fbpx
  • 020 3778 0973
  • 078 1790 1473
  • info@thestanlee.com
  • +44 7342 154942
  • Mon - Fri: 09:30 - 17:30
Facebook-f Twitter Instagram Youtube Linkedin

Client Portal

taxation

What home-office expenses are deductible for your business?

What home-office expenses are deductible for your business?

With greater use of home-working now the norm for many UK businesses, it’s important to think about the deductible expenses that you may be able to claim when working from a home office.

Working from home results in us using more power, more broadband and more heating than when working from an office space, or from a coworking space outside the home. But which elements of your home expenses can you claim back? And how does the process work?

Which of the four home-working categories applies for you?

To be able to claim back your home-working expenses, your home office must be your main place of business. If you generally work away from home and just use the dining-room table to complete the occasional bit of paperwork, that won’t count.

There are four groupings into which your business must fall when it comes to claiming back home-office expenses: Limited Company or Unincorporated, with each claiming at either a flat rate or a higher amount.

  1. Limited Company & Flat Rate: a flat rate of £6 per week can be claimed against your home expenses.
  2. Unincorporated & Flat Rate: this is intended for unincorporated businesses (sole traders etc.) who work from home, and is broken down into three scaled categories
    • If you work at home 25-50 hours/month, you can claim £10/month,
    • If you work 51-100 hours/month, you can claim £18/month,
    • If you work 101+ hours/month, you can claim £26/month.
  3. Limited Company & Higher Amount: If you want to claim more than the scale rate, it’s preferable to have a rental agreement between you and your company to avoid the charges being treated as salary. The rent should be market-related – which can be difficult to establish. Because of this, the rental price is often worked out as the share of mortgage interest or rent, council tax, utilities and buildings insurance. If there are six rooms in the house (ignore halls, kitchens and bathrooms) and one is used for the business, then you claim 1/6th of those costs. It would be unusual for more than one room to be used for business, but could be the case if, for example, you’re a photographer with a studio and a separate office in the house.
    • Note re repairs: repairs for your ‘home office’ room can be claimed back in full, and repairs for other rooms can’t be reclaimed at all. General repairs to the house (e.g. re-tiling the roof) can be claimed proportionally, so 1/6th in the example we’ve given.
  4. Unincorporated & Higher Amount: An unincorporated business can’t charge rent as such, so no formal agreement is needed. But you can claim back an amount against tax, calculated in exactly the same way as for a limited company.

Important points to be aware of

The claimable expenses may sound reasonably simple to calculate, but there are some other important factors to take into consideration.

  • Capital gains tax on a property sale: The sale of a residential property isn’t normally subject to capital gains tax (CGT). But if you use one room exclusively for business, then the proceeds of the sale of that room are potentially liable for CGT. Simplistically, for example, if you have a home office that takes up 10% of the total area of the house, and the house is sold producing a capital gain of £100,000, 10% of that gain would be subject to CGT. However, if a spare bedroom with a desk is temporarily used as a workspace while the employer’s office is not accessible, this would not give rise to any capital gains tax issues.
  • Use of the room: If possible, try not to use any room exclusively for business. Put an exercise bike in your office room for workouts, so it’s only available for the business 90% of the time! The ‘1/6th’ in the earlier section then gets reduced by 10% and the rental agreement specifies that the room isn’t available for business use between specified hours, or on specified days.
  • Phone and broadband expenses: Your home telephone expenses only cover the cost of itemised business calls, not the whole bill. Your internet provider costs are not allowable as dual usage (personal and business) unless you have a separate connection for your business. Your mobile phone bill is fully allowable (so personal use is ignored) but if you’re claiming as a limited company then the mobile contract MUST be in your company name.

Talk to us about claiming your home expenses

With more and more of us now working from home, it’s important to know what expenses you can claim for, and how much you can claim back against these home-working overheads.

Talk to us and we’ll help you calculate what can (and can’t) be claimed, and what the impact will be on your annual tax bill.

