When you set up a business it’s a great idea to get a separate business bank account set up. Your business and personal affairs, including finances, are kept completely separate, and having a business bank account allows this process to be much smoother. It also makes your accountant’s job much easier, as they’re able to distinguish business and personal transactions.

Can my current bank open a business bank account?

Most banks will be able to set up a business bank account. In the past we have found many of the high street banks take a very long time to open one. For this reason we have researched a number of banks that we know offer a very smooth bank account opening process.

How do you know which business bank account is right for you?

It depends on what you’re looking for, and what each bank can offer you. Some may offer free set up, no charges on transactions for X number of months, a cash back incentive for choosing them, or mobile and online banking.

Which bank accounts can you use with Assure Accountants?

We have researched a number of banks for small businesses and have close working relationships with Tide, Metro Bank, Mettle and Cashplus in order to make the application process easier…some are even able to offer preferential deals for new businesses. We’re also more than happy working with other banks, so if you’re already using a different bank, simply let us know. Many of our clients have more than one account, so speak to our team about how this can benefit you.

How do they work with FreeAgent or other software?

Tide, Mettle and CashPlus all integrate automatically with FreeAgent and many other software providers in real-time, meaning what you see is 100% up to date. The integration is seamless, so there’s no waiting around for updates, or unexpected mistakes. If you use a different business banking partner, simply ask us how they integrate with FreeAgent.

Why are two business accounts better than one?

Having two accounts allows you to keep your tax in one, and the rest of your day to day money in the other. It also allows you to have a back-up from an Financial Services Compensation Scheme point of view, should there be a problem, so you’ll never be left high and dry.

What’s the best way to get started?

Give our team a call on +44 330 174 4922, and we’ll talk through your options with you. Whether setting up a new business or maybe you have a property portfolio, or are considering another type of investment, either way we’ll be able to discuss and give you some personalised advice based on our years of experience.

Have more questions? We’ll have the answers

If there’s anything else you want to ask or to simply chat through your options, please do get in touch or give us a call. We look forward to hearing from you!

The post Business Bank Account FAQs appeared first on Assure Accountants.

In this blog, we look at the electric car tax rates vs. fuel, to help you decide if it’s worth the upgrade.

Company car tax changes

Owning a company car used to be seen as a useful benefit for those running their own Limited Company. However, the tax burden and perceived responsibilities linked to company car tax have led many to abandon this idea. Thankfully, HMRC has introduced recent tax changes that have made electric cars more accessible.

Electric car tax rates

In order to help the government achieve its net zero targets by 2050, a reduction has been made to the Benefits in Kind (BiK) tax rate for electric company cars. The rate has been set at 2% for the tax years 2023/24 and 2024/25, with annual increases of 1% in the following years. For instance, the rate will be 3% in 2025/26, 4% in 2026/27, and so on. While this gradual increase might appear substantial to some, it remains significantly lower than the 25% BiK rate applicable to petrol or diesel cars.

Currently, only 2% of the list price of your electric car will be subject to taxation for the next two financial years.

Calculating the Cost

The cost of company car tax is split between what your Limited Company pays and your personal contribution as an employee. For example, if you own an electric car valued at £40,000, the taxable amount (BiK) would be £800. The portion of that £800 you’d pay as an employee of your Limited Company depends on your income tax bracket. If you fall into the basic rate tax bracket of 20%, your annual payment would be 20% of £800, amounting to £160. A higher-rate taxpayer at 40% would therefore pay 40% of £800, which is £320 per year. It’s important to note that your Limited Company will also be required to pay National Insurance Contributions (NICs).

If you are unsure of what the cost of an electric car will be for you, reach out to your dedicated business accountant, who will be able to assist you.

Electric vs. Petrol: Does it Save Money?

We’ll now compare the costs of a petrol car and an electric car using the same £40,000 car example. In this case, let’s assume a higher income tax bracket of 40% and that the petrol car emits 130 grams per kilometre of carbon dioxide. This falls under the 31% BiK rate for the current financial year. So with 31% of £40,000 being £12,400, a 40% tax-bracket employee would need to pay £4,960 per year, or £413.33 per month in tax. Therefore in this example you’d be looking at an annual saving of over £4,500 per year if you went for an electric vehicle.

How Do Hybrids Compare?

Taxation for hybrids depends on their battery range and level of emissions. Conventional hybrids that can’t be charged via a plug generally have a limited electric range of less than a mile and emit over 50g per kilometre of CO2. The tax authorities consider these vehicles similar to petrol or diesel cars in their emission output and so you will be taxed similarly.

However, plug-in hybrids (PHEVs) generally emit less than 50g per kilometre of CO2. For these cars, the BiK rates are determined based on the distance they can travel using only battery power. Here are the BiK rates for PHEVs based on their battery range for the next three financial years:

• Less than 30 miles →14% BiK rate
• Between 30-39 miles → 12% BiK rate
• Between 40-69 miles → 8% BiK rate
• Between 70-129 miles → 5% BiK rate
• Over 130 miles → 2% BiK rate (treated as a 100% electric vehicle)

Choosing the Right Option for You

Figuring out whether you could benefit from an electric or a hybrid will depend on how many miles you will average and the availability of charging points. If you’re not confident you can rely solely on electric power, especially if there are very few charging points in your area, you might be better off with a hybrid for now. By 2030, the ban on petrol and diesel cars will take effect, and as charging infrastructure continues to expand in the coming years, you could consider transitioning to a fully electric car. For an illustration of how much tax you could expect to pay on an electric car, visit the gov.uk website and use their company car tax calculator.

Are There Any Other Savings?

