It's April and this means the end of the previous tax year and start of the next. HMRC's personal tax year runs from 6th April to 5th April each year.

The start of the new UK tax year from 6.4.18 means there are new opportunities and new rules and allowances that now apply. So, it is a good time to take a moment and work through what is best for you and your personal circumstances to make them more tax efficient and plan and budget for the coming year.

The UK government and HMRC are ramping up their collection system and enforcement to try to get as much money in to pay for Brexit and other services etc so it’s up to each individual to become more vigilant to how they may end up with less in their pocket than previously.

Checking your income tax code regularly is now a necessity. Call HMRC immediately if something looks incorrect or out of the norm. Tax codes can often be incorrectly produced if there is a slight mix up in info and recent news reports have highlighted more changed tax codes than usual.

Complete your personal tax return for 17/18 early. It’s not worth waiting till 31st January 2019 when its actually the payment deadline day to work out how much tax is due if your self-employed because if you are owed a tax refund this means waiting till Feb / March 2019. Also, if you do owe tax then you have 9 months to plan and budget to pay for the sooner you know how much is due.

The personal tax-free allowance goes up to £11,850 from £11,500 and dividend tax allowance falls to £2000 from £5000, similar movements with other allowances means it helps to plan ahead to decide which year to receive and declare income. A good tax accountant can help with this - note an average bean counter (accountant) does not normally keep up to date with rapidly changing tax rules and regulations so may not be able to help.

We always recommend you speak to an expert tax accountant - they should save you far more in tax than they ever charge plus their fees are tax deductible - so it’s a win, win situation if your serious about planning ahead and paying less tax the correct way.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. With branches in Surbiton , Worcester Park , Kingston upon Thames , Cheam and Epsom 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 and support.

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.

HMRC can open an investigation into your tax affairs at anytime, and can request to go back up to 20 years (although it is normally no later than 6 years). When you receive a letter stating HMRC are pending an investigation, it can be a very tense and stressful time even if you have done nothing wrong.

Investigations can occur for a variety of reasons. The most frequent is an obvious mistake that HMRC can see whilst looking through the information you have submitted to them. The mistake can be on any scale of seriousness so should not be taken lightly. If you spot a mistake and tell HMRC about it, they will still have to open an investigation still but it will be less severe and strict. Sometimes, a business selected for an investigation is totally random, HMRC will pick a few businesses in an area, maybe that are tax-fraud hotspots, just to make sure there is no tax evasion going on. HMRC are also the epitome of suspicious. If your sales figure has gone drastically up or down from one year to the next or are hugely different to the industry average, they will look into why this is.

The letter from HMRC will normally have clues on it as to why you are being investigated. It will also detail what direction the investigation will be taking. When you receive this letter, the emphasis is to act fast as if you do not have all the required information ready and at hand when the investigation starts, you will be seen as unorganised.

HMRC have the ability to request information from third-parties such as banks and other businesses. This is the extreme as normally they will look for co-operation, from the person being investigated, which will not only speed the whole process, but reduce any fines or penalties incurred. This can be just allowing them access to your files or it could be letting them interview you for a day. If you have made clear and obvious mistakes but do not allow HMRC access to your documents, the fine can be doubled, making it much worse for you.

The effect of not co-operating on your business is as follows:

1. The cost of the fine; which has no limit.
2. The cost of lost business and income whilst the investigation is going on. You could even be called for a police-style interview for a few days.
3. The bad publicity of tax evasion being hung over your business. This could lose potential and current suppliers or clients.
4. You will find it harder to get loans or funding from external sources. This is seen as deliberate avoidance of payment which is not the type of business they want to give a loan to. If you struggle to pay the fine, it can affect your credit rating too.

The general trend is that it is at this stage people will go and ask for professional help. The best people to see are tax accountants such as Tax Affinity Accountants who can help in various ways with the investigation. Some are below:

