HMRC now has landlords in their sights

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Residential property lettingsHMRC (Her Majesty’s Revenue & Customs) has announced some new initiatives over the course of the last month and one of these is The Let Property campaign which is a campaign designed to recover undeclared tax from those receiving income from residential property lets. The idea is to encourage those landlords with under-declared income or gains (potentially including income tax, Capital Gains Tax and VAT) to contact them in order to make a full disclosure. By doing so they may well avoid the higher penalties which may be applied to them should HMRC discover the undeclared income/gains via other means. Don’t forget that they now have access to information shared across systems, including in relation to properties both at home and abroad, as well as being gained through their digital intelligence system ‘Connect’ which identifies links between individuals, entities and properties. So the message to landlords is loud and clear!

The campaign applies to landlords whether they have just a single property or a large portfolio of properties and encompasses lets to students, business workforces and the holiday market. Read more

New tax break for married couples

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In this recently filmed interview David Cameron said:

“Marriage is a great institution and it helps to build good and strong societies so I think it’s right to back marriage properly in the Income Tax system – most other advanced industrial countries do and it and we should do it too.”

So on the eve of the Conservative Party Conference at the end of September, the Prime Minister began to unveil plans for a new allowance which will benefit an estimated 4 million married couples, including 15,000 in civil partnerships. It is aimed at those who are not in the higher tax-paying rate (so those couples with a taxable income of less than £42,285 in the tax year 2015-16) – so will benefit only those on a middle or lower income. Read more

New brochure available for download

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Taxfile's BrochureHave you ever wondered what other services the Taxfile group can help you with? Well, find all the answers in the new downloadable brochure, which outlines services undertaken at the various different offices in both South London and Exeter, Devon. From accountancy and bookkeeping for SMBs to simple tax returns for individuals and right through to the most complex of complicated tax issues – we’re here to help and the new brochure gives you all the contact details for each office including address, email, telephone, Skype ID, how to book appointments on-line and, finally, what discounts are available – both to new and existing customers – it’s all there … or rather I should say … it’s all here! (A4 PDF format, less than 1MB).

Taxfile: Scholarship Income

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By scholarship we mean an exhibition, bursary or any other similar educational endowment. If the holder of the scholarship is receiving full-time education at a university, college or school then the income from the scholarship is exempt from tax.
The rate of payment including lodging, subsistence and travelling allowances is now £15,480 a year, £1,290 a month or £297.92 a week. This rate has increased from £15,000 (rate used up to 01/09/2005) to £15480 (from 01/09/2007 onwards).
Important to note is that this exemption does not apply to payments of earnings made for any periods spent working for the employer during vacations.
If the rate exceeds £15,480 HMRC will look at the arrangements in detail. This is because the level of payment exceeds what might reasonably be described as a scholarship or training allowance. However, an increase in the rate of payment over the qualifying limit, part way through a course, will not affect the exemption applying to any payments for the earlier part of the course
One of the condition to be met by the employee receiving the scholarship, is that he/she must be enrolled at the educational establishment for at least one academic year and must attend the course for at least twenty weeks in that academic year.
Also, the educational establishments must be recognized universities, technical colleges or similar educational establishments, which are open to members of the public generally and offer more than one course of practical or academic instruction.
Very important to know is that the concepts of “earnings” and “scholarship income” are mutually exclusive.
In conclusion, it is important to remember that there are a few factors to consider when dealing with scholarship income:
•the relationship between the payer and the recipient;
•the nature of the course;
•where the course is being undertaken;
•whether it is full time;
• total amount.
So pop in to see us in our office in South London Monday to Friday and even Saturday now!
Any of our tax agents at Taxfile will be more than happy to help if you have any further queries.

