Account-Ease

Understanding Landlord Tax and Your Responsibilities in the UK The Concept of Landlord Tax As a landlord, understanding landlord tax is crucial. This tax, levied on rental income, forms a significant part of your property investment strategy. Essentially, it’s the amount you owe to the government from the income you earn from your rental property. The specifics of how much tax you pay can depend on several factors, including your total income, the rental income, and any allowable expenses you incur. Your Legal Obligations Being a landlord in the UK comes with certain legal obligations. One of these obligations is accurately reporting your income and paying any due taxes. You need to ensure you stay on the right side of the law by correctly declaring your income and paying your taxes on time. Failure to do so can result in penalties and legal consequences. Maximising Rental Income Through Property Investment Strategies for Consistent Income Investing in rental properties is an effective way of generating a consistent income stream. However, the actual rental income you take home is after the landlord tax and allowable expenses. Therefore, optimising your property investment strategy can help maximise your returns. This can involve several elements, such as choosing the right location for your property, setting a competitive rental price, ensuring regular occupancy, and managing your property effectively. Optimising Your Property Investment Optimising your property investment means making strategic decisions to maximise your rental income and minimise your expenses. This involves a deep understanding of the rental market, your potential tenants, and the current tax laws. Regularly reviewing your rents, keeping your property well-maintained, and ensuring a low vacancy rate can all contribute to optimising your investment. Navigating Allowable Expenses: Boosting Your Profit The Power of Allowable Expenses Allowable expenses are certain costs you can deduct from your rental income, reducing your overall landlord tax. These costs can range from property maintenance to insurance and letting agent fees. Essentially, these are the costs you incur solely for renting out your property. The power of these allowable expenses lies in their ability to significantly reduce your taxable income, and therefore, your tax bill. Record-Keeping for Success Keeping a comprehensive and accurate record of these allowable expenses is essential. This record can include receipts, invoices, and bank statements that prove your expenses. Having these documents at your fingertips can make your tax filing process smoother and ensure you are not missing out on any potential deductions. Remember, each unclaimed expense is a missed opportunity to decrease your tax liability. Property Management Essentials: Minimising Expenses, Maximising Returns Achieving Profitability Through Effective Management Effective property management is key to maintaining a profitable rental property. It involves a range of responsibilities, from finding and vetting tenants to dealing with repairs and maintenance. It also includes ensuring your property complies with various safety standards and regulations. Effective management can minimise your expenses by preventing costly damages or legal issues and ensure a steady rental income. Importance of Compliance with Property Standards Compliance with property standards is not just about adhering to the law; it’s also a crucial element of property management that can impact your bottom line. Properties that meet high standards tend to attract and retain reliable tenants, ensuring a consistent rental income. Furthermore, ensuring your property meets all required standards can prevent legal issues that could result in significant expenses. Key Tax Deductions for UK Landlords The Landscape of Tax Deductions In the UK, landlords have access to various tax deductions that can lower their taxable income. These deductions can include mortgage interest, insurance premiums, and legal fees, among others. However, the landscape of tax deductions is complex and constantly evolving. Therefore, it’s important to stay up-to-date with the latest tax laws and guidelines. Leveraging Professional Help While it’s possible to handle your taxes independently, leveraging professional help can ensure you’re making the most of these deductions. Tax professionals or accountants can provide guidance tailored to your specific situation and help you navigate the complexities of the tax system. This can save you valuable time and potentially prevent costly mistakes. Rental Agreements and Their Tax Implications The Role of Rental Agreements Rental agreements set out the terms and conditions of your relationship with your tenant, but they also have tax implications. For example, the type of lease you offer could influence your tax responsibilities. Short-term rentals may be subject to different tax regulations than long-term leases. Therefore, understanding the role of rental agreements in your tax situation is crucial. Tax Regulations and Leases There are specific tax regulations related to rental agreements that landlords must be aware of. For instance, certain expenses related to leasing a property may or may not be deductible depending on the specifics of your rental agreement. Understanding these regulations can help you optimise your tax strategy and avoid any potential pitfalls. Tax Planning for Landlords: A Proactive Approach The Importance of Proactive Tax Planning Proactive tax planning can save you from potential tax headaches down the line. This involves staying up-to-date with changes in tax regulations, understanding how these changes affect you, and adapting your strategy accordingly. Regular tax planning can help you spot opportunities to minimise your tax liabilities and ensure you’re making the most out of your property investment. Navigating Tax Regulations Tax regulations can be complex and overwhelming. However, a solid understanding of these laws is crucial for successful tax planning. Make sure to consult with a tax professional or use reputable tax planning tools to navigate this landscape effectively. This will help you stay compliant while also ensuring you’re not paying more tax than necessary. Landlord Responsibilities: Property Maintenance and Tax Regulations Beyond Rent Collection: Your Responsibilities As a landlord, your responsibilities go beyond simply collecting rent. You are also responsible for property maintenance, ensuring the property meets safety standards, and adhering to landlord-tenant laws. These responsibilities not only ensure a safe and comfortable living environment for your tenants but also help protect your investment in the long run. The

