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Archives for May 2017

THE NEW FLAT RATE VAT SCHEME EXPLAINED

Have you heard about the new Flat Rate VAT Scheme and are wondering how it will affect you and your business? Don’t worry. We’ve put together a brief guide explaining what it means for you.

The New Flat Rate VAT Scheme 2017 came into effect from the 1st April 2017. This new scheme sees a new 16.5% flat rate for businesses who have limited costs. The scheme is intended to remove any opportunity for contractors to make high splurges from the scheme and to stop the “aggressive abuse” of the system. The new flat rate will affect those businesses who are using the VAT Flat Rate Scheme, but who spend very little on goods, including raw materials – an example of this is firms providing different services. If you find yourself caught by the new rules you will end up paying more VAT.

<h2>General background of the Flat Rate Vat Scheme</h2>

The VAT Flat Rate Scheme (FRS) is an accounting scheme for small businesses. Businesses can currently determine what flat rate percentage to use by reference to their different trading sectors. Those businesses who currently use the scheme or intend on joining the scheme must also determine whether they meet the “limited cost trader” criteria to include themselves under the new flat rate scheme. This is easier to determine for some businesses than others and those who are unsure will need to complete a simple test to work out whether the 16.5% rate is for them.

You should compare your VAT inputs and trading activity to see if you fall into the category of a ‘low-cost trader’ and if you do, then it’s up to you to calculate whether it will be beneficial or not to switch to the standard VAT scheme and see if you can pay less tax. If you need assistance from a reliable accountant, then visit our accountants in Melton Mowbray for expert information.

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HOW TO REGISTER FOR AND FILE YOUR SELF ASSESSMENT TAX RETURN

You will receive a fine from Her Majesty’s Revenue and Customs (HMRC) if you file a tax return late or fail to file one at all. Filing a tax return on time does not mean you pay less tax, but at least you can avoid paying any penalty.

We have put together this simple guide to help you unravel the filing process.

How to register with HMRC

You will need to first register with HMRC for self-assessment before you can file a tax return.

You can register with HMRC either by completing a form on HMRC’s website or by completing a paper form which you then post to HMRC.

If you are self-employed, you must register with HMRC immediately when you set up your business.

If your business is a partnership, you will need to register your business for partnership tax and each individual partner will need to register to file a tax return.

You must register by 5th October following the end of the relevant tax year. So for example, for the tax year ending March 2015/2016, you must register with HMRC by 5 October 2017.

How to file your self-assessment tax return

Once you return your completed application form, provided HMRC have all the information they need, they aim to send you a letter with a Unique Taxpayer Reference (UTR) within 10 working days.

Once you receive your UTR, you can log back onto HMRC’s system to complete the tax return or complete and return a paper tax return.

Time limits

The time limits for filing a tax return are strict. HMRC charge a £100 fine if your tax return is up to 3 months late and the fine increases thereafter.

Paper tax returns must be submitted by midnight on 31 October 2017 while online tax returns must be submitted by 31 January 2018.

Contact our Accountants in Melton Mowbray today for more assistance with filing your self-assessment tax return.

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2017-18 TAX YEAR AND ALL OF THE CHANGES YOU NEED TO BE AWARE OF

Thinking about tax is often the last thing on your mind when running a busy and successful accountancy firm. With changes year-on-year, even for those on top of it, understanding tax can be a burden on time and resources. That is why we have compiled a list of the major changes for the tax year 2017-18 which will affect every accountant in Melton Mowbray and beyond – all with the aim of helping you pay less tax.

Corporation Tax

Coming into effect back in April 2017, the first major change set out by the government was to cut corp tax to 19%. It is worth keeping an eye on the fact the Chancellor earlier this year stated the aim was to reduce the rate to 17% by 2020.

ISA Limit Changes

The annual allowance limits for ISAs have increased from £15,240 up to £20,000.

Personal Allowance

The total earnings for an individual before they incur income tax has risen to £11,500, and the higher rate threshold has been increased to £45,000 (in Scotland this is £43,430).

Business Rates

For businesses in England, a rate relief of 100% will be available to businesses occupying a property valued at £12,000 and under.

VAT Registration threshold

The margin for VAT Registration has risen to a minimum turnover of £85,000 for small businesses.

Money purchase annual allowance

Those individuals looking to flexibly access money such as pensions will see their allowance reduced from £10,000 to £4,000.

Domicile

For tax purposes, any person holding residency in the UK for at least 15 of the past 20 years is now deemed UK domiciled.

Salary sacrifice & employee benefits

Employer NI contributions, salary sacrifice schemes, and income tax relief have been removed. However, pensions, childcare, and various other employee benefits such as cycle-to-work have been left untouched.

For these and many other of the various tax year changes (especially ones you think will affect your clients), it is worth reading about them in more detail at www.gov.uk, where you’ll find up-to-date figures and step by step guides on the changes made and how they affect us.

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WHAT YOU NEED TO KNOW ABOUT INCOME TAX

Income tax can be very taxing for many people. Many people find it quite difficult to understand how income tax is calculated, what the various tax codes mean, who is required to pay income tax and so on and so forth. What is clear though, is that Her Majesty’s Revenue and Customs (HMRC) can come after you if you unlawfully pay less tax than you are required to pay, which is one good reason to get it right.

Below we cover the essential aspects of income tax.

What is income tax?

Income tax is tax you pay on earnings you receive. These earnings could either be income you receive from your employment, pension, some savings, rental income or profits you make from self-employment, to mention a few.

How much income tax is payable?

This depends on your tax bracket.

For the 2017/2018 tax year, the first £11,500 of earnings is a tax free personal allowance.

All other earnings above £11,500 will be charged at the following rates:

• Basic rate of 20% on earnings from £11,500 to £33,500
• Higher rate of 40% on earnings from £33,500 to £150,000
• Additional rate of 45% on all earnings in excess of £150,000

How is income tax paid in the UK?

• Your employer deducts income tax from your wages using the Pay As You Earn (PAYE) system before paying your wages to you, or;

• You file a self-assessment tax return to HMRC. HMRC calculates what you owe based on the information you provide in the self-assessment. People with complex tax arrangements or those who are self-employed usually use the self assessment procedure.

As accountants in Melton Mowbray we can offer the full range of accountancy services to individuals and businesses in the area. Contact us today.

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