HW Top Banding 1200
Did You Know?

Top 10 Tips 

1. Reverse charge VAT for construction
As from the 1st March 2021 vat registered businesses within the construction industry need to consider the reverse charge vat for CIS. This may affect the VAT charged on invoices to your customers and VAT charged by sub contractors to your business. To see if this affects you click on the link below.


2. National Insurance £4000 employment allowance
Many businesses are entitled to an annual employment allowance of £4,000 to reduce their liability for class 1 secondary national insurance contributions. This will be delivered through standard payroll software and Real Time Information (RTI). To claim, the employer will have to complete the yes/no indicator once on their PAYE software. Alternatively this will be processed by the payroll provider/ bureau. However the allowance is not available to companies where the sole employee paying national insurance contributions is the director.

3. Auto enrolment for pensions.
Businesses who have hired their first employee’s on or after the 1st October 2017 will be required to comply with the auto-enrolment employer duties from the date the employee first starts working for them. We can help you comply with all of your obligations in respect of this. Please contact us if you wish to discuss this.

4. Use of home as office
You can claim a flat rate per week for use of home as office as a deduction from your taxable profits, dependant on how many hours you work. Alternatively you can claim a deduction based on a percentage of your actual home costs such as electric, gas, mortgage interest, water rates and council tax. The percentage claimed must be calculated by reference to time spent working in your home and the floor space used as a proportion of the whole house. Employees can also make a claim if they are required to work from home by their employer or because of the restrictions of Covid 19

5. Is your PAYE coding notice right?
If you have more than one source of income such as employment and pension, you may be paying too much or too little tax. HM Revenue and Customs will expect you to understand your code, and tell them as soon as possible if it is incorrect. You should also be aware that where you have made lump sum pension contributions in the previous year then HMRC may make an adjustment to your current year tax code, anticipating that you will make the same lump sum payment in the current year. If the contribution in the previous year was a one off this could result in you underpaying tax in the current year. Please contact us if you believe this may affect you.

6. Should you be registered for VAT?
Are you supplying goods or services within the UK? If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £85,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT. However, if your turnover has gone over the registration threshold temporarily then you may be able to apply for exception from registration. You may be charged a late filing penalty if you are late in registering.

7. Use the right VAT scheme
You may not know it but there are several different VAT schemes which can be used by a business. You may be able to use the flat rate scheme, a cash accounting scheme and there is also an annual accounting scheme which means that you only need to prepare one VAT return a year while making payments over the year which will also reduce the administrative burden of preparing VAT returns.

8. Buy to let Mortgage interest restrictions
From 2017/18 buy to let landlords who pay income tax at the higher rates will find their income tax liabilities increasing due to the phased restriction on the mortgage interest that can be claimed by higher rate tax payers in 2017/18 and onwards. By 2020/21 all of the mortgage interest relief will be given as a 20% tax reducer meaning that your taxable income will be considerably higher as you will not benefit from the deduction of the mortgage interest when calculating the letting business profit. This could then further potentially impact on things such as student loan repayments, child benefit and child tax credit claims and availability of the personal allowance for those taxpayers earning close to £100,000 at present.

9. Marriage Allowance
If you or your spouse has income below the personal allowance threshold of £11,850 and your spouse or yourself are a basic rate tax payer, i.e. earning below £45,000 then you can elect to transfer up to £1,150 of the personal allowance to your higher earning spouse which would save tax of up to £238 per year. You can backdate the claim for marriage allowance to cover any tax year since 5th April 2015 that you were eligible to claim the allowance. Details on how to apply can be found at www.gov.uk/marriage-allowance-guide/how-it-works

10. And finally ... Making Tax Digital – VAT registered businesses
The introduction of digital record keeping and quarterly updates for VAT registered businesses will occur in April 2019. Businesses whose turnover is above the VAT registration threshold, currently £85,000, will be required to keep their records in a digital format and submit these records to HMRC along with their quarterly VAT returns. This is required for all returns commencing on or after the 1st April 2019.

Businesses will no longer be able to submit their VAT returns by logging into the government gateway and entering the figures manually, instead they will need to use software that is MTD compliant and has the ability to file the return directly with HMRC.

We are currently offering our clients consultation, conversion packages and training to enable them to choose the software that best suits their needs and to help them become MTD compliant before the 1st April 2019. Details can be found here ……. 'Making Tax Digital' 

Keep in contact with your accountant throughout the year. We encourage our clients to contact us during the year for updates on their business at no extra cost. This enables us to support them and help them to make business decisions in the most tax effective way.