As of April 6, 2023, the Self-Assessment (SA) for income tax has undergone a significant transformation, known as Basis Period Reform. This change aims to align the taxation of business profits with the standard April-April tax year, rather than any other accounting periods that may have been required by the taxpayer.
While the transition to the new basis period has introduced certain complexities, it also presents opportunities for businesses to manage their tax liabilities more effectively. One such opportunity lies in the spreading of tax arising from transitional profits.
Transitional profits refer to the profits that arise from the transition between the old and new basis periods. These profits can be spread over Read more
https://www.taxfile.co.uk/wp-content/uploads/2023/12/Tax_Spreading.jpg8611080Taxfilehttps://www.taxfile.co.uk/wp-content/uploads/2020/03/taxfile-logo-2020.pngTaxfile2024-01-02 15:56:322024-01-02 16:03:35Basis Reform and Spreading
Do you have different accounting dates from the standard 6th of April to the 5th of Apri?
If you answered YES to both questions, some IMPORTANT changes will apply for the tax year 2023-24.
The concept of the basis period determines the time frame used to calculate taxable profits or losses for self-employed individuals, partnerships, and some trusts. It marks a departure from the traditional “current year” basis, where business profits were taxed based on the accounting period ending within the tax year. Instead, it introduces a “tax year” basis, aligning taxable profits with the UK’s standard tax year, running from 6 April to 5 April. Read more
https://www.taxfile.co.uk/wp-content/uploads/2023/12/Basis-Reform-Period.jpg8781000Taxfilehttps://www.taxfile.co.uk/wp-content/uploads/2020/03/taxfile-logo-2020.pngTaxfile2023-12-21 15:25:212025-06-12 13:22:37Understanding Basis Period Reform for Self-Assessment Tax in the UK
Today we look at the tax-free allowance thresholds for what’s officially known as the tax-free Personal Allowance in the tax and accountancy world.
The Tax-Free Personal Allowance
This is the amount a UK individual can earn as income before they have to pay any Income Tax. In the current tax year (6 April 2022 to 5 April 2023) individuals can earn up to £12,570 before they have to start paying Income Tax, as you’ll see in the first table. In other words, if their taxable income is two thousand pounds more than that, they’ll only have to pay income tax on the extra £2000, not the core £12,570. There are exceptions, and different rules applied before 2016/17, but our aim is to keep things simple in this guide rather than focusing on more rare exceptions. So, below, we show the Personal Allowance thresholds for tax-free income over the last 7 tax years. As you will see, the Tax-Free Personal Allowance has gradually increased over the years.
Tax Bands for Basic Rate, Higher Rate and Additional Rate Taxpayers
The tables also show the various tax bands for earnings above the Personal Allowance threshold. These are the Basic Rate, Higher Rate and Additional Rate income tax bands, with tax rates increasing the more people earn. The information might be useful if you owe income tax from previous years but bear in mind that anyone born prior to 6 April 1948 may be entitled to a larger Personal Allowance.
Please note: this guide focuses only on Income Tax. Taxpayers will also need to allow for other deductions like National Insurance, which we’ll cover in a separate guide, and things like pension contributions, any student loan interest repayments, any tax on dividends, and so on.
Tax-Free Allowance Thresholds 2022/23
For the tax year 6 Apr 2022 to 5 Apr 2023:
The first £12,570 (your Personal Allowance) is tax-free*
Earnings between £12,571 and £50,270 are taxed at 20% (‘Basic Rate’ income tax)
Earnings between £50,271 and £150,000 are taxed at 40% (‘Higher Rate’ income tax)
Earnings over £150,000 are taxed at 45% (‘Additional Rate’ income tax)
* For every £2 earned above £100,000, the Personal Allowance is reduced by £1. It therefore reduces to zero for earnings of £125,140 or more.
