Tips to help you

As a taxpayer we all hate paying taxes don’t we? But understanding our tax system, HMRCs collection processes, what taxes are due for what and when is a minefield! We’d always recommend having an accountant to help navigate this with you; one small error could cost you dearly as far as HMRC are concerned.

There are several different types of tax, all of which depend on whether you may be a sole trader, partnership or limited company or even a PLC. We have outlined below the main types of tax and relevant thresholds as of 2017/18 and 2018/19.

Tax itself is the main source of the UK governments’ income and we are one of the heaviest taxed countries in the world with tax on everything we buy, everything we earn and even everything we smoke or drink nowadays.

Income Tax – The most common form of tax

All individuals get an allowance per year, which can be earned without having to pay any form of tax on it. Once you are over this threshold then tax applies to your earnings whether you are employed or self-employed in any form. The personal allowance on your earnings has changed over the years from as little as being able to earn £2,605 back in 1988/89 to £12,500 2019/20.

When you’re self-employed you pay Income Tax on your profits – not your total income. So by deducting your business expenses from your total income you can see where you stand.

PAYE – As an Employer

The Pay As You Earn (PAYE) system is a method of paying Income Tax and National Insurance contributions, when employed by a company directly. Your employer deducts tax and National Insurance contributions from your wages or occupational pension before paying you your wages or pension.

Taxation for Employers

If your company is going to employ individuals, one of the tax payments of which you should be aware of is PAYE. PAYE requires a company which employs individuals to deduct Income Tax under the ‘pay as you earn’ system from all payments of salary made to those individuals.

National Insurance Contributions (“NICs”) are also payable both by the employee and the employer. The employee’s contribution is deducted, by the employer, from their salary.

The employer’s contribution is an additional cost to the business. Currently an employee’s NIC is charged at a rate of 12% or 2% depending on level of earnings, and employers’ NICs are charged at the rate of 13.8% of the gross salary paid to the employee.

As soon as your company employs any individuals it should inform HMRC and establish a payroll system (this can be outsourced to a payroll services provider).

National Insurance (NI)

National Insurance is a tax on earnings and self-employed profits. Your National Insurance contributions are paid into a fund, from which some state benefits are paid. This includes the state pension, statutory sick pay, maternity leave, or entitlement to additional unemployment benefits. Anyone 16 years old and above are mandated to pay National Insurance provided the employee earns more than £162 a week or the individual is self-employed and makes a profit of £6,205 or more annually

VAT (Value Added Tax)

VAT was introduced in 1973 and it’s the third largest source of our governments income. VAT is levied on most goods and services provided by registered businesses in the UK and some goods and services imported from outside the EU (ignoring Brexit for a moment there!) Since 2011 the default rate of VAT stands at 20%. Some goods and services are subject to VAT at a reduced rate of 5% (for example domestic fuel) or in some instances 0% (such as most food and children’s clothing). The VAT threshold has been frozen at 20% through to 2019/20 – Its estimated that this will raise approximately £26 million p/year for HMRC in collected taxes.

VAT is something you will need to cater for, once you hit what is called the VAT threshold – It’s always best, again, to have an accountant involved as you’ll need to understand your forecasted income to ensure to register for VAT in a timely fashion. All businesses which have an annual turnover of more than the current VAT threshold – currently £85,000 – must register for VAT and complete a quarterly VAT return. In some instances HMRC may request monthly VAT returns if you are in arrears and if it helps simplify a collection process on a business.

How VAT works

Once your business is VAT-registered you must do three things:

1. You must charge VAT – currently 20% – on the goods or services you sell to customers and other businesses, 
2. you must pay VAT on the goods and services you buy from other businesses,
3. and you must file a VAT return every quarter to HMRC.

The idea is that the VAT you charge and the VAT you pay roughly balances – any difference is sorted out via your VAT tax return, with you either paying HMRC the amount you owe them or receiving a refund for the amount they owe you. Its sounds simple but we all know errors can occur and delays in HMRC refunding VAT can cause issues with a businesses cash flow, causing other debts to escalate. Our team will happily chat through options, should you be faced with any debt issues with HMRC or be encountering issues on VAT. You can contact us if you wish to discuss matters further.

The VAT threshold may change once a year when the government announces the Budget for the coming year – usually in March or April – so ensure you are always charging the correct amount.

The practicalities of VAT

When adding it on to invoices you should show the VAT amount separately, listing the cost of the goods or services before VAT, the cost of VAT and what rate it was charged at, and the total sum owed.

There are three different rates of VAT that can be charged – standard rate (currently 20%), reduced rate (currently 5%) and zero rate (0%). Some goods and services are also exempt from VAT, such as antiques and education services. You must charge VAT on the full sale price, even if you accept goods in part exchange or barter instead of money.

There are also specific VAT rules that apply to certain trades and industries – the motor trade for example.

You can register to pay VAT online at the Government Gateway website, www.gateway.gov.uk.