In the dynamic world of tax legislation, staying up to date with the latest IR35 news is crucial for contractors, freelancers, and employers alike. In exciting developments, HMRC has recently launched a new review process, aiming to enhance compliance and ensure fair treatment. This latest announcement has generated significant buzz and speculation within the industry. Contractors and businesses must understand the implications of this new review system to navigate the complexities of IR35 effectively. Our blog brings you comprehensive coverage and analysis of the IR35 news, including insights into the review process, expert opinions, and practical guidance. Stay informed, stay ahead, and make informed decisions with our timely updates on the ever-evolving world of IR35. HMRC Launches Review of IR35 Off-Payroll Working Regulations: A Potential End to Double Taxation The UK’s HM Revenue & Customs (HMRC) recently made a statement that has been widely received positively by both our accounting sector and self-employed contractors throughout the UK. They have initiated a review of the IR35 off-payroll working regulations, which could potentially abolish the significant issue of double taxation. Many experts in the field have voiced their agreement that the existing legislation is fundamentally unjust and that this review is much needed and long overdue. As it stands, the current law allows HMRC to collect an excess from contractors via the tax bill, as it doesn’t account for tax that has already been paid. This has resulted in several instances where a business has encountered tax liabilities exceeding four times the apparent underpayment of tax. This review process is set to last for 8 weeks, concluding on June 22nd, at which point we will ascertain whether there will be amendments to prevent such occurrences. The proposed new law would establish shared tax liability between the client and the worker by approximating the offset of tax the worker and their intermediary have already paid. This offset will also apply retroactively to unsettled bills dating back to as far as April 2017. Outstanding bills could potentially be reduced by up to 75%. HMRC has indicated that the new regulations could be operational by April 2024. We will be monitoring this development closely and provide updates via our blog as soon as we gain more insight into the matter. Other HMRC news Specialists in IR35 have issued warnings that HMRC is likely to intensify its scrutiny on contractors following the legal disputes with Gary Lineker and Eamonn Holmes. It appears that HMRC will persist in its vigilant monitoring of prominent TV presenters. There is already speculation about HMRC appealing their case against Gary Lineker, with whispers indicating that the process to appeal to the Upper Tribunal may have already commenced. If the Upper Tribunal determines that IR35 is applicable, a lower court would then delve into Lineker’s work protocols. Over recent years, HMRC has brought several well-known figures to tribunal over alleged “unpaid tax” under IR35 regulations. However, they have also faced defeats in cases against personalities such as Adrian Chiles and Lorraine Kelly. Choosing a Contractor Accountant The importance of having an accountant who thoroughly understands you and your profession cannot be overstated. This is crucial for ensuring accurate taxation, balanced accounts, and well-managed finances. While IR35 can be notoriously complex to navigate, the process becomes significantly simpler with the right accountant at your side. The challenges extend beyond IR35 when it comes to transitioning into a contracting role. Freelancing and contracting allows you to provide your services and skills in a manner that aligns with your work-life balance. However, it necessitates careful financial planning to accommodate time off, vacations, or slower periods in the work month. Naturally, opting to employ a contractor accountant to maintain your documentation up to date and manage your tax evaluations is a significant decision. A firm that keeps on top of industry news The significance of having an accountant who is well-versed in the industry’s current affairs cannot be overstated. Given the frequent changes in legislation, it’s crucial to ensure that the advice you receive is both accurate and timely. Experts in contractor accounting As a contractor, it’s necessary to adhere to intricate regulations, including IR35. The off-payroll working regulations can be applicable if a contractor offers their services to a client through their own limited company or another form of intermediary. IR35 ensures that workers, who would be considered employees if they were directly offering their services to the client, pay equivalent income tax and National Insurance contributions as regular employees. Engaging an accountant well-versed in these processes ensures that your financial situation remains consistently stable. Tech-Savvy accountants The era of paperwork and in-person meetings has passed. In 2023, it’s essential to have an accountant you can reach in the way that suits you best. With the advancement of the Making Tax Digital initiative. There has been a transition towards utilizing cloud-based accounting software and digitally submitting records to HMRC. The most effective way to accomplish this is to maintain all records digitally from the outset. Submitting your tax records and financial data has become significantly simpler with the utilization of top-tier software by accountants. In this digital age, if your accountant still requires physical copies of receipts through mail, sends paperwork for signatures via post. Or maintains hard copies of your records, they may not be as updated as necessary. At Account Ease, we provide each client with access to FreeAgent at no additional charge. It enables you to manage your business from anywhere, upload images, monitor your cash flow, and easily stay abreast of your tax obligations, all while ensuring utmost security. When is it time to join Account Ease? With the onset of the new tax year last month, it remains an ideal time to join us at Account Ease. Transitioning between accountants is a breeze with us. We ensure a swift, efficient, and straightforward process, providing you the assurance that your finances are in good order. Some may perceive an accountant as an unnecessary expenditure, particularly if contracting has yet to

