MTD: quarterly reporting, MTD: software and costs, State pension top-ups

We generally don’t discuss tax proposals which are still at the consultation stage in this practical tax update, but we are making an exception this week to answer some key questions about the Making Tax Digital (MTD) proposals. We also have some good news about topping-up a state pension.

This is an
extract from our topical tax tips newsletter dated 13 October
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

State pension top-ups

Only individuals who have paid sufficient NIC for the requisite number of tax years can qualify for the maximum state pension. The number of tax years required depends on when the individual attained state pension age (SPA). Those that reach SPA on or after 6 April 2016 need to have paid NIC for 35 full years, but where the individual was contracted out for any part for their working life they may receive less state pension than they were expecting.
You can help your clients budget for their retirement by using the online state pension checker facility. Where NICs have been missed for certain tax years, the missing amounts can often be replaced using voluntary NIC payments, as detailed in the excellent guide from Royal London.

This top-up facility is particularly useful for individuals who have retired before they reach SPA or have missed contribution years by living overseas. Spouses and civil partners of members of the armed forces, who accompanied their partners when posted overseas, can apply for NI credits toward their state pension for tax years back to 1975/76.

The
full newsletter contained the remainder of this item plus links to related source material and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Expenses and benefits, Single-tier state pension, End of contracting-out

As we start a new tax year, we look at some of the changes that come into effect from the start of the 2016/17 tax year. We explore the new-look expenses and benefits regime and examine the single-tier pension and the implications of the end of contracting out. 

This is an
extract from our topical tax tips newsletter dated
7 April 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Single-tier state pension 
Individuals who reach state pension age on or after 6 April 2016 will receive the new single-tier state pension rather than the two-tier pension (comprising the basic state pension and the earnings-related second state pension) which is payable to people who reach state pension age before 6 April 2016. Those individuals who are of state pension age on 6 April 2016 will continue to receive their state pension under the two-tier system. They will not switch to the new single-tier state pension. 

The single-tier state pension is set at £155.65 per week for 2016/17 (slightly above the standard minimum guarantee, which is £155.60 per week). The basic state pension is £119.30 per week (but this may be topped up by the pension credits). 

To qualify for the full single-tier state pension, individuals need a minimum of 35 qualifying years. A reduced pension is payable where an individual has less than 35 qualifying years but at least ten. By contrast, only 30 qualifying years were needed for the basic state pension where state pension age was reached between 6 April 2010 and 5 April 2016. A person who contracted-out prior to 6 April 2016, may receive less than the full single-tier state pension, even if they have 35 qualifying years. 

It is possible to make up for missed years by paying voluntary Class 3 contributions. Also, individuals who reached state pension age before 6 April 2016 have until 5 April 2017 in which to pay a Class 3A contribution. Each Class 3A contribution increases the basic state pension by £1 per week and individuals can `buy’ up to £25 per week extra from Class 3A contributions. The amount of a Class 3A contribution depends on the individual’s age at the time that the contribution was made. 

Before deciding whether to pay voluntary contributions, individuals should get a pension forecast so that can assess whether or not such contributions are worthwhile.

This is an
extract from our topical tax tips newsletter dated 7 April
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
 

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>> 


Getting through to HMRC, Employee share schemes, Employer Bulletin

The start of last week saw a melt-down at the Government Gateway that allows tax returns to flow through to HMRC. In last week’s newsletter we offered some reassurance about penalties that may arise and suggestions of other routes to contact HMRC. We also had a warning about the fast approaching deadline for registering employee share schemes, and a heads-up on useful information hidden in the Employer Bulletin.

Employer Bulletin 
The June 2015 edition of the Employer Bulletin (issue 54) is just out and it’s well worth a read. This publication is now issued six times a year and it covers a wide range of tax and regulatory matters, not just payroll issues. 

For example this edition includes articles you may want to pass on to clients who will shortly reach state retirement age, who sell alcohol, or who are worried about pensions auto-enrolment.    

State pension 
People who reach state pension age on and after 6 April 2016 will receive the new flat rate state pension, but there is a lot of confusion about who will be entitled to what. A new You-Tube channel has been set up to answer questions about the state pension and how to prepare for retirement. It also includes videos about auto-enrolment.    

Individuals aged 55 or over can request a personalised state pension statement from the Pensions Service, which will give them an idea of their expected level of state pension. This service use to be open to anyone but it now seems to be restricted to those within 10 years of retirement age. 

Alcohol 
Clients who sell alcohol as a retailer or wholesaler need to prepare for a new alcohol wholesaler registration scheme which comes into effect from 1 October 2015. It’s going to be administered by HMRC so no doubt there will be some cross-checking with VAT and Excise duty returns. 

The scheme is designed to stamp out sales of counterfeit alcohol and where duty has not been paid. There will be civil penalties and criminal sanctions for non-compliance with the scheme. 

This is an
extract from our tax tips newsletter dated 25 June 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>