Connect – April 2015

April 22, 2015

Savings Income Nil Rate Band

From April 2015, the savings rate band for income tax reduces from 10% to 0%, which means individuals with savings income of less than £15,600, may not pay any tax.

If you expect your total income to be less than £15,600 for 2015/16 (£15,660 if born before 6 April 1938), you may be able to ask your bank to pay your interest gross (without deduction of tax).  This is done by completing HMRC’s form R85 and handing this in to your bank.  Unless they receive a signed R85 from you, banks are required by law to pay interest on non-ISA accounts net of 20% tax (ISA accounts are exempt from income tax and are paid gross).  There are, however, some types of non-ISA accounts which are paid gross and your bank could advise on this.

HMRC also have an online tool, which can be found at http://www.hmrc.gov.uk/tools/r85/r85-2015.htm for helping you to determine if you can apply to receive your interest gross.

If you are required to complete tax returns, any tax overpaid on your investment income can be claimed via self assessment.

If your spouse has low income, it may be worthwhile transferring part of your interest generating investments to your spouse to fully utilise both of your personal allowances and savings nil rate bands.

It is also worth noting the increase in the cash ISA limit from £15,000 in 2014/15 to £15,240 for the 2015/16 tax year.

 

Personal Allowance Transfer

From April 2015, for basic rate taxpayers, it is possible to transfer £1,060 of your personal allowance to your spouse.  This means that if your spouse does not use all of their personal allowance, up to £1,060

of the allowance can be transferred to you, which would result in a tax saving of up to £212.

If this is of interest to you, you can let HMRC know by registering at the following link:  https://www.gov.uk/government/news/registration-opens-for-new-married-couples-tax-break  and HMRC will email you once it is possible to claim.

HMRC have still to confirm how the transfer will operate and, hopefully, we will have more information on this soon.

 

Childcare Vouchers

HMRC are introducing a new childcare voucher scheme later this year, which is available to the self-employed.  Employees currently enjoy a similar scheme, which is operated via PAYE.  The new scheme will operate via an online account and HMRC will contribute 20p towards every £1 in childcare vouchers.  The maximum vouchers available per child is £1,200 per annum and both parents need to be working/self-employed.  The new scheme may be particularly useful for farming partnerships with children and the mother both working in the business.

 

Pension Flexibility

Many people will be considering taking large one-off lump sums from their pension pots as a result of the new legislation which commenced 6 April 2015. However, you should be aware of the tax consequences.

If you take money of out your pension gradually you can reduce the tax burden by spreading it over many tax years, utilising basic rate tax bands and keeping more of your savings. If you take a large lump sum or encash all of your pension at once you may pay too much income tax.

If you have not taken money out of your pension pot before, your pension provider won’t have PAYE tax code for you. This means it has to follow HM Revenue and Customs rules and apply what is called the ‘emergency tax code’.

The emergency tax code works by assuming a ‘month 1’ basis, meaning only one-twelfth of the personal allowance is given and one-twelfth of the basic rate band is applied. You may therefore pay tax at 40% unnecessarily, or even pay tax at 45%.

To claim a refund of any tax overpaid you need to complete a form available on HM Revenue & Customs website. A form P55, P50Z or P53Z can be used and the form to be used depends on your personal circumstances. The repayment should be received within six weeks.

If you complete a tax return you can also claim the refund by the completion of the return but this will require you to wait until after the end of the tax year.

You should note that the emergency tax code doesn’t apply when you are taking money out of a pension fund which has a value of less than £10,000 in total. You will get 25% tax free with the rest taxed at 20%.  Tax free lump sums will continue to be paid free of tax.

 

Capital Gains Tax for Non-Residents

HMRC have published guidance on new capital gains tax (CGT) rules affecting non-UK residents when they sell their UK residential property.

Previously, non-resident individuals were exempt from CGT when they disposed of a UK residential property, creating a perceived unfairness between the treatment of UK residents and non-residents.

From 6 April 2015 new rules were introduced to redress this imbalance and bring such disposals by non UK residents within the UK CGT remit.

Under the new rules, those not resident in the UK and who sell a UK residential property will need to inform HMRC within 30 days of the sale being completed as they may be liable to CGT on the gains they make – this can be done online.

The HMRC guidance clarifies that only the amount of the overall gain relating to the period after 5 April 2015 is chargeable to tax.

