During the pandemic, we have seen an increase in holiday lets. With the restrictions to go abroad, a lot of people have been having a ‘Staycation’ exploring the wonderful options we have in the UK. 

If you have just started out renting homes or holiday lets, there are a lot of rules for these. HMRC are very strict when it comes to rentals. Replacing items need to be based on a like for like, is the property being improved, all these things need to be taken into consideration 

With self-assessments, we are seeing a lot of husband and wife ownership of property currently that don’t realise that both parties need to complete a self-assessment. If rent is being received or if a property has been sold it all has to be declared regardless of your other income.  

If both parties are named on the land registry, you both need to complete a self-assessment return. Unless you have seen a solicitor to change your set up with land registry, any property with joint names is classed as 50:50 ownership. Even if one person has the most interest in the property, all named people on the land registry will have to send a return to HMRC.

It is important you read up the rules on taking income from property, whether it is long term rental or holiday let ownership. The number of people we see not declaring income and then having the shock of HMRC writing to them asking for back dated returns is increasing.

HMRC do have the full facility to check land registry registers and transfers of land ownership. Backdating these returns can be costly for the owner and cause a lot of unnecessary stress.

We are here if you need to query anything regarding your property ownership.

The chancellor, Rishi Sunak announced the Autumn Budget on Wednesday. A ‘New economy’ as it was branded to help us get through the winter. We digest the budget and give the main highlights and what it means for you. If you did want to read the full budget, please click here 

National Living Wage

There is a lot to get through and one of the notable changes in the Chancellors budget was the increase in the National Living Wage. We will see an increase in pay to £9.50 per hour for anyone aged 23+ from April 2022. That’s an increase of 6% from the current £8.91 and the pay rise worth extra £1,000 for full time workers.

Social Care Levy

A new health and social care levy is to be introduced on all of us. It is a 1.25% charge on 

National Insurance from April 2022.  The rate also affects Employers National Insurance, and the dividend rates will also change in line with the new social care levy of 1.25%

• Employees National insurance will change from 12% to 13.25%

• Employers National Insurance will change from 13.8% to 15.05%

• Sole traders National Insurance will rise from 9% to 10.25%

Dividend rates as follows:

• Lowest rate 8.75% from April 2022

• Mid-rate 33.75%

• High rate 39.35%

From April 2023 the 1.25% social care levy will show as a separate section of the tax rate system. National Insurance will revert to where it was.

Why is this social care levy coming in?

The funds from the social care levy will be used for care homes and funding for pensioners. This includes several reforms to how people pay for adult social care in England, supported by £5.4 billion of investment over the next three years.

The reforms include:

• From October 2023 a cap on personal care costs of £86,000.

• The threshold above which somebody is not eligible for local authority support towards their social care costs (upper capital limit) is increasing from £23,250 to £100,000 from October 2023.

• The threshold below which somebody does not have to contribute towards their care costs from their capital (lower capital limit) is increasing from £14,250 to £20,000.

• If somebody has capital between £20,000 and £100,000 the local authority may fund some of their care, but they may have to contribute up to 20% of their chargeable assets per year (in addition to their income).

• Increasing the amount of income that care recipients can retain after contributing towards their care costs (the Minimum Income Guarantee and the Personal Expenses Allowance) in line with inflation from April 2022.

Corporation Tax

From April 2023 changes to corporation tax are coming in place. The reintroduction of the marginal rate system which has been done away with for several years. 

Corporation tax rates for business with:

• Profit £50,000 or below – 19% rate

• Profit between £50,000 to £250,000 - 25% rate (less marginal relief calculation)

• Profit above £250,000 - 25% rate

Super deduction for purchase of equipment and allowance capital allowances will bring tax relief of 130% applies to incorporated (Limited companies, PLC’s) business only and is in place for two years. 1 April 2021 to 31 March 2023

The £1 million annual investment allowance is still available to every company including sole traders.

