New business registration with HMRC
Q: I have just started my own business. When do I need to register with HM Revenue & Customs?
A: Firstly, you need to work out
which tax year your start date falls into. The tax year runs from 6th
April to 5th April, so your start date falls into the tax year ended
5th April 2014. You must therefore register by the following 5th
October, i.e. 5th October 2014. As you are registering as self employed,
the form you need to complete is HM Revenue & Customs (HMRC) form
CWF1 or you can register with HMRC online at www.hmrc.gov.uk.
You will also need to pay Class 2 National Insurance which is only
£2.70 per week for 2013/14 so most people choose to pay for these
contributions via Direct Debit. You will need to complete HM Revenue
& Customs form CA5601 if you would like to pay via this method.
Although you have some time before you need to register, avoid
leaving it too long as you may face penalties for late registration.
Please note, this is merely with regards to self assessment, and does not include VAT or employer matters for example.
Category: Starting a Business
October Tax Return Filing Deadline
Q: I
have received a letter from HM Revenue & Customs reminding me that I
need to file my tax return by 31st October 2013. I do not have all of
the information together yet so I cannot complete it. Is there a way I
can avoid a late filing penalty?
A: The filing deadline of 31st October 2013 only applies to those taxpayers wishing to complete and submit a paper 2013 tax return. But
taxpayers also have the alternative to file the tax returns online. The
online filing procedure allows taxpayers to submit 2013 returns up
until 31st January 2014.
But
it is a good practice to complete your tax return well ahead of the
deadline. Doing it early should avoid mistakes being made and allow you
time to consider any tax planning opportunities available. Furthermore,
you will know what your tax liability is ahead of the due date of 31st
January 2014 and therefore, have more time to put some money aside and
manage your cashflow better.
Filing your tax return ahead of
31st January 2014, whether you file it electronically or in hardcopy,
does not accelerate the due date for the tax either.
Category: Tax Returns
Use of home - repairs
Q: I
am self employed but I operate from home at the moment. I’ve just had
to make some repairs to the roof. Am I able to claim any of this as a
business expense?
A: For the self-employed, their home
has a dual purpose- you live there and you carry on some or all of your
trade from there. As a result, many of the household expenses cover
both business and private use.
The element attributable to the business will depend on the facts;
including the extent and nature of the work undertaken from home. The
part attributable to the business use should be allowable.
A proportion of the cost of general household repairs and maintenance
is allowable in line with the proportion that the house is used solely
for the business. For example, redecorating the exterior or repairing
the roof.
Repairs that relate solely to part of the house that is not used for
the business, such as decorating a room not used for the business, are
not allowable. Equally if a room is used solely for business purposes
then the cost of redecorating that room is wholly allowable.
Capital expenditure (for example on “improvements” to the property)
is not allowable expenditure; though plant and machinery allowances may
be appropriate for certain qualifying expenditure.
Category: Sole Traders
Separation and the High Income Child Benefit Charge
Q: My
partner and I are separated and don’t live together anymore. I earn
£60k a year and my wife has been receiving Child Benefit for our two
daughters- who live with her. Will I still be subject to the High Income
Child Benefit Charge?
A: Essentially, you may be liable to
the High Income Child Benefit Charge (HICBC) if you, or your partner,
have an individual income of more than £50,000 and one of you gets Child
Benefit or contributions towards the upkeep of a child.
If you are liable and have received a Child Benefit payment since 7th January then you must register for Self Assessment by 5th October 2013 to pay the charge.
For the purpose of the HICBC, your “partner” is your husband or wife
or civil partner, unless you are permanently separated from them, or the
person you are living with as if they were your husband, wife or civil
partner. The partner you are living with does not have to be the mother
or father of the child.
If the separation occurred during the tax year, you may have to pay
the charge for the period that you were living together, but your income
for the whole year is taken into account and not just for the period
you were living together.
Category: Income Tax
Can I reduce my NI?
Q: I
am employed and earning £60,000 plus I have self employment income of
£50,000. I am aware that I am now paying rather a large amount of
National Insurance. Is there anything I can do about this?
A: The general principle of tax is
the more you earn; the more tax you pay. However, there is an annual
maximum amount of National Insurance contributions that are payable.
If you only had employment income, your employer would ensure that no
more than the maximum annual amount was paid via the PAYE system.
However, where there is more than one employment or where there is a
mixture of employment and self employment, there could be Class 1
contributions or Class 1, 2 and 4 Contributions respectively that exceed
this maximum annual amount.
Excess payments can be repaid after the actual position has been calculated after the tax year end (5th
April). Alternatively, you may make a claim that National Insurance
contributions are deferred; any shortfall being paid once the correct
position has been calculated after the tax year end.
Category: PAYE, NIC & Benefits In Kind
Disclaimer
– advice shared in this column is intended to inform rather than advise
and is based on legislation and practice at the time. 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 column,
before receiving our written endorsement, we will accept no
responsibility for any financial loss incurred.
