The Limited Company contractor’s guide to Entrepreneurs Relief

Entrepreneurs Relief

 

What is Entrepreneurs Relief (ER)?

ER was created to encourage people to set up and grow their own businesses, by providing a reduced level of Capital Gains Tax (CGT) on business disposals (when you decide to either sell or dissolve your Limited Company).

 

Who can claim ER?

ER is available to shareholders who are trading using a Limited Company and who have held the business assets in question for more than 12 months. It’s usually applied to a business disposal or share sale, but can also be claimed for other assets.

 

You must have been a serving partner, director or employee and have held at least 5% of the share capital in the year preceding the sale, If you’re disposing of business shares.

 

How does ER work?

To calculate your personal ER, you must firstly deduct your CGT annual exemption from the amount of your gain. Then, multiply this gain by 10% to leave you with your CGT liability.

 

Should you be fortunate enough to reach the lifetime allowance threshold of £10 million, then any further gains are made at the standard CGT rates.

 

Remember!

There are deadlines for when ER must be claimed. If business assets were disposed of during the 2015/16 tax year, then you must make your ER claim by 31 January 2018.

 

You are able to make a claim on your Self-Assessment Tax Return, but we strongly advise you seek the professional advice and support of an expert Limited Company contractor accountant.
For more information Entrepreneur’s Relief, please visit HMRC’s website.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Understanding the Self-Assessment Tax Return

Understanding the Self-Assessment Tax Return

We don’t like to be a scrooge here at Intouch, but after the Christmas festivities have ended it’ll be time for you to submit your Self-Assessment Tax Return (SATR). After all the Christmas chocolates have gone and the New Year celebrations seem like a distant memory, you will need to take stock from the past tax year and pay what is due to HMRC.

 

It’s a good idea to get on with your SATR as soon as possible so that it’s one less thing to worry about, especially over the festive period. If you are an Intouch client your Personal Accountant will have already been in touch to guide you through this process and make you aware of what needs to be submitted.

 

But if you’re not yet a client of ours and need to understand what the assessment is and if you need to fill one out, read on…

 

What is the Self-Assessment Tax Return?

It’s HMRC’s way of accounting for the incomes that may not all be taxed through permanent employment. Paper self-assessments must have been received by HMRC by the 31st of October and online submissions must be made by January 31st.

 

The assessment itself is a series of questions which all must be filled out. If you’re struggling with the answers, or need advice on claiming for your business expenses, then enlisting the services of a trusted accountant will be one of the best moves you can make.

 

If you have received only PAYE income since April 6th of this year, you may not have to complete an assessment. Exemptions may include if you have received any Child Benefit in your household and one receives an income in excess of £50,000, or if your income has exceeded £100,000 whilst in PAYE.

 

Who has to fill one out?

If you have received non PAYE income then you may need to fill out a Self-Assessment Tax Return. This includes (but is not limited to) the following types of people:

  •  self employed
  • if you are a company director
  • if you have accommodation or land that you receive payment for from tenants (unless covered by the rent-a-room scheme threshold of £4,250)
  • if you receive other income which is not taxed before you receive it
  • if you are subject to paying more tax as a result of Child Benefits and a member of your household is receiving more than £50,000 in income
  • if you are a pensioner who receives a higher amount than your tax-free personal allowances

 

If you’re unsure whether you need to complete a return, take a look at HMRC’s website.

 

What happens if you don’t return your self-assessment or tax due to HMRC?

If you miss the submission deadline for your return and / or tax payment, HMRC will issue you with a fine. The fines range from £100 for the first three months after missing the submission deadline and interest if the tax payment is late, with penalties enforced if more than 30 days late.

 

HMRC do allow you to pay your tax bill throughout the year with the use of their budget payment plan. Your Personal Accountant will be able to advise you on the best way to ensure you retain the correct amount of tax and when it’s due to HMRC.

 

What happens if you make a mistake on your SATR?

