Here is a reminder of the thresholds for the current tax year (6th April 2020 - 5th April 2021)

Personal Allowance

You do not have to pay any tax on income up to the amount of £12,500.

Band

Taxable income

Tax rate

Personal Allowance

Up to £12,500

0%

Basic rate

£12,501 to £50,000

20%

Higher rate

£50,001 to £150,000

40%

Additional rate

over £150,000

45%



National Minimum Wage

It is against the law to pay under the national minimum wage.

Year

25 and over

21 to 24

18 to 20

Under 18

Apprentice

April 2020 (current rate)

£8.72

£8.20

£6.45

£4.55

£4.15

April 2019 to March 2020

£8.21

£7.70

£6.15

£4.35

£3.90



Dividend Allowance

The dividend allowance for this current year is £2,000

Tax band

Tax rate on dividends over the allowance

Basic rate

7.5%

Higher rate

32.5%

Additional rate

38.1%


There are many more rates and threshold that will be of value when it comes to your tax affairs, we have highlighted the most frequent rates.

It has been a rollercoaster of a few weeks with some unprecedented times. It is a new worry that we’ve had to face, and we’ve had to face this together. The Coronavirus has not only brought the whole country to a standstill, but has slowed down the whole world.

 

However, together we must have high spirits, and come out of this stronger. We hope everyone reading this is safe and our thoughts are with those directly affected by the virus. We all must adhere to what the government are saying and stay home. Travel only if necessary as this will delay any spread and get us out of this sooner.

 

The government has pledged support for employees, and have now put together something for the self-employed. It may not be what we all wanted, however, we have to give credit to the government for the level of support they are showing.


Coronavirus Job Retention Scheme


Q: I have heard the government will contribute towards employee wages?


The Chancellor has put together an emergency temporary package to allow employers to keep on their staff. The Coronavirus Job Retention Scheme is open to all UK employers for at least three months starting from 1st March 2020. The scheme is expected to be up and running by the end of April 2020. It is designed to support employers whose day to day trade have been severely affected.

Employers can claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer NI contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period and is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.
 
Your furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including full-time, part-time, employees on agency contracts and on flexible or zero-hour contracts. The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

To be eligible for this, when on furlough, your employee can not undertake work for or on behalf of you. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions. If your member of staff is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
As an employer you will have to write to your employees confirming that they have been furloughed and keep a record of this communication. Employees hired after 28 February 2020 cannot be furloughed or claimed for. You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you. Deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

An employer can also choose to top up an employee’s salary beyond the 80% but is not obliged to under this scheme. You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1st March if applicable and you will have to work out how much you can claim for,

  • Salaried Staff: For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
  • Varied Staff: If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
    • The same month’s earning from the previous year
    • Average monthly earnings from the 2019-20 tax year
However, if the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the employee only started in February 2020, you will need to use a pro-rata for their earnings so far to claim.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.


Coronavirus Business Interruption Loan (CBIL)


Q: It’s great that the government will help with wages once it is due to be out by the end of April 2020, but how can business get help immediately?


During this interrupting time, there is bound to be a dip in cashflow, so how can businesses get an injection of cash when all trade has halted? Well the government has introduced a temporary Coronavirus Business Interruption Loan Scheme which supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years.


The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.


The government will provide lenders with a guarantee of 80% on each loan to give lenders further confidence in continuing to provide finance to SMEs. This is great for businesses with low credit rating. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.


To be eligible your business must tick the following;

  • Be UK-based in its business activity
  • Have an annual turnover of no more than £45 million
  • Have a borrowing proposal which the lender:
    • Would consider viable, were it not for the COVID-19 pandemic
    • Believes will enable you to trade out of any short-term to medium-term difficulty

To apply, you should talk to your bank or bank manager or one of the 40 accredited finance providers as soon as possible, to discuss your business plan. You can find out the latest on the best ways to contact them via their websites or click here https://bit.ly/CrossAccCBIL


Self-Employment Income Support Scheme


Q: Will the self-employed be looked after by the government?


Great credit must be given to the government as a lot of pressure is on them during this unprecedented time. They have taken strides that no government has in history. The chancellor has left the self-employed questioning whether there would be any support. However, the chancellor has announced that there will be a scheme in place to allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.


You can apply if you’re a self-employed individual or a member of a partnership and you;

  • Have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
  • Traded in the tax year 2019-20
  • Are trading when you apply, or would be except for COVID-19
  • Intend to continue to trade in the tax year 2020-21
  • Have lost trading/partnership trading profits due to COVID-19

Your self-employed trading profits must also be less than £50,000 and more than half of your income, come from self-employment. This is determined by at least one of the following conditions being true;

  • Having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
  • Having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

If you started trading between 2016-2019, HMRC will only use those years for which you filed a Self-Assessment tax return. If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020. HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.


So to summarise, the grant will be 80% of average trading profits from the year 2016-17, 2017-18 and 2018-19 and will be up to a maximum of £2,500 per month for 3 months. The grant will be paid directly into your bank account, in one instalment.


You cannot apply for this scheme yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online. Again, this is looking to be all set up by the end of April 2020.


