Monthly Archives: January 2015

0 12 Days of Tax Tips – Day 12

Reasonable estimates

Use an Accountant or Use Estimates in the Return

This is the last one of the series, and it is the simplest.

Self assessment tax returns were devised to be straight forward to complete so theoretically anybody can do them. However, for some, any kind of form or anything to do with money and tax turns them cold. If you think you need help, take up a free consultation with an accountant. If you don’t understand what they are telling you, then they may not be the right accountant for you. Don’t muddle through, try another.

Remember: If you do not have exact figures for required totals such as interest earned on your savings, put in reasonable estimates for now. You can tell HMRC in the additional information box on your return that the figure is an estimate and go back in as soon as possible with an accurate figure. Do make sure to use as accurate an estimate as possible. Just tick the button to show you have used estimates.

If in doubt, there is the HMRC helpline. It can be a queue of 1-2 mins or up to 2 hours.

You can book an appointment to talk to us at https://performanceaccountancy.youcanbook.me/

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.

0 12 Days of Tax Tips – Day 11

Mileage Claim for the Employed & Self Employed

Should you travel in your own car for your business or for your employers business, you would normally claim a mileage allowance (other systems are allowed for the self-employed). The HMRC approved allowance is 45p a mile (a change of rate of over 10,000 business miles traveled). Very simple for the self-employed.
BUT:

If you are employed and your employer only allows you to claim 35p a mile for driving your own car on business, what can you do? Well, if you complete a self-assessment tax return, this extra 10p a mile can be put down as an allowable cost of employment. Should you be a high volume business traveler, that 5000 business miles amounts to £500 you could have received as expenses which can give you a tax saving of up to £100.
However:

What is given with one hand is taken away with another. If your employer gives you more than 45p a mile (25p over 10,000), then you need to declare that as additional income.

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.

0 12 Days of Tax Tips – Day 10

Capital allowance for horseboxes

This one is straight from the horses mouth !

Following from Day 9 in talking about the annual investment allowance, HMRC have been looking into the capital allowance claims for horseboxes. They are using classified and small ads to look, not only for prices, but also specifications especially those with owners accommodation inside. They would then expect a reduction from cost price for the tax return as there could be an element of personal use.

For all capital equipment purchases (not just horse boxes), you need to reduce down time claim for capital allowance and annual investment allowance by the proportion of personal use. That iPad you brought when you are travelling to keep in contact with emails and presentations which is then given to keep little jimmy quiet in the evening, needs to have a dual benefit assigned. Sorry.

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.

0 12 Days of Tax Tips – Day 9

Did you buy anything big for your business?

If you are self-employed and your profit is less than the personal allowance (£9440 in 2013/14) and you have capital spend, don’t use your Annual Investment Allowance as this will be a waste given you will not be liable to pay any tax. (You may be liable for class 4 National Insurance, but that’s another story). Carry forward the value and write off in instalments in future years when you have tax to pay.

Most often this happens in your first full year of business when you are probably having to buy computer equipment & other tools of business.

You can only claim AIA in the period you bought the item.

The date you bought it is:

• when you signed the contract, if payment is due within less than 4 months
• when payment’s due, if it’s due more than 4 months later

If you buy something under a hire purchase contract you can claim for the payments you haven’t made yet when you start using the item. You can’t claim on the interest payments.

You cannot claim the Annual investment allowance for the following items:

• Cars (the exception here are dual control cars for driving instructors);
• Items you owned before you started to use them in the business;
• Items given to your business for example that shiny new iPad Santa gave you.
• If you are a sole trader and you use part of the item outside the business, hen you have to apportion down the amount claimed by the proportion of personal use.

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.

0 12 Days of Tax Tips – Day 8

Are there penalties for late filing of my tax return?

Is the sky blue?

Oh yes, there are penalties for getting your self-assessment tax return in late, and also for paying late. If you are sitting comfortably, I’ll begin.

If you receive a notice to file a tax return, you are legally obliged to complete it and return it (paper or on-line) even if you think it is not relevant to you or if you know you tax liability will be zero.

Late filing penalties

Should you wish to make a paper tax return, it must be done by the 31^st October. If the deadline is passed, the only option is to have it done by the 31^st January online. Should HMRC advise you to complete a tax return after the 31^st July, they do give an extra 3 months grace to have it done.

If you don’t get your online tax return done by the 31^st January , you will receive a penalty of £100 even if you don’t owe any tax. As it is all computerised, the computer knows if you press submit at 23:59 on the 31^st January or 00:01 on the 1^st February. You may not want to leave it that late especially if the internet goes down or one of the clocks are slightly out.

If you leave the return for 3 months, you will then start to get a £10 a day penalty which mounts up quickly. It does include weekends ! It does stop at £900.

If you don’t file your tax return for 6months, you’ll get a further £300 or 5% of the tax owed if greater.

