How to Pay HMRC Online

File Tax_TaxAgility Accountants London

Quite a few contractors and small business owners in the UK do not understand the Self Assessment tax process, so we seek to assist.

According to HMRC, there are various scenarios which require you to file a Self Assessment tax return, and some of the common scenarios are:

  • You are self-employed.
  • You are a business partner, a director of a limited company.
  • You have an investment income from investment, land, property or overseas which you need to pay tax on.
  • You have made a capital gain.
  • You are a trustee of someone who has passed away.

Most people mistakenly believe that HMRC will contact them and ask them to file a Self Assessment tax return. In reality, HMRC has made it very clear that it is your responsibility to declare taxable income and file a Self Assessment accordingly. The deadline to pay your Self Assessment tax bill is midnight 31 January for any tax you owe for the previous tax year (known as balancing payment) and your first payment on account. Another key date is 31 July for your second payment on account.

If you have questions pertaining to your tax situation, contact one of our chartered accountants in Putney, Richmond and Central London today. With years of experience helping small business owners, contractors and individuals in London to become tax efficient, we can help to take the stress of tax and Self Assessment away.

Understanding payments on account

If your last Self Assessment tax bill is more than £1,000 and you have not paid 80% of all the tax you owe, then you are required to make two payments a year to HMRC before 31 January and 31 July respectively.

Here is a simplified example:

Assuming your tax bill for the year before last was £1,800 and you had pay to HMRC twice, each time £900.
Last year you had a good year and as a result, you have a tax obligation of £3,000 this year. This means on 31 January, you will be paying £2,700. The breakdown is as follows:

  • The balancing payment of £1,200 (latest tax bill £3,000 minus previous tax bill £1,800 that you had paid).
  • £1,500 for the first payment of latest tax bill £3,000.

Then before 31 July, you will need to pay HMRC £1,500 – which is the remaining of your tax bill £3,000.
It is important to note that payments on account do not include anything you owe for capital gains or student loans (if you are self-employed). You will need to pay those in your ‘balancing payment’ on 31 January. This process is indeed complicated, hence it is best to work with a qualified and honest accountant who can assist you.

Ways to pay HMRC

You can choose to pay your Self Assessment tax bill online or by telephone banking, by debit or corporate card online (not personal credit card), or CHAPS. If you have received a paying-in slip from HMRC, you can also choose to walk into a bank or a building society and make the payment. Alternatively, you can also choose to pay via BACS, Direct Debit or by check through the post.
We usually encourage our clients to make a payment online as it is efficient, particularly if you are a busy individual juggling multiple tasks or if you reside overseas.
HMRC has two accounts, one is called HMRC Cumbernauld and the other is called HMRC Shipley. If you are paying from the UK, you need the usual sort-code and account number for the respective accounts. If you are paying from an overseas account, you will need BIC and IBAN. Details as follows:

  • HMRC Cumbernauld: Sort-code 08 32 10, Account Number 12001039
  • HMRC Shipley: Sort-code 08 32 10, Account Number 12001020
  • HMRC Cumbernauld: BIC is BARCGB22 and IBAN is GB62BARC20114770297690
  • HMRC Shipley: BIC is BARCGB22 and IBAN is GB03BARC20114783977692

Regardless of the account you are paying into, you must include your 11-character payment reference number when making your payment. This is your 10-number long Unique Taxpayer Reference (UTR), followed by the letter K (for example, 1234567891K). It can also be found on the original payslip HMRC sent you when you opened your online account.

How to save money on your tax returns

There are many ways to become tax efficient. For example, in this “Tax planning tips for self-employed contractors” post, we discuss five options – taking IR35 seriously, considering Flat Rate VAT, incorporating a limited liability company (and with that, you can split your income between salary and dividends, as well as claiming tax relief on legitimate expenses), taking advantage of Annual Investment Allowance, and submitting all the paperwork on time.

