Archive for the ‘Tax Advice’ Category
Tax and the Small Business
Tax Accountants London – Business Tax Advice
Even though Sir Winston Churchill stated that “there is no such thing as a good tax”, very few of us in our society are completely exempt from having to pay them in one form or another. All business is subject to taxation and small businesses in particular find that they are often seemingly swamped by a vast amount of tax legislation on a regular basis.
There are obviously taxes that a business owner pays that are not particular to being the owner of a business, but along with these there are also some that apply just to them, so which are they?
Business Rates
Although not a tax in name, business rates act in exactly the some way; all businesses have to pay rates on their premises in the same way and for the same reasons that we pay council tax on our homes.
What you pay in business rates is down to the ‘ratable value’ of your business premises, which in turn is based on an estimation of the market rent and has to be re-valued and up-dated every five years. The ‘Small Business Rate Relief Scheme’ could reduce your business rates if your business’ ratable value is less than £15,000.
Corporation Tax
HMRC requires all UK Limited Companies to pay ‘Corporation Tax’ on their ‘taxable’ profits. This only applies to Limited Companies and is a sort of Income Tax for Limited Companies.
PAYE
You do not get to escape the joys of Income Tax simply because you are a business, in fact, if you employee staff, you will have the added joy of dealing with the payment of their Income Tax to HMRC. PAYE (Pay As You Earn), is the system used by employers, whereby they deduct Income Tax directly from their employees’ wages or salaries and pass it on to HMRC.
National Insurance
As well as the deduction Income Tax directly from an employee’s pay, employers are also responsible for the deduction of their staff’s National Insurance contributions at source, which are passed on to HMRC along with other taxes.
Value Added Tax
All UK businesses that have registered for VAT, which they must do if their turnover has reached, or is expected to reach within a month, the VAT threshold, (currently £70,000) have to add VAT to the sale price of most goods and/or services they provide. Some goods and services are either exempt or zero-rated and VAT need not be charged on these, but it must be added to most.
Capital Gains Tax
If all the taxes you are subject to are getting the better of you as a business owner, you may choose finally to sell your business and move on, yet even at this point you cannot completely escape taxation; Capital Gains tax is collected on gain or profit made on anything sold or given away, and so disposing of your business will probably find you paying yet more tax.
Although it may sometimes seem like a never-ending list of payments to make, try to remember that without taxation we couldn’t fund our society, we may not always agree on the size of our tax bills, but most of us in business resign ourselves to taxation as an inevitable fact of everyday business life.
Small Business Accounting – How to Please the Tax Man With Your Great Record Keeping
Accountants London – Small Business Accounting
Small businesses in particular are prone to being stretched for time, knowledge and resources, with often just a sole trader or partnership having to take on the entire workload, as well as everything that comes with the running of a business. It is hardly surprising then that the quality of the accountancy records sometimes takes a bit of a back seat.
If, on top of this you are also very new to business, it could be that you are, in addition, struggling with a learning curve as steep as an Olympic ski run. Finding out exactly what is expected of your record keeping can be a little tricky, mostly because you will be keeping the records for a variety of different people, all of whom probably need something slightly different from them, so, it helps then, if you work out the most important people to please and aim to make them happy.
Regardless of what sort of business you have, the fact is that you will most likely need your records to ensure that you are paying the correct amount of tax; no one wants to pay more than they need to, and under paying could land you in a whole heap of trouble.
So how does one keep a set of records that will bring a smile to HMRC’s figurative face? Well, there are a few simple principles to follow that will at least take you some of the way to getting it right.
It should go without saying, (but it rarely does), that all records should be presented professionally. Keep them clean and tidy and clear and concise. HMRC are nothing if not impressed by neat records.
Do not struggle on alone with things that only a professional can help with; the advice of a professional accountant, especially in the early years of a business’ life can be invaluable and for understanding and explaining the complexities of UK Tax Law, there is no one else who can really help in the same way; most accountancy professionals also have a good working relationship with the Tax Man and can communicate with them in a way that will cut out the need for an interpreter; so, make engaging an accountant a priority.
