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Archives for April 2016

Staff perks – new rules mean you should be treating your staff more often!

How often do you treat your staff?

Being a lovely employer and giving your staff little treats before April 16 often ended up with accountants telling you that your gift has landed your staff an unwanted tax charge.

From April 16 there is a new exemption which everyone should be taking advantage of!

The exemption covers “trivial benefits”.

At its most simple, the new rules state that gifts to employees, their family or household members by their employer are not taxable so long as:

  • The cost is under £50
  • The benefit is not cash or a cash voucher
  • The benefit is not contractual or habitual (ie done every month)
  • The benefit is not linked to performance or in recognition of a particular service provided by the employee, so no bottles of champagne for reaching a target or clinching a deal

There is no limit to the number of gifts that can be given to staff members in a year – but if the cost of a gift is over £50, the whole lot is taxable not just the excess.

That sounds great – but before you get carried away – there is a limit imposed on close companies (that is a company controlled by less than 5 people – so in reality – most family companies.)   For these companies there is an annual cap of £300 per director, which is still generous.  Gifts to any family member, who is not themselves an employee would be included in the director’s limit.

There are lots of examples provided by HMRC as to what qualifies – but things such as birthday presents, flowers on special occasions, Xmas gifts for staff, theatre tickets, would all potentially qualify.  So up to the limit, for family companies, these should all be going through the company from now on!

You do need to note that the exemption is only on the tax the employee would have suffered – there is no change to the tax in the company.  For example if you pay for a birthday meal out – it may still count as entertaining which would not be allowable for corporation tax in the company.

So what are you waiting for – go ahead and treat your staff (and directors) every now and again!

Im off to enjoy the chilled bottle of wine the company has just very kindly treated me to – what a lovely employer I have!!

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Working from home – how much can you claim from your business?

If you are self-employed and work at least partly from home then you are entitled to include part of the running costs of your home in your accounts.  But how much?

You have 2 options as to how to work out how much you can claim.

  1. Flat Rate Method

    If your sales are under the VAT threshold (currently £83,000) and you are self-employed then you can use this method. You simply work out how many hours a month you spend on average running your business from home and then include a fixed amount in your accounts, as follows:

25-50 hours: £10 per month

51-100 hours: £18 per month

101 hours or more: £26 per month

The flat rate covers the running costs of your home; you can also claim a proportion of the fixed costs and your phone/broadband as per option 2.


  1. Actual Costs

This method requires a little more effort, but it may give you a higher figure and therefore save you more tax.  Under this method, you need to apportion the running costs of your home on a “fair and reasonable” basis between those that are personal and those that relate to the business.

This is usually done by reference to the number of rooms you have in your house and the amount of time you use them for business.  There is no laid out formula though and therefore how you allocate costs will vary from business to business.  Keep any workings you have done so you can back up your figures to HMRC if necessary.

The costs you can actually claim can be spilt into fixed costs, running costs and phone/broadband.

Fixed Costs

Mortgage interest (not capital) or rent

Council tax


Water rates

Running costs




Repairs and maintenance

For example, assume you work from your sitting room 8 hours per day 4 days per week.  Your total fixed costs are £6,600 per year and your running costs £1,500.  You have 6 rooms in your house. A reasonable allocation of the fixed costs would be £6600 x 1/6 x 4/7 x 8/24 = £210.

An allocation of the running costs could be £1500 x 1/6 x 4/7 x 8/12 (as gas etc not used during the night) = £96

The phone and broadband is claimed on a usage basis only, so if you use your internet 50% business, 50% private you can claim 50% of the cost, including line rental.

If a property repair works solely to the area that you use for business, you can include the full cost in your accounts – for example, your office roof needs repairing.  If the repair is to the whole house – then claim in proportion as above.

So claiming costs of working from home is not as simple as it sounds.  The flat rate method will give you a quick answer, but the actual costs option may give you a higher figure.  If you need any further help then please contact Rosie Forsyth at Wilkins & Co.

