Tax Issues Archives - Page 15 of 20

News,May 2018

How Long Do Businesses Need To Keep The Tax Records?

George21/07/2022Tax Issues , Taxation

Do you also wonder about how long you should keep the tax records in the UK? Why is it important to keep the old record intact for a long time? It may seem to be less important to you especially when you are done with using these old details. If you are an individual who is running a business as self-employed, you are in need to know everything about keeping the records intact for the required period for the sake of your business benefit. It is vital to understand that accurately keeping the records is equally important to self-employed business owners. By accurate tax, we don’t mean to pay the right amount of tax only. You need to keep the record so that they can keep you protected at the time of business investigation by HMRC. There is a certain number of years suggested to maintain old records as well. In this guide, you will get all your related queries answered as we have covered the required period to keep your tax records intact whether you are running your business as a sole trader or as a limited company. We recommend finding professional help to further learn about How Long Do Businesses Need To Keep The Tax Records. Talk to our guys and get your queries answered quickly. Tax Records – For How Long Do I Need to Keep Them? It is suggested to keep the records intact and save the five-year period if you are a self-employed self-assessment taxpayer. The relevant tax year will be considered after the 31st of January as the deadline. In the case you aim to file your tax returns for the years 2018 and 2019, your relevant tax deadline will be 31st January of 2020. With these dates, you will be required to keep your record until the 31st of January in 2025. If we take the example where an individual is running the business as a limited company, the rule of filing tax returns will vary from the details that are mentioned above. This case requires keeping the details of the tax for a longer period. The year of records is considered and accounting records will be kept for six years. There are a few exceptions where the limited companies are asked to keep the records for even a longer period. The details of these exceptions involve the following: In case you are experiencing an investigation by HMRC. The company tax returns were submitted late. Some equipment is purchased by the company and they should last for six years or more. A transaction covering more than one company is found out. It depends on the type of business structure you have chosen to carry out your business activities that will decide your set of rules. Either way, you have to follow the instructions for maintaining the records of your business expenses and income. In the details below, we have discussed how this practise of record keeping might vary according to different business structures. Sole Traders and Partnerships How to Keep Records Intact? There is a lot of information that is required to be saved. Along with the records, there should be proof too as per the instructions of HMRC. This includes the receipts of expenses, stocks and other goods. There must be an efficient filing system to keep the records. This will ease your trouble times like end-year tax. It is recommended to use accounting software that will help you to maintain the records in an error-free manner. This will also save the time and energy that you waste on doing the records manually. What to Keep in the Records? According to HMRC, the following details are required to save for a long period. Personal income. Rental incomes, savings, and investments are a few such examples. In case you have hired employees, the PAYE will also be a part of the records. If your company is VAT registered, VAT records are also required to be saved. Income and sale details. Choose the Accounting method: There are two main examples of accounting methods. The first is traditional accounting and the second is cash basis accounting. When you are self-employed, you can use any one of them. In the case of traditional accounting, you need to keep the business expenses and income with the relevant dates. And in the case of cash basis accounting, your business income and expenses are saved but with the date of payment or when you pay the bill. Limited Companies and Their Tax Records When you adhere to the business structure that is known as a limited company, you need to consider the following: Accounting Records: You know that you will have to pay fines and penalties if you do not keep your accounting records. It is very important to keep these records otherwise you will be disqualified as a company director. The accounting and financial details you need to consider for records include the following: Profit and losses Turnover Details of assets Tax returns income Company Records: The directors of companies are more liable to keep the records in comparison to the sole traders. This makes the limited company structure a little more complex than others. Other than the financial records, you are liable to keep the company records. Shareholders, transactions, and loans are a few such examples. How to Maintain the Records? It is beneficial to hire the professionals like bookkeepers and accountants to maintain these records promptly. The Bottom Line To sum up the discussion of keeping the tax records, we can say that the process of maintaining the records for a long period is not an easy task but it will keep you and the business protected when HMRC requires the details at the time of business investigations. We hope you have developed a better understanding of maintaining your company’s tax records. Disclaimer: The general information provided in this blog about how long …

A Beginner’s Guide About Tax when You’re Self-Employed!

