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Making Tax Digital and Individuals

29th January 2019
29th January 2019

Making Tax Digital (MTD) is a major new initiative from the HMRC which will fundamentally change how tax is paid.  In the third of our series of articles, here we look at what MTD means for individuals…

Personal Tax Accounts (PTA)

The PTA enables individuals to communicate with the HMRC, to update any financial details, and check their tax affairs in real time.  Actions that can be undertaken include making tax payments, providing bank details, plus any taxable benefit details.  If you haven’t yet got yourself a PTA, then you can go here for more details and to go through the registration process.  The benefit to you is that it is hoped that the requirement to complete and file self-assessment tax returns will lessen for those with straightforward tax affairs.

Simple Assessment

This is where the HMRC has the power to assess your tax liability for income or capital gains tax, without the tax payer needing to complete and submit a tax return.  Currently, only certain taxpayers with a state pension are included in this but there are plans to roll it out to other groups of taxpayers in future years.

Under this scheme, individuals don’t submit a tax return, but rather HMRC send out a calculation of tax owed, which can be viewed in their PTA.  If you disagree, you then have a period to appeal against that calculation.

All of MTD is moving towards a fully digital tax system.  As with all of these big technological changes, we don’t expect it all to go smoothly.  And of course, we are more than happy to help you with any questions you have about how MTD will affect your own circumstances.  Don’t hesitate to contact us for help. 

In the next of this series of articles, we’ll  be looking at what MTD means for the self-employed.   

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Blue Monday

21st January 2019
21st January 2019

Today is Blue Monday – apparently, the most depressing day of the whole year.  Here, we look deeper into why today is so significant, and what it means for businesses…

Blue Monday was defined in 2004 by a psychologist who was asked by a travel firm to come up with a scheme for promoting their winter deals.

A number of factors were identified which were seen as contributing to low mood:

  • The weather – today is definitely chilly but at least the sun is shining!
  • Debt – particularly that racked up over Christmas with the monthly statement about to drop through the letterbox
  • Monthly salary – with wage increases around the 3% mark, and inflation over 2%, pressure remains on wages
  • Time since Christmas – the decorations are packed away, it’s back to the daily grind…
  • New Year’s Resolutions – how many are you still maintaining?  Thought so…
  • Motivation – for many, this is the time when motivation levels are lowest
  • Need to take action – we know we have to, but…

Like many theories, this one turns out to be nothing more than pseudo science – they have even come up with a formula for calculating just how depressing today is meant to be.

What it does mean is that some marketing stunts can piggy-back onto the whole Blue Monday bandwagon.  McDonalds, for example, are giving away free cheeseburgers if you use their app.  There’s other deals on sushi, aromatherapy and diet plans.

Perhaps more importantly, it does help to raise the issue of well-being at work.   One in six will experience depression at some stage of their lives.  To claim that depression can happen on one day in January clearly trivialises the experiences of people who have a serious illness.  It’s an issue which businesses and staff need to be aware of all year round.

For more information from mental health charity Mind, and the NHS, click the links.

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Making Tax Digital and VAT

11th January 2019
11th January 2019

If your business is registered for VAT, there are some far reaching changes happening which will be implemented for most businesses this April.

Making Tax Digital (MTD) will be implemented for any VAT returns which need submitting after 1st April 2019.  All VAT records will need to be kept digitally, using software which is MTD compatible.

There are a small number of businesses who are being allowed to defer the start of digital reporting for 6 months, but the vast majority of businesses will have to comply.

There are 3 key challenges for businesses, and it is important that businesses are prepared ahead of the April deadline.

Record Keeping

Manual records are no longer good enough.  Digital records must be kept using ‘functional compatible software’, which means software which can connect to the HMRC using an Application Programming Interface (API).  There is a requirement to collect more information after April than is currently the case.

VAT Returns

Returns can only be submitted using the HMRC API platform.  Manually entering figures will not be possible. 