Corporation Tax

Certain low-emission vehicles qualify for a 100% first-year allowance, allowing you to deduct the car’s purchase cost from your Limited Company’s profits and, as a result, reduce your Corporation Tax burden. If you opt to lease a car, the lease payments can also be used to offset your company’s profits, also reducing your Corporation Tax liability.

Road Tax

Currently, electric cars are exempt from road tax. However, from 2025 onwards, this will no longer be the case, and road tax will be the same amount for all car types.

Considering Your Financial Situation

Before deciding to purchase an electric or hybrid vehicle, why not get in touch with our team of expert accountants here at Assure Accountants. They’re able to offer advice and support when it comes to tax matters that affect your business, and can help you make the right decisions financially both personally and professionally. Get in touch today to find out more.

The post How much tax can you expect to pay on an electric car? appeared first on Assure Accountants.

The post The Spring Budget 2023 appeared first on Assure Accountants.

First things first – what is Corporation Tax?

Corporation Tax is a levy on your company’s profits, which is essentially a charge on the profits left in your company once expenses such as your salary, have been deducted from your company’s turnover.

For example – If your company’s turnover was £150,000 and your business expenses came to £80,000, you’d have to pay Corporation Tax on the remaining £70,000. At present the rate of Corporation Tax is 19%.

When do you need to pay Corporation Tax?

Corporation Tax payments must be made nine months and one day from your company’s yearend. You’re also required to complete and file a CT600 tax return annually, 12 months from your company’s yearend date. Failure to comply with these dates will result in fines from HMRC, and a possible increase in your Corporation Tax bill.

What’s changing in April 2023?

Corporation Tax will be increasing from 19% to 25% from April 2023, with a tapered relief for those Limited Companies whose profits fall between £50,000 and £250,000. Should your company profits fall below £50,000 you’ll be subject to the new ‘small profits rate’ of 19%.

Why is it increasing?

Corporation Tax has been 19% for a long time, and with the added pressure the financial support provided to businesses during the Covid-19 pandemic, the then Chancellor of the Exchequer, Rishi Sunak decided an increase would help to recoup some of the money spent. The government is keen for UK businesses to ‘give back’, and to aid in the UK’s economic recovery.

How will this affect Limited Company businesses?

If your company’s profits remain below the £50,000 threshold you’ll remain unaffected, but if they increase between £50,001 – £250,000 you’ll be subject to the new tapered relief of tax, reaching up to a maximum of 25% that you can expect to pay.

How can Assure Accountants help?

Tax is tough and with the government constantly moving the goal posts it can feel near impossible to run a business and keep on top of your tax affairs. That’s why it’s a good idea to enlist the services of a small business accounting expert who can keep you up to date with what will affect you, your money and your business. Here at Vantage our team of expert accountants do just that, ensuring our clients’ personal and professional needs are taken care of, no matter what changes are on the horizon. Get in touch today to find out more and speak to a member of our team today.

The post Vantage’s top tips on the Corporation Tax Rate increase – what’s happening, when and how you could be affected appeared first on Assure Accountants.

• Decrease in the additional rate threshold from £150,000 to £125,140 from 6 April 2023. The government is also fixing other personal tax thresholds within income tax, NICs and Inheritance Tax for an additional 2 years, until April 2028
• Reduction in the Dividend Allowance (currently £2,000 tax free but set to reduce to £500 from April 2024)
• Reduction in Capital Gains Tax Annual Exempt Amount (reducing to £6,000 from April 2023 and £3,000 from April 2024). The Personal Allowance will generally be available in addition to the reduced Dividend Allowance and Capital Gains Tax Annual Exempt Amount
• The income tax additional rate threshold will be lowered from £150,000 to £125,140 from 6 April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The ART for savings and dividend income will apply UK-wide.
• VAT registration and deregistration thresholds will be maintained at the current levels for an additional 2 years and will not change for a further period of 2 years from 1 April 2024.
• Confirmed Off-payroll working rules: maintain 2017 and 2021 reforms (also known as IR35)
• Reflecting the success of the transition to electric vehicles, the government will introduce Vehicle Excise Duty (car tax) on electric cars, vans and motorcycles from April 2025

The Autumn Statement 2022 – Full Report

On 17 November 2022, the government undertook the third fiscal statement in as many months, against a backdrop of rising inflation and economic recession. The Chancellor laid out three core priorities of stability, growth and public services. The government sought a balanced path to support the economy and return to growth, partially through public spending restraint and partially through tax rises.

Income tax

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This was to be accelerated so that it took effect from April 2023. However, whilst the government aims to proceed with the cut in due course, this will only take place when economic conditions allow and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely.

At the Mini Budget on 23 September 2022 the government announced a plan to abolish the 45% additional rate of income tax from April 2023. It was announced on 3 October 2022 that the government would not proceed with this plan.

From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

Income tax allowances

The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively.

The government will uprate the married couple’s allowance and blind person’s allowance by inflation for 2023/24.

Dividends

The government has also confirmed that, from April 2023, the rates of taxation on dividend income will remain as follows:

• the dividend ordinary rate – 8.75%
• the dividend upper rate – 33.75%
• the dividend additional rate – 39.35%.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

In addition, the government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024.

These changes will apply to the whole of the UK.

National Insurance contributions

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the government has:

• reversed the temporary increase in NICs and
• cancelled the Health and Social Care Levy completely.

More detail for employees and employers

The changes took effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) generally reduced from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) reduced from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

NICs thresholds

A similar principle to that outlined above for income tax thresholds will be followed in respect of the NICs upper earnings limit and upper profits limit. From July 2022, the NICs primary threshold and lower profits limit were increased to align with the personal allowance and will be maintained at this level from April 2023 until April 2028. The Class 2 lower profits threshold will also be fixed from April 2023 until April 2028 to align with the lower profits limit. They will again be £12,570 and £50,270 as appropriate.

