Do you have a Limited Company and are currently an employee of that Limited Company? If you are a director of a Limited Company and receiving a salary, you will be an employee. As we have now approached the end of the tax year for 2016/17, we will now be able to finalise the calculations for your P11D Benefit forms for the last tax year ending 5th April 2017.
If you have expenses which are a mixture of both business and personal use, we will be able to claim these as company expenses, as long as the expenses are detailed on your P11D for the tax year.
This can be a good way to reduce the amount you need to withdraw from your company, as instead of having to pay for these personally, the expenses can be accounted for as an allowable company expense. Otherwise, these expenses are classed as dividends and will cause you to incur additional personal tax.
For example if you are paying for your mobile bills personally and they are around £100 per month, totalling around £1,200 across the tax year, you would normally have to withdraw this amount from your company as a dividend in order to pay for the personal bills. As this amount is taxed personally in order for you to have £1,200 you would essentially need to withdraw £1,777 (including the personal tax of £1,200 x 32.5% which you will need to pay on top).
However, if we claimed for the £1,200 mobile bills through the company as an expense, this would instantly save you the £577 you would be paying on the dividends for the year. This would generate a personal tax payment on the P11D benefits of £240 though.
The employers Class 1a National Insurance due on the £1,200 mobile bills is £165.60, which does have to be paid by the Limited Company.
Although that appears to be costing the Limited Company, the mobile bills and the employers National Insurance payment then become tax deductible expenses.
Overall, the corporation tax you would be saving through the company would be £273.12 (which is £1,200 + £165.60 = £1,365.60 x 20%).
So, for this example you can see the outgoings are personal tax of £240 and employers NIC of £165.60.
However, if you didn’t choose to include the mobile bills through a P11D, you would be withdrawing an additional dividend of £1,777 across the year causing personal tax of £577, and you also wouldn’t be getting corporation tax relief for the £1,200 which would have been £240.
Looking just above, the total cost of outgoings for claiming the mobile bills would be £405.60 so overall you would actually be better off by £444.52 (£577+£273.12-£405.60) by claiming the mobile bills through the Limited Company.
For your specific industry, other expenses such as the following are allowable through a P11D:
• Cable bills
This is just among the handful of the many expenses we can claim on the P11D forms for the tax year and save you personal tax at rates of either 7.5% or even up to 32.5%.
If the expenses are not detailed on a P11D form, you will not be able to claim the amount against your corporation tax for the company accounting year.
Please send across all of your receipts and expenses up to 5th April 2017 as soon as possible, so we can ensure we have the P11D calculations ready to be submitted to HMRC by 6th July 2017.
If you have class 1a National Insurance to pay on the P11D benefits, this amount will be payable by 19th July 2017 by your Limited Company.
Don’t hesitate to contact us if you have any questions or queries regarding the types of expenses we can claim for you through the P11D benefit forms, remember there is no such thing as a silly question!
If you are considering purchasing a property to rent out, or currently have a rental property, this might be a nice read for you.
Once you have purchased a property to rent out, with the intention of earning income for several months, or even years, this becomes one of your business assets from which, may earn you future profits.
If you decide to sell this rental property at a later date, for a variety of different reasons such as it being something that you no longer wish to keep, HM Revenue & Customs (HMRC) will expect you to pay capital gains tax on any gain made from the sale of the business property.
HMRC should be updated within 2 years, if you do change your principal private residence (PPR) address. For example, if you purchase a new property to live in but wish to keep your old property to rent out, HMRC should be informed of the change in the PPR address within 2 years of buying the new property.
This is a very important factor, as if you have previously lived in the rental property before renting it out, the months/years the property was your principal private residence, this relief can go towards reducing down your tax bill arising from any capital gain made on the sale.
When completing the capital gains tax calculation for the sale of the rental property, there are a few things which are taken into account. Here are some of the items which will be considered and will be worth keeping a note of throughout the period of ownership (whether rented out or not):
– Purchase Date and Price of the Property
– Associated Acquisition Costs in Purchasing the property (including Stamp Duty)
– Disposal Date and Proceeds (sale date and price)
– Additional Disposal Costs
– Incidental Costs (costs spent out during the period of ownership)
– Enhancement Costs (costs spent out during the period of ownership)
You may be entitled to Principal Private Residence Relief and/or Lettings Relief, which are two reliefs you could be eligible for when selling your property and can massively reduce down the amount of tax you have to pay.
