Spring Statement 2022
A detailed round-up of 2022 Spring Statement and changes coming up in the 2022-2023 tax year is this downloadable PDF prepared by The Institute of Certified Bookkeepers.
Click the link below to download your copy:
Coronavirus Job Retention Scheme – how to claim
Here are the links on what and how to claim for Coronavirus Job Retention Scheme.
1. Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme
2. Work out 80% of your employees’ wages to claim through the Coronavirus Job Retention Scheme
3. Claim for wages through the Coronavirus Job Retention Scheme
National Minimum Wage from April 2020
The new National Minimum Wage and National Living Wage rates coming into effect in April 2020. Here are the details of the new rates which are available on HMRC website.
Tax Filing and Payment Deadlines
Meeting your tax filing and payment duties
For any company or individual, meeting their deadlines when it comes to filing and payment of taxes to the government is essential. It is the responsibility of every business to meet their deadlines without fail, as missing these will trigger the risk of getting a penalty. Here are some Filing and Payment deadlines to help you keep up with your duties.
Self-Assessment
Self-Assessment is a system HM Revenue and Customs (HMRC) uses to collect Income Tax. Tax is usually deducted automatically from wages, pensions and savings. People and businesses with other income must report it in a tax return. If you need to send one, you fill it in after the end of the tax year (5 April) it applies to.
Deadlines:
Registering and Filing Deadlines:
HMRC must receive your tax return and any money you owe by these deadlines following the end of the tax year:
- Register for Self-Assessment: 5 October
- Paper Tax returns: Midnight 31 October
- Online Tax returns: Midnight 31 January
Payment Deadlines:
The deadlines for paying your tax bill are:
- 31 January – for any tax you owe for the previous tax year (known as a balancing payment) and your first payment on account
- 31 July for your second payment on account
If you prefer to pay regularly throughout the year, you can use a budget payment plan.
Penalties:
You’ll get a penalty if you need to send a tax return and you miss the deadline for submitting it or paying your bill. You’ll get a penalty of £100 if your tax return is up to 3 months late. You’ll have to pay more if it’s later, or if you pay your tax bill late. You’ll also be charged interest on late payments.
PAYE
Any employer would normally operate PAYE as part of their payroll. PAYE is HMRC’s system to collect Income Tax and National Insurance from employment. You do not need to register for PAYE if none of your employees are paid £118 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records.
Filing:
When paying your employees through payroll you also need to make deductions for PAYE. The PAYE deductions will be filed to HMRC through RTI (Real Time Information) submission every month on the day of paying your employees.
Payments and deductions:
You’ll be able to view what you owe HMRC, based on your reports. You then have to pay them, usually every month.
You must pay your PAYE bill to HMRC by:
- 22nd of the next tax month if you pay monthly
- The 22nd after the end of the quarter if you pay quarterly – for e.g. by 22nd July for 6th April- 5th July quarter.
- If you pay by cheque through the post deadline is 19th of the month.
CIS
Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HMRC.
Filing:
You must tell HMRC each month about payments you’ve made to subcontractors through your monthly return. You do not have to file a return for the months when you made no payments to subcontractors, but you must tell HMRC that no return is due.
Deadlines:
Send your monthly returns to HMRC by the 19th of every month following the last tax month. For example, if you’re making a return for the tax month of 6 May to 5 June, it must reach HMRC by 19th June.
VAT
You must register your business for VAT with HMRC if its VAT taxable turnover is more than £85,000* (*VAT registration threshold in 2020).
You usually submit a VAT Return to HMRC every 3 months. This period of time is known as your ‘accounting period.’
The VAT Return records things for the accounting period like:
- your total sales and purchases
- the amount of VAT you owe
- the amount of VAT you can reclaim
- what your VAT refund from HMRC is
You must submit a VAT Return even if you have no VAT to pay or reclaim.
Deadlines:
The deadline for submitting the return online and paying HMRC are usually the same – 1 calendar month and 7 days after the end of an accounting period. You need to allow time for the payment to reach HMRC’s account.
