AccountancyPlace

What we will cover today Sole Trader v Limited Company Personal Tax Corporation Tax Other Tax Issues Tax Tips

Sole Trader You are Business Owner Self Employed Pays Income Tax & NI Liable for Loss

Sole Trader Registration Self Employment HMRC - within 3 months of starting Simple Form If you have not registered – please speak to us and we will get you registered

Sole Trader Important Dates Tax Year Ends 5 April Tax Return submission 31 Jan Tax Payment 31 Jan & 31 July

Limited Company Business separate legal entity You are Shareholder & Director Company pays Corporation Tax Limited Liability Improved Perception

Limited Company Registration Register at Companies House & HMRC Cost £ 50

Ltd Company Dates Accounts and Company Tax Return to HMRC Accounts to Companies House 8 Months after Year End (year end is 12 months after company registered) Annual Return to Companies House

TAX

Personal Tax

Personal Tax Year End The tax year ends on 5th April 2016 Tax Year 6th April 2015 to 5th April 2016

Tax Return Issues you a Tax Return HMRC Soon after the 5th April 2016 Also known as the Inland Revenue or Tax Man!!! Issues you a Tax Return Soon after the 5th April 2016

Tax Return Requires Tax Payer to complete a tax return Tax payer calculates the tax payable Tax must be paid on set dates Errors and there are penalties!

Tax Return Information Self employment Employment Interest received Dividends received Pension contributions Charity donations Rents received Capital gains (selling of shares/investments etc..)

Time Scale Receive Tax Return soon after 6th April 2016 This requires to be completed and submitted to the HMRC by 31st January 2017 Tax Return information is for one year 6th April 2015 to 5th April 2016

Tax Payments 31 January 2017 & 31 July 2017

How we help you April 2016 – we send our checklist June 2016 onwards - you start receiving letters/emails/phone calls We remind you about Tax payment deadlines

On the Profits of Business we pay Self Employed On the Profits of Business we pay Income Tax & National Insurance

(personal allowance for 6 April 2016 to 5 April 2017 - £ 11,000) Income Tax For the Tax Year ending 5th April 2016 the first £ 10,600 is tax free – this is known as the “Personal Allowance” After this? (personal allowance for 6 April 2016 to 5 April 2017 - £ 11,000)

Income Tax Rates After the first £ 10,600 20% between £ 10,600 to £ 42,385 40% between £ 42,386 & £ 150,000 45% over £ 150,000

National Insurance Class 2 - £2.80 per week (if profits > £ 5965) (abolished from April 2018) Class 4 – 9% on profits between £8,060 and £42,385 plus 2% on profits above £42,385

How Tax is calculated Example A N Other starts self employment on the 6th April 2014. To the 5th April 2015- Fees earned are £77,000. To the 5th April 2015 – Expenses are £7,000. Profit £70,000 (£77,000 - £7,000)

Profit £ 70,000 Less Personal allowance (£ 10,000) £ 60,000 First £ 31,865@20% = £ 6,373 Next £ 28,135@40% = £ 11,254 Total £60,000 £ 17,627 Income Tax

National Insurance Calc Class 4 NIC 9% profits between £7,956 -£41,865 plus 2% on profits above £41,865 (41,865 – 7,956) £33,909 @ 9% £ 3,051.81 (70,000 – 33,909) £36,091 @ 2% £ 721.82 Total £ 3,773.63 National Insurance

To Pay 31 Jan 2016 Income Tax £ 17,627.00 Class 4 NIC £ 3,773.63 Total £ 21,400.63 Is that all?