Foster Carers and their tax relief

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Fostering is looking after someone else’s children in your own home at a time when his or her family is unable to do so. Foster care relief applies to people who get income from providing foster care to children and young people.
Anyone receiving this type of income is considered by the tax office to be self-employed and therefore liable for tax.
If total receipts from fostering no dot exceed a certain amount, often referred to as qualifying amount, than the foster carer will be exempt from income tax for that year.
A qualifying amount is made up of two elements added together.
One element is the fixed amount of £10,000 per year for each household. Only a proportion of the fixed amount can be claimed if the foster carer is registered for less than a year.
The second element consists of an amount per week for each foster child which varies depending on the child’s age.
If total receipts from fostering exceed the qualifying amount than there are two ways of calculating your tax. One is called the profit method and it is calculated by deducting the allowable expenses from the receipts.
The other one is called the simplified method and is calculated by deducting from the receipts the qualifying amount with no additional relief for expenses. Capital allowances are not available if such a claim is made. The election must be made on or before the first anniversary of 31 January next following the end of the year of assessment to which it relates. If they do not make such an election the will need to calculate their profit in the normal way (the profit method).
As profits from fostering as treated as earnings from self-employment, than National Insurance Contributions will be due (Class2 £2.30 per week and Class4 8% on the profit).
As a foster carer need you to keep good records consisting of total receipts for the year from their local authority, HSS trust or independent fostering provider.You also need to keep a record of the number of weeks that you care for each child placed with you in the year.
Also you need to keep a record of the date of birth for each child.
If your total receipts from fostering exceed the qualifying amount and you are using the profit method than you would need to keep records of your expenses as well.
If you are a foster carer and need help with filling in your tax return, Taxfile‘s tax agents in South London and Exeter are here to help.

Tax return deadlines: taxpayers’ worse nightmare

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Have you ever felt overwhelmed by not having enough time to cope with your tax affairs in time?
During the tax year (6 April one year to 5 April the next) there are important dates , let’s call them key dates, by which you need to send in your tax return and make certain payments. It’s important to be aware of these dates as HM Revenue & Customs (HMRC) imposes penalties, interest and surcharges if you miss them.
• 31 January
This is the formal deadline for sending back a tax return received by the previous 31 October. If it arrives after this deadline you’ll be charged an automatic £100 penalty.This is also the deadline for paying the balance of any tax you owe, referred as ”balancing payment”.HMRC will charge you daily penalties until they receive your payment.
• 30 September
Paper tax returns for the tax year that ended on the previous 5 April must reach the HMRC by this date if you want them to calculate your tax for you, tell you what you have to pay by the following 31 January or collect tax through your tax code (if possible) where you owe less than £2,000 .
If they receive your paper tax return after 30 September and process it by 30 December, they’ll still calculate your tax and try to collect tax through your tax code; but they can’t guarantee to tell you what to pay by 31 January.
If you file your tax return online the deadline is later (see below) because the system calculates your tax liability for you automatically on-screen.
• 28 February
If you don’t pay the balancing payment by 31 January, you’ll be charged an automatic 5% surcharge on top of the amount still owing. This is in addition to any interest payments.
• 31 July
This is the deadline for making a second ‘payment on account’ for tax owing for the preceding tax year.
If you still owe tax that you were due to pay by the previous 31 January, you’ll be charged a second automatic 5% surcharge on top of the amount you owe.
Taxfile‘s tax accountants in South London took a group policy for all their customers in order to protect them from any extensive work generated by an enquiry from the tax office. In order to help us protect you from the taxman you need to send your tax return in time.
Taxfile can also protect new customers for their last tax return, provided they sent their return in time, before the deadline.

PAYE forms: P45, P60, P11D

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PAYE (PAY As You Earn) is the HM Revenue and Customs system for collecting income tax from the pay of employees.

As an employer, you need to deduct income tax and National Insurance contributions (NICs) from your employees’ pay and send it to the HMRC.

As an employee, you should receive a P45 or a P60 from your employer that show you the tax you pay on your wages. If you receive benefits or expenses your employer has to send a form P11D to the tax office.

P45 form

You receive a P45 from your employer when you stop working for them. It shows:
•your tax code, tax reference number and Tax Office
•your NI number
•when you were last paid
•your earnings in the tax year from all your jobs
•how much tax was deducted from your earnings

You are entitled by law to get a P45 when you stop working for your employer.

P60 form

P60 is a summary of your pay and the tax and the tax deducted during the year.

Your employer should give you a P60 at the end of every tax year (tax year runs from 6 April to 5 April the next year)

It is very important to keep your P60 safe as you might need it to prove your income if you apply for a loan or to claim back any overpaid tax.

P11D form

Your employer doesn’t have to give you a copy of P11D but he must tell you the details included on the form. This form shows the expenses payments, benefits and facilities provided by the employer.

For more information, you can visit Taxfile‘s tax accountants in South London. Their multilingual staff (including English, Polish, French, Hungarian and Dutch) are ready to help you with any type of tax affair.

Confused about your tax code?