Corporation Tax

Simply put it is a tax levied on companies’ profits for UK limited companies. It’s a little like an Income Tax for companies without the benefit of a personal allowance (as described above for Income Tax). If you’re a Limited company, as soon as you make profits you’ll start to pay Corporation Tax, which your accountant will produce via returns.

In the early days the percentage you paid was dependant on how much profit you made, the rate now is 19%. It is also forecast that for 2020/21 Corporation Tax may be reduced to 17%.

Corporation Tax rules revolve around your companies accounting periods, this can either be checked by yourself via HMRCs online services or through your accountant/bookkeeper. Most companies run a 12 month accounting period, inline with statements and annual accounts being produced. Corporation Tax filing deadlines differ than other taxes, normally this is paid prior to filing your company tax returns and the date important to this depends on your own accounting periods. The deadline for paying is 9 months and one day after the end of your accounting period for your previous year.

One of the first things a small business must do when setting up is register for Corporation Tax, which you can do on the .Gov.uk website with HMRC. This needs to be done within three months of starting to trade.

If you would like to discuss any of the above taxes in further detail or you think we can help you with a Time to Pay Arrangement when you owe taxes to HMRC, then do contact us. We are a very friendly approachable team who look forward to helping as many people as we can. Head over to our website – www.taxdebtshelpandadvice.com and start a live chat or call 0800 448 0293 today.

Are you looking for help with tax problems?

The advice around this topic can be in abundance but not always helpful, especially if you are trying to navigate the ‘mine field’ that is HMRC. Our article is here to help give you some tips so the need to look for help with tax problems in any variety could be minimised.

Tax issues take many forms and can be as simple as an enquiry about a tax related matter or a return due in to more complicated issues surrounding tax arrears.

HMRC arrears play an ever increasing part in today’s larger debt problems across the UK. With many banks and lenders offering large overdrafts and extending credit facilities to more individuals and businesses than ever, it’s perhaps not difficult to see why.

Published in 2018, HMRC noted that the tax gap was £33 billion.

What is the tax gap?

The ‘tax gap’ is the difference between the amount of tax that should, in theory, be collected by HMRC, and what is actually collected. So not much then!

The old adage that ‘prevention is better than cure’ has never been truer than in the context of HMRC and tax arrears. We are here to help with tax problems and have put together our tips for taxpayers and businesses to avoid owing arrears to the tax man.

Register for tax: Many newly Self-Employed or those with second incomes from other sources are aware they need to register with HM Revenue and Customs, yet fail to do this. Some may think this helps defer a tax bill, let’s them get some income in firstly, before worrying about paying taxes. However, this can result in penalties, interest and charges and in more serious instances of tax avoidance persecution.

Keep up-to-date: If you receive a tax return from HMRC, deal with it on time. Apart from the fact you can incur penalties and surcharges for late filings, HMRC can also decide how much tax an individual should pay – This will be an estimated bill unless you get your return in, preferably on time.

One form of help with tax problems is a Time to Pay Arrangement – A monthly re-payment plan with HMRC. However, if there is tax owing from earlier years, the Revenue will not generally consider allowing a Time to Pay Arrangement unless all outstanding tax returns have been submitted.

Complete paperwork on time: There are time limits set with HMRC not only for the filing of individual or business based returns but also for notifications about changes, make sure you are aware of what applies to you and your business (dependant on how it is set up to trade).

If you are newly Self-Employed you need to register with HMRC within 3 months of the business commencing trading. As a rule, the tax man waits for no one.

Check all paperwork: HMRC may be asking you to pay a tax bill, it does not always mean that this amount is correct. Always check any calculations and statements of account against your tax returns and check against any payments you have made. In some instances, penalties and charges could be reduced owing to errors – Don’t be afraid to query anything with HMRC.

Save and plan for your next bill: This may sound obvious but some people are too tempted to spend the money they work hard to make, sometimes a little more too. However, even something as easy as opening a separate bank account for your upcoming tax and saving on a regular basis could help ease the pain of that next tax bill.

Don’t forget too about National Insurance payments – If you have an accountant, they can help or basic information is available online https://www.gov.uk/self-employed-national-insurance-rates/

Don’t bury your head in the sand: Escalating debts can have a paralysing effect on some individuals and businesses. So many clients come to us looking for help with tax problems after ‘burying their head in the sand.’

It may be tempting to ignore the issue and hope that it goes away. Of course, life isn’t that simple. Arrears to HMRC can quickly escalate as charges and penalties will be applied, Meaning that a small amount originally owed, once ignored, can become unmanageable.

If in doubt or in difficulties – Get help: Preparing and filing returns can be daunting. Sometimes taxpayers are reluctant to seek help owing to concerns over costs of hiring a ‘professional’. Trying to save that cost is probably false economy. The cost of ‘getting it wrong’ could be a huge, unexpected bill from HMRC.

