Guide on Changes to UK Dividend Tax Thresholds for 2023/24

If you own a personal or family company, you're probably aware with the benefits of taking dividends as a tax-efficient way to extract profits. However, recent tax changes have affected the benefits of this strategy, and it's important to stay informed and plan earlier for the upcoming tax year.

One significant change is the impact of corporation tax changes, effective from 1 April 2023. If your profits exceed £50,000, you'll face a higher rate of corporation tax, which will reduce the post-tax profits available for dividends. This means that even if your profits remain unchanged, you may not be able to maintain previous dividend payments if your effective rate of corporation tax increases.

 Another change to be aware of is the decrease in the dividend allowance. Earlier set at £2,000 for 2022/23, it will be halved to £1,000 for 2023/24, and further reduced to £500 for 2024/25.

The dividend allowance works as a zero-rate band, meaning that dividends covered by the allowance are taxed at a zero rate. However, the allowance also utilises some of the tax bar in which the dividends fall, lowering the profits that can be extracted tax-free. This reduction in the dividend allowance may require a review of strategies such as the alphabet share structure commonly used in family companies to maximize the use of the dividend allowance for family members.

While dividends are still attractive due to their lower tax rates compared to income tax rates, it's important to remember that corporation tax has already been paid on the profits distributed as dividends. Additionally, the dividend tax rates were increased by 1.25 percentage points from 6 April 2022 in anticipation of the now-cancelled Health and Social Care Levy. Despite the Levy not going ahead, the increased dividend tax rates will remain in place for 2023/24. This means that dividends will be taxed at 8.75% in the basic rate band, 33.75% in the higher rate band, and 39.35% in the additional rate band.

Speaking of the additional rate band, the threshold has also changed, with taxable income needing to exceed £125,140 for 2023/24, down from £150,000 previously, for the dividend additional rate to apply.
In summary, these tax changes mean that you may have less profits available for dividends, with only £1,000 being tax-free.

Dividends above this level will continue to be taxed at the higher rates introduced in April 2022, and the additional rate will now apply at a lower threshold of £125,140. It's crucial to stay informed and review your dividend extraction strategy in light of these changes to ensure you're making the most tax-efficient decisions for your personal or family company in the upcoming tax year. Stay ahead of the game and dive into dividends with a clear understanding of the current tax landscape.

6 Tips for Choosing The Right Tax Accountant UK

In order to save money or to launch firm quickly many small businesses begin without an accountant. At some point, every business requires more help handling their financial records and realizes they must take help of qualified accountant or bookkeeper. Every accounting firm has its own features and benefits, making it difficult to pick the right accountancy firm. This article will help you understand what to look for in an accounting firm and what questions to ask for finding not just an accountant but a counted industry partner.

Choosing an accountant is like picking a new business associate. To select the best accountants in the UK, you can follow these steps:

1.   Determine Your Needs: Before you start looking for an accountant, you need to identify what kind of services you require. This will help you narrow down your search to those accountants who have the expertise and experience to meet your specific needs.

2.   Look for Certified Accountants: It's important to work with a certified accountant in the UK who has the necessary qualifications and credentials. Look for accountants who are members of recognized professional bodies such as the Institute of Chartered Accountants in England and Wales (ICAEW), the Association of Chartered Certified Accountants (ACCA), or the Chartered Institute of Management Accountants (CIMA).

3.   Check Their Experience: Look for accountants who have experience in your industry or with businesses similar to yours. This will ensure that they have a better understanding of your business and can provide tailored advice.

4.  Reviews and Testimonials: Look for reviews and testimonials from other clients to get an idea of their experience with the accountant. You can check their website, social media, and review platforms such as Trustpilot or Google My Business.

5.   Book a Consultation: Before you finalize your decision, schedule a consultation with the accountant to discuss your needs and get a feel for their expertise and communication skills. This will also give you an opportunity to ask any questions you may have.

6.   Compare Fees: Finally, compare the fees of different accountants to find one that offers competitive pricing without compromising on quality.

By following these steps, you can find the best accountants in the UK to help you manage your finances and grow your business.

 

 

 

 

 

 

 

Importance of Accounting and Bookkeeping Services for eCommerce

 

 

 

Businesses these days are mostly opening up in e-commerce format. In the case of existing companies, they are ever changing to e-commerce or opening up an e-commerce storefront. The E-commerce format does not have the restriction of having a physical store or geographical boundary, and thus businesses can develop huge amounts at a time.

The need for having an E-commerce Accounting & Bookkeeping solution is undeniable for a business to grow and expand or to survive in a highly competitive market. Like different industries, e-commerce businesses also require you to manage your finance efficiently to grow your business. Furthermore, to deal with the business finance proficiently, one must put attention to detail in the accounting and bookkeeping for e-commerce companies.

Assuming you have an existing e-commerce business, you might already know how important it is to manage your finance to grow your business. In any case, the precarious part is how would you deal with the accounting and representing your business. Having web-based business accounting services is very evident for a business to grow and expand or survive in a highly competitive market.

You need a smart way to manage your money, whether you’re selling goods through an eCommerce website or not. Here are some of the essential benefits of developing sound accounting procedures continuously.

Dependable Plan of Action

Establishing a sound, functional business requires the right accounting and bookkeeping. You can clearly see how your organization operates if you have a system in place for tracking all transactions and expenses. When it’s time to pay your employees, contractors, or the duty bill at the end of the month, you can do so without experiencing any unpleasant surprises.

Determining your Business Goals

Making estimates that foretell your business’s future requires a firm grasp of your financials. Your ability to plan and work more smartly will improve.

Readiness of your Tax Assessment and Filing 

A qualified accountant will save you a tonne of time and headaches when documenting your spending annually. You'll need to keep up with great monetary records to ensure that your actions comply with all applicable federal, state, and local tax laws and deal charge rules. These standards don't change, you can have an Accountant based in London or any other part of the world, and they will all tell you the same thing, keep your books in good order.

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.