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Budget Summary March 2013

Posted on 20th March, 2013

Chancellor George Osborne has cut his official growth forecast in half, but insisted the UK would avoid a "triple dip" recession. In what has been described as a "fiscally neutral" budget, the economy if unlikely to move much either way.

 

Businesses benefit with reduced Corporation Tax & reduction in NI payable. Unfortunatly the average tax payer will only save this year if heavy beer drinkers...!

 

To summarise the main, relevant points:

 

* September's 3p fuel duty rise scrapped

 

* April's 3p rise in beer duty scrapped. Instead, beer duty to be cut by 1p

 

* Annual inflation +2% rise in beer duty to be ended but "duty escalator" to remain in place for wine, cider and spirits

 

* Limit at which people start paying tax to be raised to £10,000 in 2014 - a year earlier than planned

 

* Corporation tax to be cut by 1% to 20% in 2015

 

* New employment allowance to cut national insurance bills cut by £2,000 for every firm

The UK tax authority is to close all of its 281 Enquiry Centres which gave face-to-face help to 2.5 million people with tax queries last year.

 

The move in 2014 by HM Revenue and Customs (HMRC) will put 1,300 jobs at risk, although the authority aims to deploy these staff elsewhere.

 

The centres will be replaced by a telephone service and home visits, to save HMRC £13m a year.

 

But an accountancy body said some "very vulnerable" people could be affected.

 

"While we wish HMRC success in saving costs and making their brave new world of roving enquiry staff work, we wonder whether the timing of this change will come to haunt them," said Chas Roy-Chowdhury, head of taxation at the ACCA.

 

"One wonders whether this should really happen to a later and longer timetable to take account of the wide ranging changes to the tax and benefits system."

Early closures

 

The tax authority said that the number of people using the Enquiry Centres across the UK had halved from five million in 2005-06 to 2.5 million in 2011-12.

 

Each visit cost the service £152 on average, according to HMRC, but it said four out of five queries could have been solved on the telephone or online.

 

There will be a five-month pilot of the new telephone-based service in the north-east of England, starting in June.

 

Some 13 Enquiry Centres will be closed as part of the pilot, at Alnwick, Bishop Auckland, Bridlington, Hexham, Darlington, Durham, Middlesbrough, Morpeth, Newcastle, Scarborough, Stockton, Sunderland and York.

Continue reading the main story

“Start Quote

 

Closing all face-to-face tax offices would break the link between people in communities and an essential public service they rely on”

 

Mark Serwotka PCS general secretary

 

People will need to contact the phone line or go online to get their tax query answered.

 

Advisers may then decide that the issue should be discussed face-to-face at the caller's home or elsewhere, but there is no set procedure about which cases would require visits.

 

"We will give a more specialised phone service for customers whose affairs can be resolved over the telephone, and face-to-face help to those who need it, visiting them at a place convenient to them, saving them both travel and time," said Lin Homer, HMRC chief executive.

 

"HMRC will provide a more modern and accessible service that will target the right support to customers who need it, where and when they want it."

Cost-cutting

 

However, the authority has been criticised in the past for its call-handling efficiency. HMRC handles more than 60 million calls a year dealing with issues such as self-assessment tax filing, and VAT returns.

 

In January, Ms Homer admitted to the Commons Public Accounts Committee that some people faced waits of more than 10 minutes to get through.

 

From April, HMRC will have a target of making 80% of people wait no longer than five minutes to speak to a real person.

 

Call costs will also be reduced by the end of the summer.

 

In February, the National Audit Office said HMRC had improved its value for money in 2011-12 as it began a programme to reduce annual running costs by 25% by 2014-15.

 

HMRC is targeting a £955m annual reduction in running costs, as well as bringing in an extra £7bn in tax.

 

The PCS union, which represents some HMRC staff, said it was unhappy with the decision to close the centres.

 

"Closing all face-to-face tax offices would break the link between people in communities and an essential public service they rely on," said general secretary Mark Serwotka.

 

"If, as we fear, flawed research has been used to justify these closure plans then ministers must put an immediate stop to them."

 

Extra funding will go to voluntary sector organisations that might also deal with queries.

