Ian explains ‘Tax Free Childcare’…

The government is launching a new scheme called ‘Tax Free Childcare’ which has the aim of helping working parents with their childcare costs.

 

In the UK the average cost of sending a child under the age of two to nursery can range from  around £115 to £220 per week depending on if the parent is part time or full time.  The cost of this often means that it simply isn’t feasible for both parents to work full time whilst they have young children.

 

The government are aiming to help working parents by offering to pay £1 for every £4 paid by the parents towards childcare.  A total of £2,000 can be received each year per child up to the age of 12, this changes slightly for disable children as £4,000 a year can be received up to the age of 17.

To be eligible for the scheme parents must earn at least £115 each and not in excess of £100,000 each.  The scheme will be launched in early 2017 with parents with the youngest children able to apply and benefit from the scheme first.  By the end of 2017 the scheme will be available to all eligible working parents in the UK.

 

The scheme currently in place is the Employer-Supported Childcare scheme.  From this you can receive up to £55 per week for childcare depending on how much you earn and how long you have been on the scheme.  However, unlike the current scheme, with Tax Free Childcare self-employed parents will also be able to take advantage of the new scheme, so this is definitely something to look out for in 2017.

There are other ways of gaining help to pay for childcare such as salary sacrifice schemes through payroll, Child Tax Credits, Working Tax Credits, Free Childcare and Education for 2 – 4 year olds and also schemes to help whilst you are at college or university.  A lot of helpful information can be found on the following link, or if you would like more information regarding eligibility for different schemes then please feel free to contact us.

https://www.gov.uk/help-with-childcare-costs/approved-childcare

Chloe explains about Payments on Account…

31^st July is the deadline for the second payment on account for 2016/17 self-assessment tax returns to be paid to HM Revenue & Customs.

 

Payments on account are payments in advance towards your next tax bill, they are paid twice a year before the 31^st January and 31^st July deadline.

 

Each payment is half your previous year’s tax and, if you’re self-employed, Class 4 National Insurance liability.

 

For example, if your 2014/15 tax liability was £2,000, you will have had to pay £1,000 to HM Revenue & Customs by the 31^st January 2016 and £1,000 by the 31^st July 2016. These two payments relate to the tax year 2016/17. Therefore you are making the payments in advance.

 

If the tax liability ends up being more than the payments on account the balancing payment is due by the 31^st January following the end of the tax year. In the example above the balancing payment would be due on the 31^st January 2017.

 

You only fall in to the payments on account scheme when your last self-assessment liability is over £1,000 and less than 80% of your income is taxed at source.

A lot of people are not aware of these rules and can get in a bit of a pickle if their tax liability suddenly goes over £1,000 and at the end of January they have to pay the last year’s tax bill plus the first payment on account for the next tax year!

 

It can be very confusing so if you are worried about payments on account or would like to know if you will be affected by them please do not hesitate to contact us on 01772 735865.

Nicola Hardy, our practice manager, asks if you are due a tax refund?

Are you due a tax refund?

 

As you will know we entered into a new tax year in April and so at Rotherham Taylor we are now starting to file tax returns for last year – 2015/2016.

We do like it when we can get a client a tax refund, however that does mean that you have overpaid tax in the first place!

Here are some of the scenarios that could generate a refund:

•  Are you a subcontractor in the construction industry and already had tax deducted on all of your earnings?
• Have you had emergency tax deducted from your pay or could you have been on the wrong tax code?
• Did you stop working during the tax year or move overseas and had previously been employed and paying PAYE?
• Can you claim deductions against your earnings such as business mileage or employment related subscriptions?

Or, are you self employed and made payments on account for 2015/2016, but your profits have since decreased, you ceased trading, or you made a substantial capital investment that could also have decreased your profits?

Any of the above situations could result in overpaid tax. If you would like advice on the above and would like to get your tax affairs up to date asap then please get in touch.

If you aren’t lucky enough to get a refund then at least we can give you plenty of notice of your tax liability!

Nick Smith explains the ‘Panama Papers’

 

On 3 April 2016, the world’s media broke the news on the “Panama Papers”.

 

The Panama Papers are a set of 11.5m documents leaked by the Panamanian law firm Mossack Fonseca which provide information about more than 214,000 offshore companies. The Papers document how wealthy individuals have hidden assets from public scrutiny.

 

High profile names mentioned to date include Vladmir Putin, the brother-in-law of China’s President Xi Jinping, Ukraine’s President Petro Poroshenko, Argentina’s President Mauricio Macri and Pakistan’s Prime Minister Nawaz Sharif.

 

Not surprisingly perhaps, football’s world governing body FIFA, has also been implicated.

 

In the immediate fall out, Iceland’s Prime Minister, Sigmundur Gunnlaugsson, announced his resignation.

 

Whilst the use of offshore business entities is not illegal, it has been reported that some of these companies may have been used for illegal purposes, including fraud, drug trafficking, money laundering and tax evasion.

