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The Self-Employment Income Support Scheme – Everything you need to know

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.

 

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Update on Packages Announced by HMRC to help businesses

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.

 

 

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Update from Wilkins & Co

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

 

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We all know planning is important! What tax-planning can you still do before the tax year end?

With the tax year ending soon have you been as tax efficient as you could have been this tax year?

What can you still do before the year end to maximise your tax efficiency?

Here are a few of my tips for tax efficiency:

  • Use your personal allowance – everyone has a personal allowance of £12,500 for this tax year.  Consider family members who have no other income and if their allowance can be utilised.
  • If you have a new limited company, have you taken a salary this year?  Low levels of salary may be able to be processed without the need to set up a PAYE scheme with HMRC, but generally you will need to register as an employer with HMRC to be able to pay yourself a salary from the company – you just about have time to do this before 5 April.
  • If you have a limited company –have you paid dividends this year?  The dividend allowance is still £2,000, so the first £2,000 of dividend received in a tax year is tax-free, and then for basic rate taxpayers, the rate of tax on dividends is 7.5%.  Dividends must be paid out of available reserves and are payable per share -so if you have more than one shareholder in the company, you need to get the maths right!
  • Check you and your partner’s total income for the year if you receive child benefit payments.  If you have the ability to determine your income for the year, by varying the level of dividend paid, keeping the higher earner’s income below £50,000 will ensure you retain your child benefit.  If one of you has earned more than £50,000 this year, be aware you will need to pay back some or all of your child benefit and may need to complete a tax return to do this.
  • If you are considering buying capital equipment for your business, doing if before the end of the tax year will give you the tax deduction this year rather than next
  • Pension contributions – very tax efficient for the company to contribute to your personal pension.  Review any payments made in the year and take advice from an IFA.
  • Also think about contributing up to £3,600 into a pension scheme for a spouse, civil partner or a child, even if they have no earnings of their own, to obtain basic rate tax relief on the contributions
  • If you have taxable income over £100,000, you will start to lose your personal allowance, and will receive no personal allowance once your income is over £125,000 – this makes your marginal tax rate 60% on this part of your income.  Consider making additional pension contributions or gift aid donations which may restore your personal tax allowance
  • Use your allowance for tax free ISA saving; that’s up to £20,000 in this tax year. Under 18s can save £4,386 in a Junior ISA.  Also consider LISA’s to help your children get on the housing ladder.

Often simple steps can be taken to minimise your tax bill.  You should always however take professional advice to ensure the best tax saving strategy for you and your business.

Please contact us at Wilkins & Co if we can help you ensure that you and your business and operating as tax efficiently as possible.

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Last Minute Tax Return Help?

If you have yet to file your personal tax return, you probably have a rising sense of panic as you now have less than 3 weeks to get it in!

There is an automatic £100 fine for your return being late, whether you owe any tax or not, and although you can appeal with the fine with an excuse, you are very unlikely to get it overturned!

I have put together a summary of blogs I have done over the last year to hopefully help you with the most frequently asked questions for a sole trader trying to prepare their accounts and tax return.  I hope you may find them useful.

  1. Who needs to file a tax return?
  2. How you work out the amount you can claim for working from home
  3. What you can claim for using your personal mobile phone for work
  4. The rules around working in coffee shops!
  5. Payments on account – this was written in the Summer for the July payment on account, but the explanation of payments on account applies to January as well!

I’ll leave my blog about being organised and getting it done early in the year for another time!!

Good luck, and if you decide its all too much and this is the year you are going to do it differently and be organised – you know where I am (next year!)

 

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Are you missing out on tax-free childcare?

Recent statistics show that the take-up of the new scheme has been low, not helped by widely-reported technical issues soon after the scheme was launched.

So what does the scheme offer – and can you take advantage of it?

Under the Tax-Free Childcare scheme, for every 80p you put into your online account, the government will add 20p.

In total you can use the scheme to help pay for up to £10,000 of childcare per child each year – giving you an extra £2,000 per child (up to £4,000 if your child has disabilities).

Tax-Free Childcare is open to all qualifying parents, unlike the old Childcare Vouchers scheme offered by some companies.  It is open to all working parents, including those who are self-employed, with children up to the age of 11 (or 17 if your children have disabilities)

You can get Tax-Free Childcare at the same time as 30 hours free childcare if you are eligible for both.  However, you won’t be able to get the tax-free childcare if you already get Universal Credits.

To qualify, you and your partner, need to be working and earning a minimum of £131 a week, and a maximum of £100,000 a year.  If one of you does not work, then you are not able to claim.

Tax-Free Childcare can be used to pay for activities by any regulated childcare provider who has registered with the Scheme, and this may include holiday and after-school clubs as well as the more obvious nurseries etc, so it is worth checking who is covered in your local area.

If you are eligible for the scheme, then you need to create an online childcare account via the Government Tax-Free Childcare site. You then pay the money into this account, and transfer funds from there to pay your childcare provider.

So even if you do not regularly use childcare, it is worth checking if any provider that you do use is signed up to the scheme, and if you could be saving money by setting up an account.

For more information, please contact Rosie Forsyth at Wilkins & Co.

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Property Landlord? – Big Changes ahead to Capital Gains Tax

There are 2 big changes coming in from April 2020 that will affect anyone selling a property that is now rented out but that has once been your main home.

