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Budget News

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Personal Allowances
The latest budget has confirmed that the basic personal allowance will be increased from the current £8,105 to £9,440 for 2013/14. The Coalition Government plan to ultimately raise the allowance to £10,000 from 2014/15. The additional tax rate of 50% is reduced to 45% for 2013/14 for taxable income over £150,000.

National Insurance Employment Allowance
The Government will introduce an allowance of £2000 per year for all businesses and charities to be offset against their Class 1NIC liability from April 2014. The allowance will be claimed as part of the normal payroll process through RTI (Real Time Information)

New Scheme for tax free Childcare
New tax incentives for childcare have been announced. To be eligible, families will have to have all parents in work, with each earning less than £150,000 a year, and not already receiving support through Tax Credits or Universal Credit. The relief will be 20% of the childcare costs up to a total of £6,000 per child per year. The scheme will therefore be worth a maximum of £1,200 per child. The scheme will be phased in from autumn 2015. The current system of employer childcare will continue to be available for current members or they can switch to the new scheme.

Tax Year End Procedure 2013

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The end of another tax year is approaching. This is a busy time for payrollers and there are numerous payment and reporting deadlines to be met if penalties are to be avoided. It is vital that employers and their agents understand what needs to be done and when, and that they have all the required information to hand so that the process can be handled smoothly and efficiently. I advise all employers to start their year end preparations early March with the following checklist:

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New Starters and RTI

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With RTI imminent, the way employers report new starter information to HMRC will change. You will no longer submit P45s or P46s as all starter information will be reported on the first Full Payment Submission (FPS) for those employees. Previously, a new starter would provide their new employer with either a P45 or a P46 if they did not have a P45. With RTI, even if your new employee provides you with a P45, you still need to ask them certain P46 like questions to determine what tax code to use, depending on when they left their previous employer and their start date with you. HMRC have now provided an optional Starter Checklist form which can be downloaded from the HMRC website you may find helpful. This form, which RTI employers can use in lieu of form P46, is also intended to be used alongside a P45. This is a massive change to previous procedures and may take some time getting used to!

Click here for more information from the HMRC website on new starters for RTI.

Child Benefit Change for High Earners

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From 7th January 2013, any taxpayer earning more than £50,000 a year who receives Child Benefit, or whose partner receives Child Benefit, will be liable to incur a new income tax charge.

Anyone who has to pay the charge will need to pay an amount equivalent to some or all of the Child Benefit that they or their partner receive. For those with income between £50,000 and £60,000, the tax charge will be 1% of the Child Benefit for every £100 above the £50,000.   Those with income above £60,000 will be charged the full amount of the Child Benefit and might wish to stop receiving Child Benefit payments.  If customers choose to keep  receiving the Child Benefit payments they will need to declare the amount which they or their partner are entitled to receive by registering for Self Assessment and filling in a tax return each year.

HMRC will write to taxpayers who are likely to have income over £50,000 to explain the changes and tell them what they need to do if they are affected. Those who pay income tax via PAYE can choose to have the underpayment for 2012-13 and their ongoing in-year liability collected through their tax code in 2014-15.  However, they must still complete a Self Assessment return.  To find out more go to hmrc.gov.uk/childbenefitcharge

Payroll Giving

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Payroll Giving was launched back in 1987 but only 6% of UK employers currently offer the scheme to their employees, so there is still massive scope to give charities access to huge income they are missing out on. Many employees would like to donate to charity this way but more businesses need to offer payroll giving to meet this demand. It is a great way for employers to show they care about more than just their profits, it helps their staff feel they are doing something positive and it costs nothing to set up.

The attractiveness of payroll giving to charities is clear, as they receive all of the tax on every donation they receive. If an employee donates £10 a month to be deducted from their salary via the payroll, the charity actually receives £12.50, making their money go even further. The real benefit is that it forms a sustained, regular income stream that charities can rely on. Employees also get immediate tax relief and employers get a Quality Mark award for demonstrating commitment to the causes that their employees care about, so everybody wins.

Please consider payroll giving for your business, your employees and your local charities this Christmas.