I have inherited a property. Should I pay Capital Gains Tax on it?
What is capital gains tax? Capital gains tax is the tax which you pay when you sell a property which has increased in value from the time you bought it and you have made a gain. You don’t have to pay capital gains tax when you inherit a property, however you will have to pay capital gains tax when you dispose of the inherited property and you have made a gain on it. Will it be your Principal Residence? If you have decided to live in the property that means it’s considered your main home at the time of selling it and you can avoid paying Capital Gains Tax on its sale as you can qualify for Private Residential Relief. What is considered your main home? Will you Rent it? If you have inherited a property another option that you will have is to rent it out. If you sell the inherited property which you had been renting then you will pay capital gains tax on it. How will you calculate the capital gains tax? First you will have to calculate the gain. Incase of the inherited property you calculate the gain by deducting the selling price from the market value You have an annual CGT allowance of £12 300. If the gain falls within this amount you won’t be paying any capital gains. If it falls above it and you are a basic tax rate payer you will pay 18%on the residential property and 28% on any amount above the basic rate. Any Capital Gains will be added to The couples can combine their CGT allowance so they can make a gain of £24 600 without paying any taxes. When you inherit a property you can also decide whether you want to keep it in your name, transfer it to your children or you want to register it in the company’s name. If the property is registered in the company’s name you will have to pay corporation taxes on the profits and any gains you make on selling the property. In many cases this reduces the overall taxes that you pay. Each of the above situations have different tax implications, you may want to talk to your accountant to know what structure will be most tax beneficial for you. There are different reliefs available . For example, if you are a business and you sell property to reinvest in the property you will be considered to be in the property business and you will qualify for a relief. You can also reduce your overall tax bill If you transfer the inherited property to your spouse.You won’t be paying any capital gains tax on such a transfer. This will also help you reduce your income tax bill incase you decide to rent that property you want to rent your inherited property you might benefit by transferring it to your spouse if they haven’t used their personal allowance. How to save money by paying the right taxes contact Taxaccolega, accountants in Croydon’ and our team of accountants will be happy to help you.
Do I need a cashflow forecast for my startup?
If you are self-employed or an incorporated company it’s very important that you stay on top of your finances. You should be aware that if your finances are not organized your business will run out of cash and your business will fail no matter how great your business model is.To read our blog on why your business might have click here A GENERAL BUSINESS RULE YOU SHOULD FOLLOW: There is an important business rule and it is that the business money should stay in the business. To keep the business money separate you should have a separate business account which is maintained only for the business transactions.This way you will have a fair idea of how much you can invest in your business or whether you have enough money to pay your suppliers and other liabilities such as taxes. Also you should pay yourself salary at market rate or if you are borrowing money from your business for your personal loan make sure it is accounted in your business account as directors loan and treated accordingly. WHY IS CASH FLOW FORECAST IMPORTANT FOR MY BUSINESS With a good business model and an effective business strategy you should have a very efficient financial model. If you are not an accountant you might want to hire professional accountants to make your startup business a success. Cash Flow forecasts will tell you your business’s financial position. You calculate the net cash flow which means you will estimate the cash coming in and subtract the cash that is expected to go out in the future to see how much cash you will be left in hand. This will help you predict how much money you are left with to reinvest in the business or It also helps to understand when you have to raise funds and how much you have to raise. It is usually based on estimates and forecasts. If in the forecast you don’t see cash coming in your company will become insolvent. If you are starting a business or have just started a business you should make a cashflow forecast. It’s going to take a little longer for the first time however it will take a few minutes next time. You can do cash flow forecasts regularly, some businesses do it weekly, some monthly and some do it quarterly. If you are a small business you will have to do it weekly. Startups should look at the weekly projections because they evolve so quickly. WHAT SHOULD I INCLUDE IN THE CASHFLOW FORECAST You should consider cash flowing in and out. The figures are estimates and therefore there is a chance of error, you should be well aware of the business and completely understand why you are making a cash flow forecast. For a startup this can be trickier since there are no historic figures and you might go wrong in predicting the income for the sales. You might be dealing with different currencies for example you might be getting your supplies from a variety of countries, this might result in inaccuracies. The cash coming in can be from the sales of your business product, any loans or from other sources. The costs that are incurred (cash outflows ) will vary from business to business. For example if you are selling items online your cash flow forecast will include the costs such as the following: The above list is only an example and it can include other costs as well such as depreciation costs. If you are a startup and you want to hire a professional startup account in Croydon contact Taxaccolega at 020 8127 0728 and our expert team of accountants will sort out the numbers for you and give you advice so you can make informed decisions.