Get in touch to talk through your home expenses and let’s find how we can help from here at The Stan Lee.

What home-office expenses are deductible for your business? Read More »

Knowing the tax impact of using a company car

Knowing the tax impact of using a company car

Do you know the tax implications of a company car? We can explain the impact of a company car on your benefits in kind (BIK) and company taxable costs.

Having the use of a company car is a great perk. But are you aware of the tax impact of a company car and how having this vehicle may affect your company benefits?

Two of the key tax considerations related to company cars are the benefits in kind (BIK) tax charges incurred by the driver, and the tax deductions which benefit the company. At present, it’s also worth understanding the benefits of running an electric or low-emission vehicle.

Understanding the BIK charges on your company car

The BIK amount you’re taxed on as the driver of a company car is calculated as a percentage of the list price of the vehicle when new. The list price includes delivery charges, optional extras and VAT but not the registration fee or the first year’s vehicle excise duty.

Because it’s based on the original ‘list price when new’ value, any discounts are ignored, and even for used cars, the original value is retained.

The percentage applied depends on CO2 emissions, and for hybrid vehicles the on-electric range, as you can see in the table below:

Screenshot 2023-07-18 at 3.57.51 PM

It’s worth noting that:

  • Diesel vehicles registered before January 2021 that aren’t RDE2-compliant attract a 4% surcharge on their published BIK rate, up to a maximum total of 37%
  • Where fuel is provided by the company for private mileage, the same percentage is applied to a value of £27,800.

Claiming company benefits against the cost of a company car

Although the driver is taxed on the perk of driving a company car, the company can benefit by claiming deductions for the costs involved in running this vehicle.

All expenses in connection with the operation and maintenance of the car are deductible as trading expenses, including things such as insurance, fuel and maintenance. Capital allowances are also available in respect of the purchase price of the vehicle.

Depending on the vehicle, the capital allowances available are:

  • 100% First Year Allowance – this is only for new zero-emission cars.
  • 18% annual allowance on written-down value – this is for second-hand electric vehicles and all vehicles with emissions between 1 and 50 g/km
  • 6% annual allowance on written-down value for all other new and used vehicles.

Talk to us about the tax implications of company cars

If you’re thinking about investing in a company car, it’s worth considering that there are tax advantages for both the company and the driver in selecting an all-electric vehicle. There are also advantages, to a lesser extent, in opting for a low-emission vehicle.

We can calculate the likely personal BIK tax charge on any vehicle you’re considering buying through your business, as well as advising on the tax and other implications for the company.

Talk to us before purchasing a company car for personal use. The tax charges can be higher than you may expect, so it’s worth considering the BIK impact before you buy.

Get in touch for a chat about your company car plans from us at The Stan Lee.

Knowing the tax impact of using a company car Read More »

Getting your tax affairs in order prior to death

Getting your tax affairs in order prior to death

Your tax liabilities don’t end when you pass away. That’s why getting your tax affairs in order prior to death is so helpful for those you leave behind. Here’s what you need to know.

If you’ve always thought that your tax affairs end once you die, then think again. The truth is that the requirement for tax filings doesn’t end with the death of the taxpayer.

There are tax considerations:

  • Up to the date of death
  • For the period of administration, the time between death and the final winding up of the deceased’s estate
  • And the documentation potentially applicable to inheritance tax.
  • What this means is that you could leave complicated tax liabilities behind for your loved ones, family and the executor of your will to sort out.

So, how do you ensure you leave your tax affairs as tidy and manageable as possible?

Understanding end-of-life tax responsibilities for your personal representative

When a taxpayer dies, their personal representative is responsible for completing any outstanding tax returns. There will be one for the current tax year up to the date of death, and possibly one (not normally more, but there can be) for previous tax years.

