From 7th January 2013, child benefit will be subject to a tax charge, where one member of the family earns over £50k.
The charge will increase by 1% of the amount of benefit for every £100 earned over £50k so that by the time you reach £60k, the charge will be equal to the benefit received.
As this cannot be calculated until after the end of the tax year, the charge will be payable in the following tax year, either via the PAYE code or via self-assessment.
Don’t get caught out as there may be instances where the recipient of the child benefit is different to the person who will be paying the charge, so make sure you are aware of any consequences of this difference.
Have you thought about using your smartphone to help you with your record keeping?
If so, you may be interested in the new Record Keeping Apps. There is a list of these on HMRC’s website, although they are not endorsing them in any way.
It might be useful for those of you who are always out and about and need to record items of income and expenditure as you go. Although these are suggested for those who only complete very simple tax returns and who are not registered for VAT, they do not offer a proper bookeeping system, and may be best used as a supplement to an existing system.
If so, you may be trading, and you may need to contact HMRC to disclose any undeclared trading income from previous years.
HMRC are not interested if you are clearing out your loft and getting rid of things you don’t want any more, but it is targetted at companies and individuals who regularly acquire items to sell at a profit online.
You have until 14th June to come forward if you think it applies to you. If you log onto HMRC’s website, they give you a list of questions and answers to help you decide whether or not you may be trading. Otherwise contact your accoutant for further help.
If you would like a quick and rough response, you can log onto HMRC’s website and click on the Calculators and Tools tab.
In there is a self employed ready reckoner which will allow you to enter your expected net income (ie sales less expenses) to work out roughly what you can expect to pay in tax and Class 4 NI.
Bear in mind this does not take into account any other income you have, and if this is your first year of paying any tax, you may well need to pay double the amount, as you need to pay upfront for next year.
It will also not include any loss relief you may have if you have made a loss in a previous year.
Lorraine Dale from Rightway Accounting took yesterdays promo slot at the Chelmsford BWN event to share some top tips for this critical time of year for business (Ok so all year is critical – but this is the time of year accountants live off of coffee and get panic calls from last minute worried business owners – Lorraine shared some ideas so your not one of them….
Not yet done your tax return for 2010/11?
Then get it filed today and you will not get a penalty. After today you will get an automatic penalty of £100 regardless of whether or not you owe any tax, and further daily penalties of £10 per day for each day after that.
Did you know that making a loss can be a good thing?
There are special rules for tax treatment of losses in the first years of trading, so you shouldn’t assume that just because you aren’t making money that it is not worth completing a tax return. Apart from it being against the tax rules to be self employed and not be registered for self-assessment, you could be missing out on some money. The treatment of losses is a complex area and you should contact an accountant for advice.
Just started trading and making profits? Great!
If your profits fall below the personal allowance and you have no other income you may not pay any tax this time, but don’t forget that the first time you start to pay tax you will need to pay up front for the following year as well. The tax system operates by assuming that the following years profits will be the same as the current year and you will be required to pay the following years tax up front in two installments in January and July.
Tax Refund Scams.
Don’t respond to any emails claiming to be from HMRC and offering you a refund. You will be redirected to a false website where you are required to enter your bank details, and then your bank account will be emptied. In the last 3 months HMRC have closed down 185 false websites of this nature so this fraud is epidemic. If you think you are due a tax refund contact your accountant to check, or contact HMRC directly.
Thanks Lorraine for sharing that information – since Lorraine is the expert head over to her website (www.rightwayaccounting.co.uk) to learn more and don’t forget your accountant is there for the whole year to support your success and feed you advice and ideas to sustain and grow your business.
You can meet Lorraine at Essex BWN events.