New State Retirement Pension Rates

Details of the new State pension rates were announced by George Osborne in the recent Autumn statement.

From April 2016, the rates will be as follows:

  • £119.30 per week for existing pensioners (i.e. those who reach state pension age before 6 April 2016)
  • £155.65 per week for the new ‘single tier’ state pension for those who reach state pension age on or after 6th April 2016, and have the full 35 years of National Insurance contributions. The actual amount payable could be higher or lower, depending on your National Insurance record.

If you are aged 55 or over, you can apply for a forecast of the amount of State pension you are likely to receive here.

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Stamp Duty Increase for Buy-to-Let Landlords

Buy-to-let landlords received another shock in the Chancellor’s recent Autumn statement.

From 1st April 2016, HMRC are introducing a 3% Stamp Duty surcharge on the purchase of ‘additional’ residential properties. This will include both buy-to let properties and second homes, but will not apply to caravans, mobile homes or houseboats.

The surcharge will increase the Stamp Duty payable on a property costing £275,000 by £8,250 (from £3,750 to £12,000).

Christmas Parties and Gifts!

With Christmas fast approaching, a reminder of the tax implications of Christmas parties and gifts provided to staff.

A Christmas party for your employees is considered entertaining, but there is a tax exemption for employee entertaining that applies to ‘annual parties’, which are open to all staff.

The tax-free limit for this is £150 (inclusive of VAT) per guest, which must include any related transport or accommodation costs.  However, if the total exceeds £150 per head, the whole cost becomes taxable as a benefit in kind, not just the excess.

It is also important to remember that the £150 per head applies to both your employees, and their guests or partners.

With regards to Christmas gifts, any cash or vouchers paid to staff will be taxable, however HMRC won’t seek to tax ‘seasonal presents’, such as turkeys or chocolates, so long as the cost is reasonable.

Lower Emissions Company Cars

If you have the option of a company car, or are about to change your current company car, think about the CO2 emissions of any vehicle you are considering.

Choosing a car with lower emissions can save considerably on the amount of the taxable benefit in kind, and consequently decrease your tax liability.

The taxable benefit is calculated as a percentage of the list price of the car, and the higher the emissions, the higher the percentage applied.

Please see here for a full list of current and proposed rates.

State Pension Top-up

The state pension top-up opportunity opened on 12th October for people who want to boost their annual income by increasing their state pension.

The opportunity is available to anyone who already receives a state pension, or anyone who will become eligible to receive the state pension before 6th April 2016 (when the new flat rate pension commences).

Those taxpayers can pay a voluntary lump sum (Class 3A National Insurance) to receive up to £1,300 a year, for life, on top of their current state pension.

The actual amounts payable to receive additional pension depend on the pensioner’s age at the time of payment. Further information and calculators can be found on the HMRC website.

(Please note that the ability to inherit a spouse’s pension will disappear next April with the introduction of the flat rate pension. People who reach state retirement age on or after that date need to ensure they have sufficient complete NI contribution years in their own name to receive a pension – a minimum of 10 years, and a maximum of 35).

Beware of Phishing and Scams!

There have recently been a large number of emails supposedly from HMRC, advising individuals that they are due a tax refund.

Please be aware that HMRC will never send you an e-mail about a tax refund, so never give out private information (such as bank details or passwords), reply to text messages, download attachments or click on any links in emails if you’re not sure they’re genuine.

The different ways in which HMRC may contact you, together with their advice on how to tell if an email is fraudulent, are detailed on their website here.

VAT Toolkits

If you are responsible for preparing and/or submitting VAT returns on behalf of a business, HMRC have recently updated their VAT ‘toolkits’, which are designed to provide guidance on how to avoid making the common errors that they see in filed returns.

They aim to highlight the areas of potential risk, using real errors that have been identified by compliance staff in returns filed by real customers, and therefore include sections on areas such as motor expenses and business entertainment.

There are currently three toolkits available, as follows:

VAT Input Tax Toolkit

VAT Output Tax Toolkit

VAT Partial Exemption Toolkit

The New Personal Savings Allowance

The government is set to introduce a new personal savings allowance from 6th April 2016.

The allowance will enable basic rate taxpayers to receive up to £1,000 of savings income tax-free, whilst 40% taxpayers will be able to receive up to £500, resulting in a tax saving of up to £200 per year.

Because so many people will no longer pay tax on their savings, the automatic deduction of tax by banks and building societies will no longer be necessary.

Please note that the savings allowance will not be available to additional rate taxpayers, i.e. those with taxable income in excess of £150,000 per year.

Increase in Rent-a-Room Relief

If you rent out a room in your only or main home, you can currently claim up to £4,250 in rent-a-room relief.

This means that you can receive up to £4,250 per year tax free income from letting out furnished accommodation in your home.

However, from 6th April 2016, this relief is set to increase by over 75% to £7,500 per year, giving an opportunity for householders with spare rooms to generate additional tax free income.

See here for further information regarding the Rent a Room scheme.

Update to Income Certification

Since the rules for obtaining a mortgage or loan have been tightened up, it has become increasingly difficult to obtain sufficient evidence of earnings for the application process.

Previously, many lenders would request an original HMRC ‘SA302’ tax calculation as proof of earnings. However, as HMRC were getting deluged with requests for these forms, they have devised a new process to enable individual taxpayers and Agents to access the forms themselves.

If you submit your tax returns yourself using the HMRC online filing software, you can print the documents yourself – the instructions can be found here.

If your accountant submits your tax returns on your behalf, they can print the forms for you.