Frequently asked questions
Please read through our FAQ’s. If you have a question that is not one of the FAQ’s, please do not hesitate to contact us.
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.
When you are self-employed, as with other types of business, you will have various costs to keep your business running. Many of these expenses qualify for tax relief, which means you can deduct the value of these expenses from your profits before working out how much tax you owe.
You can claim tax relief on small and regular costs as ‘allowable expenses’. These are things like fuel for business use, staff costs, and advertising. More expensive items which you are likely to use for more than 2 years can be claimed as ‘capital allowances’. If you rent property, we have a guide for rental expenses that qualify for tax relief. You will have to report these expenses on your Self Assessment tax return. You can follow this link to read our tips on common mistakes to avoid.
Figuring out whether you need to pay tax on income earned outside of the UK depends on whether HMRC classifies you as a ‘UK Resident’.
If you are not classed as a UK Resident, you will not pay tax on your foreign income. UK Residents will pay UK tax on all of their income, no matter where it was earned. There are some special exceptions for those who permanently live abroad – we’ll cover those later.
Wondering whether you should buy a car through your company or buy it personally? Lets look at the options and what their benefits and cons are.
Buying a car personally
The vehicle cost is non-deductible from tax.
Business trip fuel paid for by the company is tax-free as long as it remains under 45p/mile for the first 10,000 miles annually, then 25p/mile thereafter. A company paying for private fuel use creates a Benefit in Kind, described below, and is often not tax efficient.
Buying a car through a company
The company can deduct a portion of the car’s value from their taxable profit as a kind of Capital Allowance.
However, this only applies if the vehicle is used ONLY for business trips. This does NOT include commuting to and from work, which is considered private use. Company ‘pool’ cars are a valid business use. In these cases, the car is kept on site and used by multiple employees.
The amount deductible depends on the CO2 emissions for the vehicle. For electric vehicles (or any vehicle with CO2 emissions under 96g/km) you can claim 100% of the vehicle’s value immediately in the first year.
For other vehicles, you can claim either 8% (for cars with CO2 emissions above above 130g/km) or 18% (for cars with CO2 emissions between between 96g/km and 130g/km) of the vehicle’s value every year the company still owns the vehicle.
This means that you can eventually deduct the full value of the vehicle from the company’s taxable income, but it would take either 6 or 12 full years to eventually do so.
If you’re renting property owned by you, rather than your business or company, you could qualify for income tax relief. However, this depends on the kind of rentals you are running. There are also many costs associated with rentals that can lower your taxable profit, which we outline further on.
Let’s talk pensions. Everybody needs to make a plan for when they eventually retire. Nobody wants to work forever, and that means making sure you have enough money to live off of after saying goodbye to your 9 – 5 job. The most common way to save for retirement is through pensions.
Pensions are schemes which you pay a certain amount into regularly and which will pay money out to you once you reach retirement age. Pensions don’t simply hold onto this money to pay it back to you later. They will invest this money in some way so that you end up receiving more money in the end than you’ve paid in over the years.
There are many types of pensions in the UK, but the most important divide is that of the state pension vs. private pensions.
State Pension
As the name suggests, the state pension is provided by the UK government. The previous state pension scheme is called the Basic State Pension. In 2016, this scheme was replaced by the New State Pension. Those who reached pension age before 2016 will continue to be paid the Basic State Pension.
The New State Pension rules therefore apply to men born on or after 6 April 1951, and women born on or after 6 April 1953.
‘Phishing’ is the term for attempting to get someone to give you personal information / access to systems by pretending to be someone else. This could be an email from someone who claims to be writing from your bank, or a phone call from someone pretending to be with a government department.
All legal profit-seeking businesses fall into one of two broad categories: unincorporated and incorporated. The difference is that incorporated forms have what is called a ‘separate legal personality’. The business is considered its own entity under the law.
This means that those in charge of unincorporated businesses bear full responsibility for the company’s debts. The people running incorporated businesses, on the other hand, have what is called ‘limited liability’ – they only stand to lose what they have already invested.
