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If you are self-employed you’ll pay Income Tax on your taxable profits, through Self-Assessment. You may also need to pay National Insurance and capital gains tax, which are also assessed for a tax year

If you employ someone even if its only yourself as a Director with regards to limited companies – you’ll have to operate PAYE (Pay As You Earn) on their earnings. You’ll need to register as an employer with HMRC. You will also need to operate a workplace pension scheme and enrol eligible employees into the scheme and make pension contributions at least for the requirement minimum amount. We can help with all of that.

A tax year runs from 6th April to the following 5th April. After the tax year ends on the 5th April, you will need to complete a Self-Assessment tax return, which must be received by HMRC by 31st January following the end of tax year. 

Here at Logic Accountancy Solutions Ltd, we use HMRC approved software to complete your tax return, produce your tax calculation and submit it to HMRC. We always provide you with how much tax you owe or refund, when and how to pay your tax liability. 

If you pay your tax late, you will be charged interest from the date your tax was due and may be charged penalties. We will help you budget for your self assessment tax bill so you can manage your cashflow better. 

Non-compliance with HMRC requirements will cost you! Some of the penalties may include:

• HMRC can charge you a penalty if your records are not accurate, complete and readable.  You may have to pay interest and penalties if your figures turn out to be wrong and you have not paid enough tax .You need to keep accurate records if you have to send HMRC a Self Assessment tax return. 
• You’ll get a penalty of £100 if your tax return is up to 3 months late. You’ll have to pay more if it’s later, or if you pay your tax bill late. You’ll also be charged interest on late payments. 

Get a piece of mind knowing that we've got this! We will support you in complying with regulatory requirements in the forever changing tax legislation.

Deadlines

Tax year 2019/2020 started on 6 April 2019 and ended on 5 April 2020.

Self-Assessment                        Deadline

Register for Self-Assessment     5 October 2020

Paper tax returns                        Midnight 31 October 2020

Online tax returns                       Midnight 31 January 2021

Pay the tax you owe                  Midnight 31 January 2021

Second payment on account    Midnight 31 July 2020

It is vital to keep full and accurate records of your income and expenses from the start.  HMRC may check your records to make sure you’re paying the right amount of tax.  You should keep your records for at least 22 months after the end of the tax year the tax return is for. 

So it’s important to get a proper system in place from the outset, and update the information regularly. Also, keeping records is important as a penalty may be due for not taking reasonable care with records and tax returns.

Some of the records you will need to keep include the following as a guide:

• invoices for sales and purchases
• receipts for business expenses
• bank including savings and investment records
• PAYE records
• Pension information
• rental income and expenses
• Receipts, bills and invoices that show the date and the amount you paid for an asset for Capital Gains tax purposes 

​We will help you set-up the right systems to support you in complying with record keeping requirements. For example keep everything in one folder throughout the year in month or week order, capture this onto a digital system for ease of reference and accounting purposes.  Record keeping systems depend on the nature of business and can be all  electronic or manual or mixture of both.

For more information about record keeping do get in touch.

Limited Company Vs Sole Trader

Are you wondering if you maybe better of running your business as a Limited Company instead of say a sole trader? We can help you decide!

Starting up as a sole trader is without doubt the simplest way to start a business in the UK. All you need to do is inform HMRC that you are working as ‘self employed’, and account for your business activities through the annual self assessment tax process. 

Setting up your business as a limited company involves a more complex formation process, and the financial and administrative responsibilities of running a limited company are certainly greater than those of a sole trader. 

However there are many advantages of running your business as a limited company, which may be applicable to you. We can help you explore the pros and cons, which is the right way to go and even support you with company formation. For example: some clients may legitimately pay less personal tax depending on the nature of their business. It may also be easier for a limited company to secure finance and big contracts, than for a sole trader.

Running a Limited Company

Managing taxes and producing statutory accounts for limited companies can be complicated, that's why we offer a comprehensive service for company owners. We prepare and submit all the relevant returns to mainly the HMRC, Companies House, Lenders and business specific regulators.

If you are running a limited company or association, you must file a Company Tax Return, whether you make a loss or not, at the end of each financial year. To complete a Company Tax Return, you will need to produce a full set of statutory/annual accounts. Corporation Tax is worked out from your company’s overall taxable profits and is payable to HMRC. 

The main corporation tax rate for tax years starting 1 April 2020 is 19%. This rate will remain the same for 2021.

What to submit :

• HMRC requires a full set of accounts in a specific format, the Company Tax return and payment of corporation tax and payroll submissions where applicable.
• Companies House requires the annual accounts and a Confirmation Statement.

Deadlines:

As with all other taxes the are deadlines.

