MTD for ITSA and basis period reform - will it affect you?

Basis Period Reform (BPR)

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MTD for ITSA and basis period reform - will it affect you?

Are you a sole trader or in a partnership? 

Do you have different accounting dates as the standard 6th April to 5th April? 

If you answered YES to both questions, some IMPORTANT changes will apply for the tax year 2023-24.

The “Basis Period Reform” (‘BPR’) will apply to you.

Any sole trader or partnership that does not have an accounting period ending between 31st March and 5th April (including 31st March and 5th April) will need to change the way they calculate their business profits for their 2023/24 tax return (and going forward).

If you have an accounting period ending between 31st March and 5th April then you may be affected in the 2023/24 tax year if you have unused overlap relief but on the whole these could be treated as ending on the 5th April.

The Basis Period Reform (BPR) means that Read more

Pension Contribution Deadline Extended

Deadline for Voluntary Insurance Contributions Extended to 5th April 2025

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Deadline for Voluntary Insurance Contributions Extended to 5th April 2025

The original deadline for buying National Insurance ‘credit’ was 31st July 2023, but you can now ‘buy’ incomplete years to boost your state pension until 5th April 2025. The extension was approved by the Government, giving HMRC more time to deal with the process.

You can view our original blog on what you need to do to plug the gaps in your National Insurance contributions here.

How do I pay myself as a Director?

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This is a question we often face from new company directors, how to pay yourself from the company.

As part of our £375+VAT package for a new limited company we offer the following;

  • company formation (including the option to have the company phrased as a special purpose vehicle for a property rental company)
  • we will register a single director with HMRC for self-assessment
  • we set up the payroll scheme
  • we arrange your chart of accounts on online software and set up the bank feed so transactions are automatically recorded

So the two ways to get paid are in the form of a monthly salary run from a payroll set up by the limited company and the second way is through dividend allocations based on the company’s annual post-tax profit.

A salary is treated as an expense to the business, therefore decreasing profits, reducing corporation tax, and in turn, minimising the amount of dividends available to then be attributed to each shareholder.

We suggest (correct as of the 23/24 tax year) a salary of £9,096 per annum (£758 p/m) as this is the minimum amount to qualify for a state pension (also known as the secondary threshold).  If there are 2 or more directors (on the secondary threshold or above) or any additional staff on the payroll above the secondary threshold for the company, the Employment Allowance offered by the government becomes available, giving the company £5,000 ‘pot’ towards the employer’s NI contributions.

If the company posts a profit, the value of the post-tax profit can be allocated as dividends to the shareholder(s) of the company.  If there is more than one shareholder, then the dividends are allocated dependent on the percentage of shares held by each shareholder.

Unfortunately, the tax efficiency of dividends is being reduced.  For the 22/23 tax year there is a £2,000 tax-free allowance, for 2023/24 there will only be a £1,000 tax-free allowance and for 2024/25 it has been stated that it will be halved again to £500.

The amount of tax you pay on dividends will be dependent on your income tax band which includes your tax-free allowance, and any earnings from the limited company and any other earnings outside.

This will need to be declared on a self-assessment tax return to HMRC, which covers the period of the UK tax year from 6th April to 5th April every year.

As part of our £375+VAT package we can enrol one shareholder/director onto the self-assessment scheme with HMRC to obtain a Unique Tax Reference (UTR) to allow them to comply with their personal tax obligations in the future.  Contact us on 020 8761 8000 for more information.

How Corporation Tax is calculated has changed

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At Taxfile we can compile and file your company’s tax return as well as calculating what is owed in Corporation Tax.

As of 01/04/2023, the main rate of Corporation Tax (CT) will rise from 19% to 25%, although the rate will remain at 19% for small businesses with profits less than £50,000.00.  However, if the profit is anywhere between £50,000.00 to £250,000.00 then the calculation is slightly more complicated as there is a marginal relief that can be applied.  Anything above £250,000.00 is taxed at the new rate of 25%.

The marginal relief means that you would not pay an outright 25% on a profit between £50k-£250k.  So for example, your company posts a profit of £80,000.00.

At 25% the tax would be £20k.

To calculate the marginal relief you would subtract your profit from the maximum where the relief is allowed (£250k) leaving you £170k and apply the marginal rate multiplier (3/200 or 0.015) to this, which is £2,550.00 in relief.

So the £20k would be reduced by £2,550, meaning that the CT liability would be £17,450 on the £80k profit.

When we file your tax return we calculate:

  • profit or loss for Corporation Tax (this is different from the profit or loss shown in your annual accounts)
  • Corporation Tax liability

Taxable profits for Corporation Tax include the money your company or association makes from:

  • doing business (‘trading profits’)
  • investments
  • selling assets for more than they cost (‘chargeable gains’)

Our SMB Private Limited Company accountancy services will take a lot of the strain away from being a company director, and allow you to focus on why you formed a limited company in the first place, to make a successful and expanding business.

