• ICAEW
  • XERO GOLD PARTNER
  • KASHFLOW

 

0161 928 3276

 

 

We understand our clients

Tax Credit Changes Approved

Newsletter issue - October 2015.

The government has recently confirmed that the draft Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015, which were laid before Parliament on 7 September 2015, are compatible with the European convention on human rights. Following a lengthy parliamentary debate, the draft regulations have been approved and are expected to apply from 6 April 2016. The implication of these regulations means that most tax credit claimants will have their working tax credit (WTC) and child tax credit (CTC) reduced from April 2016, but the impact of these changes may have passed many people by.

Following the announcement in the Summer 2015 Budget, there has been much debate over the draft regulations and their impact. In particular, there is concern about how the introduction of the national living wage will affect the proposals; whether there are likely to be any behavioural impacts brought about by the proposals; and the degree to which the proposals are likely to impact upon the successful transition of tax credits to universal credit.

Two changes - the increase in the taper rate from 41% to 48%, and reduction in the income threshold from £6,420 to £3,850, will affect many existing claimants and mean that they are likely to see a fall in the amount of tax credits received.

Currently, tax credits are reduced (tapered) by 41p for every £1 that income rises above the following thresholds:

  • For WTC only claims, the threshold for 2015-16 is £6,420
  • For CTC only claims, the threshold for 2015-16 is £16,105
  • For WTC and CTC claims, the threshold for 2015-16 is £6,420

Although not directly announced, these changes, combined with the freeze on some elements of tax credits, mean that the CTC-only threshold will also reduce as a consequence down to £12,125. Broadly, this means that people with incomes above the new thresholds will see their tax credits reduced lower down the income scale and at a much faster rate.

The Low Incomes Tax Reform Group (LITRG) has produced guidance and a useful table, which shows the maximum loss of tax credits, at various levels of income, from the changes set to take effect from April 2016. The table can be found here. http://www.litrg.org.uk/latest-news/news/150917-how-will-tax-credits-cuts-april-2016-affect-you

 

To work Smarter in your Business Contact Beauchamp Charles

Contact Us

"Join our newsletter for hints, tips and tax advice"

 

What our clients say

Dakins Property Services

Great Results, Personable, High Integrity

Choice Events Limited

All at Beauchamp Charles are very helpful, approachable and easy to talk to. They keep me informed with key dates; I can feel totally confident that I won't ever miss any deadlines! Whoever I deal with, always deal with matters professionally and efficiently and if they are unavailable they get back to me promptly.

FT leisure Ltd

I have worked with Beauchamp Charles as our management accountants for over 20 years and have never received anything less than exceptional service. Their approach is both professional and personal. Finances and particularly tax strategies are a minefield for small businesses; Beauchamp Charles have in-depth knowledge of these area, which is comforting. They pay very close attention to our business activities and have provided financial strategies that have helped our company develop.

Fredrick Thomas Electrical and Maintenance

We have used Beauchamp Charles since company formation back in 1998. Beauchamp Charles offers us a one to one service as they are small enough to offer this dedicated service and large enough to do the work and offer best advice. They get to know us as individuals and a business, always giving sound advice. Frederick Thomas Electrical are in a stronger place thanks to the service we get from them.

Barnes Walker Landscapes Limited

We are a small business and had employed the same accountancy firm for many years. Two years ago we took the decision to switch to Beauchamp Charles after several othe local businesses recommended them very highly to us. We have not been disappointed with the service they have provided to us over these last two years.