If you have received your self assessment statement this month from HMRC, you may be confused by the amount that it is telling you is due.

Payments on account of tax are part of self-assessment and never easy to get your head around.

Keeping things simple, you usually pay 2 payments “on account” of your 19/20 tax bill during the year, one in Jan 2020 and one in July 2020.  The amount you pay is based on your last submitted tax return, and HMRC assumes you will have exactly the same income again in the next tax year.

So if your tax liability under self assessment last year was £2,000, HMRC will ask you to pay £1,000 in Jan 2020 and £1,000 in July 2020 as an upfront payment on account of your 19/20 tax.

Obviously, it is extremely unlikely that you tax bill will be exactly the same each year, so once you have submitted your 19/20 tax return, HMRC will work out the actual amount that is due for the year.  In our example, say your final actual tax bill is £2,400.  You will have already paid £2,000 on account of this, so you will owe £400 at 31 January 2021.

The cycle then starts again though, so at 31 January 2021 you will also pay your first payment on account of your 20/21 tax, which HMRC will calculate as £1,200, so the total amount they ask you in Jan 2021, will be the £400 plus the £1,200, making £1,600 in total.

There are situations where a payment on account is not required but these are not covered here.

Payment on Account Deferral

Under the Gov help offered for Coronavirus, the payment on account that was due at 31 July 2020 has been deferred by HMRC -and this seems to have been done automatically.  Therefore if you receive a statement from HMRC this month, you will see that the due date for this second payment on account is 31 Jan 2021, and not 31 July 2020.

You can of course make the payment now, but if it helps cashflow, the payment can be deferred.

If you have lower profit for 19/20 than you did the year before, then it is well worth getting your tax return completed for the year and submitted, as if you are due a repayment, this will be issued as soon as your return is submitted – you won’t have to wait until 31 Jan 2021 for this!

For more information or assistance with personal tax returns, please contact Rosie Forsyth at Wilkins & Co.

From 1 July, the new flexi-furlough scheme opens.

Under the scheme, employees can come back to work for any amount of time, and employers can still claim the furlough grant for the time they do not work, and pay staff 80% of their wages for this time.

How does this work in practice?

From 1 July, employees can do any number of hours under flexible working.  Their pay for this will be based on their hourly rate.  Where employees have a fixed salary, this will be calculated by dividing their annual salary by their contracted hours.

The employer will pay their staff 100% for the hours worked, and for furloughed hours – they will pay a minimum of 80% of their hourly rate, subject to a daily maximum.  The maximum amount is the £2500 cap per month as before, divided by the number of calendar days in the month (so £80.65 for July, Aug and Oct – and £83.34 per day for Sept!)

The employers will then claim back the 80% from HMRC as before, though there is a requirement to put different information onto the claim form as we are now looking at hours worked/not worked per month per employee.

No claims can be made for this until 1 July, and claims have to be made covering at least a week at a time.  In practice, this will still be done (by me anyway) monthly, the week before payrolls are due to be done to ensure funds are received in time to pay staff.

What are the other changes to the Furlough scheme?

The scheme will close on 31 October and is being phased out over 3 months.

For June and July – there are no changes to the grant levels

For August – HMRC will cover 80% of the gross wage only and employers will be responsible for the employers NIC and any employer pension contributions.  For a lot of small businesses, they will not have any employers NIC or pension contributions due in August, so they will see no difference in the amount they can claim.

For September – the amount the government will cover reduces to 70% of wages up to a cap of £2,187.50.  The employee will need to top up wages to ensure that the employee still receives at least 80% of their salary whilst on furlough.

For October – the government contribution reduces to 60% (up to the cap of £1,875), with the employer contributing 20%

Other Points to Note

31 July is the last day that you can claim for periods ending on or before 30 June.

Only employees who had been furloughed for any 3 weeks in the period ended 30 June are eligible for flexi-furlough, so you can’t put an employee on flexi-furlough who has previously been working their normal hours throughout the lockdown period.

The flexi-furlough work patterns will again need to be discussed and agreed with employees, and a written agreement that confirms the furlough agreement should be signed by both parties and kept on file.

If you need help dealing with the HR side of furloughing/flexi-furloughing/bringing staff back to work or even making redundancies, then we would recommend that you contact Louise Lithgow-Dicker at Go HR for tailored advice.

