amir

Payroll accounting can seem like a bit of a headache, even though taking on employees is a sure sign of business success. Once you start employing and paying other people, there’s a lot to deal with – keeping on top of all the changes in tax, employment law and regulatory issues is a complex and time-consuming task. Year-end becomes a minefield with HMRC knocking on your door for tax returns, alongside the race for P60s. And as you can imagine, it’s a breeding ground for transcription errors and miscalculations. So, this is where QuickBooks payroll UK comes into its own. In this article, we’ll explore some of the benefits QuickBooks payroll UK offers, delving into how it can help you run payroll easily and accurately and best payroll providers in UK. What is a payroll management system and how does it work? A payroll management system, or QuickBooks payroll UK, is exactly what it says on the tin: a system or software that manages your payroll. When we say ‘payroll’, we’re talking about the process by which employers withhold some of their employees’ earnings to pay directly to the government as tax. Payroll software like QuickBooks payroll UK simply makes this process run correctly and easily, processing the data you input; working out how much you owe, to whom and when; and ensuring that all payments are sent to the right entities on time. What does payroll software do? In a nutshell, payroll software will ensure you pay your staff the right amount at the right time. And that’s crucial in holding onto your staff – happy staff means they’ll stick around for longer, which improves your bottom line as well. Payroll software also automates much of the processes involved in payroll accounting, leading to more accurate data and reports. Who needs payroll software? The simple answer is anyone with employees, or who pays themselves as an employee. While it is possible to work out payroll manually, it presents serious costs in terms of time and energy, as a maze of deductions need to be worked out for each individual employee. Since HMRC introduced Real Time Information (RTI) reporting, employers have to submit PAYE information through compatible software every time they pay their employees. This Full Payment Submission needs to happen on or before the day the employee is paid through HMRC online services. Even if your employees don’t need to be registered with HMRC (because they earn less than £118/week) you’ll need to keep records for them. Payroll software like QuickBooks payroll is the best way to do this as it knows what you need to know . 6 key benefits of payroll software You’ll save time and reduce errors Payroll accounting software such as QuickBooks payroll software takes the number crunching out of the process, leaving your payroll administrator to oversee everything. Income tax deductions and National Insurance Contributions (NICs) will all be worked out for you. It can also track absences, expenses, bonuses, holiday pay, overtime, pensions and (of course) hourly pay or salaries. And with the advent of open banking and psd2, payments are faster than ever (and more secure). You’ll stay compliant with government regulations Staying up-to-date with current tax rates and responsibilities can feel like a constant game of catch-up. But there’s no need to worry with payroll software. It tracks all the latest regulations automatically, dealing with issues from GDPR to Workplace Pensions as well. You’ll improve accuracy and simplify the payroll process As with all aspects of your business, manual data entry means the risk of human error and potentially costly mistakes. Under-deductions, late payments, miscalculations – they’re all part and parcel of manual entry. We’ve all done it: hit the space bar mid-spreadsheet on Excel and deleted a formula without even noticing later on. When all the number crunching is handled by your payroll software, that risk is removed. You’ll actually be on top of your record keeping, so it’s much easier to meet your deadlines and make those payments to HMRC in plenty of time, especially with a built-in reminder. Your employees will benefit Some payroll software offers employees access to their own portal. This gives them restricted access to the system and allows them to check details, take a look at their payment history and even book time off. It sorts your stationery and avoids mistakes Employers are required to give each employee a pay slip with the details of their pay and any deductions. Doing this manually increases the risk of any errors made. While automating this means the payroll management system can run payslips automatically, sending out secure and compliant payslips straight to your employees. Make sure the payroll software you choose lets you produce smart, customisable, secure and compliant payslips that can be printed or emailed as well as P60s and payroll reports. It’ll make your year-end easier Automatic tracking, recording and reporting is offered as part of most payroll software. These features make the year end far less stressful for you or your payroll manager – gone are the days of paperwork mountains. It could save you a lot of money in penalties. Payroll places extremely high levels of responsibility on employers, and getting it wrong could potentially be very financially painful. Which Payroll software is right for you? As with any choice concerning your business. You need to carefully explore your options and select the payroll software that’s right for your business needs. Some areas you may want to consider include: Features – As noted above, different systems can do a range of different things. You should think carefully about what sort of features you need – and avoid paying for those that won’t benefit you. Cost-effectiveness – Different systems have different payment structures, and choosing the right one can save you a lot of money in the long term. If you run payroll multiple times a month, for instance, a monthly fee will likely work out cheaper than paying each time you run payroll. Integration – Which other systems does your business use? To get the most out

