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Autumn Budget 2021

Key Points from todays Autumn Budget

 

– The national living wage will increase to £9.50 an hour next year, up from the current £8.91. An increase of 6.6%.

– The Universal Credit taper rate will be cut by 8% from no later than December 1, bringing it down from 63% to 55% – this will allow claimants to retain more of their payment.

– A planned rise in fuel duty will be cancelled as a result of the current 8 year high pump prices.

– Flights between airports in England, Scotland, Wales and Northern Ireland to benefit from a new lower rate of Air Passenger Duty from April 2023.

– 4% levy to be placed on property developers with profits over £25 million.

-A 1.25% increase in the rate of National Insurance for workers and pensioners from April 2022.

-A 1.25% increase on tax on dividend earnings over £2000 per year.

RTI for PAYE – What is it all about?

 

HMRC’s new system of reporting PAYE and what it means for you and your business.

 

From 6 April 2013 you will have to start reporting PAYE information in real time. You may see this referred to as Real Time Information – or RTI. HMRC have introduced this new system for reporting PAYE for large and small business including Limited Companies with the main objective to enable more accurate PAYE reporting. The more accurate the information the better the chance that employees will be on the correct tax code and thus ideally, less mistakes from HMRC will be made.

What this really means is that HMRC will receive information on employers PAYE per pay period, rather than receiving it all at once at the end of the tax year. By receiving Pay As You Earn information in real time, HMRC have the opportunity to pick up on and amend any errors as they occur, rather than trying to reconcile a backlog of errors and inconsistencies at the end of the tax year. This decreases the likelihood of you being lumped with an unexpected penalty.

RTI is only relevant to employers, so if you operate as a sole trader, with no employee’s, the changes do not apply to you. As the director of a Limited Company however, you do have to report your PAYE salary, if you take one, when it is paid to you as an employee of your Company.

What do you have to do?

 

As an employer, each time you pay an employee, you already keep payroll information. After 6 April 2013 you will still operate PAYE in the same way but you must submit the payroll information you already keep to HMRC on or before the day you pay your employees. Your payroll software will generate the new reports you need and submit payroll information online, (please check with your current payroll software provider now to ensure all is in order). These will include details of:

  • the amount you paid your employee(s)
  • deductions, such as Income Tax and National Insurance contributions (NICs)
  • starter and leaver dates if applicable

You need to include the details of all employees you pay, including those who earn below the NICs Lower Earnings Limit (LEL), for example students.

 

You no longer submit end-of-year forms P35 and P14 and the starter and leaver process is simplified. You continue to give your employee a form P45 (employee parts) when they leave but you no longer send forms P45 (part 1) or P46 to HMRC. Instead you must report all starter and leaver information via your payroll software each time you pay someone. When you run payroll, your software gathers the PAYE information you send to HMRC, based on the payroll entries you make.

You can use any RTI-enabled commercial payroll software (there are some free packages available) or HMRC’s Basic PAYE Tools package which is designed for employers with nine employees or fewer. You submit your PAYE information online to HMRC using commercial payroll software or HMRC’s Basic PAYE Tools, if it’s suitable for you. You do this via the Government Gateway, the online entry point to government services. You cannot use HMRC’s PAYE Online Returns and Forms direct from the HMRC website to send this PAYE information.

 

It’s very important you use accurate employee details, such as full name, home address, date of birth, National Insurance number and gender before the new PAYE real time is introduced within your business. By doing this you will:

  •  ensure employees pay the correct Income Tax and NICs
  • make it easier to match the information you send with HMRC’s record of your employee
  • reduce the number of employee queries you receive from HMRC

 

The best way to check these details are correct is to verify them against a birth certificate, passport, driving licence or official document from HMRC or the Department for Work and Pensions.

 

 

RTI will be beneficial for you because your remittance advice will be accurate and the information held by HMRC will all be correct meaning no nasty surprises, no confusion and hopefully faster processing from the HMRC.

