November, 2011

How Much Is Emergency Tax in 2011?

Are you on an emergency tax code?

If your employer doesn’t know enough about your income or tax details then you may be put onto an ‘emergency tax code’.  This ensures you pay some tax although it doesn’t take into account your specific tax reliefs and allowances.

But what is an emergency tax code?  When might you end up on an emergency tax code?  And how much is emergency tax in 2011?  Keep reading to find out.

What is an emergency tax code?

You will be put on an emergency tax code by employer if HMRC does not have enough information about your income to enable them to send your employer (and you) your correct tax code.

An emergency tax code ensures that you receive the basic Personal Allowance (and therefore some tax-free pay) but it doesn’t take into account any other tax allowances or tax reliefs you may be entitled to.

When might I be put on an emergency tax code?

You might be put on an emergency tax code if:

  • You were self employed and have now started a new job
  • You have started a new job but you don’t have your P45 from your previous employer
  • Your tax code has changed during the year (for example if you have stated to receive company benefits)
  • You have started your first job since the start of the tax year

How much is emergency tax 2011/2012?

The emergency tax code is set each year and changes on an annual basis as the Personal Allowance changes.  It is a number followed by the letter ‘L’.

The number represents the basic Personal Allowance divided by ten.  In the 2011/12 tax year, the basic Personal Allowance is £7,475 and so the emergency code for 2011-12 is therefore 747L.  This means that you can earn up to £7,475 in the current tax year before you start paying income tax.

Coincidentally, 747L is also the tax code for someone who is entitled to just the basic Personal Allowance in 2011/12.  If your tax code is 747L it doesn’t automatically mean you are on an emergency tax code.

Getting the right tax code

It is advisable for you to provide any information requested by your employer or HMRC as soon as possible so you can get onto the correct tax code as quickly as you can.  If you don’t you could end up paying too much or too little tax.

Once HMRC has details of your previous income and the tax you have paid for the tax year, they will send you and your employer your correct tax code. Your employer will deduct the correct tax in future and refund any overpaid tax.

If you have been on an emergency tax code you may well have paid too much tax.  If you think you’ve paid too much tax you should claim a refund by contacting HM Revenue and Customs. You’ll need to provide them with your P60 form.

How You Get A National Insurance Number

If you’re working in the UK or you need to claim benefits or tax credits then you’ll need a National Insurance (NI) number.

Most people receive a National Insurance number automatically.  However, there may be cases where you have to apply for a number.  Keep reading to find out more about your National Insurance number in addition to recent changes to the National Insurance card system.

What is your National Insurance number?

Your National Insurance number is unique to you.  You keep the same number all your life and it ensures that any tax and National Insurance contributions that you pay are correctly allocated to you.

Getting a National Insurance Number automatically

You will automatically be sent a National Insurance number just before your 16th birthday if you live in the UK and your parents/guardians are receiving Child Benefit for you.

Previously, you would have been sent a National Insurance card.  However, the Government have announced that cards will no longer be issued and you will receive your National Insurance number through the post.

How to apply for a National Insurance Number if you don’t have one

If you’re between 16 and 20 years old and haven’t received a National Insurance number, you should contact the National Insurance Registrations Helpline on 0845 915 7006 for advice.

If you don’t already have a National Insurance number you must apply for one if:

  • You want to claim benefits and/or tax credits
  • You are starting work or you are setting up your own business and you have the right to work in the UK

When you apply for a National Insurance number, Jobcentre Plus will arrange an ‘Evidence of identity’ interview for you or send you a postal application.  Your ‘Evidence of identity’ interview will normally be on a one to one basis and you will be asked about why you need a National Insurance number and for some details about your circumstances and background.  You will also have to prove your identity via a valid passport, national identity card, a birth certificate or a driving licence.

During the interview a National Insurance number application form will be completed and you will be asked to sign it.

Receiving your National Insurance number

If your application is agreed by Jobcentre Plus you will be sent confirmation of your National Insurance number by post.  As mentioned above, you will no longer receive a National Insurance card.  However, it’s important to keep the letter confirming your NI number as you may need to refer to this in the future.

If relevant, you should tell your employer your National Insurance number as soon as you know it.

What if you have lost your National Insurance number?

