When your income exceeds £100,000 for income tax purposes your entitlement to a personal allowance (£11,850 for 2018-19) is reduced by £1 for every £2 that your income exceeds this threshold. Which means, when your income reaches £123,700, you no longer qualify for a personal allowance. The effect on the income tax rate you pay in this band - £100,000 to £123,700 – is alarming. As well as paying tax at the higher rate of 40%, income up to the value of your lost personal allowance £11,850 that was previously exempt from tax is now due to be taxed at [...]

The Supreme Court has ruled in favour of Gary Smith, a self-employed contractor with Pimlico Plumbers, who considered he was due worker’s rights and has now had his assertion rubber stamped by the highest court in the land. There are no win-win outcomes following this case, in fact the status of all sides in the so-called “gig economy” is up for reinterpretation. Let’s hope that government is up to the task and is able to draft clearer instructions on this fractious area of tax law so that we can all proceed to negotiate future arrangements between companies and their self-employed [...]

There are advantages for tax purposes if the vehicle you buy for your business is considered to be a van as opposed to a car. If you are VAT registered, you can claim back the VAT added to the purchase price (as long as there is no private use in which case you will have to apportion your claim) and the acquisition will qualify for generous tax allowances. If you buy a car you cannot reclaim the VAT and tax allowances are far less expansive. There are exceptions; for example, if you by a car to use solely as a [...]

Next month, those of us who are still self-employed will be digging deep to pay our second payment on account for the tax year 2017-18. The deadline to avoid late payment interest and penalties is 31 July 2018. For most of us, these payments on account (January and July 2018) for 2017-18 are based on agreed self-assessment liability for 2016-17. Which begs the questions, what if your liability for 2017-18 is more or less than 2016-17? The quick reply is fairly obvious, you will be over or underpaying tax in January and July 2018 dependent on your taxable income in [...]

Women who find that they are not eligible to claim Statutory Maternity Pay may nevertheless, still qualify for the Maternity Allowance (MA). The amount of MA you get will depend on eligibility. You might get Maternity Allowance for 39 weeks if one of the following applies: you’re employed, but you can’t get Statutory Maternity Pay you’re self-employed and pay Class 2 National Insurance (including voluntary National Insurance) you’ve recently stopped working In the 66 weeks before your baby’s due, you must also have been: employed or self-employed for at least 26 weeks earning (or classed as earning) £30 a week or more in [...]

Government are considering an extension of the VAT reverse charge to include the construction sector. The reverse charge process places the responsibility for paying VAT on the customer instead of the supplier. In their explanatory notes on this topic HMRC said:  What is being done and why 7.1 This instrument, with effect from the 1st October 2019, applies a reverse charge to certain supplies of construction services in order to remove the opportunity for missing trader fraud in the construction sector. 7.2 Missing trader fraud is an organised criminal attack on the VAT system. The fraud is perpetrated through transaction [...]

There are a number of obligations that business owners should be aware, that involve them informing HMRC of changes to their business circumstances. In some cases, failure to comply may result in fines. We have paraphrased some of occasions when you will need to advise HMRC: You must tell HMRC if you decide to change the legal structure of your business, for example if you become a limited company or set up a partnership. you’ll need to tell HMRC if you stop being self-employed or close a limited company. To close a partnership, the nominated partner needs to report this on the final partnership tax return. You don’t need to [...]

There seems to be an endless growth in illegal sites who aim to make money by claiming to be associated with HMRC. The Government announced recently that it had scuppered one of these schemes. According to HMRC: Scammers create websites that look similar to HMRC’s official site and then direct the public to call numbers with extortionate costs in comparison to the low cost and no cost service HMRC provides. These sites promote non-HMRC premium rate phone numbers as a means of reaching HMRC, but these are merely call forwarding services which connect callers to HMRC at a significant price. [...]

Since April 2016, the amount of tax-free income you can earn from letting a room in your home has increased to £7,500 per annum, or £3,750 if two persons own a property jointly. You can use the scheme if: you let a furnished room to a lodger your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning You can’t use the Rent-a-Room Scheme if: not part of your main home when you let it not furnished used as an office or for [...]

You would be hard pushed to find a tax payer who was happy to pay tax. Whatever the economic benefits of taxation, we would all prefer that someone other than ourselves paid the bill. Companies are obliged to disclose their corporation tax liabilities in the year in which they are charged. Profits are stated net of tax due and any retained profits are available for the shareholders to draw as dividends. Sole traders and partnerships do not have to disclose current year’s taxation in current year’s accounts. Therefore, conversations about profitability and income tax can be separated. Hopefully, readers who [...]