Is it ever too early to submit your tax return?

tax return

Sole traders across the UK will notice letters from the taxman dropping through their letterboxes in the days ahead, reminding them that the tax year has ended and it’s now time to file their Self-Assessment Tax Return. Of course, the deadline for filing is 31st October for paper returns, or 31st January (2019!) when filing online. No sense doing today what you can put off until tomorrow, and tomorrow, and tomorrow…right?

Maybe. But maybe not.

Submitting your tax forms correctly and on time can be a confusing business. To take some of the strain out of filling out your returns we’ve put together this handy guide:

How do I know if I need to submit a tax return?

If you fall into one of the following categories, it is likely you will need to submit a tax return:

  • If you’re a director of a Limited company
  • If you’re self-employed or a sole trader
  • If you’re renting out a property
  • If you or your partner receive child benefit and your income is more than £50,000

What should I do before I submit my tax return?

Although the deadline is just around the corner, you still have time to complete your tax return. We have compiled a list with a few tips to try and help you do it more efficiently and quickly.

  • Understand your financial year – your tax return is in relation to income and gains for the financial year between 6th April 2016 and 5th April 2017
  • Prepare all the correct documents you need
  • Make sure you organise your paperwork
  • VAT – don’t forget to separate your VAT from your income
  • When collating information be as accurate as possible
  • Don’t miss the deadline if you want to avoid penalties

Can you help with my tax return?

Yes,  of course, we can! Here at DNA Accountants, we understand that filling in a tax return can be complicated and confusing. It is a time consuming process and difficult at times which is why we are on hand to help. But if you choose to go ahead and make the submission yourself, then “Don’t delay, submit today!”.

DNA Accountants

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Tax Deductions – Are you losing out?

tax deduction

When completing your tax return a good accountant will check that all of your tax deductions are included. Sadly, however, some are less pro-active and will simply process the details you give them, without looking for extra tax savings. So, to maximise your tax deductions, you need to make sure you let your accountant know about them and that nothing is forgotten.

Here are our top forgotten tax deductions:

  1. If you do any work from home, you can claim part of your household running costs, including heat and light, mortgage interest and council tax.
  2. If you ever use your car for business, you can claim part of your running costs. Even quite occasional use is worth a claim: does your accountant know about it?
  3. You can claim capital allowances on any asset you use in your business, including computers, furniture, equipment and your car. If you use something partly for business and partly personal, then a partial claim is possible.
  4. Did you pay your spouse, partner or children for some work in your business? Tell your accountant about it. If you didn’t pay them last year, ask if it’s something you should consider this year.
  5. Lost the paperwork or never had it? Don’t give up – tell your accountant about it. Just because you’re missing a receipt doesn’t mean the expense can’t be claimed. There are other ways to prove the expenditure took place and HMRC will not usually refuse reasonable claims.
  6. Professional subscriptions related to your business are deductible. This applies not only to sole traders and business partners but also to directors and other employees who pay their own subscriptions personally.
  7. Most pension contributions are made net of basic rate tax but you need to include them in your tax return to get any higher rate tax relief that’s due.
  8. If you’re a higher rate taxpayer, gift aid payments will save you tax, but your accountant won’t know about them unless you tell them. Don’t forget to include entry fees for museums, zoos, etc – these are often paid under gift aid.

Forgetting a valid tax deduction is a tragedy: don’t let it happen to you!

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Spring cleaning for the new tax year

spring cleaning for the new tax year

The new tax year will start on 6th April 2018. Tax years are normally referred to by the two years that they span over, so the new tax year will be “2017/18” and when you’re running your own business, the start of the new tax year can be a great time for some spring cleaning, here are our top tips on how to get your business ready for the new tax year…

Invoicing:

If you have yet to issue any invoices to customers, now is a great time to catch up. Unless you’re using the cash-based method for simplified accounting, you have to include your income in your accounts when you earn it, not when you invoice for it or are paid for it, so there’s no disadvantage from a tax point of view to issuing your invoices before the end of the tax year.

Expenses:

Make sure you’ve tracked down all those fiddly little receipts and included in your accounts as many of your out-of-pocket expenses as you can claim tax relief on. Don’t forget expenses for which you haven’t paid actual physical cash, such as mileage travelled in your own car, or business use of home. It’s worth tracking down even the smaller expenses (items less than £10) that many small business owners aren’t claiming them for tax relief.

