Tax Issues Archives - Page 13 of 20

News,May 2018

Calculating Your Dividend Tax Bill

George02/11/2022tax , Tax Issues , Taxation

Calculating Tax on Dividends might be confusing and you can commit an error in the calculation of tax on dividend income. Income taxes are relatively easier to calculate. On the other hand, dividend income brings a lot of confusion when it comes to paying taxes on them. Dividend income is an additional source of income. So, it is possible you have invested in a company and purchased shares or stocks. As a result, you will get regular income in the form of dividends when a company earns a profit. HMRC taxes these dividends as they are also a source of income for the investors. In this blog, we will help you how to calculate tax on dividends. We will use an example to elaborate on the tax calculation of dividend income. So, let’s start! Dividend income and taxation on it might be confusing for you. Let’s seek help from the best accountants and tax advisors at CruseBurke. Contact us now! What are Dividends? Dividends are the profits shared among the shareholders of a company. A publicly-traded company typically needs capital to run its operations. For this, they can either get capital from the investors or from the debt. Mostly, companies rely on investors who invest in these companies in return for getting a share in the profits. These shares in profits are known as dividends. Whenever a company earns profit, the companies either plough back those profits or give the shareholders dividends. The larger corporations usually don’t pay dividends, resulting in the high value of the stock. The investors enjoy these dividends as it steady stream of income for the shareholders. However, HMRC levies taxes on this additional income source. The tax on dividends is lower than the general income level. There’s also a dividend allowance of £500, just like an income allowance of £12,570. What is Dividend Allowance? A dividend allowance is a tax-free dividend income. In other words, an investor can enjoy the first £500 in dividends because it gives them an opportunity to get lower dividends tax-free. In addition to a personal income allowance of £12,570, an investor can also get the £500 dividend income tax-free. According to the 2024/25 tax year, all people who have earned income from dividends up to £500 are exempt from taxes. If dividend income exceeds this allowance, they will have to pay tax according to their income tax threshold. Similarly, the shareholders cannot pay taxes on their Individual Savings Accounts (ISA). UK Dividend Tax Thresholds 2024/25 Each of the income thresholds has a different rate of tax on dividends. The three thresholds calculate the tax on dividends after personal allowance and dividend allowance have been taken into consideration. The following are the UK dividend tax thresholds for 2022/2023: Basic Rate taxpayers will pay a dividend tax of 8.75% Higher Rate taxpayers will pay a dividend tax of 33.75% Additional Rate taxpayer will pay a dividend tax of 39.35% Example: Suppose, you’re earning an income of £32,000 and getting a dividend of £3,000 annually. When you will prepare your tax returns, you will have to provide your total income first. Your Total Income = £32,000 + £3,000 = £ 35000 After you have calculated your total income, you will deduct the personal income allowance. The personal allowance is £12,570. Income after Personal Income Allowance = £ 35000 – £12,570 = £ 22,430 This is the taxable income you will pay tax on. Deduct the dividend income from this taxable income and calculate dividend tax and dividend allowance separately now. Now, you need to deduct the dividend allowance Taxable income after dividends = £ 22,430 – £3,000 = £ 19, 430 This is the basic rate of income. So, you will calculate a tax of 20%, which is £3,886 Calculate dividend tax and dividend allowance separately now. This income will help you determine the UK Dividend Tax threshold. Taxable dividend after Dividend Allowance = £3,000 – £500 = £2500 So, £1,000 is the taxable dividend. Because your total income was falling in the basic rate taxpayer threshold, so you will calculate a dividend tax of 8.75% on £2500. This dividend tax is equal to £218.75 Your total income tax including dividend tax will be Total tax = £3,886 + £218.75 = £ 4,104.75 The Final Thoughts Finally, we conclude the discussion that dividend tax calculation is tricky due to the various steps involved in this process. You can also use online dividend tax calculators to avoid the hassle of calculating taxes. It will prevent any errors in the payment of the right amount of taxes. For this, you need to remember to deduct personal income allowance from your total income. Dividend allowance will be subtracted only from the dividend income. Your taxable income will help determine the right dividend tax. CruseBurke is the right place to sort out your tax problems instantly and professionally. For more information, feel free to give us a call or send us a message. Disclaimer: All the information provided in this article on, Calculate tax on dividends, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.

Business Interruption Insurance – Are Pay-Outs Taxable?