In addition, the government will fix the lower earnings limit and the small profits threshold at 2022/23 levels in 2023/24, namely £6,396 and £6,725 per annum respectively.

The government will uprate the Class 2 and Class 3 NICs rates for 2023/24 to £3.45 per week and £17.45 respectively.

Finally, the government will fix the level at which employers start to pay Class 1 NICs for their employees at £9,100 from April 2023 until April 2028.

Capital gains

The government has announced that the capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

Inheritance tax

The inheritance tax nil-rate bands are already set at current levels until April 2026 and will stay fixed at these levels for a further two years until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000 and the residence nil-rate band taper will continue to start at £2 million.

Stamp Duty Land Tax

A number of changes were made to the Stamp Duty Land Tax (SDLT) regime earlier this year and these remain. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Higher rates may be payable where further residential properties are acquired.

Land Transaction Tax

The Welsh government also altered its rates in relation to land and buildings in Wales for transactions with an effective date on or after 10 October 2022.

Higher rates may be payable where further residential properties are acquired.

Business

Corporation tax rates

It had been previously announced that the expected increase in the rate of corporation tax for many companies from April 2023 to 25% would not go ahead. However the government announced on 14 October 2022 that this increase will now proceed and this has been confirmed.

This means that, from April 2023, the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

In addition:

• bank corporation tax surcharge changes will proceed, meaning that from April 2023 banks will be charged an additional 3% rate on their profits above £100 million and
• from April 2023 the rate of diverted profits tax will increase from 25% to 31%.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses.

The government will also extend the 100% first year allowance for electric vehicle chargepoints to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.

Research and Development

For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

VAT

The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2024, staying at £85,000 and £83,000 respectively.

Vehicles

The government will set the rates for the taxation of company car benefits until April 2028 to provide long term certainty for taxpayers and industry. Rates will continue to incentivise the take up of electric vehicles.

In addition, from 6 April 2023 car and van fuel benefits and the van benefit charge will increase in line with inflation.

Welfare, work and pensions

Cost of living payments

The government will provide households on means-tested benefits with an additional £900 cost of living payment in 2023/24. Pensioner households will receive an additional £300 and individuals on disability benefits will receive an additional £150.

Uprating of benefits

The government will increase benefits in line with inflation, including the state pension. The standard minimum income guarantee in pension credit will also increase in line with inflation from April 2023.

Raising the benefit cap

The benefit cap will be raised in line with inflation, so that more households will see their payments increase as a result of uprating from April 2023. The cap will be raised from £20,000 to £22,020 for families nationally and from £23,000 to £25,323 in Greater London. For single adults it will be raised from £13,400 to £14,753 nationally and from £15,410 to £16,967 in Greater London.

National Living Wage and National Minimum Wage uprating

The government will increase the National Living Wage (NLW) and National Minimum Wage from 1 April 2023 as follows:

• the rate for 23 year olds and over to £10.42 an hour
• the rate for 21-22 year olds to £10.18 an hour
• the rate for 18-20 year olds to £7.49 an hour
• the rate for 16-17 year olds to £5.28 an hour and
• the apprentice rate to £5.28 an hour.

In-work conditionality for Universal Credit claimants

The government will bring forward the nationwide rollout of the In-Work Progression Offer, starting with a phased rollout from September 2023, to support individuals on Universal Credit (UC) and in work to increase their earnings and move off benefits entirely. This will mean that over 600,000 claimants on UC whose household income is typically between the equivalent of 15 and 35 hours a week at the NLW will be required to meet with a dedicated work coach in a Jobcentre Plus to increase their hours or earnings.

Energy

The Autumn Statement sets out reforms to ensure businesses in the energy sector who are making extraordinary profits contribute more. From 1 January 2023, the Energy Profits Levy will be increased to 35% and extended to the end of March 2028 and a new, temporary 45% Electricity Generator Levy will be applied on the extraordinary returns being made by electricity generators.

The Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000.

The government is also setting a national ambition to reduce energy consumption by 15% by 2030, delivered through public and private investment, and a range of cost-free and low-cost steps to reduce energy demand.

The post The Autumn Statement 2022 Full Report – what it means for small business owners appeared first on Assure Accountants.

As part of his ‘Growth Plan’, Kwarteng had set out a number of tax cuts designed to support the growth of the British Economy. However, following widespread criticism and instability in financial markets, Mr Kwarteng was replaced with Jeremy Hunt who has scrapped all of the growth plan changes bar the planned cut to stamp duty and National Insurance. As of today, 17^th October 2022, the only changes still going ahead are:

• NI (health and social care levy) increase of 1.25% has been repealed from 6th November 2022
• Stamp duty 0% threshold increased to £250,000

The post BREAKING NEWS – today’s announcements from Jeremy Hunt appeared first on Assure Accountants.

The (not so) mini-budget delivered by new Chancellor, Kwasi Kwarteng last Friday, had a lot more in it than anyone expected, and lots of great news for small businesses. Here are the headlines:

• Corporation Tax planned increase from 19% to 25% has been scrapped
• Basic rate of income tax reduced from 20% to 19% from April 2023
• Reversal of the 1.25% increase in the dividend tax rate from 2023
• Additional rate of income tax of 45% has been scrapped
• NI (health and social care levy) increase of 1.25% has been repealed from 6th November 2022
• AIA remains at £1m indefinitely
• Stamp duty 0% threshold increased to £250,000. This is a saving of £2,600 on an average house costing £312,000
• Freeze on energy bills
• Rules on bankers’ bonus limits are to be scrapped
• IR35-off-payroll rules to be repealed from April 2023. Reverting to pre-2017 rules

For a more detailed look at the mini budget and what was announced, please see below.