Should you go the whole hog and not file for 12 months, then there is another £300 penalty plus 5% of the tax owing or greater. HMRC are able to give out a higher penalty of up to 100% of the tax due.

So – If you don’t have any tax to pay and you don’t file you self assessment tax return for 12 months, you could be looking at penalties of £1600.

Late payment charges

Late filing penalties is only the start of it. I f you pay late, you also get penalised.

• unpaid after 30 days, then there is a 5% charge of the tax due;
• unpaid after 6 months, then there is a further 5% charge of the tax due;
• unpaid after 12 months, then there is a another 5% charge of the tax due;

These fines happen even if you do not owe any tax.

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.

0 12 Days of Tax Tips – Day 7

Parking charges, etc

Take the time to go through your expenses, both personal (eg. pension contributions, charitable donations, etc.) and business.

Claiming for your allowable expenses is the surest way to reduce your tax bill. A £2 parking charge a day amounts to £500 (assuming 2 weeks off from your business ha ha) of potentially allowable deductions. If you don’t claim this, you are handing over to the taxman approx. of £145 in tax and class 4 NI that you don’t need to. That car parking fee has now cost you £2.58 per day.

These little things count !

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.

0 12 Days of Tax Tips – Day 6

Using your home for business

If you run your own business from home, you may be able to claim a home office allowance which could be a flat amount, or based on actual costs. Once the method has been selected, that is the one that should continue unless circumstances change. Contact us and we can give you the outline of both methods. 

Method 1 – use HMRC allowances

The allowances are based on the number of hours a month you work in your home on your business. This could be doing all your work from home like a maths tutor, or only the administration of your business like paperwork like a plumber.

Keep a record of the number of hours spent each month, and then work on the following table:

• Less than 25 hours per month £0
• 25 to 50 hours per month £10
• 51 to 100 hours per month £18
• 101+ hours per month £26

Records do need to be kept and available if requested.

Method 2 – Home apportionment costs

Work out the total spend running the home. This includes mortgage interest, council tax, house insurance, gas, electricity (not water), cleaner, and any repairs to the overall house e.g. the roof. If you live in rented accommodation, replace the mortgage interest with the rental amount. Things like telephone & broadband are not included in this calculation as these are based on actual use. Any repairs/redecoration to the business room would be taken in full as a business expense but then apportioned down for the amount of non-business use.

Count the number of rooms in the house (excluding the kitchen, Bathrooms, garage, hallway & landing), and the number of room that are used for the business.

Divide the yearly household cost by the number of rooms and multiply up by the number of rooms. The result needs to be reduced down by the amount of time it is used for business. Having a room 100% dedicated to your work will cause issues with capital gains tax when you come to sell it as it has not always been personal use. If you have several rooms that are used, calculate the amount per room as they will have difference usage percentages.

We have developed a quick tax calculator in excel that will work this out for you. All you do is fill in the yearly costs, number of rooms and percentage use, and it will give you the amount to put into your tax return.

Once you have worked out this amount, you need to keep evidence of how you came up with the figures, so copies of the household bills will need to be kept as part of your 6 year financial records.

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.

0 12 Days of Tax Tips – Day 5

Losses from prior years

If you are self employed, make sure to check your previous Self Assessment returns for losses that can be offset against any gains/ income this year. HMRC will not do this for you. In order to receive any tax relief owed you must carry the losses forward yourself.

Why would HMRC tell you if you have losses brought forward as that will mean you will pay less tax in the current year. If you make a loss in the current year you can push it back to prior years and possibly get a tax refund; you can off-set it against some income you have made this year for example employment income, or you can carry the loss forward to the next year and offset it against any profits from the same trade.

Should you make a loss on property rental and you chose to carry this forward, it can only be used against future property profits.

……

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.

0 12 Day of Tax Tips – Day 4

Furnished Holiday Lets

For those of you lucky enough to have furnished holidays lets in the UK or in the European Economic Union (plus Iceland, Norway and Liechtenstein, then you must ensure that it is available for rent:
– at least 210 days in a 12 month period;
– actually let for 105 days in a 12 month period;
– no occupation for more than 31 consecutive days, and these longer occupations cannot account for more than 155 days of the year.

The let must be on a commercial basis so you intend to make a profit from the let. Therefore lets to friends and families at zero or a notional rent will mean that the property is not a qualifying holiday let. A furnished holiday let means there has to be sufficient furniture in the property for normal/full occupancy. You can’t get away with just putting a bed in the master bedroom, and the property is rented out as a 3 bedroom let.

The furnished holiday let is treated like a property business, but you are able to claim capital allowances on the furniture and equipment that goes into the property. This is different from normally property lets, which is why there are two sections on the tax return. The income and accounts for furnished holiday lets and property rental must be kept separately.

Always talk to your accountant before acting on any advice. If you’d like to talk to us about your accounting requirements, please complete the contact form >>>> HERE <<<< and we’ll get in touch.