It won’t be long before April, and we all know what that means – a new tax year.
You’re probably already aware that there will be changes in the base rate figure of tax-free income for employees: the Chancellor announced it earlier last year in case in missed it.
From April the base rate figure of tax-free income for employers below state pension age will increase from £10,000 to £10,600 for the 2015-16 tax year. So far; so good.
But do you know what other tax changes are on the horizon for the next tax year?
The chances are probably not. So we thought it was incumbent on us as accountants to bring them to your attention. So here goes:
Couples and tax.
There will be important changes in the next financial year that will affect couples who are either marries or in a civil partnership. From April 2015, 10 per cent of the new £10,600 tax-free personal allowance will be able to be moved between partners. How will the new ruling work? Well, the partner who receives the tax-free additional allowance of up to £1,060 will be given a tax code letter ‘M’ as opposed to the usual ‘L’. The partner transferring the allowance, who will lose up to £1,060 of tax-free allowance, will have a tax code letter of ‘N’ rather than ‘L’.
Before you get carried away, however, it’s important to note that there will be limitations to this new ruling. The changes will not apply to higher rate tax payers for starters. What’s more, if you want to claim under this new ruling, you will have to apply for this transfer online. Unfortunately, as yet, the system is not up and ready. Another important point to note is that the first 2015-16 PAYE tax codes will not include any adjustments made and you will be required to submit a claim for a revision to your tax code later in the year.
The second major change to come in 2015-16 concerns higher earners. The total amount of HMRC debt that can be included within a PAYE tax code is increasing. Professionals earning up to £30,000 -a-year will not be affected, with the total amount of debt that can be recovered remaining at £3,000.
However, for every £10,000 of additional income, HMRC will be able to include a further £2,000 debt in a tax code – rising to a maximum of £17,000 for those earning more than £90,000 per annum.
If this new ruling regarding tax code adjustments to recover outstanding tax debts applies to you, it’s important to ascertain whether the debt is correct. If repaying the debt within a single tax year could cause hardship, you may be able to renegotiate a repayment plan with HMRC.
Anything else that might affect you when the new tax year starts in April?
Well, HMRC will no longer be informing employees if their tax code is operated on a Week 1 or Month 1 basis. As a result of this taxpayers could end up paying too much tax – especially those relatively new to a job or who had previously been a student or self-employed. If you’re likely to be affected by these changes, then you should contact your employer immediately as they can put you in the picture before you contact HMRC.
For further information on the important taxation changes that will come into effect in April, 2015, contact Steven Glicher accountants on 0161 485 8007 or email info@.