Rental properties that have never been the landlord’s main home do not get these reliefs anyway, and are therefore not affected.

  1. REDUCTION IN THE FINAL PERIOD EXEMPTION

When you sell a property, you pay capital gains tax (CGT) on the profit you make.  CGT is paid at the rate of 18% or 28% on residential property transactions depending on your tax bracket.

At the moment you don’t have to pay any CGT for the years you lived in the property, plus an additional exemption for the final 18 months that you owned it, even if you weren’t living there at the time.

For example, if you have owned the property for 10 years, lived in it for 6 years and then rented it out for the last 4 years, you would not pay CGT on 7.5 years of ownership – or 75% of the gain.

But from April 2020 this final period exemption will be cut to 9 months.  This means in the above example, after April you will not pay CGT on 6.75 years or 67.5% of the gain.

(There will be no change to the 36 months available to disabled people or those in, or moving into, a care home.)

  1. ABOLITION OF LETTINGS RELIEF FOR MOST LANDLORDS

The other change is arguably a bigger deal and involves lettings relief, which currently provides up to £40,000 of relief (£80,000 for a couple) to people who let out a property that is, or has been in the past, their main home.

From April 2020, lettings relief will only apply where the owner actually SHARES OCCUPANCY of the home with a tenant – effectively spelling the end of this tax relief for most people!

The relief will not be available at all for properties sold after 6 April 2020 – there are no transitional rules allowing you to claim it for the years up to April 2020 – it is simply going!

If you are therefore currently selling or thinking of selling a rental property, that has previously been your main home, then this needs to be sold before 5 April 2020 if you want to keep your lettings relief, and the current 18 month final period exemption.

For more information, please contact Rosie Forsyth of Wilkins & Co.

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Going self-employed? 5 things you need to do

Setting up a new business can be daunting and the To Do list endless.  Here are 5 things that you need to do to get the financial side of your business up and running:

  1. Register with HMRC

    You need to tell HMRC that you have become self employed.  You can do this online here.  You will receive your Unique Taxpayer Reference (UTR) in the post within about 2 weeks from HMRC.  This is a 10 digit number which you need to keep safe, as you need this to be able to file your tax return.

    You should register with HMRC as soon as possible after you start trading, and by 5 October following the end of the tax year in which you started self-employment at the latest.

  2. Set up a Separate Bank account

    It is always a good idea to have a separate bank account that you just use for your business.  Not only does it make preparing your year end accounts easier, it makes sure that you account for all your business expenses, gives you a clearer idea of how your business is doing, and if HMRC were ever to enquire into your affairs, gives them less scope to start asking other questions!

    As a sole trader, you don’t need to set up a “business” bank account.  You just need to have an account in your name that you use solely for business purposes.  If you have any business related DD’s (mobile phone/subscriptions) move them over to this account.

  3. Set your prices

    Presumably you want to make money out of your business, so you do need to think about what you are going to charge people for your services.  I’m not going to cover various pricing strategies here, but it is important to have think about all the different types of costs that are going to be involved with running your business, and to make sure that your prices will generate enough income to cover them.

    You also need to consider the amount of “admin” time that is involved in running a business.  Running that “hour workshop” won’t just take an hour of your time, you need to plan it, advertise it, deal with the finances of it, follow up etc so you need to build all this time into your pricing strategy.

  4. Keep your records

    You need to get this organised from the start.  Unless you are going to be raising only a handful of invoices and have very few expenses, I would definitely consider using a cloud based accounting package.  These are subscription based, so you need to take this cost into account, but packages start at under £10 a month, so are well worth the cost. At Wilkins & Co, we use Xero with our clients, but there are many others to take a look at as well.

    Make sure you are aware of the types of expenses that you can claim against your business and keep records of all these, as you will need them to prepare your accounts for HMRC, or to pass to your accountant.

  5. Put Money Aside for Tax

    Being self employed as opposed to employed, no-one pays your tax for you!

    It is your responsibility to pay HMRC your tax and NIC.  You will do this by preparing a set of accounts for your business and sending HMRC a tax return. Your accounts will generally be prepared to the end of the tax year (5 April), and then you have until the following 31 January to submit your tax return and pay your tax and NI.

    It is therefore a good idea to put money aside as you go along to pay your tax bill.  It is very easy to see money in your business bank account, and take it out and spend it – and then realise you have a tax bill to pay at 31 January that you have not budgeted for. How much you should put aside does depend on your personal situation, and what other income you may have in a tax year, but 20-30% of your profits put aside should cover your tax bill for the year.  Do check with an accountant though for personal advice on this.

  6. Did I say 5 things – oh well!

    No 6 could be the most important – talk to an accountant!!!  You can contact me at rosie@wilkinsco.co.uk.

 

 

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Summary of Useful Blogs for the self-employed

If you are starting up in business,  here’s my summary of useful blogs to help you with your accounts if you are self employed!

  1. Smile – 10 reasons to get your tax return done early
  2. Who needs to file a personal tax return
  3. What you can claim from your business for working from home
  4. Claiming the cost of your mobile phone
  5. Claiming travel and subsistence
  6. What are payments on account of tax
  7. How to budget for your personal tax bill
  8. Maternity Pay for the self-employed
  9. When do I register for VAT?
  10. Are you getting paid on time?

Hopefully there is something there to help you, if you need help and want to get in touch, please contact Rosie Forsyth here.

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