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Thinking VAT – Have you checked your turnover in the UK and do you know how to?

Posted on by Monica Jervis

Recent History

The sales turnover threshold at which a business would ordinarily be required to register for VAT in the UK has been £85,000 since 1st April 2018, only now changing to £90,000 from 1st April 2024.

Why am I writing this?

The UK VAT threshold of £80,000 plus in the last decade until it recently became £90,000 was not that easy to reach for many single-owner micro businesses, and some could be quite relaxed, believing they were never going to go anywhere near that figure. The rise in inflation in the UK in recent years has made £80,000 plus in sales far more common and easier to reach without the business feeling great profits. People, particularly if they haven’t engaged with an accountant, are at risk of exceeding that figure without realizing it on time. I’m saying “people” because it is far more common for unincorporated businesses to operate without an accountant than incorporated businesses taking advantage of the limited company structure. However, even if you do have an ‘on the ball’ accountant, it is the business owner’s responsibility to ensure they are registered for VAT if they exceed the VAT registration threshold.

Understanding the Registration Rules

If you are not yet VAT registered, you may think that looking at your annual accounts is a sufficient check on whether you should become VAT registered. Or you may think it’s a calendar yearly check or a tax yearly check. The 12 months that HMRC refer to is actually a rolling 12 months from the 1st of the first month to the last day of the last month. So every month, you consider the previous 12 months, and every month that you do this, the 12-month period you are looking at has a 1-month difference to the 12-month period you looked at last month.

Confused? Ok, all you have to do right now is look at the 12-month period from 1st June 2023 to 31st May 2024 (the last full 12-month period). Have you made sales in excess of £90,000 in that period? If not, then wait until July and look at 1st July 2023 to 30th June 2024. I’ve drawn up a table below for you to keep doing this every month.

Time to Register

Once your business has exceeded £90,000 (since 1/4/2024) in sales, you have 30 days from the end of the month that you went over the threshold to register for VAT.

What Date Will My VAT Registration Start?

You will be VAT registered from the first day of the second month after you go over the threshold.

Questions

Q: What if I exceeded the VAT threshold in the middle of the month?
A: It is the last day of the month in which you exceeded the VAT threshold that you need to consider.

Q: What if I exceeded the VAT threshold because I had an exceptionally large order in one month only, but I don’t expect that to happen again?
A: You can apply for a registration ‘exception’ if you exceed the VAT threshold temporarily.

Q: What if my sales are exempt from VAT?
A: Check with an accountant that this is the case, and if so, you do not need to register.

Q: What if all of my sales are zero-rated for VAT?
A: Check with an accountant that this is the case. You will still need to register for VAT, but HMRC may offer you an exemption, which you and your accountant may or may not think is the best way forward.

Q: What if I already know I’m going to go over the VAT threshold next month?
A: If you are going to exceed the VAT threshold in the next 30 days, you have to register by the end of the 30-day period.

Q: I already have an accountant – isn’t it their responsibility to tell me if I need to register for VAT?
A: Yes, if they have agreed to do that. Check your contract.

Q: I’m selling to an overseas country only – I don’t have to register for VAT in the UK, do I?
A: Yes, you do if you exceed the VAT threshold. Discuss with an accountant.

VAT REGISTRATION CHECKER TABLE
Date from Date to Sales over £90,000 – Action Sales NOT over £90,000 – Action Submit vat registration by Date I should be registered from
01/05/2023 30/4/2024 Yes. Register for Vat Look next month 30/05/2024 01/07/2024
01/06/2023 31/05/2024 Yes. Register for Vat Look next month 30/06/2024 01/08/2024
01/07/2023 30/06/2024 Yes. Register for Vat Look next month 30/07/2024 01/09/2024
01/08/2023 31/07/2024 Yes. Register for Vat Look next month 30/08/2024 01/10/2024
01/09/2023 31/08/2024 Yes. Register for Vat Look next month 30/09/2024 01/11/2024
01/10/2023 30/09/2024 Yes. Register for Vat Look next month 30/10/2024 01/12/2024
01/11/2023 31/10/2024 Yes. Register for Vat Look next month 30/11/2024 01/01/2025
01/12/2023 30/11/2024 Yes. Register for Vat Look next month 30/12/2024 01/02/2025
01/01/2024 31/12/2024 Yes. Register for Vat Look next month 30/01/2024 01/03/2025
01/02/2024 31/01/2025 Yes. Register for Vat Look next month 02/03/2025 01/04/2025
01/03/2024 28/02/2025 Yes. Register for Vat Look next month 30/03/2025 01/05/2025
01/04/2025 31/03/2025 Yes. Register for Vat Look next month 30/04/2025 01/06/2025

Scope

This blog is concerned with UK VAT only.

