Have you taken advantage of the Marriage Allowance?

A married couple or civil partnership can apply to transfer 10% of the income tax personal allowance from one to the other. Although called the marriage ‘allowance’, it is a transfer rather than an additional allowance.

To qualify for the allowance, neither of the partners can be higher rate taxpayers and cannot be claiming the married couple’s allowance. To benefit as a couple, one person should be earning below the personal allowance (£11,850 for 2018/19).

The maximum tax saving in 2018/19 is £237.00 (10% of the £11,850 personal allowance at 20%).

 

How to apply

 The application for the transfer is made by the person who wants to transfer part of their allowance to their partner. It is absolutely fundamental that the recipient of the allowance does not make the claim.

If your income is predictable, you can apply during the tax year here. If you apply during the tax year, the claim is in place until withdrawn or through either death or divorce.

If your income is unpredictable, because you are self-employed for example, you can make an application after the tax year on your Self-Assessment Tax Return. This claim must be done each year – it does not remain in place for future years.

 

Backdated claims

 Currently, you can backdate marriage allowance claims to include any tax year since 5 April 2015 if you were eligible. This means you could claim back as much as £662 if you can claim for 15/16, 16/17 and the 17/18 tax year.

 The Married couple’s allowance

 If either you or your partner were born before 6 April 1935 you may benefit more from the Married Couple’s Allowance instead, which you can read more about here.

For further information or help on the above, please call the office on 0116 242 3400 or email us at info@torrwaterfield.co.uk

Aiden Hyett, Accounts & Tax 

Is your child about to collect their GCSES? – You need to tell the Tax Man

(A-levels, further education or an approved training course, you MUST tell the taxman if you’re claiming child benefit or risk losing out on thousands of pounds a year)

June was a busy period for students throughout the UK as they completed their GCSE and A-Level exams, but what happens to your child benefits afterwards?

Your Child Benefit stops on 31 August on or after your child’s 16th birthday if they leave education or training. It continues if they stay in approved education or training, but you must tell the Child Benefit Office.

You’ll be sent a letter in your child’s last year at school asking you to confirm their plans.

You must report any change of circumstances to the Child Benefit Office.

‘What If my child continues education or training?’

Use the online service to tell the Child Benefit Office that your child is staying in approved education or training after age 16.

Approved education:

Education must be full-time (more than an average of 12 hours a week supervised study or course-related work experience) and can include:

  • A levels or similar – eg Pre-U, International Baccalaureate
  • Scottish Highers
  • NVQs and other vocational qualifications up to level 3
  • home education – if started before your child turned 16
  • traineeships in England

Courses are not approved if paid for by an employer or ‘advanced’, eg a university degree or BTEC Higher National Certificate.

Approved training should be unpaid and can include:

  • Foundation Apprenticeships or Traineeships in Wales
  • Employability Fund programmes or Get Ready for Work (if started before 1 April 2013) in Scotland
  • United Youth Pilot, Training for Success, Pathways to Success or Collaboration and Innovation Programme in Northern Ireland

Courses that are part of a job contract are not approved.

‘What if my child decides to leave education or training?’

Use the online service (CH459) to tell the Child Benefit Office that your child aged 16 or over has left approved education or training.

When your child leaves approved education or training, payments will stop at the end of February, 31 May, 31 August or 30 November (whichever comes first).

 Temporary breaks

 If there has been a break in your child’s education or training (for example if they change college), you might get Child Benefit during the break. In this case you should tell the Child Benefit Office.

 Apply for an extension

You could get Child Benefit for 20 weeks (called an ‘extension’) if your child leaves approved education or training and either:

  • registers with their local careers service, Connexions (or a similar organisation in Northern Ireland, the EU, Norway, Iceland or Liechtenstein)
  • signed up to join the armed forces

To qualify for this, your child must:

  • be 16 or 17
  • work less than 24 hours a week
  • not get certain benefits (eg Income Support)

You must have been entitled to Child Benefit immediately before they left the approved education or training and apply for it within 3 months of them leaving.

Apply for the extension online

If you have any queries regarding this information please feel free to contact a member of TorrWaterfield on 0116 242 3400

Sam Koelling, Accountant

Help When You Need It

For the times when you need a second opinion, simply don’t know the answer, or it’s outside of your business remit, you can contact our dedicated Employment Law, Health & Safety and Commercial Legal Advice lines.

