Tax Tips

Have you transferred a property into a company, and as a consequence you now have a balance owed to you on your director’s loan account?

If so, you could claim relief on your personal tax return for any interest you pay on personal loans and mortgages up to the balance owed to you on your director’s loan account balance.

Speak to us to find out more.

Do you or your employees have to make any overseas work trips?

If so, you can claim tax free expense payments from the company for each night overseas. HMRC publish overnight & meal rates for each country that you can claim even without any receipts.

The amounts for each country can be found here.  

The tax relief on R&D expenditure is reducing from 1 April 2023.

Incur the expenditure prior to 01/04/23 to get a better rate of relief.

Avoid late payment surcharges by ensuring any personal tax balance for 2021/22 is paid by 28 February 2023.

If you can’t make that deadline then contact HMRC beforehand otherwise a penalty of 5% applies.

Reduce your capital gains tax by transferring a share of the asset to your spouse before you sell it. This makes use of 2 tax free annual exemptions, and 2 basic rate tax bands. It could save capital gains tax of up to £7,200 on property sales, or up to £6,200 on other assets. Speak to us to find out more.

The OTT does not carry over to the buyer without formally claiming it with HMRC.

It’s a common misconception that if an owner opts to tax a commercial property and sells it, that the option to tax carries over to the new owner. It doesn’t - each new owner has to decide to opt to tax and then notify HMRC.

Monies borrowed from your company, via your director’s loan account, must be repaid to the company within 9 months after the company’s year end date.

Failure to repay incurs a s455 tax charge for the company.

The rate of s455 tax has increased to 33.75% for monies borrowed from 6 April 2022.

A repayment is not valid if the monies are drawn back out within 30 days before or after the repayment.

HMRC interest rates are creeping up. Late payment interest is now at 4.75% which means that delaying paying tax liabilities is suddenly becoming costly.

We highly recommend you pay these promptly to avoid costly interest fees. 

Have you loaned money to your limited company? You could pay yourself interest on the loan balance. For basic rate taxpayers £1,000 of interest is tax free (£500 for higher rate taxpayers).

Additionally, using the 0% savings band could enable even more tax free interest to be paid in certain circumstances.

Paying yourself interest can be a very tax effective way to extract money from your company.

Make use of each year’s capital gains annual exemption by selling shareholdings each year. Provided that you don’t re-buy within 30 days then the gain is “banked”.

If you’re worried about value fluctuations after selling, then you can re-buy immediately through a stocks & shares ISA, or via your spouse.

Don’t forget to report the capital gain to HMRC within 60 days. Many people are still not aware of the new reporting regime for property sales.

Speak to Ellis & Co if you need help with this

If your income is just over £50,000 you could avoid re-paying your child benefit by making a pension contribution. This reduces your "net adjusted income" upon which the HICBC is assessed. Speak to us to find out more.

If they are on HMRC "list 3" then you can claim tax relief for them.

Speak to us to find out more.

Do you jointly own a rental property with one spouse a higher rate taxpayer, and the other spouse not?

You can do an election to move the profits into the spouse with the lower rate of tax. Speak to us to find out more.

Got a BTL property with no/low mortgage?

You may be able to get a reduction to your tax bill of 20% of your main home mortgage interest.

Speak to Melanie.

Ellis & Co Chartered Accountants and Business Advisers, Chester & Wrexham - 01244 343504, info@ellis-uk.com

Are you receiving less than 45p/mile from your employer when you do business trips in your own car? You can claim a tax deduction for the difference. Speak to us to find out more.

Ellis & Co Chartered Accountants and Business Advisers, Chester & Wrexham - 01244 343504, info@ellis-uk.com 

You can claim a laundry allowance income tax deduction of £60 each year. 

For further information on this or any other tax matter please contact Melanie Tomkins, tax manager at Ellis & Co Chartered Accountants.

Ellis & Co Chartered Accountants and Business Advisers, Chester & Wrexham - 01244 343504, info@ellis-uk.com

Did you know that each person can earn up to £1,000 of trading income completely tax free.

This is your “trading allowance” and everyone can receive up to £1,000 from side ventures without having any reporting obligations nor any tax liabilities.

If this amount is exceeded then the results must be included on your tax return, but you can then elect to claim a fixed deduction of £1,000 against your income – this could be useful where your actual expenses were lower than the £1,000.

For further information on this o any other tax matter please contact Melanie Tomkins, tax manager at Ellis & Co Chartered Accountants.

Ellis & Co Chartered Accountants and Business Advisers, Chester & Wrexham - 01244 343504, info@ellis-uk.com

Following the submission of P11d benefit in kind forms to HMRC each July, your employees may find that their tax codes have changed.

If HMRC were not aware of a new company car then the employee’s tax code may change to update the benefit in kind value for the current tax year, and also to claw back any unpaid tax from the previous tax year. This may lead to an unexpected tax deduction for you or your employees.

To avoid this big hit to their pay it is important to notify HMRC as soon as you as a director, or your employees, are issued with a company car, or as soon as the car changes.

This is done via form P46(car) and our payroll team can do this on your behalf.

Getting up early for work? Travelling all day? Working late? Get the taxman to contribute towards your snacks!

If you are required to work early or late, or travel for work and if this is outside your normal pattern of working then you can claim a deduction for the following subsistence costs on your tax return:

Breakfast rate – if you have to leave earlier that 6am: £5

1 Meal Rate – if you have to undertake business travel for > 5 hours: £5

2 Meal Rate – if you have to undertake business travel for >10 hours: £10

Evening meal rate – if you’re working later than 8pm: £15

You can only claim for up to three meals in any 24 hour period.

It is important that this early/late working or travel is necessary for your employment and that it is outside of your normal pattern of working.

Keep a tally of them and let us know when you send your tax return details.

For further details on this or any other tax matter contact Melanie Tomkins, tax manager at Ellis & Co on 01244 343504.

Ellis & Co Chartered Accountants and Business Advisers, Chester & Wrexham - 01244 343504, info@ellis-uk.com 

The VAT deferral new payment scheme is open for all businesses that deferred VAT due between March 20, 2020 and June 30, 2020 and were unable to pay in full by March 31, 2021.

Businesses can spread these payments over several months – businesses that join by June 21, 2021 will still be able to benefit from up to eight monthly instalments.

Businesses can join the easy-to-use scheme quickly and simply without needing to call HMRC.

