Online Selling – What is my Corporate Social Responsibility?
When we are setting up our business, we often go through our checklist of legal responsibilities such as registering our company with the company’s house, registering with HMRC for taxes such as corporate taxes etc . One thing we often miss out is that how our business activity is going to affect our environment. Not only should we avoid impacting our environment negatively but also we should have a strategy to actively protect our environment. If you are self employed running your own business you are not legally required to produce a sustainability report. However, as individuals we have responsibility towards our surroundings and we should act socially responsible on all levels. Today, due to the pandemic crisis and the surge in the online shopping a lot of business start-ups have emerged which are operating online. We often ted to miss the point that online selling and buying is increasing the carbon emissions being released in our environments. Research shows that around 65- 75 % of the consumers check the sustainability strategy of the company before buying the product as with the increased awareness more and more people are likely to care about the environment that they live in. Having sustainable preferences might increase the cost of the product but in the long term this is likely to attract more customers who are looking for ways to protect the planet. So, If you are selling online you might want to consider the following points to be part of the eco friendly environment. It is important to be genuinely implementing sustainable policies to help the environment. If you are just advertising it to attract customers and not the policies practically this is known as green washing, and you will be accountable for false claims and misleading information. If you are thinking of selling online as a business or as self-employed and you are looking for advice from an accountant you can call Taxaccolega at 020 8127 0728, we are shopify accountants and we will help with all the accounting and legal matters.
Social Influencer- How are paid posts, endorsements and other freebies taxed in the UK?
With the increase in the use of social media there is an increase in the form of marketing known as ‘ influencer marketing’ It is a growing industry and according to business insiders it is on track to be worth up to 15 billion dollars by 2022. If you are a social influencer creating content on youtube or instagram and influencing thousands and sometimes millions of people it is likely that you are contacted by some brands who want to use your popularity to sell their products. Influencer marketing will be in the form of the following: Before you decide you need to pay tax on the paid posts, endorsements and freebies you need to consider some factors which are explained below but as a rule of thumb always make sure that if you are getting any type of income whether its trading or non trading always keep a record of all the income and expenses associated with it incase HMRC raises an enquiry. The factors are as follows: Tax on Paid Posts: If you are being paid for the posts and your income in one year exceeds the trading allowance then you will have to register for self assessment and pay the taxes according to your income bracket. Tax if you get a product to review: If you are given products which you review online with your followers, HMRC guides that such a transaction will come under ‘ Barter Transaction’. It states that any non monetary form of trading income is taxable in the same way and as part of the normal income. However, HMRC realises and states in its Business Income Manual that not everything can be converted into cash. So if you are receiving any product which you advertise online for example a free holiday stay you won’t have to pay tax on it. However,if you receive a valuable gift you will have to pay tax on it. It is important that the terms and the value of the gift are clearly agreed with the company sending the gift. Tax on free gifts: If you receive a free gift and there is an obligation attached to it for example advertising about it etc,once you have accepted it, then it becomes taxable. If it is just a gift of a gracious manner then it is non taxable. To make sure you are on the same page with HMRC you might consider hiring an accountant who can make things clearer for you. If you are looking for a social media accountants in Croydon, Surrey or South hall contact Taxaccolega at 020 8127 0728 and our team will give you expert advice tailored to your business.
The Company is offering me car benefits – will I be able to pause if the circumstances change such as covid-19?