If you can’t find your letter or National Insurance card, you may be able to find your National Insurance number on other official paperwork such as your payslip, your P60 or your PAYE Coding Notice.  If you still can’t find it you should contact HM Revenue and Customs.

As from 2010, replacement National Insurance cards will no longer be issued.

Completing a Self Assessment Tax Return for 2011? What You Should Know

Do you have to submit your own Self Assessment Tax Return for 2011?

If you’re self assessing for the first time or if you’re newly self employed, completing your tax return may seem like a daunting task.   And, the deadline for sending your return to HM Revenue and Customs (HMRC) is getting ever nearer.

So, if you have to send in your self assessment tax return for 2011, keep reading for four vital things that you should know.

If you missed the 31st October 2011 deadline you now have to submit online

There are two ways to submit your Self Assessment tax return.  You can either complete a paper based form or submit your tax return online.

However, the deadline for paper based tax returns is 31st October following the end of the tax year.  So, the deadline for sending in a paper tax return for the 2011/12 tax year was 31st October 2011.

The deadline for submitting your Self Assessment Tax Return 2011 is 31st January 2012

If you have missed the deadline for sending in a paper tax return then you have to complete your tax return online.  You get extra time to submit your Self Assessment via the web and so you have until 31st January 2012 to submit your 2010/11 tax return using the internet.

In order to send your tax return online you will have to register for this service.  This is a two stage process where you register for online government services and then activate your account when you receive your Activation Code from the Government Gateway.

In order to register to send your Self Assessment tax return 2011 online, you will need your Unique Taxpayer Reference (UTR) number and your National Insurance number.

The penalties for missing the tax return deadline are significant

If you fail to submit your 2010/11 tax return before the deadline of 31st January 2012 then you will face a penalty from HMRC.

If you are even a day late in submitting your 2011 Self Assessment Tax Return then you will face a fixed penalty of £100.  If your tax return is up to three months late then you will pay a penalty of £10 for each day that it is late (up to a maximum of £900) in addition to the £100 fixed penalty.

And, if your tax return is even later then the penalties you will face will increase.

Your deadline for paying any tax owed in 2010/11 is 31st January 2012

As well as submitting your tax return by the deadline, you must also pay any tax that you owe by the 31st January following the end of the tax year.

So, any tax you owe as a result of your 2010/11 self assessment tax return must be paid by 31st January 2012.  This is the case whether you submitted a paper or online tax return.

You will have to pay any tax you owe for the previous tax year plus the first of two ‘payments on account’ which go towards your next tax bill.

What Should My 2011 Tax Code Be?

Do you know what your tax code is?

Your tax code generally changes every year and is used by your employer or pension provider to work out the amount of tax that they should deduct from your pay or pension.

The process for working out everyone’s individual tax code is the same and so our guide looks at how you can work out your tax code for 2011 and where you can find it.

Where you will find your tax code

Every year, you should receive a PAYE Coding Notice from HM Revenue and Customs (HMRC).  This document outlines your tax allowances and your deductions and explains how your tax code has been worked out.

Your PAYE Coding Notice also tells your employer or pension provider how much tax-free income you can earn in the current tax year.

You are likely to have received your current PAYE Coding Notice in spring 2011.

How your tax code is worked out

There are four steps involved in working out what your tax code for 2011 should be.

Firstly, your tax allowances are added up.  Your tax allowances are the amounts you can earn without paying tax such as your main Personal Allowance which, in the tax year 2011/12, is £7,475.  In addition, if you are eligible to claim other allowances such as Blind Person’s or Married Couple’s Allowance these will be included in your total tax allowances.

Then, any income that you haven’t already paid tax on is added up.  This might include company benefits, savings income or earnings from a second job.  These are called your ‘deductions’.

Your deductions are then taken away from your allowances.  The amount that is left is the amount of tax-free income you can earn in the current tax year.

In most cases, the amount of tax-free income you can earn is then divided by ten and added to a letter that fits your circumstances.

Worked example

Let’s say that you’re eligible for the full Personal Allowance (£7,475 in 2011/12) and you have no other allowances.  You have £500 of income that you have not paid tax on.

Your total tax allowances would be £7,475.  Your total deductions would be £500.

The amount of money you could earn before you paid any tax would therefore be £6,975 (£7,475 minus £500).  Your tax code would be 697L.