Tax Minimization Strategies for Small Business in London

Is your company paying extra tax? Looking to reduce the tax impact? As a small business owner in the London, it's important to stay up-to-date on the latest tax laws and regulations to ensure that you're paying the right amount of tax and taking the benefit of any available tax savings opportunities.

The best tax planning strategy is developing an idea that will put you in the best financial position possible. An effective tax planning strategy focuses on three key areas: reducing your income, increasing your deductions, and taking advantage of lesser tax rates. 

Here are some strategies you can reduce the tax as a small business in London:

• Make the most of tax deductions: There are many deductions available to small businesses, such as expenses for business travel, employee training, and office equipment. Make sure you're claiming all the deductions you're entitled to in order to decrease your tax liability.
• Use tax-efficient business structures: Choosing the right business structure can have a big effect on your tax bill.
• Best Planning for capital gains tax: If you sell an asset that has increased in value, you may be liable for capital gains tax. However, there are exemptions and reliefs available, such as the Entrepreneurs' Relief, which can decrease your tax bill. Plan ahead and consider the tax implications of any asset sales.
• Make use of tax-free allowances: The number of tax-free allowances, such as the own allowance and the capital gains tax allowance, which can diminish your tax bill. Make sure you're aware of these allowances and how to claim them.
• Keep good records: good record-keeping is fundamental for any business, but it's especially important for tax purposes. Make sure you keep correct records of your income and expenses, as this will make it easier to claim deductions and exemptions and reduce the risk of errors on your tax returns.

We develop a cordial relation with our clients by making them understand Accounting and Taxation matters in a simple language. Call us at 020-8239-4999 today to get Free Consultation.

MTD for Income Tax Self-Assessment Delayed Until 2026

    

HMRC has officially announced that MTD for ITSA has been postponed by two years on 19th December 2022. According to Treasury, the delay should help smaller businesses in the long run. The announcement observed effective rallies and concerns raised by professional bodies and practitioners. 

An element of the UK government’s initiative to digitalise the tax system, the system was earlier slated for April 2024. The latest delay sees this moved back to April 2026 to “maximise the benefits”, according to Victoria Atkins, financial secretary to the Treasury.  

MTD for Income Tax Self-Assessment will be required from April 2026, and will not be executed from April 2024 as per fresh announcement by HMRC. The subsequent changes were also publicized about the scope of the scheme and concerned taxpayers:

• Self-employed individual and landlords with £50,000 plus income will be required to keep digital record from April‌‌‌ ‌‌2026 and need to provide quarterly updates regarding their income and expenses to HMRC via MTD-compatible software
  
  
• People with an income between £30,000 and up to £50,000 will require to do this from April‌‌‌ ‌‌2027
  
  
• Before the mandated MTD for ITSA most taxpayers will be able to sign up voluntarily. 
  
  
• For general partnerships MTD for ITSA will not be extended to in 2025 but should be started at a later date, to be confirmed.
  
  

Accountants will need to aware their self-employed and landlord clients about HMRC announcement of two years delayed of MTD for ITSA. We can help you by providing accounting and bookkeeping services, annual accounts preparation, company tax returns, self assessment tax returns,VAT and payroll. 

File Your Self-Assessment Tax Return by 31st January To Avoid Late Filing Penalties

Self-assessment is the method employed by HMRC to gather Income Tax and National Insurance contributions from individuals who are self-employed, as well as those who receive unreported taxable income from various sources. This includes individuals holding positions such as limited company directors, shareholders, and members of limited liability partnerships (LLPs). Through the self-assessment process, taxpayers are required to report their income, gains, and other relevant financial information, enabling HMRC to calculate the appropriate amount of tax and National Insurance owed.

For the year 2022/23 the tax return filing deadline is midnight on 31st January 2024. To save yourself from tax return penalty, any National Insurance and income tax due for the year 2022/2223, must be paid by 31st January 2024. 

You also have the option to file a tax return by post in case you do not know how to file tax returns online. Filing a self-assessment tax return online is a much easier and quicker option. 

How to Register for Self-Assessment?

You must be registered for Self Assessment tax return when you file your first tax return. If you did not sent tax return online last year, you need to register (in case if you have submitted tax return through post) HMRC will send you a letter to your registered address containing 10 digit Unique Taxpayer Reference (UTR) number with in 10 working days or 21 days. 

You must then:

• make an online account
• use your UTR to sign up for the Self Assessment online service
  
  

HMRC will send you an activation code to your registered address with in 7 working days or 21 days if it is outside UK. Use this code with your UTR for sign in to your account and filing your tax return online. 