HM Revenue & Customs (HMRC) has a very clear process for what happens once a taxpayer comes to the end of their life:

  • When HMRC is notified of the taxpayer’s death, any outstanding returns will normally be cancelled and then re-issued, together with one for the current year to the date of death. These returns will be sent to your personal representative.
  • If HMRC has issued a notice to submit a tax return. it must be completed unless they agree to cancel it. But in cases where HMRC already has all the information from their own sources – if, for example, your only income is from employment – they will not normally require a separate tax return to be filed.
  • Any re-issued returns must normally be submitted within 3 months and 7 days to HMRC. The return for the current year is due by the following 31 January. Electronic returns cannot be submitted – they must be in paper form.
Providing the required financial information to HMRC

Following your death, it will be your personal representative (usually the executor of your will) who has to deal with your financial and tax affairs on your behalf

Where a return is required, it will be your personal representative’s responsibility to collate the information that’s required and get your tax return completed and filed with HMRC.

So, how does this work in practice?:

  • HMRC will be able to provide details of income from any employment, state and other pensions, as well as any taxable welfare benefits.
  • Banks and building societies should be able to provide values for any interest payments. Dividends on listed shares should be evidenced by dividend vouchers, although the amount paid per share is also publicly available. Dividends on unlisted shares can be confirmed with the company’s accountant if vouchers are not readily available.
  • Any capital assets owned at the date of death go into the deceased person’s estate at the then-market value but are not deemed to have been disposed of by the deceased. Accordingly, these are not required to be reported for capital gains tax purposes. Any assets disposed of prior to death should of course be included in the final tax return.
  • Any tax refund due will be paid to the estate, and the estate is responsible for any tax payable by the deceased.
  • In addition to tax returns up to the date of death, it may also be necessary to complete a return covering any income and capital gains arising during the period of administration – this is the time between the date of death and distribution of assets to the beneficiaries. Where income from interest would result in a tax liability of £100 or less, no return will be required, and the tax-free status of income derived though individual savings accounts (ISAs) is maintained.
  • Where a tax return is required for this period, it will be a Trust and Estate Tax Return, not a normal personal tax return. Often though, HMRC will accept the necessary information less formally, in a written summary.
  • Where any residential property is disposed of from the estate, any capital gains must be reported within 60 days, and tax paid at the same time.
  • The final area of tax following death is in respect of inheritance tax (IHT). That is an area where you should always seek professional advice.
Talk to us about getting your tax affairs in order

Tax administration following death can be confusing, and something your surviving family members will likely find emotionally difficult. We’re always there to help in these circumstances.

Where the size of your estate is likely to exceed the inheritance tax threshold of £325,000 (excluding the residence nil rate band) please talk to us to explore if there is any planning that can be undertaken to reduce your potential IHT exposure.

As your adviser, we can also help you make sure your financial and tax affairs are always in order, and that you have funds put aside to cover your end-of-life tax liabilities.

Get in touch to get your tax affairs in order and let’s find out how we can help from The Stan Lee.

Getting your tax affairs in order prior to death Read More »

What should be on a VAT invoice?

What should be on a VAT invoice?

Are you VAT-registered? Are you complying with the regulations when sending out VAT invoices and claiming against supplier invoices? We’ll give your invoice process a review to make sure you’re ticking all the boxes

Whether you’re selling or buying, it’s important to make sure that any VAT invoices you issue or receive comply with the strict VAT regulations.

Failing to do so can cause problems both for you and for your customers.

If you reclaim VAT using a defective invoice, HM Revenue & Customs (HMRC) can disallow the claim. HMRC can also charge penalties and interest on any amounts you’ve incorrectly claimed. Equally, your business has an obligation to your customers to send out invoices that meet the regulations and include the right documentation to support their VAT claims.

The three different types of VAT invoice

There are three types of document that can be produced, so it’s important to understand the differences between these three and to use the right type for your business usage.

