Jenner's Tax & Business Advisers’ Post

Changes to high earners for Self-Assessment Anyone who earned between £100,000 and £150,000 in the 2022-23 tax year should have received a letter from HMRC regarding changes to the requirements to fill out a Self-Assessment Tax Return for 2023-24. Those with income within this range and who are purely paid through PAYE have been required to submit a tax return up until now. But the threshold is rising to £150,000 for 2023-24, as HMRC officials are highlighting to taxpayers in recent weeks. So, now those with income between £100,000 and £150,000 will not have to complete Self-Assessment for 2023-24 - unless any of the following criteria applies to them. They: receive any untaxed income over £2,500 are a partner in a business partnership have to pay the High-Income Child Benefit Charge are a self-employed individual with gross income of over £1,000 The 2023-24 Self-Assessment deadline is 31 January 2025. Bigger changes are afoot for beyond this. For the current tax year (2024-25), HMRC is scrapping the income threshold to complete a tax return for PAYE-only taxpayers. However, the list of criteria above will still apply, meaning Self-Assessment Tax returns will be necessary for those fitting them. If this news had sparked some concern for you - please do get in touch, we are always here to help. Give me a call on 01432 379988 or drop me a message here.

❗ Self-Assessment Threshold Changes The £100,000 threshold for Self-Assessment change for taxpayers taxed through PAYE only, increased from £100,000 to £150,000 with effect from 6 April 2023. However, the Self-Assessment for 2022-23 tax returns remains at £100,000. 💰 Taxpayers who submit a Self-Assessment tax return for 2022-23 showing income between £100,000 and £150,000 taxed through PAYE and do not meet any of the other criteria for submitting a Self-Assessment return will be sent an exit letter by HMRC. 👉 This will remove the requirement for an annual Self-Assessment tax return to be submitted by qualifying taxpayers. For the 2023-24 tax year onward, taxpayers will still need to submit a Self-Assessment tax return if their income taxed through PAYE is below £150,000 but they meet one of the other criteria for submitting a Self-Assessment return, for example: 🧾 Receipt of any untaxed income; 🤝 Partner in a business partnership; 🧒 Liability to the High-Income Child Benefit Charge 🤑 Self-employed individual with a gross income of over £1,000. Taxpayers who need to complete a Self-Assessment return for the first time should inform HMRC as soon as possible. The latest date that HMRC should be notified is 5 October following the end of the tax year for which a Self-Assessment return needs to be filed. 🌐 HMRC has an online tool available at https://lnkd.in/gGxU5y4i that can help taxpayers decide if they are required to submit a Self-Assessment return. What do you think about these changes? 💫 #accounting #accountants #selfassessment #taxreturn #tax #savetax #PAYE #HMRC #childbenefit #highincomechildbenefit #selfemployeed

You have just two days left to register for self-assessment ahead of the deadline on 5 October. You only need to register if you have not sent a tax return before. HMRC has a tool for you to check if you need to send a tax return for the 2023/24 tax year, which is between 6 April 2023 and 5 April 2024: #selfassessment #taxreturn #hmrc

Anyone earning between £100,000 and £150,000 should have received a letter from HMRC warning them about significant changes to the rules on tax returns People earning between £100,000 and £150,000 will no longer automatically have to file a self assessment return if they are paid through PAYE and have no other income, after the employment income threshold was raised for the 2023/24 tax year. HMRC has sent letters to affected taxpayers ‘to confirm that they do not need to complete a tax return, if they submitted a 2022-23 tax return showing income of between £100,000 and £150,000 that is taxed through PAYE, and they do not meet any of the other criteria for being in self assessment’. For the 2023-24 tax year, taxpayers will still need to submit a tax return if their income taxed through PAYE is below £150,000 but they meet one of the other criteria, such as: 🌟 they receive any untaxed income over £2,500; 🌟they are a partner in a business partnership; 🌟pay the high income child benefit charge (HICBC); 🌟are self-employed with gross business income over £1,000. From the tax year 2024-25 onwards, the income threshold to complete a tax return for PAYE only taxpayers will be removed completely. Taxpayers will still be required to submit a return if they meet any of the other criteria listed above. HMRC recommends people use its online tool to check whether they need to submit a tax return. ☎️ 01733 247500

