Tax Saving Tips Archives - Page 14 of 15

News,May 2018

Entrepreneurs’ Tax Relief: Everything You Need To Know

George25/03/2021Tax Issues , Tax Saving Tips

Establishing a new business is never easy, you need to face a lot of problems while starting a new business. Being a smart entrepreneur, you should try to reduce your expenses and increase your earnings by opting for efficient strategies. This is where you need to know about Entrepreneurs’ Tax Relief. You can use this relief to lower down your Capital Gains Tax (CGT) at the rate of 10% for the business assets that are sold or disposed of. Entrepreneurs’ Tax Relief- An Overview: As a business owner, you might wish to sell or dispose of your business due to your hectic routine and many other reasons. In this case, you can claim an allowance to receive a reduced tax rate on your sold assets. This allowance is known as Entrepreneurs’ Tax Relief. This relief can help you to boost your financial gains by reducing the charges of CGT on the profit you made out while selling your business assets. Nowadays it is renamed by HMRC as Business Asset Disposal Relief. Whether you’re a freelancer or sole trader, we can fix your all tax issues within a minimum time. Just click here to get an instant quote! How to Claim and How much to claim? If you’re a business owner, this relief is one of the most captivating tax benefits for you. You can claim Entrepreneurs’ Tax Relief, which is now known as Business Asset Disposal Relief up to £1 million in your lifetime. If your claim is within the threshold of £1 million, you can claim it multiple times until you reach the limit. You can claim this relief in two ways: Self Assessment tax return Completing the Section A form of the Helpsheet Business Asset Disposal Relief Key Takeaway: If you have disposed of your business in 2010/20, the deadline to claim for this relief is 31 January 2022. Eligibility for ER: Individuals are eligible for Entrepreneurs’ Tax Relief. This relief is not available for companies. To qualify for this relief, you need to sell qualifying assets, along with fulfilling other requirements. You are given a two years qualification period to qualify for this tax relief. For qualification you must follow the below criteria: You’re a sole trader and an employee You own 5% share and voting rights You have not crossed the £1 million lifetime limit This criterion differs if you sold out your shares or you’re selling your whole/ part of your business. Though, both cases qualify for the EU, you should know the difference. Seems difficult? We can make it easy! We have a team of professional tax experts for your assistance. How Does ER Work? The process is quite simple and easy. Whenever you sell an asset, you are liable to pay tax on it. This tax relief minimizes the amount of tax you pay in terms of Capital Gains Tax (CGT). Assets that qualify for Entrepreneurs’ Tax Relief: Including the tangible assets that you sold or disposed of, your shares and securities are also eligible for this relief. However, your investment and personal assets are not eligible for this relief. How can You work out Entrepreneurs’ Relief? You can calculate this tax relief by following the below steps: Add all your capital gains and calculate your CGT Subtract it with your tax-free allowance of CGT Pay 10% from the remaining amount and the rest is yours Quick Wrap Up: We hope you have got enough information about Entrepreneurs’ Tax Relief. You should keep in your mind that the rules and regulations may vary as they change with each passing year. Therefore, you must be up to date with the latest policies and legislation by HMRC. As this will be saving you thousands of pounds. For further help and assistance, don’t hesitate to contact us for getting expert advice from our qualified chartered accountants in Croydon.

