Coronavirus: Government Support for the Self-Employed

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Rishi Sunak, the UK Chancellor of the Exchequer has announced the self-employed and those who run a business as a partnership are to receive 80% of earnings, calculated from the mean average of their trading profits for the 3 previous tax returns (2016/17, 2017/18, & 2018/19).  The trading profit is the taxable profit that is calculated as part of your income tax return, from either self-employment or as part of a partnership.

The scheme is called the Self-Employment Income Support Scheme (SEISS).

The average is determined by adding the trading profits for the three years, then dividing by three (if you’ve only been trading for two years, the government will add those two years and divide by two instead).  This average can then be divided by 12 to calculate you monthly income average.  80% of this average will be what the government will offer you as a grant which is taxable (-meaning it will need to be declared in your 2020/21 tax return as income received).

The grant is capped at £2,500 p/m and last only for 3 months (although this may be extended depending on how the coronavirus pandemic plays out in the UK).

For you to be eligible, more than half of your income must come from your self-employment. In other words, you can’t claim if more than half your income come comes from another source, such as full-time employment.

Similarly, if more than 50% of your income comes from other sources usually included on your Self-Assessment tax return, such as investment or rental income, then you are not eligible.

Furthermore, you aren’t eligible for the grant if the 2018-19 trading profit is equal to or greater than £50,000, and the average profits for previous years starting in 2016-17 are equal to or greater than £50,000.

If you have not yet submitted your 2018/19 tax return (that was due 31/01/20), you will NOT be eligible for the grant.  If you were self-employed during this period (06/04/2018-05/04/2019), then you have till the 23rd of April to submit your tax return and qualify for the SEISS.  Contact us at Taxfile to help submit your 2018/19 tax return on 020 8761 8000.

Who isn’t eligible?

You are not eligible for the SEISS grant if any of the following applies:

  • Your trading profits are equal to or more than £50,000 – for both tax year 2018/19 and when averaged across the tax years you traded in during last three full tax years starting in 2016/17.
  • You aren’t self-employed or in a partnership at the moment, or don’t intend to be in the future. It’s not enough to merely be enrolled for Self Assessment and to have undertaken self-employment work or have a role in a partnership at some point in the past year. You must be trading now and intend to do so in the 2020/21 tax year too.
  • You failed to submit a Self Assessment tax return for the 2018/19 tax year before 23 April 2020.
  • You haven’t lost trading profits due to the coronavirus outbreak.
  • Less than 50% of your income comes from your self-employment or partnership.

To apply for the SEISS, the government will contact you (via post) and invite you to apply online, using details they have via your self-assessment registration.  It is estimated that the scheme will be available from June 2020, and that will be the earliest that the grant will be available to the self-employed.

Other coronavirus measures for self-employed workers

There are other coronavirus emergency measures that the government has put in place that might help you, as a self-employed individual or member of a partnership.

Deferred income tax payments

Self Assessment payments due on 31 July 2020 (that is, income tax payments on account) can be deferred until 31 January 2021.

Anybody who fills in a Self Assessment return and who is liable for payments on account can make use of this, not just the self-employed.

Time to Pay

If you’re self-employed and struggling to meet outstanding tax obligations due to financial difficulties, you can contact HMRC to see if you’re eligible for support via the existing HMRC Time to Pay Scheme.  This allows more time to settle financial obligations if you can demonstrate a reasonable ability to pay in future. Contact HMRC on the special coronavirus helpline: 0800 0159 559.

Universal Credit increases

Because of the coronavirus outbreak, the government has increased Universal Credit amounts beyond the already anticipated yearly increase as of April 2020.

The standard allowance will be £409.89 per month.

Grants for businesses that pay little or no rates

If your business operates from a property and is registered for the Small Business Rate Relief (SBRR), or Rural Rate Relief (RRR), then it will receive an automatic grant of £10,000 from your local authority.

You don’t need to do anything to receive this (note: the requirements differ depending on where in the UK your business is located).

However, if your business doesn’t pay any rates, you may need to contact your local authority to ensure it has your bank details for the payment.

Coronavirus Business Interruption Loan Scheme

Businesses can apply for a loan with approved lenders. The government will underwrite 80% of the loan, making the loan more widely available to those who might not normally be able to apply.

It will also pay the interest for the first six months.

MOTs have been suspended

Those who use a vehicle for their self-employed work will be pleased to hear that MOTs have been suspended for six months, provided the MOT falls after 30 March 2020.

The vehicle must be kept in a road-worthy condition but the exemption is automatic, so there’s no need to apply for it.

