Category Archives: News

BEWARE –PHISHERMEN ARE AFTER YOUR CASH – Sophisticated new scams doing the rounds

Fraudsters are sending out texts targeting those with Gmail and Paypal accounts. Be aware that neither Gmail nor PayPal would contact you in this way.

What the fraudsters are doing is :

For Gmail – They are sending a text asking whether they’ve requested a password reset for your Gmail account – and, if you have , to reply with the word ‘STOP’.

If you respond with ‘STOP’ then next you are urged to send them the 6 digit numerical code you will receive from Gmail in order to prevent the password being changed.

Of course what is really happening is that the scammer has requested a password change on your account. That request sends a code to the real account owner to verify that they actually want the password changed. And by sending the attacker that code back, you’re enabling the bad guys to complete the password change, and now they have access to the account and all the email. By accessing your email the bad guys will be able to specifically target you for fraud / clone your ID / use information to pose as you to target your friends etc etc

For Paypal – they are sending texts saying your account has been temporarily blocked and click on a link. Clicking on the link takes you to a very convincing PayPal page where you have to enter your email address and password. Then you get to a page asking you for lots of personal info including credit card details …… I am sure you can see where this is going! They will then have the info needed to clean our your PayPal account – or trade through it – and clone your ID. In fact they now have carte blanche.

None of this is good for you or your bank balance if you are caught out by it.

Take care out there.

If in doubt then give us a shout!

Steven
Managing Director
Blue Skies

Universal Tax Credits Part Two

How is Universal Tax credits worked out?
In our recent article we gave you a run down on universal credits; we explained what it would be replacing, and the importance of informing HMRC of changes. Now we will look at how universal credits are worked out if you re self employed.
How will your payments be worked out?
If you have been self-employed for 12 months or more, the DWP will work out your payments based on the minimum income floor.
How your minimum floor is level calculated?
HMRC take the number of hours you are expected to work each week, (up to 35 hours) dependent on personal circumstances. This figure is then multiplied by the relevant national minimum wage (NMW)
So if you are aged 30 HMRC believe you can work a minimum of 35 hours a week. They start with multiplying 35 by the NMW of £7.50 =262.5 (weekly figure). This is then multiplied by 52 and divided by 12 to reach a monthly figure:
252 x 52/12= £1137 (monthly figure)
They will also deduct income tax and Class 2 and 4 National Insurance from this figure, currently using 2017/18 figures, this works out around £12.35 in National Insurance.
The DWP therefore expect you to earn (£1137-£12.35) = £1125.15 a month. For every additional pound you earn above this, the Universal Tax Credit will decrease by 63p. If you earn less, unfortunately your Universal Credit will not rise.
There are exemptions to who can be assessed using the minimum floor income

New Businesses
If your new business is less than 12 months old, the minimum income floor won’t apply to you for the first year. You will have to attend an interview every three months to prove you are still gainfully self employed and looking to increase your earnings. For the first 12 months your assessment will be made on your monthly earnings. You can only make one start up period every five years.
Disabled and Lone parents

If you fall into this category of “no work –related requirements group or the “work focused interview”, “Work Preparation” group, and are also self-employed then the minimum income floor also won’t apply
If you are unsure always ask check with the DWP, it is better to avoid any over payments then underpayments.
What happens if for one month your expenses are high?
If one month you find certain expenses not factored in, resulting in a unexpected drop in income. Universal income will not go up. It cannot be used to offset against a future month where your income rises. Universal credit looks at income month by month irrelative to any additional factor your business may face.

Managing your income
It’s essential that if you are going to use universal credits to supplement your income, that you try to smooth your incoming and outgoing finances as much as possible.
Universal credit is paid monthly in arrears. If all of a sudden one month you are scrapping the barrel for work and the following month you are turning away work, you must remember that if you go below the minimum income floor it won’t be topped up but it could be reduced to accommodate your increase in profits.
Therefore it is advised that you try to work out your yearly income, which Blue Skies can help you with. Then divide this by 12 for a monthly guideline. If one month your income is higher than you expected, save the extra amount, as this will allow you to offset this against any learner months.
What can you do to predict your expenses?
Look at whether moving to monthly payments will be helpful, as opposed to yearly ones. Things to make sure if you do this, is that companies do not charge you more to pay in instalments. Also check for rolling contracts. Paying monthly means you sometimes forget when the renewal is due so don’t scan the market for competitive quotes.
There is lots of information and calculators you can use on the internet to see if you are eligible to apply. It is essential that if you are a client and find your income dropping, or you have a change in circumstances keep us up to date. We are here to work with you, and the quicker we know of any changes the quicker we can implement some actions to avoid any negative outcomes.

