Tax Issues Archives - Page 13 of 13

Why Outsourced Accountants are the Solution to Conquering Tax Returns

George / 01/04/2020

Regardless of whether you enjoy organizing your finances or wish income statements could disappear altogether, there’s no denying that tax returns are a vital part of your business’s financial feasibility and success. They may be regarded as the dread of most British business owners, but tax returns have proven themselves to be one of the most integral parts of doing business, especially as the HMRC’s own standards grow stricter by the day. While a business’s tax returns are a vital component of its long-term profitability, the simple truth is that they’re complicated, time-consuming, and difficult to understand if you aren’t a financial professional. Fortunately, taking on your business’s own tax returns in the most accurate, efficient, and timely manner possible doesn’t have to entail sacrificing crucial opportunities to improve your business. In fact, outsourcing the services of an accountant will get the job done! To better understand exactly why an outsourced accountant is a solution that your business needs in order to succeed while staying productive amidst organized chaos, let’s look at everything you need to know about them. Efficiency and Effectiveness at their Finest As your business continues to rake in more success, generate more profit, and welcome more customers, your workload is set to proportionally increase as well. When not approached properly, the greater level of success that your business is experiencing may not be as sustainable as you’d hope if you don’t have the necessary skill or manpower to whip everything into order. By letting an outsourced accountant step in, however, you can hand off most of the challenging numerical tasks over to an experienced professional who can get them done more efficiently and accurately. Tax returns, in particular, are an outsourced accountant’s expertise that can be used to your business’s advantage in spite of growing complications with the filing process as your business scales and grows at record rates. Instead of having to burden yourself with the process of filing your tax returns without the essential skills or knowledge, outsourced accountants can help you avoid even the tiniest of errors at all costs. The Significant Payoff of Outsourcing an Accountant Aside from the great deal of efficiency and effectiveness that they provide, another significant selling point of outsourced accountants—such as the professionals at Cruse Burke accountants In Croydon—is that they make for a great investment. Thanks to the fact that most outsourced accountants are highly skilled and have years of experience from working with a wide range of businesses, they can help turn the tides on your tax returns and tweak them to your advantage. From handling your tax returns and filings to spotting other lucrative opportunities and problem points in your business, an outsourced accountant can easily contribute to a greater ROI for your business in the long run. “Okay, outsourcing the services of an outsourced accountant sounds great— but how much does it cost?” Depending on the overall size of your business, the number of transactions it goes through in a certain amount of time, and the complexity of its operations, the costs of outsourcing an accountant for your tax returns can vary. Fortunately, getting a quote for your own business’s needs with affordable Accountants In Croydon by filling out this form is both free and easy— so feel free to fill it out and give us a call today!

Personal Tax, Tax Issues, Tax Saving Tips

Timing Dividends Right Could Help Save Tax

George / 12/08/2019

Timing the date of a dividend payment from a company can determine both the amount and the due date of the tax payable. This may be a particularly useful strategy in a close- or family-owned company. The dividend allowance — the amount you can receive tax-free — has been reduced to £500 for the 2024/25 tax year. Above this, dividends are taxed at the following rates: 8.75% for basic rate taxpayers 33.75% for higher-rate taxpayers 39.35% for additional rate taxpayers Your tax band is determined by your total income, including salary, savings, and dividends. Accelerating payment The timing of the dividend payment may have a marked impact on the directors’ and shareholders’ personal tax situation. A dividend is not paid until the shareholder receives the funds directly or the dividend amount is put unreservedly at his or her disposal, for example by a credit to a loan account on which the shareholder has the power to draw. If the personal tax allowance and basic rate band for a tax year have not been fully utilized towards the end of the tax year, payment of a dividend may mean that the unused portion can be mopped up. Example Graham is the sole director and shareholder of his limited company. In the 2024/25 tax year, he earns a salary of £25,000. He’s considering whether to pay a dividend before 5 April 2025. Personal allowance: £12,570 Basic rate band: Up to £50,270 Remaining allowance in basic band: £25,270 If Graham pays a £25,770 dividend: £500 is tax-free (dividend allowance) £25,270 is taxed at 8.75% = £2,166.13 Remaining £500 is taxed at 33.75% = £168.75 Total dividend tax: £2,334.88 This timing allows Graham to take advantage of the lower 8.75% rate before crossing into the higher band. Delaying payment Where the shareholder already has income exceeding the basic rate band in one tax year, delaying the dividend until the start of the next tax year could save tax. Example If Graham already earned £50,000 in the 2024/25 tax year, his basic rate band is nearly used up. If he pays a £27,000 dividend before 5 April 2025: First £500 tax-free Remaining £26,500 taxed at 33.75% = £8,943.75 But if he delays the dividend to 2025/26, and earns only £25,000 in that year: All £27,000 dividend income remains within the basic rate band £500 is tax-free Remaining £26,500 taxed at 8.75% = £2,318.75 Tax saved by delaying: £6,625 Additionally, the tax is due one year later — giving a useful cash flow advantage. Fluctuating income Dividend payments can often be timed to smooth a director/shareholder’s earnings year-on-year. Broadly, where profits fluctuate, a company could consider declaring and paying dividends equally each year, or by declaring a smaller dividend in the first year (when profits are higher) and treating the remainder of the payment as a shareholder loan. At the start of the next tax year, a further (smaller) dividend can be declared, which will repay the loan. Care must be taken with this type of arrangement, not least because the loan must be repaid within nine months of the company’s year-end to avoid a tax charge arising on the company. The family business potentially offers considerable scope for structuring tax-efficient payments to family members using a mixture of both salary and dividends. A pre-dividend review may be particularly beneficial towards the end of the company’s year-end. Additional Note: ITA 2017, s 8 and s 13A; F(No 2)A 2017, s 8; CTA 2010, s 455

Tax Issues, Tax Saving Tips

Which Benefits are Taxable and Non-Taxable?