Before joining, businesses must:

• have their VAT registration number
• create their own Government Gateway account (if they do not already have one)
• submit any outstanding VAT returns from the last 4 years – otherwise they will not be able to join the scheme
• correct errors on their VAT returns as soon as possible
• make sure they know how much is owed, including the amount originally deferred and how much they may have already paid

Businesses may be charged a 5% penalty and interest if they do not either pay in full, 

Sign up to the scheme online by June 21, 2021, or get in touch with HMRC to make an arrangement to pay by June 30, 2021.

One consequence of the recent periods of lockdown is that employees may have driven fewer private miles in their company cars, particularly where they have not been driving to the office.

If they are to avoid being taxed on the provision of private fuel, they need to fully reimburse their employer for the cost of private fuel by July 6, 2021 for the 2020/21 tax year.

If not, the benefit needs to be reported on the employee’s form P11d for 2020/21.

Note that the CO2 emissions percentage for the car is multiplied by the £24,500 notional list price used to calculate the benefit for 2020/21.

For example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% = £9,065 for 2020/21.

If they are a higher rate taxpayer that would mean £3,626 tax.

That would be an awful lot of private fuel!

In addition to the tax payable by the director on the provision of private fuel, there would be £1,251 Class 1A national insurance contributions payable by the employer.

Note that the private fuel benefit is an all or nothing benefit.

There must be full reimbursement by July 6, 2021 to eliminate the benefit.

The simplest method would be to multiply private miles by the HMRC advisory fuel rate for the vehicle which is amended every three months.

Advisory fuel rates from June 1, 2021

These are the suggested reimbursement rates for employees' private mileage using their company car from June 1, 2021.

Where there has been a change the previous rate is shown in brackets.

Note that for hybrid cars you must use the petrol or diesel rate.

You can continue to use the previous rates for up to 1 month from the date the new rates apply.

Recovery of Input VAT on Employee Fuel

These HMRC advisory fuel rates may also be used to calculate input VAT that may be claimed by the employer where an employee uses their own car for business journeys.

The tax free reimbursement amount continues to be 45p per mile (plus 5p per passenger) so for a 1800 cc diesel car 11p of the 45p is deemed to be diesel and 20/120 of that amount, 1.83 pence per mile, may be reclaimed by the employer provided there are petrol station receipts to cover the amounts claimed.

For further infromation on this or any other tax matter please contact Ellis & Co's tax manager Nick Charnley on 01244 343504. 

The government are committed to encouraging more and more people to drive electric cars and have reduced or eliminated the income tax benefits of providing electric company cars or charging points for employees.

Since April 6, 2019 there has been no taxable benefit for employees where they use an electric charging point at their place of work, provided the facility is available to all staff.

But what are the VAT implications of the supply of electricity and what if public charging points are used?

HMRC have issued Revenue and Customs Brief 7 (2021) which explains HMRC’s policy concerning the VAT treatment of charging of electric vehicles when using charging points situated in various public places.

The brief clarifies that supplies of electric vehicle charging through charging points in public places are charged at the standard rate of VAT.

It also explains when input tax can be recovered for charging electric vehicles for business purposes.

The HMRC brief confirms that input tax can be recovered on electricity used to fuel a car intended for business use where:

• The charging takes place at the business premises of the VAT-registered business
• The charging is at the home of a sole proprietor

VAT cannot be recovered where the charging is at the home of an employee as the supply is then not made to the company.

Where employees charge an employer’s electric vehicle (for both business and private use) at the employer’s premises the employee needs to keep a record of their business and private mileage so that the employer can work out the amounts of business use and private use for the vehicle.

It is hoped that a simpler system can be found such as a scale charge similar to that used for the supply of fuel for private use.

For further information on this or any tax matter contact our tax manager Nick Charnley on 01244 343504.

With 6 weeks to go until the end of the Tax Year, it is time to make the most of your tax allowances this year. 

The first step to making the most of your tax allowances can mean looking closely at your pension.

UK residents under 75 can add money to a pension and receive tax relief on it.

You’ll automatically get basic rate tax relief (currently 20%) paid into your pension by the government.

If you pay tax at a higher rate you could get up to a further 25%, but you’ll need to claim it by declaring any pension contributions you’ve made on your tax return.

To make the most of your pension, you need to know the pension allowances that you are entitled to.

If you have not used them to the full, there may still be time to top them up – and start planning on how you will use them next tax year.

The annual allowance is the maximum you can invest in your pension each year that would be eligible for tax relief.

It is currently £40,000, or your entire income, whichever is the smaller and there are lifetime allowances to consider.

If you run a limited company then there are some actions you could consider such as dividend and salary planning, purchasing capital items to maximise capital allowances, research and development tax credits and a range of other matters.   

Please talk to us if you need any advice.

The deadline to buy a home under the current Help to Buy scheme in England has been extended to the end of May.

Help to Buy makes new build homes available to all home buyers (not just first-time buyers) who wish to buy a new home but may be constrained in doing so.

For example as a result of deposit requirements, but who could otherwise be expected to sustain a mortgage.

Up to a maximum of 20% in England and up to 40% in London, of the purchase price is available to the buyer through an equity loan funded by the Government through Homes England.

Help to Buy is available in England from house builders registered to offer the scheme.

Help to Buy has been available since 2013.

For details of the scheme click here.

Last month HM Revenue & Customs (HMRC) announced that Self-Assessment customers would not receive a penalty for filing their 2019-20 tax return late, as long as they filed online by ‌Sunday, February 28. 

Customers still needed to pay their Self-Assessment tax bill by ‌January 31, with interest charged from ‌February 1 on any outstanding liabilities.

More information is available at GOV.UK.

Major changes to the way VAT is collected within the UK construction sector will come into play next week, after being delayed due to the Coronavirus pandemic.

The Domestic Reverse Charge, also known as the Reverse Charge, will require the customer receiving the service to pay the VAT to HMRC, rather than the supplier.

The Reverse Charge was delayed for a period of five months from October 1, 2020 and will now come into effect from March 1, 2021.

In addition, there will be an amendment to the original legislation, which was laid out in April 2019, to make it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their sub-contractors in writing that they are end users or intermediary suppliers.

However, businesses must be prepared for the changes, with HMRC saying it ‘remains committed to the introduction of the reverse charge and has already increased compliance resource’.

The new rules apply to VAT registered businesses which supply certain construction services to other VAT registered businesses for onward sale.

The Reverse Charge does not apply to businesses who do not make onward supplies of the services, HMRC class this group as ‘end users’.

HMRC is warning businesses to be prepared for the changes by:

• checking whether the Reverse Charge affects either your sales, purchases or both
• making sure your accounting systems and software are updated to deal with the Reverse Charge
• considering whether the change will have an impact on your cash flow
• making sure all your staff who are responsible for VAT accounting are familiar with the Reverse Charge and how it will operate
• Contractors will need to review all contracts with sub-contractors, to see if the Reverse Charge applies, and notify suppliers if it will
• Sub-contractors will need to contact customers to see if the Reverse Charge will apply, and whether they are an end user or intermediary supplier.

