Taxation Archives - Emma Stevens Accountancy

Did you know? …. Marriage Allowance

09/11/2017 By Emma Stevens

Marriage allowance allows you to transfer £1,150 of your personal allowance to your husband, wife or civil partner, reducing their tax by £230.

Who will benefit? If you earn less than £11,500 a year and your partner earns between £11,501 and £45,000 you could be better off by applying for marriage allowance. You need to be married or in a civil partnership to apply.

You can apply for the marriage allowance online via www.gov.uk/apply-marriage-allowance If successful the change will be backdated to the beginning of the tax year (6 April) and the change will be reflected in your tax code.

If you complete a tax return you can opt for marriage allowance for 2016/17 via your personal tax return which is due for filing by 31^st January 2018.

If your circumstances change you, such as your partner earning more than £45,000 or you earning more than £11,500 then you can apply to cancel your marriage allowance online.

If you need any advice on tax please get in touch with Emma Stevens at Emma Stevens Accountancy.

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Self Assessment Tax Return

14/08/2017 By Emma Stevens

A Self-assessment tax return is the form an individual completes to report to HMRC their income for the year and to calculate how much tax is due on that income. In the UK, the tax year runs from 6^th April to 5^th April the following year. So, for 2016-17 the period covered is 6^th April 2016 to 5^th April 2017. Not all UK residents are required to do a tax return. If your only income is as an employee you don’t need to worry about it. However, there are some situations which do require the completion of a return and this article should guide you through them.

Do I need to do one?

You are required to complete a Self-assessment tax return if you come under the following categories:

· Self employed.

· Have untaxed income such as rental income exceeding £2,500

· Your income from shares, savings or investments exceeds £10,000

· You’re a company director

· You made a chargeable gain such as selling a 2^nd home

· Your income is over £100,000 (or £50,000 and you/your partner claims child benefit)

· You have income from abroad or you live abroad and have UK income

What do I need to do?

If you fall into one of the above categories you must complete a tax return each year by 31 January. So, for tax year ending 5 Apr 2017, your tax return must be completed and sent to HMRC, online, by 31^st January 2018 (paper versions must be filed by 31^st October).

You need to include all your income on your tax return, not just the income which hasn’t been taxed

When do I pay

HMRC must be paid the balance of tax due by 31^st January following the end of the tax year (31^st January 2018 for the tax year ending 5 April 2017).

If you owe under £3,000 in tax and pay tax through the PAYE scheme you can ask HMRC to collect the tax owed through your pay code, as long as you submit your tax return by 31^st December following the end of the tax year. HMRC will only apply this if you have enough PAYE income for it to be collected.

You will be required to make a payment on account towards your tax bill for the following year if your self-assessment bill is more than £1,000. Each payment on account is half your previous year’s tax bill. These payments are due on 31^st January and 31^st July. If you still have tax to pay after you’ve made your payments on account this balancing payment is also due by 31^st January.

I need to do a tax return how do I tell HMRC

How you register depends on the reason you are registering. If you are registering because you are self-employed you need to complete the form CWF1 online. If you’re not self-employed you need to complete the form SA1. You must register by 5^th October if you need to complete a tax return for the last tax year (5^th October 2017 for the tax year ending 5^th April 2017).

How can an accountant help me?

An accountant can help you in many ways with your tax return. Firstly, they will save you the time and hassle of doing it yourself. A good accountant will also know what you can and can’t claim against your taxable income and they will advise you accordingly. An accountant will register as your agent and can speak to HMRC on your behalf, saving you hours of waiting on hold if you have a problem! To find out more contact Emma Stevens

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Expenses and employee benefits – how are they taxed and what do I need to do?

22/05/2017 By Emma Stevens

If you pay any expenses or offer employee benefits to your staff members, you must make sure that they are properly declared to HMRC and the right tax is paid on them. Many types of employee perks are taxable and if you don’t submit the right paperwork on time, you could end up with a hefty fine.

Some of the benefits and expenses that are included are:

Travel expenses
Entertainment expenses
Childcare costs
Company cars
Employee health insurance

Reporting and paying

Depending on the type of benefits or expenses you give your employees, different rules apply for reporting them and paying tax on them.

Normally, you’ll submit a form to HMRC for every employee you’ve given expenses or benefits. The form is called a called a P11D and has to be submitted at the end of every tax year.

