BUDGET SUMMARY ARCHIVE
Posted on 31st October 2024 at 12:00
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Posts tagged “tax”
TWJ TAX TIPS
Posted on 2nd December 2023 at 09:31
CORPORATION TAX RATES
Corporation tax changed to a marginal rate as of 1st April 2023.
From 1 April 2023 the main rate of Corporation Tax will be 25% for Companies with profits of £250,000 or more. This applies for all profits.
A small profits rate of 19% will exist for Companies for profits of £50,000 or less.
The main rate will taper in between £50,000 and £250,000.
The effective tax rates will be;
£0 - £50,000 – 19%
£50,000 - £249,000 – 26.5%
Above £250,000, all profits are taxed at 25%.
It is important to note that these thresholds are divided by the number of 'associated companies' HMRC guidance on associated companies.
A company is associated with another if, at any time in the chargeable accounting period (1) one company has control over another, or (2) both companies are under control of the same person or group of persons.
If an individual is holding control over three separate companies the 25% threshold would reduce to £83,333.
SALARY SACRIFICE
This is a useful tool for employee benefits and leads of a saving on employee’s national insurance at 10% (from Jan 2024) & other deductions.
Employers can pay an expense on behalf of employees, then deduct this amount from the gross salary. Income tax is payable by the employee (tax code change), and employer’s national insurance is payable by the employer. Employee’s national insurance and other deductions are not charged. A P11D (due June) is filed to notify HMRC of any such payments.
HMRC's definition of a benefit-in-kind is anything of monetary value provided to employees that is not 'wholly, exclusively, and necessary' for work purposes. For example, health insurance, gym memberships, cars with personal use etc.
COMPANY CARS
The benefit in kind on electric cars is currently 2%, set to rise a further 1% from 5th April 2025.
In practice this means an employee is deemed to have received a benefit of 2% of the cars original list price (this value doesn’t change) as income.
For example, if a car has a list price of £50,000. The employee will pay income tax based on receiving £1,000 extra income. Tax payable of £200 at lower rate, £400 at higher rate.
The employer pays employers national insurance (13.8%) based on this figure, £138.
Overall yearly tax charge for the use of a £50,000 electric vehicle – lower rate £338 / higher rate £538.
If the lease cost of this car is around £600/month the following tax savings would be made;
VAT - £50 (50% of VAT can be reclaimed on lease cars)
Employee’s NI - £55 (10%)
Income tax - £110 / £220
Overall yearly tax savings for monthly payments of £600, lower rate - £2,580, higher rate - £3,900.
Net saving, lower rate - £2,242, higher rate - £3,362.
*The above calculation is for a monthly lease agreement, there is a slightly different calculation for hire purchase/purchase, full amount of VAT can be reclaimed as well as other things.
Employees begin to see tax benefits on cars below 15% benefit in kind.
DIRECTOR'S SALARIES
It’s important directors pay themselves up to the Secondary Threshold for national insurance, the point at which employers start paying NI (13.8%). This counts as a year towards state pension qualification. Individuals need 35 years contributions to get a full state pension.
23/24 Secondary Threshold - £9,096 (£758/month)
There is also a case for paying directors up to the Primary Threshold for national insurance, when employees start paying NI (10%). Up to this point only employers NI has been due, a payment of 13.8% vs a corporation tax saving of 19-25% based on company profits.
23/24 Primary Threshold - £12,576 (£1,048/month)
Past this amount other deductions are also due, there is no further tax benefit.
TRIVIAL BENEFITS AND DIRECTOR'S EXPENSES
Directors can take up to £300 in tax free vouchers during the year. These must be in £50 denominations.
£150 can be spent on annual events for employee's, such as Christmas parties.
Mobile phone costs of employee's and directors are allowable as long as the phone is used for work purposes (personal use is also permitted).
Working from home expenses can be claimed.
Year End Tax Planning 22/23
Posted on 9th February 2023 at 15:19
End of year tax planning – what you need to consider
Posted on 29th March 2022 at 13:09
The new tax year on April 6 is accelerating quickly towards us, and now is the time to make sure that any last-minute allowances you may not have made the most of in the 2021/22 tax year are mopped up.
There are plenty of allowances that have a time limit on each tax year, and if you can use these last few days to maximise the benefits, then it would be a good deed done.
Managing your inheritance tax
Posted on 27th February 2022 at 17:00
Inheritance tax (IHT) is one of the most unpopular form of taxes due to the extremely high 40% tax rate which typically is more than most would pay during their lifetime. Making plans to minimise IHT has never been more important.
NI to increase by 1.25% from April to fund the Health and Care Levy
Posted on 27th February 2022 at 16:15
The Government is set to increase National Insurance Contributions (NICs) by 1.25% from April to fund the Health and Social Care Levy.
Businesses helped by COVID-19 support could face unexpected tax charges
Posted on 31st January 2022 at 17:26
Businesses and self-assessment taxpayers that received any financial aid as part of the COVID-19 support scheme will now need to include these grants in their tax return.
Tax return extension 20/21
Posted on 31st January 2022 at 13:38
Any taxpayers who are yet to submit their completed Self-Assessment tax return which is due before January 31st are being given an extension to file until February 28th.
