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Question: Can I build an office for my business in the back garden?

Answer: Yes you can BUT you can’t get tax relief on it.

Unfortunately whether it’s a shed, shipping container, garden room or a wendy house, it’s treated as a building and not an item of plant & equipment so no capital allowances are available.

The same applies if you build it from materials or buy it as a whole.

Everything you put in it though, that’s all good for tax relief – insulation, furniture, decoration, equipment, Harry Potter pencil case.

Running costs such as light, heat & water are also probably allowable for tax, but always best to check with your accountant.

The 1k trading allowance….

Did you know you can earn up to 1k of self employment income in any one tax year without even having to tell HMRC let alone pay any tax?

So if you’re thinking about turning that hobby into a living but want to start off slowly, if you want to earn a little bit of extra money on the side of an employed job, or just want to provide some services to family & friends, then go for it!

Always keep track of your income & expenses, and of course consider any other insurance/subscription needs depending on your trade, but the tax man doesn’t need to be one of your worries.

Companies House….

Did you know you can search Companies House to find quite a few details on a limited company you might be wanting to work with? A supplier, a customer, an advisor maybe?

Are they who they say they are?

Is the company active?

How long have they been trading for?

Have they got any charges against them?

Is someone trying to strike them off?

Are they in liquidation?

Are they up to date with their accounts?

Who the directors and people in control are?

How many other companies do they have (or have had in the past)?

The latest submitted accounts should also show you quite a bit of financial information, which will vary (and may need your accountant to explain) but could also be useful to know.

What’s an overdrawn director’s loan account?

If you decide to trade through a limited company then unfortunately you can’t view all the cash sitting in the bank account as your own.

Your supplier invoices need settling, loans need repaying, and the tax man needs paying. All before you pay yourself.

You only get the left over available profits, after tax.

If you take out what’s not yours, you will owe this back to the company. You will overdraw your directors loan account.

You may then have to pay tax on that overdrawn loan account until you give it back. 33.75% tax.

So probably not a good idea.

HMRC self assessment payments on account.

This has come up quite a few times lately so I thought I’d share the info again.

If your self assessment tax bill goes over £1k then you may need to make payments on account towards your next tax bill.

This can give rise to a ‘double whammy’ of tax the first year that this happens.

If you’ve already paid at least 80% of your total annual tax at source then you don’t have to make these payments.

HMRC calculate these payments based on your last tax bill.

They are payable by 31st January and 31st July each year.

You can make a claim to reduce these payments on account if you believe your current years tax bill will be less than the last

Do give me a call if you would like any more information.

VAT

Perhaps your business is steadily growing? Or you have just landed a large contract? Both of these are reasons to regularly check your turnover to see if you need to register for VAT.

You must register for VAT if your VAT taxable turnover has gone over £85,000 in the last 12 months, or that you know that it will in the next 30 days.

The easiest way to keep track of your income is by using a piece of software, such as Intuit QuickBooks, for your invoicing and bookkeeping. This means you can find out your previous 12 months turnover by running a simple report.

Depending on your circumstances it may also be beneficial to voluntarily register for VAT, so drop me a message if you want any more information.

A1. False! If you earn over £1k self employment income or rental property income you need to tell HMRC.

A2. Sales unfortunately. And this is in any last 12 months, not for a tax year.

A3. If a tax return has been issued you need to complete it even if it is NIL. Unless you call HMRC and can get them to cancel it.

A4. Yes, probably.

A5. Only If the beneficial interest in the property has officially been changed and you’ve sent the correct form to HMRC.

Quick fire quiz with some commonly misunderstood issues! (Answers in next post)

Q1. True or False – If you don’t earn enough to pay tax you don’t have to tell HMRC?

Q2. The VAT registration threshold is 85k. Does this mean sales or profit?

Q3. If you’ve stopped being self employed do you still need to submit that tax return that was issued?

Q4. Does my partner start to lose their child benefit if I earn over 50k?

Q5. We rent out our spare property but only I declare the income because my partner is a higher rate tax payer, is that OK?

From April Dividend tax will also be increasing by 1.25% alongside national insurance. So if you are a company director make sure you optimimise any dividends this month if distributable reserves are available. And don’t forget the first £2k of dividends are tax free.

Are you ready for the national minimum wage increase from 1st April? If you are an employer you must make sure that all staff over 23 earn at least £9.50 an hour. Along with the rise in national insurance this might mean you need to revisit your budgets and cash flows.

Self employed and been thinking about that new computer, van or piece of machinery? If so, make sure you buy it before the 5th April to get the tax relief this year (unless you are a company with a different year end). But, always remember, only buy it if you actually need it – don’t spend 100% just to save 20% tax!

Just a reminder that 2020-21 tax returns need to be filed by 28th February to avoid a late filing penalty, and a late payment penalty can be avoided if you pay your tax or set up a payment plan by midnight on 1 April. You can pay your tax bill or set up a Time to Pay arrangement online at GOV.UK.

HMRC self assessment payments on account.

This has come up as a query or a concern for a few clients lately so I thought I’d share a bit of info.

If your self assessment tax bill goes over £1k then you may need to make payments on account towards your next tax bill.

This can give rise to a ‘double whammy’ of tax the first year that this happens.

If you’ve already paid at least 80% of your total annual tax at source then you don’t have to make these payments.

HMRC calculate these payments based on your last tax bill.

They are payable by 31st January and 31st July each year.