Independent contractors, consultants, or freelancers are self-employed individuals who work for businesses, usually on a short-term basis. Hiring a contractor enables firms to access specialist skills, knowledge, and experience, without actually taking someone on full time. This is often very appealing. If you’re thinking of becoming a contractor, you’ll need to decide what kind of legal set up your business will have. It’s known as your “legal structure”. The legal structure you choose affects how much tax you’ll pay, your management structure, and what records you’ll need to keep. As with most start-up business, you essentially have three main options: Operate as a sole trader Set up a limited company Create a partnership (you’ll need a friend!) Setting up your contracting business as a sole trader Becoming a sole trader is usually the simplest route into contracting in terms of admin and tax. You don’t need to register with Companies House, so won’t have to file annual accounts with them, and there’s very little admin to get started. As a sole trader, you and your business are, legally speaking, the same thing. There is no distinction between yourself and your business, so you get to keep all the profits after tax. On the flip side of this, any business debts or liabilities are also your responsibility. If your contracting business runs into trouble, all the financial and legal responsibility falls to you to sort out. Paying tax as a sole trader contractor As a sole trader you must register for Self Assessment with HMRC and complete a tax return each year. It’s important to keep accurate records of your business income and expenditure because this will help make sure you pay the right amount of tax (and claim all those expenses!) Keep in mind that you might also need to pay fixed-rate Class 2 National Insurance contributions (NICs), as well as Class 4 National Insurance contributions on any profit you do make. What are the benefits of being a sole trader for contractors? Plenty of contractors prefer being a sole trader because it’s easy to start up, and offers more flexibility. You’ll need to make sure you record your profits and losses (known as bookkeeping), and submit your Self Assessment tax return on time (and pay the bill!). Are there any disadvantages to being a sole trader for a contractor? You are totally responsible for your business, so if there are any debts or other liabilities it’s you that pays them out of your own pocket. This could mean your home or other personal assets are at risk if you don’t have the cash available. You might also find that some contracting agencies won’t work with sole traders, which can have a massive impact on your ability to find work. Operating as a contractor with a limited company Limited companies are completely separate legal entities from their owners and directors. You’re not legally responsible for the company’s debts or liabilities, but this also means any profits belong to the company. In order to begin trading you will need to register as a limited company with Companies House. This is called incorporation – a process which the video below explains in more detail. A limited company needs at least one director to start up, and must submit annual accounts to Companies House. The benefits of running your contracting business as a limited company The beauty of setting up as a limited company is limited liability. It’s more costly and admin-heavy to register, but if anything goes wrong, only assets belonging to the business can be seized – not the personal assets of directors or shareholders. It’s often more tax-efficient too. Many company owners are both directors and shareholders, essentially taking a salary as an employee of the business, and then receiving dividends alongside it. Another benefit for contractors in particular, is that starting a limited company rather than operating as a sole trader can help your business appear more credible. Many contracting agencies won’t work with sole traders, so running your business as a company can help you source more work. It can also be much easier to raise finance, and is likely to be easier to sell up. What are the practicalities of running a company? As company director it’s your responsibility to make sure that the company submits the correct tax returns and accounts to HMRC and Companies House each year. As an individual who is a company director, you’ll also need to complete a Self Assessment tax return. If you don’t normally fill in a tax return, you’ll need to sign up for Self Assessment on the Gov.uk website. Each time you submit your tax return, you’ll need to provide details of the income you receive as a director, as well as any other income you receive. Setting up a partnership Setting up a partnership allows contractors to share the responsibilities, costs, and risks of running a business with other people. It’s a simple and flexible way for two or more people to own and run a business together. You don’t need to register with Companies House, reducing some of the administrative burden. Instead, each partner is self-employed in their own right, and then registers the partnership for Self Assessment. Partnerships have no legal status in the way that limited companies have. They simply act as a way of linking two or more self-employed people together. Though partners can also be a limited company or another partnership! The profits and gains are generally shared between each of the partners, unless a different agreement is set up that says otherwise. Are there any disadvantages of setting up as a partnership? If you go into partnership with someone, you must be absolutely sure you can trust them. Even then – make sure you have an agreement in place before starting up! This is because all debts and liabilities are the responsibility of each partner personally. Creditors can seize personal assets if the partnership runs into difficulties. Even if your partner ran up the debt and you didn’t –

