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Why hire a specialist accountant to complete your yearly tax return? Performance Accountancy

Why hire a specialist accountant to complete your yearly tax return?

The problem of managing taxes is crucial to your personal financial success from budgeting, accounting and the dreaded tax return whether it is a self-assessment tax return for the self-employed or annual accounts & tax return for limited companies. A personal tax accountant can make the whole process much more manageable with up-to-date knowledge of the changing tax world and how it may affect you, and if everything is submitted to the accountant online, escape late penalties etc.

A proactive approach to the tax return process can help avoid surprises as accountants like to get tax returns done early in the filing period (always check spam as that is where tax-related emails tend to end up), and you get to know your liabilities early enough to make arrangements in how to pay.

But there are plenty of other reasons to use an accountant.

1. Time-saving: Unless you are utilising apps regularly, you often spend hours or days trying to get your tax data up-to-date for the year, and many people sometimes leave it too late and are then tied up with a mahoosive amount of work. The use of an app and installation of good habits can be put into play if you connect to your accountant, as they can nudge you in the right direction. As a self-employed person, time is one of your most valuable resources. The complexities of the UK tax system can make tax return filing a time-consuming process, which takes you away from your core business tasks. It is also possible of course you hand all the day-to-day stuff to the accountant so saving you time.  Of course, that takes money so it is a time v money situation.

2. Expert in tax law: General tax law can be complicated enough, but all the changes that take place mean you have to be in the know if you go it alone. Professionally qualified accountants have to undertake professional development and update courses each year in order to keep their certification and to operate as a qualified accountant. This way, they can offer you the correct advice at the time to minimise your tax liability. But beware, if you have been doing your tax return incorrectly in the past and you get an accountant that knows the rules and corrects you going forward, it can cost you more than just their fee. Equally though, you may not have been claiming for things you could claim for, so they will then save you money.

3. Peace of mind: That’s nice (sorry – just channelling Mrs Brown). Knowing that a professional is handling your taxes can provide considerable peace of mind. You can rest assured knowing your tax affairs are in order if submitted to the accountant in plenty of time, you’re compliant with the latest laws and regulations, and you’re optimising your tax position.  An accountant can ensure you understand and meet your self-assessment obligations, which can be particularly useful if you’re new to being self-employed.

4. Filing on time with accuracy: A familiar theme here – if you get your data to the accountant when they request it, it will ensure that there is plenty of time to work through the data carefully and give time to file so you can save up for it. There is no point in handing your data over in December/January and expecting everything to be perfect and filled so you don’t get late penalties. If you complete a checklist provided by the accountant, then it is highly possible that everything will be available at the same time and not have to waste energy, time and money having to keep re-starting the work.

5. Awareness of VAT: Although you are responsible for accurate accounting records, you need to keep an eye on your fee income/turnover as to whether you should be registered for VAT (UK fee income/turnover over £85K in a rolling 12-month period). Handing everything over to an accountant near the end of the filing period may show that you should have been VAT registered months ago and that can unearth a whole host of pain. I you are running close to that level, it may be worthwhile engaging an accountant to keep an eye on everything and give you advance warning of the situation.

6. Possible financial advice: I don’t really want to put this one on the list as most accountants are not qualified to offer actual financial advice in terms of pensions, investments, mortgages etc, but they can make you aware of using things like pension contributions and the effect on your tax return, and general money management advice for self-employment and director owned companies.

7. Support with HMRC investigations: Heaven forbid this happens, but in the event of an investigation by HMRC, having an accountant can be invaluable as they can help you navigate the process and prepare the necessary documents required. If you are a member of one of the performance unions, your membership may pay for accountants fees for this and representation.

So that takes into account why you would hire an accountant, but surely all accountants are the same?

So why hire a specialist in the music, arts and entertainment industry?

It is simple in that a specialist accountant will know the ins and outs and the peculiarities that may exist eg subsistence, clothing, grooming etc. Two key areas that a specialist can help you with are capital allowances, especially on instruments and overseas tax deductions.

As a self-employed individual or a director of your own limited company, having an expert accountant in your corner can save you time, money, and stress, making it a smart business investment.

Insuring the future with a look at the present (no gifts from the chancellor in this one)

how to link personal tax a/c to self assessment

Spring has sprung (OK, it is snowing as I write this but forgive me), the daffs are out, the sap is rising, what a time to be alive!

And what better time than to check out the latest episode of our favorite soap, “Downing Street”, starring Dishy Rishi and his magic red box of delights.

In this week’s episode, he’s got that special spring in his step too and who can blame him…it is time to reveal the latest changes to National Insurance (NI)…

Cue drums or brass band intro, depending on your preference of north vs south soaps. Scene opens with Dishy (sorry, Rishi – must be professional, all very serious here) stood at his little table thingy in Downing Street.

Flashes go off from the adoring/baying press, delete as applicable.

One intrepid hack ventures from the media scrum.