George01/11/2022tax , Tax Issues , VAT

Do you get the thoughts of the sudden reason that can cause a business closure? Here comes the help of business interruption insurance that can cover the profit and loss of the business immediately. This has to do a lot with the type of cover you might want to opt for. Several people enquire if is there VAT on business insurance. You need to get the idea of whether or not business interruption insurance was included. The process turns out to be quite a straightforward experience just like it sounds. Further in the discussion of this article, we will focus on what is business interruption insurance, how it works for your business, and what are different types of business interruption insurance. Reach out to one of our professionals to get to know if is there VAT on business insurance for your business. We will love to offer instant help! What is Business Interruption Insurance? The different types of insurance are specially designed to protect your business and you as well. This protection is provided when your business and you are going through an event or a disaster that is not in your control. Moreover, the business practices and other relevant activities are unable to operate like the regular norms of the business. How Does Business Interruption Insurance Work? The main role of this type of insurance is to protect the cash flow and profits of your business. This will ensure to help your business to be unaffected after the incident happens, be it a natural calamity or any other such event. Sometimes the coverage is so good that it will turn out to be as if the incident never affected the growth of your business. However, sometimes a set period of time is required in this process. This period is known as the name of the maximum indemnity period. This period is considered to be the period that will be taken into account for the recovery of your business operations after any natural calamity or any other event has occurred. Generally, 36, 24, or 12 months are considered for this process. Is There VAT on Business Insurance? Most of the policies will only focus to cover the valid damage claim caused by such events. Storms, fires, or floods are certain examples to make such claims. The specific policy wording is required to be referred to identify what is the available cover for you. Are you now wondering whether is there VAT on business insurance? Generally, there is no VAT on the amount you get from any kind of insurance policy. Business Interruption Insurance – What are the Different Types? Business insurance generally has three types. They are listed and explained below: 1- Increased Cost of Working This type of insurance is only related to businesses that have the space to minimise the cost related to working. Also if not too much cash is required to move ahead according to the plan. 2- Loss of Gross Revenue This is to claim for the loss of gross revenue. The service industry generally uses this kind of claim. Hotels are such examples that find this type of insurance the most appropriate. 3- Loss of Gross Profit This type is used commonly in the UK. If there is a reduction in turnover, this kind of insurance is used to cover the loss of profits. The increased cost of working and standing charges are also covered by this type. Business Interruption Insurance – Are Payouts Taxable? When it comes to the discussion of tax implications in the case of business insurance or you might wonder whether the payouts are taxable or not, the general stance of HMRC explains that if the premium is considered to be tax deductible then the insurance receipt will be taxable too. The Bottom Line Now that you have gathered a fair amount of information about ‘is there VAT on business insurance’, we can bring the discussion towards wrapping up. Business interruption insurance is a professional way to cover the loss of your business profits in the unfavourable circumstances of natural calamity or any other such events that are out of the control of business owners. We hope these few minutes of reading will help you to handle your business insurance choices in the future. Get in touch with our young, clever and tech-driven professionals if you want to choose the best guide on capital gains indexation allowance for your business. Disclaimer: The information about ‘is there VAT on business insurance’ provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

Everything You Need to Know About Living Abroad and UK Tax

Chris19/10/2022tax , Tax Issues , Tax Saving Tips

If you are a businessman who is carrying out a business in the UK, however, you are not living in the UK but you are someone who is settled abroad. There are chances for individuals who are not residing anywhere in the UK but they have their properties here and they are earning through making them as rental properties. You will have to deal with the different scenarios of tax implication by HMRC and you are dishing pit everything that makes you obliged to have an understanding of what to do when ‘pay UK tax when I live abroad. Reach out to our smart and clever-minded guys to get your pay UK tax when I live abroad queries answered quickly. We will help to let you decide about your annual accounts with a clear mind. How to Pay UK Tax When I Live Abroad? It all depends on the unique circumstances of your earning sources. In the case you are an individual who is earning through multiple sources in the UK, you will be in a position to be obliged for the tax implications in the UK. This payment could possibly be from savings, pensions, rental property, or a business. When you have settled abroad and might have a source of income in the UK by having a rental property, you are in a position to get the allowance amount of £12,570 in every tax year. In the same way, as you are entitled to get the benefits, you will be entitled to duties and responsibilities. This means you will have to pay income tax. Am I Obliged to Pay Tax in the Country I am Settled? As discussed earlier that the tax responsibilities and tax implications are a serious matter to HMRC and when it comes to tax affairs, there is a very slim margin provided by HMRC. This makes the scenario a little complicated because you will be in a position where you will have to deal with the tax implications of the UK and the other country where you are settled in. Moreover, the only exception will be there unless the country you are living in has a double tax agreement with the government of the UK. This is also known as DTA. A double tax agreement turns out to be a very beneficial agreement for saving individuals who have settled abroad but earn in the UK as well. This way, you will keep yourself away from the edible tax payments. In other words, we can say that you will no longer be required to pay the tax in both countries, and the tax authorities will spare you in case of DTA. It will make you apply for any one of the following: You will be able to get a tax refund if you have paid the double tax. You will enjoy partial tax relief. You can enjoy full tax relief. The Prominent Differences Between a Non-UK Resident and a UK Resident It is imperative to develop an understanding of the differences between the residents of the UK and the non-residents of the UK who are settled abroad. You will have to consider the following conditions to be called a UK resident: You are required to complete the duration of 183 days to stay in the UK within a tax year to be considered a UK resident. You will have to work for a minimum of 274 days within a tax year in the UK, and this should be your main job. You should have a property in the UK, and you must spend 91 consecutive days in that property you own in the UK. Moreover, when it comes to the tax terms for the residents and the non-residents of the UK. If you are a non-UK resident, you will have to pay tax on the income earned in the UK. However, if you are not residing in the UK but are considered a resident, you are liable to all tax implications in the UK and the other country. The Bottom Line Now that you have gathered a fair amount of information about paying UK tax when living abroad, we can say that it matters a lot to know whether you are considered a UK resident or a non-UK resident to relate to your tax responsibilities. This can vary from one scenario to another because every person is in a unique situation. We hope these few minutes of reading will help you to develop a better understanding and you will now be able to handle your tax affairs efficiently in the future. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly. Call us or email us today. Disclaimer: The general information provided in this blog about pay UK tax when I live abroad includes its text and graphics. It does not intend to disregard any of the professional advice.