We can help you with all the necessary bookkeeping, computations and filings, as well as advising on other business taxes that may be required such as VAT, and also look after your payroll and expense claims when filing your P11D’s.

Our personable and knowledgeable accountants are real people that you can talk to and meet in person, available to answer your questions and offer advice.

We are a friendly, relaxed accountancy firm offering services to businesses spanning the South London area, from Croydon through to Wandsworth.  We are your local accountant for small to medium businesses.  Call us for advice on 020 8761 8000 for a free 20-min no obligation chat.  We will be happy to answer any of your questions regarding limited companies.

What does it mean to be a Director?

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Your obligations as a Director can be ‘taxing’.

Running a successful limited company typically involves administrative duties outlined by Companies House & HMRC. As the director you’ll also be responsible for ensuring the finances of the company are regulated and healthy.  At Taxfile we can help you focus on growing your business and take care of all your accounting needs.

In order to fulfil your obligations, after your limited company’s financial year comes to a close, it must prepare a set of final accounts and a company corporation tax return.

The company’s final accounts are prepared from the company’s financial records for the period that covers your company’s financial year and must include:

  • a balance sheet showing the value of everything the company owns, owes and is owed on the last day of the financial year
  • a profit and loss account showing the company’s sales against its running costs and highlighting the profit or loss it has made over the financial year
  • notes about the accounts
  • a director’s report (unless you’re a ‘micro-entity’)

The accounts must either meet ‘International Financial Reporting Standards’ or ‘New UK Generally Accepted Accounting Practice’.

At Taxfile we can provide support for small to medium businesses that require accountants to compile and file their full company accounts ready for the shareholders, people of significance to the company, Companies House and HMRC as part of your company corporation tax return.

We can assist you with the bookkeeping and bank reconciliation to ensure that your accounting records are complete and include:

  • all money received and spent by the company
  • details of assets owned by the company
  • debts the company owes or is owed
  • stock the company owns at the end of the financial year
  • all goods bought and sold

As the director you are solely responsible that your accounts and tax return meet the deadlines for filing with Companies House and HMRC. From the accounts you can also deduce how much Corporation Tax to pay. The dates you will need to remember:

  • File the first set of accounts with Companies House 12 months after the date you registered with Companies House
  • File annual accounts with Companies House 9 months after your company’s financial year ends
  • Pay Corporation Tax or tell HMRC that your limited company does not owe any 9 months and 1 day after your ‘accounting period’ for Corporation Tax ends
  • File a Company Tax Return 12 months after your accounting period for Corporation Tax ends
  • File a Confirmation Statement 12 months after: company incorporated, company accounts submitted, or last confirmation statement

As a Director do I need to file a Self-Assessment Income Tax Return?

See our blog HERE

If you are thinking about setting up a limited company we are offering a special price of £375+VAT for the following;

  • company formation (including the option to have the company phrased as a special purpose vehicle for a property rental company)
  • we will register a single director with HMRC for self-assessment
  • we set up the payroll scheme
  • we arrange your chart of accounts on online software and set up the bank feed so transactions are automatically recorded

For more information about any of our tax- and accountancy-related services, call us on 020 8761 8000.

Forming a Limited Company?

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Having been the accountants of choice for individuals and businesses in the South London area, we have recently noticed a surge of individuals moving away from the sole trader status and enquiring about forming a limited company.

The reasons for changing status have varied; someone mentioned they should be, their customers needing them to be, being worried about having a personal liability against the business, to hoping to be more tax efficient.

What do we mean by a limited company?

A limited company is an organisation that is set up to run your business. A business becomes ‘limited’ once the company name and its owner(s) have been registered with Companies House and when limited status is granted, it becomes a distinct entity from its owners.

A limited company structure creates a distinct border between the business owner and the business itself, and under the eye of law, the business becomes a separate legal entity in its own right, becoming responsible for its own actions and finances.  This in turn limits the liability of the owner from any risk the business may need to take.    So if you are a small business expanding & possibly needing employees & assets, then a limited company is a good idea.

At Taxfile we are helping a lot more clients make this transition from a sole trader to limited status.

We can help you set up a private limited company, guide your through the process of what happens and what you need to do.  We offer an all-encompassing service from the setting up to filing the corporation tax returns.

We are offering a special price of £375+VAT for the following;

  • company formation (including the option to have the company phrased as a special purpose vehicle for a property rental company- SPV)
  • we will register a single director with HMRC for self-assessment
  • we set up the payroll scheme
  • we arrange your chart of accounts on online software and set up the bank feed so transactions are automatically recorded

A limited company will:

  • need to keep company records
  • report any changes to Companies House & HMRC
  • need to file an annual company tax return along with the company’s accounts, giving an undistorted view of its finances.