The overall gain can be calculated either by establishing the value of the property as of 5 April 2015 (known as ‘rebasing’) and then calculating the amount of gain over that value in the normal way; or apportioning the whole gain on the basis of the time the property was held after 5 April compared with the total time the property was owned.

HMRC say if the seller chooses to rebase, it is the seller’s responsibility to accurately value the property.

HMRC also suggest that in April 2015 owners record the overall condition that their property is in and any unusual features as at that date as this will help establish a fair valuation later on.

Further guidance on how to inform HMRC and pay any CGT due should be published shortly.

 

Remittance Basis Charge

As of 6 April 2015, a new annual remittance basis charge (RBC) of £90,000 for non-domiciled individuals who have been resident in the UK in at least 17 of the last 20 years comes into play, as well as an increase in the charge paid by non-domiciled individuals who have been resident in the UK in at least 12 of the last 14 years from £50,000 to £60,000.

 

Company Car Changes

HMRC are now providing employees with the ability to update their tax code number quicker online when there is a change of company car in the tax year.

The below link to HMRC website provides a note of the details required initially to access the system for the current tax year.

https://www.gov.uk/update-company-car-details

You should have the information relating to the car’s manufacturer list price and CO2 emissions figure to hand at the time you submit.

If your employer has opted to payroll benefits and expenses you will not need to update online as this is already happening.

 

Employment Tax Deadlines for year ended 5 April 2015

6 July 2015 – Final date for requesting a PAYE settlement agreement

If you provide benefits for staff that you do not wish them to pay tax on they can be included on a PAYE settlement agreement, i.e. gift vouchers, hampers, food, drink and entertaining outwith the exemptions. It is necessary to agree with HMRC prior to 6 July 2015 those benefits which will be covered by the agreement and the relevant tax and NIC must be paid by 22 October 2015, if paid by BACS. Cheque payments must reach HMRC by 19 October 2015. These are annual agreements and should be updated as necessary annually.

6 July 2015 – Final filing date for forms P11Ds and P11D(b) for the year ended 5 April 2015

The form P11D details the expenses and benefits provided to any employees earning at a rate of over £8,500 per annum (including the value of benefits and expenses) and all directors. A return is also required on a P9D for each employee who does not fall into the above categories but who is in receipt of a limited range of benefits. These form part of the end of year return and must be forwarded to HM Revenue & Customs (HMRC) together with the return of class 1A national insurance contributions form P11D(b). The class 1A NIC liability is due for payment by 22 July 2015 if by BACS. For payments by cheque the deadline is 19 July 2015.

Potential benefits in kind include company cars, excessive mileage allowance, interest free or low interest loans, medical insurance, use of company assets and vans which you should review for every person employed by you during the year.  Please note that this list is not exhaustive.

There can be significant administrative advantages in obtaining a dispensation in relation to reimbursed expenses. If you have a dispensation in place already, it’s important to check that this is up to date and as a general guideline should be updated every 3 years with HMRC.

6 July 2015 – Filing date for form 42 (companies only)

The acquisition of shares in a company by an employee or director, whether by allotment or transfer, must be reported by the company each year on form 42. There may be other taxation implications that should also be considered in this regard.

 

Upcoming Key Compliance Dates

April 2015    

1st       Corporation Tax payment date for companies with 30 June 2014 year end.

5th       End of 2014/15 tax year.

6th       Start of 2015/16 tax year.

19th     PAYE due for quarter or month of March 2015.

22nd    PAYE electronic payment deadline.

30th     Corporation Tax return (CT600) filing deadline for companies with 30 April 2014 year end.

30th     Companies House filing deadline for companies with 31 July 2014 year end.

May 2015     

1st       Corporation Tax payment date for companies with 31 July 2014 year end.

1st       Commencement of £10 daily penalties for 2013/14 tax returns not filed.

2nd      Employers submit P46 (car) form showing quarter’s changes to company cars.

19th     PAYE due for month of April 2015.

22nd    PAYE electronic payment deadline.

31st     Corporation Tax return (CT600) filing deadline for companies with 31 May 2014 year end.

31st     Companies House filing deadline for companies with 31 August 2014 year end.

June 2015     

1st       Corporation Tax payment date for companies with 31 August 2014 year end.

19th     PAYE due for month of April 2015.

22nd    PAYE electronic payment deadline.

30th     Corporation Tax return (CT600) filing deadline for companies with 30 June 2014 year end.

30th     Companies House filing deadline for companies with 30 September 2014 year end.