Property Income – How should I declare it to HMRC?
If you own property which you are renting and you are earning a significant amount of income in the form of rent then you should be reporting it to the HMRC in the self assessment tax return. The significant amount of rent would mean that you are earning above £1000. If you are earning anything less than this amount you don’t have to report it to HMRC. If you are earning between £1000 and £ 2500 you need to contact HMRC. If you are earning between £2500 and £9, 999 after the allowable expenses you need to register yourself with HMRC and complete the annual self assessment tax return. If you are earning above £10, 000 before the allowable expenses you should register yourself with HMRC and complete the self assessment tax return. When you register with the HMRC online to file a return you will get a UTR number and also an activation code in your post. You need to keep that safe . In case you have lost your activation code you can apply for another one by signing in to the online service and requesting a new one. The taxes that you pay if you own property are In your self assessment tax return you have to fill in the pages which relate to your property income. You declare any income, claim allowable expenses and then calculate the profit or loss. If you are making a profit you will be paying tax on it. You pay income tax depending on how much your total income is. If you are employed somewhere and you have already used your personal allowance this will affect the income tax that you pay to HMRC. You will calculate the income for your tax year which runs from 6 April to 5 April and deduct the allowable expenses. The allowable expenses are the deductie costs which you incurred wholly and exclusively for the purpose of renting the property. These costs will reduce your profits and therefore the taxes in the profit. HMRC lists these costs as follows: Or you can claim property income allowance of £1000. It is worth claiming this allowance if your expenses are £1000. If you claim your property allowance you cannot claim any of the above expenses. There are different reliefs available to the landlords depending on the type of property they are renting. You might be renting The deadline for submitting paper tax returns for the tax year 2020/ 2021 is 31 Oct 2021 and for online submissions it’s 31 Jan 2022. It will be worth hiring an accountant to fill in the self assessment for you. If you are looking for accountants in Croydon, accountants in Surrey don’t hesitate to call us. Our accountants will be happy to advise you, complete your tax returns and do the submissions for you so you don’t incur any penalties.
I want to set up a trust, will it reduce my Inheritance tax bill?
The answer is Yes it will. This is because when you set up a trust and transfer your assets which could be your property, land, money, or shares will not be part of your estate on which Inheritance tax is applied. To look for inheritance tax rates click here While you are trying to save up your inheritance tax, the rules involved in setting up the trusts and the way that income is taxed could be tricky and you might have to hire an accountant or a lawyer which can be costly. When you put your assets in the trust there could be income taxes and capital gains taxes and that depends on the type of your asset and the trust that you want to set up. You should take professional advice to assess the overall costs. When you put money in the trust , it belongs to the trust and it won’t form part of anyone’s estate. However, the beneficiaries might have to pay the income tax and the capital gains tax. There are several different types of trusts that can be set up. All of the above trusts are taxed differently, however, all of them involve a settlor ( the one who puts the assets in the trust),trustee( the one who manages the trust), beneficiary(the person who benefits from the trust) You set up trusts for your assets depending on your individual requirements, here we will talk about Bare Trusts and Discretionary trusts. For example a bare trust is a simple trust in which you put your assets and they are in the name of the trustee. The beneficiary will have the right to the asset when they are 18 or over. They will be entitled to the capital ( the money) as well as the interest that is being earned on that money. In this type of a trust the trustee must act according to the wishes of the beneficiary when they reach a certain age and therefore the beneficiaries and not the trustees have absolute rights over the funds. If you want to leave your assets to your family or friends and you want to control how it will be used then you can use a discretionary trust. In such a trust the trustee has the power to distribute the capital as well as the interest on the capital to the beneficiaries according to their own wishes. They can decide how they want to distribute the funds to the beneficiaries. If the settler wants they can nominate themselves as a trustee initially, and they can use the funds for their children’s education, health or maybe even fund their houses. The trustee responsibility can be passed on to someone else who can continue to act in the favour of the beneficiary. For example, you want your grandchildren to be benefited from the funds so you pass on the trustee responsibility to their parents. By setting up trusts you make sure that your wealth is distributed and used by your family and friends the way you want it to be in a tax efficient way. The family will be benefited from the funds without losing their entitlement to the state benefits. If you need any further information contact Taxaccolega, accountants in Croydon, Surrey at 020 8127 0728 our expert team of inheritance tax accountants will take care of your asset and estate planning and account for your inheritance tax liabilities.