• Prepare you for the situation likely to be faced. Tax Accountants have gone through this process before and have seen clients both be let off and be found culpable. Tax Accountants are able to give advice on what type of thing you should say, how the investigation will pan out and what will happen if you get called for an interview. If this happens, you can be “warmed up” with some questions that HMRC will ask you and warned of the potentially probing questions they could ask to try and get what they want to hear from you.
• Collating information relevant to the investigation and ensuring only relevant information is provided to HMRC. This is where it is better to be using a Tax Accountancy firm already for your returns and accounts as they can provide you with all the information related to your investigation. Some people try to take everything they have (including receipts from shops and payslips) to investigations which are simply not needed. If you take everything, it can often dilute your argument as you are trying to argue over small details and take a long time trying to find the document in question.
• Dealing with any request by HMRC for further information. Sometimes HMRC will require more information for their investigation. However, sometimes this is a trick to try and get you to admit to what you did wrong or what you are covering up. A Tax Accountant will be able to distinguish between what is a genuine request and what is a ploy. They will also be able to provide a rapid turnaround for any information required by HMRC as all terms and requests will be understood rather than potentially misinterpreted by someone on their own making the situation look more suspicious or that they are not co-operating.
• Keeping the investigation to the point. Similar to the above, sometimes HMRC will see if there are any leads to other investigations they could do during this time. They might try to test other things which might not be picked up on by a person doing it alone. A Tax Accountant will make sure HMRC are only investigating what they said in their initial investigation letter.
• Negotiations with HMRC regarding penalties and potential interest. A Tax Accountant is in a better position to try and negotiate with HMRC over any penalty or fine imposed. People trying this on their own often get confused by the complicated HMRC phone system so end up at the wrong person.
• Creating a mutually beneficial pay arrangement between the parties. If a fine is levied against the business, if it is too large to pay at once, or if the business has a poor cash flow position at that date, a Tax Accountant can act as a third-party to try and create a suitable payment plan. This can often avoid the interest charges that HMRC try adding to the fine.

Even when the investigation has finished, there is no guarantee that you will not be investigated again. If you were randomly investigated one year and then the next year your profit figure increased dramatically, you could well actually be at risk of being investigated again. HMRC will not take to kindly either if you have already been found to be responsible in a previous investigation and then continue to make mistakes in subsequent years.

This blog might seem all doom and gloom but regulations are in place for the amount of tax that should be paid by either businesses or individuals. HMRC just apply this regulation as it would be unfair for some people to get away with not paying enough tax. If you have done nothing wrong, or even make an innocent mistake, HMRC will not be aggressive or disruptive. If you co-operative with them, they will ensure the investigation is as pain free for you as possible.

A Tax Accountant’s expertise and experience will help you greatly both financially and emotionally. As the fees that you may have to pay will be far outweighed by the amount of tax saved in direct negotiations with HMRC.

They know what the situation is and what the next move by HMRC will probably be. This means that anything unusual going on by HMRC will be noticed and prevents you from submitting too much information or making the investigation drag on longer than it should. The key is to co-operate with both your Tax Accountant and HMRC so the investigation is over quickly and as

CIS: Sub-contractor Tax in the construction industry

The Construction Industry Scheme, CIS, details payments for sub-contractors from contractors. As the name suggests, it is only applicable in the construction industry. When a contractors needs work from a different skills set (like an electrician, plasterer or plumber), the person(s) they ask to complete the work will be a sub-contractor.

The rules as to what qualifies as construction are complex and it worth seeking professional advice to ensure you are not over paying tax. If you are a sub-contractor in construction, you need register under CIS and be registered as self-employed.

As the contractor gets a sum of money for the work as an entirety, it is the contractor who is responsible for paying the sub-contractor. As it is a service based position, income tax and NI contribution are taken off the wage of the sub-contractor by the contractor and paid to HMRC at a rate of 20% of the total pay.

The tax year for any sub-contractor or self-employed persons is 6th April until 5th April the following year. During this time, all gross pay and deductions will be added together to work out a total pay. Then the profit for the sub-contractor will be worked out after deducting cost of materials and then any other business expenses such as training, travel or phone bills from the income.

If, at the end of the year, the contractor is below the personal allowance threshold (£9,440 for the year ending 2014, going up to £10,000 for the year ending 2015) they will not have to pay any tax. Therefore any tax paid by contractors to HMRC out of the sub-contractors pay will be refundable. See below example for Mr J Bloggs, a plasterer:

• Total Gross Income for Mr J Bloggs for year ending 5th April 2014: £12,000
• Total CIS deductions (tax and NI)  for the same period: £2,400
• Cost for materials and business expenses for the year: £5,900
• Profit for the year for Mr J Bloggs: £12,000-£5,900 = £6100

As we can see, the profit for the year is below the personal allowance for the year ending 2014 (£9,440). Therefore, Mr J Bloggs should not have paid any CIS deductions so he is able to reclaim the £2,400 from HMRC at the end of the year. See below example for Mrs J Smith, an electrician, when the profit for the year is above the personal allowance:

• Total Gross Income for Mrs J Smith for year ending 5th April 2014: £22,000
• Total CIS deductions paid for the same period: £4,400
• Cost for materials and business expenses for the year: £7,200
• Profit for the year for Mrs J Smith, £22,000-£7,200 = £14,800

In the above example, the profit for the year is above the personal allowance by £5,360. Therefore tax paid should equal 20% of £5,360, which is £1,072. However, we have paid £4,400 from CIS Tax deductions. This means that Mrs J Smith is eligible for a Tax refund of £3,328.