Pay your VAT bill:
You must pay VAT to HMRC electronically, for example through direct debit or internet banking. Most businesses are not allowed to pay by cheque.
Corporation Tax
Corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities, foreign corporations who have a permanent establishment in the country, or corporations deemed to be resident for tax purposes in the country.
Rate:
Corporation Tax main rate is 19% from the year starting on 1 April 2017. To check the current corporation tax rate click here.
Deadlines:
The deadline for your tax return is 12 months after the end of the accounting period it covers. You’ll have to pay a penalty if you miss the deadline.
There’s a separate deadline to pay your Corporation Tax bill. It’s usually 9 months and 1 day after the end of the accounting period.
Ways to pay:
Make sure you pay HMRC by the deadline applicable. You’ll be charged interest and may have to pay a penalty if your payment is late.
The time you need to allow depends on how you pay. You can no longer pay at the Post Office.
Same or next day:
- online or telephone banking (Faster Payments)
- CHAPS
- by debit or corporate credit card online
- at your bank or building society
You need a paying-in slip from HMRC to pay at a bank or building society.
3 working days:
- Bacs
- Direct Debit (if you’ve set one up with HMRC before)
- by cheque through the post
5 working days:
- Direct Debit (if you have not set one up with HMRC before)
If the deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before (unless you’re paying by Faster Payments or by debit or credit card).
You can find more information on how to pay HMRC here: https://www.gov.uk/topic/dealing-with-hmrc/paying-hmrc
Record Keeping Under MTD
Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.
It is increasingly common for business records and accounts to be kept digitally, in a software program on a computer or tablet, or in a smartphone application, or maintained through such a device and stored using a cloud-based application.
The difference under Making Tax Digital is that the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally through the Application Programming Interface (API) platform.
If your digital records are up to date, software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received.
What records you must keep and how to keep them if you’re registered for VAT
Records you must keep
The basic rule is that you must create and keep normal business records. You do not have to keep records in a set way and most bookkeeping and computer systems will meet this requirement.
Apart from keeping business records and the special requirements, HMRC asks that records are complete, up to date, and allow you to calculate correctly the amount of VAT that you have to pay or can claim from them.
Special records for VAT
There are 2 records that are specifically required for VAT. These are:
- the VAT account, in many cases this will be based on a routine business record of VAT you owe or can claim
- a VAT invoice for supplies to other VAT-registered businesses, a ‘VAT invoice’ is just the term for an invoice which contains some information required by the VAT rules, most commercial invoices will already hold the right information
Business records
VAT law requires you to keep all your business records. The view of business records is wide and will include:
- annual accounts, including profit and loss accounts
- bank statements and paying-in slips
- cash books and other account books
- credit or debit notes you issue or receive
- documentation relating to dispatches and acquisitions of goods to or from EU member states
- documents or certificates supporting special VAT treatment such as relief on supplies to visiting forces or zero rating by certificate
- import and export documents
- orders and delivery notes
- purchase and sales books
- purchase invoices and copy sales invoices
- records of daily takings such as till rolls
- relevant business correspondence
- VAT account
What a business record is will depend on the type of business you run. You’ll always have to keep a VAT account and copies of invoices, but some of the other records may not be a normal record in your business. If that’s the case, you do not have to keep such a record just for VAT. But equally, some businesses will create additional business records, and these must be kept and produced to HMRC when you’re asked.
Keeping records
Generally, you must keep all your business records for VAT purposes for at least 6 years. Records that you use for other tax purposes may need to be kept for longer periods.
If the 6-year rule causes you serious storage problems or undue expense, or you need advice on records for other types of tax, then you should consult VAT general enquiries in HMRC portal. HMRC may be able to allow you to keep some records for a shorter period.