Many people aspire to be self-employed, and if you are an individual running your own business, you are considered a “Sole Traders.” There are many benefits to being a sole trader, such as the ability to set your own schedule and achieve a good work-life balance. Additionally, you get to keep all of your business’s profits after taxes. But you are personally responsible for any losses and ensuring that you pay the correct amount of income tax and national insurance. It is crucial to know how much tax you are required to pay and complete an annual self-assessment tax return as a sole trader. Registering for self-assessment is easy, but it is essential to do so each tax year. As a sole trader, you are also responsible for paying your own national insurance contributions. Recent research has indicated that over 75% of UK sole traders are uncertain about the tax and VAT thresholds that apply to them. This lack of knowledge could be costing them too. A survey of 800 sole traders conducted by Account-Ease revealed several gaps in the financial knowledge of small businesses in the UK. We are here to fill those gaps for you, allowing you to focus on running your business. 3 in 4 sole traders are unsure of the amount they would need to earn to pay a higher tax rate of 40% (£50,271) Less than 1 in 10 (9%) know what could happen if they didn’t pay their tax bill 1 in 50 thought nothing would happen if they did not pay their tax bill Which sole traders are the least informed? Based on the survey findings, lawyers appear to have the highest knowledge regarding when they should pay a higher income tax rate. While retailers are the least informed, with only 13% providing the correct answer. Furthermore, the survey revealed that only 31% of sole traders are aware of the deadline for submitting a self-assessment tax form. With legal professionals being the most knowledgeable, as 42% of them knew about the January 31st deadline. Sole traders are not obligated to pay corporation tax, unlike limited liability companies. However, 73% of sole traders mistakenly believe that they are required to pay this tax. Sole traders pay most tax since records began Over the last two decades, there has been a notable surge in the number of individuals starting their own businesses and working as full-time self-employed professionals. As a result, sole traders are now paying the highest amount of tax ever recorded. In January 2023, the self-employed sector paid a record high of £22 billion in income tax. Marking a one-third increase from the previous year. Looking after your finances The survey also revealed that 18% of sole traders have not made any pension contributions or saved for their future. The East of England had the lowest percentage of sole traders with pension schemes, with only 55% having one. Meanwhile, those in London and Wales were the most financially astute, with 92% having a pension pot. Additionally, 21% of sole traders admitted to having no safety net saved for at least three months. Which is concerning given the current economic crisis. Although Welsh sole traders were found to be the most informed regarding pensions, they were the least likely to save. With one in three not having any funds put aside. Regarding reinvestment, restaurants were the most likely to allocate at least 20% of their income back into their business. On the other hand, those in education were the least likely, with 25% not reinvesting. Account-Ease offers a comprehensive accounting service for small businesses, with personalized assistance from dedicated accountants. They understand that every business has different needs, and provide tailored support to help clients save for the future. Take care of their finances, and achieve a work-life balance. With Account-Ease on board, business owners can focus on running their business with peace of mind that their finances are being handled by experienced professionals. Joining Account-Ease If you’re looking for a forward-thinking, tech-savvy accountant, switching to Account-Ease is so easy. We have vast experience working with businesses in a diverse range of industries and sectors. From tech start-ups to established SMEs, contractors, freelancers and locums – we’re able to support a wide range of small businesses and SMEs. Our pricing is transparent with no hidden fees or surprises. Our sole trader accountancy package is just £50 + VAT per month. Ready to join Account-Ease? Contact Us Now

Are you ready to become an employer for the first time? This is huge news! If you’re just getting started, you might be glad to know about Employment Allowance relief. This allows employers who have 2 or more employees (or companies with 2 or more directors) to reduce the cost of their National Insurance contributions by up to £5,000. You’ll find everything you need to know about the Employment Allowance right here, but if you need more in-depth advice or support, just book a call back from one of the team. What is employer’s National Insurance? Let’s start off with the basics. National Insurance is based on how much an employee earns, and is made up of two payments: one from the employee and one from you, the employer. Employees pay Class 1 (primary) National Insurance if they are under State Pension age and earn more than the Primary Threshold (in 2023/24 this is £12,570). Employers pay Class 1 (secondary) National Insurance on employee’s earnings above the Secondary Threshold, which in 2023/24 is £175 per week (or £9,100 a year). As the employer, it’s you who manages Class 1 National Insurance. You’ll deduct the employee’s contribution from their wages before it lands in their bank account. This deduction, along with your contribution for employer’s NI, is paid on to HMRC. What is the Employment Allowance? This is where it gets really interesting as the Employment Allowance could shave a significant amount off your outgoings. The Employment Allowance only applies to the employer’s contribution towards National Insurance. The amount that your employee contributes doesn’t change and isn’t impacted. Providing you are eligible (more on that below), you could save up to £5,000 per tax year in relief. It means that each time you run payroll you’ll pay less employer’s NI, until you use up the allowance, or start again in a new tax year. Once you’ve used up your full £5,000 allowance in a tax year, you’ll need to start paying any remaining employer contributions towards National Insurance. You don’t need to be paying more than £5,000 to qualify, either. Even if your bill for employer’s NI is less than £5,000 in a year, you can still benefit from the Employment Allowance. Am I eligible for the Employment Allowance? There are three basic criteria to qualify for claiming the Employment Allowance.   