Chancellor reveals his plan for growth

The week leading up to Chancellor Kwasi Kwarteng’s ‘Mini Budget’ may have been a short one due to the Queen’s funeral but the new government managed to fill it with a stream of policy announcements.

Before Mr Kwarteng stood up to make his statement on ‘The Growth Plan’ much of what he had to say about energy support for businesses and households, bankers’ bonuses, investment zones and reversals to NICs had already been announced. The government also said that the Chancellor’s statement would not be subject to a forecast from the Office for Budget Responsibility. However, this did not stop the media from dubbing this event a Mini Budget.

The Growth Plan set out a new approach to the economy built around three central priorities:

• reforming the supply-side of the economy
• maintaining a responsible approach to public finances
• cutting taxes to boost growth.

National Insurance contributions

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the new Chancellor has decided to:

• reverse the temporary increase in NICs from November and
• cancel the Health and Social Care Levy completely.

The Health and Social Care Levy was expected to raise around £13 billion a year to fund health and social care and the Chancellor has confirmed that funding will be maintained at the same level as if the Levy was in place, funded from general taxation.

More detail for employees and employers

The changes take effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) will generally reduce from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) will reduce from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

Income tax

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This is now being accelerated so that it takes effect from April 2023.

In addition, to ‘incentivise enterprise and hard-work and simplify the tax system’, the government will abolish the 45% additional rate of income tax from April 2023. Consequently, there will be a single higher rate of income tax of 40%.

There are a number of tax consequences which stem from these changes. One of them is the amount of tax relief given at source on pension contributions and Gift Aid donations. This is currently given at the basic rate of 20%. The government has stated that there will be a four-year transition period for Gift Aid relief to maintain the income tax basic rate relief at 20% until April 2027. This will support almost 70,000 charities and is worth over £300 million. However, there was little comment on pension contributions other than that there will also be a one-year transitional period for Relief at Source pension schemes to permit them to continue to claim tax relief at 20%.

Dividends

From April 2023:

• the dividend ordinary rate of 8.75% will reduce to 7.5%
• the dividend upper rate of 33.75% will reduce to 32.5% and
• the dividend additional rate will be abolished.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, it will also reduce to a 32.5% charge for loans made on or after 6 April 2023.

These changes will apply in Scotland as the rules on dividends apply to the whole of the UK.

Business

Corporation tax rates

It had been previously announced that the rate of corporation tax would increase for many companies from April 2023 to 25%. This change will now not go ahead, leaving the rate of corporation tax at 19% for the majority of companies.

In line with this change, the Bank Corporation Tax Surcharge will remain the same, as will the Diverted Profits Tax.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery, including cars with zero emissions, up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses. Interestingly, these allowances were not mentioned, other than minor amendments to the current rules, so it appears the scheduled withdrawal of them will occur in 2023.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

Investment Zones aim to encourage rapid development

As part of the government’s plan to drive economic growth and encourage development the Chancellor confirmed that Investment Zones will be established across the UK.

These zones will benefit from lower taxes and liberalised planning frameworks to encourage business investment.

The government is already in discussions with 38 local authorities to establish investment zones in England. In addition, it says it will work closely with the devolved administrations to offer the same opportunities in Scotland, Wales and Northern Ireland.

Businesses in designated areas in investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.

In addition, businesses will receive full Stamp Duty Land Tax relief on land bought for commercial or residential development and a zero rate for employer NICs on new employee earnings up to £50,270 per year.

There will also be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.

As well as time-limited tax benefits there will be designated development sites that will release more land for housing and commercial development in the zones. The need for planning applications will be minimised and streamlined.

Stamp Duty Land Tax

A number of changes are made to the Stamp Duty Land Tax (SDLT) regime. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold is increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief is increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief is increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Residential rates may be increased by 3% where further residential properties are acquired.

Other comments

There were a number of other interesting comments made by the Chancellor which suggest future policies and changes, although lacking detail at the moment.

IR35 and off-payrolling

Over the last 20 years, there have been numerous changes to the tax system to try and address ‘disguised employment’ and to generate additional tax and NICs accordingly. In a surprise announcement, the government has stated that it will repeal the off-payroll working rules from 6 April 2023. From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.

Infrastructure

The Chancellor announced plans to accelerate new roads, rail and energy infrastructure with new legislation which will cut barriers and restrictions. This will make it quicker to plan and build new roads, speeding up the deployment of energy infrastructure such as offshore wind farms and streamlining environmental assessments and regulations.

State benefits

Universal Credit claimants who earn less than the equivalent of 15 hours a week at the National Living Wage will be required to meet regularly with their work coach and take active steps to increase their earnings or face having their benefits reduced, broadly from January 2023. Jobseekers over the age of 50 will also be given extra time with Jobcentre work coaches, to help them return to the job market.

VAT-free shopping areas

The government will introduce a modern, digital, VAT-free shopping scheme with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors. The delivery will include modernising the scheme that currently operates in Northern Ireland and introducing a new digital scheme in Great Britain. The new VAT-free shopping scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.

Alcohol duties

Reforms to modernise alcohol duties will also be taken forward and the government has published a consultation response on these plans. The reforms will be implemented from 1 August 2023. The government is also freezing the alcohol duty rates from 1 February 2023 to provide additional support to the sector.

Further announcements

Over the next few weeks, the government will set out further details of plans to speed up digital infrastructure, reform business regulation, increase housing supply, improve our immigration system, make childcare cheaper, improve farming productivity and back the financial services sector.

