A Guide to Self-Assessment Registration

At KC Accountancy, we understand that navigating the intricacies of tax obligations can be daunting, especially when it comes to self-assessment. Whether you are self-employed, a landlord, or have other untaxed income, registering for self-assessment with HM Revenue and Customs (HMRC) is a crucial step. This blog aims to simplify the process and ensure you are fully informed.

What is Self-Assessment?

Self-assessment is a system HMRC uses to collect income tax. Tax is usually deducted automatically from wages, pensions, and savings. However, people and businesses with other income must report it through a self-assessment tax return. This includes:

– Self-employed individuals

– Partners in a business partnership

– Company directors

– Individuals with rental income

– Those with untaxed savings, investments, or dividends

– Individuals with overseas income

Why Register for Self-Assessment?

Registering for self-assessment is essential to ensure you comply with UK tax laws and avoid penalties. Failure to register and submit your tax return on time can result in fines and interest on unpaid taxes. Moreover, self-assessment allows you to claim various tax reliefs and expenses, potentially reducing your tax liability.

When to Register?

You must register for self-assessment by the 5th of October following the end of the tax year in which you received the income. For example, if you started receiving untaxed income in the 2023/24 tax year, you need to register by 5th October 2024.

How to Register for Self-Assessment

Before you start the registration process, ensure you have the following information at hand:

– National Insurance number

– Personal and business details

– Details of income received

Register Online

You can register for self-assessment online via the HMRC website. Follow these steps:

If you do not already have one, you will need to create a Government Gateway account. This will provide you with a user ID and password.
Log in to your Government Gateway account and complete the online registration form for self-assessment. You will need to provide your personal details and information about your income sources.
Once registered, HMRC will send you a Unique Taxpayer Reference (UTR) number by post. This process usually takes up to 10 days.

After Registration: What’s Next?

After you have registered, you will need to:

– File Your Tax Return: You will need to file your tax return online by the 31st January following the end of the tax year. For example, for the 2023/24 tax year, the deadline is 31st January 2025.

-Ensure you pay any tax owed by the 31st January deadline to avoid penalties and interest.

– Maintain accurate records of your income and expenses. HMRC requires you to keep records for at least five years after the 31st January submission deadline.

Tips for a Smooth Self-Assessment Process

– Don’t leave registration and filing to the last minute. Starting early helps avoid errors and missed deadlines.

– Consider using accounting software to keep track of your income and expenses. This can make the process of completing your tax return much simpler.

– If you are unsure about any aspect of self-assessment, seeking professional advice can save you time and ensure your tax affairs are in order.

At KC Accountancy, we are here to help you navigate the self-assessment process with ease. Our team of experts can assist you with registration, filing your tax return, and ensuring you claim all applicable tax reliefs. Contact us today to learn more about our services and how we can support you.

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Understanding VAT registration

Value Added Tax (VAT) is a key milestone of running a business. Registering for VAT can be mandatory or voluntary depending on your business’s turnover and nature of goods and services. Here’s what you need to know about VAT registration:

When to Register for VAT

Mandatory Registration

If your business’s VAT taxable turnover exceeds £90,000 in the last 12 months or you expect it to exceed this threshold in the next 30 days, you must register for VAT. This also applies if you are based outside the UK but supply goods or services to the UK.

Voluntary Registration

Even if your turnover is below the threshold, you can choose to register voluntarily. You may wonder why you would choose to register voluntarily, however this can be beneficial for reclaiming VAT on purchases. If you spend as much VAT as you receive it’s definitely worth becoming VAT registered. Discuss this with your bookkeeper to find out what best suits the requirements of your business.

The Registration Process

Most businesses can register online via the HMRC website. This process includes creating a VAT online account which you create via your Government Gateway account.

Information Required

In order to register for VAT online, you’ll need details such as your turnover, business activity, bank account information, and business address.

After Registration

Once registered, you will receive a VAT registration number and must start charging VAT on your taxable supplies. You’ll also need to file VAT returns, typically every quarter.

