We are looking to recruit a confident, self-motivated and ambitious trainee to join our team at Bainbridge Lewis. A sense of humour is also a must!

We are a small but growing business and the right candidate will gain a real insight into working with local small businesses and get some real hands on experience. We are looking for someone who will stay with us as we grow and become an important part of our team.

Initially this will be for a 4 day, 30 hour week with one of those days spent at college studying. The salary for the role is £100-£120 per week.

For more details and to apply please click here to go to the Apprenticeships website

The Revenue appear to be offering another helping hand by announcing this month they have been working with software developers to create free mobile phone applications that will help you keep track of your business transactions.

The idea behind this is you log all your income and expenses on your mobile phone on the go which will have the following benefits:

• Help you with keeping track of receipts to back up your expenditure as you can store photos of your receipts. This will also mean you don’t have to worry about losing receipts as they will all be stored electronically on your phone.
• The app will be able to tell you how much profit your business is making and how much your tax bill is likely to be. This prevents any nasty surprises when you come to prepare your personal tax return.

If you think you would find this useful for your business see the Revenue website for details of the different apps available.

A cautionary word of warning though, make sure that you can back up the information loaded onto the app. Imagine if you have taken photos of all your receipts and thrown away the originals and then you drop your smart phone in a puddle, not sure HMRC would be too pleased with this excuse.

Bainbridge Lewis is a small accountancy practice based in Brighton & Hove that specialises in working with small and start-up companies. If you have any questions please contact us or even request a quote.

So today is the last day of the tax year and you’ve probably been bombarded with reminders to put money in your ISA, your pension and buy some new equipment so hopefully you’ve managed to do a little tax planning.

But what can we look forward to from tomorrow?

Yes I know I hear a resounding reply of ‘a 4 day weekend’ and I’m looking forward to that myself but in terms of tax…..

1. If you are a director of your own company, paying yourself a small salary below the tax and national insurance level, don’t forget to increase it to £624 per month.
2. Put some more money in your ISA – you have a whole new allowance and the sooner you get it in there the more interest it will earn.
3. If you have a spouse or partner who isn’t earning, think about whether you can move any income onto them, perhaps you have rental property income that could be moved.
4. If you are a director claiming the flat rate of £3 a week towards use of home don’t get too excited but you can now claim £4 a week.
5. Get your tax return in early, if you are self-employed making payments on account and your profits are lower than the previous year you can reduce the amount due in July. If you’re not self-employed get it in early anyway, gives you more time to save for the tax bill.

Have a great Easter and definitely eat too much chocolate!

If you need any assistance with any of the above contact Gail or Carol on 01273 737307 or contact us here and we be pleased to meet up for a coffee and a chat.

1. The personal allowance will be increased to £9,205 from April 2013. This is good news for business owners as not only does it decrease your personal tax bill but it also means your employees will get to take home more of what you pay them. This should result in most people having a £220 lower tax bill in 13/14.

2. From April 2013 if you have an unincorporated business with turnover under £77k you can produce your accounts on a cash basis for tax purposes. The idea behind this is that it reduces the administration costs for small business which can only be a good thing.

3. If you have children you will still be able to claim child benefits as long as no one in your household earns over £50k. The benefit is gradually reduced if someone earns over this until no benefits are available if someone earns over £60k.

4. The decrease in the main rate of corporation tax has been accelerated so that the rate from April 2012 will be 24%, decreasing to 22% by April 2014. It is disappointing that no similar decrease was made to the small companies tax rate.

5. This won’t have much effect for small business owners but the big news was the decrease in the 50p tax rate to 45p. This has led to accusations that the budget will help the rich but only marginally help the less well off.

6. The Government is also considering enterprise loans for young people to start their own business which I hope will get approval in the next budget.

If you had any questions on how the budget will affect you then please feel free to contact us on 01273 737307 or e-mail us info@bainbridgelewis.co.uk.

