By Emma Hooper

The government has announced minimum pay rises in April 2020, with the National Living Wage increasing by 6.2% in comparison to 2018/19.

For a full time worker aged 25 or over who currently receives the National Living Wage, this would amount to a pay rise of £930 over the year.

If you have employees who are currently on the minimum pay for their age bracket, you’ll need to ensure you comply with the new rates when processing the April 2020 payroll. If we process your payroll for you, do not fear – we will inform you of any employees that may be impacted by the above to ensure your payroll is processed correctly.

If you have any questions regarding pay for employees or how this may impact your business, please get in touch on 01454 529 529.

by Steve Wiltshire

Starting your own business can be an exciting – but daunting – time. One of the first and most important decisions to make is how are you going to structure your business? The reason this decision is so important is that it has a variety of consequences – not only related to tax, but also from a legal and administrative perspective, and how your business will be perceived.

The main options to consider are whether to set up as a sole trader, a limited company, or a partnership. Each has benefits and drawbacks.  As a sole trader, there is significantly less of an administrative burden than setting up as a company.  However, as a sole trader you are taxed on profits as they arise through income tax (at 20%, 40% and 45% depending on your level of earnings).  You also have a class 2 and 4 National Insurance burden.

On the other hand, setting up as a company gives more flexibility over your personal taxation position, as you are personally liable to income tax on income from the company when it is extracted from the company, rather than as profits are earned by the company. There also tends to be more flexibility, and therefore potential available tax planning opportunities, when structured as a company, although these have been mitigated with the recent changes to dividend taxation rules.  The company will be liable to corporation tax as soon as profit is earned, but this is at a lower rate of 19%.

Legally, owning a company offers more protection over personal assets than setting up as a sole trader, as the company is a separate legal entity from the shareholder.

However, there is additional administrative cost and procedures to follow as a company, and any tax saving may not be sufficient to compensate for this additional burden. Also, changes to taxation over dividends from April 2016 reduces the taxation efficiencies of setting up as a company, which makes this a less attractive proposition than previously.

In addition, anti-avoidance legislation (IR35) means that under certain circumstances, profits made through a company will be targeted as ‘earned income’, which means any tax saving will potentially be lost. This is a particularly important area to assess thoroughly before deciding on the right structure for your business.

A third alternative is to set up as a partnership. More and more businesses are setting up as a Limited Liability Partnerships.  With this structure, profits earned are subject to income tax as they arise, but the liability of the individual partners is limited to the capital which they have put into the business (rather than their personal assets), in much the same way as for a company.

When choosing which type of business structure to use, another consideration might be the availability of loss relief. If it is anticipated that the business might be loss making in its early years, this could impact the selection decision.

Capital gains arising on any sale of the business in the future may also be taxed, depending on which structure is chosen.

Overall, this decision is complex, and each individual’s preferences, priorities and circumstances will impact the final outcome. Here at Frost Wiltshire, we can set out the options available to you and give you the information and advice which you need to make an informed decision on what suits you and your business best.

 

Photo by Nathan Dumlao on Unsplash

The boxes are unpacked, the painting is done, and the Christmas tree is up! We have moved into our new office and are loving the change of scenery. Whilst there were a few hurdles to overcome (a meeting room without any walls for a few weeks made for an interesting challenge), overall everything has gone smoothly and to plan, and we are now adding the final touches.

If you haven’t seen the new office yet or missed our previous article, we have moved from the High Street in Chipping Sodbury to a beautiful converted barn on a small business park in a lovely area called Latteridge. Still only under 20 minutes from the M4, it’s an incredibly peaceful and tranquil environment. With lots of parking, we hope that this is not only a nicer setting for client meetings, but also more convenient. We are also lucky enough to be surrounded by lots of lovely country pubs, which we are gradually trying out for team lunches!

We look forward to welcoming as many of our clients and contacts as possible here, to enjoy our new environment!

By Mel Hackney

The deadline for filing your 2018.19 self-assessment tax return is 31 January 2020. If you haven’t got round to completing it yet, or are concerned about a large liability – don’t worry! You are not alone, and we might be able to help. We might even be able to reduce your liability with some tax planning suggestions.

Also, don’t forget that even if you do not need to complete a tax return, if you have allowable employment expenses you may be entitled to a refund of tax! For example, if you drive business mileage as part of your job, and your employer pays you less than the allowable amount (45p for the first 10,000 miles and 25p thereafter) you can claim the difference as a deduction against your taxable income, saving tax at up to 45%.

If you would like to have a chat, please don’t hesitate to call us and we can go through what you need and how we can take away that burden hanging over you.

We are very excited to announce that we are moving offices! It all started with a client meeting…

Around four years ago, we met with a new client at their offices. We were immediately impressed – the office was a fantastic space; a modern and beautiful barn conversion. Wide open spaces, gardens, and plenty of parking for clients. Fast forward, and this now longstanding client commented a few months back that they had outgrown the space and would soon be moving on. Eyebrows raised and knowing looks across the meeting table between us… the FW team instantly had the same thoughts: could this be the opportunity to move on ourselves?

And so, here we are with the lease now signed and feeling extremely excited to move on to pastures new – quite literally. With sheep as our neighbours, the fresh air and views of the countryside, our new offices fit our vision perfectly, and it won’t be long before our Monday morning meeting might well be outside, with a Cornetto in hand. The new office also supports our ongoing drive to be as environmentally aware as we can, with a sustainable wood chip heating system. It also gives us much more space to grow the team and entertain clients.

More details and pictures to follow… and we hope our clients and contacts will be as impressed as we were, all those years ago!

by Steve Wiltshire

Starting your own business can be an exciting – but daunting – time. One of the first and most important decisions to make is how are you going to structure your business? The reason this decision is so important is that it has a variety of consequences – not only related to tax, but also from a legal and administrative perspective, and how your business will be perceived.

