FREQUENTLY ASKED QUESTIONS

WHAT RECORDS DO I HAVE TO KEEP?

If you are self-employed as a sole trader, you’ll need to keep records of your income and expenditure for at least five years and ten months after the end of the tax year. We’d always recommend that you manage your finances in an organised fashion from the outset as it is a legal requirement. That doesn’t necessarily mean investing in expensive accounting software, unless you feel you really need it, but instead at a most basic level. If you enter everything into a simple spreadsheet in Microsoft Excel, you’ll always know where you stand.

WHAT ARE THE DEADLINES FOR SENDING MY SELF ASSESSMENT TAX RETURN?

If you are submitting a paper return for 2018-19, it must reach HMRC by midnight on the 31st October 2019. If you decide to send your tax return online, it isn’t due until midnight on the 31st January 2020. You will be charged a penalty if your tax return isn't received on time. When you send HMRC a Self-Assessment tax return, you will receive a Self-Assessment statement showing what tax you owe and how to pay. If you have paid too much it will show how much you will be repaid. If you file your Tax Return online, you can view this before you even receive it in the post.

WHAT ARE THE MOST COMMON REASONS TO FILL OUT A TAX RETURN?

The most common reason to fill out a tax return is If you are self employed, have other sources of income or even if you are a company Director. Although, if HMRC ask you to complete a tax return you must do so. This will normally be to make sure you are paying the right tax and getting the right allowances. If you haven’t already completed a tax return form, you’ll need to do so if you receive any of the following:
• Income from savings & Investments of £10,000 or more.
• Income from untaxed savings & investments of £2,500 or more.
• Income from property (before deducting allowable expenses) of £10,000 or more.
• You receive income from overseas or Income from the estate of a deceased person on which tax is still due.
• If you or your partner receive child benefit and your income is over £50,000.

WHAT PENALTIES CAN I EXPECT FOR A LATE TAX RETURN

You will be issued with an automatic late filing penalty of £100; irrespective of your tax liability or what tax you had outstanding at the time of filing. However, if you will file your return within the next three months, you will avoid the next wave of late filing penalties which are £10 per day- for up to 90 days. Further penalties are applied when the return reaches over 6 and 12 months overdue of the higher of £300 or 5% of the tax outstanding. Each of these penalties are all in addition to one another; not in place of. If you have any tax outstanding, interest will begin accruing immediately, and late payment penalties will begin being imposed after 30 days.

WHAT IS THE MARRIAGE ALLOWANCE

To qualify for the Allowance, throughout the tax year (6th April to the following 5th April) you must both be:

Not higher or additional rate taxpayers,
UK resident and domiciled,
Married or in a civil partnership with one another; and
Born on or after 6th April 1935.

If you and your partner are eligible for Marriage Allowance, you can register your interest with HMRC online. You’ll get an email from HMRC confirming your application. You can backdate your claim to include any tax year since 5th April 2015 that you were eligible for Marriage Allowance.

IS MY SOFTWARE MAKING TAX DIGITAL COMPLIANT?

Making Tax Digital for VAT applies to VAT-registered businesses with taxable turnover in excess of £85,000. For VAT periods starting on or after 1st April 2019, mandated businesses will be required to record transactions digitally and file their VAT returns using functional compatible software. Inputting the figures directly into the Government Gateway will no longer be an option for those forced to comply with Making Tax Digital.
Otherwise, HM Revenue & Customs has developed a tool for you to search for compatible software, which is available here. They’ve also produced a list of which software houses they’re currently working with, but aren’t quite ready.

HOW DO I REGISTER TO FILE A TAX RETURN?

If you are registered for self employment, you should already have a UTR, if you are not you will be required to register, you can do this either online or via telephone although it is a lot more quicker online. https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed

WHAT IS THE THRESHOLD FOR VAT REGISTRATION?

The VAT registration threshold is £85,000 and under current plans, will remain at this level until March 2022. This should give businesses clarity about their VAT status as the UK looks to leave the EU.

I AM A CONTRACTOR: SHOULD I OPEN A LIMITED COMPANY OR CONTRACT AS A SOLE TRADER?

Being a sole trader, any CIS deductions you and your business suffers can only be reclaimed via your own self assessment tax return. This means that you can only claim it once the tax year is up, so you do have to wait up to a whole year to get any relief. This relief is obtained as the CIS you suffer (i.e. tax deducted) is, in essence, a payment on account of your tax bill.
Whereas if you were a limited company, then you are allowed to offset any CIS your business suffers against any CIS, PAYE tax or National Insurance deductions that you are due to pay over to HM Revenue and Customs each month. This means that your company gets the relief much sooner and throughout the tax year.
We can help you by looking into your specific situation and help you make the right decision. We can look to see if this situation could benefit your business, so please give us a call and arrange a meeting

WHAT TAX RELIEF IS AVAILABLE ON A LEASED CAR?

Firstly, just be careful here as 'lease' can mean different things and depending on what they mean it can have significant impact on the relief you will be able to get. If you are in essence, ‘renting’ it and will hand it back in the future then it is classed as an operating lease. This means, that if the car has emissions under 110g/km, you can get tax relief on all of the payments. However, if the car’s emissions are above 110g/km, then 15% is blocked, so only 85% can be claimed for income tax or corporation tax purposes.If your business is VAT registered, then be aware that not all VAT charged will be claimable, as half of the VAT is often blocked on operating lease payments - on the assumption that they often have a mixture of business and personal use.

I’VE STARTED A BUSINESS, CAN I OFFSET COSTS INCURRED BEFORE IT STARTED?

Yes, as a start-up, you can providing the expenses were made for business purposes. These expenses will be treated as though they were incurred on the first day of trade and tax relief will be given where appropriate. VAT can also be reclaimed on these business expenses made prior to the date of VAT registration – the rules for this are different for goods and services. You can go back up to four years from the date of registration for VAT on goods you still have on hand or that have been used to make other goods you still have.
It's six months for services.

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.