If you have heard about using personal allowance, capital gain tax allowance, pensions and ISAs to help with tax planning and would like to know more, then this post “Tax planning and your Personal Allowance” would make a great read.

If you are a working parent and would like to know how strategic family tax planning can benefit you, follow the link to this post “Tax planning for families”.

We are experienced tax accountants and we can help you

To speak with one of our experienced accountants to discuss your Self Assessment, tax matters and payments to HMRC, contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

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Xero MTD for landlords

Making Tax Digital for landlords: What you need to know as a landlord

Xero MTD for landlordsIf you are a landlord, you will understand that you have certain responsibilities for which you are accountable under the law. These include fire, health and safety regulations; certifications for energy performance, gas and electrical equipment, as well as specific duties with respect to your tenant(s). Further to this, as a landlord, you are obligated to manage your finances and accounts for the purpose of tax reporting.

Her Majesty’s Revenue and Customs’ Making Tax Digital initiative is now in effect for VAT registered businesses earning above the threshold (£85,000) and will soon become ubiquitous for all businesses in England and Wales – currently set down for April 2020. What this means, is that all businesses will be required to submit mandatory quarterly tax returns (as well as the standard annual return) to HMRC as of this date, through the use of a Government recognised and sanctioned cloud accounting software, including landlords.

Migrating your finances may seem like a daunting task, and there will be a number of changes felt by businesses with established bookkeeping and tax lodgement systems already in place, but before we get into the specifics, Tax Agility, London’s local accountants for small business, will take a brief look at the various taxes applicable to landlords.

What taxes are landlords liable for?

When property owners let out their property, they become liable for several taxes and contributions:

  • Income Tax – If an individual lets property in the UK, they are subject to income tax. The first £1,000 of income from property rental is tax-free and known as a ‘property allowance’. For individuals letting out a property that they personally own, rental income has to be reported if it is 1) £2,500 to £9,999 after allowable expenses or 2) £10,000 or more before allowable expenses.
  • National Insurance – This is required to be paid by landlords who are deemed to be ‘running a business’. A landlord is deemed to be 'running a property business' if 1) being a landlord is their main job, 2) they rent out more than one property and 3) they’re purchasing new properties for the purpose of renting them out. If a landlord meets these requirements and is categorised as running a business under such parameters, they are liable for Class 2 National Insurance, as long as their annual profits exceed £5,965.
  • Stamp Duty Land Tax (SDLT) – This is a lump-sum tax that is payable when buying land or property that amounts to more than a certain value. The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties, with rates increasing depending on the value of the property.
  • Capital Gains Tax – Landlords will be liable for Capital Gains Tax (CGT) if they sell a property that has increased in value. The tax is only payable on the profit you have made, not the total amount received. Types of properties that are incorporated under CGT include buy-to-let properties, business premises, land and inherited property.
  • Value Added Tax (VAT) – Lease or sale of residential and commercial properties is usually VAT exempt, but a commercial property owner may ‘opt to tax’ the property for the purpose of recovering VAT charged to the property.

Making tax digital (MTD) for landlords

Instituted in 2018, HMRC has integrated their Making Tax Digital scheme sequentially with respect to the degree of difficulty some businesses might encounter when migrating their finances to online cloud accounting platforms. In essence, Making Tax Digital is an initiative designed to make tax administration more effective, efficient and easier for taxpayers through a fully digital tax system. Instead of filing an annual self-assessment tax return, taxpayers and businesses are required to keep records digitally and send quarterly updates of their finances to HMRC. They will also need to send in a final report at the end of the tax year, together with a claim for any reliefs or allowances.

