 | As it’s that time of year don’t forget you can claim £150 for a company director and guest for your Christmas party (or parties) provided the total does not exceed £150 – exceeding it invalidates the relief. A Christmas gift not exceeding £50 is also allowable – again exceed this amount and the relief is invalidated. During the year a maximum of 6 such gifts are allowable. |
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Until 1 April (5 April 2021 for income tax) a low or zero emission car can qualify for a 100% first year allowance (FYA) if its CO2 emissions do not exceed 50g/km and the car is purchased new and unused. A similar 100% FYA applies for zero emission vans, where the vehicle is purchased new and unused before 1 April 2021, or 5 April 2021 for income tax. However, as all commercial vehicles qualify for 100% relief under the AIA, this special FYA for zero emission goods vehicles is not needed by the majority of businesses. This is where it gets more interesting, for Company Director owners of businesses, I have been advising that the taxable benefit for a car is becoming prohibitive in many cases (and fuel is a definite no), however draft legislation (bearing in mind the forthcoming budget) suggest the following benefit for electric only cars:
Charging points also qualify for Capital Allowances. The planning point here is that your business can buy outright an electric car by April 2021, claim 100% first year allowance and the driver does not have a taxable benefit from April 2020. Let’s see what the budget brings but it’s definitely worth considering going green!
Clients preparing their own VAT returns:
For clients who use book keepers and myself, we are in the process of setting up agent services accounts and securing additional software as we’re ready in good time. So in reality a business filing a quarterly return from April to June 2019 is likely to be first affected by the change with the filing date of 7 August 2019 being unchanged. HMRC have issued guidance on this link.
Property and Trading Allowance - Where the £1,000 allowances cover allof the income (no expenses are ever allowed) then you don’t need to declare it. In the case of these being your only other source of income it means you don’t need to do a tax return anymore. So for example, you’re a teacher and you do some tuition earning £15 a week then previously you should have completed a tax return and provided you don’t have any income other that your PAYE salary then you probably don’t need to do a tax return. There is quite a bit more to this particularly where people have a main sole trade and a ‘hobby business’ and the detail can be found on this link. The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else. You can let out as much of your home as you want. If income falls below this limit (as with the above reliefs, you can’t deduct costs), then the relief is automatic and provided there is no other reason to complete a tax return, you don’t need to do one. Follow this link for more information. As a reminder if you need to complete a tax return you must register by 5thOctober to be sure to avoid a penalty. It’s important to note that if you do need to complete a tax return and fail to do one, HMRC ‘not sending you one’ is not considered a reasonable excuse if you are subject to a compliance check. The following personal allowances will take place with effect from 6thApril 2019:
It’s important to note that the change is 1 April and not6thApril so wages and salaries change before the end of the tax year. HMRC continue to remain responsible for policing this and with the payroll data that is now submitted its pretty easy to tell who’s not complying!
Following the increases, its also really important that you also check to see if an employee needs to be taken into a pension scheme as the £10,000 trigger remains unchanged which means more people are likely to qualify. The Pensions Regulator has a useful toolkit here: https://www.thepensionsregulator.gov.uk/en/employers Pension contributions will also rise and this link is particularly helpful. For more detailed advice, why not contact me here?
The papers which support the budget often contain far more than what is actually said on the day and it is clear that there will be further consultations on VAT and the implementation of the IR35 changes. I’ve also produced an audio recording of my commentary on the budget! Don't forget, this newsletter is designed to draw attention to specific topical issues and is in no way intended to provide advice tailored to your business - advice must always be sought before acting on any item featured. Personal Allowances & National Insurance
The new £50,000 does create somewhat of a cliff edge, as at £50,000 earnings you will:
The thresholds at which people pay National Insurance have not risen as significantly so employees and sole traders can still expect to pay National Insurance even if there is no tax to pay. The threshold will be £8,632. Class 2 National Insurance (at £3 a week) will continue to be collected as part of the Self Assessment process and now will continue as the Class 3 alternative would have been costly to low earners. Clients working for large organisations through ‘personal companies’ could see a major change in their taxation from April 2020 as HMRC seek to tax them as being employed rather than as a freelancer. These rules were piloted within the public sector this tax year and will be rolled out to larger organisations. Selling Your Let Property
VAT ThresholdThe VAT threshold will continue at £85,000 – it is widely anticipated that following the UK’s departure from the EU, a taper system may be introduced for lower turnover businesses to start paying some VAT. Employing People National Minimum and Living Wages will increase from April 2019.
The changes are as follows:
It is important you review all employees on the payroll to ensure you are compliant. With ‘RTI’ payroll reporting in place it would be very easy for HMRC to spot non-compliant employers and indeed a number of businesses have already been fined, named and shamed. There were changes to Employment Allowance but these are unlikely to affect most clients. It is vital if you are a single director company that you do not claim this (even if HMRC basic tools or your software allows it)as HMRC are now carrying out compliance checks in this area and are set to collect underpaid National insurance. I’ve been doing some work with a programme called ADVenture in Bradford which is designed to help businesses under 3 years old with:
https://www.bradford.ac.uk/management/working-with-business/support-for-business/ad-venture/   Believe it or not the ICAEW’s latest statistics show that 82% of businesses are still logging onto the HMRC gateway to complete their VAT returns with the remainder filing directly from software. More worryingly around half of the businesses surveyed by the ICAEW had no idea this was changing. From 1 April 2019 businesses caught by the rules will be required to:
The burning question therefore is, who and what does this apply to?
