Tax-free childcare roll out

The implementation of Tax-Free Childcare, the new government scheme to help working parents with the cost of childcare, is being rolled out to eligible parents in stages.

The scheme first made its debut in April 2017 and although there have been initial systems problems, HMRC’s aim is to have the scheme open to all eligible parents by 14 February 2018. Application is made online through the Childcare Choices site www.childcarechoices.gov.uk and applications can be made for all eligible children at the same time.

Under Tax-Free Childcare, for every £8 the parent pays, the government provides a £2 top-up, to a maximum of £2,000 per child each year – with a higher limit of £4,000 for disabled children. This gives a total childcare pot of £10,000, or £20,000 for disabled children. To be eligible, parents must generally have minimum weekly earnings of at least £120 each. There is also an upper earnings limit of £100,000.

Compensation may be available in certain circumstances where a parent:

  • is unable to complete an application for Tax-Free Childcare
  • is unable to access their childcare account
  • or doesn’t get a decision about whether they are eligible, without explanation, for more than 20 days.

Those employing a nanny should be able to use the childcare account to pay their PAYE tax and National Insurance. Delays in getting this system working may also give grounds for compensation. Application is made online GOV.UK childcare-service-compensation 

If you would like to discuss any of this further then please get in touch 0116 2423400 or https://www.torrwaterfield.co.uk/contact-us 

The Apprenticeship Levy

The Apprenticeship Levy is charged on employers’ “paybills” at a rate of 0.5%. The levy is payable through Pay as You Earn (PAYE) and is payable alongside income tax and National Insurance. To keep the process as simple as possible “paybill” will be based on total employee earnings subject to Class 1 secondary NICs.

Each employer receives one annual allowance of £15,000 to offset against their levy payment. There is a connected persons rule, similar to the Employment Allowance connected persons rule, so employers who operate multiple payrolls are only be able to claim one allowance.

1.) If you’re an employer with a pay bill over £3 million each year, you must pay the apprenticeship levy from 6 April 2017. You can find out how to do this here.

You will report and pay your levy to HMRC through the PAYE process.

The levy will not affect the way you fund training for apprentices who started an apprenticeship programme before 1 May 2017. You’ll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.

Detail on how to setup and use your online account can be found here.

2.) If you do not have to pay the levy then you can still receive support to pay your apprentices.

From May 2017, you will pay 10% towards to the cost of apprenticeship training and government will pay the rest (90%), up to the funding band maximum.

If you do not pay the levy, you won’t be able to use the apprenticeship service to pay for apprenticeship training and assessment until at least 2018.

Instead, you’ll need to agree a payment schedule with the provider and pay them directly for the training. The provider must prove that you have paid your contributions as a condition of government paying its contribution.

There are 2 different types of apprenticeships to choose from:

  • apprenticeship standards– each standard covers a specific occupation and sets out the core skills, knowledge and behaviours an apprentice will need; they are developed by employer groups known as ‘trailblazers’
  • apprenticeship frameworks– a series of work-related vocational and professional qualifications, with workplace- and classroom-based training

To choose training:

If you would like to discuss any of this further then please contact us on 0116 2423400

Becky Edwards, Payroll Manager 

The Right to work in the UK

Do you know how to carry out a ‘right to work in the UK check?

The Immigration, Asylum and Nationality Act 2006 places a duty on employers to carry out checks to confirm someone’s right to work in the UK before employing them.

Punishments for employing an illegal worker are:

  • £20,000 for each illegal worker employed
  • Up to five years imprisonment for knowingly employing an illegal worker

Some employers may not know the specific checks and check-ups that must be used when employing a new worker:

The ‘Right to work Check’

Employers must carry out a ‘Right to work check’ on a worker before the employment begins to ensure that he or she is legally allowed to work in the UK and do the work in question. This check should be carried out on all employees to maintain accuracy and avoid any discrimination.

The ‘Right to work check’ means that an employer must check that a document, provided by the worker, is acceptable for showing the employee’s permission to work in the UK. There are three key steps to determine the check:

  1. Obtain the original version of one or more of the permitted documents
  2. Check the validity in the presence of the holder (worker)
  3. Take and retain a clear copy of the document in an un-editable format, e.g. PDF / JPEG, and record the date of the check.

These copies must be kept until 2 years after the employment ends.

List A and List B

HMRC provides two lists that show the documents required to prove a worker has the right to work in the UK. List A gives the documents that show the holder has an ongoing right to work in the UK. If an employer checks these correctly, they have an excuse against payment of a civil fine for the duration of that person’s employment.

Alternatively, List B gives documents that show the holder has the right to work in the UK for a limited time only. If an employer checks these correctly, they have an excuse against a civil penalty for a limited time. To retain a statutory excuse, another check must be carried out towards the end of this period.

HMRC’s employers guide to acceptable right to work documents explains list A and list B:

https://www.gov.uk/government/publications/acceptable-right-to-work-documents-an-employers-guide

HMRC also provide an online interactive tool on checking somebodies right to work in the UK. This should be used when carrying out the checking of documents, if extra clarification is needed:

If you have any questions on the above or would like any more information, please feel free to contact us on 0116 2423400.

Zahra Bates, Payroll Assistant 

Spring Budget 2017

I am sure that you have seen the headlines in the papers this morning about the Budget and for a detailed analysis please see the report on our website:

www.torrwaterfield.co.uk/news/budget-report.