The combination of salary and benefits in kind (BIK) often referred to as “perks” is what makes an attractive salary package these days. As mentioned in one of our previous blogs, some of these benefits in kinds are taxable and some are non-taxable. Car benefit is one of the benefits in kind on which you pay taxes if you are using it for our personal use or for private commuting. The amount of tax you pay will depend on the value of the car (which your employer will mention in the P11D). The value of the car is reduced if you pay something towards its cost, if it has low carbon dioxide emissions and if you have it part time. It will also depend on the tax bracket you fall in, You will be paying higher tax rates if you are in higher tax rate brackets. Do we continue to pay tax on company car benefit even if we are not able to avail the benefit due to situations like pandemic Covid-19? Well the answer is no, you don’t have to. To stop the company car benefit you should prove to HMRC that the company car wasn’t available for your personal use for at least 30 days, You will be able to save some tax in this way. To prove it to HMRC the best way is to hand over the company car keys to the employer for this time period. Or to return the car to the employer for this period. If the company is providing you with the company car as well as the fuel then your fuel benefit will also stop with the car benefit and you will be saving tax on the fuel as well. The benefits in kind are reported on P11D forms. This form needs to be submitted by 6 July following the end of the relevant tax year. For more tax deadlines see here. If there are any changes in the benefits in kind they should be reflected in the P11D forms What are my responsibilities as an Employee if there are any changes in the Benefits in Kind? Your employer should give you a copy of the P11D form and you should check the amounts of taxes you paid on the benefits. If there are certain figures you don’t agree with you should discuss them with your employer. If your benefit in kind is being payrolled by the employer, you need to check the tax code and the payslip to ensure the correct amount of taxes are being paid. HMRC suggests employee that If there are any alterations in your salary sacrifice arrangements they should be reflected in the contract. And they should be clear on their cash and non cash entitlement P11D can be a bit confusing as there are too many details to fill in. If you need any help with the P11D form contact our team of accountants at Taxaccolega at 020 8127 0728. If you are an employer and you need a payroll accountant we will provide you the payroll services at very affordable rates. Accountants based in Croydon, Surrey and Southall our expert team can help do calculations for you and meet the deadlines.
Stamp Duty Land Tax (SDLT) surcharge and the non-resident UK property buyers
If you are a non resident interested in buying a residential property in the UK you should be aware that from 1 April 2021 different rates of SDLT will apply to you. As a non resident buying residential property in the UK (either freehold or leasehold)you will have to pay 2 percentage points higher than those paid by the UK residents . The surcharge will apply to you if you are a non resident and If you satisfy the residence rule after the transaction According to HMRC website “The individual buyers can claim a refund of 2% surcharge if after the purchase they are present in the UK for at least 183 days during any continuous 365 day period that falls within the 2 year period. If the transaction involved more than one individual, the refund can only be claimed if all the individuals in a transaction satisfy the residence rule. AM I A UK RESIDENT for SDLT purposes? For tax purposes HMRC will not consider you a resident depending on your nationality or your visa status. HMRC has set some rules to establish whether or not you are considered a non resident for SDLT purposes in a particular transaction. There are different rules for different situations, for example you might be buying property as an We have touched few situations below: If you are buying as an Individual If you are buying the property as an individual, you will be considered non- UK resident in relation to the transaction if you are not present in the UK for at least 183 days during the 12 month period before the purchase. An individual is considered to be present in the UK on a particular day if they are present in the UK at the end of the day. To prove that you were in the UK on a particular period you should keep a record of your phone bills and other utility bills such as energy bills. credit card statements, any proof of the use of a sports club etc. If you are buying with your married or a Civil Partner If you are buying your property with your partner both of you will be treated as UK residents if any one of you satisfy the UK residence rule at the time of the transaction. If you are a corporate buyer If the corporate buyers are not UK resident for Corporation tax purposes at the time of the transaction they will be considered non UK resident and will have to pay the surcharge. If you are buying a property and you need any help in paying the surcharge or amending the return contact Taxaccolega, property accountants in Croydon, Surrey and Southall. Just call us at 020 8127 0728 and our expert team will be happy to help you.
How will SEISS grant be taxed?
The government has supported the self employed throughout the pandemic with a generous grant under ‘Self employed -income Support Scheme’. The businesses which were affected during the lockdown were given this grant, the third grant given was 80% of the lost income up to a maximum of £7500, paid in a single instalment. It is expected that a fourth self-employment grant will be given following the third lockdown covering the three month period where most of the shops remained shut and the businesses were adversely affected. While the self employed are eager to welcome the fourth grant to cover their lost income they should bear in mind that the grant will be taxed. You should keep some money aside to pay for your taxes which will not be due before Jan 2021. IS SEISS GRANT TREATED AS INCOME SEISS grant is taxable income and therefore it will subject to income tax and National Insurance. You will have to include this income in full in your tax return for the tax year 2020-2021 regardless of your accounting period. This might over estimate the profits and create losses in the future period. You might want to consider changing your accounting period. It is a simple process and if you need any help our accountants in Croydon at Taxaccolega can help you with that. YOUR TAX LIABILITY Income tax and NI Your Tax liability is explained in the following example considering that you are a basic tax rate payer : HMRC calculates your average income based on what you have submitted in your previous tax returns. For example your average annual income as calculated by HMRC is £48 000 Average monthly income will be (48000/12)=£4000 Income for 3 months will be (£4000*3)=£12 000 Grant will be- 80%*12 000=£ 9600 and this will be capped £7500 Since the above income falls in the basic tax rate payer you will be paying tax at the rate of 20 % and Class 2 NI will be paid at 9%. WILL VAT BE APPLIED ON THE GRANT SEISS grant is not subject to VAT. Even if the grant income when added to the taxable incomes moves the income up to the threshold after which the business needs to be registered for the VAT and fill in and submit VAT returns. In short the SEISS grants are not VAT-able income If you have the received the grant you should be ready to pay taxes on it in Jan 2022. Its best to set the money aside now to avoid any cash flow problems. You will be paying payments on account in Jan 2022 which are the advance payments towards your tax bill. You get a penalty charge if you do not pay on time. HOW CAN WE HELP? If you are self employed and want to apply for the grant, we at Taxaccolega cannot apply on your behalf. Although we can help you apply and advise you on all the accounting issues related to the grant. If you do not qualify for the grant we help you find more options as provided by HMRC. Feel free to contact us at 020 8127 0728 and we will be happy to help you.
