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Although IR35 is the hot topic – IR35 itself is not new – it has been around since 2000.  It is a piece of legislation that allows HMRC to collect additional payment from a contractor, where in reality the contractor is effectively an employee of their client – but is just choosing to operate through a limited company.

So why is everyone talking about it now?

New rules are coming in from April 2020, which are shifting the emphasis of deciding whether your working relationship is caught by IR35, from the worker to the end user in some circumstances.  If that end user determines that you are caught by the rules, they either need to take you onto the payroll or deduct PAYE and NI from your invoice.

This blog aims to demystify the new rules so you can determine if it will affect you.

Off-Payroll Working – What is it?

Off-payroll working is a term used by HMRC to describe the situation where:

A worker/freelancer provides a service (eg themselves) to an end client, and invoices that client via their own limited company and CRUCIALLY – if that worker was providing that service directly to the end client (eg NOT via ABC Limited) then that worker would meet the employment test status (see below) to make them an actual employee of the client.

If off-payroll working applies:

  • The end client is required to deduct PAYE and NI from your invoice, BUT
  • You do not acquire any employment rights under the rules – so you have no right to SSP, SMP, holiday pay,pension etc

so not a great position to be in!

The Changes from April 2020

From April 2020 if your end user is a large or medium sized company, then it becomes their responsibility to assess whether you have the employment status of a “worker”.  If they determine that you do, then the off-payroll working rules kick in.

Prior to April 2020 it was your responsibility to determine your status, and to deal with the IR35 legislation yourself.

(A medium company is one that meets 2 out of 3 of these criteria:

  • turnover over £10.2m,
  • over 50 employees
  • balance sheet total of over £5.1m)

It is important to note that if your end user is a small company, the changes do not apply to them at all.

If it is a medium/large company then the following will happen:

  • The end client must tell you that they are a large or medium size company
  • The end client must assess your employment status and tell you what they have decided
  • The end client will then deduct PAYE and NI from your invoice if they have concluded the off-payroll working rules apply

How will they assess my employment status?

The end client should start by using HMRC’s Check Employment Status Tool “CEST” which will give an assessment at the end of the questions.

It asks a number of questions about your working arrangements, such as “could you send a substitute to perform the task” and “does the end client have the right to determine your working hours”

If the questions are answered accurately and honestly, HMRC will accept the results of this test.

Once they have determined your status, they need to inform you of their decision by providing you with a Status Determination Statement.  If you disagree, you can challenge the result, and they will need to come back to you within 45 days.

What is likely to happen?

These rules came into force for the public sector last year, and the outcome was for many organisations, they just decided to take everyone onto the payroll and to no longer engage freelancers, as the risk of getting it wrong was just too high.  We are seeing the same already from some of the banks in advance of these changes.

Obviously, having PAYE and NI deducted from your invoice is going to affect your take-home pay, and if you are affected then there should be some negotiation about your future invoices!

It is important to note that the changes do not affect everyone, but there is, as is to be expected, currently widespread panic in the freelance world!

If your end client is a small company, there is no change.

However you are still responsible for determining your employment status, and I would highly recommend running through the CEST questionnaire to see how HMRC would assess your status, and if you should be applying the IR35 rules yourself.

If you have any questions, then as usual – get in touch!

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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.


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.)


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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How has the tax on buy-to-lets changed?

The new tax rules for landlords have been in since April 17 but it’s only now that you will be completing your first tax return under these rules, so here is a little reminder of how the new rules work (and a little work out for your brain in this hot weather!)

In the good old days pre April 17, unincorporated landlords would only pay tax on their rental profit.  The interest that you pay on your “interest-only buy to let mortgage” was a cost that you could claim in full in working out your profit for the year.  In tax terms, you would be saving tax at your highest marginal tax rate on this mortgage interest, so at 40% for a higher rate taxpayer.

From April 2020, you will no longer be able to deduct your mortgage cost from your rental income in working out the profit.  Instead, you will receive a 20% tax credit for your mortgage interest.

This new system will potentially increase the tax you pay in 2 ways:

  1. If you are a higher rate taxpayer, the tax credit is only 20%, whereas before you had 40% relief
  2. Less obviously, you could be forced into a higher tax bracket, depending on your other income, as the rental income that you now need to declare is higher than it was before. This could have knock on effects for child benefit or tax credits, or even capital gains tax if you are selling your rental property.

The change is being phased in over 3 years – which leads to some complicated calculations over the next few years.

In 17/18, you can still claim 75% of your mortgage interest relief, and you’ll get the 20% tax credit on the other 25%

In 18/19, you can claim 50% of your mortgage interest relief, and you’ll get the 20% tax credit on the other 50%

In 19/20, you can only claim 25% of your mortgage interest relief, and you’ll get the 20% tax credit on the other 75%

So if you are doing your 17/18 tax return, you need to provide HMRC with this information.

