George Osborne

Highlights from the Chancellor’s Budget, 18 March 2015

Along with some encouraging news about the UK economy, some interesting new measures were announced in the Chancellor’s Budget yesterday and below we highlight those which we feel will directly impact the majority of UK taxpayers:

  • As widely forecast, the tax-free allowance will increase. The amount people can earn before paying tax will rise to £10,800 from 2016-17 and then to £11,000 from 2017-18. At the same points in time, higher earners will also receive a two stage increase to the threshold at which they start to pay a 40% rate of tax, with the threshold increasing to £43,300 by 2017-18.
  • The Chancellor also announced a brand new Personal Savings Allowance whereby the first £1,000 of interest (£500 for higher rate taxpayers) will be tax tree. This new allowance will kick in from April 2016 and will take 95% of taxpayers out of savings tax completely. (Fact Sheet available here).
  • Another new scheme announced was the introduction of a new ‘Help to Buy ISA’ aimed at prospective first time buyers. This fairly generous scheme means that the Government will chip in up to £50 extra per month (up to a ceiling of £3,000) when an eligible saver saves up to £200 per month towards their first home. (Fact Sheet available here).
  • In another ISA reform, savers will now be able to withdraw money from a new Flexible ISA and deposit it back later in the same financial year without losing any of their usual ISA tax benefits. £15,240 will be able to be put into this re-styled savings vehicle. Read more
George Osborne

How the Chancellor’s 2014 Autumn Statement affects YOU!

George Osborne, the Chancellor of the Exchequer, announced his Autumn Statement on Wednesday (3 Dec 2014) in what could be seen as a mini budget. Here we focus on the key announcements, concentrating on those relating purely to taxation, as it is those which affect you, our customers, most directly.

1). First some good news: The UK is seeing the fastest growth out of all the G7 countries, and the number of people employed is at its highest point ever. This is good for all of us because it restores optimism in the UK economy, higher employment speaking for itself.

2). As we announced in a separate blog post, Stamp Duty (Land Tax) has been given a major shake-up and, for anyone buying a house for £935,000 or less, the amount of Stamp Duty which they’ll have to pay will be less, and sometimes very significant. See our separate blog post and infographic for more detail.

3). In the financial year 2015-16, the tax-free personal allowance (which is the amount you can earn before you start to pay any tax) will increase to 10,600 which is an increase of £600. So … more tax-free money in your pocket, which is good.

4). Economy flights will become cheaper for under 12s from 1 May 2015 and under 16s from 1 March 2016, because their tickets will become exempt from tax on those dates. So … a small concession, but another welcome one. Average 4-person families will save £26 for flights within Europe and £142 on flights to the U.S.

5). From 3 December 2014, spouses will be able to inherit their partner’s ISA benefits should their partner pass away. Currently this is not the case and the change will mean that, from 6 April 2015, the surviving spouse or civil partner will be able to Read more

The Shocking Truth about Tax on the Poor

How much is taken in taxHave you ever wondered how much of one’s total income is taken up in tax? And I don’t mean just Income Tax. I mean in ALL taxes paid by ordinary taxpayers throughout the course of a year. Such a figure would need to take into account National Insurance (income tax in all but name, some might say), the insidious Value Added Tax or ‘VAT’ – which on its own is a hefty 20% tax on what is often already taxed money for most ordinary taxpayers, and don’t forget to include Council Tax and finally, of course, Income Tax itself.

Well, the answer may surprise you. Before seeing the answer, though, try The Guardian’s little quiz about this and see how you get on. There are only 8 questions, and for each you simply choose from 4 possible answers – so it’s quick to complete and, once submitted, you are immediately taken to a feedback page where you will be told how your answers compared to the average respondent and, more interestingly, what the correct answers were. It’s interesting to note that, in a joint poll by The Equality Trust and Ipsos MORI, nearly 70% of people drastically underestimated how much the poorest pay in tax, as a percentage of their total income. They also over estimated how much the richest pay as a proportion of total income. This wide misconception is due to most people incorrectly focusing only on Income Tax alone which, in reality, only makes up a small proportion of total taxes paid throughout the course of a typical year.

Spoiler alert: be warned that I’m shortly going to divulge the answers Read more

RTI (Real Time Information) – last Full Payment Submission (FPS) due soon

Exactly eleven months ago at time of writing, HMRC launched ‘RTI’ (Real Time Information) in the UK. This is the mechanism through which employees now have to report PAYE information for employees on the day it actually happens, or alternatively before that day, for example to confirm to HMRC each time an employee is paid through PAYE, including any NI or Income Tax deductions. RTI is, almost without exception, for all employees including those whose earnings fall below the NIC’s Lower Earnings Limit (‘LEL’), e.g. students.

