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As we near the end of the summer season, or is it the monsoon
season, we are including information in the newsletter this
month to highlight:
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Changes to PAYE tax codes 1 September 2008
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State Benefits that are tax free
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Two important consequences of the new Annual Investment
Allowance, and
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Postal and payment changes.
Our October newsletter will be published on 6 October 2008.
Changes to tax codes
For those who have
not received the HM Revenue & Customs (HMRC) employers letter
we have reproduced below changes to tax codes which need to
be made from 1 September 2008.
The changes were introduced to soften the effects on some lower
paid persons who were adversely affected by the scrapping of
the 10% starting rate band for income tax on 6 April 2008. As
well as changes to tax codes you should also have received new
tax tables or changes to your payroll software that accommodate
the lowering of the basic rate band for income tax purposes;
from £36,000 to £34,800.
Changes to Tax Codes:
L codes - Add 60 to the existing code. For
example 543L becomes 603L.
T codes - No change unless you receive P6
from tax office.
P, V or Y codes - No change unless you
receive P6 from tax office.
A or H codes - These codes are no longer in
use, seek advice from HMRC immediately if you are still using
codes with these suffixes.
State Benefits that are tax free
Please
ensure that you take account of the following notes when you
declare benefits on your tax return.
The State Retirement Pension
Your state pension is taxable but do not include either the
Winter Fuel Payment or the Christmas Bonus as both of these
latter payments are tax-free.
Incapacity Benefit (IB)
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Short term IB paid at the lower rates is not taxable for
the first 28 weeks, after 28 weeks it becomes taxable.
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Short term IB paid at the higher rates is taxable.
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Long term IB paid at the higher rates is taxable unless
benefit commenced before 13 April 1995.
The new Employment and Support Allowance
This new benefit is being introduced from October 2008. It
will replace the existing Incapacity Benefit and Income Support
for all new claimants.
Annual Investment Allowance personal considerations
From 6 April 2008 sole traders and partners can claim up to
£50,000 a year as a direct write off against their profits if
they invest in certain qualifying assets; plant and equipment,
vans and so on. Small and medium sized companies can also claim
(from 1 April 2008). This article alerts individuals claiming
the allowance of two other matters they should consider before
making a claim.
First the good news!
Tax credits
If the claim you make reduces your income sufficiently you
may be eligible for tax credits.
The problem is that until the current tax year's earnings are
quantified, you will not know for certain that you are eligible
to claim - a pity as you can only back date claims for three
months!
A possible solution may be to make a protective tax credit
claim now. Your initial claim may show £nil but when adjusted
for your actual post AIA claim the actual claim achieved may
be much higher.
And now the bad news!
Mortgage applications
Many lenders now ask for taxable income rather than trading
profits when they consider if you are eligible for a loan. If
your trading profits of £50,000 are covered by an AIA claim
of £50,000, zero income is not going to qualify for much of
a loan. Hopefully lenders will take into account the reason
for the dip in your taxable income - but some may not!
HMRC further online incentive
From 1 October 2008 HMRC will no longer send taxpayers
a postage paid envelope to use when paying their tax or filing/paying
their VAT returns.
This apparently is a signal to us all to make returns and payments
online.
To ease the payment process HMRC are also about to make it
easier to pay our tax by allowing us to use our credit card.
Legislation has just been passed that will allow them to recover
the credit card charges. HMRC will charge you 0.91% for the
privilege.
Tax Diary September/October 2008
1 September 2008 - Due date for
corporation tax due for the year ended 30 November 2007.
19 September 2008 - PAYE and NIC deductions
due for month ended 5 September 2008. (If you pay your tax electronically
the due date is 22 September 2008)
19 September 2008 - Filing deadline for the
CIS300 monthly return for the month ended 5 September 2008.
19 September 2008 - CIS tax deducted for the
month ended 5 September 2008 is payable by today.
1 October 2008 - Due date for corporation
tax due for the year ended 31 December 2007.
19 October 2008 - PAYE and NIC deductions
due for month ended 5 October 2008. (If you pay your tax electronically
the due date is 22 October 2008)
19 October 2008 - Filing deadline for the
CIS300 monthly return for the month ended 5 October 2008.
19 October 2008 - CIS tax deducted for the
month ended 5 October 2008 is payable by today.
DISCLAIMER - PLEASE NOTE: The ideas shared
with you in this email are intended to inform rather than advise.
Taxpayers circumstances do vary and if you feel that tax strategies
we have outlined may be beneficial it is important that you
contact us before implementation. If you do or do not take action
as a result of reading this newsletter, before receiving our
written endorsement, we will accept no responsibility for any
financial loss incurred.
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