additional rate tax, london accountant, wimbledon, farringdon, managing capital gains, high earners, income tax

Tax Efficiency in London: Insights for Additonal Rate Earners

Tax Efficiency in London: Insights for Additonal Rate Earners

Welcome to CIGMA Accounting, your premier partner for tax efficiency solutions in London. Whether you’re based in Wimbledon, Farringdon, or the surrounding areas, our dedicated team of experts is here to guide you through the intricacies of tax planning. In this post, we’ll explore key concepts such as Additional Rate tax, capital gains, and foreign income, offering insights tailored to the unique financial landscape of London, Wimbledon, and Farringdon.

Understanding the additonal rate of tax

Navigating Additional Rate Tax in the Heart of London
As a resident or business owner in London, you may face unique challenges related to the Additional Rate tax. CIGMA Accounting understands the local nuances and will work with you to develop bespoke strategies to optimize your tax position while considering the specific requirements of the London tax environment.

Expert Guidance for Wimbledon and Farringdon Residents
If you’re situated in Wimbledon or Farringdon, our specialists are well-versed in addressing the tax implications specific to your area. We’ll tailor our advice to align with the local tax landscape, ensuring you benefit from the most relevant tax planning strategies.

Require accounting services?

Get in touch with our expert accountants today! Contact us via WhatsApp for personalized financial solutions.

Capital Gains Planning

Strategic Capital Gains Planning for London Residents
Capital gains planning is essential for London residents seeking to maximize tax efficiency. Our team at CIGMA Accounting will create a customized plan that reflects the unique property and investment landscape of London, Wimbledon, and Farringdon.

Local Insight: Capital Gains in Wimbledon
For residents in Wimbledon, where property values may fluctuate, our experts provide insights into optimizing Capital Gains Tax through property transactions and investment decisions.

Managing Foreign Income in London

Global Income Management for London-based Individuals and Businesses
In the international hub of London, managing foreign income requires a nuanced approach. CIGMA Accounting specializes in guiding London clients through the complexities of reporting foreign income, taking into account local and global tax implications.

Tailored Foreign Income Solutions for Wimbledon and Farringdon
Residents and businesses in Wimbledon and Farringdon can rely on CIGMA Accounting to develop tailored solutions for reporting foreign income, ensuring compliance with local regulations while optimizing tax efficiency.

Need Assistance from an Accountant?

We’d be more than happy to help you with your accounting needs in London, or anywhere else in the UK!

Reach out to us by completing this form and one of our staff members will get in touch within one business day. 


Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

127 Farringdon Road

Farringdon

London

EC1R 3DA



About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

What is a Declaration of Trust and why do you need one?

What is a Declaration of Trust for property?

A Declaration of Trust, also known as a Deed of Trust, is a legal document that outlines the ownership and distribution of assets between two or more parties. Alongside companies and partnerships, trusts are a common way for multiple individuals to jointly own assets.

What is a Declaration of Trust?

A Declaration of Trust is a legal document that sets out the rights and responsibilities of each party, and how the asset will be managed. It can also specify rules for the use of a property, how to divide profits or losses when the asset is sold, and how to proceed in certain situations, such as the death of one of the property owners.

There are several types of trust acknowledged by HMRC. These differ in the specifics of how control of the trust is passed on, and how any income is divided. Knowing how HMRC labels your trust is important for making sure you pay the correct rate of tax on any income from the trust.

What is a Declaration of Trust?

A Declaration of Trust is essential for anyone who jointly owns property or assets with another person. There are several reasons why multiple parties would want to invest in / jointly own a property or asset. These include unmarried couples, investment partners, and family members who help make payments but whose names are not on the mortgage.

Without a Declaration of Trust, there is no clear legal agreement in place to determine how the property will be managed or how money will be repaid. This can lead to disputes and misunderstandings in the future, which can be costly and time-consuming to resolve.

A Declaration of Trust provides clarity and peace of mind for all parties involved, ensuring that everyone understands their rights and responsibilities.

What should be included in a Declaration of Trust?

A Declaration of Trust should include the names and contact information of all parties involved, a description of the property or assets being managed, and the terms of the agreement. These will depend on the individual situation, but often include:

  • How much money each person has contributed towards the property purchase and other costs, such as maintenance and mortgage repayments.