 

For further information on RTI payroll please feel free to contact us on info@jsrcharteredaccountants.co.uk,

See also http://www.hmrc.gov.uk/payerti/getting-started/index.htm

2012 Autumn Statement

 

George Osborne delivered his 2012 Autumn Statement yesterday and we have summarised the key points below:

INDIVIDUALS

  • The Personal Allowance is to increase from £8,105 to £9,440 from April 2013 for those aged under 65. This is part of a plan to ultimately increase the Personal Allowance to £10,000.
  • The band of income tax rate at 20% is being reduced from £34,370 to £32,010 from April 2013
  • The threshold for 40% income tax is to decrease from £42,475 to £41,450 in 2013/14 but will increase by 1% in 2014/15 and 2015/16 to £41,865 and £42,285
  • The 50% band currently applies where taxable income exceeds £150,000 but the rate will fall to 45% next year.
  • New universal credit for Income Tax is coming into effect next year as previously announces
  • The Capital Gains Tax annual exemption is to increase by 1% to £11,100
  • The Inheritance Tax exemption is to increase in 2015/16 from £325K to £329K
  • No new tax was implemented on property
  •  From 2014/15, pensions lifetime allowance is to reduce from £1.5m to £1.25m and annual allowance from £50K to £40K. This restriction of pensions tax relief is a £1bn tax rise for high earners
  • The ISA limit extended from April 2013 to £11,520
  • The Basic State pension is to increase by 2.5% next year which is a rise to £110.15 per week
  • Tougher measures on welfare fraud are announced. Changes to welfare benefits will save £3.7bn in 2015/16
  • Child benefit is to increase by 1% for 2 years with effect from April 2014

BUSINESSES

  • Main rate of Corporation Tax cut by 1% to 21% in April 2014 (was set to be 22%), currently set at 23% for April 2013
  • Increase in Annual Investment Allowance for capital allowances from £25K to £250K from 1 January 2013 for 2 years. This is a huge boost for expanding businesses
  • A number of tax avoidance loopholes are to be closed immediately, and anti avoidance will be further tackled by an increase of 2,500 in the number of tax inspectors
  • New general Anti Avoidance Rule still be introduced in April 2013
  • £5bn to be received over 6 years from undisclosed Swiss bank accounts of UK residents
  • Temporary doubling of small business rate relief was to end 2011 – already extended to April 2013; now extended further to April 2014
  • Tax relief for employee shareholder scheme to be introduced
  • Consultation on new tax incentives for shale gas

OTHER ISSUES

  • The planned 3p rise in fuel duty from January 2013 is now cancelled.
  • Extra £5bn capital investment to be made in infrastructure – Northern Ireland will get its share
  • Broad band investment in various areas across UK
  • Extra £600m for scientific restructure in UK
  • £270m to be made available for improvements in further education in UK
  • £1bm to be made available to expand schools and build 100 new free schools and academies in UK

Possibly a little more “something for nothing” -Enhanced Capital Allowances on Energy Saving Equipment

Previously I pointed out the potential savings that can be made and the finance available from The Carbon Trust for replacing current lighting, heating, cooling equipment etc with an energy efficient equivalent. In that article I mentioned that the cash flow savings delivered through reduced payments to your utility supplier can finance the loan repayments. This is not the whole picture. There is still a little more meat to add to the bones on this topic.

HRMC have in recent years attempted to encourage business to invest in green technology/ equipment. This has primarily been delivered through the Capital Allowance scheme.

The ‘incentive’ as provided by HMRC is the availability of Enhanced Capital Allowances to achieve tax relief on the acquisition and installation of certain certified energy saving equipment.

Check the following link to confirm that any potential equipment acquisition qualifies for Enhanced Capital Allowances before you buy http://etl.decc.gov.uk/etl/find/

The application of these Enhanced Capital Allowances effectively allow the business to claim tax relief on the full cost of acquisition and installation of this equipment in year one.