You can make a claim to reduce these payments on account if you believe your current years tax bill will be less than the last

I’m pleased to announce that RSJ Accountants Ltd is now an Intuit QuickBooks certified pro advisor. Quickbooks offers comprehensive and user friendly cloud bookkeeping solutions for all businesses so please do contact me to discuss your options further.

Do you or your partner earn over £50k and claim child benefit? If so you will need to pay some or all of it back to HMRC. If you have any questions or want to know how you go about paying this back (or how you can maybe avoid it) then drop me a message.

Did you know that the way self employed business owners and landlords report their profits to HMRC are changing in April 2024? If you earn over £10k a year you will have to make 4 quarterly returns as well as a final year end return, and these returns will need to be made through HMRC compatible software. This will be a huge change to many of you and will understandably cause some worry and burden, so although it is still a while away, do give me a call if you want any help or advice to plan ahead

‘You make my accounts sound as fun as they ever could be, thankyou so much’.

Lovely to receive this from a client this morning. Always find yourself an accountant that loves what they do, and does it with a smile.

Renting out a property? Not earning much from it? Maybe the mortgage repayments are more than the rents? It’s just a bit of Air BnB? It’s only a friend paying me a bit to live there? Unfortunately, if your rental income is more than £1k per year then you have to still declare it to HMRC and pay tax on any profits. This may mean registering for self assessment so give us a call to see how we can help.

Did you know you can only earn £1000 of self employed income before you need to register for self assessment and submit a tax return? You must register by 5th October after your first tax year end, but why wait? Early registration and early tax return submission means you can make plans and budget for any tax due.

Do you have your own company and are you worried about future tax rises? In two years time the main rate of corporation tax will rise to 25%, but there will be rises for any small business with profits over 50k. This threshold will be even less if you have more than one company under the same control. Give us a call to see how we can help you start planning for these changes now.

The chancellor delivered his highly awaited budget on 3rd March. If you would like to receive my summary of the key points, to see how it will affect you or your business, the please do contact me.

The portal for the VAT deferral scheme opens today if you have previously deferred VAT due to coronavirus and want to pay in installments rather than in full by 31st March.

The ‘soft landing period’ for the implementation of Making Tax digital for VAT is coming to an end and ‘digital links’ are becoming compulsory. If you are currently using multiple pieces of software, including spreadsheets, to calculate and report your VAT then you will need to make changes if you haven’t done so already. However, if you believe this to be ‘unachievable and not reasonable’ then you can make a formal application to HMRC. Do contact me if you have any queries.

If you have not yet paid your 2019-20 self assessment tax you now have until 1st April to pay or set up a payment plan without incurring the 5% surcharge.

Are you a higher rate tax payer with some surplus cash available? Pension contributions are a really great option to reduce your tax bill and save for the future. And with possible tax changes coming in the budget why wait?

CONTACT US LINK – Apologies if anyone has tried to contact us through the link on the website and has not received a reply, it has temporarily been down but is now back up again.

Today HMRC have announced that people will not receive a penalty for filing their 2019-20 tax return late as long as it is filed by 28th February. However, tax payments are due by 31st January and interest will accrue, so we would encourage returns to still be submitted on time.

From 1st March 2021 the VAT reverse charge must be used for most supplies of building and construction services. This is going to affect alot of businesses, and you will need to be prepared.

Thinking about changing your company vehicle to an electric or hybrid? It may be worth doing this before the end of the tax year when 100% can be claimed by the purchaser. As of April 2021 this will only apply to fully electric cars.

Own a residential property that isn’t your main home? If you sell that property you may have to let HMRC know within 30 days to avoid a fine.

The Chancellor has announced one off top up grants up to £9K for retail, hospitality and leisure businesses forced to close. These are accessible through your local authority.

Check if you are eligible for the third Self Employed Income Support Grant and claim by the 29th January.

I often get asked about how important good bookkeeping is, and my answer is always very.

These are my top 3 reasons;
1. Management decisions. Having accurate, real time information about your business finances means you can make those all important decisions to help push your business forward.
2. Keeping up with the law. If you are VAT registered you will know that you already need to keep digital records and submit quarterly VAT returns. However, by 2023 HMRC will be expecting all businesses with income of over £10k to report to them quarterly using a digital platform. Getting your bookkeeping on track now will help enormously with meeting your current or future obligations.
3. Less cost. Most people think that just providing a bundle of paperwork to us once a year means less expense to them. However, investing in some bookkeeping software and some training can often mean lower year end fees from us. Or of course we can do it for you.

And as a bonus, we get to see you more than once a year.

As a practice we can highly recommend Intuit Quickbooks, who we are partnered with to offer you discounts on all packages.

It’s not often HMRC relax their rules, but if you are a company and are anticipating making a current year loss due to Covid, then HMRC may consider an early claim for that loss relief.

If you are worried about being able to pay your self assessment tax by the end of January, there is still time to apply to pay in installments. If the amount you owe is less than £30,000 you can do this online without having to call HMRC.

If your business is anyway connected to the EU, you will need to make changes by 1st January.

Potential capital gains tax changes ahead according to a government review. But will it just affect the wealthy? If you own a rental property or are planning on selling shares in a business, you could be affected.

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.

If you’re a VAT registered business, check if you can temporarily reduce the rate of VAT on supplies relating to hospitality, accommodation, or admission to certain attractions.

The government has launched a new campaign to help businesses and individuals prepare for the end of the Brexit transition period.