As contractors eagerly await the Medium-Term Fiscal Plan on Monday 31st October, we take a look at the latest on IR35. With potential implications to be unveiled, the plan will fall 5 weeks after the mini-budget 2022, where, surprisingly, the repeal of IR35 reform was announced. It was announced that the IR35 off-payroll legislation would be simplified from 6th April 2023. The rules will revert to the 2016 position with the recent 2017 & 2021 reforms, which were largely unpopular, due to be repealed. This was great news for contractors as they would once again be responsible for determining their own employment status and paying the correct tax and NI contributions, rather than the employer. Ultimately, this change makes it easier for companies to hire contractors which will result in a significant uplift of people moving into self-employment or returning if they had gone back to employment due to the complexity. What has the government said since? Since the announcement of the Government plans to repeal the Off-payroll (IR35 Reforms), there has been confusion across the internet and social media. The most common is that “IR35 has been repealed”. IR35 in its whole form will remain. There is no getting away from that for now, however it is the controversial reforms to IR35 rules that will be scrapped. The changes will come into effect from 6th April 2023, at the start of the new tax year. For now, the IR35 reform’s repeal is set to stay, despite the pressures on the economy and the unstable nature of the government, with many agreeing the passing the responsibility of status back to contractors is the right thing to do. Businesses are often struggling with IR35 issues, which is hindering growth due to a shortage of contractors. But what is the latest with IR35? 5 things you need to know as a business or a contractor 1) If IR35 has not been scrapped, what has? Nothing has been “scrapped” at the moment, and certainly not IR35 in general. The plans are to repeal the Off-payroll working rules (“IR35 Reforms”), which were introduced in 2017 and 2021. The original IR35 rules will remain in place. 2) What will change in April 2023? What causes the most confusion is that the IR35 legislation has changed over the course of time, but is still used to refer to two pieces of employment legislation. The Off-payroll working rules (Chapter 10 of the Income Earnings and Pensions Act) 2003 were introduced into the public sector in 2017. This was then extended to the private sector in 2021 for medium and large companies. The original IR35 rules date back to April 2000. In basic terms, under the original rules, contractors were responsible for deciding where they stood in terms of IR35 status and it was their responsibility to ensure they were paying the correct tax. Under the new rules, hiring firms took on that responsibility for assessment and tax liability. In 2015, it was planned to replace IR35 with the term “off-payroll working”, however Ministers decided this would be a huge burden on small businesses, and the rules only applied to medium and large companies instead. The change in 2023 will be for the new rules, with things reverting to how they were before. Contractors will make their own assessments and deal with their own tax implications, as well as bear the liability if they get it wrong. It’s business as usual until the law officially changes, however companies and contractors should start to get prepared. 3) How exactly should businesses and contractors prepare for any changes? For now, businesses should comply with the Off-payroll working rules. Until the Finance Act is changes by a bill, they remain law. If you are a business who has contractors working for you and operating Outside IR35, they can continue in the same way. Where firms may have implemented a decision to disallow limited company contractors, due to the IR35 burden it has created on the business, it may be time to reconsider reversing that decision. From 6th April, there will be a huge amount of talent that you can now retain. If you are a contractor and you believe you should be operating ‘outside IR35’, you should begin assessing your status. If you need assistance with this, Account-Ease can help. We work with specialists who can support contractors across all industries identify their status and make sure they are paying the correct amount of tax to protect themselves. 4) Will all firms take on contractors again? This will likely be a gradual process where firms lift their blanket bans and allow contractors to work under a limited company again, providing that the contractor is “outside IR35”. Firms that did put a blanket ban in place may decide to work with contractors again as the switch from the old rules to the new rules was pretty easy to navigate, and this should be fairly seamless too. If they decide to engage with contractors again on an “outside IR35” basis, proper assessment will need to be in place though. This is to ensure that contractors meet their compliance, and they cannot be accused of facilitating tax avoidance. In terms of recruitment, agencies will be expected to prove due diligence is taken in the recruitment of contractors, and that everything is above board with an IR35 contractor check. There is also the issue of the transitioning of existing contractors, as they do now have different rights. Companies cannot be seen to have workers finish one week as an on-payroll worker and then return after the weekend as a limited company contractor. The transition needs to be carefully considered and a gradual process, as this is one of the reasons for IR35 being introduced back in 2000. 5) Will I no longer have to use an umbrella company? The IR35 changes won’t make a huge amount of difference to those who choose to use an umbrella company. However, there may be less of a requirement

