Bank reconciliation made easy with Xero and Liric
Xero is designed to automatically import your bank, credit card and PayPal transactions using bank feeds to make reconciling your bank accounts faster and easier.
Xero is designed to automatically import your bank, credit card and PayPal transactions using bank feeds to make reconciling your bank accounts faster and easier.
Have you received letters from The Pension Regulator (TPR) telling you to “ACT NOW” to prepare for auto enrolment? An initial letter asks you to nominate a contact to receive communications about auto enrolment, a second one will be asking for details about your chosen scheme. There will also be threats of fines or prosecution if you don’t take action.
The “staging date” for your business will be stated in the letter which is the date by which you must have a pension scheme ready for your employees to join. However, not every business will need a scheme.
A large number of small companies will be exempt from auto enrolment, if they don’t technically have any “workers” at their staging date. A company director is not a “worker” if he or she does not have a contract of employment with the company. A company with no staff other than directors has no obligations under auto enrolment if any of the following apply:
TPR doesn’t know which directors in which small companies have employment contracts.
If you are satisfied that your company meets the exemption provisions then The Pension Regulator does need to be advised. This can be done direct on The Pension Regulator website
http://www.thepensionsregulator.gov.uk/employers/what-if-i-dont-have-any-staff.aspx
You’ll need your letter code , PAYE reference and Companies House number You can re-request the letter code if you have lost it by following the link and entering the PAYE and Accounts office references.
Liric will be contacting all our clients whom we think are eligible for this exemption.
If your company does have staff other than its directors, we should talk about what preparations you need to make to get ready for auto enrolment.
Changes announced in the Summer Budget may significantly increase your tax liability if you have a property business – including a single buy to let – read on….
Now
At present, full tax relief is available for interest on a loan used in a property business. The funds may have been used to purchase the let property, to make major repairs, or just to fund the working capital of the property business.
From April 2017
From April 2017, tax relief on interest in property businesses ( including single buy to lets) will be restricted so that by 2020, interest will not be an allowable expense in computing the profit of the business, but instead will attract tax relief at 20%. The change does not affect furnished holiday lettings. The change will be phased in as follows:
2017/18 | 2018/19 | 2019/20 | 2020/21 | |
% of interest allowed as a deduction | 75 | 50 | 25 | 0 |
% of interest given as a relief at 20% | 25 | 50 | 75 | 100 |
A letting activity that has a low level of interest in relation to the borrowings will not be too badly affected, but where there is a higher level of borrowing, individuals will find that the business model has been severely undermined.
So how will this work?
Example 1
Jo is a 40% taxpayer. He has purchased a buy to let property as an investment. Here is the effect of the changes:
now | 2020/21 | |
Gross rents | 7,200 | 7,200 |
Repairs, agents fees and other tax deductible costs | 1,000 | 1,000 |
Mortgage interest | 2,500 | |
Net rental profit | 3,700 | 6,200 |
Tax at 40% | 1,480 | 2,480 |
less interest relief at 20% | 500 | |
Net tax liability on rental income | 1,480 | 1,980 |
tax increase | 500 | |
effective tax rate on “real” rental profit | 40.0% | 53.5% |
Example 2
In this case Jo has a bigger mortgage and hence more interest:
now | 2020/21 | |
Gross rents | 7,200 | 7,200 |
Repairs, agents fees and other tax deductible costs | 1,000 | 1,000 |
Mortgage interest | 5,000 | |
Net rental profit | 1,200 | 6,200 |
Tax at 40% | 480 | 2,480 |
less interest relief at 20% | 1,000 | |
Net tax liability on rental income | 480 | 1,480 |
tax increase | 1,000 | |
effective tax rate on “real” rental profit | 40.0% | 123.5% |
The tax due is more than the net funds available from the rental surplus by £280.
The new rules may also push a tax payer into the higher rate band, result in reduction of personal allowance or trigger the repayment of child benefit.
What are your options?
Please contact us to find out how this will impact on you.
01763 – 853633
Uproar amongst business owners, the entrepreneurs of now and the future has resulted in a petition being put to the Government to which there is now an official response :
“The Government is committed to supporting entrepreneurs and a fair tax system. Dividend tax reform allows further cuts in Corporation Tax and reduces the incentives for tax motivated incorporations.
The Government is fully committed to supporting business and entrepreneurship. As set out at the Summer Budget 2015, the Government believes that one of the best ways to support growth and enterprise in the UK is through lower and more competitive Corporation Tax rates.
Owners of small companies will also benefit from a range of other measures announced at the Summer Budget, including an increase in the National Insurance Employment Allowance to £3,000 from April 2016 and a permanent increase to the Annual Investment Allowance to £200,000 from January 2016. They will also pay less tax as a result of the increases to the tax-free Personal Allowance to £11,000 and to the Higher Rate Threshold to £43,000 in April 2016. We also have a commitment to go much further, taking the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 by the end of this Parliament.