There are new boxes on the 2017/18 tax return to complete – the 75% you can claim this year goes into Box 26 on the Property pages, and the 25% you can’t claim needs to be entered into Box 44.  You’d then be wise to check the tax due as a result, to make sure it has been calculated correctly.

Good luck!

As ever, if you need some help with this, or your tax return this year, then please drop me an email at

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Are you Missing Something?

This blog looks at items that are often overlooked or missed by individuals and employees when completing their tax returns.  All are allowances that you may be perfectly entitled to, so if you are not claiming them, you are missing out and paying more tax than is necessary.

Marriage Allowance

Many people entitled to this are still not claiming it – and it is worth £238 this tax year.  The allowance is available if you are married, one partner does not pay tax and the other pays basic rate tax.  The non-taxpayer can transfer £1190 of their personal allowance to their partner, resulting in a £238 saving.  You can backdate a claim to April 15 for any year you were eligible, giving overall savings of £900.

Claiming for Using your own car for work

Most self employed are aware that you can claim 45p per mile for business travel, but often overlooked is the situation for the employed.  If your employer reimburses you for business travel at a rate less than 45p then you can claim tax relief on the difference via your tax return or online.


Professional subscriptions related to your business are deductible. This applies not only to sole traders, but also to directors and other employees who pay their own subscriptions personally, and a claim can made via your tax return, or online as above.

Tax Relief on Pension Contributions

Contributions to personal pension schemes are paid net of basic rate tax.  Higher and additional rate taxpayers can claim further tax relief on their contributions, again this should be done via your personal tax return.

Gift Aid Payments

Donations to charity through Gift Aid are also paid net of basic rate tax, and the charity reclaims the tax that you have already paid.

Again, if you pay tax at higher or additional rates, you are entitled to further tax relief on your donations and this can be claimed via your tax return.  It is useful just to keep a list during the year of donations you have made that are under Gift Aid, so you have the information when you do your tax return, or to pass to your accountant.

Missing Receipts/Items paid personally

Failing to keep a list of items you have paid for personally for your business, or not having receipts means you are not claiming for all your costs of running your business, and will end up paying more tax.  The odd missing receipt is not going to be the end of the world, but not having any back up for your costs is going to cause a problem.

New Trading and Property Income allowances

New £1,000 allowances for trading and property income were introduced from April 17. Individuals with trading or property income below £1,000 no long need to declare or pay tax on that income.  This is meant to cover ebay sellers, hobby businesses etc.

Those with income above the allowance either calculate profits in the normal way, or simply deduct the relevant allowance from the income (not from the profit – you can’t have both!)


These are just some of the commonly missed items.  Getting prepared and keeping information as you get it will help make sure you don’t miss out.  An accountant should pick up on these areas if they are completing your return for you, and you should always seek professional advice if you are in any doubt as to what you can claim.  For more information contact Rosie Forsyth at Wilkins & Co.

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Taxes Made Easy for 2018/19

Hot of the press is my new tax planning brochure for this tax year.

This easy to read guide provides you with simple tax planning points for the current year.

Covering personal tax, and matters affecting both you and your family, my guide suggest many ways in which you can save money on your tax bill by taking full advantage of the current tax system, as well as highlighting some of the pitfalls that you should avoid.

Please download a copy with my compliments – and let me know if I can help you with any issues raised.

Download Your Free Copy Now

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Are you getting paid on time?

Managing cashflow is one of the biggest and most important challenges you will face in your business.

It doesn’t matter how brilliant your business idea is, the old saying “turnover is vanity, profit is sanity, but cash is reality” is so true.

Unless that fabulous new customer actually pays you, in full and on time, they are not a fabulous new customer at all.

It’s crucial, then, not only to effectively manage your finances and keep on top of income and outgoings – but also to do as much as possible to ensure you get your invoices paid as quickly as possible.

So what can you do to help prompt payment?

Before starting work:

  • Make sure you have a signed agreement for your work. Ensure your terms and conditions are clear and payment terms are agreed.
  • Check out who you are working for if possible – consider looking at Companies House or doing a credit check on your client. A client on the edge of going under is not going to pay you!
  • If it’s a significant piece of work, consider asking for a deposit or part payment upfront, especially if you are having to incur costs from the outset.