Banking:

Now is a great time to check if what your books say is in your bank is the same as the balance on your bank statement. If not, then you should find the missing, wrong, or duplicate transactions and put it right. This is important because if you don’t have an accurate picture of what’s going in and out of your bank, you may find yourself running out of cash if you spend money you don’t have, or if you get a visit from a HMRC inspector then they may fine you for inadequate record-keeping!

You can also use the end of the financial year to save tax now! If you’re preparing your business’s accounts to 5th April, and you’re planning to buy a piece of equipment for your business soon, such as a new computer, then buying it before the end of your accounting year rather than after means you’ll get the capital allowances on that asset a whole year earlier. Also, don’t forget your personal tax. Have you used as much as you can of this year’s ISA allowance? What about pension investments or donations to charity? Remember to keep a note of all these points that could save you tax!

So start your spring cleaning for the new tax year now

DNA Accountants

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Get those invoices paid quicker!

invoice paid

The problems faced by small business due to late payments have been very much in the news lately, as a business owner you are very aware of the importance of getting paid on time and that payment delays can seriously disrupt cash flow. When searching for ways to speed up payment, keep in mind that the most effective solutions are often the most simple. The invoice you send your customer is, hands down, the most important communication in regards to getting paid. With a few simple adjustments and additions to your invoices, you can actually speed payment from customers and increase your chances of getting paid…

– Please and thank you
Good etiquette is always important, but when it comes to invoicing, minding your manners can actually increase the probability of getting paid. By adding a “please” or “thank you” to an invoice, you can improve the chance of getting that invoice paid quickly by more than 5 percent. That simple adjustment could end up resulting in thousands of £’s per year.

– Customized details
Make it a habit to ask all of your customers what they require on invoices. It will take some time upfront to make these inquiries, but you will save time and money down the road if you don’t have to re-invoice a customer due to missing or incorrect information. You might want to ask: Do you need a purchase order (P.O.) number or is an invoice number enough? Do you need a detailed breakdown of services or will a general description suffice? Is there any individual I must direct the invoice to?

– Days vs. Net
By simply using the term days over the term net, will help you to get paid on time. Terms like net 30, net 60, etc. make a lot of sense on the business end, but customers don’t always know what they mean. When you include phrasing like “payment due within 30 days,” the customer immediately identifies the time frame. This is stronger than, say, due upon receipt, which gives the customer room to waffle about when the invoice was received and does not offer a strict timeline.

– Interest fee
If you aren’t already charging interest on late payments, you absolutely must begin. Late fees add urgency to invoices, ensuring they don’t end up at the bottom of the bills-to-pay pile. Be sure to reference late fees in the initial customer contract and make certain to restate them in the invoice. Let your clients know exactly what the fee percentage is and when it applies (i.e., a 2 percent interest fee will be charged per month on late payments.) This lets the customer see what additional payments they would have to make if they don’t get that invoice in on time.

– Incentives
Beyond motivating payment with late fees, try positively incentivizing customers to pay you early. Incentives might include a 1 to 2 percent discount if payment is received within a specific “early” time frame. Include these incentives in the invoice so the customer is immediately motivated to react to the offer. Also, consider offering future discounts, credits, gift certificates or merchandise as possible incentives. In the end, you’re saying thank you for making that payment a priority. It’s rewarding your customers for their business, increasing their loyalty, and helping you get paid.

– Include electronic payment options
You will see a much quicker response when you give customers the opportunity to have an invoice paid electronically.

Here at DNA Accountants, we can help you to get onboard with cloud accounting to take some of the pain out of your invoicing each month, get in touch, we’re happy to talk business.

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Accountants: Not just here for Tax Returns!

tax returns

January, the time when everyone gets themselves in a tiz about their self-assessment tax returns. But imagine you had someone on hand all year, not just January, keeping on top of your numbers, making sure you keep more of the money you earn rather than paying it in tax. These people do exist and we are ACCOUNTANTS.

When you work for yourself or run a small business, every penny is important and keeping on top of where they are all coming from or going to is a job in itself. Give yourself a break and pass on all these jobs to us, you didn’t start-up your business to be a number cruncher, but we did. Here are 5 good reasons for you to let go and let us take care of your numbers:

– We will save you time
Having to do the paperwork can be time consuming and actually take time away from the task in hand (the one that you actually want to do). Employing an accountant, who is au fait with the latest tax laws, rules and regulations and deadlines, not to mention one who completely understands what format HMRC requires all the information in, can save you hours and hours.

