Explaining the complete list of tax rates and allowances for 2015-16, plus any changes to the rules in this year would take more than a blog post – that’s what accountants are for, after all. We’ve put together a quick guide to some of the most important taxes that affect you as an individual and as small business owner.
Your actual income will be affected not only by the tax rates, but also by changes in personal allowances. For help with tax and any other financial issues, feel free to contact Emma Stevens Accountancy.
Tax bands and thresholds for 2015-16
Tax bands for 2015-16 haven’t changed a great deal, except for the 10 per cent savings band which has been replaced with a £5,000 nil-rate band for people on a low income.
Income Tax Rates
Income tax for self-employed people is only paid on the profits, not the gross income; deduct business expenses, capital allowances and losses to find your profit.
- First £31,785 of taxable income 20%
- £31,786 to £150,000 40%
- Excess over £150,000 45%
Annual investment allowance
The current annual investment allowance is £500,000 until December 2015, when it will be reduced. You can spend up to £500,000 on business-related capital assets in this tax period, and offset it against your income tax bill.
Expenses you can claim
You can deduct the costs of anything bought for your business when you work out taxable profits and get immediate tax relief for the full amount spent unless it’s an item that counts as a capital asset- such as a computer which is accounted for under different rules.
- Running costs of a car or vehicle, including petrol, car tax, insurance, repairs and servicing – depending on the proportion of mileage that was business-related.
- Running costs of your business premises – or if you work from home, your home office costs
- Salaries and benefits of any employees
National Insurance bands and rates can be confusing because they are different for employees, sole traders and limited company directors. For self-employed business people;
Class 2 National Insurance contributions
For profits up to £8,060 in 2015-16, you have to pay Class 2 contributions at £2.80 a week. You can claim exemption if your annual profits are below £5,965 in 2015-16.
Class 4 National Insurance contributions
If your profits are more than £8,060 in 2015-16, you will have to pay Class 4 contributions. This is calculated at 9% on profits between £8,060 and £42,385 in the 2015-16 tax year.
On profits above £42,385, the rate drops to 2%.
If your business is a limited company, even if you’re the only employee, you are counted as employed and so the employee income tax rules will apply.
Value Added Tax (VAT)
If your turnover is over £82,000 in 2015-16 you also have to register for VAT and pay quarterly. You can also register voluntarily if your turnover is less than £82,000, and it maybe worth doing so if you have to pay VAT on things bought for your business, as you get to claim the VAT back if you’re registered. It depends on your consumer as you will need to add VAT to your sales.
If you charge more VAT on the goods or services you sell than you pay in items you buy for your business, you will have to pay HMRC the balance.
If your turnover is less than £150,000, you could also benefit from using the flat-rate scheme. The scheme calculates your VAT payments as a percentage of your VAT-inclusive turnover, which makes it good value for small businesses as well as simplifying admin.
The standard rate of VAT is 20%.
There is a list of VAT flat rates available for different types of business on the HMRC website.
This year, married couples and civil partners can transfer up to £1,060 of ‘unused’ tax allowance to each other. If one of your incomes is below their allowance, they can transfer up to £1,060 of the excess, as long as their spouse pays tax at 20% – this can help save up to £212 a year in tax.
For more information and a full list of all personal and business tax allowances and changes, see the HMRC website.
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