George15/07/2022Tax Issues , Tax Saving Tips , Taxation

The basic information about self-employment tax and insurance is often confused among people. As a self-employed person, you are responsible for paying income tax and class 2/class 4 national insurance. You must ensure to stay on top of record maintenance, as this will help you to pay the right amount of tax and will save you from troubles in the future. To know the exact amount that you are liable to pay as tax, you have to identify your exact employment status. By this, we mean to know whether you are employed or a self-employed individual. This might sound like a straightforward matter; however, identifying the employment status becomes a complex question at times. This happens when you are employed for your first job and also registered as self-employed for your second source of income. If you are wondering about your employment status by now, you will get your queries answered in the discussion further. Are you a sole trader or self-employed and want to have another business in the United Kingdom? Whether you’re managing one business or juggling multiple ventures, make sure you’re registered the right way. It’s easy and quick to Register as Self-Employed with CruseBurke. Identify Your Employment Status If you wish to be more clear about your employment status and self-employment tax, you can use the tool that has a series of questions to identify your exact employment status. This is offered by HMRC. You need to be aware that this tool only works as an indicator. Here is the link to check employment status for tax. Moreover, this is mandatory that you get yourself registered immediately when you become a self-employed individual. In case of delaying the registration, you will have to deal with the penalty. Tax-Free Earnings when You’re Self-Employed This does not matter if you are employed or self-employed in the case of tax-free earnings. You will be eligible for just the same tax-free allowance as an employed individual. In the year 2025-26, the standard personal allowance is £12,570 for every £2 of the amount that you make over the amount of £100,000. This depends on how much earnings you can make. Consider this before you plan to pay the income tax. In the case, your earnings go over the figure of £100,000, the figure of standard personal allowance is £12,570 in the tax year 2025-26. On the other hand, if you are doing two jobs and one of them is self-employed, the case becomes a little complex in this scenario. You are eligible to get only one personal allowance. This depends on HMRC as to how they views your source of income. As well as which one is considered the main source of your income. Usually, people consider their main employment according to their earnings. By this, we mean to consider the job that is giving you more earnings as your main employment. Moreover, the tax code is a simple way to figure this out and be clear about your main employment. Self-Employment Tax for Self-Employed Individuals You are liable to pay tax on the trading profits you are making from your business, in case you are a self-employed individual. Several people confuse paying the trading tax on the total income, but it is not the case. However, the question that arises here is how to work out what your trading profits are. This can be calculated through a simple formula. Simply, you can deduct your business expenses from your total income. The figure you will get after this will give you the amount on which you have to pay the tax. In case you are a self-employed individual, you will pay the same amount of income tax as you do for your employed income. Are you now wondering about the rate of income tax? This also depends on the amount of money you make as earnings. In case your limit is somewhere between £0 to £12,570, you will have to pay no tax on the trading profits you are making. If your limit is between £12,571 to £50,270, you will pay 20%, which is the basic rate of tax on the trading profits. In case of the higher rate, you will pay 40% tax on your profits if you are between £50,271-£150,000. Furthermore, if you cross the limit of £150,000, you will have to pay additional tax. That is 45% of your trading profits. Always remember to consider your tax bracket when you plan to pay the tax. It is vital to understand what is the tax rate according to your trading profits to pay the right amount of tax. National Insurance for the Self-Employed From April 2024, Class 2 NICs have been abolished. In 2025–26, self-employed individuals pay Class 4 NICs at 6% on profits between £12,570 and £50,270, and 2% on profits above that. The Bottom Line In conclusion, we can say that paying the right amount of tax is a complicated process. You must be aware of the right tax bracket according to your trading profits to make the process error-free. Moreover, you must realise the amount of profit in which your earnings become tax-free as well. This information will protect you from future troubles and any kind of penalties. We hope this gathered information will be helpful for you to develop a better understanding and deal with your tax affairs in a more professional way. Get in touch with one of our team members to know more about the tax percentage if you are a self-employed individual. We will ensure to provide the best possible tax advice for your business. Disclaimer: The information provided in this article about self-employment tax includes text and graphics in general. It does not intend to disregard any of the professional advice.

Voluntary VAT Registration for Small Businesses!