A million-dollar question: Can an increase in my salary which puts me in a higher tax bracket ever lead to lower take-home pay? Answer: No, it cannot.  Let me illustrate with this example, Jane is single with a taxable income of  $47,000 for the year 2024 at a marginal tax rate of 12%, she got a salary increase which pushed her taxable income to $52000 at a marginal tax rate of 22%.  Myth At $47,000 Federal income tax will be = 12/100 * 47000 = $5,640 Take-home pay after federal income tax = 47000 - 5640 = $41,360 At $52,000 Federal income tax will be = 22/100 * 52000 = $11,440 Take-home pay after federal income tax = 52000-11,440 = $40,560 Under this incorrect thinking, it doesn’t make any sense to accept this increase as this leads to a reduction in final pay. Reality:  At $47,000 The First $11,600 is taxed at 10%, then the rest is taxed at 12% Federal income tax will be = 10/100* 11,600 + 12/100 * (47000-11600) =$5,408 Take-home pay after federal income tax = $47,000 - $5,408= $41,592 At $52,000 The First $11,600 is taxed at 10%, then from $11,600 to $47,150 is taxed at 12%, then the rest is taxed at 22% Federal income tax will be = 10/100 * 11600 + 12/100 * (47150-11600) + 22/100 * (52000-47150) =  Take-home pay after federal income tax = $52,000 - $6,493 = $45,507 The example above shows that Jane’s take-home pay increases despite moving to a higher tax bracket. Always accept the pay increase even if it puts you in a higher tax bracket, it will not reduce your final pay. Note: This is an oversimplified example as social security tax, Medicare tax, state tax, local tax, 401k contributions,  deductions, and other paycheck contributions are ignored.

Beware of Greeks bearing Gifts! Or why you should still do a UK tax return if your income is between £100k - £150k per annum. If your income is in the above range, you should have recently received (or will be receiving in the near future), a letter from HMRC stating that you may not be required to complete a 2023/24 UK tax return. The guidance in particular highlights that this is the case, if you are an employee with (substantively) all of your income being covered via PAYE withholdings. However, whilst there will be some people in this earnings band, who genuinely don't need to do a tax return, the reality is that HMRC have withdrawn the core filing requirement for people in this earnings band, to reduce the workload on HMRC and not because they typically believe you have paid the correct amount of tax. The reality is that many taxpayers earning between £100k - £150k would have more need to file a tax return than is the case with other groups of employees. This is partly linked to the 60% effective tax rate which applies for part of this band (due to the withdrawal of the personal tax allowance). However, amongst the many reasons for people in this earnings band to file a tax return are: a) To get tax relief on their gift aid contributions; b) To get tax relief on their pension contributions; c) To claim relief for their business expenses and similar costs (e.g. professional subscriptions); or d) To claim relief on tax efficient investments (e.g. EIS, SEIS). In practice, many individuals with tax underpayments caused by dividends or bank interest will have their liabilities 'captured' by HMRC and will receive a tax demand for any additional taxes which are due 'automatically'. In contrast, the cynic in me suspects that HMRC will be less forthcoming about issuing tax refunds in the above situations if someone doesn't submit a tax declaration claiming this relief! Whilst no regular taxpayer enjoys doing their tax return - and there will definitely be some 'relief' if their filing requirements are removed - don't be surprised if this development results in you paying more tax than you should do... Or as the old saying goes - 'Beware of Greeks bearing gifts'! #selfassessment #uktaxes #taxreturns https://lnkd.in/ep5NUp38.

