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Archives for March 2019

Not Claiming Child Benefit could affect your State Pension

Back in 2013 the rules around child benefit changed, so that if one partner earns more than £60k then child benefit is not due – and if it has been claimed, it has to be repaid.  Often this means the mother claims it, and the father has to repay it!!

As a result, many couples who know their income is above this level, see this as a waste of time, and don’t bother to register for child benefit on the birth of their child.

But claiming child benefit, whether it is actually paid or not, is important as it ensures that the claimant (usually the mother) receives a National Insurance Credit for the year.

Why does this matter?

To get the full state pension, you need to have paid NIC or have received NIC credits for 35 years.  To get any state pension at all, you need to have a payment record for 10 years.  The NIC credits you receive while you stay at home to bring up your children, are therefore important in building up your NI record.

It is possible to claim child benefit, but then to elect for it not to be actually paid to you, and this gets round the hassle of having it paid to you, only to have to pay it back again via self-assessment.

New child benefit claims can only be backdated 3 months, so if you do realise you have a gap in your NI record, it can’t be corrected retrospectively.

Once registered though, if your income for a previous year changes, (eg if you are self-employed and you have a loss one year, this can be carried back to the year before and reduce your income for the previous year) this may mean that you would then qualify for child benefit that year.  As long as you are registered, it would then be paid to you.  If you had never registered, this would not be possible.

It’s really important to check your NIC record with HMRC – not only to see how many qualifying years you have, but also because HMRC very often get it wrong and you need to correct it.  To check your record, you need to set up and log on to your Personal Tax Account – https://www.gov.uk/personal-tax-account

So if you are in a position where either you or your partner earn over £60k, you should still register for child benefit, even if you then opt not to actually receive it, and protect your entitlement to a state pension!

For more information please contact Rosie Forsyth at Wilkins & Co.

 

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5 things to check before the tax year end

The tax year end is rapidly approaching so it’s a good time to check your finances and make sure you have minimised any tax liabilities.  What should you be looking at?

Here are 5 things that may apply to you to help you save some tax before 5 April.

Dividend Allowance

If you run your business through a limited company, then you can extract funds via dividends, as long as the business has the reserves to be able to do so.  The dividend allowance for 18/19 is £2,000, so you will be able to extract this amount tax-free per shareholder.

Timing of Expenses

If your company or business year end is 31 March 19, then think about expenditure around the year end.  Money spent before 31 March 19 will be included in this year’s accounts, and reduce your profit this year, whereas delaying until April 19 will move those costs into next year (generally).  If your business is on the cusp of paying higher rate tax, then bringing forward planned expenditure could be tax efficient.

Pension Contributions

Pensions remain one of the most tax efficient ways to save. You receive a 20% top-up from the government on any contributions you make personally and you also extend your basic rate band for income tax purposes. Depending on your income, this can reduce the amount of tax you pay at higher rates.

Paying a pension contribution from your limited company is also tax efficient and is an allowable deduction for corporation tax.  Speak to an IFA if you are interested in contributing to your later years!

Child Benefit

If you or your partner’s adjusted taxable income is above £50,000 then you start to lose your child benefit for the year.  This is reduced on a sliding scale up to £60,000 when it is lost in full, and if you have received it in the year it will need to be repaid.  Consider making pension contributions, or gift aid donations to reduce your adjusted taxable income, and to keep your child benefit.

Marriage Allowance

So many people who are entitled to this are still not claiming it!

The Marriage allowance lets you transfer 10% of your personal allowance to your spouse/civil partner if you have not used it.  This can save you £237 as a couple.  To qualify your spouse must be a basic rate taxpayer, and your income under £11,850.

For any more information, please contact Rosie Forsyth atWilkins & Co

 

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