Posts by Darren

How to pay your tax bill

Paying a tax bill is never going to appear on a top 10 enjoyable things to do list.  But paying it and also paying it correctly so it is allocated against your account correctly are important.  Late payment can result in fines and interest increasing your tax bill.

But first let’s look at the deadlines for both corporation tax and self assessment tax.  The deadlines are when the payment has to be received by HM Revenue and Customs (HMRC) not when it leaves your account.  So do take into account clearing times that the different payment methods have

Corporation tax 

 For companies with taxable profits up to £1.5 million, corporation tax is just a one off payment that needs to be made before 9 months and 1 day after the companies year end.

Self Assessment

The deadline for payment of Self assessment tax due is 31st January.  This payment is for the previous tax year and also includes the first payment on account for the next tax year if due (You can find out more about this here)

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Self Assessment – Payments on Account

You have worked out your income for the tax year and you know based on this what your tax bill is.  But hang on a minute, HMRC are asking you to pay extra and another payment in July.  What is this?

The extra is what HMRC call payments on account.

The timescale for Self assessment is you make the income in the year to 5th April but payment and reporting via the tax return are not completed until the following  January at the latest.  To bring Self assessment to be more in line with PAYE work they ask you to pay some of the bill “upfront”.  This is what they call payments on account.

So who has to make payments on account and how are they calculated.

Every individual who has a tax liability via Self assessment has to make a payment on account unless one of the following two criteria is met

  • your tax bill is less than £1,000
  • you’ve already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings
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Budgeting for the year ahead

At the end of the year it seems almost too premature to start thinking about the next year before we’ve even got Christmas and New Year’s Eve out of the way.  But the Christmas period often gives people some much needed downtime to reflect and start to plan ahead for their goals and achievements for the forthcoming year.

So preferably before that 2nd glasses of wine why not take some time to think what is it you want from the next 12 months.  Budgeting is not just about financial figures, but also determining your goals and what you need to do to achieving them.

First take stock of last year

Look at your financials, but also look at the achievements, what went wrong, what could you have done differently and what worked for you.

The next step

With what has happened fresh in your mind you can start to plan your objectives for the new year.  This could be as simple as saying keep expensive fairly constant and increasing turnover by 10%.   But you can make this as detailed as you want – The more you put in the more you get out.

Let’s look at an example.

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Christmas party

As hard as it is to believe, but provide your staff with social events and the tax man wants his cut.  Social events are declared on the employers P11d as a benefit resulting in a tax charge and you have to pay class 1a NIC on the total cost.

However, HMRC do have a bit of festive cheer and there are exemptions to this rule so that you can get a tax free social event.  To be exempt, the party or similar social function must be all the following:

  • £150 or less per head
  • annual, such as a Christmas party or summer barbecue
  • open to all your employees
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Taking on your first employee

As a business grows so do the demands on the owner.   For some this will lead to making the decision to hire their first employee.  But finding the right person is only the start of the process.  Before taking on your first employee take a look below at the additional requirements that you take on when employing people.

Employment checks

You have a legal responsibility to check that the employee has the right to work.  This could be as simple as checking a passport or as complicated as checking the right to work for an overseas worker.

 

Payroll

The new employee will want to get paid (and not paying less than the minimum wage is definitely not an option!) so you will need some form of payroll.

This will require registering for PAYE with HMRC and then processing the payroll every time you pay someone.

Running a payroll involves calculating the Tax and National Insurance, calculating what is left to pay the employee, issuing payslips to show these calculations and submitting returns to HMRC with these calculations.

 

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Are you trading? – When does selling a few items become a trade

We all sell the odd item from time to time.  But when does this stop being a personal transaction and start being a trade (creating the requirement to register for Self Assessment and paying taxes on any profits).

HMRC does not have clear guidelines but instead gives the vague guidance below

You’re likely to be trading if you:

  • sell regularly to make a profit
  • make items to sell for profit
  • sell online, at car boot sales or through classified adverts on a regular basis
  • earn commission from selling goods for other people
  • are paid for a service you provide
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HMRC – Reasonable excuse to appeal a penalty.

As you probably already know – Pay your taxes late get a penalty! – File a return late – get a penalty!

But are there any excuses that HMRC will accept to avoid a penalty? Well, as you would expect HMRC are not incredibly lenient, otherwise what would be the point of the penalty in the first place! “The dog ate it” is not going to get you much sympathy. However, if you genuinely were trying to submit it but had a reasonable excuse that something stopped you meeting a tax obligation that you took reasonable care to meet then an appeal may be successful.

A few examples include;

• your partner or another close relative died shortly before the tax return or payment deadline
• you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
• you had a serious or life-threatening illness
• your computer or software failed just before or while you were preparing your online return
• service issues with HM Revenue and Customs (HMRC) online services
• a fire, flood or theft prevented you from completing your tax return
• postal delays that you couldn’t have predicted
• delays related to a disability you have

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Budget – Initial points to take away

Philip Hammond has delivered his speech.  Now the exciting/popular/energetic/charismatic people among us will bury our heads in the actual text and find out what the budget actually means for you and me.  As like all budgets, the start is about how well we are doing, how great the economy is and the increases in public spending that are announced.  Then the finer details follow which have a more immediate effect on you and me.  Here are the takeaway headlines that may affect you from his speech.

Growth Forecast

The OBR growth forecast is 1.6% 2019, 1.4% 2020, 1.4% 2021, 1.5% 2022, 1.6% 2023

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