Personal Tax Guide for Limited company Owners

Personal Tax Guide for Limited company Owners

The UK tax system is convoluted and keeps changing every now and then. Moreover, these tax rules apply differently to different sorts of businesses. However, we here will be discussing all about Corporation tax that all Limited companies have to pay. We will discuss what Corporation Tax, when is the due date and what rates apply? 

Let’s start the discussion with briefly describing what a Limited Company is.      

What is a limited company?

Setting up a limited company means that you are running a business but your personal finances will be treated as a separate entity. This means that Limited company owners are protected by ‘limited liability. A single person can run the company as both the owner and the director also. Any profit that you make via the Limited company will be the company’s profit solely after Corporation Tax has been paid. 

How much corporation tax does a limited company pay?

Once you start your own Limited Company, the first legal thing to do is to get your business registered to pay Corporation Tax. All Limited Companies are required to pay the Corporation Tax on the profits earned. The current rate of Corporation Tax stands at 19%.

How does tax on dividends work for limited companies?

If your limited company has made a profit after taking away business expenses and corporation tax, it can distribute these earnings to its shareholders with something called a ‘dividend’. However, it’s to be noted here that you are liable to pay shareholders a dividend only if you have sufficient profits to cover it. 

Note: From April 2018, the dividend allowance was reduced from £5000 to £2000. This means that as a shareholder, you can draw down £2000 in dividends before they are subject to income tax. This allowance is tax-free, but still takes up £2000 of your basic rate tax allowance (up to £34,500 for 2018/19).

Do I need to register my company for Value Added Tax (VAT)?

If you are likely to turnover £85,000 or more during any 12 month period (this is the 2020/21 threshold), you must also register your company for Value Added Tax (VAT). Limited Company owners collect VAT on behalf of HMRC by adding the prevailing rate to your invoices (the standard rate is 20% and hospitality is currently reduced to 5% during Covid). Once you deduct any VAT your company may have spent during a VAT quarter, you pay the balance to HMRC.

You can of course voluntarily VAT register, this may be beneficial if you are paying VAT on your purchases and want to claim this back. It also adds prestige to your business if you have a VAT number. Remember on the other side you will have to add 20% (or 5%) to your sales so make sure you factor that into your pricing when making the decision to VAT register.

Do I need to pay PAYE/National Insurance Contributions?

If you and any employees receive a salary, then income tax and National Insurance Contributions (NICs) are deducted at source and paid to HMRC on a monthly or quarterly basis. This the other initial task you (or your accountant) will have to set up within your company payroll.

Even if you don’t pay any salaries which breach the lower threshold for tax or NICs, you must still notify HMRC that no tax is due for that period (this is a simple process).

What are other taxes I need to know about?

Other taxes that you are liable to pay if you are a Limited Company owner include:

Payments on account: 

You may also need to make ‘Payments on Account’ towards the following tax year, if your personal tax tax bill is over £1,000 and you haven’t paid more than 80% of all the tax you owed directly, i.e. through your tax code on your PAYE salary. For the tax year ending 5th April 2021, there would be a payment due 31st January 2022 and 31st July 2022.

Capital gains tax:

You may also be liable to personal or company Capital Gains Tax on any assets you have disposed of during the tax year (such as shares, investments, or property).

If you sell your own company and have owned the shares for at least 12 months, then you may be eligible to pay Entrepreneurs’ Relief on the proceeds – at a flat rate of 10%.

Entrepreneurs Relief

To qualify for Entrepreneurs Relief you must have owned the business (at least 5% of the shares and voting rights) for at least 2 years before the date you close it. You should also be an employee or officeholder of the company. Your company’s main activities should be trading (rather than something like an investment company).

Capital Gains Tax on shares without Entrepreneurs Relief is 10% if you’re in the basic rate tax band, and 20% in the higher rate. Capital Gains Tax on properties would be either 18% or 28%.

For more information, feel free to get in touch with us.

Call us at: +44 7535 6176 81 

or

Email us at: [email protected]

How Technology can help save time & money for UK small business

How Technology can help save time & money for UK small business

As a small business owner if I ask you what are the major problems faced in running a business profitably, what will be your answer?

If we go by the stats, “there were 5.9 million small businesses at the start of 2020, in the UK.” This points us to a clear indication that the marketplace is fiercely competitive and standing out against all the competitors is not easy and many businesses lose out on this.

Moreover, the end-consumer is becoming more & more demanding every day & businesses that miss out on this interaction will suffer. Mark Waid put it very aptly when he said “ Especially in the digital age, people want everything now, now, now.” That sounds about right!!

