Small Business Tax Advice: How Will The New Tax Changes Affect Small Businesses?

All of the changes announced in Chancellor George Osborne’s recent budget have now been implemented.

As part of our series of articles about small business tax advice, Steven Glicher accountants though we’d have a look at some of these changes and see how they might affect your small business. We hope you find the article of interest.

Real Time Information.

RTI is a new PAYE reporting system that was introduced from April 6. It will eventually affect all businesses. The new workflow system has been designed to ensure employers notify HM Revenue & Customs (HMRC) about gross pay, tax, National Insurance contributions on a regular basis – in other words, when or before payments are made, rather than waiting until the end of the tax year.

Employers will now be required to make submissions under RTI known as ‘Full Payment Submissions’ (FPS). These submissions will be created by the employer’s payroll software and sent directly to HMRC automatically online. Obviously all small businesses should ensure that their employee information is accurate before migrating to RTI.

The first FPS submitted must also include the hours that each employee regularly works each week, as this information is required for Tax Credit purposes. It’s also worth mentioning that even those members of staff who are paid beneath the Lower Earnings Threshold (LET) will need to be reported on. Therefore their details will need to be obtained in the same way as any other normal employee.

Personal Tax Allowance increase.

The Personal Tax Allowance has increased for workers aged under 65 from £8,105 to £9,440 for the new tax year from April 6. As a result, an increasing number of the lowest paid workers will no longer be required to pay tax at all.

Employees earning between £9,441 and £41,450 in the forthcoming tax year will pay the basic tax rate of 20%. Individuals earning between £41,451 and £159,440 will be in the 40% tax band for the 2013/14 tax year.

From April 6, a new tax band of 45% will also be introduced, replacing the current 50 percent rate for individuals who earn more than £159,440.

Tax Returns.

HMRC will be despatching letters to taxpayers for those tax payers needing to file a tax return for the 2012-13 tax year.  The deadlines for submission remain unchanged with paper-based self-assessment tax returns needed to be to be returned by October 31, with online submissions required by January 31 2014.

Universal Credit.

A new in and out-of-work credit, integrating six of the main out-of-work benefits, is to be implemented from April 28 in a pilot scheme in one job centre in Ashton-under-Lyne, Greater Manchester. The Universal Credit scheme is designed to increase incentives to work for the unemployed and encourage longer hours for those working part-time.

Job centres will test the new sanctions regime, as well as introduce a fortnightly job search trial, which aims to ensure all jobseeker’s allowance and unemployment claimants are automatically signed onto Job Match – an internet-based job-search mechanism.

A national programme is due to begin in October for new claimants, following a trial at four job centres throughout the summer.

45p tax rate for high earners.

The 50p tax rate for high earners, introduced in April 2010, has been scrapped from April 6. Britain’s highest earners will benefit significantly because of this reduction, and could gain as much as £100,000 a year. There has been widespread criticism of the policy, but George Osborne maintains that it displays Britain’s commitment to business and an enterprise economy.

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