October 2018

tax tips & finance e-newsletter

In this issue

National Insurance and the self-employed
Making tax digital for VAT
IT consultant wins IR35 personal service company case
Tax efficient childcare schemes
Don’t forget there may be tax to pay on your dividends in January
2018 Budget date announced - 29 October 2018
HMRC app
Being busy versus being productive
Exam success

National Insurance and the self-employed

The planned abolition of Class 2 National Insurance contributions and the associated reform of Class 4 contributions, due to take effect from 6 April 2019, will not now go ahead during the current Parliament.

This means that if you are a self-employed earner, you will continue to pay Class 2 contributions in 2019/20 on profits in excess of the small profits threshold and Class 4 contributions on profits in excess of the lower profits limit.

If you are a self-employed earner with profits below the small profits threshold, you will still be able to pay Class 2 contributions voluntarily. This is cheap option to maintain your contributions record if you do not have the 35 qualifying years needed to qualify for the full single-tier state pension. At 2018/19 rates, voluntary Class 2 contributions cost £2.95 per week, whereas voluntary Class 3 contributions are £14.65 per week.

Speak to your adviser to find out what the policy change means for you personally.

Making tax digital for VAT

The start date for Making Tax Digital (MTD) for VAT is fast approaching.

If you are a VAT-registered business with turnover in excess of the VAT registration threshold of £85,000, you will need to comply with the requirements of MTD for VAT from the start of your first VAT accounting period beginning on or after 1 April 2019. If you are VAT registered but your VATable turnover is below £85,000, you can choose whether to join in, but if you do there is no going back and once in MTD for VAT you will need to stay within MTD for VAT as long as you remain VAT registered.

Under MTD for VAT you must keep certain VAT records digitally and send your VAT returns to HMRC using software that is MTD-compatible. You will no longer be able to use HMRC’s VAT Online service to file your VAT return. Your adviser can still file your VAT returns on your behalf.

Speak to your adviser to find out what you need to do in order to be MTD-ready in time for the start date.

IT consultant wins IR35 personal service company case

The government have been consulting on extending the personal service company rules that currently apply to public sector workers to those in the private sector, but in the meantime tax tribunal decisions are still being decided against HMRC.

In a recent case involving an IT consultant working on various projects to implement the new Universal Credit system the First Tier Tax Tribunal decided that the consultant would not have been an employee if directly engaged. A key factor was that the level of control over the consultant fell far below the sufficient degree required to demonstrate a contract of service.

AND FOOTBALL REFEREES ARE SELF-EMPLOYED

The degree of control was also held to be a critical factor in determining that football referees in charge of matches in the Championship and lower leagues were self-employed. HMRC were arguing that the referees should be taxed as employees and subject to PAYE. Interestingly, those refereeing Premier League matches are employees of the Premier League and HMRC are expected to appeal the decision of the First Tier Tribunal.

Tax efficient childcare schemes

Earlier this year the government announced that no new childcare voucher schemes could be set up after 5 October 2018.

This was a six month extension from the previous 5 April 2018 end date. If those employers offering such schemes at 5 October are prepared to keep administering their scheme then they will continue to be available but will eventually be phased out.

The current scheme allows employers to provide vouchers to employees to pay for care of their children up age 16. Vouchers to the value of £55 a week can be provided tax free to basic rate taxpayers with differing tax free amounts for higher rate and additional rate taxpayers.

The replacement scheme is the government's "tax free" childcare account which started this year for children up to age 12. Under this scheme the government tops up the savings in the childcare account by 25% up to £2,000 per child per year (£4,000 for a disabled child). Thus, savings of £8,000 would be topped up by the government to £10,000 and the £10,000 could then be used to pay Ofsted registered childcare providers such as nursery fees, childminders, after school clubs and summer camps. Unlike childcare vouchers, the new childcare accounts will be available to both employees and the self-employed.

For those already in childcare voucher schemes it may be beneficial to switch to the new childcare account and we can help you calculate whether or not that would be beneficial.

Don’t forget there may be tax to pay on your dividends in January

The rules for taxing dividends changed radically from 6 April 2016 with the removal of the 10% notional tax credit and the introduction of new rates of tax on dividends. For many taxpayers that meant more tax to pay on those dividends on 31 January 2018. The same will also apply on 31 January 2019.

