Tax Issues Archives - Page 20 of 20

News,May 2018

Utilise the Trivial Benefits Exemption to Provide Tax-Free Christmas Gifts

George16/12/2020Tax Issues , Tax Saving Tips

How will people approach the Christmas office party is one question in the minds of so many of us. It’s certainly not off the menu. Employees will make sure to spread some holiday cheer among their workers. These are people who have been furloughed or working from home for 2020. Taxes fade away the happiness at your end, no matter how excited you may be. You definitely want to hear more about all the trivial benefits offered at this point and time. What tax-exempt Christmas gifts are there? How do they help you keep your costs low? If you’re a business already struggling with finances, you probably want to hear more about these exemptions. Let’s Find More About the Nature of the Exemptions When the following conditions are met, a benefit is exempt from income tax and national insurance. If your benefit costs less than £50. If the benefit is not in the form of cash or non-cash voucher. If the employee is not contractually entitled to the benefit. If the benefit is not given out as an achievement award for the services provided as part of the employment duties. Then another thing that bothers many of the employees is what happens when a benefit is given to more than one person. It’s impractical to work out the exact cost in every single receipt. Average cost really helps you out whether the benefit is trivial or no. If you’re the director of a close company, you can receive tax-free benefits to a maximum of Directors of close companies £300 in a tax year (this includes the members of your family and household too). For other recipients, there is no annual limit (but each individual trivial benefit must cost £50 or less). Let’s Dig into Seasonal gifts Use trivial benefits exemptions to give out tax-free Christmas gifts to your employees. Let’s dig into a few examples: Example 1 An employer decides to buy 100 turkeys for their employees. The total bill around £4,800. The turkeys are not priced individually. So how does one work out the cost? The average cost of the benefit would be around £48. Let’s say all other trivial benefit exemption conditions are met, the turkey will be considered as a gift that’s not in any way given to the employer as a reward of their service, etc. What’s the Gift Card Trap? Take special care of gift cards topped on several occasions. Rather than evaluating each use of the card for trivial benefits exemption, HMRC takes the total cost of benefits for the calculations for one tax year. Let’s explain it better with this example: Gift Card Trap Example You’ve given a card to your employer for the exchange of a gift at a particular store. The total cost of the card will be around £30. What happens when the card is topped up with £30 for another special occasion? The card is topped up by a further £30 on the employee’s birthday. The employee is still eligible for the trivial benefits exemption. The moment he spends more than £60, he’ll be unqualified to claim the tax exemption. Now that we’re clear on the tax exemptions on Christmas gifts, let’s make sure that we’re treating our employees right while doing our tax exemptions right.

How to Pay Taxes on eBay Sales UK?

George23/11/2020Tax Issues

Just like any other traditional business, eBay sellers also have to pay a due amount for tax on eBay sales UK. In case you forget your deadline, you’ll have to pay a designated amount to HMRC as a penalty or fine. The UK laws oblige you to pay taxes whether you’re operating any big business or independent business. The same is the case with eBay. Whether you’re operating as an eBay seller or affiliate marketer, you eventually have to get down to pay a certain amount of tax on beat sales the UK to HMRC. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help about who owns a private limited company. What amount am I Eligible for as an Online Seller? The 2016 finance act made self-employed individuals comply with HMRC’s law to declare their financial income. There are certain factors that you need to keep in your mind before making a big payment. Let’s dig deeper into these elements that help you consider a trade: You’re generating profit out of your business. There is a similar transaction over a period of 2 months. You’ve invested in an item that you want to sell out to make a profit. The item is sold at a fixed price to retailers. There’s a limited time involved in buying and selling the product. You’re modifying an item to sell it. If you take a look at all the eBay business trades, this is a constant pattern you have to undergo to keep yourself self-stable. You buy an item, you either modify it or you sell it under a brand name at a fixed price. That’s why it classifies as a trade under the UK finance act of 2016. What Amount Do I Have to Sell to Pay the Taxes? It will be illogical to tax every person who is selling out a certain item on eBay. There has to be a threshold that defines what amount you’re eligible for. Until 2017, people earning around £1000 generated through eBay were excluded from tax. This was done to encourage people to move on take part in uplifting the digital economy. The amount is just eligible for people with a trading allowance. People having a personal allowance sit at a threshold of £12,570 for the 2025/26 tax year. What if You Don’t Declare Your eBay Earnings? It’s ok to sell low-value items and not tell HMRC about it. The important part is that is your business classified as a trade or not. The moment to reach the threshold of 1000 pounds, your eligible for taxes. Go on and fill out that self-assessment. Even if you’re evading a tax man, remember that your transactions are completely trackable. This means that you need to keep your earnings in order. Get Help from a Professional Now that you know the tax thresholds for online income (also classified as trade), know that other taxes might be eligible on other items too. Let’s say you’re buying a car worth more than £6000. You’re eligible to pay the capital gains tax. But the good news is that if you’re getting a profit of £11,000, the sales tax of capital gains return might not be eligible for you. It’s always a good idea to have an expert tax accountant to help you figure out your cash in and cash out. This helps you figure out what taxes are you eligible to pay, get help with a trade allowance or personal allowance, and pay all your taxes on time.