The Comprehensive Guide to UK Tax Compliance

George11/02/2021Tax Saving Tips , VAT

Just imagine you are enjoying a sweet sleep at home. Suddenly, a door knock woke you up. You have been given a letter written to you by HMRC. The envelope is too thick, and the words like ‘penalties’ and ‘back taxes’ made you sink. Because your tax compliance failure regarding delays, some casual reporting, etc, has turned your sweet sleep into a nightmare. Here is a complete guide to tax compliance that will enable you to understand the system with accuracy. This guide will give you knowledge about tax culture, not only to avoid penalties but to give you back your sweet sleep. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help with tax compliance. What is Tax Compliance? It has been defined as compliance with tax laws and regulations. The objective is to ensure that the companies and the individuals pay their tax without delays, errors, and omissions. It is your safety against late filing and payment penalties. In the UK, this means: Reporting true revenues and expenditures. Filing tax returns on time. Properly paying the correct amount of tax. Keeping prompt financial records. Respond to HMRC inquiries or audits. In a nutshell, tax compliance refers to compliance with the rules that are enforced by HMRC to declare, calculate, and pay your tax appropriately and at the specified time. It is not only the payment of taxes but also keeping records and filing returns, besides demonstrating that you are a responsible citizen. Understanding Tax Penalties To avoid costly issues with HMRC, it’s vital to understand the penalties for non-compliance. These primarily include: Late Filing Penalties: An initial £100 penalty for missing deadlines, escalating with daily £10 charges after three months (to a maximum of £900), and further charges if still outstanding at 6 and 12 months. Late Payment Penalties: Charged as 5% of the unpaid tax at 30 days, 6 months, and 12 months overdue, plus late payment interest. Inaccuracy Penalties: Applied for errors in returns leading to underpaid tax or overstated claims. Penalties range from 0% to 100% of the potential lost revenue, depending on the behaviour (careless, deliberate, or deliberate and concealed) and the quality of disclosure. Serious record-keeping failures can incur penalties of up to £3,000. Evolution of Tax Compliance in the UK UK tax compliance has evolved. The cornerstone legislation in the Tax Management Act 1970 has been made. Now, to a large extent influenced by more recent regulations like MTD and Finance Acts. This applies to all the workers in the gig economy, and even multinational corporations in the UK. It apparently appears to be the dull but compulsory thing that finances our NHS, the roads, and the schools. With the ongoing implementation of digital tools and applications like the Making Tax Digital (MTD), tax compliance will become real-time and paperless. From April 2026, self-employed people earning above £50,000 will have to abide by MTD on their income tax returns, which will further boost the use of digital compliance. When it comes to individuals, it is mandatory to report income, which is the salary, rental or side income. Corporate tax and VAT are some of the taxes that businesses pay. You took a wrong step or missed a step, and you can be on the verge of HMRC scrutiny. Tax Compliance and HMRC – An Oversight The tax collection organisation of the UK is “Her Majesty’s Revenue and Customs” (HMRC). They manage compliance by: Checks: The HMRC can inspect your company records, returns, and payments to ensure that all is correct. Investigations: HMRC has the power to call formal investigations where it has a suspicion of fraud or tax evasion. Guidance and Support: HMRC offers guidance and support, WebExs, and helplines, to facilitate taxpayers to be compliant. In the case of large businesses, HMRC has a Large Business Directorate, which has senior compliance managers to manage and support tax requirements. Why Tax Compliance Matters in The UK? Firms are at risk of losing their reputable status. A tax scandal has the power to sack your brand overnight in the world of trust currency. Conversely, timely payment of taxes comes in handy. Get the legal reliefs, e.g., the trading allowance of £1000 on side jobs, and your pay after tax will go up. It also forms an effective rapport with HMRC, which makes it easier for future queries. This is not just about avoiding fines, but this is also a question of stability as well as trust building. Here’s why it matters: Fines: Filing after the deadline or underpayment can lead to fines and interest. Reputation: This is especially the case with business, as tax compliance is a sign of professionalism and trust. Support Public Services: The taxes are used to fund healthcare, education, infrastructure, etc. Foster Growth: The firms that comply will be better placed to invest and develop. Breaking tax laws is not a victimless crime. Firstly, there are severe penalties. A late Self Assessment return attracts a fine of £100 at the first instance, and then there are further penalties of £10 per day up to £900 in case of 3 months. If the return remains unfiled after six months, a further penalty of £300 or 5% of the tax due (whichever is greater) is applied, and another similar penalty of £300 or 5% of the tax due (whichever is greater) is applied if the return is still outstanding after 12 months. Tips for Prompt Tax Compliance Effective tax compliance is mainly achieved through good practices. First of all, store and keep records in electronic devices, use apps, e.g., FreeAgent, and integrate them there. Second, there will be known reliefs such as the Marriage Allowance, which will save the couple a sum of £252 a year. Always stay ahead. Some of the methods to ensure compliance are as follows: Maintain Records: Maintain the records of income, expenses, invoices, and receipts in proper order. Deadlines: Enter in your calendar the due dates of VAT …

