September 26, 2017

Have you got 31st July in your diary?

tax, self-assessment, HMRC, 31st July, accountant, herefordshire, monmouthshire, gloucestershire

Have you got 31st July in your diary?

 

We may all have put this matter to one side, filing the reminder letter in the unshrinking in-tray, but staying on top of our taxes is vitally important to all small businesses and those who are self employed.

The key is to not fear them or forget them!

 

I know you are busy, time so often our enemy and much better spent delivering our goods and services, but time has to be taken to keep our business affairs in order and avoid any nasty penalties. And if you don’t have the time, engage with someone who has both the time and the expertise.

Diary dates.

So, let’s start by reminding ourselves of the key dates for your diaries regarding taxes:

  • 5th October – registration date for individuals who are self-employed
  • 31st October –paper tax returns completed submission deadline
  • 31st January – online tax returns submission deadline
  • 31st January – deadline to pay taxes you owe
  • AND if you paid more than £1,000 tax on 31st January 2017, you may have more to pay by 31st July 2017.

How do you know if the July 31st deadline is applicable to you?

HMRC state this: ‘If you are self employed and earn enough to pay over £1,000 in tax and you have not already settled all tax due for the year to 5th April 2017, you will need to make a payment by 31st July this year.’

Also, if you have rental income or large amounts of investment income such as dividends, you may also be affected.

There is further information on the gov.juk website, or if you are unsure talk to your/an accountant.

You still have time.

If you haven’t already completed your tax returns, don’t panic! You can still avoid HMRC’s late filing penalties just start taking action now.

  • Gather together all your receipts, bills, bank statements, mileage logs, sales invoices and takings summaries
  • If you have already entered these into a spreadsheet or accounts software, such as QuickBooks Online, well done. It will make your life easier, and you will have a better handle on how the business is doing.
  • Gather other details of income such as bank interest, rental income (and related expenses), P60s and P45s and P11ds from any employment or pension you have. Also pension payments if you can deduct those from your tax bill
  • If you are married, discuss with your spouse whether there is benefit in reallocating some of the personal allowance to the other spouse (10% can be moved although some rules apply)

Decide if you are going to feel brave and prepare your own tax return. If so

And if you would rather have help making sure you are declaring everything and claiming all you can, call me and we can get things sorted.

Penny Lowe, Wellington Consulting

Visit my website to find out more about how I can help you and your business >

Poor Planning leads to..

Have you ever worked late into the night? When did you last feel you could have done a better job if you had had more time? Have you ever missed a deadline? Its all about planning.

Recognising what needs to be done and by when allows you to prioritise your tasks. Your finances should be planned in the same way. You have limited time and know it is down to you how you spend it. Treat your business funds in the same way.

You should have two types of plans which are different views of the same thing. One is a budget which sets out your planned sales, costs of sales and expenses. This may be by month in the coming year and annually for the next couple of years. In addition, you also need a cash flow statement. As it says, this is cash flowing in and out from the business with dates. This type of plan will keep you within overdraft limits, or indicate when you can take a dividend from the business (remembering to leave the money for the tax bill in the business).

A simple example of the difference is sales in a budget may show as £50,000 per month for three months. If your terms are 30 days, the cash flow would show nothing coming in during month one, £60,000 in months two, three and four and cash out of £20,000 also in month four. Where do these figures come from?

The nil in month one is down to £50,000 of sales but no one has paid you yet. Months two, three and four are £60,000 per month being £50,000 of sales plus 20% VAT) paid by your customers for sales in months one, two and three. What about the £20,000 out. This is the VAT you have collected on behalf of the taxman and received in months two and three. That is what I mean by leaving some money in the bank. Don’t forget, you have another tax to save up for as well, being the tax on business profits. Although not due yet, this would be another £30,000 due to go out. (being say 20% corporation tax on £50,000 for 3 months).

With these chunks of money due out, it is important to know, not only what you current bank balance is, but what you need to keep money back for. Even if it is only a rough idea, planning is better than penalties.

Need any help? Contact me.

How to reduce your Tax Bill

As we approach the end of the tax year – 5th April 2013, what can you do to reduce your tax bill? Although you have left it a bit late, you still have a couple of days to act.

If you have a pension scheme and some money to spare, you could pay some extra money into your pension scheme. Just remember to tell your accountant that you have made extra payments. If you do your tax return yourself, you need to include this extra payment.

Another option is to invest some money in an ISA. Although the rates of interest are not high, you will not have to pay tax on the interest earned, so if you are a higher rate tax payer, this could almost double the actual rate of interest.