Once your turnover in the preceding 4 quarters exceeds the £85,000 threshold then you need to join the scheme and if your turnover falls below the limit you don’t exit the scheme. HMRC have prepared a list of software what is compatible with the new regulations: https://www.gov.uk/government/publications/software-suppliers-supporting-making-tax-digital-for-vat/software-suppliers-supporting-making-tax-digital-for-vat Income tax and Corporation tax will follow in a year or two’s time. I’ve prepared a short video to help you prepare... See Below.  The current weekly for 2018/19 is £2.95 and is based on whether profits are at least equal to the small profits threshold of £6,205 and the number of weeks of self-employment in the year. This is paid alongside your tax bill on 31 January. Voluntary contributions may also be paid if profits are below the threshold. The original plan was to abolish Class 2 National Insurance from April 2019 and potentially merge them with Class 4 which runs at 9% of profits. Class 4 does kick in at the higher level of £8,424. There has however been a further announcement made (September 2018) by the Exchequer secretary to the Treasury that the government will not proceed with the Class 2 changes following a review of evidence concerning the impact on self-employed individuals with low profits. In short, the weekly contributions will continue to be collected as part of your tax return. The fear was that people who are below the threshold who still want to pay the £2.95 would have had to pay significantly more to access Class 3 National Insurance at £14.65 per week.
I will be making some changes to how the practice deals with clients including a new file exchange system to avoid the need for Email attachments - this will have the added benefit of E signing of tax returns.
The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else. You can let out as much of your home as you want. If income falls below this limit (as with the above reliefs, you can’t deduct costs), then the relief is automatic and provided there is no other reason to complete a tax return, you don’t need to do one.
https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme Since the rise in popularity of websites such as Air B&B, HMRC have been consulting on whether rent a room is fit for purpose. The upshot is, we’re likely to see some sort of ‘residence’ test with casual B&B type arrangements either being treated as a trade or being subject to the much tighter £1,000 property income allowance. As a reminder if you need to complete a tax return you must register by 5th October to be sure to avoid a penalty. It’s important to note that if you do need to complete a tax return and fail to do one, HMRC ‘not sending you one’ is not considered a reasonable excuse if you are subject to a compliance check.
It’s important to note that the change is 1 April and not 6th April so wages and salaries change before the end of the tax year. There have been some high profile ‘naming and shaming’ with resultant fines so it’s important to make sure you’re on top of this as you’ll not only have to pay the back pay but you could also be ‘named and shamed’ and be subject to a fine. With increases over the rate of inflation, its also really important that you also check to see if an employee needs to be taken into a pension scheme as the £10,000 trigger remains unchanged which means more people are likely to qualify. More detail can be found here: http://www.thepensionsregulator.gov.uk/automatic-enrolment-earnings-threshold.aspx April also marks the first time that minimum pension contributions will rise, so it’s important your payroll software or payroll provider is on board. You’ll also note that you need to budget more for pension contributions. More information can be found on the link below: http://www.thepensionsregulator.gov.uk/doc-library/increases-in-minimum-contributions-automatic-enrolment.aspx
The thresholds at which people pay National Insurance have not risen as significantly so employees and sole traders can still expect to pay National Insurance even if there is no tax to pay. Contributions start after earnings exceed £162 per week £8,424 per annum which is the amount many directors will pay themselves from 6 April 2018.
Class 2 National Insurance (£2.95 per week) continues to be collected as part of the Self Assessment process and will be abolished from 6th April 2019 – not 2018 as originally announced to allow further time to design the new process. The reduction in the nil rate band for dividends to £2,000 (currently £5,000) will be implemented from 6th April 2018. This will result in a tax charge of an additional £225 per annum for owner managers of small companies.
Not surprisingly it will be frozen at £85,000 for the next 2 years whilst a consultation takes place on what the threshold should really be.
The current deregistration threshold is £83,000 and will continue to be the case. Digital taxation for businesses which are VAT registered and trading above the threshold will be implemented as planned in April 2019.