For further information contact Nick Charnley, tax manager at Ellis & Co on 01244 343504.

Business ratepayers adversely affected by COVID-19 are to get a £1.5 billion discount on their bills.

The new relief fund of £1.5 billion for businesses affected by COVID-19 outside the retail, hospitality, and leisure sectors has been announced with targeted support delivered as appeals against rates bills on basis of material changes of circumstance due to the pandemic to be ruled out.

The government hopes their relief fund will get cash to affected businesses in the most proportionate and equitable way.

The government set out plans to provide an extra, targeted support package for businesses who have been unable to benefit from the existing £16 billion business rates relief for retail, hospitality and leisure businesses.

Retail, hospitality and leisure businesses have not been paying any rates during the pandemic, as part of a 15 month-long relief which runs to the end of June this year.

Many of those ineligible for relief have been appealing for discounts on their rates bills, arguing the pandemic represented a ‘material change of circumstance’ (MCC).

The government has made it clear that market-wide economic changes to property values, such as from COVID-19, can only be properly considered at general rates revaluations, and will therefore be legislating to rule out COVID-19 related MCC appeals.

Instead the government will provide a £1.5 billion pot across the country that will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values, ensuring the support is provided to businesses in England in the fastest and fairest way possible.

The governments rationale is that allowing business rates appeals on the basis of a ‘material change in circumstances’ could have led to significant amounts of taxpayer support going to businesses who have been able to operate normally throughout the pandemic and disproportionately benefitting particular regions like London.

Business rates are devolved so the devolved administrations in Scotland, Wales and Northern Ireland will receive an additional £285 million through the Barnett formula as a result of the announcement.

HMRC issued Making Tax Digital (MTD) in 2015, however its rollout has been amended over the years to ensure businesses have ‘plenty of time to adapt to the changes’.

MTD is a £1.3bn investment programme by the government to make fundamental changes to the way the tax system works.

With business activity being reported digitally using Cloud accountancy software packages.

The next phases are as follows:

Making Tax Digital for VAT

VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.

If you are below the VAT threshold you can voluntarily join the Making Tax Digital service now.

VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.

Making Tax Digital for Income Tax

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 April 6, 2023.

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax.

If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return.

Ellis & Co Accountants and Business Advisers are experts in accountancy software, providing Sage, Xero, QuickBooks and FreeAgent accounting packages to our clients.

Our software specialist Anna Rowson-Smith reviews your needs and resources and offers an accountancy software package that is right for you and your business. 

Anna also provides three hours of FREE set-up and training to all our clients.

For further information, or to sign up today, email annarowson-smith@ellis-uk.com or call 01244 343504. 

If you are a medium or large sized non-public sector organisation and you engage contractors, you should now be taking action to prepare for changes to the off-payroll working rules (IR35) coming into effect on April 6, 2021.

For all contractors working through their own limited company, you will need to:

• identify contractors who work in this way
• decide if they are inside or outside the rules
• inform your contractors of their status determination, and any agencies you engage with
• be ready to add them to payroll if needed
• be ready to deal with any disputes
• maintain an audit trail, and test your processes, systems and controls

If you are an employment agency which supplies contractors who work through their own limited company or other intermediary, you need to understand the changes and may also need to take action.

You need to:

• identify contractors who work in this way
• be ready to pass on the status determination statement to any agencies you engage with down the supply chain or be ready to put contractors onto payroll
• maintain an audit trail, and test your processes, systems and controls

You can find more information about the actions you need to take to prepare here.  

The VAT deferral new payment scheme is open for all businesses who deferred VAT due between March 20 and June 30, 2020 and still have payments to make, or who are unable to pay in full by March 31, 2021.

This includes those on Payment on Account and Annual Accounting schemes.

Apply now to spread these payments over a number of months – the later you join the fewer instalments are available to you.

You can join the scheme online without the need to call HMRC.

To find out more information, including the things you need to do before joining, click here.

A temporary extension to assist incorporated and unincorporated businesses has been granted.

The carry back period has been extended so that businesses can carry trading losses back for relief against profits of earlier years to get a repayment of tax paid.

Some businesses have experienced reduced demand for their products and services, or disruption to their supply chains as a result of Coronavirus and associated restrictions.

This has led to increased trading losses in the short term for many businesses.

This measure will provide a cashflow benefit to affected businesses by providing additional relief for trading losses, thereby generating repayments for tax paid for 2 additional years.

This measure will have effect for company accounting periods ending in the period April 1, 2020 to March 31, 2022 and for tax years 2020 to 2021 and 2021 to 2022 for unincorporated businesses.

Trade loss carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years first.

Corporation Tax

The amount of trading losses that can be carried back to the preceding year remains unlimited for companies.

After carry back to the preceding year, a maximum of £2,000,000 of unused losses will be available for carry back against profits of the same trade to the earlier two years.

This £2,000,000 limit applies separately to the unused losses of each 12 month period within the duration of the extension.

Income Tax

The amount of trading losses that can be carried back by individuals to set against profits of the preceding year remains unlimited. The current restrictions to carry back losses from a trade against general income will remain.

A separate £2,000,000 cap will apply to the extended carry back of losses made in each of the tax years 2020 to 2021 and 2021 to 2022.

The team at Ellis & Co will be actively reviewing the availability of the loss carry back on a case by case basis for our clients.

Employers who hire military veterans will be entitled to National Insurance contributions relief.

The new incentive, designed to encourage employers to take on military veterans, came into force on April 6.

This relief is only available for 12 consecutive months from the veteran’s first day of civilian employment.

This zero-rate can be applied up to the upper secondary threshold (£967 per week).

This relief is available from April 6, 2021.

Qualifying veterans

Employers will only be able to claim National Insurance contributions relief on the earnings of qualifying veterans.

A person qualifies as a veteran if they have served at least one day in the regular armed forces.

This includes anyone who has completed at least one day of basic training.

The relief is available to all employers of veterans regardless of when the veteran left the regular armed forces, providing they have not previously been employed in a civilian capacity.

Employments that qualify

Relief is available for any civilian employment.

A civilian employment is one that is not part of the armed forces and includes employments with organisations that may have strong links to HM Armed Forces, such as the Ministry of Defence or NATO.

Employment with a reserve organisation is not considered as civilian for the purpose of this relief and does not trigger the qualifying period.

Employers can claim relief even if the employment starts before April 6, 2021 but will only be able to claim for the remaining 12 month qualifying period.