Universal Tax Credits Part One

You’ve made the decision to become self-employed. You’ve registered with HMRC and have got a business plan. Things started off well, but your income starts to drop, and for some it dries up.
What can you claim?
There is lots of information about current tax credits and benefits being replaced by Universal Tax credit, so lets look at what they are replacing and how it works

Benefits to be replaced by Universal tax credit
• Child Tax Credit.
• Income Support.
• Housing Benefit.
• Working Tax Credit.
• Income-based Jobseeker’s Allowance.
• Income related Employment and Support Allowance.

Dependant on where you live will dictate what system you currently fall under. If you already claim and are self employed, then you do not need to do anything. The Department for Work and Pensions (DWP) will tell you when you are moving over to universal credit. You will also be exempt from the minimum floor income for the first six months of the changeover, (see below for further info)
If you are a new claimant, your post code will dictate whether you claim the above or the new “all in one” benefit of Universal Credit’s but in order to claim Universal Credits you will need to prove you are gainfully self- employed

To do this you will need to provide at a gateway interview evidence of : –
• Your Business Plan
• Copies of invoices, (proof of income)
• Your trading accounts for previous years
• Receipts for expenses

Therefore it is essential you keep all your documents and bank statements. These can be kept electronically. Here at Blue Skies, we encourage all our clients to keep as much as they can electronically, as it not only makes it easier to access but also makes it more environmentally friendly.
Once you start to claim Universal you will need to report to HMRC your self-employed income, this also applies to company directors. You need to report the income you receive before the monthly assessment period, any time up to 7 days before your assessment date or 14 days after. BE AWARE:-if you fail to do so your payments will be stopped

What you need to let HMRC know
• How much your business has received (your gross income)
• How much you have spent on Business expenses
• How much tax and national insurance you have paid if relevant
• If you have paid any money into a pension.

TAX RETURN DUE 31.01.2018

You may have seen on the news, that according to HMRC one third of tax returns expected have still not been filed. This is concerning considering we only have one week to go!
According to HMRC they estimate around eight million people have already filed their tax returns
What are the problems with leaving it so close to the deadline?

TIME SCALES:-You need to account for the few days it takes to register with HMRC online, this enables you to submit electronically and directly to HMRC avoiding the issues with paper tax returns.

IT ISSUES: – HMRC have enabled self assessment customers the facility to submit their tax returns through their personal tax account. This only takes a few minutes to set up! BUT BE AWARE HMRC has admitted that they have experienced issues with the IT in the self assessment population service. Though this is fixed, their will always be glitches with any programs. Leaving it so close to the deadline means you are reliant on HMRC providing a flawless service.

Sourcing an accountant
: – January is notoriously busy for accountancy practices, Blue skies have a number of processes in place that avoid any of our staff being under unnecessary stress. These include keeping our clients accounts up to date where possible, by doing this we are able to provide in advance for your up and coming tax payments. If you do need to source an accountant you may find that many are unable to guarantee your tax return by the 31.01.2018, thus incurring penalties.

FINES and Penalties

If you are late submitting your tax return you automatically incur a £100.00 fine, plus any tax you owed for the year that was due to be paid by 31.01.2018 will incur fines as well!
For example Peter has forgotten to submit his tax return; he has a tax liability of £20,000. Below are the fine incurred for the late submission of Peters tax return

Peter also as well as incurring fines and penalties on the late submission of the tax return ALSO incurs penalties on not paying his tax liability on the due date of 31.01.2018. He therefore gets more fines!

So not only is it essential you submit your tax return on time, you also need to make sure you pay your tax liability by the 31.01.2018! In a previous article on our website you will find a guide on how to pay. If you are a client you would have received reminders on what is owed and how to pay, If you have any concerns, or we can help please feel free to give us a call.

Student Loans

As we set our first foot into the adult world of employment, some of us may have a student loan hanging over us.