What is a Provision for Income Tax and How Do You Calculate It?

George17/10/2022tax , Tax Issues , Tax Saving Tips

People often take corporate tax provisions as they work as a safeguard for your business and keep you protected from the tax fines and penalties charged by HMRC in the case you have made a late tax payment. It is also referred to as the tax burden that you might face in the current year; generally, this is set aside until the payments are made. This is known to be a unique kind of provision as well. This depends on the industry that your business is associated with that will decide what is the possibility of creating provisions related to bad debts, sale allowances, pensions, and depreciation. However, people still get confused and this article has got you covered to develop a better understanding of what is corporate tax provisions, what is the importance of tax provisions, and what is the way to calculate them. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get ensured instant help whether you are running a small business or large. What is Corporate Tax Provision? The corporate tax provisions refer to the amount of money that your business is liable to pay in the current tax year. It is an expected amount of the tax burden of your business. On the main role the provision depicts the main tax burdens of your business, however, on the other hand, it provides protection to your business from the charging of late payment fines and other relevant tax penalties. We all wish to have precise and complete details of our tax implications. The tax provisions are able to provide the most precise estimate possible for your business. Here are the current corporation tax rates and bands: £0–£50k profit: 19% small profits rate £50k–£250k profit: sliding scale via marginal relief Profits over £250k: 25% main rate In spite of the estimated provisions, the businesses tend to keep some buffer amount set aside. This kind of amount of money that is taken out from the business is referred to as income tax provisions. This will further help in the process of calculating the gross income of the company and what are the tax rates applicable to your unique situation. After the process is completed, the final figure is usually rounded off. The calculation steps might involve the following: Calculate the net income of your current tax year. You need to consider the tax rates that are relevantly applicable to you. Next, you will have to multiply both figures. Finally, you can add a small buffer. Moreover, this might sound simple to you; however, the calculations become a bit complicated practically. What is the Method to Calculate Corporate Tax Provisions? When you aim to identify the accurate amount you are liable to pay as your income tax, the process can be time-consuming. You will have to consider the involvement of the relevant professionals while you spare the time to grow your business valuations and work for the betterment of your business’s financial position. It is always a better idea to have an understanding of the corporate tax provisions when you plan to carry out your business. It is advisable to have a breakdown of the tax provisions and get an analysis of how other companies are handling the income tax and financial statements. Main Aspects of Tax Provisions The calculation of tax provisions is indeed a complicated process. This is because there is a difference between the procedures of Generally Accepted Accounting Principles and the rules of income tax accounting. However, most of the departments related to accounting follow the rules of Generally Accepted Accounting Principles. There are chances of a slight difference between the figures of the owned income tax amount and the estimated amount. Before delving further into the discussion, let us have a look at the two main aspects of the tax provisions as they are listed and explained below. 1- Current Year Income Tax Expenses By the term current year income tax expenses we mean the overall amount a business owes to HMRC. It involves the calculations of the current earning figure and the differences between calculations, whether they are permanent or temporary. The differences do not tend to reverse normally, so there should be a serious consideration while you are in the middle of the calculation procedure. Especially when your business is registered for the purpose of income tax. This might allow the factors of discrepancy in the results that you will regret later, so it s better to be accountable for them now. 2- Deferred Year Income Tax Expenses The deferred income tax expense refers to the cost that is considered a liability on the business balance sheet; however, it is not yet paid. It is also known as the opposite of the assets that belong to deferred tax. You can easily get it by calculating the difference between the rules of income tax and your company’s accounting rules. The Bottom Line Now that you have gathered a fair amount of information about corporate tax provisions, we can say that the provision of corporate income tax is a complicated procedure to make accurate calculations, even though the process and method might seem easy and simple to you. Sometimes it even requires the involvement of professionals to get accurate results. However, there is always a little difference between the estimated figure and the final calculated figure, which is usually because it is rounded off as discussed earlier. We hope these few minutes of reading will help you to develop a better understanding of tax provisions and how they work for your business. This will further allow you to handle your tax affairs efficiently in the future. Are you seeking professional help to know corporate tax provisions for a small business? Why not get help from the experts at the CruseBurke? Talk to us now! Disclaimer: All the information provided in this article on corporate tax provisions, including all the texts and graphics, in general. It does not intend …

