Changes to Child Tax Credits
With recent changes to the tax credit thresholds and changes to the working requirements of claimants, I thought it may be useful to post a rough guide to the new tax credits changes and how they may affect you.
The child tax credit is paid to lower income families with children whether they are working or not. As a rough guide claimants with one child may not receive child tax credit if their income is more than around £26,000 and those with two children may not receive the credit if their income is more than around £32,200. This is a substantial reduction from the £41,300 income limit in 2011/12.
However, claimants with higher incomes and with larger families, disabled children or who spend a lot on formal childcare, could still be entitled to some payments. Child tax credit is paid directly to the main carer in the family either weekly or monthly and is usually paid directly to a designated bank or building society account.
The working tax credit assists taxpayers on low incomes by providing top-up payments. The rules for couples claiming the working tax credit changed from 6 April 2012 with an increase in the minimum amount of working hours from 16 to 24 per week. One member of the couple will have to work at least 16 hours a week. Single people who are responsible for children (for example single parents) are not affected by the new rules.
The rules for backdated claims are also changing, from April 2012 claimants are only able to backdate the increase in their entitlement by one month and not three months as before and there are also changes to the tax credits rules where a claimant’s income drops during the tax year as well as the withdrawal of part of the working tax credit known as the ‘50-plus element’ for taxpayers aged over 50.
The leaflet also reminds claimants to notify HMRC should their circumstances change such as stopping or starting work, changes in income and changes in family circumstances. HMRC have also published a revised copy of the factsheet entitled ‘Tax credits – coming to the United Kingdom’.
2012 Budget facts and figures Newsletter
We have today published a round up of the relevant facts and figures from yesterdays budget for you to take a look at.
The newsletter lays out the changes that will happen over the next twelve months that will basically effect everyone who is liable to pay tax.
We have shown a comparison for some of the changes to the figures for the current year (2012/13) so that you can see how the budgetary changes may affect you.
Take a look at the newsletter; and if you have any questions or queries about any of the topics covered then you can contact us at anytime, we would be pleased to answer your question(s) and help you in any way we can.
CBS February Newsletter Published
This months Newsletter features Clare and Anna in the “meet the team” section, and we have articles considering the processes you need to think about and follow when closing your business, including the submission of the C16 form.
Also included are tips on how to avoid costly PAYE fines by understanding deadlines and using the HMRC new faster payment facility.
HMRC are keen to track down instances of fraud and are offering business owners the opportunity to come forward and confess using their contractual disclosure facility (CDF). However there (as always) is small print and so if you think you may be affected or are thinking of making a disclosure; read the article and come and speak to us first, we may be able to help!
To access February Newsletter click here.
If you want to subscribe to the free monthly edition you can do so from here
Pension Changes Delayed
John
Good news for small businesses with employees is that the proposed introduction of a compulsory pension has been delayed for a year. We advised you of the proposals in a recent post. It is certain that the cost of employing anyone will increase as a result of the change – but in the last week it has been announced that the timetable will be changed to allow smaller businesses an extra year to prepare.
This is good news for businesses, already struggling because of the recession, but please note that the plans haven’t been abandoned – just delayed.
If you need help and advice on employing people, give us a call on 01509 816150 or contact us via our website. We provide a range of payroll linked services. We can run your payroll for you, including CIS. We can provide you with a full support service to produce contracts and employee handbooks and can offer ongoing support to answer any queries you may have. And, should the worst happen, we can help with employee disputes – right up to tribunals.
Seasonal Workers Tax and NI requirements
Students and other temporary workers are reminded that they may not be required to pay any income tax on earnings that are below the tax free personal allowance for the year. This is especially important to remember at this time of year when many students and temporary workers take on part-time jobs in the run up to the Christmas holidays.
Students that expect to earn less than £7,475 in the current tax year (i.e. to 5 April 2012) and complete a form P38(S) when they commence temporary employment should be able to receive their pay tax free.
Students who already have earnings in the current tax year (within the personal allowances thresholds) which have been taxed could be eligible for a refund. A refund of overpaid tax can be requested using a form P50.
Anyone who worked over the summer and earned less than tax free limit but paid tax on those earnings, should also apply for a refund as they could receive a tax refund from HMRC to help pay for the Christmas celebrations!
If you are an employer and you need some support with your PAYE requirements contact us at anytime for an initial feww consultation and help and support for your PAYE scheme and other Business operations
If you are an employee and think you may need to complete a tax return to reclaim tax you have overpaid then Contact us to see if we can help you with your claim.
Pension update for employers
Starting from October 2012 employers will begin to automatically enrol eligible workers into a qualifying workplace pension scheme and contribute to that pension. Workers who are automatically enrolled will also contribute to the scheme and get tax relief. Measures in the Pensions Act 2011 such as allowing companies to defer automatic enrolment for up to three months, simplifying the scheme certification process, and greater flexibility on choosing the automatic re-enrolment dates will apparently reduce red tape and cut costs.
The measures in the Pensions Act 2011 are:
-An optional waiting period allowing the automatic enrolment date to be deferred for up to three months to help those employing short-term and seasonal staff.
-Simplifying the process for employers to certify that their schemes meet requirements.
-Greater flexibility to choose an automatic re-enrolment date three months either side of the three yearly re-enrolment date.
-Introducing a new higher earnings threshold for automatic enrolment set initially at £7,475, to be reviewed every year.