Because we have partnered with Croner Taxwise you’ll receive access to the UK’s leading Employment Law firm, free of charge.

Croner Taxwise specialists will offer you advice on all Employment Law related issues, acting as an external HR team for you.

Employment Law Advice Line

The specialist team will provide you with commercially sound advice on matters relating to looking after your employees and their welfare.

From managing absenteeism to calculating holiday entitlements, the Employment Law team is here to help.

Health & Safety Advice Line

The key with Health & Safety in the workplace is to proactively manage your obligations and not, as many do, wait until something happens.

The dedicated Commercial Health and Safety experts are only a phone call away. They are ready to answer any questions you may have and help you understand your safety obligations.

Commercial Legal Advice Line

Their Legal Consultants are, as you would expect, highly experienced solicitors who you can call to advise you on issues ranging from landlord and tenant litigation to ascertaining if an issue worth pursuing on formal legal representation or not.

Access to all of these advice lines is FREE to all our Fee Protection clients. Call us today to find out more 0116 2423400

Clause 24 in the Finance Act – Is it affecting you?

We have known for some time that Landlords have been hit hard by recent tax changes:

  • Clause 24 restricting relief for interest;
  • 8% extra capital gains tax;
  • 3% extra stamp duty.

Clause 24 of the Finance Act set out restrictions for individuals on claiming loan interest as a cost against property investment income, for individuals it works as follows:

  • For the tax year just ended 2017/2018, 75% of the interest can be claimed in full and 25% will get relief at 20%;
  • For this tax year just started 2018/19, 50% of the interest can be claimed in full and 50% will get relief at 20%;
  • From 6 April next year to 5 April 2020, 25% of the interest can be claimed in full and 75% will get relief at 20%;
  • And finally from 6 April 2021, 100% will get only 20% relief.

Essentially Clause 24 removes Interest from the allowable property expenses, and gives you tax relief at 20% instead, so that Higher Rate tax payers will pay more tax.

However, these rules do not apply to companies and therefore they will continue to claim full relief.

If you would like to discuss any of this further please get in touch on 0116 2423400 or info@torrwaterfield.co.uk

Paul Witherington, Accounts & Tax 

P11d returns – Recap on the general principles of what is allowable.

BUSINESS TRAVEL

As we approach the time when employers have to deal with P11d returns, it is worth having a recap on the general principles of what is allowable.

Travel expenses have specific tests which must be satisfied in order for an employee to gain a deduction. These rules are different from the general rule for deductibility of expenses in that they do not need to be incurred “wholly and exclusively”. This is because with any business travel there are likely to be elements of mixed or private purpose, e.g. meals on trips or overnight accommodation. Meals and overnight accommodation come under the heading of “subsistence” and these follow the rules on business travel.

In order for travel expense to be allowable, it must satisfy one of two tests. Either

  • It is ‘necessarily incurred in the performance of duties’ or
  • The travel is ‘for necessary attendance’

Allowable business travel expenses include the actual costs of travel, the subsistence expenditure and other associated costs that are incurred as part of the cost of making the journey. They consist of expenses you are obliged to incur in performing your duties. Tax relief is not normally available on travel costs relating to commuting to and from the normal place of work, or private travel. There are some special rules on Worksite Travel Costs however, where exceptions occur that should be considered.

Road Travel – Use of Private Vehicles

You may claim a cost per mile for allowable business journeys in your own vehicle.  There is a distinction between the first 10,000 miles in any tax year and subsequent miles. The 2018 allowable mileage rates that may be claimed are as follows:

Type of Vehicle Motorcar Motorcycle – all Cycle
First 10000 Miles 45p per mile 24p per mile 20p per mile
10000+ Miles 25p per mile 24p per mile 20p per mile
       

You must retain valid VAT fuel receipts to support your claim. There is currently no HMRC requirement to state the fuel type.

Road Travel – Use of a Hire Car

Occasionally you may need to hire a car, either for a specific journey or if your own car is being serviced or repaired. If you regularly use your personal car for business travel and claim mileage rates you cannot claim the cost of the hire car, you should continue to claim the authorised mileage rates.

If you don’t use your personal car for business and you hire a car in your own name for business journeys for short term use, the hire costs and fuel are an allowable expense. If the hire car is used for personal use a proportion of the hire costs will be disallowable.

Hiring a car abroad specifically for business purposes is an allowable expense and the hire costs and fuel can be claimed.

