Taxation Archives - Page 11 of 13

News,May 2018

Tax Deductible Travel Expenses for Self Employed

George30/11/2022tax , Tax Issues , Tax News and Tips , Tax Saving Tips , Taxation

When you claim your travel expenses as a self-employed individual, the first important thing you need to do is identify which travel comes under a specific category. Whether you are self-employed or working with an organisation, the travel that you are covering daily as a commute to your permanent workplace will not be considered an expense that is deductible. It becomes an allowable expense when you are travelling to a workplace that is temporary. The cost and amount of money that you spend on ordinary commuting can not come under the allowable expenses. Many of you must be wondering by now what are self-employed tax-deductible expenses then. Further, this guide will help you to gather information about what are permanent and temporary workplaces, how are they related to travel expenses, what are allowable tax-deductible expenses for self-employed individuals, and what points you should be considering before you plan to claim the costs for tax purposes. Reach out to one of our professionals to get to know self-employed tax-deductible expenses for your earnings in the UK. Get in touch and you will be provided instant professional help! What are Temporary and Permanent Workplaces? Sometimes the regular workplaces are temporary, however, the grey area is still there and the point becomes complicated. When you are associated with a construction project and you expect to work there for a duration of two years at least, many of you might confuse it with a temporary workplace. However, the case is entirely different because of the duration. This is a permanent workplace. How are Temporary and Permanent Workplaces Related to Travel Expenses? If we talk about the salesperson who works in the field, this will also be considered his permanent workplace. The commute and travelling expenses from some areas will not be considered allowable expenses in this scenario. The travel that is done for the business meeting can be claimed while you’re doing your tax returns. In some cases, you might require to travel to visit a client. If you travel from the permanent workplace, these expenses will be considered, however, if you travel from home to the client the expenses will be allowable in a few circumstances. You can seek the help of a professional to understand the rules of HMRC for your unique situation. What are Self-Employed Tax-Deductible Expenses? Travel for business purposes comes first on the list of tax-deductible expenses. While you are on a business journey, it is imperative to understand that you need to keep all the related receipts for any transport you have used. This includes the uses of public transport as well like buses, vans, cabs, and taxis. The journey that is purely related to the business purpose will be considered. You can even use Transport for London’s “TFL App” if you are travelling in London. You should keep the receipts intact that are related to the toll booth charges, car rental, parking costs and congestion charges. A few salient features to consider in this regard are explained below. 1- Mileage Tracking In case you are the one who is driving, you will have to keep a track of the mileage. This should be 45p per mile for the initial 10,000 miles. This is the instruction for the cars and vans. This will help you to save a lot of money. 2- Cost of Travelling One of the frequently asked questions that people ask is whether you have to avail of a cheap form of travel while you are on a business trip. The simple answer is no. For example, you are travelling in the UK and the tube cost you pay is £5.90, however, if you find it easy to take a cab you can have one. Even if the cab is an expensive commute, you do not need to worry about that. What are the Things to Remember Before You Claim Expenses for Tax Purposes? The take-home points you must remember before you plan to claim the allowable business expenses are listed below. You should keep the record of your business travel intact to get approval and provide any kind of evidence that is required. Keep a record of the purchases that you have done for your business and ensure to keep it separate from your personal expenses. Your mileage log should be as detailed as possible. You can better use the automatic mileage tracking app. The partial parts of the journey may not include in the list of allowable expenses and your claim may not be successful if you add them. Ensure to understand your journey details to make an accurate tax return and get the claim of the maximum that you have spent. It sounds like a time-consuming process but it will help you to provide pieces of evidence when required. You can get in touch with the professionals if you are unable to understand the details of your journey and how to record them. The Bottom Line Now that you have gathered a fair amount of information about self-employed tax-deductible expenses, we can bring the discussion towards wrapping up. The deductible travel expenses for a self-employed individual might sound complicated to record every detail of the journey, however, you can use the automatic apps to do the needful and save time. The more detailed your record is, the more accurate the tax return you will be able to file. You can even take the help of an advisor for a better comprehensive guide. We hope these few minutes of reading have helped to develop a better understanding of self-employed tax-deductible expenses and tax rates. Get in touch with our young, clever and tech-driven professionals if you want to choose the best guide for self-employed tax-deductible expenses in the UK. Disclaimer: The information about the self-employed tax-deductible expenses provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

How Do I Get My Tax Refund After Leaving the UK?