The first day of employment will be the start date taken from the employment contract between the employer and the employee.

This 12 month period does not change if the employment finishes.

This means that current and future employers can also claim this relief if they employ a veteran within their qualifying period.

Subsequent employers must determine the first day of the veteran’s first civilian employment and confirm that the veteran is employed with their business during the qualifying period.

Claiming the relief

From April 2021 to March 2022, employers will need to pay the associated secondary Class 1 Employers National Insurance contributions.

From April 2022, employers will be able to claim back the associate National Insurance contributions that would have otherwise been relieved.

Employers will need to keep records that demonstrate they are eligible for relief for those periods.

Further details on this process will be published before April 2022.

From April 2022 onwards, HMRC will put measures in place to enable employers to apply the relief through PAYE.

Employees can be paid £6 a week tax free Home Working Allowance whilst working from home.

The amounts are free from income tax and Class 1 national insurance contributions (‘EEs and ‘ERs).

The normal rule to take advantage of this exemption is that the employee is required by their employer to work from home from time to time and is normally not available where the employee works from home as a matter of choice.

£6 a week tax free for a higher rate taxpayer is equivalent to £538 gross pay (after 40% income tax and 2% employee NICs). The employer would also save 13.8% NICs.

This rule was temporarily relaxed due to the COVID-19 pandemic for 2020/21.

HMRC have advised that as long as an employee has been required to work from home at some point during 2020/21 as a result of the COVID19 pandemic they will accept a claim for home-working for the whole 2020/21 tax year. This has now been extended to 2021/22 up until the end of the pandemic.

Where the employer does not pay the allowance, the employee may make a claim for a deduction of £6 a week from their earnings and this has also been extended to 2021/22. That would result in a tax refund of £124.80 for a higher rate taxpayer.

The quickest way to make a claim is to use the HMRC online claims service which requires the employee to set up a Government Gateway account.

Alternatively, employees should use HMRC form P87 to make their claim.

If you require further details on this or any tax matter please contact our tax manager Nick Charnley on 01244 343504.

Following a number of “dodgy” R&D claims which have resulted in companies having their claims for relief refused or restricted, HMRC have issued the following guidance on common errors:

Some of the common errors made in R&D tax relief claims include:

• Project activities outside the scope of R&D for tax purposes are included in the claim.
• Expenditure outside the qualifying categories is claimed
• Staffing costs are claimed in respect of people who are not employees of the company (however, consider whether the expenditure qualifies as expenditure on externally provided workers).
• Claims are made in respect of overheads that do not qualify as consumable items or consumable stores.
• Expenditure is claimed on a particular item for a period before it was in a qualifying category.
• Special rules for connected parties are not applied.
• Companies do not recognise they are not SMEs.

For the SME scheme only:

• A loss previously surrendered for a payable tax credit is carried forward.
• Unconnected subcontractor expenses are not restricted to 65%.
• A payable tax credit claim is made for expenditure that only qualifies under the large company scheme.
• No account is taken of subsidies or Notified State Aid.

Are you missing out?

If your business spends money developing or enhancing new products or services in science or technology, then you could receive a cash payment or a reduction on your Corporation Tax Liability.

For example:*

Qualifying expenditure                               £100,000

Additional tax relief at 130%                      £130,000

Total tax saving £230,000 at 19%             £43,700

*Figures correct as of April 1, 2021

NB: Please note that any R&D in receipt of funding classified as ‘State Aid’ may not qualify for the full tax relief above, but instead at a much lower rate.  If you are considering ‘State Aid’ funding, please contact us to discuss the implications before making a final decision.

There are a number of costs that qualify for R&D including:

• Employee costs

• Staff providers

• Materials

• Payments to clinical trials volunteers

• Utilities

• Software

• Subcontracted R&D expenditure

• Capital expenditure

Note: You must make any claim for R&D Tax Relief in your Corporation Tax Return or amended return.

Corporation Tax will increase to 25% for the financial year beginning April 1, 2023.

As announced during the Budget 2020, Corporation Tax remained the same at 19% for the financial years starting April 1, 2020 and 2021. 

The increase in 2023 will apply to profits over £250,000.

A small profits rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%.

Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.

This measure is expected to have a significant administrative impact on approximately 2 million businesses who will need to be aware of the changes even if they do not currently have a Corporation Tax liability.

“We were expecting this increase, especially due to government spending over the past 12 months,” said Nick Charnley, tax manager at Ellis & Co Chartered Accountants and Business Advisers.

“Companies should be planning for this now, potentially bringing forward sales of assets so that the profits are taxed at the lower rates.”

For further information on this or any other tax matter please contact Nick on 01244 343504.

Do you have a spouse who is not using all of their £12,570 tax free personal allowance?

You can move 10% of it over to you to save around £250 each year.

Speak to us to find out more on 01244 343504 or at info@ellis-uk.com

Do you have a job aswell as being self employed?

You may be overpaying your National Insurance Contributions and entitled to a repayment.

Speak to us to find out more.

A significant change of the reporting and payment of Capital Gains Tax on private residences is coming this April (2020).

As of April 6, any UK resident who sells a residential property and makes a taxable gain will only have 30 days to report it to HMRC; rather than until the Self-Assessment deadline which previously could result in a period of up to 22 months before having to report the gain and pay the tax due.

Any Capital Gains Tax (CGT) arising after selling a residential property must also be reported and paid via a new online CGT return within 30 days of the completion date of the sale.

“The earlier payment of CGT on residential property allows the government to collect any tax owed more quickly,” said Nick Charnley, tax manager at Ellis & Co.

“Previously any tax gained was declared and then collected via a yearly self-assessment, now the deadline is only 30 days after the sale. 

"Some taxpayers may not know if whether they will be a basic or higher rate taxpayer before the end of the tax year so will have to make a best guess approach to which CGT rate is applied to the gain and amend the CGT return if needed.

“Although the new form must be completed within this new deadline, the gain must also be reported on a self-assessment tax return," he added. 

For further information on this, or any other tax matter, contact Nick on 01244 343504.

Did you know that working parents could get up to £2,000 to help with childcare costs?

The government led childcare scheme helps working parents (and self-employed) with childcare costs.

Tax-Free Childcare will cut childcare costs by up to £2,000 per year for each child under 12 years old, or £4,000 per year for disabled children under 17 years old.*

The scheme, which has been designed to replace the Childcare Vouchers Scheme, offers families the following options:

Tax-free childcare*

• For working families earning under £100k and at least £131 per week
• For those who aren’t receiving Tax Credits, Universal Credit or childcare vouchers
• Children are aged 0-11 (0-16 if disabled)
• Every £8 that goes into an online account, the government will add an extra £2, up to £2,000 per child.

