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Approaching a General Election, taxes and state benefits are often in the media. But while speculating about the future, don’t forget to consider actions you might need to take now. 

Introduction

We are of course now in a new tax year, but we cannot quite yet put 2009/10 behind us. To help you think about the things you might need to consider, we give some pointers below. These cover tax, National Insurance contributions, tax credits and certain other benefits.   

Tax

2010/11 PAYE Codes – a hot topic

Many people will already have seen the press coverage and warnings of HMRC’s problems this year in ensuring correct Pay As You Earn (PAYE) codes are in place for 2010/11. Again, we urge you to check to make sure your codes are correct and take action if necessary. For help, read the recent article we posted in conjunction with TaxHelp for Older People: ‘Tax Code Errors – Check Yours Now’.

Tax returns for 2009/10 – have you received one?

If you are on HMRC’s list to receive a Self Assessment tax return for 2009/10, probably by now you should have received one (or a notice to submit one if you filed online last time). 

You can now start gathering together the information you need to complete the return. Some things to keep together/look out for are:

• Form P45 (Part 1A) from former employers if you have lost your job or changed jobs
• Form P60 for 2009/10 - your employer should give you this by 31 May 2010 (note that this is currently a paper form but for 2010/11 onwards – ie, from April 2011 – employers will have the option to provide employees with P60s electronically)  
• Form P9D or P11D showing benefits and expenses provided by your employer – this may hold up your return as your employer has until 6 July to give it to you. You might need to request one from your former employer if you have lost your job or changed jobs in the last tax year
• Bank and building society statements and/or certificates from the banks and building societies showing how much interest was added to your accounts in the last tax year
• Other information relating to taxable income might need to put on your tax return or to expenses and allowances you might be able to claim.

Remember that you have until 31 October 2010 to submit the tax return if you are filing on paper, or until 31 January 2011 if you are doing it online. But there could be benefits in getting it done sooner, for example you might be able to pay less if you are due to make a payment on account on 31 July 2010 and your tax bill is less than the previous year.

If you don’t receive a Self Assessment tax return or notice to complete one in April, but you think you might have tax to pay for 2009/10 (for example, if you started to have a new source of income in the year such as becoming self employed), you must tell HMRC.  The deadline for telling them is 5 October 2010.  Telephone the Self Assessment helpline on 0845 900 0444.

Failing to notify HMRC of a new liability to tax can trigger a penalty – links to further information on the new penalty regime can be found below. 

Tax on bank interest

You might have noticed in with your bank and building society statements recently an extra note telling you how much interest was paid on your account in the last tax year, whether or not you paid tax on it and, if so, how much.

Again, keep this information – you will need it to check if you are due a repayment and need make a claim.  Not all banks and building societies send out the tax summary, so you might need to ask for one – check you’ve got them for all your accounts. 

More information about tax on savings is given in our earlier ‘Tax Year End Tips’ article.

Carers – tax relief changes from 6 April

The December 2009 Pre-Budget Report included an announcement that from 6 April 2010, there would be a change in the tax treatment of shared lives carers (see Pre-Budget Report 2009 Note 22). We intend to post up an article in the next few weeks giving more details about the changes, although the actual rules have not yet been brought into law. This unfortunately leaves those potentially affected by the new rules uncertain of their tax position and we have to await the outcome of the election and publication of a second Finance Bill to see what happens next. 

Repaying a student loan?

If, for example, you left a higher education course last year and are now working, you might find you need to start repaying your student loan.  Indeed, you might have seen the first deductions coming through on your April payslip if you are an employee.  Have a look at our recent article for some ‘Student loan repayment pointers’.

Employers

Finish off 2009/10 Pay As You Earn

First of all, don’t forget that most employers will now have to file their year end returns online, including filing the Employers Annual Return (P35) along with P14s for individuals, the deadline for which is 19 May. Employees’ copies of the P14 (P60) must be given to them by 31 May. See our previous article for more information about online filing. 