The main options to consider are whether to set up as a sole trader, a limited company, or a partnership. Each has benefits and drawbacks.  As a sole trader, there is significantly less of an administrative burden than setting up as a company.  However, as a sole trader you are taxed on profits as they arise through income tax (at 20%, 40% and 45% depending on your level of earnings).  You also have a class 2 and 4 National Insurance burden.

On the other hand, setting up as a company gives more flexibility over your personal taxation position, as you are personally liable to income tax on income from the company when it is extracted from the company, rather than as profits are earned by the company. There also tends to be more flexibility, and therefore potential available tax planning opportunities, when structured as a company, although these have been mitigated with the recent changes to dividend taxation rules.  The company will be liable to corporation tax as soon as profit is earned, but this is at a lower rate of 19% (and this is set to fall to 17% in 2020).

Legally, owning a company offers more protection over personal assets than setting up as a sole trader, as the company is a separate legal entity from the shareholder.

However, there is additional administrative cost and procedures to follow as a company, and any tax saving may not be sufficient to compensate for this additional burden. Also, changes to taxation over dividends from April 2016 reduces the taxation efficiencies of setting up as a company, which makes this a less attractive proposition than previously.

In addition, anti-avoidance legislation (IR35) means that under certain circumstances, profits made through a company will be targeted as ‘earned income’, which means any tax saving will potentially be lost. This is a particularly important area to assess thoroughly before deciding on the right structure for your business.

A third alternative is to set up as a partnership. More and more businesses are setting up as a Limited Liability Partnerships.  With this structure, profits earned are subject to income tax as they arise, but the liability of the individual partners is limited to the capital which they have put into the business (rather than their personal assets), in much the same way as for a company.

When choosing which type of business structure to use, another consideration might be the availability of loss relief. If it is anticipated that the business might be loss making in its early years, this could impact the selection decision.

Capital gains arising on any sale of the business in the future may also be taxed, depending on which structure is chosen.

Overall, this decision is complex, and each individual’s preferences, priorities and circumstances will impact the final outcome. Here at Frost Wiltshire, we can set out the options available to you and give you the information and advice which you need to make an informed decision on what suits you and your business best.

Have you come across Research and Development relief (R&D) before? If you own or run a company, this relief could be hugely advantageous to you.

HMRC are really keen right now to help companies in developing new and exciting products; these range from anything to developing mobile phone apps to creating a new part for a bike; if the product is new and innovative, it could be eligible for this relief.

If eligible, the company can get an additional deduction on the qualifying expenditure of 130% of that expense – that means that for every £100 spent on R&D, the company saves £24.70.

In addition, if the company makes a loss, which is common in the early developmental stages of a product, the company can turn a loss into an almost immediate cash repayment. of up to 14.5% of the R&D deduction.

Here at Frost Wiltshire, we have considerable experience in preparing and submitting R&D claims and have 100% success rate in doing so.

If this is of interest to you, give us a call and speak to our tax director, Mel Hackney, who will be able to provide more guidance as to whether the expenditure is likely to be classified as R&D.

By Mel Hackney

When you sell your home, if it is the only property you own, it is unlikely you will pay any capital gains tax. This is because a relief called Private Residence Relief (PRR) is applied.

If you own a second property and that property is rented out, a relief known as ‘letting relief’ may be available on the second property. The impact of letting relief is to reduce the amount tax payable on the eventual sale of that second property.

At Budget 2018, the government announced that letting relief will be changed with effect from 6 April 2020, so that it only applies where an owner is in shared occupancy with the tenant.

Once implemented this may lead to a significant change in how much tax is payable on the sale of a property, and will no doubt affect many landlords.

For example, Bob owns 2 houses, Acorn Cottage and Highgrove Terrace. Bob lives in Highgrove Terrace and rents out Acorn Cottage. Bob used to live in Acorn Cottage.

Under the current rules, when Bob sells Acorn Cottage, he will be able to claim both PRR and letting relief for the full period of ownership.

However, under the new rules, Bob can no longer claim letting relief unless he lives in the property at the same time as the tenant. As such, if Bob sells Acorn Cottage in 2022, there would potentially be a gain on the sale of the property.

These rules are extremely complex, so can be tricky to interpret. If you would like to find out more about the changes to tax on property, or about any of our services including tax planning, please contact Mel Hackney.

By Mel Hackney

When you calculate the tax you owe through self-assessment, HMRC ask you to make ‘Payments on Account’ (‘POAs’) towards your liability for the following tax year. By default, these are set at the same level as the previous tax year’s liability.

The first of these payments is due on 31 January in the tax year to which it relates, and the second is due on 31 July following the end of the tax year. For example, POAs for the 2018/19 tax year (6 April 2018 to 5 April 2019) are due on 31 January 2019 and 31 July 2019 and calculated based on the level of your tax liability for the previous tax year, 2017/18.

However, if this year your income has gone down, or even stayed the same, it is likely that your tax liability will have reduced too.

By completing your tax return before 31 July 2019, you can establish what you owe on 31 July 2019 and you might end up paying less than you thought you would.

If the liability turns out to be higher than you thought, this will not impact what you owe on 31 July 2019, the balance will instead be paid on 31 January following the tax year.
This isn’t as complicated as it sounds. If your income has reduced compared to last year, get in touch and let us demystify how we can help you to pay less tax on 31 July!

We’re hiring! Do you know someone ambitious at an early stage in their accountancy career, who’d like to join a small friendly team in a relaxed environment? Tell us, we’d love to talk to them!