Business Rates

A new one year 50% business rates discount for retail, hospitality, & leisure businesses for England. Wales already have a discount in place until April next year. We will have to see what the Welsh government say in December for the updates of business rates in Wales. 

Small business rates relief still apply.

Universal Credit

Universal Credit taper rate is cut by 8%, as of now for every £1 earned, 63p gets taken off. With the new rate cut, for every £1 earned, 55p will be deducted. Allowing lower paid people to keep hold of more benefit when they are working. The target date for this is 1st December.

Alcohol Duty

The tax on some alcoholic drinks such as beer, cider and wine will be slashed. The drinks with lower-level percentage of alcohol will mean a lower rate of tax. This means that next time you go to the pub and order a pint or on a night out, a glass of prosecco, will be a little bit cheaper.

It doesn’t matter if it is UK produced or imported. Tax relief for small brewers that produce under 8% alcohol. 

The budget brings about optimism boosted by prediction of higher growth for the UK after Covid. The Chancellor hit an upbeat tone as he talks up building a “stronger economy of the future”. Again, if you want the full version of the budget, please click here

Bridgend Council has revealed designs for a £1.8 million project that it hopes to build in Porthcawl.

The council wants to develop a new building with community facilities and space for shops and start-up businesses at land on Porthcawl seafront, known locally as 'Cosy Corner'.

Click here to find out more

The UK Government announced a new capital allowances relief. From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

• 130% super-deduction capital allowance on qualifying plant and machinery investments
• 50% first-year allowance for qualifying special rate assets

This super-deduction is designed to promote companies to invest in productivity enhancing plant and machinery. It is important businesses understand and take advantage of these generous new reliefs while they are available.

The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive. There is no upper limit set for the expenditure, so as long the expenditure is incurred between 1 April 2021 – 31 March 2023. The enhanced relief also does not allow for plant and machinery that will be made available for leasing (including landlord fixtures within rented property) and excludes cars.

The pandemic has been a big blow for a lot of businesses, if you have been looking at equipment to help you grow, now may be the time to use this relief. If you are not sure on whether it is the right time to make a purchase, or if the equipment qualifies for the super-deduction relief, message us on nicola@crossaccountingservice.co.uk or if you would prefer to chat, call Cardiff: 02920 653 995 or Bridgend: 01656 530 063. Our team is always happy to help.

We all want to leave something behind for our loved ones. It’s what we get up in the morning and work hard for. But a financial gift unfortunately has a tax implication to it. Research shows that only 45% of people making financial gifts are aware of Inheritance Tax.

It is always recommended to write a will, you can get a professional to do this for you for as little as £150. Make sure your money goes to who you want it to.    

We are hearing a lot of cases where there is no will. It can cause issues in a couple of situations example if your partner needs to go into a nursing home. What happens to children under the age of 18. Your wife, husband or civil partner having difficulty accessing family funds.

The treasury benefits from £5.8 billion income in inheritance tax each year. There are also 10,000 unclaimed estates where a no next of kin has been found worth more than £150,000, plus thousands more amounting to several million pounds. After 30 years that money is gone if a direct descendant cannot be found, it goes straight to the treasury and not to your family.    

Live in partners are not next of kin, even if they have been living with you for 20 years or more. Under inheritance tax law they have no rights to anything if a will has not been created.

So, what is Inheritance Tax?

Inheritance Tax is a tax on an estate of someone who’s died. An estate is the likes of property, money and possessions. There is a tax-free threshold of £325,000. You normally don’t have to pay inheritance tax if the value of your estate falls below the £325,000 threshold.

If you pass all your assets to your wife/husband, civil partner there is no inheritance tax to pay, its only when you give assets away to other people that inheritance tax is payable. Its 40% tax over and above the nil rate band.

There is an elected transfer to your spouse, civil partner or charity where both your nil rate band and your partners can be added together to make a maximum tax-free amount of £650,000. The transfer is claimed on the occasion of the 2^nd partner dying. It’s not automatic there is a form to complete for this. Don’t assume its Automatic.