For any queries on the new rules, or the government business support packages in place, then please contact Rosie at rosie@wilkinsco.co.uk  

I’m sure we all saw in the news on Friday that this has been extended for 3 months, but here is just a quick summary of the main points:

• the scheme will run for another 3 months, covering June, July and August
• the second grant will be paid in one lump sum in August
• this time the grant is worth 70% of average monthly trading profits, capped at £6,570
• all the same criteria to qualify as for the first grant, so if you qualified and received that, you will qualify for this payment
• applications for the grant will open in August so you cannot do anything until then to receive the money
• you can still apply for the first grant until 13 July if you have not yet done so
• you DON’T have to claimed for the first grant to apply for the second.  One of the criteria is that your business has been adversely affected by COVID-19, so it may be the case that it has only been affected in the later phase, in which case you would only apply for the second grant

This is all the information currently available: further guidance will be published on June 12 so we will bring you this when we have it.

As usual, if you have any questions, please do not hesitate to get in touch with Rosie Forsyth at Wilkins & Co.

rosie@wilkinsco.co.uk.

I know – doing your tax return doesn’t fill you with enthusiasm but we all know it has to be done.

This year, more than ever, it is a good idea to get your tax return completed and filed early. Here are a few reasons why:

1. Budgeting
   You will know now what your tax bill is going to be at 31 January 2021 and you can start budgeting to be able to pay this on time. Submitting your return now does not mean the tax is due any earlier
2. Tax refunds
   If you are due a refund of tax, this will be repaid to you as soon as your return is submitted – you do not need to wait until 31 Jan for this
3. Availability of Information
   You will have the information to hand. P60’s should have been received recently and other financial information that you may receive in relation to your income is normally sent to you in April or May, so put it altogether now, before you have a chance to lose it!
4. Accounts
   If you are a sole trader, you will need to prepare your accounts to 5 April 2020 (usually) and again this may require you finding information and answering queries from your accountant. Not only may this information still be fresh in your mind, but if you are not working at the moment, you may have some more time to be able to complete this task now.
5. Tax Credits
   The tax credits renewals form has to be completed by 31 July, and being able to produce accurate figures will ensure your claim is accurate for the year, and you won’t end up having to repay amounts you were not entitled to.
6. Tax Code
   If you have your tax collected via an adjustment to your tax code, submitting this early will help ensure that your tax code is accurate, and you are not over or under-paying tax during the year.
7. Relief
   Finally and possibly most importantly- its done! One less thing to worry about towards the end of the year.

Don’t forget that any payment that you were due to make on account of your 19/20 tax bill at 31 July 2020 can be deferred.  You don’t need to request a deferral with HMRC, it will be done automatically if you do not make the July payment.

So although it may not be your favourite job, there are lots of good reasons to get it out of the way now.  Call it a project to do alongside your kids doing their school work and set yourself a deadline.  Then give yourself a large gold star when it is done!

Thank you to Rosie for inviting me to write a guest blog on her website.

Today, we find ourselves in unprecedented and challenging times, many are anxious and understandably concerned about what the future holds.  Marketing is a core part of running a small business and it is important to continue to engage with your target audience.  It is recognised that at the moment everyone is going through their own journey of ‘lockdown’, so it is important to also consider what feels right for you, your business and your customers.  It might be that now is the right time for planning and the implementation can wait.  I wanted to share some tactical marketing hints and tips to help drive your small business forward, so that you have them to hand when you are ready to start planning your next campaign.

Before we get into some low-budget tactical actions which you can take today, for these to be successful it is important you have some clarity on the wider, more strategic questions.   It is important to understand “What you are trying to achieve?”  It could be that you wish to build your social media audiences, gain more clients or increase your revenue.  Putting your customer at the heart of everything you do is important, so visualising your target audience and defining their dreams, aspirations and challenges they face is key.  This will help guide your marketing approach, including: your media selection, tone of voice, image selection and creative.

Here are our 8 essential low-budget tactical marketing tips:

1. Engage in social media. Social media is a gift for any small business owner.  Firstly, consider which network is right for your-business audience.  If you are a professional business such as a Solicitor, Accountant or HR Consultant then Linked In or Twitter will definitely be a good place to engage.  Alternatively, if you are a product targeting a family audience then Facebook or Instagram maybe a better alternative.

2. Video. All of the current marketing trends show that video engagement is growing at a huge rate.  Plan to include use video as part of your media mix, either as a Facebook Live or mini video, it will certainly help support your reach.

3. Send an email campaign. Email marketing is a great tool to use to retain and engage with your existing customers.  Ensure that the messages you communicate tie into your wider marketing activity.  Plan carefully what it is you would like to say and where possible design the email to be – visual, short, sharp and concise.

