July, 2010

Tax Credits – Do I Qualify?

Tax credits can be a confusing and complicated issue. We receive a number of questions regarding this subject, so we thought it would be worth creating a set of articles around the subject. If you have any question, please include them in the comments below and we will do our best to answer them.

What are tax credits?
Tax credits are payments from the government. There are two types of tax credits, Child tax credits and working tax credits.

Am I entitled to tax credits?
The Inland Revenue states that 90% of all people with children and eligible for tax credits. Even if you do not have children you may be entitled to some form of tax credits.

How much is tax credits?
There are a number of factors that will determine the amount of tax credits that you will recieve, including:

  • How many children you are looking after and have living with you
  • How many hours a week you work
  • If you have to pay for child care
  • If any of your children are disabled

Can a tax credit claim be backdated?
Yes, usually it is possible to back date a claim for 3 months. Sometimes there can be delays with the Inland Revenue and therefore it is advised to make your application as quickly as possible

What about overpayment’s of Tax Credits?
Sometimes the Inland Revenue can pay you too much. They may try and claw back this money by adjusting your future tax credits or they may ask you to pay the tax overpayment back.  It is possible to dispute the overpayment demand from the Inland Revenue and this may be successful depending on a number of factors including:

  • If they gave you the correct advice based on the information you gave them
  • If they accurately recorded and used the information you gave them when you made a claim (or renewed your claim) to work out your tax credits and pay you the correct amount
  • If you told them about changes in your circumstances throughout the year so they have accurate and up to date information
  • If you told them about any mistakes on your award notice within one month of receiving it

Inland Revenue Jobs

The Inland Revenue employs over 88,000 people in over 290 locations within a number of different departments including:

  • Collecting Income, Corporation and Environmental taxes
  • Distributing Tax Credits
  • Collecting all  VAT and Customs Duty
  • Monitoring the UK’s borders and ports for illegal trade
  • Administering National Insurance and Student Loans
  • Enforcing  the Minimum Wage

HM Revenue and Customs is the biggest business in the UK with a revenue of £457 billion, and one of the only businesses guaranteed to make a profit!

Pay and Benefits

Jobs at the Inland Revenue are given a grade and each of these will have a different salary scale, a table of which can be seen below. Location is another factor that determines pay, with employees living in London earning more because of the higher cost of living:

Grade National Minimum* National Maximum* London Minimum* London Maximum*
Administrative Assistant 13,641 15,571 17,534 19,767
Assistant Officer 16,349 19,281 20,702 23,655
Officer 21,386 25,967 24,501 30,031
Higher Officer 27,015 32,299 30,237 36,738
Senior Officer 33,938 39,250 36,705 42,432
Training grade (graduate development programme) 26,130 39,550 28,267 42,764
Grade7 45,399 54,199 50,888 60,980
Grade 6 55,626 66,658 61,317 73,474

If you work for the Inland Revenue let us know what it is like in the comments below.

Lost Tax Rebate Cheques

Each year millions goes unclaimed in overpaid taxes.

Often people are lucky enough to claim a tax rebate but end up losing the cheque they were sent from the Inland Revenue. If you do not have your tax rebate cheque you can not cash your refund. This article will let you know what you need to do if you loose your tax rebate cheque and also how long you have to ask for a replacement from the Inland Revneue.

How to Get a Replacement Tax Rebate Cheque

If you have been given a tax rebate cheque from the Inland Revenue and  have since lost it do not fear, it is possible to obtain a replacement. Also if you have a cheque that is passed its expiry date a replacement can also be obtained. Assuming your tax rebate is still valid you can contact your local tax office and ask them to send you a replacment. You can find your local tax office by using the Inland Revenue office locator or the address may still be with the letter that came with the cheque. Simply write to the tax office requesting that they send a replacement cheque to your current address.
Deadline for Claiming  a Tax Rebate

Make sure that you do not wait too long to claim your tax rebate as they can expire if too much time elapses. You can check to see what the deadline is for the specific tax year that you are claiming for by reading the following article: http://www.taxfix.co.uk/forum/articles/deadline-for-tax-rebates-and-self-assessment.html. If you have any questions about getting a replacement tax cheque, leave them in the comments below.