Timing

MTD for VAT will be implemented on April 1st 2019.  You may have noticed that this is a couple of days after the UK formally leaves the EU.  There is some uncertainty around how VAT transactions between the UK and the EU will be treated, and you can virtually guarantee everything won’t go as smoothly as promised!  No large scale computer system is ever launched without there being some glitches…

Conclusion

It clearly won’t be good enough for your business to wait until April to ensure your VAT systems are ready.  If you’ve not implemented a MTD VAT compatible software system already, you need to start soon.  And of course if you need any help in preparing your business, please don’t hesitate to get in touch.  Its only a matter of weeks away…

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What is Making Tax Digital

14th December 2018
14th December 2018

Making Tax Digital (MTD) is a major initiative the Government are introducing which will change the way individuals and businesses pay their tax.  It will impact on every tax payer and business in the country.  We’ll be writing a number of blogs posts on MTD so you know exactly what it means to you.  First of all, we’ll tell you what is planned to happen…

Why bother with MTD?

The Government want to introduce MTD so that the tax system is:

  • More effective
  • More efficient and
  • Easier for tax payers to get their tax right.

The context for this is clear – HMRC reckon they lose about £9 billion every year down to ‘avoidable mistakes’.

Will it affect VAT?

Oh yes!  If your turnover is over the VAT threshold (currently £85,000) then your business will have to use the MTD service to keep records and submit your VAT returns from April 1st, 2019.  That’s just over 3 months away.

And Income Tax?

The deadline for implementing MTD for income tax is a bit further away – this will be April 2020 at the very earliest, and will probably be impacted by how the VAT implementation goes.  If you’re a self-employed business of landlord, you can choose to voluntarily keep business records digitally and send Income Tax updates to the HMRC now, instead of doing a Self Assessment tax return.

Personal Tax Accounts

The introduction of Personal Tax Accounts is all part of this move towards a more digital tax system.  The aim is for you to be able to manage your tax affairs through the account, rather than phoning or writing to the HMRC.  There’s over 30 services currently available through the new system, with more planned.  Registering is easy, but if you do need any help, don’t hesitate to contact us here.

 

So that is what Making Tax Digital is – next time, we’ll look in more detail at how it will impact on your VAT payments and reporting.

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Are you claiming Employment Allowance?

30th November 2018
30th November 2018

If you are an employer and paying National Insurance for an employee, you could get up to £3,000 off your National Insurance bill by claiming Employment Allowance.

The allowance effectively reduces your employers Class 1 National Insurance (NI) each time you run your payroll, either until the £3k has been used up or it’s the end of the tax year.

Who Can Claim

If you are a business or charity (which includes community amateur sports clubs), and paying Class 1 NI, then you are eligible to claim.  Also, if you employ a carer or support worker, it’s likely you’ll also be able to claim this allowance.

Who Can’t Claim

There are 4 main categories of businesses that can’t claim the allowance:

  • If you are the director of the company and the only employee paid above the secondary threshold (just over £8k per year)
  • You employ someone for personal, household or domestic work – such as a nanny or a gardener, unless they are a care or support worker
  • You’re a public body doing more than half your work in the public sector
  • You’re a service company working under the IR35 rules

How to Claim

Claiming is easy through your payroll software, or you can access the claim process through the Basic PAYE tools from the HMRC.

For more information

Our Payroll Section is able to help with all of your questions regarding any of the complexities involved in paying staff.  If you need any help at all, please contact us here.

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Mental Health & Well-being at work

27th November 2018
27th November 2018

The impact of poor physical health in the workplace is plain for all to see – but the effect of poor mental health can be just as, if not more damaging.  A recent letter signed by industry leaders from across business and education highlighted that one in every six workers will experience mental ill health – which includes depression, anxiety, or stress-related issues.

This represents about 5 million people in the UK, so the costs are significant.  Mental health issues are estimated to cost the UK economy nearly £35 billion each year, with 15.4 million working days lost to mental ill health.

What can be done?

There is still a lot of stigma around the issue of mental health, which often makes it difficult for someone experiencing problems to come forward and ask for help.  One of the challenges, then is to make the issue of poor mental health as important as poor physical health.