15 hours free childcare

• 15 hours of free childcare for two year-olds (only available in England)

15 hours free childcare

• 15 hours of free childcare for children aged three and four (for all families in England)
• 570 hours per year, can be used with one or more childcare provider
• Similar schemes are run in Wales and Scotland

30 hours free childcare

• 30 hours free childcare for three and four year olds (only available in England)

Tax credits for childcare

• For all working families in the UK with children under 16 (under 17 if disabled)
• 70% of childcare costs, up to a cap

Universal Credit for childcare

• For all working families in the UK with children under 17
• 85% of eligible childcare costs, up to a cap

 “It is very important that working parents register for these schemes,” said Nick Charnley, tax manager at Ellis & Co.

“You apply online, and there is also a childcare calculator which will help you choose the best childcare scheme for you and your family.”

For further information or to apply click here or contact Nick on 01244 343504.

*All figures from HMRC. 

The number of orders for pure electric cars has increased since the new benefit-in-kind (BIK) tax rates were announced.

The Government announced that company car drivers, driving a pure electric vehicle, will pay no company car tax in 2020-2021.

UK leasing firms have reported a surge in orders of electric cars since the BIK announcement back in July 2019.

The key decisions were:

• for cars first registered from April 6, 2020, most company car tax BIK percentage rates will be reduced by 2 percentage points in 2020-21 before returning to planned rates over the following two years – increasing by 1% in 2021-22 and 1% in 2022-23
• to accelerate the shift to zero emission cars, all zero emission models will pay no company car tax in 2020-21, 1% in 2021-22 before returning to the planned 2% rate in 2022-23
• on Vehicle Excise Duty, a call for evidence will be published later this year seeking views on moving towards a more dynamic system which recognises smaller differences in carbon dioxide (CO2) emissions

In addition to the reduction in BIK rates, companies purchasing new electric vehicles can also write off the full cost of the vehicle against taxable profits. This could lead to a reduction in corporation tax of 19% of the purchase price of the vehicle.

“It’s no surprise that the number of orders for electric vehicles has soared, this is a real saving for company car drivers,” said John Moorhouse, accounts senior at Ellis & Co.

For further information about this or any other matter contact Ellis & Co on 01244 343504.

If you’re an employer and need to report your expenses and benefits for your employees and directors, you will need to complete a P11D form and then submit a P11D(b) form to HM Revenue & Customs by July 6, 2019.

The benefits and expenses you can claim on fall within the following 14 sections:

• Section A – Assets Transferred (cars, property, good or other assets)
• Section B – Payments made on behalf of the employee
• Section C – Vouchers and credit cards
• Section D – Living Accommodation
• Section E – Mileage allowance payments / passenger payments
• Section F – Cars and car fuel
• Section G – Vans and van fuel
• Section H – Interest free, low interest and notional loans
• Section I – Private medical treatment or insurance
• Section J – Qualifying relocation expenses payments and benefits
• Section K – Services supplied
• Section L – Assets placed at employee’s disposal
• Section M – Other items
• Section N – Expenses payments made on behalf of the employee

A separate P11D form will need to be used for every employee and director.

A copy of this form must also be given to your employees and directors by July 6, 2019.

It is very important to declare any expenses and benefits.

You will be liable for a fine of £100 per 50 employees for each month your P11D(b) is late.

For further information on P11Ds contact Ellis & Co on 01244 343504.

Following the introduction of tax-free childcare for all from February 2018 the childcare voucher scheme was due to close to new entrants in April 2018.

This  has now been extended by six months to October 2018.

The new Tax-free Childcare scheme began in 2017 and was opened to children of all ages on February 14, 2018.

The new scheme is available to the employed and self-employed where both parents are in paid work for more than 16 hours per week, regardless of whether the employer contributes.

The old scheme was only available to employed individuals

"The new scheme which parents contribute to and the Government tops up by 20% replaces employer childcare voucher schemes which will now remain open to new entrants for an extra six months until October 2018," said Peter Way-rider, tax manager at Ellis & Co. 

"Parents already registered at that time can continue to receive vouchers for as long as their employer offers them, or switch to tax-free childcare instead.

"There are arguments for and against each scheme but you now have a further period of time to consider which one suits you."

For further information about the childcare voucher scheme, or any other tax matter, contact Peter on 01244 343504. 

Marriage allowance lets you transfer £1,190 of your personal allowance to your husband/wife/civil partner – if they warn more than you.

This reduces their tax by up to £238 in the tax year (April 6 to April 5 the next year).

In order to qualify you must:

1. Be married / in a civil partnership
2. One spouse/partner must earn below the personal allowance of £11,850
3. Your partner pays income tax at the basic rate, with an income between £11,851 and £46,350.

If you’re in Scotland, your partner must pay the starter, basic or intermediate rate, which usually means their income is between £11,850 and £43,430.

“If you are eligible for marriage allowance in 2018/19 tax year you can back date your claim to April 5, 2015 and reduce the tax bill even further,” said Peter Way-Rider, tax manager at Ellis & Co Chartered Accountants and Business Advisers.

For further information about marriage allowance or any other tax matter, contact Peter on 01244 343504.

From April 6, 2019 all people living in Wales and who pay Income Tax will pay Welsh rates of Income Tax.

PAYE individuals resident in Wales will receive a new tax code with a suffix ‘C’, including individuals whose income is below the tax threshold.

Self-employed individuals who file an online tax return will be asked to note their country of residence when filing their 2019-20 tax returns.

It is important that you  inform HMRC when you change address, whether this be moving to or from Wales on a permanent basis.

Individual Savings Accounts (ISAs) are one of the most popular ways to save.

With exemption from income tax and capital gains tax it’s easy to see why they are the main choice for savers.

The ISA savings limit for the tax year 2019/20 is frozen at last year’s limit of £20,000, meaning you can pay up to £20,000 into one ISA account (or across multiple ISA accounts) tax-free.  

There are five main types of ISA: cash ISA, Help to Buy ISAs, innovative finance ISAs, stocks and shares ISAs, and now the Lifetime ISA.

There is also a Junior ISA, which will provide a child with a tax-free lump sum when they reach the age of 18; this allowance has raised from £4,260 to £4,368.

 “The ISA allowance is set by the government each year, so the allowance doesn’t roll over to the next tax year, so if you don’t use it you will lose it,” said Peter Way-Rider, tax manager at Ellis & Co.

 “You can open multiple ISAs but cannot pay in more than £20,000.

