How to check your 2019-20 PAYE code

Each individual’s PAYE code determines how their employment income is taxed.  The PAYE code normally includes a tax free element to make use of an individual’s personal allowance if they are entitled to one. If the code isn’t correct it can result in under- or over-payments of tax.

The basic PAYE code for the 2019-20 tax year, which runs from 6 April 2019 to 5 April 2020, is 1250L and incorporates a tax-free personal allowance of £12,500.  This is the PAYE code that you may start to see on your payslips from April 2019 onwards.  HMRC do not normally send out a notification if you are on the basic PAYE code.

However, if your tax code is different to the basic code of 1250L, then you should have received a ‘PAYE Coding Notice’ (form P2) from HMRC. This notice is sent to both you and your employer and/or pension provider so that they are notified of the PAYE code that they need to operate for you.  You can also check your PAYE code via your personal tax account with HMRC here.Continue reading

National Minimum Wage and National Living Wage Rates 2019-20

The National Living Wage is applicable to all employees aged 25 and over.  The rate increased to £8.21 from 1st April 2019.  The National Minimum Wage applies to all other employees under 25.  The table below summarises the National Minimum Wage and Living Wage rates for the year commencing on 1 April 2019 and these are the minimum hourly rates that employees are entitled to by law:

Date 25 and over 21 – 24 18 – 20 Under 18 Apprentice
1 April 2019 £8.21 £7.70 £6.15 £4.35 £3.90

The apprentice rate applies to apprentices under the age of 19, or to those aged 19 and over but in their first year of apprenticeship.

Note that the above rates do not apply to the self-employed.

Budget Update – October 2018

As always there were many scare stories before the Budget but thankfully most of those didn’t materialise…for now anyway. Here is our round up of the key tax announcements affecting individuals, small businesses and landlords.  Overall, we think small businesses can breathe a huge sigh of relief as many of the mooted tax changes won’t take place, at least for another couple of years and possibly not at all for the smallest of businesses.

Personal Tax

The Chancellor left the best news until the end but we’ll start with it.  A year earlier than the Conservative manifesto commitment, from April 2019 the personal allowance will increase to £12,500 (from the current level of £11,850) and the higher rate threshold will increase to £50,000 (from £46,350).  These thresholds will remain the same in 2019-20 and 2020-21 and increase in line with CPI thereafter.  The increased thresholds from April 2019 represent an annual tax saving of £130 for a typical basic rate taxpayer and £860 for those earning £50,000 to £100,000. Continue reading

Do I need to complete a self assessment?

You will need to complete a self assessment or personal tax return if any of the following apply to you:

C– You are self-employed

– Your annual earnings from all sources are £100,000 or more

– You are a director of a limited company

– You have income of £10,000 or more from savings or investments

– You receive £2,500 or more from renting out property

– You have £10,000 or more income from savings or investments

– Your income is £50,000 or more and you or your partner receive child benefit

Further details about each of these circumstances are provided below. There are also other situations in which a self assessment may need to be completed but those listed above are the most common reasons that individuals are brought into the self assessment net.

If one of the above applied to you for the first time during the 2017/18 tax year (i.e., from 6 April 2017 to 5 April 2018) then you must notify HMRC of the need to complete a self assessment as soon as possible and by 5 October 2018 at the latest.  This can be done on HMRC’s website here.Continue reading

The New Tax-Free Childcare Scheme

In April 2017, HMRC began to roll out its new tax-free childcare scheme and on 14 February 2018 this was opened up to all working parents with children under the age of 12. For the first time, this includes parents who are self-employed which will be welcome news for the self-employed who have previously received very little in terms of childcare tax breaks.

Tax-free childcare available to all working parents with children under the age of 12

Under the scheme, for every £8 that a parent contributes to the scheme, the government will instantly top it up with an additional £2. The government will contribute up to £2,000 per year for each child, though this is restricted to a maximum of £500 per quarter; to benefit from the full £2,000 per year, parents would therefore need to contribute £2,000 per quarter, i.e., the full £8,000 cannot be contributed in one go at the end of the year as this would only be eligible for £500 of government top-up for that quarter. The funds must be used to pay for approved childcare, which includes registered childminders, nannies, nurseries, playschemes and after school or holiday clubs.

