SBSAdmin, Author at Simply Balanced Solutions

Motor expenses you can claim if you are self-employed

SBSAdmin — Wed, 09 Apr 2025 08:07:51 +0000

If you’re self-employed and use your own car to make business journeys, then you can claim expenses to help reduce your tax bill. Unfortunately like a lot of things to do with HMRC, it can be complicated. But don’t worry, we’re here to help! Let’s get started.

When are motor expenses classified as “allowable expenses”?

An expense is allowed as a deduction only if it is “wholly and exclusively” for business purposes. This means a journey to a temporary work place (e.g., to a client’s premises) can be claimed, but it doesn’t include: • Normal travel from home to work • Private travel • Mixed journeys: e.g., if you go to the supermarket for your weekly shop and happen to pick up some stationery for work, you can’t claim this.

Calculating motor expenses

There are two ways of working out motor expenses if you’re self-employed (assuming that you own your car): 1) The Mileage Method: A fixed-rate for each mile travelled on business – these are fixed rates set by HMRC that you claim to cover all expenses related to your vehicle. 2) The Actual Cost Method: Actual expenses using detailed records – this allows you to claim the proportion of all motor expenses that relate to your business. Let’s take a look at each in more detail.

The mileage method

You can only use the mileage method if you meet the following criteria: • You don’t claim any other costs for running that car (e.g., insurance, MOT, servicing etc). • You use HMRC’s AMAP (Approved Mileage Allowance payments) rate that applies to the vehicle you are claiming for. This could be a car, van or motorbike. You can’t claim a penny more. • Once you have decided to use this method, you must carry on until you change car.

The full-cost method

If you’re not eligible to use the mileage method, then you can use the alternative full-cost method. To do this, you must keep a record of everything you spend on your vehicle through the year (e.g., petrol, tyres, MOT etc), and work out the proportion of the costs that relate to the business use. You may also be able to claim capital allowances on the business proportion of the initial cost of the vehicle. How do I work out the business proportion? Keep a log of all journeys. There are lots of apps you can use to make it easier – QuickBooks Online has one built in! When it’s time to do your accounts, work out how many of the miles were business related, and this will give you the proportion of your total motor expenses that you can claim. For example, in January you drove 600 miles and 300 of them were for business. You can claim 50% of any vehicle expenses and petrol that month. The mileage method sounds so much easier, why wouldn’t I use that? The mileage rates from HRMC are one size fits all, so if you have a gas guzzling vehicle that’s a bit older and needs repairs, then you might be better to use the full-cost method.

Top tip:

Remember to keep mileage records even if you don’t think you do many miles – those trips to the post office can add up, and its worth claiming them to reduce your tax bill. Need advice on the best method for you? Get in touch! We’re here to help.

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Payment on account: a guide for the self-employed

SBSAdmin — Wed, 09 Apr 2025 08:06:43 +0000

Self-assessments and payment on account can cause a lot of angst if you’re self-employed. The annual rush to get your tax return submitted on time coupled with unexpected tax bills is far from fun. Payment on account is a commonly misunderstood part of the self-assessment process. It was developed by HMRC to help self-employed people spread out their tax bill. (This is HMRC trying to be helpful, although it may not feel like it the first time it happens to you!). Payments on account are tax payments made twice yearly by self-employed individuals so that you don’t have to find it all in one go for the 31st January.

Does payment on account apply to me?

If you owe more than £1,000 in tax and less than 80% of your income tax is collected at source (e.g., through PAYE), then HMRC will require you to make payments on account. For example, if your tax bill for the 2018 to 2019 tax year was £2,000, then you will pay two instalments of £1,000.

When do I need to pay?

You make two payments each year: • By 31st January: during the tax year in question • By 31st July: after the tax year end By paying in two instalments, you spread the cost of your tax bill – a bit like paying monthly if you are an employee.

How does HMRC know how much I need to pay?

Payments on account are calculated based on your previous year’s tax bill. If you owed £2,000 for the 2018 – 2019 tax year, you will need to make two payments on account of £1,000 for the 2019 – 2020 tax year. If you know you are going to pay too much in tax (for example, you are winding your business down), you can apply to HMRC to have the payments reduced. Though be warned -if you reduce the payments too much, then you could be charged interest and penalties by HMRC. If it turns out that you should have paid more tax in the year, then you will need to make a balancing payment on 31st January and future payments on account will be adjusted. For example, if it turns out that your tax bill for the year is £2,500 and you have already paid £2,000, a balancing payment of £500 will be due on 31st January. And your future payments on account will then be increased to £1,250.

