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“AT Monday, the Chancellor announced the biggest package of tax cuts in 50 years. Without even a semblance of an effort to make the public finance numbers add up. Instead, the plan seems to be to borrow large sums at increasingly expensive rates, put government debt on an unsustainable rising path, and hope that we get better growth. This marks such a dramatic change in the direction of economic policy-making that some of the longer. Serving cabinet ministers might be worried about getting whiplash. Mr Kwarteng has shown himself willing to gamble with fiscal sustainability in order to push through these huge tax cuts. He is willing to shrug off the risks of inflation, and to invite significantly higher interest rates. And he has avoided scrutiny by presenting a Budget in all but name without accompanying forecasts from the Office for Budget Responsibility. Injecting demand into this high-inflation economy leaves the government pulling in the exact opposite direction to the Bank of England, who are likely to raise rates in response. Early signs are that the markets – who will have to lend the money required to plug the gap in the government’s fiscal plans – aren’t impressed. This is worrying. Government borrowing is set on an upward path. It will reach its third-highest peak since the war, and remain at well over £100 billion, even once the energy support package is withdrawn. Public finances The Government’s costing of the Energy Price Guarantee for households and non-domestic consumers – £60 billion over the next six months. Means that borrowing this year is now on course to climb to £190 billion. At 7.5% of national income this would make it the third-highest peak in borrowing since the Second World War. After the Global Financial Crisis and the COVID-19 pandemic. By 2026-27 we now forecast that borrowing will be over £110 billion – 3.9% of GDP – which is more than £80 billion higher than the £32 billion forecast by the Office for Budget Responsibility in March. Over half of this increase in borrowing is due to the almost £45 billion a year of tax cuts announced by the Chancellor today. Our forecasts make no allowance for any top-up to spending on public service spending which might be required given the myriad pressures they face and the fact that public-sector pay awards will run at a much higher rate than assumed when the spending envelope was set a year ago. We also do not account for the most recent rises in gilt rates: the interest rate on 10-year government bonds is currently running at 0.5 percentage points higher than on just Thursday morning. A sustained increase in the cost of government borrowing of this magnitude would add £5 billion a year to borrowing. Borrowing at the rate we forecast would see debt continuing to rise as a share of national income even after the Energy Price Guarantee has expired. It is possible that economic growth will be higher than expected, either through luck or through concerted policy reforms across government. But on current policies it is more likely that, at some point, today’s tax cuts will need to be paid for by future tax rises or spending cuts. Public sector net borrowing forecast with and without Energy Price Guarantee (EPG) (23 September 2022) Underlying government debt forecast as a percentage of national income (23 September 2022) Tax cuts – the big picture ‘Mini-budget’ is anything but mini. In fact, it represents the biggest tax cut to the planned level of tax of any budget since 1972. Outdoing even Nigel Lawson’s 1988 Budget in which the top rate of income tax was reduced from 60% to 40%. Net permanent tax cuts as a percentage of GDP, relative to previous plans While the tax reductions announced in this budget are substantial. Their impact is only forecast to return the UK tax burden to 2021-22 levels – reflecting the large increases in the tax burden previously forecast for the coming years. This will mean a tax burden that remains at its highest sustained level since the 1950s. UK tax burden as a share of GDP Income tax and National Insurance Chancellor Kwarteng has announced some broad-based tax cuts that will affect tens of millions of people. One tax cut aimed very narrowly at the 600,000 people on the highest incomes. April’s 1.25 percentage point (ppt) increases to the rates of employer, employee and self-employed National Insurance contributions (NICs), and to the rates of income tax on dividends. Will be reversed from 6 November. Workers with annualised earnings above £12,570 gain from the NICs cut. The health and social care levy, which was effectively going to extend that NICs increase to workers aged over the state pension age from next April, will not be implemented. This will cost about £16 billion per year from next year. A 1ppt cut to the basic rate of income tax announced previously by then-Chancellor Rishi Sunak. From 20% to 19%, has also been brought forward by one year to April 2023. Hence income taxpayers will gain for an additional year from a tax cut worth an average of £125 per year for basic-rate taxpayers, and £377 per year for all higher-rate taxpayers. Finally, the 45% additional rate of income tax applying to incomes above £150,000 per year will (for those living outside Scotland) be abolished from April. Instead, the 600,000 people currently paying this additional rate – about 1.1% of adults – will simply pay the standard “higher rate” of 40%. The government says that cutting the top rate from 45% to 40% will cost about £2 billion per year. If no-one increased their declared taxable income in response to the change. We estimate that it would cost about £6 billion per year. Hence, the government is assuming that roughly two-thirds of the mechanical reduction in revenue is recouped due to behavioural responses. That looks like a plausible estimate, but the main thing to emphasise is the large uncertainty

