Archives for Accounting

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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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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MTD Pilot scheme is opened

HM Revenue & Customs (HMRC )opened up their  pilot for the online VAT service for MTD on the 16th October, with HMRC inviting more than half a million businesses to try it ahead of new rules coming into force in April 2019.

HMRC’s press office proudly stated :

“Making Tax Digital (MTD) for VAT will make it easier for businesses to manage their tax and will save them, and their agents, time which can instead be devoted to maximising business opportunities, encouraging growth and fostering good financial planning.

From 1 April 2019, under MTD, around 1m businesses registered for VAT with a taxable turnover above £85,000 will need to keep their VAT records digitally and file their returns using MTD-compatible software.

The pilot opens today for around half a million businesses whose affairs are up to date and straightforward, and will extend to most other business types over the coming months. HMRC has also listened to concerns and will give a small group of customers with more complex requirements a further six months to prepare. This will ensure there is sufficient time for testing the service with them in the pilot before they are required to join.”

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Software solutions

Accounting solutions that fit you, not fit us and pushed on you.

Holmes and Company have teamed up with a number of accounting software providers – including certified status with the market leaders in this field,  Xero and Quickbooks, and bridging software solutions for Making Tax Digital (MTD) and excel accounts – so we can find the right solutions for our clients.  If you have any software requirements please contact us

   

    

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Advisory Fuel Rates for ‘pure’ electric cars

HMRC have announced the introduction of an advisory fuel rate for 100% electric cars.

As of 1st September 2018, if your employer provides you with an electric car, you can now claim 4p for every business mile the vehicle is used for.

If you own the electric car personally, you can also charge it for free at work and incur no taxable benefit, and your employer can pay you 45p per mile for the first 10,000 business miles driven in a tax year, and 25p per mile for any additional business miles.

Hybrid and plug-in hybrid cars will continue to be treated as either petrol or diesel models.

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Cloud accounting software

I’ve got accounting software, why do I need cloud accounting software.   The short answer is you don’t.  In the same way your trusty 2nd hand car gets you from A to B just like a Tesla.  But the Tesla has advantages as it utilises modern technologies.

Cloud solutions

Cloud software is all the buzz at the moment.  Especially with Making Tax digital around the corner.  But really all cloud means is that the data and software is held out in the “cloud” not on your local PC or server.   The cloud just means someone else’s server not local to you which you access via the internet.   The advantages of this are no more updates to software, access anywhere you have an internet connection and on multiple devices and reduce costs as you do not need to replace that 10 year old machine sat in the back office that no one knows how it works.

This off course isn’t just limited to just accounts software.  Most IT services now have cloud solutions (And maybe some you use without even thinking about it) including file and record storage, Relationship management software, Email, Practice management to name a few.  But ultimately, if it had a bit of software it probably has a cloud solution available now.

Also, being in the “cloud” makes it easier for other systems to communicate directly with the software.  The most common benefit that shows this is direct bank feeds into the accounts software relegating the need to manually enter all the bank movements.

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Making tax digital

You may have started to hear about Making Tax Digital and over the coming months you will be hearing a lot more about it.  Your current procedure for your financial records may not be compliant with it so action is required now.

But what is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s attempt to move to a digital tax environment – giving real time access to your Tax Information as well as moving you to digital record keeping and submission of tax information.

You can find a detailed overview on the HMRC website at the following link- HMRC – Making tax digital overview but below we will summarise this for you and talk about how it affects you and your business..

Making Tax Digital is an attempt made by the HMRC to do exactly what the name suggests. 

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Sole trader or limited company

Sole trader or limited company? The one thing every business owner has thought about in detail and looked financial implications right?  Well probably not, and there is no right answer that suits every business.  But you should really compare the two routes and see which one is best for you.

Every business – no matter how big or small – must have a legal structure, with the bulk choosing to be either a sole trader or a limited company. An estimated 3.4 million operate as sole traders, with 1.9 million operating as limited companies – so what is the difference between the two? And which could be the best fit for your business?

First – some definitions

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