According to the government’s timetable, as it stands, all businesses including landlords will have to switch to meet the requirements of MTD by April 2020. This means that everyone from large conglomerates and corporations to small businesses and startups will be lodging their financial and fiscal data to HMRC through digital accounting software. In a nut-shell, MTD requirements stipulate that by April 2020, landlords will have to:

  • Maintain their records digitally using MTD-compatible software
  • Report summary information to HMRC every quarter via a digital tax account
  • Make an end of year tax return declaration

Making the transition to the cloud is not as complicated as you might think, and many of the software platforms available are incredibly intuitive and straightforward. Digital tax accounts are accessed via a secure online portal where a property business or individual landlord can see all of their tax details. All of the records will be ‘cloud-based’, meaning that they reside online, and are accessed through commercially available third-party accounting software and mobile apps. Many of these softwares provide easy to understand insights into the financial health and positioning of businesses, however, using them can often be a burden for landlords and property ownership businesses that don’t have the time to also manage their own accounting functions. This is where Tax Agility can help. As Gold Partners of Xero, one of HMRC’s recognised MTD accounting software, we have a proven track record of managing finances and accounts on the cloud and are also able to assist you with the move to digital.

Making tax digital FAQs for landlords

Does it matter if I am a residential or commercial landlord?

It might. If you’re an incorporated property lessor or landlord with an income over £85,000 that has opted in for VAT, you will need to be MTD-compliant from 1 April 2019. If you are a residential landlord, then you won’t have to become MTD-complaint until April 2020, when MTD for income tax comes into effect for all businesses.

What if I rent out multiple properties? Will I have to report for each property or just the business as a whole?

Where multiple properties are held within a business or by an individual landlord, income and expenditure only has to be recorded and submitted for the property business as a whole and does not have to be allocated individually. However, it is good practice in such circumstances to keep a record of the income and expenditure of each property so as to keep comprehensive records and avoid a possible audit by HMRC.

What if I have joint ownership of the property?

There is a difference between properties owned by a partnership or simply owned jointly, such as by a married couple. The principles of the proposed system for partners and partnerships are as follows:

  1. The partnership, rather than each partner, will be responsible for the requirements of Making Tax Digital.
  2. A nominated partner will fulfil these obligations.
  3. There will be an option for the nominated partner to push quarterly summary information of their share of the profit to each partner’s digital tax account. With this option, each partner would have an estimate of their profit to date in the tax year.
  4. When the end of year declaration is made, the nominated partner will be obliged to push each partner’s share of profits to their digital tax accounts.

How Tax Agility can help landlords transit to MTD

If you’ve maintained a paper-and-binders kind of approach to record keeping, you may want to approach an accountant for small businesses for assistance. A local London accountant like Tax Agility can help clients to subscribe to a compatible online ‘cloud’ tax accounting software package, such as Xero. Apart from helping with the MTD transition, Tax Agility also specialises in advising landlords to:

  • identify special tax reliefs available to property owners
  • purchase property with tax-efficiency in mind
  • track tax changes that will impact on your cash flow, tax position or accounting practices
  • prepare and submit landlord accounts and personal tax returns in a timely and accurate manner
  • remember any interim and final payments through the year
  • invest rental income

Tax Agility has worked with Xero since 2011 as a gold partner and certified Xero adviser. This means that our clients get exclusive access to a whole host of benefits, including 25% discounts on Xero subscriptions. As experts in Xero, Tax Agility can help make your transition to Making Tax Digital as smooth as possible. Take advantage of the free 30-day trial and contact us today on 020 8108 0090.

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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Xero: How Xero can help with Making Tax Digital

Making Tax Digital is the Government’s imminent legislative initiative that comes into effect for VAT-registered businesses earning above the VAT threshold (£85,000) on 1 April 2019. This will require qualifying businesses to migrate their current financial recording systems to a dedicated digital, cloud accounting platform, and will become ubiquitous for all businesses by April 2020. This means that sole traders, partnerships, landlords and commercial property owners and trading companies and corporations will all be subject to these changes in little over a year.

It’s a big change. Under Making Tax Digital, finances are required to be reported quarterly rather than annually, though the annual tax return is still included under this. Essentially, Making Tax Digital represents a more effective way for the Government to stay updated on companies’ financial reporting – providing less room for error, miscalculation and fraud when it comes to processing tax.

