According to legislation surrounding employees claiming on costs incurred when working from home, employees are only able to claim relief for expenses that are exclusively & necessarily incurred during the performance of their stated duties. Any costs that don’t increase directly from  the act of working from home aren’t included in what you can claim against. To claim relief, employees need to be able to show evidence that their home is a workplace. In the eyes of HMRC, the home is only a workplace if it meets the following criteria:

• If the employee undertakes substantive duties when working from home. These are the tasks which employees must carry out which form the whole or part of their central duties outlined in their employment.
• These duties can only be completed with use of appropriate facilities and that these facilities aren’t available on the employer’s premises or anywhere else provided by the employer. There is however an exception here for employees that live far enough away that it could be classed as unreasonable for them to travel daily.
• There is no instance either before or after the employment contract is written that the employee given the opportunity to make the choice as to whether they work at home or at the employer’s premises. Working from home must be the only option in order to make claims.

If an employee is able to show that their home qualifies as a workplace then they can claim tax relief for the following expenses:

• The unit costs of telephone calls that are made solely for business purposes
• Metered costs of water that is used in the performance of work duties
• Any additional costs (unit) of gas and electricity which is used whilst a room is occupied for work only.

Costs that employees cannot claim against are:

• Insurance
• Rent / Mortgage payments
• Council Tax
• Insurance

This is because these will not increase due to working from home. Sometimes it isn’t practical to calculate extra costs. You can make these claims online, by calling HMRC, by post or through your self-assessment tax return if you’re registered.

If you need a little more guidance on claiming expenses, self-assessment or anything else at all then get in touch with the ABC team today!

Call us on 01427 613613

or

Drop us an email to info@abc-accounting-services.co.uk

The post Working From Home – What You Need To Know About Tax Relief appeared first on ABC Accounting Services.

How do I pay the tax and National Insurance (NI) due?

You have to make sure your payment reaches HMRC by the deadline, which is the 31^st January. The time you need to allow depends on your choice of payment method. You can pay on the same or next day online or via telephone banking (Faster Payments), via CHAPS, at your local bank or building society, or at the Post Office. It takes three working days to pay via Bacs or post. The deadline date falls on a Saturday this year so realistically you need to make sure your payment reaches them on the last working day at the latest (Friday 30^th January).

What happens if I miss the deadline?

You must pay immediately or HMRC can take action against you. You can make one-off payments for any overdue amounts you owe.

It might be possible for you to get more time in order to pay or to pay your bill in instalments but only HMRC have the power to issue an extension or instalment plan. You best bet is always to let them know in good time what the issue is.

If you do not have a reasonable excuse for missing the deadline then penalties and interest will apply which only makes your tax bill bigger.

If you would like to get an idea of the scale of penalty you could be looking at use Gov.uk’s calculator here: https://www.gov.uk/estimate-self-assessment-penalties

If you disagree with HMRC’s tax decision (the amount of tax you owe) then you need to contact HMRC to discuss this with them directly.

What if you are no longer self-employed?

You have to tell HMRC if you have stopped trading as a sole trader or have decided to end or leave a business partnership. You will also have to send a final tax return and tell any employees that you are shutting the business down. HMRC will need a tax return by the same deadline that applies to everyone else (31^st January).

The final tax return will require you to work out your trading income, add up all allowable expenses (including any costs that are involved with closing down your business), work out your capital allowances (including any charges for sold business equipment/machinery), calculate any Capital Gains Tax owed on any assets sold or ‘disposed’ of, work out your final profit or loss.

What tax relief can I claim?

Your final tax bill could be reduced if you are eligible to claim tax relief in the following forms:

Entrepreneurs’ relief – This could reduce the amount of Capital Gains Tax you need to pay

Overlap relief – This can prevent you being taxed twice on your profits if you stoped trading during a tax year

Terminal loss relief – This can offset a loss made in your last tax year against your profit in the 3 tax years previous to it

What Expenses can I claim?