Constant Vigilance Spotting and Reporting Tax Return Scams

George04/02/2021Personal Tax , Tax Issues , Tax Saving Tips

The National Fraud Intelligence Bureau reported that coronavirus-related scams skyrocketed 400% in the first month of lockdown in the UK in March 2020. Over 100 cases were recorded, with losses totalling £970,000. The scams continued over the course of the year. At the beginning of 2021, fraudsters are now targeting citizens who are filing personal taxes. HM Revenue and Customs (HMRC) reported copycat HMRC websites, phishing scams, and fake text messages sent to trick people into disclosing account information and personal details. In this article, we will cover the methods of tax return scams, how tax return scams work, how to spot it and what to do if you have been scammed. How Tax Return Scams Work Tax return scams usually start in the same way. A fraudster will communicate with you over landline, text message, or email, claiming to be from the HMRC. They will say that you can claim financial help or that you’re due a tax refund. Sophisticated fraudsters even reference your Government Gateway Account and create email graphics that look official. You will then be led to a portal that requires you to enter all your details, bank account information, and other data, including your Unique Taxpayer Reference Number (UTR). If successful, the fraudsters will be able to claim your refund or even get into your bank account. Fraudsters are leveraging technology in increasingly creative ways, so you need to be vigilant whenever you receive text messages or emails from seemingly official channels. It’s best to keep from clicking any of them, even if they’re simple promo texts from your favourite retail store! Simply accessing a suspicious link may make your phone or computer vulnerable to malware or viruses. How to Spot a Tax Return Scam For tax return scams, in particular, spotting them is simple: HMRC does not contact customers through email or text. It always sends all tax return communications via post. If you are employed and don’t usually fill in your tax return, any HMRC communication is a scam. If you do fill in a Self Assessment Tax Return form or VAT returns, HMRC will communicate with you via email. It’s important to always check that the email is sent from an email address ending in hmrc.gov.uk. HMRC will never ask for your bank account information, passwords, or PINs. It’s best never to enter any of this information in an online form that’s in any way suspicious. If in doubt, you can get in touch with HMRC to check if the communication is genuine. You can forward suspicious emails to [email protected] and texts to 60599. What to Do If You’ve Been Scammed If you think you’ve been the victim of a scam, check your bank accounts immediately and see if you’ve lost any money. Contact your bank and ask for advice on how to protect your accounts. You may have to change your passwords, create a new account, or cancel your card. Check your accounts with HMRC as well, and let them talk you through how you can retrieve lost money. Conclusion Fraudsters continuously come up with new and creative ways to scam people into giving away personal information. It’s more important than ever to be vigilant and to protect yourself from these attempts. Double-check email addresses and website URLs before clicking links and entering any personal details. HMRC sends all tax refund communication via post, so report any suspicious texts or emails to their official channels. Are you looking for affordable accounting services in Croydon to help you with your tax filing and avoid tax return scams? CruseBurke provides affordable accounting and taxation services to individuals and small businesses. We have over 100 years of combined experience in providing a broad range of services, such as self-assessment tax returns, corporate tax, auditing, and more. Contact us today!

How Can a Self Employed Personnel Benefit From £2,000 Dividend Allowance 2020/2021