Transitioning your business’s finances to the cloud sounds like a complex and calculated process and indeed it can be unless you have the right help. The scale and scope of the operation depend on the size of your business and the quality of your existing bookkeeping, but some cloud accounting platforms exist that can facilitate a quick and painless migration such as Xero.

In this post, we take a look at the various ways in which Xero can improve your business’s financial accounting and streamline the bookkeeping and accounting process.

Why choose Xero?

There are a number of reasons for choosing Xero as your dedicated cloud-accounting platform, all of which stand to benefit your company and its financial position and stability. Aside from the obvious benefit of being listed by HMRC as a compatible Making Tax Digital platform, using Xero’s accounting software can assist with:

Simplifying and streamlining your accounts

With an intuitive and intelligent interface, Xero is the perfect solution for businesses looking to refine their approach to bookkeeping through clear, concise accounting. The Xero system is simple and straightforward to use, and as it’s built specifically for small business owners and operators, it means you’re not required to have an in-depth knowledge of accounting in order to use it, understand it and in turn, better understand your business’s finances.

Understanding your business’s financial position

By engaging with Xero’s illuminating dashboard overview, you’re provided with a clear, comprehensive and unobstructed view of your business’s financial stability. From automated daily bank feeds to outstanding invoices owed, Xero is compatible with a number of third-party technologies and platforms, and its dashboard offers a holistic insight into your finances - giving you the tools to better understand your business’s positioning and health.

Unadulterated access

With a strictly digital hosting network, Xero’s client data is stored entirely on the cloud. This means that you can access the platform from anywhere in the world; the only requirement is an Internet connection and a compatible device. Further to this, you don’t need to back up your files when using Xero. The secure servers are in place with all necessary redundancy measures, so accessing everything is a remarkably painless affair.

Improving your business’s operations

As a cloud-based platform, Xero provides freedoms that many small businesses once thought out of reach or unattainable. With no need for IT maintenance, no over complicated setup process or the tediousness associated with having to serve a client with a physical invoice the week after completing a job, Xero can make your business a smoother, simpler operation.

Better security of your financial data

Incorporating complex encryption technology into the storage and transference of your business’s financial data, Xero’s cloud accounting technology is a reliable and secure means of keeping your accounts in order. With your data encrypted in both storage and sending phases, any records that you submit online are efficiently and effectively safeguarded - which means your business and its interests are also better protected.

Aligning yourself with future Making Tax Digital Requirements

Despite coming into effect for VAT-registered businesses above the threshold on 1 April 2019, future instalments of the MTD legislation are imminent and will incorporate other forms of business. The ramifications of this are yet to be seen, but depending on how the introduction of MTD for VAT-registered business pans out, there may be changes to the existing and planned tax lodgement processes - so embracing the cloud and familiarising yourself with a platform such as Xero is imperative.

How can Tax Agility help?

As a gold partner of Xero, Tax Agility is privy to a handful of benefits that other tax agents and accountants aren’t. As London’s local accountants for small businesses, we’ve been working with Xero since 2011 and as such, have cultivated a reputation for being experts when it comes to using their digital cloud accounting software – becoming certified Xero advisors in the process.

This certification means that we’re able to provide our clients with special benefits when it comes to subscribing to Xero and using their technology, as well as being able to offer discounts of up to 25% for new small businesses looking to make the switch. Not only can we make it more affordable for your business to migrate its finances to the cloud, but Tax Agility is also able to provide bespoke assistance for businesses whose transition might be more complex or complicated – we’re specialists in start-up and small business accountancy and have a proven track record of delivering reliable accounting advice.

If you have any queries as to the processes by which you can migrate your business’s finances and accounts to the cloud, or would like to get in touch regarding setting up with Xero, Tax Agility can advise and assist regardless of your business type or structure. Moreover, if you’re a small- or medium-sized venture that is interested in securing the services of a qualified, specialist accountancy firm familiar with your needs and your area, London’s local small business accountants, Tax Agility, can help.