Principal Private Residence Relief is calculated using the amount of months you have owned the property, and includes months where the property was actually classed as your principal private residence. You could also be eligible for Lettings Relief and this will take into account the months that the property was rented out, throughout the period of ownership.
The remaining gain after taking all of the above into account will be subject to capital gains tax, which can be taxed at either 18% or 28% depending on the level of your other taxable income in the year of sale.
If you are thinking about selling a rental property, or want some advice on any of the above, please do give us a shout – ideally before you have already sold the property! We may be able to complete some draft calculations for you and give you a rough estimate of any future capital gains tax bill that may be due!
Have you recently decided to move house or perhaps renew your current mortgage to get a better rate? Being self employed, are you wondering what sort of information you will need to provide to the banks in order to stand a chance at getting a good mortgage?
Some Mortgage providers and lenders will require an Accountant’s Certificate to be completed, detailing the previous 3 years of income along with signed copies of your Accounts for the past 3 years. Just forward on the information they require to us and we will provide you with exactly what you need.
More recently, HMRC have provided a list of Mortgage Providers and Lenders which now accept 2 documents for tax years they require:
This is the link which takes you to the specific HMRC website.
The 2 documents these mortgage providers and lenders require are a ‘Tax Year Overview’ and an ‘SA302’.
The Tax Year Overview can be found on your account with HMRC which we have access to and can obtain copies of these for you. They detail the amount of tax due for the tax years in question, the payments, and any outstanding balances of tax due.
An SA302 is something which details the amount of taxable income you have earned for the specific tax years in questions, and also give detail of how the income has been taxed. It also gives a breakdown of the personal tax payments due by 31st January and 31st July of the year it is for.
These 2 documents should coincide with each other and it proves to the mortgage provider that we (as your Accountant) have lodged the tax return in which the SA302 has been produced.
Some mortgage providers and lenders only prefer the original HMRC copies of the SA302’s, however the update from HMRC seen in the link above suggests that several banks have actually agreed to accept the SA302 forms which are produced by our commercial software.
This should mean a quicker turn around for you in the information you require from us to give to your mortgage providers.
If you are thinking about getting a mortgage for your property, then contact us as early as possible using the details below. We can provide you with most of the information in a flash, but unfortunately should your specific mortgage provider need information verified from HM Revenue and Customs (HMRC), then unfortunately HMRC can take a couple of weeks to provide copies of the SA302 forms – so the earlier we know, the quicker we can help you!
Are you a grandparent who is looking after your grandchildren, or are your children being looked after by their grandparents while you are out working?
If you fall into this category or someone you know may fall into this category, then this following article could prove to be of some benefit to you.
HM Revenue & Customs (HMRC) are offering a National Insurance top up credit, for grandparents who care for their grandchildren of 12 years of age and under. This in turn will top up their income at retirement age. The credit to which the grandparent would be entitled, is a Class 3 National Insurance Credit and protects the entitlement to the basic state pension.
HMRC have provided a form online to apply for the national insurance tax credits and this will need to be signed by both the adult carer and the child benefit receiver.
The application form will need to be submitted to HMRC in the October following the end of the tax year in which the caring took place. For example, if you cared for your grandchildren in the tax year 16/17 which covers from 6th April 2016 to 5th April 2017, then you would need to fill out the form by October 2017 in order to receive the national insurance credits.
For the caring itself, there is no minimum amount of hours you have to care for the grandchildren to receive the credit, all you need to do is apply!
Please use the link above for the HMRC form if you feel this could be useful to yourself or someone you may know!
Of course if you have any questions or queries relating to any of the above, please don’t hesitate to get in contact with us and your team!
Were you aware of the new and upcoming changes that HMRC had got lined up for the Class 4 National Insurance contributions? Would this have affected you?
HMRC have been keeping us on our toes this year with all of the upcoming changes they are putting into place, and here is a brief outline of one change which has now been reversed following the spring 2017 Budget.
The recent budget announced an increase in the amount of Class 4 National Insurance self-employed individuals would have to pay from April 2018.
Currently, the class 4 National Insurance contributions are paid within your personal tax payments you pay across to HMRC during the year through your payments on account.