Disclaimer

This blog is intended to raise awareness and hopes to prevent small UK businesses from unwittingly exceeding the VAT threshold without taking action. It is not a comprehensive guide for the intricacies of VAT compliance in the UK or any other country. If you are in any doubt at all about your UK or other country VAT responsibilities, you should consult with your accountant.

What expenses can I claim for tax and how do I prove them

Posted on by Monica Jervis

With different rules for Limited Companies and sole traders, flat rates for simplified accounting, cash accounting, accruals accounting and restrictions on property businesses depending on the type it’s not surprising that business owners get confused about what counts for an expense and what doesn’t in their particular business.

This blog aims to give some general guidance to individuals carrying out a sole trade.

The overarching test of whether an expense can be claimed against tax is that it must be ‘wholly and exclusively incurred for the purpose of carrying out business. If your expense can meet that criteria then it is likely to be allowable.

 

Wholly and exclusively test

Wholly and exclusively means that the expense is for the trade only. If it is not only for trade but also for a personal reason because it is logical to kill 2 birds with one stone so to speak, then you will be disappointed to know that you will not be able to claim the expense. For example, if you have business contacts in Spain and decide to have a business meeting with them while you are on holiday in Spain, then the travel and hotel will not be allowable as a business expense. The cost of the meeting if any is a business expense categorised as entertainment but entertainment is unfortunately a business expense that is not tax deductible.

 

Working from home

Use of home as office expenses are often an area of confusion for tax payers. Under simplified expenses for the self employed you can use a flat rate based on the hours you work from home each month as follows:-

Working from home simplified cost

Hours of use per month Flat rate per month

Hours of use per monthFlat rate per month
25 – 50£10.00
51 – 100£18.00
101 and more£26.00

Working from home actual costs

If you think that the trade portion of your domestic costs would exceed the flat rate allowance you can work out the proportion. For example if you use one room in your home 24 hours a day for your trade and you have 6 rooms in your home in total then you can claim 1/6 of your domestic bills such as heating, electricity, Council tax, rent and mortgage interest, internet and phone use. Of course if you use a room for business for 8 hours a day and then use it for personal living the rest of the time then the calculation is a bit more complicated ie 8/24 *1/6 * £x,xxx.

You can use other reasonable ways of calculating the actual cost but just remember to document your calculation (write it down or type it up and file it safely) and keep the evidence of the costs such

as your electricity bills. If your electricity use is heavy such as for those constantly using machinery in their business then you can keep a record of the electricity readings each time you use the machine and keep your electricity bills to prove the unit price and that the total bills are reasonably in excess of your claim to take into account personal domestic use.

 

Clothing

Clothing is another bone of contention and confusion for many business people. If you do want to claim for clothing then I recommend you purchase the clothing from a specialist shop as you won’t be able to claim ‘normal’ clothing against tax. Therefore if you are a builder, buy your protective footwear and clothing from somewhere like Screwfix or Toolstation. If you buy it from JB Sports for example it will be deemed ordinary clothing and disallowed by HMRC unless it bears your business logo.

According to HMRC allowable clothing includes:-

  • Uniforms
  • Protective clothing
  • Costumes for actors or entertainers
 

Training Courses

You can claim allowable business expenses for training that helps you keep your already acquired knowledge and skills up to date.

You can’t claim expenses for training courses that enable you to start a new business or expand into new areas of business including anything related to your current business. That rule has particular potential area for confusion. I recommend that if you are doing something that may fall into that category you should take some advice on whether it counts as a business expense or not.

 

Evidence

You must keep proof for expenses claimed. This is for yourself so that you can remind yourself why you have made a claim and it’s also for HMRC in case they want to see them.

Types of proof may include:-

  • Receipts for stock and other expenses
  • Bank statements including paypal statements and credit card statements (You need the bonafide PDF or paper bank statements, not csv downloads and don’t just depend on your bank feed if you are using software as these can be edited).
  • Sales invoices, till rolls, website reports of sales, Shopify statements
  • Use of home as office or workshop calculations as described above

I like to keep my blogs upbeat and this one whilst letting you know your restrictions will help you to stay compliant. Although HMRC are under resourced they are also under pressure to bring in more tax since the big CV19 spend.

