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Tax-Free Childcare will be available to around 2 million households to help with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families.
- The new scheme will start in early 2017
- You will open an online GOV.UK. Tax-Free Childcare account
- For every 80p paid in there will be a top up of 20p. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children). You or anyone can pay in whenever and whatever amounts you choose.
- Its available for children under the age of 12 or 17 if disabled
- Parents must be working and earning between £100/week and £100,000/year, there will be a 3 month checking process.
- Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements. Its not dependent on your employer offering a scheme. Its also available to self employed parents and those of paid sick leave, SMP, SPP and Adoption leave.
- You will also have the option to continue with an employer supported scheme
- If you need to you can withdraw the 80p part paid in
You find more details at Gov.UK
As reported last year by the Telegraph –
Five million people may have been billed incorrectly by HMRC.
You’ll find your tax code on:
- your pay slip
- your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
- form P60 – you get this at the end of each tax year
- form P45 – you get this when you leave a job
Among those most likely to be affected are veterans who have taken a civilian job after leaving the Armed Forces, but who also draw a military pension. Pensioners with two pensions and those who have continued to work part-time after retirement are also more likely to be hit.
Taxpayers, who must complete their self-assessment tax returns before Jan 31, are being warned to check their paperwork again to make sure they are not affected.
Problems arise because various tax offices around Britain are failing to share information about taxpayers’ incomes on a central database.
People with more than one income, whether from pensions, PAYE employment or a mixture of the two, are being allocated their personal tax-free allowance multiple times. It means the tax codes issued for their various income sources are incorrect, so not enough tax is taken. Often the mistakes are discovered by HMRC years later, leading to unexpected tax demands. Telegraph
If you think your Tax Code is wrong you should tell HMRC as soon as possible using online form P2
You can check how your tax using this HMRC link
The most common tax code for tax year 2015 to 2016 is 1060L (£10,600 being the annual income tax free allowance for 2015/16) – in 2014 to 2015 it was 1000L. It’s used for most people born after 5 April 1938 with one job and no untaxed income, unpaid tax or taxable benefits (eg company car).
Will Scottish taxpayers pay less?
From 5th April 2016 a new Scottish Rate of Income Tax (SRIT) will come into force in Scotland. Although is it currently anticipated that taxpayers in Scotland and the rest of the UK will pay the same rate of tax next year, it is likely that the regions will diverge in coming years as more power is devolved to Scotland.
Who is Scottish?
The criteria applied to determine Scottish taxpayers are based on where the individual lives, and not where they work or their feeling of national identity. All of the following would be classed as a Scottish taxpayer:
- WILLIES (Working In London Living In Edinburgh)
- Scottish Parliamentarians (regardless of where they live)
- People living and working in Scotland
- People living in Scotland and working across the border in Carlisle / Newcastle etc
HMRC are responsible for assessing whether or not someone is a Scottish taxpayer. Anyone that HMRC deems to be Scottish based on their principal residence will be issued with a new S tax code. Your payroll software should automatically process the SRIT for anyone with a new S code. As with student loans, it is not for the employer to use their own judgement about applying the SRIT. If an employee disagrees with their tax code, it for the employee to resolve this with HMRC. Employers must act on instructions from HMRC.
Do English employers need to do anything?
Even if your business operates exclusively in England (or any other region of the UK outside Scotland) you will need to comply with regulations as they apply to any of your employees who live in Scotland. Surprisingly, there is no legal obligation to inform HMRC if you move and although employers really ought to know where their employees live, it might not always be obvious, especially if an employee has more than one residence.
It is common to think that any of the criteria below qualify for Scottish taxpayer status, but it isn’t the case.
- National identity
- Place of work
- Where income is generated (eg property income in Scotland)
- Regular travel to Scotland
Will Scots benefit?
The costs of the SRIT are to be borne by the Scottish Government. HMRC currently estimates that the total costs of implementing SRIT will be in the range of £30 million to £35 million over the seven-year period from 2012-13 to 2018-19. This is split between IT expenditure of between £10 million and £15 million, and non-IT expenditure of £20 million. The additional annual costs of operating the SRIT will be between £2m and £6m. The lower estimate corresponds to a SRIT where Scots pay the same rate as the rest of the UK. If the SRIT diverges from the neutral rate of 10%, the costs rise in administering the tax regime in the UK including pensions, gift aid and disputes over residence.
