fpdteam, Author at Bennetts Accountancy

Pension tax relief at source

31st August 2023 by fpdteam

You can usually claim tax relief for your private pension contributions. There is an annual allowance for tax relief on pensions of £60,000 for the current 2023-24 tax year. The annual allowance for 2022-23 was £40,000.

You can claim tax relief on private pension contributions worth up to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of Income Tax paid.

This means that if you are:

a basic rate taxpayer you receive 20% pension tax relief;
a higher rate taxpayer you can claim 40% pension tax relief; and
an additional rate taxpayer you can claim 45% pension tax relief.

There are two kinds of pension schemes where you receive relief automatically. Either:

your employer takes workplace pension contributions out of your pay before deducting Income Tax; or
your pension provider claims tax relief from the government at the basic 20% rate and adds it to your pension pot (‘relief at source’).

If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs you are entitled to on your Self-Assessment tax return. You may also need to make a claim if your pension scheme is not set up for automatic tax relief or if someone else pays into your pension.

There is a three year carry forward rule that allows you to carry forward any unused amount of your annual allowance from the last three tax years; if you have made pension savings in those years. (There used to be a lifetime limit for tax relief on pension contributions, but this was removed with effect from 6 April 2023.)

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are regional differences if you are based in Scotland.

Source:HM Revenue & Customs| 28-08-2023

Self-Assessment threshold change

31st August 2023 by fpdteam

The £100,000 threshold for Self-Assessment change for taxpayers taxed through PAYE only, increased from £100,000 to £150,000 with effect from 6 April 2023. However, the Self-Assessment for 2022-23 tax returns remains at £100,000. 

Taxpayers who submit a Self-Assessment tax return for 2022-23 showing income between £100,000 and £150,000 taxed through PAYE and do not meet any of the other criteria for submitting a Self-Assessment return will be sent an exit letter by HMRC. This will remove the requirement for an annual Self-Assessment tax return to be submitted by qualifying taxpayers.

For the 2023-24 tax year onward, taxpayers will still need to submit a Self-Assessment tax return if their income taxed through PAYE is below £150,000 but they meet one of the other criteria for submitting a Self-Assessment return, for example:

receipt of any untaxed income;
partner in a business partnership;
liability to the High Income Child Benefit Charge; or
self-employed individual and with gross income of over £1,000.

Taxpayers that need to complete a Self-Assessment return for the first time should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a Self-Assessment return needs to be filed. If you are required to submit a Self-Assessment return for 2022-23, you should ensure that you file your tax return electronically and pay any tax due by 31 January 2024.

HMRC has an online tool available at www.gov.uk/check-if-you-need-tax-return/ that can help taxpayers decide if they are required to submit a Self-Assessment return.

Source:HM Revenue & Customs| 28-08-2023

Are you a company director?

29th August 2023 by fpdteam

There is more to being appointed a company director than accepting the title.

According to Companies House directors formal, statutory duties and responsibilities include:

filing an annual confirmation statement;
filing your company annual accounts – even if the company is dormant;
notifying Companies House of any change in your company’s officers or their personal details;
notifying any change to your company’s registered office address
filing details of any allotment of shares;
dealing with the registration of any charges (mortgage); and
notifying Companies House of any change in your company’s people with significant control (PSCs) or their personal details.

Additionally, directors need to record minutes of company meetings that impact returns to Companies House and HMRC. For example, when dividends are voted and paid.

Directors should be aware that if you use a sensitive address like your home address as your company’s registered office or single alternative inspection location (SAIL), it will be available to the public. You cannot remove a registered office or SAIL address from the public register, even if it’s your home address.

If you are a director of a registered company, some of your details will be made public. This includes your:

name
nationality
occupation
month and year of your date of birth

A director must provide two addresses:

a correspondence address for the public register – known as a ‘service address’; and
their home address – known as the ‘usual residential address’.

A correspondence address is one you can use to receive communications about the company. This can be the same as the registered office address of the company, or it can be somewhere different.

A residential address is a director’s usual home address. You must tell us your home address, but it will not be available on the public register for everyone to see. It’s kept on a private register.

We will only provide home address information to credit reference agencies and specified public authorities, such as the police. In certain circumstances, you may be able to restrict the disclosure of your home address to credit reference agencies.

