fpdteam, Author at Bennetts Accountancy

How dividends are taxed

19th October 2023 by fpdteam

Dividends received are taxed as income but the rates of tax applied are different to the formal Income Tax rates. Also, individuals can receive dividends up to the annual dividend allowance tax free. The annual dividend allowance for 2023-24 is £1,000.

The current tax rates for dividends received (in excess of the dividend tax allowance) are as follows:

8.75% if dividends form part of a taxpayer's basic rate band;
33.75% if dividends form part of a taxpayer's higher rate band; or
39.35% if dividends form part of a taxpayer's additional rate band.

Dividends that fall within (are covered by) your Personal Allowance do not count towards your dividend allowance. It is also possible that you may pay tax at more than one rate of tax.

If you receive up to £10,000 in dividends, you can ask HMRC to change your tax code and the tax due will be taken from your wages or pension. Alternatively, you can enter the dividends on your Self-Assessment tax return if you already file a return.

You do not need to notify HMRC if the dividends you receive are within your dividend allowance for the tax year.

If you have received over £10,000 in dividends, you will need to complete a Self-Assessment tax return. If you do not usually complete a tax return, you will need to register by 5 October following the tax year in which you had the relevant dividend income.

Source:HM Revenue & Customs| 16-10-2023

Accounting periods for Corporation Tax

19th October 2023 by fpdteam

Companies often have two different company accounting periods. This is because there are different rules for Companies House filings and for returns sent to HMRC.

The accounting periods can be the same but can also differ and a change may need to be made to ‘sync’ the accounting periods. As a general rule the Companies House rules are more flexible and under certain circumstances it is possible to make a change to the year end. The Companies House accounting period can sometimes run for more or less than 12 months.

A tax accounting period for Corporation Tax purpose cannot be longer than 12 months. This can mean that you will need to file two returns to HMRC to accommodate the maximum 12 month rule.

If your accounts cover less than 12 months, then your accounting period will normally end on the same day and will be shorter than 12 months. This can happen if the company stops trading or shortens its company’s year-end also known as its accounting reference date.

Source:Companies House| 16-10-2023

Increase in National Living Wage

19th October 2023 by fpdteam

The Chancellor of the Exchequer, Jeremy Hunt, confirmed that the government has committed to the proposals of the Low Pay Commission for increasing minimum wage rates from 1 April 2024. The actual wage rate recommendations of the Low Pay Commission are expected to be announced next month.

The latest forecasts show that this would create a pay boost next year worth over £1,000 for two million low-paid workers. A full-time worker on the National Living Wage (NLW) will be over £9,000 better off than they would have been in 2010.

These increases are expected to see the NLW increase to over £11 an hour. The NLW is the minimum hourly rate that must be paid to those aged 23 or over. The threshold is expected to further reduce to age 21 by 2024. These changes are based on the remit from the Low Pay Commission which sets a target for the NLW to reach two-thirds of median earnings by 2024 for workers aged 21 and over.

The current minimum wage rates for the period from 1 April 2023 – 31 March 2024 are as follows:

National Living Wage

Aged 23 & over – £10.42

National Minimum Wage

Aged 21 to 22 – £10.18
Aged 18 to 20 – £7.49
Aged 16 and 17 – £5.28
Apprentice rate – £5.28

Source:HM Treasury| 16-10-2023

Reporting early payment of wages before Christmas

19th October 2023 by fpdteam

There is a permanent easement in place for employers to report PAYE information in real time over the Christmas period. This can be for a number of reasons, for example, during the Christmas period the business may close meaning workers need to be paid earlier than normal.

Employers that pay wages early over the Christmas period should report their normal or contractual payday as the payment date on their Full Payment Submission (FPS) and ensure that the FPS is submitted on or before this date. Doing this will help to protect employees’ eligibility for Universal Credit, as reporting the payday as the payment date may affect current and future entitlements.

HMRC provides the following illustrative example:

If you pay on Friday 15 December 2023 but the normal or contractual payment date is Friday 29 December 2023, you will need to report the payment date on the FPS as 29 December 2023 and ensure the submission is sent on or before 29 December 2023.

The overriding PAYE reporting obligation for employers is unaffected by this exception and remains that you must report payments on or before the date the employee is paid.

Source:HM Revenue & Customs| 16-10-2023

Electric charging of company vehicles at home base

19th October 2023 by fpdteam

HMRC has published revised guidance concerning the charging of company cars and vans at residential properties. HMRC had previously maintained that the reimbursement of costs in relation to charging a company car or van at a residential property was a taxable benefit. This advice seemed at odds with the exemption on payments and benefits provided in connection with company cars and vans laid out in the relevant legislation.

HMRC has now confirmed, following a review of their position, that the electric charging of company vehicles at home base can now be treated as a tax-free benefit.

HMRC has published revised guidance about this change in interpretation and has stated that:

Following a review of our position, HMRC now accepts reimbursing part of a domestic energy bill, which is used to charge a company car or van, will fall within the exemption provided by section 239 ITEPA 2003.

This means that no separate charge to tax under the benefits code will arise where an employer reimburses the employee for the cost of electricity to charge their company car or van at home. 