A Guide About Tax-Free Rent-a-Room Scheme

George12/10/2022Tax Issues , Tax Saving Tips

People are always interested towards the idea that are useful for making a few extra pounds. Are you also the one who is seeking such profitable ideas these days? You are on the right page if so. One of the brilliant ideas for improving your bank balance is the rental income that you can make just from the comfort of your home. If you take a house visit and focus on that spare room that can help you increase your earnings. The rent-a-room scheme is for your suitability and you can sign up without any difficulty. This will allow you to enjoy an immediate increase in your income. Also, there is an opportunity for you to have an amount of income that is totally tax-free. The limit of tax-free amount is £7,500 in one tax year. If you are still wandering and need your queries answered for the rent-a-room scheme, we have got you covered here. Further, the discussion of this article involves the points like what is a tax-free rent-a-room scheme, what is the eligibility criteria, and what are the advantages of this scheme. Reach out to one of our professionals to get to know the rent-a-room allowance for your business. We will love to offer instant help! What are the Eligibility Criteria for the Rent-a-Room Scheme? This scheme is open to the tenants who have the option of the main home available for lodgers and furnished accommodation letting. Also, the owners and occupiers of the property can avail of this opportunity if they have any spare room for this purpose in their main home. Even the portion of the main house can be a perfect fit for this purpose. This venture allows the owners to enjoy an amount of £7,500 that is tax-free within the duration of a tax year. If the property is owned by the partners or in the case of jointly owned properties, the amount becomes £3,750 for each partner in the scheme. Several people confuse this with the condition to be the homeowner. That is not the case at all. Even if you are the tenant yourself and you have a spare room in the main house, you can avail yourself of the opportunity to enjoy the tax-free amount. You can simply rent the room to a lodger, however, you are bound to seek the permission of the owner. What are the Prominent Advantages of the Rent-a-Room Scheme? There is no doubt that this scheme brings in a lot of benefits it is a great source to provide accommodation for the lodgers as well as to supplement your income. However, when it comes to the benefits there are certain effects that are mean-tested. In the following, these are listed and explained. 1- Rent-a-Room Scheme and Housing Benefits This scheme affects if you are working as a social housing tenant. A lot of it also depends on the tenant who is getting the room and how is he classified. Subtenants and the broader are two classes in this regard. Sometimes the tenants avail the option of getting prepared food along with the room, such tenants come under the category of broader. On the other hand, when the tenant is only interested in availing of the room and not the prepared food, the tenant will come under the category of a subtenant. You need to get the categories classified vigilantly as it will affect the income. 2- Council Tax Reduction Some people are making a living on their own. Now they decide to use that spare room for the tenants. If such an individual is availing the benefit of a 25% single-person Council Tax Reduction because he qualifies for it, he is not allowed to have a tenant otherwise he will stop getting the discount since he no longer qualifies for this with a tenant. 3- Rent-a-Room Scheme and Universal Credit People who are on universal credit earned money through the sources of lodgers and sub-tenants will not be a part of the income up. This means no tax-free allowance amount will be up for you. This will make it a possible option for you to supplement your income. How to Opt-In or Out of the Rent-a-Room Scheme? In case the amount of money that you are earning through the source of renting a room and this earned amount is less than the threshold, tax exemptions will be automatic for you. You will not be required to do anything in this regard. On the other hand, if you are making more money than the limit threshold, you will be liable to file tax returns. Consider doing any one step from the following mentioned points: Decide to opt into the scheme. You will have to inform HMRC about this and make a claim while you are submitting your tax returns. This will let you enjoy your tax-free allowance. If you decide not to opt into the scheme, you will have to maintain a record of your expenses and income on the property pages while doing the tax returns. The Bottom Line Now that you have gathered a fair amount of information about the rent-a-room scheme, we can say that this scheme is a wonderful way to earn extra money and increase your monthly income, however, there are certain points to consider to check if you are qualified according to the eligibility criteria. To enjoy the availability of the scheme will demand to fulfil all the required standards whether you are the owner of the property or living as a tenant. We hope these few minutes of reading will help you to develop a better understanding and handle your tax-free allowances well in the near future. Get in touch with our young, clever and tech-driven professionals if you want to choose the best rent-a-room scheme for your business. Disclaimer: The information about the rent-a-room scheme provided in this blog includes text and graphics of general nature. It …

splitting rental income for tax purposes

How is Rental Income Taxed on Jointly Owned Property?