Reverse Charge explained for Building and Construction industry
If you are a UK VAT registered company suppling building and construction services you should be aware that you must apply VAT reverse charge to your supplies from 1 March 2021. WHAT WOULD IT MEAN? This means that if you are a sub-contractor the customer will no longer be paying you VAT. As a result you will notice that the gross value of the payments coming in your business as sales will be reduced. This means that if you are supplying construction services to a VAT registered customer you will no longer be accounting for VAT in other words, the supply which is covered by a reverse charge no VAT will be due on the sales . TO WHOM THE CHANGES APPLY? To see if the changes apply to you. You should ask yourself the following questions If the answer to the above is yes then the changes will apply to you and you will be charging a reverse VAT charge. In addition you shouldn’t be an employment business and you should not have a written confirmation from your customer that they are the end user. WHAT STEPS DO I NEED TO TAKE? To establish if the reverse charge applies to you ask your customer for their VAT number, CIS and the end user status. Make sure that you are not a employment business because if you are supplying construction workers your business will be treated differently for VAT purposes and reverse VAT will not be charged. If the conditions are met and you come to a conclusion that the domestic VAT reverse charge will apply to your supplies you should consider changing your invoices because now you will not be charging your customers VAT. As you, the supplier will be claiming net repayments from HMRC, HMRC recommends that you to move to monthly returns as this will help with the cash flows. VAT RETURN In your VAT return, include the value of the sales when you receive the payment from the customer which will no include the VAT. VAT on Sales When the sales are made, under the domestic reverse charge rules, the supplier must not enter any output tax on sales. Only net value of the sales will be added to the box. VAT on purchases Under the VAT reverse charge rules , you must enter the VAT charges as an output tax on your VAT return. Input tax can be reclaimed on the reverse charge purchases. Its always best to seek a professional advice on this matter. We at Taxaccolega have an expert team of accountants dealing with customers under CIS scheme. We have specialist VAT accountants just call us at 020 8127 0728 and we will be happy to help you. Source: https://www.gov.uk/guidance/how-to-use-the-vat-reverse-charge-if-you-supply-building-and-construction-services
Corporation tax increase by 6% – Will it affect your property business?