Ways to not get investigated may include:-

  • Using a regulated accountant with a good reputation
  • Not showing profit and loss figures out of kilter with your normal industry
  • Not making significant tax reclaims.

I obviously wouldn’t recommend that you don’t claim tax genuinely owed to you – just make sure you can prove it!

E-commerce – The accounting and tax challenges and solutions

Posted on by Monica Jervis

Not everyone that goes into business means to go into business, or not in a significant way. 

We can all earn a £1,000 per tax year from trading without worrying about a tax return but some social media businesses are so successful so quickly that their owners who are often inexperienced in the tax implications,  are swept along with the momentum and before they know it they have responsibilities but not the knowhow, time or possibly even awareness to deal with the them. 

I’m concerned here in this blog with owners such as young influencers who’s TikTok activities for example culminate in high volume, relatively low value sales of goods all over the world. 

The simplest form of calculating profit for income tax purposes is the cash basis which can be used for most sole trade businesses (not limited companies) with a turnover no higher than £150,000.  The scheme is intended to help people that complete their own tax returns, and I am not concerned with the pros and cons of the scheme in this blog. 

If you have high volume sales running into thousands of transactions, you are likely to be using PayPal or like collect the income.  You may also be using PayPal to pay suppliers and other expenses.  You may also be using your personal bank account, personal PayPal account and credit card to run the financial side of your business.  Analysing the business transactions from your personal transactions over several bank accounts is not an easy task and it isn’t easy to ensure there are no errors.  Remember the income is not just the transfers you make from PayPal or like your bank. 

I am going to assume that the reader is in a relevant business and that once you have had a go at your own tax return in year one you then decide to appoint an accountant and that the accountant decides in his or her wisdom that cash accounting doesn’t work for your business and that the traditional model is more appropriate. 

This may be because: – 

  • The most accurate record of your sales is the report from your website 
  • You are holding stock which cash accounting ignores 
  • You are likely to need to register for vat or have already exceeded the threshold and must register asap.  In the case of reclaiming purchase vat reference must be made to valid vat invoices or receipts, not just the bank transactions. 
  • You are going to need a solution to deal with your multi-currency sales payments 

He or she is likely at this point to throw you a curveball as you are selling all over the world and should have been dealing with your vat responsibilities in the relevant countries from the start. 

Your accountant will at this stage also implore you to arrange a business bank account, credit card account and PayPal account. 

So back to processing.  We have thousands of sales transactions as reported from your website and we need to know the following: – 

  • Date of sale 
  • Country the goods are being shipped to  
  • Vat rate – depending on country and type of goods. 
  • Currency of payment 

The answer can only lie in automation.   To get this information into your accounting software you need to be using an API or Application Programming Interface such as Auto Entry, Receipt Bank (now called Dext)  or ‘other’.  Your accountant will be able to provide that at the relevant cost which you will need to factor into your sales price. 

From the API, once the Sales transactions are fully analysed, they can be forwarded on to your accounting software such as Sage, Xero or QuickBooks.  You are then ready to apply the actual money received to the sales. 

Purchases are also dealt with in the API before being sent to your software to be dealt with in the various ways. 

 You need to be careful with the setup in both the API and your accounting software to get all this working as it should be and I strongly recommend this is done with an appropriately skilled accountant. 

Personally, I’m nervous of full automation but when you have thousands of transactions in this way a human being cannot check each single one and an audit-based approach must be applied to accuracy i.e., checking samples. 

Bookkeeping vs. Accounting: What You Need to Know

Posted on by Monica Jervis

What is Bookkeeping?

Bookkeeping is the process of recording and organising the financial transactions of a business. Bookkeepers are responsible for keeping track of every financial transaction in a business. They also prepare and maintain the books of accounts, such as the general ledger and the bank reconciliation statement.

Bookkeeping is a very important task because it ensures that all the financial data of the business is accurate and complete. Bookkeeping also helps to monitor the financial performance and health of the business.

Some of the common tasks that bookkeepers perform include:

  • Recording journal entries for each transaction
  • Posting entries to the appropriate accounts
  • Balancing the books and reconciling bank statements
  • Preparing financial reports such as income statements and balance sheets
  • Processing payroll and invoices
  • Managing accounts receivable and accounts payable

What is Accounting?