Things I should know about VAT while selling on Amazon.
Many e-commerce businesses who are selling on Amazon, find it hard to understand VAT rules on their online sales. Sometimes they are even reluctant to spread their business in Europe because they think that they will have to deal with complicated VAT rules. If you are using the Amazon platform to sell your products then it’s best to be confident with all the rules so you can sell to the Amazon clientele worldwide. In this blog, I have tried to simplify the rules for you but still if you are unsure you can contact e-commerce accountants they can explain things to you and also deal with your accounts . We will start by understanding what VAT is? In simple terms, VAT is a tax which is collected by the seller from the end consumer and passed on to the tax authorities. The value of VAT is added to the selling price, the price at which the seller sells its products to its customers. If you have your customers in European countries you might have to register for VAT in that particular country as well, however, some rules have been changed and a new E commerce VAT package introduced in 2021. When you sell your products online you may come across the following scenarios: 1.Uk registered business with the product in the UK selling to a customer in the UK: If your business is registered in the UK and your product is in the UK and selling to the UK customer. The tax rate applied will be 20%. The seller will be responsible for accounting for VAT . However, if you are drop shipping and the product is coming from outside the UK to the customer in the UK and the value of the product is £135 or less then Amazon marketplace will be responsible for collecting the VAT. 2.If your business is not UK based If your business is not UK based and you are selling your products directly to the customer in the UK through Amazon which is a B2C company. Amazon will collect the VAT for you and account for VAT. Where Amazon is responsible for collecting VAT you need to make sure that you declare VAT in your VAT return however this does not need to be shown in box 1 figure. Where Amazon is responsible for collecting VAT the seller won’t have to include the VAT in the price of their products. In Fact, the customers will see the VAT value added to the product at the time of the check out. What is One Stop Shop( OSS)? And what is Import One Stop Shop(IOSS) ? OSS and IOSS are the systems introduced by the new E-commerce VAT package. This system helps facilitate the sellers who have customers in more than one Eu country to file the VAT return in one place. If you are selling within the EU you will register with OSS and if you are selling to the EU you will have to register with IOSS. Amazon is registered for IOSS and therefore if you are selling on Amazon you don’t have to register for IOSS, you can use Amazon IOSS number on the customs form which will indicate that the customer has already paid the VAT and therefore no VAT will be charged at the customs. If you are an FBA seller that means that your products are stored in the different countries that you are selling you will have to report your VAT in the country you are selling. This may be difficult from an administrative point of view. To facilitate this there is an OSS scheme. We at Taxaccolega as e-commerce accountants deal with such VAT on a daily basis. If you have any queries give us a call here or visit us we are accountants based in Croydon, Surrey.
My UK VAT responsibilities if I am selling online on Amazon
If you are selling online you might be selling directly to a customer who is not VAT registered, to a business customer who is VAT registered, and you might also be selling through an online marketplace such as Amazon and Ebay. The UK VAT responsibilities are slightly different in each case. If the rules get tricky and confusing for you please do not hesitate to contact Taxaccolega and our expert team of e-commerce accountants will be there to help you. When are you required to register for VAT? You are required to register for VAT in the UK if the following applies to you: You will have to register for UK VAT if you are an overseas seller and the following applies to you Source: https://www.gov.uk/guidance/vat-overseas-businesses-using-an-online-marketplace-to-sell-goods-in-the-uk You can get yourself registered online by following the link here or you can do this by post by filling up a form here Once you are registered you will get a VAT registration number. You will have to give it to Amazon or any other marketplace that you are planning to sell on. You are now responsible for collecting VAT from your customers, account for them in the VAT return on a quarterly basis and pay it to HMRC. I have outlined the points which you will have to consider when you are a UK established business, have an online presence and you are selling through an online marketplace. We will discuss how they affect the VAT return in detail in our other blog. In addition to the above information you should also know precisely where your goods are at the point of sale. For that matter you might have to classify your sales in 2 categories: If you are thinking of starting a business, registering your business in the UK, registering for VAT when selling online, filing VAT returns contact Taxaccolega, e-commerce accountants in Croydon, E commerce accountants in London, and our expert team of accountants will be there to help you. Call us on 020 8127 0728 or leave us a message here and we will get back to you,
Inheritance Tax planning and Business Property Relief?
