How to Save Money on Your Self-Assessment Tax Return
The new year is now well underway, which can mean only one thing for self-employed small (and medium-sized) business owners; it’s time to finally get around to submitting your self-assessment tax return.
Your 2013-14 self-assessment tax return is due at midnight on 31 January 2015, as is your final payment of any tax due.
There are dozens of ways to save money on your tax return year after year; some of the most rewarding of which are summarised below:
Maximise Your Tax-Free Personal Allowance
If you’re married or in a civil partnership you can maximise your joint tax-free personal allowances by transferring income between each other so to ensure neither of your personal allowances go unused.
Your personal allowance for the current tax year (2014-15) is set at £10,000, meaning should your spouse earn less than £10,000 a year, they can transfer the unused portion of their personal allowance to you, allowing you to benefit from a slight tax break on this amount.
Use Your ISA Allowance
In the last twelve months Individual Savings Accounts (ISAs) have been completely transformed.
Whereas before you could only use half of your tax-free ISA allowance as a cash investment (the other half having to be placed into stocks and shares), under the new rules you can save up to £15,000 into your ISA each year, with a choice as to whether you want the full amount to consist of cash, stocks and shares, or a combination of both.
Invest In a Pension Scheme
Investing into a personal pension scheme (or one organised by your place of work) allows you to save money on your tax return by way of tax relief of up to £40,000 a year.
It’s possible to opt to push forward your allowance for up to three years, an option that’s of considerable use should you currently not wish to invest into a scheme for whatever reason, but you’re confident you’ll wish to do so in a few years from now. If you do have the money to invest now, however, you’re encouraged to make the investment (and benefit from the tax relief) immediately.
Use Your Capital Gains Tax Exemption
Chances are you won’t need to think twice about your Capital Gains Tax (CGT) exemption limit if you’re not planning on selling assets of particular significance (and expense).
If you do choose to sell such an asset, however, you can make best use of your Capital Gains Tax exemption limit (set at £11,000 for 2014-15) by transferring certain assets to your partner (or becoming joint-owners) ahead of selling it on.
Maximise Your Annual Investment Allowance
The Government has been increasing and decreasing the Annual Investment Allowance (AIA) for years now, with the most recent increase; from £250,000 to £500,000 in place until 31 December 2015.
Designed to stimulate business investment across the economy, this allowance can be deducted from your taxable profits. According to Chancellor of the Exchequer George Osborne, “99.8% of businesses will get a 100% investment allowance… [meaning] almost every business across Britain will pay no upfront tax when they invest in the future.”
Place Investment Capital in EIS/SEIS Schemes
If you’ve not done so already, placing investment capital into the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) allows you to receive healthy tax reliefs while helping small business owners across the country.
Investors in the EIS should expect to receive up to 30% tax relief on income tax, Capital Gains Tax, and inheritance tax. Investors in the SEIS have the potential to receive up to 78% in tax relief (50% income tax relief on invested funds, and 28% Capital Gains Tax relief).
Claim for Capital Losses
You can claim for capital losses by carrying them forward into the next tax year, and therefore reducing your Capital Gains Tax over time. These losses will be offset against your profits from the same trade.
You may also claim for capital losses by carrying back any trading losses; offsetting them against other income in the year. Unlike carrying your loss forward, however, which happens without any input from you, carrying back trading losses is a fairly complicated process and you’re therefore encouraged to speak with your accountant before carrying them back.
Maximise Your Wear and Tear Allowance
If you rent furnished properties you’re legally within your right to claim a wear and tear allowance each year, an allowance (currently set at 10% of the relevant rental amount) that allows you to offset some of the ongoing costs that come with renting such properties; with the allowance directly reducing your taxable rent.
Call Us to Save Money on Your Self-Assessment Tax Return
To speak with a professional to discuss how you can save money on your self-assessment tax return, contact us today on 020 7129 1199 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
Accessing Your Annual Tax Summary
Earlier this month the Government started sending out an Annual Tax Summary to over 24 million people across the UK breaking down exactly how their tax payments are spent by Chancellor of the Exchequer George Osborne.
Of this number, the eight million individuals who complete self-assessment returns will be able to see their break-down online immediately, while sixteen million PAYE taxpayers will receive their break-down in the post within the next four weeks (if they haven’t already) if they received a tax coding notice from HMRC for tax year 2013 to 2014.
