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Welcome…
to our monthly newsletter which brings you commercial advice and bookkeeping tips for MYOB, Acclivity and AccountEdge.
If you need further assistance please just let us know. Alternatively you can send us a question for our Question and Answer Section.
Please contact us for advice in your own specific circumstances. We’re here to help! |
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| Time for a New Dividend Strategy |
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In the budget the Chancellor confirmed that from April tax-free allowances will rise, but the point at which the higher rate tax kicks in will be lower. What changes to your salary and dividends are needed to stay tax and NI efficient?
New tax rates
The 2013/14 tax year starts on 6 April and with it come changes to tax and NI rate bands and limits. Directors who aim to extract profit from their company in the most tax-efficient way might need to tweak their salary to make the most of these new rates.
Tactics recap
The general idea is to set your salary at a level where no tax and NI is payable. However, because the NI-free limits, known as thresholds, are lower than the tax-free allowances, concentrate on pitching your salary below these.
NI limits on the up
The NI thresholds for 2013/14 will mean you won’t pay NI where your salary and bonuses for the year don’t exceed £7,747. But your company’s NI starts at £7,695, so from April 6 it’s this lower salary figure that’s optimum.
Note. At the salary level suggested neither you nor your company will pay NI, but the good news is you’ll still receive a full year’s NI credit to your state pension record.
More income needed
A salary of £7,695 per year isn’t going to pay the bills, so you’ll want to top this up with income which doesn’t count for NI purposes. Usually this means dividends, although some benefits-in-kind (BiK) also work. The trouble with tax and NI-free BiKs is that they are few and far between and not terribly user friendly. For example, you can’t pay your grocery bill using the cycle-to-work-scheme! What you should do therefore is pay regular dividends, say monthly, at the most tax-efficient level; this will depend on the tax-free allowances and rate bands available to you.
Up and down tax limits
For the tax year 2013/14, basic tax-free allowances are set at £9,440, up from £8,105 for the current year. However, the bad news is the point at which higher rate tax will apply drops from £34,370 to £32,010.
The tax-free allowance increase is not as large as the fall in the basic rate tax band. As a result, the most tax-efficient combination of salary (£7,695) and dividends (£30,433) for 2013/14 has fallen from the total for the last tax year.
Tip. Where you have other tax deductible allowances for reliefs, such as those given for personal pension contributions or Gift Aid payments, you can increase the amount of dividends the company pays you and yet remain tax efficient.
Trap. Dividends can only be paid from company profits and so the low salary, high dividend strategy can’t be used where your company doesn’t have profits to distribute. In this situation a different plan is needed. We are happy to advise you.
This article is updated from an original article in Indicator March 7th 2012, http://www.indicator.co.uk/, requoted with permission. |
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| SEIS Investment Extension |
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If you are using our Business Companion Service you will already be aware that we have systems for keeping you compliant with this new regulation. The real time information (RTI) system for submitting PAYE information to HMRC must be used by small employers for all pay days on and after 6 April 2013. However, at the last minute the Government has agreed to a temporary relaxation of one of the RTI reporting requirements for employers with fewer than 50 employees.
If you fall into that category, and you pay some employees more frequently than once a month, you can send your RTI report known as full payment submission (FPS), to HMRC when you run your monthly payroll. You would normally have to send in a FPS every time you pay an employee.
However, there are conditions: Read More |
The Budget also included an announcement of the extension of capital gains tax (CGT) relief, where the gain is reinvested in new shares issued under the Seed Enterprise Investment Scheme (SEIS). This scheme started on 6 April 2012 and is due to run to 5 April 2017, but the CGT relief was due to apply only for investments made in 2012/13.
We have a full briefing about the SEIS in our helpsheets. (note: you have to be logged in to access this).
The legislation makes it clear that the CGT relief is to be extended for one year, for investments made in 2013/14. Read More |
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Spring Clean your Prices
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| April Question and Answer Section |
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One of the most critical parts of running a successful business is setting the correct price.
The more you can differentiate your products or services from others the wider the range of possible prices you may be able to charge as the customer has little to compare what you are offering against.
If you can differentiate what you are offering, a higher price may work better. People automatically value high priced items more than low priced items and some people just wouldn’t buy a low priced item on the belief it is also low quality.
The perceived value to the customer must be greater than the price or they won’t buy. Your price will not ultimately be determined by you but by what your prospects are prepared to pay. You can only find this out by testing different prices.
You will have always have a minimum price below which it doesn’t make sense to sell your product or service. You’ve got your overheads to cover and the minimum amount you need to earn to cover your personal living costs.
For more information on setting your prices see our helpsheet.
(Note: you need to be logged in. Use your email address as a username. Use the word ‘accountant’ as your password.)e |
 Q. I have put my hairdressing salon up for sale as I can’t face the hassle and cost of RTI. I am self-employed and not VAT registered, but the proceeds from the business sale will take me over the VAT threshold. Do I have to register for VAT and charge VAT on the sale of the business? Answer
Q. If my company buys the rights to the intellectual property I create in the form of blogs, websites and online presentations, is that treated as the sale of a capital asset in my hands subject to capital gains tax? If so, can I sell such intellectual property every year for £10,000, so the gain is covered by my annual exemption and I pay no tax? Answer
Q. Our son is now old enough to attend nursery. Can my company, as my employer, help out with the nursery fees? Answer |
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 5 – End of 2012/13 tax year. Last day to use up your annual exemptions for capital gains tax, inheritance tax and ISA’s
14 – Return and payment of CT61 tax due for quarter to 31 March 2013
19/22 – PAYE/NIC and CIS deductions due for month to 5/4/2013 or quarter 4 of 2012/13 for small employers. Interest will run on any unpaid PAYE/NIC for the tax year 2012/13
30 – Additional daily penalties of £10 per day up to a maximum of £900 for failing to file self assessment tax return due on 31 January 2013
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 Please contact us if we can help you with these or any other tax or accounts matters.
In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list. |
 If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.
See details of our Business Companion Service. |
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Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks, Wave Accounts, Quicken, Tasbooks or Clearbooks. We offer a range of accountancy services despite being specialists.
‘All clients using these software packages can benefit from our support. Visit our website http://www.simpleaccounting.co.uk for a look at the resource on offer.’ |
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