If you own a business, or interest in the business or shares in an unlisted company you will be entitled to 100% BPR relief. Getting a 100% BPR relief will mean that this particular qualifying business, interest in the business will not become part of your estate on which you will have to pay Inheritance tax at the time of your death. Inheritance tax is paid on everything you own at the time of your death if the value of your estate is above £325 000 unless you leave all your wealth to your spouse, charity or community amateur sports club. There are certain reliefs available which will reduce the inheritance tax and the business property relief is one of them. It will either reduce the inheritance tax on the qualifying asset by 100% or 50% depending on the circumstances which are discussed below. You will get 100% relief if: You will get 50% relief if : Conditions: Inheritance tax Planning: If you want to manage your assets so as to reduce your inheritance tax you should consider investing your wealth in a business which qualifies for an exemption from Inheritance tax. This might be better than gifting your wealth in your lifetime in 2 ways: However, this also means that you are investing in a high risk investment and your capital might be at a risk. BPR can be claimed by the executor of your will or the administrator of your estate. HMRC will assess the qualifying assets for the BPR relief after the appropriate forms are filled. Estate planning can involve lots of rules which need to be considered, different reliefs are available depending on your personal circumstances.You might want to consider hiring an accountant who can help you with this. We at Taxaccolega, have a team of accountants who can help you with estate planning, setting up trusts, calculate and pay inheritance tax bills. Just call us at 020 8127 0728 or leave us a message here and we will get back to you, you can also email us at info@taxaccolega.co.uk Source: https://www.gov.uk/business-relief-inheritance-tax
Buying a new house before selling my old home what will be the tax implications?
When you are buying a new house when you already own one you have to think what are you going to do with your house you were living in. If you are a UK resident and this was your main house which you were sharing it with your spouse( in that case it will be the main residence for both of you)and you are buying another one you have to think tax wisely. Do you want to keep your old home? Rent it? Or sell it?. The timing of everything is very important here. And there is no definite answer as to what will save your tax costs. It all depends on your personal situation so it is best to talk to an expert accountant who can give you a personalised advice. If you are buying a new house and not selling the old one because you might be thinking of putting it on rent in the future you are likely to consider the following taxes: Capital Gains Tax: You will have to pay capital gains tax when you sell property which is not your main home, it’s used for any commercial purposes and you are letting it. So if you buy a new house before selling the old one you will face CGT in any gains that you will make. Although you won’t get a full private residence relief which you get when selling property which is your main home, you will get a relief for the last 9 months that you lived in that property. The higher or additional tax payers will pay 28% on the gains. If you fall within the basic tax band after deducting your personal allowance of £12 570 and tax free allowance of £12 300 you will be paying 18% on the residential property. Stamp Duty Land Tax: You will have to pay Stamp Duty Land Tax if you are buying a property for more than £125 000. The first time buyers get a relief on SDLT as well but since in this case you are not a first time buyer you won’t get that relief. This tax needs to be paid within 14 days of completion, a solicitor will usually do this for you however, if they don’t do it then you will have to file a return and pay the tax. If you don’t do this within 14 days of completion you might face a penalty. Income Tax If you receive rent from your property and you are making profit you will be paying income tax on it. To calculate the taxable profit you will deduct all the allowable expenses from your rental income, deduct your personal allowance if it’s not being used up against your income from other sources and also don’t forget to deduct property allowance. Property allowance is the allowance which you will get on your income from your property. Currently it is £1000. You will report and pay your rental income in the self assessment tax return which will be filled and submitted online by 31 Jan of the following year. Once you have calculated your capital gains tax, if you have sold your property on or after 6 April 2020 you should report and pay the tax to HMRC within 30 days. If you want to let your property for rent or sell your property and you are concerned about the tax implications you should go for professional advice. We at Taxaccolega can provide you with tax advice on your property matters. Call us at 020 8127 0728 or drop us a message here and our specialised property accountants in Croydon, London will be happy to help you.