The same tax rules apply for sub-contractors and self-employed persons as those in employment meaning when you hit the upper threshold (£41,450 in the year ended 2014 rising to £41,865 for the year ending 2015) you will have to pay 40% tax on that amount. The summary is below, using the 2015 figures:

• No tax is paid on your first £10,000 earnings in the year
• 20% tax is paid on the next £31,865 of earnings (between £10,000 and £41,865)
• 40% tax is paid on any income exceeding £41,865

To try to make the above simpler, we will look at how much tax should be paid by Mrs O McKenzie who had an income (profit) for the year of £55,000:

• No tax is paid on her first £10,000 of income
• ·20% tax is paid on her next £31,865 of earnings meaning £6,373 tax payable
• 40% tax paid on her remaining £13,135 of earnings over the upper threshold meaning £5,254 tax payable
• Total amount of Income Tax payable is £11,627.

If all of her income came from sub-contracting, the amount of CIS Tax already paid would be 20% of £55,000 which is £11,000. She is due to pay £11,627 so she would have to pay HMRC an extra £627 to avoid a potential fine in the future for Tax Evasion. This profit figure is very high so most sub-contractors who register under the CIS as self-employed will get a tax refund. It is advisable that if you qualify for this scheme, you do so as it will more often than not result in you getting money back from HMRC at the end of the tax year.

There are also National Insurance (NI) contributions that need to be paid. These are more complicated as the amount you pay will vary with the amount of profit you have at the end of the year. There are different classes and different personal allowances depending upon what type status of employment you have and what your level of income is. It is worth seeking a professionals help at this point to ensure you do not make a mistake and pay the wrong amount.

If you are still confused, or think that you should get a refund, and want to know what the next step is, get in contact with us here at Tax Affinity. Use any of the contact details on the website and we will gladly assist you on the next stage.

How do you save money on Capital Gains Tax? For an Accountant this is a question which is asked regularly. But as you can always find a way to save money. Below I give you a basic insight into how CGT (Capital Gains Tax) works, some tips, exceptions and how to avoid it completely:

How does it work?  

CGT is run through the tax year (6th April one year to 5th of April the following year). It is worked out on the total of your taxable profit from any capital assets that you hold. For instance, property, bonds and shares on the stock exchange. Furthermore, it is when the amount exceeds the purchase price of a property, bond and shares/stock. The amount that is exempt (tax free) annually is £10,900 for 2013 to 2014 (which increases to £11,000 for 2014 to 2015). At present there are two different types of CGT. The basic rate taxpayers pay is 18%, although the higher rate tax payers pay is 28% and if the capital gains goes over your threshold you will pay the higher tax.

Tips to save money       

Below are some tips to keep the CGT Low as possible:

• Keep receipts and records of all assets that might get CGT.

• If you are married or in a civil partnership each spouse has their own allowance to double the amount they can keep away from the tax man.

• Paintings, antiques and other collectibles are tax efficient investments because you can sell them off as a set or individually as well.

• Unmarried partners can recommend a different home as their main home to get tax relief on both.

• And many more

Exceptions

Any profit made on selling your home is tax exempt, unless you did one of the options below:

• Rent / Let part of your property

• If you used parts of it to run a business

You can also get away with not paying tax if you make a profit on selling a car, ISA’s, Peps, UK government gifts, savings certificate, premium bonds, personal belongings that are worth £6,000 or less when you come around to selling them. Furthermore there is a 10% tax rate with the entrepreneur’s allowance, which is aimed to help people that are selling their businesses they have built up. It has a lifetime limit of £5m.

Avoid it completely

If you want to avoid paying the higher threshold of 28% there are some suggestions below:

• Spreading you gain over a longer period of time. For Example, when you want sell some shares you should sell some before 6th April and then some after because you can take advantage of two years worth of allowances (£21,800.00).

• You can deduct your capital losses against you capital gains in order to arrive at your net gains. For Example, a profit of £25,000 minus a loss of £10,000 will produce a net gain to £15,000. As you can see this has reduced it considerably and has now placed it into the lower threshold of 18%.