The RTI reporting has to be done electronically using payroll software, whether that’s the employer themselves reporting it, or their nominated accountant, payroll bureau or bookkeeper. The information reported to HMRC will also now need to include new information which includes the usual hours worked by each employee and any unusual break in the normal working pattern, for instance if an employee takes unpaid leave. RTI also includes other changes to how various things are reported e.g. starter and leaver dates and also employers no longer need to submit end of year forms P14 and P35 because this will be handled on the last Full Payment Submission (‘FPS’) for the tax year in question – this is due in less than a month  at time of writing as the new tax year begins Read more

‘Employment Allowance’ to save businesses up to £2k in NIC

In April 2014 the new ‘Employment Allowance’ will be introduced. This will cut up to £2k off the National Insurance costs incurred by businesses and save employers nearly £5.5 billion across the UK as a whole by the end of the Parliament. This equates to £200 per UK employee.

These savings will also be helped by the abolishment of the National Insurance previously paid by businesses for employees under 21 years of age (from April 2015) and by the increase in the “threshold before an employer has to begin paying National Insurance contributions for employees” (from April 2011).

George Osborne, Chancellor of the Exchequer, said:

“Small businesses make a vital contribution to our economy, creating jobs and stimulating growth. The ones I have visited today want to expand, take on new staff and make new investments so the actions we have taken to cut the jobs tax will be a real boost to them.” Read more

Autumn Statement by the Chancellor of the Exchequer

George OsborneOn 5 December 2013 George Osborne, Chancellor of the Exchequer, gave his Autumn Statement in Parliament. Key announcements included:

  • A rise for the Personal Allowance, as was long-anticipated, to £10,000 in 2014/15;
  • the higher 40% tax rate threshold also increasing to £41,865;
  • A new, transferable, tax allowance of £1,000 for married couples and those in civil partnerships from April 2015;
  • For employees aged under 21 employers will not have to pay Class 1 National Insurance (‘NI’) Contributions on earnings up to the Upper Earnings Limit;
  • Capital Gains Tax (‘CGT’) for future gains will now also apply to NON-resident individuals from April 2015 (previously this had been applied only to UK resident landlords);
  • For 2014/15 the annual ISA subscription limit will increase to £11,880 (of which £5,940 can be in cash);
  • There were also announcements relating to the continuing clamp-down on tax avoidance, improvements and plans for UK infrastructure, and the proposed inheritance tax (‘IHT’) simplification for trusts.

The full speech transcript can be read here or alternatively view the following video recording: Read more

Business Payment Support Service

Business Payment Support Service (BPSS) was launched on 24 November 2008. This service is designed to support businesses having trouble payment their tax bills in the current economic crisis.
Very important to realise is that this service does not deal with anyone that has already made a payment arrangement with HMRC .
Also, the BPSS does not deal with you if HMRC has already got in touch with you regarding an overdue payment.
In order for the BPSS to be able to help your business, you need to contact them before the tax, VAT, Corporation Tax, Pay As You Earn or National Insurance contributions liabilities are due.
You can contact them seven days a week on 0845 302 1435.
According to HMRC, this service “designed to assist all businesses (large and small) that will be unable to pay their tax. The service is primarily available to self-employed people and companies but can be used by any of your clients who are having difficulty in meeting their tax liabilities. It covers most taxes and duties including Income Tax, Corporation Tax, VAT, PAYE and National Insurance.”
The Payment Support service only applies to businesses that cannot genuinely meet their tax payments on time and they are likely to pay their tax over a longer period of time.
Also according to HMRC, “ surcharge(s) can be avoided on late payment of income tax where a Time to Pay agreement is entered into before the relevant surcharge date AND the terms of the agreement are adhered to.”
Although surcharges can be avoided, interest on late payment will be charged in the normal way.
If you would like to know more about this service , you can follow this link.
Taxfile‘s tax agents in South London and Exeter can discuss your business position with HMRC on your behalf and arrange a Time to Pay agreement.

Employed or Self Employed?

If you work for someone else, it is important to know whether you are working for that person as employed or self-employed as an independent contractor.
If you are the one having to employ somebody, it is your responsibility to correctly determine the employment status of that person.
A worker’s employment status will determine the charge to tax on income and the class of National Insurance contributions due.
It is necessary to determine whether the person works under a contract of service (as an employee) or under a contract for services (as self-employed or independent contractor).
There are some test and factors that can determine the worker’s right status. For instance if the workers are paid by the hour, week or month and if they can get overtime pay or bonus it means that they are employed. Also, if they work a certain amount of hours and they can be moved from task to task than again they are considered to be employees.
Important to establish is whether the workers can be replaced by somebody else and whether they are being told where, when and how to carry out their work. Again if the answer is affirmative than that worker classifies as an employee within the company.
If the workers are self-employed,the answer to all the following questions should be positive:
•Do they regularly work for a number of different people?
•Can they hire someone to do the work or engage helpers at their own expense (the so called right of substitution and engagement of helpers)?
•Do they carry a financial risk?
•Can they decide what work to do, how and when to do the work and where to provide the services?
•Are they providing the main items of equipment they need to do heir job?
•Do they agree to do a job for a fixed price regardless of the time it takes?

