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Welcome… To March’s Tax Tips & MYOB News. As we get ready for the new tax year, we look at the best split between salary and dividends for directors.   March 2018 · Optimum Salary and Dividends 2018/19 · HMRC win IR35 appeal · Tax deductions for family members’ wages? · Banks that are Compatible with AccountEdge · March questions and answers · March key tax dates Optimum Salary and Dividends 2018/19 top The table below shows the current and next year’s tax and NI thresholds, plus tax allowances.                                                       2017/18    2018/19 Personal Tax Allowance               £11,500    £11,850 Basic Rate Tax Band                   £33,500    £34,500 Dividend nil-rate Band (DNRB)     £5,000      £2,000 NI annual thresholds:    Lower Earnings Limit                     £5,876      £6,032 Lower Threshold                            £8,164      £8,424 Upper Threshold                          £45,000    £46,350 Maximum tax and NI effect The first priority is to pay yourself a salary from your company. Pay yourself up to the lower threshold. Low salary plus dividends If you’re a director shareholder who follows the popular tax and NI-saving strategy of taking a low salary plus dividends, the change announced in an earlier budget to reduce the dividend nil rate band (DNRB) will also affect your tax bill for 2018/19. Note. The figures above are for earned income only. Where your income includes or is entirely derived from savings or investments, e.g. interest or dividends, the tax and NI position is different. 2018/19 compared with 2017/18 The most NI efficient level of salary has increased from £8,164 to £8,424. At this figure neither you nor your company will be liable to Class 1 NI. The most tax efficient level of salary depends on how much income you receive, apart from that you take from your company in salary and dividends. Assuming nearly all your income is from your company, a salary of £8,424 and the rest in dividends, ideally up to £37,925 or more will avoid higher rate tax.  The Lower Earnings Limit (£6,032 in 2018/19) represents the lowest salary for which you receive NI credits.  But no NI is paid until you reach the Lower Earnings threshold. Number crunching. Don’t get hung up on hitting the optimal figure for tax efficiency spot on unless you can be absolutely certain of what your total income will be for 2018/19. Concentrate on setting your salary at £8,424 and drawing enough dividends to use your DNRB in full if possible.   HMRC win IR35 appeal top   Tax deductions for family members’ wages? top HMRC have won a significant appeal concerning the application of employment intermediaries legislation to BBC television presenters. In Christa Ackroyd Media Ltd and the Commissioners for Her Majesty’s Revenue and Customs, [2018] UKFTT 0069 TC06334, the First Tier Tribunal (FTT) ruled that the legislation (known as the ‘IR35 rules’) applied to the arrangements under which the BBC contracted one of the presenters of the regional news programme Look North. Read More Many adults are likely to embrace the offer of help with technology from the younger generation! So where a child is employed in a family business to work on, say, website creation, management and social media, how can the owner make sure that their wages will be tax deductible? The recent case of Nicholson v HMRC (TC06293), in which the first tier tax tribunal examined a deduction made in sole trader’s accounts for his university student son, gives us some pointers. Read More   Banks that are Compatible with AccountEdge top Several of our clients are using electronic downloads of banking transactions.  This can be a very easy way of entering masses of repetitive transactions.  The key is whether a bank offers a business internet portal which allows downloads of OFX, QIF or QFX files.  For choice we like the QIF downloads.  Useful: These banks all produce qif files that are particularly easy to import: MetroBank, Bank of Scotland Lloyds Other banks that offer these formats include: Halifax (ofx) Bank of Scotland (ofx or qif) Royal Bank of Scotland (ofx) NatWest (ofx) Unity Trust (ofx or qif) Not as useful as they should be: PayPal claims to make a QIF download … but it is impossible to get a complete statement to include your PayPal sales.  To make things really confusing Paypal also has the annoying habit of offsetting sales with purchases and then crediting your bank account with the difference.  This makes Paypal sales receipts difficult to match to the sales invoices your customers pay you. Santander is in a special class of its own … offering qif and ofx statements that then don’t link properly.  They put masses of extra text into the payment reference.  This makes the Santander Bank transactions difficult to import in a meaningful way. HSBC has an ofx download that, according to bulletin boards, appears not to import very well. Confirmed as difficult to use: Many banks offer comma separated value downloads.  But the format of these is inconsistent. This makes them tricky to use. Banks only offering this form of download include the Co-operative. Clients have also explained to us about the quality of the service they have received from the Co-operative. We would therefore advise against banking with the Cooperative Bank. Owned by: Some banks are using software provided either by a corporate owner, or an associated major bank.  These include: Cater Allen (Santander), Coutts (Royal Bank of Scotland), Marks and Spencer (HSBC) Ulster Bank (Royal Bank of Scotland). We would be very grateful for reviews of other banks from AccountEdge users. Just about your experience. And if you work for a bank… please make your downloads easier for us to use!   March questions and answers top   March key tax dates top Q. I am a sole trader and have been trading for several years. My turnover has now exceeded the VAT registration threshold and I have registered with HMRC accordingly. I am currently waiting for VAT number and certificate. Will I be able to claim back VAT on purchases made by the business before the registration date? Answer Q. I own a buy-to-let leasehold property, which currently has 49 years remaining on the lease. Can I claim a tax deduction for the legal and professional costs of extending the lease? Answer Q. I am self-employed and have been claiming capital allowances on certain business items. If I close down the business and move into employment, but continue to use the same assets for my work, can the transfer from one to the other be at the written down value, or will there be a balancing allowance at the date my business ends  Answer Q. Can Acclivity AccountEdge work for Making Tax Digital? Answer: I will have an answer for my own clients that use, and will continue to use Acclivity.  It will involve use of a VAT filing software which we shall supervise. 19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/3/2018   Need Help? top   New Clients Welcome top Please contact us if we can help you with these or any other tax or accounts matters. 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.   About Us top Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB and AccountEdge. ‘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.’   If the images do not show. If the images contained within this email do not show correctly please add this email to your safe senders list.

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