George24/11/2022tax , Tax Issues , Tax News and Tips , Tax Saving Tips , Taxation

Are you the individual who is planning to work abroad or to live there and leave the UK? The first thing you must gather information about is the tax refund entitlement. This has to do a lot with the current tax status and the unique circumstances of your case that will help HMRC decide whether you are eligible for a UK tax refund. You will have to get in touch with the tax authority of the UK and HMRC to inform them about the date when you are leaving the UK and finally going overseas. This will help them to make the right calculations for your tax refund, if any. Moreover, there are plenty of online calculators available that you can use to calculate your amount of tax refund amount yourself. In this guide, you will find out what is leaving a UK tax refund is, what is the eligibility criteria, what is the amount of tax refund, and how can I get the tax refund before I leave the UK to settle overseas. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get instant help whether you want to learn about leaving the UK tax refund. What is the Leaving the UK Tax Refund? Leaving the UK tax refund refers to an amount that you will have to claim within four years after leaving. This works as the timescale of the refund. The tax office will require a claim to be received, considering the limit of the timescale before you expect to receive the amount of refund. This can be the overpaid income tax that you paid in the same year when you left the UK to settle abroad or to move back to your country. Who is Eligible to Claim the Tax Refund after Leaving the UK? The UK residents who have now planned to move overseas are in a position to claim a tax refund. This is allowed because of the fact that you will no longer have the status of being a UK resident, and the tax implications will not be implemented anymore. You will have to pay the tax in the new country that you are planning to move in. For the cases who have lived for a long time in the UK or have worked here, and now want to move back to their own country, it is allowed to claim the tax refund before they leave the UK. However, you will have to be a PAYE employee and must have left the UK within the past four years. Also, consider that you were earning an amount that you were able to pay the income tax in the year of claim. How Much UK Tax will I Get after the Refund Claim? According to the information provided by HMRC, there is no upper limit decided for such cases. There are multiple factors that you will have to consider and it depends on the unique circumstances that will decide the amount of tax refund. Especially when you have more than one income source. For these factors, your situation will be considered to provide the amount of tax to your unique case. Because it always varies from one person’s case to another. The common practice is that you get the income tax refund for the same year in which you plan to leave the UK. HMRC will decide the amount of tax you have paid in the situation of leaving and the amount you would have paid if you were planning to stay in the UK. How will I Get the Refund if My Claim is Accepted? It is the job of the tax office to provide an accurate calculation of any overpaid tax and generate a P800 form that will have all the details about the amount of your tax refund. The breakdown of your tax refund will also be updated on your personal tax account if you own one, and the tax authority will post the form to your available address. Moreover, you are even allowed to explain to HMRC how you are comfortable getting the tax refund. You have the option of getting the tax refund to one of your UK banks through a bank transfer or receiving a cheque for the payment. There are several cases when people do not have a personal bank account in the UK. If that is the case with you, you have the option to nominate someone who will receive the tax refund in their account on your behalf. The Bottom Line Now that you have gathered a fair amount of information about leaving the UK tax refund, we can bring the discussion towards wrapping up. Getting a tax refund might sound exciting and add up to your existing amount of money while you are leaving the UK and planning to settle overseas. However, there are multiple factors that are considered to be entitled for the tax refund. If you meet the eligibility criteria, you will be lucky enough to get the amount. We hope these few minutes of reading will help you to develop a better understanding of how to be eligible for a tax refund while leaving the UK. Are you seeking professional help to know about leaving the UK tax refund? Why not get help from the experts at the CruseBurke? Talk to us now! Disclaimer: All the information provided in this article on leaving the UK tax refund includes all the texts and graphics. It does not intend to disregard any of the professional advice.