Accounting is the process of interpreting and analysing the financial data of a business. Accountants are responsible for using the information provided by bookkeepers to make informed business decisions and recommendations. They also prepare and present financial statements and reports to various stakeholders, such as owners, investors, creditors, regulators, and tax authorities.

Accounting is a more complex and strategic function than bookkeeping because it involves applying accounting principles, standards, and rules to the financial data. Accounting also helps to plan and forecast the future of the business, as well as to identify and solve any financial problems or issues.

Some of the common tasks that accountants perform include:

  • Preparing tax returns and filing them with the relevant authorities
  • Conducting audits and reviews of financial statements and records
  • Performing account analysis and variance analysis
  • Creating budgets and cash flow projections
  • Advising on financial planning and strategy
  • Evaluating business performance and profitability

Why Do You Need Both Bookkeeping and Accounting?

Bookkeeping and accounting are both essential for any business because they complement each other. Bookkeeping provides the foundation for accounting, while accounting provides the meaning for bookkeeping. Without bookkeeping, there would be no reliable data for accounting to work with. Without accounting, there would be no insight or guidance for bookkeeping to follow.

Bookkeeping and accounting also work together to ensure that your business is compliant with tax laws and regulations, as well as to provide accurate and timely financial information to various stakeholders. By having both bookkeeping and accounting functions in your business, you can:

  • Save time and money by avoiding errors and penalties
  • Improve your cash flow and liquidity by managing your income and expenses
  • Increase your profitability and growth by identifying opportunities and risks
  • Enhance your reputation and credibility by demonstrating transparency and accountability

Summary

In summary, bookkeeping and accounting are essential but distinct functions for businesses. Bookkeeping involves recording and organizing financial transactions, maintaining books of accounts, and preparing financial reports. Common tasks include recording journal entries, processing payroll, and managing accounts receivable and payable. Accounting, on the other hand, interprets and analyses financial data to make informed decisions and provide insights. Accountants prepare tax returns, conduct audits, create budgets, and advise on financial planning.

Both bookkeeping and accounting are necessary as they complement each other, ensuring compliance with tax laws, providing accurate financial information, and enabling businesses to make informed decisions. The Fishbourne Accountant is an example of a company that offers both bookkeeping and accounting services, streamlining the process for businesses.

Making Tax Digital (MTD) for Self Employed Individuals and Landlords

Posted on by Monica Jervis

Making Tax Digital was first announced at Budget 2015 in the government’s bid to improve the tax system by encouraging all businesses to  keep their accounting records digitally and use this to file their various tax returns directly from the software.  The government believe this will reduce errors in reporting tax due thereby reducing the ‘tax gap’, and reduce stress for relevant individuals as they will keep on top of their taxes though-out the year instead of focusing on a whole tax year that is potentially 9 months into the past all in one go. 

We have had MTD for VAT and various re-alignments of the target dates for compliance by individuals.

From April 2024 self-employed individuals and Landlords with a turnover exceeding £10,000 must have signed up to MTD for income tax and use HMRC approved digital software to record their transactions and report profits quarterly to HMRC.  HMRC will in turn update the taxpayer on much tax is due at the relevant periods throughout the year based on their submissions. 

At the tax year-end there will be a final submission due by 31st January after the end of the tax year giving the taxpayer the opportunity to review all of their transactions and make corrections, final accounting adjustments and claims for reliefs before submitting the final report.   The submissions must all be from HMRC approved software such as Sage, Xero or Quickbooks and not directly via the HMRC portal.

Businesses that already use recognised software such as Sage, Xero or Quickbooks and also have an in year bookkeeping/accounting solution will suffer the least stress as the accountant and bookkeeper will carry out all the work but will just make an additional four submissions per year.  Individuals and Landlords that are still using paper records will be concerned about the cost implications of using an accountant for 5 submission per year instead of 1.  Vat registered self employed individuals or Landlords may not be too pleased to have to make 9 tax submissions per year.

This legislation does seem to be targeted at those individuals that complete their own tax returns every year from their bank statements, invoices and other records.   These may be individuals that feel intimidated by having to venture into the unknown and learn new I.T. skills.  Although much of the advertising for software proclaims that the software does it all for you, I have yet to come across a piece of software that will accurately make decisions on a taxpayers transactions and 100% guarantee that those decisions are correct or insure against the fines that are still in place for errors.  Remember that errors can result in overpaid tax as well as underpaid tax.

