Frequently Asked Questions

Do I need to complete a self-assessment tax return?

I have heard that the deadline for completing a self-assessment tax return is 31st January, but I am not sure whether I need to complete one?You will need to prepare and submit a self–assessment tax return for the 2019-20 financial year if you:

Earned over £2,500 from letting property (after deducting allowable expenses)*
Received more than £10,000 in rental income (before deducting allowable expenses)
Or your partner received Child Benefit and either of you had an annual income of more than £50,000
Receive more than £2,500 in untaxed income e.g. commission or tips*
Are self-employed sole trader and earned over £1,000
Are a partner of a business partnership
Receive over £10,000 in dividends*
Earn more than £10,000 from savings and investments *
Are an employee claiming expenses worth over £2,500
Have an annual income over £100,000
Earn income from overseas that is liable for tax
Received income from a trust

This list is not exhaustive, but it will hopefully give you an idea of the sort of things that can trigger the need for a tax return.If you are having to complete a self-assessment tax return for the first time and don’t know where to start, we can help.We love working with self-employed professionals and independent business owners and if you are not receiving the service and support you deserve from your accountant then please talk to TaxAdvisor Uk on 0203 538 1276 or drop us a line using our online enquiry form. We offer free initial consultations, advice and support over the phone or via video meeting if you have any concerns about face-to-face meetings.

How to report rental property to HMRC if you live outside the UK

I will be leaving the UK to work abroad and will be renting my UK property out, while I’m away. How do I report the rental income to HMRC?When you leave the UK to live abroad and rent out a residential property in the UK, you will be treated as a non-resident landlord by HMRC.

This will generally mean your UK letting agent, or potentially your tenants, need to deduct tax from your net rental income and pay this to HMRC.As this will impact your cashflow, you can apply to HMRC for its approval to receive the rental income with no tax deducted. The application can be made using form NRL1.

It is important to note that even if HMRC accepts the application so the rent can be paid without tax deducted, the rental income will still remain liable to UK income tax and you will generally be required to submit a personal tax return to HMRC. The need to complete a tax return will depend on your personal circumstances.You should also be aware of the need to confirm your UK tax residence status and you should seek professional advice if you are not sure of your situation.

You should also be aware that non-UK residents are subject to UK capital gains tax on capital gains arising from direct or indirect disposals of all types of UK land and property as well as interests in UK property rich entities. HMRC require any disposals to be reported to them and the tax be paid within 30 days.

We can help advise you in respect of the above matters, based on your specific circumstances. Please contact us on 0203 538 2832 or use our simple online contact form to arrange a free initial consultation.

Consequences of paying tax late

I am newly self-employed and have been rather unorganised this year. I just managed to get my 2018/19 tax return filed online on 31st January 2020, but I didn’t have enough cash put aside for my tax bill. What are the implications of paying my tax late?

You will have interest to pay on anything you owe until HM Revenue and Customs (HMRC) receives your payment. Furthermore, after a delay of 30 days, late payment penalties at 5% of the tax you owe will begin to apply. Additional late payment penalties will be added if the delay exceeds six months and more at 12 months.

At TaxAdvisor Uk, we would be happy to assist you with your affairs, from helping with the day-to-day bookkeeping, to completion of your accounts and tax return. We’ll also ensure that you’re claiming everything you’re entitled to and obtaining as much tax relief as possible. Please call us free to find out more.If you’re struggling to keep on top of your tax affairs, call us on 0203 538 2832 or complete our contact form here and we will be happy to take care of this on your behalf.

Can I amend my Income Tax Return?

I rushed the submission of my tax return in January, and realised that I missed off the interest I received from my bank accounts and dividends received from some investments during the 2020/21 tax year. Can I revise my tax return and will I incur any fines for doing this?

Just as HMRC has the right to repair an obvious error or mistake on a return the taxpayer has the right to amend it, within 12 months of the filing date for the tax return, which in the majority of cases is the following 31st January.

The amendment to your tax return may be in the form of a letter detailing the omissions, an amended return, an extra supplementary page that shows the relevant source of income, or an amended supplementary page of one originally submitted with the return.

HMRC will normally accept an amendment to a return or self-assessment, whether it is notified by the taxpayer or by their agent. However, you must ensure the amendment is supplied in writing.