George13/07/2022Tax Issues , VAT

If you are running a small business that is still less than £85k per annum but you decide on voluntary VAT registration. This decision does not make sense in all circumstances and situations. Other than that suitable circumstances to go with this decision. People associated with carrying out a small business often question about voluntarily registering for VAT is a fair decision for the betterment of business or not? The answer is yes it is worth questioning about registering VAT voluntarily as the question will lead to further business benefits in future. This decision will make you charge the administration well as the customers who are interested in buying your offered products or services. Nowadays it is required to connect with HMRC MTD (Making Tax Digital) if you aim to register voluntarily. It has been observed that the tax collector on behalf of HMRC does not sound like a wise idea and appeals to most people. The process is not as simple as it might sound, as there is a restriction of certain circumstances as to when voluntarily registration can be beneficial for the business. We have covered the process of VAT registration, who needs to register, and what are the business responsibilities involved in this process. Reach out to our smart and clever-minded guys to get your VAT queries answered quickly. We will help to let you decide about VAT registration with a clear mind. Who Needs to Voluntary Register VAT? It becomes a compulsion for your business to register for VAT when your business crosses the limit of the VAT threshold. The required figure in this regard is £85,000 currently. When you foresee your VAT taxable turnover will cross the required limit of your threshold within 30 days, you should immediately do the needful. In the other case, if you are not expecting your taxable turnover to cross your business threshold any time soon, there is no requirement for you to register for VAT. However, some small businesses still do it voluntarily. The Process of Voluntary VAT Registration Even in the case of voluntary registration for VAT, the process will remain just the same as the businesses do when they are required to begin the process. The businesses no matter if they are VAT groups or partnerships, come under one registration number. Online registration for VAT is considered the most reliable method. All businesses are allowed to register for VAT online. If you finally decide to register VAT online, you will be in need of creating an online VAT account. This will be later used to maintain reporting of your VAT. Moreover, in the case of the VAT exceptions, you will have to apply for the VAT exceptions. In such a case you will apply by post. You can register the business divisions, or join the late rate scheme of agriculture. This will be done for separate VAT numbers. The Business Responsibilities of Voluntary VAT Registration If you are running a small business and have decided to voluntary register for VAT even though it is not a business requirement according to your threshold as yet. Your duties and responsibilities will remain just the same as the businesses that are required to register for VAT. This brings in the following listed requirements: You are required to maintain the records as well as the account for your VAT. You need to submit your VAT returns. You will be asked by HMRC to pay any VAT. You can have a right to charge VAT to your customers and administration, however, focus on charging the right amount of VAT. Voluntary VAT Registration and MTD Obligations When you get your business registered for VAT, you will have to consider MTD. This is to ensure the initiative of HMRC to make the VAT returns digitise. Under the requirement of MTD, the businesses will keep an online record of VAT. They will also use the online making tax digital software to report the VAT. Moreover, making tax digital is not mandatory for every business that is VAT registered in the current scenario. In case your taxable turnover is more than your business threshold, only then you will be required to adhere to the rules and regulations of MTD. Some complex businesses are still exempted from this obligation. In case your business threshold is less than £85,000, you are not required for VAT registration and for making tax digital. If the situation changes in future, so will the obligations. In simple put, you can say that mostly you will have to register for making tax digital if you are required to register for VAT. And if you have chosen this option voluntarily, you can choose whether you will opt for making tax digital or not. The Bottom Line We can bring the discussion of Voluntary VAT registration toward wrapping up as you have gathered a fair amount of information by now. In conclusion, we can sum up by saying that registering for VAT voluntarily can prove to be a beneficial option for several small businesses. However, there are still businesses that choose to remain unregistered unless they are required to get their business registered for VAT. To make a fair decision about whether you want to get your business registered for VAT voluntarily or not, you must weigh up the circumstances of your business and its financial health. Furthermore, you should consider the MTD obligations and other responsibilities that come when you are a VAT-registered business. We hope the gathered information after reading this blog will guide you to make the right business choice. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly. Call us on 02086868876 or email us today. We will come up with fine solutions. Disclaimer: The information about Voluntary VAT registration provided in this blog includes text and graphics that are general. This does not intend to disregard any of the professional …

Difference Between Sales Tax and VAT

George08/07/2022Tax Issues , Taxation

The development of a country’s economy has a lot to do with tax and related policies. There is a possibility of the production of the growth of the economy through the policies of taxation before the time as well. Due to this, the professionals keep on updating and making new policies with the help of finance experts. To make such decisions, the growth and capacity of people who will pay the tax are considered every year. People tend to confuse the difference between sales tax and VAT. Keeping this in mind, we aim to make this clear in this guide. VAT and sales tax are known to be the two popular tax structures. Their structure came into being a long time ago. This is certain that both VAT and sales tax serve the same cause as both of them are meant to apply to the services and products offered by different systems. However, there are still some differences that make them both define uniquely. We have gathered a basic and introductory explanation of VAT and sales tax along with the prominent differences between them. Get in touch with one of our experts if you are stuck with your sales or value-added tax. We will offer to provide instant help. What is Value Added Tax VAT is the abbreviation of value-added tax. It is a system that is multi-stagged taxation. At the level of production, VAT is the kind of tax that is charged whenever a value is added. VAT is paid by the consumer and it tends to increment at every stage of the production of whatever product your business offers. In the case of shared services, VAT is compensated as well. VAT is not meant to charge on each step of the production. When it comes to export, VAT is not charged and exports are considered exempt from this. It is vital to keep in knowledge that when a buyer pays the amount of money to purchase your service or product, the cost of material used in the production will be subtracted. Moreover, VAT is a standardised model and does not tend to affect the customers more than the income tax. individuals with lower income find it difficult in the longer run. Because VAT cumulates at the production stage, it is known as cascading tax. VAT is not affected by the income of the taxpayers because it is allowed to charge only on the utilised products and services. Unlike the case of income tax where the tax percentage is more if one earns more money. VAT is equal for all the consumers who use your services and products. An Introduction to Sales Tax When it comes to the sales tax, it is charged on a product at the time of sale. It is known as the consumption tax that applies at the point of sale of any products or services. The formula for sales tax collection is easy and simple. When a consumer purchases any product, the retailer will collect it and submits it to the government. All the businesses come under the liability of the sales tax. The total value of the product is charged with the sales tax. Unlike VAT which is shared on every level of the production stage when value is added to the product, sales tax is known for adding to the cost of the product. The value of the product is changed due to this and the tax will be collected in this process as well. According to the research of economists, sales tax does not involve any harmful factors to intervene in the growth of the economy. This is because the sales tax does not change as the income or business profit of the consumer changes. Difference Between Sales Tax and VAT The prominent difference between VAT and sales tax is the way it is applied to a commodity. Other prominent features that belong to these types of taxation structures are listed and explained below: The application of the tax in both structures is different. Because in the case of VAT, it is allowed to charge tax at every level of production while sales tax is charged on the cost of the product when it is time to sell the product. VAT is known as a taxation system that is multi-stagged and tends to cascade at all levels of production. On the other hand, sales tax is known to be a single-point ta system. It is not possible to evade VAT, however, there are legal possibilities to evade sales tax. VAT is a tax type that belongs to the vale added stages of a product whereas sales tax belongs to the single-stage when the overall value of the product is finalised. VAT is supposed to be a burden that is given to all the manufacturing entities right from the initial stage of production till the product is finalised. However, sales tax is only for the end-user to be paid. The Bottom Line Now that you have gathered a fair amount of information about the difference between sales tax and VAT, we can bring the discussion toward wrapping up. We can sum up by saying that VAT and sales tax are two prominent structures of the taxation system that are mainly used to charge tax on the products and services offered by businesses. However, the way both VAT and sales tax is applied to the products is different from each other. Which makes each tax structure different and unique in its way. We hope these few minutes of reading will help you to develop a better understanding and help you to deal with the taxation systems more professionally. Reach out to our young, clever, tech-driven team members to learn the difference between sales tax and VAT. Call us on 02086868876 or email us today. Disclaimer: The information about the difference between sales tax and VAT provided in this blog includes text and graphics in general. This does …