     

  • How and when each person will get their money back.

     

  • What will happen to each person’s financial contribution if the current relationship breaks down.

     

  • What will happen to each person’s financial contribution if the homeowner fails to keep up with mortgage repayments.

     

  • What will happen to each person’s financial contribution if the homeowner sells the property and buys another.

     

  • Outline any restrictions or conditions on the use of the property or assets.

How do you create a Declaration of Trust?

Creating a Declaration of Trust is a relatively straightforward process. The first step is to decide on the terms of the agreement, including how the property or assets will be managed and how any profits or losses will be shared. Once you have agreed on the terms, you will need to draft the document and have it signed by all parties involved.

It is important to seek legal advice when creating a Declaration of Trust to ensure that it is legally binding and enforceable. We at CIGMA Accounting are always ready to assist you, no matter where you are in the UK.

Maximise your savings with top-tier accountants in Wimbledon. Contact Cigma Accounting for expert advice!

Reach out to us by completing this form and one of our staff members will get in touch within one business day. 




About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

Who can register for Flat Rate VAT; london accountants

Who can register for Flat Rate VAT?

Value Added Tax, or VAT, is a tax revenue collection method that taxes consumers and producers by adding a percentage of an item’s value to its price.

Only businesses with a turnover above £85,000 need to charge VAT on their goods and services. The standard rate of VAT is 20%, but there are many items, such as food and education, which are either exempt from VAT or charged at a reduced rate.

HOW DOES VAT USUALLY WORK?

Businesses must register for Value Added Tax and charge VAT on their goods and services if their ‘VAT taxable turnover’ is over £85,000. You can find out how to calculate this turnover here.

These businesses inevitably both charge VAT to their customers, and are charged VAT on purchases they make for the business. These businesses must pay to HMRC the difference between the amount of VAT charged to customers, and the VAT it has paid to other businesses.

 

In short, this means that if your business has charged more VAT than it has paid, it will owe HMRC money. The reverse is also true, meaning that if you paid more VAT than you charged, HMRC will repay you the difference.

What is the VAT Flat Rate Scheme?

The VAT Flat Rate Scheme allows a business to pay a fixed percent of their turnover to HMRC as VAT owed. This simplifies the sales and invoice records you must keep, and gives you access to VAT rates that are lower than standard.

Your business keeps the difference between the VAT charged to customers, and the flat amount paid to HMRC.

This also means that you cannot reclaim the VAT on your purchases, making the Flat Rate Scheme less beneficial for businesses who usually pay more VAT on their expenses than they charge to customers.

You can still reclaim VAT on single purchases of capital expenditure goods over £2,000.

Is my business eligible for the VAT Flat Rate Scheme?

You can join the Flat Rate Scheme if your business is VAT registered, and its VAT taxable turnover is £150,000. This total must include everything you sell that is not exempt from VAT, and must not include the VAT you charge on these items.

 

However, you cannot use the scheme if any of the following apply:

  • You left the scheme in the last 12 months.
  • You committed a VAT offence in the last 12 months, for example VAT evasion.
  • You joined (or were eligible to join) a VAT group in the last 24 months.
  • You registered for VAT as a business division in the last 24 months.
  • Your business is closely associated with another business.
  • You’ve joined a margin or capital goods VAT scheme.

Is my business eligible for the VAT Flat Rate Scheme?

The amount of VAT paid to HMRC is calculated as a flat rate of your ‘VAT inclusive turnover’. This includes exempt and zero-rated items, and means that you may end up paying more VAT under the Flat Rate Scheme if these items are a larger than average portion of your business.

 

If your business’s expenses on goods are either less than 2% of your turnover, or less than £1,000 a year total, it is classed as a ‘limited cost business’. This means that the business pays a flat rate of 16,5%. You can use HMRC’s calculator to check if this applies to your business.

 

If you do not count as a limited cost business, you can find your VAT flat rate according to your business type using the table below.