Are there any exceptions? You can probably guess that qualifying for the Employment Allowance isn’t quite as straightforward as that. Remember that one employee you need to have in order to be eligible? That employee can’t be both a director of the business and the only employee who’s paid more than the secondary threshold for National Insurance. This is the amount that employees can earn before their employers must start contributing towards their National Insurance. In 2023/24 the secondary threshold amount is £758 per month. In other words, if you employ one person, and that person is a director of the business and they are paid more than £758 per month, then you can’t claim Employment Allowance. It also means that if you employ several people, but the director is the only one paid above the National Insurance secondary threshold, you won’t be able to claim the Employment Allowance. I make or sell goods or services, are the rules different? Yes! This is where state aid rules come into play. The Employment Allowance is counted as part of the ‘de minimis state aid’ for those that make or sell goods or services. Depending on your sector, there is a limit to the amount of state aid you can receive over a three-year period. To understand if you’re eligible to claim Employment Allowance you will need to: Check whether you’re within the de minimis state threshold And also calculate how much state aid you’ve received As state aid is part of an EU initiative to ensure fair competition, the threshold is calculated in Euros. Sectors are split into four key areas:   Sector De minimis state aid threshold over 3 years Agriculture products €20,000 Fisheries and aquaculture €30,000 Road freight transport €100,000 Industrial / other €200,000 Is there a deadline to claiming the Employment Allowance? We’re glad you asked. There is currently a 4-year limit in place. So, if you didn’t know about the Employment Allowance, or just didn’t find the time, you can still claim for the previous 4 tax years. Be aware though, that there are different rules for historical claims! We advise consulting with an accountant on this one. How do I claim Employment Allowance? You can make a claim for the Employment Allowance as part of your PAYE reporting process. Either: Using the HMRC’s Basic PAYE tool, or; With your payroll software. Simply tick the box that indicates you will be claiming the Employment Allowance. If you make or sell goods or services, you’ll also need to indicate that state aid rules apply. Select the relevant business sector, even if you don’t make a profit. When can I make a claim? The Employment Allowance is allocated each tax year, so you’ll need to claim for every tax year that you’re eligible for the relief. You can apply at any time during the tax year but the sooner you get your application in, the sooner you’ll get the allowance. Help! I’m late making a claim Don’t panic. You haven’t missed out. It just means that the process for claiming your Employment Allowance is slightly different. You can ask HMRC to either: Use your unclaimed allowance to pay any outstanding tax bills or National Insurance, or; Refund you after the end of the tax year, if you don’t owe anything. I’ve submitted my claim for the Employment Allowance – what next? You can start using your Employment Allowance as soon as you submit your claim. There’s no need to wait for confirmation from HMRC, and there is no formal letter to give you the green light. The only time HMRC will contact your regarding your application is if they reject your claim. In that

You might have heard that earlier this year, the tax deadline for Self Assessment was extended by the government. Sounds great, right? After all, nobody actually likes paying taxes, so the fact that HMRC gave everyone more time to file and pay their tax returns was an added bonus! But that change now has many people wondering… will the tax deadline be extended again in 2023? If you’re due to file a Self Assessment tax return, you must be DYING to know the answer. So let’s delve into what we know so far. Hang on, when is the tax deadline usually? If you’re new to the world of taxes, let’s give you a quick overview of everything you need to know about Self Assessment tax deadlines. There are two key deadlines that you need to know about for tax returns, which are: The deadline to register for Self Assessment – which is 5th of October in any given year. If you’ve never done a tax return before, this is essentially how you tell HMRC that you’re earning untaxed income. The Self Assessment deadline – which is 31st of January the year after the tax year you’re paying for. So, if you were paying your 2022/2023 tax return, this should be paid before the 31st of January 2024. It was the latter that was extended in 2022, and the one that’s got people wondering whether HMRC will extend it again next year. Why was the tax deadline extended in 2022? Earlier this year, HMRC decided to waive late filing and late payment penalties for everyone who needed to complete their 2020/2021 tax returns. Instead of filing and paying their tax return before the usual 31st January deadline, this meant that Self Assessment taxpayers didn’t: Receive a late filing penalty if they filed online before 28th February 2022 Receive a late payment penalty if they paid their tax in full, or set up a Time to Pay arrangement before 1st April So why exactly was the Self Assessment deadline extended? Well, it was mostly thanks to the Covid-19 pandemic. That and the effect it had on Self Assessment taxpayers to meet their tax obligations in time. As a result, HMRC extended the deadline to relieve some of that pressure by giving them more time to file and pay their tax. Without them having to worry about being fined! So will the tax deadline be extended again? Nope. Well, at least we don’t think so. Unless anything changes, it’s looking highly unlikely that HMRC will extend the deadline again. In fact, on their website, HMRC even states that for the 2021/22 tax year, they must receive tax returns and any money owed by midnight on 31st January 2023. So if you have untaxed income that you made between 6th April 2021 and 6th April 2022, you’ll have to file and pay your tax return before the usual deadline! Who will have to file a tax return in 2023? Wondering whether you’ll have to file and pay a Self Assessment tax return next year? This depends on whether you have any untaxed income you made between 6th April 2021 and 6th April 2022. There are various reasons that you might have earned untaxed income, such as: You’re self-employed You earn more than £100,000 You have a side gig alongside your full-time job You’re a landlord You have capital gains from investments You make a profit from selling assets (e.g. a house) You’re claiming pension tax relief That’s me! What do I need to do? Don’t panic! If you’ve never filed a tax return before, then you first need to register for Self Assessment on HMRC’s website before 5th October 2022. They’ll give you a Unique Taxpayer Reference (UTR) number, which you’ll use to pay your tax bill. Once you’ve registered you’ll then need to fill out your Self Assessment form online and pay the tax you owe before 31st January 2023. There are a few options for how you actually do this: Do it yourself on HMRC’s website: for free, although it’s not super easy to understand how to use it Find an accountant and pay them to help you: this can be pretty pricey! Give Account-Ease a go: we’re £55 per month, all in and it doesn’t matter how many sources of income you have, or how complicated your tax situation is. Plus, we’ll give you your own personal accountant too!

