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BENEFITS FOR WIDOWS AND CHILDREN SLASHED

New widows and their children will get thousands of pounds less benefit from April as the Government reorganises the way they are paid. ...

Wednesday, 19 December 2012

£130 OFF YOUR WINTER ELECTRICITY BILL

The big six energy suppliers are spending £1 billion over four years to give some low income customers a discount off one winter electricity bill. This year the discount is £130 and around two million households are eligible.

Pension age – ‘core group’
People over pension age on pension credit qualify for the discount if their income is below around £143 single or £218 (couple). That has to be true on 21 July 2012. People already 80 on that day qualify with a slightly higher income – below £161 (single) or £241 (couple). Some people with disabilities or carers can have higher incomes and still qualify. There are reckoned to be more than a million in this ‘core group’ and they should get the discount automatically – the energy supplier will match their details to a list provided by the Department of Work and Pensions.

Low income
Low income households can qualify for the discount if they apply for it. This is called the ‘broader group’. Each of the big six energy suppliers has its own rules about who qualifies in this group. Generally it is households on a low income where the customer or their partner or child is disabled or they have a child under 5. But each supplier has its own detailed rules and they are all different from each other. Some suppliers also include people over pension age on pension credit who do not get the automatic ‘core group’ payment. See 'Details' below for the six different schemes.

Apply
You apply to your energy company. Find it online or call the customer number no your bill. Ask about the Warn Home Discount. See 'Details' below for contact numbers for each scheme.  

Prepay
You can get the discount however you pay your bill. So it includes people on prepayment meters as well as those who pay quarterly or by monthly direct debit. People on prepayment meters will get a credit to put no their key. Some may get a cheque. More here http://cfe.custhelp.com/app/answers/detail/a_id/6709

PROBLEMS
Big six only
Only the big six energy suppliers are part of the scheme. People with smaller suppliers and those in Northern Ireland will generally NOT get the discount.

The big six are:
British Gas (includes Sainsbury’s Energy), EDF Energy, E.on, npower, Scottish Power, SSE (includes Atlantic Energy, Scottish Hydro, Southern Energy, SWALEC, Ebico, Equipower, M&S Energy).

Utility Warehouse and Equigas give the discount to those in the core group only. People with the other smaller energy companies and those in Northern Ireland will NOT get the Warm Home Discount.

Social tariffs
Before 2011 people on low incomes could pay less for their energy through what were called ‘social tariffs’. They included schemes like Energycare Plus, Energy Assist, Essentials, Fresh Start, and Spreading Warmth. These schemes are closed to new applicants and are being phased out. But some people may still get them and they cannot get the Warm Home Discount as well.

Deadlines
The discount has to be made by 31 March 2013 and applications in theory can be accepted up to that date. However, some suppliers have earlier deadlines. British Gas says you have to apply by 31 December and E.on will only accept applications up to 24 January but both may be flexible. If you qualify it is best to apply as soon as possible.

Run out of cash
Even if you fulfil the conditions you may not get the discount. There is a fixed amount of money for the broader group scheme and once that runs out no one else will be paid. However, no supplier has run out yet.

Not paid automatically
If you are in the ‘core group’ of people on pension credit but have not been sent a letter you should contact your supplier and ask why. It is possible that the information held by the DWP is slightly different from the details held by the energy company and you are in what is called an ‘unmatched’ group. Call 0845 603 9439 to get it sorted out.

MORE DETAILS
The core group is defined as people on pension credit who get ONLY the guarantee credit and do NOT get any savings credit. However, people born 21 July 1932 or earlier qualify even if they get guarantee credit even if they also get some savings credit.

In general the date when you have to fulfil the conditions for the Warm Home Discount was 21 July 2012. If you have moved supplier since then it can get complicated. Ask your existing supplier what to do. Remember it is your electricity supplier who pays the discount. That is because everyone gets an electricity bill but not everyone has piped gas.

The broader group is defined differently by each of the six energy companies. You can read the details of each six and how to apply here

Thanks to Consumer Focus for that information.

There is a Warn Home Discount helpline on 0845 603 9439

Saturday, 17 November 2012

CPP FINED BUT BANKS IN THE FRAME



When I appear on BBC Breakfast I write a cue and notes of what I am going to say. I never read it but it is a useful aide memoire for me. And where there are allegations it ensures I get them right and am fair and balanced.

This morning my spot on BBC Breakfast was stood down for some breaking news. These things happen. But here are the script and notes I wrote about CPP and its mis-sold insurance products.

CUE: A firm which sold millions of people insurance against ID theft and loss of their bank cards has been fined more than £10 million by the financial regulator and told to pay compensation to customers.

CUE: The Financial Services Authority revealed that CPP had told customers untruths and misled them while selling the insurance, which was unlikely to pay out in any normal circumstances. Paul Lewis is in our London studio

Q: What did CPP sell and why was it mis-sold?

PAUL: Two products were mis-sold. What CPP called card protection plans which were supposed to pay out if you had money stolen from your account – but of course if you do the banks pay out in almost all circumstances so the insurance was generally useless. The FSA revealed CPP charged around £35 a year for it but the product cost it just 60p. The other was ID theft insurance. It was more expensive at £84 a year but it cost CPP just £16. Both products were mis-sold by sales staff who, to put it bluntly, lied. They used false statistics, made misleading claims, exaggerated the value of the insurance – which as I said would almost never pay out – and they gave advice which in the later years they were banned from doing. Their contracts also contained unfair terms.

