We’ve updated our accountants for dentists page
Our team of specialist accountants for dentists are here to help
At Tax Agility, our specialist accountants for dentists in London are passionate about working with General Dental Practices (GDPs), newly qualified associates, consultants and other dental professionals to deliver a range of accounting services, so that they can maintain a healthy financial state. This passion led us to update our accountants for dentists page with comprehensive and sound advice that you can trust.
Before advising you on the next step or compiling a service plan, we start by offering a FREE, no-commitment consultation to understand your unique circumstances. Once we’ve addressed your situation, we will provide a single or combination of our services that will best suit your needs.
These services include:
- A business structure suitable for your current situation (GDPs, locums or other)
- Tax advice to minimise your tax obligations
- Payroll services
- Tax returns
- Management consultancy
- Advice and management of the cloud accounting software Xero
- Ongoing consultations with a member of our team
On our specialist accountants for dentists page, you can find information regarding:
- How our accountants can assist each type of dental professional – newly qualified associates, GDPs, locums, consultants and private dental practice owners
- Tax questions relating to dentists in London
- Making Tax Digital for dentists
Contact Tax Agility today for specialist accountants for dentists
As specialist accountants for dentists in London, we go above and beyond to help you manage your accounting and bookkeeping responsibilities, ensuring that you understand your tax returns and more. Get in touch with one of our specialist accountants for dentists today.
Give us a call on 020 8108 0090 or send us a message via our Contact Form.
Does HMRC object to putting family members on the payroll?
It’s said that more than half of small businesses in the UK are family-owned, mainly in the wholesale, real estate, construction and transport sectors.
They employ more than 12 million people and generate more than a quarter of UK GDP. In London, it is estimated that there are more than 800,000 family businesses.
Even if you are the single owner of your limited company or a sole proprietor, there may be situations where you need an extra pair of hands helping you with the running of your business. In most instances, you turn to your spouse or family members as you know you can trust them to help you out on short notice. As such, questions relating to ‘can you put family members on the payroll’ abound, which is why our payroll specialists at Tax Agility aim to explain the ins and outs of hiring family members.
Unsure if you need to complete an SA100 Self Assessment tax return form? Checkout our full article that explains when you’ll likely need to complete an SA100.
Family ties are irrelevant
First of all, it must be explained that HMRC deems your family ties to be entirely irrelevant when it comes to who is placed on your payroll. You can definitely employ your spouse or any family members and put them on your payroll.
What HMRC is very much interested in is what your company gets out of the arrangement. In other words, the person who is being paid a wage appropriate to the job should actually be doing the job. There must be no special treatment paid to the family member through an inflated salary, reduced working hours, or anything that falls outside the ‘equal pay for equal value’ idea.
Creating work for a family member
Many business owners incorrectly assume that they can only employ a family member within their company if they apply through the correct channels of communication for a job that is already available.
This isn’t the case at all. It’s entirely legal for you to create a job for your family member provided the work serves a necessary function in your company. For example, if you’ve been considering employing a receptionist for some time but haven’t got around to it, employing your spouse in this role would be perfectly acceptable. However, if you already have a receptionist who can currently handle their workload, to employ your spouse or any other family member as a second receptionist wouldn’t serve a necessary function in your company and could raise eyebrows at HMRC.
The same applies to employing your teenage son as your office cleaner, or your sister as an office administrator. So long as these extra bodies serve a necessary function, HMRC will have no issue with you employing them and placing them on your payroll, the same way you would any other employee in your company.
In general, the rules you must follow include:
- The work must be real and your family members must be paid commercially viable wages. You can’t get away by paying them £2 an hour to do bookkeeping nor £100 an hour to answer telephone calls.
- Payments must be made and records are kept.
- You (the employer) and them (the employees) must pay National Insurance contributions if they earn more than £166 a week.
- Obey child employment regulations if the family members involved are between 13-16-year-olds.
Don’t really understand your notice of coding letter or tax code? Here’s our article that explains all you need to know about your tax code.
