July 2022 | DSK Partners LLP

Pensions triple lock to be reinstated

Posted on July 7, 2022 by

The triple lock guarantee on pensions that was suspended for the current 2022-23 tax year is to be restored from April 2023. In September 2021, the government announced that its triple lock guarantee on pensions was to be abandoned for one year due to unprecedented fluctuations to earnings caused by the COVID-19 pandemic.

The triple lock guarantee was first introduced in 2010 and had remained in place until April 2022. The guarantee had seen the full yearly State Pension increase by over £2,050 in this period. The triple lock is the mechanism used to calculate increases to the state pension each year. Under the triple lock guarantees the basic state pension rises by whichever is the highest out of average earnings growth, inflation or 2.5%.

The confirmation that the government will reinstate the triple lock from April 2023 means that the state pension increase will be based on the reading of the consumer price index (CPI) for September 2022. Based on current forecasts this is likely to be significantly higher than the forecast inflation rate for 2023-24 and likely to be in the range of a 10% increase.

The change was announced in Parliament by the Chief Secretary to the Treasury and remains subject to the Secretary of State’s review. This decision will bring some cheer to many of those in receipt of the State Pension especially following the changes this tax year and the inflationary pressures affecting the real value of their pension.

Source: HM Government Tue, 05 Jul 2022 00:00:00 +0100

Tax if living abroad and selling UK home

Posted on July 7, 2022 by

One of the most often used and valuable of the Capital Gains Tax (CGT) exemptions arises on the sale of the family home. In general, there is no CGT to pay on a property that has been used as the main family residence. An investment property which has never been used will not qualify. This relief from CGT is commonly known as private residence relief or PRR.

The rules are different if you live abroad. A CGT charge on the sale of UK residential property by non-UK residents was introduced in April 2015. Only the amount of the overall gain relating to the period after 5 April 2015 is chargeable to tax. In certain circumstances PRR may apply where the property is the owner’s only or main residence.

A UK non-resident that sells UK residential property needs to deliver a non-resident CGT (NRCGT) return and pay any CGT within 60 days of selling a relevant property. The return must be made whether or not there is any NRCGT to be paid and even if there is a loss on the disposal, or where the taxpayer is due to report the disposal on their Self-Assessment tax return.

There are penalties for failing to file the NRCGT return within the deadline as well as for failing to pay any tax due on time.

Source: HM Revenue & Customs Tue, 05 Jul 2022 00:00:00 +0100

Standards for tax agents

Posted on July 7, 2022 by

HMRC last published guidance on the standard for agents in January 2018 (updating the first set of standards published in February 2016). The standard applies to all tax agents who transact with HMRC and to any professional who advises or acts on behalf of others in relation to their tax affairs. HMRC’s guidance sets out what agents can expect from HMRC and vice versa.

What to expect from HMRC

If a taxpayer wants an agent to deal with HMRC on their behalf, HMRC will deal with that agent courteously and professionally. HMRC want to provide agents with a service that is fair, accurate and based on mutual trust and respect. HMRC also want to make it as easy as possible for agents to get things right.

What HMRC expects from an agent

HMRC expects all agents who want to interact with HMRC to meet the HMRC standard which requires all tax agents to maintain high standards that promote tax compliance.

This includes that the agents demonstrate:

Integrity,
Professional competence and due care,
Professional behaviour,
They meet specific standards when advising on tax planning.

The largest accountancy and tax professional bodies share a standard known as ‘Professional Conduct in Relation to Taxation’ (PCRT). Where agents meet the PCRT standard, HMRC does not envisage that their standards will place further onerous requirements on agents.

Source: HM Revenue & Customs Tue, 05 Jul 2022 00:00:00 +0100

National Insurance for company directors

Posted on July 7, 2022 by

Directors are classed as employees and pay National Insurance on annual income from salary and bonuses that exceeds the Primary Threshold. The annual threshold is pro-rated this year following the increase to £12,570 from 6 July 2022 (£9,880 from 6 April 2022 – 5 July 2022).

Many director shareholders take a minimum salary and any balance of remuneration as dividends. This tends to reduce National Insurance Contributions (NICs), and in some case Income Tax. The planning strategy is to pay a salary at a level that qualifies the director for state benefits, including the State Pension, but does not involve payment of any NICs.

A director’s liability to NI is worked out based on their annual (or pro-rata annual) earnings. This differs from regular employees whose liability is calculated based on their actual pay period usually weekly or monthly. Payments on account of a director’s NICs can be made in a similar way as for employees, however, an annual adjustment must be made at the end of the tax year.

Directors, who are first appointed during a tax year, are only entitled to a pro rata annual earnings band which depends on the actual date appointed and the amount of time remaining in the tax year. Care needs to be taken in these circumstances not to incur an unexpected liability to pay NIC.

There are a number of considerations to consider when setting the most tax/NIC efficient salary.

Source: HM Revenue & Customs Tue, 05 Jul 2022 00:00:00 +0100

Tax credits renewal deadline reminder

Posted on July 7, 2022 by

31 July 2022 is the final day for families and individuals that receive tax credits to tell HMRC about any changes to their circumstances or income and to renew their tax credit. As in previous years, there is likely to be a huge last-minute rush and it may be difficult to contact HMRC by phone. Renewing a claim online (either on the HMRC APP or GOV.UK) is the preferred method. It is also possible to renew by post or phone. At the beginning of July, there were still 323,700 claims that had to be renewed.

Once the deadline has expired, anyone who has not yet renewed their tax credits should still ensure they do so as soon as possible as otherwise their payments may be stopped, and monies received since last April may have to be repaid. We would strongly advise any of our readers still to renew their tax credits to do so as a matter of urgency.

Over 2.1 million renewal packs were sent out by HMRC between late April and early June. A renewal is required if the pack has a red line across the first page and it says, 'reply now'. If the pack has a black line and says ‘check now’, recipients will need to check the details are correct. If the details are correct the tax credit awards will be renewed automatically.

Taxpayers need to notify HMRC where there have been changes to the living arrangements, childcare costs, number of hours worked and salary (increase or decrease). Details of previous year's income also need to be completed on the form to allow HMRC to check if the correct tax credits have been paid.

Source: HM Revenue & Customs Tue, 05 Jul 2022 00:00:00 +0100

Month: July 2022

Pensions triple lock to be reinstated

Tax if living abroad and selling UK home

Standards for tax agents

National Insurance for company directors

Tax credits renewal deadline reminder

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