The key message is that Making Tax Digital is going to be implemented for sole traders and Landlords by April 2024 so if you haven’t already done so you need to be preparing to find software that you can get on with by that date.  Therefore for a relatively pain free MTD journey we do advise starting with the software by April 2023.

 

Remember to ask an accountant for support you with training and guidance in relation to your new responsibilities.  A good accountant will try to make this as pain free as possible and best case scenario the process will be enjoyable and beneficial to you.

When is a hobby not a hobby?

Posted on by Monica Jervis

When is a hobby not a hobby (in the eyes of HMRC) and should I be completing a tax return?

We all have hobbies – well hopefully. Some of us paint, tend to our gardens, spend our Sunday’s cooking, or help our friends with an additional skill we may have learned for fun or to expand ourselves. Unless we are hit with a conscious urge to make a life changing decision, jack in our job, and turn our hobby into a self-employed business, we don’t think about having to complete a tax return.

Sometimes when we’re good at our hobby, our friends and family may ask us to furnish or supply them with the benefit of that skill or knowledge for a ‘drink’ or a small informal payment.

There are other kinds of income that might not fit the traditional idea of a hobby, but there are some activities that have become popular over recent years and people do not always realise that they should check whether they should be declaring any income from it to HMRC.

Since the famous day on 21st March 2020 when many were furloughed and confined to their homes without work, hobby activity has been on the rise.

Properties and Cryptocurrencies

As well as the traditional kind of hobby, there has been an explosion in property rentals – ‘income from land and property’. Property rental includes renting a room or rooms in your home, renting a self-contained home out for a family or individual to live in long term, renting as a furnished holiday let either in the UK or abroad or maybe renting a small storage area to a local business.

Furthermore, many people have become interested in cryptocurrency such as Bitcoin to the extent they have made significant financial gains – especially since March 2020 when many investments plummeted in value and have now recovered.

This blog can’t go into the complex tax issues relating to property rentals and cryptocurrency investing or trading but just seeks to raise awareness that what you may consider just ‘what you do in the evenings and weekends’ may be subject to ether income tax or capital gains tax.

HMRC do recognise hobbies and since 6th April 2017 when the £1,000 trading allowance was introduced, there has been no need to complete a tax return if the gross income in the tax year i.e., 6th April to 5th April does not exceed £1,000. This was mainly intended to cover such activities as eBay trading which had grown at the time.

There is a different £1,000 allowance for property income called the ‘Property Income Allowance’. So if your income from property doesn’t exceed the £1,000 mark, there is no need to complete a tax return.  This does seem unlikely though and if you do have to do a tax return you can claim the £1,000 allowance instead of expenses.

I would be remiss if I didn’t mention the amazing £7,500 rent a room allowance at this stage. This applies if you are renting space in your home and the most important and simple test of eligibility is whether the tenants are using the same front door as you. If they are, then you are likely to be eligible to use the rent a room allowance. You also need to be aware that there could be capital gains tax consequences or renting space in your home.

Regarding Cryptocurrency, this quite often applies to very young people as they are so accomplished in computerised activities. Depending on the number and frequency of the transactions, the young individual may be deemed to be trading rather than investing and there are very different tax treatments depending on whether a ‘gain’ is made from the sale on an investment asset or whether an income is being derived from the activity.

Selling bits and bobs

Lastly, I should cover people that have been having a clear out in lockdown and may have sold some family heirlooms, a painting or sculpture that they never really liked. If you received more than £6,000 for the item, you may have to pay capital gains tax. Note the capital gains tax allowance of £12,300 in the current tax year to be used across all your gains.

Note you don’t have to have received money for a transaction to be subject to Capital Gains tax. If you give away an item, this could amount to a taxable event in which capital gains tax would be due.

Please always check with an accountant before entering any significant financial transaction or activity.

The Budget – 2021

Posted on by Monica Jervis

We waited worryingly for this budget, well I did after all the rumours and speculation e.g., taxing the reserves of limited companies which has not happened.  And arguably Rishi Sunak’s second Coronavirus budget seems to mainly be supportive, at least for now.

Here is an overview of the main features from my point of view which I hope clearly highlights the concerns of most individuals and small businesses in the Chichester locality.