Tax evasion – it’s becoming increasingly common in the UK. From celebrities to big corporations, there have been multiple high-profile cases on the news of HMRC being short-changed. But how much have HMRC really lost to tax evasion? Read to find out more! First of all, what exactly is tax evasion? Tax evasion, tax avoidance, tax efficiency – it can all become a huge blur. But to keep it short and simple, tax evasion is purposely not paying or underpaying the tax you owe. This is illegal and most likely HMRC’s biggest “pet peeve”. What are some common instances of tax avoidance within the UK? Paying or not paying tax isn’t just about not bothering to report tax-deductible income to HMRC. There are a variety of ways in which individuals end up being in the tax department’s black book. This could be done by: Maintaining your business out of the financial books (so using cash) The ability to hide money shares, money or other assets in accounts at banks located offshore The writing off of personal expenses is a taxes-deductible expenses for business Utilizing the property of the company to use for personal purposes (yes it’s not legal) Even with all these examples of tax evasions, the most expensive and difficult problem for HMRC is in fact strategies to avoid tax. What is the purpose of tax-evasion schemes within the UK? Schemes to avoid tax are firms that have been designed to help taxpayers pay less than the fair amount of NICs and tax. A lot of these schemes take the form of umbrella companies that are not compliant that claim they can assist you in keeping more of you money through paying less taxes. They may offer your wages as an advance loan, salary or grant, or a set life-time amount of money. HMRC define tax avoidance to mean “bending tax laws in order to get an advantage in taxation that the Parliament never planned.’ They also declare that “most tax avoidance strategies simply don’t work and those who employ these strategies could end up having to pay a lot higher than what they were trying to avoid, which includes penalties.’ The shade. It is safe to affirm that HMRC isn’t in the business of tax avoidance schemes in any way despite the claims of many promoters that HMRC actually supports the tax-evasion schemes. What is the impact of tax avoidance (UK)? Tax evasion is an offense. And , as is the norm, crime results in consequences. Particularly when it comes to messing up with HMRC. For tax evasion, you can face anywhere between a few months to seven years in prison (depending on the severity of the situation).  Also, you can be penalized anywhere from £ 5,000 to an unlimitable amount. The consequences of participating in tax-evasion schemes can be quite severe, too. If you do fall victim to what seems like a harmless “want to reduce tax’ advertisement online and you’re required to pay any tax you owe, and could be subject to an extra charge. It’s like lots… Yup. That’s the reason HMRC have put forth a myriad of attempts to stop taxpayers using tax-evasion schemes. For instance the don’t be caught out campaign (and incessant pleas to the public to avoid using the schemes, regardless of the opinions of Jimmy Carr says). They’ve used their rights under the Finance Act 2022 to publish details about the tax-evasion schemes as well as their promotors. As per the law they also have the ability to directly seek information from promoters regarding their activities. HMRC vs UK tax avoidance schemes The outcome of HMRC’s work? It’s true that the tax-payer’s use of avoidance strategies has decreased since 2017/2018. In the past the number was at an all-time high. (And after that, naturally there was news in the press that Take That band member Gary Barlow was forced to pay £ 20 million in tax due to participating in a tax-evasion scheme that was in place for four years before (yikes!) In the year 2020/21, HMRC estimated that 31,000 taxpayers and 1,000 individuals employed tax avoidance schemes. This represented a massive drop in comparison to previous years.