Best accounting firms in Croydon
What to look for in an accountant when choosing an accountant for your company. Are they qualified? When choosing an account you should look for an accountant’s qualifications and experience. If they are qualified they will be associated with a relevant professional body such as Acca and ICAEW. At Taxaccolega we have qualified bookkeepers, certified accountants and chartered accountants. We make sure that the accountants in our firm have professional competence and strictly adhere to the ethical code of conduct. This includes objectivity, integrity, cofendiciality, professional competence and due care, professional behavior. Since as your accountant we will be dealing with confidential and sensitive information we make sure that we keep it conference and not disclose it to anyone. Easy to talk to They should be friendly and you should feel comfortable talking to them .This is very important that you are comfortable with your accountant when you talk to them for the first time . You should feel free to talk about the fees that they will be charging. For example, are they going to bill you per hour or is there a quarterly or an annual package? discuss what you expect from them and what they expect from you. The clearer the things are between you and the accountant the better it is for you and your business. You should not feel shy asking them questions related to accounts and taxes. You might want your accountant to explain to you what the numbers mean and how they affect your business. Since you run a business, it’s not necessary that you know the financial side of the business and an accountant should understand this and answer all your queries patiently. You should hire an accountant who does not only prepare your accounts and other financial statements but is also able to explain the numbers well. Meeting deadlines A good accountant will be an accountant who will deliver on time . He will meet all the deadlines. He will ask for any information required to make the accounts on time . He will make sure that no penalties are incurred. A good accountant will remind you of your deadlines in the timely manner rather than expecting you to remember them. Communication Skills A good accountant is an accountant with good communication skills. He will keep you in the loop with everything they are doing A good accountant will keep you informed . If your deadline was on 7 Feb and your accountant usually submits by 27 Jan however due to some reason the accountant won’t be able to do it this month it would be good for you if they tell you clearly that due to some reason they won’t be able to submit it until 6th Feb . When you are informed you will have a better understanding of the situation. This also shows a sense of responsibility towards the client and the client in turn will have more confidence in the accountant. Scale of the firm and the size of your business When you are looking for an accountant, their scale should match your business. For example if you are a small business you should go for an accountant who is a small firm. If you are a startup or a growing business you should look for medium to large firms. Taxaccolega deals with both small and medium sized businesses. Experienced You should also make sure that your accountants have experience in the type of business you are in. For example if you are in a real estate business it would be worthwhile going to an account who has an experience in the real estate business. Your accountant should be able to tell you frequently made mistakes by the client in this business and you can also learn from the experience of the client. At Taxaccolega we deal with a large number of clients who are in the real estate business and therefore if you are renting your property we will be able to advise you on the business structure and other related taxes. We are also experts in the inheritance tax law and we can provide you with expert advice on inheritance taxes that will include how to save your taxes and also how to Pay the taxes. These taxes can get tricky as everyone is in a different situation and a relief that applies to you might not apply to the other individual or a business, an accountant who is experienced can advise you on how to save taxes by utilizing the reliefs available to you. Taxaccolega, as one of the best accounting firms in Croydon deals with a variety of clients such as contractors , freelancers, sole proprietors, small business owners. We provide tools for clients who are selling on platforms such as Amazon, Ebay so the accounting is made easy for them. Since we are a team of accountants and chartered accountants we won’t only do your bookkeeping but we will also give you professional, unbiased advice on your financial matters. For example, we will let you know how you should run your business either as a limited liability , sole proprietorship or a partner. We will even tell you by looking at your individual circumstances when you should switch to a different business structure in order to save taxes. Are they easily approachable? When looking for an accountant you want an accountant who is approachable. You can talk to us on the phone in case you want to discuss anything with us, you can walk in our office or arrange a video call with your accountant. Here at Taxaccolega, although the whole team of accountants will be working on your accounts there will be one specialized accountant allocated to you who will do all the correspondence with you this is to avoid confusion and to have consistency in the work. When one accountant is allocated to the client this develops an increased rapport and the accountant gets to know the client and his business well. Efficient Accounting Approach We use Efficient
When do I need an accountant for my startup business?