Mental Health First Aid

Awareness is so important here, and a training programme called Mental Health First Aid (MHFA) aims to tackle these issues.  The aim of MHFA is to try and change attitudes in society around mental health, by developing skills to look after our own and others’ wellbeing.  The outcomes of the training are an increased knowledge of the range of mental health problems, including substance misuse, and an increase in the supportive behaviours towards individuals with mental health problems.

The courses teach people to spot the symptoms of poor mental health, and then offer initial help and guide a person towards appropriate support.  What it is not about is training people to be therapists themselves – but rather, to help people develop listening and responding skills.

To find out more about MHFA, the skills involved and courses available, go to their website here.  There are a range of courses available, including some which focus specifically on young people, and people who are or have been in the armed forces.

 

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National Insurance for the Self Employed

9th November 2018
9th November 2018

Self employed people pay class 2 National Insurance if their taxable profit is over £6,205, at a flat rate of £2.95 per week – which equates to £153.40 per annum. They are also liable for class 4 National Insurance if their taxable profit is over £8,424 and the current rate for this is 9% for profits between £8,424 and £46,350. Profits over this threshold are chargeable at 2%.

Class 2 contributions count towards several state benefits such as the basic and new state pension, employment and support allowance, as well as maternity allowance and bereavement support allowance.

Both of these classes of National Insurance are dealt with as part of your Self Assessment Tax Return and are payable by the 31 January, following the end of the tax year to which they relate; for example, your liability for the year ended 5 April 2018 is due by 31 January 2019.

Class 2 contributions were originally due to be scrapped in April, then the move was delayed by a year and it was recently announced that class 2 national insurance contributions will continue and will not be abolished in this Parliament. The reason the Government are giving for this change in policy is that low earning self employed people would pay more to access the state pension, as it’s estimated that around 300,000 self people earning less than £6,000 a year are paying class 2 National Insurance voluntarily in order to access the state pension. If they were abolished they would have needed to switch to paying class 3 voluntary contributions which are currently payable at a rate of £14.65, therefore they would have been faced with an annual increase of over £600.

Labour have labelled the move as a betrayal of the self employed and the Federation of Small Businesses said it would hit more than 3 million people and believe it will net the Treasury over £350 million annually in the 3 years to 2021.

If you have any concerns relating to your National Insurance record and want to access your state pension forecast, then the best thing to do is to set up a personal tax account with HMRC which provides lots of useful information.

If you need any help at all, don’t hesitate to get in touch with us.

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Budget 2018 – Key points

1st November 2018
1st November 2018

This week’s Budget 2018 has brought a few changes in to effect individuals and businesses. We will summarise a few of these now and will revisit some of these topics in our future pieces to give more detail.

  • The personal allowance will rise to £12,500 in April 2019, a year earlier than expected. However, national insurance, for those that pay it, still begins at the lower threshold. The basic rate band is extended to £37,500. In total, this allows earnings of £50,000 before paying higher rate tax.
  • The National Living Wage will increase to £8.21 per hour from next April. The Minimum Wage will increase for age 21-24 to £7.70 per hour, age 18-20 £6.15, under 18 £4.35 and apprentice rate will increase to £3.90 per hour.
  • Selling property you have lived in for the whole period of ownership usually is exempt from Capital Gains Tax if the property is your Principle Private residence (PPR). However, if you sell a property that you haven’t lived in the whole time can bring a charge to capital gains tax on the profit. There are reliefs which can lower this if you have lived in it for part of the period of ownership, one of these reliefs allows you to reduce the profit based on time you have lived in the property and, in addition, the last 18 months could count towards this even if you have moved out by that stage. It has been announced that this 18 month rule is being reduced to 9 months from April 2020. There is also another relief which allows you to reduce the capital gains tax if you have let the property out during ownership. This letting relief which was worth up to £40,000, will also be lost in most cases from April 2020.
  • Capital Gains Tax on residential properties will also be payable within 30 days of completion of sale from April 2020, this brings the tax payable forward by up to 19 months in the most extreme case.
  • Annual investment allowance is going to increase from 1st January 2019 for 2 years. Currently annual investment allowance allows a business to claim 100% tax relief on expenditure on certain plant and machinery used within the business. The current allowance gives 100% tax relief on £200,000 spent on capital expenditure in each financial year. The new allowance will give 100% relief on £1 million expenditure for a 2 year period from 1 January 2019.
  • There is a new capital allowance for qualifying expenditure on structures and buildings. From 29th October 2018 new non-residential buildings will qualify for 2% capital allowances, similar to the old industrial buildings allowance. This will give 2% allowance on the cost of the building as tax relief for 50 years. The unused allowance will transfer with the transfer of ownership.

