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An update from OnTheGo Accountants on COVID-19
March 2020 Budget: OnTheGo Accountant’s Summary
From 6th April 2020, if you’re UK resident and sell a residential property in the UK, you’ll have 30 days to report any gains to HMRC and pay any Capital Gains Tax due.
IR35 - Considering your options in Private Sector
I think… ‘what on Earth have you managed to get all over your face now?!’. Three baby wipes and several tears later, that thought is followed by ‘what am I actually doing to provide for your future?’. The business is going well and we have some savings, but I’m not sure that 57pence I made in interest last year is going to fund you through university, or pay for your first deposit on a house, or allow you and your boyfriend to make countless trips to Amsterdam because you’ve suddenly discovered an interest in Dutch architecture – I’m not falling for that one baby! So, let’s consider the options: Stocks and Shares Investing cash surplus in the stock market is the high risk, full throttle option but can yield some good returns. You have the option here of investing directly through your company or drawing a loan from your company to invest personally. This would allow you to take advantage of the Capital Gains allowance. This is afforded to individuals but not businesses – but make sure you are aware of any interest/tax implications with your loan. Take care also when trading through your business that you do not run the risk of being considered an ‘investment company’ as opposed to a ‘trading company’. This could pose a threat to your claim for Entrepreneur’s Relief in the future. Property Whether through your current Ltd company or financed by the same through a separate entity, rental property investment has become increasingly popular in recent years and rightly so. This route allows you to inject your cash into an asset that will hopefully increase in value over time whilst making you a return on monthly rentals. That income can then be extracted tax efficiently or reinvested in additional properties. By doing this through your company, you can also benefit by expensing the full amount of your finance costs incurred i.e. mortgage interest which is no longer available to landlords on an individual basis. Be aware that it can be harder for companies to obtain a mortgage initially so this may only be viable if you have been trading for a certain period of time. High Interest Accounts A lower yield than the above options however there is no work involved with this one and far lower risk involved. Typically with higher interest accounts or bonds, you will agree to tie your money up for a minimum period ranging from a few months to a few years with the reward providing you with a higher interest rate than regular current accounts. Note there may be penalties if you decide to withdraw your cash sooner than the agreed timeframe. What do you think then baby? Oh! Now you sleep – why does this always happen when I talk accountancy with you??
Every year all Limited Companies, even dormant ones, are required to submit Annual Accounts. Late submission of these Accounts will result in an automatic fine, and a substantial one too! So when do you need to file your Accounts? The main company deadlines are as follows: Company Accounts : To be filed 9 months following the Company's Year End date to Companies House. Corporation Tax : Payable 9 months and 1 day following the Company's Year End to HMRC. Note in this is your first Year End you may have two amounts payable with different due dates. Corporation Tax Return : To be filed 12 months following the Company's Year End. If you fail to meet your Accounts deadline with Companies House, the fines are as follows:
As standard, every individual receives a Personal Allowance – this year the Personal Allowance is £12,500 and is the amount of income you do not have to pay tax on.
A UTR is a ten-digit reference issued by HMRC when you first register for Self-Assessment. Need to register? You have a couple of options; Register directly with HMRC Appoint FileTax ‘N’ Go to register you for a fixed fee of £30.
Have you checked your emails? HMRC would have emailed your user ID to you upon registration. No luck? You can no longer recover your user ID online; you will therefore need to contact HMRC on 0300 200 3600. Please make sure you have your national insurance number or Self-Assessment UTR to hand! Forgot your password? You can reset your password on HMRC ’s website. To do this, you will need: Unique Taxpayer Reference National Insurance number or postcode linked with the account User ID
For those of you who take dividends from your company, in previous years a 10% non-repayable tax credit meant that any dividends falling within the Basic Rate were effectively tax free. However, as of April 2016 all individuals are instead granted a tax free dividend allowance. For the current tax year (2019-20) this allowance has remained at £2,000. Any dividends over this amount are then taxable in the Basic Rate at 7.5% and 32.5% in the Higher Rate. Therefore, if you typically try to stick to a tax efficient structure of low salary, high dividends up to the Basic Rate maximum threshold you will be looking at a liability of just over £2.6k for the 2019-20 tax year. But… sorry folks but this might not be all you need to pay by 31 Jan… So, what are Payments on Account? Payments on Account are essentially payments in advance of the next year however they are only enforced if you have a balancing liability at year end in excess of £1,000. As such this is likely to apply for many now that Basic Rate dividends are taxable. But you don’t pay PAYE at source I hear you say! Well yes and no – whilst you still don’t need to make contributions each time you withdraw dividends in the year, like you would on a PAYE salary, through Payments on Account you will need to make two additional payments; one by 31 January along with your current year’s liability and another by 31 July. These payments will be exactly half of your current year’s liability each – here HMRC make the assumption that you will draw the same again in the following year – and will be used to reduce your overall liability due by the next 31 January. So unfortunately this January might cost a pretty penny! Our Top Tips Plan ahead – this might sound obvious but can be difficult in practice, particularly if your monthly income fluctuates. If you already have an accountant they should be able to give you a good estimate of what you should be putting aside based on what you hope to take home. If you don’t have one there are lots of free calculators online that should be put you on the right track, but use with caution of course. Put aside more than you need – now this is definitely easier said than done but if you are able to, and certainly don’t if it will mean you go short, then putting aside a flat amount each month over and above your anticipated liability can combat any nagging doubts you might have throughout the year. Once you have then submitted your tax return and confirmed your actual liability for the year, you can pocket the surplus and have a night on the town!!! Or, I mean, invest everything sensibly…cough cough. Open up a bank account just for tax payments – Even if you have a good idea of what your tax liability will be, it can be difficult to have this at your fingertips if you are keeping the funds in your main account. Why not transfer this out each month or quarter to a separate account solely designated for future tax bills. There are some good incentives out there at the moment for people with a bit of time and patience willing to switch and set up new accounts so you could even bagsy yourself a little starter to your tax savings! Feel free to get in touch if you would like any advice on your personal tax situation. Roll on the 1st February!!