4. Set up an offer or event. If you are keen to try to generate business think about your audience – What challenges are they facing at the moment? and How does your business support them with their challenges?  If you are able to, set up an offer or incentive and use your internal marketing channels to drive awareness.  If you can widen your audience by boosting a Facebook post or setting up some advertising this will help drive greater awareness.
5. Pick up the phone. Many people find this a little bit harder.  If you are a professional small business, why not check in with past or potential clients to see how they are doing?  Maybe their circumstances have changed and they are now in a position to work with you.  You never know where this will lead, even if they do not need your product or service now, they may know someone who does.

6. Little and often. Marketing works most effectively when you do little and often, if you do a lot in a six-week time frame and then nothing for six-months you won’t see the results you are looking for.  Plan out your activity and content, think about what you can do when you are at your busiest and start with that as a frequency base.  For example, it is better to engage in one social media network well, than try to do four all at once.

7. Less is more. Try to be single minded in your communications on whichever channel you are engaging with.  Trying to cram too many messages into an email for example could be confusing to the reader and could have a negative effect.

8. Build partnerships. If you can identify another business with a similar target audience, which compliments yours, why not try to build a partnership? Collaboration is a great way to connect with a wider audience, plus when you work for yourself it is really good to have someone else to bounce ideas around with.

Good luck in engaging with your small business audience.

Sophie Comas is a freelance marketing consultant from Rimu Marketing (https://www.rimumarketing.co.uk), if you have a marketing challenge she would love to hear from you.

The High Income Child Benefit Charge has been in for a few years now.  If the higher earner in your household earns over £60,000, then you are not eligible to claim child benefit, and if your income is between £50,000 and £60,000 then an element of the child benefit is repaid via your tax return.

This has meant that many households have stopped claiming child benefit, as they see little point in claiming it, only for it to be paid back again via self-assessment.

In the current climate, with the furlough scheme in place and income levels falling for the self-employed, many individuals will see their income levels go down. Individuals placed on the 80% Furlough scheme who previously earned £60,000 (or just over) will now be receiving under £50,000 and may become eligible to claim child benefit.

A claim for child benefit can only be back dated for three months so you will need to decide if you want to start claiming again for this tax year by the end of June to get maximum benefit.

For the 2020/21 tax year child benefit rates are £21.05 per week for your first child and £13.95 per week for subsequent children. A family with two children could therefore be entitled to £1,820 a year.

If you do make a claim and at the end of the tax year your income exceeds £50,000 but is less than £60,000 you will be required to submit a tax return and repay a proportion of the benefit received. The amount repayable is 1% for every £100 earned over £50,000. Once you earn over £60,000 the full amount will be repayable via your tax return.

An assessment therefore does need to be made as to whether this is worth claiming again -but it could provide you with much need cashflow in the next few months.

Here is the link for more information https://www.gov.uk/child-benefit

If you want to discuss you own position with regard to child benefit, then please do get in touch.

More guidance was added over the weekend to the Job Retention Scheme, in particular in relation to the issue of directors and furloughing.

The full guidance can be found here, but here is my update on what has now been added:

• Salaried company directors may be furloughed
• Once furloughed, as for other employees, they cannot do any work for the company that would make money for the company, or provide services for the company.
• They can continue to carry out their statutory obligations as a director – this would include filing accounts, opening post, paying bills etc.

  To quote the guidance “they should not do any work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company.”

• The decision to furlough a director must be formally adopted as a company decision, communicated in writing to the director and this record kept for 5 years.
• The minimum length of time you can be “furloughed” is 3 weeks. You may then return to work for a period of time, and then be “furloughed” again.
• Claims can be backdated to 1 March – but in practice you would have to have done no company work since then to claim from this date.

How much can directors claim?

As for employees, the company can claim 80% of your wages.  This relates to the amount on the payroll as salary, and does not include any dividend payments.

• For directors who pay themselves a regular monthly amount, this will be 80% of your February 2020 payroll amount.
• For directors whose pay varies, or is paid irregularly, you can claim the HIGHER of:
  • The same month’s earning from the previous year
  • Your average monthly earnings for the 19-20 tax year

Claiming in Practice

As previously announced the claims will be made via the new online portal once it is launched.  HMRC will check your claim and if you are eligible pay the amount into your company bank account.

