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The Low Incomes Tax Reform Group (LITRG) looks towards the 2009/10 tax year and provides some tips and pointers.

Introduction

With the 2009/10 tax year having begun on 6 April, now is the time to take stock of what you need to do to start off the new year on the right footing.

So make your resolution to sort out forms and papers – the earlier the better!

For somewhat obscure and historic reasons, the UK tax year ends on 5 April; so this is a key date in the calendar for tax, tax credits and some state benefits.  

The 2008/09 tax year ended on 5 April 2009 and the 2009/10 tax year started on 6 April 2009. So what do you need to do to make sure you get things right as we move into the new year? Read on for some tips and advice, which follow on from our March article. 

Tax

Student loan borrowers – are you due to start repayments?

Student loan borrowers who finished their course last year may have to start making repayments from 6 April. Borrowers who are employed and earning at least £15,000 a year should have repayments deducted from their wages. More information about repayments is given here.

HMRC have also published a leaflet for borrowers who are in Self Assessment (for example, those who are self-employed).   

Pensioners – check the tax on your state pension

Contrary to popular belief, the state pension is taxable! But confusion arises as tax is not deducted from it before it is paid to you; which means the tax either has to be collected by adjusting the tax taken off your other earnings or pensions under Pay As You Earn, or by completing a Self Assessment tax return. 

An important piece of paper is sent out to state pensioners by The Pension Service at this time of year – your notification of how much your weekly pension will be from April. You should keep this notification as you might need it later to help complete your 2009/10 Self Assessment tax return. But take care to note that the notification might also include some non-taxable benefits, such as attendance allowance, which should not be included on your tax return. 

This notification letter is also useful for you to check your Pay As You Earn coding notice for 2009/10, making sure that the state pension figure in the code is correct. The amount shown in the coding should be the weekly amount multiplied by 52 to give the total for the year.

Know your rights – a new system of tax appeals and HMRC reviews

From 1 April 2009, there is a new appeals system for tax.  At the same time, HMRC are introducing an ‘internal review’ system, which means you are entitled by law to ask for HMRC decisions to be reviewed by them provided that the decision carries a right to appeal to an independent tribunal. 

HMRC have produced a factsheet here which outlines the new system. 

Employers – finish off 2008/09 Pay As You Earn

The last date for employers to settle 2008/09 PAYE before interest is charged, is 19 April. Depending on the final outcome of consultation, this is likely to change in future years and employers may suffer interest and penalties if PAYE is not paid on the correct dates throughout the year. 

Employers also now need to be finishing off 2008/09 PAYE returns, 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.

From 2009/10, mandatory online filing will be introduced for all employers; so you will no longer be able to submit P35s and P14s on paper. Small employers (with fewer than 50 employees) will qualify for a tax-free incentive payment of £75 if they file online for 2008/09. HMRC provide a guide to online filing for PAYE here.

Something else that has changed for 2009/10 is the new A4-size form P45 which replaces the A5-size form and must be used for all employees leaving after 6 April 2009. Be sure to order new stock from HMRC.

Tax returns for 2008/09

If you are registered to complete Self Assessment tax returns, you should receive either a paper return or notice to complete a return (for example, file online) shortly after 6 April. 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 from former employers if you have lost your job or changed jobs
• Form P60 for 2008/09 - your employer should give you this by 31 May 2009
• 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 you 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 2009 to submit the tax return if you are filing on paper, or until 31 January 2010 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 2009 and your tax bill has reduced compared to 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 2008/09 (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 2009. Telephone the Self Assessment helpline on 0845 900 0444.

Are you due a repayment for 2008/09? Claim it now!

There are any number of reasons why you might pay too much tax then have to claim it back after the end of the year. If you are due to complete a Self Assessment tax return, you should get your repayment after you file your return. If you don’t fill in a tax return normally, you will need to make a separate claim in writing (see below). Here are just a few examples of cases where you might be able to claim a repayment:

• Having more than one job might mean you pay too much tax under PAYE – this is particularly common with students, for example.
• Those with savings who qualify for the 10% savings rate might have had 20% deducted at source and have to claim the lower rate.
• Pensioners who have cashed in a pension plan in full under the trivial commutations rule might have been taxed on it at too high a rate.
• Your PAYE code might not have given you all your allowances, or you might be able to claim additional expenses and tax reliefs which weren’t given to you automatically. 
• If you have suffered a loss of eyesight, you could have become entitled to the Blind Person’s Allowance which needs to be claimed.
• Those turning 65 or 75 in a tax year might need to claim entitlement to higher age allowances.

