The latest headlines this week regarding taxes and tax credits.
Thousands Miss HMRC Tax Credit Deadline
- 1 Thousands Miss HMRC Tax Credit Deadline
- 2 Pensioners May Need to Fill Out Self-Assessment Form when Cashing In their Pension
- 3 Jersey Social Security Payments Expected to Rise
- 4 Woman Campaigns after Working Tax Credit Changes made her Suicidal
- 5 Employers Warned about Adverse Effects of PAYE Tax Code Changes
The HMRC has reported that more than 455,000 have missed the deadline for renewing their working tax credits and child tax credits.
The deadline, originally Thursday July 31, was pushed back another week due to strike action at the HMRC offices. However, thousands still failed to renew on time and now face losing their payments altogether.
Nevertheless, the number was down 195,000 from last year, when a whopping 650,000 failed to renew by the given deadline. David Gauke, Financial Secretary to the Treasury, said:[quote]I am delighted so many people have renewed on time, ensuring they get the financial help they are rightly entitled to.”[/quote]
The new deadline, Wednesday August 6, was the cutoff point for those wishing to reapply for working tax credit and child tax credit for the year 2014-15. Working tax credit is given to those on a low income, whilst child tax credit is intended to help families with children also on low incomes. It is possible for both types of tax credit to be awarded at the same time.
Around 1.3 million people chose to renew the traditional way – by post – whilst 390,000 opted for the online renewal method, available for the first time this year.
Whilst many will have failed to renew because of a change in circumstance no longer entitling them to tax credits, others who are still eligible are being urged to contact HMRC as soon as possible.
Pensioners May Need to Fill Out Self-Assessment Form when Cashing In their Pension
Pensioners may be faced with shock tax bills or the need to fill out a self-assessment form thanks to the upcoming retirement reforms outlined in the Chancellor’s budget.
The new plans will ensure that every income source will have a separate tax code and that pensioners are taxed at the right band on each of their allowances. However, if their income should increase or their tax code is wrong, they may be landed with a large surprise tax bill or have unpaid tax deducted from their tax-free allowance the following year, experts say.
HMRC avoids putting pensioners into self-assessment under the current regime as the process can be complicated. But as it is likely many pensioners will want to keep some of their pension invested and draw it in chunks under the new reforms, self-assessment may be the only way to ensure they pay the correct amount of tax.
This is because taking the money as chunks could move them into higher tax band – up to 20-40 percent.
The proposed individual pension guidance is reported to explain how taking one’s pension as cash will affect their tax and how HMRC can help with this.
Jersey Social Security Payments Expected to Rise
Jersey’s social security payments are expected to rise after an urgent announcement from Senator Francis Le Gresley warned about the island’s remaining fund.
The outgoing social security minister said that the £80 million social fund that currently pays for subsidised GP visits may only be enough to last for another ten years.[quote]The pressure on the Health Insurance Fund will come on the cost of prescriptions and dispensing fees and that’s the area that’s driving the reduction of the fund and the need to consider increasing contributions that go into it,”[/quote]
Le Gresley said.
The fund, which is made from social security contributions and pays for GP visits and free prescriptions, is expected to run out in ten years if nothing changes. To break even, auditors say the fund will need to almost double by 2032 from its current level of 2%.
Senator Le Gresley stressed that the island will need to find new ways of paying for the health care of its aging population.
Woman Campaigns after Working Tax Credit Changes made her Suicidal
A woman from Weymouth, UK is campaigning for drastic changes to be made to the working tax credit system after the recent changes made her feel suicidal.
Working 18 hours a week at two jobs, Jill Hordle, 57, is not entitled to tax credits because she is a single adult with no dependent children. She lost her job as Post Office Bureau manager at Weymouth’s WH Smith store in 2011 and was forced to sell her house after six months, leaving her homeless.
She now lives in a one-bedroom flat but is still unable to make ends meet, despite working 18 hours a week as both a cleaner and a Marks and Spencer cashier.[quote]I think the government needs to look at the system and just restructure it all,”[/quote]
Ms. Hordle says.[quote]The working tax credits should be there to help anyone who wants to work. There are no jobs in the area that offer 30 hours a week. They are normally zero-hour contracts and are seasonal.”[/quote]
Ms. Hordle says she cannot even afford hot water, or heating in the winter. Even her local council and tax authority have agreed that Ms. Hordle should be entitled to more help.
Cllr Francis Drake from Weymouth and Portland Borough Council said:[quote]The government should look into the case properly and see if there’s any way they can help her. She would probably be entitled to some help.”[/quote]
Jonathan Isaby, chief executive of the Taxpayers Alliance, said that Ms. Hordle’s case is just another “symptom of how complex our tax system has become”.
Employers Warned about Adverse Effects of PAYE Tax Code Changes
Employers are being warned by the Association of Taxation Technicians (ATT) about the adverse effects that PAYE tax code changes could have on their business.
The changes proposed by the HMRC involve relaxing the time frame in which a revised PAYE code must be issued to employees. Currently, HMRC has to inform an individual’s employer at the same time when they wish to change an employee’s PAYE tax code.
However, in the new plan outlined by HMRC, this obligation could be delayed by up to 30 days. This could bring disastrous results if payrolls are run with the wrong tax code and employees are charged the wrong amount of tax.
ATT president Natalie Miller said:[quote]The introduction of a 30-day delay will inevitably lead to many payrolls being run using amended code notices before employees have had the chance to check that they are correct.
This is very likely to lead to payroll organisations and employers having to deal with more inquiries and complaints from employees and pensioners who cannot understand why there is a change in their net pay.
This seems wholly illogical to us.”[/quote]
Natalie says that a large part of the problem comes from the fact that employers are never supplied with breakdowns of their employees’ tax code changes, so employees are none the wiser about potential income changes until HMRC decides to contact them.
A HMRC spokesperson, on the other hand, assured the ATT that PAYE deducts the right tax at the right time for “the majority of customers”.
It also added that many of its customers have said issuing tax code details is “of little value” to them and can cause unnecessary worry, whilst also costing the taxpayer millions of pounds.