The portal is supposed to be open by the end of April.  There is currently no new information on this apart from to say that HMRC will retain the right to audit your claim retrospectively, and have already warned that anyone submitting bogus claims, or attempts to falsify records to increase payouts will be shot.  (OK slight exaggeration, but you get my point!!)

Conclusion

Great that we finally have some clarification – but to qualify, directors really can do no normal work at all.  I have a couple of clients with employees and they have disabled their access to their work email to ensure they can’t send the odd email or do anything that would invalidate their claim.  Directors in my opinion need to follow a similar approach if they want to ensure their claim will be valid.

On and off furloughing may be an option, but potentially horribly complicated!  At the end of the day, we are talking about £500 a month, so directors will need to make personal decisions about whether they can generate more continuing to work.  Remember that £500 is also taxable income in your accounts!

More info as and when we get it!!

Rosie

Here is our summary of all the information currently available about this scheme to help the self-employed.

Who qualifies:

You can apply if you are self-employed or in a partnership.

Directors of limited companies, even if you are the only person in the company, are not self-employed, and you do not qualify for this support.

To qualify, you must meet ALL the following criteria:

• Have traded in the 2019-20 tax year
• Still be trading when you apply (or would be, if it were not for CV-19) and intending to continue to trade in 2020-21
• Have suffered a reduction in profit due to CV-19
• Have submitted your 2018-19 tax return. This was due to be filed by 31 January 2020.  If for some reason, you have not yet done so, you have 4 weeks now to get it in – before 23 April 2020.

What income do I need to have had to qualify?

Your self-employed trading profit must be less that £50,000 and more than HALF of your total income must come from your self-employment.

This is worked out by at least one of the following 2 conditions being true:

• Your trading profit in 2018-19 was less than £50,000, and these profits were more than half your total taxable income in 2018-19
• Your AVERAGE trading profits in 2016-17, 2017-18 and 2018-19 were less than £50,000, and these profit were more than half your average total income in the same period. (If you have been trading for less than 3 years, you use the length of time you have been trading instead)

It is presumed that HMRC will take the figures from your previously submitted tax returns to work our your eligibility, so you can check your SA302’s if you need to check your eligibility.
(SA302 is the tax calculation sent to you with your tax return)

How much will I get?

You will get a taxable grant which will be 80% of the average profit for the tax years:

• 2016-17
• 2017-18
• 2018-19

HMRC will add up the trading profit for 3 years, divide by 3 and use this to calculate a monthly amount.  The maximum will be £2,500 for 3 months.

It will be paid into your bank account in one instalment.

It is important to note that this is a taxable grant, so although it does not need to repaid, it will go as income on your 2020-21 tax return.  If you claim tax credits, you’ll need to include the grant in your claim as income.

When Will I Get It?

This is the contentious issue at the moment.  HMRC have said the money should be available in early June.

This is not HMRC being difficult or delaying on purpose.  It would normally take months of planning, if not years, to set up this system, and HMRC are trying to do it a few weeks.

How do I Apply?

YOU DON’T.

HMRC already have your tax returns and they will contact you if you are eligible for the scheme.  You will then complete some details online and subject to final checks, the money will be paid into your bank account.

Summary

This is a massive help for 95% of the self-employed.  As with all schemes, it doesn’t work for everyone.  Anyone starting self-employment since 6 April 2019 is not covered, nor is anyone who has been self-employed, but now made the transition to a limited company.
Businesses that have grown in 2019-20 will not have these increased profits taken into account when calculating the payments due.  But for many, it is the help that was being requested.

If you require any more information about the scheme, or other help that may be available to you in these difficult times, then please get in touch with Rosie Forsyth at Wilkins & Co.

We have put together a summary of measures introduced over the last week aimed at helping you get through this period, and highlighted any actions that you may wish to take.

This will be updated as more information becomes available, especially in regard to any help being announced for the self-employed.

As you may expect, much of the detail has not yet been made available, but this is what we know so far…….

Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been made redundant during this crisis.

The scheme will cover the cost of wages backdated to 1 March 2020 and funds should be available before the end of April. It will continue for at least three months, and can include workers who were in employment on 28 February.

To access the scheme:

• you need to designate affected employees as ‘furloughed workers’, and notify employees of this change. “Furloughed” means that the worker is allowed to be absent temporarily from work. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
• submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
• HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.

It is really important to note that to qualify for this scheme the furloughed workers should not undertake ANY work for you during this period.

While HMRC is working urgently to set up a system for reimbursement, it is not ready yet, and funds will not be available until the end of April.

There are no details yet how this may apply to family members on the payroll, directors etc.

