Category: Self Assessment

Remember Remember…the 31st January

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The 31st January is the self assessment tax return deadline for both sole traders and partnerships. If you are the owner of a new sole trade or partnership you may not have submitted one of these tax returns yet, but don’t worry, we have all the information you need.

Why Sole Traders and Partnerships?

Sole traders and partnerships do not submit corporation tax returns every year like Limited companies would. The tax on your profits will not be directly charged to the business, the tax also will not appear on your financial statements, however it will be charged directly to you on your self assessment tax return.

So how will I be taxed on my profits?

Every year you will need to fill out a self assessment tax return in your name, this will have to include your business income and expenses and any other income you may have received personally. Basic rate for tax on profits is 20%, however if your profits reach above a certain threshold you may have to pay class 2 and class 4 national insurance. If you own a partnership then your profits will be split between the partners in accordance with your partnership agreement.

Other Useful Information

There are lots of things you may need to know when filling out a self assessment tax return but some things are a lot more common than others. Below I have listed some of the more common occurrences:
• Any tax you have paid through the payroll in another employment will be taken off your tax liability.
• Everybody will have a personal allowance which is £11,850 for 2018/19 tax returns, this will be taken off your overall profits and income before your tax liability is calculated.
• Any dividends received from other Limited companies will also need to be included on your tax return, however you will receive a separate dividend allowance on this, for the 2018/2019 tax year the dividend allowance is £2,000

Medical Profession – Pension Tax Trap

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It’s that time of year again when we come round to preparing tax returns. We understand how complicated they can get.

One of our specialisms here at Egan Roberts is acting for clients in the medical profession.

Tax returns can be complicated enough to put together with a combination of practice or NHS income and then private income and looking at ways to minimise your liability. One way to reduce your liability used to be pension contributions, but over the years with the introduction of the lifetime allowance and limits to annual contributions this has become less of a tax planning opportunity.

How does my pension affect my tax?

Indeed it is now quite likely that your pension may be the cause of additional tax liabilities. For older members of the medical profession with a long period of service, you need to carefully monitor the value of your pension in comparison with the lifetime allowance, which presently stands at £1,030,000, increasing to £1,055,000 for 2019/20.

Where the whole of a lifetime allowance has been used by crystallisation events, the lifetime allowance charge will be applied at the rate of 25% on income (the income itself then being also taxed at your marginal income tax rate). For excess amounts taken as lump sums, the marginal rate is 55%.

 

In addition to the above tax trap, you also need to watch that your deemed pension contributions don’t exceed the Standard Annual Allowance which is £40,000 per annum. It is important that you pass to your accountant your NHS Annual Allowance Pension Savings Statement which will tell you your pension input amount for the year.

However, you should be aware that if you do exceed the Standard Annual Allowance, you may be saved from additional tax by the use of Carry Forward, where excess contributions can be offset against unused allowance carried forward from the previous three years.

Liked this blog? Read another here.

You became a doctor to be a doctor, not to run a business.

For help getting started with your tax return checklist, click here.

If you would like any help or advice regarding your self assessment tax return, call us on 01254 583515 and we’ll get in touch.

Make your list and check it twice!

Posted on by r3df3rn

The Christmas markets opened this week, but what about January? You might not be thinking about it yet but your accountants are!

While your children sit down to start their lists to Santa, you should join them and complete your tax return checklist.

Running your business and planning Christmas leaves little time for all of that admin work…but the tax return deadline at the end of January will be here before you know it.

Complete your list now and you’ll have one less task to think about!

Not sure where to start? Here’s a simple list to help you on your way.

 

  1. Employment income
  2. Employment benefits e.g. car benefit
  3. Pension income
  4. Interest income
  5. Dividend income
  6. Property income and expenses
  7. Trade income and expenses
  8. Child benefit received
  9. Charitable donations
  10. Pension contributions

 

Read more on self-assessment here.

Every checklist is unique and personal to you. So if you would like some help or advice on completing yours, contact us on 01254 583515 or fill out the form below and we’ll get back in touch with you as soon as possible.

HMRC Investigations: What to Expect

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Whether you are the chief executive of a multi-million pound company or a small business owner, HMRC may open an investigation if they suspect false reporting or underpayment of tax.