No penalties for late filing will be applicable, but you need to be aware that if the amendment results in additional tax to pay you will be charged interest from the due date of payment, which in your case was 31st January 2022, and may be liable to a 5% surcharge if this is not paid by the end of February 2022.

If you’re struggling to keep on top of your tax affairs, call us on 0203 538 2832 or complete our contact form here and we will be happy to take care of this on your behalf

How to register for CIS?

What you need to do

Register for HMRC’s online service and enrol for self-employment
You’ll get your Government Gateway ID(email) & UTR number (by post)
Register for CISat HMRC’s website using your government gateway ID
Choose your CIS payment status– net pay or gross pay (more details about it below)

Why do I need to register for CIS?

If you’re self-employed and working in the construction industry, then you have to register for the Construction Industry Scheme (CIS).

If you don’t, then your payslips will have 30% deducted from them as taxes and given to HMRC as tax payments on your behalf.

When you register for CIS, these deductions are reduced to 20% when you register for “net payment” status. They can also be removed if you register for “gross payment” status.

Difference between gross pay and net pay status

Net payment status

Taxes withheld: 20% instead of 30%
Everyone qualifies.

The main benefit of choosing Net Payment is that your contractor will only withhold 20% of your earnings, instead of 30%.

You’ll still likely end up overpaying your taxes and need to claim a refund.

Gross payment status

Taxes withheld from your payments: 0%
You need to meet the qualifications criteria.

With gross payment status, HMRC will no longer ask your contractor to withhold tax payments, so it is your responsibility to calculate and pay your taxes.

However, to get this status, you need to meet the following criteria:

You’ve paid your taxes on time in the past
Your turnover is over £30,000
You’re making your business payments through a bank account.

Reverse Charge for CIS

I have seen that the deadline for Reverse Charge for CIS has changed, what do I do now?

The new date for this coming into effect will be on 1^st March 2021. This change is where VAT-registered subcontractors will no longer charge VAT on certain construction services to another VAT-registered business. Instead, the customer will ‘self-account’ for any VAT due – this is known as the Reverse Charge.

The changes were due to come in on 1st October 2020 but the changes are now delayed until 1st March 2021 due to the coronavirus pandemic.

HMRC recognises that some businesses will have already made changes to meet the needs of the reverse charge and cannot easily change them. Where genuine errors have occurred, HMRC will take into account the fact that the implementation date has changed.

What is a confirmation statement (CS01)?

I have been sent a letter telling me I need to submit my confirmation statement and I don’t know what this is.A company needs to file a confirmation statement to Companies House every year and it costs £13 to file the form online or £40 if you have to file a paper statement.

If you need to file an amended statement there will be no further charge, you only pay the fee once a year.Your first confirmation statement will be due a year from incorporation and then annually thereafter or 12 months from any amended statements filed. You have 14 days to file the statement from the due date.

The confirmation statement shows general information about the company such as company directors, secretary, registered office address, shareholders, share capital and people with significant control.

You must file a confirmation statement even if the company is dormant.

If you require any assistance with confirmation statements or any other company matter please give us a call on 0203 538 2832 and a arrange a meeting today.

How do I know my bookkeeping is correct?

I use a cloud based bookkeeping software but how do I know if I have correctly recorded everything?

The good news is that online bookkeeping software does take a lot of the hard work out for you, but it doesn’t eliminate the need for an accountant.

Your accountant’s job is to use your software and perform reconciliations and checks to ensure that your software has not only included everything but also that everything has been categorised and treated correctly.

This will typically be done alongside some work that needs to be completed on your behalf such as a VAT return, a self-assessment tax return or annual accounts etc.

Like most software it will do what you tell it to, but it cannot interpret legislation, so unfortunately if you don’t know what to do with an item your software isn’t going to be able to help.

Some software nowadays has an ability to learn by the use of ‘rules’. These rules can used to classify an item automatically. For example, say you receive a petrol receipt from a garage. If you class it as fuel, the software will remember this and automatically classify items from this garage as fuel going forward, unless you tell it differently.

Software speeds up your bookkeeping as it becomes more automated for you and it’s much easier for your accountant to help you as they can simply login and check how items are being classed and to help you use the software.