Why is the SRIT being introduced?
Scotland as a whole is likely to be worse off as any difference in tax raised is offset by an adjustment to the block grant from Westminster. It is estimated that 2.6m people will be issued with an S tax code. The annual running costs are therefore less that £3 per taxpayer but it is a valid question to ask if it is a good use of taxpayer’s money if tax rates are the same across the UK. It is anticipated that after additional powers are introduced in 2017 the SRIT could be more progressive, meaning that wealthier individuals would pay a higher proportion of tax. For anyone thinking about their residence status and still had a choice, now is a good time to get advice on the best situation for you!
For more information on the SRIT and for guidance on operating your payroll scheme, please contact Alterledger.
From the 1st October 2015 the new National Minimum Wages (NMW) came into force
|Year||21 and over||18 to 20||Under 18||Apprentice*|
|2015 (from 1 October)||£6.70||£5.30||£3.87||£3.30|
|2014 (current rate)||£6.50||£5.13||£3.79||£2.73|
With a further increase in April 2016 for over 25’s to £7.20 per hour. The April 2016 wage will be called the Living Wage.
Penalties for non compliance are already harsh and as reported by the BBC on 1st September 2015 they are getting tougher…
These include doubling penalties for non-payment and disqualifying employers from being a company director for up to 15 years.
The government also announced plans to double the enforcement budget for non-payment and to set up a new team in HMRC to pursue criminal prosecutions for employers who deliberately do not pay workers the wage they are due.
Penalties for non-payment will be doubled, from 100% of arrears owed to 200%, although these will be halved if paid within 14 days. The maximum penalty will remain £20,000 per worker.
Are you paying enough?
Trainee Accountant Vacancy
Training for Chartered Management Accountant
If you have graduated in the last year and are looking for your first job after university there are some fantastic opportunities in Glasgow including a position at Alterledger as Trainee Accountant.
Yet again, we have another case on Pool Cars which could have been prevented had the right procedures been put in place.
The Case was decided in May 2015 and involved Mark and Trudie Holmes and their company KMS Logistics (UK) Ltd. The company owned 7 prestige cars which were used assist in maintaining and attracting clients.
There was no prohibition (not even a verbal one) on the private use of the vehicles, mileage logs showed that the cars were mainly used by Mr & Mrs Holmes. Until 2003/4 they had been declared as a benefit in kind but then the stopped being declared! There even seemed to be confusion over who owned the cars.
So not surprising Mr & Mrs Holmes lost the case.
Read the full details by clicking here
So what should you do to prove there is no private use:
- Keep the car on the company’s business premises
- Keep the keys at the company’s business premises
- Prepare a Board Minute
- Make sure your contract of employment bans private use
- Keep a mileage log
- Insure the car principally for business use
HMRC have specific rules on keeping vehicles at home in EIM23465
Even if you do meet the 60% rule you still have to prove ‘no private use’
New office for Alterledger
Growing the business and the team
We are pleased to announce that Graham has joined the team as Trainee Accountant and will be working through his ACCA qualifiation. For more information, please visit the Alterledger website.
Motorbikes have a clear tax advantage over company cars because they are classified as plant and machinery. This is better for both employers and employees.
Capital Allowances are restricted on cars based on CO2 emissions and employees also get taxed on the benefit in kind based on CO2.
Motorbikes being plant and machinery aren’t restricted and you could use the Annual Investment Allowance to offset the cost.
The Benefit In Kind is assessed as 20% of the cost of the motorbike but there will also be a benefit in kind on fuel, repairs and insurance.
The company will also have to pay 13.8% Class 1A NI on the benefit in kind but that applies to most benefits including cars and motorbikes.
Would motorbikes be a viable option for your employees?
Back in November 2014, the BBC reported..
Workers have won a ground-breaking case at the Employment Appeal Tribunal to include overtime in holiday pay.
