4 ways to reduce CGT when selling your property
When you are selling your property you just do not want to get rid of it, you want to maximize your profits and at the same time you want to minimize the taxes you pay on them. CGT is the capital gains tax which you pay on your property which is not your main home. You will pay CGT if you own a property which is not your main home and you bought with the intention of selling it and or you have rented the property. If you are a landlord owning one or more properties and you have incorporated your business then you don’t pay CGT on the gains instead you pay corporation tax on it. But if you have rented your property and you are paying income tax on the rental income, you will be paying capital gains tax on all the gains you will make as a result of the sales. IF your annual income falls in the basic rate band you will be paying income tax 20% and CGT at 18% on the residential property and if your income falls in the higher rate tax band your income tax will be 40% and the CGT will be 28%. Make sure that you keep in mind that you will have to pay these taxes and calculate the cash that will be left with you after paying these taxes so that you don’t run out of cash if you plan to make any investments or you have to pay some bills. Look at the following ways in which you can save some money by reducing your tax bills: 1. Making use of your CGT annual allowance:you In the tax year 2022-2023 every individual is given a tax free CGT allowance of £12 300. This means that you can make a gain on your chargeable assets without paying any taxes on it. This allowance cannot be carried forward, so it is wise to use it every year and make tax free sales. If you have already used this allowance in a particular year it would be wise to delay the sales to the next year so you can make use of the allowance. 2. Share the property with your spouse: If you own the property jointly with your spouse this can double your tax free CGT allowance. This means that when you sell the property you can make a gain of £24 600 without having to pay CGT on it. If you don’t have joint ownership of the property with your spouse you can transfer all or part of the property to your spouse. You don’t pay any CGT on the transfer of your property to the spouse. 3. Transfer the property to your spouse: You can transfer the property to your spouse if your spouse falls in the lower income tax band, this way you can pay CGT at the lower rate on the sale of the property 4. Deduct your costs: When you are calculating the chargeable gain don’t forget to deduct all the costs incurred. You should deduct all the legal costs that were incurred when buying and selling the property, the stamp duty land tax that you paid when you were buying the property and the costs incurred that increased the value of the property, If you want a property tax accountant, please don’t hesitate to contact Taxaccolega. We are accountants in croydon and can do your income tax, corporation tax, inheritance tax. Call us at 020 8127 0728
Uber Drivers and taxation
If you are working for Uber you are not considered their employees. You are working as a self employed person as you set your own working hours and you follow your own business strategies to improve your business. You will be responsible for your own taxes as well. For tax purposes you are considered self employed and you will be paying National Insurance and Income tax on all the profits that you will make. Some people tend to confuse income with profits, please note that income is all the earnings that you get as a result of the business that you are doing, in this case it is the Driving service that you are giving as an Uber Driver. However, the profit is the net income which you get after deducting all your expenses. This means that you will deduct all your costs which you incurred and it is directly related to the service that you are providing. For example, in this case one of the costs which you can deduct are the fuel costs. This net income is the taxable profit and you will pay income tax on it. When and How should I register for my taxes? You don’t have to register for a Self Assessment tax return if your income(before deducting any expenses) is less than £1000. If you exceed this threshold you will need to register for a self assessment tax return by 5th October in your business’s second tax year. As an Uber Driver what expenses can I deduct? You should make it your habit that whenever you buy something or use something for your business you should keep a record of it. You can save all the paper receipts in a box, however, you can be a bit more organized and take a picture of all the receipts and save it to your drive. If you have an accountant you can just share that file with them instead of giving them all the paper receipts. You should also enter your expenses digitally somewhere as you make them. You can either make an excel sheet and enter your expenses there or you can also use a software where you can enter your expenses. This will give you a peace of mind and it will save you lots of time when you are filing your tax return. Here is a list of expenses that you can deduct from your income: If you are an Uber Driver and you want tax advice or you want an accountant to do your taxes contact Taxaccolega and Taxaccolega self employed will ask you simple questions and do all the taxes for you.
Business Asset Disposal Relief- What you need to Know?