 

The Low Incomes Tax Reform Group said that the pilot needed to ensure that tax credit claimants on low incomes or those with particular needs benefited from an improved service.

 

"We will give a more specialised phone service for customers whose affairs can be resolved over the telephone, and face-to-face help to those who need it, visiting them at a place convenient to them, saving them both travel and time," said Lin Homer, HMRC chief executive.

 

"HMRC will provide a more modern and accessible service that will target the right support to customers who need it, where and when they want it."

Cost-cutting

 

However, the authority has been criticised in the past for its call-handling efficiency. HMRC handles more than 60 million calls a year dealing with issues such as self-assessment tax filing, and VAT returns.

 

In January, Ms Homer admitted to the Commons Public Accounts Committee that some people faced waits of more than 10 minutes to get through.

 

From April, HMRC will have a target of making 80% of people wait no longer than five minutes to speak to a real person.

 

Call costs will also be reduced by the end of the summer.

 

In February, the National Audit Office said HMRC had improved its value for money in 2011-12 as it began a programme to reduce annual running costs by 25% by 2014-15.

 

Advisers may then decide that the issue should be discussed face-to-face at the caller's home or elsewhere, but there is no set procedure about which cases would require visits.

 

HMRC is targeting a £955m annual reduction in running costs, as well as bringing in an extra £7bn in tax.

 

The PCS union, which represents some HMRC staff, said it was unhappy with the decision to close the centres.

 

"Closing all face-to-face tax offices would break the link between people in communities and an essential public service they rely on," said general secretary Mark Serwotka.

 

"If, as we fear, flawed research has been used to justify these closure plans then ministers must put an immediate stop to them."

 

Extra funding will go to voluntary sector organisations that might also deal with queries.

 

The Low Incomes Tax Reform Group said that the pilot needed to ensure that tax credit claimants on low incomes or those with particular needs benefited from an improved service.

People who have sold properties that are not their main homes, and who have not told HM Revenue and Customs (HMRC) about any profit made, are being targeted in a new campaign.

 

The Property Sales Campaign is aimed at those selling homes in the UK or abroad, where Capital Gains Tax (CGT) should be paid on any profits made. This includes, for example, properties people have sold that were given to them, and the sale of holiday homes.

 

People will have until 9 August to tell HMRC about any unpaid tax on property sales, and until 6 September to pay the tax owed.

 

After 6 September, HMRC will take a much closer look at the tax affairs of those who have sold properties other than their main home, but who appear to have paid no CGT. By using this campaign to come forward voluntarily, people will receive the best possible terms, as any penalty they pay by coming forward voluntarily will be lower than if HMRC comes to them first.

 

Marian Wilson, Head of HMRC Campaigns, said:

“Some people will not understand that selling a second home, a holiday home or a property disposed of as a gift could attract Capital Gains Tax. They need to look at our website or contact us. Telling HMRC about your tax liabilities is simple and straightforward, and help, advice and support are available.

 

“It is better to come to us before we come to you. After the opportunity closes on 6 September, HMRC will use information it holds about property sales, in the UK and abroad, to identify people who have not paid what they owe. Penalties – or even criminal prosecution – could follow.”

 

People can take part in the campaign by:

 

Telling HMRC about unpaid tax by 9 August

disclosing the details of what they owe paying the tax owed by 6 September.

 

For more details plus help and support about the campaign, customers can visit HMRC’s website: http://www.hmrc.gov.uk/campaigns/psc.htm .

 

Help is also available from HMRC by calling 0845 601 8819.

Plans for a "simple" flat-rate state pension have been unveiled, but many of those entering the workforce now will be worse off than under current rules.

The government's White Paper shows that there are short-term gainers but longer-term losers from the policy. Instead of a basic pension of £107 a week plus various means-tested top-ups, recipients will get £144 in today's money from 2017 at the earliest.The government said this was fairer for the self-employed and many mothers.

Figures in the White Paper, published on Monday afternoon, suggested that at least half of all people reaching state pension age before 2050 were likely to have a better outcome under the new system than they would if the current system were to continue. Of these, the majority would be better off by at least £2 per week.

However, by 2060, more than half would be worse off than if the current system continued, because they could not build up a state second pension. After April 2017, people will also have to work longer, making 35 years' worth of National Insurance (NI) contributions, rather than the current 30, to qualify for the full pension.