This means some people working overtime could claim for additional holiday pay. Currently, only basic pay counts when calculating holiday pay.
Since then we have had further legislation, the Deduction from Wages (Limitation) Regulations 2014 (the Regulations), which impose the 2 year limit on any new holiday pay claims raised from 1st July 2015 onwards. Separately, a recent case from the Northern Ireland Court of Appeal (Patterson v Castlereagh Borough Council) suggests that voluntary overtime may – in some circumstances – have to be included in holiday pay calculations.
The Northern Ireland Court of Appeal has just held that there is no reason why voluntary overtime cannot be part of an individual’s normal working week and therefore could be included in holiday pay calculations.
This will be bad news for many employers and in Scotland there are now 21,000 holiday pay claims in the Scottish Tribunal system alone. [Law-Now]
Whilst I am sure may employees will welcome the decision, this will surely lead employers to reconsider whether using contractors would be cheaper? No Holiday Pay, No Auto Enrolment Pension, No Redundancy or Statutory Pay
Many already predict that by 2020 50% of workers will be self employed!
More and more office based workers are now working from home and the employers are focusing on Output rather than hours. For generations work has meant 8 hours per day at your desk but that’s changing.
Switching from office based to home based is best done in stages, starting with a couple of days home based and building up.
Increasing the numbers of UK employees working from home can cut costs by £3 billion a year for UK employers and employees and save over 3 million tonnes of carbon a year, according to a report released in May 2014 by the Carbon Trust.
Advances in technologies such as broadband internet, smart phones and cloud computing mean that many jobs can now be done effectively outside of traditional workplaces. This has resulted in a significant increase in the number of UK employees who work from home, with the total now standing at over 4 million out of a workforce of 30 million.
Investigating the potential environmental benefits of a further shift to homeworking, the new research concluded that, if adopted and encouraged by employers across the country, homeworking could result in annual savings of over 3 million tonnes of carbon and cut costs by £3 billion.
Over 40 per cent of UK jobs are compatible with working from home, but recent research by the Carbon Trust has found that only 35 per cent of companies have a policy allowing their employees to work from home. And where homeworking is offered by companies, between one-third and one-half choose not to accept it.
Homeworking reduces employee commuting, resulting in carbon, money and time savings. If office space is properly rationalised to reflect this, homeworking can also significantly reduce office energy consumption and rental costs.
It is estimated that UK employees save an average of £450 per year if they work from home for 2 days a week.
A UK employer could save around £280 per homeworker per year (according to Indicator).
Ian Foddering, Chief Technology Officer & Technical Director at Cisco UK & Ireland, said:
“By 2018, there will be over 10 billion mobile-connected devices globally, as such, telecommuting will not only become commonplace but is already in the progress of fast becoming the most natural way for people to work and collaborate globally. Cisco has aggressive targets to reduce greenhouse gas emissions from our operations and suppliers worldwide, and telecommuting is helping us to achieve these goals.
“The average Cisco employee telecommutes 2 days a week, and those using our Cisco Virtual Office technology typically work from home 3 days each week. In total, this amounts to avoiding 35 million miles of commuting per year. Not only is this great for the environment, reducing Cisco’s CO2 emissions by 17,000 tonnes annually, but it’s also great for business, with an estimated $333 million per year made in productivity savings.
“Although some organisations may experience cultural barriers in adopting telecommuting, we believe our experience at Cisco demonstrates the real benefits to the environment, the business and the individual employee.”
Employers are also saving £6k by opting for Freelancers…
A survey by PeoplePerHour has shown that the self-employed segment of the labour market in both the UK and USA is growing at a rate of 3.5% per year – faster than any other sector. Should this growth continue for the next five years, researchers predict that half of the working population could be self-employed freelancers by 2020.
The survey also suggests that small businesses that hire freelancers instead of full-time employees could save £6,297.17 per annum. The survey shows that the average waste or spare capacity for each employee in a SMEs is 1.9 hours per day.
The research identifies a number of key drivers behind the shift from employment to self-employment, including “the availability of ubiquitous and inexpensive computing power, sophisticated applications and cloud-based services“. [Lawdonut]