Entrepreneurs relief which is now known as Business Asset Disposal Relief is one of the reliefs available to the business owners and the entrepreneurs when they sell the asset. If you are eligible for this relief it will help you reduce the capital gains tax that you pay on the disposal of an asset. You will only have to pay 10% on the profit that you make as a result of the disposal of a qualifying asset instead of a normal CGT which is paid at 10% or 20%. Am I eligible for the Business Asset Disposal Relief if I am a Contractor? In the following cases a contractor can qualify for Business Asset Disposal Relief: You will not qualify for business asset disposal relief if you work through an umbrella company. As a sole trader you are eligible for the reduced rate of CGT(business asset disposal relief) if you owned the asset for 2 years or more. If you are closing down your business: If you are closing down your business and you dispose of all your assets within 3 years of selling your business then you can claim the relief. For example if you are planning to sell your business in 2022, to qualify for Entrepreneurs relief you must sell all your business equipment and assets by 2025. There is no limit as to how many times you should claim the relief, you can claim it as many times as you want provided your profit does not exceed £ 1 million over your lifetime. Once you hit the £1 million cap in your life you won’t be eligible to claim Business Asset disposal relief If you are selling shares in the company you have invested in You can claim business asset disposal relief if the following applies to you: If a company goes from being a trading company to a non-trading company you will still be eligible for business asset disposal relief as long as you sell your shares within 3 years. If you are closing your business you should not be involved in the same business activity for at least 2 years otherwise HMRC might consider your profits as income distribution and you might have to pay dividend tax on it. If you are looking for an accountant in London contact Taxaccolega and our expert accountants will help you with your taxes. They have expert knowledge and they can advise you on what the most tax efficient structure to use to run your business and utilise the tax reliefs available.
Accountants in Croydon
Why do I need an accountant ? You need an accountant not only because they will do your accounts but having an accountant who is dependable can actually make your life easy. If you are self employed If you run your own business as a self employed person you have certain legal responsibilities related to accounting and the taxes which you have to fulfill within the deadlines otherwise you will have to bear certain penalties. You can hire an accountant to do these duties for you so you can focus more on running and expanding your business rather than being stuck in the accounting things which can be outsourced. If you hire an accountant they can take care of the following duties : We at Taxaccolega have accountants who will give you accounting and taxation advice after understanding your business. We understand that every business is unique and therefore the accounting advice for one business might not be right for the other business. An accountant will help you minimize your tax liabilities by claiming all the possible allowable expenses that can be deducted from your income while coming to the profit figure. You will also need advice from your accountant on how you can withdraw money from your business. If you are self employed you can withdraw money as dividends, you can also withdraw money as director loans. However, an accountant can tell you which method would be most tax efficient. If you run your business as limited liability company If you run your business as a limited liability company you have some added legal responsibilities: An accountant will help you with all the book keeping, they will manage your payroll and they will also advise you all on the other taxes such as capital gains tax, inheritance tax, property taxes. They will also guide you on different relief available such as business property relief which can reduce the inheritance tax bill in the future. You do not need an accountant while you are running your business, the best time to hire an accountant is before you start your business. Although you have to pay your accountant which will add to your costs, the good news is that it is an allowable expense and you can deduct it from your income. When you hire an accountant before you start your business, an accountant can advise you on the most tax efficient structure, which depends on your individual circumstances. They will also prepare and advise you on the cash flow forecasts so you can adopt the best business strategy. If you are running a business or thinking of running a business you can contact Taxaccolega accountants in croydon and they will advise you on the possible ways to run your business in the most tax efficient way.