Claiming Expenses On Your Furnished Holiday Let

With holiday season rapidly approaching, it’s a good time to review the list of expenses that you may be entitled to for your furnished holiday let.

One of the biggest expenses almost needs no discussion. You’re well aware that Parliament upheld the tax break for you to claim relief on expenses such as mortgage interest.

The tax break allows owners of furnished holiday lets to offset against tax expenses such as mortgage interest, utility bills, council tax and running repairs.

However, there are certain conditions involved with taking this allowance:

• If your holiday home is located in the United Kingdom, you will be allowed to deduct certain expenses and tax allowances from your rental income.

• If you own more than one property, you can pool your expenses together to work out your taxable profit.

The government produced a list of qualifying rules for your income to be treated as Holiday Let Income.

• The Holiday home must be in the United Kingdom.

• It must be fully furnished.

• It must be available to be let as a holiday home for no less than 140 days a year.

• It must be let as a Holiday Home for at least 70 days in one year

• It must be let on a short term basis of no more than 31 days.

• It must be let as a Holiday home for at least 7 months of the year.

If you meet all of the above, you will be able to let the holiday home for whatever period you like in the remaining 5 months. If however a let is in excess of 31 days in this final 5 month period, then it will not qualify as a holiday let.

However, there are many other expenses that qualify for tax relief. And it’s absolutely critical that you understand what you are currently allowed to claim. Some of the most common expenses are listed below.

Accounting Fees – This includes amounts payable in respect of the preparation of your holiday home business accounts. It does not include amounts charged for preparing your tax return.

Advertising – This includes the cost of advertising your property on property websites, magazines etc. You may also claim for the cost of printing brochures and for the cost of postage.

Rent/Council Tax/Insurance – All of these items you can claim against tax. Some ground work on your part to make sure that the council tax rather than the rating structure better suit your needs..

Interest – Interest you have to pay against loans acquired to improve the property to making ready for letting together you any interest payable on loans to purchase furniture etc foe the property.

Heating & Lighting – You can claim for your gas, electricity and any fuel charges relating solely to your holiday let property. If the property adjoins your own, then you can only claim for the portion that is let.

General Repair – To be successful, you will have to keep the property in tip top condition, you are allowed to claim for the cost of general maintenance including painting & decorating.

Additional Services – You may be able to claim for any additional services that you provide at the premises such as a gardener or caretaker, you will need to speak to your accountant about this.

Outside – If you cottage has a garden, you can claim for the cost of its upkeep or for stocking it with plants etc in preparation for letting.

Crockery/Cutlery/Bed Linen – These are all items that you can expect to replace on a regular basis, they all have a limited life especially in a holiday home, you can claim for them against tax.

Phone Bills – If you have to use your own telephone to make calls with regard to the letting of your cottage.

Cleaning items – Any consumables purchased for use at the holiday home are claimable, items would include, soap, washing up liquid, dusters, dishcloths, toilet cleaner, bleach, toilet roils, light bulbs, bin liners etc.

Travelling Expenses – You may claim an amount based on your annual mileage to and from the property, providing of course it is in connection with the business. Your accountant will be able to advise you on this.

Remember, a good rule of thumb is that if the expense is solely for the use as a holiday let then you will be able to claim against tax. And always keep your receipts.

You may qualify for other expenses not listed here, let our professional advisers help. You can ask as many questions as you like.

Inland Revenue Tax Codes

Everyone that works in the UK is given a tax code. Your tax code determines how much tax your employer deducts from your pay and consequently how much pay you tax home.

