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Update for April 2017

April 28th, 2017

 

Tax Year 2016-17

The 5th April 2016 was the end date for the tax year 2016-17. Accordingly the timeline for the preparation & submission of Income Tax Returns has now begun & runs all the way to & including the 31st January 2018.

Income Tax Returns must be prepared by all those who are self-employed or have sources of income other than just income which is subject to PAYE (Pay as you Earn). These sources include Pension Income, Rental Income, Profits of a Self-Employment trade or profession, Investment Income or even just Bank or Building Society Interest.

The benefits of getting your Income Tax Return prepared & submitted early on the year in good time are that you know how much Income Tax you will have to pay in advance & can plan to save it ahead of its pay by date which is also the 31st January 2018 & if you have paid too much tax for example under the Payments on Account scheme then you recover the excess as soon as the Return has been submitted to HMRC.

A P11d is a form summarising the expenses & benefits paid/allowed to employees by their employers in the tax year just ended on 5th April 2017. It is submitted each year by the employer to HMRC to allow a cross comparison to be made against the employees income & benefits for the year to ensure that income tax levies on the employee is correct. For example if the employee is allowed to use a Company car for private use then it’s use is a taxable benefit in the hands of the employee & the P11d informs HMRC of this allowance. Another benefit commonly used in small companies is the director’s loan whereby the employee who is often also a director obtains the temporary use of some of the Company’s money. If the Directors loan account is greater than £10,000 at the end of the year then a benefit arises & tax is levied on this loan until such time as it is repaid as it is effectively in interest free loan.

 

Payment on Account: this is a scheme whereby the estimated income tax due for a year (which will be based on the actual income tax paid in the previous year) is collected in two annual instalments. It only applies if the annual tax bill is greater than £1,000. The first instalment is due on the 31st Jan of a year which is three quarters of the way into the tax year in question the end of it being on the 6th April & the second instalment is due by 31st July after that 6th April. The aim is to even up the timings of the payment of income tax by those who are employed & pay it as they earn income under PAYE & those who are self-employed & earn profits or whose income is from other sources e.g. rental, investment etc. which has not been taxed at source. The next date for making a Payment on Account is 31st July 2017 & this is a payment of estimated income tax due for the tax year 2016-17 ended 5th April 2017.

 

 

 

 

 

 

DIARY DATES

Earliest

Latest

Income Tax Return 2016-17

6th Apr 2017

31st Jan 2018

P11d

6th Apr 2017

6th July 2017

2nd Payment on Account for 2016-17 due

6th April 2017

31st July 2017

 

 

 

 

 

 

 

 

 

 

 

 

Making Tax Digital

This applies to all those who are self-employed running a trade or profession with turnover greater than £85,000 on a rolling 12 month basis (which is also the VAT threshold) & whose year-end falls on or after 5th April 2018. If a one-off change is made to the year-end date, this delays the process for a year & this option is open to those who are affected by the making tax digital regime.

 

IR35 & Companies who deal with Public Sector Organisations (PSO)

With effect from 6th April 2017, it is up to the Public Sector Organisation, rather than the Contractor to decide whether or not the relationship falls within the scope of IR35. If the POS decides that it does, then it will deduct PAYE Income Tax & Class 1 National Insurance from the payment of the Contractors Sales Invoices. The Contractor cannot influence this decision.

 

Benefits in Kind

One way of rewarding employees for extra effort put in or as part of the motivational tool box is given them minor gifts. These gifts are free of tax as long as they are less than £50 per individual, the gifts are not given more than once a month, are not given regularly but rather occasionally & they are not in the form of Cash or Vouchers which can be exchanged for Cash. They could be vouchers which would be redeemable in a supermarket for example.

 

Marriage Allowance

For the tax year just ended, 2016-17 the Marriage Allowance has increased to £220.

This calculated as 10% maximum of the Personal Tax Free Allowance applicable to 2016-17 of £11,000, so £1,100 & amounts to 20% of this, which is £220. So far as we understand, if one has applied for the Marriage Allowance before the end of the first tax year for which it was available (i.e. 2015-16 starting from 6th April 2015) so that it was applied for before 6th April 2016, then it will be automatically included in the Income Tax Returns of subsequent tax years, but if it was not applied for until after the end of the tax year, then it has to be separately applied for in each subsequent tax year. Apply for it before the tax year runs out & it is then given each year thereafter.

 

The content of this article is for general information only. It should not be relied on and action which could affect your business or personal circumstances should not be taken without appropriate professional advice.