Landlords can claim a special tax allowance of up to £1,500 per property for expenditure on energy-saving insulation. This includes loft, wall, floor or hot water system insulation installed in residential properties.
This is a one-off allowance for expenditure made before 6 April 2015. It cannot be claimed by those who are claiming rent a room relief or if there is commercial letting of furnished holiday accommodation.
See the details here:
Under this scheme, for a limited period and subject to meeting certain conditions, new businesses may qualify for a deduction of up to £5,000 from the employer NICs that would normally be due – for each of the first ten employees they take on.
The NICs you are entitled to withhold under the scheme does not have to be repaid at a later date.
The NICs holiday is voluntary – you do not have to take advantage of the scheme. If you decide not to apply or you do not meet the qualifying conditions, you must simply calculate Class 1 employer NICs in the normal way and pay them to HM Revenue & Customs (HMRC) with your monthly/quarterly payment.
Business location – why it’s important
You can only apply for the NICs holiday if your principal place of business is located within designated areas of the UK at the time your business starts up. The included countries and regions are:
•Northern Ireland
•Scotland
•Wales
•East Midlands
•North East
•North West
•South West
•West Midlands
•Yorkshire and Humber
The NICs holiday is available to new businesses that start up during the period from 22 June 2010 to 5 September 2013.
For further information follow the link.
http://www.hmrc.gov.uk/paye/intro/nics-holiday/index.htm
If you are unsure whether your business falls within a qualifying region, you can check by reading more about this in the guide on checking your business location.
Salary vs Dividend
One major benefit of incorporation is the ability to extract profits by way of dividends. The main advantage is in National Insurance savings as no NICs are payable on dividends, whereas a salary payment would attract employee NICs of 12% or 2% and employer NICs of 13.8% (2012/13 figures).
Dividends also come with an associated tax credit (the dividend is deemed to be paid net of the 10% tax credit). Dividends are taxed at a rate of 10% up to the basic rate limit, which is matched by the tax credit, so no additional tax is payable on dividends until the basic rate limit is exceeded. The dividend higher tax rate is 32.5% and the dividend additional tax rate is 42.5%. A payment of salary will attract tax at the taxpayer’s marginal rate of income tax (20%, 40% or 50% as appropriate).
However, unlike salary payments and employer NICs, dividends are not deductible when calculating corporation tax profits and must be paid out of after-tax profits.
A dividend can only be paid if there are sufficient retained profits. In addition, various company law requirements must be met.
The best results will depend on the circumstances as the decision whether to take remuneration or dividends will depend on the interaction of various factors – respective rates of income tax, corporation tax and National Insurance contributions, any other income that the taxpayer has and whether the company has sufficient retained profits.
Example:
Tony is the director and sole shareholder of a company. He has profits of £25,000 and wants to know whether to take a salary or a dividend. It is assumed that tony has received a small salary equal to his personal allowance.
Salary
| Profits |
25,000 |
||
| Less Employer’s NIC |
(3,031) |
||
| Available to pay as salary |
21,969 |
||
| Less Income Tax @ 20% |
(4,393) |
||
| Less NIC @ 12% |
(2,636) |
||
| Retained by shareholder |
14,940 |
||
There is no corporation tax to pay as taxable profits are reduced to nil after deducting salary of £21,969 and employer NIC of £3.031)
Dividend
| Profits |
25,000 |
||
| Less Corporation Tax @ 20% |
(5,000) |
||
| Distributed as a dividend |
20,000 |
||
| Income Tax |
0 |
||
| Retained by shareholder |
20,000 |
||
The gross dividend (£20,000 x 100/90) of £22,222 does not take the shareholder’s income above the basic rate limit so no additional tax is payable on the dividends. The tax on the dividend (£2222) is fully matched by the associated tax credit In this case; dividends are clearly more beneficial than a salary. Tony retains £20,000 of the profit by taking a dividend and only £14,940 if a salary is taken.
This guide is produced for general guidance only. Please seek professional tax advice before undertaking any tax planning measures as personal circumstances can differ and other considerations may need to be taken in to account before acting. Tax rules and legislation are constantly changing always seek professional advice before proceeding.
Even the smallest business can host an annual, tax-free social function for its entire staff, including the directors and their partners. As long as the cost per head is less than £150, employees are not taxed for having a good time, well not yet anyway, and the company benefits from full tax relief on the expense incurred.
Remember, however, that the figure of £150 is an exemption, not an allowance. If the £150 figure is exceeded, the whole amount becomes taxable for inclusion on the P11D.
Strictly speaking, all benefits are subject to tax and NICs, unless there is a specific exemption.
However, sensible practical administration of the tax system determines that benefits of a trivial nature (for example, a seasonal gift of a turkey or an ordinary bottle or two of wine) should not be treated as a benefit.
Anything more lavish in quality or quantity remains chargeable. Helpfully, there is no monetary limit to determine what a trivial benefit is.
Follow the link for more information: http://www.hmrc.gov.uk/guidance/480_chapter5.pdf
By transferring assets into joint names prior to a sale, you can utilise your spouse’s or civil partner’s annual capital gains tax exemption as well as your own if he or she as not used it. For 2012/13 the annual exemption is £10,600 which means that a couple can make gains of up to £21,200 before paying any capital gains tax.
Transfers between spouses and civil partners are treated as a no gain/no loss transaction and hence the spouse/civil partner steps in to the shoes of the other holder, taking over their base cost and length of ownership.
This can be especially useful when selling investment properties, although stamp duty land tax consideration need to be taken in to account.
Example
Mr Smith (a higher rate taxpayer) sells shares in 2012/13 and realises a taxable gain of £20,200.