As a director of a private limited company you will:

  • make decisions that benefit the company rather than yourself
  • abide by the rules and regulations outlined by the company articles of association, which are written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary
  • notify any shareholders if you might benefit personally from a company transaction
  • always act with the intention of making the company successful.
  • In forming a limited company you are limiting your personal liability but in doing so you cannot abuse your power with the limited liability to take selfish and unnecessary risks.

At Taxfile we can advise you on setting up a private limited company and take care of all these tasks for your private limited company — and avoid any complications down the line.

Starting a limited company is a relatively straightforward administrative task that starts out with choosing an available company name from Companies House to filling and filing a series of forms. At Taxfile we can ensure that all your forms are compiled correctly, providing ongoing support.

To set up your private limited company you will need at least one director and one shareholder.  As the business owner(s) you would then take a salary/wage from the business.  We can advise you how to best set up your salary and dividends to pay less tax.

Once you have a limited company set up you will need to open a new bank account in the name of your new company.  Our advice to clients, is to try and keep all the business income and expenses restricted within this one bank account and to avoid any personal transactions overlapping into this account.

It is also important to remember to transfer all business-related expenses into the company’s name and move any payment plans over to the new bank account.

If you would like help and advice about forming a private limited company please call us on 020 8761 8000.

Boost State Pension by Plugging Gaps in National Insurance

Boost State Pension by Plugging Gaps in National Insurance

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IMPORTANT: the video mentions the original deadline in April 2023. This has now been extended to 5th April 2025.

Do you have gaps in your National Insurance record? If so, it could mean that you could get a lower State Pension when you reach state retirement age, particularly if you are aged between approximately 45 and 70 at the moment. Generally speaking, you need 10 years of contributions for a basic state pension and around 30 to 35 years for a full state pension. It does vary by circumstance though and, even with gaps, some people might have enough qualifying years for the full state pension already.

Urgently Check Whether You Have National Insurance Gaps

Our advice is to urgently check whether you do have any gaps in your National Insurance record. If so, in many cases it would be wise to make some one-off payments to plug any gaps for the years 2006 to 2016. However, there is limited time to do so despite the deadline for this opportunity having been extended from early April to the end of July 2023 [UPDATE: This has now been extended again to 5th April 2025]. Thereafter, the chance to fix all 11 years from 2006 to 2016 will be gone forever. Read more

Late with your tax return and tax payment? What happens now?

Missed the Tax Return Deadline? What Happens Now?

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Missed the Tax Return Deadline? What Happens Now?

[February 2023]: If you missed the deadline to submit your self-assessment tax return, the first thing to know is that you are now into the penalty stage. HMRC applies an automatic £100 penalty to those who are even 1 day late (the deadline was 11.59pm on 31st January) and further penalties are added if you take even longer to comply. It’s worse, of course, if you also haven’t paid any tax owed as you’ll then owe interest too, so our advice is to pay as much as you can as soon as possible, so you’ll reduce any element of interest. However, if you “took reasonable care to meet” a deadline and there is a genuine reason why you were late, you have the option to appeal if your circumstances fit eligible criteria. Let’s take a look … Read more

TODAY is the deadline for submission of your tax return. Contact Taxfile for help filing & avoid a minimum £100 fine!

31st January was the Self Assessment Tax Return Deadline!

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Today (31 January) is the self-assessment tax return deadline!

[As at 1 February 2023]: The 31st January was the Self Assessment tax return and tax payment deadline. Miss the deadline and you’ll be in for a £100 HMRC fine right away. Interest will also be charged from 1 February, as usual, if tax is not paid by midnight on 31 January (rules apply). Time is short, so contact Taxfile for help with your tax return as soon as possible please. Book an appointment* with one of our helpful tax advisors and accountancy experts TODAY — we’ll make it easy!

020 8761 8000 Book Appointment Get Started Here
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1 week to the self-assessment tax return deadline!

1 Week to the Self Assessment Tax Return Deadline!

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1 week to the self-assessment tax return deadline!

[As at 24 January 2023]: This is the final week in the run-up to the Self Assessment tax return and tax payment deadline. Miss the deadline (31st January) and you’ll be in for a £100 HMRC fine right away. Interest will also be charged from 1 February, as usual, if tax is not paid by midnight on 31 January (rules apply). Time is short, so contact Taxfile for help with your tax return as soon as possible please. Book an appointment* with one of our helpful tax advisors and accountancy experts TODAY — we’ll make it easy!

020 8761 8000 Book Appointment Get Started Here
Read more