How to Choose the Right VAT Scheme for Your Small Business?

George07/07/2022Tax Issues , VAT

Whether you carry out your business as a limited company or as a sole trader. VAT registration becomes mandatory if your business’s taxable turnover exceeds £90,000 in a 12-month period. However, many small business owners choose to register voluntarily before reaching this threshold. Nowadays several people choose to voluntarily register for VAT even in a scenario where they don’t see themselves reaching the taxable turnover threshold anytime soon. It is considered to be a strong strategic business decision. In case you are a beginner who is getting registered for VAT for the very first time, you need to ensure that you have good research about how to choose the right VAT scheme for your business. In this guide, we have gathered the schemes of VAT that are most common among small business owners. This will help you to pick a suitable option for your business. Reach out to one of our professionals to learn what is the best way to choose the right VAT scheme for your business. We will love to offer instant help! How to Choose the Right VAT Scheme for your Small Business You are allowed to choose the right scheme of VAT when you initiate the process; it’s a flexible option open for everyone to choose as per their understanding. As of April 2024, the VAT registration threshold is £90,000, and the deregistration threshold is £88,000. Moreover, it is important to choose the right option wisely as this will further help you to identify the ways to make calculations about your VAT returns as well as how frequently you are required to file with HMRC. If you successfully pick the right option of VAT scheme for your business, you will have the benefit of controlling your cash flow in a better way. The most common VAT scenes among the owners of small business owners are listed and explained below for your further understanding. 1- VAT Flat Rate Scheme If you choose the VAT flat rate scheme, you will find the appropriate VAT rate to charge for the services and products that your business is offering. Further, when the stage comes toward the calculation of VAT to identify how much you owe to HMRC in this regard, under the Flat Rate Scheme, you pay a fixed VAT percentage based on your business type, rather than calculating VAT on individual sales and purchases.. This fixed percentage is according to the industry you belong to, and HMRC has fixed it. Your final year’s total taxable turnover is required. The good news is that you will discount on this flat rate in case you are in the first year of VAT registration. Moreover, there is an opportunity to save for small businesses in case they choose the VAT flat rate scheme because these fixed rates are lower than the rates of the standard VAT rate. 2- VAT Annual Accounting Scheme VAT annual accounting scheme refers to the allowance of filing for VAT returns only a single time within the time duration of a year, unlike the standard VAT scheme or the cash accounting VAT scheme. Form VAT600 AA is required to be used in case you aim to apply for a VAT annual accounting scheme. There is a possibility of choosing a combination of schemes, like a VAT annual accounting scheme with a flat rate scheme. Moreover, if you do not submit the VAT returns frequently in a year, you are still required to clear VAT payments regularly with HMRC. In case you are in the first year of VAT registration, the amount will be decided through an estimate. However, if you are not in the first year, the amount will be decided according to the VAT return bill of the previous year. This scheme is ideal for businesses with steady cash flow and turnover under £1.35 million. You make advance payments towards your VAT bill and submit one VAT return per year. 3- Cash Accounting VAT Scheme This cash accounting VAT scheme is not considered different from the standard VAT scheme. It is just an alternative method to calculate VAT. In case you decide to switch to this alternative method of calculation, there is no requirement to bring this to the attention of HMRC. However, the ability to stay consistent with the chosen method is always suggested. Moreover, if you choose the method of cash accounting VAT scheme to make your calculations, your calculations will be only done when the invoice of sales is paid, as well as the purchase invoices are paid by you. Using this scheme, you only pay VAT when your customers pay you and reclaim VAT on purchases when you pay your suppliers. 4- Standard VAT Scheme People mostly get confused between the terms accrual VAT scheme and standard VAT scheme. However, the accrual VAT scheme refers to the standard scheme, is just a simple explanation for this confusion. The prominent feature is that this is set automatically as a default option in case you are a beginner and getting registered with HMRC for the first time. The method to make calculations is very straightforward in this case. Simply, the VAT sales invoices are deducted from VAT purchase invoices. This scheme allows a factor of flexibility by having good control over your cash flow. In case you find out that your purchases are less than your sales, some of our sales invoices can be staggered and be part of the following quarter. The Bottom Line Now that you have gathered a fair amount of information about ‘choose the right VAT scheme’, we can bring the discussion toward wrapping up. We can sum up by saying that we have listed only the popular VAT schemes, considering your small business. However, there are more specialist VAT schemes with other specifications for the relevant industries. If you wish to learn more about the VAT schemes to be more clear to complete your VAT returns, you can simply opt for further professional help to choose the right VAT scheme …

