If you are self-employed and earn above the 2018/19 small profits threshold of £6,205 per annum then you are required to pay Class 2 National Insurance of £2.95 per week. The exact amount payable is determined when you complete your self assessment tax return and is paid alongside your income tax.
Class 2 NI entitles you to a state pension, maternity allowance, bereavement benefits, widowed parent’s allowance and short-term contributions based employment and support allowance.
Voluntary contributions can be made if your profits are below the threshold to ensure you remain entitled to the above.
What’s changing?
The Government’s original plan was to abolish all Class 2 completely from April 2018 which was then delayed until April 2019.
However, an announcement has been made this month (September 2018) by the Exchequer secretary to the Treasury that the Government will not proceed with the changes.
This is due to the fact that voluntary contributions to maintain access to state pension would need to rise substantially therefore negatively impacting on self-employed individuals with low profits.
There are currently no plans to reintroduce the abolition at this time.
If you have any questions about your self employment and national insurance contributions please fill out the form below or call us on 01254 583515.
At Egan Roberts we provide year round tax advice on income tax, capital gains tax, inheritance tax trust and estates and non-domiciliary tax issues.
If you are interested in growing your business or making an investment, the below investment schemes may be available to you.
Enterprise Investment Scheme (EIS)
The company’s perspective
An EIS raises money for your company to help grow your business.
It offers tax reliefs to individuals who buy new shares in your company.
You can receive up to £5 million per year up to a company lifetime maximum of £12 million. However this does include any amounts received from other venture capital schemes.
Can my company apply?
If your company is less than 10 years old, has less than 250 full time employees and less than £15 million of assets, you may be eligible.
All conditions of application for EIS are set out here.
The investor’s perspective
An investor can receive the following incentives:
Income tax relief being 30% of the investment up to a maximum investment of £1 million.
Capital gains tax exemptions
Inheritance tax exemptions
Reinvestment relief
Loss relief
Note: If your income tax liability is lower than the 30% relief, you must relinquish the excess relief.
Seed Enterprise Investment Scheme (SEIS)
Similar to the EIS, if your company is less than 2 years old, has less than 25 full time employees and less than £200,000 of assets, you may be able to receive up to £150,000.
All conditions of application for SEIS are set out here.
The investor can receive income tax relief of 50% of their investment up to a maximum investment of £100,000.
Reinvestment relief, loss relief and capital gains tax relief are also available with a SEIS.
An overview of venture capital schemes for investors is available here.
If you would like to get in touch, please use the contact form below, visit our website www.egan.co.uk or call us on 01254 583515.
At Egan Roberts Accountants based in Ribchester, Lancashire we can advise you as to whether your ‘excuses’ and expense claims are reasonable or whether they just won’t cut it with HMRC.
We’ve shared with you below some of the recent claims submitted to HM Revenue and Customs (HMRC).
Late Tax Return Excuses
1. I spilt coffee on it.
2. My ex-wife left my tax return upstairs, but I suffer from vertigo and can’t go upstairs to retrieve it.
3. My wife has been seeing aliens and won’t let me enter the house to file my return.
Less recent excuses also include:
1. My husband ran over my laptop.
2. My dog ate my tax return.
3. My tax papers were left in the shed and the rat ate them.
All of the above will not be seen as ‘reasonable’ and are likely to suffer a £100 penalty which can be significantly increased the later your return is filed.
Expense Claims
Interesting expense claims have included:
1. A three piece suite for my partner to sit on when I’m doing my accounts.
2. Hotel room service for candles and prosecco.
3. £4.50 for sausage and chips meal for 250 days.
Unsurprisingly, all of these claims were rejected by HMRC.
Need more information?
Follow the links below for some guidance on reasonable excuses and expense claims.
Alternatively, if you would like to get in touch with us, please use the contact form below, visit our website www.egan.co.uk or call us on 01254 583515.
Enquiry About My Tax
If you think there might be anything amiss with your Tax, or you’re setting up a new business and don’t want to get in any uncomfortable positions with HMRC, contact us for a free meeting to discuss your situation and how we may be able to help now and in the future.
In summary, if you are selling all or part of your sole trade or partnership, you must have owned the business for at least 12 months prior to the sale. If you are selling shares (of which you hold at least 5% of total shares), the company must be trading and you must be an employee or officer of the company.
ER reduces the CGT rate to 10% regardless of whether you are a higher rate tax payer.
Gifts to Spouses / Charity
Any assets you gift or sell to your spouse or civil partner are not subject to CGT unless you separated and did not live together for the whole tax year or you have them goods for them to sell on as part of their business.
CGT is not charged on assets given to charity. You may pay some CGT if you sell an asset to charity for more than you paid for it but for less than market value.
If you make a gift during your lifetime to a person, this is known as a PET (potentially exempt transfer), meaning no IHT is payable on the gift.
However, if the donor dies less than 7 years after making the gift, IHT then becomes chargeable at 40%.
Death Estate
If you leave the asset as part of your death estate rather than selling it or gifting it, IHT may be payable at 40%.