Should you make your family members shareholders?
As tax on dividends is lower than on salary, you may consider making your spouse a shareholder and allowing them to receive dividend payments instead of salary.
Here’s an example, assuming your spouse only receives £35,000 in dividend payments (no salary) in tax year 2020/21:
- The first £12,570 is tax-free (personal allowance)
- The first £2,000 of dividend is tax-free (director allowance)
- Dividends up to £37,500 are taxed at 7.5%
- This means the tax bill they are liable for is only £1,537.50
In comparison, if they receive £35,000 in salary in tax year 2020/21, then they are liable for £4,500 income tax (and £3,060 in National Insurance).
Tax advantages
The salaries, commissions and bonuses you pay to your employees are tax-deductible expenses because they incur wholly and exclusively for the purposes of the business.
Here’s an example, assuming you hire your sister to do filing for £50 a week (£2,500 a year), you can offset this amount against your profit for income tax purposes. If you’ve done the work yourself, then you would be spending more time in the office while not enjoying the tax benefits.
Thinking about putting family members on the payroll?
If you’re a London-based business in need of further advice about putting family members on the payroll or other small business tax tips, contact TaxAgility’s small business accountants on 020 8108 0090, or get in touch with us via our contact page to arrange a complimentary no obligation meeting.
We’re London’s local accountants serving clients throughout the city with particular focus on Putney, Wimbledon, Fulham, Richmond, Hammersmith and Central London.
If you found this helpful, take a look at:
- Why outsource your payroll administration
- Payroll, pension and dynamic tax code changes April 2019
- HMRC Legal Powers
- How does HMRC expose tax evasion and avoidance?
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.
Tax planning tips for self-employed contractors
Having worked with self-employed contractors across London for many years, we understand that you’ve got a lot on your hands juggling your business operations and financial responsibilities. When it comes to tax planning and reducing your tax obligation legitimately, your busy schedule often means that this is an afterthought and as such can fall by the wayside, leaving you in a difficult position come the end of the financial year.
This is why Tax Agility exists, we’re here to help contractors like yourself maximise your tax returns and increase your contractor business’s profitability. We do this providing tailored advice that suits your business and your industry. In this article, we aim to discuss the top five tax tips for self-employed contractors that you should be aware of with respect to both your day-to-day and long-term operations.
Top 5 tax-planning tips for self-employed contractors
1. Take IR35 seriously
Perhaps the most helpful tip we can give to a self-employed contractor, recognising where you are in relation to HMRC’s IR35 legislation is of the utmost importance at all times. Understanding how to navigate IR35 with respect to your classification and categorisation as a contractor or potentially as a ‘disguised employee’ could mean the difference between a huge increase in tax payable to the government, so taking IR35 seriously is imperative.
On our ‘What does the IR35 legislation mean’ page, as well as in our ‘What’s IR35? A brief guide to the IR35 legislation’ post, we cover IR35 extensively including what it is, why it was introduced, how it might impact your taxes and how to tell if you’re at risk. The main point is, if HMRC believes you to be operating under IR35, in other words, they consider you as a ‘disguised employee’ rather than a genuine contractor, then you will be required to pay back the underpaid tax or have to pay a penalty and interest. It also means that your current contractor tax planning structure and methodology will need to be re-evaluated.
Getting IR35 right the first time is important because HMRC doesn’t give you the benefit of the doubt, so speak to one of our experienced accountants for contractors if you aren’t sure if you’re inside or outside of IR35.
2. Becoming a Limited Company
Assuming the services that you provide don’t fall inside IR35, incorporating your contractor business as a limited company is an effective way to pay less tax while simultaneously growing your business and boosting its profitability. The main reasons are:
- With a limited company, you can split your income between salary and dividends. Dividends aren’t subject to National Insurance Contributions and also taxed at a lower rate, resulting in you paying less taxes legitimately.
- You can claim tax relief on legitimate expenses.