You might have received a repayment claim form R40 from HMRC already if you regularly claim tax back.  Further guidance on claiming a repayment can be found here.

Pensioners on a low income who need help with tax, including claiming a repayment, can contact TaxHelp for Older People on 0845 601 3321 or 01308 488066.

Students can look at this guidance from HMRC for help with repayments. 

Make sure your tax code is right for 2009/10

Our March article gave advice on checking your PAYE coding notice(s) for 2009/10. When you get your first payslip for the new tax year, it is also a good idea to check your employer or pension provider is using the code that has been issued. 

Some employees might also receive a form P810 from HMRC after the end of the tax year to check certain details. You should complete and return this as it can be used to check your tax for the previous year and also help get your code right for the year ahead. 

Tax credits

For tax credits, 5 April is also a key date, as tax credits awards are also based around the tax year. 

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.  See our article Feeling the Pinch? for more information on safeguarding your position in these turbulent times. 

For those already claiming tax credits, the renewals process now begins for 2009/10. Over the next month or two, you should receive papers from HMRC to confirm details of your income and circumstances for 2008/09 in order to finalise your award for that year and to adjust your 2009/10 award. 

Although the deadline for renewal is 31 July 2009, 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 2009/10 is revised 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 for more information about renewing a claim.

Welfare benefits

Changes in payment arrangements for some benefits

From 6 April, Job Centre Plus introduced changes to when certain benefits are paid. The benefits affected by the new changes are Income Support, Jobseekers' Allowance, Bereavement Allowance, Widows' Pension, Widowed Parents' Allowance, Widowed Mothers' Allowance, Incapacity Benefit, Severe Disablement Allowance and Maternity Allowance.

The changes mean that from 6 April 2009, new claimants will be paid fortnightly in arrears on a day based on the last two digits of their national insurance number.

Existing claimants will also be moved over to the new arrangements. The movement of existing claimants will take place through to March 2011.

More information can be found on the Job Centre Plus website.

Child Trust Fund

Back in August 2008, we published an article on our website about changes to the Child Trust Fund (CTF) and LITRG’s success in helping bring them about.

These changes come into force from April 2009, covering cases where Child Benefit was first paid in the 2008-2009 tax year. 

Previously, low-income families had to have a Child Tax Credit award in place when child benefit was awarded in order to qualify for the additional CTF payment. The problem with this was that Child Tax Credit can only be backdated three months and so if a family delayed claiming, even though they had a low income, they would not be able to receive the CTF additional payment.

Under the new rules, so long as a family applies for Child Tax Credit before their CTF voucher expires, they will be able to get the additional payment. In practice this means families have twelve months to claim Child Tax Credit.

Similar rules will come into force for claimants for Income Support and Income Based Job Seekers' Allowance.

More information about the CTF can be found here.

Pension Credit changes for those aged 80

Some people who are 65 and over and claim pension credit are given what is called an ‘assessed income period’ (AIP). The AIP is normally set at five years. During this period, pensioners do not need to report any changes to their ‘retirement provision’. This includes changes to pensions and savings. Other changes still have to be reported.

From 6th April 2009, all pensioners who are aged 80 or over will be given an assessed income period of indefinite length instead of five years.

More information about claiming pension credit can be found here.

Free prescriptions for cancer patients

From 1 April 2009, people who are undergoing treatment for cancer have been able to apply for a certificate which will give them exemption from prescription costs.

Patients should ask their doctor for an application form which needs to be signed by their GP or hospital doctor.

More information can be found here. 

Pregnant?  Claim your Health in Pregnancy Grant

The Health in Pregnancy grant is a new tax-free payment available to expectant mothers from 1 April 2009.  Our February article article explained who is eligible and how to claim. 

State Pension Claim Line – new free telephone numbers

Finally, we welcome the move from DWP to introduce 0800 telephone numbers to claim the state pension which means that from many landlines, calls will be free (mobile callers in particular should remember that 0800 may not be free). The following numbers replace the existing 0845 (’lo-call’) services:

0800 731 7898 – State Pension National Claim Line
0800 731 7339 - State Pension National Text Phone
0800 731 7936 - State Pension National Claim Line – Welsh Language
0800 731 7013 - State Pension National Text Phone – Welsh Language

For people with hearing or speech impairment, we also welcome the inclusion of Text Phone services in these changes. Work is continuing on how to provide free services to those calling from mobiles or abroad. We hope that HMRC will also take note of these changes and investigate how they too can provide more free, accessible helplines. 

Article by Kelly Sizer of LITRG