Rail or Air Travel

The cost of train or airfares for business-related journeys is allowable. Additional costs such as excess baggage claims are also allowable if they are incurred in the performance of your duties and have no personal element.

Other Allowable Travel Costs

Allowable travel costs include bridge, tunnel and road tolls, bus and taxi fares, car-parking charges and congestion charges provided they have been incurred on a business trip.

Overseas Travel Costs

The cost of overseas travel is allowable where you are obliged to incur the expense in the performance of your duties.

Accommodation

The cost of hotel accommodation for nights spent away from home on business may be claimed. The cost of maintaining a rental property may also be allowable provided that use of the property is necessary for business purposes, and a permanent residence is being maintained elsewhere within the UK where a regular pattern of commuting back to that residence is evident. Where a rental property is not used exclusively for business purposes the proportion of costs relating to the period of private usage is not allowable. In such cases it will be necessary to determine the appropriate split of private and business usage and claim only for the business use.

The cost of accommodation in relation to site work is allowable if the period of time at the site is both expected to be no more than 24 months in total, including any time spent on-site prior to the current contract and in fact does not exceed 24 months. The “40% rule” also applies here; claims can be made for accommodation at/near a temporary workplace but never near a permanent workplace.

Incidental Overnight Expenses Allowance

On a business trip you may incur personal costs such as private telephone calls, laundry, newspapers or the cost of childcare. HMRC regards these as personal rather than business expenditure and are not allowable. However, if you are staying overnight while either away on business or on allowable work-related training, you are entitled to claim a subsistence allowance.

There are two Incidental Overnight Expenses Allowance rates: £5 per night in the UK and £10 per night overseas (including Eire). No receipts need to be produced. These allowances can only be claimed in relation to an overnight stay, for example, on a business trip in the UK lasting 5 days with 4 overnight stays, £20 can be claimed.

Incidental Overnight Expenses Allowances in relation to site work are claimable if the overnight stay is associated with a period of time at a site that is both expected to be no more than 24 months in total, including any time spent on-site prior to the current contract, and in fact does not exceed 24 months. The “40% rule” also applies here; claims can be made for accommodation at/near a temporary workplace but never near a permanent workplace.

Meals

When staying overnight meals are an allowable expense. Food and drink must have been purchased after the journey commenced. As a result of this rule costs incurred in preparing a pre-packed lunch are not allowable expenses. The levels of costs that are generally acceptable to HMRC are as follows and claims need to be supported with a valid receipt:

  • Breakfast or lunch: £15 in London and £10 outside London
  • Dinner: £40 in London and £30 outside London

HMRC accepts that reasonable costs of alcoholic beverages with a meal may be claimed. Where you have dined with work associates, only the proportion of the total cost that pertains to you as the director is allowable unless the purpose of the meal is business entertaining. Appropriate identification and explanation of the receipts must be provided in English when submitted in relation to meals overseas.

If you would like to discuss any of this further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk 

Nish Bathia, Director 

I’m self-employed, what do I need for my mortgage?

Applying for a mortgage always sounds like a tricky task, especially if you’re self-employed as you do not have a set and secure amount of income every year.

Previously, you could apply for a self-certified mortgage – this allowed you to disclose to your lender how much you were earning without actually providing any evidence. Unfortunately, this type of mortgage was scrapped and now all lenders require proof of income for all mortgages.

This means that if you are self-employed, you need to prove how much you earn in order to apply for a mortgage.

Lenders usually ask for the following as proof of income:

  • Two or three years’ worth of accounts prepared by a qualified accountant
  • HMRC Tax Year Summaries – that show how much income you declared to HMRC and how much tax you paid on that
  • Bank statements – including savings or ISA’s Proof of your deposit
  • Details of any debt repayments and other outgoings, including things such as childcare costs, credit purchases and pension contributions.

If you have only recently started up as self-employed, you may not have two or three years’ worth of accounts. In this situation the lender may ask for proof of future trading such as sales contracts.

Depending on whether you operate as a sole trader or a partnership the lender will assess you in different ways.  Lenders favour providing mortgages to those they consider to be low risk.  This usually includes people with a steady income that have a low risk of defaulting on their monthly payments.  For a sole trader, lenders will usually look at the net annual profit of the business.  For partnerships, they’ll look at each partner’s share of the profit.

If you have any queries on the above or would like some advice on applying for a mortgage, please feel free to contact us on 0116 242 3400.