Your tax code is dertmined by your allowances, deductions and benefits such as company cars. If you company does not know what tax code to put you on you may be placed on an emergency tax code and as a result overpay tax.

Your tax code is normally made up of some number and a letter. If you take the number within your tax code and multiple this by 10, you can calculate your tax free allowance. This is the amoutn that you can earn before paying any tax.

The Letter in your Tax Code

The letter in your tax code corresponds to how your allowance should be adjusted following any changes announced by the Inland Revenue or the chancellor. Below is a list of some of the common letter within tax codes and what they mean:

Letter in Tax Code Meaning
L For people entitled to the basic Personal Allowance – 647L for the 2010-11 tax year.
P For people aged 65 to 74 and eligible for the full Personal Allowance
Y For people aged 75 or over and eligible for the full Personal Allowance
T If the Inland Revenue need to review any other items in your tax code, for example the income-related reduction to the Personal Allowance.

Tax code ‘0T’ means your allowances have been used up or reduced to nil and your income is taxed at the relevant tax rates.

K This tax code is used when your total allowances are less than your total ‘deductions’.

Sometimes you may not be given a normal tax code, one that does not have a number. This could be because you have two jobs or your employer was not given a P45.

Tax Code Meaning
BR This tax code is used when all your income is taxed at the basic rate and you are not given any tax allowances. If you are on this tax code you can often end up overpaying tax if it is your only job.
D0 This tax code is used when all your income is taxed at the higher rate of tax – currently 40 per cent .
NT This tax code is given when no tax is to be taken from your income or pension

How Cab Drivers Can Understand the Taxi Capital Allowance

Many taxi drivers miss out on a capital tax allowance that can cause them to pay more tax than is necessary.

This article will attempt to clearly explain this important tax allowance so you can file a proper tax return.

First, it’s important to understand the definition of a capital tax allowance. A capital tax allowance applies to fixed assets a business may claim as a deduction from net profit to arrive at the net taxable profit.

In the case of a cab driver, a fixed asset would be a vehicle used as a taxi. They are entitled to a capital tax allowance that can be spread over the life of the asset rather than the item being expensed in full in the year the purchase was made.

The taxi capital allowance allows taxi drivers to write down a portion of the cost of the taxi.

I purchased a taxi in 2009-2010, what can I claim?

If a driver has purchased a vehicle in the financial year 2009-2010 to use as a taxi, they can claim a first year writing down tax allowance of 25% of the cost of the taxi. The allowance is restricted to 3,000 pounds for vehicles costing over 12,000 pounds.

I purchased a taxi prior to 2009, what can I claim?

On vehicles purchased in previous tax years, you can claim a 25% writing down allowance on the balance not yet claimed.

I bought or sold a taxi in 2009-2010, what can I claim?

The capital tax allowance is the difference between the written down value for tax purposes and the amount of sale proceeds.

What allowances can I claim on my non-vehicle assets?

There is a first-year allowance on non-vehicle assets of 50% for small businesses. This must be taken in the current tax year.

What are my allowances for taxis bought on Hire Purchase

To comply with the definition of a qualifying hire car the vehicle must be of a type that is not commonly used as a private vehicle and would also be unsuitable for use as a private vehicle. Hackney carriages, black cabs and limousines qualify as hire cars. This would increase the first-year allowance to 50%.

The allowance for subsequent years would remain at 25%.

Where do I list my capital allowances?

You can claim capital allowances on the original cost of the vehicle, interest and other charges count as business expenses and go in the self-assessment tax return box 3.61 “Other Finance Charges.”

As you can see, filling out your self-assessment tax return may be more involved than just recording your typical expenses. Why not ask a question? We have the answers you need.

Inland Revenue Form – P11D

A P11D is a tax form from the Inland Revenue which is used to report benefits and expenses from an employer to an employee that are not administered via the companies payroll system.