Source:Other| 28-08-2023

Giving money to charity in your Will

24th August 2023 by fpdteam

A reduced rate of Inheritance Tax (IHT) of 36% (reduced from 40%) applies where 10% or more of a deceased’s net estate is left to charity. The lower rate applies where 10% or more of the ‘net value’ of the estate is left to charity.

The current IHT nil rate band is £325,000 per person, below which no Inheritance Tax is payable. Any unused nil rate band can usually be transferred to a surviving spouse or civil partner.

HMRC also have a calculator tool that will help work out the charity donation required to qualify for the reduced rate and will check whether an existing bequest is sufficient to qualify for the reduced rate. The calculator can be found at www.hmrc.gov.uk/tools/iht-reduced-rate/calculator.htm

In order to use the calculator, you will need to know:

the value of the assets in the estate;
how the assets are owned;
the total value of the assets in each part of the estate (‘component’);
the value of any debts and liabilities that must be paid out of the estate;
the amount of any Inheritance Tax relief and exemptions;
the amount of any charitable donations already made;
the value of the threshold (‘nil rate band’); and
the value of gifts the deceased made in the 7 years before death.

A gift smaller than 10% can also be left to charity in your Will. If this is the case, the charitable donation will be taken off the value of your estate before IHT is calculated.

The donation to charity can be a fixed amount, an item or the balance of what’s left after other gifts have been distributed.

Source:HM Revenue & Customs| 21-08-2023

VAT supplies for no consideration

24th August 2023 by fpdteam

In most cases, a supply of goods or services for VAT purposes is deemed to have taken place in return for consideration. This is usually payment in money but can also be of a “non-monetary” nature, such as goods or services supplied in return. There is no legal definition of consideration in the VAT Act 1994.

However, HMRC quotes the following definition in its internal manuals that was taken from the EC 2nd VAT Directive Annex A13 (at the same time accepting that this is no longer in force after Brexit).

The expression “consideration” means everything received in return for the supply of goods or the provision of services, including incidental expenses (packing, transport, insurance etc), that is to say not only the cash amounts charged but also, for example, the value of the goods received in exchange or, in the case of goods or services supplied by order of a public authority, the amount of the compensation received.

There are additional provisions in UK law that treat certain transactions made for no consideration as supplies for VAT purposes. These are:

the permanent transfer/disposal of business assets;
the temporary application of business assets to a non-business use; and
the self-supply of goods or services.

A supply is also deemed to have taken place if business assets are retained after VAT deregistration and where services are put to a private or other non-business use where input tax had been previously recovered.

Source:HM Revenue & Customs| 21-08-2023

Checking your Simple Assessment tax bill

24th August 2023 by fpdteam

Simple Assessment is a method by which HMRC can assess where additional Income Tax is due by a taxpayer. A Simple Assessment letter is usually issued to taxpayers with reasonable straight forward tax affairs. The Simple Assessment notice of liability does not require taxpayers to submit a Self-Assessment tax return.

The Simple Assessment process was first announced by HMRC back in 2016. However, the rollout has been paused a number of times. The process can be used in various situations, for example, where it is not possible to collect the whole of a person’s annual Income Tax liability through PAYE, if HMRC is owed £3,000 or more and if there is tax to be paid on the State Pension.

Recipients of a Simple Assessment tax bill should check that the amounts shown in the letter match your records, for example, your P60, bank statements or letters from the Department for Work and Pensions (DWP).

If the amounts are correct, you will need to pay your Simple Assessment tax bill.

You must pay by either:

31 January – for any tax you owe from the previous tax year; or
within 3 months of the issue date if you received your letter after 31 October.

The tax year runs from 6 April to 5 April. In some cases, HMRC will allow the payments to be made in instalments.

A taxpayer who does not agree with the Simple Assessment has 60 days from the date it was issued to contact HMRC, setting out the reasons for their objections. If no objections are raised within 60 days, the Simple Assessment is automatically finalised.

Source:HM Revenue & Customs| 21-08-2023

On your bike tax-free

24th August 2023 by fpdteam

The Cycle to Work scheme was introduced over 20 years ago to help promote the use of environmentally friendly modes of transport.

The scheme allows employers to provide bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme must be offered to all employees and the bike must be used mainly for qualifying journeys, i.e., between home and work. However, pleasure use of the bike is also allowed. Where the scheme conditions are satisfied employees can benefit from a significant tax and National Insurance Contributions (NICs) reduction. In addition, there is no employer liability to NICs.