Speaking on the issue, Mr. Osborne said:
I promised that taxpayers would know much more about how much direct tax they pay and how that money is spent. Now we’re delivering on that promise by giving 24m taxpayers a new personal tax summary. It is a revolution in transparency and it will show how hardworking taxpayers have to pay for what governments spend.
The New ISA (NISA)
Just a few months ago we created a simplified guide to Individual Savings Accounts (ISAs) here at Tax Agility, a guide that sought to help you understand the differences between cash and investment ISAs in just a few short paragraphs.
During Chancellor George Osborne's Budget speech, he set forth his plan for cash and investment (share) ISAs to become interchangeable, with each existing adult ISA set to turn into a New ISA (NISA), arguably one of the biggest announcements of Mr Osborne’s fourth and final Budget before next year’s General Election.
Supporting Savers
In what the Chancellor called a bid to dramatically increase “the simplicity, flexibility and generosity of ISAs” for the 24 million UK adults who are currently in possession of one, the New ISA will allow savers to subscribe the full annual tax-free savings limit into a cash account (previously only 50% of this annual limit could be saved in cash, see below), as well as adding a wider range of securities that can be invested within a New ISA; such as certain retails bonds less than five years from maturity.
Designed primarily to support savers, especially those who were previously hitting their annual cash ISA limits on a yearly basis, HMRC predict the economic impact of the introduction of the New ISA to be as follows:
“These measures will reduce income tax on savings for people constrained by the current ISA limits, improving incentives to save and increasing real household disposable incomes. This might feed through to higher consumption or savings in the household sector. There may also be a shift in the savings portfolio composition towards cash deposits.”
NISA Tax-Free Limits
From 1 July 2014 the new, all-inclusive tax-free NISA limits will be increased to £15,000 a year.
Previous to cash and investment ISAs becoming interchangeable, you could only place up to 50% of your annual ISA limit into a cash ISA — a limit which was set at £11,520 for the 2013-14 tax year. The Chancellor’s tax-free NISA increase to £15,000, as of July this year, represents a significant rise (£9,240) in the tax-free amount previous cash-only ISA savers can save each year.
Junior ISA limits have also been raised, though at a much lower percentage, from £3,720 to £4,000. In a policy paper published immediately after Mr Osborne’s 19 March 2014 budget, HMRC claimed that 300,000 children under the age of eighteen currently hold a Junior ISA. An estimated six million children across the UK still hold a Child Trust Fund (CTF), the precursor to Junior ISAs, with the savings from a CTF being able to automatically transfer to a Junior ISA (or an adult ISA, should the child have reached age eighteen by then) from April 2015.
Understanding the New ISA
To speak with a professional to discuss how you can get the most from the New ISA, contact us today on 020 8780 2349 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.
HMRC’s New Salary Grab: The Facts
First announced at March’s Budget 2014, the Government’s plans to grant HMRC the power to significantly increase the amount of money it can take from individuals’ pay packets for repayment of debts was picked up by The Daily Mail recently.
Though it shouldn’t come as a shock that The Daily Mail would jump on a topic such as this with venom, these changes certainly shouldn’t be ignored if you’re in the higher tax bracket and have been repeatedly disregarding communications from HMRC.
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Changes to VAT Place of Supply Rules for Digital Services
From 1 January 2015 the taxation location of digital services supplied to private individuals (B2C) is set to make a significant change from the location of the supplier of these services, to the location of the individual consumer purchasing them.
Known as the European Union (EU) VAT place of supply of services rules, these new changes will specifically relate to the sale of broadcasting, telecommunication, and digital services to individual consumers within the EU.
If you only sell digital services to other registered businesses (B2B), these changes do not apply to you. If you supply these services to both B2C and B2B customers, these changes only apply to your B2C sales.
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Looking for Accountants in London?
Say Hello to Our New Central London Office
Whether you’ve been a client of ours for years, or you’re looking for accountants in London and have considered getting in touch with us for some time, we’d like to take this opportunity to announce our latest brand-new office, ideally located right in the very heart of central London.
Our new address is below:
Tax Agility
17 Cavendish Square
London, W1G 0PH
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Contractors Now Receiving Accelerated Payment Notices (APNs)
Back in July 2014 HMRC published a list of over 1,000 schemes that they deemed to be tax avoidance vehicles, claiming that they will soon start sending out Accelerated Payment Notices (APNs) to taxpayers, including contractors and freelancers, who have invested in these schemes.
Under the new rules associated with APNs it’s mandatory for contractors who receive one of these letters to pay any tax bills upfront before appealing their case; including the full payment of all and any bills you dispute. If you don’t pay your tax bill in full you will automatically incur fees and penalties, even if you intend to appeal the decision.