There are costs that you can claim as allowable expenses. When you are self-employed your business has various running costs and some can be deducted from your final tax bill as they fall under the category of allowable expenses.

Running a limited company enables you to deduct any business costs from your profits before tax.

• Allowable expenses include:
• office costs, eg stationery or phone bills
• travel costs, eg fuel, parking, train or bus fares
• clothing expenses, eg uniforms
• staff costs, eg salaries or subcontractor costs
• things you buy to sell on, eg stock or raw materials
• financial costs, eg insurance or bank charges
• costs of your business premises, eg heating, lighting, business rates
• advertising or marketing, eg website costs

You could also claim capital allowances when you buy something that you keep and use within the business. This could include equipment, machinery, and business vehicles.

If you use something for personal as well as business use you must be sure to only claim allowable expenses for the business costs. Examples could include a family car where you would claim business mileage for business trips, or a mobile phone that would require an itemised list of business and personal calls so you could claim allowances for an appropriate amount.

If you work from home then you could claim a proportion of your costs for:

• heating
• electricity
• Council Tax
• mortgage interest
• internet and telephone use

These are questions we get asked quite frequently, if you have any others you would like to run by us then you can contact us on Facebook (AccountantsABC), Twitter (ABC_accounting), via email (info@abc-accounting-services.co.uk), or pick up the phone and ask us in person 01427 613613.

The post Self-Assessment Questions & Answers appeared first on ABC Accounting Services.

This blog will address sole traders and partnerships while next weeks will look at Limited companies and directors.
The online filing deadline for your tax return is the 31st January 2015. That means you need to start getting your head around it now. You have one month until the countdown to Christmas becomes in earnest. Once Christmas has been savoured and the arrival of the New Year has been celebrated you will have exactly 31 days (bar one for a mild hangover) to complete your tax return.

Leave it that late and you will be putting pressure on yourself, and if you use accountants, you will inadvertently be putting further pressure on their heavy workload. So, November is the perfect month to make inroads into your tax return.

You will need to make a return if:
a) You are a Sole Trader, Partner in Partnership, Partner in an LLP.
b) Were trading at any point between 6th April 2013 – 5th April 2014.

You have to register to submit an online tax return so make sure you do that in good time. It takes seven days to register. In terms of a partnership, each partner must register with HMRC.

How many tax returns do I need to file?

If you are a sole trader then just the one will suffice.
If you’re in partnership, then each partner must file a tax return of their own. The partner designated by HMRC as ‘the nominated partner’ will also need to file a tax return for the partnership itself. The partnership’s tax return shows its income less its costs which leaves profit that is then shared between the partners as agreed. The profit does not have to be shared equally between them. Each individual partner’s tax return will show their exact share of the profit.

Registering to do it yourself

Sole Traders will need to register a new business and file tax returns at the same time. Existing businesses need only register to file their tax returns online.

Partnerships will register first through the ‘nominated partner’ who will register the partnership and themselves in one process. Each partner will then need to register separately.

LLPs again involve each partner registering with HMRC. If you are an LLP partner you will register the LLP with Companies House who will in turn register the LLP with HMRC so you do not have to.

Once registered to file your tax return online HMRC will issue a 12-digit user ID or what is also called your ‘Government Gateway ID’. This needs to be stored in a safe place – online storage would be an excellent idea. As you are registering you will choose a password to go with the ID. HMRC then send you an “activation PIN” in the post, which takes at least 7 days to arrive. The moment it arrives you should log in using your Government Gateway ID and password, and key in the activation PIN.

Now that you have registered and know what to expect it is time to put the actual tax return together.

What business income do I need to include in my tax return?

You should include:
• Sales that you invoiced customers for during the 6th April 2013 to 5th April 2014
• Sales that you have completed the work for during the 6th April 2013 to April 2014 but have not yet invoiced the customers for
• Any additional sales to customers
• Any private sales of goods that relate to the business (this includes online strands on eBay, Amazon, Gumtree). An example would be a gardener who sells offshoots, plant pots or gardening books on Amazon.