In the budget it was announced that there will be an increase in the corporation tax by 6 % from 2023. According to the HMRC website this will affect the 30% of the trading companies which are doing well and making a profit of more than £50 000. ‘70% of the actively trading companies will continue to pay tax at 19% making a profit of less than £50 000.’ If you are running a property business for example renting property through a limited company things that you need to consider the following: STAMP DUTY TAX RELIEF The stamp duty tax holiday has been extended so the buy to let landlords might be looking into buy more property to widen their portfolios. There has been an increase in the buy to let landlords in 2019, but after the budget they might be looking if its still worth it to run through a limited company or as a sole trader. CAPITAL GAINS TAX There was a prediction that there will be a capital gains tax increase in the budget announced. However, it is a relief that there is no increase in the capital gains tax relief which along with the extension of the stamp duty relief will encourage the property owners to buy and continue to stay in the business. DIVIDENDS If you are a company director you will be paying yourself dividend and you will be paying income tax on it. The dividend allowance for 2021/ 2022 is £ 2000. IF you are a basic tax rate payer you will be paying your dividends at the rate of 7.5%, 32.5% at the higher rate. PROFITS You are considered to be in a property business if you are renting more than one property. If you are renting property and the total taxable rental income after deducting all the expenses are £50 000 or you are expecting to make the rental income up to £ 50000 in 2023 you should be aware that you will have to pay corporation tax at the rate of 25%. A taper relief will be introduced so you wont have to pay a tax at the main rate of 25 % till your profits reach £ 250 000. PERSONAL ALLOWANCE In the budget, Sunak announced that the personal allowance will increase to £12 570 for the basic rate payer and for the additional tax rate payer it will increase to £50 270 from April 2021. The increase in the personal allowance will reduce the income tax and dividend that is payable to the HMRC. FINANCE COST If you are running a property business through a company you will be able to deduct the finance cost as an expense which you will no longer be allowed if you are self- employed. This way if you run the property business through a limited company you can reduce the taxable income and therefore reduce costs to the company. If you are looking to invest in property and need advice on how to structure your business, please do not hesitate to contact us for an expert advice. We are property accountants and we can provide accounting services at affordable rates.
Increase in the Personal Allowance- How does it affect you?
In the budget last week, the chancellor, Rishi Sunak announced that there will be an increase in the personal allowance from the tax year starting April 2021 and will remain the same till 2026. This means that the allowance after rising in April 2021 will remain frozen for the next 6 years. Personal allowance is the allowance up to which you do not have to pay any income tax. For the tax year 2020-2021 the personal allowance was £12, 500.Every individual would pay income tax if they earned more than £12, 500. For individuals earning more between £12501- £ 50 000, tax was paid at 20% this was the basic tax rate bracket. The changes are summarised in the table below: Tax year: 2020-2021 Tax year: 2021-2022 till 2025-2026 Increase or decrease in the allowance Personal allowance £12,500 £12,570 £70 increase Basic Tax Rate Threshold-20% £12,501-£50,000 £12,571-£50,270 £70 increase Higher tax Rate Threshold-40% £50,271-£150,000 £50,001- £150,000 £270 increase Additional Tax Rate Threshold-45% £150,000 and above £150,000 and above No change The changes mean that the individuals can earn an extra of £70 than they were earning now without having to pay tax. The Basic Tax rate payer will pay income tax at 20% on £37,699 after the personal allowance of £12, 570. The Basic Tax rate payer can earn an extra of £14 per year while the higher rate tax payer will be able to earn an extra of £68 a year as calculated by Low Income Tax Reform Group. The personal allowance is expected to remain at the same threshold till year 2026. This means that although the wages will increase with time either due to inflation or otherwise the threshold will remain the same, it will not increase even in the line of inflation. This will result in individuals paying more tax over the years as the basic tax rate payer will be pushed in the higher rate tax bracket. Look at this example below: Mr A earned £70, 000 in the year 2020-2021. How much income tax will he be paying? Total income £70,000 Personal Allowance (12,500) Taxable income £57,500 tax at 20% 10,000 tax at 40% 7,500 total tax paid £17,500 Mr A has an increased income in the tax year 2024-2025 of £ 80, 000 Income £80,000 PA (12,570) taxable income £67,430 tax at 20% (50, 270*20%) £10 054 tax at 40%(17,160*40%) £6,864 total tax payable £16,918 Mr A will be better off as a result of the increase in the personal allowance and the thresholds even though his income is increased. Look at another example of Mr B who earns £60, 000 and is a basic tax rate payer. When calculated he will be paying £9500 of tax in the year 2020-2021. However, if Mr B`s income increases to £70, 000 over 2 years and the thresholds remain the same he will be pushed in the higher rate tax bracket, the total tax that he will pay will be (10, 054+2864)= £12, 918. Although he is pushed in the higher rate tax bracket and paying less tax due to increase in the thresholds, he could have saved some tax had the threshold increased in line with the threshold by staying in the same tax bracket. Keep a check on your tax codes to make sure which tax bracket you are in and at what rates you will be paying taxes. To know more about the personal allowances and how to save money on taxes by making use of the allowances you can talk to our expert tax team in Croydon. Call Taxaccolega at 020 8127 0728 and we will be happy to help you.
Airbnb income- what tax exemptions can I get?