If your year end is 31st March, have you declared all the dividends the company can afford to pay? This is where you need to monitor your profits as there is no point putting yourself into the highest rate of tax, when this is due to reduce from 6th April 2013. If you are not sure, speak to your accountant and tell them you need to know whether to do something before 5th April.

Other lesser ways to reduce your tax bill is to ensure that your business is being charged for all the amounts you pay out on its behalf. A client today, realised that she hadn’t charged the company for the mobile phone she used for business for the last 6 months. I personally know I need to put a mileage claim in for last month and this. How up to date are you with such claims? If you do not put your claims in, not only will your business pay more tax, but the costs you consider for your business will not be accurate and may distort your planning and cash flow plans.

If you haven’t done so before, sit down this weekend and make sure that you – and any other member of staff eligible – have caught up with your expense claims

Are you worried about RTI? Do you know what it is?

As from 6th April 2013 all employers will need to tell HMRC every time they pay someone. This is known as Real Time Information (RTI). Whether it is the usual staff getting their monthly pay, or a casual member of staff getting cash for helping you out for a couple of days, the taxman needs to know.

If you run your own payroll, the chances are you are using software to do the calculations. It is likely that it will also file the necessary forms on line for you but it is worth checking.

The logic behind this change is that HMRC will be able to link multiple employments together as they are happening and make sure the correct tax code is being used. This should stop so many employees getting bills sometime 3 years after the tax year in question. The other benefit to the taxman is they know how much you should be sending them each month so, if you don’t pay, they know how much to chase you for!

The emphasis will again be put on the employer to ensure that the employee is entitled to work in the UK. For new employees, HMRC suggest seeing a copy of the passport to confirm name, date of birth and help towards a right to work in the UK. If a potential member of staff does not have a passport, HMRC suggest a birth certificate as an alternative. That is all very well unless the female in question has got married. How do you then match the name to the individual without marriage certificates etc? There are alternative documents that can be produced, but does someone turning up for a day’s work carry these papers about as well as their National Insurance number – they may need to in future.

Once the individual is set up within a payroll system, the operation should be straightforward. It’s a bit like sending HMRC a copy of the payslip each time you work out pay as well as giving one to the employee. If it is a casual worker who gets paid cash at the end of the day, it is up to you to work out the correct figure to pay. In a very few cases such as this one, you can send the copy of the payment details through to HMRC within 7 days of making the payment. Most other cases you need to tell them on or before the date the payment is made.

How many hours do you work ?

As part of the new regime that HMRC are bringing in for payroll know as RTI (Real Time Information) you will need to declare whether each employee does under 16 hours, 16 – 30 or over 30 per week or is an occasional worker. As a business owner, you may well do over 30, but how many do you get paid for?

 

At minimum wage (currently £6.19 per hour) you would need to be taking a salary of £9,657 to meet this hourly rate on 30 hours per week. If you are a director of a company, it may be that your company recognises your efforts by paying you a dividend depending on the profitability of the company. Even if it does not have the cash to pay you at the time, it may reserve the funds by adding it to the amount the company owes you. This is not uncommon. Dividends do not attract National Insurance whereas salary does.

 

So, is this a ploy by HMRC to ensure that company directors are getting a fair wage or will they start chasing those companies that primarily pay their directors by way of dividends on their shareholdings?

 

The good news is there is another box to tick which says the hours are unspecified. As a director you may choose how many or how few you work so this sounds like a more accurate answer.

 

If you employ your children during the school holidays to create PowerPoint slides, help with your web site, proof read the book or reports you have written, they would be counted as ‘occasional’ workers so must go on the payroll, but you don’t have to pay them every month. Remember this is an allowable expense of the business and will reduce the tax bill whether you are a sole trader or a limited company unless – of course – you pay them a huge salary. The minimum wage for under 18s is £3.68 per hour.

What will you do differently in 2013 ?

I have just finished completing my mileage claim for last month. If you drive for work, how do you keep your mileage log up to date – and remember to put the claim in?

 

Whether you are employed as a director of your own company, employed by someone else, or are a sole trader or partner who claims mileage, you need to keep a log of miles you do for work. I recently saw a client who was paid 40p by his employer. He was good at keeping a log but did not realise that, if he did under 10,000 claimable miles a year, he could claim the difference between 40p and HMRC approved rate of 45p. By claiming 5p times 9,000 miles he could claim an expense of £450. As a higher rate tax payer, when you multiply this by 40% it works out to £180 of tax he could get back. If he was reimbursed at 25p, the refund would have been £720 of tax – a nice payout.

 

The other thing to check is that your car insurance covers the business miles you do. A simple check and often there is no extra charge to have business listed on the certificate.