In short, incorporating a limited company is the most popular means of establishing a self-employed contractor business, mainly due to the significant financial benefits it affords the business owner.
Establishing a limited company does have its drawbacks, however, and brings with it a number of responsibilities and administrative necessities that non-company owners wouldn’t normally be required to fulfil. They include accurate record keeping, quarterly submission of accounts and annual returns, as mentioned on our ‘Managing a Limited Company’ page. The good news is, the teams at Tax Agility can help to alleviate the stress by managing your bookkeeping, payroll, VAT returns, and completing annual returns.
3. Consider the VAT Flat Rate Scheme
The Value Added Tax (VAT) Flat Rate Scheme allows contractors who have an annual turnover of £150,000 or under (excluding VAT) to pay a fixed amount of VAT based on their turnover. This can be beneficial in circumstances where contractors don’t have the time or manpower required to add up every taxable purchase to produce an exact VAT amount, instead paying a fixed rate of VAT to HMRC and keeping the difference between what you charge your customers and what you pay the Government.
As with most of the tips in this list, the VAT Flat Rate Scheme isn’t for everyone, so speaking with your accountant is advised to gauge whether this scheme is suitable for your business structure.
4. Take advantage of the Annual Investment Allowance (AIA)
The AIA, which is currently set at £1,000,000 between 1 January 2019 and 31 December 2020, allows you to deduct the full value of a qualifying item from your contractor profits before tax.
There is a large number of exceptions here, including cars and any item that you previously owned before using it for your contractor work, as well as items given to you or your business (i.e. not specifically purchased).
You can find out more about AIA on this gov.uk page or speak to us if you want to take advantage of this allowance.
5. Submit everything on time
In the same manner that not taking IR35 seriously can make your professional life difficult, not submitting your tax returns on time can also add stress, and even harm your tax planning efforts due to the penalties you’re likely to receive. This is why using a cloud accounting platform and having an experienced accountant working alongside with you are imperative.
With Making Tax Digital now effective for VAT-registered businesses earning above the threshold of £85,000, and soon to be applicable to all businesses regardless of structure, size or industry, transitioning to a cloud accounting platform is an efficient and effective way to streamline your finances and ensure that you provide HMRC and your accountant with all of the necessary data and information required, well in advance of the filing date.
Experienced accountants for contractors
To speak with a professional, specialist contractor accountant to discuss more tax planning tips for self-employed contractors like yourself, contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
If you found this helpful, take a look at:
- Moving from permanent employee to full-time contractor
- What is IR35? A brief guide to the IR35 legislation
- Business expenses you can claim as an IT contractor
This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.
Moving from permanent employee to full-time contractor
It’s said that in the UK the numbers of contractors are between 1.7 to 1.9 million, depending on which data source you refer to/ depending on which source you get the data from. What’s certain is that they contribute billions to the UK economy collectively and the number of contractors is set to increase further.
So, there must be a rationale that explains why we’re seeing this trend as it’s rather obvious that becoming a full-time contractor has many benefits. Among them, greater flexibility when it comes to working hours, higher pay rate, a greater degree of market demand and tax benefits (depending on the structure of your business) are often cited as key benefits.
How do I switch from working as an employee to working as a contractor?
With growth forecast for the coming year for contractors and contractor work, particularly in manufacturing, automotive, engineering, design and construction industries, the time is right for you to get ready and take full advantage of the robust contracting landscape in the UK.
While you may be aware of the benefits of contracting, you might not be privy to how you can actually make this move, primarily if you’ve worked in permanent employment all your life. This is why our contractor accountants at Tax Agility put together some useful tips to help make your transition smoother.
Sending out speculative applications
First and foremost, you should begin by testing the waters to gauge whether there is a demand for your services in your area. Doing your due diligence on your target audience/ potential clientele, as well as researching the market and any competitors in your locale is always advisable and considered good practice. One effective mechanism for implementing this is by sending out speculative applications offering your services.
