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

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

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

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

Inheritance Tax Planning

The inheritance tax paid on an individual’s estate upon their death is charged at a hefty 40% rate on the value of their estate after deducting the tax-free inheritance tax threshold, known as the ‘nil rate band’. The value of an estate is comprised of all of the deceased person’s assets, including property, shares and savings. The inheritance tax nil rate band is currently £325,000 and an additional property allowance of £175,000 on top of this is being brought in for those owning a main property that is being passed to their direct descendants, bringing the overall total to a potential £500,000 per individual or £1 million for married couples and civil partners.  The additional rate is being phased in over four years from 2017 at £100,000 until it reaches £175,000 in April 2020.  Note that any unused nil rate band can be transferred to a surviving spouse or civil partner.

For those with an estate valued above this level, a number of steps can be taken throughout their lifetime to minimise the amount of inheritance tax that will become payable upon their death. While no one likes to think about death, careful planning will ensure that as much as possible of an individual’s hard-earned estate is left to their intended beneficiaries rather than it going to HMRC’s coffers.Continue reading

Property Tax Update

There is no doubt that property landlords are on the government’s radar and have been targeted in recent Budget announcements. These have resulted in some substantial changes to the way income from properties is taxed and we have provided a recap of all the various changes due to take place below.

Stamp Duty Land Tax (SDLT)

In the 2015 Autumn Statement it was announced that from 1 April 2016, individuals purchasing an ‘additional’ residential property such as a second home or buy-to-let property would be subject to an extra 3% of stamp duty above the regular rate of stamp duty that would normally be applicable to the property.  Property Tax

The additional stamp duty is payable on the entire purchase price if the buyer owns more than one residential property at the end of the day on which the property purchase occurs.  Buyers who purchase a home before selling their old one will therefore be caught but note that if the old home is sold within 3 years of the purchase of the new property, the additional 3% duty can be refunded. Note that married couples and civil partners are treated as a single unit when it comes to determining whether the purchase constitutes an ‘additional’ property.Continue reading

HMRC’s Let Property Campaign

HMRC Let Property Campaign | Coral Accountancy ServicesHMRC’s Let Property Campaign is aimed at individuals who own and rent out property but have not been declaring the rental profits to HMRC.  Landlords have the opportunity to voluntarily come forward and notify HMRC of the previously undeclared rental profits and will be offered more lenient terms as a result.  However, those that have not reported the income or made a voluntary disclosure are starting to get caught out as HMRC sends out letters to property owners who it believes have unreported rental income.

The ‘Let Property Campaign’ was announced in September 2013 and is still ongoing. Its aim is to encourage landlords who let out their property but don’t report the income to HMRC to come forward and bring their tax affairs up-to-date.  Making a voluntary ‘disclosure’ in this way is likely to result in more favourable terms than if HMRC discover the unreported rental income first.Continue reading

How the employment allowance benefits small businesses

A new ‘Employment Allowance’ became available from 6 April 2014 to cut up to £2,000 of employer’s class 1 national insurance contributions per year on employees’ or directors’ earnings.  It is important to point out here that employer’s class 1 national insurance is a direct cost to employers on top of an employee’s gross salary and this will therefore be a very welcome tax break for small businesses.

Banknotes

The allowance is available to businesses or charities of all sizes with one or more employees.  There are specific rules for groups of companies and charities under common control as well as for employers running more than one PAYE scheme so that the employment allowance is only available once.  Certain employers such as carers and nannies cannot claim the allowance.

The allowance can be offset against the employer’s national insurance liability each week or month until the full £2,000 is used up.  This could mean that some employer’s will benefit from the full £2,000 allowance in the first month of the tax year while other smaller employers will benefit gradually throughout the year.Continue reading

How will HMRC know if I don’t report income?

How will HMRC know if I don't report income?HMRC are increasing their activities to collect revenue lost from tax evasion and plan to recoup almost £22 billion per year by 2014-15. As we all know, they are also cutting costs through job cuts, so just how will they manage to monitor unreported income?  The answer is through the use of some very sophisticated technology called ‘Connect’, developed by BAE Systems and which has already won several technology awards.

While HMRC has collected information from employers, banks, insurers and other third parties for some time, the collection and analysis of the data has been a very labour intensive and manual process, where it has often taken a tax officer weeks to build a full picture of a taxpayer’s affairs. The introduction of Connect automates much of the analysis and is both a data collection and data analysis tool, with the ability to draw on and link information from a much wider base.Continue reading