• The easiest, quickest and the most popular way of not paying any type of tax ( which includes CGT)is to open an ISA  as every person has a yearly allowance of £11,280 (£5,640.00 can be cash). Over 19 million of the British Public has an ISA because it keeps your income and investments away from the taxman’s grasp.  Furthermore, many investors have built up six figure sums inside ISA’s, which is all protected from HMRC.

• Make extra contributions to your pension schemes because if you add more to pensions the less income you have available to get taxed, which would come available after retirement.

• One option is for parents who have children under the age of 15 can bring down there taxable income by purchasing childcare vouchers. Every parent can sacrifice up to £243 a month of their salary for tax free childcare vouchers.

• And many more

You can defer your CGT by reinvesting it into the Enterprise Investment Scheme (EIS). You would have a limit of £200,000. Furthermore, any profit made will be exempt if you meet the qualifying standards.

Finally, while tax avoidance is legal, tax evasion is illegal. So do not be tempted to sell assets without declaring any profit to HMRC. Defrauding the tax man can land you with a large fine or even a prison sentence.

But the advice and support of an experienced tax accountant and some sound forward tax planning can save you thousands of pounds.

By Tahir Malik at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they are considered in the Finance Industry to be the experts in all types of Tax including Capital Gains Tax. Helping and supporting businesses and individuals throughout the UK, they regularly help people with their CGT tax issues.

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.

Saving Inheritance tax

Inheritance tax can be a tricky issue to deal with for most people but it is generally considered a “voluntary tax” as good tax planning can greatly reduce your inheritance tax liability or erase it completely. Assets exceeding the current inheritance tax threshold of £325,000 (for tax year 13/14) are taxed at 40%. That’s basically half of your excess assets going straight to the government and not to your loved ones. This is why inheritance tax can be extremely costly for those who have not done sufficient planning. Fortunately, there are many exemptions and allowances to utilise which would significantly reduce the amount of inheritance tax you have to pay. Here are a few things to consider that can help you save some inheritance tax:-

Make a Will

Making a will allows you to know that your estate is divided exactly as you want it to be when you die. In the absence of a will, people that you wish to benefit from your estate such as an unmarried partner may not be entitled to any share in the event of intestacy.

What is a gift?

A gift is something of value given unconditionally to someone without any reservations. The biggest asset that most people are in possession of is their house. However, giving away your house yet trying to live in it may allow HMRC to invalidate the gift as genuine and apply tax on it.

Give away sooner

Majority of gifts you make are classified as “potentially exempt transfers”.  If you survive more than seven years after making the gift, no inheritance tax is due on that gift. The amount of tax can be reduced depending on how long you lived after making the gift due to taper relief. Gifts made less than three years before death have no reduction in tax. If the gift was made three to four years before death then tax is reduced by 20%. This increases by 20% for every extra year the donor lives up to seven years where the whole amount is exempt. Therefore it can help relief some financial burden on your death estate if you make gifts sooner rather than later.

Allowances to take advantage of

You can give away gifts worth up to £3,000 in total per person every tax year and these gifts will be exempt from inheritance tax when you pass away. Any unused part of this annual allowance can be carried forward to the following year, but if you don’t use it in that year, the carried-over exemption expires. You can also give up to £5,000 to your children when they marry as a wedding gift. Grandparents can give up to £2,500 and others up to £1,000.

Regular Gifting

Regular gifting can dramatically reduce your inheritance tax bill as long as they meet the following criteria: they must be from your income, they must be regular and they must not decrease the standard of living of the donor.

Be generous on birthdays

Gifts under £250 to any recipient per tax year are exempt from inheritance tax. This means that it might be worth giving your boy a big birthday present even if he’s been naughty as it helps reduce the tax bill.

Gifts to charities and political parties are tax-free

It’s good to know that any donations you make to charities or political parties are inheritance tax free at least.

Getting Tax Advice

While it is generally more economical for you to do things by yourself, if you have sizeable assets then seeking professional tax advice is well worth your money. You may end up paying a few hundred pounds to potentially save over hundreds of thousands of pounds. I’m no bargain hunter but that sounds like a good deal to me.

By Wilson Law at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they are considered in the Finance Industry to be the experts in all types of Tax including Inhertance Tax. Helping and supporting business and individual throughout the UK, they regularly help people with their Inhertance tax issues.

