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Tax credit renewals deadline
The 31 July was the last day for families and individuals that receive tax credits to renew their tax credit. As in previous years, there was likely last minute rush when it may have been difficult to contact HMRC by phone.
Claims can be renewed by post, phone or online. A press release from HMRC released on 24 July 2016 highlighted the fact that approximately two million people have already renewed their tax credits. However, that still left more than one million renewals outstanding. According to HMRC the online renewal process now takes less than 10 minutes on average, with satisfaction rates reaching 90%.
Nick Lodge, HMRC’s Director General, Benefits and Credits, said:
'It’s great that millions of people have renewed their tax credits or reported changes so far, but anyone who hasn’t done so yet should take action now – it only takes a few minutes to renew online. There are more ways than ever before for people to renew their claim – including our new app – so I urge people to renew now.'
Claimants need to notify HMRC of any changes to the family size, child care costs, number of hours worked and salary. Details of previous year’s income also need to be completed to allow HMRC to check if the correct tax credits have been paid.
Claimants must also inform HMRC of any changes in circumstances not already reported during the year such as new working hours, different childcare costs or changes in pay.
Once the deadline has expired, anyone who has not yet renewed their tax credits should still ensure they do so as soon as possible as otherwise their payments may be stopped and monies received since last April may have to be repaid. We would strongly advise any of our readers still to renew their tax credits to do so as a matter of urgency.
Tax relief for buy-to-let landlords
HMRC has published new guidance on the upcoming changes to tax relief for buy-to-let landlords. From April 2017, tax relief on mortgage costs is to be restricted to the basic rate of tax. Landlords of residential properties have benefited from tax relief on finance charges, such as mortgage interest for many years.
This change marks a seismic shift in tax relief for buy-to-let landlords and will leave many facing far larger tax bills than was previously the case. The reduction in the relief for finance costs for landlords will be phased in over four years from April 2017.
The changes will also affect those who let residential properties in a partnership or a trust. Finance costs include interest on mortgages, loans - including loans to buy furnishings and overdrafts as well as alternative finance returns, mortgage fees and other costs and discounts, premiums and disguised interest.
Deductions from property income will be restricted to:
- 75% for 2017 to 2018
- 50% for 2018 to 2019
- 25% for 2019 to 2020
- 0% for 2020 to 2021 and beyond
The new rules apply to:
- UK resident individuals that let residential properties in the UK or overseas,
- Non-UK resident individuals that let residential properties in the UK,
- Individuals who let such properties in partnership and
- Trustees or beneficiaries of trusts liable for Income Tax on the property profits.
Landlords of furnished holiday lettings, UK resident companies and non-UK resident companies are not affected by the changes.
The introduction of automatic enrolment for workplace pensions is intended to ensure that the majority of employees in the UK are offered the chance to be part of a work based pension scheme. Automatic enrolment into workplace pensions has been rolling out across the UK since 2012.
However, the first batch of small and micro employers with 30 or less employers only began to enrol in the scheme on 1 June 2015. There are estimated to be 1.8 million small and micro employers in the UK. It is expected that all employers will be part of the scheme by February 2018.
The Pensions Regulator is in the process of mailing almost 100,000 small and micro employers with less than six months to go until their staging date to remind them that they need to choose a new pension scheme or check if an existing scheme can be used for automatic enrolment.
Staging dates are based on the size of an employer’s PAYE scheme as at 1 April 2012. Most small and micro employers with less than 50 employees will commence the process between 1 June 2015 and 1 April 2017. Recent research by NOW: Pensions has revealed that from April – June 2016, some 40% of employers signed up to a pension provider either very close to their staging date or after their deadline had already passed.
Employers failing to comply with their auto-enrolment duties and missing their staging date can trigger statutory notices, fixed penalties and even court action. We would urge all employers to check their staging date and ensure they are properly prepared to be able to offer their staff a pension scheme in a timely manner.