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.

Tax Affinity Accountants is pleased to announce that we have been awarded the Best Business of 2017, and have been recognised as one of the Top Service providers in our field of expertise by an Independent reviewing panel. A proud member of the Federation of Business this award was external to the FSB and a surprise award.

Independently recognised
Our Worcester Park branch was commended for providing a consistently high quality service in our area of business (Tax and Accounting). The independent review team reviewed Tax Affinity Accountants using a 50-Point Inspection which included everything from checking reputation, history, complaints, ratings, satisfaction, trust and the cost to the general public. In short overall excellence.

Unexpected review
As you can image this has been a very pleasant surprise as we did not even know we were being independently reviewed and did nothing different from what we normally do. We were simply providing the best service we can as normal for every member of the public who approaches us for advice and support.

Appreciation
We would like to thank all of our customers for allowing us to be part of their lives and letting us help and support them and their businesses.  We enjoy helping every self employed person and feel immense sense of pride and happiness when we see our clients businesses expand and  grow. In some cases we have seen you guys start from absolutely nothing to a multi million pound turnover within a couple of years.

Understanding all the hard work, and long hours it takes for each self employed owner to make their business a success. We have always been there to help and support you and congratulate you on your hard fought success.

This award is also recognition for all the staff at Tax Affinity Accountants for going the extra mile and ensuring clients are 110% satisfied. Their long hours worked and late finishes to ensure each clients work is done on time and as tax efficiently as possible means this a reward for their hard work.

And finally, we would like to thank the reviewers for their glowing recommendation and wish them the very best for the future as well.

By Andrew Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. With branches in Worcester Park, Kingston upon Thames, Cheam, and Surbiton they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting companies, contractors and self employed people throughout the UK, they regularly help clients with their payroll and pension. And help grow their business by 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.

Thousands of reminder letters from HMRC have begun to drop on across door steps in the UK. The tax year ended 5/4/17 ie 2016 -2017 self assessment is now due to be completed and the sooner you do it the sooner you can get a refund of income tax or know how much you need to save and pay.

If you already have a personal UTR - unique tax number then the letter may have already arrived or will be on its way. If you do not then you may need to ensure you or your accountant has applied for one to allow for its submission.

Who needs to do a tax return?

You’ll need to have a personal tax return calculated and submitted if, in the last tax year:

• you were self-employed in a previous tax year, or had income in any capacity other than employed ie income from overseas, property, dividends, sale of investment property or assets etc
• you received more than £2,500 in untaxed income, for example from tips or renting your property etc - if you received less than £2,500 you may still have to complete a tax return
• you received income from your savings / investments which was £10,000 or more before tax
• your income from dividends from shares and investment portfolio's was £10,000 or more before tax
• you made profit(s) from selling things like shares, a second home or other assets and need to pay capital gains tax to HMRC
• you were the director of a limited company registered at Companies House - unless it was for a non-profit organisation (limited by guarantee or registered charity) and you have not been paid or received any benefits, like a company car, medical cover, gym, travel, company phone etc
• your income (or your partner’s) was over £50,000 and one of you claimed child benefit in the tax year 16/17
• you have had some income from abroad that you needed to pay tax on - the money need not be exchanged into Pound Sterling or come into the UK for it still to be taxable
• you lived abroad and had a UK income - which more than likely was declared as non-domiciled income and therefore not tax correctly eg rental property and overseas landlord
• your employed income was over £100,000 - eg higher earner with possibly a P11d also
• you were a trustee of a trust and/or registered pension scheme - and therefore like a company director are required to clarify your tax position each year
• you had a P800 form posted to you from HMRC saying you may not have paid enough tax last year - could be due to your tax code not deducting the correct amount of tax
• you fall into a certain category of worker eg religious minister or Lloyd’s underwriter etc
• if you’ve been told to submit a tax return by HMRC - even if it just an email not a letter

If your not sure contact an experienced quality accountant like Tax Affinity Accountants and they would be happy to advise.

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 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.

IR35 is the name of piece of 'intermediaries legislation' by HMRC which is designed to establish whether a contractor is considered self employed or employed for tax purposes.

An investigation can be triggered by HMRC either as a random check or when they find a contractor that they suspect of being declared as self employed but actually working in a manner like an employee and therefore paying less tax than normal. They call such a person a 'disguised employee'.

There are certain key signals to HMRC if someone is a 'disguised employee'. And a few of these are listed below:

• A person working through their own limited company with relatively low turnover, is the sole director, has low expenses, pays himself/herself the minimum wage and then has large dividends.
  
• A limited company with a spouse as a shareholder.
  
• Limited Company being used by a freelancer to work
  
• A freelancer who is not spending any money or has any real risk or expense in finding work e.g. office rent or marketing fees.
  
• A freelancer thinking that they are safe behind their limited company tend to have irregularities in their records and accounts and usually inevitably give away their position by their behaviour.
  
