May 2023

Technical and Client Update

In this issue

2022/23 P11D forms to be submitted online

PAYE settlement agreements also online

Pension lifetime allowance

Pensions and estate planning

Government Gateway and personal tax accounts – reminder

Tax data card 2023/24

Exam success

2022/23 P11D forms to be submitted online

The deadline for filing the P11D forms to report benefits in kind in respect of directors and employees for 2022/23 is 6 July 2023.  Note, however, that the original and amended reports must now be made online and paper returns will be rejected.

Forms P11D and P11D(b) returns must be submitted online through one of the following:

  • PAYE Online for Employers
  • PAYE Online for Agents
  • payroll software that is recognised by HMRC

For employers or agents who need to submit P11D forms for up to 500 employees, the free HMRC PAYE online services can be used. For anything more, 3rd party software is required.

Remember that ‘Trivial’ benefits in kind provided to employees and directors do not need to be reported on form P11D.  ‘Trivial’ benefits are those that:

  • cost the employer £50 or less to provide;
  • are not cash or a cash voucher;
  • are not a reward for work or performance; and
  • the employee is not contractually entitled to.

Note that there is an annual limit of £300 for trivial benefits provided to directors of close companies.

PAYE settlement agreements also online

Where benefits in kind are provided to employees it will usually result in an income tax charge on the employee and a Class 1A national insurance (NI) charge on the employer. The rate to be used for 2022/23 is 14.53% because of the withdrawal of the 1.25% Health and Social Care levy part way through the year.

The income tax charge on the employee can be avoided by the employer entering into a PAYE settlement agreement (PSA) with HMRC, whereby the employer pays the income tax on the employee’s behalf. Not all benefits provided may be dealt with this way. The benefits must be minor, irregular, or impracticable. Impracticable means that the expenses and benefits are difficult to place a value on or divide up between individual employees. An example would be the costs of a staff party where the £150 per head limit has been exceeded.

From 6 April 2023 there is a new online service available from HMRC for employers and their agents to apply for a PAYE settlement agreement (PSA). Employers and agents can also use the online service to amend or cancel an existing PSA.  To support these changes, HMRC has updated its guidance on PSAs to include reference to the new online tools.

What can be included in the PSA depends on when you apply.  If you applied for a PSA before the start of a tax year, you can include any expenses and benefits contained in the agreement. If you applied for a PSA part way through the tax year, you may need to report some items separately on form P11D.

Employers must pay any tax and class 1B NIC owed under a PSA by 22 October after the tax year that the PSA applies to (19 October if paying by cheque).

Pension lifetime allowance

The latest Finance Bill will legislate the announcement in the Spring Budget that the lifetime allowance (LTA) charge is abolished from 6 April 2023.

Individuals will continue to be able to receive 25% of their pension savings as a tax-free lump sum when they become entitled to their pension benefits. From 6 April 2023, for most individuals, the tax-free amount will be capped at £268,275.

The £268,275 limit represents 25% of the 2022/23 LTA of £1,073,100. The LTA has changed many times over the years and has been as high as £1.8 million. This is a complex area, but taxpayers have been able to elect to protect their LTA at the higher amount.  HMRC have confirmed that individuals who hold valid LTA protection can access a tax-free lump sum of more than £268,275. The exact amount will depend on which protection they hold. 

Those who made a successful enhanced protection or fixed protection application prior to 15 March 2023, can also re-commence contributing to their pension scheme from 6 April 2023 without losing their protection. They are also able to enroll into new workplace pension schemes and transfer money between pension schemes from 6 April 2023 without losing LTA protection.

Pensions and estate planning

As a result of the pension reforms introduced by George Osborne which took effect from 6 April 2015, a drawdown pension fund has become an important part of estate planning. The fund itself is not subject to inheritance tax and, where the pensioner dies under the age of 75, there is no charge when the beneficiary draws the remaining capital. Where the pensioner dies over the age of 75 then the beneficiary is taxed at their marginal tax rate on any amounts drawn.

Where an individual has both ISA savings and a drawdown pension fund, they would generally be advised to spend their ISA savings in priority to drawing down on their pension as the ISA is subject to inheritance tax whereas their pension fund is not.

Again, this is an area where specialist advice is required but it should be noted that where the pension fund is used to buy an annuity, the annuity will lapse on the death of the annuitant, unless a joint life annuity is purchased.

Government Gateway and personal tax accounts – reminder

Of course, we at Humphrey & Co are always on hand to assist you with providing and managing your tax information. However, we do recognise that there may be instances where you may need access to this tax information.  HM Revenue & Customs provide a secure online facility to allow individuals to check, update and manage their tax details, with the aim of contacting HMRC more quickly and easily.

The service allows you to:

  • Check your income Tax estimate and tax code
  • Check your state pension
  • Check income from employment and how much tax you have paid in the previous 5 years
  • Check or update your Marriage Allowance.
  • Tell HMRC about a change of address
  • Check or update benefits you receive from employments such as company car and medical insurance benefits.
  • Find your NI number and Unique Taxpayer Reference (UTR) (if applicable)

To sign up , please visit Personal tax account: sign in or set up - GOV.UK (www.gov.uk)

To do so, you will need to register for a Government Gateway account and provide personal data to prove your identity. When applying for a Government Gateway account for the first time, you will need to provide your National Insurance number or postcode plus 2 of the following:-

  • A valid UK passport
  • UK Photocard driving licence issued by the DVLA
  • A payslip from the last 3 months or P60 from your employer
  • Details from a Self-Assessment Tax Return if you have submitted one previously
  • Information held on your credit record
  • Details of a tax credit claim if you made one

Once you have enrolled, you will then be able to access the Personal Tax account.

Tax data card 2023/24

A copy of our 2023/24 Tax Rates Card, which summarises many of the rates and allowances fundamental to our business and personal lives is available to download here. We are sure that you will find it as a useful point of reference throughout the coming tax year.

Our tax card is intended for use as a quick point of reference. Should you require any further information, have a simple question or require detailed advice, please do not hesitate to contact us.

Download the Tax Data Card

Exam success

We are pleased to announce that Ben Packer recently passed the exam for the highest level tax qualification in the UK, to become a Chartered Tax Adviser (CTA), to complement his Chartered Accountancy qualification (ACA).

Ben joined Humphrey & Co as an apprentice in 2014 and has gone on to achieve several accounting qualifications with the firms support, progressing to a Client Manager for Partner Greg Penfold.

“I am delighted to qualify as a Chartered Tax Adviser and I am grateful for the continued support offered by Humphrey & Co over the years. I look forward to using the knowledge I have gained to provide the best possible service in assisting our clients with their accounting and tax needs” said Ben.

Senior Partner Anthony Smith comments “Ben is the latest addition to a seven strong team of Chartered Tax Advisors at Humphrey & Co, demonstrating our commitment as a firm to support our clients with ever increasing tax complexities and planning opportunities. The CTA and ACA qualifications are a powerful combination together and certainly a challenge to attain – congratulations Ben from all the partners!”