The complicated changes in the tax system seem to be outsmarting even the HMRC, warns Whitley Stimpson tax expert Owen Kyffin.
With successive governments making significant changes in recent years, navigating your way through the regulatory framework can be a real challenge.
Owen explains: “Filling out a self-assessment tax return or working out future tax bills can often be daunting; and now with changes to the system, including the introduction of the dividend allowance and personal savings allowance, as well as increasing the personal allowance and changes to National Insurance, it can be even more ‘taxing’.”
Last week HMRC admitted it was struggling to properly calculate how the dividend allowance applies to some individuals’ taxes, and has consequently made some mistakes. Launched in April 2016, the dividend allowance permits individuals to earn up to £5,000 in dividend income before they face tax. The first tax returns are now being filled out for the 2016-17 tax year (not due until January 2018) – and it’s not been smooth sailing.
Software glitches at HMRC are being blamed for the fact that the system cannot correctly work out how the dividend allowance, the personal savings allowance (a tax-free limit for savings income) and the tax-free personal allowance all fit together.
Owen continues: “The changes to the personal allowance – the amount you can earn before paying income tax – are one big difference this tax year. The thresholds have altered and it’s important that earners understand how this can affect them and plan for it effectively. In addition, the band on which National Insurance is levied has also shifted. It’s vital that individuals and businesses understand these changes and can plan for them accordingly.”
The HMRC has also made errors recording “Class 2” National Insurance Contributions (NICs) for self-employed people. From April 2015, workers’ “Class 2” National Insurance contributions have been declared on self-assessment tax returns. Previously they were paid to HMRC by direct debit. HMRC again blamed the errors on a “technical fault” with its systems, and said it had only involved a few people.
Owen concludes: “At Whitley Stimpson we have a fully qualified team of people to help advise on any tax issues. It’s important to understand these significant changes, and we believe this is best done face to face to help individuals and businesses understand, calculate and plan effectively.”
Whitley Stimpson, which has offices in Banbury, Bicester, High Wycombe and Witney is ranked within the top 100 accountancy companies in the country and advises on all aspects of personal and company tax affairs. Owen Kyffin can be contacted on 01295 270200 or email@example.com