If you’re running a small business, or you’re self-employed, there are a number of things that you need to be aware of as we enter 2023. As a new year begins, there is so much to look forward to, with plans for the year fresh and at the forefront of your mind. You may have already kicked things off on a high, with business already booming, or you could be getting geared up for a busy Spring/Summer. Either way, keeping on top of your finances from the beginning of the year is incredibly important. Understanding just how much tax you will need to pay when it comes to your self-assessment will help you manage your cash flow throughout the year and keeping track of this through a Making Tax Digital compliant software, like FreeAgent, which comes as part of the package when you sign up to Account-Ease, will help you be more aware of your incomings and outgoings. You can access everything at the touch of a button, wherever you are. If you’re operating a smaller company, or are self-employed, here’s what you should be aware of in relation to your financials, as well as the dates that you should be aware of. 2022 was a memorable year in the world of politics that we’ll never forget in the near future. After witnessing a string of U-turns in the last year by previous chancellor Kwasi Kwarteng, Liz Truss and the present chancellor Jeremy Hunt, there are significant changes that are yet to be in effect starting with the tax year 2023/24, which will begin on the 6 April. Tax rates for income As confirmed in the budget of Jeremy Hunt in the October 2022 budget, the threshold at which people have to pay the higher rate of tax on income is set to be decreased from   £150,000 to £125140. Apart from that your personal allowance is expected to be set at £12,570 and the tax rate threshold for higher rates will be at £ 50,270 and will remain in place until April 28th at most. In the future, this will result in more people paying the highest tax rate on income, as wages rise this will force an increasing proportion of the earnings to the tax rate higher band. Reduction in dividends allowance Also , as announced in the budget was the dividend rate band will be reduced from £2,000 in the tax year 2022/23 to £1,000 by 2023/24’s tax year, and £500 for the tax year 2024/25. year. Anyone who wants to take advantage of these allowances, especially during the current tax year, must ensure that dividends are officially declared by 5 of April in 2023. The rate that dividends are taxed will remain the same as they are now. Basis price (income as high as £50,270) — 8.75 percent More expensive percentage (Income that exceeds £ 125,140) Higher rate (up to £125,140) 33.75 percent Additional rate (income higher than £125,141) + 39.35 percent Corporation tax In March 2021, the announcement was originally made by the chancellor Rishi Sunak, and later slated to continue according to the original plan, starting April 2023, the primary corporation tax rate increases from 19 percent to 25 percent. But, it will only be applicable to companies which earn a profit of more than £ 250,000. Profits of £ 50,000 or less will be required with corporation tax payments at 19%, which is referred to “the “Small Profits Rate”. Between the two levels of £50,000 and £250,000 the lower marginal tax rate of 26.5 percent will be in effect. The upper and lower limits will be reduced proportionally in the event of smaller accounting periods or associate companies to be considered. Associate companies are companies that are under common control. Capital Gains Tax In April 2023, the tax-free capital gains allowance for tax-free capital gains will be reduced from £12,300 down to £ 6,000, and on April 24, it will decrease to £3,000. If you are married and live with each other, assets can be transferred between them with the condition of “no gain or loss’ that is something to think about. You can make use of the tax-free capital gains allowance for each individual when trying to sell assets, like shares that are not part within an ISA as well as property which can soften the blow of the decrease in tax-free allowance. MTD ITSA The Making Tax Digital (MTD) for Self-Assessment of Income Tax was initially set to start in April 2024. However, it has been delayed for another two years, and will come in April 2026. MTD “Making Tax Digital” is designed to move toward an increasingly digital tax system. After the rollout of VAT The next phase will apply to taxpayers who are required to file self-assessment tax returns for self-employment earnings, and rental revenue. Alongside this delay, the threshold of income for individuals who have to adhere to the rules has been raised between £10,00 and £50,000, and this will take effect from April 2026. Beginning in April 2027, all with a £30,000 income or more in self-employment earnings or rental income will be required to meet the requirements. While the extension and delay in the thresholds for minimum thresholds has been well-received from many people, when you think that you’ll have to follow the new changes in law starting in April 2026, it might be wise to take the step to a more electronic method of keeping your documents now. It is possible to do this using MTD compatible bookkeeping software like FreeAgent, sage and QuickBooks, as of April 2026, you will be in the best position to start making submissions. Important Dates in the Diary 1 January, 2023 The deadline for filing Self-Assessment tax returns on the internet for the 2021-2022 tax year. 31st January, 2023 First payment tax due for tax year 2022/23 due. 5 April , 2023 Tax year 2022/23 closes. 6 April , 2023 Tax year 2023/24 starts. 19 April 2023 Send your Employer’s Payment summary for the fiscal year that ended 5 April 2023.

Due to the ever-changing tax legislation and commercial factors affecting your company, it is advisable to carry out an annual review of your company’s tax position. Pre-year-end tax planning is important as the current year’s results can normally be predicted with some accuracy and there is still enough time to carry out any appropriate action. We outline below some areas where advance planning may produce tax savings. Corporation tax Advancing expenditure Expenditure incurred before the company’s accounts year-end may reduce the current year’s tax liability. In situations where expenditure is planned for early in the next accounting year, the decision to bring forward this expenditure by just a few weeks can advance the related tax relief by a full 12 months. Examples of the type of expenditure to consider bringing forward include: building repairs and redecorating advertising and marketing campaigns redundancy and closure costs Note that payments into company pension schemes are only allowable for tax purposes when they are actually made as opposed to when they are charged in the company’s accounts. Capital allowances Consideration should also be given to the timing of capital expenditure on which capital allowances are available to obtain the optimum reliefs. Single companies irrespective of size can claim an Annual Investment Allowance (AIA) which provides 100% relief on expenditure on plant and machinery (excluding cars). The amount of AIA is currently set at £1,000,000. Groups of companies have to share the allowance. Expenditure on qualifying plant and machinery more than the AIA is eligible for writing down allowance (WDA) of 18%. Where the capital expenditure is incurred on integral features the WDA is 6%. 