George01/02/2021Limited Company , Tax Issues , Tax Saving Tips

All taxpayers can claim their tax-free dividend allowance. Dividend Allowance 2020/21 is set at £2,000. This is a golden opportunity for all the self-employed personnel to registered for self-employed. If you’re thinking of making the switch, you need to do it right now. Let’s Discuss the Nature of Allowance If you own a limited company, and you’ve registered it as a self-employed. The good news is that you can take out some money as dividend allowance 2020/21. You can even take out these dividends if you’ve got some shares in the company. The ‘dividend allowance’ is at zero rate band. You don’t have to pay taxes on these dividends, but these count towards band earnings. If you’ve not utilized any personal allowance, you can also avail dividends under the personal allowance. These will be counted as free of tax. What Dividends are Not Covered by the Allowance If your dividends are not shrouded under dividend allowance or personal allowance, count them as taxable. These dividends will be taxed under regular tax rates. Dividends are considered as the prime source of income if the taxpayer has other sources of income too. The dividend is taxed at 7.5% such that it falls under the basic rate band. At 32.5% to the extent that it falls within the higher rate band and at 38.1% to the extent that it falls within the additional rate band. All these tax rates are applicable in 2020/2021. How to Use the Dividend Allowance 2020/2021? If you’re not using the dividend allowance in 2020/2021, you might end up losing it. The tax year comes to an end in 5th April 2021, so it’s a good option to review what dividends you’ve taken up, and what dividends do you wish to take up in the future? The COVID-19 may have an impact on your shared income. And this changes things overall for you. Whether you’re a self-employed individual or taking up dividends from a family investment, you might want to take up more of these dividends to make sure that you’re utilizing your allowance. Remember that dividends can be only paid from retained earnings. Can you Pay Dividends if your Business is Facing any Losses? Paying Dividends from your company’s income is not affected by losses. If your business faced loss in 2020/2021, and there are any chances of profit that can compensate for the losses as well as for the dividends then go forward and avail them. It’s important to go by the company law requirements and pay your dividend allowance 2020/21 using the alphabetic share structure if you own family business. Like one shareholder has A-class share, another shareholder has B class share. This is helpful in using all your family member’s dividends.

Environmental Taxes, Reliefs and Schemes For Businesses

George11/01/2021Accountants , Tax Issues , Tax Saving Tips

Adapting regulations regarding environmental taxes in the UK makes your business more environmental friendly and protects our environment. There are different taxes and schemes to encourage you to adopt these regulations. If you are running a business then: You may be consuming a lot of energy Small businesses with fewer energy needs You go on to buy energy-efficient solutions Climate Change Levy (CCL) CCL is an environmental tax charged on the energy used by businesses in industrial, commercial, and public service sectors. There are two CCL rate categories: Main Rates: Apply to gas, electricity, and solid fuels. Carbon Price Support (CPS) Rates: Apply to fossil fuels used for electricity generation. Current (2025) Main Rates: Electricity: 0.775 p/kWh Gas: 0.775 p/kWh LPG: 2.175 p/kg Other Fuels: 6.064 p/kg You do not pay the main rate if your business has low energy needs, is for domestic use, or is involved in charity-related activities. CCL is collected by HMRC and includes VAT on top. Emissions Trading The EU ETS affects businesses from energy-driven sectors and areas. This includes industries related to energy and manufacturers of certain kinds. This scheme allows your business to trade greenhouse allowances. This means you can buy and sell greenhouse gas emission allowances. Allowance trading reduces your business’s environmental impact. Under EU ETS, your business has to meet the target by cutting its emissions and trading emission allowances. Capital Allowances on Energy-Efficient Items You can avail this allowance if you purchase environmentally friendly equipment for your business. You can pay less tax after this. Your business will also be eligible for enhanced capital allowance on equipment that includes: Vehicles with a low carbon footprint Energy-efficient equipment and machinery Gas and biofuel technology Water-saving gadget Zero-emission vehicles As of 2025, a new Climate Change Agreement (CCA) Scheme is opening to support energy-efficient investments. Landfill Taxes Businesses have to pay taxes on dumping their waste through landfill sites. This tax is independent of the landfill fee. Your business will have to register for it in under 30 days. You will have to face fine and penalties if the period expires. There are two rates: Lower rate of £2.65 per tonne for waste that includes rock and soil The standard rate of £84.40 per tonne for active waste Aggregate Levy This levied tax is applicable on rock soil, sand and other earth material dredged from the ground or waters. Your business will have to pay £2 per tonne for it. Environmental taxes in the UK ensure that you reduce your carbon footprint and contribute to the environment. Also, these green taxes will help you bring down your operational costs significantly. Conclusion Environmental taxes in the UK aim to reduce the carbon footprint of businesses while promoting greener practices. By complying with these regulations, your business not only contributes to protecting the environment but may also benefit from tax savings and operational efficiency.

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.

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!

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.