Q: How did it manage to sell so much?

PAUL: Altogether it sold more than £840m of new and renewed business to 4.4 million people between 2005 and 2011. CPP sold about 10% of its products directly. But the bulk of them – about 4 million new policies – were sold as a result of a partnership with four High Street banks – Barclays, RBS, Santander, and HSBC. In some cases the bank put a phone number on newly issued cards with the instruction to call it to ‘activate’ the card. In fact you got straight through to a CPP sales person. So some banks at the least colluded in this mis-selling to 4 million people.

Q: And have the banks also been censured?

PAUL: No. Not yet. I understand the FSA is in discussions with the banks and other CPP partners. CPP has been fined £10.5m for direct sales and is expected to pay out £14.5m compensation. But ten times as many policies were sold through the banks – so will the fines and compensation be ten times as big? We won’t know that for some time. But it is more bad news for the reputation of those banks.

Q: What compensation will customers get?

PAUL: Anyone mis-sold these products – and the FSA report makes it clear that was widespread, so it may be most or almost all of those with them – will get their premiums refunded plus interest. CPP has been banned from selling these products – in fact its whole website is down at the moment – but those who have them are allowed to renew. Anyone who is offered a renewal should think very carefully about whether it is good value for money. And should prepare to make a claim for compensation when the scheme is announced in the New Year.

Q: What does the company say?

PAUL: In a long statement it apologised, said this was all in the past, it would pay the penalties, and move on to a better future.

You can call CPP in office hours free from a landline on 0808 156 0199

Thursday, 8 November 2012

CHILD BENEFIT HIGH INCOME CHARGE

UPDATED AND AMENDED 6 AUGUST 2015

If you get child benefit and you or your partner has an income over £50,099 a year some or all of your child benefit will be taken back in extra income tax. It is called the Child Benefit High Income Charge. If the income is over £60,000 you may prefer to give up the child benefit than pay the charge. But there are alternatives - see 'Avoid the charge' below.

The rules are complicated and may seem illogical and unfair.

The charge
The tax charge began on 7 January 2013. No-one has their child benefit itself taken away. Instead the partner with the higher income pays an extra income tax charge. If their income in a tax year is £60,000 or more the tax charge will equal the child benefit. For a household with three children child benefit is worth £2549.30 in the year 2015/16. So the extra tax will also be £2549.30 (confusingly there are 53 child benefit payments in the tax year this year). It will be collected through self-assessment. If you do not already fill in a self-assessment form you will have to in future. The Revenue estimates that an extra 350,000 people will have to fill in a self-assessment form as a result of the charge. But 45,000 of them may have failed to do so.

If the partner with the higher income gets £50,100 to £59,999 a year the tax charge is less than the child benefit. It will be 1% of the CB for every £100 by which income exceeds £50,000. So if income is £55,000 the tax charge is 50% of the CB. For a household with three children that would be £1250.60 in 2015/16. Work out the charge for earlier years on the official calculator. See 'Avoid the charge' below.

The charge is assessed on the partner with the higher income. If one partner has an income of £60,000 and the other partner has no income then the full tax charge will be made and every penny of the Child Benefit will be taken back in tax. On the other hand if both partners have an income of £50,099 no charge is made even though their household income is more than £100,000.

Paying the charge
The charge began on 7 January 2013. If it applies to you for 2012/13 then you should have informed HMRC by 5 October 2013 and registered for online self-assessment. If the charge begins in subsequent tax years then you must tell the Revenue by 5 October in the next tax year. Click here to tell HMRC. You then have to submit your form online by 31 January in the next tax year. If you are an employee and the total amount due under self-assessment is £3000 or less then it can be paid through your tax code. The full charge itself will be more than £3000 in a tax year if you have four children or more.

If you miss the 5 October deadline then HMRC may charge a penalty as well as the tax when your self-assessment is worked out. The penalty can be up to 100% of the tax due on the child benefit. But HMRC says it only want to charge the big penalties to those who have deliberately avoided paying the tax charge. You can appeal against a penalty.

HMRC estimates that 1.1 million people will be subject to the charge.

The charge is due from the date your first child is born or the date one partner or the other has an income over £50,099. You can choose not to claim child benefit for the child. Otherwise the partner with the higher income will have to pay the tax charge.

Cohabitation
If someone who gets child benefit lives alone then it is their income which is assessed. If they live with another person as a married couple or as civil partners then the partner with the higher income is assessed and – if their individual income is more than £50,099 – charged. It does not matter whether two people are married, including a same sex marriage, or in a legal civil partnership. If they live as if they were in one of those relationships then they are counted as partners. And it does not matter whose children the child benefit is paid for.

This rule can lead to anomalies when relationships begin and end.
  • Amanda Smith is divorced and has two children. She earns £35,000 a year and gets £1823.20 in 2015/16 in child benefit. Her income is below £50,099 so the tax charge does not apply to her. She meets Charles Wright. After a few months they start living together. He earns £61,000 and has to inform HMRC and pay the extra tax charge of £1823.20 even though the children are not his and he contributes nothing directly to their upkeep. On the other hand their biological father James Smith, who pays maintenance for his children and who earns £95,000 a year, pays no extra tax.
The rules about living together are the same as those used for tax credits. If two people have a relationship but have two separate homes HMRC can still decide they are living together as partners.