Time to Pay Arrangements with HMRC

George23/11/2022tax , Tax Issues , Tax News and Tips , Tax Saving Tips , Taxation

There are several companies and organisations in the UK that fail to meet the deadlines for tax bills. If you are also one who is carrying out a business in the UK and struggling with the tax bills, you might be offered an instalment plan by the HMRC to pay your tax bills easily. This will allow you to get your payments cleared by having a long period of time and in the form of instalments. To avail of this opportunity, you must have a basic understanding of the time-to-pay arrangement. This article will turn out to be helpful in this regard, and you will be able to gather information about what a time-to-pay arrangement is, what the criteria are to check eligibility, how you can negotiate with HMRC, and how to apply for the instalment plan. Reach out to one of our professionals to get to know what is the time to pay arrangement HMRC for your business in the UK. Get in touch now and get your queries answered quickly. What is the Time-to-Pay Arrangement with HMRC? The time-to-pay arrangement refers to a kind of agreement that is working between the taxpayers and HMRC in case you fail to pay the tax. This allows you to pay the tax in instalments by availing of a long period of time. This is the agreed duration of the period that is specified for the payment plan. This plan can work for all kinds of taxes; however, it is most commonly used for the sake of corporation tax. The companies use it for the payment of VAT and PAYE. If you are a limited company that is struggling with short-term cash flow difficulties, the time-to-pay arrangement is your handy solution. However, for the companies that have a usual habit of having tax problems and paying the tax late, HMRC will not entertain the instalments for such cases. What are the Criteria to Check Whether I am Entitled to Get a Time-to-Pay Arrangement? The main thing to consider for the HMRC when a company applies for the time-to-pay arrangement is that the company needs time to clear the payment in an easy way or to find an escape from the tax bills. When a company applies, it has to prove the genuine reasons with shreds of evidence that can explain the reason why it can not pay the tax bills at the moment. The genuine shred of evidence will be able to make HMRC feel considerate about the case to approve the time-to-pay arrangement. Moreover, the payment history from past records will also be checked by HMRC. HMRC makes decisions after checking the ability of a business to pay the instalments by its financial position. Also, the chances of future tax bill payments will be considered by HMRC. Is there a Possibility of Negotiation? There is a limit to the matter of negotiation, but HMRC is flexible for this. This is not the idea to put more pressure on a business that is already going through a rough patch. This means that HMRC is open to negotiating in such hard circumstances for a business. You can even hire a professional to do the job on your behalf. Because HMRC will respond well to a person who has a better understanding of their rules. How to Apply Online for a Time-to-Pay Arrangement with HMRC HMRC now allows eligible individuals and some small businesses to apply for a Time to Pay arrangement online, making the process quicker and more accessible. This service is ideal if you are experiencing temporary financial difficulties and want to spread the cost of your tax bill into affordable monthly payments — without needing to call HMRC directly. Who Can Apply Online? You can apply for a Time to Pay plan online if all the following conditions apply: You owe up to £30,000 in tax. Your tax return has been submitted on time. You are within 60 days of the payment deadline. You don’t have any other active Time to Pay arrangements. You can pay the full amount in monthly instalments within 12 months. If you meet these conditions, the online service is the quickest way to set up your instalment plan. Taxes You Can Pay with an Online Plan Self Assessment Tax (most common) PAYE (for sole traders) Corporation Tax or VAT may still require phone-based arrangements. How to Apply Log in to your Government Gateway accountYou’ll need your login details and your UTR (Unique Taxpayer Reference). Go to the HMRC Time to Pay portalApply for a payment plan Follow the on-screen steps Enter your tax owed Choose how much you can pay upfront (if anything) Select how many months you want to spread the payments over Review and confirm your arrangementIf accepted, your direct debit will be set up automatically. What If You’re Not Eligible? If you: Owe more than £30,000, or Need more than 12 months to pay, or Are outside the 60-day window …then you’ll need to contact HMRC directly by phone to request a manual arrangement. The Bottom Line Now that you have gathered a fair amount of information about the time-to-pay arrangement with HMRC, we can bring the discussion towards wrapping up. The business that is going through a struggling phase will have to prove the genuine reasons behind it to HMRC before expecting the payment plan and the flexibility of HMRC. We hope these few minutes of reading will help you to develop a better understanding and you will be able to deal with business struggles well in the future. Get in touch with our young, clever and tech-driven professionals if you want to choose the best guide for the time-to-pay arrangement with HMRC for your business in the UK. Disclaimer: The information about the time-to-pay arrangement HMRC for your business in the UK provided in this blog includes text and graphics of a general nature. It does not intend to disregard any of the professional advice.