Additional records you might have to keep
HMRC may direct some businesses to keep additional records. This is where they have reasonable grounds to believe that such records might help them identifying supplies on which VAT is at particular risk of going unpaid. This will most commonly arise with supplies of mobile phones and computer chips but is not limited to these types of supplies. Failure to comply with one of these directions can result in a financial penalty.
You have a right of appeal against the issue of a direction and against the imposition of any penalty for non-compliance.
Keeping records on your computer
It’s common for business records and accounts to be kept on a computer and there are no special VAT rules about using a computer.
Failing to keep or produce records
There’s a financial penalty for failure to keep or produce the records required by law.
You can request a review of any penalty or appeal to an independent tax tribunal.
Digital record-keeping
All VAT registered businesses must keep and preserve certain records and accounts. Under Making Tax Digital, some of these records must be kept digitally within functional compatible software. Records that are not specified in this notice, or that are not required to complete your VAT Return, do not need to be kept in functional compatible software.
Some software will record all your VAT records and accounts information. However, there are some records that by law must be kept and preserved in their original form either for VAT purposes or other tax purposes.
Example
A business receives an invoice and types selected data contained in the invoice into functional compatible software. They must still keep the invoice in its original form as the data in the functional compatible software is not a copy of the invoice.
If you deregister from VAT you will no longer need to keep digital records in functional compatible software, but you must retain your VAT records for the required period.
Functional compatible software
Functional compatible software is a software program, or set of software programs, products or applications, that must be able to:
- Record and preserve digital records.
- Provide to HMRC information and returns from data held in those digital records by using the API platform.
- Receive information from HMRC using the API platform.
Digital links:
Data transfer or exchange within and between software programs, applications or products that make up functional compatible software must be digital where the information continues to form part of the digital records. Once data has been entered into software used to keep and maintain digital records, any further transfer, recapture or modification of that data must be done using digital links. Each piece of software must be digitally linked to other pieces of software to create the digital journey.
A ‘digital link’ is one where a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications. That is without the involvement or need for manual intervention such as the copying over of information by hand or the manual transposition of data between 2 or more pieces of software.
HMRC also accepts that the following are digital links:
- Emailing a spreadsheet containing digital records so the information can be imported into another software product
- Transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to someone else who then imports that data into their software
- XML, CSV import and export, and download and upload of files
- Automated data transfer
- API transfer
Soft landing regarding digital links requirements
HMRC will allow a period of time, the “soft landing period”, for businesses to have in place digital links between all parts of their functional compatible software.
For the first year of mandation businesses will not be required to have digital links between software programs.
This means that if Making Tax Digital rules first apply to you from a:
- VAT period starting on or after 1 April 2019 – you will have until your first VAT return period starting on or after 1 April 2020 to put digital links in place
- VAT period starting on or after 1 October 2019 – you will have until your first VAT return period starting on or after 1 October 2020 to put digital links in place
During the soft landing period only, where a digital link has not been established between software programs, HMRC will accept the use of ‘cut and paste’ or ‘copy and paste’ as being a digital link for these VAT periods
Submission of information to HMRC
The submission of information to HMRC must always be through an API. While HMRC expects most businesses to use API-enabled commercial software packages both to keep digital records and file their VAT Returns, the following alternatives may be available.
Bridging software
This is a digital tool incorporating relevant Making Tax Digital APIs that is used to connect accounting software to HMRC systems. It allows the required VAT information to be reported digitally to HMRC, and for information to be sent digitally back to the business from HMRC.
API-enabled spreadsheets:
These are spreadsheets that incorporate relevant Making Tax Digital APIs. They can either:
- combine with accounting software to submit the required VAT information digitally to HMRC, and allow information to be sent back to the business digitally from HMRC
- be used to keep digital records and then directly submit the required VAT information digitally to HMRC.
Errors found in records
Where you find that your VAT records contain errors, you will need to correct them. This guidance only applies to declarations of UK VAT and doesn’t apply to VAT MOSS returns, as these contain declarations of VAT due in other EU member states. To correct errors in declarations of VAT due in other member states, you will need to follow the rules of the relevant EU member state.