A parent is eligible for the scheme if they are employed for more than 16 hours per week and earning at least the national minimum wage or living wage but less than £100,000 per year.  The minimum wage restriction does not apply to those who have been self-employed for less than 12 months.Continue reading

What do I need to consider when choosing an accountant?

Anyone can call themselves an ‘Accountant’ or ‘Tax Advisor’ as these terms are unregulated.  Even HMRC do not currently require any specific qualifications for a person to become a tax ‘agent’.  This means that it is up to the client to ensure that they choose an accountant or tax advisor who is professional, technically able and with strong ethical standards.

The first thing to look out for is whether they have a professional qualification and belong to a professional supervisory body.  Many of the stronger qualifications require years of studying and experience with a commitment to maintain and refresh that knowledge regularly if they are to keep the right to that qualification. If an accountant has any qualifications this should be obvious from their business stationery and/or website.  There are all sorts of accountancy bodies and various initials that you will come across but it is essential to look for a qualification and membership of one of the following professional bodies:  Institute of Chartered Accountants in England & Wales (ICAEW), Association of Chartered Certified Accountants (ACCA) or the Chartered Institute of Management Accountants (CIMA).  Membership of these bodies can be identified with the ACA, ACCA or CIMA initials after the accountant’s name.Continue reading

Personal Tax Tips 2017-18

Good tax planning is essential from the very beginning of a new tax year.  We are now in the 2017/18 tax year which runs from 6 April 2017 to 5 April 2018. Taking action early in the tax year can often enhance the tax savings that would be made by leaving tax planning until the last minute.

Personal Tax Tips 2014/15Personal Allowances

Unless you earn over £100,000, all individuals are entitled to a certain tax-free amount of income, referred to as the ‘personal allowance’.  The personal allowance for the current tax year is £11,500.  A limited number of couples may be able to transfer a small portion of the personal allowance to a spouse using the marriage allowance, for which further details can be found here.

It is important to check that any PAYE coding notices received from HMRC correspond to these allowances with any adjustments made reflecting your own personal circumstances. It is also important to check that payslips match the PAYE coding notice.Continue reading

High Income Child Benefit Charge

YThe ‘High Income Child Benefit Charge’ (HICBC) means that high earning parents are entitled to either a reduced child benefit or no benefit at all.  This affects those families where one parent earns £50,000 or more from ‘adjusted net income’, which includes all sources of taxable income less any pension contributions and charitable donations made under the gift aid scheme.

A household that receives child benefit between 6 April 2017 and 5 April 2018 where one parent earns £50,000 or more may need to pay some or all of the child benefit back.  If a parent earns £60,000 or more then all of the child benefit must be paid back. The parent with the higher income would need to pay the child benefit back by completing a 2017/18 tax return even if it was the lower earning parent that actually received the benefit.  Continue reading

Should I become VAT registered?

VAT, which stands for ‘Value-Added Tax’ is completely separate to income tax or corporation tax and is a tax on sales. A VAT-registered business is effectively an ‘agent’ on behalf of HMRC and is responsible for charging its customers the correct rate of VAT and then reporting and paying that VAT to HMRC each quarter.

VAT

VAT Registration

A business must legally become registered for VAT when it reaches the VAT threshold, which is currently £85,000. In assessing whether the threshold has been reached, a business must look at its total sales over a rolling 12-month period – many businesses often get this wrong as they assume that the threshold applies to an accounting or tax year.  In considering whether the threshold has been reached, goods which are exempt from VAT should be excluded from the calculations, e.g., postage stamps, financial or property transactions.Continue reading

How individuals could benefit from the marriage allowance

The marriage allowance enables 10% of one spouse’s annual personal allowance to be transferred to the other spouse, if certain conditions are met.

The marriage allowance could save married couples and civil partners £212 tax

The marriage allowance could save married couples and civil partners £230 tax

The marriage allowance is applicable to both married couples and those in civil partnerships and means that an individual not utilising their annual personal allowance could transfer a portion of that allowance to their spouse or civil partner.  The 2017-18 personal allowance is £11,500 and so 10% or £1,150 of this amount is potentially transferable, saving £230 in tax.  In order to qualify for the transferable allowance, one partner must have income between £11,501 and £45,000 and the other must have income below the annual personal allowance of £11,500.  Income includes earnings from all sources such as employment, self-employment, pensions, rental properties, interest and dividends.  The marriage allowance will not be available if either one of the partners is a higher rate taxpayer.Continue reading