Here at TaxAdvisor Uk, we have lots of experience with a range of cloud bookkeeping software and can help you from getting it set up correctly, to giving you training, right through to performing checks to ensure it is complete and accurate. Please contact us on 0203 538 2832 or use our simple online contact form to arrange a free initial consultation to see how we can help you.

Does my P11D have to go on my tax return?

I am in employment but I also have some rental income so I need to complete a tax return. Does my P11D need to go on my tax return? As an employee or director, you may receive additional benefits from your employer which are in addition to your salary or wages. These may include health insurance, company cars and interest-free loans.

These so-called ‘benefits in kind’ may be taxable, in which case the value of the benefit needs to be reported to HM Revenue and Customs (HMRC) by your employer on form P11D at the end of the tax year or via the payroll. To avoid receiving a big tax bill, HMRC will normally look to adjust your tax code so that your tax bill for your benefit is collected throughout the year from your wages.

Although your benefit has been reported to HMRC and you are likely to have paid some or all the tax on it, you will still be required to enter the details from your P11D onto your self-assessment tax return. A tax return should give a complete picture of your tax affairs, and therefore include all your taxable income, allowances, deductions and reliefs. Any tax you have paid at source (such as the PAYE on your wages) is considered and knocked-off your eventual bill; meaning you don’t get taxed twice on your wages and benefits in kind.If you don’t include the figures from your P11D, it will look like you have overpaid tax because your PAYE will be higher than expected and you may be incorrectly refunded for the tax on your benefit in kind.

If you don’t feel confident in completing your own self-assessment tax return, feel free to contact us and we would be happy to complete this on your behalf.

What is the Marriage Allowance?

What is the Marriage Allowance and how do I know if my partner and I qualify?

To qualify for the Marriage Allowance, throughout the tax year (6th April to the following 5th April) you must both be:

Not higher or additional rate taxpayers,
UK resident and domiciled,
Married or in a civil partnership with one another; and
Born on or after 6th April 1935.

If you and your partner are eligible for Marriage Allowance, you can register your interest with HM Revenue and Customs (HMRC) online. You’ll get an email from HMRC confirming your application. At present, you can backdate your claim to include any tax year since 5th April 2015 that you were eligible for Marriage Allowance. However, from 6th April 2020 the ability to claim the allowance for the earliest year, 2015/16, will be lost since claims may only be made for the current tax year and the four previous tax years.

If you’d like to discuss your personal tax affairs in more detail, please call 0203 538 2832 or complete our simple online enquiry form

Are you able to prevent receiving penalties for missing the tax return deadline?

I missed the 31st January deadline for filing my self-assessment tax return – can I stop HM Revenue and Customs (HMRC) from issuing any penalties?There are some circumstances when HMRC may consider waiving them.

If you believe you’re not required to submit a self-assessment tax return, you should talk to HMRC and ask for it to be withdrawn. If HMRC agrees, you won’t have to file a return and any penalties issued should be cancelled.The penalties escalate the longer the delay so you should file your tax return as quickly as possible.

Once you submit a late tax return, you can expect to receive a late filing penalty. If you have a good reason for the delay in filing your return, you may be able to appeal against the penalty.These are known as ‘reasonable excuses’ and typically mean that something unexpected or outside your control prevented you from meeting a tax obligation.

HMRC give these examples of Reasonable Excuses on its website:

The death of your partner or another close relative shortly before the tax return or payment deadline
You had an unexpected stay in hospital that prevented you from managing your tax affairs
You had a serious or life-threatening illness
A fire, flood or theft prevented you from completing your tax return

If you’re struggling to keep on top of your tax affairs, call TaxAdvisor Uk on 0203 538 1276 or complete our contact form here and they will be happy to take care of them on your behalf.

What is an overdrawn directors loan account?

I have an overdrawn directors loan account, what are the consequences of this?If you have an overdrawn loan account at the period end, S455 tax may be due depending on when it is repaid.

S455 tax is just a tax charge that is charged at a rate of 32.5% of the outstanding loan at the period end. It is payable by the company and is due to be paid alongside the corporation tax payment – nine months and one day after the end of the accounting period.If the loan is repaid within nine months of the period end no S455 tax charge will apply.