Different set-ups require a different way of running things, so the right choice for one business could be completely different to another, even if they offer the same services within the same sector. When you are first starting out in business, many people believe that being a sole trader is the easiest route to take, at least until the business grows. Some people who find being a sole trader beneficial are freelancers such as personal trainers, photographers, artists and hairdressers, but it depends on the circumstance. What is a Sole Trader? There are 4 main types of business structures in the UK, and each of these has different tax and liability implications: –  Sole trader. –  Partnership. –  Limited liability partnership. –  Limited company. A sole trader is a simple business structure – one individual runs and owns the entire business. They are personally responsible for the success of the business and personally liable for the finances. They keep all of the profits after taxes but they are liable if the business incurs any losses. The sole trader and the owner are seen as one entity in the eyes of the law, meaning they are responsible for any business debts or failures. Although this may sound daunting, there are many advantages to being a sole trader: It works out cheaper to set up The biggest advantage of being a sole trader is when you first start-up, the costs of doing so are significantly lower than if you were setting up as a limited company. Registering as self-employed is free as opposed to registering as a limited company. Setting up is easier than if you were a limited company When you set up as a sole trader, there are fewer legal regulations than if you set up as a limited company, which makes it quicker and easier. You work and get paid as an individual, so the only legality is to tell HMRC that you are self-employed. As long as all of your necessary licences are in place, you can then start trading. You still have to pay tax on your profits but there are fewer compliance burdens than those that work via a limited company. Increased privacy Unlike limited companies, sole traders do not have to upload their personal details to Companies House, meaning you can be private about your accounts, sensitive data and directors information. Companies House is easily accessible to the public, and many sole traders like that their competitors cannot keep tabs on them. Sole traders are protected by HMRC’s taxpayer confidentiality rules. You work for yourself Being your own boss means there are no shareholders or directors to answer to or worry about, and you have full control over how you run your business. You are free to make your own decisions when it comes to the day to day running of the business, with things such as finances, workflow, business strategy and hiring, and the decision making is much quicker. You can also set your own hours and focus on your own long-term goals without having to agree with other people. Above all, it means you get to keep all of your post-tax profits, and do not have to worry about sharing these out to shareholders and directors. You can add your own personality As a sole trader in a lot of industries, your services are not the only thing you offer a customer. Your character, quirks and all, are what sells you too. People buy into you as a person when you work in a customer facing role. Whether you’re a personal trainer or a hairdresser, run an independent shop or you’re a wedding photographer, your personality is what retains customers and is why people recommend you. Larger brands are not able to add their own stamp, which gives you the upper hand. There is less admin Because there is less regulation, it means there is less paperwork. Less paperwork means more time to run your business and less time needed on admin. Add into the mix a good accountant, and you can fully concentrate on what you do best. It’s easy to switch to a limited company If you start out as a sole trader, it is much more flexible to change over to a limited company down the line. To move from sole trader to limited company status, you send an application to Companies House and this can be approved as soon as 3 working days later. If you did things the other way around and started out as a limited company then decided to switch to a sole trader, you would have to dissolve the company first and step down as the director. If you do want to want to shut the business, you will have to do the following: –        Alert HMRC –        Settle any liabilities –        Collect money owed –        Keep or sell any physical assets and equipment –        Distribute any residual money to the owner As a sole trader, you can only sell the assets. However, with a limited company there are a lot more steps to the process, which can be complicated. You can get tax back on losses You are more likely to make a loss in your first 4 years of trading than at any other time, but if losses occur in the early days, you can set these against other income streams. This helps to reduce the amount of tax you pay. Setting up a business is a daunting process, especially if you’re a start-up coming from full-time employment. There are limits and caveats, but there is the option to carry back that loss. Early year loss claims apply in the first four years of trade. In your first years, once you’ve worked out your tax adjusted loss, you might be able to carry that loss to a prior year, where you may have been paying tax at 40%. It is worth speaking to your accountant about this, as they will be able