“To gain maximum benefit from your ISA you should open it at the start of the tax year (April 6), failing that as close to this date as you can.”

For further information on ISAs or any other tax issue contact Peter on 01244 343504. 

In 2016 there were 4.8 million family-run businesses in the UK, making up 87.6% of all private sector firms.*

Setting up a family-run business has many benefits, but did you know that employing a family member can help reduce your tax bills?

If you are trading as a limited company, employing your spouse or partner can be particularly tax-efficient.

“Paying your spouse or partner a salary (between £118 and £166 a week), dividends or benefits can cut a lot off your tax bill,” said Peter Way-Rider.

“They won’t be liable to pay National Insurance Contributions, but benefits, such as a State Pension, will be protected.

“Utilising the personal allowance, currently £12,500, on family members is also another option to lower your tax bill”.

For further information on this or any other tax matter, contact Peter on 01244 343504.

*Stats from Institute for Family Business

Did you know a higher rate tax payer can reduce the amount of income tax they pay by donating to charity?

If you pay tax above the basic rate, you can claim the difference between the rate you pay and basic rate on your donation.

You can do this either:

• Through your self-assessment tax return
• Asking HMRC to amend your tax code

“If you donated £150 to charity, the charity can claim Gift Aid to make your donation £187.50,” said Peter Way-Rider, tax manager at Ellis & Co Chartered Accountants and Business Advisers.

“Higher rate tax payers can then claim back £37.50, as you pay 40% tax.”

For further information on this or any other tax matter, contact Peter on 01244 343504.

Following the introduction of tax-free childcare for all from February 2018 the childcare voucher scheme was due to close to new entrants in April 2018.

This  has now been extended by six months to October 2018.

The new Tax-free Childcare scheme began in 2017 and was opened to children of all ages on February 14, 2018.

The new scheme is available to the employed and self-employed where both parents are in paid work for more than 16 hours per week, regardless of whether the employer contributes.

The old scheme was only available to employed individuals

"The new scheme which parents contribute to and the Government tops up by 20% replaces employer childcare voucher schemes which will now remain open to new entrants for an extra six months until October 2018," said Peter Way-rider, tax manager at Ellis & Co. 

"Parents already registered at that time can continue to receive vouchers for as long as their employer offers them, or switch to tax-free childcare instead.

"There are arguments for and against each scheme but you now have a further period of time to consider which one suits you."

For further information about the childcare voucher scheme, or any other tax matter, contact Peter on 01244 343504. 

The tax free personal allowance will increase from April 6, 2018.

The increase will mean millions of people in the UK will be paying less tax as of next month.

The tax free personal allowance will rise from £11,500 to £11,850.

A typical taxpayer will be paying £1,075 less income tax than in 2010/11.

The threshold for higher rate tax will also increase to £46,350 from April (or £43,431 in Scotland).

For further information about this, or any other tax matter, contact Peter on 01244 343504.

Landlords are able to claim tax relief on money spent to replace 'domestic items' in their rental properties.

These include beds, carpets, crockery or cutlery, sofas, curtains, fridges and other white goods.

This only applies to items being replaced - not those bought for a property for the first time.

You can also only claim the amount for a like-for-like replacement.

For advice about this or any other tax matter, contact Peter Way-Rider on 01244 343504.

Tax-free Childcare is now open to all remaining eligible families; parents whose youngest child is under 12.

The HM Revenue and Customs (HMRC) led scheme, helps working parents with the cost of childcare with up to £2,000 per child a year, or £4,000 for disabled children.

As of February 14, 2018, parents with children under the age of 12 can apply online for TaxFree childcare.

Parents who are self-employed can also apply for this scheme.

HM Revenue and Customs has been gradually rolling out Tax-Free Childcare since April 2017.

The money can go towards a whole range of regulated childcare, including nurseries, childminders, after-school clubs and holiday clubs.

Since opening the service, through which parents can apply for both Tax-Free Childcare and 30 hours free childcare, more than 340,000 families have successfully applied.

“It is very important that working parents register for these schemes,” said Peter Way-Rider, tax manager at Ellis & Co.

“You apply online, and there is also a childcare calculator which will help you choose the best childcare scheme for you and your family.”

To find out more and how to apply visit https://www.childcarechoices.gov.uk or contact Peter Way-Rider on 01244 343504.

*Figures from HMRC. 

Marriage allowance lets you transfer £1,150 of your personal allowance to your husband/wife/civil partner.

In order to qualify you must:

1. Be married / in a civil partnership
2. One spouse/partner must earn less than £11,500
3. Your partner’s income is between £11,501 and £45,000

This will reduce the overall tax bill by up to £230 every tax year.

“If you are eligible for marriage allowance on 2017/18 tax year you can back date your claim to April 6th, 2017 and reduce the tax bill even further,” said Peter Way-Rider, tax manager at Ellis & Co.

For further information about marriage allowance or any other tax matter, contact Peter on 01244 343504.

April 2018 will see a £3,000 reduction in the tax-free dividend allowance.

The allowance, for shareholders and directors of small private firms, will decrease from £5,000 to £2,000 from April 5, 2018.

According to HM Revenue and Customs (HMRC) the change will affect individuals and households who receive dividend income in excess of £2,000; It is estimated that this will affect around 2.27 million individuals in 2018 to 2019 with an average loss of around £315.*

The reduction was announced by The Chancellor Phillip Hammond during his Spring Budget Speech last year (2017).

It was a move designed to provide ‘fairness’ and ‘reduces a tax perk that had been enjoyed by those trading through limited companies and by private investors’.

“This measure will ensure that support for investors is more effectively targeted and that the total amount of income they can receive tax-free is fairer and more affordable, in light of increases to the tax-free personal allowance and the Individual Savings Accounts (ISA) allowance,” said HMRC.

“It will also partially reduce the tax difference between the self-employed and those working through a company.”

The Chancellor said that HMRC estimated the cost of people working through companies at £6bn a year: “It’s not fair and it’s not affordable,” said the Chancellor.

The move is expected to raise £2.63bn by 2021/22.

*Figures from www.gov.uk

From April 2018 Wales will introduce Land Transaction Tax (LTT) its own version of Stamp Duty Land Tax (SDLT).

It is the first Welsh-only tax in almost 800 years.

Stamp Duty Land Tax (SDLT) is payable when you buy or lease a building or land over a certain price; the rate of tax due is calculated using a banding system.

Land Transaction Tax (LTT) uses the same banding system, however, instead of separating into residential and non-residential properties - LTT calculates tax owed based on residential banding only.