You are starting a business because you have a brilliant idea which you want to commercialize. You should know that business is not only about ideas. You cannot succeed as a businessman if your targets are not achieved and the target of a business is to make profits. That is why you need an accountant – to maximize your profits. HOW EARLY SHOULD I HIRE AN ACCOUNTANT? It is a good idea to hire an accountant at the planning stage. I have encountered a number of entrepreneurs who were so excited about pursuing their idea and introducing it to the world that they didn’t bother about the numbers. You might have an innovative idea but you have to make sure the financial aspect of your business is covered as well. An accountant today is not only the bookkeeper, he can act as your financial advisor at the early stage of your business. For example, when you are planning your business you should know the financial feasibility of your project etc. An accountant can prepare a cash flow forecast for your business. A cashflow forecast tells you how much cash you will have after deducting all your expected expenses and costs. An accountant will not only prepare the forecast he can explain to you what the figures mean and the importance of the figures for your business. A cashflow forecast will tell you 2 important things: do you have enough money to pay to your suppliers and do you have enough funds and when and how much will you have to raise funds to keep your business running. Since the figures used in the cashflow forecast are an estimation there is an increased chance of an error. This is especially true for a startup business at the planning stage since the business is new and the estimation is based on the prediction and there are no previous figures to look at. This chance of error can be decreased when you have an accountant who has worked for a similar business. Your accountant can help you decide if you should run your business as a limited company, sole trader or a partnership. The structure you choose should be chosen wisely because it affects the taxes you pay and the way you report to HMRC. The fact is that the type of structure you choose to run your business depends on the individual circumstances. There’s no one answer to this even if you are in the same type of business. For example if you chose to run your business as a sole trader and you have personal assets as well on which you have to pay taxes you might end up paying more tax which could have saved if you were running your business as a limited company. An accountant makes sure that you utilize all the reliefs available to you so you can maximize your profits but reduce the tax costs. You will also need your accountant if you have to register for VAT. They can help you file your VAT returns, fill in the self assessment tax returns if you are a sole trader and file them on time, prepare your accounts, file your accounts and do all the necessary book keeping. If the returns are not filed on time and taxes are not paid on time you will have to bear unnecessary extra costs. If you are looking for a startup accountant in Croydon or a startup accountant in London call us 020 8127 0728.