Assuming you send out a high volume of applications, you’ll be able to measure the current state of the market concerning the ways in which various businesses react to your proposal. Don’t be deterred by the number of responses you receive initially, as this is more of a numbers game than anything. The rule of thumb is generally a 10% response rate, depending on the quality of your email and offer.
Even if you don’t receive a contract from this initial interaction, don’t give up. View this as an opportunity to increase your visibility within the marketplace and to companies who might not have been open to the possibility of hiring a contractor in the first place. As long as your details are in their systems, it’s likely that they will contact you when something comes up.
Networking
As a contractor, it’s important to develop a network that can deliver consistent opportunities and work. You can do this by creating a comprehensive networking plan, appearing at business events, distributing business cards or networking online, particularly on the social network, LinkedIn. To be successful, you’ll need to establish relationships within the industry that could potentially provide you with employment opportunities.
In a nutshell, it’s all about getting your name out there. You generally shouldn’t contact clients that you previously worked with when you were a full-time employee for someone else – this is considered poaching and bad etiquette. However, there’s no reason why you can’t reach out to individuals whom you used to liaise with that have since moved company.
Forming your company
When you first begin as a contractor, you’ll have to make the choice between working under an umbrella company, or alternatively, for your own limited company.
We’ve written at length on the differences between umbrella and limited companies in the past, but to put it simply: when you work through an umbrella company they take care of the financial side of things; taking payment from clients then paying you, minus tax, national insurance, and their personal fees.
When you form a limited company, everything (including the financial side) is your responsibility; but you’ll ultimately make more money as you won’t have fees to pay, and you’ll more than likely be operating outside of IR35 legislation if you have established a legitimate contractor business.
Hiring an accountant
If you haven’t already enlisted the services of a specialist contractor accountant at this point, then you should research a suitable financial services provider in your area who can assist you with the operation of your business. A specialist small business accountant is advisable for contractors and freelancers, and an expert in start-ups such as Tax Agility can assist with the transition from full-time employment to full-time contracting.
We’re able to advise you on the requirements for establishing your business, including all aspects of company formation, opening business banking accounts, and registering your incorporated entity with Her Majesty’s Revenue and Customs (HMRC).
To speak with an experienced tax accountant and discuss your potential move from permanent employee to full-time contractor, contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
If you found this interesting, take a look at:
- How Xero can help contractors in the UK
- Eight top tips for choosing a contractor accountant
- Tax planning tips for self-employed contractors
- Business expenses you can claim as an IT contractor
Tax Planning and your Personal Allowance
Let’s be clear – tax planning doesn’t automatically mean tax avoidance.
Personal tax planning is the process where your chartered accountant uses their skill and experience, along with legal, government-approved methods to reduce your tax bill. There are no legal consequences for using proper tax planning.
Tax avoidance, on the other hand, involves ‘bending the rules of the tax system to gain a tax advantage that Parliament never intended’ as defined by Gov.uk. It must be noted that HMRC does crackdown on tax avoidance and you can read the related articles ‘HMRC legal powers’ and ‘How does HMRC expose tax evasion and avoidance’ by clicking on the appropriate link.
At Tax Agility, our chartered accountants have been helping individuals with tax planning for decades but never tax avoidance. Our personal tax planning services include but are not limited to income tax, trusts and estates, inheritance tax and capital gains tax. We work with you to create a strategic tax plan that allows you to earn, save, protect and invest your money as efficiently as possible.
Personal allowance
For tax years 5 April 2019 to 6 April 2020 and 5 April 2020 to 6 April 2021, your Personal Allowance is set at £12,500. What it means is you can earn up to £12,500 without paying any income tax.
If you earn between £12,500 and £37,500 then you will fall into the Basic Rate band where you pay 20% tax.
For most people on PAYE, the relevancy between personal allowance and tax planning seems trivial. But the more you earn, you need to be aware that there is the cost of losing tax breaks like marriage allowance, child benefit tax break, among others. It is best to speak to an experienced tax accountant who can provide specific advice pertaining to your circumstances.