Everything you need to know about being taxed through an umbrella company
If you are working through an umbrella company you should make sure that you have the right employment contract. This means that you will be treated as an employee and you will be entitled to the employment rights such as holiday pay, statutory sick pay, maternity pay etc. If you are a contractor , freelancer or an agency worker where an agent finds work for you, you might be advised by someone that you work through an umbrella company. Who will pay you ? Since you are an employee of the umbrella company the umbrella company will be your employer, they will have all the responsibilities of an employer for example the umbrella company will collect the earnings from the client you were working they will then deduct the following taxes : After collecting the taxes they will pay the net salary to the employee. An umbrella company however cannot deduct employer national insurance contributions from the employee’s gross pay. As an employee of an umbrella company you don’t have to worry about the taxes that you have to pay to HMRC, however, you should be aware of the taxes that are being deducted to check if the right amount of taxes are being deducted and the company is not involved in any kind of tax avoidance. If the right amount of the taxes are not paid on your behalf you will have to pay interest and penalties. If you are a contractor and you work through an agent, that is if the agent finds work for you then the agent will collect your earnings from the client for whom you worked, the agent will then deduct their fees, any other administration cost and then give it to the umbrella company. The umbrella company who is your employer will pay you the wages after deducting the taxes as mentioned above. An umbrella company can be your personal limited company or it can be a services company. If it is your personal limited company or even if it is the services company you have to make sure that you understand off-payroll working rules. Off payroll working rules make sure that you pay the right amount of taxes. The changes in IR 35 are to be implemented on all the payments made after 6 April 2021. If you work for a large or medium-sized company in the private sector as a contractor, your client will be responsible for determining your employment status. If they determine that your contact is within the off payroll working rules then the agency and the client will be responsible for deducting the NI and the income tax from your gross pay. If you have set up your own umbrella company and you decide to work through that company you cannot be self employed. In fact you will be an employee and pay the relevant taxes as described above. You cannot take dividends out of your umbrella company. If you are a contractor and you want to make sure that you are working through the structure that is more tax efficient and it does not involve any tax avoidance scheme you can contact accounts in Croydon, London. We have experienced accountants who can give you tax advice and work out the taxes for you as well. Don’t hesitate to contact Taxaccolega by calling at 020 8127 0728 or send us a message here we will be happy to help you.
Home baker business. Expenses you can claim if you are self Employed.
If you are thinking of starting a business the first thing that should come to your mind is profitability even if this is your side business. This means that you should keep in mind what costs will incur to run your business. Many people today are turning their hobbies into businesses and earning profit over it. Thanks to social media where you can advertise your product and reach millions of potential customers. Earning profit means you have to pay taxes. If you are running your business as a sole trader you have to pay taxes through your self assessment tax return. The deadline to submit the self assessment tax return is 31 Oct if you want to submit the paper return and it will be 31 Jan for the online submissions. You will also have to pay any tax that is due to be paid on 31 Jan 2021. Straight away when you are starting your business you should register yourself with HMRC to let them know that you are starting your business and you are ready to pay any taxes if you earn above £ 1000 from your business which is your trading allowance. The deadline to apply to register yourself as a sole trader with HMRC is 5 Oct 2021. There is a whole different procedure if you want to work through a limited company. You contact Taxaccolega here if you want information about setting up a limited company. While you are filling in your self assessment tax return and reporting your earnings you should be fully aware about the expenses that you can claim. This will affect the taxes that you pay. The expenses will lower your profits earned and therefore the taxes that you pay on your profits. When you are self employed your business is not a separate entity and all the money that you have earned is your profit and you pay income tax on the profits that you have earned. Remember that the expenses you claim are the costs that were incurred wholly and exclusively for the purpose of the business and trade. HMRC is fair enough not to charge tax on the costs that you incurred, you are only paying the taxes on the profits that you earned. It is very important that you be fair as well by claiming only the reasonable expenses and keeping all the receipts of the expenses that were incurred for the purpose of your business. The expenses can be direct as well as indirect. The direct costs incurred that you can claim as expenses would be your The indirect costs would include: If you think that all the accounting for your business is a hassle for you and you won’t be able to meet the deadlines just contact accounts near you. At Taxaccolega, we have an expert team of accountants who can help you with making accounts and submitting them online. We will even take care of your VATs. Just call us at 020 8127 0728 or leave us a message here and we will get back to you.
My National Insurance Contributions and why do I pay them?