– Reduce your tax liability
A good accountant (DNA, obviously!!) will be proactive, not reactive and will understand how to save you money and be able to give you good advice on the most tax efficient way of running your business. Knowing the best way to operate – whether it is as self-employed or a limited company – and the most tax efficient way to take money out of your company is something they will guide you on, based on your individual circumstances and situation. They will go through paying yourself through dividends, understanding what you can and can’t claim through company expenses and the benefits of using the flat rate VAT scheme.

– Prevent you receiving hefty tax penalties and fines
Keeping on top of your tax submissions whether with the support of an accountant or not will help keep your company bank balance healthier by avoiding fines which can range between £150 for a day late submission of annual accounts to a whopping £1,500 fine for a six month delay!!!

– Help you to grow your business
We make it our goal to understand and get to know the ins and outs of your business, we also take great pride in seeing your business succeed.

– No tax worries
Tax is complex!!!! Depending on whether you are a Sole Trader, Limited Company or a Partnership, you need to: prepare your company year-end accounts, prepare abbreviated company accounts (if required), sort out your personal tax return, prepare corporation tax computations and Returns, VAT calculation submissions, liaise with HMRC and deal with Companies House.

Here at DNA Accountants we can prepare everything you need, saving you money and removing your worries, so you can get on with running your business. Get in touch today and we will make sure you proceed with your business on the right footing.

DNA Accountants

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Posted in HMRC, Tax, Tax Returns

Tis the season to be jolly (and tax free!!)

tax free

Did you know that HMRC seasonal rules allow employers to throw staff a tax free Christmas party!! It’s true – the seasonal allowance can be used to subsidise employee food, drink, travel or accommodation. Employers have been reminded that in the run up to Christmas, HMRC’s seasonal gift rule allows bosses to treat their staff to a tax free Christmas party, up to the value of £150 per employee. A Christmas party is a great way to reward staff for hard work, and as a little festive gift, HMRC allow up to £150 spend per employee completely tax free!!

The Institute of Chartered Accountants in England and Wales (ICAEW) has reminded businesses that HMRC’s seasonal gift rules provide a yearly tax-free Christmas party allowance that can be used to subsidise food, drink, travel or accommodation.

For tax free status to apply to seasonal gifts according to HMRC’s rules, all employee spending must be below £150 per head.

If the £150 limit is exceeded, employers would no longer be entitled to tax free status, and income tax and national insurance would need to be paid on all business expenditure.

Tax free Christmas party invites can be extended to employee’s partners as well, providing that the cost per head is kept under the £150 limit.

The Christmas tax exemption can be enjoyed by businesses of any size, so long as it’s within the £150 budget, also many employers may also be able to take advantage of the so-called “trivial benefits” exemption. Under this rule, if an end-of-year gift to an employee costs less than £50, it can be considered trivial, and may therefore be entitled to tax free status. So, business owners can now not only treat their employees to a tax-free Christmas party, but add a little gift to that as well.

Cash or cash vouchers are not entitled to tax exemption under HMRC’s seasonal gift and trivial benefit rules, and gifts can only be considered for tax-free status if the cost of providing that benefit to employees doesn’t exceed £50.

Similarly, employee gifts that don’t qualify for tax exemption include those which an employee is entitled to as part of a contractual obligation with their employer (for example, in a salary sacrifice-type arrangement). Neither does tax-free status apply if a gift is given in recognition of a specific service or task performed by an employee as part of their job role.

 

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HMRC – Credit Card Crunch!

credit card

HMRC will no longer be accepting credit card payments when you pay your self-assessment bill.

From January 13, self-employed, sole traders and company directors will no longer be able to use their own personal credit card to pay their self-assessment tax bills

Under current rules, all taxpayers can pay their HM Revenue & Customs (HMRC) with a personal credit card using either their online account or, if they prefer to receive paper statements they can settle their tax bill using a paying-in slip.

Why is this change being implemented?

From 13 January 2018, retailers and traders will no longer be allowed to charge consumers for paying on plastic when making a purchase, this includes HMRC. Therefore this now affects anyone paying HMRC – something that HM Revenue & Customs have been very quiet about up till now, so this could create a very large and unwanted post- Christmas financial surprise for many people and is not likely to be well received by the UK’s many tax paying individuals! For some, it may be because they actually receive rewards from their credit card providers for others it may be the ease of being able to spread their tax bill over a few months at 0% – whatever the reason, they are now no longer going to be an option.

So what’s the answer?

The first option is a “no-brainer”, simply pay your self-assessment tax bill prior to the deadline date of 13th January, don’t wait till the evening of 31st January to submit your payment (obviously we do not condone this!! We always advise that you are organised and pay your tax well before the end of the year). But this is obviously a short-term solution as it only works for this year.