Calum Ainge, Accounts & Tax 

The following Tax Events are due on 19th April 2018.

The following Tax Events are due on 19th April 2018:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th January 2018 to 5th April 2018.

This deadline is relevant to small employers and contractors only. As a small employer with income tax, national insurance and student loan deductions of less than £1,500 a month you are required to make payment to HMRC of the income tax, national insurance and student loan deductions on a quarterly basis.

Postal payments for month/quarter ended 5 April should reach your HMRC Accounts Office by this date.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 20th April 2018 unless you are able to arrange a ‘Faster Payment’ to clear on or by Sunday 22nd April.

Penalties apply if payment is made late.

PAYE, Student loan and CIS deductions are due for the month to 5th April 2018.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions. Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.

Postal payments for month/quarter ended 5 April should reach your HMRC Accounts Office by this date.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 20th April 2018 unless you are able to arrange a ‘Faster Payment’ to clear on or by Sunday 22nd April.

Penalties apply if payment is made late.

Automatic interest is charged where PAYE tax, Student loan deductions, Class 1 NI or CIS deductions for 2017/18 are not paid by today. Penalties may also apply if any payments have been made late throughout the tax year.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Deadline for employers’ final PAYE return to be submitted online for 2017/18.

This deadline is relevant to employers.

This is the last day by which your final Full Payment Summary (FPS) for the 2017/18 tax year should be sent to HMRC.

You will not be able to file an FPS relating to 2017/18 after 19th April. If you need to make an amendment or correction to the details reported on a 2017/18 FPS you will need to submit an Earlier Year Update (EYU).

Please be aware that if we deal with the payroll on your behalf that we will ensure that this matter is dealt with on a timely basis.

If you would like to discuss this any further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk 

We send monthly reminders about all upcoming tax deadlines and other important business related deadlines. If you would like to receive these email notifications please register here https://www.torrwaterfield.co.uk/registration/register 

 

 

How do you complete a Monthly CIS Return?

What is CIS?

The Construction Industry Scheme is a method of deducting tax from subcontractors in the building sector. Contractors deduct a percentage of the money owed on their payments to subcontractors and pass it over directly to HMRC. The amounts are effectively taxed at source as the sub-contractor does not get the money.  The deducted CIS tax counts as advance payments towards the tax and National Insurance contributions that will be calculated upon completion of the subcontractor’s self-assessment tax return.

What do I need to complete a return?

Monthly CIS returns need to be submitted by the contractor to HMRC to disclose the amount of CIS which has been deducted and is therefore due to be paid over to HMRC.

The contractor needs from the subcontractor an invoice which states the money they are owed.

The invoice should split out the materials and labour with CIS only being deductible on the labour element of the invoice. CIS is deducted at 20% providing the subcontractor has a UTR (unique tax reference) number which should be displayed on the invoice. If there is no UTR number then CIS will be deducted at 30%.

How do I do it?

CIS periods run from the 6th of the month to the 5th of the month following – for example, 6th March – 5th April. The CIS return then needs to be submitted and the liability paid over within two weeks of the period end – 19th April for example in order to avoid facing late filing charges. The return can be manually entered under the contractor’s logon on the HMRC website or it can be submitted via numerous accounting software programmes. The CIS is payable to HMRC upon payment of the invoice and not the date the invoice is issued, so it should only be included on the CIS return at this point. Once the return has been submitted to HMRC, statements should be sent out to all subcontractors for their own records.

If you wish to discuss any of this further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk

Brook Lucas, Accounts & Tax 

With effect from 6 April 2018, all PILONs will be chargeable to Income Tax and Class 1 National Insurance Contributions (NICs)

With effect from 6 April 2018, all PILONs will be chargeable to Income Tax and Class 1 National Insurance Contributions (NICs), whether or not they are contractual payments. Payments or benefits paid in connection with the termination of a person’s employment will be split into two elements. The first element, post-employment notice pay (PENP) received is taxable as general earnings and will be subject to Class 1 NICs from 6 April 2018. The PENP represents the earnings that the employee would have received had they been given and worked their full and proper notice and on which they would ordinarily have paid tax and Class 1 NICs.

PENP is calculated by applying a formula to the total amount of the payment or benefits paid in connection with the termination of an employment. The second element is the remaining balance of the termination payment, or benefit, is not a PENP. This is taxable as specific employment income to the extent that it exceeds £30,000 and is treated in the same way as other payments and benefits taxable under section 403 Income Tax (Earnings and Pensions) Act 2003.

