The newsletter this month covers: payroll changes from April 2013, information about the new flat rate state pension, a wake-up call if you have outstanding VAT returns to file and information about a number of additional personal allowances and reliefs.
Payroll changes April 2013
Employers should make sure that they are ready for the switch to the Real Time Information (RTI) from April 2013. Most employers will be affected from April 2013 and all employers by October 2013.
Essentially, RTI requires that you submit payroll data on or before the date that salaries and wages are paid to employees rather than wait until the end of the tax year to submit a P35 and associated returns.
This is the first major change to the PAYE system since 1944.
According to HMRC employers should take action on the following three steps:
- Visit HMRC website for comprehensive information about RTI, including how to prepare, payroll software options and hints and tips to help avoid some common pitfalls.
- Acquire new or updated payroll software ? employers will need to talk to their payroll software provider or their payroll service-provider (if they have one) about this.
- Start checking and updating employee information. It’s vital that the information employers have about their employees is accurate and up to date.
These generalised comments hide a multitude of tasks that must be completed before 6 April 2013 when RTI commences for smaller businesses. If we provide a payroll service for your business all of these transitional tasks will be sorted for you, if you still prepare your own payroll and need help with the transfer to RTI please call. Less than two months to go…
New flat rate state pension announced
It has been proposed that from 2017 a new flat-rate state pension will be paid ? worth in today’s money £144 a week.
Details will no doubt change over time but some of the information available so far is listed below:
- As stated above the starting rate April 2017 will be £144 per week, £7,488 annually, based on current value of money. This will likely rise to approximately £160 per week when changes in the value of money are taken into account.
- This is good news for self-employed retiring April 2017 as currently they are only entitled to the basic state pension of £107.45 per week. We will have to wait and see if self-employed National Insurance contributions, Class 2 and 4, will increase to compensate.
- Contracting out and the present second state pension will be abolished and this will increase National Insurance costs for those employers with contracted out employees.
- The minimum number of years that you need to make National Insurance contributions is increasing from the present thirty years to thirty five years.
- Government is also reintroducing a minimum qualification period. Persons with less than ten years of NI contributions will not get a state pension.
- Persons retiring before April 2017 will continue to receive benefits previously paid. If this is less than the flat rate they will lose out, if more the higher amount will continue to be paid.
A 65 year old would need a pension pot of over £200,000 to generate a weekly pension of £144 so the new flat rate scheme is not ungenerous. However, there will be winners and losers.
50,000 businesses targeted by HMRC
Businesses that have failed to submit their VAT returns by the due date will be targeted by HMRC this month. An estimated 50,000 businesses may be affected by this latest campaign by HMRC. Registered traders who have outstanding returns to file may find that their tax affairs will be closely scrutinised and without prior warning.
According to HMRC more than 600,000 businesses have to file VAT returns each month and most do so on time. From 28 February, the 50,000 who have not filed on time may find their tax affairs attracting greater attention.
The VAT Outstanding Returns campaign is aimed at businesses that have one or more VAT return outstanding and that have been told to submit their returns but have not done so. Some will have received an assessment of VAT for these periods. These businesses are being given an opportunity to get up to date and pay the tax they owe by 28 February. After this date HMRC will target them and take a much closer look at their tax affairs. If traders do come forward voluntarily they may receive better terms ? lower penalties.
Additional tax allowances and reliefs
There are a number of tax allowances that can be claimed if certain conditions apply, in some cases these can be transferred to your spouse or civil partner if you are unable to utilise the additional tax relief.
- Increased personal allowance from age 65.
You will be eligible to apply for an additional personal tax allowance in the tax year in which you reach your 65th birthday. Whether you are successful in your claim will depend on your total income in that tax year. Currently the under 65 allowance is £8,105, if you are between 65 and 74 the increased allowance is £10,500 and 75 or over £10,660. The additional element will be reduced if your income exceeds £25,400. From 6 April 2013, increased allowances will be restricted to those born before 6 April 1948.
- Married couple’s allowance.
This allowance is available if at least one spouse, or civil partner, was born before 6 April 1935. The allowance is made as a deduction from your tax bill so if you pay no tax it is of no value. However if your income is not high enough to absorb the additional tax relief you can transfer any balance to your spouse or civil partner. For the tax year 2012-13 the minimum benefit from this allowance will be £296 and the maximum, depending on the level of your income, £770.50.
- Maintenance payments relief.
It is still possible to claim to reduce your tax bill for maintenance payments you make to your ex-spouse or former civil partner. The conditions are:
Blind person’s allowance.
- You or your former spouse or civil partner was born before 6 April 1935.
- You’re separated or divorced or the civil partnership has dissolved and you’re making the payments under a court order.
- The payments are for the maintenance of your ex-spouse or former civil partner (as long as they haven’t remarried or formed a new civil partnership) or for your children who are under 21. The amount of tax relief is the lesser of 10% of the qualifying payments or 10% of the basic married couples allowance. If you receive maintenance payments you will not pay tax on the amount received.
Blind Person’s Allowance is added to your tax-free Personal Allowance. For 2012-13 the allowance is £2,100. There are no age related or income restrictions. You can claim it if either of the following applies:
- You’re certified blind and are on a local authority register of blind persons.
- You live in Scotland or Northern Ireland and are unable to perform any work for which eyesight is essential. If you’re married or in a civil partnership and you don’t pay enough tax to use all the allowance, you can transfer any unused allowance to your husband, wife or civil partner. You can do this regardless of the state of their eyesight.
Tax Diary February/March 2013
- 1 February 2013 – Due date for corporation tax payable for the year ended 30 April 2012.
- 19 February 2013 – PAYE and NIC deductions due for month ended 5 February 2013. (If you pay your tax electronically the due date is 22 February 2013)
- 19 February 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2013.
- 19 February 2013 – CIS tax deducted for the month ended 5 February 2013 is payable by today.
- 28 February 2013 ? Self assessment tax for 2011/12 paid after this date will incur a 5% surcharge.
- 1 March 2013 – Due date for corporation tax due for the year ended 31 May 2012.
- 19 March 2013 – PAYE and NIC deductions due for month ended 5 March 2013. (If you pay your tax electronically the due date is 22 March 2013)
- 19 March 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2013.
- 19 March 2013 – CIS tax deducted for the month ended 5 March 2013 is payable by today.