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Did You Know?

Top 10 Tips to Help Your Cashflow

1. Change to dividend tax rates and the impact on owner managed companies
From 2016/17 directors who are also shareholders will find themselves paying additional income tax on their earnings due to the change in taxation of dividends and the abolishment of the 10% tax credit previously given.There are other remuneration strategy’s that can be implemented in order to negate part of this tax increase and we are now offering a remuneration review service, please contact us about this if you believe you will be affected.

2. National Insurance £3000 employment allowance
Many businesses are entitled to an annual employment allowance of £3,000 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 will no longer be available to companies where the sole employee paying national insurance contributions is the director.

3. Auto enrolment for pensions.
Automatic enrolment has begun. This means employers will need to automatically enrol certain workers into a pension scheme and make contributions towards it. To find out when your enrolment date is, log on to www.thepensionsregulator.gov.uk and enter your PAYE employers reference number. We are now offering an auto-enrolment package alongside our current payroll services to help you with this transition. Please contact us for more information.

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.

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.

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 2019/20 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 £11,500 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 £230 per year. The request will be backdated to the beginning of the tax year so it is imperative that you act now to avoid losing the relief this year. Details on how to apply can be found at www.gov.uk/marriage-allowance-guide/how-it-works

10. And finally ... Making Tax Digital
The introduction of digital record keeping and quarterly updates for the majority of businesses, self-employed people and landlords will be introduced from April 2019. Please contact us for further details.

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.