The items that have caught my attention and I think are relevant to most people are as follows:

National Insurance for the self-employed

At present, if self-employed, you pay class 2 National Insurance of £145.60 for a complete year, and class 4 at 9% based on your level of profits.  The Government do not think that this is fair as employees pay National Insurance at 12%.  To level this position, class 2 National Insurance will be abolished from 06/04/2018 and the class 4 element will increase to 10% from that date, and to 11% from 06/04/2019, thus bringing the self-employed more in line with the employed.

Dividend changes again …

From 06/04/2016 broadly the first £5,000 of dividend income is taxed at 0 % (Dividend Allowance).  This will continue until 05/04/2018.  However, from 06/04/2018 the Dividend Allowance will reduce to £2,000.  This will mainly affect the family company shareholder and increase their tax liability as follows:

Basic rate taxpayer – additional tax of £225

Higher rate taxpayer – additional tax of £975

Additional rate taxpayer – additional tax of £1,143

Individual Savings Accounts (ISAs)

 The overall limit is increasing from £15,240 to £20,000 on 06/04/2017.

Property and trading income allowances

Although this was mentioned last year it comes into play on 06/04/2017. It is as it says, so if you have property or trading income of £1,000 or less you will no longer need to declare this or pay tax on it.  This could cover small amounts of rent from Air ‘bnb’ activities or trading on ebay. 

New Childcare provisions

 If you are taking out new childcare provisions from 06/04/2017 then, instead of opting for a salary sacrifice scheme and receiving vouchers, for every 80 pence that you contribute the Government will contribute 20 pence. The maximum the Government will contribute will generally be £2,000.

Making Tax Digital

This will be introduced on 06/04/2018 for businesses, the self-employed and landlords who have profits chargeable to Income Tax and pay Class 4 National insurance Contributions where their turnover is in excess of the VAT Threshold, which will be £85,000 from 01/04/2017.

As this is a very new area please contact us for further information.

Salary Sacrifice

 From 06/04/2017 this is changing, but it is still beneficial for both the employer and employee to sacrifice salary in respect of employer provided pensions, childcare vouchers, workplace nurseries and cycle to work schemes. 

Construction Industry

The government are launching a consultation on 20 March 2017 to look at various areas, including the qualifying criteria for Gross Payment Status and options to combat VAT supply chain fraud in supplies of labour.

In addition to the above, certain other changes come into force on 06/04/2017 that have been mentioned in earlier Budgets namely:

Restrictions on residential property interest

Landlords will no longer be able to deduct all of their finance costs from their property income.

Inheritance Tax residence nil rate band

There will be an additional nil rate band for deaths on or after 06/04/2017 where an interest in a main residence passes to direct descendants.

As mentioned above I have only mentioned the areas that I believe will be most relevant to the majority of our clients but other areas can be found on our website.

Please contact us if you have a specific query. 0116 24243400

Julia Harrison, Tax ManagerJulia Harrison April 2012

The New Marriage Allowance

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The marriage allowance allows you transfer £1,100 of your Personal Allowance to your husband, wife or civil partner – if they earn more than you.

This reduces their tax by up to £220 in the tax year (6 April to 5 April the next year).

In order to benefit as a couple, you (as the lower earner) must have an income of £11,000 or less.

If you are eligible for marriage allowance in the 2015/2016 tax year, you can backdate your claim to 6 April 2015 and reduce the tax paid by up to £432.

Who can apply?

You can get marriage allowance if all the following apply:

  • You are married or in a civil partnership
  • You don’t earn anything, or your income is under £11,000
  • Your Partner’s income is between £11,001 and £43,000

You can also apply for marriage allowance if you or your partner:

  • Are currently receiving a pension
  • Live abroad – as long as you get a Personal Allowance

If you or your Partner were born before 6 April 1935, you might benefit more as a couple by applying for Married Couple’s Allowance instead.

If you would like to discuss this please get in touch. 

Paula McIntosh, Administration  

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A day in the life of a junior accountant

Some of you may think that training to become an accountant involves going to university and graduating with a degree – but this is not always the case. Here is my day as a junior accountant:

It’s the dreaded Monday morning and I’m waking up nice and early so that I can attempt to miss the rush hour traffic. Get into work, turn on my computer and sit down with a brew to wake me up before starting work.

First job is a set of accounts, looking through the income and expenses, then knuckling down to balance some control accounts!

At 10am I have a catch up with one of the directors to discuss my plan of action for the week including jobs that need completing, what bills need raising, any deadlines that are looming and any courses that I will be taking.

After that I will carry on with the set of accounts I am working on for the rest of the morning, making sure that I make full use of my lunch by working on some booklets that need completing in order for me to pass my AAT qualification – currently I am working on ‘developing commercial awareness’ which involves me producing a presentation to show to my tutor based on Torr Waterfield.

When lunch is over, I will pass the finished set of accounts over to my trainer who will look through them to adjust any notes or figures to make sure that the accounts are correct. Once he has passed these back to me, I will review the notes so that I am aware of anything that I will need to look out for on my next job and do the amendments that are necessary.

It’s now time to see the client manager with the job who will scrutinize the figures and ask any questions that they will need to know in order to have a successful meeting with the client.

Once the manager has reviewed the file and is happy with the figures I will contact the client to arrange the meeting.

It’s now 5.15pm- but my day is not over!

Time for college now to learn about ‘budgeting’ for one of my five AAT level 4 exams.

At 5.45pm the tutor will go through the aims of that lesson and then the lesson commences; a 5 minute break at 7.15pm. Just an hour left!

We complete some practice questions as a group, and then jot down the home work that the tutor has set us for that week.

Finally 8.15pm – it is home time!

Jessica Cooper , Accounts & Tax