If you leave it too late and make your self-assessment submission after 13th January 2018, to make the subsequent tax bill payment you will have to use a business credit card (which many people do not have) or choose to pay via bank transfer or debit card.

Frankie Tortora, the founder of freelancing digital magazine Doingitforthekids.net, says she believes that the changes will take many self-employed professionals by surprise.

“My fear is that a lot of people will be panicking come January,” she said.

“As much as we all work hard to ensure we’re on top of our cash flow, freelance life is inherently unpredictable and there will be situations where things just don’t go to plan.

“Removing the option to use a personal credit card will cause a lot of problems for a lot of people and, as far as I can tell, HMRC have made zero effort to communicate this change.”

If you are concerned about this change in policy affecting you, then please do get in touch and we can help you plan your cash flow.

DNA Accountants

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Don’t be afraid of… TAX Returns!!

paper tax return

Halloween is just days away, so what are you most scared of? Ghosts, ghouls, and things that go bump in the night? Or could it be that you’re more afraid of submitting your paper tax return!!

 

If you are submitting a paper tax return to HMRC for 2016/17 you should complete it and submit it to HMRC by 31 October 2017. And if you still have an outstanding return for 2015/16 which you wish to submit on paper, again you must do so before 31 October in order to avoid triggering further late filing penalties for the return being 12 months late.

 

What if I miss the deadline?

If you intend to submit a paper return for 2016/17 and do not do so by 31 October 2017 you still have the option of submitting an electronic return by 31 January 2018 to avoid late filing penalties. However, if a tax return for 2015/16 is submitted after 31 October 2017 in paper form rather than electronically then the maximum automatic late filing penalties will eventually be charged.

 

Can I appeal against the penalties?

You cannot usually make an appeal until after you have submitted your outstanding tax return so do not put off submitting! You may have missed the tax return deadline due to an unforeseeable event. This would be classed as ‘reasonable excuse’ and grounds to appeal a penalty charge. If the appeal is successful then the penalties will be cancelled.

 

If you have not submitted your tax return because you are unable or cannot afford to pay any tax due, then be aware that HMRC regard submitting a return and paying the tax due as two separate and distinct obligations. Penalties will continue to build up if you do not submit the return and you will not be able to arrange a debt payment plan with HMRC while the return is outstanding.

 

What is a ‘reasonable excuse’?

HMRC’s guidance states that a reasonable excuse is ‘something unexpected or outside your control that stopped you meeting your tax obligation’ and gives a few examples of situations that they would accept constitute a reasonable excuse, such as:

  • death of your partner shortly before the tax return or payment deadline
  • an unexpected stay in a hospital
  • computer or software failure just before or while preparing an online return.

Examples of reasonable excuse claims they will normally reject are given as follows:

  • reliance on someone else to send your return and they did not
  • cheque bounced or payment failed due to lack of funds
  • difficulties using the HMRC online system

What happens if my appeal is rejected?

If HMRC rejects your appeal you can request a review of their decision. The review will be carried out by another team from HMRC who have not been involved in making the original decision. If you lose a statutory review, they will provide you with details about how you can make a further appeal to the independent tax tribunal.

 

Will HMRC ever cancel the return?

Sometimes tax returns are issued by HMRC when the criteria for self-assessment are no longer met by the taxpayer. If HMRC has sent you a self-assessment tax return to complete but you do not think you need to submit one, you can contact HMRC to see if the tax return can be cancelled. If HMRC agrees, any associated penalties will automatically be withdrawn.

 

If you are still feeling a little “spooked” by your tax return get in touch with us here at DNA Accountants, we’re not afraid of taxes!!!

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5 Money Management Tips for Small Business Owners

money management

Whether you like them or not, finances are a necessary part of running a small business, so to get some insight on effective procedures that entrepreneurs can adopt to improve their money management we’ve compiled our top five tips for all small business owners:

 

  1. Don’t mix business and personal expenses.

There are so many reasons not to mix your business and personal accounts, including tax issues, personal liability, and jumbled accounting records, just to name a few. When things get tight, resist that urge to secure your business finances with personal funds. It may give you that quick fix you need at the time but it will no doubt create a mess that you are only going to have to deal with at a later date.

The best way to maintain a clear separation of your expenses is to set yourself a personal budget and a business budget. Try and adhere to them strictly and separately so that credit cards and loans for your business don’t get used for your personal finances and vice versa. Your bookkeeper and accountant will be eternally grateful if you separate the two when it comes to managing your books and paying your taxes.