If that advice does not fit your particular circumstances, you may need further help from HMRC VAT Helpline, or you may wish to consult your own tax adviser.
Where an error has led to a misdeclaration on a VAT return you’ve already sent to HMRC, you can always correct the error at a later point of time using HMRC links. If you deliberately fail to correct an under declaration of VAT, you may be liable to a penalty or even criminal prosecution.
The records listed must be kept, maintained and preserved in digital form. The exact way you must enter the information will depend on the software package. The API enabled spreadsheets can be used to keep digital records and then directly submit the required VAT information digitally to HMRC. Contact us at Cloudit Bookkeeping if you are unsure about how and what the records should be maintained and filed to HMRC and how to manage accounts digitally.
Main Income Tax Rates 2018/2019
UK INCOME TAX BANDS 2018/2019
(excluding Scotland)
- 20% basic rate on income up to £34,500: tax on band £6,900
- 40% higher rate on income over £34,500 to £150,000: tax on band £46,200
- Additional rate of 45% on income over £150,000
- Savings rate of 0% on savings income up to £5,000
(not available if taxable non-savins income exceeds the starting rate band) - Savings allowance at 0% tax:
Basic rate taxpayers £1,000
Higher rate taxpayers £500
Additional rate taxpayers £0 - Dividend allowance at 0% tax – all individuals £2,000
Tax rate on dividend income: - Basic rate taxpayers £7.5%
- Higher rate taxpayers 32.5%
- Additional rate taxpayers 38.1%
MAIN PERSONAL ALLOWANCES
- Personal (basic) £11,850
The personal allowance of £11,850 is reduced by £1 for every £2 by which income exceeds £100,000 - Married couple’s allowance (available where one partner is born before 6 April 1935) £8,695
- Marriage tax allowance £1,185
- Blind person’s allowance £2,390
- Rent-a-room tax-free income £7,500
MAIN DUE DATES FOR TAX PAYMENT
- Income tax, NIC and Capital Gains Tax – Self Assessment:
31 January in tax year
Following 31 July
Following 31 January
If you’d like to keep a copy of the above information, here is a link to download the PDF: Main Income Tax Rates 2018_2019
Self-Assessment – What Not To Do
If you are self-employed, you would have received the brown envelope from HMRC reminding you that it is TIME – time to file yet another tax return. Funny, how quickly a year can fly by!
Now that you have cleared a weekend to sort it all out (or at least put a date in your diary to get it sorted!), let’s have a look at what you shouldn’t do this year when dealing with your tax return.
Firstly, do not wait until the last minute and miss the deadline.
An online version of the tax return can be completed and submitted electronically allowing you until 31 January to file it with HMRC. The paper version needs to be submitted by 31 October following the end of the tax year. However this will not be an option for too much longer. HMRC are on a path of digitalising tax system with the first step being VAT returns and other taxes will be next.
If you do miss your deadline, the penalties are harsh:
- A £100 penalty for missing the filing deadline
- For returns over 3 months late – an additional daily penalty of £10 per day up to a 90 day maximum of £900
- For returns over 6 months late – an additional £300 or 5% of the tax due if this is higher
- For returns over 12 months late- a further £300 or 5% of the tax due if this is higher. In serious cases the penalty could be up to 100%of the tax due instead.
- Interest is payable on late payment of tax at a rate of 3.0%.
Secondly, do not claim expenses which are not tax deductible.
Expenses included in your trading profit calculation must be wholly and exclusively for business purposes. When adding up your expenses do not include disallowable items. We have put together some examples, however you should consider each expense and the purpose for which it has been incurred before deducting it from your trading income.
Do not include these expenses:
- Customer gifts if it doesn’t contain a conspicious advertisement, it is over £50 per customer per year and food, drink or tabacco gifts.