There’s a further form called a P11D (b) and this needs to be completed if:

you’ve submitted P11D forms for any employees
you’ve paid any of your employees’ expenses through your payroll
you’ve been sent a P11D(b) form by HMRC

The P11D(b) just tells HMRC how much Class 1A National Insurance you must pay on the benefits and expenses you’ve given. You can let HMRC know that you don’t owe any Class 1A National Insurance by completing a declaration.

How to pay tax through the payroll

If you register with HMRC before 6th April it’s possible to deduct any tax on most employee benefits and expenses though the payroll. If you do this, and you pay tax on all of their benefits and expenses directly via payroll, you won’t have to fill in the P11D form. You’ll still have to complete and submit the P11D (b) to pay the Class 1A National Insurance.

What you need to report

Different types of expenses and employee benefits are all reported differently, and there’s an A-Z of different benefits available on the GOV.UK website which will help you choose the right way to report and pay it. https://www.gov.uk/expenses-and-benefits-a-to-z

For ‘minor’ expenses or employee benefits, you could be able make a one-off payment called a PAYE Settlement Agreement.

You can normally report using:

commercial payroll software
HMRC’s PAYE Online service
HMRC’s Online End of Year Expenses and Benefits service

You can also download and fill in forms P11D and P11D (b) and send them to HMRC.

Be careful: If you’re late filing the information you could get a penalty of £100 per 50 employees for each month or part month your P11D (b) is late.

There are also penalties and interest if you’re late paying.

For deadlines – go to: https://www.gov.uk/employer-reporting-expenses-benefits/deadlines

Keeping accurate records

It’s very important to make sure that you keep accurate records of everything you give your employees by way of expenses and benefits. You must be able to prove to HMRC that your reports are accurate and that your end of year forms have been properly completed. Sometimes HMRC ask to see evidence of this, too.

Things you’ll need to make a record of include:

dates and details of every expense or benefit you’ve given
information about how you worked out the amounts to put on your end-of-year forms
payments that your employees contribute themselves to an expense or benefit

You must keep these records for three years from the end of the tax year they relate to.

Exemptions

Some expenses and benefits don’t need to be reported, and they include;

business travel
telephone bills
entertainment expenses relating to business
tools or uniforms that are used for work

To qualify you must be paying a flat rate to your employee as part of their earnings – either a benchmark rate or a rate approved by HMRC, and paying the actual costs incurred by the employee.

For more advice and guidance, contact Emma Stevens Accountancy.

All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Is my business ready for a HMRC inspection?

17/04/2017 By Emma Stevens

Nobody relishes the idea of a HMRC inspection. Since 2010 the chances of any business being inspected by HMRC have risen, due to a pledge by the then government to recoup some of the deficit in public finances. Although larger businesses are being looked at more carefully by HMRC, small businesses aren’t escaping the scrutiny of the tax office either. Keeping accurate records is paramount if you want to avoid potential issues in the future.

What happens in a HMRC inspection?

If your business is selected for a tax inspection, HMRC will want to take away all of your business records for the past tax year and come back to ask you questions about them. Should they find that you haven’t paid some of the tax that’s due, they can fine you £100 plus make you pay any tax they believe is owed.

If you’ve just made a simple mistake, they might be lenient, but if they suspect there’s something other than an honest omission going on they could ask you for five years of business records rather than just the one year that’s usual. Most of the time they won’t find anything, and although there’s no penalty, it can cause a lot of inconvenience and worry.

Small firms are often hit hardest by the stress of an HMRC inspection. It can take a while for them to come back to you and confirm that all is OK, while asking you questions, and while you’re in limbo, it can be unsettling.

What triggers a HMRC inspection?

There is a small percentage of random checks every year, but in the vast majority of cases HMRC only triggers an inspection if they think there might be something going on.

HMRC are interested in the ratio analysis – if they notice that your figures change a lot from one year to the next. If inspectors notice any unusual fluctuations in income or expenses on your tax return, they might be a cause for concern, and this can set off what’s called an aspect enquiry where they will want to know more about why the figures have changed so much. Although this is still a worry, it’s less stressful than a full blown enquiry and if they don’t find anything or you can adequately explain the reasons for any differences, it should be fine.

One way to avoid arousing suspicion if there’s a good reason for a big change in your figures is to use the extra space on your tax return form to explain any unusual fluctuations in the businesses turnover or profit.

If you declare everything and keep your records accurately, you should theoretically have nothing to fear from HMRC, although be warned, ignorance is no defence if you’re found to have been routinely making mistakes. Ideally you should make sure that your tax returns are filed on time and in full, so that HMRC doesn’t have any cause for concern.