If you live together for part of the year then the higher earner only has to pay the charge for that part of the tax year. That can get very complicated especially if both partners have an income above £50,099.

If your partner will not tell you if they get child benefit or what their income is then you can ask HMRC. It will answer two questions - 'Does my partner xxx receive child benefit?' and 'Is my partner xxx's income higher than mine?'

Marginal tax rates £50,100 to £59,999
A person liable to the charge whose income is between £50,099 and £60,000 faces very high rates of tax on each extra pound they earn. They pay income tax at 40%, National Insurance at 2%, and then the child benefit charge. If there are three children that charge is 25.5%. That means for every extra £100 they lose two thirds of it to tax and keep just £32.50. If they have a student loan and pay the graduate tax of 9% they will keep less than a quarter of any extra earnings, losing £76.50 of every £100 to tax.

The more children there are in the household the higher the child benefit tax. If there is one child it adds 11% to the tax rate. For two it is 18.2%, three children is 25.5% and four adds 32.8%. Five children adds 40%. If there are eight children it is 61.8%, taking the total tax take to more than the money earned. For every £100 earned the total tax is £103.80. And if graduate tax is paid then a partner in a seven child family will pay £105.50 on every £100 earned. In other words they will be better off not earning the extra money.These calculations use the 53 week child benefit year for 2015/16.

The child benefit tax charge means that anyone with even one child and an income between £50,099 and £59,999 will pay a higher marginal rate of tax than someone with an income of £1,000,000. Everyone with even one child will pay at least 53% in tax for each extra £1 earned. That is a higher rate than the 47% income tax and NI charged on those with an income above £150,000. And even higher than the 52% that was due in 2013/14 before the additional rate was cut to 45%.

Income
The income which is assessed is called 'adjusted net income’ though in fact it is more like gross income before tax. It is your total taxable income from all sources including earnings, rent, dividends, and savings interest before any tax allowances are deducted. However, you do adjust it by deducting pension contributions, gift aid donations, and salary sacrificed for child care vouchers or a cycle to work scheme. So someone who earns £60,000 and would face the full 100% tax charge could pay £10,000 gross into a pension scheme and avoid the charge altogether. As most of the contribution would be tax relief that would be a very good deal. But check that the pension tax rules allow you to make that contribution.

For people with simple tax affairs who are employees then the key figure is on their P60 form. That is given to every employee after the end of the tax year. Find your P60 for 2014/15 and look at the pay box 'total for year'. If that is £50,099 or less and you have no other income then no tax charge will be due and you do not need to register for self-assessment. If it is more than £50,099 then you may have to pay the tax but you can deduct the gross amount of any Gift Aid payments or pensions you pay into separate from your job. If you have more than one job or you get a pension and pay then you will have to find all your P60s and add up the total income boxes.

You can check your net adjusted income using the official calculator. Put the P60 figure in the 'Salary before tax' box. Assume that includes taxable benefits and deducted amounts like work pension contributions, cycle to work scheme and childcare vouchers. Then put in other income including income from savings and any pension contributions or gift aid donations. Gross amounts in both cases. That should give the correct figure for your adjusted net income.

Avoid the charge
You can avoid the tax charge and the hassle of self-assessment if the person who gets the child benefit tells HMRC they do not want to receive it. The child benefit will stop and the tax charge will not be due for subsequent tax years - though if any child benefit is received in a tax year (6 April to next 5 April) then the higher earner will still have to be in self-assessment and pay the tax on the child benefit received for that year.

Although child benefit is not received, entitlement to it will continue. So it can be reinstated if circumstances change and National Insurance credits will continue to be available for the person entitled to it. Those credits build up entitlement to state pension if National Insurance is not paid at work.

Giving up child benefit should not affect a current or future entitlement to widowed parent's allowance as you will still be 'treated as entitled' to child benefit even if your late spouse/civil partner or you have given it up.

If you give up child benefit but it turns out that the tax charge is not due you can reclaim it for up to two years.

Giving up child benefit is only sensible if the higher earner has an income well above £60,000 and the relationship between them and the person entitled to child benefit is stable. Even then there are good reasons for keeping the child benefit. It can be put into a savings account where it will earn interest and the money in the account can be used to pay the tax charge up to 21 months later leaving a small profit on the interest. If the account is an ISA no tax will be due on the interest.

In 2015 the Revenue estimated about 800,000 people have given up their child benefit to avoid the tax charge.

More information
This brief guide covers the basics. Always get advice and study official documents before making changes in your personal circumstances. The Government has some information here.

Version 2.0
5 August 2015




Tuesday, 2 October 2012

AUTO-ENROLMENT ENDS THE 20TH CENTURY


Parliament.uk now provides records of parliamentary debates in the future – prospective Hansard – as well as historic Hansard from the past. A quick search finds this interesting insight into how auto-enrolment will end means-testing, and see the state pension and National Insurance phased out.

Wednesday 11 December 2052, 2.30pm.

The Secretary of State for Savings and Longer Life (Mr. John Potter): Mr. Speaker, may I first pay tribute to the noble Lord, Lord Webb of West Bromwich, who is still, I believe, an active member of the other place, and whose foresight and vision led us to the happy situation we are in today. The latest Real Time Information from His Majesty’s Revenues show that in 2051/52 90% of all eligible people in work are paying in to a workplace pension scheme. And that of those retiring last year three quarters had a workplace auto-enrolment pension worth an average of £1083 a month.

