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What a difference a day makes

How about three extra days?

HMRC has relaxed the rules on “Real Time Information” for payroll reporting.  UK employers are required to send electronic reports to HMRC with each payment of wages to employees.  HMRC are now saying that you can submit your RTI report up to three days after the payment date without incurring a penalty.

Any employer who has received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015 and filed within three days, should appeal online by completing the “Other” box and add “Return filed within 3 days”.

Outsource your payroll

Despite the relaxation provided by three extra days, the burden on employers is only likely to increase over the coming months.  Auto enrolment is being rolled out to all UK employers over the next couple of years.  With the new payroll year about to start on 6th April, now is a good time to consider using a payroll bureau – or at least checking that your current systems will deal effectively with auto enrolment pensions.  For more information please and see how Alterledger can help please click here.

Pension annual allowance

Carrying forward unused pension annual allowance

Money that you pay into a UK registered pension scheme or qualifying pension scheme receives tax relief.  Personal pension contributions are paid from your earnings after tax and the pension provider reclaims the 20% tax suffered.  All employers will soon be required to offer pension schemes to employees, so now is a good time to think about what you can contribute to your pension scheme.

Anyone can make (gross) contributions each year of £3,600, but above this threshold the maximum you can put into the fund is 100% of Net Relevant Earnings (NRE).  Tax relief on contributions is only available up to the Annual Allowance (including any Annual Allowance carried forward).

Tax Year 2011/12
£
2012/13
£
2013/14
£
2014/15
£
Annual Allowance 50,000 50,000 50,000 40,000

Carry-forward relief

Any unused annual allowance can be carried forward provided you were a member of a registered pension scheme, or qualifying overseas pension scheme during the year.  The carry-forward relief can be used for any unused allowance from the previous 3 tax years.  Assuming you were a member of  a pension scheme, but didn’t have any contributions (personal or employer’s) in the tax years from 2011-12 up to 2013-/14, it would be possible to have total contributions of £190,000 in 2014/15.

 Net Relevant Earnings

  • Earnings from employment
  • Benefits in kind
  • Self-employed profits as a sole trader
  • Share of profits from a partnership
  • Any profit from furnished holidaylettings
    • Less allowable business expenses

Alterledger can help

Alterledger can explain the tax implication of pension contributions for employers and individuals.  Contact Alterledger or visit the website alterledger.com for more information.
 

Employers and their staging date

Staging Date

A process started in 2012 which means eventually, all UK employers will be obliged to enrol all their eligible employees into a contributory pension scheme, known as Auto Enrolment.  This obligation is already being phased in, starting with the biggest employers.  The commencement date for an employer’s obligation to provide a contributory pension scheme is known as the staging date.

The government has said that no small employers (those with fewer than 50 employees) will be affected before the end of the current Parliament.  The general election will be on 7th May so we are nearly there.  Employers will be able to meet this obligation in any way they choose, but one way will be through a government-sponsored National Employment Savings Trust ( NEST ), a simple, low-cost scheme with very limited fund choice, and initial restrictions on transfers and contribution levels.  NESTs will be operated by the NEST Corporation, a not-for-profit trustee body, and will be regulated by the Pensions Regulator.

Alterledger can help

Alterledger can help you prepare for your staging and manage your auto enrolment process along with your payroll once everything is up and running.  Contact Alterledger or visit the website alterledger.com for more information.
 

Self Employed National Insurance

Changes to payment of National Insurance

HMRC has announced changes to the way that the self-employed will pay their Class 2 and Class 4 National Insurance Contributions (NIC).  This is not the first time the process has changed.  Some people still refer to paying their stamp – in days of old you had to buy special stamps for your NIC!

English: British National Insurance stamp.

English: British National Insurance stamp. (Photo credit: Wikipedia)

No new direct debits

Until recently I would have encouraged the self-employed to set up a Direct Debit Instruction (DDI) with HMRC to pay their Class 2 NIC.  From April 2015 HMRC will calculate the NIC due from your self-assessment tax return.