If the loan is still outstanding nine months after the period end S455 tax is due. This tax can only be claimed nine months and one day after the end of the accounting period in which the loan is repaid.There could also be income tax and national insurance complications for both you and your company if the loan balance is greater than £10,000 as this will need to be reported on a P11D if interest is not paid to the company at HMRC’s official rate which is currently 2.5%.

The company will pay Class 1A NIC at 13.8% on the value of the benefit and the benefit will need to be included on your Self-Assessment tax return.

Please note that S455 tax is due on whatever the overdrawn balance is if it remains unpaid nine months after the period end and is not restricted to loans over £10,000.

This can be a complex area, so please do get in touch with us today. We can help you understand your obligations if you find yourself in this situation. Please contact us on 0203 538 2832 or use our simple online contact form to arrange a free initial consultation.

How does the Construction Industry Scheme (CIS) work?

CIS (short for “the Construction Industry Scheme“) was set up by HMRC to collect income tax throughout the year from people working in the construction industry.

Construction companies deduct tax on behalf of their workers (subcontractors) and send the money to HMRC as tax payments:

20% for workers who have registered themselves as subcontractors with HMRC
30% for those who have not.

Note that CIS only applies if you work in construction as a subcontractor and you have registered for CIS – here is how you do it.

Example of how CIS works:

ABC Ltd hires Peter Carpenter on their site as a subcontractor. Every month Peter is owed £1,500 pounds for his work.

Every month the company pays £300 (20% of the £1,500) to HMRC as Peter’s taxes
The company sends a CIS statement or payslipto Peter as proof
The company pays the remaining £1,200 to Peter as payment for his work.

How do CIS refunds work?

In the example above, Peter’s annual income was £18,000 (£1,500 * 12).

Peter technically owes HMRC £2,370.20 (£1,230 Income tax + £1,015 national insurance).

However, throughout the year ABC Ltd paid £3,600 in taxes on Peter’s behalf!

Peter is now due a refund.

I'm a director but not paying any National Insurance, why?

I am a director of my own limited company and I am taking a salary of £12,500 per annum paid in equal monthly instalments. I know this is above the level at which you start paying National Insurance, but I am not having anything deducted and I don’t know why.

All directors, regardless of their actual pay frequency, have an annual earnings period. This means that the class 1 contributions for the year are calculated by reference to the annual National Insurance Contribution (NIC) thresholds, rather than by reference to those for the pay interval.

There are two methods that can be used to work out a director’s class 1 NIC: the annual earnings period basis (also known as the default method) or the alternative basis. The result is the same: the director and employer will pay the same amount of NIC regardless of the method used, but the pattern of deductions will differ.

Can I claim the VAT back on fuel for my car?

Can I reclaim the VAT I have paid on the fuel I use in my car and if so, can I claim it all?If the car is only used for business purposes, then all the input VAT can be claimed (subject to any restrictions for non-taxable supplies).

If you use a business car for personal use then you should be restricting the amount of input VAT you claim on the fuel you purchase to just the business element. There are several ways you could do that.

One of the simplest approaches is to use the fuel scale charge. In this scenario you would account for the VAT on your motor running expenses in your records as normal, and then apply the fuel scale charge on your VAT return. HMRC provide you with the fuel scale charge figures which are dependent on the CO2 emissions of the car. The fuel scale charge is effectively a claw-back and used to restrict your input VAT claim. The rates change on the 1st May every year and can be found here.

Accounting for the VAT on road fuel can be an administrative hassle and if the amount of business miles is low the fuel scale charge may be more than the input VAT claim and therefore it would not make sense to adopt the fuel scale charge method.

An alternative would be to keep detailed mileage records so you know exactly what the percentage is for business and personal use and then you can claim that percentage of input VAT. Detailed records would need to be kept.

If the fuel scale charge doesn’t work for you and you’re not keen on keeping detailed mileage records, the only other alternative would be not to recover any VAT on your fuel costs. You could still recover VAT on your vehicle repair costs.

HMRC provide guidance on input VAT and motor expenses in VAT Notice 700/64.

Claiming motoring expenses and VAT is a complex area. If you would like more information on claiming VAT on fuel or VAT in general please feel free to call us on 0203 538 2832 or use our simple online contact form.

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