Perhaps you’re self-employed and looking to expand your business. Or maybe you’re looking to start a new endeavour from scratch, and want to raise capital by selling shares. Whatever the reason, you’re thinking about creating an incorporated business, often called a company.
There are several steps to go through to establish and register a new company, but first and foremost is understanding what you’re signing up for.
Limited companies are a form of legal business where the company is a separate legal entity to the individuals who run it. All companies must keep records about the people who make decisions or are invested in the company. These are called ‘statutory registers’.
Limited companies are a form of legal business where the company is a separate legal entity to the individuals who run it. All companies must keep records about the people who make decisions or are invested in the company. These are called ‘statutory registers’.
All legal profit-seeking businesses fall into one of two broad categories: unincorporated and incorporated. The difference is that incorporated forms have what is called a ‘separate legal personality’. The business is considered its own entity under the law.
This means that those in charge of unincorporated businesses bear full responsibility for the company’s debts. The people running incorporated businesses, on the other hand, have what is called ‘limited liability’ – they only stand to lose what they have already invested.
Professional accountancy bodies are the organisations responsible for accounting qualifications. That means they create curriculums, train students, and run exams. In principle, any organisation can do this, so how do you know which qualifications are actually up to standard?
The organisation given power by the UK government to oversee accountancy is the Financial Reporting Council (FRC). The FRC serves as an independent regulator of accountants, and decides which qualifications make accountants able to perform audits. To legally call themselves a ‘chartered accountant’, a person must be a part of a professional body with a royal charter.
HMRC’s ‘Your Charter’ sets out what the public can expect from HMRC and vice versa. The HMRC Charter is a legal requirement under the Finance Act 2009. The Charter helps define the service and standard of behaviour that taxpayers should expect when interacting with HMRC.
Accounting regulatory bodies are essential for ensuring that accountants, actuaries, and auditors are trained to a common standard and held to a code of ethics and good practice. In the UK, the top level of oversight is performed by the FRC, or Financial Reporting Council.
While FRC does not train or certify accountants, they serve as an independent regulator of professional bodies and set the UK’s Corporate Governance and Stewardship Codes. The FRC recognises six professional accountancy bodies, for which they provide oversight. This includes handling complaints regarding the actions of these bodies as a whole.
The short answer is yes, you can appeal your HMRC penalties provided you have adequate evidence to support your appeal. The HMRC can raise various penalties including failure to pay/file and failure to notify penalty. If you find yourself in this situation and you’re wondering “How do I fight the HMRC” you have found the right place to help you. The HMRC leaves ample room for individuals (Self Assessments) and corporations (Corporate tax and VAT returns) to appeal against a penalty, it is just about understanding the process to make use of it.
So you’ve received a HMRC penalty and you’re freaking out just a little bit. Whether this was intentional or by accident, an HMRC penalties notification can be a stress-inducing event. But let’s talk about what you can do now that you’re here. Firstly we will look whether you have a reasonable excuse (as defined by the HMRC), and if not, we’ll look at how you can get your penalties reduced as much as possible.
As accountants that specialize in tax returns we see these self assessment mistakes over and over again. Self assessments is already stressful enough as it is. But lets just look over 10 of the biggest mistakes people make when they are filing their personal tax returns.
These are all avoidable mistakes if you know your way around the tax legislation, and if you don’t know your tax legislation, CIGMA Accounting is here to lend a helping hand.
- Forgetting about tax free allowances
- Not declaring the correct salary and benefits (PAYE)
- Claiming ineligible expenses
- Using wrong tax code
- Not declaring all income
- Not adding supplementary pages
- Human error
- Submitting self assessment when you don’t have to
- Missing the deadline for submissions
- Failing to plan for your tax account accordingly
Every limited company registered on Companies House must submit annual accounts and confirmation statement to Companies House. The company will also submit a Corporation Tax return to HMRC. The amount of money the company made or lost is irrelevant. Dormant companies must also submit these documents. However, instead of annual accounts a dormant company will need to submit dormant accounts.
A confirmation statement, also referred to as a CS01, is a document a company submits to Companies House at least once a year. Companies also submit a confirmation statement when there is a change in company structure.