- Client entertainment expenses such as restaurant bills, drinks or coffee receipts incurred at a meeting with your client or business contact
- Fines and penalties such as HMRC penalties or other governing body fines, for example parking fine
- Asset depreciation
- Your own drawings – what you take from your business as a ‘salary’ comes from the profits and is not regarded as business expense
- Lunch expenses, unless you were travelling away for business and it can be regarded as subsistence
- Clothes to wear to work for example smart office wear or a suit. You can however claim for protective clothing or uniform costs.
If you are employed, there might be expenses you can claim through your self-assessment tax return if these have not been reimbursed by your employer. What tax relief you can claim for your job expenses can be found on HMRC website here.
If you need help with your self-assessment, an ICB qualified bookkeeper can help you and guide you through it. Get in touch for a chat about how we could help.
MAKING TAX DIGITAL FOR SMALL BUSINESS
WHAT YOU NEED TO KNOW AND PREPARE BEFORE APRIL 2019
HMRC has announced their plan to make tax digital by 2019. Under the new scheme, people will have online tax accounts that track their professional and business transactions automatically. These accounts will be submitted quarterly to HMRC to estimate the taxes due.
The online system is intended to be more transparent while removing some of the inaccuracies and inefficiencies that hinder paper tax filings.
This is not the same as lodging a return online. Making tax digital has three important distinctions:
- Bank transactions and other financial information will flow automatically into people’s digital tax account, whether or not they declare that income or those expenses.
- Submissions will need to be made at least once per quarter.
- Submissions will need to be filed using some form of software.
While Making tax digital has been on the agenda for some time, the latest government finance bill has proposed a two-part roll out:
- From April 2019, businesses with a turnover above the VAT threshold will have to keep digital records for VAT purposes.
- From 2020, businesses may be asked to keep digital records and update HMRC quarterly for other taxes.
What does it mean for your business?
Your business will need to use some form of software to keep your VAT records and file VAT returns if you fall into the above category. Remember this will become a requirement from 1st of April 2019.
For other forms of tax, your business will likely be required to submit accounts every quarter which is scheduled to take effect in 2020. Thus keeping your records electronically will become essential.
More frequent submissions will help your business avoid nasty surprises. Big tax bills can accumulate over the course of a year but when tax is calculated quarterly, things are far less likely to get out of hand.
If your business chooses to use accounting software, you should make sure it has online capabilities. Desktop accounting software hasn’t traditionally been able to submit tax online.
As a bonus, online accounting software also allows you to:
- access the business’s accounts from anywhere there’s internet
- create ‘bank feeds’ so transaction data flows straight into the ledger
- collaborate online with your bookkeeper by leaving and receiving messages within the software
Online accounting software can also sync with other online services such as POS software, inventory management software, or time-recording apps.
Where do I start?
Don’t think of making tax digital as just another obligation. This is your opportunity to regularly check income, expenses and profit in your business – which will help you make better decisions. Take these three steps to help make the transition smooth.
- Figure out when you have to make your tax digital
You can make your tax digital right now, if you like, and there’s no reason to wait till the last possible moment to do it. But you need to know when it will become compulsory for your business. You’ll find a government timeline here. - Consider online accounting software
You don’t have to use online accounting software to comply with making tax digital but it might make things easier. And it will give you access to other powerful tools. Ask your bookkeeper about online accounting software or read this guide to learn more. - Assess your bookkeeping support
Will you hire a tech-savvy bookkeeper to help your business make tax digital? If so, start looking soon. They’ll be busy people during the transition period.
Making tax digital could be really good for your business
Change can often seem daunting, especially if it requires you to adopt new technology. However, quarterly tax filing could actually lessen your workload. And by updating your accounts more often, you’ll be able to react faster to opportunities and threats in the business.
For help setting up your digital accounts and VAT reporting, speak to our qualified bookkeepers today.
Source: xero.com
Tax Codes
Looking to find out what your tax code means? Here is a link to HMRC website where it is covered in detail:
Tax Codes