Completing a self-assessment is the bane of a lot of contractors‘ lives; on top of taking a lot of time, there are often many common mistakes made which can either result in having to start again or receiving a fine. Not all mistakes lead to a penalty but they can lead to more tax being paid than necessary. Made a Mistake on Your Self-Assessment Tax Return? What You Can Do: Making a mistake on your self-assessment tax return form is an easy thing to do. When you spot a mistake after you have filed it, there are things you can do. If you submitted the form online in the last 12 months you can fill out an online amendment form. When logged in to your HMRC online account you can find your submitted self-assessment tax return form. When viewing this form, you will see an option to amend the form. Upon selecting this option, you will see a list of sections and elements of the form available for amendment. You will need to select the appropriate section and then fill out the revised details and re-submit. If you filled out your return on paper, you have 12 months following the October submission (as paper returns have an earlier deadline), to re-download the form and fill it out correctly to send back to HMRC. If you have missed the 12-month window, you will need to write to HMRC explaining your circumstances and the mistake. The change to your form will either result in you needing to pay more tax or receiving a refund. You must make sure to carry out either action as soon as possible. You will have a four-year window to file for and receive the refund starting from the end of the tax year it applies to. HMRC Penalties for Incorrect Returns HMRC can give penalties for incorrect returns. The fine process uses a ‘behaviour based’ system which range from 0 to 100% when assessing a penalty for incorrect returns. A reasonable care penalty of 0% will be applied when the taxpayer discovers a mistake and discloses this to HMRC, then 100% penalties apply when there is a deliberate false return, facts are concealed and the taxpayer only accepts the position following a challenge by HMRC. Steering clear of mistakes and avoid HMRC penalties for incorrect returns is essential when you are submitting your returns. Read through our advice below to prepare yourself for your next self-assessment and avoid those pesky errors! Remember to Pay This has to be the first thing we talk about, even though it’s the last thing you need to do. More individuals than you may expect complete their self-assessment” and then do nothing. It’s easy to assume that everything’s done now, but you do actually have to arrange the payment to HMRC yourself. Whether it’s by direct debit or cheque. Be sure to finish this step to avoid any late fees or criticism from HMRC. Keep a Record of Everything This will make your life so much easier when it comes to self-assessment time, but is something so few contractors, freelancers and business owners do right. Keep a clear and easy to follow record of every piece of expenditure, every wage or dividend – anything to do with money! When it comes to filling in your self-assessment, you’ll find having everything to hand (preferably on a spreadsheet) speeds the process up and prevents any panicked searches for bank statements. Check the Figures Check your record keeping and ensure that the figures entered onto the tax return match the actual amounts in your records. Any errors could result in you under or over declaring your income and taxes. Read the Questions Just like an exam back at school, be sure to read the questions and make sure you know exactly what the form requires of you. If you provide the wrong information, it could mean you have to re-do the whole thing. You could be declaring the wrong amount of tax/profit etc. Always be sure before you do anything. Amend Your Self-Assessment If you realised you have made a mistake on your tax return. It won’t be too late to do something about it. Can go back and amend your self-assessment should you need to. You have 12 months after the usual 31st January tax return deadline to amend a self-assessment. You amend your self-assessment via the process that you submitted it, so online if it was submitted in this way and on paper if you submitted it on paper. Use an Accountant Of course, the best way to avoid all of the headaches involved with self-assessment forms is to simply hire a self assessment tax return accountant. They have the professional knowledge to understand what is required and have often done it hundreds of times before.  Still remember to keep a record of everything though – it’ll make their life a lot easier! If you have already started, or even submitted your self-assessment. Feel like you need assistance with it, it may not be too late to get help either. You, or an accountant can amend a self-assessment so long as it’s before the deadline, which you can find on the Government’s website. If you want to complete your next self-assessment on time and correctly, consider asking an accountant for help. Contact Account ease for expert advice and professional assistance, and avoid any mistakes!  

From 1 November 2022, VAT-registered businesses will have no choice. But to use Making Tax Digital (MTD) compatible software to file their VAT returns, unless they have a digital exclusion exemption. Businesses with a taxable turnover above the VAT registration limit of £85,000 have had to use MTD VAT rules since 2019. It became a requirement for all VAT businesses from 1 April this year. HM Revenue & Customs (HMRC) will remove the option to file a VAT return from 1 November without using MTD compatible software, so it is advisable to set up this process sooner rather than later. Despite promises to not issue penalties for those who use the wrong filing method. Businesses could be handed a default surcharge instead and from January 2023, late payment penalties as well. It has been reported that around 10 per cent of businesses above the VAT threshold and 55 per cent of those below. It have not yet signed up to MTD VAT, which they need to do as soon as possible. A portion of businesses have not signed up for MTD but are already filing their VAT returns using MTD software. They must complete the sign-up process now. So you should check if this applies to your business as soon as you can. For businesses that file VAT returns annually, the online return will be accessible until 15 May 2023. Additionally, for those with a digital exclusion exemption. The online VAT return will remain open for those who can access it with assistance or through another body. Businesses that benefit from this exemption should be aware of this. If you are unsure it is best that you check before the November deadline. For more advice and information, contact us today. You can reach out us via phone call and also via email. Mail us at askus@account-ease.co.uk or call us at 0208 133 4599.