The last date for employers to settle 2009/10 PAYE before interest is charged was 19 April. From now on, however, this has changed so that employers may suffer interest and penalties if PAYE is not paid on the correct dates throughout the year. 

Employers should also bear in mind that further changes are coming in next year. From April 2011, most will be required to file ‘in-year’ forms such as P45s and P46s online, subject to certain limited exceptions. 

National Insurance

Credits for carers

From 6 April 2010 a new Carers Credit is being introduced. This isn’t an additional payment, but instead it gives credits towards the National Insurance (NI) record of qualifying carers (reflecting that they generally cannot also work and pay NI contributions). This keeps up their entitlement to the state pension.

The credit has to be applied for.  To qualify, you have to provide care of at least 20 hours a week to a person (or persons) in receipt of one of the following benefits:

• Attendance Allowance
• Constant Attendance Allowance
• Disability Living Allowance (Care Component) at the highest or middle rate
• Certain other benefits relating to old industrial injuries, disablement pensions and compensation schemes. 

The application pack is available to download (link below), so make sure you apply if you meet the criteria. 

Tax credits

Renew your claim or review whether you are now eligible to claim

Tax credits awards are also based around the tax year, making 6 April a key date.

Tax credits are perhaps now more important than ever, in times when many people’s income is decreasing through reduced working hours or redundancy.

Our advice is to review your position. For instance, you might now be eligible to make a claim even if you were not eligible before. If your income is currently too high to qualify for tax credits, but you think it might reduce later in the year, you can consider making a ‘protective claim’ for tax credits now, so that they can be backdated later.

The renewals process

For those already claiming tax credits, the renewals process began on 6 April. You may already have received, or should shortly receive, papers from HMRC to confirm details of your income and circumstances for 2009/10 in order to finalise your award for that year and to make your claim for 2010/11. 

Two new changes in respect of renewals have recently been announced by HMRC. The first is that people who wish to withdraw from the system will be able to do so by only finalising 2009/10 and not claiming for 2010/11. The detail of how this will work is not yet known, but people should approach this option with caution. If there is no claim for 2010/11, any payments made between 6 April and the time when the renewal forms are returned to HMRC and processed by them will have to be paid back.

The second change is for couples who separate during the renewals period. Previous rules meant that both partners had to complete the process and complete their forms (or give the information over the telephone). If this did not happen, HMRC deemed that there had been no successful renewal and so any payments made between April and the date the couple separated became overpaid. The new rules mean that one member of the separating couple can now complete the process on behalf of them both.

Although the deadline for renewal is 31 July 2010, you should aim to contact HMRC as soon as possible and not leave it to nearer the deadline. This will ensure that your claim for 2010/11 is made as soon as possible and minimise the chance that you will be paid too much tax credits, or if you are due more tax credits, you will get the money sooner. Use the link below for more information about renewing your claim.

As announced in last year’s Budget, Child Tax Credit claimants will receive an extra increase to the child element from April 2010 of £20 above indexation.

Welfare benefits

Child Trust Fund

From April 2010, additional payments towards the Child Trust Fund accounts (not affecting the amount that can otherwise be saved into the accounts) are being made for children with disabilities.  Those in receipt of Disability Living Allowance (DLA) will qualify for an additional £100 per year to be paid to their Child Trust Fund accounts, increased to £200 per year for children with severe disabilities (that is, those for whom the highest rate care component of DLA is paid). 

Useful links

HMRC’s website provides frequently asked questions and a Factsheet on the new penalty regime from 6 April 2010 for failure to notify them of a new liability to tax.  

Pre-Budget Report Note 22 – Income Tax Treatment of Shared Lives Carers
 
Carer’s credit application pack 

LITRG guidance on tax credits claims 

LITRG guidance – tax credits ‘Doing the sums’ (including details of ‘protective claims’)

LITRG guidance on renewing tax credits claims 

More information about the Child Trust Fund