HMRC has also said that the exemption will only apply where it can be demonstrated that the electricity was used to charge the company car or van.  Employers will need to make sure that any reimbursement made towards the cost of electricity relates solely to the charging of their company car or van.

Source:HM Revenue & Customs| 16-10-2023

Recurring sales

17th October 2023 by fpdteam

Most business owners will appreciate the difference between one-off sales, and services that are generally described as recurring.

For example, you may sell a laptop (a one-off sale) and then bolt on a support contract (a recurring sale).

The advantage of recurring income streams is that they not only impact your current sales numbers, but they also help you build a platform of future sales for your business.

Also, the cost of “selling” or acquiring recurring sales is generally lower than securing a one-off sale as you are creating sales revenue into future years rather than just improving your sales figures in the current month.

It is worth researching how you could develop recurring income streams for your business. Subscriptions or support are two areas ripe for development. Or you could encourage one-off buyers to join your Customer Club where for a minimum monthly fee, they would be entitled to a progressive discount on purchases.

As we strive to emerge from recent difficult economic challenges, seeking out ways to introduce recurring services into your product mix may help you build a sustainable future for your business.

Well worth getting together with your work colleagues to brainstorm ideas.

Source:Other| 16-10-2023

Repeat business

17th October 2023 by fpdteam

Once you have secured the attention of a customer that has purchased their initial goods or services from you, you have completed the hard part – converted a prospect into a buying customer – so don’t be afraid to follow up with cross-sales offers.

For example, when you deliver goods to a customer, do you promote other products that you supply or offer a discount for a repeat order?

Many firms adopt this strategy by:

Inserting a current publicity leaflet or brochure with the goods physically delivered, or by
Following up orders by email, a “Hope you found our recent delivery useful…”, with a link to your website and other offers.

In this way you build your relationship and increase footfall.

Three factors influence turnover:

The number of customers.
The price of your goods or services, and
Footfall, the number of times a customer buys from you in a trading period.

In most cases, increasing footfall will have the most impact on turnover. Footfall is the number of times you can encourage customers back to buy more from your business.

So, be on the lookout for ways to encourage your customers back. Once you start thinking in this way, you will be surprised by the number of strategies you could apply.

Source:Other| 16-10-2023

Tax Diary November/December 2023

13th October 2023 by fpdteam

1 November 2023 – Due date for Corporation Tax due for the year ended 31 January 2023.

19 November 2023 – PAYE and NIC deductions due for month ended 5 November 2023. (If you pay your tax electronically the due date is 22 November 2023.)

19 November 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2023.

19 November 2023 – CIS tax deducted for the month ended 5 November 2023 is payable by today.

1 December 2023 – Due date for Corporation Tax payable for the year ended 28 February 2023.

19 December 2023 – PAYE and NIC deductions due for month ended 5 December 2023. (If you pay your tax electronically the due date is 22 December 2023).

19 December 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2023.

19 December 2023 – CIS tax deducted for the month ended 5 December 2023 is payable by today.

30 December 2023 – Deadline for filing 2022-23 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2024-25.

Source:HM Revenue & Customs| 12-10-2023

Re-starting a dormant company

12th October 2023 by fpdteam

HMRC must be informed when a non-trading or dormant company starts trading again and thus becomes active for Corporation Tax purposes. Companies can use HMRC Online Services to supply the relevant information.

When a company has previously traded and then ceases to trade it would normally be considered as dormant. A company can stay dormant indefinitely, however, there are costs associated with doing this and certain filings must still be made to Companies House. The costs of restarting a dormant company are typically less than forming a new company.

The following steps are required:

Tell HMRC that your business has restarted trading by re-registering for Corporation Tax.
Send accounts to Companies House within 9 months of your company’s year-end.
Pay any Corporation Tax due within 9 months and 1 day of your company’s year-end.
Send a Company Tax Return – including full statutory accounts – to HMRC within 12 months of your company’s year-end.

Whilst reporting dates for annual returns and accounts should remain the same. The Corporation Tax accounting period is different and is set by reference to the date when the company restarts business activities.

Source:Companies House| 09-10-2023

Deadlines 2022-23 Self-Assessment tax return

12th October 2023 by fpdteam

The 2022-23 tax return filing deadline for taxpayers who continue to submit paper Self-Assessment returns is 31 October 2023. Late submission of a Self-Assessment return will incur a £100 late filing penalty. The penalty usually applies even if there is no liability or if any tax due is paid in full by 31 January 2024.

We would recommend that anyone still submitting paper tax returns consider the benefits of submitting the returns electronically, and therefore benefit from an additional three months (until 31 January 2024) in which to submit a return.

Taxpayers with certain underpayments in the 2022-23 tax year can elect to have this amount collected via their tax code (in 2024-25) provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts and the amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000.

Daily penalties of £10 per day will also take effect if the tax return is still outstanding three months after the filing date up to a maximum of £900. If the return still remains outstanding further higher penalties will be charged when a return is six months and twelve months late.

Taxpayers that received a letter informing them that they have to submit a paper return after 30 July 2023 have an extended deadline which runs for three months from the date they received the letter to submit a paper return.

Source:HM Revenue & Customs| 09-10-2023