However, this is just the tip of the iceberg. What lies deeper is managing everything efficiently with limited capital. A small business owner is like that juggler who, if misses out catching even one ball, the show is ruined. Both have to manage it all with limited resources.

Time and money for a business are the most critical elements to its growth.
What do you think can help save both for a business?
The answer is technology!

We are living & breathing technology. From tirelessly scrolling through the Tik Tok videos to promoting your business on the same platform, technology is omnipresent. My point here is that we are living in Digital Age and not investing in the same means you have already invested in digging a grave for your business.

We are done with the ‘Why’ & ‘What’, now comes the important part of this discussion which is the ‘How’. Let’s deep dive into technology and see how small businesses can save time and money to see positive growth graphs consistently.

Technology trends for Small businesses

Let’s break down the influence of technology into five major components of a business model. Go full digital from day 1 and eliminate the risks of the transitional process.

Marketing & Sales:

There are over 4.66 billion active internet users(Source: Statista) as of January 2021 & over 3.8 billion social media users (Source: Baklinko). This makes digital platforms the first stage to grow your business. Another report suggests “63% of small businesses believe that social media helps to find and maintain more loyal customers.”

Small businesses missing out on this opportunity just to save a few bucks initially need to understand that this is a long-term investment that will fetch results when the disaster hits. The year 2020 has already shown how early adopters of digital platforms have profited when nations all around the globe were under strict lockdown restrictions.

Marketing online will help you reach your target audience faster, generate more leads, eventually generating more revenue.

Streamlining Finances & Accounting:

We have been waiting to say this – “We come in here. We are the tech-savvy remote Accounting professionals that can save your business both time and money.”

Finances are a core part of every business and managing them in the most efficient way is no walk in the park. Accounting is no more the age-old practice of just adding up a list of numbers to match the accounts, it has evolved into an enormous giant that can both hurt your business as well as be your savior. From Accounting software to invoicing tools to filing taxes online to sharing confidential financial data through encrypted cloud servers, technology has been deep-rooted in the Accounting industry now. To support my claim, “82% of companies reportedly saved money by moving to the cloud instead of older, more outdated digital storage systems.”

Why are you still waiting to go paperless?

Just let us know and we can be Your Tech-savvy Accountant & Advisor.

Productivity while managing a remote work culture:

Productivity of the team collectively lays the foundation of a strong business. However, according to Deloitte, “40 percent believe that digital tools are “not relevant for my business,” and 38 percent that “they are not effective for my business.”

Is it true? No is the answer.

Small business owners can easily leverage the power of digital tools like time tracking software, project management tools, Human Resource Management Systems, etc to streamline their work processes. Moreover, most of the businesses are currently working remotely and this seems to be the future as well since it allows businesses to save cash. And with technology in place, businesses can save both time-saving & money.  A lot of both these resources are wasted when manual processes are in place.

Collaboration & Communication:

“14% of small businesses fail because they don’t respond or communicate with their customers.”

This brings us to collaboration & communication with the clients. Customer behaviour has changed a lot over the years and today’s customer isn’t just looking for service but 24/7 support. This issue can be sorted out by simply choosing one of the many collaboration tools out there. Also, collaboration isn’t just an external factor, even the in-house team needs to be communicated well enough to get the desired results.

We ourselves use tools like Slack, Accountancy manager, Google Hangouts and WhatsApp to stay connected with our clients at all times. Client Relationship Management:

The evolution of the CRM industry has had a massive impact on helping businesses grow. Statistically speaking, “CRM software is now the biggest software market in the world and the growth isn’t slowing down. In fact, CRM is now expected to reach more than $80 billion in revenues by 2025.” 

It’s a no-brainer realising the fact that CRMs allow businesses to have access to their client data in real-time. Moreover, technology has made it possible to access this cloud-based software from mobile devices. Keeping track of all your business leads and personalising automated workflows to reach out to them has become a key business growth tactic nowadays.

To keep in mind:

  1. Cybersecurity:

As we move forward in this digital age, cyber-attacks have also grown. “43% of all cyberattacks target small businesses.” Again, no business owner wishes to lose their hard-earned money & time to these fraudsters. What they can do instead is leverage the power of highly encrypted technologies & undertake other security measures. As an example, Lastpass allows us to encrypt all of our passwords to ensure our client’s data security.

  1. Technology costs:

Softwares while they help you be productive, may result in cost overruns if not managed efficiently. Do not subscribe to softwares’ that you are not going to use. Always measure the ROI of your investment in the software. If done wisely, it’s a win for you!

We have saved enough using cloud technologies & other software. But we do this only after proper research around the benefits that our firm will get. As an example, we use My Quick Cloud so that our remote team can work from the same cloud computer. Our server is in Ireland and we have peace of mind that all data is secure in our working environment. We even partnered up with cost management consultancy Reducer to offer our clients free and easy savings on business utilities. Technology has been our best friend!!