Items left to your spouse/civil partner/charity are exempt from IHT.
The value of your remaining estate chargeable to IHT could be reduced with the use of business property relief.
Everybody has a nil rate band of £325,000 which also reduces the amount chargeable to IHT.
This £325,000 is reduced by the gross chargeable transfers of any gifts made within the 7 years before death.
If your spouse did not use all or some of their nil rate band on their death estate, the amount unused can be transferred to you in addition to your £325,000.
The remaining value is then subject to IHT at 40%.
If you would like to get in touch with us, please use the contact formbelow, visit our website www.egan.co.uk or call us on 01254 583515.
The Post Office service or personal credit cards will no longer be accepted when paying HMRC from the 15th December 2017 and 13th January 2018 respectively.
Not to worry! There are still various other ways of making payment which HMRC say will save you time and expense. These include:
Direct debit
Online or telephone banking (including Faster Payments, Bacs and CHAPS)
Debit/Corporate Credit card online or by telephone
Specifically for Self-Assessment you can also set up a budget payment plan to give you control over the payments you make.
Making weekly/monthly payments will be more manageable for most people and saves you from being hit with a hefty tax figure on the deadline.
Taxpayers who are unable to pay their tax bill on time may be entitled to pay by instalments or be granted additional time to pay.
You will need to contact HMRC with details of your income, assets etc. and HMRC will decide whether you are entitled based on your circumstances. Interest will be charged on the amount you pay late and HMRC will expect you to pay your tax bill straight away if you don’t meet their criteria.
With this free cutting edge App you can now manage your finances and income on the go, all from the device you always carry with you and use every day – your mobile phone.
Such as the ability to store virtual receipts and log your mileage in real-time, all whilst having access to quality approved information regarding rates, taxes and maximising profits.
The App is not here to replace your accountant, but this App gives you their financial management service in the palm of your hand, at any time, day or night.
Packed full of powerful features, ready to be used as soon as you download such as:
Income Manager – Log your income, ready to export and send directly to us
Receipt Manager – Take photos of your receipts on the go, quick and easy
Mileage / Logbook Tracker – Make sure your mileage claims are always accurate with background GPS tracking
Calculators – a suite of useful calculators to provide you financial and tax information in an instant
Tax & Finance – Get access to tax tables, important financial dates and business news, updated regularly
Say goodbye to paper receipts, our App allows you to photograph your originals, quickly categorise them and export them in a spreadsheet format, ready to send to your accountant whenever suits you. Never again will you have to worry about losing a receipt or taking up valuable office space with piles of paper.
No more lost income records!
You can now use the App to quickly and simply capture invoices and payments. With the click of a few buttons you can log, categorise, add notes, add an image and then save. Captured income can then be exported and emailed to your accountant ready to incorporate into your accounts.
Is capturing your business mileage a chore?
The App can take this pain away too. Mileage / Logbook Tracker will record your mileage at the press of a button. Simply ‘tap’ on the start button and the App starts tracking your journey, even when it is minimised. Once you have finished your journey hit stop, give it a name and you’re done. If you forget to track the journey at the time, don’t worry – you can manually add the journey later so all your journey details are in one place. You also have the ability to export mileage at any time with the click of a button. This will make capturing your business mileage a doddle.
We have also packed the App with super useful calculators to help you make informed decisions such as APR, loan payments, mortgage payments, savings and currency conversions.
We make sure that you also have access to essential tax and financial information. From key tax dates and tax tables to the latest financial news and budget information, you can access it all from within the App, with the reassurance that it is always up to date.
Whether you’re employed, self-employed or running a private company
This App will help you to manage your money effectively and save you time and administrative costs. Simply download to your mobile or tablet and take the first step to easier accounts.
Q. My client has recently inquired about the possibility of claiming relief for the expenses of cleaning of clothing that she wears in her role in nightclub security, having heard that there are flat rate expenses that employees are able to claim.
A. Your client is correct in that HMRC have issued guidance, which sets out a flat rate deduction for some industries and occupations for the cost of replacing, repairing and cleaning protective clothing or uniforms. This guidance can be found here and it was updated in July 2018.
What You Can Claim.
For example, the armed forces can claim £100 per year whilst a firefighter can claim £80. Whilst for other employees £60 per year that can be claimed by employees in general where they can meet the statutory test outlined below.
In practice, the cost of clothing is seldom allowable as a deduction from earnings as it rarely meets the strict statutory test at s336 ITEPA 2003. The test requires that the employee is obliged to incur and pay it as a holder of employment and the amount is incurred wholly, exclusively and necessarily (‘WEN’) in the performance of the duties of the employment.
It is common for employees to meet part of the above requirement but fail to meet the whole requirement.
This is illustrated in a decision released on 4 June 2018 by the First Tier Tribunal [2018] UKFTT 0291 (TC) in respect of the Higginbottom & Ors. Three individuals who worked in sewers had made a claim for the cleaning costs of their clothes. Their appeal against the original judgement was dismissed by the FTT.