The real impact of fiscal drag When the UK government announced the freezing of income tax thresholds in April 2022, many people were not overly concerned. Fast-forward just a couple of years, and the real impact of fiscal drag is becoming evident. Bearing in mind that the tax thresholds will be frozen until April 2028, there is still a lot more to come. Additional rate taxpayers In the 2021/22 tax year, 520,000 people paid the 45% additional rate of income tax - those earning in excess of £125,141. This figure is expected to top 1 million people in the current tax year, bringing in huge income tax increases for the government. Higher rate taxpayers As things stand today, those earning between £50,271 and £125,140 are subject to a 40% income tax rate. In the 2021/22 tax year, there were 4.43 million people in this bracket, but the figure is expected to increase to 6.31 million people in the 2024/25 tax year. Taxpayers in the UK It's essential to recognise that the income tax allowance of £12,570 was also frozen by the government, which means millions of people will pay tax for the first time in the 2024/25 tax year. HMRC expects 37.4 million people to pay income tax in the current tax year. Income tax receipts Remembering that the tax thresholds will be frozen until 2028, the government is expected to receive £272.6 billion in tax receipts in the current tax year. This is an increase of £16.3 billion from the previous tax year, and as the economy recovers and wage inflation strengthens, this will only rise. Summary As we have mentioned in recent articles, "fiscal drag" allows governments to keep promises of not "increasing tax rates" by effectively reducing the real value of tax thresholds. Unfortunately, this phenomenon means that more pensioners are also paying tax than ever.

Are you ready for the income tax changes arriving on 31 July? 🤔 PaySauce have got you covered, answering common questions such as what's even changing to what you need to do. Read the full guide here: https://lnkd.in/gKaQbGmp

Rent Tax Credit Claims 2022 -2024 In reply to a question in the Dáil on 23rd of July by Deputy Ruairí Ó Murchú about the number of persons who have availed of the rent tax credit in this tax year, Minister for Finance replied: "The Rent Tax Credit (RTC), as provided for in section 473B of the Taxes Consolidation Act 1997 (TCA 1997), was introduced by the Finance Act 2022 and may be claimed in respect of qualifying rent paid in 2022 and subsequent years to end-2025. I am advised by Revenue that the RTC statistics currently available refer only to claims by PAYE taxpayers. Data on claims by self-assessed taxpayers are not yet available. These data will be available, in respect of the 2022 year of assessment, in Q3 2024 when the self-assessed tax returns for that year, filed in late 2023, are fully analysed. RTC claims are made are on a ‘taxpayer unit’ basis. A taxpayer unit is either an individual with any personal status who is singly assessed or a couple in a marriage or civil partnership who have elected for joint assessment. The below table outlines the number of claims by year of assessment 2022, 2023 and 2024 as at 17 July 2024." 2022 2023 2024 277,652 259,286 62,143 Ref: Dáil Éireann Debate, Tuesday - 23 July 2024 Questions (364) #renttaxcredit

HMRC's Payment on Account system helps manage tax payments for self-employed individuals in the UK. This applies if your last Self Assessment tax bill was over £1,000 and less than 80% was collected at source. You're required to make two payments during the year, each half of your last tax bill. Suppose your total tax bill for the last tax year was £5,000. Under this system, you need to make two payments of £2,500 each. The first payment is due on 31 January, at the same time as any balance owed for the previous year. If you owed exactly £5,000 and made no prepayments, you’d pay £7,500 on this date (£5,000 for last year plus £2,500 for the current year). The second payment of £2,500 is due on 31 July. Once you submit your tax return for the current year, if your total tax due is more than these payments (e.g., £6,000), you must pay the additional £1,000 by the next 31 January, along with your first payment on account for the following year. If it was less (e.g., £4,000), you would have overpaid by £1,000, which could be refunded or offset against the next bill. You can adjust your Payments on Account if you expect to earn less. For instance, if you lower each payment to £2,000, totaling £4,000, but end up owing £5,000, you will have underpaid by £1,000. HMRC will require you to pay this balance by the next 31 January and will charge interest on the underpaid amount from when it was due until it is paid. Accurately estimating your income to avoid underpayment and potential interest charges is crucial. Overestimating your payments can be safer, as overpayments are either refunded or offset against future bills and can earn interest. #tax #taxpayments #cashflow