June 2019

tax tips & finance e-newsletter

In this issue

Doctors lobbying for pension tax changes

High income child benefit charge and State Pension

P11D forms due soon

Reporting the issue of shares or options to staff

Tax changes for non-residents holding UK property

Connect effectively in the digital age

Exam success

Doctors lobbying for pension tax changes

Hospital doctors and GPs are lobbying the government to amend the pension tax rules as the current system of restricting tax relief on pension contributions means many doctors paying almost all of the extra salary back in tax if they take on additional responsibilities or work additional shifts. This is an issue that doesn’t just affect doctors as it potentially restricts the tax relief available to other individuals with high income.

The NHS Pension Service have alerted members of the NHS Pension Scheme that they could receive a tax bill if their pension savings exceed limits set by HM Revenue and Customs (HMRC). These limits are known as the annual allowance, which is calculated each year, and the lifetime allowance, which is calculated based on overall pension savings.

The normal annual pension allowance is currently £40,000 each tax year and limits the amount of pension contributions which qualify for tax relief. The limit covers the combined contributions paid by the taxpayer and their employer. A tapered annual allowance was introduced in April 2016 with the intention of reducing pension tax relief for high earners.

It applies to those with adjusted incomes of over £150,000 and threshold income in excess of £110,000. The rate of reduction in the annual allowance is by £1 for every £2 that the adjusted income exceeds £150,000, up to a maximum reduction of £30,000 at £210,000. This is a complex calculation and we recommend that you contact an IFA to discuss any concerns.

High income child benefit charge and State Pension

Last month we looked at tax planning to minimise or eliminate the high income child benefit to keep both husband and wife (or civil partners) looking after a child below the £50,000 threshold.

Where the income of one of the individuals exceeds £60,000 such that the whole of the child benefit is taxed they may be tempted not to claim child benefit at all. This may however limit the amount of State pension and other benefits at a later date. Under current rules Individuals must make National Insurance contributions for 35 years to receive a full State Pension. Individuals may claim Child Benefit and choose not to receive the payments, which means they do not have to pay the charge but still receive the associated National Insurance Credits for that year and protect their State Pension entitlement.

Note that grandparents who have ceased working and are looking after their grandchildren may also claim NIC credits for that year which would count towards their 35 year contribution history.

Remember that you can check your National Insurance record online on the DWP website to see:

  • what you’ve paid, up to the start of the current tax year (6 April 2019)
  • any National Insurance credits you’ve received
  • if gaps in contributions or credits mean some years do not count towards your State Pension (they are not ‘qualifying years’)
  • if you can pay voluntary contributions to fill any gaps and how much this will cost

You can check your State Pension online at any time for a forecast of how much you could get. The service will also confirm when you will reach State Pension age, under the law as it stands. Note that Government proposes to increase the State Pension age to 68 from 2037.

P11D forms due soon

Employers need to submit details of benefits in kind provided to directors and employees by 6 July 2019. Remember that reimbursed expenses no longer need to be reported where they are incurred wholly, exclusively and necessarily in the performance of the employee's duties. Dispensations from reporting are no longer required.

Remember also that trivial benefits of no more than £50 provided to employees need not be reported.

Reporting the issue of shares or options to staff

Gifts and awards of shares in companies, often known as employment related securities (ERS) are commonly used by employers to reward, retain or provide incentives to employees. They can be tax advantaged or non-tax advantaged.

You must notify HMRC of all new ERS schemes including one-off awards or gifts of shares by 6 July following the end of the tax year in question or you may have to pay a penalty.

Once you have registered the share scheme you need to submit an ERS return (or nil return) even if there have been no transactions in the year otherwise the company may be liable to a penalty.

Please contact us if you need assistance dealing with these reporting obligations.

Tax changes for non-residents holding UK property

Tax Partner, Kevin Hancock has written a technical briefing summarising the changes to the taxation of UK property held by non-resident individuals and entities from April 2019.

Download PDF

Connect effectively in the digital age

It’s time to rethink how we connect with customers, suppliers, colleagues and the business community.

The way we work is becoming increasingly digital. Today it is pretty normal for people to work remotely at least one day per week and this is just the tip of the iceberg.

As the future of work looks set to become more and more focused on digital, it’s going to be the fundamental human skills that remain most relevant. Skills like being able to seek out and learn from someone who already possesses the skill you’re looking to acquire; being able to display value through a meaningful conversation; being able to pick up on and understand people’s pain points without needing them to be pointed out in the first place. Despite the focus on all things digital, the most important business skill of all will continue to be having the ability to spot a commercial opportunity.

The shift to a more digital focus has seen people become increasingly isolated. As such, people who understand how to form meaningful connections will have the advantage. Tools such as LinkedIn, Twitter and Instagram are useful, but they are just that, tools. The most meaningful business connections still come through genuine conversations and physical meetings. When it comes to success in business, we are all familiar with the phrase "it's not what you know, it's who you know." Many of the most valuable skills in business are soft skills: communication, relationship management, leadership, etc. which means that the way to succeed, regardless of the type of business you work in, is to make meaningful connections with people who have influence.

As the world continues in this direction of social media, online connectivity and remote working, it’s likely that over time we will see closed or vetted social networks adding more value for business people. This is already happening on platforms such as LinkedIn through Groups, etc. More importantly, it’s going to be the individuals who invest in bringing these online connections, offline, that possess the greatest professional advantage. In business, "people buy people". People want to do business with individuals that they like and respect.

Exam Success

We are pleased to announce that Ben Light has passed the final exams to become a fully qualified Accounting Technician (AAT).

Ben joined the firm in 2018 and works for Partner Greg Penfold, assisting with his wide portfolio of healthcare clients. We are delighted to have yet more exam successes within the firm and congratulate Ben on all his hard work in achieving this qualification.