Calculating Your Dividend Tax Bill

George02/11/2022tax , Tax Issues , Taxation

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

How You Can Have Tax-Free Income of £18,570 from Savings?

George14/10/2022Personal Tax , tax , Tax Saving Tips , Taxation

How much income is tax-free if you are saving from your income and earning interest on it? Many people in the UK put some savings aside and earn an interest rate on them. However, they have no idea about the tax-free income from savings they can have. Interest in savings is a good source of earning additional income in the UK where the cost of living is increasing every day. However, this income is also not tax-free. You have to pay tax on this income too. Just like income, there’s an income allowance, you can have multiple allowances on your savings as well. If you’re also one of those people who have no idea about allowances and tax-free savings incomes, then we have got you covered. In this blog, we will walk you through different types of tax-free allowances and how you can get the maximum tax-free income from your savings. So, let’s start! Do you need help in sorting out your tax problems if you are self-employed or working with an organisation? Let’s get instant help from the qualified financial experts at CruseBurke. Tax on Interest Income Many people in the UK keep their savings either in cash Individual Savings Accounts (ISAs) or in bank accounts. For this, they earn a certain percentage of interest rate on these savings. HMRC offers tax-free allowances to these people who save. Cash Individual Saving Accounts (ISAs) are free from taxes and anyone can have these savings accounts without paying any tax on them. However, other savings are eligible for taxes in the UK after certain allowances. These allowances are as follows: Personal Allowance Starting Rate of Saving Allowance Personal Savings Allowance Personal Allowance (PA) HMRC covers all the income received from all sources of income. If you have multiple sources of income, including interest income, you will get a personal allowance after calculating the total income from all these sources. You cannot get a separate personal allowance for each source of income. In other words, you will get only one personal allowance on the total income you received in a tax year. You will get a personal allowance of £12,570 after the calculation of the total income. The rest of the income will be taxed according to the tax bracket in which your income falls. Starting Rate For Savings (SRS) Starting rate for savings is zero percent for the people earning a low level of income. On the other hand, the starting rate for savings is tax-free up to £5,000. It is calculated after the calculation of the personal allowance. For example, if your income is £16,500 and you get a personal allowance of £12,570. The remaining income will be: £16,500 – £12,570 = £3,930 Now, you can calculate the starting rate of savings that is tax-free as follows: £5,000 – £3,930 = £1,070 It means you can have £1,070 from the interest income tax-free. For example, if you are earning £50 as interest on your savings, it is tax-free as it is within the limit of the starting rate of savings, that is now £1,070. Personal Savings Allowance (PSA) Personal savings allowance is another tax-free allowance on the income earned from the interest on savings. Personal saving allowance is fixed for different tax bands. For example, Personal Savings Allowance for Basic Rate Tax Payers is £1,000 Personal Savings Allowance for Higher Rate Tax Payers is £500 Personal Savings Allowance for Additional Rate Tax Payers is £0 In other words, if you are earning more than £12,571 and less than £50,000, you are paying 20% income tax on your income. However, you can get a Personal saving allowance of £1,000 on your interest income. On the other hand, you can get £500 Personal Savings Allowance, if you are a higher rate taxpayer. Unfortunately, you cannot get any PSA on your savings if you are a higher rate taxpayer in the UK. How Much Income is Tax-Free on Savings? If we calculate all of the above allowances for a basic-rate taxpayer, you will get a total tax-free income of £18, 570. For example: Tax-Free Income = Personal Allowance + Starting Rate For Savings + Personal Savings Allowance Tax Free Income = £12,570 + £5,000 + £1,000 = £18,570 The Bottom Line Finally, we can say that you can earn more tax-free income if you earn interest on your savings. However, you have to pay no tax if you have saved your income as cash ISAs in the UK. Otherwise, you will get a personal income allowance, a starting rate of savings and a personal savings allowance. For this, you need to work out your total income and calculate the tax-free savings income. You need to keep all records of all your sources of income and tax receipts to claim tax-free income from the HMRC. Experienced and certified tax advisors at CruseBurke are the experts in UK tax laws and able to deliver the best tax solutions to you. Feel free to contact us now! Disclaimer: All the information provided in this article on How Much Income is tax-free, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.