Pension facts

Currently 11.5 million people claim the state pension. 2.8 million women receive a state pension of less than £80 a week. Only 474,000 men do so 3.2 million individuals receive pension credit to supplement their retirement income. Anyone who has not paid NI for at least seven, or possibly even 10, years will not qualify for the new state pension at all.

The current full state pension is £107.45 a week, but can be topped up to £142.70 with the means-tested pension credit, and a state second pension which is based on National Insurance contributions.

Anyone who qualifies for the state pension before April 2017 will continue to receive their entitlement under the current system. For new pensioners from April 2017, the second state pension will be abolished.

 

Winners and losers

 

Winners include:

The self-employed, who currently do not build up a state second pension

Those who have spent time out of the workforce, such as mothers and carers of those with disabilities, will benefit in the short-term

 

Losers include:

Many of those entering the workforce now are likely to receive less than they would have done had the current system remained in place

Those who have fewer than seven, or possibly even 10, years of National Insurance contributions, who will get no state pension under the new rules

Autumn Statement: At-a-glance summary of key points

Chancellor George Osborne has updated MPs on the state of the economy and the government's future plans in his Autumn Statement. Here are the key points:

FUEL

The 3p-a-litre increase in fuel duty, planned for next January, is cancelled

 

BENEFITS AND PENSIONS

Most working-age benefits to rise by 1% for each of next three years

Basic state pension to rise by 2.5% next year to £110.15 a week

Child benefit to rise by 1% for two years from April 2014

 

 

TAXES AND ALLOWANCES

Basic income tax threshold to be raised by £235 more than previously announced next year, to £9,440

Threshold for 40% rate of income tax to rise by 1% in 2014 and 2015, from £41,450 to £41,865 and then £42,285

Main rate of corporation tax to be cut by extra 1% to 21% from April 2014

Inheritance tax threshold to be increased by 1% next year

ISA contribution limit to be raised to £11,520 from next April

 

High Income Child Benefit charge Coming 2013

Posted on 26th November, 2012

The High Income Child Benefit charge will be introduced from 7 January 2013. You may be liable to this new tax charge if you, or your partner, have an individual income of more than £50,000 and one of you gets Child Benefit or contributions towards the upkeep of a child.

 

You will be affected by the High Income Child Benefit charge if during a tax year any of the following applies to you:

 

* you have an individual income of more than £50,000 and are entitled to receive Child Benefit

* you have an individual income of more than £50,000 and live (or have lived) with a partner who's entitled to receive Child Benefit

* both you and your partner have an income of more than £50,000 per year, you have the higher income and one of you is entitled to receive Child Benefit

 

You will also be affected if during a tax year you have an individual income of more than £50,000 and both of the following apply:

* someone else is entitled to receive Child Benefit for a child who lives with you

* they're entitled because they contribute at least an equivalent amount of Child Benefit towards the child's upkeep, for example pocket money or clothes

 

It doesn't matter if the child that is living with you is not your own child.

 

Your income will generally be your income before tax and deduction of ''Personal Allowance'.

These rates apply to all journeys on or after 1 September 2012 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.

 

For table of rates visit:

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

One in four higher rate tax payers say they do not contribute to a pension scheme, despite the tax reliefs available, research from Prudential has found.

The national study said this equated to around 216,000 UK employees who are missing out on up to £438 million a year in pension tax reliefs and a boost to their retirement savings.

Questioning those earning between £42,275 and £149,999, 21 per cent said they could not afford to contribute to a pension scheme, while one in eight (13 per cent) said they 'did not see the point' in saving for retirement. A larger number (17 per cent) said they did not know why they had not contributed into a pension a scheme.

Prudential estimates that an average higher rate tax payer - those paying income tax at 40 per cent- who contributes £425 a month into a pension fund would receive a tax relief of £85 a month, equating to £1,020 a year. An additional £1,020 a year in higher rate tax relief could also be claimed.

Prudential's tax expert Matthew Stephens said that 'turning down what is effectively free money simply does not make sense'.

"Pension saving offers valuable tax reliefs to all workers and particularly to higher rate taxpayers. Basic rate 20 per cent tax relief is available at source plus up to an extra 20 per cent from HMRC for higher rate taxpayers," he said.

