Archives for Tax

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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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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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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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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Rent a Room Relief

The government believes that rent a room relief is being abused, with many people believing that the relief can be claimed on properties let out entirely as holiday or short term lets.

The relief will continue at the current threshold of £7,500 per year however an additional condition will apply from 6th April 2019, such that the tax payer must be present in the property for all or part of the time for which the room is let out.

Tax payers will not receive the relief for letting out their house while they are on holiday but taking short holidays during a period of long-term letting to a lodger will not break the conditions of the relief.

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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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