Establishing your own business with the ability to control your career path, and even being your own boss is definitely a desirable prospect. All that additional freedom and flexibility may perform extremely well ( even if sometimes it’s not exactly the way you’d expect). The fact owning your own business typically requires a little more administrative work than being an employee who is paid through Pay-as-you-go, but Self Assessment is just one of the additional aspects. If you’re an individual contractor, then you could be required to take Self Assessment as a sole trader or director for a restricted company. Depending on how you conduct your business. Confusing, isn’t it? That’s why we’ve put together this article to assist. Self Assessment for Contractors As with all businesses, contractors must file tax returns according to the type of business structure they have in place. Additionally, the best structure for your business of contracting is based on the circumstances of your business. Self Assessment can be described as a form of the tax return in which you provide details about the amount you earn during the tax year to HRMC. HMRC makes use of this information to calculate how much tax you are liable to pay. You will generally need to make Self Assessment submissions if you contract as a sole trader or in a partnership, or if you’re the director of a limited company.   Contractors who operate as Usually need to submit Self Assessment Sole Traders To report the income, they make from self-employment Partnerships For the partnership as an entity, as well as separate submissions for their own personal income Limited companies To report any income they take from the company as a director – such as dividends   Self Assessment generally works according to a tax year, which begins on April 6 and ends on 5th April in the year after. Be aware that if you require Self Assessment submissions it is necessary to declare your entire income, regardless of the source to ensure that HMRC can determine: How much did you earn How did you get it What allowable expenses can you claim tax relief for? Taxes that you’ve been paying (so you don’t have to pay twice) How and when do contractors pay for a Self Assessment tax bill? The deadline for paying any tax due after you have submitted Self Assessment is midnight 31st January. Therefore, if you are required to file a report for your tax year that began on the 6th of April in 2021, and concluded on April 5, 2022, the deadline for payment is midnight on January 31, 2023. It is also possible to make ‘Payments on account If your bill is more than £ 1,000. HMRC generally assumes they’ll pay you the same amount in the future, and request you to pay an advance toward the next bill. The advance payment will amount to half the amount of your last amount. Can I lower the monthly charges on my account? The reason is that usually, a business has a lower profit over the last year. If this is the case it is possible to request to lower the amount you pay on your account to avoid paying tax too much and then later claim it. It is possible to request this via the account you have created in your Government Gateway account, or talk to your accountant about the request. Will I be charged interest or penalties for late payment? It is crucial for you to settle your Self Assessment bill before the deadlines. Unfortunately, you’ll be penalized for late payment in the event that you fail to pay it in time. The interest will become due until you have paid the entire amount that is still due. If you believe you’ll face problems getting deadlines for your Self Assessment due dates for tax, the very last option is to try to avoid the issue. Call HMRC directly or speak with your accountant regarding what you should do. I’ve made an error on the Self Assessment tax return. How can I fix it? Yes, you are able to amend taxes within 12 months after the deadline for filing. Keep in mind that any modifications you make may cause you to pay additional taxes or pay interest. If you file your tax return and there are obvious errors or issues, HMRC can correct it within nine months after the date of filing. Does HMRC ever enquire into a tax return? Sometimes, yes. HMRC could initiate an inquiry into Your Self Assessment within 12 months after it has been completed. The IRS will notify you by letter if this occurs. There are no questions that can be asked by HMRC regarding your tax return until they have launched an inquiry. Don’t be concerned when this happens, however, it’s not necessarily a sign there’s an error or that there are difficulties. Most of the time, HMRC will just want to confirm the accuracy of your tax calculation, and sometimes it could happen randomly. What information should I record? You’ll have to keep accurate financial documents in order to finish Your Self Assessment accurately. Due to the forthcoming making tax digital for Self Assessment of Income Tax rules, you should think about adopting a digital approach to your bookkeeping, if you’re not already doing it. You may also require additional documents or information to ensure you have completed all the items in your self Assessment checklist. What do you think of CIS tax returns? How will they impact Self Assessment? Under the Construction Industry Scheme (CIS) contractors in the building trade keep back a percentage of what a subcontractor earns and then pay the deduction on to HMRC. This is similar to the way employers pay employees. The contractor will have to pay the administration is a little more complicated, but for sub-contractors, it can have a greater impact. This is due to the method by which CIS deductions are calculated. There are two elements to this equation: The CIS tax rate and the tax-free personal allowance. What is the CIS taxes? Contractors are able to deduct CIS tax based of whether or not the subcontractor is registered with the scheme.