Though these new rules were due to come into effect in July, HMRC have since revealed that APNs will start being sent out from August. It’s worth noting that if you are due to receive an APN you will first be sent a notice letting you know that HMRC have placed your tax payments under consideration. You should use this time to gather your payment options, as once you receive your APN you’ll have exactly ninety days to pay your bill in full.
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How to Make Redundancy Payments
If you’re the owner of a small to medium-sized business (SME) you may be lucky enough to not have had to make a single employee (or group of employees) redundant as of yet.
This luck, however, may well change over the coming months and years, and though you’ll by no means want to place your focus on this negative train of thought, when you know the implications of such a situation ahead of it occurring, you’re better placed to deal with the consequences once you’re put in a situation that requires you to go down this path.
Selecting Employees for Redundancy
If you’re required to make an actual position (or entire operation) within your business redundant, then every employee in this position will have fairly and objectively been selected for redundancy.
If, however, only a certain number of employees within a particular position need to be made redundant (often as a response to budget cuts or a reduction in company income), the most common, objective, and fair way of selecting employees for redundancy are:
- Self-Selection: When you ask for volunteer redundancies you can save your employees a lot of heart-ache if there are others who are happy and willing to accept redundancy at this time.
- Last In: The last in, first out selection process is deemed fair in most industries.
- Looking over Disciplinary Records: Another selection process that’s hard to argue against.
- Overlooking Skills, Qualifications, and Experience: Ensuring you keep on your most skilled and experienced workers.
When selecting employees for redundancy it’s imperative that any choices you make can’t be classed as unfair dismissal.
Redundancy Payment Breakdowns
Your employee(s) will be entitled to statutory redundancy pay if they’ve been working for your company for upwards of two years. Any redundancy pay your employee receives from you won’t be taxable so long as it totals under £30,000.
Depending on how long your employee(s) has been with you, you’ll have to pay out the following:
- Half a week’s pay for each year (full year) in which they were under the age of twenty-two.
- One week’s pay for each year in which they were between the ages of twenty-two and forty.
- One and a half week’s pay for each year in which they were forty-one and above.
You can calculate your employee(s) redundancy pay using this government-provided tool.
Finding Suitable Employment Alternatives
If you’re required to make an employee, or number of employees within your SME redundant, you should put some serious thought as to whether or not you can provide them with ‘suitable alternative employment’ in another area of your business, or an associated organisation.
The suitability of any employment alternatives you make to your employee(s) will be based upon the similarity of the new job compared to their previous role, the acceptability of the job’s terms, the similarity of the required skills for said job, and the rate of pay, benefits, working hours, and work location.
If your suitable employment alternative(s) are turned down by your employee(s), they may lose their right to statutory redundancy pay.
Notice Periods
You are legally contracted to give your employees the following notice periods before ending their employment through redundancy, though you may provide your employees with more than the below-stated minimums if you so wish:
- One week’s notice for employees employed between one month and two years.
- One week’s notice a year for employees employed between two and twelve years.
- Twelve week’s notice for employees employed twelve years and above.
Making Redundancy Payments
To speak with a professional to discuss how to make redundancy payments and what you owe your employees, as well as the tax implications regarding any payment made over £30,000, contact us today on 020 8780 2349 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.
Green Taxes and Reliefs for Businesses
The general idea behind the government offering green taxes and reliefs to businesses up and down the land is to encourage you to act in a more environmentally friendly manner; whether you’re a large organisation using a significant amount of energy annually, or you’re a SME that hardly uses any energy at all.
It should be remembered that, at a more general level, you can claim capital allowances when you purchase energy-efficient or low/zero-carbon technologies for your company, reducing your overall tax payments.
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How to Appeal to the Tax Tribunal
Following on from last week’s blog about how contractors and small to medium-sized (SME) business owners can appeal HMRC’s tax decisions against them, this blog aims to outline how to appeal to the tax tribunal if you disagree with HMRC’s response to your appeal review.
The tax tribunal is an independent body to HMRC, and you may appeal against decisions regarding direct and indirect tax. Direct tax issues include income, corporation, and PAYE tax, and indirect tax issues include excise duty and VAT surcharge.
Direct tax issues must be reviewed first by HMRC before you may appeal to the tax tribunal. All appeals can be dealt with by your accountant, though you will have to be present at your hearing, with your accountant in attendance as your representative.
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