 

So, whether you run your own business, or are employed, it is worth noting the mileage and other expenses you pay out on and ‘forget’ to log at the moment. The important point to remember is the more legitimate expenses you claim, the smaller your tax bill and the more money you will have.

 

May 2013 bring you every success, happiness and money.

What are you planning for next year ?

Many people start a year with New Year’s resolutions, but they often do not achieve them. Are you going to be one of those?

I would suggest the main reason for failing to achieve is that you can see the goal you want to achieve, but don’t plan a route to get there. If you want to travel to any destination, you wouldn’t just expect to arrive without the journey. How you choose to travel is a matter of for you. The decision will be based on research, preferences and practicality – and possibly budget.

One question I have long asked myself is why do many business owners put more effort into choosing a car than the decisions that affect their business? So, my simple request to you is decide where you want your business to be this time next year and then put the effort in to planning the route including check points to ensure you are on track. If you do this you will get there.

Happy Christmas and a Successful 2013

Do you enjoy working online ?

The government is trying to encourage greater use of computers. This may be a move to efficiency, but is it what you like to do?

This might sound a bit rich, as you are reading this on line, but do you do it by choice? What happened to the old days of piles of papers?

As an accountant, I still deal with piles of paper. Most departments at HM Revenue and Customs cannot communicate by e-mail. They are improving, but having tried to deal with things over the telephone, including call backs to then be told to write in can be a little frustrating. What compounded the issue for me was the first chap I spoke with didn’t know the answer so I suggested writing in. I was told not to do that, as it would not be looked at for at least three weeks. This is much better than some departments a couple of years ago, where they had a three month backlog of post. So things are improving.
Can we help ?
If you have an outstanding issue, by all means ask your accountant to chase it, but the more information you can give them, the more they can give HMRC, the more likely you are to get an answer. If you have an outstanding tax return for 2011/12, get it moving now so you know how much tax you will have to pay by 31st January 2013. If you are due a refund, there is still a chance you could get it by Christmas – if you act now and let them simply put the money in your account. If only one could just get all customers and client to ‘simply put the money in your account’, life would be wonderful!

Have you completed your Tax Return ?

You may see advertising regarding submission of your tax return by 31st October. This only applies if you (or your accountant) are doing it on paper. If you submit via HMRC web site you have until 31st January 2013 but I wouldn’t recommend you leave it that long.

I am a great believer in keeping on top of the figures. One figure is how much tax you owe. If you know in advance you can make sure you plan to have sufficient funds available so the earlier you can complete your return, the more time you have to plan.

Tax return sooner rather than later If you don’t currently need to submit a self assessment return, you can choose to optionally submit one. The benefit is that you declare each year what income you have and any claims such as pension contributions that can reduce your tax bill and you then pay the correct tax each year. Last week I had one client who had been sent a tax return this year for two years ago and ended up with a tax bill of £3,500. He had changed employments during the year and the tax codes had not been updated. With company cars, medical insurance and other factors affecting your tax bill. This could happen to you.

 

Earlier this year I acted for a client who had been self employed for many years and submitted his own tax return. When we reviewed what he had done/hadn’t done the tax bill should have been more. We were able to declare his errors before penalties were applied, and he was given time to pay. Claiming your loan repayments for your holiday home as an expense against business profits is not correct. If you are not sure about something, find someone to ask. Although HM Revenue and Customs offer advice, you need to ask the right question to get the right answer – and then they have been known to change their mind. You never know, it may be a repayment you can claim before Christmas rather than a tax bill to pay in January.

Would you like a no-obligation chat about your tax obligations and returns ? Contact me and lets simplify your tax affairs

How much do you put away for tax?

They say the two certainties in life are death and taxes. The big difference is that you know when taxes are due, the same thing can’t usually be said about death.

I have today been to a client who has, for as long as I have known her, religiously put money away each month so that when her VAT bill or tax bill arrives, the money is always there to pay it. When she changed her trading status from sole trader to limited company we sat down and did the figures to make sure she knew approximately how much she would need to have saved and by when. What she now does is put a larger amount aside every month and then pays a dividend to cover her holidays and Christmas. She also pays a monthly salary and has this, and its PAYE, set up on standing order.

work out your tax and put it awayAlthough she would rather not pay tax, she knows the more she pays, the better she is doing. By reviewing her transfers to the company’s second account regularly, she just sighs with a smile when I tell her how much VAT to pay or what her corporation tax bill is. This is different from the reaction of some of my other clients who know when the tax is due, but always think it will be nil. At least that is one excuse as to why they haven’t put money aside.

If you are not sure how much to put aside, speak to your accountant and they should be able to help. Remember it is always better to put too much away and have a nice surprise rather than a nasty shock.

Could your business benefit from this proactive planning ? Contact me and I will be happy to help.