The cycle to work benefits only relate to the loan period, however, it is commonplace for an employer or a third party bicycle provider to offer the employee the bicycle / equipment they have been using for sale after the loan period has ended. The bike may be offered to the employee for sale at a fair market value, but this must be done as a separate agreement.

Employers of all sizes across the public, private and voluntary sectors are eligible to take part in the scheme to provide (technically loan) bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme can also be used for electronic bikes known as e-bikes.

Source:HM Revenue & Customs| 21-08-2023

Class 2 and 4 NIC for the self-employed

24th August 2023 by fpdteam

There are two types of National Insurance contributions (NICs) payable by most self-employed people. These are known as Class 2 NICs and Class 4 NICs.

Class 2 NICs are paid by all self-employed taxpayers unless they earn under the Small Profits Threshold (SPT), currently £6,725, which remove the necessity to pay NICs. Class 2 NICs are currently payable at a flat weekly rate of £3.45 for the 2023-24 tax year. Class 2 NICs count towards payments such as the basic State Pension, the employment and support allowance, maternity allowance and bereavement benefits.

In addition, most self-employed people are also required to pay Class 4 NICs. The self-employed are required to pay Class 4 NICs (as well as to Class 2 NICs) if their profits are £12,570 or more a year. Class 4 NIC rates for the tax year 2023-24 are 9% for chargeable profits between £12,570 and £50,270 plus 2% on any profits over £50,270.

There is also a specific list of jobs where class 2 NICs are not payable. These are:

examiners, moderators, invigilators and people who set exam questions;
people who run businesses involving land or property;
ministers of religion who do not receive a salary or stipend; and
people who make investments for themselves or others – but not as a business and without getting a fee or commission.

If you fall within any of these categories, it may be beneficial to get a State Pension forecast and examine whether to make voluntary Class 2 NICs to make up missing years.

Source:HM Revenue & Customs| 21-08-2023

Do you need to submit a Self-Assessment tax return?

24th August 2023 by fpdteam

There are a number of reasons why you might need to complete a Self-Assessment return for the first time. This includes if you are self-employed, have an annual income over £100,000 and / or have income from savings, investment or property.

Taxpayers that need to complete a Self-Assessment return for the first time (for the 2022-23 tax year) should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October 2023.

HMRC has an online tool www.gov.uk/check-if-you-need-tax-return/ that can help you check if you are required to submit a Self-Assessment return.

The following list summarises some of the reasons when taxpayers are usually required to submit a Self-Assessment return:

newly self-employed (earning more than £1,000);
individuals with multiple sources of income;
taxpayers that have received any untaxed income, for example earning money for creating online content;
individuals with income over £100,000, and note, that from tax year 2023-24 the Self-Assessment threshold for individuals taxed through PAYE only, will change from £100,000 to £150,000;  
those who earn income from property that they own and rent out;
who are a new partner in a business partnership;
taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
those receiving interest on savings or investment income of £10,000 or more before tax;
taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax; and
taxpayers who are self-employed and earn less than £1,000 but wish to pay Class 2 NICs voluntarily to protect their entitlement to State Pension and certain benefits.

Source:HM Revenue & Customs| 21-08-2023

Access to cash to be protected

21st August 2023 by fpdteam

Recognising the need to maintain access to cash withdrawal facilities, the government is stepping in to set out a new access standard in the UK.

The vast majority of people and businesses are set to be no further than three miles away from withdrawing cash under a new framework set out by the Treasury.

A government statement recently published sets a minimum expectation on banks to protect services for people and businesses wanting to withdraw or deposit cash.

They can expect to withdraw cash without any fees – something that has been set out in law.

As part of this move, the Financial Conduct Authority (FCA) has been provided new powers by the government to protect the provision of cash access services. This includes protecting cash access without any fees for those who hold personal current accounts.

Building on laws granted through the government’s Financial Services and Markets Act 2023, the FCA will use these new powers to make sure banks and building societies are keeping up to these standards – and have the power to fine them if they do not.

While we are moving further away from using coins and notes – with the number of online payments rising from 45% to 85% in the past ten years – cash can still be an integral part of many businesses and people’s lives. This is particularly so for disadvantaged groups and old persons who may not be able to access online or card payment services.

Source:Other| 20-08-2023