Example – assume the business spends £10,000 on energy efficient equipment and its subsequent installation. The business can then claim a reduction in its taxable profits to the extent of £10,000. This is applicable to either limited company, sole trader, or partnership businesses.

There is a further aspect to the Enhanced Capital Allowances for limited companies that we will look at next time.

Something for nothing? …

Fossil fuels, energy efficient equipment and The Carbon Trust

 

Having recently been involved in a review of utility expenses with some of our SME clients I came to challenge the notion that “you can’t get something for nothing in this life”.  Well, on the basis of some number crunching, a lot of meetings and discussions and the like with various others, it would appear that it is in fact possible to get something for nothing.

 

The technology upon which energy efficient lighting, heating, cooling etc. is based has developed so rapidly over the last, say 10 years that if your equipment was installed around that time, or before, then it just might be the case that you could change your lighting, heating/ cooling equipment “for nothing”.

 

In one of the cases that we have been looking into, as I referenced above, we have moved beyond the paper review of the costings, and are now looking at the physical equipment that is being proposed.

 

In that case the lights are ‘burning’ for approximately 50 hours per week.  It would appear that new energy efficient LED based lighting can be introduced to provide a ‘similar level of lighting’ but delivering between 65% – 70% efficiency gain on the current lighting.

 

The Carbon Trust currently provide interest free loans to SME’s based in Northern Ireland and Wales.  These loans are typically repaid over the first 3 – 4 years after installation.

 

The projected cashflow savings (through reduced payments to the electricity supplier) being delivered through the installation of these LED lights, in the case we have looked at, is greater than the monthly repayment of the Carbon Trust loan – albeit only by a small margin during the loan repayment period.  However, once the loan is repaid in full the savings all yours!

 

For more information on Carbon Trust and their interest free loan see their website: http://www.carbontrust.com/client-services/northern-ireland

 

 

Our next article will look at the Enhanced Capital Allowances position and their impact on the acquisition of energy efficient equipment.

LinkedIn Passwords Leaked by Hackers

LinkedIn has confirmed the rumors that some of its user passwords have been compromised. Some six million passwords have been said to be compromised, according to news sources this morning.

LinkedIn confirmed that some passwords have been compromised and said it would contact affected users with details on how to change their password.

Hackers posted a file containing encrypted passwords onto a Russian web forum.

Although usernames associated with the passwords were not released, the passwords themselves will surely be used to help reverse-engineer other cryptography systems. Some sources have revealed that we can also expect to see these passwords added to dictionary lists of programs that attempt to break into various accounts.

In other words — if you’re a LinkedIn user, no matter how strong your password seemed — it’s a good idea to go ahead and change it.

 

 

The Husband & wife business partnership and a healthy work life balance. Can we have both??

 

When we got married we were both studying our professional exams and training to become accountants. We were attending university together on a Saturday, studying together and living and breathing the same text books for three solid years. It seemed to work OK, however there was one fundamental difference, we were not working in the same firm. Perhaps this is why it seemed to work so well.

Given that we were ‘heading in the same direction’ it seemed inevitable that one day we would go into business together and here we are.

When we first made the decision to work together, I thought this will be great, we had just started our family and it seemed, to me, to be the perfect situation. I could work and still be flexible for my young children and not miss out on them growing up. I was going to be super woman!! However, when I actually started to think about it seriously I thought, what if we ‘kill’ each other, or even worse what if I turn into my husband!! However, we decided to risk it and in January 2010 we decided to just ‘go for it.’ I have to say, if I am honest, there have been arguements, but we have never looked back!!

Husband and wife business partnerships are on the rise, we can see this in our client list, through colleagues and friends, and when it works it seems to be working very well.

When a husband and wife go into business together they have the same end goal and dedication. This type of dedication can help young companies get off the ground. When married couples work together, their business can become like their own baby. Their emotional involvement with each other spills over into an attachment with the company, driving people to be more dedicated than they would other-wise be.

