Tax Deadline Planner 2018
How will you pay your tax bill?
The self-assessment payment for the tax year ending April 2017 is due by the 31st January 2018 along with the first payment on account for the year to 5 April 2018 if required. Helpfully, on the 13th January 2018, the option of paying your tax bill to HMRC using a personal credit card ends. It is also no longer possible to pay HMRC tax payments via the post office.
With regular changes like these being made, so that you cannot get caught out, Everfair Tax has compiled a summary to show the current alternative ways to pay.
To avoid any penalties or interest, you must ensure that you pay HMRC by the deadline and it is important to remember that the time you need to do this differs, depending on how you pay.
Payments will generally be received by HMRC on the same day or next working day if you use online or telephone banking, CHAPS, debit cards, or pay at your bank or building society.
However, you will need to pay at least three days in advance if you are paying by BACS or direct debit – providing you have set one up before. If you need to set up your direct debit for the first time, you will need to pay at least five days in advance to ensure that the payment is set up in time.
When paying by cheque you will need to allow up to three working days for a cheque to clear from when it is received by HMRC so make sure you allow enough time for the post to be received and the cheque to clear!
Payment by debit card online Despite the option to pay be credit card being ceased, you are still able to pay online with a debit card.
You will need your 10-digit Unique Taxpayer Reference (UTR) followed by the letter ‘K’ as your payment reference, and this may be found either in your HMRC online account or on your paying in slip if you still receive paper statements.
Your payment will be counted from the date you make it rather than the date it reaches the HMRC account and this includes weekends and bank holidays. However you are limited to one use of a debit card to pay for the same tax.
You may use multiple payments for different taxes such as Corporation Tax or employers PAYE, but if you cannot pay your self-assessment tax in one go, you will need to find an alternative payment method. Payment over the phone
You are able to pay your self-assessment Tax using the HMRC Self-Assessment Payment Line. To do this you will be asked for your 11-character payment reference and this is your 10-digit Unique Taxpayer Reference (UTR) followed by the letter ‘K’. This method is also referred to as a payment by Faster Payments, which includes online or telephone banking. Payment will usually reach the HMRC on the same or next day, including weekends and bank holidays, but payments from overseas may take longer.
The phone number for the HMRC Self-Assessment Payment Line is 0300 200 3402.
Payment via Bank transfer online, CHAPS or Bacs Payments may be made from your bank account using Faster Payments, CHAPS or Bacs and the account details to use are as follows:
Cheque in the post Cheques sent by post should be addressed to the address below and you do not need to have a street name, city name or PO Box with this address. HMRC Direct BX5 5BD
Should you have a reply envelope showing a different address (HMRC, Bradford BD98 1YY), this may still be used to post your cheque.
Cheques should be made payable to ‘HM Revenue and Customs only’ followed by your Unique Taxpayer Reference number. Include the paying-in slip from HMRC if you have one and if you no longer get paper statements you may print a self-assessment payment slip via the HMRC website. However, this printed paying in slip may not be used at a bank. You should not fold the paying-in slip or cheque, or fasten them together.
Payment by Direct Debit You can set up a single direct debit to pay your account in full for the 31st January. This may be set up via your HMRC online account and a new single payment will need to be set up each time you want to pay by direct debit.
A separate direct debit will need to be set up before the 31st July if you need to make an on account payment.
You will need to use your 11-character payment reference, and you should allow 5 working days to process the Direct Debit the first time you set one up. For subsequent direct debits it should only take 3 working days, providing you use the same bank details. When paying by direct debit, the payment must reach HMRC on the last working day before the deadline, should it fall on a weekend or bank holiday.
Payment via a budget plan It is possible to set up a regular budget payment plan to pay your tax bill in advance of it being due. This may therefore perhaps not be so helpful for any amount due on 31 January but should be kept in mind for future payments.
With this you are able to choose how much to pay each week or month and may stop paying for up to 6 months if required. However to do this you must be up to date with your previous Self-Assessment payments. To set this up you will use your HMRC online account. Go the direct debit section and chose the budget payment option when you fill in the direct debit form.
Should your payments not be sufficient to pay your tax bill in full, you will need to pay the difference by the payment deadline. Payment via your bank or building society You are only able to use this method of payment if you still receive paper statements from HMRC and have the paying-in slip they sent you. You may pay by either cash or cheque, and all cheques should be made out to ‘HM Revenue and Customs only’ followed by your reference number.
Things to keep in mind when considering expatriation…
More and more people are renouncing their American Citizenship. Figures show the growth between 2015 and 2016 as a 26 percent increase, with 5,411 giving up their citizenship or terminating their long-term residency status.
With the United States being one of the only countries that collects taxes from citizens living abroad, many are tempted to terminate their citizenship in order to get around the administrative burden and cost of the annual filing and in some cases even additional taxes becoming due.