Capital Gains tax allowance
For those who intend to sell some shares or a second home, you would want to know about Capital Gains tax allowance. For the tax year 2019-20, the capital gains tax allowance is £12,000 for individuals and £24,000 for married couples and civil partners.
How much capital gains tax you pay depends upon your tax bracket – if you pay a higher rate income tax, you are likely to pay more capital gains tax, but if you pay a basic rate income tax, there are formulas to calculate how much you pay. Contact us if you are unsure.
Pensions
Using pensions to reduce your taxable income is a common method for those looking to pay less tax and save for the future.
A simple example is that if you’re a basic rate taxpayer and you pay £80 into your pension, you get an added £20 from basic rate tax relief.
Once you reach the age of 55, you can withdraw 25% of your pension tax-free. Do note that there are scammers out there looking to take advantage of your interest in this, so be mindful.
ISAs
Individual Savings Accounts (ISAs) are attractive because you can invest up to £20,000 per tax year and don’t have to pay tax on the money you make from your ISA investments. How much you tax bill you can reduce depends on the type of ISA you have.
Pay less tax if you’re self-employed
If you have set yourself up as a contractor, there are certain business expenses which you can deduct from your tax bills. However, it must be said that every contractor is unique, so the tax advice you get should be personalised and not one-size-fits-all, as explained in our post ‘Eight top tips for choosing a contractor accountant’. At Tax Agility, we are the contractor accountants you’re looking for, so call us today to arrange a complimentary, no obligation meeting.
Tax Agility can help with your tax planning
If you’re looking to reduce your tax bill, and have questions on capital gains tax, inheritance tax and other personal tax matters, contact the chartered accountants at Tax Agility. To find out more, get in touch on 020 8108 0090 or fill out our Online Form.
This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.
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We’ve updated our accountants for doctors page
With a proven track record working with salaried GPs, locums, consultants and GPs running their own practice, our team of specialist accountants for doctors in London have been delivering a complete range of accounting services to medical professionals and keeping their financial health in check. This is why we have recently updated our service page with comprehensive no-nonsense advice that you can count on.
It must be stressed that we provide a FREE initial consultation to understand your situation first before we can put together services that can fully address your needs. The services that best fit you can be one or a combination of the following:
- A business structure that is best for your current situation (IR35, limited, partnership to name but a few).
- Proactive tax advice to minimise your tax obligation.
- VAT scheme that’s best suitable for your business and VAT returns.
- Corporate tax returns.
- Company House Annual returns.
- PAYE returns.
- Ongoing consultations.
On our specialist accountants for doctors page, you can find information pertaining to:
- How our accountants can help each type of medical professional – from salaried GPs, locums, consultants, GP running their private practice to private healthcare providers
- Tax questions concerning medical professionals
- Making Tax Digital for doctors
Contact Tax Agility, independent and trusted accountants for doctors and medical professionals today
We’re specialist doctors accountants in London that will go the extra mile to help you manage your accounting responsibilities, understand tax and VAT returns and much more. Contact one of our specialist accountants for doctors and medical professionals today on 020 8108 0090. Alternatively, you can send us a message via our Contact Form.
What is IR35? A brief guide to the IR35 legislation
IR35 is a tax legislation designed to mitigate tax avoidance by workers, particularly contractors, who supply their services through the use of intermediaries.
Introduced in 2000 by HMRC, IR35 is effectively a means of identifying individuals who are providing clients with a service under an intermediary, such as a ‘personal service company’ (usually in the form of a limited company), that would normally be classified as regular workers, known as ‘disguised employees’, without the existence of said intermediary.
Determining whether you’re operating inside or outside the scope of IR35 is mind-bogglingly complex and requires a thorough understanding of your unique situations. For the purposes of this article, our team of London’s local accountants for contractors aims to explain the various requirements for contractors under IR35, as well as gives an outline of the best practices for ensuring that you aren’t categorised as a ‘disguised employee’ under IR35’s classifications. Information given in this post should not replace professional advice tailored to your specific circumstances.