1. A simplified invoice

The simplified invoice is intended for sales under £250 and keeps the amount of information on the invoice to a minimum. The invoice must include:

  • The seller’s name, address and VAT registration number
  • A unique sequential invoice number
  • The tax-point (usually the date of supply)
  • A description of the goods or services supplied and the applicable VAT rate(s)
  • The total charge including VAT.
2. A full VAT invoice

A full VAT invoice is the standard invoice in most circumstances and is more comprehensive than the simplified invoice. It includes the same fields as the simplified invoice plus:

  • The invoice date (usually the same as the tax point)
  • The customer’s name and address.
  • Whereas the simplified version only requires a VAT-inclusive total, the full version needs to show the amount excluding VAT as well as the total VAT charged.
  • The unit price and quantity of goods must also be shown, together with details of any discounts.
3. A modified VAT invoice

A modified VAT invoice can be issued in respect of retail sales exceeding £250. They contain the same information as a full VAT invoice, and in addition must include the total charged including VAT. In practice, that will be on the full VAT invoice anyway.

Making sure you stick to the regulations

With the choice of three different types of VAT invoice, it’s vital to choose the right type of documentation and to also make sure you adhere exactly to the guidance and regulations.

  • You don’t need to issue a VAT invoice if your customer isn’t VAT-registered, or if all the items charged on the invoice are zero-rated or exempt.
  • You mustn’t issue VAT invoices for goods supplied under the VAT second-hand schemes, and there are special invoices required for supplies under the Margin Scheme, Global Accounting Scheme, Auctioneers Scheme and the Tour Operators Margin Scheme.
  • Invoices should be issued within 30 days of the time of supply, and you must keep copies (electronic copies are acceptable) of all invoices issued, including spoiled ones.
  • Although invoice numbers must be sequential, you can have multiple series in use at the same time.
  • NOTE: quotes and pro-forma invoices are NOT acceptable for claiming VAT.

Helping you keep your VAT procedures in order

As you can see, it’s important to have your own VAT invoices in order and to have proper VAT invoices for any purchases where you are reclaiming VAT charged.

As your adviser, we can check that the invoices you produce comply with VAT regulations, and check more-generally that your VAT procedures are robust.

Get in touch for a review of your VAT procedures and let’s find out how The Stan Lee can help on your VAT affairs

What should be on a VAT invoice? Read More »

Spreading your tax costs with Time To Pay

Spreading your tax costs with Time To Pay

Have you been hit with an unexpectedly large tax bill? One way to manage this is to apply for a Time to Pay arrangement with HMRC. We’ve got the lowdown on how to do this.

HM Revenue & Customs (HMRC) expects you to pay your taxes on time. But if you’re finding it difficult to pay in full, HMRC can be approached to allow a Time to Pay arrangement.

A Time to Pay arrangement will allow you to pay your debt off in pre-agreed instalments, reducing the impact of a large tax bill – and helping you manage your debt and cashflow.

How does Time to Pay work?

If you need to request a Time to Pay arrangement for self-assessment tax, Employer’s PAYE and VAT, these can often be made online using a ‘self-service’ system.

Where you owe other types of tax, or where the conditions for online applications are not met, you’ll need to contact HMRC to discuss your situation.

  • The easiest (although not always the quickest) way to discuss your Time to Pay request is by telephone to 0300 200 3835.
  • HMRC agents will want to know about all taxes you owe, not just the one(s) where you want to spread payment. They will also ask for details of your income and outgoings, and any savings or assets that may be able to be used to reduce the amount owed.
  • Presuming that you agree to a payment plan with HMRC during the call, they will usually want to set up a Direct Debit straight away.

Making use of the self-serve Time to Pay system

If you don’t have any existing payment plans or debts with HMRC, the ‘self-serve’ system may be more straightforward, provided that the applicable tax returns have already been filed. The conditions and amounts vary depending on the particular tax.

For example:

  • Self-Assessment: You must apply no more than 60 days after the payment deadline and owe no more than £30,000.
  • Employer’s PAYE: You must be within 35 days of the deadline, owe no more than £15,000 and have no outstanding penalties. The maximum period over which the amount due can be spread is six months.
  • VAT: For VAT, you need to apply within 28 days of the due date and owe no more than £20,000. You can’t apply for a Time to Pay arrangement through the self-serve scheme if you use either the cash accounting or annual accounting schemes.