Use either a good accounting software package or an online accounting system. Having the sort of instant access to information that these systems provide will make things very much easier should the Revenue ask for particular facts; being able to provide the relevant information quickly and clearly will certainly endear you to HMRC.
Keep hard copy back-up in the form of bank statements, receipts and cheque book stubs, in case they are required, but store them in easily accessible, well ordered files; if they are requested, having to hunt around a damp garage to find a few stained, mouse-chewed bits of paper, is not only a pain, but handing this sort of incomplete information over will definitely earn you a black mark, or two.
Ensure that all information is accurate and complete. It may sound obvious, but forgetting to record a transaction or logging something incorrectly will portray you and your business as, at the very least sloppy, at worst corrupt, in the eyes of the Tax Man, so make sure you are careful to get it right.
Ultimately, although HMRC are there to collect taxes from your business, they are not your enemy; if you are helpful and professional in your dealings with them, they will respond far more favourably than if you are hostile and obstructive; just like you the Tax Man (and woman) in all their guises are only human after all.
Tax Accountants London – How to Save Some Money on Tax
Overpaying the tax man is not just as a result of simply tax code mistakes, not maximizing your personal tax allowances, mistakes when claiming tax credit and not using the full allowance of pension or saving investment. If you are a tax payer who does not have the full understanding of the allowances you have as an individual tax payer then how can you save yourself money? Most people think it will be too complicated and simply do not bother to find out valuable information that can really save you money.
There are an estimated 30 Million taxpayers in the United Kingdom that submit their tax returns every year and there are a few things you should consider looking into before you fill out the forms. Saving money has become more important in this economic climate so here are a few areas you might have missed that could save you some more money.
Just double check the tax code and ensure your rate of tax is correct, it sounds simple but if it is wrong it can really cost you hundreds of pounds on an administrative error. If you happen to be over 65 the check whether you have been awarded the higher personal allowance which increases your amount to 9,490 from the 6,475 of the under 65’s, if it hasn’t been upgraded then get it done.
Get it finished sooner rather than later! You will be well aware of the deadline but being prepared and getting all of your paperwork in early rather than just on time can mean avoiding any accidental late submission which can mean a penalty. This is just common sense but it’s amazing how many people are late and get charged over 100 pounds for simply being organised. For paperwork 31st October is the deadline but on-line submissions are 31st January which gives you more time.
If you are married then financial gifts between couples can be £6035 from the higher earner to the lower, reducing the rate which the money is taxed on which can make a real difference.
Pensions are incredibly efficient ways of saving especially when you are a higher earner. A personal or company pension scheme can be topped up with your own money to maximise your tax savings. The maximum amount of tax free saving is 235,000 in 2008/2009 which is a considerable amount.
There are some tax free winnings on gambling prizes, premium bonds and the National Lottery and although you need lady luck on your side, it might happen!
Your personal individual saving allowance is 3600 and for stocks and shares the allowance rises to 7200. This is a yearly amount and can really add up over time.
If you are planning to give your home to your children in your will then think about giving assets away early to your children. House prices are low at the moment so any inheritance tax paid will be much lower now than in five years time.
If you have a home based business then when claiming your business expenses using your rent/mortgage paid and utilities in the place of the dedicated office space can save you extra money.
If you have just started up a business then all business expenses up to seven years prior to official start up can be claimed so think about the money you have already put into your business and save now. The dates will need to be obvious in the receipts though to stop false claiming.
Tax is something that seems to increase rather than decrease but there are ways to avoid paying more than you have to. If you are unsure of any details about what you can and cannot claim for then seeking professional advice can really stop the headaches of playing too much tax.
Tax Accountants London would like to thank Felicity Lightbody for sharing her insights.
Felicity is a part-time journalist, writing occasional columns in the UK. If you need to do a online self assessment tax return and don’t know where to start, then try our cheap tax return. For subcontractor tax return and more information please visit the taxreturnsdirect.co.uk website.
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