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November 2018

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To November’s Tax Tips & MYOB News.

Don’t forget to look at our series of MYOB/ AccountEdge training tutorials from time to time.  A good use of any spare few minutes is to brush up on your accounting software skills.  And if you haven’t yet moved to the latest version of AccountEdge you can see a review of the latest features.
Video Guidance on MYOB and AccountEdge

November 2018
· How would you like to earn £146k Tax free?
· Employees – How to Access Workplace Pension Details
· Agent Authorisation – Allowing us to act for you with HMRC
· What is the effect of the Budget on Small Limited Companies?
· November questions and answers
· November key tax dates
How would you like to earn £146k Tax Free?
Well it’s not usual… but it is possible.  You just have to arrange your affairs to take advantage of all the HMRC’s tax-free allowances, exemptions and disregards.

Nil Tax
Exemption or zero rates apply for all the following incomes for 2019/20. Note that to take advantage of the Rent-a-Room relief you have to be living in your home while renting out a room to a lodger.  And there is only one Rent-a-room allowance per household.

Spouse 1 (£k)  Spouse 2 (£k)
Salary and/or Pension
Rent a Room
Property Allowance eg Air BNB           1          1
Trading Allowance eg Ebay trading
Interest received on savings or Director Loan
Capital Gains Tax
Employer Pension Contributions


The CGT annual exemption is quite difficult to use every year.  However if you have an investment portfolio of £100k each, invested in growth stocks, it might be possible to use it by selling shares that have grown by £12k in value, each year.

The introduction of the new trading and property allowances for 2017/18 onwards mean that those with low levels of income from these sources may not need to report it to HMRC. The trading allowance is £1,000 for 2017/18 and 2018/19. Broadly, those with trading income of less than £1,000 a year, no longer need to report it to HMRC. This may be particularly useful for people with casual or small part time earnings from self-employment, for example, someone who up-cycles old furniture for resale on eBay or similar. 
Employees – How to Access Workplace Pension Details
Agent Authorisation – Allowing us to act for you with HMRC
Make sure that you and your employees know how to access and manage your own pension pot with the Peoples Pension. Why don’t you forward this advice to your employees?

To set up an online account with the Peoples Pension (PP)

You will need your Peoples Pension Customer Number – this is on your joining letter and other correspondence from the Peoples Pension (or  ring the Peoples Pension on 0300 2000 444).  You will also need your National Insurance number and contact details. Then Go To: PP Online Account Set Up

Once the account is set up you can log in and see details of your monthly contributions and projected pension pot at retirement.

Transferring in from other Pension Schemes
If you have had another Pension Scheme before you may wish to consolidate your pensions by transferring them into The People’s Pension.  See Transfer In 

Drawing Your Pension Savings

You can take out your pension savings from the age of 55 or leave them invested for longer. For the best options for you see: .
When you become our client we normally ask you to complete an Authorising your Agent form (‘64-8‘) (pdf file). It would be convenient if this gave us access to all your tax affairs.  Unfortunately nothing with HMRC is that simple and each of the taxes is treated slightly differently.  So whilst the 64-8 gives us authority to deal with all your tax affairs by phone and letter it doesn’t give us full online access for PAYE and VAT.

So we may also separately request online access to your records.  To do this we trigger an authorisation code at HMRC which is then sent to you in the post in about a week.  Please look out for the letter from HMRC (which will mention Simple Accounting Ltd) and then tell us the code (by email is fine) so we can complete the authorisation.  Read More 
What is the Effect of the Budget on Small Limited Companies?
Thinking about the recent budget in a comprehensive way can be complicated.  So let us take this apart for you.  Imagine that you are a partnership currently earning £117,592 in annual profits and you want to set up as a small limited company from April 2019 using the rates announced by Philip Hammond last week.  

As employees the new directors of the company would earn £12,500 salary each.
There would be no tax on salary, but Employees’ NIC 2020/21 applies – £464 each.
Then the company would pay its shareholders some dividends, say £37,500 each (creating £50,000 of combined income).
Just £2,000 of the dividends would be tax-free, then there would be 7.5% tax on the remaining £35,500 = dividend tax £2,663 each.
This creates a total of £6,254 Income Tax/NI for the couple leaving £93,746 net income between the two.

Note: if the company had other employees there would be value in potentially setting the directors’ salaries at the National Insurance threshold instead.
To afford the dividends the company would have taxable profits of £92,592 which incurs corporation tax of £17,592 (19%) . 

Tax paid by the company is therefore £17,592
Taxes paid by the individuals are £2,663 and £464 each. 

Compare this to the tax rates on the partnership from 2019/20.  Now the £117,592 profit creates a self- employed taxable income of £58,796 each
The first £12,500 is taxed at @ Nil
The next band of £37,500 is taxed at @ 20%= £7,500
The next band of £8,092 is taxed @ 40% = £3,518

Class 2 NI is also charged  at £156 each
Class 4 NI is firstly charged at 9% on £41,368 (ie £50,000 less the NI threshold of £8,632) £3,723 each
Class 4 NI is secondly charged at 2% on £8,796 (the income beyond £50,000) £176 each.

The tax now comes to £15073 each or £30,146.  This is over £6,000 more tax than the variety of taxes paid under the Ltd company regime.
November questions and answers top
November key tax dates top
Q. Are there any advantages to registering voluntarily for VAT even if my taxable turnover is less than the registration threshold? Answer

Q. What counts as a gift for inheritance tax purposes? Answer

Q. I am a builder. I have recently started operating the construction industry scheme (CIS) although it is still quite new to me. I have recently taken on two labourers, both of whom are registered with HMRC as subcontractors. One of the subcontractors worked for me 3 months ago, the other has never worked for me. Could you please clarify what I need to do with regards deducting tax from their wages? Answer
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/11/2018
Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

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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.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Wave.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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