George11/10/2022tax , Tax Issues

In the case of properties where there is the involvement of multiple owners is observed, there will come certain expectations from HMRC. This will make each partner liable for paying tax on the amount of income they share, file for the self-assessment tax returns separately, and maintain the records. People find splitting rental income for tax purposes to be tax efficient and reduce the amount on their tax bills in such cases as well. Like every other income source, this joint venture also brings in some tax implications that each partner will have to consider seriously. Moreover, there has to be routine preparation for making a declaration of the joint property so that the tax bills are sent to you accordingly. Many people wonder at this stage who is responsible for splitting the income. Because the preparation of the income is different for each one of them. HMRC normally consider the partners to pay tax on half of the income so it is an automatic split of income between the joint owners. The income is split because of the tax purpose. There are several questions asked regarding this split. We have got you covered here in this article and you will find the answers in the discussion on the split of income for being tax efficient, how much amount of tax each partner will pay, how to choose the different split, and what will happen if there is a chance of selling the property. Reach out to one of our professionals to know more about splitting rental income for tax purposes. We will love to offer instant help! Splitting Rental Income for Tax Purposes – How Much Each Partner Will Pay? If you are not a married couple, the process of share is very simple for your case. You will simply have a share in the rental profit and it will be dependent on the share percentage you own for a particular property. Here we will take an example of a live-in couple who are together for quite some time and have invested in a property together. The property is flat for example. 70 per cent of the money is invited by the female partner and the remaining 30 per cent is the share of the male partner. They decide to put the property on letting to earn from the rental income. Now the share of income will depend on the investment. The female partner will get 70 per cent because of her investment percentage, whereas the male partner will get 30 per cent. Again because of the percentage of his investment share. Furthermore, the case becomes a little different when you are in a civil partnership or a married couple. You will be liable to invest with a ratio of 50:50 and the same will be the matter of rental income share. It does not matter to HMRC whose account details are being used for the transfer of the rental income unless the 50 per cent share is received by each partner. Different Splits – How to Choose It? The stage of choosing a different split and how to do it will totally depend on your situation. Because the scenario will be unique and always varies from one person to another. However, the following are a few imperative factors that you should consider: If you aim to save more on tax by being tax efficient, you have a chance by using your personal allowance. This is possible only when one of the partners is staying at home. If each partner falls into a different tax band, there are chances to get the rental income taxed with the reduced rates. This will allow you to get reduced tax bills as well. Moreover, in the case you are not a married couple, you can take the help of a lawyer who can draft a Severance of Joint Ownership for you. You will have to file this Severance of Joint Ownership by getting in touch with the land registry. There is no other requirement to file with HMRC. There will be a new percentage in your next self-assessment tax returns that you will have to use further. In the case of civil partnership Declaration of Trust will be drafted by your lawyer. You will fill it out with HMRC after the completion of form 17. What Will Happen If We Sell Out the Property? Several people enquire about a situation when a couple who are in a civil partnership or a married couple aim to sell the property. This is imperative to understand here that the legal title of the property is not transferred when you as a married couple plan to file a declaration of form 17 and trust. This is because the selling situation of the property will require you to reverse the process. The following steps have an explanation of how is that possible for you: You should assign back the beneficial interest that is 50 per cent for each partner. You will be required to file form 17. This will allow each partner to use his tax-free capital gains tax allowances. The Bottom Line Now that you have gathered a fair amount of information about splitting rental income for tax purposes, we can bring the discussion towards wrapping up. We can say that the tax implications on the jointly owned property are a tricky process in comparison to other situations as you will have to consider multiple factors like the investments share of each partner and how much each partner will pay in form of tax. We hope these few minutes of reading will help you to develop a better understanding of tax implications related to jointly owned properties. This will allow you to make better choices. Get in touch with our young, clever and tech-driven professionals if you want to know more about splitting rental income for tax purposes. Disclaimer: The information about splitting rental income for tax purposes …

Do I have to Pay Tax as an Online Seller?