Many people make mistakes on their SATR, but it’s worth remembering that HMRC will not accept it if you’ve included incorrect information. If you do make a mistake you’ll have twelve months to correct it (which is called an amendment). However, if HMRC find an error in which they have had to prompt you, there could be a minimum 15% penalty charge on the total tax owed for each mistake that HMRC classes as a careless error. So make sure that you check it, check it again – then check it once more before you submit it!

 

How can Intouch Accounting help?

We ask our clients to submit their assessment details to us by November 30th, so there’s still time to join Intouch and have your self assessment submitted for this year. Please be aware that if you do join us now, there will be a charge for your SATR to be completed, as you have not been a client for the past tax year.

 

Alternatively if you’ve tried to go it alone and seen first hand the amount of time (and potential stress) it can cause, it might be time to look into appointing a contractor accountant.

 

At Intouch we include a personal self assessment tax return as part of our all inclusive monthly fee of £98+VAT. But that’s not all, take a look at our full service inclusions to see just how much we include in our monthly charge with no nasty hidden charges. Ready to join us? Great! Give our team a call on 01202 375 562 to talk through the joining process.

 

Missed our twitter chat with IPSE on the Self-Assessment Tax Return? Catch the full Q&As here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Payment difficulties – Self Assessment 2015

Payment difficulties – Self Assessment 2015

Many contractors and freelance workers submit a Self-Assessment Tax Return. The deadline for filing the Return for the year ended 5 April 2014 and also for having paid any additional tax that’s not collected via the PAYE system is the end of this month (January 2015).

The tax system requires that you pay not only any balancing tax liability but can also require that you make a second payment on account for the current tax year (5 April 2015), both at the end of January, with a second payment on account for the current tax year next July.

If you don’t pay your tax liability on time HMRC will automatically charge you interest from 1 February at 3% per annum, and you would expect that to be the case, but what many contractors don’t realise is that there are additional surcharge penalties that are automatically charged for unpaid tax after 30 days, 5 months and 11 months.

Each penalty is 5% and so your unpaid tax liabilities can rapidly increase significantly.

So, what do you do when you cannot pay?

key-points4

Our advice for contractors who find themselves in the unfortunate position of not being able to meet their tax liabilities in time there are a few points to consider which might help:

Speak with your contractor accountant – as soon as you’re aware that you will have difficulty with paying your tax liabilities let your contractor accountant know. They will be able to advise you in detail of the options available as they apply to your specific financial position and can help you establish exactly how much tax is due and by when.

Contact HMRC – There is some flexibility possible, depending on your circumstances, so it’s worth exploring your options.  For example:

  • If your notice of tax changeability was issued late in the year, you have three months from the issue date until the tax is due. If this is the case, it may mean that your personal tax due date for the current tax year is after 31st January.
  • If amendments are made to your tax changeability after 1st January additional tax chargeable as a result will not be due until 30 days after the amendment was made. There will, however, still be interest charged if you pay the additional amount after 31st January.
  • HMRC will usually accept if you cannot pay by 31st January but promise to pay the full amount owed within  30 days.
  • If you cannot pay within  30 days HMRC will consider special circumstances and may reduce penalties in some cases, so speak with them if this might apply to you.
  • There are also a number of schemes available which can help you spread out your tax payments as long as you are currently paid up to date. HMRC are obliged to at least consider reasonable payment arrangement proposals. However, if an arrangement is spread over more than 3 months, HMRC will want evidence of income, expenditure and any savings you have.

 

Being unable to pay your tax liabilities can be extremely stressful, but by taking action as you soon as you become aware there’s an issue you may find there are workable solutions available.

Are you a contractor in need of some advice on your Self Assessment Tax Return? Intouch Accounting are contractor accounting experts, able to provide professional support to Limited Company contractors – leaving you to focus on the matter at hand without needing to worry about your finances.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

New contractors’ guide to Tax Return Deadlines

New contractors’ guide to Tax Return Deadlines

With the 31st of January deadline for online self-assessment fast approaching, it is important that all new Limited Company contractors are aware of all personal and company tax return deadlines.