The process to relinquish citizenship is relatively simple, although the cost of the Embassy appointment required now stands at $2,350.
It is important however, to ensure you avoid any unintended tax consequences arising and therefore advice should always be sought from a Tax Professional as early in the process as possible so that you are aware of all the options and pitfalls.
A key consideration for example is that an “exit tax” will apply on expatriation if you have not complied with your tax obligations for the five years prior to expatriation. It is therefore key to ensure that you are up to date with all your filings before taking this step.
The exit tax also would come into play if your income tax for the previous five years is $160,000 or more or if your net worth is in excess of $2 million. Your net worth value calculations for this purpose will include and take into account everything; your property, investment accounts, assets such as artwork and any assets held overseas. Working in a similar way to capital gains tax, the Exit Tax will use the sale values to assess the amount of taxes to be paid. The There is however an exemption from this tax, even if you meet the asset or income tax thresholds, for those US citizens who are also nationals of another country from birth and who meet other relevant criteria.
There will be many reasons for renouncing citizenship and not all will have a financial slant. Some may have been born in the U.S. but have lived most of their lives in another country, or for Meghan Markle, marriage to Prince Harry and her desire to become a British citizen is her trigger. Whatever it may be, we always recommend that professional advice is obtained to ensure that you are properly informed before commencing the process.
Savings and Dividend Income : Important Tax Changes To Be Aware Of
There have been key changes to the UK tax system in the past year and those who have never had to report their income to HMRC may now need to do so. This document sets out how who is most likely to be affected by these changes.
Taxation of Bank Interest
Prior to 6 April 2016, if you held an interest bearing account with a bank or building society you would only receive 80% of the interest payments – with the other 20% comprising basic rate savings tax which was paid to HMRC directly by the bank. This system ensured that basic rate taxpayers did not have to report their savings income to HMRC on an annual tax return.
Since 6 April 2016, banks are no longer required to deduct tax on interest payments, and account holders will now receive 100% of the interest due to them. HMRC also introduced a new annual “tax-free savings allowance” of £1,000 with effect from 6 April 2016 to ensure that the majority of basic rate taxpayers can continue to receive bank interest without having to complete a tax return.
Despite the new savings allowance, there will still be some basic rate taxpayers who will have a tax liability for the 2016/17 tax year. As a general rule anyone with more than £16,000 of non-savings income (e.g salary or pensions) and more than £1,000 of annual bank interest will need to pay tax to HMRC.
There are three options for ensuring the tax payment is dealt with correctly:
• Call HMRC and ask to have the tax paid from salary/pensions income through the PAYE system
• Register with HMRC to file a standard self-assessment tax return
• Settle the tax via the new “simple assessment” whereby HMRC issue a tax demand for the outstanding tax, with the amount due by the following January.
It is anticipated that HMRC will be writing to potentially affected taxpayers from August 2017, which will include those who receive interest in excess of the savings allowance. Those who do not receive a letter, but believe they have tax to pay, should take action before 5 October 2017, which is the deadline for notifying HMRC of a tax liability for the 2016/17 tax year. Those who do not notify by 5 October 2017 may be liable for a late notification penalty.
Simple assessments are due to be rolled out by HMRC this year, with further guidance anticipated by the end of September 2017.
Higher rate tax payers, those with total annual income over £43,000, have a lower savings allowance of £500. Any higher rate taxpayers who do not currently complete tax returns should contact HMRC if their annual saving income is in excess of £500.
HMRC Information Powers
Financial institutions are obliged to provide HMRC with information about interest received by UK resident individuals. As HMRC now have access to this information they will be able to use this to pursue potential unpaid tax from individuals who are not already on their records. HMRC have the power to charge penalties for those who do not comply with their tax obligations on time, but are more lenient in cases where taxpayers disclose income voluntarily, i.e. without having been chased by HMRC first. With that in mind, it is important to ensure any undeclared tax is disclosed to HMRC before you receive a letter from them.
Taxation of Dividends
The taxation of dividend income has changed significantly with effect from 6 April 2016. Prior to this date, dividends were paid with a notional 10% “tax credit”, which had to be added to the dividend before calculating the tax. The same 10% credit would then be deducted from the tax due. This credit has now been abolished and tax is payable at a flat rate, based on the actual dividend payments received. As well has abolishing the tax credit, HMRC has introduced a £5,000 tax-free dividend allowance which means no tax is payable on the first £5,000 of dividends received in a year.
Finally, the tax rates payable on dividends have changed, as set out in the table below
Under the previous regime, if you received dividends and were a basic rate taxpayer, you would have no tax to pay on those dividends.
With the new regime, a basic rate taxpayer could see their tax liability increase dramatically.
