Head Teachers: How Does the 2015-16 Tax System Affect You?
These rules will remain in place until the next budget in 2016. So, it’s important that you are aware of how the changes affect you, your staff and other members of your family.
You’ve been doing all the “work” part, now how about some of the “reward”?!
As a head teacher you are not the intended recipient of these tax breaks, as the government’s stated aim is to support lower and middle income taxpayers. But you will benefit from general changes that affect most taxpayers and you are certainly eligible for many tax reliefs on work related expenses.
HMRC hold no responsibility for organising individual’s tax affairs. It’s up to you to make sure you are paying what you should and claiming what you are owed.
General tax system changes that impact on most taxpayers
• New standard tax code is 1060L for the tax year 2015-16.
• Income tax bands have been altered slightly.
On income £0 - £31,785, you pay 20% Basic Rate of tax.
On income £31,786 - £150,000, you pay 40% Higher Rate of tax.
On income £150,000+, you pay 45% Additional Rate of tax.
The changes are;
• The Basic rate starting point has been lowered, it was previously £31,865.
• The threshold over which you pay the Higher rate of income tax has been raised from £41,865 last year to £42, 285 this year.
The significance of these changes varies depending on your viewpoint and current financial situation.
• Personal Allowance is up from £10,000 to £10,600.
If you were born after 5th April 1948, you can earn £10,600 before paying any tax whatsoever. If you have any relatives over the age of 75, they can add an extra £60 to that figure.
• How much tax do I pay?
You need to deduct your Personal Allowance from your salary to work out your taxable income. Then determine which Income Tax bracket that figure is in.
Salary – Personal Allowance = Taxable Income = Rate of income tax
e.g. £48,505 - £10,600 = £37,905 = 40% Higher rate of income tax
(Salary) (Personal Allowance) (Taxable income)
Tax system changes that impact on some, higher earning taxpayers
• Taxation rate on savings up to £5,000 is reduced from 10% to 0%!! The interest you earn on this amount is now free and can be put straight into your bank account.
• Child Trust Funds and Junior ISAs have annual subscription limits raised to £4,000.
• Easier transfer of money between Cash ISAs and ‘Stocks and Shares ISAs’ as they are now standardised at £15,000. There are also positive predictions that more types of investments will soon be allowed in ISAs.
Luxuriating in a wine-drenched, sun-soaked retirement may well be the inspiration for committing to your savings plan!
But whether you are thinking about eventual emigration or just spending British winters in a warm holiday home, there are a couple of significant factors to consider during your decision making process.
• Non – domiciled British citizens and the remittance charge.
British citizens who are not domiciled in the UK can choose to pay tax on a remittance basis. This means that any incomes and gains they have offshore are only taxable when they are brought into the UK. To address issues of fairness, the government have changed the remittance rules so that you pay a higher charge when you spend longer living in the UK.
• If you have lived in the UK for 7 of the last 9 years, then there is no change to the charge.
• There is an increase in the charge for non-doms who have resided in the UK for 12 of the past 14 years.
• There is now a new charging point for people who have lived in Britain for 17 of the past 20 years.
• The government are also consulting on another change to the remittance charge. This would see the choice to pay on a remittance basis be applied for a minimum of 3 years. The idea behind this is to prevent people from only paying occasional charges by arranging their tax affairs around the current remittance payment rules.
In the meantime make sure you get your full tax relief entitlement…
Most of us just want to pay a fair amount of tax for an efficient range of public services. It’s common for many education professionals to actually pay more than their fair share because they are not claiming back the tax relief they are entitled to for work related expenses.
When you spend money on something that is for your work you are entitled to reclaim the tax you spent on that item – so you are effectively overpaying your tax bill.
We’re sure you will agree that that section of your pay statement already contains a depressing enough figure. HMRC cannot automatically make a repayment, you have to help them return your money by submitting an official claim.
Head teachers and teachers are eligible for a variety of tax reliefs. Our most common successful claims for Head teachers are;
• Subscriptions to professional bodies and journals and Union fees.(eg NAHT, NUT)
• Using your own vehicle for work travel. (This does not mean your usual commute from one permanent place of work.) Journeys between schools, multi-agency meetings, CPD events, cluster group meetings…the list is quite extensive when you consider all your responsibilities.
• Using your home for work purposes. We know you don’t all go home 5 minutes after the children and that even when you do get in, your day is definitely not over. Each claim needs reviewed on their own merits and you don’t need receipts if you’re eligible.
• Buying and laundering specialist clothing. For example If you are one of the few Heads who still manage to timetable in teaching PE lessons then ‘specialist clothing’ translates into your PE kit. We make regular successful claims for classroom teachers, so there’s no reason for you to miss out.
• You can backdate your initial claim for 4 years.
• As a head you’re probably paying tax at the higher rate of 40%. This means any tax relief you get back will be at 40% and not the lower rate of 20%.
• After a rebate your tax code will change, allowing you to save on tax into the future.
Click here for more information on Teacher Tax Rebates.
As with any government documentation, tax regulations require some translation into standard English. It does require time and patience to work through the system and many consider it prudent to seek professional advice to ensure the accuracy of their personal tax situation.
This article was provided by Tony Shanks, Operations Director of TaxRebateServices.co.uk, leading experts in reclaiming tax and completing tax returns in the UK.
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