The self-serve option for Time to Pay does make the process easier, but remember that HMRC isn’t obliged to offer you the option of settling your taxes owed via instalments.

If you fail to pay your taxes, HMRC can take recovery action in the County Court, and apply for the taxpayer to be put into liquidation or made bankrupt where appropriate.

Talk to us about making Time to Pay work for you

One of the best ways to avoid getting into difficulties with your tax liabilities is to work more closely with your accountant. As your tax adviser, we’ll produce regular forecasts so that any financial stresses can be foreseen well in advance.

Where unexpected circumstances do arise, putting a suitable payment plan in place with HMRC is the most sensible way to manage this situation. Ignoring your tax problems won’t make them go away and burying your head in the sand can lead to serious penalties and legal action.

Get in touch to talk about Time to Pay and let’s find out how we can help from The Stan Lee.

Spreading your tax costs with Time To Pay Read More »

What is Principal Private Residence Relief?

What is Principal Private Residence Relief?

If you’re selling a property, Principal Private Residence Relief (PPR) needs to be on your radar. Talk to us about how PPR can reduce or eliminate your capital gains tax liability.

Paying capital gains tax (CGT) on the sale of a property asset can be a necessary but expensive liability. The good news is that Principal Private Residence Relief (PPR) is available and may help you reduce (or in some cases eliminate) that CGT cost.

Let’s take a look at the rules around PPR and how you qualify to make use of this relief.

How does Principal Private Residence Relief (PPR) work?

Principal Private Residence Relief ensures that any capital gain arising on a property that is your main or only residence is free of capital gains tax.

If you acquire a second property, you have two years from the time of acquisition to nominate which property should be treated as your principal private residence (main residence).

However, if you’re the owner and are absent from the property, gains related to that period (on a pro-rata basis) may be chargeable to CGT.

What are the main PPR rules?

Buying a property is a significant life event, where couples may well buy a property together, in both their names. If you’ve bought a house as a couple, it’s important to note the PPR rules.

  • A married couple or civil partners can only have one main residence between them. This rule only changes if you’re separated (either under a Deed of Separation or otherwise in circumstances where the separation is likely to be permanent).
  • If upon marriage or partnership registration the couple own different properties, and continue to use both, you have two years to nominate which property is to be treated as your main residence.
  • Provided that the property being sold was your main residence at some point, the final nine months of ownership is treated as a period of deemed occupation, regardless of any other factors.
  • Some other periods of absence (see below) may also be treated as periods of occupation when calculating PPR relief, subject to two conditions:
    • Firstly, the property must have been the only or main residence at some time before the period of absence.
    • Secondly, it must have been the only or main residence at some time after the period of absence, unless you were prevented from occupying it because of the situation of your place of work or due to a condition imposed on you by the terms of your employment. This second period requires actual occupation, not deemed occupation, as in, for example, the final nine months of ownership.
  • These other periods of absence include:
    • Any period for any reason not exceeding three years in total.
    • Any period without limit where you were employed or an office holder and where all the duties were carried out outside of the United Kingdom.
    • Any periods of absence up to four years in total where you could not live in the property because of the location of your place of work, or because of any reasonable requirement of your employer that they must live elsewhere.
    • Any or all of these conditions can apply, and in the case of periods where more than one condition applies, the time can be allocated against whichever is most beneficial. The period of deemed occupation can be claimed where the condition applies to the spouse or civil partner in the same way as if it applied to the individual, and is not affected by the actual use of the property – e.g. it can still apply even if the property was rented out.
Talk to us about PPR if you intend to sell your property

For many taxpayers, PPR relief is the main CGT relief that will affect them.

Where the property being sold has not been continuously occupied as the main residence throughout the period of ownership, application of the rules around deemed occupation can have a significant impact on the amount of CGT you end up paying.