The joy of securing employment and being able to afford to live, as opposed to existing just on beans on toast, becomes a pay cheque away. The hours of study are about to pay off…that is until the powers at be within the Student Loan headquarters says “well done on your new job, but as well as tax, national insurance and pension contributions, we also want our chunk to repay what we lent you!”
Then very soon, that pay cheque feels a lot less and exciting than you initially thought it would be.

There are two different types of plans when it comes to Student loans.

How the amount deducted is calculated depends on when you took the loan out.

Plan 1 is for:

• English and Welsh students who started before 1 September 2012
• all Scottish and Northern Irish students

You start repaying when you earn over £17,775. This amount changes on 6 April every year. If you earn less than this then you do not pay anything back.

Plan 2 is for:

• English and Welsh students who started on or after 1 September 2012.

You start repaying when you earn over £21,000, the same with plan 1 if you do not earn above 21,000 you do not start any repayments.

For those of us that are employees of a company the loan deduction will be taken out of our wages along with national insurance, tax etc.
It is important that you inform your employer what plan you are on. If you do not tell your employer you have a student loan, then the HMRC have a nifty way of finding out when/where and what you are earning, they will then get in touch with your employer to inform them what deductions to make.

For those of us that entered the world of self-employment, the way the repayments are made are slightly different. Once you have worked out your income and expenses for the year and submitted your tax return, the level of profits you have, based on the same levels set out above, will determine the amount of student loan you repay – which will be in addition to your tax and national insurance payments.

Example 1 Employed:-

• You are employed on a salary of £35,000 per annum,
• You have an outstanding student loan on plan 2.

You will pay 9% on the difference between £35,000 and £21,000. Therefore per year you will be paying £1260 against your student loan, this will be deducted from your wages at£105 per month.

Example 2 Self Employed:-

• You have earned an income of £28,000
• After expenses your net income is £22,500.
• The Student loan you have was taken out before September 2012 so you are on Plan one.
• You declare on your tax return that you have a Student loan on plan one.

The amount you would pay along with any tax due would be 9% on the difference between £22,500 and £17775, therefore an additional amount of £425.25 would be needed.
If you are self-employed, or have student loan things to remember…

• Keep your accountant updated as to what Student loan you have
• Keep a track on the outstanding balance:
o If it is will be paid off within two years, then you can request for a direct debit to be set up.
• You can make voluntary payments towards the balance
• Just because you are a director and receive dividends you are still liable for the loan repayment if you receive above the threshold
• If you are employed an d have unearned income over £2000 the loan deductions become active only if a tax return is required, if the tax is collected through your PAYE then the loan repayments will also be calculated this way
• There are various rules relating to working aboard, so always best to check when considering foreign jobs.
• Keep records to show what you have already paid
• Student loans will be written off after a period of time, though this all depends on when you took it our.
Further reading on interest rates and loan write offs can be found below. Also you sill see extracts of the key points available on these links:-

https://blog.moneysavingexpert.com/2017/05/02/will-student-loan-written-off/

When are outstanding loans wiped?

(1) This is the age you were when your last agreement for a loan was made – usually your last year of study.

Interest charges on Student loans, the information below is sourced from
https://www.slc.co.uk/students-and-customers/loan-repayment/interest-rates.aspx
Undergraduate loans
Income Contingent Repayment for pre 2012 (Plan 1) loans

From 1 December 2017 until 31 August 2018, the interest rate set for the existing Income Contingent Repayment loans will be 1.5%.

Income Contingent Repayment Loans for post – 2012 – (Plan 2) loans
From 1 September 2017 until 31 August 2018 one or more interest rates may apply to you:

Postgraduate Loans (England and Wales)
From 1 September 2017 until 31 August 2018, the interest rate for borrowers in England and Wales taking out a Postgraduate Loan for a Master’s degree will be 6.1% (RPI + £3%).
These interest rates are still a lot lower than some credit companies, plus you have the added advantage on of only paying once you reach the threshold per plan.
If you need any further advice on the above feel free to give us a call where one of our friendly team members will be more than happy to help.