George29/09/2022Tax Issues , Tax Saving Tips

You are an online seller in the UK, and you are left wondering, Do I need to pay tax for an online business? It can be if your sales go beyond the specified limits or you run your operation as a business. There are different taxes that you are required to deal with depending on the type of your business, earnings, and sales. In this blog, we will discuss the primary taxes that you incur, such as income tax, VAT, national insurance, and corporation tax. We use the official UK guidelines and the best practices to make sure that you are compliant in 2025. We have divided it into several steps. Reach out to our smart team of professionals to get your sales tax for the online seller queries answered quickly. We will help to let you decide about tax relief with a clear mind. Do I Need to Pay Tax for An Online Business? You pay tax on your online business where HMRC considers your activities as a trade. HMRC checks include things such as whether you are trying to make a profit, whether you are selling the same product over and over, or whether you are adding value to products to sell. When you sell personal things infrequently, you are not likely to pay tax. But websites such as eBay, Etsy, Depop, Vinted, or Amazon will send your information to the HMRC in case the seller sells more than 30 items or earns above approximately £1,700 annually. This reporting began in January 2025, and it did not introduce any new taxes. It simply assisted HMRC in identifying undeclared income. You enjoy the trading allowance, which enables you to make up to £1,000 on online sales tax-free each year. Your gross sales will have to remain under this amount to avoid tax. When you cross £1,000, then the excess is your income and you pay tax. Some sellers begin online businesses as a side hustle. But when your sales increase, you get to be registered as self-employed with HMRC. Then you have to submit a self-assessment tax return by 31 January at the start of every year. Tax on Online Sellers If you are selling your old items like clothes, shoes, some gadgets, or any other used items to dispose of them. It’s usually tax-free. But if you are practising it too often and in bulk, it will be a trade. You need to report this online business to HMRC through your tax return. When you are a sole trader or a partner, you pay income tax on profits that are received in your online business. Profits refer to your sales less permissible costs, such as the cost of stock, the cost of shipping, the cost of marketing, and the cost of platforms. HMRC counts this as self-employment income, and you include it in any other income of yours. Thresholds and Rates In the UK, you have a personal allowance of £12,570 in 2025/26, where you do not pay any tax. You subsequently make payments of tax on income as: 20 per cent between £12,571 and £50,270. 40 per cent between £50,271 and £125,140. 45 per cent on the £125,141 and above. For example, if your online profits are £20,000 and you do not have any other income, you will pay 20% of £7,430 (after allowance), which equals £1,486 income tax. It is emphasised that you must deduct expenses to reduce your taxable profits. You are claiming home office expenses, web hosting expenses, or even mileage expenses incurred in delivering goods or services. How An Online Seller Files a Tax Return? You need to get a Unique Taxpayer Reference (UTR) by registering with the HMRC online. Then submit your return online by 31 January, following the closure of the tax year on 5 April. You make any payable tax on the same date, or, in case of large taxes, make payments on account. Make this easier with GoSimpleTax or FreeAgent software, as numerous other online businesses do. VAT Obligations for Online Businesses Most goods and services have Value Added Tax (VAT) to which you can charge, provided your business comes under the tax payments. It depends on where the online businesses operate and sell their products. When to Register for VAT You are to register for VAT once you have a taxable turnover amounting to £90,000 in one 12-month period of time, or when you anticipate it to be above that within the next 30 days. All the online sales that are taxable are considered taxable turnover. In the case of international online sales, the import VAT is charged on goods coming to the UK, and in the case of exports to non-EU countries, the export is often zero-rated. VAT Rates and Compliance The standard VAT rate is 20%, although lower rates are also charged. A 5% on items such as car seats or products that use less energy, 0 percent on children’s clothes and books. You also apply the VAT to the charges you make and send the difference between the prices charged and paid VAT to the HMRC every quarter in Making Tax Digital (MTD)-compliant software. The National Insurance Contributions As a self-employed online seller, you contribute to National Insurance (NI) to build entitlement to state benefits like the pension. You pay Class 4 NI on your annual profits, with a rate of 6% on profits between £12,570 and £50,270, and 2% on profits over £50,270 for the 2025/26 tax year. Mandatory Class 2 NI was abolished from April 2024, but if your profits are above £6,845, you are automatically treated as having paid contributions to protect your NI record and build entitlement to the state pension. If your profits are below that amount, you can choose to make voluntary Class 2 contributions. Corporation Tax for Online Business When running an online business as a limited company, you pay corporation tax rather than income tax on the profits. Rates and Filing For the 2025/26 financial year, …

What are the Tax Implications of Side Gigs?

George27/09/2022Tax Issues , Tax Saving Tips

This is the era of ideas where people are so smart and full of unique ideas to meet both ends to make a living. People do not rely on one job only and tend to manage a side job along with the management of a full-time job. This is usually to pursue their dreams or to earn extra pounds. Whatever the reason is but the side gigs are way more popular than you expect especially among the residents of the UK. We know this feels so productive to earn extra money from your side gigs but what about the tax implications of side gigs? Are you aware of the tax liabilities this extra income can bring in for you? Is it worth it to go with it after you realise how beneficial it can get after seeing it tax-wise? Several people are unaware of the fact that there are tax implications for their side gigs too. If you do not get a clear understanding of the tax responsibility of your extra income coming from your side gigs, you will end up being stuck in the unexpected visit from HMRC. To be on the safer side, this guide will help you to understand everything that you need to know about what is side gig, what are the tax implications of side gigs, what is the need to declare the extra income from side gigs, and how tax you will have to pay on this extra earning. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get ensured instant help whether you are running a small business or large. Side Gig – What is it? When you are in full-time normal employment, you always have a few dreams to pursue or you still need those extra pounds to make a better living. A side gig is a way out to those dreams or to earn those extra pounds that you have always wished for. A side gig is one of the favourites and most popular ways to manage full-time jobs among the people of the UK. This is known to be a smart idea when you want to make extra money and want to manage your full-time job as well. As people are of the view that side gigs play a supporting role in not only pursuing dreams but making extra money for a better living as well. An example of an individual who works as a receptionist in a company also works for his twitch streaming in extra time is perfect mention here to relate. What are the Tax Implications for Side Gigs? You need to be aware of the fact that the money that is coming through your side gigs is untaxed. Unlike the system when you are a PAYE and the tax deductions are already done even before you get the salary and all the deduction details are mentioned in your salary slip. By this, we understand that the deduction of national insurance and income tax is already done from your salary through the system in regular employment. However, this is not the case when you are earning as a freelancer or earning through your side gigs. This is because the PAYE system is not involved in the process. This brings in the responsibility of tax payments like the income tax and national insurance contribution all by yourself. If you fail to do so you will have to struggle with the HMRC observational visit. What is the Need to Declare My Side Gigs Income to HMRC? This is imperative to understand that it is a must for you when you are earning through your side gigs that you will have to declare your income to HMRC. Because this income is not associated with the PAYE system and so it is untaxed. If you fail to fulfil this requirement, you will have to face penalties and interest on the late tax payments. This will make you suffer in form of tax payments that are more than the original bill of tax. The amount of personal allowance that everyone gets other than the amount they are earning is a favourite beneficial thing by the UK residents. In the case you are making less amount than the amount of your personal allowance, you do not need to declare your income to HMRC. Otherwise, you are bound to inform HMRC and submit the self-assessment tax returns as well. In order to make your earnings in a tax year evident, you will need the documents like your side gig receipts and your bank statement. This will help HMRC to calculate your overall income including your main employment earnings and charge you the tax accordingly. How Much Do I Pay on My Side Gigs? This purely depends on the amount of money that you are making from your side gigs that will decide the amount of your tax bill. Your main employed job earnings will also be considered in this calculation. In some cases, the overall earnings from the side gigs and the main employment push towards the higher tax brackets and you will have to pay the higher tax rate. There are online calculators to check the amount of money that you will pay according to your overall earnings. The Bottom Line Now that you have gathered a fair amount of information about the tax implications of side gigs, we can bring the discussion towards wrapping up. We can say that side gigs are a great way to pursue your dreams and make extra pounds to make a better living, however, you will have to consider the tax implications that come with this beneficial factor. Are you seeking professional help with the tax implications of side gigs? Why not get help from the experts at the CruseBurke? Talk to us now! Disclaimer: All the information provided in this article on the tax implications of side gigs including all the texts …