Making payments on account for the first time

This can be a nasty surprise if you haven’t prepared for it as you will be expected to pay all the tax for the previous tax year, and the first payment on account all in one go. Using the figures in the above example, that would mean a bill of £3,000 (£2,000 for 2018/2019 and £1,000 payment on account for 2019/2020). It’s one reason to do your tax return as soon as possible so you have time to save for the bill if you hadn’t expected it.

Top tips:

If you complete your tax return early, you won’t pay tax any earlier but you will know how much you have to pay so you can budget. And, if you are due a refund you will receive this earlier. If you can’t afford your bill, the sooner you contact HMRC the better. If you owe less than £10,000, you might be able to set up a Time to Pay Arrangement online. This lets you pay your self-assessment tax bill in instalments. Keep an eye on your profit through the year and try to put money aside to pay your tax bill. A good rule of thumb is saving 20% of profit then you should have more than enough to pay your bill. If it turns out you owe less, you will have a nice little bonus to spend. Need help completing your tax return or understanding payments on account? Get in touch. We’re here to help.

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5 benefits of cloud accounting software for business

SBSAdmin — Wed, 09 Apr 2025 08:04:24 +0000

More and more business owners are turning to cloud accounting software to manage their business finances.

Cutting edge technology is perhaps not what first springs to mind when you think of bookkeepers, we do tend to be a cautious bunch. But most of us are now embracing the power of the cloud when it comes to accounts. It’s simply brilliant.

If you want your business to work smarter and faster, cloud accounting offers a host of benefits to help you work with greater efficiency.

5 benefits of cloud accounting

1. You can access it from anywhere Cloud accounting software means that you can log into your business accounts anywhere with an internet connection. No more worrying about keeping spreadsheets up to date! You can raise invoices on the go and receive your hard-earned cash more quickly.

2. Keep track of your numbers in real time Most banks will link to your accounting software, giving you a real time view of your business finances and access to a variety of useful reports. No more waiting for bank statements to arrive.

3. Easy collaboration with your bookkeeper With cloud accounting, your bookkeeper can log in and access your business finances at any time – helping you to work together with ease. As well as saving time, there’ll be no more sending spreadsheets or back-ups – your bookkeeper will have everything they need readily to hand.

4. Updated and secure With cloud accounting software, your data is saved on a secure cloud server and regularly backed up to give you complete peace of mind. There’s no need to worry about your data being hacked or compromised – it’s all taken care of for you.

5. Save time with automation Cloud accounting software can be linked to a number of handy apps to save you time. One of our favourites is AutoEntry – you can just snap receipts while you are out and about, your bookkeeper can then process them for you. No more rummaging around looking for paperwork.

QuickBooks or Xero?

We’re often asked which cloud accounting software is best. At Simply Balanced Solutions, we like working with QuickBooks and Xero but the choice is yours. Each has its pros and cons. We like to compare it to whether you’re an Apple or Samsung person – the difference is often simply down to personal preference.

Top Tips:

Cloud accounting software has many brilliant benefits, but like anything it pays to do your research. Here’s a few little reminders we like to share with our clients:

• Cloud accountancy packages have a monthly fee which can add up to more than a one-off fee • If the wi-fi goes down, you can’t access your accounts • Relies on all those accessing it to have secure passwords • There are lots of different packages for each software – don’t pay for features you won’t use (you can always upgrade if you need it in the future)

How can we help you?

Our friendly team of QuickBooks and Xero certified advisers can help you get the most from either software package. We can show you product demos, plus share discount codes to save you money. Or, if you already use accounting software and would like to get more from your current package, book a training session and we’ll get you up and running.

Sound good?

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Reverse Charge VAT for the Construction industry

SBSAdmin — Wed, 09 Apr 2025 08:03:12 +0000

From 1st March 2021 VAT is changing within the construction industry It has been brought in to cut down on VAT fraud in the construction sector.

Who does it affect?