ACTION:

If you need to reduce staffing during this period, can you use the scheme? Has anyone been made redundant already that could now be furloughed? 

Statutory Sick Pay

• SSP is now available from the first day of absence from work, rather than the previous rules of day 4
• The current rules surrounding eligibility for SSP have not changed, so only workers earning on average over £118 per week are eligible
• SSP is currently £94.25 per week and can be paid for a maximum of 28 weeks
• Those who are self-isolating and who cannot work, even if they themselves are not sick, are eligible for SSP.
• Employers will be able to reclaim 2 weeks of SSP for employees who are off work or self-isolating due to COVID-19.

ACTION:

Make sure your staff are aware of your sick pay policy and what they need to do should they have to self-isolate.

VAT 

The next quarter of VAT payments can be deferred.  The deferral will apply for periods ending between 20 March 2020 until 30 June 2020.  You will have until the end of the 2020-21 tax year to get your payments up to date.  There will be no penalties etc for not paying your vat in this period.

VAT refunds will continue to be paid as normal.

The deferral is automatic and businesses do not need to apply for it.

ACTION:

Don’t pay your next VAT payment, though your return should be submitted as normal.  If payment is usually by Direct Debit, make sure you cancel this with your bank.

Income Tax payments

All income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

There is no need to apply for this deferral – it will be applied automatically. No penalties or interest for late payment will be charged in the deferral period.

ACTION:

Do not pay your self-assessment payment on account bill that was due at 31 July 2020.

Business Rates and cash grants

• No rates payable for the 2020-2021 tax year for any business in the retail, hospitality or leisure sectors.
• In those sectors, if your rateable value is between £15K and £51k, you’ll also receive a cash grant of up to £25,000 per property.
• Any business which gets small business rates relief, including those in the retail, hospitality or leisure sectors, will receive a cash grant of £10,000
• This help will be administered by local authorities and should be delivered automatically, without businesses needing to claim.

ACTION:

The rates holiday is automatic, so no action is needed from you.

 HMRC Time to Pay

HMRC’s Time to Pay scheme can enable firms and individuals in temporary financial distress as a result of Covid-19 to delay payment of outstanding tax liabilities. HMRC’s dedicated Covid-19 helpline provides practical help and advice on 0800 0159 559.

ACTION:

If you have any tax bill due that you are going to struggle to pay, call HMRC in advance.

Coronavirus Business Interruption Loan Scheme

• These will be available from Monday 23 March and are delivered all the major banks. The lender receives a guarantee of 80% of the loan amount from the government.
• The loan period can be for up to 10 years. The borrower remains liable for 100% of the debt.
• No interest will be charged for the first 12 months. Interest rates offered on these loans are likely to be high, as they are high -risk loans for the bank.  Overpayment will be permitted to repay the loans early if possible
• Banks will require financial statements, management accounts and cashflow forecasts as they would for any normal loan.

ACTION: 

If you think you may wish to apply for this loan, contact us so can make sure your accounts are up to date and can help you with a cashflow forecast.
We can put you in touch with a great commercial loans advisor to talk through your options if you are considering taking out a business loan.

We will update this blog as and when more information becomes available.

Please contact us if you want to discuss your accounts and finances at this difficult time.

Just a quick blog from me to let you know how we are currently working at Wilkins & Co.

Most of our work can be done remotely and I have a separate office at home, so while there is no such thing as business as normal at the moment, we are continuing as best as we can.  My kids are home like everyone else’s so I am dealing with teenagers around the house – and the girls who work with me are also working from home, juggling with their new role as teaching assistants too.

I am still on the end of the phone – if we’d normally meet up, then please do call over the phone or via a video call.  Interrupted calls to deal with children is absolutely no problem at all.  Don’t ask me too many complicated maths questions though – after about year 5!

If anyone needs to drop anything off, please give me a call and let me know you are coming.  Apart from walking the dog (who is going to be fitter than ever!) I will be here and you can drop stuff off on the doorstep.

It is obviously a worrying time and I understand that you have very serious concerns at the moment.  You can call me and chat about your business and finances any time you need to. Hopefully we will get some clarification soon from the government on help available to small businesses and I will sharing as much information as I can with you all.

Now more than ever it is important to support local businesses and we will be doing what can to buy local, support small business and help our local community.  Our social media will continue as this is a great way to stay in touch and keep connected with the outside world.

And when you really can’t think of anything else to do- why not make a start on your tax return?

With best wishes and virtual hugs

Rosie