• Turnover trends and levels over the course of time.
  
• Trends of gross profit rates over the course of time.
  
• Dividends that seem too low to account for the owners lifestyle, and cash inserted into a company with no clear origin.
  
• Lack of business letterheads and business card etc
  

Contractors therefore need to be aware and compliant to the rules and regulations of working and make sure certain things are in place to ensure safety for both the company they are working for and for themselves.

An experienced quality accountant like Tax Affinity Accountants can help you to be safe and ensure procedures and practices are in place to ensure you are compliant. If you are worried you should contact us as soon as possible.

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 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.

Sole Trader v Limited Company

A difficult question that the self-employed face is whether to trade as a sole trader/partnership or to trade as a limited company. However, the answer isn’t definitive and is dependent on many factors ranging from the type of business you are running to the type of person you are. Whichever one you choose has different implications for tax, legal and financial responsibilities. The aim of this article is to give you an insight to the advantages and disadvantages in terms of tax purposes of being a sole trader/in a partnership or forming your own limited company. Hopefully it will inform you on the structure most beneficial to you.  

Legality

As a sole trader, you are the business. You have full control and ownership of the business and are able to manage it in any way you like. On the contrary, a limited company is its own legal entity. Instead you serve the company as a director of the company and act as a shareholder. In most cases, you are considered as an employee but this status is not automatically granted in terms of Employment Law, the National Minimum Wage or for Tax Credits.

Tax – Sole Trader

You are subject to income tax on the taxable profits of your business. For the tax year 2013/14, you pay 20% tax on income between £0 - £31,785 and 40% tax on income between £31,786 - £150,000. Income above £150,000 is taxed at 45%. The personal allowance amount for persons aged under 65 is £10,600. You are also required to pay Class 2 & 4 National Insurance contributions (NIC). Class 2 NIC are at a flat rate of £2.80 per week. However, you may not need to pay Class 2 NIC if your earnings are below £5,725 for the whole year. Class 4 NIC is calculated based on your profits for the year. For 2013/14, you pay 9% on annual profits between £8,060 and £42,385 and then 2% on any amount over that.  Any trading losses you incur on your business can be offset against other your income to reduce your tax liabilities.

Tax – Limited Company

For a limited company, it pays corporation tax on its taxable profits. Company tax rates are lower than the higher rates of income tax. If you are employed under your company and taking a salary, your earnings from that employment are subject to income tax and Class 1 NIC due through PAYE (Pay As You Earn). The amount you pay is dependent on your earnings. Shareholders of the company who are on a higher tax bracket may have to pay higher a higher tax rate on any dividend income they receive.  Losses from the company can only be offset against its other income but not against your income as an individual.

What does it all mean?

Now for most people, the above two paragraphs may have confused you further. But here is a scenario that will make things easier to understand and hopefully give you enough information to aid you in that important decision.

You have a trading income of £30,000 pre tax and wish to extract all the profits for yourself. As a sole trader, you will be taxed at around 29% for any income and NI in excess of your personal allowances. The total tax liability including the Class 2 & 4 NIC amounts approximately to £6,000.20 (assuming normal personal allowance of £10,600). This leaves you with £23,999.80 in real terms after taxes.

The tax calculation for a limited company is slightly more complex as you have more flexibility in how you distribute the income. For simplicity sake, you take the minimum annual wage that is not liable for PAYE tax or NIC which is around £7,956.  Company profits under £300,000 are taxed at a rate of 20%.

Taxable profits are again at £30,000 which amounts to a corporation tax liability of £4,408.80 (after tax free wages). This leaves you with £25,591.20 in real terms taken as tax free dividends because it’s below the current earnings threshold of £31,785 (you only pay tax once under current rules).

So in this scenario, it is better to work as a Limited Company because you pay much less tax. However, calculations may differ depending on the trading income and how much salary you take. The general idea is that as your trading income increases, its becomes more and more beneficial to trade as a limited company than as a sole trader (40% income tax versus 20% corporation tax).

Just a Final Note

The Government has announced that the corporation tax rate will fall in 2017 to 19% and in 2020 to 18%. But in some cases you can be better off trading as a sole trader for tax purposes if your annual trading profits are not high or if you want to have losses brought forward from a previous year.

However, many businesses opt to form limited companies for reasons that extend past tax issues. A limited company status adds prestige and makes a trader appear more established and reliable.  Also should the business fail, you will not be personally liable for its debts if you were a limited company.

If you plan to sell the business after a few years then limited is again a better choice. Also if you plan to expand the business then getting finance for your business may be easier if you were a limited company. There are many varying circumstances that makes being one more appealing than the other but if you still appear unsure then feel free to contact us and we’ll be sure to offer you tailored expert advice.

By Andrew Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Surbiton they are considered in the Industry to be experts accountants for small businesses. Helping and supporting business throughout the UK, they regularly help new and established businesses to succeed.

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.