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Tax Free Childcare from 2017

 

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.

In summary:

  • 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

steve@bicknells.net

5 million paid the wrong tax last year – is your tax code right?

 

Tax Refund Green Blue Horizontal

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

https://online.hmrc.gov.uk/shortforms/form/P2

You can check how your tax using this HMRC link

https://www.gov.uk/check-income-tax

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).

steve@bicknells.net

A SRIT idea

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

Who decides?

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.

Common misconceptions

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!

More information

For more information on the SRIT and for guidance on operating your payroll scheme, please contact Alterledger.

Related articles

Are you paying enough? New Minimum Wage

Pay for woman.

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?

steve@bicknells.net

Job opportunity at Alterledger

Trainee Accountant Vacancy

We are pleased to announce that another job opportunity at Alterledger has opened up for a Trainee Accountant.
Top Rated certificate for accountant Tim Alter of Alterledger Ltd, Glasgow

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.

 

It’s a Pool Car isn’t it?

Car racer

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:

  1. Keep the car on the company’s business premises
  2. Keep the keys at the company’s business premises
  3. Prepare a Board Minute
  4. Make sure your contract of employment bans private use
  5. Keep a mileage log
  6. 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’

steve@bicknells.net

Alterledger moved to Legal House

New office for Alterledger

Alterledger has been growing consistently over the last few years and the time has come to move into new office premises.  Alterledger is now based at Legal House, 101 Gorbals Street, Glasgow G9 5DW
Top Rated certificate for accountant Tim Alter of Alterledger Ltd, Glasgow

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.

 

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