The Benefits of Filing Your Tax Return Today

George26/09/2022Tax Issues , Tax News and Tips

You must have observed the financial matters associated with your business, they keep on fluctuating over a specific period. This asks for maintaining a smooth record of every financial detail so that you can focus on other opportunities that will help to grow your business valuation. This will further make your way to good tax planning as well. It is required for you to be organised financially in your business to enjoy the benefits of filing your tax return earlier. As this will spare you enough time and space to spend on applying innovative business ideas to make your name in the industry. This means you will be able to manage your tax affairs more efficiently. The information detail that is required for the filing of the tax returns usually involves important documents related to business finances and the bank statement. Moreover, there are multiple smart choices for arranging the data through accounting apps rather than doing it manually these days. This will allow you to gather error-free data and the process will be less time-consuming as well. Get in touch with one of the young and clever professionals and discuss the benefits of filing your tax return. We ensure to provide the best guide to you. Benefits of Filing Your Tax Return Early You must realise how advantageous it can get for you if you allow yourself to file your tax returns early. The deadline for filing the tax return is 31st January, which will remain the same and this is a plus point. This will allow you to be organised enough in managing your financial details, which plays an important role in filing the tax returns early. You may seek the help of your accountant in doing so. The most advantageous factor of filing tax returns before time is that you will not suffer any amount of hefty fines or penalties from HMRC. As well as this brings the factor of being organised with your financial details and records for the whole tax year. The importance of better record keeping is not denied neither its advantages. This way, you will keep your records up to date and will never have a chance to miss your deadlines. You will be able to expect your refund of overpayments sooner as well. Further in the discussion of this guide, we have listed and explained the prominent benefits of being an early bird in filing tax returns. 1- Don’t Risk Missing Your Tax Deadlines If you keep on delaying the process of managing your financial details, this will bring the risk of missing the deadline for filing the tax returns. This will result in the issuance of an automatic late filing penalty of the amount of £100 for you. Your past good record of filing the tax returns will not matter here. In the case of filing tax returns late for three months, an amount of £10 will be generated for each day until it reaches the peak amount of £900. If the period of delay is for six months, the delay penalty will be an amount of £300 and in some cases, you will have to pay an extra 5% of the number of your tax charges. 2- Enjoy a Quick Tax Refund Sometimes there is an error with your unique tax code sent by HMRC. Whether you are a director or an employee, you will have to apply for a tax refund in such a case. Receiving tax refunds and this scenario is not an unusual practice. Here you will observe the benefits of filing the tax returns earlier again. The sooner you have filed, the speedy will be the process of tax refunds by HMRC. In the case of late filing, this process can even gather the extra interest if it is in your bank account. So it is wise to file early so that if you are in a position to get a refund, you will get it early. Because January happens to be the busiest month for HMRC because of the deadlines. 3- File Your Tax Returns Now and Pay Later If you start to calculate what are your tax liabilities and initiate the process of filing for the tax returns now, this will give you a chance to focus on your budgeting and the management of cash flow. You will be more focused on other tax liabilities as well. However, in the case of people who are rushing in the 11th hour tend to have a higher chance of the mistakes and the factor of accuracy is compromised. As HMRC has declared already that errors in the details of filing tax returns will charge you fines. And of course, late filing brings penalties to suffer with. It is just recommended for you to be an early bird in this case. This does not mean that you are obliged to file the tax returns early. You can do it at any convenient time before the deadline. 4- Time is Money As we have mentioned earlier that being organised with your financial details and filing the tax returns early will spare you to focus on other business growth opportunities. It allows being more efficient with the management of your bank statement and other relevant affairs with the tax liabilities. You can use smart apps to manage the records of your business finances rather than handling those piles of papers that still have a chance of errors and displacement. The Bottom Line Now that you have gathered a fair amount of information about the benefits of filing your tax return, we can bring the discussion towards wrapping up. There are multiple beneficial factors of filing the tax returns well on time rather than rushing at the last minute, which brings a high chance of errors. And HMRC gives a very slim margin to errors related to tax affairs. We recommend finding professional help to further learn about the benefits of …