Claiming Back Tax on a Small Pension Lump Sum

George12/09/2022Tax Issues , Taxation

If you are an individual who is taking amounts of money from pension sources, there is a chance of paying more tax than was required due to unawareness. You need to know in that case how is it possible to reclaim the amount you have paid as tax overpayment? The amount of money you have invested keeps on fluctuating. Sometimes it goes down and sometimes it goes up. The set of tax rules can also change for the sake of betterment or control errors to perform with accuracy. Moreover, the circumstances of your living like the area you are residing in the UK may also affect the implication of tax rules for you. However, in the case you made an overpayment, you can claim tax back on your pension. Reach out to our smart team of professionals to get claim tax back on your pension queries answered quickly. We will help to let you decide about tax relief with a clear mind. What is the Need to Claim Tax Back on Pension? When you plan to make money through the sources of pension, usually it is allowed to take the first 25% of the amount without paying any tax on it. Any amount of money that you will take after this percentage will be subject to tax. This means you will be liable to pay income tax following the set of rules according to your unique circumstances. According to HMRC, the amount of money you will take from your pension after 25 per cent will be the taxable withdrawal. You need to be aware of the tax rate applied on such taxable withdrawals can be on the emergency tax rate as well. This will result in paying a larger amount as tax than was required. Some people tend to take their regular income from pension sources; however, here you will have to be vigilant about the usual tax balance out. This will keep you away from paying any extra amount known as tax overpayments. When an individual takes a lump sum amount of money from the pension, this is a chance of the tax implication with the emergency tax rate. If you have released that you have paid more in form of tax than it was required, you do not need to worry about it. you can claim tax back on your pension. The Eligibility Criteria for Claiming Tax Back on Your Pension You may be eligible to claim a tax refund from HMRC if: You’ve withdrawn more than 25% of your pension and were taxed under an emergency tax code You received a pension lump sum but your total income for the year is below your tax-free allowance (£12,570 for 2025–26) You no longer receive pension payments or only took a single withdrawal If you’re unsure, you can use HMRC’s tax refund eligibility checker or speak with a professional accountant. Which HMRC Form Should You Use? Here’s a simple breakdown of which form to use based on your situation: Situation Form to Use Took a lump sum, no other income (e.g., retired) P50Z Took a lump sum, still working or have other income P53Z Took part of your pension pot and plan to take more later P55 These forms are available on GOV.UK and can be submitted online or by post. UK Region Matters – Scottish Taxpayers Take Note Tax rules vary slightly depending on where you live: England, Wales & Northern Ireland: Basic rate = 20%, Higher rate = 40%, Additional rate = 45% Scotland: Different income tax bands apply, with rates starting at 19% and reaching 47% If you live in Scotland, you may pay different tax rates on your pension income — especially important when calculating overpaid tax. Note: Not all pension providers automatically apply Scottish tax codes — always check with HMRC if unsure. How Will HMRC Refund You? Once you submit the right form: HMRC will process your claim—usually within 4 to 6 weeks If approved, you’ll receive a refund directly to your bank account You’ll also receive a new tax code, which ensures correct taxation moving forward If you don’t claim manually, HMRC may correct it automatically at the end of the tax year — but that means waiting until after April 2026. Real Example Scenario: You took a £20,000 lump sum from your pension. The first 25% (£5,000) is tax-free. But HMRC taxed the rest (£15,000) using an emergency tax code, deducting £3,000 (20%). If your total annual income is low, this likely means you’ve overpaid and can claim back some or all of that tax. The Bottom Line Now that you have gathered a fair amount of information about claiming tax back on your pension, we can bring the discussion towards wrapping up. We can say that if you are taking the amount of money from your pension over the tax-free limit, you will have to pay tax. There are high chances of overpayments due to the lack of awareness in this matter. However, you can reclaim the overpaid amount of tax by following certain rules of meeting the criteria. Be assured of the fact that the tax rules and implications can vary from one person to another, and this depends on the area you are residing in the UK. We hope these few minutes of reading will help you to know your tax implications better and handle the refund claims more professionally. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly. Get in touch now and we will come up with fine solutions. Disclaimer: The information about the ‘claim tax back on your pension’ provided in this blog includes text and graphics that are general. This does not intend to disregard any of the professional advice.