Consider the following example: Mr Wright receives £11,000 of pension’s income and £28,000 of dividends from an investment portfolio.
• In the 2015/16 tax year, Mr Wright would have had no tax liability on this income.
• In the 2016/17 tax year, Mr Wright would have to pay £1,725 of tax on this income.
There are winners and losers under this new dividend taxation regime, with the winners being those whose annual dividend income is under £5,000. Those with dividend income over £5,000 may have to register with HMRC to complete a tax return, whereas previously they may not have had to do so.
If you think you may be affected by the above rule changes, please get in touch with us here at Everfair Tax. Our tax advisors have many years of experience in getting clients up to date with HMRC and ensuring the correct amount of tax is paid. We can also advise on tax-efficient planning strategies to ensure you and your family are not paying too much tax. If you would like any further advice, please feel free to give us a call on 01932 428522.
Finance Bill 2017
On the 20th March 2017, the chancellor announced that the 2017 Finance Bill (which was originally due to be one of the largest parliamentary bills in history) was to have over half of its clauses removed prior to being rushed through parliament in advance of the general election.
Many of the clauses removed involve key tax policy changes including:
• The overhaul of the non-dom tax rules
• Making tax digital
• The reduction of the tax-free dividend allowance from £5k to £2k
A full list of the provisions removed from the bill can be found here: Government Drop Majority of Finance Bill
The move creates an unfortunate period of uncertainly as it was anticipated that the complex and wide-ranging non-dom changes were going to take effect from 6 April 2017.
Without legislation, and with the prospect of a new government in place after the June election, the future of the proposed changes is far from clear.
Many non-doms have already taken steps to re-structure their affairs on the assumption that the new rules would apply from 6 April 2017, and many more will have made similar plans to take action after this date.
Opinion within the industry is divided as to whether the next finance bill would back-date the commencement of the non-dom rules to 6 April 2017, or delay until 6 April 2018 once the provisions have gone through parliament.
As the government is now in purdah until after the election, there is no prospect of any further guidance being issued until after the election.
The sensible approach for non-doms affected by the rule changes would be to put relevant investment or restructuring plans on hold until there is some clarity from the post-election government as to the confirmed commencement date of the clauses that were removed from the Finance Bill.
Here at Everfair Tax, we specialise in advising non-UK domiciled and internationally mobile individuals. If you are affected by the non-dom rule changes, we can advise on the best way forward. Give us a call on: 01932 428536 or e-mail email@example.com
Short Term Business Visitors STBV
HMRC’s approach to Short Term Business Visitors has changed
• Does your organisation have internationally mobile employees?
• Do these employees visit the UK to work?
• Did you know that if you are not adhering to the UK’s new withholding and reporting obligations for short term business visitors, you could be exposed to penalties and charges imposed by HMRC?
• Are you aware of the issues and potential risks involved?
• UK resident employers have a Pay As You Earn (PAYE) tax obligation for any short term business visitors, including employees of an overseas subsidiary, parent or other group company or organisation who work temporarily in the UK.
• Employers with short term business visitors have a choice; operate PAYE tax withholding on any such visitors, or enter into a short term business visitor agreement with HMRC.
• A short term business visitor agreement grants the employer a dispensation not to operate PAYE for visitors who qualify for exemption from UK tax under a double tax treaty.
• As part of the short term business visitor agreement, the employer agrees to track individuals visiting the UK and make an annual declaration to HMRC by 31 May following the end of the UK tax year.
• Treaty exemption under a double tax treaty will no longer be accepted by HMRC as a reasonable defence by employers for the non-operation of PAYE for short term business visitors.
Who are Short Term Business Visitors?
• Short term assignees
• Business travellers
• Project workers
• Commuters If your organisation has visitors to the UK who fall under any of the above categories, even if the time spent working in the UK is as little as 1 day, the issue of short term business visitors is relevant and advice should be sought.
What are the risks?
• HMRC have a dedicated team in place to deal with short term business visitors and are scrutinising organisations with international workforces.
• If your organisation has short term business visitors and you do not have a short term business visitor agreement in place, HMRC expect you to track these visitors and withhold PAYE accordingly. Where PAYE is not operated appropriately, the company are liable for PAYE, and potential interest and penalties.
• Failure to adhere to the new rules, or lack of knowledge regarding the withholding and reporting obligations, could result in HMRC enquiring into earlier years.
How can Everfair Tax help?
• We can help you understand the issues in more detail and advise if short term business visitors are relevant to your business. We will then recommend any relevant action to consider and act upon.
• We can analyse any risks and advise on the implementation and effectiveness of your tracking systems and processes.
• We can help you determine the appropriateness of a short term business visitor agreement, or discuss and help you implement an alternative declaration and PAYE payment process.