Should I take the directors loan? And how should I treat them in my accounts
What is a Director’s loan? In simple words the directors loan is a loan that a director takes from its company (which is a separate legal entity). Since it is a “loan” the director has to return it to the company therefore a directors loan would be any money that the director is taking out from the company for personal use. It is not the salary, a dividend or an expense repayment. This also has nothing to do with the money you have previously paid into or loaned the company. Why would I need to take a Loan from my Company? You might have to borrow money from your company to cover your personal expenses. These could be any one off unexpected bills which could not be covered by the salary the company pays you and you were also not able to get any dividend since the company did not make any profits. However, if your company has enough liquid cash you might be able to borrow money from the company. This will be treated as a loan to the director and you will have to pay interest on it. This interest can be the market rate or it can be lower than the market rate depending on how things are settled between you and the company, Directors should not borrow money on a regular basis as this comes with additional administrative work and also there are risks associated with it such as penalty costs if not paid on time. How Much Loan can I borrow from a company? You can borrow as much as your company can afford to lend. Although there is no legal limit, you would not want to borrow all the liquid cash from your company and exhaust its funds as this will create cash flow problems for the company. Furthermore, there is a threshold of £10 000. If you borrow more than £10, 000 then it is treated as benefit in kind and the company will have to pay National Insurance on it. As a director you will have to report it in the self assessment tax return and pay taxes on it. When Should I Repay The Loan? The loan should be paid within 9 months of the corporation tax period. Corporation Tax will be charged on any unpaid loan at that time. How much interest will be charged on the loan ? It is upto the company as to how much interest they will charge on the loan. If the interest charged on the loan is below the market value then the difference will be treated as a benefit in kind and tax and National Insurance will be paid accordingly. How and why Should I keep a record of the Directors Loan? As part of your bookkeeping process you should maintain a directors loan account. In the directors loan account you should record all the money borrowed from the director or the money lent to the director. You should have a proper record of the money borrowed from the company or money given to the company as a loan from the director because at the end of the financial year you will have to include in the balance sheet any money the director owes to the company (overdrawn) or if the company owes to the director (credit) For more information on Directors’ loans and how they will be treated in your accounts please contact Taxaccolega at 020 8127 078 and our team of accountants will be happy to help you. We will guide you on your personal taxes, corporation tax and your payroll.
Selling on Amazon – Things I should know if I am selling as a sole trader or a limited company
The way you run your business online depends on how big the business is. If you are not trading on a regular basis then it might be just convenient and tax efficient to register yourself as a sole trader to run your online business. However, if your business is widespread or it’s just a start but you expect your business to expand then working as a limited company right from the start might be a good option. Every individual situation is different, every person starting a new business has different circumstances and therefore not one business structure would suit all even if you are running the same size of business. Let’s look at the following points which you should know once you have decided to start your business online. Costs of Registering the business: If you chose to work as a sole trader you just have to register for a self assessment tax return if you are earning more than £1000 per year. You do not pay anything for registering. You just pay your taxes by 31 Jan of the following year, you will have to fill in your tax return and HMRC will calculate the taxes for you. Whereas, if you want to incorporate your business you have to choose a name and register your business with the Company’s house. The registration fee is around £12 and the process is not that complicated. You can even hire an accountant to do this for you. Registering for taxes: You will have to pay taxes when your business is making profits but you have to register yourself to let HMRC know that you are doing a business and you have to submit your returns (incase you are a sole trader) or annual accounts (if you are a registered business) even if you are making a loss. You will have to register for self-employment by 5th October in your business’s second tax year. You can be fined if you don’t do it on time. If you are an incorporated business, you can register for corporation tax at the same time as when you register the business with the company’s house. Otherwise you can do it at any time within 3 months of starting your business. Registering for VAT You will have to register for VAT as soon as you meet the registration requirements for VAT. It won’t matter if you are running the business as a sole trader or as a limited company . Taxes If you are starting to sell online as a side business while you are already employed in a company you should note that you might be using all your personal allowance so any profits that you will make from your online business you will have to pay personal taxes on it. If you are not employed anywhere then you can earn upto £12, 570 tax free if you are a sole trader. If you run a company you will be paying tax on all your profits but the rate you pay is less than the personal tax. An accountant can help you with the evaluation of your situation and conclude what business structure will work for you. Please contact Taxaccolega, e-commerce accountants in Croydon and we will be happy to help you.
What do I need to do if I want to run my online business through Amazon?