Type of BusinessVAT flat %
Accountancy or book-keeping14.5
Advertising11
Agricultural services11
Any other activity not listed elsewhere12
Architect, civil and structural engineer or surveyor14.5
Boarding or care of animals12
Business services not listed elsewhere12
Catering services including restaurants and takeaways before 15 July 202012.5
Catering services including restaurants and takeaways from 15 July 2020 to 30 September 20214.5
Catering services including restaurants and takeaways from 1 October 2021 to 31 March 20228.5
Catering services including restaurants and takeaways from 1 April 202212.5
Computer and IT consultancy or data processing14.5
Computer repair services10.5
Entertainment or journalism12.5
Estate agency or property management services12
Farming or agriculture not listed elsewhere6.5
Film, radio, television or video production13
Financial services13.5
Forestry or fishing10.5
General building or construction services*9.5
Hairdressing or other beauty treatment services13
Hiring or renting goods9.5
Hotel or accommodation before 15 July 202010.5
Hotel or accommodation from 15 July 2020 to 30 September 20210
Hotel or accommodation from 1 October 2021 to 31 March 20225.5
Hotel or accommodation from 1 April 202210.5
Investigation or security12
Labour-only building or construction services*14.5
Laundry or dry-cleaning services12
Lawyer or legal services14.5
Library, archive, museum or other cultural activity9.5
Management consultancy14
Manufacturing fabricated metal products10.5
Manufacturing food9
Manufacturing not listed elsewhere9.5
Manufacturing yarn, textiles or clothing9
Membership organisation8
Mining or quarrying10
Packaging9
Photography11
Post offices5
Printing8.5
Publishing11
Pubs before 15 July 20206.5
Pubs from 15 July 2020 to 30 September 20211
Pubs from 1 October 2021 to 31 March 20224
Pubs from 1 April 20226.5
Real estate activity not listed elsewhere14
Repairing personal or household goods10
Repairing vehicles8.5
Retailing food, confectionery, tobacco, newspapers or children’s clothing4
Retailing pharmaceuticals, medical goods, cosmetics or toiletries8
Retailing not listed elsewhere7.5
Retailing vehicles or fuel6.5
Secretarial services13
Social work11
Sport or recreation8.5
Transport or storage, including couriers, freight, removals and taxis10
Travel agency10.5
Veterinary medicine11
Wholesaling agricultural products8
Wholesaling food7.5
Wholesaling not listed elsewhere8.5

Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

Better Space

127 Farringdon Road

London

EC1R 3DA



About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

What are PAYE forms; P800; P11D; london accountant

What are P800, P45, P60, and P11D forms?

The P800, P45, P60, and P11D forms are used for the PAYE scheme.

Pay As You Earn, or PAYE, is the process whereby the taxes you owe on your income are taken off your pay before you receive it. This is done by your employer, who pays that money to HMRC.

If you pay taxes via PAYE and your only income is a single salary, it is unlikely that you will have to submit a Self Assessment tax return. However, you will still encounter several forms which are important for you to keep track of and understand to make sure you, or your employer on your behalf, are paying the right amount of tax.

understanding paye forms; london accountant; p11d; p800

P45

When you stop working at a job, your employer must supply you with a P45 form. This form details how much tax you have paid on your salary so far for that tax year. Tax years run from 6 April to 5 April the following year.

P45 forms are important for your new employer to work out how much tax should be deducted from your salary.

 

The P45 has four parts:

  • Part 1, which your employer sends to HMRC.
  • Part 1A, which you should keep in your own records.
  • Part 2 and 3, which you give to your new employer (or Jobcentre Plus if you are not working).

what if i cannot get a p45 from my employer?

If you cannot get a P45 from your previous job, or if you are taking on a second job, your new employer will have to determine how much tax you should be paying.

Employers have to get information from you about any other jobs you work, any student loans you have outstanding, and any benefits that you receive. They may ask you to fill in HMRC’s own ‘starter checklist’ that asks for all the details needed for PAYE.

P60

The P60 form details how much tax you paid on your salary via PAYE. If you have multiple jobs, you will get a P60 from each of them. If you work for an employer on 5 April, that employer must provide you with your P60 by May 31st of that year.

You’ll need your P60 to prove how much tax you’ve paid on your salary, for things like:

  • Claiming back overpaid tax.
  • Applying for tax credits.
  • As proof of your income if you apply for a loan or a mortgage.

