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News - 24 January 2013

Universal Credit and Small Businesses

HMRC’s welfare responsibilities are to be moved back to the Department for Work and Pensions (DWP).

With this move, the need for small businesses to seek advice from qualified accountants and tax advisors will become more important.

One reason for this is Real Time Information (RTI), where employers are required to report their employees’ pay, tax and national insurance deductions to HMRC online, on or before payment, and HMRC makes the data available to the DWP to calculate the employee’s entitlement to universal credit. 

There will be no penalties for the first year of operation of RTI, but when the majority of persons become entitled to ‘universal credit’, this may no longer be the case.

Universal credit will start to supersede tax credits gradually between Autumn this year and 2017. From April 2014, it will no longer be possible to make new claims for tax credits, but the bulk of tax credit or benefit claimants will not be in the new system until 2015/16, just over two years’ time.

Tax credits, working tax credit in particular, support many business owners when starting out or experiencing difficult times. Disabled persons in particular have been helped from welfare into work by these credits, which are aligned with the tax system. Many of these may be people who have never needed to complete a tax return; this is about to change.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“However, whereas the introduction of Universal Credits will cause problems with employees, not least in relation to the higher income child benefit charge, it is the self-employed who will need most assistance.”
If you are unsure and need any help and advice on PAYE, RTI and Tax Credits, or you need to keep abreast of changes in legislation and how it could impinge upon your business, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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