100% allowances on designated energy saving technologies continue to be available in addition to the AIA. A ‘Super Deduction’ tax relief temporarily increases relief for expenditure on certain items of qualifying plant and machinery incurred from 1st April 2021 up to 31st March 2023. Companies can claim a Super Deduction providing allowances of 130% on most new (unused/not second hand) plant and machinery investments that would ordinarily qualify for 18% main rate writing down allowances. They can also claim for a first-year allowance of 50% on most new plant and machinery investments that would ordinarily qualify for 6% special rate writing down allowances (items such as integral assets like hot and cold-water systems). Although the Super Deduction can lead to tax savings, it’s also worth noting there are a few items which may mean the Super Deduction is less attractive than anticipated. In addition, exceptions apply, most notably cars are excluded from qualifying for this relief. Any decisions about expenditure need to be based on your company’s circumstances and it is worth running some projections prior to making any significant capital expenditure. Limited capital allowances are also available for investments in certain types of structures and buildings. Trading losses Companies incurring trading losses have three main options to consider in utilising these losses: they can be set against total profits of the same accounting period they can be carried back against total profits of the previous 12 months they can be carried forward against future trade profits only (if incurred before 1st April 2017) and against total profits (if incurred after 1st April 2017) However, there is a restriction on the use of carry forward losses where a company’s or group’s profits are above £5 million. Any profits over £5 million arising on or after 1st April 2017 cannot be reduced by more than 50% by brought forward losses. Losses that have arisen at any time are subject to these restrictions. A temporary extension to the rules for trade loss relief was announced by the Government in its Budget on 3rd March 2021. The temporary extension allows companies with accounting periods ending between 1st April 2020 and 31st March 2022 to carry back trading losses to an extended period of the previous three years, offsetting against profits in the most recent year first. Extracting profits Directors/shareholders of family companies may wish to consider extracting profits in the form of dividends rather than as increased salaries or bonus payments. This can lead to substantial savings in national insurance contributions (NICs). It is important to note that company profits extracted as a dividend remain chargeable to corporation tax at a rate of 19%. Dividends From the company’s point of view, timing of payment is not critical, but from the individual shareholder’s perspective, timing can be an important issue. A dividend payment in excess of the Dividend Allowance, which is delayed until after the tax year ending on 5th April, may give the shareholder an extra year to pay any further tax due. The Dividend Allowance is £2,000 from 2018/19 (£5,000 2017/18). The deferral of tax liabilities on the shareholder will be dependent on a number of factors. Please contact us for detailed advice. Share transfers There are many good reasons why a married couple or civil partners should consider equalising their income, where this is possible and practical. For married couples and civil partners, it is sensible to consider sharing income by gifting some or all of any income producing assets, such as shares you own, to your spouse to save tax. Before doing this, there are a number of legal and practical considerations which need to be taken into account. You should also be aware that for this to work, several conditions need to be satisfied. Generally, your gift must be to your spouse or civil partner from whom you have not separated and be an unconditional gift. Professional advice should always be taken so your individual circumstances can be reviewed. Loans to directors and shareholders If a ‘close’ company (broadly, one controlled by its directors or by five or fewer shareholders) makes a loan to a shareholder, this can give rise to a tax liability for the company. If the loan is not settled within nine months of the end of the accounting period, the company is required to make a payment, known as a ‘S455’ charge. This ‘S455’ charge

Now that Making Tax Digital (MTD) for VAT is in full effect for VAT registered business, HMRC are planning to introduce changes to the VAT penalty system. The new rules will bring the VAT penalties for late submission and late payment in line with income tax and Corporation Tax. The new MTD for VAT penalty system will apply from January 2023, but there is an existing penalty scheme in place. To make sure you don’t get caught out by the new rules (or forget about the current ones!), we’ll go through both. Brand new to VAT? What is the current penalty for late VAT submissions and payments? Until the new rules kick in from January 2023, HMRC will record a ‘default’ if you don’t submit your VAT return or pay your VAT bill on time before the deadline passes. The penalty (known as a surcharge) that you pay is a percentage of how much VAT you owe for that VAT period. The surcharge penalty must be paid in addition to the VAT that you owe. You won’t receive a penalty if it’s the first time that you default, but you may enter a 12-month surcharge period. This is a bit like being on probation, and defaulting again during the surcharge period will increase the rate of the penalty each time you default. Each default also extends the 12-month surcharge period by a further 12 months. The amount depends on your annual turnover, and how many times you default. How many times you default within 12 months Surcharge rate if your annual turnover is less than £150,000 Surcharge rate if annual turnover is £150,000 or more 1st No surcharge No surcharge 2nd No surcharge 2% (but no surcharge if this is less than £400) 3rd 2% (but no surcharge if this is less than £400) 5% (no surcharge if this is less than £400) 4th 5% (no surcharge if this is less than £400) 10% or £30 (whichever is more) 5th 10% or £30 (whichever is more) 15% or £30 (whichever is more) 6th 15% or £30 (whichever is more) 15% or £30 (whichever is more) You can receive a VAT penalty for other reasons too: 100% of under-stated or over-claimed tax if you send a VAT return with careless or deliberate errors. 30% if HMRC send a VAT assessment which is too low, and you don’t tell them it’s wrong within 30 days £400 if you submit a paper VAT return without HMRC’s permission to be exempt from doing so The VAT penalty points system from 1st January 2023 The current process will be replaced by a new points-based penalty system for VAT. It will apply to MTD VAT submissions for periods starting on or after 1st January 2023. Late VAT submissions will accrue one penalty point each. If you receive enough points to reach the penalty threshold, you’ll be charged a £200 penalty.   VAT penalty points will have a 2-year lifetime before they expire. The points threshold depends on how often you’re required to make submissions (which can depend on which VAT accounting scheme you are on). How often do you make a VAT submission? How many points you will receive before reaching the penalty threshold Annually 2 points Quarterly 4 points Monthly 5 points Will I be fined if I’m late paying my MTD VAT bill? The short answer is yes, from January 2023 HMRC will continue to fine taxpayers who don’t pay their VAT bill on time, as well as issuing penalties for not meeting the submission deadline. The penalty amount that you’ll be charged depends on how many days overdue you are paying the bill.   How many days after the due date you pay your VAT bill The penalty charge 0-15 days You will not receive a penalty 16-29 days 2% of the amount outstanding 30 days 2% of the tax outstanding at day 15, plus 2% of the tax outstanding at day 30 31 days or more 4 % of the amount owed, calculated daily until you pay the amount you owe What if I can’t pay my VAT bill on time? Whilst you won’t receive a penalty for the first 15 days after the payment deadline, it’s never a good idea to have a history of late payments on your account. Rather than risking non-compliance, contact HMRC’s Payment Support Service to make a ‘Time to Pay’ arrangement. The Time to Pay scheme allows you to agree an instalment plan with HMRC, taking into account other bills and spending you need to consider each month. Learn more about our online accounting services for VAT, contact the team for a chat on 0208 133 4599, or get an instant online quote.