Filing all personal and company tax information required and making payment to HMRC within their specified deadlines is vital. Firstly, it ensures you don’t end up having to pay out for late penalty amounts. It’s also good business practice to keep within these deadlines as it will mean that you’re generally keeping your contractor accounting and tax affairs fully up to date. Ideally you should be aware of the key deadline dates which apply to you, but if you’re unsure a contractor accountant will be able to help.

As a Limited Company contractor you will be required to file a number of different types of tax return. The specific returns applicable will partly depend on the size and type of business involved but most contractors will usually need to file the following:

  • Self-Assessment tax return – relating to your own personal taxable income.
  • Employer related tax returns e.g. National Insurance Contributions (NIC), Pay as you earn (PAYE) and other employee related returns for yourself (as an employee of your own company) and any other employees.
  • Company tax return for your business.
  • VAT return(s) for your business if your company is VAT registered.

HMRC specifies a number of different deadline dates for each of these returns. A list of key dates for the main tax return categories is given below.

Tax Return filing and payment deadlines

Self Assessment Tax Return:

The end of the tax year is 5 April. The start of each new tax year is 6 April. You will need to notify HMRC that you need to complete a self-assessment tax return for the previous tax year’s income.

Table 1

Employer related filing and payment deadlines

 Employer PAYE submissions in real time became effective from 6 April 2013. Employers now report their payroll information online directly to HMRC by submitting Full Payment Submissions (FPS) and Employer Payment Summaries (EPS).

table 2

Company Tax Return filing and payment deadlines

Corporation Tax is payable by all active profit making companies. The amount owed must be paid nine months and a day after the end of the company’s accounting period end date. This means that the actual deadline dates will vary from business to business.

box 3

 VAT Return filing and payment deadlines

There are no fixed dates in the year for paying VAT.  However, depending on the type of business and the VAT options you choose you could be filing and paying monthly, quarterly or annually.

box 4

Intouch Tax Returns Service

At Intouch Accounting we make your life easier, we offer tax return administration as a standard part of our comprehensive Monthly Service package (£98 + VAT per month). This includes filing all HMRC and Companies House tax returns, including your personal self-assessment tax return. Contact us to find out more about our services.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Getting ready for the end of the tax year – 5 things to think about

Getting ready for the end of the tax year

Contractors naturally spend most of their time either working hard for income, marketing and networking to win the next piece of business. After all, ensuring the business keeps rolling in is what keeps the money coming in! However, as a result, the tasks of doing accounts and keeping tax matters up to date can end up taking a back seat and important items can get left un-done. Unfortunately, leaving these things to the last minute not only creates a stressful rush to get them completed at the end of the tax year; it can also end up costing contractors’ money. This could be from missing out on tax breaks and paying more tax than is necessary or simply because returns are filed late and incur HMRC penalties. Even those who have a contractor accountant could potentially lose out, as they will still need to submit the right information, in good time, to benefit from their accountant’s knowledge and expertise.

If you are a contractor with a Limited Company set up, taking into consideration a few key points in advance of deadline dates can really help.

 

5 things to think about for the end of the tax year

  1. Check that you have fully utilised your personal tax allowance and taken all of the tax free dividends available – if you’re not sure then ask your accountant to double check for you.
  2. Make sure you have made full use of your ISA allowances to get the most of your tax free savings and interest.
  3. Confirm that you have maximised your pension contributions. You can contribute up to £50,000 per year.  Any employer contributions will also help to reduce the corporation tax for the company.
  4. If your income is close to the higher tax rate threshold, or has slightly exceeded it, consider making a charitable donation to extend the basic rate band.
  5. In preparation for the self assessment, allow enough time to request and receive all the relevant paperwork for your income and investments, such as interest statements. This will make sure that it can be prepared by you or your accountant without delays.

All of these points will contribute to making sure you are getting the most out of your income as well as allowing plenty of time for you and your accountant to get the relevant information together. Overall these will help to make the tax year and the submission of your self assessment tax return an easier, more relaxed process.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.