Archive for the ‘Tax’ Category

What’s The Difference Between Being Self Employed and a Limited Company?

Saturday, April 27th, 2013

We’re always being asked by new start-up companies, whats the difference between being self employed and a limited company. There are tax difference, and there USED TO BE  a very specific tax advantage of being a limited company where th first £10,000 net profit was tax-free (in the UK), but that has since changed.

The accountants will always tell you the best structure ‘depends’ on what it is you want to achieve – true. But there are reporting differences. The video below explains what they are. This blogpost will just recap them.

Limited Liability Companies

  • You have to file annual accounts with Companies House
  • Your year end can change, but its set to the end of the month in which you formed the limited company e.g. if you formed the company on 10 July, your year end will always be to the end of July (unless you change it)
  • You can change your year end by downloading the form from Companies House
  • The accounts you have to file consist of a profit & loss and Balance Sheet and are available to the public (for a small fee) from www.companieshouse.gov.uk
  • You have to file a Corporation Tax Return 9 months after the end of the financial year e.g. with a year end 31 March, your return is due 31 Dec
  • CT is approx 20% …. and so with Sales – expenses = net profit before tax minus Corporation Tax = Net Profit After Tax… and out of this figure (NPAT) you can pay dividends to your directors
  • There’s an annual form (on the anniversary of opening the company), which is due every year e.g. in this example, every 10th July, the company will get a reminder to fill in the form. Theres a small charge to fill it in online (about £13, or paper version £30), and it just asks – who are the company directors? date of birth? address? whats the main type of business the company is classed as e.g. accounting, law etc., Share capital.

Self employed

  • You file a ‘self assessment tax return’
  • The year end is government-set and is always to the 5th April
  • You can file online at hmrc.gov.uk
  • Your ultimate deadline is 31st Jan, (although if you get it in my 30th Sept, then the HMRC will help you to calculate the tax due for you)
  • Every UK individual has a tax-free allowance which they can earn, before tax is due (around £9,400 at time of writing)
  • Sales, minus allowable expenses = net profit…
  • National Insurance & Tax of about 33% is due on the earnings / net profit above the tax-free allowance

Receipts

It’s important to keep on top of your receipts, and to get your accounts done on time, otherwise penalties and fines will be coming your way! The UK government give you plenty of time/notice to file ontime, so there isn’t really any excuse if you are late. If you are a bit disorganised and need a hand with these things, then do contact Boogles: http://www.booglesltd.com/Contact_Us.html

The video explaining the difference between being a limited company and self employed on You Tube is here:

What’s The Difference Between Being a Limited Company & Self Employed?

Should People Use Tax Programs Or Look For An Accountant?

Tuesday, January 1st, 2013

This is the time of the year that as people, we all start thinking about our taxes. As people, we all know that when it comes down to it, a percentage of every dollar that Americans make will go to the government for taxes. Come the first of the year, many consumers find themselves faced with a question, “Should Americans look for an accountant or should these consumers use software to possibly save cash?”. The reality is, this question can only be answered by the people that are asking it. However, when it comes to taxes and money, I can give Americans a few pieces of information that may help them to make the decision.

#1: Accountants Are Accountants For A Reason – When we think about bookkeepers, we think about a professional that went to school to learn how to save consumers and businesses money on taxes. This is exactly the case. It is not easy for Americans to become CPAs. They need to take accounting classes and tests that prove that they thoroughly understand the matters that accountants are expected to deal with. Although program that acts as a bookkeeper is written in a way that helps people to become an at home accountant, the reality is, the software can’t talk to the consumers and ask questions that could lead to deductions and more cash for the consumers.

#2: We All Want To Save Money – The reality is, as consumers, we all want to save cash. It’s in our nature to save cash and use it for other things. However, let’s think about bookkeepers. When it comes down to it, accountants will generally charge between one and two hundred dollars to consumers for the preparation of a tax return. For this cash, the accountants will look for any and all deductions that will help consumers to receive a higher tax return. So, spending $200 may seem like a lot to many consumers however, if these people get $500 more on their tax return because of their CPAs, well, they made $300!

#3: The Law – Finally, let’s think about why people pay taxes in the first place. If it was up to people there would be a lot less of them paying every year. When it comes down to it, if people use software to do their taxes instead of a bookkeeper, there is a chance that the taxes may be done improperly. If this happens, the Americans may be chased by the IRS for back taxes which will now cost the Americans more cash!

The bottom line is, when Americans do their taxes, it’s best to do it with the help of an CPA!

This article was sponsored by:
Accounting Service Chicago IL | Tax Prep in Chicago

Payroll Costs on the Rise

Monday, October 1st, 2012

Be aware that Minimum Wage Regulations have increased in the UK. See here for the new levels. https://www.gov.uk/national-minimum-wage-rates

Also, make sure you brace yourself, for the Pensions changes set to come into affect – big firms first, and then the medium, and then the small… employers are going to have to start paying into the pension fund for staff. Its starts in 2012 and carries on into 2016 by which point everyone will be effected. See: http://www.thepensionsregulator.gov.uk/docs/intro-to-work-based-pension-changes-2011.pdf

Lots of SMEs owner-managers  are grumbling about not even having a pension themselves… let alone having to find money to pay into someone elses !! Tough! …. the country is broke, and the government are putting the onus back onto the people to save for their own retirement. If you are working full time, flat out and still don’t have enough money to set aside for your future pension… by the time you retire, do you honestly think your situation will have got any better? Or will you still be scrimping along?

A lot of people are just going to wind up and close their doors at this rate because these expenses seem to be on the rise…

But you can’t complain… we’ve been given ample warning… get your financial house in order right now. If you need help – contact us, and we can help you with your financial planning: admin@boogleslt.com

HMRC – clamping down on tax-dodging solicitors in London!

Wednesday, September 12th, 2012

The tax man periodically targets different groups who they think have something to hide. Today on the hit list are solicitors in London. They must be paying themselves huge drawings and HMRC just want to make sure that they’re getting their cut…. Full article on love money here.

Don’t get me wrong – paying tax is necessary in a progressive society as we need to fund schools, hospitals and libraries…

If you are a solicitor in London, and you are concerned that the tax man may want to come and check out that your books are in order… don’t just ‘worry’ but DO SOMETHING about it!! We offer a legal bookkeeping service to solicitors in London and UK-wide. We will keep you in order, adhering to the Solicitors Accounts Rules and help you stay compliant.

All we’d say is don’t wait for the knock at the door. Do things right from the beginning and you’ll sleep a lot more easily at night ! Get it sorted out! The worry and negative emotion arising from knowing that your accounts are a mess can be better applied to dealing with the situation.

www.boogles.org