Keep transparent records

HMRC has the power to obtain information from third parties now, and there are even increased powers to search premises. If your business does come under scrutiny you’ll have to make sure that everything is in order. HMRC also has software it can use to analyse tax returns and compare them to the average for your sector.

Make sure that you have records of absolutely everything that relates to the business – don’t throw anything out. If you don’t keep paper copies of business bank statements, you may have to obtain them from your bank if HMRC decides to inspect you. If you are missing any important information, speak to your accountant to see if there’s anything you can do to fill any information gaps.

Honesty is the best policy

If you know there is an issue with your tax return, it’s best to tell HMRC straight away, explaining why things went wrong or weren’t recorded properly. If you try to cover up glaring omissions or errors, the chances are HMRC will find them anyway and when they do, you’ll face stiffer penalties or even a criminal investigation.

The top three ways to make sure that your business is inspection ready (and avoid being inspected wherever possible) are:

Make sure you always submit your returns on time
Make your tax returns accurate and complete – ask an accountant for help if you need to
Explain any changes from one year to the next on your return. Significant changes in your turnover or gross profits will make HMRC wonder what’s going on, especially if drawings taken from the business or the remuneration paid don’t look right.

If you need help keeping your business records organised contact Emma Stevens at Emma Stevens Accountancy.

PAYE Responsibilities – Becoming an Employer for the First Time

09/11/2015 By Emma Stevens

It’s a big step, taking on your first employee. If you’ve only ever worked for yourself in the past, or even been employed by other people, the rules and regulations surrounding PAYE, NIC and other important aspects of employment law may be new to you, so make sure that you know exactly what you need to do.

The basics

As an employer, you’ll be responsible for calculating and deducting PAYE and National Insurance contributions from your employees, and making sure it’s paid to HMRC on time. You’ll also have to pay any statutory payments like Statutory Sick Pay and Maternity Pay.

You need to ensure you keep accurate records of all payments you make. These can be requested at any time by HMRC for inspection.

Registering with HMRC

The first thing to do if you’re taking on staff is to register as an employer with HMRC. If you have already registered yourself and/or your business for self-assessment, PAYE, corporation tax or VAT you should already have a government gateway account, so registration should be fairly easy. The HMRC website has a Business Tax Dashboard which is handy for bringing together all the information from the services you use online, and you can nominate someone else to handle it for you if you prefer, whether it’s a business partner, accountant or financial adviser. All you need to do is inform HMRC of your chosen person.

You register with HMRC for PAYE up to four weeks before you have to pay your new staff members.

You do not need to register with HMRC if you pay your new staff member under £112 a week provided your new employee does not have a second job, receive any benefits or have a pension income. You still need to keep accurate payroll records and you will need to register with HMRC as soon as you pay your employee more than £112 a week even if it is a one off.

Setting up a payroll

It’s your responsibility as a new employer to set up a payroll. You’ll need software that is compatible with HMRC if you’re running the payroll for your company yourself, so that you can send the information across in real time, every time an employee is paid.

There is free payroll software available from HMRC for businesses employing fewer than nine people, or you can use commercial software. You might prefer to hand everything over to a specialist payroll bureau or an accountant if that’s easier. As long as someone is giving the correct information to HMRC, it’s fine, but as the employer, it’s legally your responsibility to make sure the information is sent, whichever method you choose.

You’ll also have to decide how much you intend to pay employees – and make sure it’s at least the current National Minimum Wage.

Employed or self-employed?

Before you take someone on, check whether the new employee will actually count as ‘employed.’ Some people, such as freelance contractors, are responsible for their own tax and National Insurance so you don’t need to include them in any PAYE calculations.

There’s a useful interactive employment status indicator on the HMRC website.

Checking up on your employees

It’s important to make sure that your intended employee(s) are legally entitled to work in the UK, and if the position they are applying for is one the requires a Disclosure Barring Service (DBS) Check, formerly known as a CRB check, make sure this is done before he or she is formally employed.

Get Insured

All employers need to have employers’ liability insurance before they can become an employer. If you already have professional indemnity or third party liability insurance check with your insurer to see if you are covered.

Paying HMRC

You are legally responsible for making all the correct deductions from your employees pay and paying them to HMRC on time. There are monthly deadlines for paying deductions, as well as Student Loan repayments or tax that has been deducted from payments you’ve made to subcontractors.

Need help with your payroll responsibilities?

Emma Stevens Accountancy offer a payroll service to customers. You can check our rates here.