Filing your tax return

Posted on By dc_admin

Filing your tax return

The deadline for individuals to file Self-assessment tax returns on paper has now passed.  Anyone preparing their tax return for the year ended 5th April 2014 must now file it online before 31st January 2015.  Taxpayers often put off preparing their tax return until the Christmas period or later. However, this really doesn’t leave very long to get this completed before the January deadline, and gives you even less scope to plan if there’s a payment due on 31st January too.

smiling teacup

There are several advantages of filing tax returns early.  You can avoid penalties and cash flow problems and you’ll have the opportunity to gain any possible tax refunds sooner.

Tax payment dates remain the same

Your tax payment date is not linked to the date you file the tax return.  The payments are due on 31st July (second payments on account) or 31st January (balance and the first payment on account), regardless of when the tax return is filed.

…but tax refunds are paid earlier

If you file your tax return before the filing deadline, you should receive any tax refund you are due fairly soon after submission. HMRC do not wait until 31stJanuary to pay you. Therefore, if you suspect you have overpaid tax and are due a refund, you should really prepare your tax return as soon as possible so that you can gain the income sooner.  Don’t allow it to sit in HMRC’s bank account, when it could be in yours!

Manage your cash

Once your tax return has been done, and your tax liability calculated, you have time to start saving for the tax bill and to manage your cash flow.  If you pay your tax bill late, HMRC will charge you interest and possibly even late payment penalties.

The other benefit of filing early is that if your tax liability is under £3,000, you pay tax via PAYE and you submit your tax return by 30th December, you can opt to have your tax liability collected through your tax code. This means it will simply be deducted from your wages or pension each week or month.

Reduce errors and plan ahead

If your affairs have changed this year and you have losses, or a significant amount of additional income, then preparing your return early can be an advantage because it gives you the time to consider any tax planning opportunities which could lead to you saving tax.

Furthermore, having plenty of time to prepare your return reduces the risk of errors being made, because you aren’t rushing to get it finished.

Corrections

If you make a mistake on your tax return you’ve normally got 12 months from 31 January after the end of the tax year to correct it. For example, for the 2013-14 return you have until 31 January 2016 to make an amendment.

So the earlier you submit your return, the longer you have to make any corrections.

HM Revenue & Customs

Trying to get hold of HMRC can be pretty difficult, but it’s even more difficult around the tax return deadline. So you should really avoid leaving your tax affairs until December or later; just in case you need to speak with the department and cannot get through.

If you are due a tax refund, you’re also likely to experience a longer turnaround time if you file your return during their peak times.

Penalties

There is a £100 automatic penalty payable if your tax return is filed late.

And if your tax return is more than three months late, £10 daily penalties start to accumulate up to a maximum of £900 and there are even harsher penalties if your return is more than six months late- so they could well top £1,000 in all.

Using an accountant will take away the stress of filing tax returns and leave you to concentrate on running your business. Not only should penalties and interest be avoided, but accountants may even be able to save or defer you tax. They can also keep you informed of your tax position and abreast of any changes in the tax regime.

Contact us if you would like help getting your tax return filed on time

 

Posted in Tax

Business mileage expenses – why, what, how?

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Business mileage expenses explained

It’s very simple to record, can save you tax, and contributes to an accurate set of accounts and tax return.  So why do I meet so many people who don’t do it?

What is business mileage?

Any journey you make solely for the purpose of business. Examples include travelling to visit customers, suppliers, to attend work-related training events and business banking.   It does not include commuting to your normal place of work.  If you drop off the business post on the way home from your office, you can’t count that as a business trip.

Why record business mileage?

Keeping sufficient financial records is a legal obligation. The benefit to you is in claiming this tax free expense.  Say you travel an average of 20 business miles per day, 4 days per week, 48 weeks per year.  At 45p per mile that could save you £345 per year in tax at the current basic rate.  So what’s stopping you?

It’s a choreBusiness mileage

Well, I can’t argue with that.  It’s not much fun, but it really doesn’t take long and quickly becomes a habit you’ll barely notice.  All you need to do is keep a notebook and pen in the vehicle you use for business, or use your smartphone.

I haven’t got time

10 seconds spent jotting down the details at the end of the trip and it’s done.  You can link several business trips together. So if you start at your business premises one day and travel to a customer’s premises, then go to a 2nd customer, then onto the stationers to pick up some flyers you’ve had printed, and drop off the flyers at the distribution company, that can all be recorded as one trip.

I forget

I believe you.  I also know you’re doing your best to run a successful business, often under very difficult circumstances.  So find a way to integrate the recording of business mileage into your daily or weekly routine.

Give me an easy solution

There are 2 options for tracking mileage.  You can use the old paper and pen method, or use one of the many apps that are available now.

For each trip your paper record needs to show:

  • The date

    business mileage
    Mileage record made simple
  • details of where you’re going to and from
  • the reason for the trip and
  • the business mileage.

There are mobile apps which are appropriate for UK taxpayers Most will deal with more than just mileage. Try Concur,  Eclipsecs, Webexpenses or search for an app that will record mileage.