At this time of year it is traditional for the Secretary of State for Savings and Longer Life to stand here and tell this House how much he – or, more often, she [hon. Members: Hear, hear] – plans to increase the state pensions paid to the generation who suffered greatly in the early 21st century recessions and whom, we will all agree, deserve our gratitude for the hardships they bore to pull us out of the quagmire of deficit and debt which was left – and I say it quite frankly – by successive governments of all colours and of none.

That is why the state pension on which many older pensioners relied has been raised of late – after years of neglect by other parties – by more even than the 2.5% a year guaranteed by the triple lock, originally introduced by the noble Lord, Lord Webb and cleverly inverted by the Rainbow Alliance government in 2033.

But today I am pleased to announce that this ancient safeguard is no longer needed. The auto-enrolment system has been so successful that I can call a halt to these yearly, unfunded bonuses paid by hardworking families. And Mr. Speaker I can go further. The strength of the auto-enrolment scheme and the more than £1000 a month it provides – and for many it is of course a lot more than that – the £1000 and more a month it provides means that the Government can maintain the state pension at its current level of £1512 a month without decreasing the real incomes of pensioners overall. And those aged 72, now looking forward to their first pension payment, can do so knowing that they will be getting more in total than their older siblings got last year.

I can also announce that means-tested help with rates, rents, living costs, travel, prescriptions, 6G comms, and winter fuel, will also be phased out. Now that most pensioners rely on their own thrift, it would be unfair on them to provide a similar income for those who deliberately chose again and again to un-enrol from the pension opportunities first provided forty years ago.

At the same time I can announce a reform which has been many years – too many years for some – in the making. The old-fashioned and so 20th century National Insurance scheme is to be wound up and its funds passed to the Chancellor to absorb in the national accounts. ….I give way to my hon. Friend

The Chancellor of the Exchequer (Ms Eloise Transom): If it is helpful Mr. Speaker I can inform the House that from 6 April 2053 the 14% National Insurance contributions paid by employees will be added to the general rate of income tax and the 15% paid by employers will be similarly subsumed into corporation tax.

The Secretary of State for Savings and Longer Life: I am grateful to my hon. Friend for that timely intervention. Because, Mr. Speaker, I can go further. In future years the increasing income of pensioners will be provided by the growth in the average auto-enrolment pension. By 2062 – in ten short years – that pension which they have proudly earned for themselves will exceed the value of the state pension until now generously provided by others.

Mr. Speaker, by the end of this century, which I hope I, if not Lord Webb himself [hon. Members: hear, hear, hear], may live to see, we can look forward to the time when the crushing and humiliating dependency on the state of our older people is but a distant 20th century memory and the pension system of our great country is ready for the second half of the 21st century pride and self-reliance. A time in which our older people can stand tall and retire on an income which, even when it is less than they have now, they will at least know is all of their own making and not paid for by younger hard working families.

Mr. Speaker, my officials tell me that on the 200th anniversary of the state pension, in 2108, this House – though probably not even I! – will also be able to celebrate its burial. That will be the ultimate achievement of auto-enrolment and the Noble Lord, Lord Webb [Hon. Members: hear, hear, hear. Cheers. Rowdy stamping].

Mr. Speaker: Order. The Motion is that in view of the success of self-reliance and auto-enrolment the state pension be frozen forthwith with a view to phasing out by 2108; the National Insurance Fund be wound up and the surplus absorbed in the national accounts; and National Insurance contributions be added to general taxation at their present rates from 2053/54.

Question put and agreed to.


Monday, 24 September 2012

BEST LEARN YOUR PLACE

UPDATE 4 MARCH 2015
Andrew Mitchell agrees to pay PC Rowland £80,000 in damages for falsely accusing him of lying. Mitchell will also have to pay some or all of Rowland's costs which are still to be determined. More here.

UPDATE 27 NOVEMBER 2014
Mr Justice Mitting ruled in the High Court today 27 November 2014 that Andrew Mitchell did use the word 'pleb' and that the account of what he said by PC Toby Rowland was substantially true. 

"I am satisfied at least on the balance of probabilities that Mr Mitchell did speak the words alleged or something so close to them as to amount to the same including the politically toxic word pleb."

Mitchell was suing The Sun newspaper for a September 2012 report in which it alleged he said to police who would not let him ride his bicycle through the vehicle gate 

 "Best you learn your fucking place - you don't run this fucking country - you're fucking plebs."

PC Toby Rowland was present at the time and wrote the words in his notebook. He counter-sued when Mitchell effectively called him a liar who had made the words up. Although Mitchell admitted to using the word 'fucking' he denied using the word 'pleb'. 

But the judge said PC Rowland "was not the sort of man who would have had the wit, imagination or inclination to invent on the spur of the moment an account of what a senior politician had said to him in temper".

Full judgment 

UPDATE 10 JANUARY 2014
PC Keith Wallis admitted he lied when he gave an account of Andrew Mitchell's confrontation with police at Downing Steet. He was not present. He pleaded guilty in court to misconduct in public office and will be sentenced later.