Once the work is finished:

  • Be sure to invoice promptly. This may sound obvious but many businesses don’t invoice as soon as the work is done, and if you are doing several things at once, it’s very easy to totally forget.
  • Include a due date prominently on your invoice – in line with your agreed terms.
  • Consider payment as soon as the job is done using a card reader. You wouldn’t expect to leave a restaurant and get an invoice next week, so why would you expect to eg pick up your printed fliers and not pay there and then?  If immediate payment on completion has been agreed, then make it easy for your clients to actually do this by having the right technology in place.
  • Make sure the invoice is correct – and complete. Queries are a very good way of delaying having to pay!
  • Consider checking the invoice has been received by your client and it’s all OK. This again stops any “I never received it” delay tactics later on.

Chasing payment:

  • At some point you are probably going to have to chase up someone for payment and this may not come easy to you.
  • Remember, business is business, it is not personal – and hopefully more often than not, the payment has just slipped your client’s mind and they will cough up with a gentle nudge.
  • A couple of reminder emails initially, with a copy of the original invoice, is a good, professional, non-aggressive way to start.
  • If that fails, then you are going to have to pick up the phone. If you are having to call a large accounts department, then do get the name of who you speak to and try to come off the phone with a positive step in the right direction.  If it’s not immediate payment, it may be finding out the date of the next payment run, and confirmation that you are on it, or the email address of the person who needs to authorise the payment etc etc.
  • Hopefully you wont have to go as far as taking legal action as this is time consuming and takes your attention away from running your business. But don’t be afraid to follow this path, if you have done the work as agreed, then you deserve to be paid. Several small business schemes (such as the FSB) offer discounted rates and free assistance to help you chase slow payers, so if you are a member of such a group, make sure you use the services on offer.
  • Whatever you do – don’t start a new project for a client who has not yet paid for the last piece of work – unless you have a very good reason to believe they are good for the money!

Many accounting software packages now can greatly help with your debtor management.  The invoice can be prepared quickly and emailed over to your client, standard reminder letters and statements sent out and reports easily prepared to show you who still owes you money and how long it has been owed for.

Chasing for payment takes time and its not fun; so automate as much as you can, and concentrate on keeping your clients happy – as happy clients tend to pay up!!

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

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Are you making a profit?

People start businesses for many reasons – to be your own boss, to have flexibility, to escape the rat race and be home for the kids, or to develop a great idea you have had.  But whatever your reason, you need to generate a profit in the long term to keep the business going.

Put simply profit is the difference between your total sales and your total costs for a period and the only ways to increase your profit are to increase your sales, or reduce your costs!

Your costs include the total costs of running your business, not just the direct cost of making what you sell.  That’s where pricing becomes difficult, and you need to have some basic information to hand before you can come up with your sales price – you need to know your costs, and you need to have an idea of the income you want to generate for yourself.

Most of my clients provide services, not goods, and often say to me that they don’t really have any costs.  But your time is a cost, and you need to have an accurate idea of how long something actually takes to do – and you need to factor it in to your sales price.  This might include background research, admin time, client discussions and meetings.

You also need to think about your other costs that are not directly related to one customer – eg  rent, subscriptions, insurance, accountancy, phone charges, stationery etc as these all need to be paid from the money generated by your sales if you are to make a profit.  Make sure you account for all your costs too – if you don’t include the stationery that you bought while you were at the supermarket, or the parking ticket somewhere on the floor of your car, you aren’t building up an accurate picture of the true costs of running your business.

Once you have all this information – you can think about your pricing strategy.  There are many different ways to price your offering – it may be that you have different profit margins for different products depending on the level of expertise required to complete that project, you may offer a discount for buying in bulk.  There may be a generally accepted fee in the market place for what you are doing, and you should try to find out what the competition is doing.  But remember – you do need to be selling at a profit and covering all your costs if you want to stay in business.

New businesses are often tempted to price their services low to gain clients – and whilst there may be occasions when that’s a good idea – it shouldn’t be a long term strategy, especially if you are operating in a local market.  Awkward conversations about why you charge £x to one client and £y to another who turns out to be their best mate can be difficult, even if one was your very first client and you were so excited to get them you quoted a rock-bottom price (yes- I’ve been there!!)

Don’t undervalue yourself and think hard about taking on a client who immediately queries a reasonable quote.  A client who wants to knock you down on price may end up being more hassle than they are worth; are they coming to you because they value your service, or because you gave them the cheapest price?  You could well be better off with fewer clients paying you a higher price than with lots of clients at a lower price.

So before you stick your finger in the air and come up with a price when next asked, spend a bit of time thinking about what it is actually costing you to run your business, add in your profit margin and quote accordingly!!

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Tax for 18/19 – A Summary of the tax you will pay on your income

It’s the start of the next tax year and that means all the numbers and thresholds have changed again.

Here’s what you need to know about this year’s allowances and at what rate you will pay tax.