When do you need to complete a P11D

If you receive benefits, payments or expenses greater than the amounts below, you are required by law to provide this information to the Inland Revenue:

  • Every employee and/or director receiving benefits, payments or expenses greater than £8,500 a year or more
  • Each director receiving benefits, payments or expenses less than £8,500 a year unless they are: (1) a full time director of the company with no material interest in the company. (2) a director of a non profit or charity.

Your P11D must include any benefits, payments or expenses that was received by the company to the household of the employee. This includes your spouse, or civil partner, sons and daughters and their spouses or civil partners.

When don’t you need a P11D

If there are no expense payments, benefits or expenses, the employee shouldn’t complete a ‘nil’ P11D

Section of a P11D

There are currently 14 sections of a P11D. A cash equivalent needs to be calculated for each item, most times this is straightforward but sometimes there are more complicated calculations such as for company cars and vans, which we will detail in future articles. The 14 sections of the P11D are listed below:

A-    Assets Transferred

B-    Payments made on behalf of the employee

C-    Credit Cards and vouchers

D-     Living Accommodation

E-    Mileage Allowances

F-    Cars and car fuel

G-    Company Vans

H-    Beneficial Loans

I-      Medical Health

J-     Qualifying Relocation Payments

K-    Services Supplied

L-     Assets placed at employee’s disposal

M-   Other Items

N-    Expenses Payments

P60 Replacements

You will only be given a P60 if you were working for an employer on the last day of the tax year (April 5th). If you stopped working for an employer before the last day of the tax year, you should be given a P45 instead.

A P60 is a statement given to you by your employer which shows the amount of tax that you have paid during the tax year and the amount of income that you have earned. They may be other information on your P60 include your unique PAYE tax reference number, your tax code and your name and other personal details.

There are a number of reasons why you may need a P60, they include:

  • Claiming a tax rebate
  • Child support
  • Student loan
  • Proof of earnings
  • Tax credits

How to obtain a Replacement for a Lost P60

Often people loose or are not given a P60 and need to get a replacement. It is not actually possible to obtain an actual replacement of a P60, it is possible to obtain a document that can be used as a replacement though, this document is a statement of earnings.

To obtain a statement of earnings you need to write to the payroll department of the company that you would like the replacement P60 from. We can send you a template letter which you can customise, simply send us an Email using this: template.

The company is legally required, under the data protection act, to provide a statement of earnings for any time in the last 6 years. Let us know if you have any questions in the comments below.

Inland Revenue Forms

There are a number of different tax forms from the Inland Revenue. The one you need will depend on your circumstances. We have seperated the forms into different categories and listed their code numbers beside them:

Tax Return Forms
Tax Return – SA100
Tax Return Guide – SA150

Employment Tax Forms
Employment Pages – SA101
Notes on Employment – SA101 (notes)
Employment History – P91
Self Employment – SA103

Investments Tax Forms
Share Schemes – SA102
Land and Property -SA105
Trusts – SA107
Capital Gains – SA108

International Tax Forms
Foreign Pages – SA106
Non Resident Forms – SA109
Leaving the UK Form – P85
Entering the UK form – P86

Let us know if you have a question about the above forms in the comments section of the article below.

UTR Number Inland Revenue

If you need to complete a tax return you may need your UTR number. A UTR number is a Unique Tax Reference number provided by the Inland Revenue. This article provides some answers to some common questions on the subject:

What is a UTR Number?
A UTR is a 10 digit, unique number provided by the Inland Revenue so that you can complete your tax return.

What is a UTR Number used for?
A UTR number is used to complete your tax return and is often used for correspondence with the Inland Revenue.

Where can I find my UTR Number?
You can find your UTR number on your Tax Return, a Notice to complete a Tax Return or on your Statement of Account. It can often also be found on other documation from the Inland Revenue but it will not be found on a notice of coding.

How do I get a UTR Number?
If you have not been given a UTR number already, you can contact your local tax office who will allocate one for you. You can find your local tax office using the Inland Revenue’s tax office locator tool.