I’m self employed and want to make contributions into my personal pension scheme. Did any of the rules change in the recent Budget?

There were changes in the recent Budget which set the maximum that can be paid into a pension scheme without incurring a tax charge at £50,000 for 2011/12. This is referred to as the annual allowance (AA). If contributions are paid over this amount excess contributions are taxed as your top slice of income.

To allow larger contributions to be made when profits might be available any unused AA can be carried forward for up to three years. For example if pension contributions of £30,000 were made in each of the tax year 2008/09, 2009/10 and 2010/11 there is a total unused AA of £60,000 which can be added to the 2011/12 limit.

As a business I understand I can claim tax relief on the equipment I purchase. How much can I claim?

The purchase of equipment and other assets used in the business receive reliefs called capital allowances. In the 2011/12 tax year purchases of up to a total of £25,000 are fully deductible from your profit as Annual Investment Allowance (AIA). Any purchases over the £25,000 AIA are given writing down allowances (WDA) of 18% in the first year. The remaining cost is carried forward and this will receive further WDA in the coming years.

It is important to remember that AIA does not apply to all types of purchases and some assets receive a lower rate of WDA, the most common exception being cars.

I have been asked by one of my employee’s to pay for their child’s childcare as part of their salary. How does this work?

As an employer you can pay up to £55 per week in childcare vouchers without these being subject to income tax. The vouchers are also exempt from both employee’s and employer’s national insurances.

The vouchers must be used by your employee to pay for registered or approved childcare and the vouchers must be available generally to all your employees. If you pay the childcare provider directly rather than using vouchers the same £55 per week allowance applies.

There were changes for employees joining the voucher scheme after the 5 April 2011  if the employee’s earnings and benefits mean they are liable to higher rate tax. The effect of these changes results in the tax saving being equivalent to £11 per week for all employee’s.

Give us a call at Duncan & Toplis Newark if any of these issues effect you 01636 640321