The employment allowance remains at £4,000 meaning small businesses only pay Employers NI after this point. It is worth noting that the threshold at which Employers NI is due is lower than the employees NI threshold of £9,568 at £8,840.
See what else by reading on below...
The VAT threshold will continue at £85,000 and the lower rate on hospitality will continue at 5% to 30 September and then be subject to an interim rate of 12.5% until 31 March 2022.
Care will be needed on using software for VAT returns with Vat quarters that do not coincide with these dates
A number of restaurants and take aways have become pretty clued up at home delivery service or indeed delivering restaurant meals for you to reheat. Why not use a £50 trivial benefit to send something like this to an employee (or indeed yourself if you are an employee) – remember maximum 6 of these benefits per year and it must never exceed £50. A well known restaurant chain is doing a menu where you can get food for 2 (sometimes with house wine) by mail order costing less than £50 including delivery!
If that doesn’t work for you or your employees a gift upto £50 for Christmas is perfectly allowable. Don’t go over the allowance! You can’t get the VAT back on the gift.
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:
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
The 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.
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:
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:
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.
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