If in your self-employment business you use a lorry, bus or trailer then there are different rules – MOTs are suspended for three months as of 21 March 2020.

This again is automatic, although you may need to apply under certain conditions.

Deferral of VAT Payments

If you are a VAT registered business in the UK and have a VAT payment to make between 20/03/20 & 30/06/20, this payment can be now deferred till 31/03/2021 without any penalties or charges imposed.  If you pay via Direct debit, this needs to be cancelled with your bank for the deferment to occur.   More information can be found at deferral of VAT payments due to coronavirus (COVID-19).

Landlords & Property Investors Take Note: New Capital Gains Tax Rules for 2020

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The new capital gains tax (CGT) rules will come into effect on April 2020, which will more than likely impact the sales of most additional properties in the UK.

CGT is paid on profits from the sale of investment properties that are not the sellers main place of residence. The amount of CGT paid is dependent on the annual income of the individual.  Current capital gains tax rates on property for 2019-2020 are 18% for basic rate taxpayers (£12,001-£50,000) and 28% for higher rate taxpayers (£50,001+).

The changes coming into effect in 04/2020 are threefold:

1. The timing of when you pay the CGT to HMRC
2. The amount of tax relief you can claim if you previously lived in the property
3. How the letting relief will work

Timing:
Previously a UK resident CGT has been calculated & submitted alongside their self assessment income tax irrespective of the completion date for the sale of the investment property. From April 2020, sellers will need to pay the full amount owed within 30-days of the completion of the sale and failure to pay within the 30-day limit will result in penalties.

Tax Relief:
The private residence relief (PRR) applies to landlords selling a property where in the past they have used that property as their main place of residence.

Currently, you are exempt from paying tax on the final 18-months that you owned the property, regardless of whether it was being rented. From April 2020 it is expected to be halved to 9-months.  So once you have not lived in a property that was once your main place of residence for longer than 9-months, you will probably be required to pay some CGT on the profits when it is sold.

Lettings Relief:
As a landlord, if you have qualified for PRR, then it may also be possible to claim lettings relief.

Letting relief can currently be claimed if you used to live in the property being sold, and have also let out part or all of it for residential accommodation.

You can claim the lowest of the following:
the same as the amount of PRR you will receive
£40,000
the chargeable gain you make from the period you let out the property

When the new rules come in from April 2020, you will only be able to claim this relief if you live there when it is being sold  (i.e if you share occupancy with your tenant).

Under current rules there are certain costs that can be deducted from your CGT:

  • Stamp duty paid on the purchase of the property
  • Estate agent fees
  • Solicitor fees
  • Improvement costs that added value to the property (such as extensions)
  • Qualifying buying and selling costs (such as surveyor fees)

Aside from this, capital gains tax is only payable on property that is owned by individuals. If the property is owned by a limited company, corporation tax is applied instead of CGT.

Corporation tax is currently 19%, but the current government hinted at a reduction to 17% for 20/21 but we await the confirmation from the Chancellor budget due in the Spring of 2020.

If you have any queries around CGT or need an accountant to calculate & submit your CGT, please don’t hesitate to contact us.  We offer a free 20-minute consultation.

The Early Bird Gang

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HMRC expects people to do tax returns for various reasons;

  • Those that have an income outside of a PAYE scheme (i.e. self-employed)
  • High earners on PAYE schemes, earning above £100K
  • Company Directors & Shareholders
  • Landlords who have rental incomes

The tax returns calculated generally run between the dates 06/04/xx through to 05/04/xy, the calculation, submission, and payment deadline  of taxes owed to HMRC (or you), would need to be submitted at the latest 31/01/xz, before penalties & interest are imposed.

Each year, the Government announces a tax free allowance, which is the amount you can earn before your income starts to get taxed.  The tax free allowance for 2018/19 is £11,850.00.  However, this allowance decreases by £1 for every £2 earned above £100k, meaning by the time your reach £125K, the allowance is £0.

The amount of tax paid on income is also specified by the government & is subject to change with announcements made generally in the Budget statements.  For 2018-19 the rates are as follows;

Tax Rate (Band) Taxable Income Tax Rate
Personal allowance Up to £11,850 0%
Basic rate £11,851 to £46,350 20%
Higher rate £46,351 to £150,000 40%
Additional rate Over £150,000 45%

*For 2019-20 the new rates & tax free allowance can be found HERE.

Since 6th April 2019, you would have been able to calculate & submit your 2018/19 tax return to HMRC, so since then the Tax Agents at Taxfile have been busy filing away for the early birds.   We have been open on Saturdays too, to keep up with the influx of tax returns & CIS returns.

