Our Payroll Manager, Sarah Spooner features on the blog this week. Not only have we just enjoyed a 4-day weekend but we also saw the start of the new tax year, which this year fell on a Bank Holiday Monday. Sarah has taken the time out to point out a couple of changes that you should be aware of moving forward into the 2015/16 tax year.
Tax Free Allowance
From 6 April 2015, the standard amount of tax free pay for employees under state pension age is £10,600 – giving a tax code of 1060L. An increase of £600.
Tax Code Debt Adjustments
The amount of HMRC debt that can be included in a PAYE tax code is increasing for higher earners and those earning upwards of £30,000 will see a change in the amount of debt that HMRC can recover. For every £10,000 of additional earnings, the amount of debt which can be included in a tax code will rise by £2,000 – up to a total of £17,000.
If your tax code has been adjusted for an HMRC debt, make sure that you know exactly what it is for and if the debt is correct. If repayment in a single year will be a strain, you may be able to get longer to pay.
Transferable tax allowance for Married Couples
As of 06/04/2015 a spouse or civil partner who is not liable to income tax (earns less than £10,600) will be entitled to transfer £1,050 of their personal allowance to their spouse of civil partner provided that the recipient of the transfer is not liable to Income Tax above the basic rate.
The transferor’s personal allowance will be reduced by £1,050. The spouse or civil partner receiving the transferred allowance will be entitled to a reduced Income Tax liability of up to £210. To be eligible, both parties must be born after 6th April 1935
To benefit from this transferable allowance you would need to register your interest with HMRC. You will then receive instructions as to how to claim.
Are you an employing anyone under 21?
Any employer with employees under 21 as of 6th April will no longer have to pay Class 1 secondary NI contributions on earnings up to the Upper Secondary Threshold (£815 per week gross earnings or £3532 per month).
If you’re not sure if you, or one of your employees fall into this category please don’t hesitate to contact us.
Week 1 or Month 1 Tax Codes
HMRC are no longer telling employees if their tax code is being operated on a Week 1 or Month 1 basis (M1 /W1). This could mean you pay too much tax – particularly if you are new to employment (for example, you have previously been a student, on a career break, or were self-employed).
Sarah’s Top Tip – Always check your tax code and if you’re unsure, speak to your employer in the first instance before contacting HMRC.
If you’re with ICS and you’re not sure if your tax code is correct, please do not hesitate to contact us on 0800 195 3750 or chat to us online.
ICS are specialist contractor accountants based in Lancaster. We work with contractors, freelancers and temporary workers throughout the UK offering a complete accounting solution for contractors with a limited company as well as an umbrella solution, ideal for those on short term contracts or those new to contracting. To find out more about ICS, please click here.