Sending your Self Assessment tax return

Millions of self-assessment taxpayers who have left their tax returns to the last minute are rushing to file online by Thursday night to avoid being hit by hefty fines.

HM Revenue & Customs said that 2.5m tax returns, of the 8.1m expected in total, remain outstanding. A large portion of these are likely to be filed on the last possible day.

However, accountants warn that more than 1m people will miss the midnight deadline, resulting in an automatic £100 fine, even if they do not owe any tax. Last year, HMRC issued fines of more than £600m by the end of June.

31 January deadline for online tax returns

You must send your online Self Assessment tax return by midnight on Thursday 31 January 2013.

The deadline is only later than 31 January if HM Revenue & Customs (HMRC) sent you the letter, telling you to complete a tax return, after 31 October 2012. In this case you'll have three months from the date of the letter.

If your online tax return is late, you'll have to pay a penalty. You can read more about penalties below in the section 'What happens if you miss the tax return deadline'.

Paying your tax

You must pay any amount due for 2011-12 by 31 January 2013. The payment deadline is the same whether you send a paper or an online tax return.

HMRC recommends that you make your Self Assessment payments electronically. It's safe and secure and provides certainty about when your payment will reach HMRC.

When you make a payment, be sure to use the right reference number. It's called a Unique Taxpayer Reference or UTR. For example 1234567890K.

What happens if you miss the tax return deadline

If you miss the 31 January deadline for online tax returns, you will have to pay a penalty.

The penalty is £100. You'll still have to pay this even if

• your tax return is just a day late
• you have no tax to pay
• you pay all the tax you owe before 31 January 2013

The longer you delay, the more you'll have to pay. There are additional penalties when your tax return is three, six and twelve months late. Together these could add up to a penalty of £1,600 or more, so make sure you get your tax return in on time.

Don’t send a paper tax return now - the deadline was 31 October 2012. You'll have to pay a £100 penalty straight away if you do and the daily penalties above will start even earlier. Send it online instead.

If you would like to find out more please contact us using grant@in2matrix.com for more information.

The information is intended to provide information only and reflects our understanding of legislation at the time of writing. Before making any decision, we suggest you take professional financial advice.

State pension shake-up

State pension shake-up

A new state pension system will pay more in 2017, but many – especially women – will be caught out by the small print.

The biggest shake-up of pensions for a generation has left thousands of women concerned that they will lose out on valuable pension benefits – even though the reforms were supposed to create a simpler and fairer system.

It isn't just women who are worried that they will now have to pay more to get a full pension. Many baby boomers, who are just a couple of years away from retirement, have been told they will need an additional five years' National Insurance contributions if they want to get the new higher state pension – worth £144 a week – in full.

Those who have taken early retirement or been made redundant in their fifties, or who have moved into part-time work, may struggle to make these additional payments, particularly as those worst hit need to make up five years' of NI payments but are just four years from retirement.

Almost half a million women born in the early Fifties have been at the sharp end of almost every pension change in recent years. Plans to raise the pension age for women from 60 to 65 were first put in place in 1995, with the ages being equalised by 2020. But in 2010 the Government speeded up this timetable, meaning that up to 400,000 women who were already in their fifties saw their retirement age pushed back again, with some facing a further 18-month delay.

But those who are due to retire after 2017 can also face problems. As stated above, some will not have sufficient National Insurance contributions (NICs) to get the full £144-a-week payment.

Currently people need 30 years of NICs to qualify for the full basic state pension. This will rise to 35 years when the new pension is introduced. Many people have taken early retirement on the assumption they have paid sufficient NICs to qualify for a full state pension. This is not now the case.

For those who can afford it, making additional NICs can be a cost-effective way to boost your state pension. Voluntary NICs are currently £13.25 a week, or £698 for the year. The Treasury reviews NI rates on an annual basis, so previous years may be cheaper. You would only need to live for four years after retirement to recoup your money,

This is, of course, based on the current state pension, so arguably becomes even better value for those retiring after 2017. The cost of buying back years was likely to rise to reflect the higher benefit attached. Currently you can use voluntary NICs to buy up to six years' worth of benefits. However, the Government will extend this, so those retiring after April 2017 will have until 2023 to buy back years between 2006 and 2016.

Another option is to register as self-employed and opt to pay "Class 2" contributions. These are considerably cheaper (currently £2.65 a week) but also count towards your NI record. However, they are payable for the current year and can't be used retrospectively.

Those with just 30 years of NICs should remember that, although they won't get the full single-tier pension, they should still get around £123 a week, which is more than a full pension (£107 a week) under the current rules.

If you would like to find out more please contact us using grant@in2matrix.com for more information.

The information is intended to provide information only and reflects our understanding of legislation at the time of writing. Before making any decision, we suggest you take professional financial advice.

Child Benefit Changes

From 7th January child benefit will be means-tested and payments will be clawed back in households where one partner earns at least £50,000.

To recap what is Child Benefit?
Child benefit is a tax-free payment that is aimed at helping parents cope with the cost of bringing up children

• One parent can claim £20.30 a week for an eldest or only child and £13.40 a week for each of their other children
• The payments apply to all children aged under 16 and in some cases until they are 20 years old
• The system is administered by HM Revenue and Customs (HMRC) which pays out to nearly 7.9 million families, with 13.7 million children

So how will the High Income Child Benefit Charge work?

The charge will only apply to taxpayers whose income is more than £50,000 for the tax year. If both partners have income of more than £50,000 for the tax year, the charge will apply only to the partner with the highest income.

·         A partnership comprises:

·         a married couple living together;

·         civil partners living together;

·         a man and a woman who are not married to each other but who are living together; or

·         a man living with a man or a woman living with a woman who are living together as if they were civil partners.

For taxpayers whose income is between £50,000 and £60,000, the amount of the charge will be one per cent of the amount of Child Benefit for every £100 of income that exceeds £50,000. A taxpayer whose income exceeds £60,000 will be liable to the charge on the full amount of Child Benefit and so effectively lose all the advantage of Child Benefit. For example, Child Benefit for two children is £1,752.

For a taxpayer whose income is £54,000, the charge will be £700.80 – i.e. £17.52 for every £100 earned above £50,000. For a taxpayer whose income is £62,000, the charge will be £1,752.

An individual who has income above £50,000 but is not entitled to Child Benefit themselves will only be liable to the charge for any period of the tax year during which they are living with a Child Benefit claimant whose own income is below £50,000.

Child Benefit itself is not being made liable to tax and the amount that can be claimed is unaffected by the new charge. It can continue to be paid in full to the claimant even if they or their partner have a liability to the new charge. Child Benefit claimants will be able to elect not to receive the Child Benefit to which they are entitled if they or their partner do not wish to pay the new charge. The claimant may subsequently decide to withdraw that election if they or their partner are no longer liable to pay the charge.

The measure of income that will be used will be the individual's “adjusted net income”. This is an existing method of determining an individual's income and is currently used to work out entitlement to personal allowances for someone aged 65 or over or who has income over £100,000.

The amount of the charge will be collected through self-assessment and PAYE.

The HMRC have launched a calculator to work out how you will be impacted by the changes. The link is https://www.gov.uk/child-benefit-tax-calculator

It is possible to mitigate the loss by either sharing income with a spouse, or making pension contributions to bring your income below the limits. Specialist advice will be needed in this area, so please contact us using grant@in2matrix.com for more information.


The information is intended to provide information only and reflects our understanding of legislation at the time of writing. Before making any decision, we suggest you take professional financial advice.