Entries Tagged 'Tax news' ↓

The average UK household will pay £283 of tax per family on their festive spending this year according to the Taxpayers’ Alliance.

“While Santa Claus is coming down the chimney, George Osborne is sneaking through the back door, like the Grinch stealing the presents,” said Mike Denham, a research fellow at the Taxpayers’ Alliance.

The Christmas tax principally comprises VAT which is charged at 17.5% on virtually all Christmas goods resulting in an average VAT bill of £224.   The remainder of the £283 of tax per household is made up of excise duties (on alcohol) and fuel tax (at £3.46 per gallon).

According to Deloitte’s long-running Christmas Retail Survey the total cost of Christmas this year will be £37bn. That works out at £1,460 per UK household (including £283 of tax as above), of which £365 will go on food and drink, £803 on gifts, and £292 on socialising.

Merry Christmas everyone (well, everyone except Mr Osborne)!

Click here to see the fuel rates to use from 1 December 2010 for both:

• employers wanting to reimburse employees for business journeys done in company cars, and
• employees needing to reimburse employers for private jorneys done in company cars. 

If these rates are used there is no extra tax to pay on such payments.

HM Treasury has just announced the new tax and NI rates for 2011/12 which take effect from 6 April 2011.  In brief the changes are as follows:

• Personal allowance increased to £7,475
• Basic rate threshold reduced £35,000
• NI is payable on earnings exceeding £7,070 pa or £136 pw
• Basic NI rates increase to 12% for employees, 13.8% for employers and 9% for the self employed
• The higher NI rate is increased to 2% for employees and the self employed
• ISA limits increased to £5,340 for cash or £10,680 for shares

Full details can be found by clicking on this Tax rates for 2011/12 link.

The Prime Minister, David Cameron, has issued a message of support and thanks to the UK’s 1.4m feelance workers.

Mr Cameron sent a letter yesterday to the Professional Contractors Group (PCG) in recognition of 23 November being National Freelancers Day.  In his letter the PM said: “I can’t tell you how much admiration I have for people who leave the comfort of a regular wage to strike out on their own.  It takes a lot of courage – and without that courage this country would be a much poorer place.

“The 1.4million freelancers in our country make a massive contribution to our economy.  More and more people are choosing freelancing, recognising that it strikes the right balance between work and life in the 21st century, and as we go for economic growth this Government is getting right beghind them.”

Encouraing words, I’m sure you’ll agree.  However, let’s wait until the new version of IR35 is published before getting too carried away…

The Scottish government has failed to pay for the upkeep of an HMRC computer system that was used to support the country’s variable rate tax.

In 1997, the Scottish Parliament was granted tax powers to increase or decrease income taxes by 3% from the UK standard rate. The SNP government failed to meet a demand for £7 million by 20 August towards the cost of upgrading its software to match the latest software used by HMRC.  Non-payment of this bill means that Edinburgh has now lost its ability to raise or lower taxes for Scotland.

Pensions minister, Steve Webb, confirmed last week that every company, regardless of size, colour or creed will have to sign up to the government’s new pension provision rules.

Although the scheme starts in 2012, it won’t impact smaller companies (those with less than 50 employees) until 2014/15.  Even then, we think that exemptions will be available for personal service companies (contractors, freelancers and the like).

Employer contributions will ratchet up from 1% to 3% of the employee’s salary over a transitional period but only where that salary exceeds £7,475.   As many contractors take a minimal salary below this level (and the rest of their earnings as dividends) you can see that the impact will be small. 

In reality, a more suitable pension provision can be made via a SIPP or stakeholder pension which is more flexible both in what it can invest in and at retirement.

A fundamental review of the tax rules known as IR35 has been started by the Office of Tax Simplification.

IR35 is the tax rule that the Taxman uses when he wants to charge freelancers (or ’disguised employees’ as he calls them) the higher taxes that people on PAYE pay.

The Institute of Directors says: “IR35 imposes a burden out of all proportion to its effectiveness. Not only are contractors unduly burdened, but HMRC staff are tied up doing frustrating and often unproductive work, at a time when HMRC staffing is under pressure and there are more useful things that the staff concerned could be doing.”

We have recently been advised of a new initiative within HMRC which appears to be known as the ‘Dash for Cash’.

We understand that Tax Inspectors have been tasked to bring in as much money as possible, as quickly as possible, which is not surprising given the current economic environment.  This is likely to include pressure to settle long running full enquiry cases and encouragement to take up aspect enquiries which can be settled more quickly to optimise the tax yield in the current financial year.

Finally, we are also hearing that the number of tax investigations been launched has doubled in recent months which serves to confirm the above comments.

In a cost-cutting move, accountants and agents will no longer get copies of some PAYE and SA forms

HMRC announced last week that it is going to withdraw the agents’ copies of some self assessment and PAYE forms.

The forms affected are:

P2 – PAYE coding notice

P800 – Tax calculation

SA250 – Letter with UTR and requirement to do an SA tax return

SA251 – Letter to someone coming out of SA

HMRC says: “We are sorry if some of these changes are unwelcome but we have tried to look for savings in those areas where there will be minimal impact on our customers.”

We say, “Ensure you send a copy to your accountant of all correspondence from the Taxman”.

Government ministers have confirmed that they will make online filing of VAT returns compulsory for all businesses from 2012.

The move follows the introduction of mandatory online filing for newly registered businesses and those turning over more than £100,000 from 1 April 2010.

In the run-up to the March 2010 Budget there were some signals from HMRC that it might bring forward the date for universal filing, but if the government goes ahead with what is expected to be an April 2012 start date, it will match the programme originally laid down by Lord Carter in his 2006 review of HMRC online services.

People who have a conscientious objection to using a computer will be able to continue filing paper returns.