The changes are as follows:
It is important you review all employees on the payroll to ensure you are compliant. With the new ‘RTI’ payroll reporting in place it would be very easy for HMRC to spot non-compliant employers and indeed a number of businesses have already been fined, named and shamed. The Chancellor also announced that there will be no benefit in kind for people who charge their electric cars at work and at the same time has made some changes to the taxation of company diesel cars. He was clear to state this excludes vans. The cash equivalent where a van is made available to an employee for private use will increase to £3,350 for 2018/19 with the fuel benefit set at £633. The employment allowance continues at £3,000 and it is vital if you are a single director company that you do not claim this (even if HMRC basic tools or your software allows it) as HMRC are now carrying out compliance checks in this area and are set to collect underpaid National insurance.  Over the summer HMRC published some changes to Making Tax Digital which have ben warmly received by the businesses and professionals. The government has said it believes that introducing a new digital tax system is still the right direction to move in. However, it has made amendments to the businesses this impacts and the timescales for change. The amendments to Making Tax Digital now mean:
 This is an area which can cause problems for owners of small limited companies. With the arrival of the dividend tax it’s becoming increasingly important to document, declare and pay dividends correctly as the timing of these can influence your (and other shareholders’) tax bills.
I might have mentioned before but it really is unacceptable to simply take ‘drawings’ and hope it levels out at the year end!  With increasing benefit in kind charges on company cars there has been a move towards people running company vans and taking advantage of lower vehicle and fuel benefits. Here are the details... Recently I’ve been prompted to compose a blog post about the service I provide to the County. To say that I was prompted is an understatement. I was press ganged into writing this by two regular clients who you’ll hear from later. So… let’s do this then…
 Many reports over the weekend suggested that as we move to an Autumn Budget from this year onwards, that this budget would be a bit of a non event. With so many changes in the offing already a ‘non event’ would have offered some breathing space however there some new changes which will affect almost every reader in the next year or two! I’ve therefore decided to pull together a refresher of the changes that we already know about plus the new things announced in the budget:
Whilst very little was said about it, undoubtedly the biggest area of focus over the next 12 months will be ‘making tax digital’ which will bring a major shift in the way in which we file tax returns and submit data with much tighter deadlines. This has to date been running very much under the radar but will bring ‘VAT return’ type processes to tax returns to many sole traders and ultimately companies. My recommendation to sole traders is initially is to start ‘shadowing’ this process during the next tax year and move record keeping to apps and software as its very unclear what free software will be available from HMRC. Personal Allowances & National Insurance The point at which people will pay income tax rises to £11,500 for 2017/18 which is some £500 higher than the current year. From April 2017, spouses and civil partners may transfer £1,150 of their personal allowance to each other. The point at which people pay higher rate tax has risen and will be £45,000 for 2017/18. The thresholds at which people pay National Insurance have not risen as significantly so employees can still expect to pay National Insurance even if there is no tax to pay – this will kick in at £157 per week (£8,164 per annum). The Employment allowance continues at £3,000. This excludes single director / employee companies who can't claim it. Class 2 National Insurance continues to be collected as part of the Self Assessment process and will be abolished from 6th April 2018 and then the increase in Class 4 takes effect. If you’re self employed and plan to take maternity pay, this new collection process has caused some issues in gaining full entitlement to SMP and it is worth speaking to HMRC early and paying your Class 2 contributions up front. Making Tax Digital This is the biggest step change self employed people will have seen for many years. The new quarterly reporting regime for self employed people earning has been relaxed by 1 year for businesses with sales less than the VAT threshold - £85,000 from 1 April. This will be the subject of a future newsletter and I will be actively working to prepare clients for the change which will ultimately affect all businesses with sales over £10,000. As I mentioned above, you should consider shadowing this process with appropriate accounting software. A Tale Of 2 Allowances Two useful £1,000 allowances come into force from 6th April:
Where the allowances cover all of the income (no expenses are ever allowed) then they you no longer have to declare or pay tax on this income. In its simplest form if you rent out your garage to someone for £60 a month then this would no longer need to be put on your tax return. There is quite a bit more to this particularly where people have a main sole trade and a ‘hobby business’ and the detail can be found on the following link HERE VAT Flat Rate - Reminder Announced in the Autumn Statement, a change to the flat rate scheme will come into force 1 April 2017. This is likely to affect almost 30% of businesses using the scheme. I have prepared a handy guide to the changes which can be found by watching below or clicking on this link. HMRC updated their VAT Notice earlier this month and the link can be found here. Minimum Wage Reminder
National Minimum and Living Wages will increase from April 2017. Further funding has also been earmarked for HMRC to proactively compliance check higher risk employers. The changes are as follows:
There will also be changes made to the way in which things like salary sacrifice schemes work but this will exclude things like pensions and childcare where no changes are envisaged. As always... If any of my clients have any questions, please feel free to contact me or call to discuss your concerns. Or if you like many others are looking for a local and friendly accountant to help you cut through the red tape, I'd love to hear from you.  Now that the 31 January deadline is over, its only a few weeks until the end of the tax year so now's the time to start planning. Take a look at the helpful check list below to see what you could do for you and for your business:
As always with the Year End, with Tax, or with any other matter that you think may involve your business, please feel free to get in contact with me via the website. If you'd like to hear more about the Tax Year End or maybe see the highlights, why not watch my short video below? |
Nigel GorskiSay it as it is and you'll never be misunderstood. Here in the Blog you'll see news posts on many topics of interest to your and your business... Archives
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