4 reasons why you should incorporate your property business
When we are in any kind of a business we are looking for ways to save taxes.Tax is a cost which cannot be avoided but there are ways to reduce the taxes we pay. For example, by choosing the right structure of our business we might be able to save taxes. There is no correct answer as to what the structure should be; it depends on your individual circumstances. In recent years there is an increased trend in incorporating the property business, by property business we mean buying the property to rent for business purposes. Why is incorporating becoming a popular choice of business structure. We have listed 5 reasons why you should incorporate your business: If you are in a property business there are 5 reasons why you should run it as a limited company 1. The Tax Rates The corporation tax rate for the company profits is 19% and this is less than the tax you pay on your personal income which is 20%, 40% and 25% depending on which tax band your income falls into However, there is no tax allowance available to the company profits which means that you have to pay taxes on all the profits that you make. Whereas, although the tax rates are high on the personal income there is a tax allowance available and you won’t have to pay any taxes when you earn upto £12, 570. This means that if you deduct all the expenses from your income and you are left with the profit of £12, 570 it would be worthwhile running the property business as self employed provided you don’t have any other income which uses your personal allowance. If you have your personal allowance already used up for example if you are doing a job or you have invested somewhere else as well you might want to incorporate your business to save taxes by paying tax at 19% 2. The Finance Cost The finance cost is the cost incurred which you pay when you borrow money to buy the property. In this case it will be the interest and other costs which you pay on the mortgage. You can deduct these costs when you are running the business as a corporation but these are not allowable expenses when you are self -employed. When these costs are deducted they will reduce your taxable profits and therefore the taxes that you will pay to HMRC. 3. Low rates of capital gains tax You pay capital gains tax when you are self-employed and you sell your assets such as your property. When you sell the property which is a residential property and it’s not your main home you will pay CGT at 18% or 28% depending on which tax band you fall into. If you are a limited company you will pay corporation tax(19%) on selling the property. 4. Maintaining your income If you have income from other sources as well you might want to restrict your income to save upon some personal taxes. If your property business is incorporated it is a separate entity and you can limit the income which you take from the company. You can take the income in the form of salary, dividend income and you can even take out the dividend loan. If you are thinking of starting a business or you a landlord and you want to incorporate your business do not hesitate to contact Taxaccolega, accountants in Croydon at 020 8127 0728 or message us here and we will be happy to help you
What will be the consequences if I delay my self assessment tax bill?
Keeping in mind the increased pressures on the taxpayers as well as agents due to this new strain Omicron HMRC decided to waive the self assessment tax penalty. HMRC has estimated that almost half of the self assessment tax payers have submitted their tax returns, however, if you are included in the other The deadline for the the tax year ending 5 April 2021 is 31 Jan 2021, you should have filed your self assessment and should have paid your t If due to some unforeseen circumstances you are not abhalf who have not submitted your self assessment tax return for the tax year 2020 to 2021 you should do it by the deadline which is 31 Jan 2022, If you think you are not able to file your return and pay the tax due by the deadline provided you have a valid excuse for that as well you don’t have to worry about the penalty charges as HMRC is waiving late filing and late payment penalty by extending the deadline by one month. It should be noted that the deadline for the self assessment tax return is not extended, it is only the penalty which is waived. So the interest will still be charged on any outstanding payments from 1 Feb 2022. The waiving of the penalty as announced by HMRC means the following: However, you should not delay your filing and payments unnecessarily if you have all the information needed to file the tax return and and you have enough finances you should go ahead and file your tax return, make the tax payment and get done with it. Filing your self assessment on time and paying your tax can be beneficial in the following ways: If you are looking for a tax agent to fill in your self assessment tax return contact Taxaccolega and our team of accountants in Croydon will help you meet your tax deadlines. Call us at 020 8127 0728 Source:https://www.gov.uk/government/news/hmrc-gives-self-assessment-taxpayers-more-time-to-ease-covid-19-pressures
How do I report my loans and Grants given during Pandemic in the self assessment tax return?