Making Tax Digital (MTD): What Every Limited Company Must Know

George30/06/2022MTD , Tax Issues , Taxation

The process of making tax digital was designed by the government so that an easy and approachable way can be offered to business people as well as organisations. This will allow them to get the tax process promptly and manage it professionally. This way the submission of tax will be done with increased efficacy and in an effective manner. You will also be able to spare your time and energy to invest in your business and organisational growth. In this blog, we will provide information about the requirements of the MTD (Making tax digital) Scheme. This will help you to know how MTD work and the required tools that you will use to maintain well-managed online taxation. This will save a lot of your time to invest more efficiently in your business growth. Even if your organisation is under the list of thresholds that will compel you to make the tax online. We will initiate with a basic understanding of MTD (making tax digital). A Basic Understanding of MTD (Making Tax Digital) MTD is a way to make the tax process easy and handy. This option is placed by the government for the business individuals as well as the organisations. You will be away from the paperwork and the paper-based processes. This will make your work efficient and you will be able to save on cost, space, as well as your time. It will affect to increase the output of your financial planning. This will let you have more time and you will be more focused on the growth of your business and organisation. Speak to our young and clever team members to get your queries about MTD answered swiftly. Give us a call on 02086868876 to discuss your concerns and we will love to provide the best possible solutions. Who Needs to Follow MTD? 1. MTD for VAT If your business is VAT-registered, you must follow MTD rules, regardless of your turnover. This includes: Keeping digital VAT records Filing VAT returns using MTD-compatible software Submitting returns every quarter Important update for 2025: All new VAT-registered businesses are automatically enrolled into MTD. 2. MTD for Income Tax (MTD for ITSA) Starting in April 2026, MTD will expand to include individuals who are: Self-employed (sole traders) or Landlords earning income through property rentals The rollout will be phased: Start Date Who It Affects 6 April 2026 Income over £50,000 6 April 2027 Income over £30,000 Expected April 2028 Income over £20,000 (TBC) You’ll need to: Maintain digital records of your income and expenses Send quarterly updates to HMRC Submit a final declaration at year-end These rules apply in addition to your usual payment deadlines (e.g. 31 January). What Are the Benefits of MTD? Reduces paperwork and manual entry errors Saves time and boosts efficiency Provides real-time insights into tax liabilities Ensures compliance with HMRC requirements Helps avoid penalties by submitting on time Threshold Scenarios – What Applies to You? 1. Your Organisation Is Above the VAT Threshold If your taxable turnover is above £90,000, MTD for VAT is mandatory You must keep digital records and submit VAT returns using MTD-compliant software 2. Your Organisation Is Below the VAT Threshold If you are voluntarily VAT-registered (turnover below £90,000), you are still required to follow MTD rules for VAT 3. You’re Self-Employed or a Landlord If your total self-employment or property income exceeds £50,000, MTD for Income Tax applies from April 2026 If your income is under £30,000, you may not be required to comply until April 2027 or later What Software Do You Need? You must use HMRC-recognised MTD software to: Record income and expenses Submit VAT or income tax returns Stay compliant with reporting deadlines Popular MTD-compliant tools include: Xero QuickBooks Online Sage Business Cloud Accounting FreeAgent Spreadsheets alone are no longer acceptable unless they’re connected to bridging software. What Happens If You Miss a Deadline? HMRC has introduced a points-based penalty system for late submissions under MTD. One point is added for each missed deadline After reaching a penalty threshold, a fine is triggered (e.g. £200 for MTD for VAT) Points reset after a compliance period This makes it even more important to stay organised and submit on time. Are you confused about registering MTD and looking for professional help in this regard? We can help. Talk to one of our experts now and get instant help. The Bottom Line We can bring the discussion of making tax digital towards wrapping up as you have gathered a fair amount of information that will help you to develop a basic understanding. There is no doubt that the process of making the tax digital is to provide ease to businesses individuals and organisations, however, if the process is not done right, you will not get any benefits from it. This will rather put you in trouble. This will hinder the progress of your business growth. You can turn into being so occupied with the process that it will not spare your time and energy to invest and focus on the business. We hope these few minutes of reading will help you to process your MTD more efficiently. If you still seek for further help and information, getting in touch with a professional is always a good idea. Disclaimer: The information about making tax digital is provided in this blog including text and graphics in general. It does not intend to disregard any of the professional advice.