The amount of NIC was due to rise from 9% to 10% from April 2018 and following this, another rise from 10% to 11% in April 2019.
How will this affect you now? From April 2018 onwards, you would have needed to be saving a higher amount of your income to put towards your future tax bills.
However, HMRC have now decided to remove this original change for the increase in the national insurance from 2018, so the amount of national insurance you will be paying at the basic rate of tax will still be 9% and won’t be set to increase. Your tax saving amount shouldn’t change for now, unless of your earnings are increasing!
The personal allowance is still set to be increasing from £11,000 to £11,500 from April 2018 and an increase to £12,500 by the time we reach April 2020. You will happy to know that this has not changed and will still be taking place in the next few years to come.
Of course, if you do have any questions or queries, or wish to discuss your tax saving % with us then please don’t hesitate to contact us.
Are you finding that you are paying higher than expected amounts of personal tax if your circumstances change throughout the year?
HM Revenue & Customs (HMRC) are currently improving the Pay As You Earn (PAYE) system to make it easier for tax payers. This change will see tax being spread more evenly across the tax year so that at the end of the tax year there will be a lot less to pay.
Many people can find themselves either under paying or over paying their tax bills yearly, and therefore will find they have a balance to pay for the tax year, or find themselves due a rebate from HMRC for the overpaid tax during the year.
HMRC are trying to keep the tax codes up to date, which are used to calculate the amount of tax due on income, so that there is less to pay following the end of the tax year. These will tend to include estimated income based on the previous tax year, in order to collect the tax during the year.
The majority of tax payers won’t actually notice a change, however if you are paying tax on a Pay As You Earn basis and have changed your circumstances during the tax year which occurs from 6th April to 5th April, then this may be beneficial to you.
More and more tax is being collected at source rather than through filing an Annual Personal Tax Return.
If HMRC change your tax code, they will send you the updated tax code through the post and this will come with a breakdown of exactly what income they have included within your new tax code. Of course, if you are unsure if it is correct or not, send it across to us and we will be able to check to see if they have included what we would expect.
HMRC are getting more reluctant to change the tax codes they have provided, however if your circumstances have changed, for example you received a high amount of dividends the previous year but you don’t intend on receiving those dividends again in the current tax year, this might be something that we could speak to HMRC on your behalf and get updated!
This is all part of the drive from HM Revenue & Customs (HMRC) to the Making Tax Digital (MTD) changes which are going to be taking place within the next couple of years. HMRC will expect a quarterly submission to show the income and expenses of your business. At the moment, there isn’t anything set in stone however, this seems to be the way HMRC are leaning going forwards.
If you have any questions or queries with regards to your tax code and the amount of tax you are paying at source, please do get in contact with us! We will be able to ensure you that you are on the right tax code for your earnings, or speak with HM Revenue & Customs (HMRC) to get this updated to reflect your new circumstances.
Employer’s listens up…you could get up to £3,000 a year off your National Insurance bill!
This allowance can only be claimed against your employers’ (secondary) Class 1 National Insurance that you’ve paid in a tax year (i.e. 6th April 2017 until the 5th April 2018), up to a maximum of £3,000 each tax year.
You can still claim the allowance if you pay less than £3,000 a tax year.
So who is eligible??
You can claim Employment Allowance if you’re a business or charity paying employers’ Class 1 National Insurance.
If you have more than one employer PAYE reference, you can only claim the Employment Allowance against one of them.
You can’t claim if:
• you’re the director and the only paid employee in your company
• you employ someone for personal, household or domestic work (like a nanny or gardener) – unless they’re a care or support worker
• you’re a public body or business doing more than half your work in the public sector (such as local councils and NHS services) – unless you’re a charity
• you’re a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary (such as your personal service company, limited company or partnership)
How to claim?
You can claim at any time in the tax year. To make your claim go through your payroll software, put ‘Yes’ in the ‘Employment Allowance indicator’ field next time you send an Employment Payment Summary (EPS) to HM Revenue and Customs (HMRC).
Once you have completed and submitted your claim, it will continue until you stop it. So you won’t have to keep applying on each monthly EPS.
If you do apply late in the tax year and don’t use up your full Employment Allowance, you’ll have to ask HMRC to use the remainder of the under claimed allowance to pay towards any unpaid Class 1 National Insurance you owe or even any Value Added Tax (VAT) or Corporation Tax. If these have all been paid, you may even get a refund.