You should not include:
• Private sales of goods that bare no relation to your business. This would be a gardener who sells car parts on eBay.
• Any interest received from banks (including business bank accounts) as this will go on another section of the tax return and not in the Self-Assessment section.
The other things to consider are:
• Income types that count as part of your sales. These are individual to you so it is a good idea to discuss them with an accountant to see how this income will need declaring.
• Grants that you’ve received for your business
• Royalties received

What business expenses do I put down?

Here is the list of all the expenses you need to put in your tax return – if they are applicable of course!

Office & Stationery Costs
• Paper
• Stationary & Pens
• Ink Cartridges
• Other office supplies
• Postage – stamps
• Postage – recorded delivery

Work Memberships & Subscriptions
• Professional bodies
• Trade associations
• Federation of Small Business

Insurance
• Home insurance (part covering the business)
• Business insurance
• Car insurance but only if you opt out of claiming mileage – it is an either or deal!

Business Travel
• Mileage
• Bus Tickets
• Train Tickets
• Plain Tickets

Hosting & Technology
• Web applications
• Broadband used for business
• Phone Bills

Cost of Sales
• Materials to make goods
• Accessories needed to make goods

Training Costs
• Only if you are developing/updating existing skills

Bank Charges
Business bank account:
• charges
• bounced cheque charges
• unauthorised overdraft charges

Bank Interest
Business bank:
• loan interest
• account interest paid

What expenses can I claim for?

It is important to note that you can only claim expenses if HMRC allow you to. There are some non-allowable expenses including:

Travelling expenses
You can only claim the cost of business travel, not private. You can claim the cost of business journeys in your own car.

Food and drink expenses
There are only certain circumstances when you can claim the cost of food and drink and they have to be claimed exclusively for business trips out of the office.

Clothing expenses
You can claim the expense of buying clothing if it is for a recognisable uniform or if it is protective clothing like fire retardant outfits or builder’s site boots. You can also claim for necessary costumes like in the case of a mascot or a magician. Nothing else is admissible as a clothing expense.

Accountancy Fees
You can claim the cost of your accountant preparing your accounts but not for them filing your tax return. Your accountant should separate those costs automatically and include the correct expenses as they are inputting them. You can always ask for an itemised bill if you are unsure.

Do you work from home?

Working from home means that you can claim running costs applicable to your business. These may include heating and broadband costs amongst others.

Keeping Receipts
You not only need to keep receipts but for this tax year you will need to keep them until 2020 as they have to be kept for six years in total.

You can keep virtual copies of those receipts rather than holding onto hard copies. Don’t forget to scan both sides of the receipt. You do need to keep any paperwork that shows a tax deduction (bank interest certificate or dividend voucher).

Any other income explained

You will encounter more than the self-employment section when filling in your tax return. They cover areas including basic information, employment income, rental income etc. You need to consider some other types of income when filling in your Self-Assessment tax return.

What other income will I need to declare?

Employment income

This is where you have been paid a salary at the same time that you have been running your own business. You will need to declare your tax and income figures from this employment.

The forms you will need and links to where you can get them:
Your P60 and P11D for the year 2013-2014 which will come directly from your employer.

These forms will be received only if you have received any benefits or were paid back for expenses incurred. The info from these forms will be entered into the ‘optional employment’ section of your tax return. Remember to make a note of any expenses incurred that you were not paid back for as well.

Bank Interest and taxes
To fill in the bank interest boxes you will need to use the end of tax year certificate/statement that comes from your bank outlining how much interest you received and how much tax you paid on that interest.
The bank interest and tax information will need to be collected from:
• Business bank accounts
• Joint business bank accounts (take half of the interest and tax)
• Personal accounts used to make business transactions
• Personal joint accounts (take half of the interest and tax)
The only things that cannot be included are ISAs as they are tax free.

Shares, dividends, and other income
Add up any further income that you have received. These may include:
• Dividends on any shares owned in limited companies received between 6th April 2013-6th April 2014
• Income from a trust
• Profit from renting property

Finally, how do you file it?