It may be that your property situation is extremely straightforward – for example, you only own one property at any time, in which you live throughout your period of ownership. But for any other more complex property arrangements, it makes good sense to check with your accountant about any potential capital gains issues – and how they can be minimised.

Get in touch to talk through your property plans or visit our office to have free initial consultation without any obligations. Let’s find out how we can help from The Stan Lee for your CGT matters.

What is Principal Private Residence Relief? Read More »

Should you move your rental properties into a limited company?

Should you move your rental properties into a limited company?

Your portfolio of rental properties could be easier to manage through a limited company. Here are five reasons why getting incorporated makes good business sense.

When you first start out building a property portfolio, you may decide to purchase each property in your own name. While this keeps things simple, there are some distinct advantages to creating a limited company to own and manage your properties.

We’ve highlighted five reasons why you should consider setting up a limited company.

5 reasons to run your properties through a limited company

Creating a limited company and becoming a company director may sound like a big move. But, in reality, running a limited company can make managing your property portfolio a whole lot easier, as well as reducing liability and improving your tax position.

A limited company structure offers:

  1. Limited liability – by moving your rental properties into a limited company, you can limit your personal liability if something goes wrong with the property. This means that if the company runs into financial difficulties, your personal assets will not be at risk.
  2. Tax efficiency – using a limited company can be more tax-efficient than owning rental properties personally. Individual landlords are taxed on their rental income at their own personal rate of income tax, which could be up to 45%. Companies are taxed on their profits via corporation tax, at a lower rate of between 19-25%. On top of this, there may be additional tax benefits from being able to claim expenses and allowances against your company’s profits.
  3. Better access to finance – a limited company can have better access to finance and borrowing than an individual landlord. Lenders may view a company as a more stable and professional entity, which makes it easier to secure loans for additional properties, expansions or renovations. This can be helpful when growing your portfolio.
  4. Improved management – managing multiple rental properties can be a complex and time-consuming task. By moving your properties into a limited company, you can streamline the management and could even potentially hire a professional property manager to oversee the day-to-day running of your portfolio.
  5. Estate planning – transferring rental properties to a limited company can be a useful estate planning tool. When your properties are held within a limited company, this can allow for easier transfer of ownership to heirs or beneficiaries in the event of your death. It can also provide greater flexibility for structuring your estate and managing any inheritance tax liabilities.

Talk to us about creating a limited company structure

If you’re planning to expand your rental property portfolio, or want to maximise the efficiency of your existing portfolio, moving ownership to a limited company makes a lot of sense.

As your adviser, we can run you through the process of getting incorporated as a limited company and can connect you with experienced legal advisers, if necessary. We can also help with your tax planning to deliver the most tax-efficient outcome from your rental income.

Get in touch to talk about setting up a limited company and let’s find out how we can help on your property investment from here at The Stan Lee.

Should you move your rental properties into a limited company? Read More »

When should I register my company for VAT?

When should I register my company for VAT?

Wondering if your business should be registered for VAT? We’ve got the lowdown on when (and how) to get VAT registered, and the key reasons for doing so.

Sorting out your tax registrations is one of the first things to tick off your to-do list as a new business owner. But knowing when (and how) to register for things like value-added tax (VAT) can be a confusing process for new entrepreneurs.

Here’s a straightforward breakdown of the VAT registration process.

Why does my business need to collect and pay VAT?

Value-added tax (VAT) is a consumption tax. It’s imposed on the value added at each stage of production and distribution of goods and services. By registering for VAT you become liable to collect the VAT charged on your invoices, and to then pay this tax to HMRC on a quarterly basis. You’ll also be able to claim back some of the VAT you’ve spent on eligible expenses.

What’s the threshold for VAT registration?

It’s not mandatory for every limited company or sole trader to register for VAT. Generally speaking, you will only register for VAT once your turnover reaches HMRC’s threshold, or if there’s a tax advantage of being VAT registered to claim certain operational expenses.