Don’t get me wrong the constant interaction, the strain of juggling work and personal life, and the trials of entrepreneurship—especially in a difficult economy—can take a toll. The key however is getting the work life balance right.

I am not a marriage guidance counsellor but I thought I would share a few of our secrets and experiences that have helped make it work for us:

Figure out how you will physically work together. This will be different for every couple. Some couples can work well in the same office space however others may need to be physically separated if they’re going to work well together. If a separate space is necessary for you to make it work, then I suggest you find a separate space.

Make clear your roles. Going into business with your spouse or partner is exciting because you are building something and you will have the same dream. However, how you visualise you get there will most likely be different. Identify each others responsibilities, you will both have different strengths so use them. That way you’ll avoid stepping on each other’s toes and hopefully minimise any arguments.

Understand your working styles. This is another one that often gets forgotten when a couple works together. When we were both training we worked for different companies and naturally developed very different working styles, you need to understand how the other person likes to work, how you each deal with stress, and go into it with similar, or at least clear, expectations about sharing the work. We clashed at the very start on our very different working styles. I am ‘hyper’ organised, like things in a certain way, and especially like a nice tidy desk. My husband however, does not share my enthusiasm for a clear desk, but we got round it, by simply buying separate trays, and once a week we go through these trays and clear it all away. That way I didn’t have to look at lots of loose paper and my husband didn’t feel he had to file everything every two minutes. It is about finding the compromise and using it.

Communicate. It is so easy to forget that communication in a work environment is different from asking if the dishwasher is emptied or agreeing about who’s going to pick up the kids from school. Make sure you’re communicating about the day-to-day stuff as well as the big picture stuff. And if you have other people working for or with you, communicate with them too. Remember you are running a business together not separately!!

Leave work at work. You don’t want to be talking shop over dinner. It’s bound to happen and lets face it, it does, but try and minimise this where possible so as not to have your lives be all work all the time.

Leave home at home. This is the other side of that coin, but it can be less visible on your radar. If you’re working together it will help if you can maintain a professional relationship that’s focused on the business. Making your grocery list while you’re balancing the books can make everything feel smashed together, which is no fun – and not productive – for anyone.

Respect each other. You respect each other in your marriage (hopefully). If your spouse is your business partner you should treat that person the same way you’d treat any other colleague, whether a boss or a peer.

If you can manage all that, you might just be able to live – and work – happily ever after.

Budget 2012: Key Points

George Osborne says his 2012 Budget will “reward work”, support working families and ‘unashamedly backs business’ but warns of need to continue his austerity drive in face of sluggish growth.

Budget 2012 Key Points:

Automatic review of state pension age to ensure it keeps pace with increasing lifespans. New single-tier state pension for future pensioners to be set at about £140 and based on contributions

Duty on all tobacco products to rise by 5% above inflation from 18:00 today – the equivalent of 37p on a packet of cigarettes. No change to alcohol duty. New duty on gaming machines at a standard rate of 20% and a lower rate for low-prize machines of 5% of net takings. No change to existing plans on fuel duty (however, please note that plans to increase Fuel by 3p from August still stand). Vehicle excise duty to rise by inflation, but frozen for road hauliers

Good news for young entrepreneurs Government considering enterprise loans for young people to start their own business.

Corporation tax cut to 24% from next month. By 2014 it will fall to 22%

From midnight, new stamp duty level of 7% for homes worth more than £2m. Any such homes bought through companies will pay 15%. Extra funding to help construction firms building new homes

CHILD BENEFIT Will be phased out when someone in a houshold has an income of more than £50,000. It will fall by 1% for every £100 earned over £50,000. Only those earning more than £60,000 will lose the entirety of the benefit

From April 2013, the 50p top rate of tax will be cut to 45p. Personal income tax allowance will be raised to £9,205 from April 2013, making people £220 a year better off. However, those aged 65 and over will no longer be entitled to the higher rate of personal allowance leaving these individuals paying around £260 more in tax per year.