UPDATE 16 OCTOBER 2013
Evidence is growing that the police fitted up Andrew Mitchell after the incident with his bicycle at Downing Street more than a year ago. Deciding between two competing accounts by a politician and a police officer is always difficult. But clearly the recording of the meeting between Mitchell and the Police Federation three days after the event shows the officers' account of it given immediately afterwards to the press was not correct. When they gave it they did not know Mitchell was recording it. The Independent Police Complaints Commission has criticised the three officers concerned and the lack of disciplinary proceedings against them http://www.bbc.co.uk/news/uk-24536328

UPDATE
At the end of March 2013 Andrew Mitchell issued libel proceedings against the Sun newspaper for its story about these events.
___________________________________

It is the first clause in the newly published verbatim rant of Chief Whip the Rt Hon Andrew Mitchell MP which I find the most offensive. To a police officer doing their job and following the security rules they had been told to follow – ‘Best you learn your f------ place’. Oh dear.

The real damage of this whole episode is, of course, the class one. We rule, you are ruled, oozes from every word. And not because we are elected, just because of who we are. Few things could be more damaging to the present Government.

Of course, Mr Mitchell (as he likes to be addressed) is correct that the police ‘don’t run the f------- Government’, and we would all fight (I hope) to keep it so, even avowed pacifists like me. But, appointed by us and given rules on security to keep our elected members safe, the police officer at that barrier did have the right to tell him which gate he was allowed to use. However annoying those petty rules may be, politicians of all people should follow them. If they want the rules changed then they have the power to make that happen.

And as for ‘you’re all f------- plebs’, that is a word that will haunt Mr Mitchell as long as he is in politics. Because it fits precisely the tone of the rant. In Rome ‘plebeians’ meant the mass of the people as opposed to the patrician class who ruled them. Back to ‘learn your place’. Sorry, ‘learn your fucking place’. I don’t wish to misquote the Rt Hon Andrew Mitchell MP.

Before the apparently full account by the officer was published in The Daily Telegraph dated 25 September, Mr Mitchell said "I am very clear about what I said and what I didn't say and I want to make it absolutely clear that I did not use the words that have been attributed to me." He also apologised again.

The Daily Telegraph account http://goo.gl/J2sV1

FREE ENERGY SAVING

As it gets colder million of us worry about heating bills for the coming winter. But governments and the energy companies have money to get rid of to help us save energy. Some of these schemes offer free insulation for every householder regardless of their income or circumstances.

You should apply soon - some schemes close at the end of September. The deals may not be repeated next year.

One quick way to find out what you can get is to call the Energy Saving Trust on 0300 123 1234. It will tell you what help is available locally as well as details of the schemes for everyone run by energy companies as well as the schemes in England, Scotland, Wales and Northern Ireland run by national governments and assemblies. The service is free and impartial. More at www.energysavingtrust.org.uk

Energy companies
In Great Britain the big six energy companies all have schemes that provide insulation free. They normally cover loft and cavity wall insulation in suitable homes. The average saving on fuel bills is reckoned to be £175 a year for loft insulation and £135 a year for cavity wall insulation. These are standard industry average figures and your own experience may be different.

British Gas, EDF, Scottish Power, and SSE will insulate any home in Great Britain free - you don't have to be a customer of theirs and there are no conditions about your circumstances or income. Of course, your home has to be suitable - not all are. If you already have loft insulation that may not be a barrier to getting it upgraded to modern standards. The current standard is 370mm about 11 inches but the joists in the loft will be smaller often six inches. So storing things on the joists may be difficult in future.

Low income customers may also get up to £300 as a bonus - amounts differ and the cash will be paid in vouchers to spend in High Street shops. British Gas will also pay for any scaffolding if that is needed and give elderly customers up to £150 to pay someone to clear the loft.

Remember these four schemes are for everyone NOT just customers of these firms and regardless of income or personal circumstances. They are running out of time so call today.

British Gas 0800 980 8177
EDF 0800 096 9000
Scottish Power 0845 601 7836
SSE 0800 072 7201

You may find cheaper numbers by using www.saynoto0870.com

E.On has a similar scheme but just for its own customers.
nPower will only insulate the homes of its own customers who have a low income and also get certain benefits related to age, children, or disability.

Smaller energy suppliers and those in Northern Ireland may not have similar schemes. But it is worth asking.

The big power companies offer the deals because they have a legal obligation to achieve reductions in the amount of energy we use - it is called the Carbon Emission Reduction Target (CERT). They have to meet these targets by the end of 2012. They are all trying to do as much as they can to hit them in time.

These deals may never be repeated as CERT has ended and arrangements are different next year.

Government schemes
Warm Front (England) 0800 316 2805
NEST (Wales) 0808 808 2244
Energy Assistance (Scotland) 0800 512 012
Warm Homes (Northern Ireland) 0800 988 0559

All four offer help with insulation and with heating systems – such as boilers or inefficient fires – but to qualify you must be on a low income, normally you have to be claiming a means-tested benefit as well as being over pension age OR have young children OR be disabled.

Call to find out more. If you are calling from a mobile you may find cheaper numbers on www.saynoto0870.com

Other schemes
As well as the major energy companies Tesco is offering a free-to-all insulation scheme. 0800 321 3456 www.tescohomeefficiency.com/free-insulation

Many local councils are also offering energy advice and insulation schemes. The Energy Saving Trust on 0300 123 1234 can give you more information about those in your area.

Beware of anyone who cold calls you at the door offering free insulation or energy saving work. Never trust them. Always say you will call whoever they claim to represent and look the number up yourself in the phone book or on the internet or check with the Energy Saving Trust.