Automatic enrolment will be introduced gradually over four years, starting from October 2012, to give employers time to prepare for automatic enrolment, and large firms with 120,000 or more workers in their PAYE scheme will be first to enrol their staff. Small businesses with fewer than 50 workers in their PAYE scheme will not have to begin enrolling their workers until 1 April 2014 at the earliest. All employers must enrol their staff by 1 September 2016.
The National Employment Savings Trust (NEST) will provide a simple, low cost scheme for all employers who have little or no experience of pensions, and will be particularly suitable for small businesses.
The level of pension contributions will be phased in over time to help employers and individuals adjust to the additional costs of the reforms. Nobody will have to pay the full contribution until October 2017. Pension contributions will be phased in from October 2012 as follows:
From October 2012, these will be 1% from the employer and 1% from the worker (2% in total).
From October 2016 to September 2017, they will increase to 2% from the employer, 2% from the worker and 1% tax relief (5% in total).
From October 2017, the full minimum contribution of 8% must be paid: 3% from the employer, 4% from the worker and 1% tax relief.
The Pensions Act 2011 builds on reforms set out in previous legislation. The Pensions Act 2008 introduced measures to encourage greater private saving which included workplace pension reforms. These included new legal duties requiring employers to automatically enrol eligible workers into a qualifying pension scheme; a compliance regime enforced by The Pensions Regulator; and a new workplace pension scheme, the National Employment Savings Trust (NEST).
How do accountants charge?
The traditional way of charging for accountants is by hourly rate. Accountant A quotes one hourly rate and accountant B quotes a slightly lower one. Simple, you go with accountant B because that’s going to be cheaper isn’t it? Not necessarily. You don’t know how quickly each of them can work so, if accountant A is a faster worker, possibly because of better technology, you could find that, even on this crude measure, accountant A is the lower cost option.
Hourly rates have other traps for the unwary. If the accountant is working on an hourly rate, is there any incentive to do the work quickly? If a mistake is made and has to be put right, the client is being charged an hourly rate so the cost of correcting the mistake can be passed on to the client – and this does happen. Most people wouldn’t accept an hourly rate quote from a builder or plumber without knowing how many hours to expect. Why should accountants be different?
Many, but not all, accountants do have a policy of only charging for the time which a job should have taken. They review each piece of work and, if it has taken longer than it should, possibly because of having to correct a mistake, only charge for the time the job should have taken. This does not apply to all accountants. I have come across situations where a client has pointed out mistakes to an accountant and then received a bill for “amending the accounts”.
In my opinion it is generally better to try to arrive at a price before starting the work. This is difficult with new clients because there is no previous knowledge of working with their records and, for a brand new business, no real information to go on, other than previous experience. We can be pretty definite about some types of work, such as payroll, and for other work we will give as accurate an estimate as possible, usually within a range. The principle we use is that, we will stay within the range unless there is something very different to what we expected and then we will discuss this with clients before proceeding. In about 95% of cases we are well within the indicated range. Once we have the first year’s work under our belts, we can be much more accurate in our pricing.
This method of estimating jobs allows clients to budget properly and, because we also offer a direct debit facility, spreads the cost, so no big bills.
Potential clients sometimes ask for a price based on the turnover of a business. This isn’t really relevant. A company can have a £million+ turnover derived from just a few transactions and keep immaculate records. They will be charged less than a company turning over £20,000 with a lot of transactions and poor records. The better the records you keep, the lower the cost is likely to be.
National Minimum Wage – October 2009 increase
We’d like to remind employers that the National Minimum Wage will increase from 1st October 2009. The new rates will be:
- For workers aged 22 and over the new minimum rate will be £5.80 per hour
- For workers aged 18 to 21 the new minimum rate will be £4.83 per hour
- For workers aged 16 and 17 the new minimum rate will be £3.57 per hour
The minimum wage has to be calculated on all hours worked by the employee so you must pay for time spent setting up before starting or clearing up when finished. There are severe penalties for employers found to be in breach of the National Minimum Wage regulations – so don’t take the risk.
Paying workers a fair rate for a job results in better employees with more commitment who stay longer. Saving a few pence per hour can often cost much more in the long run.
For more information or to discuss your payroll requirements, contact us.
CIS – The importance of keeping evidence
Unless you can prove that you have had CIS deductions made from payments you receive, you could struggle to convince HMRC that you are actually owed the money. We have seen several instances where HMRC had been given incorrect or incomplete information by contractors and consequently claims by subcontractors for refunds have been denied. The attitude which HMRC take is that, in those situations, the subcontractor has to prove that the tax has been deducted. The proof should be in the form of the statements/remittances which contractors are supposed to supply backed up by bank statements showing the amounts actually received.
In one case, the contractor hadn’t provided proper monthly statements and payment had been in cash. No chance whatsoever of proving that the deduction had actually been made. Result tax to pay again.
This is a growing problem. The construction industry is notorious for not being completely honest and we suspect that many “subbies” are being ripped off by unscrupulous contractors who have worked out how to manipulate the system to their own ends. We urge every CIS subcontractor to make sure they receive, and keep, the proper documentation.
For anyone not familiar with CIS (Construction Industry Scheme) this is a process where contractors are required to deduct tax (usually at 20%) from any payments made to subcontractors. The contractor is supposed to send the money to HMRC where it is held to the credit of the subcontractor and used to offset any tax due. The scheme often results in a refund to the subcontractor. Unfortunately, a number of contractors fail to send the money to HMRC in which case the subcontractor has to prove that it has been deducted.
Most contractors are honest but there are sufficient cases of contractors disappearing with the subcontractors’ tax to merit a great deal of caution.
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