Changes to UK Income tax rates changes for 19/20 from 5th April 2019:

Personal allowance:
Up to £12,500, Tax 0%
Basic rate
£12,501 to £50,000, Tax 20%
Higher rate
£50,001 to £150,000, Tax 40%
Additional rate
Over £150,000, Tax 45%

Allowances:
There are many other changes with tax allowances such as Annual Investment Allowance claimable rising to £200,000 per annum.

Dividend tax rates:
The tax-free dividend allowance is £2,000
Basic-rate taxpayers pay 7.5% on dividends
Higher-rate taxpayers pay 32.5% on dividends
Additional-rate taxpayers pay 38.1% on dividends.

Corporation Tax:
Rate remains at 19%

Directors Loans:
If loaned amount exceeds £10,000 at any point during the year then 2.5% nominal interest on the whole amount plus Class 1A National Insurance contributions (13.8%), and may need to be reported on your P11D

As market leaders and experts in Tax and accounting for business, there are of course many other changes as well and these we regularly advise and update our clients as and when the tax rules change. If you would like to become a client and receive this support and updates - contact us today.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames and Espom they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting contractors and self employed people throughout the UK, they regularly help clients grow their business providing tailored advice.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

At Tax Affinity Accountants, we often get asked what are the differences and benefits of working through a limited company compared to an umbrella company. So we have decided to explain this in a quick easy way.

An umbrella company is like an agency with whom you are employed and therefore they are your employer and not the place where you work. They will issue you with payslips and P60, P11d and a P45 at the end of your employment. They should also pay you for any sick or maternity pay as may be required. Umbrella companies will charge you for using their services and will deduct their fees from your pay. They will also ask to be refunded their employer NIC contributions paid to HMRC on your behalf again deducting this from your pay. The income tax tends to be higher than being straight forward employed on PAYE. You do not need to worry about paperwork and record keeping as the umbrella company does all this like an employer would.

A limited company is a separate legal entity to you. That you may well own as a shareholder and run as a director. A limited company can be your employer and pay you wages via PAYE like a normal employer but be contracting out your services to the place you work. And if you are the shareholder it can pay you dividends (share of the profits) periodically or on a regular basis. A limited company pays corporation tax not income tax and the tax rate is much lower than normal PAYE or via an umbrella company. There is a certain amount of paperwork and record keeping which is required and normally you will require the services of a good accountant. It is also very difficult to try to pay yourself sick or maternity pay, which is why most people do not claim these. But the plus side is as your keeping more income then this should more than make up for any loss of benefit or time spent keeping records.

Tax wise it is usually much better option to be working though a limited company compared to an umbrella company as a good accountant, like Tax Affinity Accountants, should help you save much more in tax than fees they ever charge. Helping to ensure more of your hard earned income stays in your hands.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting contractors and self employed people throughout the UK, they regularly help clients grow their business providing tailored advice.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

If you work for the NHS or for Local Government and you are a contractor then you will have been notified that there will be changes coming in as of April 2017.  We are increasingly being asked the same question by many clients who are confused and have not been advised correctly by their recruitment agnecy or end client. So we have compiled an easy bullet point guide below:

For a vast majority of contractors this means the recruitment agency or NHS / Council paying you has to decide how to pay you after April 2017. They may opt for the safest course of action / most profitable for them which may not be financially beneficial for you. And increasingly we are seeing a knee jerk reaction by most NHS and Council Management staff and recruitment Agencies is to incorrectly lable everyone the same even when HMRC does not say this in their rules.
The vast majority of NHS and Council Management staff and recruitment Agencies are wrongly saying everyone is inside the scope for IR35 just because they cannot be bothered to work out who is and who isn't and they do not care if a person pays more tax than is really due.

So have at look below at the correct options as per HMRC, that all contractors have in all ongoing negotiations:

1. Work for non NHS and local government / council companies who are outside the scope of this legislation.
2. Prove you are not applicable, and then still be paid in full to your Limited Company, same as before. You have the right to present an  independent report from an IR35 assessment company to establish you are indeed outside the scope of legislation. The report can cost around £175 depending on the company used and once you are proven to be outside the scope all parties paying you should pay in full with no deductions. Suffice to say this small fee may save a lot of money in tax and paperwork later.
3. Have tax and NI deducted at source and claim back the over paid tax at the end of the tax year. This is actually very similar to other industries where HMRC refund on an annual basis the over deducted tax after a tax return is submitted to them annually. You must make sure all such income payments are paid to your personal bank account and not to your company bank account. Otherwise you will be taxed twice.
4. Any work you do for a non NHS and local government / council company should still be paid in full to your company bank account.
5. Avoid an umbrella company at all costs as this is going to cost you the most, even more than being directly employed.  Because an umbrella company charges the contractor for employers NI contributions (approx 13%) and extra admin charges on top of normal tax and NI deducted. You can claim back over paid tax on the tax return but will not be able to claim the extra charges and Employers NI. A lot of agencies will push worker here because they will make extra money from the charges passed on. Know your rights as they cannot force you to only have an umbrella company.
6. If you do opt for employment only contract then only tie yourself in for a very short time eg 3 months maximum. As the situation is bound to change soon and the structure of contractor work will have changed and settled by then allowing you to move back to using your limited company if this is still the most tax efficient choice.
7. Do not close your limited company as it can go into a dormant or inactive status and be reused at any time and has an unlimited lifetime. The company can also do other type of work and can be used for working for non NHS and Local Council work.
8. A limited company can still carry on incurring costs without income indefinitely and this will lead to the eventual corporation tax falling and falling as expenses rise and rise in the company. With the actual earned income possibly being completely wiped out by expenses eventually. This effectively allows the director / shareholder to take more of the income earned in the limited company with little to no corporation tax.

Lastly give it time, as one door closes inevitably another opens, and once the changes start to actually be implemented recruitment agencies and the NHS Trust's will most likely find a way around the rules and may well re-employ people in a different way when they see the sea of dissatisfaction from the majority of the contractors that is bound to come.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting business throughout the UK, they regularly help clients grow their business providing tailored advice.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.