This month’s articles include an update regarding changes for employers in the pension rules, an explanation of the tax position of Child Benefit from January next year, a reminder of tax return submission deadlines and the date of the forthcoming Autumn Statement.
Please note that the closing paragraph of the charitable giving article last month quoted an incorrect year date. The paragraph should have read:
“It is still possible to carry back Gift Aid donations made in a current tax year to the previous tax year. The over-riding condition is that any election to make the carry back must be made prior to the tax return being submitted for the relevant year. For example if a tax payer wanted to carry back a donation, made during the tax year 2012-13, to the previous tax year 2011-12, they would need to make the election prior to submitting their tax return for 2012.”
Workplace pension reform
All employers need to be aware of their responsibilities following the introduction of pension reforms. Some elements of this new legislation, such as the safeguards for individuals, came into effect for all employers from 1 July 2012.
The Pensions Regulator has issued “Getting Ready” notes for employers and this can be downloaded as a PDF document at http://www.thepensionsregulator.gov.uk/docs/pensions-reform-getting-ready-v4_1.pdf.
This article summarises some of the key points.
In certain circumstances small employers (employers with less than 50 employees at 1 April 2012) can elect to move their staging date to a later modified date. These modified dates are published in the PDF linked earlier in this article.
Higher paid and Child Benefit
From January 2013 a person who earns more than £50,000 must advise HMRC if they receive Child Benefit personally, or if they are the higher earner of a couple where their partner receives Child Benefit. If you fall into this category you may be receiving a letter soon from HMRC advising you of the new tax charge.
We have summarised below the details of the tax charge that will apply from 7 January 2013:
A couple or partnership affected by these new rules comprises:
How can you mitigate this tax charge?
If the highest earner’s income is marginally over £50,000 the simplest way to reduce or eliminate this new tax charge is to reduce your income for tax purposes. One way that you can do this and retain benefit for your family is to make a lump sum contribution into your pension scheme. You will create higher rate tax relief on the contribution and save all or part of the higher Income Tax charge to recover Child Benefit. Depending on the number of children you claim for, this could create tax savings of over 70%.
Couples affected would be wise to seek professional help to ensure this new tax charge is kept to a minimum, especially for families where the highest income earner’s income only marginally exceeds £50,000.
Tax return deadline approaching
The filing deadline for paper copies of your Self Assessment tax return for 2012 was 31 October 2012. If you file a paper return after this date penalties will apply.
Would readers note that if we prepare your return it will be filed electronically, the deadline for electronic filing of 2012 Self Assessment returns is 31 January 2013.
If you have still not sent us the information we will need to complete your return, could you attend to this as soon as possible. The penalties for late filing are now rigorously enforced by HMRC. If the filing deadline is breached you will be facing the following charges:
In serious cases you may be asked to pay up to 100% of the tax due instead.
These are as well as the penalties above.
Autumn statement 2012
The Autumn Statement 2012 will be made by the Chancellor of the Exchequer, George Osborne, on Wednesday 5 December at 12.30pm.
The Statement provides an update on the Government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility. These forecasts are published alongside the Autumn Statement on 5 December. It is regarded as the most significant economic event of the parliamentary year after the Budget.
We will be including updates in the December 2012 issue of our newsletter on matters affecting UK tax.
Tax Diary Nov/Dec 2012