Tax-Free Allowance Thresholds 2021/22
For the tax year 6 Apr 2021 to 5 Apr 2022:
The first £12,570 (your Personal Allowance) is tax-free*
‘Basic Rate’ earnings between £12,571 and £50,270 are taxed at 20%
‘Higher Rate’ earnings between £50,271 and £150,000 are taxed at 40%
‘Additional Rate’ earnings over £150,000 are taxed at 45%
* For every £2 earned above £100,000, the Personal Allowance is reduced by £1. It therefore reduces to zero for earnings of £125,140 or more.
Tax-Free Allowance Thresholds 2020/21
For the tax year 6 Apr 2020 to 5 Apr 2021:
The first £12,500 (your Personal Allowance) is tax-free*
‘Basic Rate’ earnings between £12,501 and £50,000 are taxed at 20%
‘Higher Rate’ earnings between £50,001 and £150,000 are taxed at 40%
‘Additional Rate’ earnings over £150,000 are taxed at 45%
* For every £2 earned above £100,000, the Personal Allowance is reduced by £1. It therefore reduces to zero for earnings of £125,000 or more.
We’re aware that many people are struggling right now. So, I wanted to personally touch base with you to confirm that, although the official deadline for submission of 2020/21 self-assessment tax returns and tax payments is Monday (31 January), there is now some extra time this year. This is great news for you if you are concerned about missing the deadlines or having to pay an HMRC penalty for being late. It should really take the pressure off for those who are struggling or worried.
For self-assessment tax returns, you now have until midnight on 28 February to submit. HMRC will only charge you a late filing fee if you file later than this.
For self-assessment tax payments, you now have until 1 April to make your payment (or arrange an HMRC payment plan) before incurring an HMRC late tax payment surcharge. While you will still incur interest for late tax payments from 1 February, HMRC’s interest rate is only 2.75% per annum, so even a month’s interest is unlikely to equate to much for most people.
For tax payments on account (payment in advance for the next tax year), there is no HMRC surcharge/penalty if you’re late but it does attract interest. However, again, that’s only at HMRC’s low rate, so is unlikely to amount to much for most.
We are here to help you, so don’t worry if you owe tax or are running late on your tax return. The Taxfile team can help you sort things out, particularly as we have a little longer than usual. We can work something out during February if you are worried about HMRC surcharges, interest and deadlines. Please get in touch if so.
Lastly, don’t forget that we are open on Saturdays during January and February (by appointment) and open later (until 6pm) on Mondays and Tuesdays. Read more
https://www.taxfile.co.uk/wp-content/uploads/2022/01/Guy-Bridger-Taxfile.jpg537537Taxfilehttps://www.taxfile.co.uk/wp-content/uploads/2020/03/taxfile-logo-2020.pngTaxfile2022-01-29 11:18:522025-03-13 15:15:28A Personal Message from Guy Bridger at Taxfile
HMRC has taken the decision to not issue a late filing penalty for anyone who does not submit their self-assessment tax return before midnight on 31st January 2022. It is important to point out that the deadline for filing your 2020-21 tax return remains 31/01/22 but the waiving of the penalty allows anyone who is unable to file their self-assessment tax return by the 31/01/22 deadline avoid a £100 late filing penalty as long as they submit their tax return sometime before midnight 28th February 2022.
Furthermore, anyone that is unable to pay their self-assessment tax liability before 31st January 2022 will not receive a late payment penalty if they pay their tax in full, or call HMRC to arrange a payment plan before 1st April 2022. It is important to note that interest will be added on taxes owed from 1st February 2022.
For a second year in a row, due to COVID, an extra Read more
https://www.taxfile.co.uk/wp-content/uploads/2021/02/Late_Payment_Penalty_Relief.jpg533800Taxfilehttps://www.taxfile.co.uk/wp-content/uploads/2020/03/taxfile-logo-2020.pngTaxfile2022-01-10 09:05:492022-01-12 09:15:16HMRC Waives Late Filing & Payment Penalty for 31st January Deadline
To date there has been no change on the deadline to submit and pay your 2019/20 Self Assessment Income Tax return by 31st January 2021.