“What news from the spring statement Dishy?”

“Yeah, what’s all this about a fall in income tax?”

Dishy, urging the pack to settle;

“Ah, be calm my friends. We will come to that in good time. Probably. Maybe. A bit. However, remember, that when I give with this hand, I snatcheth away with this.” Much shuffling of papers ensues before a gentle cough signals the REALLY EXCITING news is about to be announced…

Presenter (Louise) takes over, Dishy in background, droning on…

So where are we at the moment for the 2021/2022 year?

Your employer will deduct 12% NI if your gross earnings are over £9568 (then goes to 2% above £50270). They also pay national insurance on your earnings over £9568 at a rate of 13.8%.

A self-employed person gets to pay Class 2 National insurance at a rate of £3.05 per week, and also pay class 4 NI at 9% if profits are over £9568 (then it goes to 2% above £50270).

In the 2021 the chancellor introduced a Social Care Levy of 1.25% of gross earnings & profits, taken from the employee, employer and self employed person. However, for the 2022/2023 tax year, to make things “SIMPLE”, the 1.25 percentage points would be added onto the national insurance paid.
Errr what?

Basically, the employee would pay 13.25% NI (3.25% if over £50270), Employer pays 15.05% on gross salary and self-employed pay 10.25% class 4 NI on profits until £50270 then at 3.25%.

Psst (stage instruction from wings).

If you earn money from dividends, you normally pay 7.5% on dividends over £2000 in a tax year, but for 2022/2023, that rate is now 8.75%. The rate for higher and additional tax payers also have an additional 1.25 percentage points.

Righto so what’s changed?

The social levy is still being introduced, so the rates of NI will still apply, but the thresholds are changing from 6 th July 2022.

Effect on the employee:

For salary in April-June 2022, anything above £823, will have NI deducted of 13.25%. For salary from July onwards, the monthly threshold changes to £1048 before any NI is deducted.

Effect on the Self-employed:

Although the threshold to pay class 4 NI increases to £12570 in the year, it only comes in from July 2022. That means when the self-assessment tax return is done from April 2023, the class 4 threshold will be £11908 before you pay any NI.

This is because you have 3 months at the lower threshold, then 9 months at the higher threshold. The system assumes an even split of earnings throughout the year and will not do a 3/9 month split of profits if income is seasonal. From 2023/2024, the full threshold will apply.

But more on 2023/2024 another time – oooooh I bet you can’t wait!

The effect of class 2 NI is the “interesting” bit. If you are into this lark. Profits between £6725 up to £11908 will not attract any class 2 amount to be paid, but full credit will be given for NI credit in relation to benefits and state pension. Taxable income above the amount will be charged at £3.15 a week so totalling £163.80 for the year.

The self employed with profits below £6725 can opt to pay the class 2 NI amount of £3.15 per week for the year to keep the benefits or not. It seems crazy that you have to pay £3.15pw if your profits are below £6725, but if you increase profits to just above the £6725, you will have nothing to pay as you get deemed NI. Let your accountant work this one out as to whether it is beneficial for your profits to go above the £6725 limit or not as it may inpact if you have to pay income tax should you have other income.

Directors of your own limited company

Well you are a special breed. you can pay yourselves £758.33 a month and not pay any employees or employers NI. Woo Hoo. This is the maximum of £9100 a year before employers NI kicks in, so if you think you can increae it to £1047.50 from July – think again. You won’t be paying employees NI as below the threshold, but that sneaky employers NI of 15.05% kicks in at £9100, so if you are set up as a director on the payroll, you will be paying NI for the last few months of the year.

If you need any further information, please contact us

August Accounting Content Kicking Off

treble clefWell, I made a promise myself that I would spend August working on my business and building lots of accounting content and useful tools for clients to use, as well as getting round to writing an e-book or maybe even a real book by the end of the year. The trouble is, that was due to be August 2013 when I first planned it in May 2013.

August 2014 has arrived and I am actually doing it. Useful accounting content will slowly come out on my website and social media pages that can be used by all small businesses, and there will be content for my specialisms area of performers. The first of these initiatives was launched in June, and it is a paper dedicated to the expenses that performers can claim against their tax. All those singers, actors, musicians, dancers, entertainers sitting in the green rooms worried about their tax. ouch.

This paper will develop over time as people ask questions about its content, or questions that I had not considered putting an answer to. Debbie Christie – thank you for the couple of topics which will land in the next version. If you have no clue what I am talking about, then pop over to the performers page by clicking >>> HERE <<< , sign up, and check your spam for the confirmation email, and then the link to the pdf document will be sent to you.

August is always a quiet month for accountants as who wants to ruin their summer by thinking of tax returns and documentation. Should you want to talk to an accountant, then give us a bell on 01344 669084 or if you are shy, drop us a message by clicking >>> HERE <<<. We don’t bite – only when I am peckish or bored.

See you next time.