tax on property transfer during a divorce

Tax Implications of Property Transfers During a Divorce

George23/09/2022Tax Issues , Tax Saving Tips

Are you going through the procedure of divorce or separation? The most important thing that you must be aware of is a tax on property transfers during a divorce. It depends a lot on the time and circumstances in which you are proceeding with the formal steps of the divorce because this will decide some of the tax exemptions. This is because of the fact that some of the tax amounts are only off during the same year of the divorce. Once this tax year is over, you will no longer be able to get such benefits. While you are being careful about the transfer of properties, consider stamp duty land tax (SDLT), and capital gains tax (CGT) as well. If you are still wondering how CGT will work for you, we have got you covered here. As this guide will help you to develop a better understanding of how will CGT work for you, what is the tax on property transfer during a divorce, how can you avoid CGT when going through divorce proceedings, and how will HMRC decide the date of property transfer? Seek no further help after contacting CruseBurke’s team of experts and advisors about tax on property transfer during divorce with peace of mind and within your budget. Capital Gains Tax – What is it? There is a possibility of rising the capital gains tax in the case the value of the asset has increased at the point of sale. This sometimes increases to an extent that is even higher than the original value of the asset. The basic requirement of paying the CGT is when you are selling your main residence. However, this can work out to be different for you during the process of a divorce or separation. When you are an individual who is married or living in a civil partnership, you can transfer the property from one another without having to pay any CGT. Moreover, it depends on the type of property that is being disposed off and the level of income you are earning that will decide the liabilities of capital gains tax. You will be liable to pay the CGT when you are selling your main home and the rate will be: 18% if you are a taxpayer with the basic rates. On the other hand, if you are a higher taxpayer the rate will be 24% for you. If the property that you are selling is not your main home but an office building or any other land, you will be liable to pay CGT as the following: If you are a basic rate taxpayer, you will pay 10%. If you are a higher-rate taxpayer, you will pay 20%. Tax on Property Transfer During a Divorce Several people confuse the fact of transferring the property during a divorce proceeding by thinking that is not possible. This is not the case at all. You can transfer the property during this process, however, you need to pay attention and consider the right timings of doing it before the same tax year ends of the divorce proceedings. There is no CGT payable when you are transferring the main home during a normal marriage. However, you need to be aware of the fact that if you transfer the property after divorce in a different tax year, this will make you liable for paying CGT. If you consider the right timing and transfer the property in the same tax year when the separation or the divorce happened, it will be a no gain no loss process for you. Ways to Avoid Capital Gains Tax During Divorce Proceedings People are interested in avoiding CGT while transferring the property after the separation or the divorce from the spouse or civil partner. The only way to make it possible is to consider the right timing and do transfer the property in the same tax year of the divorce occurred. However, from the tax year 2023-24, the civil partners and the spouses will have a period of three years to do the process of property transfer at the benefit of no gain no loss. This means they will not pay any CGT and will have a longer period to transfer the property. The Time to Transfer the Property by HMRC When you are in the divorce proceedings, consider the following for the liability of CGT: Express it in the divorce through a court order. Express it in the agreement of the separation. Do it when the separation is in permanent circumstances. Moreover, when you are done with the process of deciding the date of separation or divorce, the market value of the property will be considered for the purpose of transfer of property. The date of the divorce or separation matters a lot in this case. If done in the same tax year, it will be a no gain no loss process as discussed earlier. The Bottom Line Now that you have gathered a fair amount of information about tax on property transfer during a divorce, we can bring the discussion towards wrapping up. Separations and divorce proceedings are considered to be a harsh experience for two people who are married or living in a civil partnership. However, to make it a less burdening process, you can take wide decisions to avoid paying the CGT on the property transfer. It is therefore suggested to choose the time wisely and do the pretty transfer in the same tax year of the divorce to make it a no loss no gain process. Are you stressed about tax on property transfers during a divorce? Feel free to contact our team of tax advisors and accountants to help you find accurate information and guidance. Disclaimer: All the information provided in this article on tax on property transfer during a divorce, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.