Teachers to Tell All

The Taxman has launched another campaign to encourage people to pay tax on income they have previously omitted from their tax returns. This time private teachers are targeted under a scheme called TCup: Tax Catch Up Plan for tutors and coaches.

If you want to use the TCup scheme you need to tell the Taxman you intend to make a disclosure by 6 January 2012, either using the notification form on the HMRC website, or by telephoning: 0845 601 8817.

On notification the Taxman will issue you with a disclosure reference number (DRN) and payment reference number. You will need to quote the DRN when you make the full disclosure of all your outstanding tax matters by 31 March 2012.

That is also the deadline for paying all the tax due on your previously undeclared income, interest on that tax, and the relevant penalty. To ensure your payment is matched to your disclosure form you need to quote your payment reference number.

It is up to you to calculate the penalty you should pay due to your late declaration of income. Under the TCup scheme the penalty can be 0%, 10% or 20%, depending on whether your under-declaration of income was an innocent mistake, careless error, or deliberate error. This is a considerable discount on the 100% penalty enforceable for deliberate and concealed errors discovered by the Taxman in normal circumstances, (which incidentally can be up to 200% where certain off-shore income is involved).

We can help you make a full disclosure and calculate the tax, interest and penalties due.

Personal Tax Changes 2011/12

Personal Allowances
The tax-free personal tax allowances for 2011/12 have not been announced but we do know that the tax free allowance for those aged under 65 will be at least £7,475, although the increase of £1,000 from the present limit will only benefit basic rate taxpayers.

Child and Working Tax Credits
Working and Child Tax Credits are to be withdrawn at the rate of 41% from families with total income of £40,000 or more from 6 April 2011. Families with income of over £40,000 may no longer be eligible for the family element of £545 per year. The baby addition to the family element (also £545) will be withdrawn completely at the same time.

The change in income that can be disregarded for a tax credit claim will be reduced from £25,000 to £10,000 with effect from 6 April 2011.

Pensions
From 6 April 2011 the state pension will be increased by the greater of: the annual increase in earnings or prices, or 2.5%.

The standard minimum income guarantee given under the Pension Credit will be increased by the same cash amount as the state pension.

From 2011/12 a member of a pension scheme can contribute up to £50,000 per year into registered pension funds, and receive full tax relief on those contributions. This £50,000 cap includes employer contributions and the deemed increase in value of defined benefit pension schemes. If contributions of less than £50,000 have been made for three immediate preceding tax years when the individual was a member of a pension scheme, the unused cap for each tax year can be carried forward up to three years.

Savings
The overall tax-free ISA limit for 2011/12 will be £10,680, of which £5,340 can be saved in a cash form such as a bank savings account.

Late Tax Returns and Payment Penalties

Late Tax Returns: Your personal tax return for the year to 5 April 2008 should have been submitted to the Tax Office by 31 January 2009 at the very latest. Tax returns submitted on paper for that year were due in by 31 October 2008. These deadlines may be later if the 2007/08 tax year was the first year for which you needed to submit a tax return, and you didn't receive the tax return form until after 31 July 2008.

The Taxman does not have much patience when it comes to late delivery of tax returns and has instructed his computer to send out £100 penalties every six months. The first penalty would have been issued in February 2009 and the second one in August 2009. If the Taxman gets really cross he will ask the Tax Tribunal to issue daily penalties of up to £60 per day, until you do deliver a complete tax return!

If you have paid all the income and capital gains tax you owed for 2007/08 by 31 January 2009, or you are due a tax repayment for that year, the £100 penalties can be reduced to nil. However, you do have to appeal against the £100 penalty notices to claim the reduction.

Late Payments: If you have not paid all the tax you owe for 2007/08 you will have been issued with a 5% surcharge in February and another 5% surcharge in August, plus interest will be mounting up at 2.5% on the amount owing. This interest rate on late tax increased to 3% from 29 September 2009. Where you have agreed a time to pay plan with the Tax Office, and are paying the instalments due under than plan on time, the 5% surcharges should not have been raised. If this is the case the Tax Office should be contacted as soon as possible to get the 5% surcharge cancelled.