Government announces plans to help cut energy bills for businesses

On 21 September 2022 the government announced a new scheme, the Energy Bill Relief Scheme, which is designed to cut energy prices for non-domestic energy customers, such as businesses, charities and public sector organisations. The new scheme is in addition to the recently announced Energy Price Guarantee for households.

The scheme will apply to fixed contracts agreed on or after 1 April 2022 in addition to deemed, variable and flexible tariffs and contracts. Running for an initial six-month period, the scheme will apply to energy usage from 1 October 2022 to 31 March 2023. According to the government, savings will first be seen in businesses’ October bills.

Businesses are not required to take action or apply for the scheme, support will be automatically applied to bills.

The government intends to conduct a review of the scheme in three months to assess:

• how effective it has been in giving support to vulnerable, non-domestic customers
• which groups of non-domestic customers remain vulnerable to energy price rises
• the extent to which the scheme could either be extended or further targeted.

Support after 31 March 2023 will be determined following the review.

Energy Price Guarantee plan caps household bills

Prime Minister Liz Truss announced the Energy Price Guarantee (EPG) for households on 8 September 2022 which will apply from the start of October 2022. The EPG means that an average household will pay no more than £2,500 per year for each of the next two years. It comes in addition to the £400 Energy Bill Support Scheme and will save the average household at least £1,000.

The EPG limits the price suppliers can charge customers for energy supplies. This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.

Under the plan, those households who do not pay directly for mains gas and electricity, such as those living in park homes or on heat networks, will be no worse off and will receive support through a new fund.

The government estimates that the EPG will deliver substantial benefits to the economy, boosting growth and curbing inflation by four to five percentage points, which will in turn reduce the cost of servicing the national debt.

The government will provide energy suppliers with the difference between this new lower price and what energy retailers would charge their customers if this were not in place. Schemes previously funded by green levies will also continue to be funded by the government during this two-year period to ensure the UK’s investment in homegrown, secure renewable technologies continues.

New plan for patients aims to tackle NHS backlog

Health and Social Care Secretary Thérèse Coffey unveiled the government’s new ‘Our plan for patients’ on 22 September 2022, which aims to tackle NHS backlogs.

The centrepiece of the plan is the expectation that everyone who needs an appointment at a GP practice should get one within two weeks, with patients with the most urgent needs being seen the same day.

The plan also includes changing funding rules to recruit extra support staff so that GPs can focus on treating patients. The government says this will free up over one million appointments per year.

There will also be ‘more state-of-the art telephone’ systems to make it easier for patients to get through to their GP surgeries. In addition, more information will be available for patients, with appointments data published at a practice level for the first time ever.

Pharmacies will help ease pressures on GPs and free up time for appointments by managing and supplying more medicines without a GP prescription and taking referrals from emergency care for minor illnesses.

The post MINI BUDGET SEPTEMBER 2022 appeared first on Assure Accountants.

In this blog we explore the world of being a landlord, what you need to consider before you get started, and how to make the most from the experience.

It might sound silly, but how do you know if you are actually a landlord?!

Whether you’ve bought a property to become a landlord, or your circumstances have meant you’re now the proud owner of an additional property, whatever the reasoning behind finding yourself in this position if you rent out the property for money then you can add the title ‘landlord’ to your job description. As a landlord there are a number of legal obligations you’re expected to meet.

Are you allowed to rent your property?

It is your property so you should be able to do what you like with it, right? Wrong! If you have a standard residential mortgage which allows you to live in it, then you’ll need to request permission from your lender to rent the property out.

If you’re renting your property for a short period of time (ie you’re going travelling and plan to return) your lender shouldn’t have an issue with allowing you to rent it. If you’re planning on letting your property long-term then you’ll need to obtain a special buy-to-let mortgage, which you’ll need to satisfy your lender’s lending criteria in order to obtain, and which will almost certainly carry higher interest rates.

If your property is a leasehold, you’ll need to also apply for permission to rent it out from whomever owns the freehold.

You’ve established you’re allowed to rent your property – what’s the next step?

Home décor is extremely subjective, and what you personally call homely and inviting might be another person’s worst nightmare. When marketing a property for the rental market it’s best to keep décor neutral, so a potential renter can visualise what the home could look like with their own belongings inside. Neutral tones and keeping clutter to a minimum tends to also make a property look bigger, and could be a strong selling point.

Be sure to fix anything that’s either broken or on its last legs, and replace items that will have a lot of use (such as carpets) with hard wearing versions which are easy to keep clean and will need replacing less frequently. Give the walls a fresh lick of paint and get the bathroom and kitchen (including the oven) cleaned professionally.

You may decide to use a letting agent to manage the tenancy. They’ll market the property for you, vet prospective tenants on your behalf, and handle the money side of things also. They will of course charge a fee for their services, so it’s worth weighing up their cost versus how much your time is worth if you’re thinking about doing it yourself.

How much rent should you charge?

It’s worth doing a little market research to see how much your place is worth. Take a look at sites such as Rightmove, OnTheMarket, and Zoopla to see what similar properties have rented out for. Also take a look at local estate agent websites to see how much they’re charging, to give you an idea of how to price your property.

Do you need a House of Multiple Occupancy (HMO) license?

If your property is large and you’re able to rent out multiple bedrooms to different people, you might decide to make it an HMO. You’ll need a license in order to do so, so how can you be sure your property is an HMO?