People in mobile homes, tenants, and those in older properties may find they cannot get help. But the Energy Saving Trust can let you know what is available.

WARNING
Qualifying conditions may change. There may be application deadlines and claims after the deadline may be refused. Some end on 30 September 2012. Apply as soon as you can.


Wednesday, 19 September 2012

UNIVERSAL CREDIT - 83% TAX RATE FOR SOME

THIS BLOGPOST IS NO LONGER UPDATED AND THE FIGURES IN IT SHOULD NOT BE RELIED ON. IT HAS BEEN REPLACED

UPDATE 9 MARCH 2017
In his Spring Budget, 8 March 2017, Phillip Hammond confirmed that the tapered loss of this benefit was a tax. He confirmed the reduction in the taper rate by saying "the Universal Credit taper rate will be reduced in April from 65% to 63%, cutting tax for 3 million families on low incomes."

UPDATE 24 NOVEMBER 2016
In his Autumn Statement on 23 November 2016 Chancellor Philip Hammond announced that the taper rate for Universal Credit would be reduced from 65% to 63% from April 2017. That will make very little difference to the figures in this blogpost paper. In the final calculation it allows claimants to keep 80p of every pound earned rather than 81p. The calculation is shown at the end of this blogpost. It will be fully updated in April 2017.

UPDATED 11 APRIL 2016
The latest council tax support details have been published and are incorporated in the blogpost.

Householders who get the new means-tested benefit called Universal Credit could keep just 19p of every pound extra they earn – an effective tax rate of 81%. In some parts of England it could be more - losing 82p to 83p in every pound that is earned, leaving them with 18p to as little as 17p for every extra pound they earn. Those losses are similar to many under the present system and could undermine the work incentives which the new system is designed to create. And for graduates on incomes above £17,495 but low enough to get Universal Credit, the deductions would be more, adding about 2.5 percentage points to those figures. Worst case would be earn £1 keep 14.5p.

Universal credit
Universal Credit is being rolled out from October 2013 to replace six means-tested benefits and tax credits. It is paid to people on low incomes who cannot work, are looking for work, or work on very low pay.

It is supposed to let people keep more of what they earn and thus boost incentives both to return to work and to earn more once in work. For every £1 extra earned the credit will be reduced by 65p allowing the claimant to keep 35p. This so called ‘withdrawal rate’ of 65p in the pound is said to be much lower than rates under the present system and allowing them to keep 35p of what they earn is seen as an incentive to work. The Government says that is a big improvement on the current system where a combination of different rules and tapers can lead to individuals losing more than more than 90p in the pound if they pay tax and their means-tested benefits are cut. 

However, that figure of 65p withdrawal rate is only accurate for people who earn less than £155 a week and are not householders.

Taxpayers
Universal Credit is worked out after tax and National Insurance have been deducted. In 2016/17 anyone earning more than £155 a week will pay National Insurance and once they earn £212 a week income tax begins. Someone paying National Insurance will lose 12p in the pound before their Universal Credit is worked out. The total loss from NI and reduction in Universal Credit is 69p from each £1 they earn. So they keep 31p. If they pay income tax as well they lose just over 76p of each pound and keep just under 24p. Those figures were originally confirmed by Pensions Minister Steve Webb in Parliament in 2012. (Hansard, House of Commons, 11 September 2012, col.196).

But that is only part of the picture.

Householders
Universal Credit, despite its name, does not replace all means-tested benefits. It does not include the means-tested reduction in council tax which used to be called Council Tax Benefit but since 1 April 2013 has been replaced by a very similar scheme called Council Tax Support which is operated by local councils. Like all means-tested benefits Council Tax Support is withdrawn as income rises. The standard taper is 20p for each £1 rise in net income (after tax, NI and Universal Credit). In other words for each extra pound of net income help with council tax is reduced by 20p. The result is that for each £1 earned a total of 81p disappears in tax, NI, reduced Universal Credit, and reduced Council Tax Support. The calculation is at the foot of this blogpost.

Localism
In some areas of England and Wales the reduction for every £1 of income earned may be even higher. As part of the transfer to local councils the Government has cut the money it currently pays towards help with council tax. From 1 April 2013 councils get 90% of the money they got to pay Council Tax Benefit. The Government has already said that out of that reduced budget they will have to pay exactly the same benefit to anyone over pension age. Nearly half of all Council Tax Benefit recipients are pensioners so the other half – working age people who can claim Universal Credit – will bear the whole of the funding cut. That will mean a reduction for them of between 19% and 33% according to the Institute for Fiscal Studies (www.ifs.org.uk/comms/comm123.pdf chapter 5). 

Councils have now published the details of their schemes for the fourth year of local council tax support. In 2016/17 the great majority are keeping the taper at 20%. But 18 have a higher taper. Five - Brent, Doncaster, Harrow, North Kesteven, and Trafford - have raised it to 30%; another 11 to 25%, and one each to 23% and 21%. Only three (Brentwood, Mid Sussex, and Wiltshire) have cut it to 15%. See http://counciltaxsupport.org/schemes/ 

In areas which raise the Council Tax Support taper to 25% householders on Universal Credit who pay tax will find that 82p of each pound earned disappears in deductions. In areas with a 30% taper they will lose 83p and keep just 17p for each extra pound earned in income tax, National Insurance, reduced Universal Credit and reduced Council Tax Support. In the three areas where the taper is 15% people will lose 80% of each extra pound. Students on plan 1 or plan 2 who pay in effect an extra 9% tax lose 85.5p in the extra pound keeping just 14.5p. 