In the previous article we talked about things you need to consider when choosing a business structure when you are starting your business online. In this article we will talk about what you need to do if you decide to sell specifically through an online marketplace such as Amazon. Create your Seller Account You can sell through your customer account but it is wise to create a business account on amazon if your intention is to sell regularly. This is because if your business expands and you have to change your account to the business account because you will be liable to pay your taxes you will have to wait and the trading is suspended for days and this might affect your business. Understand what audience you will target When you are advertising your product online you have 2 types of audience: B2C customers and B2B customers. B2C customers: When you are selling your product and services to the customers who are the end users. B2B customers: This means that you are selling from your business to another business You should understand that when you are selling on an online marketplace you will be selling to the customers inside and outside the EU. You will have to register for VAT and follow the local VAT rules in the area that you are selling. VAT requirements and registration Where, when and how you have to register for VAT depends on the following: If you are a UK seller selling goods in the UK as a business activity and your business VAT taxable turnover is more than £85 000 a year you have to register for VAT You must also register for VAT in the UK if you are an overseas seller and the online marketplace provides you with the VAT details of the business customer If you are an overseas seller with goods stored in the EU and your total sales to the customers in Northern Island are more than £70 000 a year You can also register your business for VAT if you want to recover import VAT from the goods imported to the UK that will be located in the UK at the point of sale and sold through an online marketplace. HMRC defines you as an overseas seller if you sell goods stored in the UK to the UK customers but your business is not registered in the UK and all the management decisions are made in the UK. Understanding Fulfillment by Amazon When you sign up to sell on amazon by making a seller account you will automatically be enrolled for FBA. Through FBA you just have to send your products to amazon fulfillment centers and they will handle the shipping, returns, customer service etc. you can track your inventory etc through your account. In our next blog we will discuss how we do accounting when selling on amazon. You can hire an accountant to help you simplify all the book keeping, accounts and taxation and help you concentrate on running your business. If you are thinking if you need an accountant or not read one of our blog here If you are looking for an e-commerce accountant contact Taxaccolega, accountants in Croydon, accountants in London and our team of accountants will be happy to help you. Source: https://www.gov.uk/guidance/vat-overseas-businesses-using-an-online-marketplace-to-sell-goods-in-the-uk#online-marketplaces
Increase in National Insurance. How will it affect me?
If you are an employer running a payroll for your employees make sure that you pay income tax and National Insurance on their behalf. Make sure that you are well aware of the changes in the NI rates that are due this year to avoid any costly mistakes. What is national insurance ? National insurance is a tax that is paid on the earnings and the profits. It is paid by the employer, employee and the self-employed. How does it work? The national insurance is paid into a fund which is then used to pay the statutory benefits this includes the maternity pay as well as the statutory sick pay. If you had been paying national insurance contributions you are entitled to the state pension and additional unemployment benefits as well. Once you reach the state pension age you won’t have to pay any national insurance and this will reduce the overall taxes that you pay. How do you pay national insurance? Each person is assigned a unique national insurance number. It is the number which you use throughout your life. And this number will determine how much tax you have throughout your life. If you are an employee , your national insurance will be deducted at source. This means that you will get your pay from your employer after deducting your income taxes and national insurance. If you are an employer you should collect income tax and NI contributions before paying them wages as part of your payroll obligation. How much you pay How much national insurance you pay will depend on your income. The lower earnings limit is £533 per month and the primary threshold is £823 per month from 6 July 2022 to April 2023 it will increase to £1048 per month. This means that you will only make NI contributions if you are earning above this threshold. The rates are changing for employees from 12% to 13.25% for income between primary threshold and upper earnings limit and from 2% to 3.25% for income above the upper earnings limit. The rates for employers are changing from 13.8% to 15.05% for NIC classes 1,1A and 1B How will it affect you if you are an employer ? If you are an employer this will increase your overall employee costs as you will be paying increased NI contributions to HMRC. Make sure you are ready for the change Make sure you are well aware of your financial situation. You might want to hire an accountant to know exactly how costly it will be when the changes are incorporated. You can also get an accounting software to do your own analysis of the costs by preparing cash flow forecasts etc. What can be done to mitigate the impact of the change Many companies might have to introduce or re-examine the salary sacrifice scheme. Salary sacrifice scheme means that there is a cut in the salary and the money is added into your pension instead. This will reduce the salary and therefore the taxes paid including the national insurance. Some companies might have to consider cutting down salaries or even reducing the number of employees . If your cash flow forecasts are negative after the changes are introduced you should consider cutting down your expenses elsewhere. You might work on ways to increase your sales, consider spreading your business by investing in more projects. To see the overall effect on the costs you can hire an accountant, You can also consider automating your business. For example, if you are an accountant you can use more accounting softwares, as they are more efficient time wise. If you are an employer running payrolls and you want an accountant to do the payroll services for you contact Taxaccolega at 020 8127 0728 and our team of accountants will be happy to help you.