Triggers

Reasons for you or your business drawing the attention of HMRC are:

  • HMRC receives a tip-off
  •  your business regularly receives payments in cash
  • tax returns are consistently filed late
  • you operate in a sector HMRC has specifically targeted
  • you are randomly selected
Taxes

The taxes investigated by HMRC include but are not limited to:

  • Income tax
  • Capital gains tax
  • Corporation tax
  • Landfill tax
  • National insurance
  • VAT
Stages

There are three levels of an investigation; random, aspect and full.

As above, HMRC have the ability to choose to investigate your business completely at random.

An aspect investigation means HMRC is concerned about a particular part (or parts) of your accounts. This could include something as straightforward as forgetting to include all of your savings income within your self-assessment tax return. An aspect investigation can be upscaled to full at the discretion of HMRC.

A full investigation is when HMRC considers there to be a significant risk of error in your tax return. This would include a comprehensive review of your records including personal finance records as well as business-related.

The process

1. HMRC will initially contact you via letter or phone call with a query. They will specify what information they require for the investigation.

2. You will be expected to supply the information HMRC require which may include obtaining replacement copies of documents if you no longer have them.

3. Informing HMRC at this point of any mistakes you have knowingly made will benefit you further down the line.

4. HMRC will formally begin their investigation

What happens next?

Some common resolution include:

Underpaid tax

You will have 30 days to settle the underpayment with HMRC.

Failure to do so will result in a penalty ranging from 20% to 100% of the extra tax due.

The severity of the penalty depends on whether the underpayment was due to a lack of reasonable care, a deliberate error or deliberate and concealed errors.

Overpaid tax

If you have paid too much tax, HMRC may send you a rebate through the post.

If they do not, you will need to make a claim for a repayment.

Deliberate wrongdoing

If HMRC believe you have committed fraud, you may be subject to criminal proceedings.

You may also be charged a penalty depending on why you underpaid tax, how soon you informed HMRC of any mistakes and whether you were fully co-operative during the investigation.

Resolution

A decision notice will arrive in the post explaining the assessment and any penalty details.

Alternatively, HMRC may issue a contract settlement which legally binds you to pay the money that is owed to HMRC.

Tips to avoid an investigation

Nothing can prevent a random investigation but the following tips will help you to avoid becoming under HMRC’s microscope.

  • Maintaining accurate records
  • Putting money aside to cover your tax bill and pay it on time
  • File your tax returns accurately
  • Explain any changes or unusual transactions from one year to the next

If you are under HMRC investigation or have any questions please contact us via the contact form below or call us on 01254 583515.

Take a look at our blog outlining what accounting records you should keep.

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.

Excuses and Expense Claims: What not to Submit

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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.

Reasonable Excuse

Self-employed 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.

What every small business owner should be aware of when paying HMRC?

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Paying HMRC

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.

More information concerning the above can be found at https://www.gov.uk/topic/dealing-with-hmrc/paying-hmrc.

Contact us if you would like to know more about the above

What Accounting Records Should I Keep?

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As Chartered Accountants and Financial Advisors based in Lancashire, a question we often get asked here at Egan Roberts is what accounting records we need in order to complete your year end accounts and tax returns.

The most important thing is to be as organised as possible. Accounting software packages such as Xero make this much easier for you.

At Egan Roberts, we are all Xero Certified Advisors to help and support you through your Xero journey. Some may call us Xero Heroes.

Records must be kept for a minimum period of 6 years. Xero has the ability to digitally store images of your invoices and can feed directly through from your bank. This makes record keeping for such long periods of time much easier and will no longer clutter up your spare room!

If HMRC open a tax enquiry into your business within the last 6 years, Egan Roberts offer a fee protection scheme which acts as a type of insurance against any additional work we may need to undertake to assist with the enquiry. See our more detailed blog here for more information about this service.

If you would like to speak to us about any of the above, please call us on 01254 583515 or visit our website www.egan.co.uk

Penalties: Not Football, Tax Returns!

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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.

https://www.gov.uk/tax-appeals/reasonable-excuses

Read our blog on Excuses and Expense Claims: What not to submit