Airbnb income is taxed in the same way as the any other income is taxed, however, there are some exemptions available. This depends on if you are renting the room in the property that is your main home or it is buy to let property. Rent a Room Relief You will get rent a room relief if you qualify for the rent a room scheme. To qualify for rent a room scheme you should meet the following requirements: You will qualify for the relief even if you are running it as a bed and breakfast guest house as long as it is in your main home and furnished. WHAT RELIEF DO YOU GET? If you qualify for rent a room relief you will get an exemption on first £7500 of your income. This relief is applied on the rental income that you will get before deducting any expenses. The rental income is the figure that you get by adding all the receipts from your Airbnb customers. (The figure that you get after deducting all the expenses is your rental profit) If the total of all the rental income is less than £7500 per year you will get an automatic exemption and you wont even have to declare it in your annual tax return. If you are sharing this income with your spouse the allowance is halves and each of you will get £3, 750. If the total rental income from Airbnb hosting income is more than £7500 you will have to declare it to HMRC in the annual tax return. If your income relates to tax year 2020-2021 you will have to pay tax on or before 31 Jan the following year. HOW DOES IT WORK? If your income is more than £7500,you have 2 options available to you Option 1: you can deduct all the expenses that are directly related in renting the property and you pay tax on the rental profit that you get depending on which tax band your income falls into. Please note that in the budget the personal allowance and the tax bands are set to increase from the tax year starting April 2021. For tax bands see here. Option 2:If your Airbnb income is more than £7500 and you want to claim rent a room relief on it you can deduct £ 7500 from the recipients that you get, however in that case you cannot deduct any expenses (such as heat, light, electricity). You can use either depending on how much expenses you can deduct. If your expenses are less than £7500 you will be better off if you claim rent a room relief. The relief is not available to the buy to let property, the income tax will be calculated in the normal way as any other self employed business. If you are looking for a property accountant in Croydon, Surrey who can help you with taxes contact Taxaccolega at 020 8127 0728 if you are renting property, or selling and buying property in London we can help you with that.
How much salary should I give myself in the tax year 2020-2021?
In the budget announced in March 2021, the threshold for personal allowance has been increased. There is an increase from £12, 500 to £12, 570 in the tax free personal allowance. The basic tax rate bracket has been increased to £37 700. This means that an individual will not pay any tax on its earning till £12, 570 and they will pay 20% on their income up to £37 700. HOW WILL IT AFFECT YOU IF YOU HAVE INCORPORATED YOUR BUSINESS AND YOU ARE THE DIRECTOR OF THE COMPANY? If you have your business incorporated this means that your business is a separate legal entity and all the profits and losses of the company do not belong to you. They belong to the company itself . In this case there are 2 ways in which you can an individual can earn money from the company. You can be an employee as well as the director of your company. IF YOU ARE WORKING AS AN EMPLOYEE OF THE COMPANY If you are working as an employee of the company, the company will give you salary. As an individual you will be paying income tax and NI on this salary depending on the amount of salary that you are receiving from the company. In the company accounts, this salary is treated as an expense to the company. It is deducted from the income of the company thereby reducing taxable profit which in turn reduces the corporation tax that the company pays. IF YOU ARE THE DIRECTOR OF THE COMPANY If you are working as a director of a company you will be entitled to dividends. The dividends is the money given to the director of a company after it has paid its corporation tax and other tax liabilities such as VAT. The most tax efficient way to extract money from your company is to pay yourself a combination of salary and dividends. From the tax year starting April 2023,there is an expected increase in the corporation tax as well we will have to incorporate that change in analysing the salary and dividends being paid to the individuals. Right now the question is does the increase in the threshold mean that you will be better off giving yourself more salary? A low salary means that you do not have to pay income tax or NI on it. Since there is an increase in the income tax thresholds it is worth noting what the NI thresholds are . In the year 2020-2021 the NI primary threshold is £9 568 and the secondary threshold is £8 840. This means that when the salary of an individual reaches £9 568 the employees will start paying NI. If the salary of an individual is £8 840 the employer will start paying NI. To avoid paying NI all together it is suggested that the salary of an individual is set at £8 840 per year which comes out to be £736.66 each month for the tax year 2020- 2021. This amount of salary is covered by the personal allowance and is within the NI threshold. You might need a PAYE accountant who can look after the payments to made to your employees. We at Taxaccolega , are affordable accountants in Croydon. If you run a company and you need advice in any matter we will be there to help you. Call us at 020 8127 0728 and we will be happy to help you.