As we fast approach the January 31st Personal Tax deadline, we thought we should remind you of what needs done and why with regards to your personal tax obligations.
Do I need to submit a personal tax return?
Yes, as a Director of a UK Ltd Company you are legally obliged to file a personal tax return each year.
If your total personal income takes you into the higher rate tax bracket (this means your income exceeds £41,450 for the tax year 2012/2013 (6th April 2012- 5th April 2013)) you will have a personal tax liability to pay by January 31st. This is separate and in addition to your company tax liabilities.
Personal income includes salary and dividends from your Ltd company as well as any income out-with the company such as rental income, pension Income, savings interest or any other income you may have.
When does it need submitted?
Your tax return must be submitted electronically, with HMRC by 31st January 2014.
When is payment due?
Any personal tax liability must be paid by you personally, to HMRC by 31st January 2014. If you opt to pay the liability using funds held in your company, you should advise your Account Manager whether you wish for this transaction to be classified in the accounts as either a dividend or directors loan.
What are payments on account?
If your personal tax liability is greater than £1,000, HMRC require you to make “payments on account”. You are required to make 2 payments on account within the current year.
These payments on account equate to one half of your 2012/2013 personal tax liability, and is paid in January and again in July.
The payments made go towards your following years personal tax liability. Please note, if what has been paid leaves an amount against what is due, a balancing payment will be required. If you require any further information on how to make the payment, please contact your Account Manager.
Failure to submit a return?
For the 2012/2013 tax year, the tax return is due 31st January 2014. The late filing penalty kicks in on day 1 starting at £100, even if there is no tax to pay or if already paid and increases periodically after that.
High Income Benefit Charge :
The High Income Child Benefit charge came into effect on 7 January 2013, applicable to the 2012/13 tax year. You may be liable to this new tax charge if you, or your partner, have an individual income of more than £50,000 and one of you gets Child Benefit or contributions towards the upkeep of a child.
Who is affected by the High Income Child Benefit Charge?
You will be affected by the High Income Child Benefit charge if during a tax year any of the following applies to you:
- you have an individual income of more than £50,000 and are entitled to receive Child Benefit
- you have an individual income of more than £50,000 and live (or have lived) with a partner who is entitled to receive Child Benefit
- both you and your partner have an income of more than £50,000 per year, you have the higher income and one of you is entitled to receive Child Benefit
You will also be affected if during a tax year you have an individual income of more than £50,000 and both of the following apply:
- someone else is entitled to receive Child Benefit for a child who lives with you
- they are entitled because they contribute at least an equivalent amount of Child Benefit towards the child’s upkeep, for example pocket money or clothes.
It does not matter if the child that is living with you is not your own child. Your income will generally be your income before tax and deduction of ”Personal Allowance’.
What do I do if I am affected by High Income Benefit Charge
Option 1: KEEP getting Child Benefit payments
Choosing this option means you:
- would have to pay a tax charge on the Child Benefit you or your partner get
- will have to declare the Child Benefit by completing a tax Return
If your income is between £50,000 and £60,000 you may want to choose this option. This is because the tax charge will always be less than the amount of Child Benefit. You can always change your mind, for example if your circumstances change.
You can use an online calculator to get an estimate of your likely tax charge. The calculator doesn’t store any of the information you enter. HM Revenue & Customs cannot access the data.
Option 2: STOP getting Child Benefit payments
Choosing this option means you:
- you will not have to pay the tax charge
- you will not have to complete a tax return – unless you need to for other reasons
- any entitlement to Child Benefit will still carry on – providing you or your partner still qualify for it
If you are finding it difficult to make your payments to HMRC please do not ignore them, please contact your Account Manager or HMRC.
The article outlines the typical tax payment dates and methods of estimating the values of tax payable for each type of tax, including VAT, PAYE, NIC, CIS, Corporation Tax, and Dividend and Personal Taxes.
Rishi Sunak has proposed a number of changes to the way that Corporation Tax will be calculated and applied. Learn more.