Reclaiming VAT on Pre-Registration Purchases: You can reclaim VAT on goods and services bought before you registered for VAT, subject to certain conditions:

Goods: Reclaim VAT on goods purchased up to 4 years prior, provided you still have them or they were used to create goods you still possess.

Services: Reclaim VAT on services acquired within 6 months before registration.

Ensure these purchases are for the business now registered for VAT and relate to your taxable supplies. This means they must be used for your business activities that involve VAT taxable goods or services.

Penalties for Late Registration

If you register late, you may be liable for VAT from the date you should have registered. Additionally, penalties may apply depending on the lateness and the amount of VAT due.

Benefits of VAT Registration

Registered businesses can reclaim VAT on purchases related to their business activities.

Being VAT registered can enhance your business’s credibility and can be a requirement for some contracts.

Key Takeaways

– Monitor your turnover to ensure timely registration.

– Understand the responsibilities and benefits of being VAT registered.

– Use the resources available on the GOV.UK website for detailed guidance.

For tailored advice and support with VAT registration, contact KC Accountancy. We are here to assist you with all your accountancy needs.

For more information and personalised assistance, reach out to us at KC Accountancy. We provide expert advice and services to help your business navigate the complexities of VAT and other financial regulations.

Changes to employment law 2024

If you employ staff it’s important that you keep up to date with the changes coming into place for employment law. At KC Accountancy services we ensure we’re always up to date so our clients don’t need to worry.

Several changes to employment law came into play from 6 April 2024.

Changes to flexible working

Previously employees were entitled to make one request a year for flexible working and employers had to respond to their requests within three months of them making the request. Going forward employees will now be allowed to make 2 requests per year for flexible working and employers must give them a response within 2 months from the request being made. Originally employees could only make a request for flexible working after 26 weeks of working in the role. Now they can make requests from their first day of employment.

Employees who make requests for flexible working will no longer need to explain the reason for their request. However, when an employer refuses the request they must give an explanation as to why. The reason must be one that’s listed as a valid reason, such as business costs and the impact on performance.

Carers Leave

If your employee has caring responsibilities for a spouse, civil partner, child, parent or other dependent, they will be entitled to take one week of unpaid leave per year providing that the person that they care for requires care for longer than 3 months. There is no qualifying period for this entitlement and therefore the employee is entitled to this leave from their first day of employment.

Increased protection from redundancy

If you have an employee who is pregnant they will have increased protection from redundancy for at least 18 months. The protection will begin once the employer is notified of the employee’s pregnancy and will end when the child is 18 months old. Previously the protection only covered employees for the period of their maternity leave.

This protection means that if the employee’s role is made redundant you must give them first refusal of any other vacancies; however, they can still be made redundant if no appropriate vacancy is available.

Flexibility for paternity leave

Employees who are entitled to paternity leave were only allowed to take 2 consecutive weeks of leave within the first 8 weeks of their child being born. This has now changed and an employee can now take their paternity leave in 2 separate 1 week blocks, any time within the first year of their child’s birth

There will be further changes coming into place that are expected in September of this year. We will keep you updated when we know more.

If you’re an employer and don’t have the support you need to ensure you’re compliant, we advise that you instruct the services of a HR professional.

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Real time reporting of Capital Gains Tax for the sale of a residential property

The property market is tricky at the moment to say the least so congratulations on selling your property! But, are you aware of what you need to report to the taxman and the deadlines you need to pay your Capital Gains tax by?

If you have gained a profit from the sale of your property (which isn’t your home) then this must be reported to HMRC.

If the completion date of the sale of the property was on or after 27th October 2021 then you need to report and pay the tax owed within 60 days of completion.

If the completion date was between 6th April 2020 and 26th October 2021 then this should have been reported within 30 days of the completion date.

Working out your gain

In order to work out what you’ve gained from the sale of the property you’ll need to subtract the amount you bought the property for from the amount you sold the property for. This will give you the value of profit (gain) which you’ve made. If this amount is under the threshold for your personal allowance then you won’t have to pay Capital Gains Tax. However if it exceeds the amount you will need to report and pay tax on the profit you have made.