However, the last Saturday that we will be open will be 29th June.  If you would like to join our ‘gang’ of Early Bird & can only come in on Saturdays, you only have a few weekends left.

Please note, on Saturdays, all our agents see clients by appointment only, and can not generally deal with walk-in clients.  So please book in advance by either calling 020 8761 8000 or booking online HERE.

So get our professional help at Taxfile & we’ll make filling in and filing your tax return a breeze.

See our Newsletter HERE

TAX HELP! Your 1-stop tax shop

Taxfile: Your One-Stop Tax & Accountancy Shop

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TAX HELP! Your 1-stop tax shop

Taxfile has over 100 years of combined tax and accounting experience. It’s incredible to think that the key personnel have administered over 30,000 tax submissions in the past 20 years! Beginning way back in 1994 (and continuing as Guy Bridger Limited from 1997), we originally started business offering only CIS sub-contractor returns but quickly developed the service to help the self-employed, local businesses and higher rate taxpayers with their tax computations. Along the way we added tax and accounting services for taxi drivers, cab drivers, landlords and more. We also offer Capital Gains tax expertise and tax investigation help and, more recently, professional help with disclosures, written tax advice and tax planning for things like inheritance.

We have exceptional accounting experience in all key tax and accounting areas including:

Taxfile helps individuals as well as businesses. Our customers are very varied, turning over anything from £10,000 to over £1 million a year. A few are high wealth individuals who no longer need to work but still need to account for their taxes etc. Some customers have retired, others operate small businesses and some don’t even live in the UK but may have assets here. So, whatever your income, assets or situation, the message is that if you need ANY tax-related help, you’ve found the right place in Taxfile.

Taxfile also has the back-up and expertise of professional bodies on tap (so nothing is too complicated for us) and also has excellent relations with the tax authorities — we’re very well trusted by HMRC. Guy even helps in the local employment zone, which aims to improve business in the Tulse Hill and West Norwood area. So, Taxfile is very much part of the local community, particularly in South London (but expanding to other areas too — keep an eye on this blog for forthcoming information about that in the very near future).

Whatever help you need with tax and accountancy-related matters, call Taxfile on 0208 761 8000 and we’ll be delighted to help you. Alternatively, Read more

Tax reforms coming in 2018

Big Changes Coming to the Tax System

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Tax reforms coming in 2018

Starting on 1 April 2018, a brand new tax system, one that will affect most business owners in the UK, will begin to roll out. Whether you’re a landlord, are working for yourself as a sole trader or have a limited company, the changes will affect you.

So what’s happening?

Instead of a once-a-year tax return, HMRC will require quarterly profit and loss information. So, that’s four times a year. For Taxfile clients, that means we’ll need to know all your income and expenses during every quarter so that we can make the necessary financial data available, on your behalf, to HMRC. As well as your bank statements, we’ll need to see receipts for the expenses, whether they’re provided physically or via a suitable electronic medium (there are plenty of apps and software packages for this purpose). Once we have everything for the quarter in question, we will be able to make sure that you’re claiming for all the allowable expenses that you are eligible for and aren’t claiming for things that you shouldn’t, so that your figures are absolutely correct.

If you don’t file in time there could be an HMRC penalty, so letting Taxfile handle your quarterly reporting will help to keep you on track seamlessly when the new changes come into force. We’ll be able to confirm our own pricing nearer the time but it’s likely to be circa just £75 per quarter, excluding VAT.

A ‘cash basis’ system

The new tax system will be known as a ‘Cash Basis’ system and will also allow tax to be paid to HMRC on a pay-as-you-go (PAYG) basis. Essentially, it means that businesses need only calculate their profits based on receipts and payments, which is far more straight forward than the more complex system that currently exists. When integrated into the Government’s new ‘digital tax accounts’, the system will really help to simplify tax, make budgeting and cash-flow easier through near real-time reporting and eventually remove the need for the traditional tax return at the end of the year — that’ll eventually be the case for virtually everyone. As an added bonus it’ll also mean that business owners keep more on top of their bookkeeping and thereby avoid a last minute scramble to update records. Taxpayers will also be able to see a complete financial picture of their tax affairs in the one place — their digital account — and all their liabilities and entitlements will be clear to see and manage more effectively than ever.

Taxfile

Nearer the time the changes come into place, Taxfile will be there to help its customers adapt to the new system and between us we’ll make sure that it’s easy and hassle-free. We’ll be able to Read more