All Company Tax Returns must be filed online and you must pay your Corporation Tax and related payments such as interest or penalties electronically. If you file your return late, you may have to pay a penalty. If you pay your Corporation Tax late or don’t pay enough, you’ll be charged interest.

Action                                                       Deadline

File first accounts with                             21 months after the   date you registered with  Companies House.                                   Companies  House. 

File annual accounts with                       9 months after your  company’s financial year ends

Companies House.

Pay Corporation Tax or tell HMRC          9 months and 1 day after your ‘accounting period’ for   that your company doesn't owe any.     Corporation Tax ends

File a Company Tax   Return                   12 months after your accounting period for Corporation 

                                                                    Tax ends

Taking money out of a Limited Company:

How you take money out of the company depends on what it’s for and how much you take out. 

•  Salary, expenses and benefits: The company must register as an employer.
• Dividends: The company must have sufficient profits available to pay, follow the right processes and issue dividend vouchers.
• Directors' Loans: When you take out more money than you've put in and its not salary or dividend, is a directors loan and is subject to additional detailed tax rules.

We are here to help! we will work out the most tax efficient dividend and salary structure as part of our tax planning strategies. Tax matters need not be complicated if you know who to call; Logic Accountancy Solutions

You can only charge VAT if your business is registered for VAT. You must register for VAT if your turnover is above the VAT threshold (currently £85,000) and you must keep digital records for VAT purposes and provide VAT return information to HMRC using Making Tax Digital compatible software. You may also register voluntarily at any time, however note that VAT registration can affect competition. 

VAT rules are very complex . However we can help you!  We can ensure you are registered for the right scheme based on the nature of your business, that you are MTD enabled, ready for the impeding changes in the VAT world and most of all accounting for VAT correctly. 

There are 3 different rates of VAT and you must make sure you charge the right amount. 

                            % of VAT     What the rate applies to

Standard rate    20%              Most goods and services

Reduced rate     5%                Some goods and services, eg children’s car seats and home energy

Zero rate            0%                Zero-rated goods and services, eg most food and children’s clothes 

Exempt / 'out of scope'         You can't charge VAT  e.g. insurance, stamps, health services by doctors

You need to know the right VAT rate to use so you can charge it correctly and reclaim it on your purchases. You must also keep records ready for inspection by HMRC, there are penalties for non compliance. You must keep VAT records for at least 6 years (or 10 years if you use the VAT MOSS service)

Did you know you could be charged VAT on discounts and deals you use as part of your promotion campaigns? If you need help with VAT do get in touch. We will provide the relevant guidance, prepare the VAT return and submit to HMRC on your behalf. We will also provide you with details of how much to pay if any and when. ​There is no escape, all VAT registered businesses must submit their returns online and pay electronically any VAT that is due. 

National Insurance contributions (NIC) are paid by almost everyone who works for a living and go towards paying for pensions, benefits and healthcare. The class you pay depends on your employment status and how much you earn.

Self Employed National insurance contributions:

If you are self-employed the are three types of national insurance contributions you should know about. Most people pay these through the Self Assessment.

Class 2 NIC

Self-employed people earning more than £6,475 a year (20/21) pay Class 2 NIC until they reach State Pension Age.  

Class 3 NIC

If you’re earning less than £6,475 a year (20/21), you can choose to pay voluntary contributions to fill or avoid gaps in your National Insurance record. 

Class 4 NIC

​You pay Class 4 NIC if your annual taxable profits are over £9,501 (20/21) or over until you reach State Pension Age. 

Employment National Insurance Contributions:

If you are employed you pay Class 1 NIC and your employer pay Class 1A&B. These are paid through the PAYE payroll system.

Class 1 NIC

This is paid by employees if they earn over £9,516 a year (20/21) and under the State pension Age

Class 1A & 1B

This is paid by employers on employees salary and benefits

It's possible to be both employed and self-employed at the same time. Many people work for an employer and also run their own business. Providing all the relevant information to HMRC will  ensure that you don't overpay your NICs. ​If you are not sure if you are paying the right amount call us.  

Capital Gains Tax Rates (CGT)

Capital Gains Tax is a tax on the profit you make when you sell or dispose of an asset that has increased in value. It’s the gain you make that’s taxed, not the amount of money you receive when you sell. CGT has a different tax rate depending upon whether it applies to business assets or non-business assets and if when added to taxable income fall under UK basic rate tax band or UK additional rate tax band . 

2020/21 Capital gains tax rates (non-business assets)

CGT allowance is: £12,300 

Capital gains                                                                                           Tax rate

Gains within UK basic rate tax band                                                         10%

Gains within UK additional rate tax band                                                 20%