Costs

Any fees which you have incurred to sell the property, such as solicitors and estate agent fees can be deducted from your profit. Any costs of improvement work such as renovating or extending the property can be deducted but not general maintenance costs such as decorating.

Relief

If the property you sold used to be your home, was occupied by a dependent relative or is a business asset then you may get tax relief. This may reduce or delay the amount you need to pay.

You can work out what you need to pay by using HMRC’s Capital Gains Tax calculator.

Calculate

Business owners reporting on CGT

If you’re a business that sells property, for example your main line of work is property development then Capital Gains Tax does not apply to you. Instead you will either pay Income Tax or Corporation Tax depending on whether you’re a Sole Trader or Limited company.

If you’re a Limited company and sell a single property for £2m or more then there are special rules that apply.

Find out more

When selling a property it’s always best to seek advice from an accountant to be sure that what you’re reporting is correct. If you make a false report or don’t report in time with the deadline then you will be subject to penalty fees. No one wants to pay the tax man more than they need to!

If you’d like some advice then book in for a chat with us.

Budgeting tips for small businesses

Putting budgets in place for your small business may not be something you’ve considered yet. However managing your finances sensibly means you’ll keep your cash flow nice and healthy and you’ll cut back on overspending. Poor cash flow is the most common cause for business failure.

Before you even start your business you should write a business plan. This is an important aspect of getting your business started. Reviewing your business plan from time to time will show you whether or not you’re on track when it comes to your goals and ambitions. Mapping out your objectives and setting a business strategy is key to your success.

It’s easy to just keep spending and forgetting to review all of your expenses. Burying your head in the sand when it comes to your expenses means you don’t have a true picture of how much you’re actually spending. You may be really shocked to see how much you do actually spend each month. Highlighting whether or not these outgoings are essential means you can start to cut back on your spending and start sticking to a budget.

Review your spending month on month and set yourself a realistic budget. The budget you set must allow you to save, pay yourself and employees if applicable and your suppliers. This should also leave you some money in the bank. If it doesn’t this will highlight that your budget needs cutting back.

How can I ensure I stick to a budget?

Business bank account

First off you should have a separate business account for all of your business transactions. Whether you’re a sole transfer or limited company it will mean your bookkeeping is much easier to manage and you know that everything coming in and out of the account is business related. This will give you a much clearer picture of your finances and it’s actually a legality for limited companies.

Expense recording

Having a process in place for recording all of your expenses is essential for accurate record keeping. We use Dext for all of our clients to ensure no receipts go missing and that everything pulls through to QuickBooks or Xero for payment and reconciliation. You’ll also be able to export reports that show how much you’re spending each month.

Understanding your cash flow

Facing the reality of your cash flow means you can act now before it’s too late. When you use our bookkeeping service, we are able to highlight particular times of the month where cash flow seems to drop. We can then act upon this and put steps in place to improve it. It may just be that you have clients who don’t pay you on time and we need to get on top of your credit control process or that you have lots of expenses going out at once. We can liaise with your suppliers to agree better payment terms. There are lots of ways we can help with your cash flow, so don’t be afraid to reach out.

Allow for contingencies

When setting a monthly budget, allow for contingencies. Business doesn’t always go to plan, so having a backup of money you can fall back on will mean you stay out of the red. Once you get into the red it’s much more difficult to get out of.

Save for tax and VAT

If you’re a VAT registered business make sure that any VAT you receive goes straight into a savings account or savings space ready to pay your VAT bill. Save a third of all revenue ready for your tax bill so you have no nasty surprises.

Our final tip would be that if money and numbers really aren’t your thing and you find it difficult to manage, then you should invest in our bookkeeping services. Our monthly fees are tax deductible and hiring an expert means you’re compliant with all legislation. You’ll have a much better insight into your financial situation. Having us by your side means your business will start to head in the right direction for success!

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Tax Planning Strategies for Business Owners

As the income tax self assessment deadline is approaching do you feel like you could have planned it better?

Has it been a struggle to get the money together or have you not filed until the last minute?

Running a business is stressful enough without having the added worry of your tax deadline.

