Category: Accountancy & Bookkeeping

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Accountancy & Bookkeeping

Your Guide to Stress-Free Tax Returns: Making Tax Less Taxing

Welcome to our cosy corner of the financial world, where we believe managing your taxes shouldn’t be a source of stress. Whether you’re navigating your tax return for the first time or you’re a seasoned pro looking to refine your approach, we’ve got some tips to make this process as smooth as butter on warm toast. So, let’s dive in and demystify the tax return process together.

Embrace the Power of Preparation

The early bird not only gets the worm but also enjoys a much less frantic tax season. Getting a head start on gathering your financial documents can transform your tax return experience from a nail-biter to a breezy stroll. Keep a dedicated folder for all your tax-related documents, such as P60s, invoices, and receipts for deductible expenses. This way, you’re not turning your house upside down come deadline day looking for that elusive piece of paper.

Know Your Deadlines (And Stick to Them!)

The UK tax year runs from 6th April to 5th April the following year, with the deadline for online tax returns being 31st January. Missing this deadline can lead to unnecessary fines, starting at £100 for being just a day late! Circle it, highlight it, set a dozen reminders – whatever it takes to make this date as unforgettable as your own birthday.

Utilise Your Allowances and Reliefs

Did you know the UK tax system is peppered with various allowances and reliefs designed to reduce your tax bill? From the Personal Allowance (the amount you can earn before paying tax) to savings allowances and even tax relief on charitable donations, there are numerous ways to lighten your tax load legally. It’s worth taking the time to understand what’s available to you.

Consider the Magic of Digital Tools

Gone are the days of tackling your tax return with just a pen, paper, and a calculator. The digital age has brought us a treasure trove of online tools and software designed to make tax returns easier. Platforms like HMRC’s own online services can guide you through each step of your tax return, ensuring you don’t miss a beat. Plus, digital records are not only environmentally friendly but also much easier to keep organised.

When in Doubt, Seek Professional Help

Sometimes, despite our best efforts, tax can still feel like a maze. This is where a good accountant comes into play. Whether you’re self-employed, own a small business, or just want to ensure you’re making the most of your tax situation, professional advice can be invaluable. Think of an accountant as your tax guide, leading you through the complexities with ease.

Remember, It’s Not Just About the Numbers

Lastly, while tax returns are fundamentally about finances, they’re also an opportunity to reflect on your financial health and plan for the future. Taking stock of your income, expenses, and savings can provide crucial insights into your financial habits and goals. So, while you’re crunching those numbers, take a moment to consider the bigger picture and how you can make your money work best for you.

There you have it – our guide to tackling your tax returns with confidence and, dare we say, a bit of joy. Remember, tax doesn’t have to be taxing, and with a bit of preparation and the right mindset, you’ll have it sorted in no time. Here’s to a smoother tax season ahead!

 

Please note, that all figures are correct at the time of writing

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Accountancy & Bookkeeping

Navigating the New Tax Year: Essential Tips and Insights

As the new tax year rolls around, it’s an opportune moment for individuals and businesses across the UK to assess their financial strategies and ensure they are optimising their tax situation. With the landscape of tax legislation constantly evolving, staying informed and proactive can significantly impact your financial health. Here are some vital tips and insights to consider as you navigate the tax year.

  1. Maximise Your ISA Allowance

Individual Savings Accounts (ISAs) remain a cornerstone of tax-efficient saving. With the annual allowance currently standing at £20,000, ensuring you maximise this opportunity can yield significant long-term benefits. Remember, the allowance resets with each new tax year, so it’s use-it-or-lose-it!

  1. Pension Contributions: A Double Win

Pension contributions not only secure your future but also offer immediate tax relief benefits. Contributions up to £60,000 annually (or 100% of your earnings, whichever is lower) can be made tax-free. For higher-rate taxpayers, this is particularly advantageous, as it effectively reduces the cost of contributions.

  1. Capitalise on Marriage Allowance

For married couples or those in civil partnerships, the Marriage Allowance allows you to transfer £1,260 of your Personal Allowance to your partner in 2023/24, reducing their tax bill by up to £252 a year. This is often overlooked but is a simple way to save money for eligible couples.

  1. Stay on Top of Record Keeping

For self-employed individuals and small business owners, meticulous record-keeping is crucial. Not only does this make it easier to file accurate tax returns, but it also ensures you can claim all allowable expenses, reducing your taxable income. Leveraging digital tools can simplify this process significantly.

  1. Understand Changes to Dividend Taxation

With recent changes affecting the taxation of dividends, it’s important for business owners and investors to review their investment structures. The tax-free dividend allowance remains at £1,000 for the 2023/24 tax year, with rates increasing for amounts above this threshold. Planning and advice in this area can lead to substantial savings.

6. Seek Professional Advice

Finally, while it’s beneficial to have a solid understanding of tax basics, the complexity of tax legislation often means that professional advice can result in significant savings. Whether it’s exploring specific tax relief options, planning for the future, or ensuring compliance, the value of expert guidance cannot be overstated.

 

The tax year can bring both challenges and opportunities. By staying informed and proactive, you can navigate the fiscal landscape effectively, ensuring you’re not only compliant but also maximising your financial potential. Remember, it’s not just about paying taxes; it’s about paying the right amount of tax.