TOP TIPS TO GET AHEAD OF THE GAME IN 2018

MANAGE YOUR INCOME VS. EXPENDITURE

Remember if you get paid early in December try not to spend until the end of the month, you still have your January bills to cover.
• Some of us may have a Self Assessment Tax bill in the household as well looming (31st January is the dreaded date to pay your Self Assessment tax and any payment on account for the next year).
• If you have a Self Assessment bill you can have it added to next years PAYE code, as long as:
• You owe less than £3,000 on your tax bill;
• You already pay tax through PAYE (Ie you are an employee or you get a pension income etc);
• You submitted your paper tax return by 31 October or your online tax return by 31 December.

• Don’t forget those bills for Council Tax, Utility Bills, Rent / Mortgage, Maintenance, car running costs etc. See if you can switch any of these outgoings onto Direct Debit, to benefit from slightly lower monthly amounts, as well as spreading payments across the year to help cashflow.
• If you are falling behind on any bills then it is best to contact your provider and advise them of this, rather than have them send red bills or refer you to debt. Most companies if they know you are having difficulties will try and provide options to help you, so don’t be ashamed to ask for help.
• Clear down your Gift App, you can then start getting in the habit of using this through the year for birthdays and anniversaries, when you have or see a gift that would be an ideal present just add it.
• Remember whenever shopping online to go via your chosen Cashback site, be it for birthday presents, insurance, changing utility providers or mobiles, holidays, or even your weekly shop, there is cashback to be had on almost everything.
• Look at transferring any credit cards where you are paying interest to one that can offer you 0% over a few years, as the transfer fee may more than likely be considerably less than the monthly interest.
• Consider doing more shopping online including food shopping even if you have one delivery a month for large, heavier and non perishable items it could save you time and money.
• Open a new savings account and start putting something way each month towards next Christmas, to save money towards your presents, so that the shopping trip may actually turn out to be a fun day.
• Take advantage of January Sales, purchasing items in advance like wrapping paper, Christmas cards, decorations etc if they were on your desirable list this year. Why pay full price when you can save.
• Throughout the year try not to use any supermarket loyalty rewards each quarter. Save them all up to use in December, you will notice that one larger saving more than the smaller ones through the year.
• Add some dates to your diary:

September/October

– Write List of people you need to Buy Gifts for, setting a budget next to them all;
– Add items to a watch list as you may see some gifts reduced before you would normally start shopping, thereby spreading the cost of Christmas over a few months;
– You will be well prepared for events like Black Friday which now lasts many days.

November

– Write Christmas cards early, to post them all 2nd class at the beginning of December, or even get the opportunity to hand delivery some when catching up with people. Small wins soon add up.

We may be accountants and you may think of us as being Tax advisers – but here at Blue Skies we like to think you also see us as friends.

So if you need help because you may be struggling financially then give us a call. There may be things you want to plan for in the future, that we (being different to many other accountants) can help advise you going forwards. Planning for the future rather than just processing your receipts for the previous year.

Merry Christmas To You All!

TOP TIPS TO HELP SAVE THE PENNIES AT CHRISTMAS

With Christmas approaching, we should remember that this time of year can be stressful and expensive. So if you are worried about your cashflow and costs over the festive season then making a few simple changes can ease the burden and go some way towards making Christmas more enjoyable.

Don’t forget you can use the below suggestions to add diary dates to your calendar for 2018, to get ahead and help plan and improve your financial position this coming year – it is never too late to make changes.

PLAN YOUR CHRISTMAS PRESENT LIST
• Make a list of who you are buying for, how much you are spending on each person and a choice of the gifts you could get them.
• Stick to your budget – and remember you don’t have to buy the entire list.
• For those un-organised amongst us, technology can help. Christmas Gift App’s help keep a record of what you have bought and what you still need to buy.
• Don’t forget that if you are buying a present as a gift for a business client, then make sure you send Blue Skies a copy of your receipt – it maybe claimable against tax.

VISITING THE SHOPS vs BUYING ONLINE
Visiting the shops
• Can take a lot of time, although if you have a business meeting or two in the town during the day, then in-between or afterwards you could nip to the shops, they tend to be quieter in the week, you are also not paying out for additional travel etc at the weekend.
• You need to go in with a Positive Mental Attitude, only buy what you need, do not be tempted by Deal of the Day etc unless it is something on your list to buy to avoid unplanned costs.