You must register for VAT if:

  • your total VAT taxable turnover for the last 12 months was over £85,000 (HMRC’s current VAT threshold).
  • you expect your turnover to go over £85,000 in the next 30 days.
Who else must register for VAT?

Regardless of whether you meet the threshold test, you must also register for VAT if all of the following condition are true for your business:

  • you’re based outside the UK
  • your business is based outside the UK
  • you supply any goods or services to the UK (or expect to in the next 30 days).
How to start the VAT registration process

To register for VAT with HMRC, you have two basic options:

  1. Register your business online, via your Government Gateway account. This will create a VAT online account to manage your VAT payments and claims etc.
  2. Ask your accountant to register you on your behalf. If we’re your tax agent, we can register your business for VAT and help you manage your VAT affairs.
Talk to us about getting registered for VAT

If you’re a new business that’s starting out, or an existing business that’s getting close to the £85k VAT threshold, please do contact us to talk through getting registered.

We’ll help you work out your turnover for the preceding 12 months and can advise you about the most tax-efficient reasons for making your business VAT-registered.

Get in touch to talk about VAT registration and let’s find out how we can help you from the The Stan Lee.

When should I register my company for VAT? Read More »

Back to Tax Basics: What taxes will I need to pay as a director?

Back to Tax Basics: What taxes will I need to pay as a director?

Are you aware of the personal taxes you’re liable for as a company director? We’ve got the lowdown on self-assessment and capital gains tax – and can help you plan your wealth management as a director.

When you set up a new company, there are certain business taxes you’ll be liable for as a business. But have you also planned for the personal taxes you must pay as a director?

As a company director, it’s not just the company’s corporation tax that you have to pay. You also need to pay the requisite taxes on your own income. This might be dividends payments from the company’s year-end profits, or even the income you receive from any property, shares or investments you own.

Knowing which personal taxes to plan for

A fundamental distinction to understand is the difference between company assets/profits and your own personal money.

Money that’s been generated by your company will sit in your business bank account and can be seen as the cash assets of your business. But, as a director, this is not your money. It’s the company’s money. This cash only becomes yours once it’s been paid to you, either as a dividend, a loan or via a salary paid through the company’s payroll.

HM Revenue & Customs (HMRC) will charge the company corporation tax on the company’s earnings. But HMRC will also need to charge you income tax on the cash you’ve been paid as a director – and this means planning for these tax costs as part of your wealth management strategy.

As a director, you’ll need to plan for:

  • Self-assessment income tax – self-assessment is the way that directors and self-employed people pay their income tax and National Insurance contributions (NICs). In addition to any tax and NIC collected monthly via PAYE as part of your normal payroll, with self-assessment, you must complete an annual personal tax return and submit this to HMRC. You then have to pay two ‘on account’ payments of tax and NICs.
  • Paying your self-assessment tax – paying your self-assessment tax bill is generally done by making two payments on account – one by the 31 January in the relevant tax year and one by the 31 July following the end of the tax year. If needed, a final ‘top up’ payment may be required at the end of January, following the end of the tax year. Through this system, not only does the company pay tax on its profits, but you also pay income tax when you take any of the remaining after-tax profits out of the business as dividends.
  • PAYE income tax – if you pay yourself a salary through the company’s payroll, this income will be taxed at source via the pay-as-you-earn (PAYE) system. The PAYE system will deduct your income tax and National Insurance (NI) contributions via your in-house payroll and this will then be paid directly to HMRC. This income will need to be accounted for in your self-assessment tax return, but you’ve already paid the income tax that is due on this salaried income.
  • Capital gains tax – capital gains tax (CGT) is a tax you pay on ‘gains’ you’ve made during the tax year. CGT is paid on the profit you make when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. So, for example, if you sold your business at a profit, you’d be liable for any gain (increase in value) that you’d made on selling the company. The rate of CGT that you pay will depend on your own income tax band and the nature of the gain that you’ve made. Reliefs are available, including the Business Asset Disposal Relief.