Conclusion
Losing more than 80% of each extra pound you earn is hardly an incentive to work or to work harder.

You can read the 11 September 2013 parliamentary debate on Universal Credit here

CALCULATION OF TOTAL DEDUCTIONS FOR A TAXPAYER HOUSEHOLDER
FOR EACH £1 OF EXTRA INCOME WITH 20% COUNCIL TAX TAPER

EARNS EXTRA£1.00
Tax20%-£0.20
NI12%-£0.12
Net after tax£0.68
UC reduction65%-£0.44
Net after UC£0.24
CTS reduction20%-£0.05
NET GAIN£0.19
Effective 'tax'81%

CALCULATION OF TOTAL DEDUCTIONS FOR A TAXPAYER HOUSEHOLDER
FOR EACH £1 OF EXTRA INCOME WITH 20% COUNCIL TAX TAPER SHOWING EFFECT OF 63% UC TAPER FROM APRIL 2017



EARNS EXTRA
£1.00
Tax
20%
-£0.20
NI
12%
-£0.12
Net after tax
£0.68
UC reduction
63%
-£0.43
Net after UC
£0.25
CTS reduction
20%
-£0.05
NET GAIN
£0.20
Effective 'tax'
80%

9 March 2017
Version 2.6

Thursday, 30 August 2012

CLAIMING WINTER FUEL PAYMENT ABROAD

UPDATED 18 MAY 2015
UK expats living in some other European countries can claim the Winter Fuel Payment this winter. To qualify this winter 2015/16 they must have been born on 5 January 1953 or earlier and have 'a genuine and sufficient link to the UK'. They must also live in one of 25 countries listed below. From Winter 2015 it is no longer paid in seven warmer EU countries.

Until 2012 people who lived outside the UK could not claim the Winter Fuel Payment. If they had already qualified and claimed it in the UK they could keep it if they moved, but they could not claim it for the first time from outside the UK.

The change was brought about by a judgement of the European Court of Justice in a case about disability benefits. The court ruled that it was wrong to prevent people from claiming the benefit just because they did not live in the UK at the time of the claim. As long as they had what is called 'a genuine and sufficient link to the social security system of the UK' they can claim from another European country. The DWP interprets that as meaning that the person worked and paid National Insurance in the UK for a long period of time, certainly enough time to qualify for a state pension. The new rule began on 16 September 2013.

The Winter Fuel Payment is £200 per household where a qualifying person lives. So a couple will normally get £100 each. If someone is over 80 (born 27 September 1935 or earlier) the payment is £300.

Payments cannot be claimed for earlier winters. A loophole which allowed some payments from the late 1990s to be claimed was closed from 1 April 2014.

The countries
Claims for this winter 2015/16 can be made by people living in Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Netherlands, Norway, Poland, Romania, Slovakia, Slovenia, Sweden, or Switzerland.

The payment is not made to people living in the Channel Islands nor the chilly Isle of Man because they are outside the EU.

Claims for people living in Cyprus, France, Gibraltar, Greece, Malta, Portugal, and Spain are no longer allowed, even if you got one there in the past. They were paid up to winter 2014/15.

The seven countries were chosen because the average temperature of the whole country in the months November to March were warmer than the average temperature in the warmest region of the UK - South West England where it is 5.6C. However, the Department for Work and Pensions calculated the average temperature for France including its four tropical overseas territories - Martinique and Guadeloupe in the Caribbean, French Guiana on the equatorial coast of South America and RĂ©union which is south of the Equator in the Indian Ocean tropics. Mean winter temperatures in these places range from 20.5C to 25.8C. If they had been excluded the average temperature in France would have been 4.9C, which is below the cut off point for the payment. But including the four territories raises the average to 7.0C thus enabling the Government to exclude tens of thousands of expats living anywhere in mainland France. In fact only six regions in mainland France have a mean winter temperature higher than that in SW England. The DWP claims it had no choice about including the overseas territories. It had to use the definition of France which the French government uses which includes them. 

Met Office report on temperatures in 34 European countries by region contains the data and will enable the new law to be applied if other countries such as Turkey join the EU. No other country in the 34 would be excluded.

Claiming
Find out more about winter fuel payment and how to claim. People living abroad will normally have to make a claim. And so do men in the UK aged under 65 in the first year they qualify.  If you want to get advice call +44 191 218 7777 if you live abroad. If you live in the UK call 03459 15 15 15.

If you do not qualify this year find your qualifying date in future here - assuming the rules do not change which they might.

18 May 2015
vs.3.0

Tuesday, 24 July 2012

CASH-IN-HAND


I hate to agree with a Treasury Minister. It’s not my job to support the Government, whatever its politics. My job is to hold Ministers to account and point out the flaws in what they say – a job I have relished for more than 25 years. So when Treasury Minister David Gauke said on 23 July that it was “morally wrong” to pay your plumber or decorator cash-in-hand in return for a discount I confess I was in a dilemma. Because I think he is right.

And I go further. If you do a deal with a tradesperson to pay cash in exchange for a lower price to ‘avoid the VAT’ – as someone once said to me – then you are in a conspiracy to evade tax. You are both breaking the law.