The Welsh Government has announced that nine out of 10 buyers will pay the same or less than they do at the moment; buyers of homes worth under £250,000 will pay £500 less in LTT, those buying up to £150,000 will pay no tax at all.

However, those one in 10 buyers will be paying thousands more than people in England, for example: LTT on a £750,000 house will cost £36,250 compared to Stamp Duty in England of £27,500.

The current rates*

• Up to £125,000 no tax
• Between £125k and £250k 2%
• Between £250k and £925k 5%
• Between £925k to £1.5m 10%
• Above £1.5m 12%

The new rates in Wales (NB these rates relate to purchases, lease premiums or transfer values)*

• Up to £150k no tax
• Between £150k and £250k  2%
• Between £250k and £400k 5%
• Between £400k and £750k 7.5%
• Between £750k to £1.5m 10%
• Above £1.5m 12%

“Overall this is good news for buyers in Wales, but there will be some big winners and losers,” said Peter Way-Rider, tax manager at Ellis & Co.

“Some buyers will escape the tax bill completely, whereas the higher end buyers will end up paying more than those over the border.”

During last week’s Autumn Budget (2017) Stamp Duty Land Tax was abolished for first time buyers on homes under £300,000.

For further information about this or any other tax matter contact Peter on 01244 343504.

*www.gov.wales 

Did you know your staff Christmas party qualifies as a tax-free benefit?

There is an exemption from tax, National Insurance and reporting if you provide a party or similar function for employees as long as it meets the following three conditions:

• £150 or less per head
• annual, such as a Christmas party or summer barbecue
• open to all your employees

When it comes to giving your staff a ‘little extra’ at Christmas you must report any bonuses or cash payments made to employees as this counts as earnings.

However you can give your staff a trivial benefit.

A trivial benefit (for example a box of chocolates or bottle of wine) is exempt from tax, and National Insurance payments and you do not have to inform HMRC of your purchase as long as it:

• Cost you £50 or less to provide
• Isn’t cash or a cash voucher
• Isn’t a reward for their work or performance
• Isn’t in the terms of their contract

You can also say thank you to your customers/ clients with an allowable tax deduction as long as:

• The total cost of the gift does not exceed £50
• The gift bears a conspicuous advert for the business
• The gift is not food, drink, tobacco or exchangeable vouchers.

For further information about non-taxable payments or benefits, or any other tax matter contact Peter Way-Rider on 01244 343504. 

The secret to getting ahead is getting started, as the saying goes… and the season of the tax return is looming.

Personal Tax, Partnership Tax and Trust Tax Returns all need to be filed by January 31, 2018.

“January may seem a long way off, but filing your tax return sooner rather than later will give you more time to save or obtain finance for any tax claim,” said Peter Way-Rider, Tax Manager at Ellis & Co.

“Be sure not to miss the deadline date of Wednesday, January 31,2018, or you could be joining millions of others in the UK and incur an automatic fine of £100.

“Failing to file your tax return on time will cost you £100, you will pay more the later it gets.”

The penalties for late tax returns are:

• 1 day late an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time.

• 3 months late, additional daily penalties of £10 per day, up to a maximum of £900. This is as well as the fixed penalty.

• 6 months late, a further penalty of 5% of the tax due or £300, whichever is greater; this is additional to the penalties above.

• 12 months late, another 5% or £300 charge, whichever is greater. This is additional to the penalties above.

There are also additional penalties for paying tax late of 5% of the tax unpaid at 30 days, 6 months and 12 months.

“At Ellis & Co we will prepare your Self-Assessment Tax return for you and submit it promptly," added Peter.

“We will help you structure your affairs for maximum tax efficiency, while protecting you from the penalties every taxpayer dreads.

“We can also advise on short term finance if required.”

For further information about Tax Returns or any other tax matter contact Peter on 01244 343504.

Payments made to HMRC via the Post Office will be stopping on December 15, 2017.

Tax bills including: Self-Assessment, PAYE tax and NI contributions and Corporation tax will not be accepted after December 15.

Over-the-counter payments will still be accepted at your bank.

Payments can also be made online. 

The Government has launched two new childcare schemes this year in order to help working parents with childcare costs.

• Tax-Free Childcare account: Topped up £2 by the Government for every £8 that is paid in. Open to children who will be aged 4 on August 31, 2017. Can be used by all working parents, including the self-employed.
• 30 hours free childcare: Starting in September 2017 parents of 3-4 year-olds can apply for 30 hours of free childcare (via a childcare provider).

Parents can apply for both schemes, only a single application needs to be made for both.

Tax-Free Childcare will cut childcare costs by up to £2,000 per year for each child under 12 years old, or £4,000 per year for disabled children under 17 years old.*

This new scheme has been designed to replace the Childcare Vouchers Scheme.

“It is very important that working parents register for these schemes, the 30 hours free childcare is worth £5,000 per child,” said Peter Way-Rider, tax manager at Ellis & Co.

“To qualify you need to earn a minimum of £120 per week and less than £100,000 a year (joint income if you have a partner).

“The Tax-Free Childcare scheme cannot be used at the same time as childcare vouchers, Universal Credit or tax credits; the 30 hours free childcare can be used alongside any of the schemes,” he added.

To find out more and how to apply visit https://www.childcarechoices.gov.uk or contact Peter Way-Rider on 01244 343504.

*Figures by HMRC. 

Do you pay Corporation Tax?

If yes then read on - as you may be eligible to claim Research and Development (R&D) Tax Relief.

R&D tax relief came into effect in 2010 with the aim to encourage UK based companies to spend more on Research and Development.

If your business spends money developing new or enhancing products or services in science or technology then you could receive a cash payment or a reduction on your Corporation Tax liability.

“Many businesses don’t know they can claim R&D tax relief, or how to go about it,” said Peter Way-Rider, tax manager at Ellis & Co.

“There are a number of costs that qualify for R&D including employee costs, materials, utilities and software.

“The normal time limit for making your claim is two years after the end of the relevant Corporation Tax accounting period.

“This means that event though you may have already filled a Corporation Tax return, you can amend this to reflect any relevant R&D expenditure as long as the amended return is filled within the time limits.”

Ellis & Co can tell you if you are eligible for R&D relief, the full list of expenditure allowable and how much you can claim.

To find out more contact Peter Way-Rider on 01244 343504. 

The new Lifetime ISA (LISA) commenced on April 6, 2017.

The basic rules are as follows:

You must be over the age of 18 and you can save up to £4,000 each tax year as long as you don’t exceed the annual overall ISA limit ( £20,000 for the current tax year).

The Government will give you a 25% bonus on the total amount you pay in (excluding interest or investment growth).

Money transferred into a Lifetime ISA from another ISA is also eligible for the government bonus.