I’ve noticed a lot of my clients want to grow their businesses by taking on their first member of staff but when they start looking into it they are massively put off by the costs involved. Given the high levels of unemployment this issue which is holding small businesses back from taking on staff and growing their businesses has to be addressed.

The government have put in place the Regional employers NICs holiday scheme where up until September 2013 new start-up businesses can get up to £5,000 of tax relief from employers National Insurance Contributions for each of their first 10 employees. Although this is great for the businesses in the selected areas it does nothing to help businesses and the unemployed outside the selected regions including Brighton & Hove.

I don’t know about you but I see a lot of businesses starting up and not many of them will have 10 employees by the end of September 2013, most small start ups are struggling to take on their first employee. So why doesn’t the government introduce a smaller scale scheme to benefit the whole of the UK?

Why not just a £5,000 exemption for your first employee? If you took on an employee at £20,000 that exemption would mean you wouldn’t have to pay employers NI for almost 3 years.

When you weigh up the costs of lost National Insurance contributions against the cost of paying out job seekers allowance and the boost this would give to business growth it has to be worth considering.

Being a small business ourselves as well as working with other small businesses and the unemployed we can see there is a real need for intervention by the government in this area. We have contacted local MP Mike Weatherley and he has agreed to assist and will be writing to the Rt Hon George Osborne MP, Chancellor of the Exchequer, for his comments.

We wanted to also show that there is small business support for this so we have set up an online petition. If you support our views please sign our petition to create an Employers National Insurance exemption for all small businesses.

SIGN PETITION HERE

As we are approaching the end of the tax year for 2011/12 we thought now would be a good time to think about things you need to consider before the end of the tax year to make sure you minimise your tax bill.

Dividends and salary – it is critical to think about these before the end of the tax year as you can’t back date these transactions.

If you are the director of a company you can’t just withdraw or spend the money from the business in the same way that you can when you are a sole trader so it is important that your dividends and salary have been correctly recorded in the year. See our blog on dividend payments and director’s salary.

It is also a good time to review your dividends and salary to ensure you are making the most of your tax allowances.

Personal pension contributions – These are a good way to reduce your personal tax liability if you are a higher rate taxpayer.

Investment in capital items –Are you in business?  If you are a self-employed you get a 100% tax deduction in the year of purchase for capital items of up to £100,000. This will be reduced in 2012/13 to £25,000 so if you are planning a big spend do it now. Companies also qualify for relief but this will not affect your personal tax liability.

Couples where one spouse has little or no taxable income – It is too late for this tax year but consider transferring income generating assets such as rental properties to your partner.

Utilising your tax free allowance for savings – everybody is allowed to invest up to £10,680 tax free in an ISA for 2011/12 so try and make use of this allowance before 6 April.

Inheritance tax exemption – you can give away gifts of up to £3,000 in each tax year that will be exempt from Inheritance Tax when you die

Capital Gains Tax annual allowance – You are entitled to tax free gains of up to £10,600 during 2011-12. If you have something such as an investment in shares that has made a gain that you were thinking of selling you should consider it before the end of the tax year.

If you have any questions on the above or would like some tax advice please feel free to call Carol or Gail on 01273 73 73 07 or send us an e-mail. We would be happy to meet up with anyone considering using our services for a chat over a cup of coffee.

If you do need more information or have a specific question please send us an email or give us a call on 01273 737307.

Income tax is exactly what it says it is it is a tax on income. However not all income is taxable and there are reliefs and allowances that mean that you don’t necessarily pay tax on every penny you get.

So what counts as taxable income?

• Income that you earn from your employment
• Any profits that you make from running a business as a sole trader or as a partner in a partnership
• Pension income, including the state pension
• Interest on most savings
• Dividends
• Rental income
• Income paid to you from a trust
• Some state benefits (including carer’s allowance and jobseeker’s allowance)

Do I need to complete a tax return?