So, when you hear the word technology, let the echo be time-saving & cost-cutting. In order to stay ahead in the race, you need to start early or be the fastest runner. Technology offers you both.

Spring Budget 2021 – Key Highlights

Spring Budget 2021 – Key Highlights

The Spring Budget is out!!

On March 4th, UK Chancellor Rishi Sunak made the much-awaited Spring Budget public.

In the budget that was announced at the house of commons, Mr. Sunak revealed how the government has planned to overcome the country’s largest economic annual slum in more than 3 centuries. After a 10% depreciation in 2020, Rishi Sunak announced the budget that forecasts to get the economy on track in 2021 with predicted annual growth of 4% this year.

The key highlights of the Spring Budget are as follows:

  • Furlough to be extended until the end of September. Employers to be asked to contribute 10% in July and 20% in August and September.
  • Support for the self-employed also to be extended until September.  600,000 more self-employed people will be eligible for help as access to grants is widened.
  • Minimum wage to increase to £8.91 an hour from April.
  • No changes to rates of income tax, national insurance or VAT.
  • Tax-free personal allowance to be frozen at £12,570 from April 2021 levels to 2026.
  • Corporation tax on company profits above £250,000 to rise from 19% to 25% in April 2023.
  • Rate to be kept at 19% for about 1.5 million smaller companies with profits of less than £50,000.
  • Inheritance tax thresholds, pensions lifetime allowances, and annual capital gains tax exemptions to be frozen at 2020-2021 levels until 2025-26.
  • £20 weekly uplift in Universal Credit worth £1,000 a year to be extended for another six months.
  • Working Tax Credit claimants will get a £500 one-off payment.
  • No changes to rates of income tax, national insurance or VAT.
  • Corporation tax on company profits above £250,000 to rise from 19% to 25% in April 2023.
  • Rate to be kept at 19% for about 1.5 million smaller companies with profits of less than £50,000.
  • Stamp duty holiday on house purchases in England and Northern Ireland extended to 30 June.
  • No tax charged on sales of less than £500,000.
  • Inheritance tax thresholds, pensions lifetime allowances, and annual capital gains tax exemptions to be frozen at 2020-2021 levels until 2025-26.
  • £1.65bn to support the UK’s vaccination rollout and £50m to boost the UK’s vaccine testing capability.
  • £19m for domestic violence programmes, funding network of respite rooms for homeless women.
  • £40m of new funding for victims of 1960s Thalidomide scandal and lifetime support guarantee.
  • £10m to support armed forces veterans with mental health needs.
  • Tax breaks for firms to “unlock” £20bn worth of business investment.
  • Firms will be able “deduct” investment costs from tax bills, reducing taxable profits by 130%.
  • Incentives for firms to take on apprentices to rise to £3,000 and £126m for traineeships.
  • The lower VAT rate for hospitality firms to be maintained at 5% rate until September.
  • Interim 12.5% rate will then apply for the following six months.
  • Business rates holiday for firms in England to continue until June with 75% discount after that.
  • £5bn in Restart grants for shops and other businesses in England forced to close.
  • £6,000 per premises for non-essential outlets due to re-open in April and £18,000 for gyms, personal care providers and other hospitality and leisure businesses.
  • New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas.
  • The contactless payment limit will rise to £100 later this year.

Source: 
bbc.com
morningadvertiser.co.uk

The Furloughed Accountant’s Goodbye Blog

The Furloughed Accountant’s Goodbye Blog

And so the Furloughed Accountant has reached the end of his time with Zyla Accountants it is time to reflect on the past seven weeks. It’s been a steep learning curve, but one with many highlights and I thought I would take this opportunity to discuss two of these.

The undoubted highlight for me was actually allowing Suzy and Latha time to take a well earned break. A couple of weeks ago they both took the week off leaving yours truly in charge of the firm…. And yes the firm didn’t collapse. Seeing how hard they work for their clients, and how passionate they are about their work, it was great to see them both take a well earned rest.

The other highlight has been the clients I have gotten to know over the course of my time with Zyla. Despite only ever being in here as a temporary member of the team, all of the clients have made me feel like a welcomed part of the team, and been happy to come to me for advice. Be it working my way through Management Accounts, year end Accounts, Payroll or Tax work, every client buys into the Zyla way of operating which is that of a true partnership between advisors and clients and it is great to see that.

The biggest highlight, I know I said two, has to be working with Latha and Suzy. Even though I have only met Suzy before, and I am based over 400 miles away in Scotland, from day 1 both Suzy and Latha welcomed me to the firm, took time to give me the background on the clients, and even trusted me with their firm for a week. I was even told off for using the words ‘working for’ in the early days.