You may have to pay back the bonus if you withdraw from your Lifetime ISA unless

(a)    The funds are used to purchase a first home up to a value of £450,000

(b)   You become terminally ill

(c)    You reach the age of 60

For further information on the new Lifetime ISA or any other tax matter contact Peter Way Rider, tax manager at Ellis & Co on 01244 343504. 

As of this month (April 2017) the government is introducing Tax Free Child Care to help working parents.

The existing child care scheme will remain open to new entries until April 2018 to support the transition between the two schemes.

Both of these are in addition to the free child care entitlement which will rise from 15 hours to 30 hours a week for working families with three and four year olds from September 2017.

Marriage allowance lets you transfer £1,100 of your personal allowance to your husband/wife/civil partner.

In order to qualify you must:

1. Be married / in a civil partnership
2. One spouse/partner must earn less than £11,000
3. Your partner’s income is between £11,001 and £43,000

This will reduce the overall tax bill by up to £220.

“If you are eligible for marriage allowance on 2016/17 tax year you can back date your claim to April 6th, 2016 and reduce the tax bill even further,” said Peter Way-Rider, tax manager at Ellis & Co.

Is your husband or wife a non-earner?

Did you know that one of the most substantial government tax giveaways is investing in a pension for a spouse?

All non-earning UK residents, under the age of 75, can contribute up to £2,880 into a pension.

The government then automatically adds a further £720.

These payments can be made for a non-tax payer, contributions can also be made on behalf of a child.

Personal Tax, Partnership Tax and Trust Tax Returns all need to be filed by January 31st 2017, if not there is an immediate £100 penalty, and additional penalties will be imposed for further delays. 

Liabilities for the year ending April 5th, 2016 and first payment on accounts for 2016/17 also need to be paid on or before January 31st, 2017. 

If not interest at the rate of 3% (per annum) will be charged on a daily basis, and any tax outstanding as of February 28th, 2017 will incur a 5% surcharge.

Cars do not qualify for the annual investment allowance. However, it is possible to obtain full relief for expenditure on a car in the year of purchase if you buy a low emission car that qualifies for a first year allowance (FYA) of 100%.

If the expenditure is incurred between 1 April 2015 and 31 March 2018, the FYA is available for cars with CO2 emissions of up to 75g/km. Expenditure on cars with CO2 emissions in excess of 75g/km do not qualify for a FYA, only the writing down allowance.

For more information on this matter please contact Peter Way-Rider, Tax Manager on 01244 343504.

If your business is able to claim the Employment Allowance, we would suggest an annual salary of £11,000 with dividends of £32,000 giving a total remuneration package of £43,000, meaning only basic rate tax is payable (see below).

If you are unable to claim the Employment Allowance (as you are a single director/employee limited company), the most suitable route provides for a gross salary of £8,040 which protects your entitlement to the State Pension and benefits plus dividends of £34,960. This again provides for a total salary/dividend package of £43,000.

In this case the overall return is as follows:

Overall, it would appear that there still remains some confusion as to which option is the most suitable, as option 2 obtains less Corporation tax relief due to the lower salary level. Please contact Ellis & Co.’s Tax Manager, Peter Way-Rider, to discuss which option is best for you.

Business owners are coming to terms with controversial dividend tax changes that came into effect on April 6 this year.

Under the changes, the notional 10% tax credit on dividends was abolished and a £5,000 tax free dividend allowance introduced.

While this is fine for those individuals who dabble in shares, the impact on many owners of SMEs has been considerably less welcome.

That explains why there was a surge in dividends taken from companies in the lead up to the April change.

As of April 6:

• The first £5,000 of any dividend tax is free.
• Lower rate tax-payers pay tax at 7.5% instead of 0%.
• Higher rate tax-payers pay tax at 32.5% instead of 25%.
• Upper rate tax-payers pay tax at 38.1% instead of 30.55%.

Owners of SMEs have rightly reacted with dismay to the changes. Many believe the measures are intended to hit small companies which pay a small salary to preserve entitlement to the State Pension, followed by a significantly larger dividend in order to reduce National Insurance costs.

For example, a couple splitting combined income of £100,000 a year will find themselves worse off by more than £3,000.

Peter Way-Rider, Ellis & Co’s Tax Manager, said: “There is a feeling among many owners of small businesses that this is a tax on entrepreneurialism. It is the business owners who are taking the risks, investing in their communities and creating jobs.

“There was a lot of anger when the change was first announced with over 60,000 people signing a petition against it, but now that the measures have taken effect there is unlikely to be any going back.

“Despite the changes, remuneration through dividends will in most cases remain a more tax efficient option than taking a full salary.”

For advice on this and any other business tax issue, contact Peter Way-Rider on 01244 343504 or email: peterway-rider@ellis-uk.com

Do you rent out your spare room? Are you making the most from your property?

The ‘Rent-A-Room’ relief scheme is an optional tax exemption scheme that allows property owners who let out spare furnished rooms in their only or main home to receive up to £7,500 per annum gross and not be subject to tax.

If the rent received exceeds £7,500, the first £7,500 is tax free, income tax being paid on the balance. This obviously covers income from lodgers and may also be applied to bed and breakfast or guest houses which would usually be assessed as a trade.

The exemption limit of £7,500 is reduced to £3,750 if, during the tax year, someone else receives income from letting from the same property.

The £7,500 limit is not reduced if the room is let for less than 12 months. The same amount applies, therefore, even if the room is rented for only one month or just in term time.

The owner and lodger must occupy the property for at least part of the letting period in each tax year of claim.

"This is an excellent way of obtaining rental income without having to purchase a 'buy to let' property", said Peter Way-Rider, Tax Manager at Ellis & Co.

If you have a question about the scheme, please contact Peter on 01244 343504 or email: peterway-rider@ellis-uk.com

We are now beginning to approach the Christmas season, so perhaps now is a timely reminder that for personal taxpayers, any tax due in respect of the year ended 5 April 2016 needs to be paid to HM Revenue and Customs by 31 January 2017, along with the first payment on account for the year ending 5 April 2017.

For limited companies with year ends of 31 March, the liability for the year ended 31 March 2016 needs to be settled by 1 January 2017 (New Year’s Day).

If any tax is paid late, HMRC will charge interest and for individuals, in addition to interest, a surcharge of 5% will be imposed on any tax still outstanding at 28 February 2017.

If you require assistance in settling any tax liability you may be able to agree to pay by instalments by calling the Business Support Helpline.

For advice on this and any other business tax issue, contact Peter Way-Rider on 01244 343504 or email: peterway-rider@ellis-uk.com