Welcome to the April 2012 Newsletter from Connolly Accountants Ltd

This month saw the start of the new 2012/13 tax year and the introduction of a plethora of changes affecting individuals, families and businesses. While Prime Minister David Cameron has defended the reforms, Labour said the measures amounted to a 'ruthless assault' on the finances of low and middle income families.

Meanwhile, the first tranche of employers has begun testing the new PAYE Real Time Information (RTI) system. RTI represents a radical change to the way in which employers report employee pay and deductions, with all businesses expected to use the new system from October 2013.


Tax and benefit changes come into effect

A raft of changes has come into force following the start of the new tax year, many of which are likely to have a significant impact on personal and family finances.

Perhaps most notably, 2012/13 heralds an increase in the personal allowance - the amount you can earn before you start paying income tax - taking the threshold to £8,105 for those aged under 65.

However, the advantage to higher rate payers is countered by a lowering of the higher rate threshold, to £34,370.

Meanwhile, the personal allowance for those aged 65 to 74 with income up to £24,000, has risen from £9,940 to £10,500.

Prime Minister David Cameron said the increase in the personal tax allowance would benefit around 24 million taxpayers.

6 April also signalled the introduction of a number of changes to the benefits system. Although the value of some benefits, such as jobseeker's allowance and income support, has risen by 5.2%, the Government has faced criticism over its decision to reform the rules on working tax credits.

Other than a few exceptions, the number of hours that couples with children have to work in order to be eligible for working tax credit, has climbed from 16 to 24 hours a week, with at least one person required to work for at least 16 hours a week.

According to the Labour party, such families will, on average, be worse off to the tune of £511 a year. It went on to assert that the recent host of tax and benefit reforms represented 'one of the most ruthless assaults on the finances of low and middle income families ever seen'.

Some of the other key changes which recently came into force are outlined below:

Personal

  • The annual ISA subscription limit has risen to £11,280, up to £5,640 of which can be invested in a cash-only ISA
  • The lifetime allowance on money that can be accrued in a pension fund and still receive tax relief, has been cut from £1.8 million to £1.5 million from April 2012

Business

  • The capital allowances annual investment allowance (AIA) is reduced from £100,000 to £25,000 from April 2012
  • The amount of expenditure on plant and machinery which qualifies for a 100% year one write-off (via the AIA), has been cut from £100,000 to just £25,000.

For more information and to discuss how the latest changes may affect you, please contact us.


Employers begin testing new Real Time Information system

The first tranche of employers has begun testing the new PAYE Real Time Information (RTI) system, HM Revenue & Customs (HMRC) has confirmed.

10 firms are currently participating in the pilot, with a further 310 volunteer employers and pension providers expected to join during May and June.

While the fundamentals of PAYE will remain the same (i.e. use of codes, employers deducting tax and national insurance), RTI will change how and when employers and pension providers report information to HMRC. It will require employers to provide information to HMRC for PAYE, national insurance and student loans at the point of pay.

Under the current PAYE system, employers tell HMRC what deductions they have made from employees' pay after the end of the tax year. However, under RTI employers will report tax and national insurance deductions when, or before, payments are made.

It is hoped the new system will ensure that the correct deductions are made from pay, and result in more employees paying the right amount of tax and national insurance in the tax year.

'RTI will ensure that the PAYE system meets the needs of the 21st century,' said David Gauke, the exchequer secretary to the Treasury. 'It will improve the service to taxpayers by making it easier to ensure that people pay the right tax after a change of job.'

He continued: 'RTI will remove administrative burdens of £300m a year from employers, mainly from the abolition of the end-of-year PAYE returns process - the biggest single contribution that any tax change could make'.

Subject to successful completion of the pilot, large businesses will be required to start using RTI from April 2013. All businesses will be expected to use the new system from October 2013.

More information can be found at: www.hmrc.gov.uk/rti/index.htm


ESSENTIAL TAX DATES AND DEADLINES

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

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

30 June
End of CT61 quarterly period.
Annual adjustment for VAT partial exemption calculations (March VAT year end).

6 July
Deadline for submission of Form 42 (transactions in shares and securities).
Deadline for submission of EMI40 (EMI Annual Return).
File Taxed Award Scheme Returns, file P11Ds, P11D(b)s  and P9Ds.
Issue copies of P11Ds or P9Ds to employees.

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

QUOTE OF THE MONTH

"The key principle is - more for charities and philanthropic giving - yes. Allowing people to drive their tax rate down to 10% when they are some of the richest people in the country - no."

Prime Minister David Cameron attempts to mollify growing concerns over the proposed cap on tax relief for charitable donations.


WEBSITE OF THE MONTH

www.bytestart.co.uk

Information and advice on a range of business-related topics.


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.

Loose monetary policy penalising pensioners and savers, say MPs
The Bank of England's quantitative easing policy is penalising pensioners and savers, a committee of MPs has claimed.
Click here for the full story

Full consultation for controversial charity tax relief changes
The Government will launch a consultation this summer on its controversial plans to cap tax relief on charitable donations.
Click here for the full story

'One in ten' multi-millionaires paying less than 20% tax rate
Nearly 10% of individuals who earn more than £10 million a year are paying income tax at less than the basic rate of 20%, HM Treasury has revealed.
Click here for the full story

Employers reminded of annual return deadline
Employers are being urged to file their annual return (P35 and P14s) by 19 May or risk incurring a penalty.
Click here for the full story

Tougher standards introduced for apprenticeships
New standards will come into force from August 2012, meaning that apprenticeships for all age groups will last for a minimum of 12 months.
Click here for the full story