What Tax Does a Sole Trader Pay? A Basic Guide!

George15/08/2022Tax Saving Tips , Taxation

According to a survey, there are millions of people who are associated with the private business sector in the UK. Several people among these are the ones who are carrying out private business without hiring any employees. The sole traders are the representations of the private sector of business in the UK. In the modern business era, there is a high tendency to increase their business frequency. The reason behind the increasing number of people working as sole traders is because they love the idea of freedom in working. The factor of autonomy is also achieved when you are self-employed. However, the question that arises here is what tax does a sole trader pay? It is known to be an easy process when it comes to setting up a business as a sole trader. People tend to put their passion into a career opportunity for their business. However, there are always law authorities in the country whose rules and regulations, you have to follow to carry out your business successfully. In this guide, you will get to know about what is a sole trader and what are types of taxes he has to pay. Talk to our best accountants and bookkeepers in the UK at CruseBurke. You will get ensured instant help whether you are running a small business or large. Get in touch now! What is a Sole Trader? Before delving further into the discussion, let’s first learn how to define a sole trader. It is when you decide to become self-employed or to run your business, that you will have to pick one option of whether you will like to become a sole trader to run your business or develop a limited company. Know that they are the individuals who decide to run the business on their own and their employment status is self-employed. In the case anything goes wrong in the business, the sole trader will be liable for all the losses or debt clearance that their business might owe to debtors. On the other hand when an individual chooses the option of carrying out the business through a limited company. It brings shared liability and ownership among shareholders and directors. This means all the shareholders and directors will be liable for the debt clearance as well. What Tax Does a Sole Trader Pay? It is known in the UK that all limited companies are liable to pay the corporation tax, however, for sole traders, there is no such requirement of paying corporation tax. Sole traders are liable to pay the income tax. The amount of income tax is depending on the amount of income they make and the profits every year. There is also a requirement of paying class 2 and 4 national insurance contributions. While you are doing the calculations about the amount of tax that you will have to pay, you will add the business expenses. The business expenses can include the followings: Business travel expenses include the amount spent on fuel and vehicles. The utility bills of the business. The rent of your business premises. Internet and phone bills are used for the business. Amount spent on marketing and advertisement. Stocks or material. Here it is imperative to know that the tax you will pay as a sole trader will be on your annual profits. Your profits are calculated when you deduct your business expenses from the income you earned from self-employment. How Can a Sole Trader Pay Tax? It is a legal requirement for you because you run the business as a sole trader and you take the responsibility of paying national insurance and other tax to the government. The annual self-assessment scene is the one you use to pay your tax. You need to enter all the required information into your system and it will give you the exact details of what you have to pay to the government. The question that arises here is how can a sole trader pay the tax. There are many methods to pay the tax when you are a sole trader. They are listed below for you: Cheque in the post BACS Corporate credit card Debit card In your bank branch or the society bank branch The telephone banking CHAPS Online bank account How Much is the Amount of Tax? The amount of tax that you have to pay as a sole trader depends on the number of your annual profits. The more profits you earn from your business the more tax you will have to pay. See the following points to get an elaborate idea of how much you have to pay: VAT VAT is only payable for you as a sole trader when your business turnover has reached the amount of £85,000. National Insurance Class 2 and class 4 are applied for the sole traders in the case of national insurance. Class 2 is applied when your annual profit is going over the figure of £6,725. However, class 4 is applied when your annual profits are going over the figure of £11,909. Income Tax You are only liable to pay income tax in case your earnings are more than your allowance threshold. Personal Allowance The tax-free amount is £12,570. The Bottom Line Now that you have gathered a fair amount of information about what tax does a sole trader pay, we can bring the discussion towards wrapping up. It may sound easy to run your business as a sole trader, however, there are many factors that you have to consider to make it successful. We hope this guide has helped you to know about your tax liabilities in a better way. Are you seeking professional help to calculate what tax does a sole trader pay that is based on cash? Why not get help from the experts at the CruseBurke? Talk to us now! Disclaimer: All the information provided in this article on what tax does a sole trader pay including all the texts and …

