in receipt of certain benefits or allowances.

Child(ren) are eligible up to 1st September following their 11th birthday.  Adopted children are also eligible, but foster children are not.  If a child is disabled, then it may be possible to qualify for Tax-Free Childcare for longer.

It is possible to receive Tax-Fee Childcare at the same time as receiving 30 hours free childcare if eligible for both.  However, it is not possible to receive Tax- Free Childcare at the same time as receiving Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers (if already in receipt of childcare vouchers prior to 4th October 2018).

The HMRC website has a “childcare calculator” link, designed to help work out whether Tax – Free Childcare is the best option, as opposed to other benefits.  It is also possible to apply online for Tax – Free Childcare, again through the HMRC website.

Please contact Tracy if you would like any further information on this.

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Personal Tax Accounts

HMRC are keen for individuals to set up their own personal tax account. It should take about 10 minutes and you will need to identify yourself, so have your NI number to hand and a copy of either your P60 or latest payslip. Once you have set yourself up you can use the account to;

  • check your Income Tax estimate and tax code
  • fill in, send and view a personal tax return
  • claim a tax refund
  • check and manage your tax credits
  • check your State Pension
  • track tax forms that you’ve submitted online
  • check or update your Marriage Allowance
  • tell HMRC about a change of address
  • check or update benefits you get from work, for example company car details and medical insurance
  • find your National Insurance number

If you are self employed you can use it to;

  • find out your Unique Taxpayer Reference (UTR)
  • read any secure messages
  • file your Self Assessment
  • see and print your tax calculation
  • appeal a Self Assessment late filing penalty
  • tell HMRC you’re no longer self-employed
  • see your HMRC Annual Tax Summary online
  • apply to reduce your payments on account if your circumstances change
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2019 Personal Tax Returns

You must submit a Personal Tax return if, in the last tax year (6 April 2018 to 5 April 2019), you were:

 

  • self-employed as a ‘sole trader’ and earned more than £1,000
  • a partner in a business partnership

 

We will require the following information, in order to complete your tax return, original documents where possible.

  • P60
  • Any P11d benefits
  • Property income
  • Savings income (even if less than £1,000)
  • Capital gains
  • Pensions
  • Dividend vouchers
  • Sole trader accounts
  • CIS deduction statements (if self employed)
  • Student loan statement
  • Child benefit figure received
  • Non-resident information

If you are registered on our Online portal, through Accountancy Manager, we will be uploading a new custom form to make giving us this information quicker and easier.

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Self assessment deadline dates

HM Revenue and Customs must receive your tax return and any money you owe by the deadline.

The last tax year started on 6 April 2015 and ended on 5 April 2016.

Action                                                                         Deadline

Register for Self Assessment                                         5 October 2016

To submit Paper tax returns                                         Midnight 31 October 2016

To submit Online tax returns                                       Midnight 31 January 2017

Pay the tax you owe                                                     Midnight 31 January 2017

 

There’s an additional payment deadline of 31 July if you make advance payments towards your tax bill, known as ‘payments on account’.Facebooktwitterredditlinkedinmail

Key tax changes

Harmonea Update – Two key tax changes for 2016/2017

After all the hoo-haa of the recent budget, it’s sometimes important to remember that many things announced don’t take effect for a few years. We are about to be hit by two tax changes for last years budget – Dividend Tax Relief and Savings Credit.

Dividend Tax Relief

The changes to the tax regime announced in last years budget for Dividends will have an impact of anyone who owns a family company and uses dividends as a way of drawing money out or those who rely on substantial dividends in retirement.

What is changing? After Advance Corporation Tax (ACT) was removed by Gordon Brown in 1999 a system of dividend tax credit was introduced. As Dividends are paid out of Limited Companies taxed profits, there was no further tax to pay unless the dividends took you into the higher rate tax band in which case additional tax of 12.5% was charged.

The new rules mean that dividends are taxable in at 7.5%/32.5% or 38.1% depending on your ultimate tax band. The chancellor has given all tax payers a £5,000 allowance. To see the effect of this new tax in action, consider a business owner who wishes to withdraw £30,000 a year. Traditonally we would advise taking a salary up to the tax free limit of £10,000 and £20,000 of dividends. For 2015/16 this would result in an overall ni charge of £493.34 (although this can be reduced by £260.54 if you qualify for Employers Allowance).

In contrast for 2016/17 the combines tax & NI charge would be £1,543.34, the difference being the new £1,050 dividend tax. As you can see the effect is pronounced and if you are thinking of paying a dividend doing so before 6 April 2016 may be tax advantageous.

If you are unsure in any way of how you will be affected by this new tax, or if you can pay yourself a dividend please contact us.

 

Personal Savings Allowance

Another item introduced by Mr Osborne in last year’s budget was the concept of a Personal Savings Allowance. Basic rate tax payers will be able to earn £1,000 interest before paying tax. Higher rate tax payers have an allowance of £500. In order to earn £1,000 in a typical instant access account you would need over £75,000 saved. Bank and Building societies will start to pay interest gross without the deduction of tax.

Whilst this is no doubt good news for savers, please remember if HMRC send you a Notice to File A Tax Return you are required to do so to avoid an automatic £100 fine even if you have no tax to pay.Facebooktwitterredditlinkedinmail

Changes with the treatment of tax on dividends post 6/4/16

In the emergency budget in June 2015, the Chancellor announced that the treatment of dividends will change after 6th April 2016.  This will affect many shareholders who have up to now enjoyed sizeable dividends without any tax implication.

From 6th April 2016 the dividend tax credit will be abolished.  In its place will be a Dividend Allowance which is £5000 of dividend income will be tax free and for dividends over £5000 will be taxed at 7.5% for the basic rate tax payers, 32.5% for the higher rate tax payers (no change) and 38.1% for the additional tax payers.

For a shareholder with a £10,000 salary, in 2015 they would have dividends of £30,000 and pay £213 in tax.  The same £30,000  dividend under the new rule will result in a tax bill of £1800, an increase of £1587.

Taking dividends is still a tax efficient way of extracting profits from the company providing there profits to take.

If you need help on the best way to extract your profits, please talk to us.Facebooktwitterredditlinkedinmail

Tax on interest income

In the budget in June 2015, the Chancellor announced  he was giving a savings allowance of £1000 in interest received for each basic rate taxpayer from 6/4/16.  This is a saving of 10% on the 2015 rates.  As interest rates are so low currently, for directors that are owed money by your company for undrawn dividends, you could charge 4% interest on the amount owed and net yourself £1000 interest free providing you are a basic rate tax payer.Facebooktwitterredditlinkedinmail