I come across so many business owners who have been doing the bookkeeping themselves who aren’t aware of all the expenses you can claim in order to reduce your tax bill, so they’ve been overpaying tax for many years.

Clients who come to me quite often report that they are inconsistent with their bookkeeping and it’s always a last minute effort to get all of the paperwork together ready to be filed and paid. This mad rush can lead to inaccuracies in your tax return.

In order to ensure you’re paying the least amount of tax possible and that everything you are claiming as an expense is compliant with HMRC it’s always best to seek professional support.

At KC Accountancy we advise all of our clients to get the information to us in good time. You can file your tax return for 2023/2024 as early as 6th April 2024. This doesn’t mean you have to pay your tax bill any earlier. You will still have until 31st January 2025 to settle your outstanding amount. It just means you’re more organised and have much more time to save and prepare.

Consistency is key

We know your bookkeeping isn’t your top priority. You’re always going to prioritise those tasks that are bringing in the money. However, if you can’t find the time to set aside at least once a month to do your bookkeeping you really should consider outsourcing it.

By being consistent with your bookkeeping it means your data is more accurate. There’s less chance of human error and losing paperwork. We use Dext to store all of our clients receipts and invoices so no vital receipts ever go missing.

Put money aside

When you have a clear picture of your finances you know exactly how much you need to save for your tax bill. Using bank accounts which have savings spaces such as Starling for example makes it easy to put money aside.

Get Support

When you have an expert by your side you can be sure your finances are in order. You have will have better visibility and understand your numbers better. You can be sure that you’re compliant and aware of all the benefits available to you as a business owner.

Make it your goal this year to get to grips with your accounts. Having clear transparency of your finances means you can future proof your business so that you’re heading in the right direction for success.

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How to set business goals for 2024

Setting goals for your business is crucial for your success. It’s also vital that these goals are reviewed on a regular basis to ensure you’re on track to meeting the deadline. Don’t put too much pressure on yourself as the goalpost can be moved if unexpected things crop up which impact your deadline.

When setting goals for your business ensure that they are measurable and relevant. Here’s a few steps you can take;

Define your vision and mission

Understanding what you want to achieve and why, plays an important part in your goal setting process. This will help you to decide what you want the future of your business to look like whilst remembering your values and what your business is actually about.

Identify strengths and weaknesses

In order to set challenging, yet realistic goals you need to identify areas of your business which have been successful and the ones which require a little more work. This will give you an insight into what works well and what needs improvement.

Ensure your goals are measurable

You need to know how you will identify that your goal has been met. Being able to monitor your performance is key. Seeing your progression will motivate you and help you to determine how far away you are from meeting your goal.

Use the SMART method

A good method to use when goal setting is the SMART method:

S – Specific – be descriptive about your goal, what it will look like and feel like, define exactly what you want to achieve

M – Measurable – keep track of your progress

A – Achievable – Your goal must be realistic yet challenging

R – Relevant – be part of your business strategy

T – Time bound – You must set a date when you want to achieve your goal and be specific about it. Set an actual date rather than saying in 5 years time I want to….

Prioritise

Put your goals in priority order. Which goal is the most important to you personally and what’s important for the success of the business?

When setting your goals in the new year be sure to speak to your accountant so that they can give you advice about your financial goals. We support our clients throughout their business journey which includes defining and setting goals. You’ll find that talking to someone who understands your goals will make you much more motivated and with a bit of advice and support you may just get there quicker!

Make sure you celebrate your achievements no matter how small they are. They all add up to your end goal.

Good luck with your goals for 2024!

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Tax deductible expenses for Sole Traders

Not all expenses that go through your business are allowed to be deducted against your tax bill. It’s important to understand what’s classed as a tax deductible expense and what isn’t. If you claim incorrectly this could result in fines and penalties later down the line. It could also mean that you’re missing out on claiming vital expenses.

So, what are you allowed to claim for?

Office expenses

Equipment which you are going to use for less than 2 years is classed as a tax deductible expense. Anything which has a longer life span would need to be treated differently, so reach out to your bookkeeper to clarify this.