SHOPPING ONLINE

• Saves a lot of time and can be done 24/7.
• Need to ensure prices include VAT and watch out for postage.
• If possible try to buy multiple gifts on same website – this way you may qualify for free postage.
• Register on a Cashback site, like Topcashback, Quidco. These sites could become your internet browser when shopping online, to earn extra money to then spend towards the end of the year.

PAY UPFRONT – TRY TO AVOID BORROWING
• If you have the funds use your debit card, but not your overdraft facility, as this can be costly.
• If you are using a credit card, see if your current card provider can issue you with a second card, these can often be taken out quickly as you are already known to the lender and often come with 0% interest on new purchases for several months, thereby avoiding the extra interest charge.

FOOD SHOPPING
• Treat your food shopping just like your gift list; set a budget and make a list of what you “need”, and also a list of additional items that would be “nice”. When the “need” list is done, if funds allow then treat yourself to a few of the “nice items” but don’t be tempted with unnecessary offers.
• Try to purchase non perishable items in the weeks leading up to Christmas, spreading the cost as many items will have best before dates right into 2018.
• When shopping for the Christmas Meal, try and think of it as cooking a slightly larger Sunday Roast, most of us are used to shopping for this type of meal week in week out, so don’t panic buy.
• Keep those New Year Resolutions you are considering (such as joining the Gym, getting fitter etc) in your mind when shopping. You are likely to buy extra food that you may now want to throw away.
• Consider doing an online shop for most of your shopping, and book your slot now with random items in your basket, you can change it closer to the date – REMEMBER to put the date in your diary!
• If you are going to the supermarket consider getting one of the hand held scanners so at least you can track the value of your trolley.

Personal Tax Payments by Personal Credit Cards Are Stopping Being Accepted by HMRC

Here at Blue Skies we are fast getting in to the festive cheer. Christmas decorations are being located and dusted off, the office party is booked and everyone is ready to pull out the Christmas jumpers!
Though as surprising as it may be, it seems that HM Revenue and Customs (HMRC) are not sharing this Christmas Spirit
In a move which has massively backfired, the Government under pressure from consumer groups, announced ideas to introduce a ban on the often extortionate credit and debit surcharges in the UK. On the very same day, HMRC decided that they would also not accept any personal credit card payments from 13th January 2018 for tax payments.
As one can imagine a lot of self-employed workers, company directors, tax payers and “Joe Public” are naturally angry about this. Considering personal tax payments on account are due on the 31st January 2018, removing the option to pay by Personal Credit card will leave a number of people unable to pay their tax bill, unless they have forward planned. So if you had plans to pay your tax bill with your personal credit card, then this needs to be paid before the 13th January 2018 deadline.
What does this mean?
It means that payment can only be made through Bank transfer, direct debit, faster payment, bacs or debit card.
(For any limited companies out there that might be wondering, currently business can still use business credit cards to pay VAT, PAYE, Corporation Tax and Personal Tax if needed)
Hopefully, all of our clients are already saving towards their tax payments, with our upfront tax planning advice, so this may not hit our clients as much as it may hit other taxpayers. However as much as we all work hard to ensure we are on top of our cashflow, business life is inherently unpredictable and there will be situations where things just don’t go to plan.

And if that hasn’t made paying harder. Update for those that pay at the post office
HMRC from the 15.12.2017 have announced that you will not be able to pay at the post office either! You will be able to pay be Debit card or cash if:-
• still get paper statements from HM Revenue and Customs (HMRC)
• have the paying-in slip HMRC sent you
Some branches will allow you to pay by cheque if its made payable to “post office Ltd”
We will be shortly sending out a number of emails reminding your what is due and how to pay, if you need any further advice please give us a call sooner rather than later.
Just a reminder that if you don’t pay your personal tax bill by the 31st January 2018, HMRC will send you a rather belated Christmas present of 3% interest on the outstanding amount.
If you are a client and find yourself unable to meet the payment deadline get in touch with us ASAP, we may be able to contact HMRC on your behalf and form an arrangement.
If you aren’t currently a client but feel you may be facing a similar situation, or your 2017 tax return isn’t yet complete give us a call and we can see what we can offer.

Xmas Party and Gifts to Clients and Staff

Are you considering a work Xmas party and/or giving gifts to staff or clients this year? Well here are the VAT implications of doing so… an interesting read!