  1. Nobody can have failed to have noted the big headline that Corporation Tax will increase to 25% from 2023 i.e., two years time from this coming April. This will not affect companies with profits below £50,000 and from £50,001 upwards the Corporation Tax rate will gradually increase with the full 25% only being applied to companies with profits of over £250,000.

  2. For businesses that have incurred losses however, they will now be able to carry those losses back and offset them against the previous 3 year’s profits rather than just one year as in the current rules.

  3. To help and encourage businesses to invest in new equipment over the next two years, 25% tax relief is offered on those purchases even though small business profits are still being taxed at 19%. This is being called a ‘Super Deduction’.

  4. There is also extended help for businesses that took advantage of the Vat deferral scheme for their vat bills relating to vat quarters between 20th March and 30th June 2020. The options for those businesses now are to either …
    • pay their vat bill by 31/3/2021
    • Opt into the new vat deferral scheme once launched including setting up a direct debit and paying the first of 11 interest free installments. The deadline for admission to this scheme  is 31/3/2021.
    • Request further help from HMRC
  1. Tourist and hospitality industries will continue to benefit from the 5% rate of vat until 30/6/2021 and then from 1/7/2021 the rate will increase to 12.5% for those industries until 31/3/2022 when they will revert to the standard rate of vat unless otherwise advised.

  2. Ebay and Amazon traders should be aware that the government are focusing on them and are looking to implement rules that require the platform owners to disclose information about their income to HMRC. If you are one of those traders, it may be time to speak to an accountant!

  3. The government will continue to provide direct help for businesses and the chancellor announced in this budget that the furlough scheme will continue until September 2021 but will be gradually reduced from July as it was in 2020.

  4. Further grants will be provided in the form of re-start grants.  Further grants will be available for the self-employed including those that filed a tax return before the budget announcement and there will be further loans.

  5. The Business Rates Holiday for relevant businesses continues until June then reduces to 66%.

  6. I just want to finish with the one bit of good news for non-business individuals especially the young as they will now be able to access 95% mortgages. 

This is intended as an easy-to-read overview to raise awareness rather than a detailed ‘how to’ for each feature.  Any more than one page of A4 and I am at risk of losing most people. If any area is of concern to you, there will be lots of help online now that you know what to Google and we are here to help at any time as always.

Cloud Accounting

Posted on by Monica Jervis

The Covid Revolution

Since 21st March 2020 it feels as though we have been launched into the future with close contact at work a happy thing of the past and having now recovered from the shock, industries having to rethink the way that they work and develop at an unprecedented speed if they are to survive.

Cloud Accounting

Cloud accounting for small businesses has been around for the last decade with machine reading and machine learning being the latest and most important development since the bank feed, for accounting software companies to now accelerate as quickly as possible as the main providers compete against each other on capability and price.

If you are a business owner still trying to control your business with spreadsheets, it really is time for an overhaul.  Book yourself onto a free cloud computing trial with Xero, Quickbooks, Freeagent or any provider of your choice and embrace the challenge of new learning.

The difficulty for many business owners is that although the steps are simple, the understanding of double entry bookkeeping is not there and that is still the foundation of generally accepted accounting.

The Bank Feed

The bank transactions are literally fed down into the software. 

Completed carefully, the bank feed eliminates the need for data input or the bank reconciliation where accountants used to take a client cashbook, spend hours matching the entries to the bank statements and type up the long lists of errors and omissions.

Machine Reading

Being able to email or text a photograph of your supplier invoices or petrol receipts for example to the accounting software eliminates data input errors and saves time.  The software will read the figures on the electronic documents and accurately complete the vat and total fields in the invoice or receipt transaction.  

Machine Learning

The better products will also learn your categorization of your bank payments and receipts, speeding up the bank reconciliation process even more.

Dedicated Automatic Entry Products

To get an even better result, use the bookkeeping software along with an intermediary app such as Receipt Bank or Autoentry.

The Paperless Office

Your receipt or invoice will now exist in your chosen accounting software package as a transaction and the document will be electronically attached to the transaction for you to open and view any time you need to.    

This blog may pose many more questions and clarification from enquiring business owners.  As well as seeking information from the software providers and trialling their products, I would always recommend involving your accountant in any software transition.