The new rules apply to contractors and subcontractors within the Construction Industry Scheme (CIS) who are VAT registered. Under the new rules when a subcontractor supplies services that fall within CIS to a contractor, who is not the end-user, the sub-contractor will no longer charge VAT. Instead, it will be the contractor’s responsibility to declare the input and output VAT on their VAT return. VAT will only be charged to and paid by the end-user customer. If you are not VAT registered it doesn’t apply to you! What do you need to do?

Subcontractors

If you provide services that fall under CIS, you will need to: Get a confirmation that your customer is an end-user, if they are then you will invoice with VAT as normal. If customer is not an end-user then you will need confirmation from them and the reverse charge will apply. Both QuickBooks and Xero have specific VAT codes for this so make sure you select them. From 1st of March you will need to inform customers that the reverse charge VAT has been applied and that they are responsible for declaring the VAT under the reverse charge mechanism. An example of wording that could be used on the invoice is: Customer to account to HMRC for the reverse charge output tax on the VAT exclusive price of items marked ‘reverse charge’ at the relevant VAT rate as shown above. An example invoice can be found here Sample invoice You could set up a new Invoice template in your accounts software so the wording automatically appears.

Contractors

If you buy services that fall within CIS, you will need to speak to your subcontractors to confirm that you are a contractor and not an end user and therefore they will no longer charge you VAT. Your subcontractors VAT will now need to be included on your VAT return – it goes in the sales and purchase VAT boxes so cancel each other out on the return so it won’t cost you anything! If we do your bookkeeping, we will deal with all of this for you. Just submit your paperwork as normal. HMRC have produced useful flow charts to help decide if the reverse charge applies to a transaction: Subcontractor flowchart Contractor Flowchart Links to detailed information the guidance from HMRC can be found below, it is quite long so be warned. How to Use Domestic reverse charge Domestic Reverse Charge Procedure (VAT notice 735) As always we are here to help so if you have any questions please get in touch.

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VAT Deferred due to Covid-19

SBSAdmin — Wed, 09 Apr 2025 07:51:32 +0000

Did you take advantage of the option to defer paying VAT as part of the Government support to businesses during the Coronavirus Crisis? At the time you didn’t have to do anything, you just didn’t have to pay the VAT due until March 2021. As we are now approaching this deadline HMRC has published guidance on how and when to pay including the option of paying by installments.

If you deferred VAT payments due between 20th March and 30th June 2020 and still have payments to make you have 3 options:

pay the deferred VAT in full, on or before 31st March 2021
Join the VAT deferral new payment scheme – the online service is open between 23rd February and 21st June 2021
contact HMRC on 0800 024 1222 by 30th June if you need extra help to pay

You may be charged interest or a penalty if you don’t pay the deferred VAT amount in full by 31st March 2021 or opt into the new payment scheme by 21st June 2021.

The VAT deferral period covered vat returns ending:

February 2020
March 2020
April 2020
May 2020 – for payment on account customers and certain non-standard tax periods only, in addition to the above periods.

If you want to join the new scheme, you will be able to do so from 23rd February up to and including 21st June 2021. If you are on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, you will be invited to join the new payment scheme later in March 2021.

To use the online service to sign up to the new payment scheme you must join the scheme yourself, agents cannot do this for you. You have to pay the first installment when you join, and you must be up to date with all other subsequent returns.

The number of installments available is determined by when you join the scheme (the maximum number of installments below includes the first payment that you will make when you join the scheme):

Before you join the scheme, you will need to:

create your own Government Gateway account if you don’t already have one.
submit any outstanding VAT returns from the last 4 years – otherwise, you will not be able to join the scheme
correct errors on your VAT returns as soon as possible
make sure you know how you much you owe, including the amount you originally deferred and how much you may have already paid.

You will not be able to use the online service if:

you do not have a UK bank account
cannot pay by Direct Debit
have dual signatories on your account

The full guidance from HMRC can be read here

Sadly, we can’t set up the deferral payments for you, but we can help you figure out how much you owe.

If you have any questions, please don’t hesitate to get in touch, as always we are here to help!

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Christmas parties and gifts – what can I claim?