How To File Self Assessment Tax Return?

From below two ways you can use any one to file Self Assessment tax return (form SA100) with HMRC:

• Complete & submit form SA100 online
• Download & complete form SA100 by hand and submit by post
  

The fastest and easiest way to send a Self Assessment tax return online. You also get extra three months to file an online return and it is much easier way for making amendments. 

Things need to be taken care of when filing a self-employed tax return

 First and foremost, a business owner should know whether to register as self-employed or as a limited company. Both registrations are vastly different. Let's see how:

Register As Self-Employed	Register As A Limited Company
Disclosing requirement is less as you are only required to complete a Self Assessment tax return once a year. You can hire Self-assessment accountants in London for this	Disclosing requirements are much more
You are entitled to all the profits you	You are not entitled to all the profits You
You are a business and not the officer of the company.	In a Limited Company, you are the officer of the company
You have no restrictions on withdrawing funds from your bank account.	You being a director of the company would be withdrawing as a salary, bonuses, dividend or a loan account.

Pre-Requisition For Setting Up As A Sole Trader Or A Self Employed

Anyone can set up as a sole trader or self-employed but in a few business types, you require to obtain a permit or a license from your local authority. These businesses include a Taxi Driving license, Babysitting, and Selling anything on the street.  At the time of setting up as a Sole Trader one has to follow some legal requirements.

If you will be running your business from home, you need to pay business rates in the area that you are using for your business purpose. For Example – If you are selling bakery items in your store room area or in your garage, you need to pay business charges for that store room or garage.

If you are an IT person and working from your laptop sitting in your bedroom or sitting area, it is unlikely to pay business rates because it is also being used for a domestic purpose – but if the same thing is done making a separate room such as an office, then you will have to definitely pay business rates as this room is only used for your business purpose. You may also need planning permission to work from home, depending on what type of business are you in. Planning permission is required because if your business area is getting a side extension and the neighbours residing there have an issue then at that point in time it becomes necessary for you to take planning permission. Planning permission and the rates for it are different according to your type of business to know about it you need to contact your local authority as every area is different.

Who Registers as Self-Employed?

If you register as self-employed you are not required a lot of administration as compared to a limited company. However, if you are registering as self-employed then you must register by 5th October of the second tax year of your business from when you have started your self-employment or when you have started trading. You may receive a penalty of £100 if you do not register on time and the penalty will increase after three months.

Who Can Be Classified as Self-employed?

Contractors – They work on a contract basis, for example, Plumbers, Builders, Electricians (CIS Tax), Locum GPs and etc.

Freelancers – They work on client-based requirements so it can be on a weekly, monthly or quarterly basis. Once the work is completed you get some other client to work with.

You will receive a Tax-Free code from the “gov.uk”, which for this Tax Year of 2022/2023 will be 1257L. If your income is more than £100,000 then your personal allowance will be less.

Registering for Self-Assessment Tax Returns for Self-employed

Self-Assessment Tax Return is submitted to HMRC by a Self-Employed person or Sole Trader. For this, you need to fill up a tax return form (either online or hard copy). Note the deadlines for both online and offline are different.

If you belong to the threshold of 85,000, you need to inform HMRC about your sales and expenses in a simple three-line format. There can be a possibility to fill up the full self-assessment tax return if you fall under a certain category that needs full disclosure of expenses. For a new self-employed there are many more things that you need to know. You can get the information on the HMRC website

HMRC will send you the self-assessment tax return in the month of April every year but anyhow if it doesn’t reach you by the end of April, it is your responsibility to inform about this to HMRC or else you will be liable to pay the required penalties. For those who are doing it for the very first time, you will need to fill in a self-assessment registration form first. For this National Insurance Number is mandatory.

Self-employed Registration

The one who is a sole trader /self-employed they have to fill up a CWF1 form to inform HMRC about the type of your business.

The one who is not self-employed has to complete filling out an SA1 form. Once this is done, HMRC will set up Tax Records for you and HMRC will send you a UTR number that needs to be preserved lifelong.

For all this, you can hire an accountant for self-employed in London who will register on your behalf and will get you the UTR number.

Self-employed Self-Assessment Payment Deadlines

You must pay the total amount you owe to HMRC by 31st January. The deadline for payment is the same for both filed online or offline (on paper). You will have to pay both or any one of the following:

• The balancing payment

• The first two ‘payments on account’

 

You will receive a statement after filing from HMRC stating the amount due for your return. If you do not receive this before your due date of payment, then you have to do it yourself or this can be done by the accountant you have hired.

