Guidance for employers


HMRC have issued their latest guidance to employers in the August edition of the Employer Bulletin. This publication, which is issued every two months, includes articles on:

  • expenses and benefits in kind consultations 
  • HMRC Toolkits – helping to reduce errors
  • Automatic penalties for late intermediary returns
  • the Apprenticeship Levy and apprentices
  • guidance on paying HMRC
  • student loan deductions
  • Automatic enrolment update
  • National insurance contributions for employees over State Pension age
  • Basic PAYE tools usage
  • the impact on tax codes of the Personal Savings Allowance.

For help with your payroll contact us.

Internet link: Employer Bulletin

Government urged to delay the launch of Lifetime ISA


The government is being urged by both pension providers and banks to delay the April 2017 launch of the new Lifetime ISA as they are warning that they will not be ready to offer the savings product by this time.

A new Lifetime ISA introduces a new type of savings account for adults under the age of 40. Individuals will be able to contribute up to £4,000 per year and receive a 25% bonus from the government. Funds, including the government bonus, can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn from age 60 completely tax-free.

Further details of the new account, which is expected to be available from 2017, are as follows:

  • Any savings an individual puts into the account before their 50th birthday will receive an added 25% bonus from the government.
  • There is no maximum monthly contribution and up to £4,000 a year can be saved into a Lifetime ISA.
  • The savings and bonus can be used towards a deposit on a first home worth up to £450,000 across the country.
  • Accounts are limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together.
  • Where an individual already has a Help to Buy ISA they will be able to transfer those savings into the Lifetime ISA in 2017, or continue saving into both. However only the bonus from one account can be used to buy a house.
  • Where the funds are withdrawn at any time before the account holder is aged 60 they will lose the government bonus (and any interest or growth on this) and will also have to pay a 5% charge.
  • After the account holder’s 60th birthday they will be able to take all the savings tax-free.

In the article published by This is Money pension providers Aegon and Standard Life have stated that they have delayed their plans until final details regarding the Lifetime ISA are released.

The Financial Conduct Authority (FCA) is yet to consult on the initiative. Steven Cameron, Pensions Director at Aegon, stated that a consultation is ‘likely to take three months’ to carry out.

Meanwhile, a spokesperson for Standard Life said: ‘As we want the Lifetime ISA to be a success, we would prefer that its launch is delayed until providers receive more detail on the product and how it is to be implemented.’

The Treasury is expected to confirm full details in the autumn.

Internet link: Article

Residential property income and interest relief


The government has issued guidance and examples on the restriction of income tax relief for interest costs incurred by landlords of residential properties. The new rules, which are phased in from April 2017, only apply to residential properties and do not apply to companies or furnished holiday lettings.

From April 2017 income tax relief will start to be restricted to the basic rate of tax. The restriction will be phased in over four years and therefore be fully in place by 2020/21. In the first year the restriction will apply to 25% of the interest, then 50% the year after and 75% in the third.

The restriction may result in additional amounts of tax being due but will depend on the marginal rate of tax for the taxpayer. Basic rate taxpayers should not be substantively affected by these rules. A higher rate taxpayer will, in principle, get 20% less relief for finance costs. However the calculation method may mean that some taxpayers move into the higher rate tax brackets as the following example illustrates:

Consider the 2020/21 tax year when the transitional period is over. Assume that the personal allowance is £11,000, the basic rate band £32,000 and the higher rate band starts at £43,000.

Assume Ellisha has a salary of £28,000, rental income before interest of £23,000 and interest on the property mortgage of £8,000. Under the current tax rules, taxable rental income is £15,000. She will not pay higher rate tax as her total income is £43,000 – the point from which higher rate tax is payable.

With the new rules, taxable rental income is £23,000. So £8,000 is taxable at 40% – £3,200. Interest relief is given after having computed the tax liability on her income. The relief is £8,000 at 20% – £1,600. So an extra £1,600 tax is payable.

Other complications

It should be noted that the tax reduction cannot be used to create a tax refund. So the amount of interest relief is restricted where either total property income or total taxable income (excluding savings and dividend income) of the landlord is lower than the finance costs incurred. The unrelieved interest is carried forward and may get tax relief in a later year.

Child benefit is clawed back if ‘adjusted net income’ is above £50,000. Interest will not be deductible in the calculation of ‘adjusted net income’.

The personal allowance is reduced if ‘adjusted net income’ is above £100,000.

Please contact us if you would like advice on how these rules will affect you.

Internet links: News Examples

 

Complain to HMRC – online


HMRC have always had complaints procedures and have extended these to now include an online form which can be used to make complaints about your self-assessment and PAYE. The guidance also includes other ways to complain.

If you would like help with PAYE or self assessment issues please contact us.

Internet link: GOV.UK guidance

HMRC genuine and phishing/bogus emails and calls


HMRC have issued an update of their guidance on how to recognise genuine HMRC contact be it via email or text.

They have also issued a warning regarding two telephone scams that they are aware of.

The details of the two phone scams are as follows:

  • Taxpayers receive telephone calls claiming to be from HMRC requesting personal information in order to receive a tax refund, or to demand money for an unpaid tax bill.
  • A recorded message is left, allegedly from HMRC, advising ‘that HMRC are bringing a lawsuit against the individual and is going to sue them. The recipient is asked to phone 0161 8508494 and press “1” to speak to the officer dealing with the case.

HMRC are advising that taxpayers should not reply to the message and should report this to Action Fraud, or you can call Action Fraud on 0300 123 2050.

Internet links: HMRC guidance Employer Bulletin