Capital Goods Scheme for VAT – How Does it Work?

George25/07/2022Tax Issues , Taxation

If you are dealing with assets that are highly valued, you are in need to know the importance of the capital goods scheme for VAT and how it can affect your relevant matters. In the purchasing process that you are involved with a VAT registered firm, you will struggle with the involvement of input tax here as well. It is allowable for them to claim it fully by informing HMRC. This scheme tends to deal with partially exempt businesses usually. Also, the firms that have some sort of assets for business use or non-business uses. This is specifically concerned with the time of purchasing the assets. Moreover, in this blog, you will find everything that you need to know about the capital goods scheme for VAT, how it works, and what are different scenarios related to it. Get in touch with our young, clever and tech-driven professionals if you want to know more about the Capital Goods Scheme for VAT and how does it work? Capital Goods Scheme for VAT and How Does it Work? If you are still wondering about the scheme, you must know by now that the scheme is applicable for all kinds of businesses that aim to acquire assets like having effects of the adjustment period. This makes the business diversify for exempt activities. Moreover, the amount that your business has received from the use of such an asset, VAT recovered amount will be recovered with the help of this scheme. Furthermore, this is not applicable if your assets are up for any kind of reselling. Regardless of the purpose is a fully non-business type. This will be only applicable to the following listed options: Aircraft, other vessels, boats, and ships. Types of equipment like computer buildings and land In Case Of Capital Allowance Claim When you are in a scenario where the purchasing of an asset has failed even when the scheme is applicable. It becomes a subject of capital allowance claims. The details will be allowable to be a part of the capital allowance. The following features are salient to consider in this matter: There is a requirement for scheme adjustment at every interval that is subsequent. This can lead to results like a rebate or an extra liability. There will be a great effect of the irrecoverable VAT amount on the calculations of capital allowance. The last day on which the scheme adjustment is required will be considered as the date of addition. Scenarios Which can Unexpectedly Catch Out Businesses There are chances of potential scenarios when it comes to the situation that the scheme does not apply to the partly exempted businesses. The unexpected situation of claiming VAT fully must be handled at such a stage. We can consider the example of such a business here that is going to reclaim VAT fully and then it will dispose of the business premises. This is done after the same business is owned for six years. To avoid this scenario, the taxable supply of the property can help. As VAT will be charged on selling, however, no old reclaimed input VAT will be scattered anymore. The Bottom Line Now that you have gathered a fair amount of information about the capital Goods Scheme for VAT provided in this blog, we can bring the discussion toward wrapping up. In the case at the time of purchasing the asset, there were no non-business activities to ensure that you qualify for the scheme. Here you need to know that you must keep accurate records of the purchased assets to qualify for the scheme. In the case of VAT records, the requirement is to keep them intact for six years. We hope these few minutes of reading have helped to develop a better understanding and consider the salient features of the discussion. Reach out to one of our professionals to know the best way to choose the correct way of knowing the Capital Goods Scheme for VAT and how it works for you. We will love to offer instant help! Disclaimer: The information about the capital Goods Scheme for VAT provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

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.