Loans which were granted to the self-employed during the Pandemic to support their businesses are taxable and therefore they need to be reported in the self assessment tax return. There is an exception to this. If the payments made to an individual are by the council and they are the support payments meaning that they were meant to support the council tax payments or the housing benefit you won’t have to report them in the self assessment tax return . This is because they are counted as the welfare payments and therefore they are not taxable. You will have to report if you received money from the following grant: Filling the self employment pages of your tax return You will be filling self employment – short pages if your turnover including the taxable coronavirus support scheme payments was less than £ 85 000. If the turnover is more than this figure and your business is more complicated for example you have changed your accounting period or your basis period is different from your accounting date etc. SEISS payments You will include this in box 27.1 If the SEISS payment that you receive relates to self employment and partnership. Apportion the amount on a just and reasonable basis. The total of which should equal the amount received by the individual. Other Coronavirus support payments You will have to include the payments from other loans and grants in box 10. In box 10 you will only include the payments that you received and retained. If you received an incorrect payment which you were not entitled to and you have returned it you will not include it in box 10. If you received a payment from the grant which you were entitled to and you have not returned it either you should include the incorrectly claimed amount in SA 100. If you have received a grant under eat out to help out scheme and you are VAT registered don’t add the VAT amount when including the amount in box 10. Trading Allowance An allowance of £1000 is available for every business. This means that if your earnings for the year are less than £1000 you don’t have to report it to HMRC, pay any taxes and fill in the self assessment tax return. However, if your income from self employment and all the miscellaneous income includes SEISS grant even if it is less than £1000 you will have to report it in the self assessment – short pages. Will I be including the Loans and Grants in Calculating my Trading Profits You have 2 options to calculate the trading profits If you need help in filling your self assessment tax return, you can contact Taxaccolega, accountants in Croydon, Accountants in London. We can provide you with the accounting services at reasonable rates. We make sure that all your accounting and tax deadlines are met on time in order to avoid any penalties. Do not hesitate to call us at 020 8127 0728 or send us a message here and we will contact you. Source:https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/974067/sa103s-notes-2021.pdf
I am renting a room. Can Rent a Room Relief apply to me?
When we are filing our self assessment tax return we need to make sure that we claim as much reliefs as we can when we are reporting our income to the HMRC in the self assessment tax return in order to minimise our tax bill and maximise our profits. As the deadline to submit the self assessment tax return for the tax year 2021-2022 is 31 Jan 2022 it’s time that we start doing our homework on our income, the reliefs so we are ready to file the tax return on time and avoid any penalties and any extra costs. Am I eligible for Rent a Room Relief You will be eligible for room relief if you let a furnished room to a lodger. It is an important condition that the room is furnished. If it is not furnished you cannot rent a room scheme. The room that you are renting should be part of your main home. If it is not your main home or if you are not in the UK when you are letting the room then you won’t be eligible. The Renting of the furnished room should not be used as an office to be used for rent a room scheme. You can use this scheme if the letting of that furnished room amounts to a trade for example if you run bed and breakfast. What is Rent a Room Scheme Rent a room scheme is a scheme where you get a relief of £7500 on your taxable renting profits if you meet the above conditions. If you have a joint owner you will get the relief of £3750. This is an annual limit even if you are letting the accommodation for less than 12 months. How Do I Work out My Taxes If the gross receipts are less than £7500 If the total gross receipts are less than £7500 then you will be exempt from paying any taxes. Please note that here we are talking about the gross receipts and not the profit. How do I Work out My taxes if the gross receipts are more than £7500 You have 2 options to pay your taxes and you can choose whatever method you want to use depending on your individual circumstances. However, if you want to use the Rent a room Scheme you will have to tell HMRC on time. You can choose between the two options below: Option 1: Option 2: If I made the loss, how can I use the loss in the future? If a loss is created using option 1 method you can use it in the future even if you are using option 2 method to pay your taxes. For more information on how to use loss, calculate rental profit, claim expenses and capital allowances contact our expert team of accountants in Croydon, London by calling on 020 8127 0728 or message us here Source:https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2021
Deadline for Reporting Capital Gains tax – Do I have to report them with the Self assessment Tax Return?