DO I HAVE TO PAY NATIONAL INSURANCE CONTRIBUTIONS? Yes you will be paying National Insurance Contributions if the following applies to you: However, the thresholds and the rates to pay National Insurance are different in each case abs that depends on your employment status. The thresholds are as follows: Or Or WHY DO I PAY NATIONAL INSURANCE CONTRIBUTIONS? You pay National Insurance Contributions because it’s a requirement by the government. It is illegal not to pay NI contributions if you are earning within certain thresholds. It’s actually for your own benefit and therefore some people also pay class 3 national insurance which is a voluntary contribution so they can stay eligible for certain state benefits which depend on the level of contributions. The national insurance contributions contribute towards the benefits which you can claim from the government. These benefits include the following: WHEN AND HOW DO I HAVE TO PAY NATIONAL INSURANCE The way you pay your NI depends on your employment status.whether you are employed or self employed. If you are employed and you are paid through PAYE then your employer will deduct the NI and the income tax from your salary and you will get the net salary. The employer will deduct the NI from salary, bonuses,any maternity or paternity pay, sick pay if any and any over time. If you are self employed, and you pay your income tax through self assessment tax return you will be paying your NI depending on your income calculated in the self assessment tax return and you will pay this annually. There are 4 types of National Insurance with which you should be familiar with : Class 1 – paid by employees and employers Class 2 – paid by self employed Class 3 Voluntary contribution Class 4 paid by self employed with profits above a certain amount. WHAT IF I STOP WORKING WILL I BE LOSING MY ENTITLEMENT TO BENEFITS? There are certain benefits which are based on the contributions such as job seekers allowance, employment and support allowance and you might lose the entitlement to these if you haven’t paid enough NI contributions. For state benefits such as state pensions if you have gaps in your national insurance contributions you might still be entitled to the state pension but you might lose some of the benefit. If you have stopped working you can still pay voluntary contributions to avoid any gaps in your NI contribution records. If you realise that you have gaps in your NI contribution records you can only pay voluntary contributions for the previous 6 missed years. If you are employed, self-employed or both and you are looking for an accountant to sort out your taxes, do not hesitate to contact Taxaccolega and our expert team of accountants will be happy to help you. We are accountants based in Croydon, Surrey and London. Call us at 020 8127 0728 or send us a message here.
6 Things you should know about Reporting the Capital Gains Tax when selling property.
When you are selling an asset, you should keep in mind that you will have to pay a chunk of tax to the HMRC. IS THE PROPERTY THAT I AM SELLING MY OWN HOME? When you sell your property which is your main home you won’t have to report any gains that you get. This means that you are eligible for Private Residence Relief even if you are a non-resident in the UK. A property will be considered your home for tax purposes if you have one home and you have lived in it as your main home for all the time that you have owned it and you have neither ever rented it out nor have you used the property for commercial purposes. IS THE PROPERTY THAT I AM SELLING A RESIDENTIAL PROPERTY? However, you will be reporting and paying Capital Gains Tax on any residential property that you sell. For example, if you are a landlord and you own a residential property which is not your main home then this property will be subject to Capital Gains Tax. TO WHOM AM I SELLING THE PROPERTY? You won’t have to report and pay any taxes when you sell your property to your husband/wife or to your children. HAVE I SOLD THE PROPERTY ON OR AFTER 6 APRIL 2020? If you have sold the property on or after 6 April 2020 you must pay any capital gains tax due within 30 days of selling it. HMRC will charge you interest and penalty if the CGT is not paid reported and paid on time. In this case you don’t have to wait to report the gain in the self-assessment tax return. Also note that this rule is only for the residential property, if you have sold any other asset on or after 6 April 2020 you can report is straight away using Real Time Capital Gains Tax Services or you can also report the gains in the self-assessment tax return. DO I NEED TO REPORT CAPITAL GAINS TAX EVEN IF THE TOTAL GAINS ARE LESS THAN THE TAX-FREE ALLOWANCE? Yes, if the total gains are less than the tax-free allowance you won’t have to pay capital gains tax, however, you will still need to report them. The tax-free allowance for CGT for the tax year 2021/2022 is 12300. DO I HAVE TO REPORT THE LOSSES? The losses for the year from the sale of the assets can be offset against the gains in the same year and for the losses of the previous 4 years this can reduce your capital gains tax bill. Therefore, it is very important to report the gains as well as the losses to HMRC. If you are selling a property and you what know about the tax implications and all the reliefs available, please do not hesitate to contact Taxaccolega at 020 8127 0728 we are accountants based in Surrey, Croydon, London and our team of expert accountants will be happy to advise you.