In preparation for our busiest period in the year we have been doing everything to ensure both our offices and business practices are ready to cope with the changes imposed on us by the Coronavirus pandemic.
At Taxfile we have been doing everything we can to make sure our offices comply by current pandemic safety practices. We have fitted perspex screens between staff and clients, only allowing 2 clients in at a time, minimising each visit to a maximum of 15-minutes & socially distancing our staff members on site with a maximum of 3 in the main office at one time.
We would like to stress to all our existing & potential customers, we ARE OPEN if you need help in submitting your 2019/20 tax returns. We currently offer a variety of ways to help you:
Booking an appointment to see a tax agent face-to-face for 15 minutes – call us on 020 8761 8000 so we can arrange a time and date with you
Offices are open for you to drop off paperwork to be processed and then sent through to a tax agent who can then discuss your return over the phone with you or face-to-face
Email service where all electronic data can be sent directly through to the tax agents via emails, this is probably the easiest, quickest, and safest way to proceed. You can directly send the agents your financial data through on email or using services such as dropbox or google sheets. They can then calculate your return and liaise with you via phone & email.
Regardless of which way or combination of ways suits your needs, know that we are here for you till the deadline date of 31/01/2021 but urge you to contact us sooner than later as we are restricted by the number of people we can physically see & data we can work through during these uncertain times.
We are also urging our clients to pay via online banking for their Taxfile invoices, details found on the bottom of our invoice, reducing the need to come in or phone in to pay a bill as we need to reduce the number of people in the office for health and safety & therefore reducing our resources available. We are still accepting all payment forms but if clients CAN pay via online banking, then we are encouraging them to do so.
If you have not submitted your 2019/20 tax return (that in most cases will run from 6th April 2019 through to 5th April 2020), then now is the time to get all your financial data together, and decide which of the four methods outlined above will be most convenient for you. Get in touch now & don’t leave it till the last minute. This year is like no other!
There are many benefits of helping your accountant by providing complete and organised records from the outset.
Here are some of them:
If you get your records to your accountant on time, you will give them enough time to work on your case without unnecessary pressure and file everything on time (don’t forget you are not their only client).
By providing organised and detailed records, you’ll understand your business performance better and it will save them time from processing and reorganising untidy paperwork.
By providing complete records of your business expenses, they can claim what is allowable and potentially reduce your tax bill.
When preparing your financial records you need to remember:
Separate your business from your personal finances.
Stay on top of your records and ensure they are orderly with no gaps in the dates.
Keep receipts and purchase invoices; you will need to provide proof of all expenditure and year-end creditors.
Bring bank statements for the complete period and downloads of your bank feed in .csv format if possible.
Sequential invoices for each sale, dated, to prove year-end debtors and accrued income.
Depending on your business, you may also need to keep records for things such as payroll, cash books, stock takes, travel and credit card statements.
In an ideal world:
It is much better to keep on top of these things monthly than leaving it until the end of the year, where you may have lost or forgotten data around expenses, sales, or other financial details.
You would have a software package to help you track your bank, expenses, and sales.
Call us on 0208 761 8000 if you would like to streamline your businesses finances and alleviate some pressures from your financial duties as a director. Alternatively, book an appointment with us here or drop us a message here — we’d be delighted to hear from you.
https://www.taxfile.co.uk/wp-content/uploads/2020/10/Data-for-accountants.jpg403700Taxfilehttps://www.taxfile.co.uk/wp-content/uploads/2020/03/taxfile-logo-2020.pngTaxfile2020-10-23 07:42:272021-10-31 15:43:04How To Help Your Accountant Save You Money
“What are the main differences between being self-employed and running a limited company?”
“What are the advantages and disadvantages of having a private limited company?”
The major difference between running a private limited company and being self-employed are the administrative requirements you are required to do by law & although the volume is more, the data contained within those returns are pretty similar to being a sole trader.