However, it is not possible to continue to reduce the Corporation Tax rate without looking at the overall balance of the tax system, including taxation of dividends. Lowering the Corporation Tax rate without action elsewhere increases incentives for individuals to set up a company and pay themselves through dividends to reduce their tax bill (also known as tax motivated incorporation). Therefore the Government is reforming dividend taxation. These reforms, which will also simplify the dividend tax system, will significantly reduce the incentives for people to set up a company and pay themselves through dividends rather than wages simply to reduce their tax bill. Taxpayers and the Exchequer will now be £500 million better off as result of reduced incentives for tax motivated incorporation. Those who choose to work through a company continue to pay lower rates of tax than the employed or self-employed. But the reforms move the overall tax rates for the self-employed and those incorporated closer together, making the system fairer overall.
HM Treasury”
Click this link to view the response online and register your name:
https://petition.parliament.uk/petitions/106525?reveal_response=yes
The Petitions Committee will take a look at this petition and its response. They can press the government for action and gather evidence. If this petition reaches 100,000 signatures, the Committee will consider it for a debate.
HMRC collected an additional £26.6bn from compliance in 2014/15, and has been given an additional £800m to pursue non-compliance and tax evasion. Please click to download the latest Tax-Investigations-Update-Sept-2015.pdf (820 downloads) which highlights the increased risk posed by current HMRC activity and tactics. If you are not currently insured with us then do contact us
From the 1st October 2015 the new National Minimum Wages (NMW) will come into force
With a further increase in April 2016 for over 25’s to £7.20 per hour. The April 2016 wage will be called the Living Wage. Penalties for non compliance are already harsh and as reported by the BBC on 1st September 2015 they are getting tougher… These include doubling penalties for non-payment and disqualifying employers from being a company director for up to 15 years. The government also announced plans to double the enforcement budget for non-payment and to set up a new team in HMRC to pursue criminal prosecutions for employers who deliberately do not pay workers the wage they are due. Penalties for non-payment will be doubled, from 100% of arrears owed to 200%, although these will be halved if paid within 14 days. The maximum penalty will remain £20,000 per worker. Are you paying enough? |
One of the major announcements in the Summer Budget, affecting owner managed businesses was the proposed changes to dividend taxation. Very little was announced on Budget Day but the Government have now published a factsheet providing further details on the Dividend Allowance which also provides examples of how the new tax allowance will work when it comes into force on April 2016.
To recap:
From April 2016 the dividend tax credit will be abolished and a new dividend tax allowance of £5,000 a year will be introduced. Dividends received up to £5,000 will be covered by the new Dividend Allowance and will be tax free, but dividends exceeding this amount will be taxed at the following rates:
The Dividend Allowance factsheet gives 6 useful examples demonstrating how individuals could be affected. Click here for a copy of HMRC’s Dividend Allowance Factsheet
Although the Governments headlines say “this simpler system will mean only those with significant dividend income will pay more tax”, we believe that in most cases where business owners extract profit by way of dividends, the new rules will lead to an increase in their tax liability.
With a split of income of £8,000 (to trigger basic national insurance) and £40,000 dividends received you will be £1,450 worse off in 2015/16. A salary of £8,000 with £50,000 dividends will result in £2,200 additional tax.
Recipients of dividends who were previously did not have a tax liability will now have to pay tax if they are in receipt of dividends in excess of £5,000 and they will need to register with HMRC and complete a self assessment tax return to report this.
It is important therefore to plan for these changes in the current tax year. It may be worth paying additional dividends in 2015/16, assuming there are sufficient distributable reserves, even if this accelerates the payment of income tax for those liable at the higher or additional rate of tax.
Call Liric now to find out how the new rules will affect you – 01763 853633.
Following the General Election, the Chancellor presented a second Budget to the House of Commons on 8 July 2015. The Budget contained some important announcements and confirmed a number of changes planned for the coming years. Some unexpected changes in the extraction of profits from Limited Companies will mean that dividend policy needs to be carefully reviewed.
We have put together a PDF newsletter Second-Budget-2015.pdf (753 downloads) which contains the latest tax and financial information, which we trust you will find useful. For more information on how the changes may affect you, please contact us.
We all know its very frustrating trying to get through to HMRC on their phone lines – this weeks news reveals how bad things really are – according to BBC news :
HMRC fails to answer more than a quarter of phone calls – BBC News
Of the 64.7 million calls made by taxpayers between April 2014 and March 2015, 27.5% – 17.8 million – were either unanswered or resulted in a busy tone.
HMRC’s chief executive apologised for the figures and said the revenue’s service had not been “up to scratch”.
The service has pledged to invest £45m in about 3,000 customer services staff.
Another 2,000 staff will be moved temporarily from within the HMRC to help with the tax credits deadline and letters and forms, it said.
HMRC set a target to answer 80% of calls.
But the figures showed that in some months only about two in three (65.5%) of phone calls were answered.
In September 20.8% of people heard busy tones and could not join a phone queue when they called, while 13.7% of calls were not answered.
In total 7.2 million calls made to the HMRC last year – 11% of all calls – ended with people hearing a busy tone.
Lin Homer, HMRC chief executive, said: “Despite our best efforts, our call performance hasn’t been up to scratch and we apologise to all those customers who have struggled to get through to us.”
Ms Homer said the HMRC had already invested in new telephone equipment and online services.
The new £45m investment will come from current HMRC funding rather than from additional revenue from the Treasury, the HMRC added.
The Government has recently introduced a number of changes to national insurance and further measures affecting both employers and individuals are in the pipeline. Our factsheet provides an overview of some key changes, as well as offering advice on a range of strategies to help minimise your national insurance bill.