As you probably know the filing deadline is the 31st January 2015. Don’t leave your filing until the last minute because HMRC’s website gets inundated by online submissions. We are talking about a serious gridlock over the last few days of January. The other incentive for getting your tax return in time is that one day late earns you a £100 fine.

At this stage you should be ready to complete your tax return and file it. If you are a nominated partner in a partnership that means filing the partnership’s tax return too.

Where do I file it?
You can file it via HMRC’s free online portal. However, if you are a partner in a partnership you will need to buy commercial software to do this. HMRC do not offer an online portal for this necessity.

What other information will I need for filing?
It may seem silly but let’s go through everything you need so you don’t have to get up and down several times making the whole process even more frustrating! You will need:
• Full name and address
• National Insurance Number
• Your 10 digit Unique Tax Reference
• Date of birth
• HMRC login

The moment has finally come. Once you are sure everything is complete and every ‘T’ is crossed ‘I’ is dotted, you can send your tax return to HMRC. Hoorah.
Remember to get email confirmation and keep it safe!
And finally, do not forget that you have to pay you tax and National Insurance by the 31st January. The deadline for filing and paying are one and the same.

If you have any questions about completing your tax return then feel free to get in touch or post a comment to the blog. We are more than happy to answer your queries. And if you feel like you need an accountant’s help the process or to complete your tax return for you then you can:

Give us a ring: 01427 613613

Check us out further by visiting our website: www.abc-accounting-services.co.uk

Email us for more details: info@abc-accounting-services.co.uk

The post Filing Your Self-Assessment in Time for the Deadline appeared first on ABC Accounting Services.

Do you have a specific question you need the answer to? Browse the questions below and go to the part of the blog that interests you most:

1. How much tax will I pay now that I am self-employed?
2. Do I have to pay National Insurance?
3. Can my home be classed as a business expense?
4. How do I register to become self-employed?
5. Can I claim for travel expenses?
6. How do I record business expenses?
7. What are the advantages and disadvantages of going self-employed?
8. How do I pay tax?

1. How much tax will I pay now that I am self-employed?

Once you are self-employed you get paid the entire invoice amount. So unlike permanent employment you do not get your tax and NI deducted from that total. This means that you have to avoid the temptation of taking the whole amount out and spending it as some will have to be put to one side to cover taxes at the end of the year.

As a general rule, we would recommend that you put 20% of everything you earn to one side. This amount should cover your tax and National Insurance (NI) easily. You will be able to adjust this figure over time as you get a better understanding of your tax liabilities.

Since your tax is based on profits made after allowable expenses, you need to be sure that you are claiming everything you are entitled to so that your tax bill isn’t larger than it needs to be.  Your accountant can advise you on this but as a rough guide, most direct business expenses are tax deductible.

2. Do I have to pay National Insurance?

Yes you do. As a self-employed individual it is your responsibility to make sure you pay your own tax and NI contributions.

The most common payments are Class 2 National Insurance (NI) Contributions, which are paid at a flat weekly rate of £2.75 (2014/2015), although if your annual profit is over £7,956 you fall into the Class 4 National Insurance Contributions category as well. If your profits are between £7,956 and £41,865 (2014/2015) this is an additional 9%, and any profit over £41,865 accrue an additional 2% to pay as well.

Your National Insurance contributions go towards state benefits that include maternity leave, pension, statutory sick pay and job seekers allowance. It is good sense to make your own arrangements for your income protection insurance and a personal pension that would go above and beyond a state pension.

Your National Insurance contributions are calculated alongside your tax so you will pay them when you pay your income tax. Class 2 National Insurance contributions will be paid either monthly or bi-annually by Direct Debit to Her Majesty’s Revenue and Customs (HMRC).

