Archives for Tax Tips

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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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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What to Do if You Stop Being an Employer

If your business ceases to employ anyone and you have no plans to take on any more staff, you may want to think about closing your PAYE Scheme.

If you do want to cease your PAYE scheme, you will need to notify HMRC straight away by completing a final payroll return (either a Full Payment Submission (FPS) or an Employer Payment Summary (EPS)).

You will also need to settle any outstanding tax and National Insurance liabilities, and submit any P11D expenses and benefits forms due to HMRC.

For further information, please see your accountant or financial advisor.

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The Warm Home Discount Scheme

With the colder weather starting to rear its ugly head, many people will find their utility bills rising, which can particularly affect the elderly, and those on low incomes.

If you, or someone you know, receive the Guarantee Credit element of Pension Credit, HMRC’s Warm Home Discount Scheme may be able to help offset some of the additional costs, as it offers up to £140 towards your electricity bill, payable directly to the electricity supplier.

The scheme may also apply to people on low incomes who are entitled to certain means-tested benefits.

To check who qualifies, please see further details here.

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National Minimum Wage Increase

From 1st October 2016, the National Minimum Wage (NMW) for 21-24 year-olds is increasing to £6.95 per hour, up from £6.70.

The minimum wage for apprentices will also increase, from £3.30 to £3.40 per hour, and the NMW for 18-20 year-olds will increase to £5.55 per hour, from £5.30.

The National Living Wage (NLW) of £7.20 per hour for workers over 25 is not due to change, as this was introduced in April 2016.

Please note that HMRC have advised that employers who don’t pay the national minimum wage rates are liable to public naming via a Government press release.

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Employing Staff for the First Time

The prospect of taking on new staff for the first time can seem quite daunting as the administrative burden on employers gets ever more complex.

Firstly, you need to ensure that your potential employee has the right to work in the UK or if you need to make any background checks, such as the Disclosure and Barring Service check (formerly the Criminal Records Bureau check).

You then need to ensure that your employees are paid at least the National Minimum Wage (or the National Living Wage for employees aged over 25).

If you are employing someone for more than 1 month, they must be given a written statement of employment.

You will normally need to register as an employer with HMRC, and may also need to enrol your staff into a workplace pension scheme.

Further information on the above can be found here.

If you are unsure about any payroll issues, please get in touch for help and advice – we can offer a complete payroll service if needed.

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Telephone Scams

Many taxpayers have been subject to telephone scams recently, in which the caller is claiming to be from HMRC, either requesting personal information in order to process a tax refund, or leaving a voicemail asking the taxpayer to call back or demanding payment before legal action.

Please be aware that these calls are NOT from HMRC and are scams, dedicated to take personal information, and  money, from unaware taxpayers.

Please ensure that you can verify anyone claiming to be from HMRC before handing over any information, and if you are still unsure, ask them to write to you instead.

HMRC take their security very seriously and are working on cracking down on these scams. If you are subject to this at any point, please contact Action Fraud on 0300 123 2050 and report this, or see HMRC security advice here.

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Tax on Student Jobs

If you are a student working a part or full time job, you may need to pay tax and national insurance depending on your earnings and PAYE tax code.

If you do incur income tax and national insurance charges, but don’t work for the entire tax year, it may be beneficial to complete HMRC form P50, to reclaim any tax owed to you.

For more information, see the HMRC website at https://www.gov.uk/student-jobs-paying-tax or to download HMRC form P50, click here.

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Withdrawal of the Wear and Tear allowance for Landlords

In previous tax years, landlords who rented out ‘fully furnished’ properties were able to reduce the tax they paid by claiming a ‘wear and tear’ allowance equivalent to 10% of the net rents received.  This allowance could be claimed regardless of whether any furnishings in the property were actually replaced.

With effect from April 2016, this allowance has been withdrawn, and has been replaced by a new system which makes relief available only in situations where furniture and furnishings (including white goods and kitchenware) are actually replaced.

The amount of the available deduction is now calculated as follows:

  • The cost of the new replacement item, limited to the cost of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent) plus –
  • The incidental costs of disposing of the old item or acquiring the replacement, less –
  • Any amounts received on disposal of the old item
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More Professional Bodies Approved for Tax Relief

If you pay membership fees to a professional body, you may be able to claim tax relief on the amount of your subscription (and go back for up to four years if you have not made a claim for earlier periods).

HMRC have now announced the addition of the following to their list of approved professional bodies:

  • Chartered Institute of Educational Assessors;
  • Genetic Counsellor Registration Board;
  • Health Communications Association;
  • National Association of Student Money Advisers;
  • Paediatric Intensive Care Society;
  • Teenagers and Young Adults with Cancer;
  • Cymdeithas Ddysgedig Cymru (The Learned Society of Wales was removed from the list)

For the full list, please see the HMRC website here.

If you do wish to make a claim, you need to complete HMRC form P87.

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Director’s Date of Birth

Companies House will no longer make a director’s full date of birth publicly available, as there has been concern that this is a key piece of information that could potentially be used in identity fraud.

Although Directors will still need to notify Companies House of their date of birth, only the month and year of birth will now show on the public register, and on their data products and filings.

(They are still working on a cost-effective way of redacting the day of birth from paper filings pre October 2015).

A Director’s full date of birth may still be disclosed in exceptional circumstances however, such as for credit references or police inquiries.

For further information regarding how your personal information is held by Companies House, please see their Personal Information Charter.

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Trivial Benefit

HMRC have always agreed that trivial benefits may be exempt from taxation via from P11D, however there has never previously been any guidance on what exactly constitutes a ‘trivial benefit’, until now.

From 6th April 2016, HMRC have changed their guidance to define that a ‘trivial benefit’ is exempt from tax if all of the following conditions are met:

  • the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person)
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

Please also bear in mind, directors of close companies are capped at a total cost of £300 during the tax year.

For more guidance, please see the HMRC website at https://www.gov.uk/government/publications/tax-exemption-for-trivial-benefits-in-kind-draft-guidance/tax-exemption-for-trivial-benefits-in-kind-draft-guidance

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