Welcome to the March 2012 Newsletter from Connolly Accountants Ltd

In the wake of last week's Budget, a leading think-tank has predicted that an additional 1.3 million people on 'relatively modest salaries' could be forced to pay tax at the higher rate of 40%.

Following analysis of the Chancellor's announcements, the Institute for Fiscal Studies suggested that the number of higher rate taxpayers could rise from 3.7 million in 2011, to 5 million by 2014.

Meanwhile, as the start date for pension auto-enrolment looms closer, the Government has confirmed that the earnings limits for contributions will rise in line with the tax and national insurance thresholds.

Under the new system, which will commence from this October, all employers will be required to enrol staff automatically into a qualifying pension scheme.

For the latest information following the 2012 Budget, visit our Budget Summary.


'Extra 1.3 million people to pay higher rate tax by 2014'

An extra 1.3 million people on 'relatively modest salaries' could be forced to pay tax at the higher rate of 40%, a leading think-tank has claimed.

Following analysis of the Chancellor's Budget, the Institute for Fiscal Studies (IFS) said it predicts that the number of higher rate taxpayers could rise from 3.7 million in 2011 to 5 million by 2014.

In his Budget on 21 March, the Chancellor George Osborne announced that the tax-free personal allowance will rise to £9,205 in April 2013.

The move is expected to benefit those on lower incomes, with experts suggesting that an additional 675,000 people will be taken out of paying income tax.

However, the IFS predicts that more middle income earners will be dragged into the higher rate tax threshold - the level at which people start paying 40% tax on their income - as this is being reduced from £42,475 to £41,450 (including the personal allowance).

'This is part of a long-term trend towards the encroachment of 40% income tax onto people earning above-average but relatively modest salaries,' said IFS director Paul Johnson.

'It would be useful to know if the Chancellor has a view as to what proportion of taxpayers should be paying at the higher rate,' he added.

If you would like to discuss how the Budget announcements may affect you, please contact us.


Government confirms thresholds for new pension auto-enrolment

As the start date for pension auto-enrolment approaches, the Government has confirmed that the earnings limits for contributions will rise in line with the thresholds for tax and national insurance.

Under the new auto-enrolment system, all employers will be required to enrol staff automatically into a qualifying pension scheme. Where an employer does not provide such a scheme, employees may be enrolled into the new National Employment Savings Trust (Nest).

Publishing its response to the consultation on the automatic enrolment earnings trigger and the qualifying earnings band, the Department for Work and Pensions revealed that minimum contributions will now be payable on earnings between £5,564 and £42,475.

When the auto-enrolment plans were originally announced, it was proposed that pension contributions would be payable on earnings between £5,035 and £33,500.

Earnings above this threshold will not be included in calculating an employee's pensionable pay for auto-enrolment contributions.

Under the revised guidance, eligible workers must be earning at least £8,105 a year to qualify for auto-enrolment. This is up from the original figure of £7,475.

Responding to the announcement, the Pensions Minister Steve Webb said: 'The overwhelming response to our consultation was the call to align the automatic enrolment trigger with existing payroll thresholds.

'This will help firms make a success of these reforms, as they will be able to better understand who is eligible to be enrolled.'

Auto-enrolment will commence in October 2012 and will be phased in on a staged basis, starting with larger employers.


ESSENTIAL TAX DATES AND DEADLINES

5 April: Last day of 2011/12 tax year.
Deadline for 2011/12 ISA investments.
Last day to make disposals using the 2011/12 CGT exemption.
Last day for contracting back into the State Second Pension for 2011/12.

14: Due date for income tax for the CT61 period to 31 March 2012.

19/20: Quarter 4 2011/12 PAYE remittance due.

20: Interest will begin to accrue on unpaid PAYE/NI for 2011/12.

30: Normal annual adjustment for VAT partial exemption calculations (monthly returns).

1 May: Start of daily penalties for 2011 online Tax Return not yet filed. Additional penalties may apply for further delay.

3: Submission date of P46 (Car) for quarter to 5 April.

For more information on key tax dates and deadlines, visit our 2012/13 Tax Calendar.


QUOTE OF THE MONTH

“No one likes to ask their customers to pay more. I certainly wouldn't do it, especially in these economic times, if it were not absolutely essential"

Moya Greene, Royal Mail Chief Executive, commenting on the announcement that the cost of stamps will rise significantly from 30 April.


WEBSITE OF THE MONTH

www.ukti.gov.uk

Website of UK Trade & Investment, offering support to UK-based businesses to help ensure their success in international markets.


ON OUR WEBSITE

View our guide to the 2012 Budget

For a useful guide to the key Budget announcements, visit our 2012 Budget summary.

2012/13 Tax Rates and Allowances

Our website also contains the latest up-to-date Tax Rates and Allowances for 2012/13.

Businesses reminded of new VAT filing regime
HM Revenue & Customs has issued a reminder to VAT-registered businesses, regarding forthcoming changes to the system for filing VAT returns.
Click here for the full story

Government regulation watchdog 'needs more bite'
The Federation of Small Businesses has urged the Government to give the Regulatory Policy Committee more powers to protect small businesses against excessive or inappropriate regulation.
Click here for the full story

Chancellor targets valuable properties
A new higher rate of stamp duty land tax is to be levied on properties sold for £2 million and over, the Chancellor confirmed in the Budget.
Click here for the full story

Business groups express mixed views on tribunal reforms
Business groups have expressed mixed reactions to plans to reform the tribunal system, following the end of a Government consultation.
Click here for the full story

Small businesses encouraged to trade abroad
Small and medium-sized businesses are being urged to consider potential new markets abroad, as part of a Government drive to boost the UK economy.
Click here for the full story