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Can employing a family member save tax?

Regardless of your business structure (sole trader or limited company) employing a spouse/ civil partner (or any other family member) can be one of the more efficient ways of reducing tax for your business. Such employment can take advantage of lower tax rates and personal allowances that may be available to your family member. If they are a shareholder of the company and also employed, a mixture of salary/bonuses, benefits, and dividends, could be paid thereby reducing the overall tax bill.

The work undertaken by the family member must…

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When should a business register for VAT?

The rules regarding VAT registration appear relatively straightforward — a business must register if its VAT taxable turnover exceeds the VAT registration threshold (currently £85,000, remaining at this level until at least 31 March 2024). A business which makes taxable supplies is liable to register if, by the end of any month, the value of such supplies in the previous 12 months or less is more than the VAT registration threshold; or at any time, where it is expected that the value of taxable supplies in the next…

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Latest News Round-Up

Paying employees more than HMRC’s approved mileage allowances

It seems as though the price of fuel is increasing every day. If you have employees for which you pay their business fuel you may be finding that paying at the HMRC’s set mileage rates does not cover the cost to the employee. Paying above that rate has tax and NIC consequences.

These days few employees have petrol or diesel driven company cars or vans because the tax charged on the benefit in kind generally means that it is not cost-effective to…

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Tax relief for losses – Coronavirus concession

Those businesses that have struggled through the pandemic may find that when they come to do their accounts where usually there is a profit, the business made a loss. Whether and how that loss can be utilised depends on whether the accounts are prepared using the ‘cash basis’ (recording revenue when cash is received, expenses when they are paid) or the ‘accrual basis’ (recording revenue when earned and expenses when incurred).

The ‘cash basis’ is how many businesses with turnover of less than £150,000 prepare their accounts. This method…

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Let property – Claiming the full amount of mortgage interest tax relief

Personal landlords with mortgages or loans on residential lets will be aware of the restriction on the amount of tax credit relief that can be claimed on interest paid. Usually, this amount is 20% of the interest paid in any one year. However, there are circumstances where a further restriction (a ‘cap’) may apply. The ‘cap’ is 20% of the lower of the:

– interest claimable in the tax year
– profits of the business for the tax year; and
– the landlord’s adjusted total income (after losses…

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‘Higher earner’- should you claim child benefit?

The ‘High Income Child Benefit Charge’ applies to an individual with income over £50,000 where either they or their partner received child benefit in the tax year or someone else received the benefit for a child living with them and they contributed at least an equal amount towards the child’s upkeep. Where both partners together have income greater than £50,000, the charge is levied on the higher earner; if their income is the same, the person who receives the child benefit pays the charge. ‘Partner’ does not have…

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PAYE Tax Coding – is your Code right?

Many employed taxpayers receive their wage slips at the end of every week/month and assume that the figures are correct – that the Code being used is correct. As a result, taxpayers may not realize that the amount of tax deducted by the end of the tax year is wrong. If that code is 1257L for 2022/23 then that is probably right – any other code needs further investigation.

Under the PAYE ‘Real-Time Information’ scheme employers report to HMRC electronically before making any salary or wage payments using Code…

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Latest news round-up

New Class 2 NIC rules – make sure you don’t miss out on your state pension

One of the more welcome measures in the Chancellor’s Spring Budget was the alignment of the National Insurance Contributions (NIC) thresholds for individuals with the personal income tax allowance. For 2022/23, self-employed individuals will be required to pay class 2 and class 4 NIC on profits above £11,908; from 2023/24 both class 2 and 4 NIC will be payable on profits above £12,570 per year.

However, this change brings a conundrum for those self-employed…

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Is the QCB deferral worthwhile?

When a company is sold, it is often partly for consideration which is deferred in one way or another. Sometimes this will take the form of a debt, such as loan notes. Effectively, the vendor is lending the purchaser the balance of the consideration. If certain conditions (set out in s.117 TGCA 1992) are met, the loan notes will be "qualifying corporate bonds". There are specific considerations that need to be made in such cases.

Where shares are exchanged for QCBs s.116(10) TCGA 1992 applies automatically such that, any…

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