Does LISA take your fancy? Reply

fotolia_121789142_xs-lisa

Actually, this isn’t a blog about the Mona Lisa its actually about Lifetime Investment Savings Accounts (LISA).

LISA’s are available from April 2017 and are a retirement saving option.

  • Save up to £4000 per year
  • You must be aged between 18 and 40
  • Anything paid in will be topped up by 25% at the age of 50
  • Over the age of 60 you can take out all the money tax free
  • If you take it before 60 you lose the 25% bonus and get a 5% charge

lisa

Personally, I don’t think they sound great, if you want to save for retirement why not just save in a pension?

If you want to save in a bank why not just use the Personal Savings Allowance which started in April 2016.

The PSA will apply to all non-ISA cash savings and current accounts, and will allow some savers to receive a generous portion of their interest totally free of tax.

Its expected that 95% of savings will no longer be taxed.

Basic rate taxpayers will receive £1,000 in savings income tax free, higher rate taxpayers get a band of £500 and additional rate tax payers get nothing.

steve@bicknells.net

Have you declared tax on your bank rewards? Reply

Pretty Young Woman Withdrawing Money at the Bank Machine

In April 2016 the PSA (Personal Savings Allowance) came into force.

The PSA applies to all non-ISA cash savings and current accounts, and will allow some savers to receive a generous portion of their interest totally free of tax.

95% of savings will no longer be taxed.

Basic rate taxpayers will receive £1,000 in savings income tax free, higher rate taxpayers get a band of £500 and additional rate tax payers get nothing.

Sounds great but the key word is ‘Interest

Some banks have been giving ‘Rewards‘ instead of interest and these fall outside of the scope of the new PSA and as such will be taxable, for example..

http://www.co-operativebank.co.uk/assets/ns/bank/pdf/currentaccounts/everyday-rewards/benefits-document.pdf

http://www.barclays.co.uk/PersonalBanking/P1242689794073

https://www.halifax.co.uk/bankaccounts/current-accounts/reward-current-account/Default.asp

Currently Cash Back on spending doesn’t count as a reward so that is ok and not subject to tax.

I think this situation is confusing and could lead to taxpayers incorrectly failing to declare rewards thinking that they were interest!

 

steve@bicknells.net

Have you heard of the new Personal Savings Allowance (PSA)? Reply

British piggy bank

From April 2016 the new Personal Savings Allowance (PSA) will start.

The PSA will apply to all non-ISA cash savings and current accounts, and will allow some savers to receive a generous portion of their interest totally free of tax.

Its expected that 95% of savings will no longer be taxed.

Basic rate taxpayers will receive £1,000 in savings income tax free, higher rate taxpayers get a band of £500 and additional rate tax payers get nothing.

The current TDSI (tax deduction scheme for interest) will stop.

 

PSA

steve@bicknells.net

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How to have a tax free Christmas 6

the unlike trio 01/Devil, Angel and Santa celebrating Xmas

Christmas Parties

·         HMRC have an Exemption (not an allowance) of £150.

  • available to employees generally or
  • available to employees generally at one location, where the employer has more than one location.

·         If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate.

The figure of £150 is not an allowance. For functions that are outside the scope of the exemption (see example at EIM21691) directors and employees, except those in an excluded employment, are chargeable on the full cost per head, not just the excess over £150, in respect of:

  • themselves and
  • any members of their family and household who attend as guests.

The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.

Christmas Gifts from suppliers to employees

Certain gifts from third parties are tax free if all these conditions are satisfied:

• the gift consists of goods or a voucher or token only capable of being used to obtain goods, and

• the person making the gift is not your employer or a person connected with your employer, and

• the gift is not made either in recognition of the performance of particular services in the course of your employment or in anticipation of particular

services which are to be performed, and

• the gift has not been directly or indirectly procured by your employer or by a person connected with your employer, and

• the gift cost the donor £250 or less, and

• the total cost of all gifts made by the same donor to you, or to members of your family or household, during the tax year is £250 or less.

Some other gifts are not taxable. If you earn at a rate of less than £8,500 a year and you are not a director, a gift to mark a personal occasion, such as

a wedding present, which is not a reward of your employment, is not taxable. If you earn at a rate of £8,500 a year or more, or you are a director,

any gift from your employer is taxable unless your employer is an individual and makes the gift in the course of family, domestic or personal relationships.

Seasonal gifts from Employer to Employee

An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. . For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).

If the gift extends beyond one of the items mentioned above, for example from a bottle or two to a case of wine, or from a turkey to a Christmas hamper, you will need to consider the contents and cost before being able to determine whether the benefit is trivial.

PAYE Settlement Agreement (PSA)

For practical purposes it may be that small cash and money’s worth benefits can be included in a PSA.

PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.

steve@bicknells.net

What can you include in a PAYE Settlement Agreement (PSA P626)? Reply

Businessman looking at a small present with a magnifying glass

 

 

PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.

 

 

Applications for PSA’s should be made before 6th July 2013 if you want to use them for the tax year ended 5th April 2013, once approved by HMRC payment of the Tax and NI is due by the 19th October (payments by cheque) or 22nd October (payments online).

The tax due is grossed-up at the employee’s marginal rate. For example, £5,000 of benefits provided to higher rate taxpayers (40 per cent) would be grossed-up as follows:

Benefits of £5,000 x 40 per cent = £2,000 tax

Grossed-up tax = £2,000 x 100/100-40 = £3,333.33

Benefits plus grossed-up tax = £8,333.33 x 13.8 per cent Class 1B = £1,149.99

Total due to be paid £3,333.33 tax plus £1,149.99 Class 1B = £4,483.32

.
PAYE Settlement Agreements can only be created for:

 

Minor Benefits

HMRC (PSA1060) examples (not exhaustive) of what may constitute a minor item.

  • incentive awards
  • reimbursement of late night taxi fares outside s248 ITEPA 2003
  • personal incidental expenses in excess of the statutory daily limit
  • present for an employee in hospital
  • staff entertainment, for example a ticket for Wimbledon
  • use of a pool car where the conditions for tax exemption are not satisfied
  • subscriptions to gyms, sports clubs etc
  • telephone bills
  • gift vouchers and small gifts

Irregular Expenses

HMRC (PSA 1070) examples (not exhaustive) of what may constitute an irregular item.

  • relocation expenses where the amounts concerned exceed the £8000 tax exempt threshold (Section 287 ITEPA 2003)
  • occasional attendance at an overseas conference where not all the expenses qualify for relief
  • expenses of a spouse occasionally accompanying an employee abroad
  • occasional use of a company holiday flat
  • one off gifts which are not minor.

Impracticable Items

HMRC (PSA 1080) examples (not exhaustive) of what may constitute an impracticable item

  • free chiropody care
  • hairdressing services
  • Christmas parties and similar entertainment provided by the employer which do not already qualify for relief
  • cost of shared taxis home which do not satisfy s248 ITEPA 2003
  • shared cars.

Gov.uk has guidance on How to get a PSA

steve@bicknells.net