Business Asset Disposal Relief- What you need to Know?
Business Asset Disposal Relief- What you need to know? Entrepreneurs relief which is now known as Business Asset Disposal Relief is one of the reliefs available to the business owners and the entrepreneurs when they sell the asset. If you are eligible for this relief it will help you reduce the capital gains tax that you pay on the disposal of an asset. You will only have to pay 10% on the profit that you make as a result of the disposal of a qualifying asset instead of a normal CGT which is paid at 10% or 20%. Am I eligible for the Business Asset Disposal Relief if I am a Contractor? In the following cases a contractor can qualify for Business Asset Disposal Relief: You will not qualify for business asset disposal relief if you work through an umbrella company. As a sole trader you are eligible for the reduced rate of CGT(business asset disposal relief) if you owned the asset for 2 years or more. If you are closing down your business: If you are closing down your business and you dispose of all your assets within 3 years of selling your business then you can claim the relief. For example if you are planning to sell your business in 2022, to qualify for Entrepreneurs relief you must sell all your business equipment and assets by 2025. There is no limit as to how many times you should claim the relief, you can claim it as many times as you want provided your profit does not exceed £ 1 million over your lifetime. Once you hit the £1 million cap in your life you won’t be eligible to claim Business Asset disposal relief If you are selling shares in the company you have invested in You can claim business asset disposal relief if the following applies to you: If a company goes from being a trading company to a non-trading company you will still be eligible for business asset disposal relief as long as you sell your shares within 3 years. If you are closing your business you should not be involved in the same business activity for at least 2 years otherwise HMRC might consider your profits as income distribution and you might have to pay dividend tax on it. If you are looking for an accountant in London contact Taxaccolega and our expert accountants will help you with your taxes. They have expert knowledge and they can advise you on what the most tax efficient structure to use to run your business and utilise the tax reliefs available.
I own a property – how can I reduce my Inheritance tax bill?
I own a property – how can I reduce my Inheritance tax bill? If you own a house, it is part of your estate for inheritance tax purposes and inheritance tax should be paid on it when you die at 40% however there are ways that can help reduce the tax bill. According to HMRC guidelines you do not pay inheritance tax if the following applies to you: Inheritance tax threshold Each person has a tax free allowance of £325 000. If the value of their estate at the time of their death is less than £325 000 no inheritance tax will need to be paid. Passing the house to spouse If you pass your house to your spouse ( your husbandwife ) or a civil partner, charity or a community sports club you don’t pay inheritance tax even if you do that within 7 years of dying. If you pass your home to your children or grandchildren the tax free allowance will increase from £325 000 to £500 000 and you will not have to pay inheritance tax if the total value of your estate is £500 000 or less. You can therefore reduce or avoid paying inheritance tax if the value of your estate is within the tax free allowance thresholds. You can do this by taking the following steps: Giving gifts during your lifetime If the value of your house is £325 000 or less but the value of your total estate which includes money, possessions etc exceeds this threshold you can give them away as gifts during your lifetime. HMRC has defined such gifts as exempted gifts and you have a tax free allowance of £3000 per year. If you don’t use this allowance in a particular year you can carry it forward to the next year. Giving away home before dying Even if the value of your house is more than £325 000 and you pass it to your spouse there is no inheritance tax even if you die within 7 years of giving it away. You can give the house away and continue living in it If you give the house to any of your relatives or even to your children and live for 7 years there will be no inheritance tax to pay on it. You can choose to continue living in the same property however, you will have to give rent to the new owners at the market rate and pay all the bills of the house. If the new owners are your children and they are living with you in the property you don’t have to pay rent even if you gave them a portion of your property. Giving charity If you leave 10% of your estate to charity, the inheritance tax will be paid at the reduced rate of 36% Transferring any unused nil rate band between husband and wife. If there is any unused nil rate band when one of the partners dies it can be transferred to the tax free allowance of the other partner and this can reduce the inheritance tax bill. If you own a property or you have inherited a property or you are selling your property and you want to know about the taxes don’t hesitate to call Taxaccolega and our expert team of accountants will be happy to help you. Call our accountants in croydon 020 8127 0728 or drop us a message here.
Online Tutor – What expenses can I claim and what taxes do I pay?