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A tax code is usually made up of one letter and several numbers, for instance 161L or K567 . A tax code is used by your employer or pension provider to calculate the amount of tax to deduct from your pay or pension. If you have the wrong tax code you could end up paying too much or too little tax.
The letters in your tax code have different meanings:
• L- for those tax payers that are eligible for the basic personal allowance or those that are on the emergency code.
• T-if there are any other items HM Revenue and Customs (HMRC) needs to review in your tax code.
• P- for persons aged 65 to 74 and eligible for the full personal allowance.
• V-for persons aged 65 to 74, eligible for the full personal allowance and the full married couple’s allowance (for those born before 6 April 1935 and aged under 75) and estimated to be liable at the basic rate of tax.
• Y-for persons aged 75 or over and eligible for the full personal allowance.

If your tax code has two letters but no number, it normally indicates that you have two or more sources of income and that all of your allowances have been applied to the tax code and income from your main job:
•BR-Is used when all your income is taxed at the basic rate – currently 22 per cent (most commonly used for a second job)
•D0-Is used when all your income is taxed at the higher rate of tax – currently 40 per cent (most commonly used for a second job)
•NT-Is used when no tax is to be taken from your income or pension.

Your employer will use an emergency tax code when you start a new job and your pay is above the PAYE threshold or when you declare on your P46 that this is your only job. Also your employer will use the emergency tax code if you don’t give him/her a P45 when starting a new job.
Taxfile in South London can help you sort out your tax code and make sure you pay the right amount of tax.
If you have paid too much tax under the PAYE code , Taxfile‘s tax accountants in Tulse Hill you will get in touch with the Inland Revenue and request a refund on your behalf.

IHT: Transfer of unused nil-rate band

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The Pre-Budget 2007 Report published on Tuesday 9th October announced various changes, one of them referring to the inheritance tax (IHT).
Previously, married couples could transfer an unlimited sum to each other when one died without paying inheritance tax. But when the survivor died, their estate was then taxed at 40% on anything exceeding £300,000.
Couples can now transfer their allowances to each other. When the first person dies, they can transfer their allowance to the second person. When the survivor dies, their beneficiaries can add the two allowances together.
In other words, the change in IHT is concerned with ”the transfer of any unused nil rate band allowance on a person’s death to the estate of their surviving spouse or civil partner.”
It is important to remember that there is a ”permitted period”which is the time limit within which a claim must be made by the personal representative. This is two years from the death of the survivor spouse. If the claim is not be made within the time limit, than a claim may be made by any other person who could be liable to the inheritance tax.
By 2010, the combined tax-free allowance for couples will rise to £700,000.Experts emphasise the need to keep good records, especially where the spouse who dies first does not use the whole of their IHT allowance.
Although this is a great news for married couples or those in civil-partnerships these changes will not help unmarried or non-civil partnership couples, or siblings who share homes.
If you would like to know more details about the way IHT works, you can visit Taxfile’s accountants in South London.

Is Your Estate Excepted From IHT?

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(for UK domiciliaries only)

From 6 April 2004, there are two types of estates are qualified to be excepted from IHT for UK domiciliaries.

1. Low valued estates
When the total value of estates does not exceed the inheritance tax threshold, then those estates do not suffer IHT.

Which threshold should be applied is determined by the date of deceased’s death. If the death was between 6 August and 5 April in any one tax year, or between 6 April and 5 August with the grant of representation taken after 5 August, you should use the threshold of that tax year in which the death happened. If death was between 6 April and 5 August, but the grant of representation was taken before 5 August, the threshold should be used is the one from the tax year of one year earlier.

2. Exempt estates
No IHT is payable when either Spouse/Civil Partners Exemption or Charity Exemption applies and the gross value of the estates is less then £1 million.

Spouse/Civil Partner Exemption can only be deducted if both spouses or civil partners have always been domiciled in the United Kingdom, if one of the spouse/ partners is domiciled outside of UK at the time of transfer of estates, the exemption is limited to £55000. And charity exemption can only be deducted if the gift is an absolute gift to the organisation concerned.

Both types of estates must be subject to the following conditions in order to be exempted from IHT:

• the deceased died domiciled in the United Kingdom,
• if the estate includes any assets in trust, they are held in a single trust and the gross value does not exceed £150,000 (unless the settled property passes to a spouse or civil partner or to a charity when the limit is waived),
• if the estate includes foreign assets, their gross value does not exceed £100,000,
• if there are any specified transfers(transfer the estate to somebody as a gift, the value does not exceed £100,000 if the transfer is within 7 years of death, and this transferred estate does not get involved into any trust), their chargeable value does not exceed £150,000, and
• the deceased had not made a gift with conditions attached
• the deceased did not have an alternatively secured pension fund, either as the original scheme member or as the dependant or relevant dependant of the original scheme member

Well financial planning with the help of Taxfile will significantly save your IHT, just feel free to visit our offices in
South London to get professional advice from our
tax experts.