A note on the value of your business mileage expense claims: there is more than one method of calculating mileage expenses, although there are certain restrictions.  Have a chat with your accountant or contact us to find out which is best for you.

 

 

 

Payroll changes 2014-15

Posted on By dc_admin

Payroll changes 2014-15Payroll changes 2014-15 are the usual updates to tax codes, tax rates and NIC rates.  Good news includes a delay in the implementation of late filing penalties under the RTI system, and a £2,000 reduction to employer’s NIC.  On the downside, employers will no longer be able to reclaim SSP paid to employees.

 

RTI LATE FILING PENALTIES

The penalties for late filing of the FPS files which were due to commence April 2014 have been postponed until October 2014.

The FPS files are the Real Time Information (RTI) reports sent each pay period and are due on or before the pay date. The fines are per late FPS and depend upon the number of staff you have:

Staff Monthly Penalty

  • 1 to 9 employees  £100
  • 10 to 49 employees £200
  • 50 to 249 employees £300
  • 250 or more employees £400

The penalty notices will only be sent out quarterly ,so the bill could be quite high when you receive it.  Payment is due within 30 days of the notice.

Where an FPS is late for more than 3 months and the information is not included on a later submission a further charge is made – 5% of the Tax/NICs which should have been on the submission.

SSP RECLAIM ABOLISHED

From April 2014 the reclaim of SSP will be abolished. You still need to keep a record of SSP paid in the normal way but there will be no reclaims at all. Reclaims for SMP, SPP and SAP remain the same.

TAX RATES 2014-15

The new standard tax code is 1000L

Tax Bands:

  • 20% £1 to £31,865
  • 40% £31,866 to £150,000
  • 45% £150,001 and above

NIC Thresholds 2014-15:

Payments start from the primary threshold: weekly pay of  £153, monthly £663, annual £7,956

Employees deductions are 12% on amounts above the primary threshold, up to £805 weekly/ £3,489 monthly then 2% on all other earnings

Employers liability: 13.8% on all earnings above the secondary threshold (values are the same as the primary threshold mentioned above).

The threshold for statutory payments is £111 per week.

SSP rate £87.55 per week

SMP/SPP/SAP standard rate £138.18

Student loans are recovered at 9% on earnings above: weekly £325.19 , monthly £1,409.16 or annual £16,910.00.

£2,000 NIC ALLOWANCE

HMRC are introducing a £2,000 Employers Allowance to be offset against your Employer’s NIC. Most employers are eligible for this and we will be taking it into account on your monthly PAYE Summaries.

There are a small number of employers who are not eligible and you can check your entitlement by logging on to the following website:

https://www.gov.uk/employment-allowance-up-to-2000-off-your-class-1-nics

Budget 2013

Posted on By dc_admin

The Budget 2013 introduced a new National Insurance for employers. The increase in personal allowance to £10,000 has been brought forward a year, to 2014. There will be very few changes to tax rates.

Employer’s NI (National Insurance) Contributions 

A completely new measure introduced in this budget is the employment allowance.  This will be a deduction in employer’s NIC of £2,000 per year for all businesses and charities from April 2014. It is intended that this will be easy to administer, and the Government will be consulting with stakeholders on the practical aspects. It should be easy to administer, and be done through the normal payroll and RTI (Real Time Information) reporting process.

Currently employer’s NI contributions reduce profit and business tax liability.  If all else is equal, employers will pay £400 more tax (at a rate of 20%). So the true saving for many employers will be £1,600.

Income Tax

The increase in the personal allowance to £10,000 is being introduced a year earlier than anticipated and will come in from April next year. When there is a rise in the personal allowance this usually means the Chancellor lowers the threshold for the higher rate of tax, so that it only benefits people on lower incomes. There have been no changes to income tax rates.

The basic personal allowance is available to people born on or after 6 April 1948. In the current year, 2012/13, it is £8,105; in 2013/14 (as previously announced) it will be £9,440. Once the personal allowance has reached £10,000 in 2014/15, it will then increase in line with inflation based on the Consumer Prices Index (CPI) in future years, starting from 2015/16.

VAT

The annual turnover threshold for VAT registration will go up from £77,000 to £79,000 from April 2013. The deregistration turnover limit will go up from £75,000 to £77,000.

Corporation Tax

The main rate of corporation tax is already scheduled to decrease to 23% from 1 April 2013. From April 2014 it will go down to 21%, and from April 2015 to 20%. There is no change to the rate for small companies, which remains at 20%.

Capital gains tax

The annual exempt amount in 2013/14 will be £10,900, increased from £10,600 in 2012/13. The exemption for most trustees will be £5,450.  There are no changes to capital gains tax (CGT) rates.

Small Company Shareholder/Directors’ Loans

The Government will close three loopholes to counter attempts to avoid the tax charge on loans from close companies to individuals with a share or interest in the company. The measures will have effect from 20 March 2013 and are expected to bring in just under £70m annually in the four years beginning 2014/15.

Later this year the Government will consult on the structure and operation of the tax charge on loans from close companies to their participators (shareholders). If legislation is needed it will be in the Finance Bill 2014.

The full Budget can be accessed at hm-treasury.gov.uk

If you would like any help with budget 2013 changes please contact us.