Your self-assessment is one of the most important things to take into account when you become self-employed. It’s critical that the return is filled out correctly and submitted on time, as there are penalties otherwise, so you’ll want to get it right the first time around. As contractor accountants with years of experience, we can help. We’ve put together a self-assessment tax return guide with useful information for self-employed individuals, and we’re also able to assist with the return submission if you prefer. What is a Self-Assessment Tax Return? First of all, if you’re looking into becoming self-employed or are still a beginner, it’s crucial that you’re aware of which documents to fill out and why. After all, your taxes are deducted from your wages when you’re working for someone else – but, as soon as you become your own boss (even if on a part-time basis while you still work a more traditional job), you need to submit a self-assessment tax return. Since September 2017, some people who would normally submit a self assessment tax return are now eligible for Simple Assessment Tax, but you will know if this is you as you will receive a letter from HMRC. A self assessment tax return form, is a document used by HMRC to calculate how much tax you need to pay based on your income. You have to do this once a year, either filing the return online or sending it by post to HMRC. In the document, you must declare your taxable income and capital gains, as well as the allowances and reliefs you’re entitled to. Who Has to Submit a Self-Assessment Tax Return? According to HMRC, you have to submit a self-assessment return if, in the last tax year, which runs from 6 April to 5 April, you were a sole trader who earned over £1,000 or a partner in a business relationship. You may also need to submit a return if: You’re a company director with income that is not taxed under the PAYE (Pay As You Earn) scheme. You receive income from a trust, settlement or estate. You have untaxed income from renting out a property, tips or commission and foreign income. You have untaxed income from savings, investments and dividends. You or your partner receive child benefits and your income is more than £50,000. You have capital gains where you’ve sold or given assets worth £49,200 or more. You want to claim certain tax reliefs. There are other circumstances that may require the submission of a self-assessment tax return so, if you’d like to know if that is your case, talk to us. We’re sole trader accountants and can help out every step of the way. How to Register for Self-Assessment You have to register to submit the return, and there are different ways of doing it depending on whether you’re a sole trader, not self-employed or registering a partnership. If you’re self-employed or a sole trader, you will have to register for self-assessment and Class 2 National Insurance by 5 October in your business’ second tax year. This means that, if for example, you’ve started trading on 10 February 2021, the latest date to register was 5 October 2021. Some people may have sent online returns before. If you haven’t sent a return before, you can register online and will then receive a letter from HMRC with your UTR; after this, you can set up your account for the self-assessment service. You’ll receive an activation code that you will need to use to sign in. Important Dates to Know About In this self-assessment tax return guide, we also want to touch on key deadlines. When it comes to submissions, it’s crucial that you do it within the given timeline, since you’re at risk of being fined otherwise. The same goes for the money you owe – if you have to pay tax, make sure that you do it by the right deadline and, if you’re unable to, you need a reasonable excuse to avoid a penalty. Reasonable excuses may include a sudden death in the family right before the tax return or payment deadline, an unexpected stay in hospital, a serious illness, a software or hardware failure before, or when, you were dealing with your return, a natural disaster and postal delays you couldn’t have predicted. There are also some things that don’t count as reasonable excuses, including: relying on someone else to submit your return, failed payments due to lack of funds, finding the HMRC system too difficult to use, not getting a reminder from HMRC and making a mistake on the paperwork. Generally, you should make sure that your return or payment is sent by: Self-Assessment Tax Return Deadline Register for self-assessment 5 October 2021 Submit paper tax return 31 October 2021 (Midnight) Submit online tax return 31 January 2022 (Midnight) Pay the tax you owe to HMRC 31 January 2022 (Midnight) Penalties for Late Payments You should do all you can to avoid HMRC penalties for late or incorrect returns; if you miss your deadlines, you will have to pay a penalty of £100. If you’re more than three months late, you may have to pay an extra £10 a day up to a maximum of £900 and, if you’re six months late, you have to pay a further £300 or 5% of the tax due, whatever is higher (this is on top of the existing penalties). For those who are 12 months late, on top of the penalties highlighted above, they must pay an additional £300 fine or 5% of the tax owed and, if some cases, the fine corresponds to 100% of the amount of tax owed. You have 30 days to appeal with HMRC if you’ve been issued a penalty you don’t believe is correct, but you’ll need a reasonable excuse, as mentioned, to avoid a penalty. What is Required to Submit Your Return? When it’s time to prepare and submit your self-assessment tax return, there are a few documents and information