Feel free to get in touch on 020 8108 0090 and find out how you can better manage your business and improve your business’s financial positioning.

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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. 

Paying invoice on a computer with objects around

Xero Accounting: Update your business

Paying invoice on a computer with objects around

At Tax Agility, we understand the importance of proper finance management better than anyone. With online accounting soon to become mandatory due to the Making Tax Digital scheme (MTD), there’s never been a better time to update your account management.

Xero – the right choice

Xero Accounting gives you access to timely, accurate and relevant information at a low monthly cost. It’s an internationally renowned, multi-award winning piece of software. Xero is simple, powerful and compatible with hundreds of third-party apps like PayPal, meaning it integrates seamlessly into nearly every business model. It’s also one of the few online pieces of software that is government approved as fully compatible with MTD.

The advantages of Xero

Built for small business owners – Xero simplifies business accounting for small business owners. You don't have to know any accounting jargon to understand your finances.

Online hosting – As all of your data are stored in the cloud, you can access it from anywhere in the world - you only need an Internet connection. You don't need to worry about backing up your files either, as they will be stored on secure servers with multiple redundancies in place. In addition, there is no need to manually apply software upgrades since the vendor takes care of this for you.

Electronic bank feeds – Xero can be configured to receive your bank statement data automatically, cutting down on administration time. It also presents your data as an electronic bank feed, bringing all of your information together on one screen - no more endless searching through bank statements and invoices.

Automated transactions – Most businesses have recurring, fixed-price transactions, and these repetitive processes are easy to automate. Xero excels at managing repeat payments, plus it also records them for your convenience, letting you view your payments quickly and easily.

Simplified client invoicing – Keeping track of all of your business' invoicing can be hard, and forgotten invoices can hamper your growth if you don't recover money that is owed to you. Xero allows you to set invoice reminders and send your clients emails reminding them about unpaid invoices, so you don't have to manage them yourself.

Flexible reporting – Xero lets you view and share reports and budgets in real-time, so you don't have to wait until the end of the month. It also allows you to condense years of paperwork into simple graphs that plot the shape of your business, how it’s growing and what direction you’re going in. This information is critical in making informed financial decisions about your business. Our accountants can help you make sense of the reports, so you can understand what areas need work and whether your business is on the right track to financial growth.

Easy collaboration – A major benefit of cloud accounting is that you can allow other key users - your bookkeepers and/or your accountants for instance - to access relevant information wherever they are. This means they can review the financial details with you in real time, even over long distances.

Multiple third-party software enhancements – Xero is compatible with over 400 pieces of third-party software that can be used to expand its functionality. For example, the software tool WorkflowMax can aid with project management, and the electronic API Salesforce can offer enhanced Customer Relationship Management (“CRM”) functionality by updating both itself and Xero simultaneously.

Extra benefits of Xero

As Gold Partners with Xero, we have extensive experience in working with the software, having helped businesses to use it since 2011. Working with us gives your business access to all of the perks that only a Gold Partner can provide, including insights from Xero-certified advisors to help you use the software to your advantage.

If you wish to discuss Xero Accounting in more detail, please call us on 020 8108 0090 or fill out our Online Form.

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Cloud accounting

3 easy tips to make the most out of cloud accounting

Cloud accounting

The government’s Making Tax Digital scheme is fast approaching and with all businesses expected to be reporting their tax online by April 2019, time is running out to switch to cloud accounting. At Tax Agility, we have years of experience with Xero and Freeagent accounting software, and we’ve got a few easy tips to make your transition that much smoother.

1. Make sure everyone is involved

When making a transition from an accounting software installed in your local machines to a cloud-based accounting software, you need the right support, particularly if you have an immense amount of data to transfer. Getting your bookkeepers and relevant staff involved as early as possible is key. Don't underestimate the scale of change required either - get help from experts if you think the switch will disrupt your daily operations.