What is Deferred Tax in a Company’s Accounts?

George28/06/2022Accounting Issues , Tax Issues

What is deferred tax? Is this the question confusing you while maintaining the accounts of your company? The tax liabilities and maintaining their accurate record is an uphill task due to the various types of taxes and the time when they are due. In this blog, we will walk you through what the deferred payments are and they are used to maintain the balance sheet of a company. Moreover, we will discuss the process of managing the deferred payments with the help of some examples. Get instant help from professional tax advisors at the CruseBurke in the United Kingdom to get a complete guide on your taxation issues. Contact us now! What is Deferred Tax? Deferred tax is a type of tax where a company has realised a tax but the due date to pay that tax has not yet arrived. As a result, this tax payment will be added to the accounts of a company as a deferred tax rather than the paid taxes and tax liabilities. While calculating the corporate taxes, the limited companies go through many adjustments in the earned profits. For example, the depreciation of the assets allows the companies to claim the capital allowance instead of applying for the depreciation allowances. As a result, the deferred taxes provide an opportunity for the companies to add deferred taxes to the corporation tax and the total tax expenses will be equal to the base rate of the corporation tax when the taxes will be paid. In simple words, the taxes paid on a later date are called the deferred taxes and the corporate tax allows for certain adjustments before the tax is paid to avoid the overestimation of profits. How Does the Deferred Tax Work? There are two ways to work out deferred tax while calculating corporation tax in the UK. Let’s look at an example using the 2025 corporation tax rates. Let’s suppose Company A has a profit before depreciation and tax of £5,000. The company buys office equipment worth £1,800, which is depreciated over 3 years, so the annual depreciation is £600. Accounting Profit: £5,000 – £600 (depreciation) = £4,400 This is the accounting profit, which is shown in the company’s financial statements. Taxable Profit: However, HMRC doesn’t accept depreciation for tax purposes. Instead, businesses claim capital allowances. Let’s say the company claims 100% Annual Investment Allowance (AIA) in the first year, meaning the entire £1,800 is deducted from the taxable profit. Taxable profit = £5,000 – £1,800 = £3,200 Now apply the correct corporation tax rate: If this company’s total annual profit is below £50,000, it qualifies for the small profits rate of 19%. Corporation Tax Payable = £3,200 × 19% = £608 But the accounting tax expense (based on £4,400) would be: Accounting Tax Expense = £4,400 × 19% = £836 Deferred Tax Liability: This difference results in a temporary timing difference of £1,200 (£4,400 – £3,200), due to capital allowances exceeding depreciation in year 1. The deferred tax liability would be: £1,200 × 19% = £228 This £228 is recorded as a deferred tax liability on the balance sheet, as it will reverse in future years when capital allowances decrease and depreciation continues. Benefits of Deferred tax Some of the major benefits of deferred taxes include the balancing of the accounts records. It provides a complete guide on the taxes how to calculate them and which adjustments are needed to take into account. Secondly, the deferred taxes help reduce the profits and the company can avoid the overestimation of the profits. Thirdly, the deferred allows the companies to defer the payments in future. So, the payment is lower in the first year, but the higher payments have to be made in the next years. Conclusion Finally, we can say that balancing the accounts is crucial for calculating the accurate profit and the corporate tax. For this, the deferred payments become quite challenging. However, if you take into account the deductions and allowances correctly, you can calculate the deferred taxes rightly. After reading this blog, you must not get worried about what is deferred tax as we have given you a comprehensive guide on the deferred taxes with a precise example. If you need help in balancing your accounts and in resolving your tax problems, CruseBurke can provide you with the services of expert tax advisors. Get in touch with us now! Disclaimer: All the information provided in this article on What is Deferred Tax including all the text and the graphics is general in nature. It does not intend to disregard any of the professional advice.

Understanding the Basics of Self Assessment!