It should also be noted that around 300,000 workers woll be pulled into the 40% tax bracket. Currently workers can earn £42.475 before paing tax at 40%, this limit is now to be reduced to £41,450 – This was not announced in Mr Osborne’s speech but was included in the budget document.

 

 

 

Do I Really Need an Accountant?

 

 

Chartered accountants have come through a rigorous regime of training and examinations, and have wide practical experience which they can use for your benefit. They are the general practitioners of the financial world, with the expert knowledge and integrity to give you high quality advice on any aspect of your financial affairs.You will only fill in one tax return each year, chartered accountants fill in dozens, and you can benefit from that professional expertise and experience.

No-one likes paying taxes. But effective planning to reduce your tax bill requires professional advice. Don’t make decisions based on half-understood newspaper articles, or advice from a friend – they can be so wrong that they cost you money rather than saving it.

Running a business does offer some opportunities to legally save tax. But to make the best of them, you need to talk to your chartered accountant before entering into any major transactions, so that he or she has a chance to advise you on the best approach.

You also have to worry about the tax you deduct from your employees’ wages. On the whole, they are interested in their take-home pay. However, if you, with your chartered accountant’s help, find a tax-efficient way to get cash or benefits into their hands, that can reduce your overall costs.

A lot of people think that you only need a chartered accountant if you run a business. Not true. There are lots of times when you should consult a chartered accountant for your personal financial affairs. Some people have affairs that are so complex, they need to use a chartered accountant regularly to prepare their tax return and generally advise them. But even if you are not in that category, there are still plenty of times when you could benefit from an hour or two of a chartered accountant’s time.

One of the more complicated areas of taxation is the tax charge on benefits in kind, such as company cars. If your employer suggests that you might like to buy your own car and use it for work, how much extra pay would you expect to get to make the switch worthwhile. Don’t know? Your chartered accountant does.

What about a pension? Does your employer have a pension scheme? If so, is it any good? How do you know? Not all chartered accountants give financial advice, but most can give you some general unbiased information about your pension options, and can put you in touch with a reliable adviser.

What about when you change jobs? Do you know what package you should be asking for on termination, or on taking up your new job? Will the moving allowance that you get from your new employer be tax free?

These are all questions that a chartered accountant can help you with. You may face them a handful of times in your career – a chartered accountant deals with these issues regularly. Arrange a meeting to discuss the implications, get the benefit of an hour or two of a chartered accountant’s time.

When you get married, you may not think about inviting along a chartered accountant to the wedding! But it is a good idea to check up on the financial consequences. It might be a good time for parents to make gifts that are free of inheritance tax. You may find that you can reduce your tax bill by moving your savings between you. An hour with a chartered accountant before you say ‘I do’ might help to pay for the honeymoon!

Buying a house is another time when a chartered accountant could be useful. Which is better – to take a big mortgage and keep your savings invested, or use the savings to reduce the mortgage? There is no one answer that is right for everyone, you need a chartered accountant to advise you.

And finally there is death. Asking a chartered accountant for inheritance tax advice might seem morbid – but your spouse and children won’t thank you for your squeamishness. Inheritance tax can make a hard time even worse by creating financial problems. It is a particular problem for couples who aren’t married, since they cannot pass assets to each other tax free, but all families should know what the financial consequences of a death would be – and a chartered accountant can explain it to you.

So if you are considering preparing your own tax return this year or using an unqualified accountant, why not have a quick rethink. Last January we received numerous new clients who had prepared their own tax return and wanted us to have a look at it prior to submission. In EVERY case we were able to reduce their tax bill for them by using reliefs etc that they did not know existed!!!

So who knows, this year we may even be able to persuade HMRC that you have overpaid tax.

Then you won’t just be sending in your tax return – you’ll be getting tax returned!

 

Jonathan & Stacie Ross