Financial Update Spring 2019 Newsletter

Tax pitfalls for new and working parents It can be hard for new parents to keep track of the financial implications of having a baby, with all the other things they have to deal with. There are some issues, however, it can really pay to remember. GET THE MOST FROM YOUR TAX CREDITS New parents may be missing out on an average of £495 a year in tax credits because they are reporting their income incorrectly, HMRC has warned. If you receive statutory maternity, paternity, shared parental or adoption pay, you can deduct up to £100 a week when reporting your earnings for tax credits. If your payments come to less than £100 a week, you should deduct the amount you have received. Statutory maternity pay is available for up to 39 weeks, so this amounts to a potential deduction of £3,900. With the clawback of tax credits at 41%, this can be worth nearly £1,600. It is too late to claim for the current year because the deadline for renewing tax credits was 31 July but new claimants should be aware of this for the next tax year. The bad news is that under universal credit, there is no deduction for statutory maternity, paternity, shared parental or adoption pay. ALWAYS CLAIM CHILD BENEFIT Child benefit is worth nearly £1,800 a year for a family with two children. However, the ‘high income’ tax charge claws back the full amount if just one of the parents earns at least £60,000 a year. If this clawback of child benefit applies to you, you can opt out of receiving child benefit to avoid having to register for self-assessment and filling in a tax return. However, you should still register for child benefit even when the full amount is clawed back, otherwise you will lose some other benefits. Filling in the child benefit claim form entitles you to national insurance credits, which provide state pension contributions for a stay-at- home parent until a child is 12. This gives a potential 12 years towards the 35 years of national insurance contributions required to qualify for a full state pension. Completing the child benefit form will also mean your child receives their national insurance number automatically, shortly before their 16th birthday, rather than having to apply for it. Valuable benefits such as these aren’t always easy to find or understand. If you want to make sure you are making the most of every opportunity, please get in touch. 2 Winter 2018 The Winter edition of our newsletter covers the latest news, as the country prepares for the impacts of Brexit and the 2018 Budget. Alongside these major national issues, our feature looks at the latest announcements for HMRC's Making Tax Digital system, which launches in April 2019. Not to be dissuaded by political events, we also look at how HMRC's ongoing campaign against tax avoidance affects corporate insolvency, disguised remuneration schemes and repayment of director loans. Finally, we offer some essential advice on making a will and why it is an invaluable step for your family and business. 03 Closing loopholes around director loans Are you writing off director loans correctly? We look at the costs of getting it wrong. 04 Making Tax Digital is on the horizon The April deadline is fast approaching, so we look at the latest from HMRC. 05 HMRC ups the cost for late payments Interest rates are finally starting to rise, which means penalty payments will increase too. 06 Intestacy and its consequences for business continuity It's a job we all put off, often until it's too late. But here's why you should make a will. 07 Transforming remuneration in disguise HMRC are working to close down disguised remuneration schemes. 08 From the ashes: Government cracks down on phoenixing Directors may soon have new responsibilities to companies in distress. In this issue... This newsletter is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before takingor refraining from takinganyactionon thebasisof thecontentsof thispublication. Thenewsletter representsourunderstandingof lawandHMRevenue&Customspractice. © Copyright 1 October 2018. All rights reserved. Winter 2018 TAX iStock/PeopleImages Cover image: iStock/aurielaki iStock/NickolayV SAMPLE