 

The ramifications of the Papers is expected to be huge with the volume of data dwarfing that of WikiLeaks in 2010 and Edward Snowdon’s release of classified NSA files in 2013.

 

By coincidence, 3 days after the leak, legislation came into force requiring UK companies to maintain a Register of Persons with Significant Control. In its simplest form, this will be a list of individuals with a holding of more than 25% in a company or who have significant influence or control by other means. After 30 June 2016, however, this list with accompanying Confirmation Statement will need to be filed at Companies House thereby replacing the traditional Annual Return.

 

If you want further information or guidance on this new legislation in the UK and ensure you are aware of your responsibilities as directors and business owners, please call your RT contact who will be able to advise.

 

Nicola Hardy, our practice manager, gives some top tips for individuals…

Tips for Individuals

As we are now gearing up for the new tax year in April, we have put together some tips for individuals to consider.

 

Dividend Taxation

From April 2016 the way dividends are taxed are changing, instead of the tax credit system there will be a £5,000 dividend allowance. If you are manager owned business, are a basic rate tax payer and if company profits allow it would be advisable to take dividends up to the basic rate band before the rules change in April 2016. If you require tax planning on this please do not hesitate to get in touch.

 

Use up your Partners Tax Free Allowance

The marriage allowance allows you to transfer part of your personal allowance to your husband, wife, or civil partner. To benefit as a couple, you can transfer up to £1,000 in 2016/2017, to your spouse or civil partner provided that the recipient is not liable to income tax above the basic rate. Taxpayers have 4 years to make this election.

 

Pay into a Pension Scheme

Contributions to your employer’s pension scheme can be made from your gross pay before any deductions are made for tax. All employers will soon have to offer pension schemes to their employees. A percentage of your pay will automatically be put into the scheme, to which in most cases, your employer will add money and to which you will receive tax relief on the contributions.

 

Check your Tax Code

Is your tax code correct? Having the wrong tax code could mean you are paying too little or even too much tax! The standard tax code for 2016/2017 will be 1100L, meaning you can earn up to £11,000 before paying tax at 20%. Even though this is the standard code, reductions can be made by HMRC in respect of benefits in kind, unpaid tax, and other taxable income. Likewise, the code can be increased in respect of allowable expenditure for example subscriptions. If you believe that your tax code is wrong you can contact us for advice or HMRC to review the code.

 

Help to Buy ISA

Designed for first time buyers, the government has created the Help to Buy Scheme, to help you take the first steps towards buying your own home. The Help to Buy ISA is available to each individual buyer as opposed to each household, and pays a government bonus of 25%.  So for every £200 a month saved, you receive an extra £50 bonus up to a maximum of £3,000, boosting your savings of £12,000 to £15,000. The minimum saving is £1,600 to claim a £400 bonus and you can kick start your account by depositing a lump sum of up to £1,200. On purchasing your first home your solicitor will apply for the government bonus to add to your savings.

 

If you have any questions about the above then please give us a call and we would be happy to discuss with you.

Ian Sergeant, our staff accountant, says…

It has been well publicised in recent times that HM Revenue & Customs are targeting aggressive tax avoidance schemes however there are still a number of ways small companies and individuals can minimise their tax bills.  Below is a list of ideas worth considering if you wish to reduce you tax bill.

 

Companies

Making pension contributions through the company should be considered.  Not only does this build the director’s pension fund for later life, it is also a tax deductible expense for the company.  That is provided that HMRC don’t rule the contributions in excess of what is commensurate with the directors’ duties.

When purchasing capital assets the use of the annual investment allowance should also be considered before the year end.  Since 1^st January 2016 AIA is £200,000 per year.  This covers all plant and machinery assets except cars, meaning that the cost of capital assets reduces taxable profits for the year.

 

Individuals

 

Ensure that you are making the best use of ISA contributions available to you each year.   The annual limit which can be split between cash ISA’s or stocks and shares ISA’s is £15,240 per year as of 6^th April 2015.  Any earnings generated from ISA’s are tax free.  Help to buy ISA’s are another form of ISA which have been introduced this year.  These allow prospective first time home buyers to claim an extra £50 for every £200 invested (upto a maximum of £3,000).

Pension contributions are another way of reducing your tax bill. Soon all employers in the UK will have to offer a pension scheme to employees.  The contributions made to an employer pension scheme can either be taken from your gross pay before any tax is deducted or if the contribution is paid net the pension provider claims back basic rate tax at 20% and adds this to your pension pot.

 

For self -employed people this isn’t an option, however if you are paying tax above the basic rate band, making personal pension contributions can also be of benefit.  The contributions made extend the basic rate band and therefore more of your earnings are taxed at 20% rather than 40%.

 

These are just a few simple ideas in order to try and help you minimise your tax bills, and it is key to act before any tax period ends.  So if you would like any further assistance with any tax advice then please let us know.