Learn more about the basics of directors’ personal tax

If you’d like to have a chat about your self-assessment or capital gains liabilities, please do contact us. The earlier you plan for these taxes, the more you can mitigate their impact.

Get in touch if you have any questions about your tax and let’s find out how we can help you from the The Stan Lee.

Back to Tax Basics: What taxes will I need to pay as a director? Read More »

What business taxes will your company need to pay?

What business taxes will your company need to pay?

Are you in the dark when it comes to business taxes? We’ve got the lowdown on the key taxes your new business will need to pay – so you’re on top of your tax liabilities.

Once you’ve registered your business as a limited company, you become liable for paying taxes on the profits you make. But what business taxes are there? And how do you know which of these taxes to pay?

To answer this, we’ve created a short ‘Back to Tax Basics’ email series, to give you the full lowdown on your tax responsibilities as a company director.

Understanding the main business taxes

Despite HMRC’s motto of ‘tax doesn’t have to be taxing’, the UK tax code can be a complex thing to get your head around.

If you’re not a trained accountant and have limited experience in financial management, understanding the rules around business taxes can be confusing. So, to start with, let’s look at the main business taxes you’re likely to register for.

Key business taxes include:

  • Corporation tax (CT) – corporation tax is a tax that’s levied on your profits as a limited company. At the end of your accounting period, you must submit a corporation tax return, and pay the CT that’s due. The rate from 1st April 2023 will be up to 25%, although companies with profits not exceeding £50,000 will pay 19%, with the full 25% rate applying to companies earning over £250,000.
  • Value-added tax (VAT) – VAT is a consumption tax that’s levied on goods that have had value added at each stage of the supply chain. When you buy these goods, you’ll pay VAT. And when you sell these goods, you will collect VAT. At the end of each quarter, the VAT funds that you’ve collected must be paid to HMRC. You can also claim back the VAT you’ve spent on certain qualifying goods and services too. The standard rate of VAT is 20%, the reduced rate is 5% and certain goods can also be zero-rated.
  • Pay-as-you-earn (PAYE) – PAYE is a way to collect income tax and National Insurance Contributions (NICs) from your employees. If you have employees and run a payroll, then you’ll need to collect the required amounts of income tax and NICs from your employees’ wages as part of your payroll process. Then you must report on these deductions and pay the tax and NICs to HMRC, either monthly or quarterly after the pay period, depending on the amount involved. In addition to the income tax and NICs you deduct from your employees, the company may also have to pay Employer’s NICs as a business expense.

Learn more about the basics of business tax

So, there you have it. That’s the basics of the key business taxes you’ll need to think about as a new business owner. In the next part of this series, we’ll look at the taxes you’ll be liable for as a director, and how these personal taxes tie in with the profits you take out of your business.

Get in touch if you have any questions about tax and let’s find out how we can help from The Stan Lee.

What business taxes will your company need to pay? Read More »

Get in Touch

Finding your best accounting fees quote now?

Get a Quote

About Us

The Stan Lee has the experience and expertise available to assist you as and when required. So what makes us different when compare to our competitors? The key difference is our team of highly qualified professionals go the extra mile for their clients.

Services

Sectors

Company Registration

The Stan Lee is our trading name of two separate entities as follows:
  • Stan Lee Accountancy Ltd; an ACCA Accountancy firm (Reg No: 4607747 that offers accountancy, taxation, estate administration, ATOL and other business support services that are authorised by the ACCA.
  • Stan Lee Probate Limited; a CILEX-ACCA Probate firm, “Authorised and Regulated as a CILEX – ACCA Probate Entity, Authorisation number 3001291” that offers non-contentious Probate service only.

We are required by our professional bodies to have separate entity and therefore, there are two firms involved. Both firms are required to have Professional Indemnity Insurance (details of the PII available in our office upon request).

Registered Office

40 Bank Street | 18th Floor | Canary Wharf | London | E14 5NR

© All rights reserved 2019 - 2024