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Working from home – are you getting the tax relief?

The way we work has changed and for many working from home has become the norm.

If you are self employed – then you will already be including in your accounts a charge for the additional costs incurred from working from home.  There are 2 ways you can calculate this charge – one is a simple flat rate method based on the hours you work from home, and the second is a more complicated calculation, based on allocating a percentage of the actual running costs of your home to your business.  Both methods are outlined in detail in my previous blogs.

Whichever method you use, the hours you work from home have probably increased significantly over the last 6 months, so you should ensure that this is reflected in the amount that you charge your business.  It may be that the second method would now give you a higher figure – you need to do the sums!

If you are an employee, and have been working from home since lockdown, there is also a small amount that you can claim.

Your employer can pay you the grand sum of £6 per week to cover the additional costs you are incurring from having to work at home.  If you don’t like to ask, or your employer is not able to pay you this, then you can instead claim tax relief on the £6 per week via HMRC.  Not a fortune, but a gain of £1.20 per week for a basic rate taxpayer, and £2.40 a week for a higher rate tax payer.

How to claim as an Employee?

Either claim on your tax return if you complete one, but if you don’t then you need to simply file a P87 form.  This can be done online if you have a government gateway set up – or by good old fashioned post otherwise.  The section to complete is the “using your home as an office” section.  Once submitted, your tax code will be amended to give you the tax relief on your claim.

Other costs

If you have had to buy other office equipment to use at home during lockdown, and your employer is paying you back for this, this would normally be taxed on you as a benefit in kind.  However, for this tax year, there is a relaxation of this rule!  With many more hours being spent in your home office, it is important to have the right equipment to enable you to work from home – a proper desk and office chair etc, to save aches and pains in the future!

If you would like any more information, then please do contact Rosie Forsyth at Wilkins & Co.

 

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Are you ready to make your second claim for self-employed support?

For the self-employed you can make a claim for your second, and final grant from HMRC from 17 August.

Here is everything that you need to know about it:

The Second Grant

If you were eligible to claim first time round, then you can claim again, and HMRC will use the same basis for calculating the amount due to you this time.

The scheme this time allows you to claim a grant worth 70% of your average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £6,570 in total.  The first grant was based on 80%, subject to a cap of £7,500.

As before HMRC will contact you if they believe are eligible to claim the second grant.

Claims have to be made by 19 October 2020, and HMRC aim to send you the money within 6 working days of your claim.  In most cases grants were received quickly last time.

You don’t have to have made a claim for the first grant, to be able to claim the second.  It could be that your business was not initially affected by the virus, but has been since 14 July.

Also a reminder that the grant does not need to be repaid, but it is subject to income tax and self-employed National Insurance.

The grants will need to be reported on your 20/21 tax return, and also disclosed as self-employed income for any Universal Credits or tax credits claim.

 

Record Keeping:

Information has also been released about the records that you need to keep in relation to the grant.

You must keep:

  • Details of the amount claimed
  • The grant claim reference
  • Evidence that your business has been adversely affected by the coronavirus at the time you made your claim. This could be:
    • Business accounts showing a reduction in turnover
    • Dates you had to close due to lock-down restrictions
    • Dates you were unable to work due to coronavirus symptoms, shielding or caring responsibilities
    • Evidence of a contract being cancelled
    • Confirmation of any coronavirus related business loans received

Errors:

New provisions have also been introduced to tell you what to do if you believe the last claim that you made to be incorrect, or you believe HMRC made an error.

If you received a grant, and now do not think you were actually eligible, or you were overpaid, then if you received the grant:

  • before 22 July 2020 you must tell HMRC on or before 20 October 2020
  • on or after 22 July 2020 you must tell us within 90 days of receiving the grant

If you do not you may have to pay a penalty, which could be up to 100% of the grant!

As with the last grant, it is the individual that needs to make the claim with HMRC – their agent/accountant is not able to do this for their clients.  But if you do need help with working out what you can claim, or what records you may need to keep, then please get in touch with Rosie Forsyth of Wilkins & Co.

 

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Payments on account of tax due now can be deferred, but what are they in the first place?

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.

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Extension to the Self-Employment Support Scheme

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.

 

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Why you should be doing your tax return now

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!

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Are you now eligible to claim child benefit again?

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.

 

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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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