So, you’re thinking of becoming a sole trader? Fantastic. Not only does working this way offer you greater flexibility and the opportunity to take full control of your career. It also happens to be the simplest way to start providing your services as a self-employed person. In this guide, we touch on everything you need to know when looking to register as a sole trader. We’ve also included a handful of other things to think about as you take your first steps into self-employment. Choose your business name Every business needs a name. This can be as simple as your own name, something catchier, something professional sounding or even something witty if you think. It’ll benefit your business – never rude or offensive though, the government is keen to make clear of that. In addition to this, you can’t include the word ‘limited’, ‘ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’ in your name, given these all suggest that your business is incorporated. You should also avoid copying existing trademarks because you then run the risk of legal action put forward by the owner of the trade mark. Don’t worry though, all UK trade marks can be checked on the government website, where you can even register your own if you wish. Register as a sole trader for tax purposes The only mandatory requirement when you go self-employed is to register as a sole trader for tax purposes. In simple terms, this is how you tell HMRC that you’ll pay income tax through the self-assessment, which you’ll need to file and pay every year. While your sole trader registration doesn’t technically need to be completed until 5th October in your business’s second tax year. It’s worth registering right away. You don’t want to forget and receive a fine. How to register as a sole trader: Head to the government website and enter your information Soon after, you’ll receive your Unique Taxpayer Reference (UTR) number in the post. Make a note of this, you’ll need this when submitting and consequently paying your self-assessment tax return Once your UTR arrives, you’ll be sent another letter containing your account activation code When your account has been activated. You can file and pay your self-assessment tax return any time before the 31st January deadline Sole trader businesses need to be aware of and keep on top of their tax responsibilities. It’s therefore important that you have a firm idea of the tax you need to pay, along with the deadlines for these payments. Do you have to register as a sole trader immediately? It depends on how much money you’ve earned from self-employment in the previous tax year. If the amount is over £1,000 you need to register as a sole trader right away. There are other reasons to register quickly too, such as qualifying for tax-free childcare or to make voluntary Class 2 National Insurance Contributions so you’re deemed eligible for certain benefits. Having completed your sole trader registration. You’re in a strong position to think about what else you can do to build a stable foundation for your business. Let’s take a look at some other considerations when setting up as a sole trader: Do you need a separate bank account? When setting up as a sole trader you aren’t legally required to open a business bank account. This is because sole traders aren’t separate from their business in the way that a limited company is from its owners. Even so, plenty of sole traders choose to open a new personal account through which they can make and receive payments. The thinking behind this is that it keeps your personal and business finances separate. This makes things easier when it comes to tracking income, expenses and in turn, working out how much tax you owe. Managing your accounts The last thing any sole trader wants to be doing is pouring through receipts, totting up expenses and calculating the amount of tax they owe in a mad rush before the self-assessment deadline. It’s why keeping on top of your accounts at all times, and from the word go, will make life a lot easier. If this sounds daunting, don’t panic. You can always chat to an accountant who can explain everything to you in layman’s terms, from allowable expenses to VAT and tax deadlines, before taking care of these responsibilities on your behalf. Protection for your business Even with the best will intended, things can go wrong in business. For example, you might make a mistake when working for a client which causes them to lose income. You could fall victim to a cyber attack, resulting in lost business. Or you might become ill or injure yourself, meaning you can’t work for a period of time. It’s why many sole trader businesses choose to take out insurance from the very beginning. For peace of mind and to protect them financially. Whether it’s professional indemnity insurance to cover mishaps, public liability insurance for accidents, cyber cover or equipment insurance, there is plenty of protection available for sole traders. What else should you consider? That you always count on an expert like Account Ease to support you, from taking care of your sole trader registration to providing a range of trusted and tailored accounting services that save you time, money and help to ensure your tax compliance. How can Account-Ease help? Appointing an accountant can save you time and stress when starting up on your own. If you would like to speak to someone about any of the above information or any other queries you may have, arrange a callback at 0208 133 4599 or email us ataskus@account-ease.co.uk and a member of the team will be in touch.