So at its simplest I agree with David Gauke. We should not pay cash if we know, think, or suspect that the purpose of paying by cash rather than by cheque or card is to keep the transaction off the books and away from any possible investigation by HMRC.

But of course the world is more complicated than that.

Cash can be good
Most cash payments are not about tax dodging.

A small trader with a big overdraft may prefer cash to cheque so that the money does not have to go through the banking system. It also helps cash flow – this morning’s cash payment may be used to buy supplies this afternoon for the next job.

Cash is also certain. Since the banks decided to scrap the cheque guarantee card in June 2011 any cheque can bounce which means a lot of hassle and expense trying to recover the money.

And cash is cheaper. Most banks charge for each cheque paid into a business account. And every time a debit or credit card is used it costs the trader money. Not just the fee or percentage the card issuer takes but also the cost of renting the machine to take the payments.

Some people deal with cash for the simple reason that their business is so small they do not have any taxable income – like handyman Chris on the Radio Wales phone-in today who earned less than £8000 a year.

And it would be ridiculous to pay small amounts by card or cheque.

So there are a lot of reasons to prefer cash. But of course those reasons do include the disreputable one – unlike other means of payment cash does not leave an audit trail. So it is clearly the payment method of choice for those who do want to evade tax.

Cash can be bad
I am sure everyone with a home or a car has asked the cost of a job and been told one price and then a lower one ‘for cash’. That is the moment when you must suspect that evading tax is on the agenda. If the discount is 5% then it may simply be because of those other advantages of having cash rather than a payment that is more expensive, less certain, and takes more time to process. But a much bigger discount means it is probably an attempt to involve you in a conspiracy to keep the payment off the books and hidden from HM Revenue & Customs. 

Of course, tax fraud is often initiated by customers. Paul, a carpet cleaner, called the Tony Livesey show on Radio 5 Live last night to say that he charged £95 to clean a carpet. To which many householders replied  ‘what will you take for cash?’ 

So David Gauke’s attack is on the middle-class homeowner as much as the tradespeople they pay. In the short-term, of course, you both benefit personally from such as deal – the job costs you less and the trader pays no tax. That is why it is a conspiracy to defraud!

But ultimately if you do pay cash-in-hand – and even as you say it you can feel the conspiratorial wink which accompanies that phrase – everyone loses. It is the slippery slope that led to the economic woes of Greece where tax is seen as a voluntary activity – a view supported in the past by a corrupt revenue collection service.

Bigger tax dodges
But hang on, I can hear you say. What about the real tax dodgers. The richest people in the world who, the Tax Justice Network estimates, have salted away £13 trillion in tax havens many of which are British Overseas Territories or Crown Dependencies. What about the £35 billion in UK tax which is evaded or uncollected each year? That figure from HM Revenue & Customs itself. What about the cunning plans operated by accountancy and law firms big and small, often called ‘tax planning’ or ‘tax mitigation’, which allow people and businesses to wriggle through gaps in the law to emerge tax-free on the other side thumbing their nose at the rest of us and singing ‘nah nah ni nah nah’!

And hang on again, you add. Rather than lecture us about this small-time tax dodging the Government  should be tackling the major tax evoidance (as I call it) of the people who think they are too rich or too clever or too famous to pay tax like the rest of us. Only then will people on modest income struggling to make a living or to pay for essential repairs feel it is right to pay the full whack  and their taxes. Fairness goes both ways.

All that is true. But that still does not justify entering into a conspiracy to help the local gardener or decorator or mechanic evade the tax due on their modest income.

Size of the problem
Paying traders in cash is not the biggest source of tax loss to the Government. HMRC says the ‘hidden economy’ costs about £4 billion a year out of the £35 billion total ‘tax gap’. In 2008 the parliamentary Public Accounts Committee estimated that up to two million people were engaged in taking cash-in-hand to reduce their tax bill at a cost to the Revenue of £2 billion a year. All these estimates are highly speculative. And whatever the true figure it is going to be a tiny percentage of the estimated income tax receipts in 2012/13 of £155 billion and an even smaller proportion of the total tax take of £592 billion. It is certainly not the worst wrong in tax dodging. But it is still wrong. And there is no excuse for joining in. 

It is our business
Of course it is the trader’s job to keep the books accurately, report their earnings in full and pay the correct tax. And it is not our job to ensure they do that. But if you saw a mugging the street or a burglar emerging from a window carrying a computer it would not be your job to deal with that either. But shouldn’t you do something? If only shout and call the police?

So when you pay a trader in cash always ask for a receipt. Ideally, it should be from a proper receipt book with a place of business stated clearly on it. For any large amounts get an invoice – it protects you if something goes wrong. If the bill includes VAT check that the firm is registered. And never ever ask for or agree to a big discount for cash.

It won’t stop tax dodging. But you at least will have occupied a nice square of solid moral ground from which you can demand that the wealthy pay their fair share too. 

Sources
·         Tax Justice Network www.taxjustice.net
·         HMRC Measuring Tax Gaps 2011 www.hmrc.gov.uk/stats/mtg-2011.pdf
·         Public Accounts Committee Tackling the Hidden Economy December 2008 www.publications.parliament.uk/pa/cm200708/cmselect/cmpubacc/712/712.pdf
·         Report tax fraud to HMRC www.hmrc.gov.uk/reportingfraud/help.htm
·         Check if a VAT number is correct ec.europa.eu/taxation_customs/vies