PENP calculations should not be applied to statutory and non-statutory redundancy payments. These payments are always taxable as specific employment income and subject to the £30,000 exemption where appropriate. As an employer, you will be required to apply the PENP formula to the total amount of relevant termination payments, or benefits. You should operate PAYE to deduct income tax and Class 1 NICs from the amount of PENP from 6 April 2018. You should then apply the £30,000 exemption, where applicable, to the second element of the relevant termination payment and deduct income tax (but not NICs) accordingly. Detailed guidance on how and to what payments you should apply the PENP formula to will be published in the Employment Income Manual in due course

Foreign Service relief

Foreign Service relief on termination payments is being removed for UK residents. Employees whose employment is terminated on, or after, 6 April 2018 and who receive a payment or benefit in connection with that termination will not be eligible for tax relief in respect of any period of foreign service undertaken as part of their office or employment if they are UK resident for the tax year in which their employment is terminated. This change is subject to parliamentary approval. Foreign Service relief will be retained for seafarers.

If you would like to discuss any of this further please get in touch 0116 2423400 or info@torrwaterfield.co.uk

Lower heating bills for renters – Landlords do you need to make changes?

From 1 April 2018 all privately rented properties must have a minimum energy performance rating of “E”.

This means landlords must make improvements to homes, upgrading insulation or heating systems for example, which should make them cheaper to heat.

The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020.

The Government has announced it will be unlawful to rent out a property which breaches this minimum rating, meaning properties which fall in the less efficient “F” or “G” categories will no longer be acceptable.

A civil penalty of up to £4,000 will be imposed for landlords who let homes that fall below the minimum standard.

Which properties are affected by the changes?

The new regulations apply to private, domestic rented properties in England and Wales which are let under an assured tenancy or a shorthold tenancy. The tenancy should be regulated under the Rent Acts including assured agricultural occupancy, protected and statutory tenancies under the Rent Act 1976.

The properties affected are any domestic, privately rented properties which are required by law to have an EPC or are contained within a larger unit which is required to have one. This includes houses, flats and self-contained units but isn’t applicable to bedsits. The EPC cannot be more than 10 years old.

Which properties are excluded?

Protected buildings and structures (such as those with listed status or restricted environmental regulations) are exempt if the measures needed to improve energy efficiency will alter the character or appearance of the building. In addition, temporary structures with intended use times of 2 years or less, residences used for less than 4 months of a year and buildings with floor area of less than 50 square metres are also exempt.

 Are there rules about how energy efficiency is improved?

There are no regulations relating to how the energy efficiency rating E is achieved so it is up to the individual landlord what work is carried out on the property. The regulations stipulate that only cost-effective improvements should be made and it’s possible that a landlord could be exempt in some cases. For example, if a landlord can prove that they’ve taken all possible cost-effective measures to make improvements but the rating still remains below E. Or, in some cases, the landlord may be unable to obtain consent from the occupying tenant.

Are there exemptions?

Any properties which are exempt from the new regulations need to be registered on the PRS Exemptions Register. This registration has been open since October 2017. Failure to register will be seen as non-compliance with the regulations. Once a property is assessed and declared exempt this remains valid for 5 years. After that period it would need to be reassessed.

How the regulations are enforced and what are the penalties?

The regulations will be enforced by the local authority who will serve landlords with compliance notices to confirm properties either meet the required standards or have been declared as exempt. If they find a landlord has not complied with either they are able to issue a penalty fine which, cumulatively, could reach up to £5,000. A landlord can request a review of a penalty notice followed by an appeals process if they are still not satisfied with the local authority’s decision.

There are several improvements you can make to a property which will improve the energy efficient rating and many are very simple to carry to out. You could improve the energy efficiency of your property significantly by:

  • Replacing a non-condensing boiler with a new condensing, A rated boiler with over 90% energy efficiency.
  • Installing or improving insulation in walls, roof, and loft spaces, pipework etc. to prevent heat loss. You may even be able to qualify for a free insulation grant to help with the cost.
  • Installing solar panels and a solar energy storage system to reduce the property’s energy dependence on the National Grid
  • Installing double glazed windows to reduce the amount of heat escaping through poorly fitted frames or basic single glazing.

If you wish to discuss any of this further then please contact us 0116 2423400

Hollie Crown, Office Manager