3. Can my home be classed as a business expense?

Yes it can. HMRC allows self-employed individuals to claim back expenses for a room in your home, for the hours you use it for business purposes. This means that you can make a claim for:

• Electricity
• Heating and water
• Council tax
• Mortgage interest

At the times you use part of your house as office space. You can work this out by taking into account how many hours a week you are using the space and then calculate the cost of the room per hour. The accounts will clearly state this usage as ‘use of home as office’ or something along those lines.

It is a complicated aspect of self-employment to work out, made easier with an accountant’s assistance admittedly. This tax deductible entry changes if you become a Limited company and continue to work from home. At this point we would advise getting an accountant’s assistance as they will give you the most up to date and accurate information.

4. How do I register to become self-employed?

The first stop is to register with HMRC. This is a priority because when you become self-employed failure to register this with HMRC within 3 months of starting out will potentially result in a penalty. It is very simple to do – the quickest way is to simply register online.

To enable an accountant or agent to complete this form for you make sure you have signed a 64-8 form (Authorisation for your agent). This form allows and enables your accountant to act on your behalf and deal with HMRC directly.

5. Can I claim for travel expenses?

Yes you can and you most certainly should. You can claim for your car, any rail travel and business related travel costs incurred during a business trip. Keep hold of all receipts and a detailed mileage record so you can prove the expenses and document them accurately in your tax return.

For more information on travel expenses and mileage allowances take a look at our Tax Data Card that contains all of the up to date stats for 2014-15.

6. How do I record business expenses?

As with most things in accountancy thorough records need to be kept. So for any kind of business expense, you need proof of purchase, usually by way of a receipt or a bank statement. These receipts are then added up at the end of the year and the total value is put on your self-assessment tax form. HMRC recommends that you keep your receipts for six years. However, it is admissible to scan them and store the records online. You can easily drop these files, once scanned, into a Dropbox, ICloud, or GoogleDrive account where they will be secure and take up considerably less space.

7. What are the advantages and disadvantages of going self-employed?

The advantages of being self-employed are:

• You are your own boss.
• You wear many different hats because you are in charge of finance, marketing, human resources, sales. There should never be a dull day!
• You can work when and where you choose to a routine of your choosing – that’s freedom!
• You can see the direct link between work effort and reward which sometimes is not visible to an employee.
• You can negotiate acceptable payment terms to suit your requirements.
• You can work for multiple clients at the same time, on many different projects, which can increase your earning potential and also the variety of the work you do.
• You may be able to command higher rates of pay depending on your skill level and the industry and market within which you work.

However, you also need to consider the disadvantages of taking on full responsibility for your earnings and having that level of freedom:

• You do everything yourself so you are responsible for the day-to-day demands and general running of the business.
• You will have to build resources and of course a team around you. At the start you will have to do every single task yourself ranging from cleaning the office, ordering in adequate stationary through to completing your bookkeeping and securing new clients/customers. There will be plenty of tasks that you have to do that you will dislike.
• It is rare to take away a large salary in the first few years – some months you might not even be able to afford a full wage for yourself.
• You may have to juggle two jobs at the beginning to fund the business and get it off the start line. It is common practice to continue with some form of employment to begin with so that you have a steady wage coming in that you can rely on.
• You need to offer a product or service for which there is demand. This may take you in a different direction than what you originally thought and it may also lead you to learn new skills to stay current and competitive.
• Too much expansion too quickly can be detrimental to a business as can too little.
• Working from home is the most cost effective way to run a business to begin with. If you work from other premises, you will need to pay rent and other overheads.

8. How do I pay tax?

Self-Assessment involves completing an online or paper tax return. You will send in information that tells HMRC your income and expenses, which ultimately gives them details of your profit figure. This is what they will tax you on. You will also give them full details of any other tax allowances or reliefs you are entitled to.

Those answers should give you a good grounding on all you need to know when approaching your self-assessment. If there is anything else you need to know or if you are contemplating going self-employed but want to talk things through, contact us on 01427 613613. You get a free 30 minute consultation so any concerns can be aired and alleviated before you take the plunge and start out on your own.

The post Self Assessment Questions and Answers appeared first on ABC Accounting Services.

more, and bores or baffles everybody else?