Employee Mileage Claim – Tax Rebates

Posted on by Monica Jervis

Many employees previously too busy working to think about tax rebates, are now furloughed, anxious about their futures and looking to save or re-coup money in any way they can.

If you have had to travel extensively in your employed job but been paid less than 45p per mile for driving your car, you are likely to be in line for a tax rebate, for any tax years after 5th April 2016 if you make the claim this tax year.  However, you will not automatically receive the tax rebate, you have to claim it.

How you claim the tax rebate, depends on how far your claim goes back, whether the  unpaid mileage expenses come to £2,500 or more, whether you are using your own car and paying for the fuel or whether you are using a company car and paying for the fuel, and whether you normally complete a personal tax return.

Less than £2,500 per year

If the mileage expenses you want to claim tax relief on come to £2,500 per tax year or less,  the claim is from 5th April 2016 and later, and this is basically a straightforward claim by an employee using their own car, then you can claim without registering for a tax return by using the below link.

https://www.tax.service.gov.uk/claim-tax-relief-expenses/claim-online

You may also be able to claim tax relief for other work expenses using this service.

More than £2500 per year

Again, you can still claim for the current and previous 4 tax years, at this date going back to 5/4/2016 but you must make your claim on a self-assessment tax return.  You can register for a self-assessment tax return using the form at the below link.

https://www.gov.uk/government/publications/self-assessment-register-for-self-assessment-and-get-a-tax-return-sa1

You will need to complete the ‘any other reason’ box.

HMRC Approved Mileage Rates

Vehicle type First 10,000 business miles  in tax years Each business mile over 10,000 in the tax year
Cars and vans 45p 25p
Motorcycles 24p 24p
Bicycles 20p 20p

Valid as of 31/05/2020

If you are using your own car for work, the amount you can claim depends on the amount of miles you have travelled in the tax year and the amount your employer has re-imbursed you.   For mileage up to 10,000 miles in the tax year you can claim expenses of 45p per mile less the amount re-imbursed.  For miles 10,000 or higher the claim is 25p per mile less the amount re-imbursed.

If you’re using a company car

If your employer is providing the vehicle, then you can only claim tax relief on the cost of the petrol you have had to bear.

Other Employee Expenses

This blog is aimed at giving help and guidance to employees using their own cars to carry out their jobs where they have had to travel extensively, typically in the case of sales people.  However, tax relief on mileage can also be claimed for use of a bicycle, motor cycle or van as in the table above and tax relief on other work expenses is also available.

What now?

This blog is intended to help and guide. We always advise that you check with an accountant or tax adviser before making any tax related claim with HRMC. We cannot take responsibility for any losses or other consequences of an individual using the above information without the support of a qualified professional.

Please feel free to contact me if you wish to discuss this guide further. Based in Fishbourne, a village local to the city of Chichester – and 10+ years of experience!

Coronavirus – Help For Business – Self Employed

Posted on by Monica Jervis

The government have rolled out packages of help for businesses.  This is blog is not to repeat the information that the government have provided but to clarify the main points for businesses owners because in a state of anxiety it is easy to miss vital points within a large volume of information.

Here I deal with – The Self Employed

The self employed are those individuals running a business which is not limited.  They may be sole traders or partners in an unincorporated partnership.

  • This package is some ways simpler than the package for PAYE employees but only seems to apply to established self-employed businesses with a reasonable income less than £50,000 per year and is based on profits so doesn’t help a business owner that has invested it’s own income say from a redundancy package or inheritance and made a loss in it’s first one to three years as new businesses typically do.
  • As I understand it the newly self-employed since 6/4/2019 should still apply and lay out their case to be considered.  However as the government are contacting those who are eligible, it isn’t clear how an individual that is not contacted can apply.

You can also defer this quarter’s vat payment:- https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-through-deferring-vat-payments

Also defer your income tax payment on account due 31/7/2020:- https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-through-deferring-income-tax-payments

But there will be many many tradespeople and professionals that will fall through the net.  I really hope the government will do something for those individuals and will be looking out for that information if it comes.

I hope this has been helpful and I will post about any updates as they come through.

If you’re a limited company you can find out more in my blog dedicated to companies here.

What expenses can I claim for tax and how do I prove them

With different rules for Limited Companies and sole traders, flat rates for simplified accounting, cash accounting, accruals accounting and restrictions on property businesses depending on the type it’s not surprising that business owners get confused about what counts for an expense and what doesn’t in their particular business.

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