George27/06/2022Personal Tax , Tax Issues , Tax Saving Tips

Are you seeking help to gather information about the basics of what is self-assessment? Every year, this process will help people to pay taxes with HMRC. This system is set up for the use of HMRC to have a fair collection of tax. The usual practice is that the automatic deduction of the tax is done from the amount of pension, savings and wages. In the case of the companies and individuals associated with any kind of business get the income through other ways as well, they are required to report the other ways of earning in the tax returns also. If you’re a business owner regardless of the size of your business, your annual earnings are sent through a report to HMRC. The process of self-assessment tax returns has the part of details that explains all the possible sources that give you earnings. The process is named self-assessment because it involves the list of responsibilities to make calculations of the tax amount that your business owes. Further in this blog, we will explore the introductory explanation of self-assessment along with its required timeframe and what will be the condition if you are not liable to pay any kind of tax. What is Self Assessment Self assessment refers to a way of bringing the information about your gains and taxable income for the time duration of the tax year. This is done by completing the process of self-assessment tax returns. The major concern of the process is to work out and calculate the amount of money that you owe to pay as tax returns. Our young and clever team of experts offers the best possible solution to your tax problems. Get in touch today to discuss your queries and enjoy instant help. Call us on 02086868876 or email us today. Timeframe of Self Assessment Tax Return The requirement is a compulsion if you have received a notice that explains you have to pay the tax returns. The situation can only turn around if HMRC decides to cancel the tax returns, otherwise, you have to go through the process. In the case of an income source that is untaxed, even then you are required to do the process of tax returns. The most common situations in this regard include the following: When your role is of a partner in the business. As a director role of the company, you get the income and the tax is due on that. However, under PAYE the income is not taxed. You have a source to get saving income that comes under untaxed income. HMRC still aims to get the tax amount and even when you are not in the process of tax returns. You are associated with the capital gain tax that is not paid as yet, this makes you bound to pay the tax. If you are getting child benefits, you have to pay the tax in that amount as well. Furthermore, there are several other points added according to the difference in situations in the process of tax returns. There is a tool offered by the government of the UK that helps you to be more clear about your tax return calculations. The question that arises here is how is this possible? The tool puts different questions for you to answer. The collected information from your answers will help to explain the results. This will help you to know if you have to complete the tax returns or not. What Is The Requirement if I Don’t Have Tax to Pay? People often get confused if they are not bound to pay any taxes, they think that there is no requirement for the tax returns as well. Unless the tax return requirement is not cancelled by HMRC, you have to make the process complete. This does not matter what are your circumstances. In a case where there is no notification sent to you for the process of tax returns, you are liable legally to get HMRC informed that you have to complete the process. This is because you are liable to national insurance, capital gains and income tax. This way you will get the notification of tax returns on time and you can begin the process as well. This process will further keep you protected from any kind of late fines, hidden charges and penalties. Moreover, there are chances to have exceptions that have different obligations. One such example is the income that is taxed fully under PAYE and there are no gains that are chargeable. The Bottom Line We can bring the discussion towards wrapping up as you have gathered a fair amount of information about the basics of what is self-assessment. We can sum up by saying that you might need a professional to make the right and error-free calculations of your tax returns. This is because the process of tax returns is considered to be quite complex. To ensure seamless processing, these few minutes of reading will help you to do the task well. We further hope this blog has helped to develop a better understanding of self-assessment tax returns. Learn more about tax returns and self-assessment with our professionals at CruseBurke. We will love to hear about your problems and offer the help you are looking for. Disclaimer: The information about what is self-assessment provided in this blog is general in nature. It does not intend to disregard any of the professional advice.

A Guide Based On Uber Drivers And Taxes!

George24/05/2022Tax Issues , Tax Saving Tips , Taxation

If you aim to be part of the strong community of Uber drivers in the UK, you need to have your calculations done about how much you can make as an Uber driver and what are the details of taxes for Uber drivers. The Uber drivers must be well aware of the fact that Uber is considered a self-employed company and this makes you liable for paying payroll taxes. The income Uber drivers are making is not subject to Uber taxes unless they think of filing taxes with HMRC. This will allow Uber the deduction from taxation. Sounds complicated much? The tax affairs are often complicated but you don’t need to worry as we have got you covered here in this comprehensive guide. You will everything you need to know about the eligibility to become an Uber driver, how much can you make by being an Uber driver, and what kind of tax details you will handle. What are the Requirements To Become An Uber Driver? There are certain conditions to be a part of any process or business. So is the case of being part of the Uber drivers’ community. It is wise to check the eligibility criteria to see if you meet the required standards before investing your energy further in the process. This includes the following: The individual must be of age 21 or over that to become an Uber driver. One should own a valid licence in the UK to work as an Uber driver. In case you own an EU or other foreign driving licence, the requirement is to exchange it with the driving licence of the UK. Uber offers help with the Ignition programme to get through the process even if you own a private car driving licence. It is required to have a car that was manufactured in the year 2008 or after that. Any car older than that is not workable as per Uber requirements. Income of Uber Drivers Explained By now you must be wondering about how much money you can make being an uber driver. Well, this purely depends on the amount of work you do. The more you work the more money you will get. In case you are occupied and willing to take minimum rides, even if it is one ride a month, you will be part of Uber books. The good news is that there is no limit to how much work you can do. It totally depends on you to decide your working hour and how many rides you can allow yourself in a month. Here comes the need to discuss the hourly rate. According to the head of the public policy in Uber UK, there are three typical hourly rates. The details are listed below: You can make £15 per hour in case you have your own car. In case you have a car available but you are paying for that vehicle and deal with car finance, your rate becomes £9 per hour. This rate becomes even lower in case you drive a car that is hired for the purpose. The rate in such a case is £8 per hour. By calculating these hourly rates you can have an idea that how much money you can make in your specific circumstances. And of course, you will deduct the expenses to reach the final figure of your income. Moreover, Uber’s cut is important to consider here. Uber’s cut is 25% of your income. Our Uber Accountants are just the right people to handle your tax queries, get in the car and reach out to us today or call us on 02086868876 or email us today. We will love to answer your tax queries. How Much Do I Pay? – Taxes For Uber Drivers? You know that Uber drivers are considered to be self-employed and they are responsible for paying the taxes as well as the national insurance. There is a requirement of completing self-assessment tax returns every year as well. But don’t you worry as you don’t have to pay the tax on all your income. This is applied only to the number of profits you are making. In simple words, you can make the deductions of your expenses before you calculate your profits and the tax you are bound to pay for it. In the UK, Uber drivers are sole traders mostly. The tax rates are the regular ones to follow for the sole traders as well. just like other regularly employed individuals. According to HMRC, the tax rate for the year 2022-2023 is as follows. The rates of national insurance are slightly different for sole traders. You have to pay as: The wage received from the company is £4.62 and £9.50 an hour. If your profits are between £9,501 and £50,000, you will follow 9 percent on profits and you come under class 4 national insurance. If it goes above £50,000, you will pay 2 percent. What Expenses Can I Claim as an Uber Driver? Being an Uber driver in the UK has benefits like flexible hours, but there are also car-related fees. To reduce your tax burden, you can claim costs just for Uber journeys. This includes gas, tolls, car washes, maintenance and even some of your vehicle’s depreciation. Don’t forget about phone expenses, ride-sharing insurance, and even passenger food! Keep careful records, however, as HMRC expects verification of deductions. The Bottom Line The discussion of Taxes For Uber Drivers can finally be summed up as you have gathered the basic information about the tax details applied as an Uber driver. This is important to realise that as an Uber driver, you are the one who is the major expense as a driver in this business. The expenses related to the car are also supposed to be deducted to get error-free figures about the expenses and the profits. Ensure the process wholly and exclusively to bring success factor to your business growth. We offer free …