What if I do not get a P60 from my employer?

If you are not able to get a P60 form from your employer, you can also use HMRC’s online ‘personal tax account’ system to get the details that would be on the P60. You can also use this service to check your State Pension, manage your tax credits, and claim a tax refund.

P11D

P11D forms are used to report your ‘Benefits in Kind’ (or simply ‘benefits’) to HMRC. Benefits are anything given to you by an employer that has monetary value and is not wholly necessary for your work.

Using the company car to travel from the office to a work site is a necessary business expense not a benefit for you, the employee. Free meals at work are not strictly necessary, and count as a benefit.

Why must I declare my work benefits?

It is important to tax employee benefits, as they would otherwise just become a way to get around income tax. However, there are many company benefits which are considered tax-free, including meals, a mobile phone, or workplace parking.

You will need to pay tax on benefits like accommodation, medical insurance, and private pensions. The P11D form is what you will need to fill out to tell HMRC about the benefits you receive.

Paying tax on benefits involves working out how much a benefit is worth in cash. Your employer must do this and give those details to you. You may not need to fill in a P11D if your employer already takes the tax owed from benefits out of your salary.

P800

You will receive a P800 form, also known as a ‘tax calculation letter’, if HMRC believes you have paid the wrong amount of tax – either too much or too little.

If you are due a refund, you must claim it online within 21 days or you will be sent a cheque in the mail.

If you owe tax, HMRC will automatically collect this over the course of the next year, usually through your employer and the PAYE amounts taken off your salary.

What if I receive a simple assessment letter?

If you owe more than £3,000, have to pay tax on your State Pension, or owe tax that cannot be taken off your salary, you will receive a Simple Assessment Letter instead of the P800.

You will have to pay this amount by 31 January, or within 3 months if you received the letter after 31 October.

Need Assistance from an Accountant?

We’d be more than happy to help you with your accounting needs in London, or anywhere else in the UK!

Reach out to us by completing this form and one of our staff members will get in touch within one business day. 




About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.

start-up loan success and new working rules for feb 2023

Start-up loan success and new work hours rules – HMRC updates Feb Q2 2023

The week of 13 February 2023 has seen positive reports from HMRC about its Start-up Loan Scheme and a record high of on-time self-assessment tax filings.

Importantly, new legislation is on the table that would give more power to those with zero-hour contacts. This new bill is aimed at mitigating the effects of forcing workers to be available at any time, with little warning.

Start-up Loan Scheme success

The Start-up Loans scheme was established in 2012, to provide support for new businesses that have been trading for less than 36 months.

The loans range from £500 to £25,000, and charge a fixed interest rate of 6% per year. Businesses also get free support writing up their business plan, and up to 12 months of free tutoring.

Young people (aged between 18-24 years old) have received 14 percent of loans since the scheme was established. Of the total of more than 100,000 loans, 40 percent have gone to women and one-in-five to people from Black, Asian, and other ethnic minority backgrounds.

With 12,382 loans in the North-West, 7,117 in the East of England, 5,616 in the East Midlands and 15,39 in Northern Ireland, as well as many more across all parts of the United Kingdom, the Start Up Loans scheme has seen the entire UK benefit, with total economic activity estimated to be around £5.3 billion.

Predictable working hours bill on the table

The Workers (Predictable Terms and Conditions) Bill, proposed by Blackpool South MP Scott Benton, could bring forward huge changes for tens of millions of workers across the UK to request predictable working hours.

The move, which would apply to all workers and employees including agency workers, comes after a review found many workers on zero hours contracts (i.e. contracts with no minimum working hours) experience ‘one-sided flexibility’.

This means people across the country are currently left waiting, unable to get on with their lives in case of being called up at the last minute for a shift. With a more predictable working pattern, workers will have a guarantee of when they are required to work, with hours that work for them.

What does this change for zero-hours contracts?

If a worker’s existing working pattern lacks certainty in terms of the hours they work, the times when they work, OR if it is a fixed term contract for less than 12-months, they will be able to make a formal application to change their working pattern to make it more predictable.