According to Prudential, around 58 per cent of the estimated 900,000 higher rate taxpayers in the UK contribute to defined contribution pension schemes, with a further 15 per cent being members of either non-contributory or defined benefit schemes.

Last year, the Treasury gave £32.9 billion worth of tax reliefs to those saving into registered pension schemes.

Currently, the maximum amount of contributions that can qualify for tax relief is £50,000, after being reduced from £255,000 at the start of the 2011/12 tax year.

HMRC's new PAYE reporting system flawed

Posted on 1st August, 2012

HMRC's switch to the Real Time Information (RTI) system - designed to modernise the way PAYE payments are recorded and calculated - could face potential problems, a new report has warned.

The All-Party Parliamentary Taxation Group's (APPTG) report raises questions about whether the new system will be fit for purpose and ready in time for its scheduled roll out next year, claiming that the speed at which it is being implemented could 'threaten every businesses and benefit claimant in the UK'.

Under RTI, employers and pension providers will notify HMRC about any PAYE payments, such as tax and NICs, each month as opposed to at the end of each tax year. The system will also support the operation of the Government's flagship Universal Credit welfare programme, which will calculate welfare claims and tax credits automatically based on real time earnings.

However, the APPTG report lists three main weaknesses in the programme; the timetable of roll out causing disruptions, the additional administrative costs to businesses, and its blurred position as an interim or solution to the original PAYE and benefit system.

"RTI is undoubtedly the biggest change to PAYE since its introduction back in 1944, but it should be regarded as a stepping-stone, not the final destination," says the report. "HMRC both can and should go a lot further with the modernisation of PAYE."

Although the group supports the concept of RTI, it raised concerns that HMRC had 'overstated' its business case by underestimating investment, employer migration and software costs.

The current pilot scheme has seen 1.7 million employee records uploaded into the system. The majority of employers will join RTI from April 2013, with all employers due to switch to the service by October 2013.

Furthermore, it argues that HMRC's decision to implement a trial system - known as the Interim Solution - will affect the accuracy of Universal Credit calculations.

"HMRC will only be able to check, not guarantee, that employers submit information at-or-before the point they pay an employee," via this initial system it said.

The 'Interim' system will run until April 2016, when the more robust 'Strategic Solution' - which will attach payroll data to payment instruction - will be implemented.

The report recommends that HMRC should delay the migration of RTI until 2015, coinciding with the move of the majority of tax credits into the new Universal Credit system. It also called for better support for smaller businesses and a dedicated RTI group within the Cabinet Office.

The Pensions Regulator has published guidance for businesses that will be subject to automatic pension enrolment duties which are being phased in from this October.

 

The document outlines its policy for employers who must comply with the automatic enrolment duties, and also details its enforcement strategy for those who fail to do so.

 

Over the next few years, all eligible private sector employees must be automatically enrolled into a workplace pension scheme, with employers required to contribute to each individual's pension fund, in a Government bid to encourage more workers to save for their retirement.

 

The scheme is being rolled out from this October, when the largest firms will be required to enrol all eligible employees. Small companies will follow suit at gradual staging dates until it is compulsory for all firms to do so from 1 January 2016.

 

The regulator said: "The underlying aim of this strategy is to have in place effective systems to maximise employers' compliance with their duties (under the Pensions Act 2008) and to ensure non-compliance is held at an absolute minimum, to safeguard workers ability to save in a pension scheme."

 

The main objectives of its strategy are to establish and maintain a 'pro-compliance' culture amongst businesses and to educate all employers so that they are aware of their obligations.

 

In its commitment to preparing employers for auto enrolment, the Pensions Regulator will;

 

* Notify employers at 12 and three months prior to their staging date

* Work with the pensions industry to provide pension products that work with the auto enrolment duties

* Help employers communicate with their pension advisors

* Produce guidance material to provide information and guidance

* Provide a contact centre as a single point of call for queries

* Make the process of registration simple for employers to minimise administrative burdens

 

The Pensions Regulator warned it would be 'tough' but 'fair' with non-compliant employers, saying it would consider the circumstances of each business that fails to meet its obligations and work with them to help get them compliant.