2014 Budget Summary

Please find below our 2014 budget summary with the most relevant changes in the budget for our customers. Individuals Personal allowances For people born after 6 April 1948, the personal tax allowance for 2014/15 is £10,000. This will increase to £10,500 from 6 April 2015. For people born on 5 April 1948 or before, the personal tax allowance for 2014/15 is £10,660. From April 2015, spouses and civil partners will be able to transfer 10% of their personal allowance to each other, which means £1,050 in 2015/16. To be eligible to make or receive the transfer, neither party must be liable to tax at the higher or additional rate. Tax rates 2014-2015 The basic rate of 20% will be charged on income up to £31,865. The higher rate of 40% will be charged on income from £31,866 to £150,000. The additional rate of 45% will be charged on income over £150,000. Companies The main rate of corporation tax will be 21% from April 2014, falling to 20% from April 2015.   VAT The VAT registration threshold with effect from 1 April 2014 will be as follows:                                                                         Registration (£)                                            Deregistration (£) UK taxable supplies                       81,000                                                                   79,000   ‘Relevant Acquisitions’ from other EC Member States              81,000                                                                   81,000   Annual Investment Allowance   To continue to support business investment, the Government is doubling the Annual Investment Allowance to £500,000 from April 2014 until the end of 2015.   Other news   From 1 July 2014, cash and shares ISAs are to be merged into a New ISA – NISA – with an annual tax-free savings limit of £15,000. Savers will now have complete flexibility over the cash and shares mix within the overall limit of £15,000.   From April 2015, the starting rate of tax for savings income will be reduced from 10% to nil. The maximum amount of taxable savings income that will be eligible will rise to £5,000 from £2,880.   From 1 June 2014, the cap on Premium Bonds will rise from £30,000 to £40,000, increasing further to £50,000 in 2015/16. From August 2014, two £1 million prizes per month will be on offer, instead of the current one.   And finally…   HMRC is going to be given debt collection powers to recover money direct from the bank and building society accounts, including ISAs, of debtors who owe over £1,000 of tax or tax credit debts. HMRC will use this route after the debtor has been contacted ‘multiple times’. A minimum of £5,000 will be left ‘across’ debtors’ accounts after the debt has been recovered. I think we’ll blog more about this later, this is a new tactic by HMRC who don’t have a reputation for getting their calculations right and so this is probably something to be concerned...

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Submit the tax refund request

Have you received an e-mail from HMRC entitled, “Submit the tax refund request”? These things always seem to be going around and it comes as no surprise that as the 31st January tax return filing deadline approaches, the scammers are up to their tricks again. If you receive an email purporting to be from HMRC, advising that you are due a refund, do NOT open it. You should delete it. HMRC will never email you to advise of a refund, all refunds are advised in writing and they will never email you asking to verify your card. Here is an example of a scam (phishing) email: HMRC didn’t send this email. It is just an attempt to get your financial details.    ...

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Should I Voluntarily Register for VAT?

  There are benefits to a voluntary VAT registration. You are able to charge VAT on your sales and claim back the VAT on your expenses. This is beneficial if you operate in a business to business environment and all your customers are VAT registered. They recover the VAT you charge (outputs) and you can recover the VAT (inputs) on your expenses. If you deal with consumers who are not VAT registered this can make you more expensive than your non-VAT registered competitor. If you sell zero-rated items and buy standard-rated items you would receive a VAT refund from HMRC if you have not yet sold anything or don’t sell anything during a VAT accounting period, you may still be able to claim VAT back on your purchases If you’re thinking about registering voluntarily, you might want to check the rules for reclaiming VAT on purchases made before registration since it is often possible to reclaim some of the VAT you are charged on goods or services that you use to set up your business.   Can I backdate my VAT registration? You can apply to backdate your voluntary VAT registration by up to four years. You will have to account for VAT on any VAT taxable supplies you’ve made after your chosen date, and you won’t be able to reclaim any VAT on your purchases unless you have the right evidence, and meet the other conditions for reclaiming VAT.   Responsibilities of voluntary registration If you decide to voluntarily register for VAT, you have exactly the same responsibilities as someone who must register. You must keep all required VAT records and issue VAT invoices. You also have to complete and submit a VAT Return at regular intervals, along with your payment if one is due.   Do you want to know more? If you think anything covered in this blog may be relevant to you please get in touch. We’d love to help you....

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Personal Expenses and Tax

This crops up time and time again and so we thought we’d write up a little article to let you know where you stand with the taxman and how it works. The basic rule for work-related expenses is that they are tax deductible where they are incurred wholly and exclusively for the purpose of your job. This means that if you personally pay for something that is related to (for example) business travel and then the company reimburses you, the company can claim a tax deduction and there is no income tax charge on you. However if the company pays you for a something of personal benefit to you, then you will be taxed on it. (Unless you have an exemption.) Overnight accommodation Let’s take overnight accommodation and related expenses as an example. The bill for stopping in a hotel and the meals when you stay away on business won’t result in a tax bill (the wholly and exclusively rule). However if the company pays for extras deemed for your personal benefit, for example use of the hotel gym or a pay-per-view movie then these are taxable. If the extras are included in the room bill and not itemised separately then you won’t be taxed. But what if they are shown separately? Your company can take advantage of a little tax break where these personal expenses are exempt where on average they don’t exceed £5 per night (or £10 if you’re travelling outside the UK). It’s based on an average, so if you spend £10 on the first night, then you’re still okay provided you don’t spend anything on the second night etc. A word of warning to employers though. If they opt to pay more than the exempt amount i.e. £7 per night, the whole lot becomes taxable and not just the excess over the £5. Making best use of the rules 1. You don’t actually need to incur the expenses in order to be paid by the company, therefore the company could make the payments and you get an extra £5 tax free in your pocket. 2. Make it a company policy that where any personal expenses exceed the limit, then the excess is reimbursed to the company. If you find the above interesting and would like some further assistance, please get in touch. Courtley West...

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Fraudulent E-mail Regarding HMRC Tax Refund

It has come to our attention that an email is in circulation advising that you have received a tax refund from HMRC, the email then requires you to click on a link to go through the government gateway. HMRC will NEVER email you advising of a refund. See the attached report on HMRC’s website: http://www.hmrc.gov.uk/security/examples.htm Please do not click on the link in the email. The best course of action is to delete it.

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RTI Penalties

RTI Penalties HMRC had threatened penalties for those employers that don’t comply with the new RTI rule, here’s an update to see what the latest is. What is RTI? (Real Time Information) Starting from April 2013, all employers must send details of salary, tax and national insurance to HMRC via the internet each time they make a payment to an employee. This means that the end of year returns P35 & P14 are no longer required and so there won’t be any late filing penalties for these documents. Instead penalties will be imposed for missing the RTI deadlines. Penalties HMRC have announced the late notification penalties won’t apply for the first year of RTI and instead they’re working on a fair and practical way to implement these from 2014. PAYE errors The RTI submissions (Full Payment Submissions) won’t be subject to fines for late submission in the first year however penalties will still be charged under the existing rules for employers who make PAYE errors. Late Payments Interest and penalties will continue to be charged on late payments however it is worth noting that under RTI it will be clearer to HMRC when a payment is late and to calculate the interest and penalty due. Watch this space for further information and if you have any questions please don’t hesitate to get in touch. Ben Courtley West Chartered Certified...

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