Self-employed Filing

If you are a Sole Trader, it is mandatory for you to file tax returns annually. If you are a VAT Registered business as self-employed, then your VAT returns should be completed every quarterly or Annually.

This means you will have to not only stay compliant but also be organized every time to help you make the process quick and efficient. When the new Digital Tax Scheme comes into place in the near future all Self Employed Individuals will have to file tax return quarterly in the near future as the new digital tax scheme is going to be the future

While filing a self-employed tax return you need to be accurate in the legal formalities. If you miss any small thing, you will be liable for penalties. So to be on the safer side you must take the help of an accountant for self-employed in London who will register if this is your first time, will file your tax quarterly and will not get you the penalties.

Understand self-assessment tax calculation and Payment

 

Handling your own firm and being your own boss is a great way to go down. But one job you might require to handle is filling a Self Assessment tax return. Self Assessment is a procedure that HMRC utilises to collect data required to calculate how much revenue tax you should pay. And if you’re operating a small business instead of earning a traditional salary, you must work out how much you owe.

In this article, we describe best advices to assist you File your Self Assessment tax return. Filing a self-assessment tax return is less complex; in reality it is not bad at all.

Register With HMRC
If you are self-employed, you have to inform HMRC so HMRC will send you your Unique Taxpayer Reference (UTR) and you can set up your account online. Make sure you know your NI number also.

For the first year of your business setup, you can wait till the year ends in April and file your first tax return online or through your tax return accountant by midnight of 31 January the following year. It is advisable not to wait don’t wait until the last minute!

Understand tax Slabs
Most people are entitled to gain a specific portion of the money and not pay any tax on it. It is called a personal allowance and for 2020/21 it’s £12,500. After that, you pay 20% tax until you hit £37,500, and after that 40% tax on anything until you earn £150,000 These rates change every year and vary.

Get help:
Tax Accountants generally charge £100 to £300 for calculating and filing your self-assessment tax return, but you will still have to record your income and expenses and pay the actual HMRC bill yourself.

Modern Accountancy Standards to Improve your Finance and Accounting Services

Modern-day accountancy work has shifted from being on pen and paper and has become more advanced. Accountancy services are crucial to your business and for it to be organised financially. Here’s why you should optimise your small and medium-size business with bookkeeping and accounting services.

Now that you have realised that bookkeeping and accounting are important factors to your small and medium-size business, let’s first discuss the differences between the two. To put it simply, Bookkeeping service is the practice of recording and keeping that maintains and keeps a record of financial transactions. SME accounting services in UK analyses, interprets and organises the records. When both are consolidated, they create the perfect harmony to ensure that your business has a well-maintained financial record that can be used to track different business transactions.

Modern bookkeeping services for your business –

Accounting might have looked totally different a couple of years prior. But currently, many factors have caused bookkeeping to evolve for the better. Having some of the tips that we are about to share, could help your small and medium-sized enterprises thrive financially and you will be able to keep track of your business transactions and in other areas of your business’s financial situation.

•   Be dedicated– Being dedicated to your business’s bookkeeping is crucial. Particularly assuming your business is beginning to get, the need for proper bookkeeping is crucial. Missing out on one number or even a point could cause you trouble in the long run.
•   Be vigilant– Pay attention to all the figures and matters that are required to make your business thrive and progress. This is why you should leave your bookkeeping needs to a professional that can vigilantly carry them out.
•   Separate your finances– Separating your personal finances from your business finances is crucial to ensuring that your bookkeeping can be done well. If not done, this could cause your business trouble in maintaining your financial records.

Modern SME accounting services for your business -

Different Accounting strategies have been carried out because of the ascent of innovation and different variables in the advanced monetary world. These are a few hints on how you may employ SME accounting offerings in London to make sure your enterprise is capable of progress.

•   Have the expertise– Find an accounting firm that is able to accommodate your SME accounting needs. You could reevaluate for administration to guarantee that you can utilize their abilities to help your business and guarantee things are done well.
•   Use of technology– Technology in the financial world has become more prevalent. The use of the appropriate software can help you handle and interpret your business figures to ensure that you are able to digest the results easily.
•   Hire someone with experience– Someone with experience would have had their fair share of failures and learning curves at other places which have caused them to be able to deliver the results that you need. Hiring someone with experience will ensure that they can give you the best results without mistakes.

Conclusion –

Optimising your Small and medium-sized enterprises with bookkeeping services and accounting services are crucial to ensuring your business’s progress. They also allow you to focus on other areas of your business without having to worry too much about your accountancy matters.

If you require any assistance on accounting services, feel free to contact us at 020-8239-4999. we offer a complimentary consultation for us to better understand your business requirements.