2. Choose the right software

There are many options for cloud accounting software on the market right now and each has its own advantages and disadvantages. For example, if you already understand some basic accounting principles, you may choose more sophisticated software like QuickBooks. However, if you want something that is easy to use without having to learn any accounting principles, consider Xero. Other features to consider depend on your set-up, like if you need to have a payroll function or if you would like to integrate inventory management with an accounting system.

At Tax Agility, we’re gold partners with Xero, which gives us access to exclusive benefits that we can share with you. Our certified Xero experts are also available to help you get the most out of your software. You can learn more about Xero in this post: "Xero Accounting: update your business".

3. Don’t be afraid of asking for help

Just because you’re on track to get everything sorted, doesn’t mean you shouldn’t ask for help. One of the greatest benefits of cloud accounting is the streamlining effect it can have on your business when executed properly. Once integrated into your operations, it would be foolish not to take advantage of it.

Although most cloud accounting software is designed with ease of use in mind, many offer add-ons to allow each business to tailor the software to their own needs further. Professional advice can help you set up the add-ons you may find useful in the future, and get you into the necessary habits that will keep everything running smoothly.

Talk to cloud accounting experts

When you do decide to make the transition, the structure you end up with is likely going to be the one you rely on for many years to come. It’s vital to get it right the first time around, especially as it’s going to dictate how you manage your business finances and taxes going forward.

To find out more about how our tax accountants can get you comfortable with cloud accounting, get in touch on 020 8108 0090 or fill out our Online Form.

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Why so many SMEs are switching to Cloud Accounting

In this day and age, every business relies on some kind of technology to help with productivity. For example, we use a computer instead of a typewriter, we have a broadband connection as opposed to a dial-up. In this field of accounting, more and more SMEs are starting to move into cloud-based accounting systems like Xero. At Tax Agility, we have been using cloud accounting for some time now, and we would like to share the benefits of going to the cloud.

It may be beneficial to explain that cloud accounting refers to accounting software that is hosted on remote servers, and where you record transactions over the internet. This practice means you don’t have to install the software in your computer, or own a dedicated server.

Benefits of the cloud

Do work on the go

By using cloud accounting, you are no longer tied to the particular computer in your office that runs the accounting software. You can now easily access your accounts from anywhere - in a coffee shop, at home, in another country. As long as you have internet access you can access the cloud.

Moreover, cloud accounting software is device dependent. You can access your account from any device - desktop, laptop, tablet and smartphone. This means even if you just take your smartphone on a holiday, you can still be on top of things in the event when an urgent accounting request happens.

Account information is kept safe

The cloud always backs up the work you’ve done, keeping it safe from loss. If there’s a problem or data was accidentally deleted, you don’t have to fret as it can be easily recovered. In business, time is money, keeping your data safe means you don’t need to waste time trying to recover any lost data.

Best of all, the cloud protects your data from cyber attacks or break-ins. This means you don’t have to worry about your accounting data being stolen. Think about the negative effects if your business’ financial information were stolen - the risks of someone stealing from you or using the data against you - each risk has plenty of undesirable and daunting consequences. Cloud accounting can significantly lower your risk and exposure.

Colleagues can collaborate on it

Do you have an accountant that manages the bookkeeping and finances for your business? Sometimes that can feel like you’ve got a bit less control over the business. By using cloud accounting, you can always  keep a watchful eye look alongside your  accountant.

For larger organisations with satellite offices in other countries, cloud accounting means colleagues from across the globe can access the data in real time. There isn’t a need to print out and send the spreadsheet via another method to colleagues in another country. Cloud accounting saves time and effort.

At Tax Agility, we are a team of chartered accountants, highly experienced and knowledgeable in all accounting needs. If you have yet used cloud accounting, perhaps it is time to start now. We can help to advice and guide you along the way.