If you are an employee – Employment income is taxed through the PAYE (Pay As You Earn) system which is operated by your employer so most employees are not required to complete a tax return. Your income from employment can include the value of any benefits you receive such as free healthcare or a company car.

If you are receiving income above £2,500 per year from savings, investments or property you will also probably need to fill in a tax return but you can check here. If the income is below £2,500 and you are an employee or pensioner you can have this adjusted through your PAYE as noted here.

If you are a sole trader, partner or director in your own company you will be required to register for self-assessment and complete a tax return each year.

If your total annual income is £100,000 or more – you will need to complete a tax return to ensure you have paid the correct amount of tax.

Income from savings and dividends are taxed at source for basic rate taxpayers so you only need to worry about this if you are a higher rate tax payer, if you are already completing a tax return or if the income you receive from savings and dividends is £10,000 or more.

There are other reasons that you may need to complete a tax return and if you are unsure you can check on the HMRC website.

What is a basic rate and higher rate taxpayer?

A basic rate tax payer is someone who pays tax at 20% (the basic rate). Everyone is entitled to an annual personal allowance (£8,105 for most people in 2012/13). This is deducted from your income before the tax is calculated. If your remaining income is £34,370 or below you are a basic rate tax payer. (£0 – £34,370 is known as the basic rate band)

So as long as you earn £42,475 (£8,105 + £34,370) or less you will remain a basic rate taxpayer.

A higher rate taxpayer is someone who earns between £34,371 and £150,000 and they pay tax on any income above £34,371 at 40%.

There is also an additional rate of tax at 50% for those lucky enough to have income in excess of £150,000.

Bainbridge Lewis is a small accountancy practice based in Brighton & Hove that specialises in working with small and start-up companies. If you have any questions please contact us or even request a quote.

If you are provided with a company car which you also use for private motoring (including travel to and from your place of work) you are receiving a benefit which is subject to tax.

This also applies owner managed companies where the director has purchased the car in the company.

Tax on the employee/director

The value of the benefit to the employee is calculated as a percentage of the original list price of the car regardless of its age. The percentage applied is based on the cars CO2 emissions, the higher the emissions the higher the percentage.

If the company also pays for all of the fuel (with no reimbursement from the employee for private usage) there is also a fuel benefit which is calculated using the same percentage applied to the fuel benefit multiplier (set at £18,000 for 2011/12).

Tax on the company

In addition to the tax on the employee the company must pay Class 1a National Insurance on any benefit provided to its directors and employees at a rate of 13.8% of the value of the benefit.

Increasing tax costs

Changes to the emissions scale from 5 April 2012 mean that company car users can face more than a 50% increase in the associated tax costs.  Let’s look an example of calculating company car tax to illustrate this.

Example

So let’s say we have a company car registered after 1998 with a list price of £12,000 (including VAT) with CO2 emissions of 120. This is a petrol car is used by the director for both business and private journeys.

Tax Year 2011/12

The percentage applicable for CO2 emissions of 120 is 10%

Car benefit

List price (£12,000) x appropriate % (10%) = £1,200

Tax on benefit for basic rate tax payer = £1,200 x 20%      = £240

Tax on benefit for higher rate tax payer = £1,200 x 40%    = £480

Fuel benefit

Fuel benefit multiplier (£18,000) x appropriate % (10%) = £1,800

Tax on benefit for basic rate tax payer = £1,800 x 20%      = £360

Tax on benefit for higher rate tax payer = £1,800 x 40%    = £720

Total Tax Payable

Basic Rate Tax payer = £600 per year   

Higher Rate Tax Payer  = £1,200 per year

Tax Year 2012/13

The percentage applicable for CO2 emissions of 120 has been increased to 15% and the fuel benefit multiplier has been increased to £18,800.