All that leaves me to say is thank you, and to encourage anyone that wants to experience the positivity themselves to get in touch with Suzy and Latha at [email protected]

Mar Sin Leat

The Furloughed Accountant

Claim your SEISS Grant  today – if you are self employed

Claim your SEISS Grant today – if you are self employed

Who is eligible?

If you are self-employed or partner in a partnership firm and have been adversely affected by the recent Coronavirus pandemic you are eligible to claim using this scheme. The grant need not be paid back but needs to be included and taxed in your Self Assessment Tax return for 2020-21.

How much will you get? 

You will get a taxable grant based on your average trading profit over the 3 tax years

  • 2016-17
  • 2017-18 and
  • 2018-19

HMRC will work out the average by adding the profits of the three years and dividing by 3

The grant will be 80% of your average monthly trading profits, paid out in a single instalment covering 3 months, and capped at £7,500 altogether. The amount will be paid by HMRC straight into your bank account.

Check if you are eligible to claim

You can check online to find out if you’re eligible to make a claim. Your tax agent or adviser can also check your eligibility on your behalf using the link https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

You’ll need your:

  • Self Assessment Unique Taxpayer Reference called the UTR number
  • National Insurance Number

You should be able to find both on your previous year’s tax return or contact your tax agent or advisor who would have it.

Once you have established your eligibility you need the additional information below to make the claim using the same link as mentioned above.

  • Government Gateway user ID and password – if you do not have a user ID, you can create one when you make your claim
  • UK bank details (only provide bank account details where a Bacs payment can be accepted) including

Bank Account Number

Sort Code

Name on the account

Your address linked to the bank account

How to claim

  • You have to make the claim yourself. Your tax agent or advisor cannot make the claim for you but you can contact them for support or information.
  • You’ll have to confirm to HMRC that your business has been adversely affected by coronavirus
  • You should not claim the grant if you’re a limited company or operating a trade through a trust
  • HMRC will check claims and take appropriate action to withhold or recover payments found to be dishonest or inaccurate

After your claim

HMRC will check your claim and pay your grant into your bank account in 6 working days from the date the claim is made and will also send you an email when your payment is on its way.

Record Keeping and Reporting

You must keep a copy of all records in line with normal self-employment record keeping requirements, including:

  • the amount claimed
  • Claim reference number

You should also keep any evidence that your business has been adversely affected by coronavirus such as:

  • business accounts showing a reduction in turnover
  • confirmation of any coronavirus-related business loans you have received
  • dates your business had to close due to lockdown restriction
  • dates you or your staff were unable to work due to coronavirus symptoms, shielding or caring responsibilities due to school closures

Report the grant 

  • on your Self Assessment tax return
  • as self-employed income on any Universal credit claim

Please conact [email protected] if you need any help on knowing more about the scheme and wanting to make your claim to HMRC

The Furloughed Accountant

The Furloughed Accountant

Like everyone in the world at the moment this is an unusual time, and unfortunately at this time I have found myself in Furlough. I know I am not unique in this situation, but I miss my clients, I miss my colleagues and feel I should be there to fight for my clients futures. However, as Albert Einstein said “In The Middle Of Difficulty Lies Opportunity.”

My opportunity is the chance to work with Suzy and Latha at Zyla Accountants and assist them out in the interim period, learn from them and how they operate their ‘portable’ firm. Over the past couple of weeks I have watched Suzy appear on a number of webinars and talk about cloud based accountancy firms, and it is great to not only see it in action, but experience the process as well.

Without giving away their trade secrets, I have gone from a predominately paper based environment to working remotely in Scotland for a firm in London and using seven different cloud based software that they use to run their entire accountancy firm from. We have that and we still use paper files – the savings in both cost and the environmental impact is massive by moving everything into the cloud.

The first week and a half has flown in – probably due to my wife working and me having to fit the work in around childcare, but Latha and Suzy have both been flexible, and helpful with this, taking time to show me the softwares, and the clients. It is living proof that in this ‘new normal’ accountancy practices can not only operate, but flourish. Over the next couple of weeks I will be writing about my experiences working with Suzy and Latha, showcasing the benefits of the cloud accountancy firm.


However, as many more of us work from home, and have staff working remotely there are a huge range of implications that need to be considered, and the correct planning should be considered at this time – be in Capital Allowances from additional IT purchases, changes in rental agreements and impacts on accounting treatment, and grants and payment holidays. At Zyla we have been working through this with a range of clients and pride ourselves on proactive advice.

If you need any further guidance on the current situation and working from home get in touch [email protected]

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