SBSAdmin — Wed, 09 Apr 2025 07:50:06 +0000

It’s that time of year again – Christmas! Every year we get asked questions about the rules for entertaining & gifts for clients and staff so that you stay on the right side of HMRC. As always if you any questions please get in touch before you buy gifts etc. that way we can help prevent any nasty surprises with a gift becoming taxable or disallowed. Staff Christmas parties Its been a long year everyone deserves a night out and staff parties are often seen as a good way of rewarding staff and celebrating. As always there are rules you need to remember Christmas parties can be a great tax-free benefit for employees as long as you follow the rules . . . .

The party must be open to all employees, or to all at a particular location.
The total cost of all staff parties or functions within a year must not exceed £150 per head. So if you have a summer BBQ and a Christmas party the total you spend for both must be £150 or less. If you spend £80 on the Xmas party and £80 on the summer BBQ then one will be taxable.

Key points to remember:

The cost per head includes partners or guests of employees attending so be sure to include in the head count when calculating – this means you can spend more!
The £150 includes VAT, as well as any costs such as transport or accommodation provided
If you go over £150 then it becomes taxable, and your employee will pay tax on it through P11ds
If you are VAT registered, we will claim the VAT back

To help us out let us know how many attend your party so we can check if it meets the tax free criteria. Client entertaining Sadly client entertaining is never an allowable deduction for tax purposes even though it feels like it should be as everyone does it – VAT cannot be reclaimed. Remember that if clients are invited to the Christmas party, you cannot reclaim all the VAT incurred and must apportion the costs between the members of staff and clients. Gifts and rewards Everyone likes to receive presents and it’s a nice way to say thank you to staff and customers. Client or customer gifts Business gifts are allowable as a tax deduction if they meet the following criteria::

The total cost of gifts to any one individual over a 12-month period does not exceed £50.
The gift carries a clear advert for the business.
The gift is not food, drink, tobacco, or exchangeable vouchers.

You can still pay for these items through the business, but we won’t claim the VAT back and they will be disallowed when your corporation tax is being calculated. So, feel free to buy gifts for clients but remember the rules. Christmas bonus for staff If you are giving staff cash gifts and bonuses, then they are treated as normal pay and are subject to tax and NI through the payroll as if they were additional salary. Gifts to staff Gifts are in many cases can be treated as exempt if they cost less than £50. This is on the grounds that the cash equivalent of the benefit taxable on the employee is so trivial that it would not be worth pursuing. Using the trivial benefit exemption gifts can be provided to employees as often as you like during the year provided…

The cost of providing the gift does not exceed £50 per benefit (or average of £50 per employee if provided to a group of employees and it is not possible to calculate the exact cost per person)
The gift is not in reward for service or performance
The gift is not cash or cash voucher – this is confusing as it can be a gift voucher e.g. John Lewis or Amazon

Directors Directors can benefit from the trivial benefit exemption but there is a limit of £300 per director per year. It must be paid for direct from the business account not reimbursed. Anything over these limits will need to be declared on a P11d and staff will be taxed on them which will take away some of the goodwill the gift is meant to create. As always if you need more advice or have any questions please get in touch alison@simplybalancedsolutions.co.uk

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Increases to minimum wage rates 2023

SBSAdmin — Wed, 09 Apr 2025 07:47:06 +0000

As we near the end of the tax year, it’s important that employers (and employees) are aware of the increases in minimum wage and benefits that come into effect from 1 April 2023.

National Minimum Wage (NMW)

NMW is the minimum hourly rate that employers must pay to workers aged between 16 & 222 – it applies to full-time, part-time, casual and agency workers. It also applies to some apprentices.

If apprentices are aged under 19 or 19 or over and in the first year of their apprenticeship, then the apprenticeship rate applies instead.

The national Living wage (NLW) is the minimum hourly rate that must be paid to workers aged over 23. The age this applies is dropping to 21 from April 2024.

The rates which will apply from 1 April 2023 are as follows:

Statutory pay

Some of the rates of stator pay are also increasing.

For example, the statutory sick pay rate will increase to £109.40 per week, up from £99.35. Adoption, maternity, paternity, shared parental, and parental bereavement pay will increase to £172.48 per week, up from £156.66.

These increases are good news for employees, but employers need to prepare for these increased costs at a time when all costs are rising.

If you are a client of ours, we will automatically apply the increased rates.

If you need help with running payroll, get in touch.

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