• If you have 5 or more people living there, each from separate households, and they’re renting the property (for example student accommodation)
• If the tenants share a kitchen or bathroom

Even with less than 5 people it could still be classed as an HMO, so it’s always best to contact your local council and double check. It’s advisable to speak to your local council about your plans to become a landlord regardless of whether it’s an HMO, as there may be some other rules or stipulations you’ll need to adhere to.

Get an EPC inspection

Before renting your property, you’ll need to get an energy performance certificate (EPC) inspection. You are unable to rent or buy a property without one. They show you how energy efficient the property is, and highlight where improvements are needed. Your property will be awarded a rating from A to G, and you’ll need a new EPC certificate every ten years. You cannot rent a property with an EPC rating or E, F or G.

Energy safety checks for landlords

It’s a legal requirement for your property to have safe gas and electricity supplies (and appliances if your property comes with them).

Gas – you’ll need a Gas Safe registered engineer to complete a safety check every year. For every new tenant a copy of the certificate should be given to them along with their contract.

Electricity – your property will need to undergo an electricity inspection every five years. If the report highlights any required maintenance it must be completed within 28 days, and your electrician must provide written confirmation. Once the inspection has been done and all work has been completed an Electrical Installation Condition Report (EICR) will be issued.

If you include electrical appliances with your property, they must all be PAT tested.

legionnaires risk assessment – it’s advisable you carry out a legionnaires risk assessment also, before renting out your property.

Carbon monoxide alarms and smoke detectors

Legally you must fit and maintain carbon monoxide alarms and smoke detectors.

Furniture fire and safety regulations

Under the furniture and furnishing regulations act (1988) all furniture must be fire resistant. If you do not adhere to these rules you could be heavily fined or even face criminal action.

Know your responsibilities when it comes to maintenance

Other than ensuring you meet all the legal health and safety regulations, you also need to ensure you keep it in a good, liveable condition. This includes:

• The structure of the property and any outside buildings, such as sheds, garages, etc
• The heating and hot water system
• Toilets, sinks, baths, showers and any other sanitary ware
• Any built-in appliances (fireplaces, ovens, etc)
• Communal areas if the property is situated in a flat or apartment

Any damage caused either by the landlord or tenant, must be fixed.

Comprehensive landlord insurance

You’ll need comprehensive landlord insurance for your rental property, which your mortgage provider (if you have one) will most likely require you to have from the outset. You’ll also want to have contents insurance, which can include white goods, carpets, curtains, etc. Some insurance providers can also cover you for when tenants can’t pay their rent, and emergency cover can protect you in case of a major electrical fault or water leak.

Do your tenants have the right to rent?

Sounds like a strange question to ask, but it’s one you need to have answered before accepting anyone into your property. In the UK you have to be at least 18 years old to legally rent a property, so you’ll need to see proof of ID. You can check a person’s right to rent on the gov.uk website.

Carry out checks

Impressions count, so if you feel that the person won’t treat your property in a respectful way, you don’t have to rent it to them. Don’t feel guilty about rejecting a person, you will have your reasons.

Tenants must also be able to provide proof of income and their right to live in the UK. You can carry out these checks personally, or if you’re using an agency they will do it for you.

When vetting tenants you may wish to prioritise those with the highest monthly income. Take a look at their credit history and whether they have any debt. The best place to do this is by using a credit check company, such as Experian. If the tenant doesn’t pass the credit check but you like them as a person, you could always ask them to provide a guarantor.

Draw up a tenancy agreement

The agreement is a contract which both you and the tenant must sign. If you’re not using an agency you’re able to use templates which you can find online.

Protect your tenant’s deposit

Most landlords require their tenants to pay a deposit upfront, before they move in. This protects you in case of damage, but the money does not sit in your account. The money is held in a government approved tenancy deposit protection (TDP) scheme, and you have 30 days from receipt of the deposit from your tenant, to depositing it into the TDP scheme. You have a few different options to choose from, but you must inform your tenant which one you’re using. If your property’s rent is under £50,000 pa your security deposit cannot be greater than five weeks’ rent.

Create an inventory list at your property before renting

Ensure to take photos of all the rooms of your property, including any white goods, and create a list of what’s included and where. Take photos of any damage or scratches and label them correctly. Be sure to give your tenant a copy of this and ensure they’re happy with the condition of the property and its contents before signing it.

Should the tenants leave any damage when they vacate the property, this inventory list will provide you with a solid argument to justify any deductions from the security deposit.

How much tax can you expect to pay when renting your property?

Any rent you receive from your property is treated by HMRC as income, and will therefore be subject to the same taxes as any other form of income. You’ll need to submit a yearly self-assessment tax return, which the team here at Assure Accountants can take care of for you. The type of tax return you complete will depend on how you own your property ( through personal ownership, through a standard Limited Company or through a Special Purpose Vehicle (SPV), so be sure to get it right first time with our help. Alternatively take a look at our buy-to-let tax guide, which covers everything you’ll need to know about tax and your rental property.

You can reduce the amount of tax you pay by claiming allowable expenses and offsetting them against your tax bill. Allowable expenses include service charges, utility bills, letting agent fees, accountancy fees, council tax, insurance and any incurred costs relating to finding new tenants. Sadly mortgage interest payments are no longer considered allowable expenses. Your Vantage accountant will be able to guide you through all of this, to ensure you’re claiming everything that’s available to you.

‘How to rent’ guide

The government has produced a guide on renting that you must give a copy of to your new tenant. It highlights theirs and your rights and responsibilities, so it’s good for both you and them to have a copy.

If you need to take legal action against your tenant and you haven’t given them a copy of this guide, you could find it more difficult to win a case.

Gaining access to your property

You may from time to time need to gain access to your property. This may be for maintenance, to show prospective new tenants around, or even to have the property valued if you’re looking to re-mortgage or sell. You have to give your tenants at least 24 hours’ notice that you’ll require access, unless it’s an emergency and in which case you must still let them know you’re on your way and why.