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.
So why go through the extra cost and resources of having a Limited Company?
In forming a limited company, you are limiting your personal liability. What this means is that the Limited Company becomes a legal entity of its own. Think of it as another being, that you work for. However, it is important to keep in mind that you cannot abuse your power with the limited liability, to take selfish and unnecessary risks. As a director, you are ethically and morally responsible for the business decisions and transactions the company makes.
As a director of a private limited company you will:
make decisions that benefit the company rather than your own
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.
Having a Limited company can also add professionalism to your business. This can help your business become even more successful because customers, clients, and B2B companies will be more inclined to trust you and buy your products or services if you are a limited company rather than a sole trader. It is quite common for B2B companies only to trade with another limited company as a general rule.
A final benefit is, if you have a profitable Limited Company, how you distribute salaries and dividends can have income tax savings, especially once your Read more
https://www.taxfile.co.uk/wp-content/uploads/2020/10/Limited-Compant-Blog.jpg550700Taxfilehttps://www.taxfile.co.uk/wp-content/uploads/2020/03/taxfile-logo-2020.pngTaxfile2020-10-20 16:43:252021-10-31 15:43:44Need a Limited Company? Questions you may be asking yourself
In response to COVID-19, SEISS will provide direct cash grants worth 80% of trading profits up to a maximum of £2,500 per month for self-employed individuals with profits of less than £50,000 per annum. To be eligible for this scheme, you will need to have submitted your tax returns for 2018-19 by the extended deadline of Thursday 23 April.
To assist the community captured by Wandsworth council, the scheme is to help members submit tax returns when they otherwise might not have been in a position to do so.
At Taxfile we are delighted to be considered as one of their ‘local accountants’ who will advise and assist residents to complete their 2018/19 tax returns. This service is provided by Wandsworth council for FREE, as the council covers the cost.
The submissions need to be sent to HMRC by no later than 23/04/20, so the council has placed a cut-off date 17/04/2020 to take advantage of their free support.
To be eligible for Wandsworth council’s Tax return Support Scheme you must;
Be a Wandsworth resident
Be self-employed (sole trader, freelancer or CIS contractor)
Have a Unique Tax Reference number (UTR)
Have made a profit of less than £50,000 or less in the 2018/19 tax year
Not yet have submitted your 2018/19 tax return
Not be a director of your own limited company
[UPDATE: Please note that the Wandsworth council’s scheme has now ended].
If you would like any advice, we offer a free 20-minute consultation, please call us on 020 8761 8000.
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Need Help Filing Your Tax Return?
Make an Appointment to Beat the Rush!
Your Self Assessment Income Tax for 2019-20 will need to be submitted and an initial payment be made to HMRC by no later than 31/01/2021. This means that you need to calculate your income tax for the period 06/04/2019 through to 05/04/2020. We urge anyone who needs to file a 2019/20 Self-Assessment tax return to come and see us soon. By doing so, you’ll avoid the last minute stampede — way too many people leave it until December or January, which is the busiest time in the tax and accounting calendar. While the HMRC deadline for tax returns is the end of January, you run the risk of being caught up in the bottleneck if you leave things later than December. Taxfile files tax returns for thousands of customers during November, December and January, so we’re incredibly busy at that time of year. So, those leaving it until the last minute not only run the risk of being charged more to cover the long hours and overtime that we need to work during January, but they also risk receiving a fine from HMRC if they miss the deadline completely because they left things so late.
So the message is: please book an appointment with us now, to beat the end of year rush.
For Self-Assessment tax returns, records for the period 6th April 2019 to 5th April 2020 are required. For business accounts, we will also need to do accounts based upon the business’s individual year end.
Open for Saturday Appointments from November
Saturday morning appointments should be more convenient for those who work on weekdays so we will be opening our doors on Saturdays for appointments from 2nd November. Our opening times will be 9am to 1pm by appointment only.
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