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Archive for September, 2014

Using all your allowances and exemptions

This post was triggered by an article in the Telegraph.

One way to pay less tax is to make sure you use all your allowances and exemptions. A tax exemption that is often overlooked is the Capital Gains Tax (CGT) exemption.

For the current tax year you have enjoy £11,000 of capital gains tax free. This could be worth £4,950 a year per person. For a couple over the next 10 years this is nearly £100,000.

The problem is how do you create, make or crystalise gains?

Well, there are different ways to do this depending on the type of assets you hold. But, you can also look to create gains by the type of investments you make.

Sackmans is not registered to provide investment advice but we can comment on the tax on different types of investments.

One type of shares which are not well known is called Zeros…short for zero dividend preference shares. As the name suggest, you do not get paid a dividend (which would be income). Instead, the idea is that you make a gain from the investment.

The use of the word “preference” means that shareholders get paid before others.

If you are interested in paying less tax, fed up with low returns from more well-known shares then perhaps this is an opportunity for you.

I suggest you read the Telegraph article, take professional advice and let me know if you decide to make any investments.

Xero update

Xero continues to impress me with their ongoing development.

Recently they have improved the profit and loss reporting with the aim of making them the best in the world. One of the improvements is to be able to customise the reports with drag and drop functionality, while in the report.

This enables neat and tidy reporting and bespoke analysis from inside Xero rather than having to export into a spreadsheet and do extra work.

Here is a video overview

 

Another useful feature is batch deposits. Here is a video which explains how to use the feature.

Claim and save tax

At Sackmans Accountants North London we are always looking for ways to reduce our client’s tax bills.

Some tax planning can be complicated but the basics are always worth considering. Here are a few expenses you can legally claim in your company to reduce tax:

  • Rent for using your home as a base
  • Mileage for business trips*
  • Mobile phone for personal use
  • Costs of working away from home
  • Business magazines and books
  • Eye tests
  • Annual health checks
  • Salary to your kids**
  • Car parking
  • Up to £150 per person a year for staff parties
  • Providing a bicycle

 

*Business trips can start when you leave your home, if your business is based at home.

**To claim paying your children, they need to actually work and the pay needs to be reasonable. But, this could save you £4,000 a year per child.

Bear in mind that you need to be running a company for these expenses to be tax deductible. If you are a sole-trader you would not be able to claim these costs.

If there is any doubt there is an A-Z list https://www.hmrc.gov.uk/payerti/exb/a-z/a/index.htm

Tax on business gifts

Most people know they can claim the cost of things they buy and give away to promote their business. A typical example is branded pens. But, there is one catch which you need to know about if you intend to be generous with your gifts.

If the total cost of any business gifts made to the same person in any 12-month period exceeds £50 (and you have reclaimed VAT) you have to account for VAT on the total cost value of all the gifts.

This means that if you gave the same person two gifts of £50, you would need to pay £16.67 to the tax office on your VAT return, as if you made a sale. This would be triggered by the second gift so there would be nothing to do for the first gift.

If the person uses your gifts for business then they can reclaim VAT. You should not create a VAT invoice. Instead, you would issue an invoice and include the following statement: ‘Tax Certificate – No payment is necessary for these goods. Output tax of £XX.XX (insert amount) has been accounted for on the supply.’

However, there is one exception, samples. Free samples of your products for people to try are treated differently for VAT. You don’t have to account for VAT on a free sample you give to another person or business.