A Guide Based on Key Ways to Reduce Corporation Tax!

George20/05/2022Tax Issues , Tax Saving Tips , Taxation

If a business owner aims to find key ways to reduce corporation tax, he can find more than 100 ways to do so. The will of reducing the taxes will help find a way. In this comprehensive guide, the smart and easy keyways are narrowed down for you which will be really helpful. Especially in the case of owners who carry out small businesses, there are multiple options to do so. If you are in the UK and associated with the business world the chances of reducing your taxes are even higher. There is no need to panic as according to research there are actually 32 ways to reduce the tax with the owners who carry out small businesses. Let’s discuss the most prominent keyways here to make the deadly tax year-end a little relaxing. Pay Your Civil Partner or Spouse In case you tend to pay your civil partner or your spouse for working without business as a salary. This will come under allowable expense and will save you from the tax bills. Consider the following ways to make it possible: Your spouse or civil partner earns an amount that is less than the amount of income tax-free allowance. The process will be free of tax and the amount goes straight into their pockets. This will help to grow family wealth and reduce taxes. So get ready to treat your family to some family trips with this smart earned amount. Moreover, in the case of a family member having shares in the business, he can additionally get the tax-free amount of dividends. This way makes it possible to extract some amount from your limited company and pay no tax on it. Furthermore, it is important o follow the right share structure for your business if you want to avail such benefits from the company. Our young and qualified team of professionals can actually give easy solutions to your tax problems. So pick up the phone and reach out to us now for instant help. Call us on 02086868876 or email us today. Gift Shares to Family It is to be considered that while you decide to gift shares to any of your family members, there is the possibility of tax implications. However, this is still worth doing as you will definitely be in a win-win situation. Employ Your Children Several people who are even carrying out their own business are unaware of this option and the possibility. This is important to know that your child should be over the age of 13. Some conditions for the working hours have to be followed as well as the child has to practically do some work for your business. Furthermore, a fair commercial rate can be given to the child. There can be a discussion on if you are paying your children, should it be a tax-deductible amount or not. Pension Contributions For those who are tired of dealing with the high tax rates, this one is the best solution to go with. The contributions we make for pensions are normally free of tax. Business and Personal Assets Sometimes businessmen use their own personal assets for the business. In order to reduce the tax liability there is a possibility to make a claim. An example of such businesses where you are using your gadgets like a laptop and mobile phone are considered as personal assets. You can make a claim for this personal asset. Wrapping Up Finally, the discussion of ways to reduce corporation tax can be summed up as the important information is well gathered and discussed in the guide. Dealing with taxation is often considered a complicated process, business-related individuals usually seek professional help to get rid of paying high amounts for tax bills. We hope these few minutes of reading will further help you to make smart and accurate choices to save your amount from paying taxes over the end of the financial year. If you are looking for a helping hand to talk about taxation, we offer a one-hour free consultation. Call and discuss your requirements with us for an instant solution. Disclaimer: The information about ways to reduce corporation tax provided in this article is general in nature. It does not intend to disregard any professional advice.