All workers and employees will have this new right if the bill gets parliamentary approval. However, they must first have worked for their employer for a set period before they make their application. This period will be set out in regulations and is expected to be 26-weeks.

Employers do have the option to refuse a request for a more predictable working pattern on specific grounds, such as the burden of additional costs to make changes, or there being insufficient work at times when the employee proposes to work. Workers will be able to make up to two requests a year.

Record number of taxpayers file on time

HMRC reports that more than 11.7 million people submitted their 2021-22 Self-Assessment tax returns by the 31 January deadline. This included over 861,000 taxpayers who left their filing until the final day and over 36,000 that filed in the last hour before the deadline.

Whilst this was the highest ever number of filings, there are still an estimated 600,000 taxpayers that have missed the deadline and are yet to file. Are you among those that missed the 31 January 2023 filing deadline for your 2021-22 Self-Assessment returns?

If you have missed the filing deadline, have a look at this post explaining the penalties and this post on how to reduce your penalties.

If you are unable to pay your tax bill, there is an option to set up an online time to pay payment plan to spread the cost of tax due on 31 January 2023 for up to 12 months. This option is available for debts up to £30,000 and the payment plan needs to be set up no later than 60 days after the due date of a debt.

Late tax payment interest rate increase

For those who have not filed and paid their taxes on time, your repayment amounts have just gone up. Luckily, CIGMA Accounting can help you with this process.

The Bank of England’s Monetary Policy Committee (MPC) met on 2 February 2023 and voted 6-3 in favour of raising interest rates by 50 basis points to 4% in a move to try and continue to tackle upward pressures on inflation. This is the tenth time in a row that the MPC has increased interest rates with rates now the highest they have been since November 2008.

This means that the late payment interest rate applied to the main taxes and duties that HMRC charges interest on increases by 0.5% to 6.50%.

When do these changes come into effect?

These changes will come into effect on:

  • 13 February 2023 for quarterly instalment payments
  • 21 February 2023 for non-quarterly instalments payments

The repayment interest rates applied to the main taxes and duties that HMRC pays interest on will increase by 0.5% to 3% from 21 February 2023. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

Becoming an Authorised Economic Operator

Authorised Economic Operators (AEO) status is a recognised quality mark of businesses who deal with imports, and customs control procedures. Businesses that hold the AEO standard can demonstrate that their role in the international supply chain is secure and that they have customs control procedures that meet Authorised Economic Operator standards and criteria.

There are 2 types of status:

  • Authorised Economic Operator Customs Simplification (AEOC)
  • Authorised Economic Operator Security and Safety (AEOS)

You can apply for customs simplification or security and safety, or you can apply for both (Customs simplifications & Security and safety-AEOF).

What are the benefits of being an Authorised Economic Operator?

Businesses with AEOS status benefit from Mutual Recognition Agreements (MRAs). The UK negotiates MRAs with other customs authorities to reduce friction and excessive taxation. The UK currently has negotiated agreements with the EU, Japan, China and USA. Following Brexit, all Northern Ireland AEO authorisations continue to be recognised in the EU.

HMRC’s list of approved Authorised Economic Operator businesses has recently been updated and lists 1,237 businesses that hold status with HMRC.

Change in approved ISA managers list

Individual Savings Accounts (ISAs) are accounts for cash and investments (such as stocks and shares) for which you are not charged tax on interest, income, or capital gains. The maximum you can save in ISAs for the current tax year is £20,000.

 

HMRC releases lists of individuals and firms who it deems are able to manage ISAs satisfactorily. However, HMRC has not approved any ISA that the ISA manager may offer. Potential investors are advised to take independent advice if they’re in any doubt about the suitability of the ISA manager or of a particular ISA.

What can i hold in an ISA?

The list of investments that can be held in a tax-advantaged ISA also includes:

  • securities (including retail bonds) and shares issued by housing associations and other co-operative societies or community benefit societies (registered societies – formerly known as industrial and provident societies);
  • a broader range of securities issued by companies, including those admitted to trading on certain Small and Medium Size Enterprise (SME) market; and
  • shares in a wider range of investment trusts.

Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

Better Space

127 Farringdon Road

London

EC1R 3DA



About the Author
Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.