It is mainly for the self-employed so whether on your own or in a partnership. It also

affects directors of limited companies, some pensioners, subcontractors, people who

have rental properties, and those people who are employed but fortunate enough to be

paying high rate tax.

How do I even begin to approach Self-Assessment?

If you are in business make sure you keep accurate and up-to-date business records,

an accountant can help you in this respect by telling you exactly what you need to keep

hold of. The receipt for the sandwich you ate with a bag of crisps and a can of Fanta will

need to be stored away safely just like the invoice for the new desktop you just bought.

See the section of Accounting and Bookkeeping for more details.

If you are employed, keep details of all tax statements (P60, P45, P11D), details of

interest, and all other income received, as well as details of any expense you incur

whilst employed. Don’t write it down on a number of sticky post-its because they will fall

off your desk, get stuck to your shoe and wind up down a supermarket aisle. A

notebook will suffice.

You have to complete your tax return, submit to HMRC, preferably on time, and pay the

correct amount of tax, again within the time limits.

Find a marker pen that will not wash off or get smudged over time. Walk over to your

wall calendar and put these dates in:

31st January: PAY TAX

31st July: PAY TAX

Self-Assessment in a little more detail

Self-Assessment basically means that you take into account all of your resources of

income, such as property income, savings, dividends, PAYE etc. You would then deduct

a personal allowance (for 2014-15 this is £10,000) and then your income tax and class 4

national insurance liability is calculated. If your liability is over £1000 then payments on

account are required.

To go into a little more detail, the lower limit for class 4 national insurance is £7,956

and the upper limit is £41,865. Subcontractors will need to take into account the

Construction Industry Scheme (CIS) tax suffered.

Limited Companies

An increasingly popular way of running your business because of the tax breaks it can

afford. If you are currently self-employed, we can quickly assess whether this would be

a viable option for you. Directors become an employee of the company which also has

shareholders that may or may not hold different classes of shares. So, one shareholder

might have 40% share of the company while the others each hold ten. Or, there could

be 5 shareholders that each possess 20% of the shares. Always remember that a 50%

shareholder will have half the say in a company and a 51% shareholder can take control of said company.

Limited companies pay corporation tax and profits up to 300k are taxed at 19%. Ouch!

Profits more than 300k are taxed at a marginal rate. So try not to make 301k profits! The

company must submit a CT600 12 months after the year end, although the tax must be

paid 9 months and a day after the year end.

Penalties and Interest

For late submission of tax returns and tax payments, penalties and interest will be

charged by HMRC.

If late submission is an issue because you are struggling with your accounts or

bookkeeping then consider outsourcing this work to an accountant.

Is there anything I can get back?

It all depends on your year-end figures. If you qualify then you could be eligible for

capital allowances and so could claim:

Annual Investment Allowance (AIA)

First Year Allowance (FYA)

Writing Down Allowance (WDA)

There is a special 10% tax pool for low emissions cars.

The post What is Self Assessment and when should you go Limited? appeared first on ABC Accounting Services.

Visit our handy downloads page to stay up to date with all the latest tax information and guidance on how to approach VAT, payroll, National Insurance contributions, self-assessment and bookkeeping. Use the links below to find out more of what you need to know:

New starter checklist for Payroll

https://abc-accounting-services.co.uk/perch/resources/basic-payroll-information.pdf 

The basics of bookkeeping

https://abc-accounting-services.co.uk/perch/resources/bookkeeping.pdf

Self-Assessment explained

https://abc-accounting-services.co.uk/perch/resources/1395927146selfassessment.pdf

The basics of VAT – 2014

https://abc-accounting-services.co.uk/perch/resources/vat.pdf

National Insurance Contributions – rates and allowances

https://abc-accounting-services.co.uk/downloads.php

2014/15 Tax data

https://abc-accounting-services.co.uk/perch/resources/1395935011taxdatafinal.pdf

The post Resources for start-up businesses appeared first on ABC Accounting Services.