 

If you believe you may be affected by any of the above changes and wish to know more please contact Nickie and her team nickie@barwellaccountants.co.uk

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Cyber security: are your staff aware?

23rd October 2018
23rd October 2018

We recently came across some research conducted by Norton which got us thinking about just how much people know about some of the basics around cyber security and on-line fraud.  Try these simple 4 questions out (and we’ll give you the answers afterwards!):

  • Would you be able to identify a phishing email?
  • Would you know whether the wi-fi network you’re using is secure or not?
  • Do you use a secure password only when you absolutely have to?
  • Are ALL of your devices protected with anti-fraud software?

Some of the answers are surprising.  38% aren’t able to spot a dodgy email from a legitimate one.  And 77% experienced a ‘negative outcome’ after responding to a potential phishing email.

Particularly relevant where staff use their laptops, tablets and phones when they are out and about, 54% don’t know how to work out whether the wi-fi network they are using is secure.  66% do use secure passwords even when they’re not essential – but 40% have at least one unprotected device.  43% feel overwhelmed by the amount of information they need to protect on a daily basis.

Most surprising are the groups of people who are most affected by cyber crime.  Top of the list are those who we would expect to be most tech-savvy – 36% of Millennials have been affected by cyber crime in the past year, closely followed by 35% of frequent travellers.

Does it really matter though?  The total financial cost of cybercrime in 2016 during 2016 came to £1.8 billion.  Each consumer spent 11 and a half hours sorting out cyber fraud.  These are all showing increases on previous years – the problem isn’t going away, it’s just getting steadily worse.

So what does it mean to the average small business?  If you run those 4 questions past each employee, and they can’t answer each positively, then your business is at risk.  Perhaps it might be time to consider using some of the training budget?

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Is your Business on Google My Business?

15th October 2018
15th October 2018

We’re all looking for ways to get our websites higher up the Google rankings, but here is a way that helps for definite – use Google My Business (GMB).

Basically, GMB is a free business listing tool, provided by Google.  It helps you control the content which is displayed on Google search result pages, plus other Google products.  If you want customers to find out where you are, for example, then GMB helps ensure that the information on Google Maps is correct.

There is much more to it though.  You can post information on your GMB page which will also show up when people search for you, such as reviews and testimonials from your customers, and pictures of what you do.  Google says that if you include pics on your GMB listing, you’ll receive 42% more requests for driving instructions to your premises, and 35% more click through to your website, than businesses which don’t.

You’ll need to ensure that all of the information included in your listing is as complete as possible, and is correct.  As anyone can ‘suggest an edit’, getting it right first time is important.  It will also be useful if you remember to periodically log in to your GMB account and check everything looks right.

Your cover photo is one of the most important things, as it shows up front and centre on your listing, and appears in the search results.  Make sure, then, that it is of a high quality, and accurately portrays what you do.  You can also add videos, but you’ll need to ensure they meet the strict criteria:  30 seconds long maximum, 100Mb or smaller, and 720p resolution or higher.

Don’t get confused between GMB and Google+.  Google+ was a social network with high aspirations – it claimed “to organise the world’s information” – and set itself up as a Facebook competitor, but had precious few users.  As a result, it failed to meet its objective and achieved very low engagement levels, so Google pulled the plug on this.

Find out more about GMB in this very useful article.  If you’re in any doubt, this is their conclusion: “ We can’t stress enough what a terrific service Google My Business is for SMBs and particularly local businesses.  And when you’ve got your listing up, let us know and we’ll happily tweet about it to help you get your message across.

 

 

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