4 things you should consider while choosing the company structure of your property business
If you run a property business you have 2 options to consider: you can either run as a sole trader or you can incorporate your property business. It depends on what tax band you fall into, how much cash you have and how much cash you want to keep in a certain period. Let have a look The tax rates that apply to each structure You will either be paying corporation tax or the income tax on the profits that you make when you rent your property. This depends on your company structure. The corporation tax rate is currently 19% . While you pay income tax of 20% on income above your personal allowance which is £12 570 ( the basic rate band) , 40% if you are a higher rate taxpayer ( earning an income of £50 271 to £50 000) and if you are earning over £150 000 you will be paying tax at 45%. Allowances The point to note here is that although the corporation tax rate is lower than the personal tax rates, when you are a limited company you will be paying taxes on any income that you have unlike in the personal taxes where you don’t pay any taxes on income up to £12 570. You will also get a property allowance if £1000 of you are self-employed and if you have an annual income of £1000 or less you will not be paying any taxes on it. Tax when you sell your buy to let property You will pay taxes when you make a profit on the sale of your property whether you are running your property business as a company or you are self employed but there is a difference in the way you will pay your taxes under each structure. If you are self employed you will be paying CGT on the sale of your buy to let. CGT is a tax which is payable on the sale of any asset which has increased in value since you bought it. For UK residential property the CGT is payable at 18% and 28% depending on which tax band you fall into. This rate is applied to the gain that you make and not the sale price. A CGT allowance of £ 12 300 is available for the individuals ( self-employed) and therefore no capital gains tax liability will arise if a gain is made or total gains made in a year are less than £12 300 in a year. If you have incorporated your property business you won’t have to pay CGT on it instead you will pay corporation tax on the gain. The corporation tax is 19% for the tax year 2022-2023 The deadlines to pay taxes The deadlines to pay taxes are different in each business structure. If you are self employed and running the property business as a sole trader you will have to submit your self assessment tax return and pay any income tax due by 31 jan in the following tax year If you have sold any property you will have to report and pay capital gains tax on any gains within 60 days. You must pay your corporation tax 9 months and 1 day after the end of your accounting period. The corporation tax is paid on all your profits including the profits made when you sold the property. The deadlines to pay taxes is an important point to consider since you need to forecast when you will be needing cash to pay taxes. Although different allowances are available if you are self employed, you might want to incorporate your business if you are a higher rate taxpayer but again it all depends on your individual situation. It’s always a good idea to talk to an accountant about which company structure suits you best. If you are looking for an accountant in Croydon, an accountant in London contact Taxaccolega and our property accountants in Croydon will be happy to help you.
What do landlords need to do for MTD for income tax?
The landlords whose income from the properties for example if their rental income exceeds £10 000 per year, they are required to switch to MTD for their income tax reporting. From April 2024 it will be mandatory for all the individuals who are currently using self assessment. If the landlord owns some other business as well If the landlord runs some other business as well for example he is a sole trader as a sole he will have to switch to MTD .In order to determine if he is required to switch to MTD he will have to add income from the property (rental income) or all the properties and income from the other business, if the total exceeds £10 000 they will have to switch to MTD. By switching to MTD it means that they will have to register for MTD for income tax for accounting relating to your property. If the landlord is a permanent employee If the landlord is the permanent employee and he pays his income tax and National Insurance through PAYE and also owns rental property then he won’t be combining the two incomes. If the annual income from the rental property is less than £10 000 he will continue to pay his income taxes through Self assessment. However, if the total income from all the rental property is more than £ 10, 000 then he will have to register for MTD and digitize all the accounting related to the property. If you have inherited a property You are considered a landlord for tax purposes If you have inherited a property and you receive a rental income from it. You must declare it to HMRC if it exceeds £1000 per annum and you will have to register for MTD income tax if it exceeds £10 000. You won’t have to add the income from other sources such as permanent jobs to determine if you should register for MTD. If you are a buy to let landlord and you own a share of the property If you own part of the property then you will consider the income from your share of the rent. If the rental income from your share of the property exceeds £10 000 then you will register for MTD and pay taxes through it. If you receive income from the property business which is incorporated The MTD does not apply to the incorporate business and they will continue to pay taxes By registering for MTD you might have to bear some costs such as buying the software, inhouse training, and increased accountant fees. Although there is not much change in the reporting to HMRC however through MTD you might have to report to HMRC more frequently. This means you might be reporting to HMRC quarterly instead of annually as you did in the self assessment. If you need more information on MTD contact Taxaccolega,020 8127 0728 accountants in Croydon and our team of landlord accountants, self assessment accountants, will be there to help you.