Monthly Archives: April 2016

Automatic enrolment – the number of fines is increasing
April 2016

The Pensions Regulator is finding a growing number of automatic enrolment failures.

The Pensions Regulator (TPR) recently issued its latest “Compliance and enforcement” bulletin, looking at progress to the end of 2015. This showed that as the size of employers drawn into the scope of auto-enrolment has shrunk, so have the TPR’s actions and fines grown:

  • In the final quarter of 2015, TPR issued 2,596 compliance notices, which it describes as giving employers “a ‘nudge’ to encourage them to meet their duties”. In the previous three years, the average had been under 200 a quarter.
  • TPR served 78 Unpaid Contribution Notices in the last three months of 2015. Once again the average for the previous three years was much lower – about 12 a quarter.
  • Further up the non-compliance scale, TPR levied 1,021 £400 Fixed Penalty Notices for non-compliance: in the previous three years it had only issued 573 in total.
  • TPR also imposed 24 escalating daily penalties (which can run up to £10,000) for failure to comply with a statutory notice. In the first three years of automatic enrolment only seven were issued.

2015 11 12 DJV NAT 207The bulletin includes a case study of “an employer in the sports sector” who racked up £10,000 in daily penalties and was forced to pay a further £15,000 of contributions on behalf of their staff because of delays in putting a workplace pension in place.

TPR’s message to employers is simple: “plan early to meet your automatic enrolment deadlines. …. There is no need to risk a fine.” We could not have put it better ourselves.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Keep an eye on your cash
April 2016

The latest inflation figure has crept up again, but interest rates haven’t followed.

Rising-GraphBetween December 2015 and January 2016, overall prices as measured by the Consumer Prices Index (CPI) fell by 0.8%. However, prices normally fall between Christmas and the New Year as the sales get under way and the festive travel price hikes are unwound. The latest turn of year drop was 0.1% smaller than that between 2014 and 2015, with the result that annual inflation nudged up by 0.1% to 0.3%, the highest since January 2015.

The low level of inflation prompted another of the regular letters between Mark Carney, Governor of the Bank of England, and the Chancellor explaining why the inflation target (2%±1%) had again been missed. Mr Carney gave the same main reasons as he had previously: “falls in commodity prices; the past appreciation of sterling; and, to a lesser degree, below-average growth of domestic wage costs”.

The Bank’s latest projection for inflation, published in February, is that it is unlikely to reach the 2% central target until around the end of next year, based on the current market forecasts of future interest rates. These in turn suggest that base rate – 0.5% since March 2009 – will not reach 1% until around the end of 2018. In his letter to George Osborne, Mr Carney even said that “were … downside risks to materialise” the Bank could “…cut Bank Rate further towards zero from its current level of 0.5%.”

According to Moneyfacts, the average instant access account interest rate (excluding cash ISAs) is now 0.63%, the lowest since June 2014. In this environment it is more important than ever to review your cash holdings and make sure that you do not hold more on deposit than an adequate personal reserve. Too large a cash buffer can turn out to be a deadweight on your overall portfolio returns.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Breaking the PAYE code
April 2016

Your latest PAYE code may look a little strange.

It’s the time of year when HM Revenue & Customs (HMRC) sends out PAYE codes for the new tax year. Usually that means adjustments for:

  • An increase in the personal allowance, which in 2016/17 will rise by £400 to £11,000;
  • Changes in any benefit values, notably car benefit which could increase quite sharply if you have a low emission car; and
  • Collecting tax due from earlier years and, unless you have requested otherwise, tax due for the current year on certain investment income.

Reports suggest that HMRC has started to allow for the dividend tax changes and the personal savings allowance in setting 2016/17 codes.  However, the results can be confusing, not least because HMRC’s starting point will be the dividend and interest on the last tax return which they received from you (hopefully 2014/15).

For example, if you are a higher rate taxpayer who had £7,000 of dividend income in 2014/15, HMRC will make the following calculation:

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To collect this tax, HMRC will reduce your total allowances by £1,625 on the basis that 40% of £1,625 is £650, the amount of tax due.

Anecdotal evidence suggests that the HMRC process is not running too smoothly.  There have been wrong calculations and instructions not to collect tax in-year have been ignored.  Although in the end the full self-assessment calculation will sort out any errors, it is better to start off with the right numbers rather than wait for a surprise bill or delayed tax repayment.  If you want a quick check on what your tax bill should be for 2016/17 – and ways you might reduce it – do talk to us.