Your threshold can also increase if your estate is worth more than £325,000 and you give your home away to your children (this includes adopted, foster or stepchildren) or grandchildren. There is up to an extra £150,000 available to be added to your threshold. If the estate is below £325,000, you will still have to report this to HMRC. Probate forms usually must be completed within a certain timeframe of someone dying.    

Example

Say your estate is worth £550,000, your tax-free threshold is £325,000. You will get an increase of up to £150,000 if your home is given to direct descendants. The inheritance tax charged will be 40% of £75,000.

Who pays the tax bill?

Funds from your estate are used to pay the Inheritance Tax to HMRC.  If there is a will this is done by the person dealing with the estate known as the executor. The beneficiaries are the people who inherit your estate do not normally pay the tax on the things they inherit.

7 Year Rule

There is normally no inheritance tax to pay if you gift your home and live for another 7 years, although capital gains tax might come into play.  If you die within 7 years of giving all or part of your property, your home will be treated as a gift and the 7-year rule applies. There are many tax reliefs that can be gained between the 0 years and 7-year rule. Always use an accountant if your estate has multiple sources of income. Don’t miss out on the hidden tax reliefs.

Gifts

You do not have to pay any tax on gifts between spouses, you can give them as much as you like during your lifetime.   

Anyone is entitled to give gifts of up to £3,000 per annum without any inheritance tax being involved. You can carry over an unused annual exemption to the next financial year, this can only be the next financial year that immediately follows. It’s important to record this in a diary as proof to avoid it being used to reduce your nil rate band.

You can also give away the following, in each tax year:

·         Wedding gifts of up to £1,000 to any person (£2,500 to a grandchild, and £5,000 to a child)

·         Normal gifts out of your income, such as Christmas or birthday presents

·         Payments to help another person’s living cost such as an elderly relative

·         Gifts to charities and political parties

You can also give as many gifts of up to £250 per person as you want during the tax year if you have not used another exemption on the same person.

Inheritance tax is a complicated tax system that encounters many of the other tax systems within it, always seek professional advice if this is not a straightforward estate.

For those of you watching the Glastonbury Festival over the weekend.     

It was a great boost to our UK economy.   Some £40 million turnover taken over the 5 day event.  Over 200,000 people attended and 3 million people tuned in to see Kylie Minogue, with Stormsy and The Killers pulling in great ratings too.

Donations to Oxfam, Green Peace and Water Aid were the main charities benefiting from the event.

The area I want to draw to your attention was over 200,000 attended the event this year, and over 400 small food and merchandise providers helped make the event a great success.

Whether you love it or hate it,   its provided a great boost to what has been so far quite a difficult 2019 for many retail and service outlets.

Those 400 food and merchandise providers will be providing jobs to thousands of people, creating work for not just the Somerset area but all over the UK, as a lot of the suppliers would have travelled to the area for work.   

There was also 2,000 volunteers mainly representing and supporting the three main charities.

With our continuing confused political market at the moment, with uncertainty with what is happening with Brexit.    A lot of small businesses are struggling to keep a float,  they are finding it harder to gain long term contracts, and being able to gain fixed prices for goods that may be coming from overseas.    The uncertainty affects everything.    The exchange rate of the Pound Sterling to Euro is also still highly volatile.

Please keep supporting your local businesses, they are keeping millions of people employed at the moment, we most definitely need them into 2020.

We never hear about them in the news when they suffer, they just go about their business quietly.       We only hear about the larger companies finding things tough at the moment.

Our economy and stability we all like to take for granted heavily relies on them.

Give your local business whoever they are your full support in 2019 regardless of the political outcome.      Lets keep our economy robust to ride the storm.

#shop local

We’re halfway through the year and 2019 is not slowing down for anybody. There are approximately 5.7 million businesses in the UK, of which 96% are considered small or micro. So, we small businesses are crucial to the UK economy, there is no denying this.

