This Spring's Accountancy Update
Payroll Year End
A reminder for those of you processing your own payroll:
Payroll Year End - submitted to HMRC by the 19th April
P60's - must be issued to all employees by the 31st May
The Lifetime ISA will be available from 6th April this year.
The lifetime ISA will allow younger adults to save up to £4,000 each year and receive a bonus of up to £1000 a year on these contributions. Funds can be withdrawn tax-free to put towards a first home or saved until a person turns 60.
Tax Free Childcare
Tax-free childcare will provide up to £2000 a year in childcare support for each child under the age of 12.
Parents will be able to receive up to £4000 for disabled children up to the age of 17.
Parents of younger children will be able to apply for the scheme first, with all eligible parents able to access the scheme by the end of the year.
Working parents will also be able to apply for an additional 15 hours of free childcare for 3 and 4 year olds bringing the total to 30 hours a week.
Tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018
From April 2016 the NIC status of dividends has not changed but the income tax position has. There is now a flat rate dividend allowance of £5000 and anything received in excess of that will be taxed at 7.5% if the dividend income is within the 20% standard rate band, and 32.5% if the dividend income is within the 40% higher tax band. So there is still a benefit in a remuneration package having a minimal salary paid along with dividends.
A further point is that the employers NIC allowance is now no longer available to companies where the director is the sole employee. Therefore the payment of a salary above the lower earnings level of NIC will now incur a charge for employers NIC.
So from a planning point it is now useful to:
Have your partner/spouse as a shareholder to obtain the £5000 dividend allowance
Employ your partner/spouse as a director to be able to best utilize their tax allowances
Making Tax Digital - HMRC Has a Goal
In 2015 HMRC issued a paper `Making Tax Digital` which proposes that by 2020 HMRC will have moved to a fully digital tax system.
By 2020 it is envisaged that all businesses will be updating HMRC quarterly for their income tax and national insurance obligations through their online portal.
Accounting records will need to be software based and the most efficient means will be to have the records online on to what we call the cloud.
So we and our clients need to aim for there to be no more boxes and bags of records within the next 3 years.
The HMRC have made an assumption that their 'Making Tax Digital' system is what the tax payer wants and that it will reduce compliance fees. What they seem to have missed is that many businesses will need to invest in computer hardware, software and possibly a bookkeeper, which will increase costs.
Cloud based accounting will mean accounts and financial information, whether monthly, quarterly or annually, can be produced more timely, and changes the dynamics of preparing accounts and record keeping.
Small businesses and landlords under the VAT threshold will have an extra year to prepare for Making Tax Digital
Unincorporated businesses (businesses owned privately by one or more people) that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before making tax digital becomes mandatory. Under making tax digital businesses will need to use digital software to keep tax records and update HMRC quarterly.
Imagine a cloud where your entire book keeping information is held securely. This information can be retrieved by either you or your accountant as and when needed 24/7. In a nut shell, this is Cloud Accounting!
You have probably used similar...
If you’ve used online banking, then you’ve used a similar service to Cloud Accounting. You log into online banking to view and maintain your bank accounts, from anywhere with internet access. Cloud Accounting is just using a different cloud in which you categorise all the money you’ve received and spent.
Join our new Chappells App today!
To enable our clients to move towards 'Making Tax Digital', we are looking into ways to streamline the way you keep accounting records, by offering an online cloud service to keep the additional compliance costs down, or if you require where we can maintain the records.
This powerful new free Finance & Tax App will give you key financial and tax information, tools, features and news at your fingertips, 24/7.
Download our FREE App (created for you by Team Chappell) and explore what’s on offer! Life will be made easier when you’re out and about with a simple click of a button. Click on the mileage to calculate your / your employee’s mileage or go to the receipt manager where you can take pictures of your receipts, meaning you are no longer required to deliver your records.
On the app, our Client Portal will be accessible 24/7. You’ll be able to find your Accounts, Tax Returns and correspondence, making it easier and quicker for you to deal with. Keep reading for more info!
Our Client Portal is a secure two way messaging service where you will receive Accounts, Tax Returns and any other information you would normally receive in the post. Once you have received the document and you are happy with what you see, you can approve it and send it back immediately, saving on postage and time.
Security: For complete peace of mind our Client Portal uses the highest available, military grade 256-bit Advanced Encryption Standard. On top of this, it also uses the same security protocols as internet banks to give the visible reassurance of an https website address and familiar closed padlock icon.
Efficiency: Allows clients to access key documents 24/7, eliminating postal delays and charges.
Notification: A pop-up message will alert you whenever we send a new message or file.
Electronic approval: Any document published to the Portal can be flagged as requiring approval, backed with a full audit trail.
Personalised login: A login will be required for security and confidentiality.
2017 Self-Assessment Tax Returns
The tax year ended on 5 April 2017; Information needed to complete a self-assessment tax return:
For the period from 6 April 2016 to 5 April 2017 –
Tax deduction certificates or details of interest received on all bank and building society accounts held.
Tax deduction certificates or details of all other interest received.
Dividend vouchers or details of all dividends received in respect of all shares held.
Annual statements of all interest received on National Savings Income Bonds/Pensioners Guaranteed Income bonds and ordinary and investment accounts.
Certificates or details of all pension contributions made.
Forms P60 and P11D in respect of all earnings from employment.
Details of all rental income and associated expenses.
Contract notes for all shares bought and sold in the year and full details of all other capital acquisitions and disposals.
Details of all outgoings such as gift aid donations, enterprise investment scheme payments or qualifying loan interest.
Any gifts made in the year which in total exceeded £3,000.
Details of all cash payments or shares from building societies, life assurance companies, and other organisations which have been taken over.
Chargeable event certificates or details of all cash withdrawals from life assurance policies or investment bonds.
Details of all income from Estates, Wills or Settlements.
Details of all business income for accounting periods ending in the period, if not already provided.
Full details of all other income and gains – regardless of whether it has already been taxed.
Details of child benefit received if your individual income is over £50,000 in the tax year.
Changes to the VAT Flat Rate Scheme
HMRC have announced a change to the VAT flat rate scheme to counter what they see as abuse to the scheme.
From 1 April 2017, a new 16.5% flat rate is being introduced for businesses with limited costs to be known as a limited cost trader.
Whilst full details of the changes have not yet been announced, for those of you on the flat rate scheme you need to establish whether you will be caught by these changes and the potential impact.
When the flat rate scheme was introduced, it was sold to us as being a simplified way of dealing with VAT; to some degree obliterating the intricacies of VAT recovery.
However, HMRC made no bones about the fact that it may also reduce your VAT bill. Indeed, there used to be a calculator on the HMRC website inviting businesses to work out their VAT flat rate savings to encourage the take up of the scheme.
What are the changes?
A new flat rate scheme of 16.5% is being introduced for limited cost traders i.e. one whose VAT inclusive expenditure on goods is either:
Less than 2% of their VAT inclusive turnover in a prescribed accounting period;
Greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000).
Goods, for the purposes of this measure, must be used exclusively for the business so you cannot include anything partly used for private purpose – such as office stationery.
There are other exclusions too as follows:
Food or drink for consumption by the flat rate business or its employees;
Vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services);
Goods acquired with the intention of giving them away or donating them to a third party.
These exclusions have been included in the new rules to prevent businesses buying either low value everyday items or one off purchases to inflate their costs beyond the 2% and avoid the increased rate.