Firstly, the Xmas party…

This falls under the rules of business entertainment. If it caters for employees only, then VAT included within the costs of the party can be recovered! Even where the directors attend the party.
If the party also caters for guests who are not employees, such as partners of staff or friends, the VAT should be apportioned between employees and non-employees.
As an example, if a business held a Xmas party for 20 attendees. 10 of these are employees, 2 of these are company directors and shareholders, and the remaining 8 are non-employees. They incurred VAT inclusive expenditure of £1,000. This would mean 60% of the VAT on costs could be reclaimed. In this example, that would mean they could reclaim £100 of the £167 VAT incurred.

VAT on Gifts:
In addition to receiving VAT relief on a Xmas party held, VAT can be reclaimed on Xmas gifts, given to both employees and clients.
This is only allowed if the individual receiving the gift doesn’t receive a gift worth more than £60 (inc VAT) in any twelve month period from the business in question.
So to put it simply, only provide employees and clients with an annual gift of no more than £50 (exclusive of VAT), and you can reclaim the VAT element on these gifts through your company.

Feel free to give more generously, however any subsequent gifts that result in the annual gifts exceeding a value of £50 (exclusive of VAT), you unfortunately won’t receive the same VAT relief under the current rules.

We hope this has been useful to you.
If you would like to know more about us, please contact us here at Blue Skies!

November 2017 Budget Review

Income Tax – Most people who work and pay tax in the UK will pay a little bit less tax from April next year, as the tax limits have risen slightly. For someone with taxable income of £40k they will be around £70 better off in the year; for those earning £50k and over then you are £340 better off. So not great sums of money but every penny helps.
Our advice for 40% and above taxpayers – don’t forget those tax free ISA’s offering a higher interest rate. You can put £20k into an ISA every year.

VAT – no change. Limits have been frozen for a couple more years.

Smokers – smokers have been hit hard, with an above inflation increase of 5% extra cost added onto a packet of cigarettes/cigars

Drinkers – If you drink lager, beer or spirits in England and Wales, then no real change, although at the real cheap end of the alcoholic drinks market, prices on low cost booze like “white cider” drinks are being increased in a bid to discourage heavy drinking. Scotland are in the process of introducing a minimum price per alcohol which could increase the prices of cheaper drinks.

Cars – for most drivers, there is no change with fuel duties frozen again, so just find yourself that cheapest price on the forecourts. However, if you have a diesel company car, this has become more expensive with an additional 1% tax charge per year, leaving you a bit more out of pocket. The Government is again focused on promoting “Green” Environmentally friendly cars.
For those trading through, or thinking of trading through a Limited Company, and you want to buy a car through your company, then our advice as always is to “talk to us before you buy” – as there have been small changes to some of the rules and tax. When you buy a car, as well as what you buy, could be the difference between having extra money in your pocket or being out of pocket.

Buying your 1st property – stamp duty is being removed if you buy a house anywhere for under £300k and in expensive areas (London for example) you can buy a property up to £500k and only pay stamp duty on the amount between £300k and £500k. This can save you up to £9,000 on houses under £300k.
However, if you are not a 1st time buyer but want to buy a place with someone who is a 1st time buyer then unfortunately this is help is not available to you, as both of you must be first time buyers. Our advice – Save stamp duty by getting the first time buyer to buy the house themselves, and then add the other person’s name on to the mortgage at a later date.

However like most budgets, “The Devil is in the Detail”. Tucked away in the supporting Budget paperwork there is one fly in the ointment. HMRC are going to start a review and consultation process looking at who can be self employed and/or operate through a Limited Company. This is not just for the media industry; it applies to all trades and professions. HMRC really would like to see everybody in the UK being on a PAYE contract rather than freelance contract – it means they get more tax in their coffers and it comes in easier and quicker than it does at the moment if you work for yourself.

You might already be aware that the BBC and Channel 4 are already under the cosh and being pressured by HMRC to make freelancers into PAYE employees.
Our view is that this is a huge topic to review and have a consultation on and it will impact on some very big and powerful businesses that have real clout with the government. In any event any changes are not going to come in in the short term – we predict that the earliest practical date it could be brought in would be April 2019. For most of our clients who are freelancers this will be a worrying development but rest assured that we will keep you fully updated on what is going on.