Stephen Barrett

Knowledge is power…… and can save tax!

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It’s been longer than I’d of liked since my last blog post…..needless to say it’s been a busy period.  During the time since my last blog post there has been a recurring theme. This is that tax is complicated, so it really is worth investing in proper advice when your preparing your tax return.

Of course I would say this, but I thought I would give a couple of examples of where knowledge of the tax system and associated paperwork, has led to me either obtaining refunds or significantly reducing the tax demands issued by HMRC.

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Stephen Barrett

Points from the 2015 Summer Budget…..

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HMRC - Copyright SBA Tax & Accountancy LtdDividend taxes to be changed

This could be a big one!!  Until more details are released we won’t know the impact it will have on how small business owners remunerate themselves.

The usual dividend tax credit, which means there is usually no additional tax to pay if you are a basic rate tax payer, will be replaced by new £5,000 tax-free dividend allowance.  The tax rates on dividend is also set to be increased!  It appears the governments plan is to tax those with “significant dividend income” more, although it is unclear what will be deemed as significant?  Those with modest (I presume less than £5,000) will see no change or a cut in the tax paid.

As soon as we have more information on this we will post another blog.

**UPDATE** 

More details on the above dividends tax changes are available and it looks as though dividends within the basic rate band will attract a 7.5% tax liability!!  This means if you take around £28,000 of dividends per year and a £10,600 salary you tax bill will go from around £0 to around £2,000!!!  That is a huge increase, not so good for small businesses!!  When the finer details are known we’ll let you know. 

 

Corporation Tax

Hooray!!  Corporation tax is set to be cut by 2% by 2020, down to 19% in 2017 and 18% in 2020.  This seems to be a good thing, but I’ll reserve judgement until we see how the dividends tax is going to be changed – it may well be six of one, half a dozen of the other!  Looks like this is a small token to owner managed businesses to compensate for the increase in the dividends tax increases above. Read more →

Childcare
Stephen Barrett

Could childcare save you tax?

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Do you have children and pay for some kind of childcare? Did you know that you could pay less tax by utilising the childcare voucher scheme to pay for some, if not all, of your childcare costs? If like me one of your children has started school/preschool, which is not yet state funded, you will be paying for the cost of this childcare out of your after tax income. You may qualify for childcare vouchers which could save you around £300 for every £1,000 you spend on childcare. In a nutshell, the scheme means you pay less tax/NIC and your childcare costs are still paid for. Basic rate tax paying parents can use the vouchers to pay for up to £243 of childcare a month, so for two parents that’s £486 a month! There are a number of things to watch out for though:-

  • An “earnings assessment” needs to be carried out
  • You need to ensure all the relevant paperwork is in place
  • If you are employed you will need to discuss it with your employer
  • There is a sliding scale for those who are higher rate tax payers
  • If you run your own limited company and are not operating this scheme, maybe you should contact a proactive accountant
  • Specific scheme rules apply

If you are an employee, or run your own limited company, you could benefit from childcare vouchers. If your current accountant has not mentioned this to you, perhaps you should get in touch to find out some of the other ways we could help you #keepmoremoney

Company cars
Stephen Barrett

Company cars are rubbish, right?

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You would be forgiven for thinking that the personal tax on company cars would put your right off having one through your business. But it’s worth considering them as a tax planning vehicle (pardon the pun) to help #keepmoremoney in YOUR pocket.

How it works…
The personal tax charge on company cars is based on the official CO2 emissions of the car along with it’s showroom price when new. If the CO2 emissions and showroom price are relatively low, the tax charge will also be relatively low.

“Green” cars…
There is a reasonably new breed of cars now on the market with exactly that, lower showroom prices and low CO2 emissions. The tax liability on these cars is therefore significantly lower than you may think.  A full list of the cars by CO2 emissions can be found at http://bit.ly/1kKGpvq, the CO2 bands to look at from a tax point of view are the first three up to 94g/km.

The tax bill…
Take the Toyota Auris Hybrid, which is one of the more expensive cars, with a showroom price of almost £23,000 and CO2 emissions of 91g/km. The annual personal tax burden for the company car and having all the fuel would be approximately £985 for a 20% taxpayer, and £1,970 for a 40% taxpayer.

The tax savings…
The tax saving comes about as ALL the car running costs, including petrol, can be paid for by your company, resulting in a corporation tax saving starting at approximately £450 (based on estimated running costs, but will depend on your annual petrol and other running costs). In addition, the company gets a corporation tax reduction of £4,600 in year one due to the low CO2 emissions!

The overview…
Sadly there will still be some tax to pay on having a company car, and it’s not something that should be done on a whim. But, if you are thinking of changing your family car, it’s worth exploring if a company car would be a good option. Don’t forget that the above only applies to brand new cars.

Guiding you through it…
Although a little complex, if you’re thinking of changing your car it’s worth getting in touch to see how we could help you #keepmoremoney
t: 07869 285081
e: steve@keepmoremoney.co.uk

PFP
Stephen Barrett

Peace of mind should HMRC come knocking….

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#keepmoremoney

We are now working in partnership with PFP to offer our clients fee protection cover. In the event of an enquiry from HMRC the PFP cover will pay for the professional fees associated with defending you and your business against HMRC, which can often run into thousands rather than hundreds of pounds. If you would like more information please get in touch #keepmoremoney