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 - £32,010 and 40% tax on income between £32,010 - £150,000. Income above £150,000 is taxed at 45%. The personal allowance amount for persons aged under 65 is £9,440. You are also required to pay Class 2 & 4 National Insurance contributions (NIC). Class 2 NIC are at a flat rate of £2.70 per week. However, you may not need to pay Class 2 NIC if your earnings are below £5,725 for the whole year. Visit http://www.hmrc.gov.uk/working/intro/class2.htm to see if you may be exempt from paying Class 2 NIC.  Class 4 NIC is calculated based on your profits for the year. For 2013/14, you pay 9% on annual profits between £7,755 and £41,450 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 been not only been of little help but confused you further. 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 £16,000 pre tax and wish to extract all the profits for yourself. As a sole trader, you will be taxed at 20% for any income in excess of your personal allowance. The total tax liability including the Class 2 & 4 NIC amounts approximately to £2,181 (assuming 48 weeks and available personal allowance of £9,440). 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 £7,000.  Company profits under £300,000 are taxed at a rate of 20%. Taxable profits is £9,000 and amounts to a corporation tax liability of £1,800. This leaves £7,200 to be distributed as dividend which is taxed at 10% for income below the earnings threshold of £32,010. The total tax paid equates to £2,520. In this scenario, it is marginally better to see that remaining as a sole trader is more beneficial as 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

You are better off trading as a sole trader for tax purposes if your annual trading profits are not high. However, many businesses opt to form limited companies for reasons that extend past tax issues. 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 year then limited is again a better choicAlso 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 just contact us and we’ll be sure to offer you tailored expert advice to aid your decision.

By Wilson Law at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they are considered in the Finance Industry to be the small business experts. Helping and supporting business throughout the UK, they regularly help new and established businesses with valuable support.

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.  

BUDGET 2014 HIGHLIGHTS

PERSONAL ALLOWANCE
The personal allowance is the amount of income you can receive each year without having to pay tax on it. This amount is to increase to £10,000 for 2014/15  and to £10,500 for 2015/16. The basic rate taxpayer will see a saving of about £112 in 2014-15 and a further £100 in 2015-16 on their annual income tax bill.

HIGHER RATE TAX PAYERS
The threshold for which individuals pay tax at the higher rate of 40% will increase by 1% for both tax years.

ANNUAL INVESTMENT ALLOWANCE
For businesses, the annual investment allowance will increase from £250,000 to £500,000 until 31 December 2015.

HIGHER ANNUAL SUBSCRIPTION LIMIT FOR INDIVIDUAL SAVINGS ACCOUNTS FROM 1 JULY 2014
The chancellor has announced big changes to the Individual Savings Accounts (ISA). The new policy means that, from July onwards, it will be possible to save up to £15,000 in total. Furthermore, the whole sum could be in cash unlike before where only half of the limit could be saved in cash and the rest in shares. Also, the 10p tax rate for savers will be abolished.

CLASS 2 NIC
From April 2016, Class 2 National Insurance Contributions (NIC) will be collected through self-assessment.

CHILD-CARE HELP
Parents paying 80% of childcare costs of up to £10,000 per child, aged up to 12, to a registered provider will get the remaining 20% tax-free from September 2015.

NEW TRANSFERABLE TAX ALLOWANCE
From April 2015, there will be an introduction to a new transferable tax allowance for married couples and civil partners.

PENSION CHANGES
All tax restrictions on pensioners' access to their pension pots to be removed, ending the requirement to buy an annuity. The taxable part of pension pot taken as cash on retirement to be charged at normal income tax rate, down from 55%. There is an increase in total pension savings people can take as a lump sum to £30,000

By Wilson Law at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they are considered to be small business experts helping and supporting business in the UK. They regularly help new business start up and provide valuable support for new businesses.

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.

Personal Tax Return Deadline Approaches

Completing a personal tax return can be a stressful, complex task and an unwanted hassle for self assessment taxpayers. At Tax Affinity we provide a simple, price competitive service to alleviate your concerns over personal tax returns.

If you currently complete your own tax return then you could certainly benefit from our services to ensure that you don’t overpay on tax. Mistakes on your tax return could cost you a significant amount and it is therefore worth taking advantage of expert advice to make sure you report the correct level of taxable income. We will assess all of your income and expenses information to ensure you minimise your tax liability.