Whether you are a start-up and excited for the times ahead, or an establishment renewing your challenges, we all want to be successful with our business. In our latest blog, we talk about tips we think are vital to any business.

We all have a vision in mind, of where we’d like to see our business in the future. This vision needs to be translated on paper as your business plan. A business plan is a must for all business owners. This can help outside investors get an insight of your business, for if ever you need funding to grow your business.

Business Plan

A business plan should consist of;

·    Summary – What is your purpose, what is your vision?

·    Target market – Who are you likely to sell to

·    Competitors – What is your rivals weakness? Why are you different?

·    Staff – Do you need people to help run your business. What level of skill and pay is required?

·    Suppliers – Who will be your main supplier?

·    Marketing Plan – How will you advertise yourself to the world

·    Operations – Which is the best way to run your business.

·    Finance – How much money do you need? Determine the profitability of the business.

Business Structure

As well as a business plan, you will need to have a business structure. Sole trader, partnerships and limited companies all have their own pros and cons. Deciding which structure to choose is not always straightforward. If an asset is owned outright, then you would need to consider retaining personal ownership on incorporation. If you’re not sure which structure model you should go for, then here at Cross Accounting we can give tailored advice to you.

Year End

We cannot stress enough the importance of doing your year end as early as possible. Once completed, this will give you peace of mind as you will not have to worry, until next year. It will also give you more time to budget for your tax bill. You will not be in a rush to find the money for the tax bill and not kill your cashflow. Keep all receipts for your expenses, these will all help lower the tax bill. If you buy equipment or tools, mobile phone bills, petrol, these are all deductible. HMRC can conduct random spot checks, so it’s important to keep paperwork, recommended for 6 years.

Budgeting

Having budgets in place for your business can help you predict the near future. This allows you to have a spending plan, so you can make sure you have money for the things you need and the things that are important to you. You can see what is eating up your cash and avoid spending on unnecessary fees. Below is an example of a very simple budget.

These tips will keep you motivated and more importantly give you an idea of where your finances lay, helping you to quickly identify if there are rainy days ahead.

If you need expert tailored advice, please do get in touch as we are always happy to help.

The new financial year is in full swing, and it’s when the new rates and regulations kick in. Your personal allowance has changed along with other vital thresholds that take effect when it comes to completing your tax return.

Personal Allowance

The new year brings the new personal allowance at £12,500 for the year. So, what is your personal allowance? Personal allowance is the amount of income in which you do not have to pay tax on. You will pay tax on anything over the £12,500, the table below will display what percentage of tax you pay in each band.

You do not get a personal allowance on taxable income over £125,000. Any income above this threshold and tax will be due on all amounts to the respective band.

Dividend Allowance

As well as the personal allowance, the dividend rate has also changed. Just like a personal allowance, you also have a dividend allowance. Dividends that fall in within your personal allowance do not count towards your dividend allowance.

The tax you pay depends on which Income Tax band you’re in.

Example

Say you were to get £4,000 in dividends in the 2019 to 2020 tax year. The dividend allowance is £2,000, so this means you pay tax on £2,000 (£4,000 minus £2,000) of your dividends. Your other taxable income is £30,000. Add this to your dividends of £4,000 and your total taxable income is £34,000. You pay a rate of 7.5% on £2,000 of dividends because your total taxable income is within the basic tax band.

National Minimum Wage

If you employ staff, then you are probably aware that the National Minimum Wage rate has also changed. It is a legal requirement to pay the NMW as an employer.

For all the rates mentioned, they usually change every year, typically in April. You must be aware of these rates to make the most out of completing your tax return and to fulfil your legal obligation. There are many other allowances and rates, but the ones mentioned are the usual ones that affect everyone. If you are worried about whether you are in the right tax band or not sure if you’ve used up all of your allowance, please visit our website on www.crossaccountingservice.co.uk or call us on 02920 653 995 where a member of staff can assist. We are always happy to help.