Clarke Nicklin have published their latest tax tips ahead of this month’s budget.
Salary, dividend or pension contribution?
When you work for your own company you can decide how much salary to pay yourself, how much to pay into your pension fund, and what proportion of the remaining profits to take as a dividend. The split is important as it will affect the tax and national insurance payable by you and your company.
A salary just sufficient to be covered by your personal allowance (£10,600 for 2015/16), will be tax free, assuming you have no other income. However, if your company has more than one employee (including directors), a salary of over £10,000 (for 2015/16) will mean the recipient has to be automatically enrolled in the company’s pension scheme, under the auto-enrolment rules.
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RTI penalties
Last month we warned you about the penalties coming into effect for late filed RTI reports. The good news is that HMRC are cutting employers just a little slack, and will now allow three extra days in which to submit the full payment submission (FPS) report.
Normally the FPS must be submitted on or before the day the employees are paid, but there are some circumstances in which the FPS can be submitted up to 7 or 14 days later. For example, the FPS can be submitted within 7 days of the pay day if the employees’ pay can’t be calculated until the end of their shift, such as for harvest workers.
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Child benefit claw-back
If you or your spouse/partner claim child benefit, and at least one of you has adjusted net income of £50,000 or more for the year, the higher earner must declare the benefit on their tax return in order to pay back part or all of the child benefit as a tax charge.
HMRC is writing to taxpayers who it thinks should have paid the child benefit tax charge for 2013/14, but didn’t. Unfortunately some people who have received such letters are childless, or haven’t claimed child benefit for decades.
If you have received one of those letters by mistake, don’t ignore it. HMRC can alter your tax return to collect the tax it thinks is due. You need to reject any such incorrect alteration to your tax assessment within 30 days, but we can help you do this.
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Company Cars
Does your company still own or lease the car you use for private journeys? You may need to rethink that arrangement in light of the tax charges due to apply in the years ahead.
From 6 April 2015 all company cars will generate a tax charge for the driver and the employer, even electric cars will be taxed on 5% of their list price. The taxable benefit for other low emission vehicles (51-75g/kg) will leap up from 5% to 9% of the vehicle’s list price. The taxable benefit for all other cars will also increase by two percentage points. The taxable benefit for high emission cars (over 210g/km), will increase from 35% to 37% of the list price.
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March Key Tax Dates
19/22 March – PAYE/NIC, student loan and CIS deductions due for the month to 5/3/2015
31 March – Last minute tax planning for the 2014/15 tax year. Ensure you use up all exemptions to which you are entitled