The following bills are classed as allowable expenses;

– Wifi

– Phone

– Stationery

– Postage

– Printing

– Software

– Rent

– Business rates

– Utility bills

– Insurance

– Security

Mileage and travel

If you have a genuine reason to travel for business then you can claim back the cost for a taxi, plane, train, bus etc. Make sure you keep all your receipts safe.

If you use your own car for business purposes other than commuting then you can claim 45p per mile for the first 10,000 miles and 25p per mile thereafter. Be sure to keep a record of all the journeys you make and the reason why just in case you’re ever investigated. You’ll need to clarify where you went and why. The mileage rule also applies for motorbikes.

Uniform

If you need to wear a uniform for work then this is an allowable expense but it must fall under the following criteria;

– Be branded with your logo

– Protective clothing

– Costume

– Business uniform

You cannot claim for work clothes just because you wear them for work, even if you don’t wear them for personal use. A business uniform must be branded, or be specific to your line of work.

Promotional material

Anything which you use that contains your logo that promotes your business is tax deductible. Things such as letterheads, branded pens, branded clothing, business cards, leaflets etc.

If you choose to advertise in a local newspaper or use facebook ads for example then this is also classed as a tax deductible advertising expense.

Bookkeeping

We have great news! If you hire a bookkeeper not only do you get clarity on your finances and become more in control but our fees are a tax allowable expense. Other professional fees such as legal costs, insurance etc are also allowable.

Speeding and parking fines are not included!

There are other costs which your business may incur which could well be classed as tax deductible. Items which you purchase in order to sell on, or to create your products fall under this criteria. It’s always best to speak to a bookkeeper to clarify that everything you are claiming for is legitimate and above board.

The Autumn Statement 2023

On 22 November 2023, Jeremy Hunt delivered the ‘Autumn Statement for Growth’. Against an improving economic backdrop, the Chancellor is keen to stimulate economic growth and highlighted 110 measures for businesses. In addition, there were significant statements relating to National Insurance changes and also the reform of work-related state benefits.

To find out how the Autumn Statement announcement may affect you, we’ve created an Autumn Statement guide to help you. You can download it below.

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What are capital allowances?

When it comes to your tax bill there are certain expenses which must be classed as a Capital allowance rather than a tax deductible business expense. HMRC will allow you to deduct some or all of the value of an item from your profits before you pay tax. In particular the expenses which fall into this category are usually tangible assets that are used in your daily business operations, things such as machinery, vehicles, builds and equipment

The reason these assets are classed as capital allowances is because they depreciate over time. The amount you deduct from your tax will be a reflection of the age of the asset and how much it has depreciated over time.

If you’re a Sole Trader or partnership with an income of £150,000 or less then you can use cash basis accounting instead of capital allowances.

Capital allowances for plant and machinery

Annual Investment Allowance (AIA) –

You can deduct the full value of an item which qualifies for AIA up to the value of £1m providing you purchased it during the time you have owned your business and not before.

100% first year allowances –

If you buy an asset that qualifies for 100% first year allowances you can deduct the full cost from your profits to reduce your tax bill. In order to qualify the asset must be;

– An electric car or a car with zero emissions

– Equipment for electrical vehicle charging points

– Zero emissions good vehicles

– Gas refuelling equipment

– Plant and machinery for gas refuelling stations

– Plant and machinery for us in a freeport tax site

Super Deduction or 50% special rate first year allowance

For brand new plant and machinery purchased between 1st April 2021 until 31st March 2023 the super deduction allows you to deduct up to 130% of the cost from your profits before tax. Whereas the 50% special rate first year allowance allows you to deduct 50% of the cost.

Writing Down Allowances

If your plant and machinery doesn’t qualify for AIA or you’ve already claimed the maximum amount of £1m then you can claim writing down allowances which allows you to deduct a percentage from your profits before tax.

There are 3 different rates;

– Main pool 18%

– Single rate pool 6%

– Single assets pool 18% or 6% depending on the item

You can find out more about the rates and what’s applicable to you here:

Find out more

We understand capital allowances can be quite complex and you need to ensure what you’re claiming against your tax bill is correct. It’s always best to seek professional advice from an accountant.

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