If your property needs substantial work carried out then your tenants are within their rights to request a temporary reduction in their rent, which is called a ‘rent abatement’.

How Assure Accountants can help you

Renting out a property is an exciting time, especially if it’s your first! But there’s plenty you’ll need to be aware of, especially when it comes to your money and ensuring you get the associated tax right first time. That’s where our team of expert accountants come in, they can help and guide you on your way, and provide expert advice and support. Take a look at our buy-to-let services now, or get in touch to speak to one of our team members.

The post Buy-to-let checklist – be landlord ready with our top tips appeared first on Assure Accountants.

In this blog we focus on just that, and explore the top 7 things you can be doing to reduce your income tax bill in 2022.

1. Make pension contributions

Personal pension contributions are made from taxed money, so whilst you the taxpayer will pay in X net amount (for example 80% if you’re a basic-rate taxpayer, 60% if you’re an higher-rate taxpayer, or 55% if you’re an additional-rate taxpayer), HMRC will directly contribute the tax paid on that contribution, into your chosen pension scheme. The amount as a whole is then invested tax-free, so for example if you’re a basic-rate taxpayer you’d pay £80 and HMRC would pay the remaining £20. The total investment would then grow without income tax or Capital Gains Tax.

If you’re aged under 75 and are a UK resident that’s not currently receiving your pension, you’re able to contribute a maximum of £40,000 per annum from your earnings, and still receive this tax relief. If you have a spouse ensure they’re also doing the same to make the most from this allowance.

2. If you have a partner, make pension contributions on their behalf

If your partner isn’t currently earning, you are able to contribute to their pension in a tax-efficient manner, so long as you yourself are paying tax. Your partner must be a UK resident, not earning themselves, and also not already be receiving a pension. You’re able to contribute a maximum of £2,880 per annum, and HMRC will ‘top this up’ to £3,600 with the remaining £720.

3. Make sure you’ve used all of your pension annual allowance

If you have any unused allowance from the past three years you’re able to carry it over, so long as the pension scheme was in place during these years. It’s worth having a look back over your contributions to check you’ve used all of your allowances since 2019 to date.

4. Make a financial gift to charity

When you give a gift to a UK registered charity it’s exempt from income tax, so long as you sign a gift aid declaration when making the contribution. So for example, if you were to give £80 of your taxed money to a charity, HMRC will again pay the additional 20%, so the charity would in fact receive £100. Again if you’re a higher or additional-rate taxpayer, then the tax bands are extended, respectively.

5. Transfer investments to your partner

If you have investments, it’s advisable to revise them annually, so that you can ensure they’re in the best proportion for tax purposes, should you happen to share them with your spouse. If any funds you have are generating interest, and your spouse isn’t receiving an income from employment, trading or property lettings that exceed £17,570 in 2022/23, then the first £6,000 of the received amount will be tax-free.

If your spouse happens to have non-savings earnings greater than this amount, basic-rate taxpayers should earn a minimum of £1,000 interest, and for higher-rate taxpayers it’s £500 to be able to take advantage of the personal savings allowance.  Should the investment income generate dividends, then each spouse should hold enough capital to generate dividends of £2,000 (which is the annual dividends allowance – but do be aware that this allowance is by no means tested).

6. Transfer your personal allowance to your partner

The marriage allowance allows you to transfer 10% of your personal allowance to your partner, and vice versa, so long as you’re both paying the basis-rate tax amount. By doing so this process could save you up to £252 per annum, which can be done online through HMRC.

7. Check you’ve used all of your ISA allowances

ISAs are a great way of increasing your income tax-free. Whether its stocks and shares you choose to invest in, or cash ISAs, whatever you choose you have a limit of £20,000 for the tax year 2022/23, and £9,000 for a Junior ISA.

How your Vantage Accountant can help you

One of our main goals as your trusted contractor accountant is to ensure your money is working as hard as it can for you, in the most tax efficient way possible. Our expertise in the complex and sometimes demanding issues Limited Company contractors face mean that it’s our job to ensure you receive the right advice and support you need, in order to maximise your income. Get in touch with your Vantage Accountant to discuss any points raised in this blog.

The post Vantage’s top tips for reducing your income tax bill in 2022 appeared first on Assure Accountants.

In this blog we explore all that, to help you confidently borrow money from your Limited Company.

How does it work?

It doesn’t matter how much or for how long you wish to borrow from your small business, but what does matter is how much you have in your business bank account, and that you have enough to account for tax, any staffing costs, and other business depreciation elements.

Taking money out of your small business legally

There are various ways you’re able to take money out of a Limited Company, including:

1. By paying yourself a director’s salary
2. By issuing dividend payments from available profits within the company
3. In the form of a director’s loan
4. By claiming expenses for business-related items

A director’s salary

Most directors of Limited Companies will pay themselves a salary through PAYE. Depending on the amount you pay yourself, you may also need to pay National Insurance Contributions (NICs), and/or income tax. All salary payments are a tax deductible expense, so your company will not be liable to pay any Corporation Tax liability on this money. Your company will however, be subject to paying the 15.05% Employer’s NICs on any salary earnings that fall above the NIC Secondary Threshold of £9,100 (for the 2022/23 tax year).

Paying yourself a salary up to the NIC Secondary Threshold of £9,100 means no income tax or NI is payable. This value does still allow you to qualify for the State Pension and any other benefit entitlements, as your income exceeds the Lower Earnings limit of £6,396 per annum.