• We can assist you with the implementation of a short term business visitor agreement and liaise with HMRC on your behalf to obtain this.
• We can prepare year end reports and make any relevant declarations to HMRC on your behalf.
Please contact Gillian Everall or Richard Wilcox on 01932 428522 if you would like further information on your options
The above is a general overview of short term business visitors, the interaction with UK PAYE legislation and double tax treaties and the potential action by HMRC.
It is a complex area and there may be specific circumstances not covered above which could result in different treatment being applicable. If you have not yet addressed the issue of short term business visitors you should do so now and Everfair Tax will be pleased to help navigate you through the process.
Year End Planning Considerations
It is always worth taking a moment to consider whether there is any action you should take before the end of the current tax year and take advice if required.
Tapered Annual Allowance for Individuals with Income in Excess of £150,000 and Reduction of Lifetime Allowance
As part of the Summer Budget 2015, the Government announced the introduction of a tapered annual allowance for pension contributions, which took effect from 6 April 2016. This will impact individuals with income in excess of £150,000 before any pension contributions, including employer contributions. They will have their annual allowance reduced by £1 for every £2 of income, in excess of £150,000, to leave a minimum allowance of £10,000.
The alignment of pension input periods with the UK tax year may impact the annual allowance available for 2015/16 and individuals may wish to take advice to ensure that this is fully utilised.
From April 2016, the lifetime allowance will also reduce to £1 million. If your pension savings are at or close to this level and you have not already done so, you may wish to consider whether it would be beneficial to make an election for individual, or fixed protection, in respect of your pension funds.
Changes in the Taxation of Dividend Income As it stands, UK dividends are paid net of a 10% tax credit which can be set against the UK tax liability. From 6 April 2016, this will no longer be available. Instead the first £5,000 of dividend income will be taxed at 0%.
The rates of tax on dividend income will also change. Individuals who receive UK dividends may wish to ensure that they are fully utilising their ISA allowance each year.
Those who receive significant dividends from their company may wish to review whether this will remain the preferred way in which to draw funds.
Employers who offer share awards as part of a remuneration package may wish to ensure that affected employees have received advice and understand the implications of these changes.
Buy to Let Changes for Landlords At present rental profits are calculated net of a deduction for allowable expenditure, including mortgage interest with taxpayers receiving relief at their marginal rates.
Going forward, this is to be subject to a gradual reduction, restricting relief to 20% for all taxpayers by April 2020. Landlords of furnished properties have also been able to take a ‘wear and tear’ deduction in calculating taxable rental profit. However, from April 2016 landlords may only deduct the cost of replacement furnishings.
Higher or additional rate taxpayers should expect to see a gradual increase in the tax liability arising on rental profits. Potential buy to let investors will also face a 3% increase in Stamp Duty Land Tax on purchases of buy to let investment properties (or second homes) in excess of £40,000 from April 2016. Extension of Annual Tax on Enveloped Dwellings (‘ATED’) From 1 April 2016, a new band was introduced for the ATED charge, with properties valued between £500,000 and £1 million coming within the scope of the ATED charge for the first time. The annual charge for properties falling within this band will be £3,500 and a return for the period 1 April 2016 to 31 March 2017 will be due by 30 April 2016. HMRC may apply penalties for failure to file an ATED return and pay the ATED charge by the deadline, so it is important that valuations are obtained promptly to allow sufficient time to file the return, which includes reporting of the property’s value as at 1 April 2012 (or at acquisition if later).
Foreign Losses Individuals who have made a foreign loss election may have losses available to offset UK or foreign gains, potentially enabling sales proceeds to be remitted to the UK without any UK tax implications. Individuals may wish to review their available losses, particularly where they may be considering a disposal of assets standing at a gain, or where proceeds of a foreign disposal may be needed to fund UK living expenses.
Overseas Workday Relief and Qualifying Accounts Remittances from a qualifying account are subject to the special mixed fund rules, meaning that transactions can be aggregated on an annual basis, with remittances treated as made from current year income in priority to prior year income. As a result, taxed UK employment income for prior years may become ‘trapped’ by current year income. Individuals may wish to consider remitting UK taxed income to ensure that this is available for use in the UK, or opening a new qualifying account to receive current year employment income.
If opening a new account, there are a number of criteria to ensure the account is a ‘qualifying account’ benefitting from the special mixed fund rules. If remitting the UK taxed portion of your employment income, it would be advisable to review the balance to ensure that there is no inadvertent remittance of income on which overseas workday relief has been claimed.
Income Tax Changes to Dividend Taxation
Dividend nil rate: Draft Clause 2
Abolition of Dividend Tax Credits: Draft Clause 3
Reform of the Wear and Tear Allowance
Relevant High Value Disposals Gains & Losses
Annual Tax on Enveloped Dwellings