If you are already taking advantage of our tax help, please ensure you send us all your income and expenses information (bank statements, invoices and receipts) for the period 6th April 2012- 5th April 2013 as soon as possible. With the busy Christmas and New Year period approaching, it is vital that we receive all this information in the next 3-4 weeks so we can ensure all of our clients’ tax returns are submitted before the deadline.

By leaving your tax return right up until the last minute you risk incurring a late filing penalty. Here is a summary of the HMRC penalty charges you may face:

Length of Delay - Penalty incurred

1 day late

A penalty charge of £100 even if you have no tax liability for the year or have paid the tax you owe

3 months late

A penalty charge of £10 per day up to a maximum of 90 days- £900. This is on top of the initial £100 charge.

6 months late

£300 or 5% of the tax due (whichever is higher). On top of the penalties listed above

12 months late

An additional £300 or 5% of tax due. However, in certain cases the charge may be up to 100% of the tax due or higher.

Please avoid any of these penalties by sending us all your information as soon as possible. Feel free to pop into the office or just email us the necessary documents. Rushing a tax return can result in a number of unnecessary errors so please ensure you get on top of the situation in the coming weeks.

By Tom Hoadley at Tax Affinity.

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they regularly submit tax returns for their clients peace of mind, providing a great value for money service for people from all walks of life.

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.

Properties have always been a relatively safe and sound option for investment. As a landlord, renting out your property can offer an alternative source of income in the form of rent and potentially give a good return on the initial investment through capital appreciation. However, if you’re looking for huge returns over a few days then property investment is unlikely to be your preferred choice. Nonetheless properties have historically been a low risk investment and have provided modest returns over the long term. Here are a few things to consider if you wish to maximise your rental income:

Deducting Allowable Expenses

You can reduce the amount of rental income that is taxable by taking advantage deducting allowable expenses. There more common expenses you can deduct are:

• Utility Bills and Council Tax
• Maintenance and repairs to the property (excluding additions and improvements)
• Interest on the mortgage to buy the property
• Cost of labour/services (Wages for cleaners, gardeners etc.)
• Letting Agent’s Fees
• Accountancy Fees
• Service Charges
• Direct Costs (Advertisement cost, fuel costs incurred in the journey to the property, phone calls etc.)
• Contents Insurance

The costs should be wholly and exclusively incurred as a result of renting out the property. If a part of the expense meets this condition then that part can be deducted from income.

Cost comparisons

Saving costs can only have a positive effect as expenses are the only thing eating into your rental income. Try reviewing your costs on an occasional basis (once a quarter) and you may witness bargains that could help you save a lot of money. Service providers tend to offer sizeable discounts to new customers but only have stagnant prices for existing customers. Getting quotes from different companies that offer the same service can sometimes amaze you at how wide the price range can be. Just be sure you don’t jeopardise the quality of services just to save a few pennies.

Annual Investment Allowance

Expenses of a capital nature are not deductible. You cannot deduct from income the cost of the property you are renting out, expenditure that adds to or improves the property or the cost of renovating a property from a state that cannot be rented out.

However, capital spending can be deducted using the Annual Investment Allowance. From 1st January 2013 (until 1st January 2015), you can deduct up to £250,000 a year for many types of capital spending using the Annual Investment Allowance, such as commercial vehicles, business furniture, computers, machinery and tools. It would be beneficial to take advantage of the temporary rise in the Annual Investment Allowance as it is likely to revert back to around the limit of 2012/13 (£25,000) after January 2015.

Landlord’s Energy Savings Allowance (LESA)

Until April 2015, an allowance of up to £1,500 per let residential property can be claimed for the cost of loft, wall and floor insulation, draft proofing and hot water system insulation. The LESA was introduced to encourage landlords to improve the energy efficiency of let residential properties. These expenditures are usually not deductible from taxable income and are not eligible for capital allowances.

Wear and Tear Allowance or Renewals Allowance

For fully furnished properties, a wear and tear allowance can be claimed for furnishings such as beds, carpets and appliances. The allowance is 10% of the net rental income (gross rent minus utility bills, service charges and council tax) you receive from these properties.

With the renewals allowance, you can claim expenses of any furniture as you replace them. Any money you make from the disposal of the asset must be deducted and the cost of any improvements (e.g. an upgrade from a washing machine to a washer-dryer)

Note that you can only claim either the Wear and Tear Allowance or the Renewals Allowance but not both.

By Wilson Law at Tax Affinity.

Tax Affinity Accountants are considered in the market to be experts in Tax and Accountancy in the UK. Based in Kingston upon Thames they have clients right across the UK as well as Europe, Middle East and North America.

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