Very important to highlight the HMRC’s view of a worker : “Just because a worker is self-employed in one job, doesn’t necessarily mean he or she will be self-employed in another job. Equally, if a worker is employed in one job, he or she could be self-employed in another.
It is a general requirement that those wishing to take on workers consider the terms and conditions of a particular engagement to determine whether the worker is an employee or self-employed. If you any doubts, you can always ask your local Status Inspector for an opinion as to the employment status of your workers. Also there is an Employment Status Indicator (ESI) tool that enables you to check the employment status of an individual or group of workers.
Unfortunately, the status of self-employed workers is a favourite target of the Taxman, particularly during a PAYE compliance visit.
So take Taxfile‘s tax agents advice and protect yourself with a contract and and keep all the correspondence between you and the contractor covering the main points about employment status to avoid problems in the future.

Statutory Sick Pay (SSP)

Statutory Sick Pay (SSP) is a standard rate state benefit payable by the employer from the fifth day of sickness. The first three qualifying days of a period of incapacity for work are called waiting days and there is no SSP payment.

In order to qualify for SSP you must meet the following conditions:

• you have to be sick for at leat four days in a row (including weekends and bank holidays)

• you must earn at least £90 per week or £95 a week from 08/09 tax year. This is to do with National Insurance contributions. (If you have two jobs, you may even be able to get SSP from each of your employers, depending on how many hours hours you work.)

Also you would need to provide your employer with some sort of medical evidence.

The standard rate of SSP is £79.15 a week. The way your employer will work out a daily rate is by dividing the weekly rate by the number of days you would normally work in that week.

It is important to remember that SSP payments is subject to tax and NI just like any other type of earnings.

If your employer does not pay you SSP or pays you less you have to clarify with them the reason.

Company sick pay schemes vary from employer to employer, but most state that you should have been working for at least 3 months before you make your claim for sick pay. After this you would then receive your normal pay during any period that you are off to work due to illness, but this is only up to a specific number of weeks. After that you are probably going to receive only half pay for another further period before taking any sick leave as unpaid.

We hope that you have found this information useful, and if you still have any unanswered questions regarding SSP, please fill free to pop in to our offices in South London, Tulse Hill or Exeter.

Types of CIS cards in the Construction Industry Scheme

There are five types of registration cards and certificates used in the Construction Industry Scheme:

CIS 4(P) is the permanent registration card issued to most subcontractors. It entitles the holder to be paid with a deduction on account of tax and National Insurance contributions. It does not have an expiry date but it shows the photograph and signature of the authorised holder, along with their National Insurance number.

CIS 4(T) is the temporary registration card issued to subcontractors who do not hold or do not know their National Insurance number. It enables the holder to be paid with a deduction on account of tax and National Insurance contributions while they obtain a valid National Insurance number.

CIS 6 is the subcontractor certificate issued to individuals, partners in firms and directors of most companies that meet the required turnover, business and compliance requirements. The certificate shows the photograph and signature of the holder and entitles them to be paid gross.

CIS 5 is the subcontractor certificate issued to companies that can’t be issued with a CIS 6. There is no photograph on the certificate but it bears the company secretary’s signature. It entitles the subcontracting company to be paid gross.

CIS 5 (Partner) is the subcontractor certificate issued to one partner in business partnerships that can’t be issued with a CIS 6. There is no photograph on the certificate but it bears the signature of the partner nominated to hold the certificate by the firm. It entitles the partnership to be paid gross.

Sometimes a subcontractor’s payment status will change from payment under deduction to gross payment. If this happens, the Tax Office will tell the subcontractor and any contractors who have verified or used the subcontractor in the current or previous two tax years. The revised payment status should then be applied to all subsequent payments to the subcontractor as soon as it is practical for the contractor to do so.

Subcontractors who meet certain qualifying conditions get the tax certificates and those who do not get the registration cards.

Only a minority of subcontractors will qualify for a Tax Certificate which then entitles them to gross payments. To qualify you must pass three tests; the turnover test, the business test and the compliance test.

  1. The turnover test
    To meet the turnover test as an individual you must show that for a continuous three year period you have had a net turnover of £30,000 a year or more.
  2. The business test
    You need to be in a business that provides labour to carry out construction work, conduct your business primarily through a bank account and also keep proper business records.
  3. The compliance test
    Tax affairs must be kept up-to date during the three years before application. You need to show you have paid all tax, including any PAYE and subcontractor deductions and submitted all tax returns on time.

If you qualify, you should receive your certificate within 30 days of application; if not you will automatically be sent a registration card. If you do get a subcontractor’s tax certificate it will be one of three types; either a CIS6, which is the most common type, a CIS5 which is issued to some companies because of their size, or a CIS5 (Partner) which is again issued to firms which have complex operations or geographical spread. Only the CIS6 shows the authorised user’s photograph and signature.

If you need further information about types of registration cards and CIS tax certificates, Taxfile’s tax accountants in South London, Battersea, Devon, Yorkshire or Carlisle can help you with your registration.

Call 0208 761 8000 or learn more about our tax and accountancy services for CIS contractors and subcontractors in the construction industry here.