Deferment of National Insurance Contributions

If you currently defer NIC, you don’t need to re-apply to do so.  HMRC will be sending out letters in December to everyone who currently defers NIC to confirm this.  Any new applications to defer NIC will not be processed.  For more information on National Insurance for the Self Employed please go to my blog post here: Class 2 NIC.

Alterledger can help

For more information on filling in your tax return, contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and cut your tax bill.

 

Orchestra Tax Relief

New Creative Industries Tax Relief

The 2014 Autumn Statement from the UK Chancellor included a proposal for a new Orchestra Tax Relief.

Orchestra Tax Relief for UK Companies

FHM-Orchestra-mk2006-01 (Photo credit: Wikipedia)

Orchestra Tax Relief

Many orchestras are charities and therefore don’t pay Corporation Tax, but any that do pay tax may qualify for a future Orchestra Tax Relief.  The tax break proposed yesterday will be going through a consultation process, so if you have an interest get involved!

Other Creative Industries Tax Reliefs

For more information on the tax reliefs for Orchestras, Theatres, Animation, Video Games and High End TV please go to my blog post here: Orchestra Tax Relief.

Alterledger can help

Why wait for the law to favour your industry?  Contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and claim more expenses to cut your tax bill.

 

Musicians tax breaks

Will Scottish entertainers make more money with proposed musicians tax breaks?

One of the consequences of the Scottish Independence Referendum is a “Command Paper” to be produced by Lord Smith of Kelvin and the Scottish Devolution Commission.  Among the proposals being put to the commission is copying an idea from Ireland to give artists and musicians tax breaks.


Musicians tax breaks

Special treatment for artists

The Republic of Ireland has given artists a tax exemption since 1969 which means the profits from the sale of works do not attract income tax up to a maximum of €40,000, or £31,500.  Everyone agrees that the tax system should be simplified – except of course if it the complication benefits you.  Is this a valid sign of support for artists or will everyone want “special treatment”?

Alterledger can help

Why wait for the law to favour your industry?  Contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and claim more expenses to cut your tax bill.

 

Get HMRC to pay you

HMRC will pay you interest

It is not that well-known that HMRC will pay you interest on tax paid early.  The interest rate is only 0.5% though, so it isn’t going to change your life.

In the case of Corporation Tax, any payment is due 9 months and a day after your year-end.  If you have a business bank account that pays no interest and the cash to pay your tax early you can pay your tax as soon as you have filed your return.   After the 9 months is up HMRC will send you the interest calculated.

British piggy bank

What spare cash?

See my earlier post on paying your debts first. In the situation where you have cash in the bank that you aren’t putting to good use and no outstanding debts paying your tax liability early will yield a small benefit.

Get your tax return done early

It is difficult to plan your cash flow if you don’t know how much tax you are due to pay.  Even if you don’t want to pay your tax early, it is helpful to know how much cash you will need to set aside.  The later you leave it to file your tax return the more pressure you can end up putting on your cash flow.  More importantly the later you leave it, the more pressure you put on your accountant.  Most accountants increase their fees as tax deadlines approach – or to put it another way you are likely to get a discount for starting early!

Don’t be late!

It won’t surprise anyone that HMRC will charge interest on late payments.  The interest rate isn’t the measly 0.5% mentioned above but is currently 3%.  As Bank of England rate increases  – expect this to increase too!

For support and advice on preparing your annual accounts and filing your tax returns contact Alterledger or visit the website alterledger.com.

 

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Ovivo – Dead as a dodo

I guess the moral of this story might be – if it looks too good to be true, it probably is…

Ovivo logo

Is it a dodo?

The ovivo logo looks like bird resisting the weight of a great rhinoceros.  If you have recently signed up for a free subscription to the mobile phone company ovivo, you may be surprised to learn that the company has ceased trading.  Their home page now contains a form to get your PAC code but who knows if they will be able to deal with all the requests?

Glimmer of hope

You may be able to get a refund from your debit or credit card if you signed up in the last few days under the Chargeback scheme.  There is an article on the Money Saving Expert site including a template for a letter to send your bank.  Giffgaff is offering £5 of credit to anyone transferring their number from ovivo, but the deadline for transferring your number is the end of April – and there is no guarantee that ovivo will release the PAC code in time.