Online Tutor – What expenses can I claim and what taxes do I pay? If you are thinking of starting online tutoring you should be well aware of the taxes that the taxman expects you to pay. HMRC expects you to pay taxes if you are earning money above a certain threshold. These thresholds are different for different structures in which the businesses are run. From the tax point of view if you are providing the services( in this case tutoring) and earning money from it you are running a business. You can choose how you want to run the business. For example, you can register your business as a sole trader or you can register your business as a company. Both business structures will have different thresholds, different tax rates and different deadlines. If you choose to run your business as a Sole Trader If you chose to run your business as a sole trader you would have to register as a sole trader with HMRC. You are required to register to submit your self assessment tax return if you have earned more than £1000 in a particular tax year. You can register by following the link here .You will receive your 10 digit UTR number which you will need for when you will be filing your self assessment tax return. You can do it online before the deadline 31 Jan or you can submit your paper return before 31 Oct of the following year in which you started your business. You should keep proper records of your income and expenses such as bank records, receipts, record of your bills etc. This is to make sure that when you state your profits and expenses you have proper records to back that information. Income Income will include all the tuition fees received during the tax year. You might have some defaulters. We will include only the income received and not the income which is due to be received although you have incurred the related expenses, this means that your tax bill would be a little understated in one particular year although tax on that income can be charged in the following year. If you receive any security you should not consider it as your income, it is your liability which you need to return according to the set terms of the contract. Expenses that you can claim There are certain costs that you can claim as allowable expenses. This means that you can deduct these expenses from your income which can help reduce your tax bill. If you are tutoring online you can claim the following expenses: The taxes that you have to pay As a sole trader you pay the following taxes: For more information on how to set up a company contact our accountants at Taxaccolega at 020 8127 0728 and they can guide you on setting up the company and related taxes.
Running my side business as a Sole trader or a Limited Company? Which one will be more tax efficient?
Running my side business as a Sole trader or a Limited Company? Which one will be more tax efficient? There is no one answer to this question. Either of the business structures can be tax efficient; it just depends on your individual tax position. Let’s take the example of an individual who works in a company and runs a business as well. What taxes he might have to pay. In any case there are few basic points that you need to consider: How much are you earning from your full time work? This question is important to see if the salary uses up all the personal allowance. Each individual is given an annual personal allowance, for the tax year 2021/2022 the personal allowance is £12 570, this means an individual can earn tax free upto this amount. You will be charged tax if you are earning more than £12 570. This comes out to be £242 per week and £1048 per month. Mr. A works in a company and gets a salary of £20 000 a year. He doesn’t get any other benefits. He will be taxed through PAYE meaning he will get his salary net of the taxes. He will be taxed as follows: £ Salary 20000 PA (12570) Salary after PA 7430 Tax @ 20 % (1486) Salary after tax 18514 Mr A won’t have to pay any NI as his earnings are within the lower earning limit of £6, 240. How Profitable is your business? Taxes if you chose to work as a sole trader If you have your own business and you are working as a sole trader you will be given an annual trading allowance of £1000. You are not legally required to fill in the self assessment tax return and hence pay taxes if you are earning less than £1000 from your business. Mr A earns £5000 from his business. How much tax will he pay as a sole trader keeping in mind he has used up all his personal allowance. £ Income from business 5000 Trading Allowance (1000) Expenses (100) Taxable profit 3900 Income tax@ 20% 780 Income after tax 4220 If you choose to work as a Limited Company If you choose to work as a limited company the profits that you will earn from your business will be subject to corporation taxes. There is no tax free allowance available if you run a limited company and therefore all the profits will be taxed at 19%. So if Mr A is earning £5000 and the expenses total £100. We are keeping the expenses constant in this example although in reality the expenses in the limited company are more due to added admin and legal costs. Also if you have an employee and you are giving a salary that salary is also expensed and therefore reduce the tax bill. £ Income from the business 5000 Expenses (100) Taxable profit 4900 Income tax @19% 931 Profit after tax 3969 In this example Mr A will be paying more tax However, if he keeps anyone for administrative work, the salary given to that person will be expensed and that can further reduce the taxes. When you are running a company with employees, you are running PAYE, there are deadlines to meet, annual accounts to be made and submitted on time, many individuals prefer hiring an accountant. The accountancy fees is also an allowable expense and can be expensed. This further reduces the taxes. If you are looking to run a business and you need an accountant to sort out your finances and meet all the accounting and tax deadlines you can contact Taxaccolega, accountants in Croydon and accountants in South hall at 020 8127 0728.