Paying Tax & National Insurance – Our Guide for Self-Employed Professionals

George06/04/2020Tax Issues , Tax Saving Tips

As a self-employed professional, one of the most important tasks and responsibilities that you’ll have to fulfill is paying for your own tax and National Insurance on your income. Aside from making sure that clients roll in constantly and all your assets and liabilities are managed properly, handling your tax and National Insurance is essential because: It entails handling certain legalities that you must comply with as a professional The HMRC is now stricter when it comes to handling self-employed professionals Not tending to your tax and National Insurance-related responsibilities properly can result in several fines and penalties that can easily affect your practice No matter how tedious it may seem, it’s always a good idea to stay on top of all your records so that you know exactly how much you need to repay the government. Beyond the simple yet tiresome nature of paying and filing your own financial obligations, there are a few other hurdles that may come about from complex arrangements. For instance, if you’re employed in one job and self-employed in another job at the same time, then dealing with your tax and National Insurance will be complicated. If you have a similar situation where your financial obligation settlement procedures are complicated, here’s a quick guide on how you can fulfill your requirements accordingly and accurately: HMRC’s Solution Thanks to a rise in similar cases, the HMRC has created a tool called the Employment Status Indicator that helps any self-employed professional know exactly what status they should file and pay under. The Employment Status Indicator is a multiple-choice questionnaire that helps determine your employment status based on the answers that you provide. It is important to note, however, that the questionnaire is merely an indicator of what status you can file under and not a definitive answer itself. On Registering Yourself as a Self-Employed Professional For newly self-employed professionals, the most important step when handling your taxes and National Insurance obligations is to notify the HMRC of your new status right away. Generally, new self-employed workers can register with their new status up to October 5 after the end of the tax year when you became self-employed. It is essential to follow the deadlines because doing otherwise will incur a late fee and an additional set of penalties. So, schedule, plan, and pay accordingly! “What if I Apply and Receive a Loan from My other Employer?” In a self-employed-and-employed set-up, one of the most important factors to consider is that receiving a loan from one’s employer can be deemed by the HMRC as tax avoidance. As a result of rising remuneration schemes, the HMRC is now cracking down on potential cases through the use of loan charges, which makes it more essential to declare if you’ve received a loan from your employer! Do You Still have to Pay for National Insurance as a Self-Employed Worker? Yes, you’re still urged to pay Class 2 NICs even if you’re your own boss. Should your profits be at least £6,365 in total for the 2019/20 tax year, then you’ll have to pay an additional fee for Tax Insurance with late fees being pegged at £3 a week (or £156 a year). Conclusion As a self-employed worker, it is essential to stay on top of your tax and National Insurance obligations by taking the necessary steps for proper preparation and apt payments. By following this quick guide, you can keep your self-employed practice away from penalties without going to extraordinary lengths! Are you a self-employed professional or small business owner looking for Affordable Chartered accountants in Croydon? Get in touch with us today to see how we can help!

Why Outsourced Accountants are the Solution to Conquering Tax Returns

George01/04/2020Accountants , Personal Tax , Tax Issues

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!

Timing Dividends Right Could Help Save Tax

George12/08/2019Personal Tax , Tax Issues , Tax Saving Tips

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

Which Benefits are Taxable and Non-Taxable?

George06/08/2019Tax Issues , Tax Saving Tips

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.

How to Apply for Tax-Free Childcare Scheme?

George06/08/2019Tax Issues , Tax Saving Tips

Government Childcare Scheme – Tax-Free Top-Up Working parents can receive a tax-free top-up from the Government to help with their childcare costs. The top-up is worth £500 every three months (£2,000 a year). A higher top-up of £4,000 a year (£1,000 every three months) is available where the child is disabled. To receive the top-up, eligible parents must open an account online. The Government will provide a top-up of £2 for every £8 deposited by the parents, up to the above limits. The money in the account is then used to pay for childcare with a registered provider. Who is Eligible? To qualify for tax-free childcare, the claimant (and their partner if they have one) should be in work, on sick leave or annual leave or on parental, maternity, paternity or adoption leave. The scheme is open to both the employed and the self-employed. However, earnings conditions apply. The claimant (and their partner if they have one) must earn a minimum of £183.04 per week on average (which is equivalent to 16 hours at the National Living Wage of £11.44 per hour for 2024/25 for people age 21 and over). This equates to £2,379.52 over three months. This limit does not apply to a self-employed person who started their business within the previous three months. There is also an earnings cap – tax-free childcare is not available where the claimant or their partner has ‘adjusted net income’ of more than £100,000. This is broadly taxable income before personal allowances, fewer items such as gift aid. The Child Tax-free childcare is available for a child who is 11 or under and who lives with the claimant. Eligibility ceases on 1 September following their 11th birthday. A disabled child remains eligible until they are 17. Using Tax-Free Childcare Tax-free childcare can be used to pay for childcare that is approved childcare. This includes childminders, nurseries, nannies, after-school clubs, playschemes, and home care agencies. The childcare provider must sign up for the scheme. Interaction with Tax Credit and Universal Credit Tax-free childcare is not available at the same time as working tax credit, child tax credit, or universal credit. The childcare calculator is available on the Gov.UK website at www.gov.uk/tax-free-childcare. Employer-Supported Childcare and Childcare Vouchers Similarly, an employee cannot benefit from both the tax-free top-up under the Government scheme and the tax exemption for employer-provided childcare vouchers or employer-supported care. Again, what is the best option will depend on personal circumstances. An employee within an employer scheme must tell their employer they have applied for tax-free childcare within 90 days of making the application How to Apply Applications for tax-free childcare can be made online at www.gov.uk/apply-for-tax-free-childcare. Additional Information: www.gov.uk/tax-free-childcare.

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