Tax Rates and Allowances

  • The income tax personal allowance is now £11,850 – you can earn this amount before you start to pay tax
  • The basic rate limit is now £46,350. That means that on income between £11,850 and £46,350 you will pay tax at 20%.  Over this you will pay 40%, and over £150,000 you will pay 45%


  • Dividend allowance is now reduced to £2,000 (from £5,000). The first £2,000 of dividends you receive in this tax year are tax-free.
  • Dividend tax rates otherwise unchanged. Dividends are taxed at 7.5% (basic rate), 32.5% (higher rate) and 38.1% (upper rate).


  • Since April 2016, savings interest has been paid gross by the banks, and the Personal Savings Allowance (PSA) has come into play. The PSA means every basic-rate taxpayer can earn £1,000 interest per year without paying tax on it. Higher rate payers get a £500 allowance, and additional rate taxpayers don’t get an allowance
  • A new lifetime ISA now exists to help with retirement savings or buying a first home for the under 40s.
  • The annual ISA limits increase to £20,000 (£4,260 for children)

Employers NICs and payroll

  • There is no Employers NIC on employees aged 21 and under, or apprentices aged 25 and under.
  • The NIC Employers Allowance remains at £3,000 and is not available for companies where the sole employee is a director.

Self Employed Class 2 and Class 4 NIC

  • Both class 2 and class 2 NIC are still here for this tax year, class 2 is due to be scrapped from 6 April 19
  • Class 2 NIC is £2.95 per week and is payable if profits are over £6,205. It may be worth still paying the class 2 NIC is your profits are lower than this as it gives you another year towards your state pension
  • Class 4 NIC is payable on profits over £8,424 and up to £46,350
  • Both types of NIC are collected via self-assessment

 Marginal tax rates

There are several income points where the marginal extra cost in tax of each £1 over the level is disproportionately high. They are

  • Over £46,350 – liability to higher rate tax
  • Over £50,001 and up to £60,000 – a claw back of child benefits
  • Over £100,000 – loss of personal allowances plus a requirement to file a personal tax return
  • £150,000 – liability to upper rate tax

What can you do to avoid higher and marginal rate tax?

  • Plan timing of dividend payments carefully
  • Consider employing a spouse/partner and splitting income producing assets efficiently
  • Make pension contributions which reduce your taxable income
  • Make Gift Aid donations which also reduce your taxable income

What Salary Do I Pay?

  • director aiming to be tax-efficient can pay £8,424 this year (£702 per month)
  • at this level there is no tax or NI
  • you do need to be set up as an employer and file RTI returns each month
  • you can then dividends to utilise the rest of your personal allowance and use your £2,000 dividend allowance

Everyone’s tax affairs are different and so you need to review your own situation to plan effectively for the year ahead.

Please contact me for more information and help.

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The Autumn Budget 2017

Yesterday’s budget was good news if you are looking to buy your first house but was there much else in it for small businesses?  The threatened reduction in the level at which you have to register for VAT did not happen, which was a great relief.  Please click below to see my summary of the key points that may affect you and your business, and a summary of the new tax rates and allowances, and if you have any questions, then please let me know.

 The Autumn Budget 2017

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So the heatings on, the sequins are back and Lord Sugar is firing people. It can only mean one thing……


C’mon, you’ve had since April to do it and you’ve put it off for 6 months so far.  There are 4 months to go before the final deadline, so just get it out the way now, before winter really sets in and the “C” word gets mentioned.

So what are the key dates, and what do you need to do?

  • 31 Jan – most people know that 31 January is the filing deadline for tax returns.  This is for your 2016/17 tax return which covers your income from 6 April 2016 – 5 April 2017.  Any tax not already paid for the year is also due for payment then, plus any payment on account you need to make for your 2017/18 tax.
  • 31 October -if you want to send a paper tax return then this has to be in by 31 October.
  • 5 October – if you have a new source of income in the year, or need to register for the first time for self-assessment – then this should have been done by 5 October.  If you need to do this, and haven’t already – then get on the phone now.
  • 31 December – if you owe tax for the year and you want this to be collected via your tax code in 2017/18, rather than sending them a cheque at 31 January, then you need to get your return in by 31 December, not 31 January.

If it’s your first year of self-assessment and you are going to do it yourself, you will first need to register to file online and get the passwords sent to you in the post.  This can take a few weeks to come through, so you really can’t afford to leave this until January as not being organised won’t be an excuse for not filing on time!  The fine for late filing is an immediate £100, irrespective of the amount of tax due.

By doing your return now, rather than in the New Year, you will know what your tax bill is going to be and you can budget for any tax due over the next few months.  You’ll also have that warm inner smugness that it’s done, and that you won’t be joining the January panic this year.

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