Car benefit

List price (£12,000) x appropriate % (15%) = £1,800

Tax on benefit for basic rate tax payer = £1,800 x 20%      = £360

Tax on benefit for higher rate tax payer = £1,800 x 40%    = £720

Fuel benefit

Fuel benefit multiplier (£18,800) x appropriate % (15%) = £2,820

Tax on benefit for basic rate tax payer = £2,820 x 20%     = £564

Tax on benefit for higher rate tax payer = £2,820 x 40%   = £1,128

Total Tax Payable

Basic Rate Tax payer = £924 per year (an increase of £324)

Higher Rate Tax Payer = £1,848 per year (an increase of £648)

There will also be a further increase in the costs to the company who will have to pay an additional £224 in Class 1a National Insurance.

If you would like to work out the costs relating to your existing company car HMRC have an online company car tax calculator for this purpose.

With such hefty increases the decision to purchase a company car should be considered very carefully. In particular if your company is an owner managed company it is likely that you are better off using your personal vehicle and claiming mileage for your business travel through an expense claim.

If you would like any further advice please contact Gail or Carol on 01273 737307 or drop us an email.

What does this mean if you are now self-employed or a director in your own company?

Your student loan repayments will be based on your earnings in the year and will normally be collected through your self-assessment tax return.

The good news is that if you earn less than £15,000 per year you will not be required to make any repayments. The repayments are calculated at 9% of all income earned above this threshold.

So what income is included in the calculation?

1. All profits from self-employment
2. Any employment income earned
3. Unearned income (if it is above £2,000) eg. Interest, dividends, rental income.

On your tax return you must check the box to show that you are due to make repayments of an income contingent loan.

Example Calculation

John graduated university in 2008 and has an Income Contingent Student Loan. In 2010 John started his own business and is the owner and manager of Company A Limited. In 2010/11 he paid himself a salary of £5,715. He has also paid dividends out of the company of £15,000.

Employment income    =    £5,715

Gross Dividends (£15,000 x 100/90)   =    £16,667

Total Income   =    £22,382

Loan repayment due at 9% on (£22,382 – £15,000)  =   £664.35

This will be included on John’s 2010/11 tax return and be payable by 31 January 2012. The student loan repayments are not included as part of the payment on account system so it is worth thinking about saving up to pay the additional amount each January.

Interest Rates

The interest charged on Income Contingent loans is currently 1.5%.

The student loan system has changed for loans taken out for courses starting on or after 1^st September 2012. Please take a look at the student loan website for more details.

For more information on student loan repayments you can contact the student loan company. If you have any questions or need any assistance with your tax return please contact Gail or Carol on 01273 737307 or drop us an email.

EXAMPLE

If in your first year of trading 2010/11 you have a tax bill of £2,000 this is due for payment by 31^st January 2012. However, the Revenue will want to take an advance payment for 2011/12 based on 50% of your 2010/11 tax bill. This means by 31^st January 2012 you will actually have to pay £3,000 in total.

A further payment on account of £1,000 is due for payment by 31^st July 2012.

If your tax bill for 2011/12 when finalised is £3,500 you will have to make a final payment of £1,500 by 31^st January 2013 (tax bill of £3,500 less the two payments on account of £1,000 each). The total amount payable at 31^st January 2013 will be £3,250 as you will also need to make a payment on account for 2012/13 of £1,750 (50% of 2010/11 tax bill of £3,500).

Important points

• You only need to make payments on account if your tax bill is greater than £1,000 in a single year.
• When you first start trading you will have a large one off first tax bill as up to that point you have not made any payments on account. It is therefore really important to set aside your tax in a savings account as you earn profits from your business to ensure you have sufficient funds to pay this.
• You can apply to the Revenue to reduce your payments on account if you believe your tax bill will be lower in the following tax year. However, if you underestimate the tax you owe the Revenue will charge you interest on the under payment.

If you had any questions on this then please feel free to contact Carol or Gail on 01273 737307 or e-mail us at info@bainbridgelewis.co.uk.