George / 06/08/2019

Do you want to get the most out of your employee perks? Well, the benefits aren’t about your salary anymore! When working in an organisation, you are entitled to certain benefits, except for your basic salary. However, some of them are taxable, and some of them are not. In this article, we will discuss tax free benefits in detail and also the situations where the benefits may be partly taxable. What Are Taxable Benefits? Taxable benefits (benefits in kind) are perks or non-cash rewards provided by an employer that have a cash value and are taxed as part of your employment income. Furthermore, these benefits have a monetary value and must be reported to the HMRC. They are treated as additional income, and employees are subject to Income Tax. These specific rules are set by the HMRC. Which Benefits Are Taxable? The following are the perks that are provided by an employer in addition to their basic salary that are taxable: Company Vehicle and Fuel If you are an employee and are using your company’s car or van for your personal use, you must pay tax on it. The tax amount depends on the vehicle’s market price, its fuel type, accessories and CO2 emissions. Medical Insurance Allowances paid by your employer for your private medical or dental insurance are also taxable. Accommodation Housing provided by an employer is also a taxable benefit unless it is essential for a job, such as a live-in caretaker. Loans Provided to Employees In the UK, loans provided to employees become a taxable benefit-in-kind if the total outstanding amount exceeds £10,000 at any point during the tax year. If this threshold is crossed, the loan is not tax-free. And the employee will be taxed on the interest benefit they receive. What Are Tax Free Benefits? They are the perks provided by an employer that are exempt from Income Tax and, in most cases, National Insurance contributions. It must meet specific HMRC exemption criteria; otherwise, it becomes taxable. These benefits are mostly work-related or are designed to improve employee welfare, and a specific criteria that have to be met to qualify for the exemption. Employers should make sure they are offering appropriate tax free benefits to their employees. Which Benefits Are Non-Taxable? Your employer can offer you some nice perks that are totally tax free benefits. They often come with rules, but here are some of the main ones to know about. Annual Parties You don’t have to pay tax on your staff parties, like a Christmas do, but there’s a limit. The total cost for all yearly events must stay under £150 per person (it’s an exemption, not an allowance), and the events must be open to all employees, not just some. This is a great example of tax-free benefits for employees. If it exceeds £150 per head, even by £1, the full benefit becomes taxable for the annual parties. Workplace Meals Enjoy free or cheap meals from your employer? You won’t pay tax on them if they’re provided on your company’s property and are available to all staff. But if you’ve given up some of your salary to get the meal, it doesn’t come under tax free benefits. The food also has to be ‘on a reasonable scale’. Office Supplies If your employer gives you equipment or supplies for your job, it’s not a taxable benefit. This applies as long as you’re not using it for personal reasons most of the time. The rule works whether you’re at the office or working from home. These types of tax free benefits help ensure you can do your job efficiently. Offering tax free benefits like parking spaces can significantly improve employee satisfaction. Parking That parking space your company provides for you is tax-free. It doesn’t matter if you’re parking your car, motorcycle, or bicycle, as long as it’s at or near your workplace. Situations When Benefits May Partly Be Taxable Based on HMRC rules, employee benefits can be partly taxable in these situations: If you contribute towards a taxable benefit, your payment is deducted from the value, reducing the amount you are taxed on. If you use a company asset, like equipment, for both work and personal reasons, the taxable value is reduced based on your business use. A loan from your employer is only taxable if it is over £10,000. You are not taxed on a company van if private use is insignificant. If a benefit exceeds a set limit, only the amount above that limit may be taxable. For example, some long-service awards can be partly taxable. A benefit might be mostly tax-free, but with a specific element that is taxable. For instance, some welfare counselling services are tax-exempt, but advice on finance or tax is not. How Can Employers Provide Tax Free Company Benefits? Employers can provide a range of tax free company benefits to enhance employee satisfaction and ensure compliance with tax laws. These include things like free parking, annual parties, and qualifying workplace meals, provided specific HMRC rules are followed. All these can contribute to a positive work environment while also offering employees financial advantages through tax-free employee benefits. Conclusion Benefits are essential for every employee working in a professional organisation. For employees, understanding which tax free benefits are available to them can help them plan better and ensure they are making the most out of their tax-free benefits. Employers who are providing benefits, like company cars, private health insurance or any interest-free loans, have to understand their obligations to pay Income Tax and associated National Insurance contributions. Being aware of the rules around tax-free employee benefits can lead to better financial planning and more effective use of perks in the workplace. Disclaimer: This article is general in nature; it does not intend to disregard any professional advice.