 

Please note, that all figures are correct at the time of writing

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Accountancy & Bookkeeping

Health & Social care levy

The health and social care levy comes in to practice in April 2022 which will affect employees and employers. The levy will raise extra funding for the NHS and social care and the contributions will be an additional 1.25%.

With the health and social care levy it will be important to be aware of the following:

  • For the first year from April 2022 the 1.25% increase for Class 1, Class 1A, Class 1B, and Class 4 (self-employed) will be included in your national insurance contribution.
  • In 2023 the 1.25% levy will be replaced with a standalone contribution and the national insurance contribution rates will drop to the usual levels.
  • Employers and employees will be subject to the levy.
  • The additional cost to employment will be 2.5%.
  • Individuals who only pay Class 2 and Class 3 National Insurance contributions are unaffected.
  • Individuals above the state pension age will not be affected by the temporary National Insurance increase but will be liable to pay the levy from 2023.

The new health and social care levy will be subject to the same reliefs, thresholds, and requirements of the qualifying National Insurance contributions (Class 1, Class 1A, Class 1B, or Class 4) In respect of which the levy is payable.

If you’d like to learn more please contact me on info@saleeaccountancy.com or at https://saleeaccountancy.com

 

 

Sarah Lee

MAAT CIMADipMA

 

Please note, that all figures are correct at the time of writing

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Accountancy & Bookkeeping

Self-employed Vs Limited company

When setting up your own business people are often unsure whether to register as Self-employed or as a Limited company. There is no right or wrong choice, but there may be better opinions for you based on the company you plan to set up.

Self-Employed

Being self-employed means that you have unlimited personal liability, you will be the single owner of a business (unless there is a partnership agreement). Owners would register themselves as self-employed through the government gateway and register for Class 2 National insurance. Self-assessments must be filed by the 31st January, these can be filed before this date but any tax and National Insurance due must be paid by the 31st January. This includes the 1st half of the on-account money due, with the remainder being due on the 31st July. Late submission of self-assessments and payments will result in fines and interest charges.

Tax Allowances are currently £12500, this means you can earn up to this amount without being taxed. National Insurance Class 4 allowance is £9569, this means you can earn up to this amount without paying any Class 4 National Insurance. The allowance for Class 2 National Insurance is £6515. Class 2 National insurance is taxed at £3.05 per week.

Advantages of being self employed

> You get 100% of your profits.

> It is easy to get started with your business.

> You make the decisions.

> Less admin involved.

> You can offer a personal touch to customers.

Disadvantages of being self employed

> You have unlimited liability

> You’re fully responsible for your business.

> You can only raise limited finance.

>There is a limited scope of expansion.

> You take on all liability.

Limited company

A limited company divides ownership between 1 or more people. Directors have a limited liability on their business, debt & losses. Most directors would be paid by PAYE, if a director takes drawings from the company, then a self-assessment must be completed.

Being a shareholder could mean you are entitled to a dividend if the company is making a profit after the tax liability has been met.

£0-£2000 dividends are tax free.

Dividends over £2000 will be taxed depending on your tax bracket.

Basis rate threshold 7.5%

Higher rate threshold 32.5%

Additional rate threshold 38.1%

Limited company profits are subject to corporation tax at 19%.

Advantages of a limited company.

> You can be more tax efficient.

> It is easier to leave the business.

> Losses & Debt are not personal.

> You are better perceived.

> You won’t be personally sued.

Disadvantages of a limited company.

> You must prepare annual accounts.

> There is more financial admin.

> You have less privacy.

> Taxation rules are more rigid.

> You have less input.

However you decide to run your business is up to you as the owner, but please be aware that whether you are self-employed or a limited company you must register for value added tax (VAT) if you are approaching £85,000 on turnover (Not Profit).

 

Please note, that all figures are correct at the time of writing

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Accountancy & Bookkeeping

Making Tax Digital (MTD)

Making tax digital may seem daunting but it isn’t. Gone are the days where you could scribble your income and expenses on a piece of paper and submit your tax return. Luckily technology has evolved and has made it easy for us to log our accounts and even attach our receipts.

MTD applies to the self-employed and landlords. It is used to submit your records digitally rather than a manual process like it used to be. There is a lot of compatible software out there that supports the MTD function. QuickBooks being one of them which is very competitive in price (the equivalent to a couple of pints in the pub a month).

As of April 2024, all self-assessment tax returns must be submitted digitally which means there is plenty of time to get into the habit of doing it. Once the MTD is fully implemented you will be required to send over your business information quarterly, this will include all your income and expenditure.

At the end of the accounting period the accounts will be finalised and any adjustments that are required will be actioned and the final declaration will be sent over digitally. Your tax bill will be paid as normal on the 31st January and the on-account payment on the 31st July.

Clients will have the option of paying their tax on a quarterly basis, this may be beneficial as tax payments can be made more often which can help people budget and pay the tax in instalments rather than a lump sum.

In the long run MTD will be easier to use and will show a much more accurate picture of your profit or loss.

Please be aware that little accountancy knowledge can be dangerous. In my experience clients have categorised their costs wrong which has produced an incorrect tax liability. Please ensure that you appoint an accountant to finalise your self-assessment.

 

 

Please note, that all figures are correct at the time of writing