 

  1. Negotiate with vendors before signing!!

Sometimes you have to do some digging or shopping around for a good bargain. When making purchases from vendors or contracting with suppliers, try negotiating for a better deal.

Also please don’t forget to examine purchase terms like late payment penalties when making a decision. You don’t want to be caught out at a later date.

 

  1. Pay your bills on time, every time.

Treat your business bills as you do your personal finances. You don’t pay personal finances late so business payments shouldn’t be any different.

Credit card and loan payment late fees can cost you dearly, but paying small late fees on vendor and utility bills consistently adds up, too. The same goes for taxes: paying too late can result in serious penalties.

It can be beneficial to set up monthly reminders to make sure there are no business bills falling through the cracks. For young businesses especially, the profit-loss margins are thin. Avoiding late fees could be the difference between ending the year in the red or in the black.

 

  1. Be a little Frugal.

Okay, we aren’t expecting you to become an extreme couponer like the ones on American tv shows to save money on ordinary business expenses but we do suggest that you follow through on rebate offers for office equipment and supplies, buy furniture and major equipment secondhand, and go green to save money on utilities. 

 

  1. Spend some time on an accounting refresher. 

Being a small business owner doesn’t automatically make you a money whizz/expert, but you’ll still have to make big money-related decisions for your company and understand how cash moves in and out of your small business.

 

The more you understand your business finances and cash flow, the better prepared you’ll be to make smart money management decisions. And, while these tips will get you started, nothing replaces being proactive and hands-on when it comes to managing your money—no matter how big or small the financial challenge. If you need help with your business finances then please do get in touch with us here at DNA Accountants we are always happy to talk business.

 

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Start-Up Advice: Choosing a Business Entity

Choosing Business Entity

So you’ve decided to Start-Up that business idea floating about in your head, and turn it into a reality; you’ve got a name, now you just need an Entity- but which is right? Limited Company, Sole Trader or Partnership?

You should assess the types based on your available time, commitment and resources, and consider long-term goals for your business. Although you can change your ownership type at any time, you should decide carefully, because the form of business you choose will affect the way you file paperwork, face personal liability, pay taxes and, if necessary, file for bankruptcy protection.

Sole Trader

One person owns and manages a sole tradeship, which means you are responsible for all debts incurred.

Advantages: Easy. Inexpensive. Complete control of operating decisions. Generated income goes to owner to keep or reinvest. Easy to dissolve if the business does not go as planned.

Disadvantages: Unlimited liability. Funding difficulties. Less attractive to prospective employees.

Tax requirements: Sending a Self Assessment tax return every year, paying Income Tax on your profits and Class 2 and Class 4 National Insurance.

Limited Company

A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances. Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

Advantages: Higher take home pay, claim on a wider range of expenses, entitled to the Flat Rate VAT scheme, personal assets are covered and you have complete control of your business.

Disadvantages: A certain amount of paperwork involved, accounts need to be filed every year, costly if contracting for a short period of time and not ideal for contracts less than £25,000 per year.

Tax requirements: At the end of its financial year, your limited company must prepare full (‘statutory’) annual accounts.

You then use this information to:

  • send accounts to Companies House
  • pay Corporation Tax – or tell HM Revenue and Customs (HMRC) that your limited company doesn’t owe any
  • send a Company Tax Return to HMRC

Partnerships

In a business partnership, you and your business partner (or partners) personally share responsibility for your business. You can share all your business’s profits between the partners. Each partner pays tax on their share of the profits.

Advantages: Businesses as partnerships do not have to pay income tax; each partner files the profits or losses of the business on his or her own personal income tax return. This way the business does not get taxed separately.

Easy to establish.
There is an increased ability to raise funds when there is more than one owner
Disadvantages: Each partner is individually liable for the debts and obligations of the business; if the business does not have enough assets to pay back business debts, creditors can take the personal assets of the partners.

A partner cannot transfer an interest in the business without the unanimous consent of the partners.
Partnerships can potentially be unstable because of the danger of dissolution if one partner wants to withdrawal from the business or dies.
Tax Requirements: The nominated partner must send a partnership Self Assessment tax return every year.

All the partners must:

  • send a personal Self Assessment tax return every year
  • pay Income Tax on their share of the partnership’s profits
  • pay National Insurance
  • The partnership will also have to register for VAT if you expect its takings to be more than £85,000 a year.

If you are about to commence your start-up journey, please do get in touch with us here at DNA Accountants we are always happy to talk business.

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