Hospitality, Retail and Leisure Business Grants

Q: I am in the Hospitality, Retail or Leisure sector, I have heard there is extra support since we’ve been effected the most, as we cannot work from home etc...


Restaurants, Cafes, Pubs and Bars have probably been hit the hardest as social distancing gets serious. The Government has forced these businesses to close earlier than any other businesses. However, there is support in the form of business rates relief. Retail, leisure and hospitality businesses with a rateable value of £500,000 or less will get one year business rates relief in the financial year 2020 to 2021. This means that you will not have to pay any business rates during this time. This will be applied through the business rates system. You do not need to do anything. Your local authority will contact you.

 

The Welsh Government is helping in the form of two grants. 


A grant of £25,000 is being made available for retail, leisure and hospitality businesses occupying properties with a rateable value of between £12,001 and £51,000. This means businesses that occupy properties such as shops, restaurants, cafes, drinking establishments, cinemas, live music venues and hotels.


Also, a £10,000 grant to all businesses eligible for small business rates relief (SBRR) in Wales with a rateable value of £12,000 or less. Again, you do not need to do anything as the local authority will contact you. More information is due to be released as this is only the pilot stage.


There is lots of information available on the Gov website; however, the main details are still being worked on. The government have laid the foundation for its intent on supporting businesses during these incredibly difficult times.


We are still available on the phone and on email as we continue to support our clients. If there is anything you need help understanding or want a chat please feel free to get in touch. These are incredibly tough times and we wish everyone the best of health and hope to come out of this stronger.


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

The summer months are coming to an end as autumn closes in. Everyone is returning from their summer break, the children will be heading back to school its back to business.

 

It’s always great to plan ahead, so this time we talk about the new Making Tax Digital (MTD) that HMRC are set to introduce from April 2019, this has been going back and forth in consultation for some time now, HMRC now have communicated the requirements.

 

This will be mandatory for businesses registered for VAT with a turnover above the VAT registration threshold of £85,000. Businesses will need to keep VAT records digitally and their VAT returns using MTD compatible software. This will start from their first VAT period starting on or after 01 April 2019.

 

If you submit a quarterly return for the period 01 March to 31 May 2019 then you will have to comply with MTD rules for the period starting 01 June 2019. Businesses under the VAT threshold will not have to operate MTD but can choose to do so voluntarily, which we would recommend.

 

Going forward the use of compatible accounts software will be mandatory. The use of spreadsheets can no longer be used.   

 

HMRC are trying to reduce the number of VAT inspection on businesses that are complying and MTD will make this clearer for all. If you’re struggling and not understanding what to do and how to be ready for the April 2019 deadline, do not panic and contact us, as we are always here to help.

Flat Rate Scheme

 

The Flat Rate Scheme is designed to simplify your records of sales and purchases. The process is to apply a fixed flat-rate percentage to your turnover to arrive at the VAT due. Fixed-rate percentage do vary depending on the type of business. You can find a list for percentage on this link https://www.gov.uk/hmrc-internal-manuals/vat-flat-rate-scheme/frs7300

 

From April 2017, there will be a new rule to start regarding the flat-rate scheme, this is because the government is concerned that some businesses are using the Flat Rate Scheme to pay less VAT than is appropriate. This will mainly affect businesses that spend very little on goods, such as businesses that provide service.

 

 So, what is changing? The new change will only affect businesses which have a very low cost base. These businesses will now be called “limited cost traders”. A business will be a “limited cost trader” if it spends less than 2% of its sales on goods or less than £1,000 a year, even if this is more than 2% of the businesses turnover on goods.

 

VAT returns can be a pain and take up time and not allow you to do what you do best, running your business! Visit www.crossaccountingservice.co.uk to discuss your VAT issues with us.

 

Restricting finance cost relief for landlords

 

From April 2017, there will gradually be an introduction of a basic rate reduction restricting the relief for finance cost. Finance cost includes mortgage interests, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans.

 

Landlords will no longer be able to deduct all their finance costs from their property income to arrive at their property profits. Instead, landlords will receive the introductory basic rate reduction from their income tax liability for their finance costs.

 

The governments gradual change will be as follows:

 

·         2017 – 2018 the deduction from property income as it currently is will be restricted to 75% of finance costs with the remaining 25% being available as a basic rate tax reduction.

·         2018 – 2019 the deduction from property income as it currently is will be restricted to 50% of finance costs with the remaining 50% being available as a basic rate tax reduction.

·         2019 – 2020, 25% finance costs deduction and 75% given as a basic rate tax reduction.

·         2020 – 2021, all financing costs incurred by a landlord will be given as a basic rate tax reduction.

 

This change is being implemented to make the tax system fairer. The government want to ensure that landlords with higher incomes no longer receive the most generous tax treatment.

 

For landlords in Wales, there is also a new law that has come in for self-managing landlords to obtain a licence or have an agent to deal with their properties. This is compulsory and to find out if you need to apply visit www.rentsmart.gov.wales

 

We have a lot of clients with a portfolio of properties and help them when it comes to their

self-assessment. If you’re a landlord and don’t understand the rules, you can contact us on 02920653995 or send through an email on nicola@crossaccountingservice.co.uk