Archive for June, 2015

Cashing in your pension pot

Monday, June 29th, 2015

From April 2015, persons aged 55 years or older, with defined contribution personal pension pots, can consider cashing in the value accumulated in their fund. Certainly, anyone considering this course of action should take professional advice from their independent financial advisor.

 The following steps are advised by the Pensions Wise website:

 Here are some next steps if you’re interested in taking cash:

 Cash in chunks:

  • check with your current provider if they offer the option and what they charge – if they don’t offer it, you can transfer your pot but you might be charged
  • check if your pot has any special arrangements attached to it that could mean you get a better deal, e.g. a guaranteed value at a certain time
  • make sure you know how much tax you’ll pay on any money you’re planning to take out

 Taking your whole pot:

  • check with your provider if you can take 25% tax free
  • make sure you know how much tax you’ll pay on the remaining 75%
  • if you want to reinvest the money, talk to a registered financial adviser first

 In the majority of cases, if you cash in your whole pension pot 25% of the amount received is tax free; the remaining 75% is treated as part of your taxable income for income tax purposes.

When the payment is made by your pension company they will estimate the income tax due and deduct this amount before sending you the balance. They will provide you with a P45 that shows the taxable amount refunded and the income tax they have deducted. These details will form part of your income tax assessment in the tax year that you cash in your policy.

It is important to realise that the amount of tax deducted may or may not cover the income tax due. It will have been based on an estimate of your total income when the payment is made. If you are a high income earner, subject to income tax at a marginal rate of 40% or 45%, or likely to be a higher rate tax payer if the taxable 75% of your cashed in fund is included, then take professional tax advice before spending or reinvesting your fund proceeds.

Tax Diary July/August 2015

Friday, June 26th, 2015

 1 July 2015 – Due date for Corporation Tax due for the year ended 30 September 2014.

 6 July 2015 – Complete and submit forms P11D return of benefits and expenses and P11D (b) return of Class 1A NICs.

 8 July 2015 – The second Budget Day for this year.

 19 July 2015 – Pay Class 1A NICs (by the 22 July 2015 if paid electronically).

 19 July 2015 – PAYE and NIC deductions due for month ended 5 July 2015. (If you pay your tax electronically the due date is 22 July 2015)

 19 July 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2015.

 19 July 2015 – CIS tax deducted for the month ended 5 July 2015 is payable by today.

 1 August 2015 – Due date for Corporation Tax due for the year ended 31 October 2014.

 19 August 2015 – PAYE and NIC deductions due for month ended 5 August 2015. (If you pay your tax electronically the due date is 22 August 2015)

 19 August 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2015.

 19 August 2015 – CIS tax deducted for the month ended 5 August 2015 is payable by today.

Under and over payments of tax 2014-15

Friday, June 26th, 2015

HMRC have started the process of sending formal statements to taxpayers who may have under or over paid Income Tax for 2014-15.

In a recent press release they said:

“We are sending P800s that show an overpayment of tax first, followed by a cheque around a fortnight later. You don’t need to do anything.

The whole process should be completed in October.

This automated process ensures those who have had a change in circumstances during the last tax year (2014-15) that was not captured in their tax code have paid no more or less than they should. Any discrepancy could be because the taxpayer changed jobs, had more than one job for a time, a change of company car or received investment income that was not reported during the year.

The vast majority of PAYE taxpayers will have paid the right amount of tax for the year and will not be contacted by HMRC.”

We advise taxpayers who receive a statement, and they are unsure if the figures are correct, to take professional advice – get the numbers checked.

Summer Budget 2015

Friday, June 26th, 2015

 On  Wednesday 8th July, George Osborne will present his first budget of the new parliament.

 He has indicated that there will be no hikes in the major taxes: Income Tax, National Insurance, VAT and Corporation Tax. We shall see…

 What he will be revealing is how he intends to reduce public expenditure in order to meet his commitments to reduce our growing national debt.

 We will likely see further legislation to combat tax evasion and the re-introduction of the few issues that were dropped from the March 2015 Finance Bill in order to expedite matters before the general election.

Scottish Rate of Income Tax

Friday, June 26th, 2015

From April 2016, the Scottish Parliament has devolved powers to set the Scottish Rate of Income Tax (SRIT). Within the last few weeks it has been widely publicised that this may mean a higher rate of Income Tax in Scotland as compared to the Income Tax rates in other parts of the UK.

 HMRC have also issued a technical statement that clarifies who will be subject to SRIT.

 According to the statement issued, a Scottish taxpayer will be defined using a simple test:

 “For the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.”

Factor in the possibility that Income Tax rates in Scotland will be higher than the rest of the UK and tax payers living and working in the border areas may need to reconsider their living arrangements.

For example, a business person living and working in Edinburgh will pay the SRIT from April 2016. If they relocated their family home to say Berwick on Tweed, and continued to work in Edinburgh, they would pay the UK Income Tax and not be subject to SRIT.

Turning this example on its head; consider a person living in Scotland and working in England. They would be subject to SRIT even though their income was earned in England.

Does this mean the north of England will become the UK’s Monte Carlo as wealthy Scots seek to establish tax residence in England to avoid SRIT?

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