If you are a higher rate taxpayer and received £30,000 of dividends in 2017/18 £25,000 of those dividends would be taxed at 32.5% meaning £8,125 due on 31 January 2019.

If you can let us have all of your tax documents as soon as possible we can let you know how much tax you need to pay next January so that you can set aside sufficient funds.

2018 Budget date announced - 29 October 2018

The Chancellor of the Exchequer, Philip Hammond, has announced that the Budget will take place on Monday 29 October 2018.

This is the final Budget before Brexit and will set out the government’s plan to build a stronger, more prosperous economy, building on the recent Spring Statement and last year’s Budget.

We will be posting tweets from our @humph_co Twitter feed throughout the Budget so please follow us for live updates twitter.com/humph_co. We will also be emailing a digital summary after the Budget which will be available on our website.

HMRC app

HMRC have now developed an app to find information about your tax, National Insurance, tax credits and benefits on the move.

You can use it to:

  • view your tax code and an estimate of the tax you need to pay
  • see your income and benefits
  • check your National Insurance number
  • view your tax credits payments schedule
  • renew your tax credits
  • access your Help to Save account
  • use our tax calculator to work out your take home pay after Income Tax and National Insurance deductions
  • track forms and letters you’ve sent to us
  • get 6—digit access codes to make your HMRC accounts more secure.

You can download the HMRC app from:

the App Store for iOS https://itunes.apple.com/gb/app/hmrc/id514561561

the Google Play Store for Android https://play.google.com/store/apps/details?id=uk.gov.hmrc.ptcalc&hl=en_GB

The first time you sign in, you’ll need to enter your Government Gateway ID and password. If you haven’t got these, go to the Government Gateway website at www.gov.uk/government-gateway and register as an individual.

Whenever you use the app again, depending on what your handset supports, you can sign in using:

  • a 6-digit PIN
  • fingerprint authentication
  • facial recognition

Being busy versus being productive

In today's hyper connected business environment, it seems we are all busier than ever. Whether we are responding to emails outside of office hours or taking a call while on the way to a meeting, there is so much going on in our work lives that it’s easy to lose focus on getting the most important work done.

Focus on being effective

Busy people tend to have a good work ethic. That is why they are always busy. The problem is not that they don’t work hard, but that they don’t work smart. Productive people focus on being effective. They are constantly looking for better ways to achieve the same outcome.

Don't sweat the small stuff

Busy people tend to get lost in the minor details whereas productive people tend to focus on the macro issues. Once you get from A to B in the most efficient way possible, it doesn’t really matter which route you took to get there or what else you did along the way. Focus on hitting each milestone along the way to achieving your business objectives and don’t sweat the small stuff.

Set your own direction

Busy people tend to be reactive and let others set their direction. Productive people tend to set their own direction and they are proactive in moving forward with each of their business objectives. Industry norms can try to set your direction of travel. However, if you want to move forward in a way that embraces new and innovative ways of doing things, it’s best to choose your own path to achieving each of your objectives.

The power of why?

Busy people tend to say yes and don’t really challenge why others are asking them to do things. Productive people tend to ask "why"? They challenge others with questions like "Why are we doing this" and "how does investing time in this particular activity help us to achieve the objectives of our business?"

Don’t try to do everything yourself

Busy people tend to do everything themselves. More productive people tend to use the tools and resources available to them in order to get things done in the most efficient manner. If a particular task has a high rate of recurrence or isn’t a particularly good use of your time, either hire someone cheaper to do it or outsource it.

Exam Success

We are pleased to announce that Sebastian Stracey recently passed the exam for the highest level tax qualification in the UK, to become a Chartered Tax Adviser (CTA), to complement his Chartered Accountancy qualification (ACA).

Sebastian joined Humphrey & Co in 2016 having qualified as a Chartered Accountant in 2015. He is part of the dental team providing clients with accountancy and taxation services.

“I am delighted to attain the CTA qualification and I am grateful for the support offered by Humphrey & Co over the years. I look forward to using the qualification to provide the best possible service in assisting our clients with their accounting and tax needs.”

Senior Partner Anthony Smith comments “Our CTA qualified staff are invaluable to us as tax legislation seems to get increasingly complex every year. Tax advice and planning to mitigate liabilities is critical to our clients and we are very happy to support our staff to attain suitable qualifications. On behalf of all the Partners, I congratulate Seb for reaching this milestone; it’s no walk in the park!”