It will be your responsibility to Stop your claim
If you stop being eligible, select ‘No’ in the ‘Employment Allowance indicator’ field in your next EPS.
Don’t select ‘No’ just because:
• you’ve reached the £3,000 limit before the end of the tax year – this doesn’t make you ineligible
• you’re no longer employing anyone – wait until the next tax year, then select ‘No’
If you stop your claim before the end of the tax year (5 April), any allowance you’ve been given that year will be removed. You’ll have to pay any employers’ Class 1 National Insurance due as a result. So it’s important you ensure you are entitled before making the claim.
If you have an Accountant and you are an employer who would be eligible. Check that your Accountant is making this claim on your behalf, after all it could save your business £3,000 per tax year.
If you are trading through a limited company, as a partnership or even self employed, keeping a track of what you earn could mean more than just more tax to pay. It may mean you have to be Value Added Tax Registered.
The VAT earning threshold increases from £83,000 to £85,000 from April 2017.
You must register for VAT if your VAT taxable turnover is more than the threshold in a 12 month period.
Even if you have just started trading, you may have to register for VAT, if you expect to earn over the threshold in a single 30 day period.
Failure to register for VAT in time can lead to some pretty pricey penalties from HM Revenue and Customs. This is why keeping an eye on your income levels in hugely important and shouldn’t be left until the filing tax return deadline date.
If you have an accountant ensure you’re sending them your invoices regularly, this way they can help ensure you register for VAT in time.
To find out if you should be VAT Registered, please feel free to call/email us for further advice.
Are you ready for the changes from April 2017?
The tax relief that landlords of residential properties get for finance costs will be restricted to the basic rate of Income Tax, this will be phased in from April 2017.
Finance costs won’t be taken into account to work out taxable property profits. Instead, once the Income Tax on property profits and any other income sources has been assessed, your Income Tax liability will be reduced by a basic rate ‘tax reduction’. For most landlords, this’ll be the basic rate value of the finance costs.
Currently mortgage interest can be claimed as a business expense through your rental accounts. Currently you can claim 100% of the mortgage interest incurred in a tax year however the rules for this are due to change effective from April 2017.
Going forward the following changes are due to take effect;
– from April 2017 you will only be able to claim 75% of the mortgage interest incurred in a tax year
– from April 2018 you will only be able to claim 50% of the mortgage interest incurred in a tax year
– from April 2019 you will only be able to claim 25% of the mortgage interest incurred in a tax year
– from April 2020 you will NOT be able to claim any of the mortgage interest incurred in a tax year
The above changes can have large impacts on the profits a rental property makes so a tax relief is being implemented. The relief however is looking to be substantially less than that was previously allowed when you could claim 100% of mortgage interest. The relief is set to be 20% from the lower of;
– Unclaimed mortgage interest
– Profits of the rental property in the tax year
– Total income (Excluding savings and dividends) that exceeds the personal allowance in the tax year
To find out how this will affect your future tax bills, please feel free to call/email us for further advice.
So you may have heard that the government plan on Making Tax Digital, well that’s a story for another time. Right now, if you are self employed, you should really have your own online access and leave those paper returns behind.
When you register for self employment you receive a 10 digit number, called a Unique Taxpayer Reference number (UTR). Once you receive this, you can set yourself up with a Government Gateway Login.
Once set up, you will have online access to view an array of helpful content, such as;
•your current tax position
•when and how much your next tax payment will be
•whether a tax return has been requested or received
•copies of tax letters sent to you in the post along with Pay As You Earn (PAYE) coding notices
You can view much more content if you are registered for the other online services HMRC offer, such as for VAT, PAYE National Insurance and Limited Company access.
If you have an accountant they will have their own access to your online content. For them to obtain such access does require your authority. Your accountant will require your UTR number and postcode, once submitted with HMRC, you will receive an authorisation code that will need passing on to your accountant to submit within 30 days.
By giving authority to your accountant also gives them the ability to speak with HMRC on your behalf. And whereas when you call HMRC and are put in a queue, your accountant has a dedicated line, meaning the query can be picked up and handled straight away. Good to know, eh.
Get yourself online and please feel free to call/email us for further advice.