He utilises his annual exemption and pays tax on £9,600 @ 28% = £2,688.
If Mr Smith had transferred the ownership in to joint names prior to the sale then Mr and Mrs Smith would each have a taxable gain of £10,100, which would be covered by the annual exemption of £10,600
By using their annual exemptions £10,600 each) they would incur no tax on this gain, thus leaving them £2,688 better off.
This guide is produced for general guidance only. Please seek professional tax advice before undertaking any tax planning measures as personal circumstances can differ and other considerations may need to be taken in to account before acting. Tax rules and legislation are constantly changing always seek professional advice before proceeding.
Under the Approved Mileage Allowance Payments (AMAP) scheme employers can pay employees tax free mileages rates when they use their own car for business. Provided that the amounts paid do not exceed the rates set by HMRC, no tax liability arises and there is nothing to report on the P11d.
However, many employees are unaware that if their employer pays them a rate that is less than the approved rate they can claim a tax deduction for the shortfall. The approved rates for 2012/13 for cars and vans are 45p per mile for the first 10,000 business miles in the tax year and 25p thereafter.
Example
An employee who uses his own car for work and in 2012/13 undertakes 9,000 business miles. His employer pays a miles allowance of 30p per mile. The employee receives a mileage allowance of £2,700 during the year.
However, at the approved rate of 45p per mile for the first 10,000 business miles, the employer could pay him a tax free allowance of £4,050 (9,000 miles @ 45p per mile). This is known as “the approved amount”.
The employee can claim a tax deduction of £1,350 for the shortfall between the approved amount (£4,050) and the amount he is actually paid (£2,700). If the employee pays tax at the higher rate 40%, this will save him £540.
19 Jul 2012 / By taxinsider
The annual investment allowance is not available in respect of cars. However, it is still possible to obtain a 100% deduction against profits for a car purchased for your business by choosing a car with very low CO2 emissions, Cars purchased on or before 31 March 2013 qualify for the first-year allowance if the CO2 emissions are 110g/km or less. However, for cars purchased on or after 1 April 2013 and on or before 31 March 2015, the FYA is only available for cars with CO2 emissions of 95g/km or less. Make sure you keep all receipts for expenses incurred in this way.
Example:
John has a small family business and is looking to buy a company car.
He chooses a car that has CO2 emissions of 105 g/km and which cost £15,000.
As the car’s CO2 emissions are less than 110 g/km he can claim a 100% first-year allowance thereby obtaining an immediate write-off against profits of £15,000.
If he pays tax at the small profits rate of 20% (financial year 2012) claiming the 100% FYA rather than an 18% WDA will save tax of £2,460 in that year. Choosing a low emission car also minimizes the benefit in kind tax that John will pay on the company car.
Follow the link http://www.hmrc.gov.uk/manuals/camanual/ca23153.htm or see your accountant.e company car.
Research and Development (R&D) Relief is a Corporation Tax relief that may reduce your company or organisation’s tax bill by more than your actual expenditure on allowable R&D costs.
Currently R&D expenditure carries a 225 per cent relief in the 2012-2013 tax year.
At present only 12 per cent of eligible firms make use of R&D relief. If your one of the 88 percent that does not claim relief then talk to your accountant, or better still call us.
Follow the link for further information: http://www.hmrc.gov.uk/ct/forms-rates/claims/randd-tool.htm
The decision follows a review prompted by feedback from professional and business bodies who argued that the tax department’s “helping hand” approach to paperwork was more of a hindrance.
After reviewing the record check pilot programme and listening to these views, HMRC director of local compliance Richard Summersgill acknowledged “the need for a fresh approach”.
The results of the review published on Friday 3 Febraury, showed that of 2,437 business records checks carried out up to 4 January 2012, 28% of businesses received an “amber” rating showing the existence of some issue with their record keeping, and another 11% were rated as “red”, bad enough to require a follow-up visit.
The scheme has had a fraught gestation period, with advisers concerned about the visits turning into fishing trips for tax investigations and the stance of their professional indemnity insurers. To make matters worse, HMRC then embarked on a pilot programme last April without informing professional representatives.
While publicly Summersgill and senior HMRC figures continue to talk up the merits of helping businesses improve their record-keeping, the scheme was trimmed back from a planned 50,000 to 20,000n visits a year when the full roll-out began in September 2011.
Even with the amended programme, HMRC estimated the programme would generate benefits worth £124m from improved record keeping (and tax receipts) through the period covered by the government’s current spending review. The speed at which HMRC appeared to be implementing the programme was one source of discomfort for advisers, but following the latest review, all new appointments will be put on hold until a new process is devised and put in place after the turn of the financial year in April.
But the sting in the tail is likely to remain. Further recommendations in the latest paper call for a potential “tax intervention” if companies with inadequate records fail to improve. “In extreme circumstances a penalty might be applicable,” the internal document said. “If a business is referred for a full audit and it is found that tax returns submitted before, or after, the referral were inaccurate and that inaccuracy was a result of inadequate record keeping then a record-keeping penalty should be charged in addition to any other penalty due.”
Extract from accountingweb.com
When you can get tax relief for travel and subsistence costs
If you’ve got to make journeys for business purposes you can deduct your travelling expenses from your taxable income – so you’ll pay less tax.
What are business journeys
You can only get tax relief on the cost of business journeys. These are when, as part of your job:
But business journeys don’t include:
If you’re not sure if a place you travel to counts as a permanent workplace telephone your Tax Office for advice.
Travel expenses that qualify for relief
You can get tax relief on the necessary costs of business travel like:
But you can’t get tax relief for things that aren’t directly related to the business journey – like your newspaper or private phone calls.