The Treasury has not fixed any amount for relief in relation to drainage and sewerage workers or ground maintenance workers – they are not on the guidance referred to above.
In respect of toiletries, the FTT was not satisfied that such expenses were incurred ‘WEN’ in the performance of the duties of the employment. They were incurred partly for purposes of everyday personal hygiene. The FTT did indicate that a claim for £60 would have been acceptable but the claim for £2,200 was not.
As we can see, the test is particularly tight and in many cases the claim will be denied on the grounds that the clothing provides warmth and decency as well and therefore fails the wholly exclusively and necessarily test.
Therefore be careful when claiming for uniform as you may be claiming when you are not allowed to do so.
Every business owner needs a team of professionals in the background who provide continuous support and advice. That’s what we do. Through years of commitment to our business clients we have developed a wide range of skills and services designed to improve business performance and profitability. We are committed to providing a first class service tailored to the individual needs of each client. We keep a close eye on all the essentials and offer proactive advice on how to improve personal, family, or business finances.
HMRC launches an app to assist with personal taxation
The newly issued HMRC app enables individuals to find information about their tax, National Insurance, tax credits and benefits on the move. Suitable for both Apple and Android devices, users will need their Government Gateway credentials to access the information.
For accountants like us who act as tax agents for individuals and for whom we will never have full access to the client’s personal tax account this provides easy way to enable clients to show us, ‘on the move’, otherwise unavailable information without having to access it via a computer/internet.
The first time you sign in, you’ll need to enter your Government Gateway ID and password. If you haven’t got these, go to the Government Gateway website and register as an individual.
Whenever you use the app again, depending on what your handset supports, you can sign in using:
a 6-digit PIN
fingerprint authentication
facial recognition
Setting up a personal tax account
You can use the app to set up a personal tax account by giving us your name, National Insurance number and date of birth.
If we need to verify your identity, we’ll ask for details such as your passport number and information about your salary.
Sign in to your Help to Save account
The Help to Save service went into a trial phase known as ‘private beta’ in January 2018. It is being rolled out gradually so that it can be tested and developed.
If you’ve already opened a Help to Save account as part of the trial, you can use the app to:
check your Help to Save account balance and bonus
keep track of how much money you’ve paid in each month
see how much money you can still pay in before the end of each calendar month
We all know that tying the knot can affect your day-to-day money management, but exactly what effect does marriage or a civil partnership have on your financial status? Here we’re looking at marriage allowance.
There was a time that making the leap from single life to married bliss came with a great range of tax incentives. Married couples used to be viewed by the Government as one single taxable entity and so you would be taxed less after getting married.
The picture is different today: even when joined to another in matrimony, we are now mostly taxed individually, meaning the tax benefits are few and far between.
How will your tax status be affected?
You should inform HM Revenue & Customs of your new marital status to make sure you are taxed correctly. You can do this by following the GOV.UK link here.
Marriage Allowance
Marriage allowance allows you to transfer £1,190 of your personal allowance to your husband, wife or civil partner if they earn more than you do saving tax of up to £238 in the year.
It is estimated that one in four couples who are eligible for marriage allowance fail to claim it.
The lower earner must have income of £11,850 or less to be able to make the claim.
Claims can be backdated for any tax year since 5th April 2015 providing you were eligible in those tax years.
Your application can be completed online and once an application is complete it is processed immediately. The new form is expected to take you only ten minutes to complete.
Self Assessment Tax Return Deadline 31st January 2019
With just over 6 months until the 2018 self assessment tax return deadline (31st January 2019), you may not have even begun to think about it. With the summer we’ve been having that’s hardly surprising! However, you should always be aware of the penalties you could face should your tax return be late.
Help Me With My Self Assessment
If you need a hand with your self assessment tax return contact us for a free meeting to discuss your situation and how we may be able to help now and in the future.
Late filing
If your tax return is up to 3 months late you may face a penalty of £100.
Between 3 and 6 months late will result in a daily penalty of £10 per day for up to 90 days.
Filing between 6 and 12 months late is a penalty being the greater of 5% of your tax due or £300.
A return filed more than 12 months late is again 5% or £300 unless you are found to have deliberately withheld information.
If you have deliberately withheld information, the penalty is based on whether the withheld information was concealed or not concealed. If concealed, a penalty of 100% of tax due or £300 if greater will be payable. However, if not concealed, the penalty is 70% of tax due or £300. Reductions can be applied for prompted and unprompted disclosures.
Late payment
Interest is charged on a daily basis on both tax due and tax penalties payable.
A payment made 30 days late will incur a penalty of 5% of your tax due.
Up to 6 months late results in a penalty of 5% of tax outstanding at that date.
If your payment is 12 months late, the penalty is 5% of tax outstanding at that date.
Appeal
You can appeal against a penalty if you have a reasonable excuse.
Examples of reasonable excuses include:
An unexpected stay in hospital that prevent you from completing your tax return
A serious or life threatening illness
A fire, flood or theft
Find more examples from HMRC here along with excuses which will not count as reasonable.
