The calendar year end is not of obvious significance, given the UK tax year ends in April. But LITRG warns not to dismiss it altogether, and gives some important reminders.
Introduction
This article aims to give some tips and hints of tax and tax credits matters to consider whilst contemplating the Christmas leftovers, and is the final instalment in LITRG’s 2010 monthly series.
Recent developments
Contacting HMRC
HMRC consulted earlier this year about changing their telephone line opening hours across their full range of services. In responding to that consultation, we argued that instead of restricting opening times, HMRC should better promote existing opening hours. However, HMRC have now announced that:
- from 29 November, none of their lines will open on Sundays;
- the vast majority of their lines, including the Tax Credits helpline, will be open Monday to Friday 8am to 8pm and Saturday 8am to 4pm.
Tax
VAT
From various recent advertising promotions, many people will remember that the standard rate of VAT is increasing from 4 January 2011 – an increase of 2.5% to 20%. Whilst this does mean that the cost of living will increase, the primary exemptions, zero rating and reduced rates remain for certain goods important for those on low incomes (ie basic foodstuffs, children’s clothing and domestic fuel).
But this does mean it will be even more important for disabled people and those aged 60 or over to make sure they are getting the benefit of VAT reductions available to them for certain things. Further guidance can be found on the LITRG website so make sure to check if you qualify (see useful links below).
Are you a student working in the winter holidays?
If you are a student working only in holiday time and think you will earn less than your personal allowance over the whole tax year (£6,475 for 2010/11), you can ask your employer if you can complete a form P38(S) which allows you to be paid without tax being taken off your wages. Remember, though, that National Insurance Contributions may still be deducted depending on your weekly or monthly earnings.
If you think you might be able to use the P38(S) process, read our full guidance (see useful links below) on working in the holidays. Our student guidance also explains what to do if however you are likely to earn more than £6,475 in this tax year or you have worked during term time.
Self Assessment tax returns
Using your coding notice to collect your tax
If you are filing your 2009/10 self assessment (‘SA’) tax return online and want to have your SA liability collected through your coding notice (where it is £2,000 or less), you need to have submitted your tax return by 30 December. Otherwise you will need to pay any tax due in full by 31 January 2011.
The final countdown…
Don’t forget that the final deadline for submitting your 2009/10 tax return is 31 January 2011 if you file online. Our November article gives more information for those who file on paper but have already missed the 31 October deadline and provides guidance for those who missed it but might have a reasonable excuse for it being late.
Any final self assessment liability for 2009/10 is also due for payment on 31 January 2011, together with the first payment on account for 2010/11. Hopefully you have been budgeting for this as you go along, but if not, start thinking about it now.
If you are worried you will not be able to pay, contact HMRC as soon as possible to ask if you can have extra time to pay.
Employers
Prepare for the 2010/11 tax year end if you use HMRC’s CD-ROM
Employers using HMRC’s PAYE CD-ROM should now download a vital upgrade to make sure that their software will be compatible when new online tools become available next year.
Note also that HMRC soon intend to withdraw the CD-ROM, to be replaced by online tools apart from in exceptional cases – for example, where internet connections are slow. For those who think they will have a problem with downloading, their advice is as follows:
‘If you are sure that you will not be able to download the tools, you can pre-order a disc by calling HMRC's Employer Orderline on 08457 646 646. But please only do so if you really need a disc, as HMRC is very keen to cut down on its costs and to reduce waste - helping to protect the environment.’
National Insurance Contributions for the self-employed
From April 2011, changes are to be made to the way class 2 NICs are collected from the self-employed. HMRC note the changes on their website, saying that they will be sending out a series of mailshots in the coming weeks, so you should receive a letter if you are affected.
Tax credits
Did you provide an estimate of your 2009/10 income when completing your tax credit renewal forms?
If you provided an estimate of 2009/10 income when you renewed your tax credits then you need to give HMRC the actual figure by 31 January 2011. You might by now have received a letter from HMRC reminding you about this.
If final figures are not sent in by 31 January, HMRC will finalise your 2009/2010 claim using your earlier estimate. This may be wrong and could lead to an incorrect 2009/2010 award and 2010/2011 claim.
Changes to tax credit payment dates
As a result of HMRC making changes to the tax credit computer system to incorporate the announcements made in the Budget and Comprehensive Spending Review, claimants may find that their payment dates change unexpectedly.
Each time HMRC make changes to their computer system that impact on individual claims, the system re-calculates the tax credit award from the date of the system change. If you are in the middle of a payment cycle, for example you were paid two weeks ago and are due another payment in two weeks, the system will make a one off payment to you for the last two weeks and then re-calculate your payments for the remainder of the year. The remaining payments will be slightly lower (to take account of this one-off payment) and will also be on different dates.
One important point to note is that HMRC will not be sending out new award notices to show the new payments. If you are in receipt of any means-tested benefits, such as housing benefit or council tax benefit, you will need to contact HMRC to get information about your new payment schedule and pass this information to your local authority or the Department for Work and Pensions.
Benefits
Christmas bonus
A £10 Christmas bonus is paid at this time of year to state pensioners and recipients of certain other welfare benefits. Remember that this payment is tax-free, so if you have to fill in a tax return, don’t include it with taxable state benefits.
Winter fuel and cold weather payments
The winter fuel and cold weather payments are also tax-free, so again, make sure you don’t include them on your tax return.
Useful links
LITRG guidance on VAT reliefs for disabled people and those aged 60+
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