How and when you report the capital gains depends on the type of gain you have made. Each time you sell something on which you are liable to pay Capital Gains Tax you have to report it to HMRC. There are different reporting rules in the following situations: If you sold the property in the UK on or after 27 Oct 2021. You will have to report and pay any tax due on the UK property within 60 days if the completion was on or after 27 Oct 2021. This means you should report it by 31 Dec 2021. If you don’t do this on time you will get a penalty from HMRC. If you sold the property between 6 April 2020 and 26 Oct 2021. You will have to report and pay any capital gains tax within 30 days if the property was sold between 6 April 2020 and 26 Oct 2021. Where to report and pay? You will have to report and pay by creating Capital Gains Tax on the UK property account. You will need your government gateway user ID and password. If you don’t have one you can create one. You can pay by using real time Capital Gains Tax Service. The property that you sold should not be your personal property it can be either of the following: Make sure that you have proper records You should keep proper records such as receipts, bills and invoices. You might want to include the following bills : How will you work out your gain? You will add all the gains from the property, deduct any costs such as cost of buying the property, stamp duty costs, any fees paid to the professionals such as solicitors, costs of any extensions done on the property. Once you will get the gain you have to work out if you are eligible for any reliefs such as incorporation relief, private residence relief , entrepreneurs relief, incorporation relief, gift roll over relief. For capital gains tax rates click here. If you sold any other asset as mentioned above, you will be reporting it to HMRC by 31 Dec . For example if you made a gain by selling a personal possession worth more than £6000 or shares and it falls within the tax year 2021/ 2022 you should report it by 31 Dec 2021. You can also report it in the self assessment tax return if there is another reason that you will be sending in the tax return. We at Taxaccolega, Property accountants based in Croydon can help you if you have a property business and you deal in buy to let property or you have business assets which you are interested in selling. If you need help with your self assessments do not hesitate to call us at 020 8127 0728 and our team of accountants will be happy to help you.
Employee shareholder – What tax advantages do I have?
Who is an Employee Shareholder? An employee shareholder is an employee who owns shares in the company that were worth £2000 when they got them. When you own shares you have to think of 3 taxes: Income Tax and National Insurance No Income Tax is paid on the shares uptil £2000 Capital Gains Tax If you got the shares before 17 March 2016 you will not pay any capital gains tax on selling the shares that were worth upto £50 000 when you got them. If you got shares after 17 March 2016 you will only pay Capital Gains Tax when you sold your shares and made a gain of over £100 000 during your lifetime. Your employer might as well offer you a salary package that includes shares. Every individual case is different, however since you get some tax advantages when you are offered shares through a certain scheme which we will discuss below you will be able save some money which otherwise you might be paying in your taxes, What are these Schemes? Share Incentive Plan Your employer can offer you shares through the Share Incentive Plan through Free shares( offering shares of worth upto £3600), Partnership shares( Where you can buy shares from your salary before any taxes are deducted), Matching Shares, Dividends Shares. How Is it Tax Advantageous? You won’t have to pay any income tax or NI as long as you keep your shares in the plan for 5 years. If your shares were under the plan when you sell them you won’t have to pay any Capital Gains Tax on the profits that you make. However, if you have taken them out of the plan and then sell them where they have increased in value then you might have to pay CGT. For more information on this you can contact our team of accountants , Save As You Earn Under this Scheme your Employer will offer you a Savings Contract. Under this Contract you can save upto £500 and then buy shares for a fixed price. The period of the contact can be 3 to 5 years, How Is it Tax Advantageous? You won’t have to pay any income tax or NI on the shares when you buy them. The interest and any bonus at the end is tax free. However, you will have to pay Capital Gains Tax when you sell the shares unless you transfer them to ISA within 90 days of the scheme ending or to a pension directly from the scheme. Company Share Option Plan If you are offered this plan you can buy shares worth £30 000. How Is it Tax Advantageous? You won’t have to pay NI or Income Tax when you buy the shares on the difference between what you paid for them and what they were actually worth. You will be paying CGT on the shares when you sell them. Enterprise Management Incentive This applies when you work for a company with a value of 30 million or less. You won’t be paying Income Tax or NI if you buy the shares at the market value, however if you buy shares at a price which is less than the market value you will have to pay Income tax or NI. You will have to pay CGT as well when you sell them. Tax Implications are Summarised below in the table Share Plan Will I pay Income tax or NI Will I pay CGT Share Incentive Plan No as long as the share are in the plan for 5 years No as long as the shares are under the plan Save As You Earn No No. but in certain conditions you will Company Share Option Plan No Yes Enterprise Management Incentive No but with certain conditions you will have to pay Yes For more Information contact our expert team of accountants in Croydon, accountants in London and we advise you on the tax implications of your salary packages, tax implications if you own shares, how to report the shares and if you have to fill in your self assessment tax returns contact herehttps://www.taxaccolega.co.uk/contact-us.