PLUS ADVANCE (on account) Income Tax & Class 4 NIC For year ended 5th April 2015 £ 21,400.63 PLUS ADVANCE (on account) For Y/E 5th April 2016 (50% of tax due for 5th April 2015) (£21400.63 x ½) £ 10,700.32 TOTAL PAYMENT ON 31 JAN 2016 - £ 32,100.95

Next Tax Payment 31st July 2016 (2nd payment on account) £10,700.32

Whats Next ? 5th April 2016 arrives Accounts produced Tax Calculated Example For the year ended 5th April 2016 Income Tax & Class 4 NIC is £ 28,000.00

Tax for the Year 5th April 2016 £ 28,000.00 Tax Payment 31 Jan 2017 Tax for the Year 5th April 2016 £ 28,000.00 Paid 31/01/16 ( £ 10,700.32) Paid 31/07/16 ( £ 10,700.32) £ 6,599.36 Plus 1st POA £ 14,000.00 (28000 x ½) Total £ 20,599.36

Good News We do the tax calculations for you & ensure you pay them on time But in order to do so we need information from you.

Saving for Tax Tax is payable on due dates 31st Jan & 31st July Therefore it is essential you save 25% of your income for this

2016 Corporation Tax

Corporation Tax Tax @ 20% Paid once a year 8 months after year end Tax paid by Company Corporation Tax Tax @ 20% Paid once a year 8 months after year end

Any Other Tax paid by Company? No – only personal tax on monies paid to yourself Eg. Salary & Dividends

Dividends (before April 2016) Dividends attracted a tax credit Therefore for basic rate tax payers (income below 40% level) there was NO further personal tax Minimum Salary (personal allowance) & Dividend up to 40% Level

Tax Saving via Ltd Company Profit £ 15,000 Tax Saving £ 368.16 Profit £ 25,000 Tax Saving £ 1268.16 Profit £ 50,000 Tax Saving £ 3796.44 All change from April 2016

From April 2016 From April 2016, the Government will remove the Dividend Tax Credit and replace it with a new tax-free Dividend Allowance of £5,000 a year for all taxpayers.

From April 2016 Any dividend income over that level will be subject to income tax at the following rates: 7.5% for basic rate taxpayers 32.5% for higher rate taxpayers 38.1% for additional rate taxpayers

From April 2016

Corporation Tax Changes The Government has announced an objective to reduce the main rate of corporation tax from its current level of 20% to 18% by the end of this parliament, which is in 2020. The overall rate of corporation tax is to be cut to 19% in 2017 and then to 18% in 2020.

Other 2016 Issues

National Living Wage As of April 2016, the Government is introducing a new minimum wage of £7.20, which will rise to £9 by 2020.

Employment Costs The Chancellor announced a 50pc increase to the national insurance employment allowance from £2,000 to £3,000, which will help small business owners to reduce their wage bill and could offset the New Living Wage

Employment Costs Directors of limited companies who are the only employee, will no longer benefit from the Employment Allowance and there are no new incentives or support for entrepreneurs launching a solo start-up business.

Annual Investment Allowance The Annual Investment Allowance allows small-to-medium-sized firms to make tax-deductible investments in equipment, plant, and machinery, encouraging businesses to invest in future productivity and growth. The Annual Investment Allowance is £200,000 (effective £ 200,000)

Tax Simplication !!!! Quarterly Accounts 4 times the headache

Tax Tips

Be organised Utilise personal allowances New and unused Car, CO2 emissions are 75g/km or less (or car is electric) – First year allowance Travel expenses Charity donations Pension Use of home

Buy to Let Property

Buy to Let Property New rules are to be introduced on the deduction of finance costs on rented properties, currently fully allowable against property income.

Buy to Let Property The measure is to affect those that pay tax at a rate higher than the basic rate of income tax (20%) and will eventually restrict their deduction of this type of expense to just the basic rate.

Buy to Let Property The measure will be introduced in the 2017-18 tax year and will be tapered in over the following years to give landlords time to adjust.

Buy to Let Property 40% taxpayer in the 2017-18 year will be able to claim three quarters of their finance costs for a tax deduction at 40%, with the remaining quarter deducted at 20%.

Buy to Let Property in 2018-19, half of the finance costs will be deductible at 40%, with the remainder at 20%. In 2019-20, a quarter of the finance costs will be deductible at 40%, with the remainder at 20%. Finally, from 2020-21 onwards, all deductions for finance costs against property income will be deductible at 20%.

FREE 1 to 1 meeting Tax Accounts, Business, Startups plans Etc…..

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