For business support and advice  contact Alterledger or visit the website alterledger.com.

 

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Should you start your own business?

Economy in recovery

It now looks like the UK economy is in recovery.  Even if this isn’t the case, when people think that times will get better they start to spend money again.  With interest rates at historic low rates there is little incentive to stockpile cash in the bank for consumers and for entrepreneurs debt is relatively cheap to finance a new venture.

No Change for Currency

No Change for Currency (Photo credit: Wikipedia)

What’s your plan?

If you are starting a new business, it is important to work out what you will be selling, but to survive the early days of a start-up you will need good projections of your cash flow.  As you grow you may need investment from banks or other third parties.  Without good quality management accounts is it more difficult to persuade a potential investor to part with their cash.

Ask for help!

You can’t do everything on your own.  Work out what your core activities are and how much time you need to do them.  If you have time left over for ancillary activities then you are better completing these yourself too.  The cost of hiring specialist help, whether it be an accountant, web designer or lawyer can seem to be too much for a nascent company to bear.  However if you are spending so much time working out your accounts that you don’t have time for your customers you will cost yourself more in the long-term.

Business booming in Scotland

According to this article from the BBC  more Scots are starting up their own business.  Records from Companies House show that more than 340,000 companies were formed in Scotland last year.  Glasgow and Edinburgh are at the forefront of the economic recovery in Scotland.  If you have a good business idea, now could be the time to let that idea take form, especially if you have a service that supports other new businesses.

Give yourself a break

To give your business the best start, make sure you understand your finances.  Don’t forget that if you registered a company you are obliged to file accounts with Companies House as well as HMRC.  For more information on company formation see my blog here.

For support and advice on the finances of your business contact Alterledger or visit the website alterledger.com.

 

Repay your debts sooner and save money

Order your debts

My advice is straightforward and you will have seen it before, but it is probably one of the easiest ways for individuals and companies to save money.  If you have any debts make sure you know which has the highest rate of interest.  If you are in a position to repay debt, you should pay off your most expensive loans first.  For individuals this is likely to be store cards or credit cards, followed by other unsecured lending to banks in the form of an overdraft.

Even with historically low base rate from the Bank of England, you can pay between 30% and 40% interest a year on store card and credit card purchases.

British piggy bank

Maintain minimum payments

For the remainder of your debt, make sure you keep up your minimum payments.  Failure to do this may mean additional charges are added to the debt and may affect your credit score.

Check for forgotten accounts

If you have a balance in your PayPal account or your energy supplier you are lending money free of charge.  You might be relaxed about this, but while you are paying interest on your own debts you are much better getting the balances transferred to your lenders.  Clear out any long term balance from PayPal etc and check your statements from your energy suppliers and any other suppliers to arrange for overpayments to be refunded.

Example

Let’s say you have a balance on your credit card of £200, which you are repaying at £5 a month.  The table below shows the total interest you will pay and the time taken to repay the entire balance.  At an annual interest rate of 32% (2.34% monthly interest) you will pay nearly £395 in interest on your original purchase of £200 and it will take nearly 10 years to pay the whole balance back.  If the annual interest rate rises to 35% you monthly interest would be more than the £5 monthly payment and you would never pay your original £200 off.

Annual Interest Total Interest £ No of months to repay loan
32% 394.82 119
29% 259.65 92
20% 111.85 63
14.9% 70.75 55

So – if you happen to have £200 in your PayPal account that you had forgotten about at the same time as a £200 credit card balance, you could transfer the cash, pay off your credit card balance and save yourself between £70 and £395!

Manage your cashflow

Work out how much cash you actually need for your day-to-day needs.  It is likely that you are receiving little or no interest on cash in the bank.  If you are confident that you have surplus cash, use it to pay down any debts you have – but start with the expensive debt don’t share it out equally between the different debts you have.

For support and advice on restructuring and paying off debt contact Alterledger or visit the website alterledger.com.

 

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