Talk to any business owner and it is very likely that they will have been afftected from the late payment of an invoice at some point. Research by the Federation of Small Businesses shows that a third of payments to small businesses are late with £6,142 the average value of those overdue bills. If small companies were paid on time, the economy could be boosted by around £2.5 billion annually and 50,000 more businesses could be kept open. Unpaid invoices can have a significant negative impact on a business’ cash flow, so what can a business do to reduce the chances of late payment? Research your customers If your customers are other businesses, checking a potential client’s credit history to find out whether they have a record of late or missed payments can give you the heads up on any potential problems. You need to convert leads to sustain and grow your operations. But that doesn’t necessarily mean you should agree to do business with anyone who comes through the door. Untrustworthy customers can quickly start costing your business dearly. State your terms from the start Agreeing payment terms with your client before you start delivering work means you can prepare for the impact on your cash flow. When it’s time to issue the invoice, make your payment terms very clear so there is no confusion. Outline how much the client needs to pay and by when. Issue prompt and accurate invoices Send your invoices as soon as work is delivered (or sooner if part of the agreement) and make sure they are accurate and contain all the necessary information. Make a mistake or leave off important details and it could delay the payment, particularly if a busy accounts department doesn’t let you know about an error. For business-to-business arrangements, the Government website says invoices should include: a unique identification number your company name, address and contact information the company name and address of the customer you’re invoicing a clear description of what you’re charging for the date the goods or service were provided (supply date) the date of the invoice the amount(s) being charged VAT details if applicable (the amount of VAT charged, your business’ VAT number and a breakdown of the amount of VAT charged for each item on the invoice) the total amount owed If your client requires you to include a purchase number, make sure you get the number in advance and include it on the invoice. Using invoicing tools provided by online accounting software companies like Xero and QuickBooks can help to ensure accuracy of invoices and speed up the payment process. Make it easy to pay You should make it as easy as possible for your clients to pay so they don’t have the excuse of not knowing how to do it. Make sure your full bank details are included on all invoices or offer more immediate options such as online payment services like PayPal. If you are collecting regular payments from customers, using Direct Debits is a good solution. You can allow your customers to spread the cost of your product or service across the year. This should encourage them to pay on time, allow more customers to spend money with you and increase customer loyalty. Build good relationships Developing strong and friendly relationships with clients can help to minimise late payments. For businesses providing products or services to other businesses, invoicing is often an anonymous process with email generic accounts@ addresses. Try to get the name of an actual person who you can speak to if there are any problems or delays. If you’ve built a good relationship with an individual, they can put a face or voice to the name, It will make it harder for them to let you down and pay late. Being a small business can be used to your advantage too. Larger companies may not realise the impact on smaller companies of paying a bill late. If you develop a good personal relationship with your client and they know you are running a small business, they might prioritise your payment. If you have consumer customers, you should also maintain a good relationship through regular communication. As well as being clear about how much you charge and when you expect payment. Send regular reminders Regular reminders will help to ensure you are paid on time. Payment deadlines being missed can sometimes be due to a technical error or because the invoice has been genuinely missed. In those cases, a quick call to chase might solve the issue. When chasing a payment, be polite but get straight to the point. Give them all the information they need such as the invoice number, the date the invoice was sent and when the payment was due. Speaking on the telephone rather than sending an email can be beneficial as you’ll know for sure that the customer is aware that your payment is late. You can also automate the reminder process by using online accounting software. Monitor persistent late payers Staying on top of those customers who often pay late is an important part of managing your cash flow. Understanding customers who regularly miss invoice deadlines will help to ensure you identify any potential cash. flow gaps. Take steps to find other business opportunities to deal with it before it becomes a serious problem. By using online accounting software and working with Account-Ease. You can use aged debtor reports to identify which customers owe you money and how much they owe. Late payments have a negative impact on cash flow. If you need help with managing your cash flow, call us on 0208 133 4599 or use our askus@account-ease.co.uk