Another popular salary level taken by directors is the tax-free Personal Allowance of £12,570, whereby you won’t be liable to pay Income Tax, but you must pay employee NIC contributions on any earnings between £11,908 and £12,570.

Dividend payments

Any shareholder of the Limited Company is able to take profit out of the company in the form of dividends. You can only do so though when there’s profit in the company, otherwise the dividend is classed as ‘illegal’.

The total amount you’re able to pay yourself is dependent on the number of shares you personally hold, so for example if you hold 100% of the shares then you’re able to take the remainder of the profit from your company once all other costs have been accounted for (i.e. tax, expenses, etc).

All Limited Companies have to pay 19% Corporation Tax on taxable income (which is going to increase to 25% for all profits exceeding £250,000 from 1 April 2023). The first £2,000 of annual dividend income is taxed at 0%, and is free from NICs and Income Tax. Any amount that exceeds the £2,000 limit will be subject to dividend tax that’s based on your Income Tax band (ie basic, higher or additional rate tax).

Before you pay out a dividend you must declare the dividend to the board, and make a written record of the meeting’s minutes. This provides a black and white paper trail of what was said and when, the amounts issued and to whom. You must also keep a record of a dividend voucher, which will display the dividend’s details.

Director’s Loan

By taking money from your company in the form of a Director’s Loan, you’re able to:

1. Lend money back to your company
2. Borrow more money from your company than the original amount you paid in
3. Reclaim any money you originally paid into the company

You must keep and maintain records of Director’s Loans in a Director’s Loan Account, which must be shown as part of your company’s balance sheet.

If you decide to take out more money than you’ve paid into the business, your Director’s Loan Account will become overdrawn, and there are tax implications from being so. If your company owes money then your loan account will be in credit and you’ll be also to take money out without facing any tax liabilities.

For example – if you owe your company less than £10,000:

• There are no personal tax liabilities, but there may be tax consequences for your company if your loan is overdrawn for more than 9 months following your company’s yearend (your company’s filing deadline). If this is the case then the company must pay Section 455 Tax on the full amount overdrawn
• Section 455 Tax carries a 33.75% tax charge (32.5% for loans prior to 06/04/2022), which your company is liable to pay alongside its Corporation Tax liability
• You must display any outstanding loan amounts on your company’s tax return

If the amount you owe your company exceeds £10,000 at any point:

• If the loan from your company is overdrawn for more than 9 months from your company yearend, there may be tax consequences. If this is the case the company must pay Section 455 Tax on the full amount overdrawn
• Section 455 Tax carries a 33.75% tax charge (32.5% for loans prior to 06/04/2022) which your company is liable to pay alongside its Corporation Tax liability
• Any outstanding loan amounts must be displayed on your company’s tax return
• When a director’s loan exceeds £10,000, if you repay the loan to the company with interest applied (at HMRC’s official rate of interest) the loan will not be classed as a taxable benefit
• If the loan is repaid minus the interest you’ll need to declare the loan via your company P11D and your Self Assessment Tax Return. This is because the loan is deemed as a benefit in kind (BiK) for the Director to receive an interest-free loan from the company
• The value of the benefit is calculated at the official rate of interest. Class 1A National Insurance at 15.05% will then be payable from your company via form P11D, and the benefit will also be included within your personal tax return, taxed at your appropriate rate of tax

What you need to keep a record of when it comes to Director’s Loans:

• The value of money a Director gives to the company, excluding any share payments they may take
• The total value a Director may borrow from the company
• Any interest that may be payable on that loan

These records are usually kept within the Director’s Loan Account. It may be subject to certain types of tax, depending on how much is borrowed. It’s therefore advisable to discuss your plans with your Vantage Accountant before borrowing any money from your Limited Company.

What if your Director’s Loan Account has zero balance, or is in credit?

If you take out less than the total balance you’ve paid in, you’re not borrowing any money, and therefore claiming funds which you’ve already paid in.

The Director’s Loan Account will either show a balance of nil or remain in credit, depending on the total amount you draw out. You’re able to take out the available balance at any given time without any tax implications, so long as your company account is in credit.

What happens when your Director’s Loan Account is overdrawn?

If you draw out more than what’s already in there (discounting a salary payment, dividend or expense) the withdrawal is a benefit, and will therefore be classed as a Director’s Loan. This will in effect make your Director’s Loan Account overdrawn.

Your Limited Company’s financial year

If your account remains overdrawn for 9 months after the end of the accounting period, HMRC will charge you S455 Tax at a rate of 33.75% (32.5% for loans prior to 06/04/2022). You are able to claim back the tax paid once you’ve paid the full amount of overdrawn money back into your Limited Company.

Expenses

You are able to reclaim the cost of expenses, so long as they were purchased wholly and exclusively for the purpose of the business. You must keep all receipts and a record of each expense, what they were needed for and when. You are able to claim tax-deductible expenses in the following forms:

• Parking and mileage costs
• Travel and accommodation
• Mobile phone contract costs
• Entertainment
• Food and drink
• Computer and office equipment
• Training costs
• Postage costs

If the expense is incurred personally on behalf of your business you’ll be reimbursed by your company when you’re paid weekly or monthly, or whenever is convenient to you. Your company must keep a record of all expenses for a period of 6 years, along with what the expense was and what it was needed for.

How your Vantage Accountant can help

Tax is confusing, especially when it comes down to working out your % margins, what taxes are due and when, and how much extra you could end up paying if you get your numbers wrong. That’s where your expert Vantage Accountant comes in handy, to help you navigate the complex world of running your Limited Company. If you’re considering borrowing money from your company give your Vantage Accountant a call today.

The post How to borrow money from your Limited Company and the associated tax risks appeared first on Assure Accountants.