Tax Questions and Answers
By Steve Brown
Could you tell me more about these tax-free childcare accounts that are replacing the current childcare voucher scheme please?
New tax-free childcare accounts were announced in 2014 to replace the employer-provided childcare voucher scheme. Introduction has been delayed but the new accounts should at last be introduced on a trial basis in early 2017.
- The new scheme will then be rolled out across the country based on the results of the trial. The rules are complex, but where both parents work and earn at least £115 per week, they will be able to put up to £8,000 a year into a special account which the Government will top up with 20p for every 80p contributed by the parents. This account can only be used to pay for childcare such as nursery fees.
It is anticipated that the new scheme will eventually replace the existing childcare voucher scheme which is only available to employees who work for organisations that offer such schemes. The new system will benefit the self-employed as well as those workers in organisations that currently do not provide childcare vouchers.
What are the current advisory fuel rates?
The advisory fuel rates apply when you either:
- reimburse employees for business travel in their company cars
- require employees to repay the cost of fuel for private travel
The rates take into account changes in fuel prices so can change regularly. The rates to use from 1st December 2016 are below. Where the rate before 1st December 2016 was different, the previous rate is shown in brackets:
Engine Size Diesel
1600cc or less 9p
1601 to 2000cc 11p
Over 2000cc 13p
Engine Size Petrol LPG
1400cc or less 11p 7p
1401cc to 2000cc 14p (13p)9p
Over 2000cc 21p (20p )13p
My employee has moved house. Do I need to inform HMRC, or does she?
It is, and always has been, an individual’s responsibility to notify HMRC of a change of address. If an employee informs you of a change of address, please encourage them to tell HMRC by updating their online Personal Tax Account. If they have not yet used their account they can register in a few minutes at www. gov.uk/personal-tax-account.
In some cases, the employee may not be able to do this and you as the employer can pass the information onto HMRC by completing the employee address boxes on your next Full Payment Submission (FPS).
HMRC will automatically update the employee record once
3 FPS submissions have been received with the updated address in the same format. If it is not in exactly the same format, the address will not be updated. If a change of address is accepted HMRC also update the Personal Tax Account for that employee.
An incorrectly amended address will result in government letters not being delivered. This may affect the payment of some benefits and could affect the tax taken through PAYE. Hence, it is always preferable if the employee updates.
I am employed but I have a business that I run with my brother. This year, we’re planning to take dividends of about £12,000 each. How do I pay tax on them?
In April 2016, the Dividend Tax Credit was abolished, and a new £5,000 tax-free allowance for dividend income introduced. The allowance does not reduce total income for tax purposes and only applies to dividend income.
The new rates of tax on dividend income above the allowance are 7.5% for basic rate customers 32.5% for higher rate customers 38.1% for additional rate customers.
How you pay tax on dividends depends on the amount of dividend income you received in a tax year.
If it was less than £5,000, you should not need to do anything or pay any tax.
If it was between £5,000 and £10,000, you need to tell HMRC. You can do this by contacting the helpline and asking HMRC to change your tax code, allowing the tax to be collected from your wages. Alternatively, you can enter the income in a tax return if you already complete one.
If the dividend is over £10,000, you will need to fill in a tax return. If you do not already complete one, you need to register by 5th October following the tax year you had the income. You will get a letter telling you what to do next after you have registered.
I have already filled my tax return but yesterday, I received a text from HMRC saying I needed to pay my tax. Is it genuine?
You’re right to be suspicious. There are a lot of scam emails and text messages out there, particularly claiming to be from HM Revenue & Customs (HMRC).
If you have any doubts about the authenticity of a communication, do not give out private information (such as bank details or passwords), reply to text messages, download attachments or click on any links in emails. Instead, forward suspicious
- text messages:to 60599 (text messages will be charged at your network rate)
- Send emails to HMRC’s phishing team email@example.com
You should also check HMRC’s guidance on recognising scams (http://bit.ly/1sURbcq) if you’re not sure.
Please note, HMRC will never use texts or emails to:
- Tell you about a tax rebate or penalty
- Ask you for personal or payment information
HMRC emails will never provide a link to a secure log-in page or a form asking for information. Instead you’ll be asked to log on to your online account to check for information.
However, you should be aware that HMRC has recently been sending out email and text reminders to taxpayers, advising them to pay their tax before 31st January 2017. The texts and emails do not provide any details though, they are simply a prompt.
If you have tax to pay, you can find out about the diffferent payment methods on HMRC’s website here: www.gov.uk/pay-self-assessment-tax-bill
I am a contractor on the Flat Rate Scheme.
I heard about the change announced in the Autumn Statement. Could you tell me what the definition of
a ‘limited cost trader’ is please?
Chancellor of the Exchequer, Philip Hammond, has announced the introduction of a new category called ‘limited-cost traders’ that will be subject to a rate of 16.5% under the Flat Rate Scheme from April 2017.
A ‘limited cost trader’ will be defined as a business whose VAT inclusive expenditure on goods is either:
- Less than 2% of their VAT inclusive turnover in a prescribed accounting period;
- Greater than 2% of their VAT inclusive turnover but less than £1,000 per annum if the prescribed accounting period
is one year (if it is not one year, the figure is the relevant proportion of £1,000)
Therefore, it may apply to many consultants, contractors and other service-based businesses with minor outgoings.
The rate is so aggressive that for those falling into the new category, it is likely to make use of the Flat Rate Scheme unfavourable and may even result in some businesses deregistering for VAT altogether if their turnover is below the VAT deregistration threshold.
Businesses that think the new category may apply to them should begin reviewing their affairs ahead of the rate being introduced in April 2017.
- For assistance with these, or any other tax or accounting matters, call Steve Brown at TaxAssist Accountants on 01424 211800 to arrange a free, no-obligation appointment to discuss your needs.
Advice shared in this article is intended to inform rather than advise. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility