EVERYTHING YOU NEED TO KNOW ABOUT ABRIDGED ACCOUNTS WHAT ARE ABRIDGED ACCOUNTS?

Author: Uk Tax Associate Molly Smith

WHAT ARE ABRIDGED ACCOUNTS?

Abridged accounts were introduced in 2008 and are a simplified record of a small company’s accounts. Some financial specifics that are included in full accounts can be excluded from the financial statements, balance sheet, and profit and loss statement, when finalizing abridged accounts. Abridged accounts help small businesses make it more difficult for the public to gain a perception of the company's performance from Companies House.

Abridged accounts are slightly more detailed than the abolished abbreviated accounts.

WHAT ABRIDGED ACCOUNTANTS INCLUDE

Abridged accounts do not include a breakdown of items on the balance sheet; it is not essential to include a breakdown of debtors, creditors, and fixed assets. Due to this, the account’s corporation tax figure is not displayed.

Abridged accounts must include the simplified balance sheet and profit and loss statement, along with any notes the company wishes to disclose. Without this breakdown, it is not possible to approximate a company’s net profit or loss.

If you have abridged accounts, they will have to be identified, therefore a statement needs to be included mentioning that the accounts enclosed are abridged. It has to mention that shareholders have consented to the abridged accounts.

The balance sheet must include the name of the director of the company, alongside their signature. The company can decide to append a simple profit and loss account, in addition to a copy of the company director’s report.

Even though abridged accounts are much simpler than filing full accounts, companies still are obliged to present a fair and true depiction of their accounts.

Unless a company decides to claim exemption, the abridged accounts must include an auditor’s report.

WHEN CAN ABRIDGED ACCOUNTS BE FILED

You will need to file abridged accounts if you do not publish the net profit of your company

You will be able to file an abridged account when all shareholders of your company have agreed to the abridgment of accounts. This consent from shareholders must be given every year, meaning it can not be left to a majority vote, all shareholders have to approve the use of abridged accounts. To file abridged accounts you must meet two of the three requirements:

• The average number of employees is less than 50, therefore must be a small-sized business
• Company turnover is less than £10.2 million

Balance sheet totals to less than £5.1 million.[1]

Therefore, if you are a small business and believe that your company profits should be a private matter, you must file abridged accounts.

ABBREVIATED ACCOUNTS

Abbreviated accounts, due to changes in UK Company Law, were abolished and could no longer be filed after January 1, 2016[4].

These types of accounts were commonly used amongst small businesses as they required far less information than full accounts, as the public and competitors could not gain a detailed insight into the business performance of your small company – similar to the abridged accounts.

Therefore, from January 1 2016 small companies would have to file full accounts, or the alternative option – file abridged accounts. These differ from the previous abbreviated accounts as the criteria for what Companies House considered a small business changed.

• The number of employees required to be considered as a ‘small company’ stayed the same with a threshold of 50.
• The turnover to qualify as a ‘small company’ was previously £6.5 million[5], compared to the current £10.2 million with abridged accounts
• The balance sheet limit to be identified as a ‘small company’ was capped at £3.6 million, whereas now with abridged accounts, the balance sheet threshold stands at £5.1 million.

Need any More Help?

Tax can be a complex subject, especially to those lacking experience in filing their tax return. At Bambridge, we have a team of charted accountants available to offer you sound tax advice. Do not hesitiate to contact us for help with any of your tax needs.

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A non-profit organisation has aims other than profit, such as social, cultural, philanthropic welfare. They do not possess external shareholders who provide capital, they source finance through charitable donations. If you are a member of a non-profit organisation, then you must be aware that it will be eligible for tax exemptions.

Accounting

Accounting for non-profit organisations must take place when there are any monetary transactions. This needs to be recorded as non-profit organisations are answerable to society for such money collected and spent by them.

Why should non-profit organisations maintain accounts?

·      To avoid malpractice and misappropriation

·      Have control over monetary transactions

·      To comply with provisions of laws applicable

·      To know the net worth of the organisation

·      To know the source of incomes and heads of expenditure

·      To know the surplus or deficit of the organisation during a particular period

Financial statements for non-profit organisations

Income and Expenditure:

This account records any income and expenditure, whether it is received or not. The result of the Income and Expenditure account will be a surplus (if income is greater than expenses) or deficit (if expenditures exceed income) rather than profit or loss.

If surplus, this will be carried forward as capital into the organisation, used for the welfare of the society.

Balance Sheet:

Similarly, to a for-profit organisation, a non-profit organisation will require a balance sheet, displaying the assets and liabilities of the organisation.

However, as there are no owners of the organisation, there will be no owner’s equity, and therefore the accounting equation for a non-profit organisation is as follows:

Net Assets= Assets-Liabilities 

A non-profit organisation balance sheet has capital fund (amount contributed by its members) rather than the owner’s capital. Other funds may be found on the balance sheet, such as charity fund, prize fund etc.

Receipts and Payments Account:

This is a summary of all cash and bank transactions. It records all receipt revenue and capital receipts.

Capital Receipts and Expenditure

Capital Receipts and Expenditures are non-recurring and do not form part of the regular flow of the organisation. These are expenses and revenues which occur rarely and are long-term. For non-profit organisations, these may include

·      Life membership fees

·      Donations

·      Sale of fixed assets

·      Purchase of assets

·      Investments made

Revenue Receipts and Expenditure

Revenue receipts and expenditures are recurring and are part of the regular flow of the organisation. These occur regularly and are usually short term. For a non-profit organisation, these may include:

·      Subscriptions received

·      Rent received

·      Interest on investment received

·      Wages and salaries

·      Electricity expenses etc.

Trustees' Annual Report

As a non-profit organisation, you must file a trustees’ annual report. This contains information about the charity, how it is run, its achievements and activities and helps to explain the numbers in the corresponding accounts.

The sole purpose of the trustees’ annual report is to ensure that the charity is accountable to stakeholders for any funds received and spent.

The trustees’ annual report explains its outputs, outcomes and its impacts and benefits.

You will need to complete a trustees’ annual report if the charity’s income is below £500,000[3]. The report should include:

·      Charity name, registration, address, and names of trustees

·      Structure of the organisation and how it is managed

·      Activities and objectives in the year

·      Achievements and performance in the year (including reporting on its public benefit)

·      Financial review including any debts, details of reserves policy (if necessary)

·      Details of any fund held as a custodian trustee

For a large charity, income above £500,000, a full report needs to be prepared, following the Statement of Recommended Practice (SORP).

Tax for non-profit organisations

Your non-profit organisation may have to pay tax if you have received income that does not qualify for tax relief and/or income has been spent on non-charitable purposes. Therefore, non-profit organisations pay tax on:

·      Dividends received from UK companies

·      Profits from developing property

·      Purchases (VAT rules for non-profit organisations apply)

·      Business rates in non-domestic buildings (80% discount applies)

Tax exemptions for non-profit organisations

As a non-profit organisation, you do not need to pay tax on your charitable expenditure – the income and gains you utilise for charitable purposes. This includes:

·      Donations (Gift Aid)

·      Profits from trading (if applicable)

·      Rental or investment income (bank interest)

·      Profits when you sell an asset (property)

·      When you buy property

VAT for non-profit organisations

As a non-profit organisation, registering for VAT is the same as a for-profit organisation; you must register for VAT if your taxable turnover is above the threshold (£85,000).

To claim VAT relief as a non-profit organisation, you must give your supplier evidence that you are not for profit, for example, your Charity Commission Registration Number

If you are VAT registered, you are required to send a return every three months.

As a non-profit organisation, you will pay VAT on goods and services bought from a VAT registered business. VAT registered businesses can sell particular goods and services at reduced or the zero VAT rate.

We hope this article has helped you gain an understanding of accounting for your non-profit organisation, tax exemptions and VAT.

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Bookkeeping is the recording of all financial transactions of a business. It is recommended that you keep a record of all expenses and revenues of your online business.

It is also recommended that you use accounting software, specifically one that tailors to e-commerce businesses. The best option will depend on your business and preferences; it will track sales, costs, and inventory. Xero and QuickBooks are popular accounting software.

Cash Flow

You should watch your cash flow, which is the money coming in and coming out of your business. Here is a basic example of a cash flow statement for an eCommerce business for the first quarter:

A cash flow statement is considered the most important document you can have as an eCommerce entrepreneur. When you know how much cash is flowing in and out of your online business, you can sustain a positive profit margin. On the other hand, if you experience a loss, your cash flow reflects where you need to budget or where you are overspending.

Balance Sheet

A balance sheet consists of assets and liabilities of the business. Both columns should be balanced. The purpose of a balance sheet is to measure the overall position of your business.

The balances must follow the accounting equation:

Assets = Liabilities + Owner’s Equity

(Owner’s equity is the money invested in the business by the owner.)

Income statement

The income statement includes all money brought in over a period. In the basic example above, this shows over a quarter. It shows operating and non-operating income, for example, your inventory sales, and equipment sales, therefore your primary income is your inventory sales.

VAT Threshold for E-commerce

The threshold for eCommerce businesses and selling from a physical store is the same. If you reach the turnover threshold of £85,000 per annum, you will need to register for VAT and charge tax on your goods sold to customers (20%). Therefore, you may need to increase your prices by 20% in order to maintain profit margins, but this may have the effect of customers being sensitive to the price change.

Potential E-commerce sales and delivery tax

The UK HM Treasury is considering applying a 2% sales tax for eCommerce businesses, as well as the 20% standard VAT rate. This is to level out the competition between high street businesses, who face higher operating costs, and online sales.

In addition to this, there could possibly be a delivery tax implemented in order to reduce pollution. This has the aim of influencing consumer behaviour and encouraging customers to environmentally friendly businesses.

Claimable expenses for E-commerce business

Allowable or claimable expenses are costs that are wholly and exclusively involved with the day to day running a business. This, therefore, excludes any costs incurred that are involved with your personal use.  As an eCommerce business, you can take advantage of multiple tax deductions on multiple claimable expenses.

Claimable expenses for eCommerce businesses may include:

·      Advertising and promotion - costs of promotion of your e-commerce business: Marketing (social media advertisements, sponsored advertisements, sponsored content fees by influencers, email marketing software) and Website related content (hosting, domain names, website subscriptions)

·      Banks fees

·      Cost of Goods Sold – the expense you pay as an online seller for manufacturing or selling a product: Materials, Labour (people involved in the production, not those hired for sales), Inventory (goods purchased for resale)

·      Use of home office expenses – must not include personal use, therefore you must proportion your business use and personal use of your home.

Capital Expenses

A capital expense is usually a large cost incurred in order to purchase an asset that you are expecting to have long use of life and benefit your e-commerce business. In this case, your capital expenses would be computers purchased and the website, as most websites provide customers with a system where they can purchase goods or services and contact your business. These are functions and qualify for capital allowances, as they fall into the ‘plant and machinery’ category:

·      Domain name

·      Hardware relating to the website

·      Operating software relating to the website

(You can also claim these as start-up costs for your e-commerce business)

This differs from a revenue expense as this is an amount that is expensed immediately and are used more in the day to day life of the business and is replaced more regularly, such as office stationery.

How to claim expenses for E-commerce businesses

If you are self-employed or a sole trader, employed or a partner at an e-commerce business, you can claim your allowable expenses through the HMRC Self-Assessment Tax Return. You can either file your tax return online or send a paper form, before the tax deadline.

You must have registered for the Self-Assessment Tax Return by the 5 October 2020, and pay the tax you owe by 31 January 2021

If you are filing your tax return online, you must send this by the 31 January 2021.

If you are filing a paper return, you must send this by 31 October 2020.

WE HOPE THIS ARTICLE HAS HELPED YOU UNDERSTAND WHAT BOOKKEEPING IS, HOW IT APPLIES TO E-COMMERCE BUSINESSES, WHEN AND WHAT ALLOWABLE EXPENSES YOU CAN CLAIM.

Contact us for support on your taxes

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Written by Molly Smith, Tax Associate

This article aims to inform self-employed professionals about VAT tax filing obligations, how and when to file, as well as how to register for VAT.

The information given is largely generalisable to all tax filers.

Below is a summary of the questions we will be answering- if there is anything we have not answered contact us.

What is VAT?

Who charges VAT?

When to register for VAT

How much is VAT?

What is VAT?

VAT (Value Added Tax) is a tax levied upon most goods and services that VAT-registered businesses provide in the UK. VAT is charged on about everything you buy VAT can also be charged on imported goods and services from the European Union.

Who charges VAT?

VAT can be charged by any VAT registered business; this is known as a ‘taxable person’.

If you are a taxable person you are required to be VAT registered to charge for VAT. Therefore, if you are an individual, partnership, company, club, association, or charity then you need to register.

You must check if your taxable turnover (the total value of taxable supplies made by a person if the course of business, excluding VAT) is above the threshold, if it is above the threshold then you must register for VAT. Until you exceed the threshold for VAT, registration for VAT is optional.

When to register for VAT:

 ·      You register for VAT when your taxable turnover exceeds the VAT registration threshold in the previous 12 month period or less, therefore you need to monitor your taxable turnover during the 12 month period, not just the current tax year from April 6 to April 5.

·      You also need to register for VAT if you expect that your taxable turnover is going to exceed the threshold within the next 30 days.

·      If you are not VAT registered, then you will not be eligible to reclaim VAT (unless you are an overseas visitor).

·      Not every self-employed business is required to be registered for VAT unless it exceeds the taxable turnover threshold:

The taxable turnover threshold for the 2020/21 tax year is £85,000.

·      Businesses pay VAT every three months, quarterly, but filling in a VAT Return*.

·      However, for self-employed people, such as sole traders or limited companies, this requires them, or their bookkeeper to maintain their accounts and make certain that their accounts are up to date quarterly.

·      The self-employed often mistakenly believe that the threshold solely applies to companies and that they are exempt. HMRC is clear that the self-employed must take into account the VAT on everything they sell. 

How much is VAT?

Goods and services charged at a standard, reduced or zero rates of VAT are known as ‘taxable supplies’. These are

·      Standard - 20%

·      Reduced - 5%

·      Zero - 0%

How does VAT work?

·      The VAT you charge to customers on your sales is known as ‘output tax’. This is because your sales go out of the business.

·      The VAT that you have paid on your expenses, for example, your stock and equipment, to make your taxable supplies is known as ‘input tax’. This is because your purchases and expenses are going into your business.

·      If you are VAT registered, your customers must pay you VAT and once paid you send it to HMRC, after you take away any input tax you can claim.

STANDARD VAT ACCOUNTING

Output tax – Input tax = tax overpaid or tax overdue

If your output tax is more than your input tax:

·      Then you will have to send the remaining value to HMRC.

If your input tax is more than your output tax:

·      Then you have overpaid VAT and will therefore have to send a VAT return* to HMRC to reclaim the VAT.

You cannot reclaim VAT that you have paid upon exempt goods and services.

What is a VAT Tax Return?

·      You send your VAT tax returns to HMRC if you are VAT registered, normally every 3 months.

·      You show HMRC your sales and the VAT you have charged your customers.

·      You also need to show your purchases and the VAT you are claiming for that period of the return.

Making Tax Digital (MTD) for VAT

Businesses with a taxable turnover that exceeds the 20/21 threshold of £85,000 need to sign up to Making Tax Digital keep digital VAT records and send HMRC returns using compatible software.

Making Tax Digital was put in place as the government plans to make the tax system more effective, efficient, and easier for customers to get their returns correct.

Sole traders (the self-employed) and landlords may choose to join MTD for income tax as this provides an alternative to the self-assessment tax return (system HMRC uses to collect Income Tax).

We hope this article has helped you understand what VAT is, how it applies to the self-employed and when to register for VAT if required.

If you have any questions contact us. We are a chartered accountancy firm based in Covent Garden and London

Chancellor Rishi Sunak has announced the government's plan to help support the self-employed and businesses over the coming months.

After announcing that restrictions for the pandemic may be in place for the next 6 months, the government is introducing a package of measures to support businesses and also extend the Self-Employed Income Support Scheme.

Self-Employed Income Support Scheme (SEISS)

The government will extend the Self-Employed Income Support Scheme for a further 6 months, from November 2020 to April 2021.

The grant can be claimed by self-employed individuals who are currently eligible for the SEISS and who are working as self-employed.

There will be two taxable grants:

• The first grant will cover a 3 month period from November 2020 to January 2021 and will be for 20% of average monthly profits. The grant will be paid in a single payment and will be capped at a total of £1,875.

• The second grant will cover the 3 month period from February to April 2021 - the amount of the grant has yet to be decided by the government and they will set this in the coming months.

Extended Time To Pay Self-Assessment

All self-employed taxpayers will now have more time to pay their taxes due in January 2021.

This extension is in addition to the deferral provided in July 2020 - and that deferral can now be deferred again.

Self-employed individuals with up to £30,000 in UK taxes due will be able to use HMRC's Time To Pay service to pay that amount over a 12 month period.

This means that any taxes due by 31 January 2021 can now be deferred over 12 months to 31 January 2022.

You can apply online or contact the HMRC helpline:

Self Assessment Payment Helpline

Telephone: 0300 200 3822

Monday to Friday, 8am to 4pm

If you defer the payment, interest will still run on the amounts due to HMRC.

The guide, found here, covers:

· Explanation of how employment income is taxed when you move to the U.K.

· Tax relief if you have workdays and trips outside the U.K.

· Claiming travel, accommodation and food expenses for the first 2 years

· How self-employed income is taxed when you have work and clients overseas

· Excluding foreign income from U.K. taxes for the first 7 years using the remittance basis

Many people who come to live and work in the U.K. do not realize that there are expenses that can be claimed and other tax reliefs to reduce their U.K. tax. 

The U.K. tax guide covers claiming tax relief for expenses for travel, accommodation and food (subsistence) for the first 2 years you move to the U.K.. 

Often, employees will travel outside the U.K and for the first 3 years, any workdays outside the U.K. can be excluded from U.K. tax and will give a repayment of tax.

The tax guide also explains how self-employed work is taxed when you move to the U.K. and what happens when you travel for work overseas, have clients outside the U.K. and are paid outside the U.K.

For foreign income when you move to the U.K., there is also a relief for the first 7 years to stop U.K. tax on that income - the "remittance basis" is covered by the guide and the conditions that need to be met.

The guide also looks at using double taxation agreements to help with U.K. tax when you move to the U.K. and also for short work trips to the U.K.

Finally, the concept of your tax home is explained and how this impacts U.K. tax and reporting your worldwide income in the U.K. - even if you are reporting that income and paying taxes overseas.

The Government have launched 1.47bn emergency support package to help protect Britains' creative industry. The investment follows several weeks of pressure from industry leaders, warning that many venues and jobs will be lost if no action is taken.

The relief comes at a pivotal time, as Britains creative industries are marked as one of the worst-hit by Covid-19. The industry is projected to take a turnover loss of £74 billion over the course of 2020. There has been a projected employment drop of 119,000 in the creative industries.

The projections are opposite to that of the Creative Industries contribution to the UK economy in 2019. In 2018 the CI's grew at 5x the rate of the wider British economy and contributed £111.7 billion to the economy.

“I understand the grave challenges the arts face and we must protect and preserve all we can for future generations.”

-Culture secretary, Oliver Dowden 

How the arts emergency fund will work

There has not yet been full disclosure of how the investment and grants will be distributed. It has been stated that decisions on how the fund is awarded will be made alongside expert independent figures from the sector, including the Arts Council of England and BFI.

The list of organisations that are stated to be eligible to include:

• Performing arts

• Theatres

• Heritage

• Historic Palaces

• Museums

• Galleries

• Live Music

• Independent Cinema

There has not yet been any statement issued to confirm if this is a comprehensive list.

"From iconic theatre and musicals, mesmerising exhibitions at our world-class galleries to gigs performed in local basement venues, the UK’s cultural industry is the beating heart of this country."

-Prime Minister, Boris Johnson

A vague distribution of funds has been issued on the Gov.uk site. The £1.15 billion is made up of £880million in grants and £270million in repayable loans. A further £100million will be committed to national cultural institutions such as the English Heritage Trust.

The new funding will also allow an extra £188 million for the devolved administrations in Northern Ireland, Scotland and Wales.

The return of the creative industry

Alongside the welcoming of the fund, industry figureheads are pushing for more clarity on when the entertainment industry will be able to open back up for business.

Cinemas were allowed to reopen from thee 4th July this month and the cultural secretary has said that outdoor performances may commence in the near future.

This is an ongoing area of development and we are committed to keeping our clients up to date.

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Socio-economic experts have said that financial planning and pensions are becoming increasingly important for future generations as life expectancy consistently rises every year.

A pension is a long-term savings plan which you contribute to over your working life that you can them live off later in life. Responding to the increasing importance of pensions, The Government and The Pension Regulators have introduced a number of incentives that can help individuals increase their pension savings.

This article will focus on informing employers about all of the need to know facts about pension tax relief schemes for employees.

WHO ARE THE PENSIONS REGULATORS?

CHOOSING THE PENSION SCHEME FOR YOUR STAFF

If you have further questions contact us

Who are the pension regulators?

The Pension Regulators (TPR) is the UK regulator of workplace pension schemes. They therefore are a focused pension organisation that ensures employed individuals pensions are protected. 

The pensions regulators are responsible for:

·      Ensuring employers enrol their staff into a pension scheme (automatic enrolment)

·      Protecting employee savings in workplace pensions

·      Improving workplace pension schemes

·      Reduce the risk of pension schemes ending up in the Pension Protection Fund

·      Helping employers balance the needs of their pension schemes with business growth.

Choosing the pension scheme for your staff

 There are a number of different pension schemes you can choose from as an employer for your staff. When choosing a pension scheme employers must consider which scheme is most beneficial to the employees. 

Below is further information about what employers need to consider when choosing a pension scheme.

DOES THE PENSION SCHEME INCLUDE AUTOMATIC ENROLMENT?

 Automatic enrolment means that staff will not be required to do anything to join the scheme, nor choose their own investments. Some schemes only accept employers with a minimum number of staff, or employees who earn a certain amount. 

It is important to check if the scheme is regulated by the Financial  Conduct Authority.

HOW MUCH THE SCHEME WILL COST THE BUSINESS AND EMPLOYEES?

 Different pension scheme providers have different fees. Some providers will charge monthly and others will charge a one-off up-front charge for the life of the pension scheme. There can also be exit fees for employers who decide to change pension schemes.

As pension scheme members, employee’s contributions should pay the charges to cover the cost of managing their savings. Some schemes may have different charges for different members, depending on income. It is important to weigh up the cost and charges against the level of service that the scheme will provide.

WHAT TAX RELIEFS WILL MOST BENEFIT EMPLOYEES? 

There are two methods that can be used to allow employees to have access to tax relief on what they pay into their pensions:

·      Relief at source

·      Net pay arrangements

A pension scheme can only use one method for all staff. Which method is used can affect lower and higher paid staff differently. Neither method is usually judged as superior to the other, but it can be good to be aware of what the implication of each method is.

Tax relief will only be available to employees who do not pay income tax if there is a scheme that uses relief at the source. Such schemes may have lower member charges. 

The staff that pays income tax will have access to tax relief through either the relief at source or net pay arrangement methods. However, if the relief is at source, higher rate taxpayers and additional rate taxpayers will have to claim the tax relief by completing a self-assessment.

RELIEF AT SOURCE TAX RELIEF SCHEME MODELS

Below we have summarised the different tax relief schemes that us relief at source:

National employment Savings Trust (NEST)

The Peoples Pension

True Potential Investments

Standard Life Workplace Pension

NET PAY ARRANGEMENT TAX RELIEF SCHEME MODELS

The Bluesky Pension Scheme

Creative Pension Trust

NOW: Pensions

Smarter Pension Master Trust

The Lewis Workplace Pension Trust

Workers Pension Trust

For information on minimum contributions, maximum contributions and other personal pension matters visit the links below.

CONTACT OUR COMPANY ACCOUNTANTS FOR TAX SUPPORT

Lucia Rossetti

In recent years there have been a number of government pension schemes and incentives introduced to help people save towards retirement. Experts have said that financial planning for retirement is becoming increasingly important as the UK population lives longer and longer. 

The benefits to saving into a pension run long and wide. Pension schemes allow savings to grow much faster than through other means. This not only allows people to retire earlier, but also can enable cash injections when required later on in life. 

Below is the the questions answered in this article surrounding retirement income and pension tax relief

The different types of pensions

How pension tax relief can increase pension savings

The lifetime allowance

How to find out your pension balance

The Maximum Pension Contributions

How much to save into your pension plan

Can you pay into a spouse's pension?

The benefits to making maximum contributions

If you have further questions contact us

The different types of pensions

There are three main types of pension: 

The State Pension

The State Pension is a retirement fund paid out by the government when individuals reach the state pension age. You can find out what your state retirement age is via the Gov.uk checker. You build up your entitlement to the State Pension by making National Insurance Contributions throughout your working life. If you are employed this is usually done automatically through PAYE.

How much is the state pension?

The state pension is currently set at £175.20 per week. However it can be higher depending on your National Insurance records and if you choose to delay taking your state pension. 

Defined benefit pension

If you have ever worked for the public sector or large company, it is likely you have a defined benefit pension. 

How much is the defined benefit pension?

The total amount you receive is based off of your income and how long you have been part of the scheme. 

Defined Contribution Pension 

Defined contribution pensions can be a combination of personal and workplace pension schemes, as well as stakeholder pension schemes. The Defined Contribution Pension built up through contributions by yourself and your employer. The final balance of your DC pension will depend on the below: 

• How much money you paid into your pension

• How much money your employer paid into your pension

• How much tax relief you received 

• How your investments have performed over time. 

You can access your defined contribution pension fund from the age of 55. Many use this pension savings to tide them by until they have access to their other pension funds later in life. 

How pension tax relief can increase pension savings

When money is paid into your pension some of the money that would have gone to the government as tax goes into your pension also. 

Claiming pension tax relief on workplace pensions

There are two ways you can receive tax relief on your workplace pension: Relief at the Source or Net pay arrangements. Which pension scheme your work uses is generally decided by the business owner. 

Claiming pension tax relief on Relief at the Source arrangements

Under the Relief at the source arrangement, your employer deducts tax from you taxable earnings as normal. They can then deduct 80% of your pension contributions from your net pay and send this to your pension provider. Your pension provider will then claim the other 20% in tax relief directly from the government. 

Higher and additional rate taxpayers do not automatically receive the tax relief under the relief at the source arrangement. They must claim the extra 20% in a self assessment tax return.

Claiming pension tax relief on Net pay arrangements

Under the Net pay arrangement, your employer deducts the full amount of your pension contribution from your gross pay. You will pay tax on your earnings minus your pension contributions. As a result your tax bill will be lower. 

All taxpayers will receive the tax relief automatically under this arrangement. However, no tax relief is available to people who do not pay tax under the arrangement. 

The Lifetime allowance

Lifetime Allowances (LTA) are a cap on the amount of tax-free savings that can be made within a pension fund. For the 2020-21 tax year, the lifetime allowance is set at £1,073,100. This means that the maximum amount someone can save into their pension tax-free is £1,073,100.

If you exceed the lifetime allowance there could be a tax charge, the excess can be paid as a lump sum, subject to a 55% tax charge. You can also opt to keep the money in you pension pot and be charged a 25% tax on the excess. 

How to find out your pension balance

Checking Personal, workplace and self employment pensions

Your pension provider will typically send you a breakdown of your total retirement savings in an annual pension statement. If you have a defined contribution pension, which most workplace and personal pensions are, your annual pension statement will include a calculation of the level of income you can expect to receive in retirement. 

What is the maximum contribution that can be made to your pension?

After establishing the major tax perk of putting long-term savings into your pension, many clients follow up with questions regarding the minimum contributions and maximum contributions that can be made each year. For the 2020/21 tax year, the annual limit is 100% of your salary or £40,000 (Whichever is lower). This included both contributions paid by you and employer contributions. 

Tapered annual allowance 

How much to saving into your pension savings

The tapered annual allowance is lower than the standard annual allowance and mainly affects those with income over £240,000. For every £2 of adjusted income over £240,000, the individuals allowance will be reduced by £1. 

Exceeding the pension contribution limit

If you exceed the pension contribution limit, there will be a tax charge on any amount over the contribution limit. This is called an ‘annual allowance charge’.

Figures released by the government show that around 10.4 million people contributed to their personal pension during the 2017-18 tax year. The average gross annual contribution for the 2017-18 tax year was £226 per month. This figure considers both the employer and personal contributions.

The average annual contributions tend to differ considerably depending on salary bracket. It is generally advised that people make the maximum contribution that they can each year, without impairing their regular cash flow.

Can you pay into a spouses pension?

If you have met maximum contributions to your own pension for the tax year, you may be considering contributing your spouses. It is possible to make pension contributions to your spouses pension. In this case your spouse will receive the benefits of the pension tax relief. 

The Benefits to maximum contributions

Unlike the majority of other saving schemes and products, pension plans can by boosted by contributions and money from the government in the form of tax relief. 

Below are some of the key benefits to pension savings

Employer contributions

When you make a contribution to your workplace pension, your employer will also contribute to your pension plan. This means that your will receive extra money that does not come from your salary.

Tax relief

For every £100 paid into a pension by a basic rate taxpayer, the government will contrite £25. If you are a higher rate taxpayer you can claim a further 25% top up through your annual tax return.

No inheritance tax

If you were to die before the age of 75, your pension can usually be passed on as one lump sum without inheritance tax.

Contact us to for support claiming pension tax relief

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Every year thousands of individuals and families leave the UK to further their career in America. The increased opportunity is very attractive for a wide range of different careers; however, the differences in tax regulation can be tedious and difficult to navigate for those who have taken the step to move abroad.

We aim to aid expats in their exciting new journey and alleviate some of the stress and pressure that comes with moving to America by providing free tax advice.

We are a team of American and British Accountants who are expert in all areas surrounding cross border taxation.

Contact us for support in your UK and US Taxes

How Different is the American Tax System? 

The American tax system, when compared to the United Kingdoms tax system, is widely considered to be much more complicated and difficult to understand. According to the BBC a ‘typical company’ will spend around 110 hours to comply to the UK tax code, this is substantially less than the 175 hours that American companies spend with the US tax code. Below are some key differences

What British Expats need to know about the IRS

 It is important to know the regulatory body for the American tax system is the IRS. Like the HMRC (UK’s regulatory body) they are responsible for the collection of tax and enforcement of tax laws. This includes, auditing households and individuals, providing the yearly tax brackets, providing tax aid, collecting tax, etc.

The Taxation of Households rather than individuals

The US tax code allows couples to file under one household, this doubles the tax bracket and is generally favored over opting to file separately. This is because it provides a tax break to households with one high-income earner, as the tax bracket will essentially double.

State Taxes

 Different states have different State Taxes. For example, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no state income tax at all; whereas, a state such as Utah has a flat income tax rate of 4.95%.

Better Rates for High Income Earners

Despite the more complicated nature of the American tax system there can be substantial benefits in regards to the money you come away with for the wealthier portion of the population. This is because of the lower tax percentage for higher earners. Where in UK the income tax brackets can go as high as 45% in the US federal income tax is capped at 37%.

How to know if I need to submit a US Tax Return?

According to the IRS any individual can be considered a “United States resident for tax purposes if you meet the substantial presence test for the calendar year”.

The Substantial Presence Test is a means of measuring the amount of time an individual has spent in the USA for work purposes. To fit the requirements you must either be “physically present” for 31 days of the current year and 183 days over a 3 year period (this period being the current year and the 2 years prior).

For queries regarding your tax the IRS has an interactive tax assistant. This online database contains answers to frequently asked questions to help individuals and households with tax problems.

The income tax due date is normally the 15th of April; However, due to the current coronavirus pandemic, the due date for income tax return 2018/19 has been deferred 3 months to July 15th.

Tax Advice for Actor Expats in America

The USA has one of the biggest entertainment industries on the planet. Every year thousands of budding actors from all across the globe make the move to America to further their career. We have compiled brief tax advice for an actor who has moved to America.

The Forms 

British expats who are employed by a US employer must fill out form W-4, which lets their employer know how much tax to withhold from their pay check, based on their circumstances.

The US tax return form is called form 1040, and it can be e-filed online. The American tax year is the same as the calendar year, and the filing deadline is 15th April following the end of the tax year. It’s important not to miss this deadline, as fines for late filing are much higher than those in the UK.

There is a vast array of forms all with different uses. For a comprehensive list of each form and what each one is for, visit irs.gov/forms-instructions. Failing that you should contact a tax professional to assist you with your tax return.

More information on tax forms

Deductions

 Tax-deductible expenses function to reduce an individual/ household’s taxable liability. For example, if a household’s net income is $40,000, and they have $5,000 in tax-deductible expenses, said household will only have to pay tax on $35,000 of their income.

Some common deductible expenses include:

·     Travel - Any transportation, accommodation, Airfare that occur as a direct result of your work. You can also include 50% of Meals within this category

·     Agent Fees

·     Manager Fees

·     Equipment - Film Camera, Lights, etc.

·     Headshots

·     Office Expenses

·     Education

·     Promotional Expenses - Photos, Videos, Websites, Advertisements in trade publications, Business cards and other promotional expense

·     Makeup and Wardrobe - Deductible only when incurred through business use directly, i.e. not for a pair of Jeans you have used on stage but also wear day-to-day outside of Acting

·     Subscriptions: Magazines, Newsletters and other Subscriptions relevant to your business

·     Legal and Professional Fees

Receipts 

It is very important that you keep your receipts organized and filed. If the IRS were to conduct an audit on your account, and were to query a deduction claimed, it would be your responsibility to provide the receipt for said deduction. Failure to do so would lead to a re-evaluation in tax owed and, depending on the severity of the circumstance, could lead to fines and maybe even legal action.

Tax Legislation for Expats

Specific legislation has been formed to provide financial aids for expats. It is important to be aware of the various legislations as they can allow for maximum savings on your tax bill.

Double Tax Treaty

Double tax treaties (also known as double tax agreements) are created between two countries, which define the tax rules when it comes to a tax resident of both countries. These agreements often aid in the reduction of overall tax liability for individuals who have to submit tax returns in two countries. Double tax treaties are complex and often require a tax professional’s assistance to make sure you are claiming correctly and taking full advantage of the legislation. 

The Totalisation Agreement

The Totalisation Agreement is designed to ensure that UK expats living in America (and Americans living in the UK) only pay social security tax (i.e. National Insurance tax) contributions in one of the two countries rather than both, with the contributions counting towards state pension entitlement in both.

Aid for Expats

Navigating the murky waters of US tax legislation is the last thing you will want to do when making the exciting move to further your career. We understand this and want to help. Please do not hesitate to contact us for expert advice on any and all of your tax needs.

Bambridge Accountants London and New York aims makes tax simpler for self-employed professionals worldwide.

Our team of highly trained US and UK accountants are expert in tax for all sectors within the creative industry. We have worked with self employed actors, photographer, graphic designers, architects, directors, creative directors and so much more. We have prepared thousands of UK tax returns and US tax returns for self employed professionals and learn't so much along the way.

Contact us for expert entertainment industry tax support

Many of our clients have income sourced from countries several countries throughout the world. Our accountants are expert on cross border taxation.

If you are a British Payer and receive income from a source outside of the United Kingdom, the income may be subject to UK Income Tax. 

Do you need to pay UK Income tax on your foreign income?

 Whether you are required to pay UK income tax on your foreign income will depend on your residency status. If you are not classed as a UK resident you will not have to pay UK tax on foreign income.  If you are a UK resident, you will typically have to pay tax on your foreign income.

Statutory Residency Test Explained

The Statutory Residency Test (SRT) is a test that allows you to work out your residency status for the tax year.

 The SRT takes into account:

·       the amount of time you spend and, where relevant, work in the UK

·       the connections you have with the UK

It is split into the following parts:

·       automatic overseas tests

·       automatic UK tests

·       sufficient ties test

·       application of the SRT to deceased persons

·       split years

If you’ve been in the UK for 183 or more days you’ll be a UK resident. There is no need to consider any other tests.

You’ll be resident in the UK for a tax year and at all times in that tax year if:

·       you do not meet any of the automatic overseas tests

·       you meet one of the automatic UK tests or the sufficient ties test

Reporting foreign income 

For those who are required to pay tax on foreign income, you usually will report the income on a Self Assessment Tax Return. However, there are some sources of foreign income that will be taxed differently.

Foreign income that is taxed differently

While most foreign income will be taxes in the same way that UK income is, there are special rules for: 

• Pensions

• Rent from property

• Certain types of employment income

Pensions

If you are a currently a resident or if you were a resident in any of the 5 previous tax years, you are required to pay tax on your pensions. You also pay tax on any foreign pension payments, including unauthorised payments like early payments and lump sums.

Rent from property 

If you earn rental income off of  more than one overseas property, you can offset losses from one overseas property against the other.

Certain employment income

Generally, employment income is reported on your self-assessment. However, there are special tax rules for those who work:

·      on a ship or in the offshore gas or oil industry

·      for the EU or government, or as a volunteer development worker

If your income is taxed in more than one country

If you are being taxed twice on foreign income you can apply for tax relief. This is valid for income:

-exempt from foreign tax but taxed in the UK

-made from a company that has a double-taxation treaty with the UK

Contact us for expert tax advice for UK residents with foreign income 

The Covid-19 Pandemic has had a huge impact on the photography industry. Over 90% of working photographers have reported upcoming jobs either being rescheduled or cancelled. As a result, many self-employed photographers have been left with a large income deficit.

We have been working around the clock to ensure our clients are supported in every way possible through this difficult time.

Contact us for expert tax advice for photographers

Below, we have compiled a list of some of the different reliefs and aids available. If you have any questions just get in touch.

Mortgage Holiday and Eviction Protection

At the early stages of the UK Covid-19 outbreak the government announced ‘Mortgage Holidays’ and ‘Eviction Protection’, which is available to anyone who has been financially affected by the Covid-19 outbreak. This will not only work to protect homes from being lost, but also bring down the overall monthly outgoings so there is less demand for a higher income.

Many self-employed photographers have reviewed the scheme as ‘extremely helpful’.

Tax payment delay

The government has delayed tax payments through the self-employed assessment system by six months. This will help lessen monthly outgoings further.  Currently the next income tax bill will be due in July 2020 until January 2021. It is likely in the scenario that the Covid-19 pandemic continues to thrive and affect income into the July period; the start date will be further pushed back.

Business Insurance

It may be possible to claim some loss of income back on business insurance. Successful Covid-19-related claims will depend on the detailed outlined in your insurance policy, and the claim itself.

Below is a list of some of the most common policies that may cover Covid-19 related claims:

·      Business Interruption Insurance

·      Public Liability Insurance

·      Employers’ Liability Insurance

It is important to note that even if a self-employed photographer has one of the insurance policies listed above, Covid-19 related issues still might not be covered. This is due to:

·      Some insurance policies list the specific diseases that can be claimed on. The recent emergence of Covid-19 means that most- if not all of these policies will not list Covid-19 as a claimable illness.

·      Other insurance policies may allow a Covid-19 claim, but in order for the claim to be successful there must have been a outbreak of the illness at the business premises or within a proximity of the business premises.

Most insurance companies are not allowing Covid-19 cover to be added to insurance policies going forward.

Universal Credit

Universal Credit is a Government Funded payment towards your living costs. The amount is usually available to those who have low income or are out of work. This is often the first port-of-call for self-employed photographers that have lost work and are in need of financial support.

Universal credit can now be applied for online and/or by telephone.

Employment and Support Allowance (ESA) 

ESA is a financial aid for those with a disability or health condition that affects how much you can work. ‘New Style’ ESA may be claimable for self-employed photographers who have paid enough National Insurance Contributions (NIC) in the last 2 to three years.

If you have a private pension worth more than £85 per week the amount of ESA you can receive may be affected. 

Self-employed Income Support Scheme (SEISS) 

The SEISS is available to those who are self-employed or a member of a partnership and have lost income due to Covid-19.  In order to receive the amount self-employed photographers must have:

·      Filed a 2018-19 tax return

·      Annual profits below £50,000 on average over the last 3 years.

·      Still be registered as self-employed

·      More than half total income come from being self-employed

The maximum amount claimable is £2,500 per person, per month. The grant will be fully taxable and so will be included on the 2020-21 income as income. A working example of this in practice shows that, if a person is to receive £2,500, of the credit, per month for 3 months, the total taxable income would be £7,500.

Statutory Sick Pay relief

For photography business owners, it may be an option to claim SSP relief. This is available to businesses with less than 250 employees and allows businesses paying its employees Statutory Sick Pay to be refunded 2 weeks of SSP per eligible employee.

Benefits Calculator

The Charity ‘Turn2Us’ offers a benefits calculator on their website to help work out some of the benefits you may be entitled to. This does not take into account non-means tested benefits and contributor benefits.

Arts Council Emergency Fund

The Arts Council has released an emergency fund of £20million, which is available to individuals working in the cultural sector, including ‘visual artists’. The grant itself will range up to £2,500. The final date to apply for this grant is the 30th April 2020.

Ways photographers are adapting their work to social isolation

Loss of upcoming income being said, there are many photographers demonstrating the amazing creativity and perseverance of the photography community. Below are to name a few:

Isolation Portraits

Miles Fortune, a freelance photographer, participated in Jackie Russo’s call for isolation portraits. Photograph: Jackie Russo

““There is one thing the photograph must contain, the humanity of the moment.”
— Robert Frank”

Many photographers have been documenting the history of the pandemic by showcasing the unique circumstance of social isolation. An example above, is a Miles Fortune portrait of journalist Jackie Russo in social isolation. Since mid-March, Fortune has photographed people from all over the world, working to capture ‘what this particular brand of social isolation feels like, and how different people approach and react to it’. The project has received attention from the masses.

Elsa Mitsoglou

Age 40
Brooklyn, New York

Elsa experienced a company mandate to work from home for two days, after which her office had planned to close for one full week and reassess.

Josh Ruben and Lauren Sick

Ages 36 and 35
Los Angeles

Josh and Lauren are practicing social distancing at home in Los Angeles. Sick has had four jobs cancelled so far. Ruben just wrapped a feature film shoot in upstate New York a few days before Los Angeles began implementing social distancing measures.

View our “Creative Industry reacts to Covid-19” articles for more ways creative professionals are adapting

The current crisis has many UK expats returning home to be with family and loved ones. For others, they may just have been planning a short trip to their home country and have been unable to fly out due to flight restrictions.

Expat taxes when you leave the UK

When you leave the UK to move abroad, the UK tax year is split into 2 - you will be UK tax resident up to the date you leave and then non-resident for UK tax for the remainder of the tax year.

You will complete a UK self-assessment tax return, claiming split-year treatment.

You will also need to be out of the UK for a full tax year to claim the split year treatment.

UK residence and taxes

Your UK residence status impacts how you pay tax in the UK.

UK tax residents report worldwide income in the UK and are liable for UK tax. There are exclusions if your permanent tax home (tax domicile) is overseas.

Non-residents only pay UK tax on their UK source income, foreign income is excluded.

Tax issues for UK expats returning home

For British expats returning home early, you may now be deemed UK tax resident and will be liable for UK tax on your worldwide income.

If you were planning to be outside the UK to claim split-year treatment and you have come back early, you may not qualify for that tax status.

Now you are living in the UK, your UK tax return may need to be adjusted to report worldwide income for the entire time you were away.

The UK will give relief for double taxation, by recognizing foreign tax credits on foreign-sourced income. If the UK has a tax treaty with the other country, there may be further tax relief.

Returning to the UK within 5 years

While you are overseas, if you sell or otherwise dispose of assets you held before you left the UK, you may be liable for UK capital gains tax if you return within 5 years of leaving the United Kingdom.

The UK tax will be charged in the year you return to the UK, the tax due date being 31 January following the end of the tax year.

UK tax returns once you move back

Once you arrive back in the UK, if you have foreign taxable income, were outside the UK for less than a whole UK tax year, or you are working for yourself you may need to register with HMRC for self-assessment.

Exceptional circumstances

If you have been unable to leave the UK due to the current travel restrictions, and based on the number of days you have spent in the UK you would deem to be non-tax resident, HMRC will grant 60 additional days in the UK to keep your non-residency tax status.

As an expat explore the number of days you have spent in the UK so far this year - HMRC are trying to assist expats meaning you may still be able to claim non-residency for tax.

Summary

As an expat accountant, we specialize in expat tax UK reporting and also US expat taxes. If you need assistance, feel free to contact us here.

Tapestry by Charlotte Edey

In this article we will be covering the need-to-know information about the yearly, as announced by Rishi Sunak on 11th March 2020.  

As expected can be expected , the Covid-19 pandemic plays a major part in this years budget. A large section of the budget has been put aside for financial aid and support to the many financially affected by Covid-19.

CORONAVIRUS EMERGENCY FUNDING

NHS Emergency funding

An emergency fund of £5billion will be injected into the NHS to help aid the influx of patients during the Covid-19 outbreak. This is through the virtue of a 3% increase in investment, which equates to a total of £129.9 billion in 2020.

Emergency Financial Relief for Businesses and Self-Employed Workers

The budget has made financial relief available for businesses, self-employed individuals, and people who will not be able to work during the COVID-19 pandemic. Below we have listed some of the reliefs mentioned in the 2020 Budget.

 Coronavirus Job Retention Scheme  

Announced after the official budget, this scheme was set up to enable companies to keep their workers on the payroll, thus lowering the levels of unemployment that would have been a direct result of the coronavirus pandemic. It offers PAYE employees 80% of their pay through the means of government-backed loans. Initially this is only for a period of 3 months but may be extended depending on how the pandemic progresses.

Self-Employed Offered 80% of Earnings

In a similar move to the Coronavirus Job Retention Scheme (CJRS), the aid offered to self-employed individuals equates to 80% of monthly earnings worth up to £2,500 a month. A key difference in the legislation lies within the payment schedule. Where the CJRS encourages employers to pay their workers on a regular basis, self-employed individuals will receive one lump sum payment in June 2020. This leaves 3 months where a self-employed individual could technically have no source of income.

Time to Pay

Self-employed workers and business owners may be able to delay some tax payments. We have listed them below:

·     You May Defer VAT payments due before 30th June 2020 until 31st March 2021

·     You May Defer your Self-Assessment Payment (Income Tax) due in July 2020 to January 31st, 2021

The HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties contacting HMRC or paying taxes due to COVID-19. 

Business Rates Reliefs

The government has increased the Business Rates Retail Discount[4] from 50% to 100% for 2020-21. This relief has also been expanded to the leisure and hospitality sectors[5] 

Small Business Grant Funding

Small businesses that pay little to no business rates also fall under the broad umbrella of government aid. To support businesses that are claiming Small Business Rates Relief(SBRR) or Rural Rate Relief, the government has committed to providing £3,000 grants to all that are currently eligible. This £2.2 Billion funding is said to compensate around 700,000 businesses facing financial crisis at this time.

Coronavirus Business Interruption Loan Scheme

The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme. This scheme will support SME’s to access loans, overdrafts, invoice finance and assets finance. The government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The Scheme will support loans of up to £1.2 million in value. 

Statutory Sick Pay (SSP) from the first day of sickness

Prior to the coronavirus pandemic businesses could not claim SSP until a worker had been self-isolating for 4 days. This legislation has temporarily altered this rule; with the aim of making sure individuals can take precautionary measures (self-isolating), without losing all financial income.

 ‘New style’ Employment and Support Allowance

The government altered ESA to make the relief more accessible, to a wider percentage of the general public. This is to accommodate for the increased amount of people facing financial crises during the pandemic. Details on the changes include:

• People will be able to claim Universal Credit and access advance payments where they are directly affected by COVID-19 (or self-isolating), without the current requirement to attend a job centre

• For the duration of the outbreak, the requirements of the minimum income floor in Universal Credit will be temporarily relaxed for those directly affected by COVID-19 or self-isolating according to government advice for the duration of the outbreak.

The Hardship Fund

A £500 Million fund has been set up to provide ‘council tax relief to vulnerable people and households to help those affected most by coronavirus’. This fund will go to local authorities in England, and will reduce council tax bills for working-age people receiving local council tax support.

OUTSIDE OF CORONAVIRUS

Although the Coronavirus played a major role in the budget, it was by no means the only topic spoken at length on. Other discussions included:

Raising the National Living Wage

The National Living Wage (NLW) has risen from £8.21 to £8.72. This is alongside the chancellor's announcement that the government is planning to raise the NLW to £10.50 by 2024. Also the government plan on reducing the qualifying age for NLW from April 2021, the age drop will be from 25 to 23.  

National Insurance Contributions Threshold Raised

The threshold for NI contributions has risen to £9,500 from £8,632. This will save the typical employee £104 a year, or a typical self-employed person will get a boost of £78.

Income Tax Allowance Unchanged

The Income Tax allowance for 2020-21 is set to stay at £12,500.

Entrepreneurs Relief Cut

Business Asset Disposal Relief , aka The Entrepreneurs’ Relief, lifetime allowance was slashed from £10m to £1m, reducing the tax saving to £100,000.

Change to Pension Tax Regulations for High Earners

The income threshold at which tax relief on pension contributions starts to shrink is set to rise from £110,000 to £200,000. Whilst this increase in threshold will provide further tax relief for some high earners; for people earning above £300,000, the minimum floor for the relief has now been reduced from £10,000 to £4,000.

Tampon Tax Scrapped

The notorious 5% VAT on women's sanitary products, known as the tampon tax, is to be scrapped

Support For the Self-Employed

The government states that “it will improve access to finance and credit for self-employed people, by extending funding for the Start-Up Loans program as above and by exploring how to improve the guidance available for self-employed people applying for a mortgage.

Societal Investments and Predictions

 The government also announced a plethora of investments in public health, infrastructure, and culture alongside forecasts for the economy by the Office for Budget Responsibility (OBR).

 Funding the NHS

Within the budget, the government has stated that its 'number one spending priority ' is the NHS. This is with the aim of a £34 billion increase in funds directed to the NHS by 2024. However; The Kings Fund have commented that the “long-term funding deal… excludes important areas of the Department of Health and Social Care budgets such as capital investment, public health and the education and training of NHS staff”. 

Greener Economy

The government pledged investment into the electric-vehicle charging infrastructure, which will ensure drivers are never further than 30 miles from a charging station. This was alongside providing consumer incentives for ultra-low emissions vehicles and reducing tax for zero-emissions vehicles. The Plastic Packaging Tax is also slated to come into fruition from April 2022. 

Research and Development Tax Relief

There was an emphasis put on investment in Research and Development (R&D). This investment planned is the largest and fastest ever expansion in support of researchers and innovative businesses, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France, and China.

Schools

The budget pledges £29 million per year increase 2023-24 to support primary school PE teaching and help schools make the best use of their sports facilities. This is as well as £90 million per year to introduce an Arts Premium from September 2021 to help schools provide high-quality arts programs and extracurricular activities for pupils.

£250 million Cultural Investment Fund

The government has announced a Cultural Investment Fund for cultural projects, libraries, museums and the creative industries. The Arts Council England commented on the fund stating that it allows “cities and towns to invest in creative, cultural and heritage initiatives that lead to culture-led economic growth and productivity”. The £250 million investment will be delivered by DCMS, with Arts Council England having a key role in distributing the fund.

Youth Investment Fund

The Budget has committed £500 million into a Youth Investment Fund to build new youth centers, refurbish existing youth facilities and provide high-quality services for young people across the country. The government expects that at least 800,000 young people will benefit from new or upgraded youth facilities.

National Museum Maintenance

£27 million has been allocated for the critical maintenance work on the National Museums’. The National Museum Directors Council has stated that the news is ‘really promising’ as museums in the country have been in “desperate need of investment”. This comes on top of 2019’s announcement of a £44 million investment, with the same allocation.

Economic Predictions by the OBR

The OBR has predicted that economic growth will be down this year compared to last year as a result of the COVID-19 outbreak. They are predicting growth of 3.0% compared to 2019’s 3.6%. “This includes an assumption that the outbreak would be "relatively limited", it is already clear that this is not the case, thus it can be assumed growth is likely to be less than predicted.

What’s Next?

The autumn budget is will likely be in November or December 2020, and will probably focus heavily on the government’s outlines for an economic recovery process from the COVID-19 outbreak. We aim to keep you up to date with any developments in the coming months.

We will be releasing further articles going further into depth on each of the points made in this article.

AS CHOSEN BY AMERICANS AND CREATIVE INDUSTRY PROFESSIONALS WORLDWIDE

We are a boutique accountancy firm that specialises in US and UK taxation. Set up over 10 years ago, Bambridge Accountants London was founded with the goal to simplify and optimise the tax filing process for creative professionals and US expatriates.

We have since become the leading American Accountancy firm for US Expatriates and gained a reputation within the creative industry for our 'outstanding' service and 'specialist understanding of the unique tax complexities for creative self-employed workers.'

 

GET IN TOUCH WITH OUR ONLINE ACCOUNTANTS

Zohar Winner

The government and HMRC have introduced a number of tax reliefs to work as an incentive to entrepreneurs to keep their business’s growing and thriving. As a business owner or self-employed professional, you can experience huge benefits from understanding the different reliefs and credits you are entitled to. 

Understanding how the tax system can work in your favour could not be more important, especially as we move towards a post-Brexit economy.

What is the difference between tax credits and tax deductions?

Tax credits are often regarded as superior, in terms of tax savings, to deductions. Credits are deducted from income before gross before-tax income is determined. Deductions are taken in the next step of the tax process, reducing the net taxable income.

Business Tax Credit and Deductions for ‘Going Green’

The government have introduced many incentives to encourage energy efficiency and being environmentally friendly. In addition to tax credits, you may also be eligible for tax deductions for changes made to your business facilities.

 Examples of some ‘Going Green’ credits: Business Energy Tax Investment Credit

Research and Development Tax Credits

Research and Development tax credits have been introduced to encourage businesses to build and discover in their field. The PATH Act of 2015 includes some increased incentives- in the form of tax credits- for small businesses who use the R&D tax credit.

Alternative/Hybrid Vehicle Tax Credit

Individuals and businesses who buy and use a new hybrid or electric vehicle can take advantage of the Alternative Vehicle Tax Credit.  

Contact us for more advice and tips on the different tax credits that can be claimed

Flower Week

Over the past 5 years the general UK population’s rise in concern and consciousness for the environment is undeniable. From youth climate change protests to the suggested conversion to veganism to help the environment; climate change activism can be seen in all walks of life in the UK.

This article will focus on how UK taxes are joining in on the effort to help the environment.

During 2014 Alone, UK environmental taxes raised £44.6billion; this equated to 7.5% of all revenue from taxes and social contributions in 2014. The main source of the sum was from the tax on Hydrocarbon oil (i.e. fuel tax), contributing 72.9% of all environmental taxes in 2014.

Another environmental tax is more directly on transport, for example Air Passenger Duty and Boat Licenses. This made up 23.7% of environmental tax revenue in 2014.

The final key category of environmental tax is pollution and resources taxes, such as Landfill tax, fishing licenses and aggregates levy.

The environmental taxes that have been purposed in the 2018 Budget include:

Plastic tax

A new tax on the production and importation of plastic packaging will be introduced in 2022. This aims to provide a financial incentive to manufacturers to produce more sustainable packaging and would in turn help combat issues such as water and sea life pollution.

Carbon emissions tax

 In FB 2018-19, the government will legislate a new carbon emissions tax to help meet the legally-binding carbon pricing commitment under the Climate Change act.

Company car tax and VED: carbon dioxide emission regime

The impact of the Worldwide harmonised Light-vehicles Test Procedure (WLTP) on the VED and company car tax systems is to be reviewed. Legislation will confirm that, for the purposes of VED and company car tax, the applicable CO2 figure for cars will be based upon WLTP. WLTP aims to provide a closer representation of ‘real-world’ fuel consumption and CO2 emissions.

For cars registered prior to 6 April 2020, HMRC will continue to use the current New European Driving Cycle (NEDC) test procedure for the purposes of collecting company car tax. Similarly, cars first registered prior to 1 April 2020 will maintain their current VED treatment.

Climate change levy rates

The rebalancing of the electricity and gas main rates of climate change levy (CCL) is to continue. The electricity rate will be lowered in 2020/21 and 2021/22, and the gas rate will increase in these years so that it reaches 60% of the electricity main rate by 2021/22. Other fuels such as coal will continue to align with the gas rate. The rate of CCL for liquefied petroleum gas will remain frozen at the 2019/20 level in both 2020/21 and 2021/22.

Carbon price support rates

The price of EU ETS allowances has risen significantly over recent months, raising the Total Carbon Price (currently made up of the EU ETS price and the carbon price support (CPS) rate). The CPS rate will be frozen at £18 per tonne of carbon dioxide emitted for 2020/21. From 2021/22, the government will seek to reduce the CPS rate if the Total Carbon Price remains high.

Aggregates levy rates 

The Aggregates Levy rate for 2019 to 2020 will be frozen, but it is the intention to return the Levy to index-linking in future. 

Landfill tax rates 

The standard and lower rates of landfill tax will be increased in line with RPI, rounded to the nearest 5p, for both 2019/20 and 2020/21.

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With 51% of businesses expressing desires to expand over the next year, UK unemployment levels have fallen to its lowest point since 1974. Below are some of the fastest growing sectors for employment.

Fintech

Fintech companies are one of the largest and fastest growing sectors currently. Since the general style of employment within the sector is generally contract work; there is a constant demand for work.

Construction

The construction industry has also demonstrated strong growth over the past year with 51st growth. There are many signs that this huge growth will continue. Although, since many of those employed in construction roles are from abroad, Brexit pays a significant threat to the construction industries ability to source skilled workers.

Information technology

The IT sector demonstrates monthly stable growth; with areas such as cyber security expanding masses over the past two years. The lack of skilled workers available has lead to heavy investment from both the government and IT companies to train and source IT professionals.

Contact us for expert tax advice for tech or construction professionals

Nationwide, it is becoming more and more difficult be granted an appropriate-sized mortgage. The number of people going self-employed within the UK is increasing every year, with self-employed workers now accounting for 15% of the working population (Jones, 2018).

There are a number of problems currently associated with being self-employed, i.e. the pension crisis and getting a mortgage. This article focuses on how to get a mortgage as a self-employed individual.  Research has shown that 30% of self-employed homeowners feel that the mortgage process is biased (McDowell, 2018).

 There is no such mass-market thing as a mortgage especially designed for the self-employed (currently), self-employed individuals are able to get the same- if not a higher- income than employed professionals and so are in the same pool as everyone else for mortgage brokers. However, the problem associated with self-employed individuals getting a mortgage is often the issue of proving their income.  

Proving you income to mortgage brokers

Generally speaking, the longer that you have been self-employed the better; this way you can show a steady ability to pay towards a mortgage. The majority of lenders insist that chartered accountants do the accounts. Feel free to contact us to see about getting your accounts done with the goal of getting a mortgage in the future. 

 You will also be expects to present the income you’ve reported to the HMRC and the tax paid, a SA302 is used to show this.

Planning towards getting a mortgage 

One thing that is overlooked by so many self-employed professional, when they go to enquire about getting a mortgage is the amount they are claiming in expenses. Yes, on the most part it is great to save money against tax. However, when it comes to getting a mortgage- not so great. In the spirit of being granted mortgage, you should consider not claiming the maximum and paying a little extra tax for a few years. If you are seeking to get a mortgage as soon as possible, but have previously claimed the maximum, feel free to contact us about backdating your tax returns.

Just gone self-employed

If you have just gone self-employed and want to get a mortgage, don’t lose hope. There are specialist lenders such as Precise Mortgages and Kensington that may consider applicants with only one year worth of accounts. It should be noted that this is likely to come at a higher rate.

Your self-employed status 

The status of your self-employment, whether it is sole trader, company director etc., is an important factor to your eligibility for a mortgage. Sole traders are assessed differently depending on whether their income has increased or decreased over recent years. While contracts who earn a day rate can have their rate multiplied by the number of working days in the year, as well as looking at their past income.

Contact us for expert tax support for self-employed professionals

Dinsaur Agency

As a self-employed consultant you are likely to have several running costs and expenses. Theses costs and expenses should be taken away from your business income to work out your profits. Not all expenses are allowable for tax purposes, it is therefore important to be aware of you what you are and aren’t allowed in order to save money against tax and avoid a HMRC enquiry.

What are allowable expenses? 

Allowable expenses include costs that you pay with the sole purpose of earning business profits. You’re not able to deduct costs:

·      For non-business or personal purposes

·      For buying or improving fixed assets or capital items which last for several years

·      Which are recoverable under an insurance policy

Below are some allowable expenses that you may be able to claim as a consultant:

Accountancy fees

Accountancy fees, like many other professional fees, are allowable expenses. This means that you can claim the cost of your tax returns against your taxable income.

Advertising

As a consultant it is likely that you have to market yourself to gain work. The money you spend on ad campaigns and creation is claimable against tax. This includes the costs of running a website.

Car Insurance

If you have brought a car for the purpose of work, traveling from one client to another, you can claim a portion of your car insurance against tax.

 Contact us for expert tax advice for consultants

Statutory accounts (commonly known as annual accounts) are financial reports that must be prepared and filed at the end of each financial year. For UK private limited companies statutory accounts are a compulsory part of the tax year.  

Statutory accounts are used to report financial activity and the performance of limited companies; as well as being used to calculate corporation tax.

Once your Statutory accounts have been prepared they should be sent to shareholders, Companies House and the HMRC.  

Limited companies must produce their annual accounts in line with either IFRS Standards or the New UK GAAP. Therefore they must include a balance sheet, a profit and loss statement and notes about the accounts.

Depending on the size of your company, you may also need to include a directors’ report and/or an auditors report.

I’m a small business owner. Do I need to file statutory accounts?

If you are the owner of a small business you may not be required to file full statutory accounts or supply chain reports.

Dormant companies, micro-entities and small companies are subject to different rules when it comes to statutory accounts.

 

Dormant companies and statutory accounts

If you are the owner of a dormant company you are not required to audit your company nor submit an audit report.

Micro-entities and statutory accounts

If you are the owner of a micro-entity, Companies House will accept simpler statutory accounts and balance sheets.

Small Companies and statutory accounts  

If you are the owner of a small company Companies House will accept ‘abridged’ accounts.  These contain much simpler balance sheets and make less information about your company publicly.

Contact us for support on your statutory accounts