Why was IR35 introduced?
Previously, companies who engaged these disguised employees saved a significant amount of money as they didn’t have to pay employers’ National Insurance Contributions, nor provide any employment benefits.
On the other hand, contractors operating through a personal service company could also minimise their tax obligation as they were more inclined to split the income between salary and dividends. Dividends aren’t subject to National Insurance Contributions and also taxed at a lower rate, resulting in contractors paying less taxes and getting a higher take-home pay than a normal employee would.
It was a win-win scenario for companies who engaged contractors and also for contractors themselves. However, because HMRC did lose out on tax revenue they would otherwise receive, they had to close the loophole by introducing IR35.
In short, IR35 legislation was effected as a mechanism for cutting down on individuals wrongfully claiming tax advantages as contractors (or through other intermediary means) when they would normally otherwise be classified as regular employees.
In April 2000, IR35 became effective for small businesses supplying clients with contractor services and aimed to better establish the conditions by which contractor-client relationships exist for tax purposes. Despite their best efforts, the Government has been widely criticised for IR35, particularly with respect to its implementation and the impacts it can have for legitimate contractors and their small companies.
Am I at risk of coming under IR35?
Anyone who works as a contractor is potentially at risk of being categorised as a ‘disguised employee’ under IR35, and if you are deemed to fall inside this definition by HMRC, you will face some severe tax implications.
The problem with IR35 is that there is no definitive guideline that stipulates the conditions of a ‘breach’ so to speak, and as the issue is contractual in its nature, anyone investigating on behalf of HMRC is required to make a notional judgment based on the relationship between the company and the contractor rather than on the ‘written’ agreement.
As such, it is often difficult to determine whether you’re categorised as a ‘disguised employee’ in certain circumstances. Typically, HMRC looks at the working arrangement and uses these three principles (aka tests of employment) to determine the employment status of an individual.
Principle 1: Control
This refers to how much control the company has over you the contractor, from what you do, how you do it, when you start and finish it to where you complete it. If the client requires you to come in from 9 am to 5 pm every weekday for a specific period of time to finish a series of tasks, then HMRC is likely to classify you as a normal employee and therefore IR35 is applicable.
Principle 2: Substitution
A normal employee cannot go out to source for an individual to complete their work for them but if you are a genuine contractor, you should be able to send a substitute to undertake the work on your behalf, provided that your client is reasonably satisfied that the proposed substitute has the right skillset and qualifications to undertake and complete the work.
Principle 3: Mutuality of obligation
This concept hinges on the question: is there a degree of obligation with respect to the employer supplying the work and the worker accepting this offer? If you are a genuine contractor, you must have the right to terminate the contract early if you choose to.
Understanding these principles can offer an insight into circumstances where a contractor may come under IR35 categorisation, however, these are not exhaustive and there are other factors that can be taken into account when making a judgment. For example, HMRC may check if you receive any employment benefits or if you use their equipment to complete your work to name but a few.
We’re specialist contractor accountants
Essentially, it’s important for a contractor to consult a specialist contractor accountant like Tax Agility to better ascertain where they sit with respect to this legislation and whether they may be required to pay more tax as a result. While there are a number of IR35 calculators that might be able to give a rough estimate, it’s always advisable to go to a professional. Call us on 020 8108 0090 today or send us a message via our Contact Form. We offer the first consultation for free in order to understand your circumstances and provide you with the best possible advice with regards to your contractor work.
For more information, check out our contractor pages:
- What are the pros and cons of contracting?
- What does the IR35 legislation mean?
- Tax advice for contractors
- Important dates and deadlines for contractors
If you liked this post, you might also like:
- How Xero can help contractors in the UK
- How does HMRC expose tax evasion and avoidance?
- Tax planning tips for self-employed contractors