Many accountants and professional firms offer fixed rates nowadays and they will work with you to build a support package that suits you and your business. There are also free organisations out there that can help with tax problems and can advise you, such as TaxAid and The Low Incomes Tax Reform Group.

If you can’t pay a tax bill – Seek help: If you do find that you genuinely need help with tax problems and can’t pay a tax bill in full and on time, don’t wait for HMRC to start chasing you. It is better to confront the issue head on.

If the problem is tackled quickly and arrangements agreed upon, surcharges could be suspended. HMRC are more likely to be receptive and sympathetic towards temporary cash flow issues if you try and resolve the problem and keep the lines of communication open. You may feel intimidated or lack the confidence to deal directly with HMRC, if so, seek help as soon as possible. There are professionals in this area that could help you negotiate with HMRC.

There is help at hand – You are not on your own.

Many taxpayers are in the same situation when they end up in arrears with HMRC. Everyone’s goal is to be able to afford to pay all their bills on time and in full but sometimes things don’t go to plan. Surfing the ‘world wide web’ can be informative and HMRC’s own website can be of help too.

https://www.gov.uk/government/organisations/hm-revenue-customs

There are also specialised companies out there such as Tax debts Help and Advice who are specifically set up to negotiate the ‘mine field’ that is HMRC. At Tax Debts Help and Advice, you will find the team very friendly and approachable, easy to talk with and understanding. So if you need any help with tax problems, call 0800 448 0293 or visit our website to start a live chat www.taxdebtshelpandadvice.com or follow the link to our contact page.

Understanding how to deal with tax arrears can be stressful and we are here to help alleviate that for you. Our tax arrears tips are here as a guideline on what to do when you face difficulties with HMRC and tax arrears. For many taxpayers, a dramatic change in circumstances can cause financial difficulties. Problems can occur because of challenges faced by the business, for instance a drop off in trade combined with a lack of working capital, all of which can cause cash flow issues which need to be overcome in order for trade to continue.

Since the onset of the recession we have all had to look at our cash books and balances a lot closer and unfortunately in a lot of instances, money set aside for HMRC and tax liabilities has had to be used to keep individuals and businesses trading. This leaves HMRC chasing for late and overdue tax bills.

So what happens when you need to contact HMRC? – Our top 10 tax arrears tips.

We all know dealing with HMRC can be frustrating and a time consuming activity.

Here at Tax Debts Help and Advice (www.taxdebtshelpandadvice.com) we specialise in helping those that owe HMRC and can’t pay the debts back in full and on time. We are set up to negotiate the ‘mine field’ that is HMRC specifically for our clients. Our tax arrears tips hopefully guide you through this difficult time, give you some advice and remember we are here to help, our friendly team don’t judge, we will listen and be on hand when you need us most.

1. Get comfortable and be patient – Getting through to the right person to begin with can be an issue. There are several Self-Assessment helplines that can be used to make initial contact. Our advice is to start there if you don’t have any specific contact information for the department handling your debt. The main Self-Assessment helpline number is 0300 200 3311.
2. Consider approaching a local office – if there still is one – HMRC do not promote this line of contact but discussing issues face to face with them can be a lot easier than a generic agent over the phone.
3. Always try and have all information to hand – We understand this can be difficult but if you owe HMRC you need to be able to explain what has happened to you and your business and why you are talking to them now.
4. Be prepared to go through all your incomings and outgoings – Make sure you have clear records of income and expenditure. HMRC can look to help with a Time to Pay Arrangement, which is a monthly re-payment arrangement for tax. This can be subject to criteria that not everyone can afford to meet. If you find you cannot meet the payment HMRC are asking of you, we could help, please do contact us as soon as possible.
5. Don’t be pushed in to a decision over the phone that you are financially concerned about meeting – You do have time with HMRC to work things out, just ensure you keep the lines of communication open.
6. Always document who you talk to and when – Names and department numbers.
7. Keep copies of any documentation you send to HMRC and ensure you keep good records of anything received from them, concerning the situation you are discussing.
8. Ask for conformation of everything in writing – Again, record keeping is key to surviving dealing with HMRC as queries can be passed through so many different departments.
9. Be prepared to have to repeat yourself and resend documentation over and over – Our advice is always double check when you have someone on the other end of the phone, where any paperwork needs to go and who it needs addressing to.
10. Don’t get rattled – It can be frustrating to get someone just to ‘hear you’. HMRC are there to help but getting aggravated will only cause them to stop listening, Take your time with the situation and try to keep calm. If you continue to have issues with HMRC, there are external organisations that can help and give you further advice. Don’t hesitate to contact us if you hit a ‘wall’ with them.

For more tax arrears tips and helpful articles, visit our website or if you think we can further assist you or would just like to talk about your tax debt, then give our friendly team a call on 0800 448 0293, start a live chat on our website or email enquiries@taxdebtshelpandadvice.com