Note – these rules only apply to the self-employed and not to owners of limited companies.

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What’s new for 2016/17

The new tax year is upon us so what’s new and what do you need to know about for the new tax year?

Personal Allowance
This has increased to £11,000 – this is the amount that you can earn this tax year without paying personal tax.  The next £32,000 of income will be taxed at 20%, and then 40% on earnings up to £150,000.

Personal Savings Allowance

A new savings allowance is introduced in 2016/17.  For basic rate taxpayers the allowance is £1,000 and for higher rate taxpayers £500. This means that no tax will be payable on savings income until the new savings allowance has been used up.

In a further change, banks and building societies will pay interest gross rather than deducting tax as they have done before.

Dividend Allowance

The way dividends are being taxed is changing – and most small limited company owners will be worse off.

The existing notional 10% tax credit on all dividends will be abolished and a £5,000 tax free dividend allowance is being introduced.

Dividends received above £5,000 will be taxed at 7.5% (basic rate), 32.5% (Higher rate) and 38.1% (additional rate), with no tax credit set against it as at present.

Limited company owners will therefore face tax bills on dividends taking from their limited companies – which could easily be avoided in the past.

Increase in the Employment Allowance

The allowance, which most limited company directors would have claimed at least in part in 15/16 is rising from £2,000 per annum to £3,000 per annum.  However it is no longer available to businesses where the director is also the sole employee, and therefore a lot of companies will no longer be able to claim it at all.

Abolition of 10% Wear and Tear Allowance for Landlords

The flat rate 10% allowance for landlords with furnished properties is being abolished, and being replaced with Replacement Furniture relief.

Tax relief will be given against rental income for the cost of replacing domestic items which includes moveable furniture, carpets, curtains, household appliances (fridges, freezers etc) kitchenware and TV’s.
So with lots to changes to be aware of as the new tax year starts, take the time to think about how they affect you and your business, and make sure you are being as tax-efficient as possible.

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Cloud Accounting – Is it for me?

More and more business are starting to use cloud accounting software for their businesses.  But what is it and should you be using it too?

Cloud accounting is the same concept as accessing your bank account online.  You don’t need to install the software on your desktop, keep it up to date or back up your data. You can access your data from anywhere that has an internet connection and collaborate easily with your accountant who can access your real time data as well, if you let them!

Cloud accounting is generally subscription based – so you will pay anywhere between £5 and £30 per month depending on which package and product you go for.  Most VAT registered small businesses will pay between £10 and £20 per month.
Popular options are Kashflow (my favourite), Quickbooks, Freeagent, Xero and Sage – and most will offer a 14 day trial so you can try before you buy.

The main advantage is that all your information is in one place.  You can add logo’s etc so you can raise your invoice directly from the software, it will then show you who owes you what – and how old the debt is.  With “automated bank feeds” you can link your bank account to the software so you can download your bank statement directly into the package.  It will then match up receipts with outstanding invoices and payments with suppliers for you.  Other amounts paid from the bank can be allocated to a category such as “stationery” or “materials purchased” quickly and easily.

You can even get “add-ons” now such as “Receiptbank” (payable extra) where you literally take a photo of your receipt and an app whizzes it off to your accounts package for you.  No more losing receipts or sitting down once a month to put them all into a spreadsheet.

Another advantage is you can see how your business is doing during the year.  I have some clients who hand their books over once a year and have no idea what their sales figure has been for the year, or if they have made a profit or loss.  Cloud accounting produces real time key data for you – in reports or graphs for you “creatives” out there!

So is it for you?  If you have sufficient transactions to make your bookkeeping a chore, or if you hand your accountant a shoebox at the end of the year full of receipts that have probably been through the wash once or twice – then definitely!   The monthly cost is minimal given the time savings involved.

For very small businesses, then you may find your spreadsheet is adequate for now but with HMRC pushing for everyone to have “digital tax records” by 2020 or sooner, it may be that cloud accounting will soon be the way forward for everyone.

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