Personal Tax | Simply Accounting Solutions

How do I work out my self employed profits for Universal Credit?

Universal Credit is a new state benefit that is gradually replacing other means tested working age benefits. For most people it is no longer possible to make a new claim for Tax Credits and existing Tax credits claiments are being moved over to Universal Credit in a phased migration.

Univeral Credit is calculated on either a weekly or monthly assessment period. If you are self employed you will need to report your profits to the DWP on a monthly basis. Reporting is done on the cash basis - money in and money out for your assessment period.

You must report your monthly earnings to the DWP between the period of seven days before to 14 days after the end of your assessment period.

For an easy step by step guide on what you need to report follow this link to the Chartered Institute of Tax's website.

Construction Industry Tax Refunds

The Construction Industry Scheme (CIS) is where a contractor in the construction industry deducts, at source, a certain percentage of the money paid to their subcontractors. This amount is passed straight to HMRC and counts towards the subcontractor’s self-assessment tax and national insurance bill for the tax year.

The amount deducted will depend on whether or not a subcontractor is registered under the CIS scheme. Unregistered subcontractors usually get a 30% deduction, while registered subcontractors get a deduction at the standard basic rate of tax of 20%.

The deduction rate is a flat rate and does not take into account the tax-free personal allowance that every UK based taxpayer is entitled to. The personal allowance for the tax year 2019-2020 was £12,500. Because the flat rate deduction does not take account of this, or other business expenses that you can claim, many ‘subbies’ are due a tax refund at the end of the tax year. The average refund is around £2,000, but will depend on your other income and the amount of expenses that you can claim.

In addition to the UK personal allowance, you can also claim a deduction for business expenses incurred in running your business such travel to sites, insurance, telephone, tools, safety clothing and lots more.

This can be a complex process so to make sure that you are getting the maximum tax rebate let Simply Accounting Solutions help you, our fees are tax deductible too!

Fixed fee CIS tax repayment claims are only £199!

Start your claim now

Tax free payment that could help with the extra costs of working from home

Employers who require their employees to work from home as a result of the temporary closure of their business premises due to the Coronavirus can provide a tax-free payment as a means of offsetting reasonable additional household expenses.

The payment, which was increased to £6 per week – or £26 per month – from 6 April, in the March Budget, can be paid to workers in addition to their salary, free from income tax and national insurance.

It is up to your employer to decide whether to make the payment. If they don’t, you may be able to claim tax relief from HMRC on the additional household costs of your home office, provided you keep records of these costs and can prove to HMRC that they were ‘wholly, exclusively and necessarily’ in the performance of your work.

While I expect this situation to be temporary, the extra £6 per week payable to employees in addition to their regular salary payments would be a welcome boost, particularly for those on lower incomes, to help them offset some of the additional costs associated with working from home.

If you are currently working from home due to the closure of your employer’s premises, why not ask them if they would be willing to pay you the additional £26 per month whilst working from home?

Coronavirus – what help is available to me?

If you are self-employed

See our article here about help under the Self-employed Income Support Scheme.

If you work in the gig economy

Unless it has been agreed as part of your contract, it is unlikely that you will be entitled to Statutory Sick Pay, sick leave or paid holiday leave.

Some employers have said they will offer sick pay if you have to self isolate because of coronavirus. Others have said they might offer some kind of compensation if you have been diagnosed with coronavirus.

If you’re working in the gig economy, check with the company to find out what your rights are.

You will be able to claim sickness benefits available to self-employed people if you’re eligible.

If you’re employed

The government has announced it will pay your wages through the coronavirus job retention scheme if your employer is forced to temporarily close because of coronavirus.

This will be available to anyone on the PAYE scheme and your employer will need to contact HMRC to apply. In order for you to qualify, your employer will have to re-assign your employment status as a 'furloughed worker’.

The scheme will pay 80 percent of retained workers’ salaries, up to £2,500 a month, plus the associated employer National Insurance Contributions and minimum automatic enrolment employer pension contributions on that wage. Your employer can top up your salary to more than this if they choose to.

Wages under the scheme can be backdated to 1 March, if you stopped working then, and the scheme will be open for at least three months. There is no limit on the amount of funding or the number of employees that can be furloughed.

The first of the grants are hoped to be paid before the end of April so it could take a few weeks to get your money.

If you have already been told your job is gone, you should contact your employer to see if they are now willing to take you back on and reassign you as a furloughed worker.

If you have already made a claim for benefits contact the relevant benefit helpline for advice on what to do before you cancel your claim.

Employment and Suppot Allowance (ESA)

You can apply for ESA if you are employed, unemployed or self employed.

Most new claims will be for the 'new style' ESA. To get this 'new style' ESA you need to have worked as an employee, been self employed and paid sufficient National Insurance in the previous 2 - 3 years. National Insurance credits also count, so if you have claimed Child Benefit or Tax Credits, you may be eligable.

Your partners income and savings will not affect how much 'new style' ESA you are paid.

ESA is taxable and counted as social security income for Tax Credits

You cannot get 'new style' ESA if you are getting Statutory Sick Pay (SSP) from your employer. You can apply for 'new style' EA for upto 3 months before your SSP ends and you will start to receive ESA payments when your SSP ends.

You can get Universal Credit (UC) at the same time or instead of ESA, but it ESA is counted in full as unearned income for UC purposes.

You can apply for ESA if you are below state pension age and have a disability or health conition that affects how much you can work. You can apply for ESA if you are working, unemployed or self empolyed. There are conditions to working whilst claiming ESA.

You cannot get ESA at the same time as claiming:-

Statutory Sick Pay (SSP)
Statutory Maternity Pay (SMP)
Jobseekers Allowance

For more information and to check eligability click here.

If you don’t want to go into work because of coronavirus

If you don’t want to travel or go into work because you are worried about catching coronavirus your rights are more limited. Employers are required to listen to your concerns and try and find a way to work around them. You might also be able to take the time off as holiday or unpaid leave. Your employer may also be able to set you up to work from home.

Am I entitled to sick pay?

Your rights to Statutory Sick Pay (SSP) depend on your employment status and earnings, see below for the various options.

If you’re an employee and earn more than £118 a week

If you’re an employee and earn at least £118 a week (£120 from 6 April 2020), you will be able to get £94.25 per week (£95.85 from 6 April 2020) for up to 28 weeks. The government has announced SSP will be paid from the first day you are off sick if it is related to coronavirus.

SSP covers you both if you’re ill and if you need to self isolate because you have been in direct contact with the virus. You will still need to provide a sick note or fit note. You no longer have to go to a doctor to get a sick note or fit note. You can get one by calling NHS 111.

Some employers have more generous contractual sick pay schemes, which menas that they will pay you either full pay or reduced pay for your period of illness. It is worth checking your contract, staff handbook or directly with your employer.

The government has said that it will bear the costs of SSP for small employers, so claiming it should not be a problem. If you do have a problem, contact the HM Revenue and Customs statutory payment dispute team:

Telephone: 03000 560 630
Monday to Thursday 8.30am to 5pm
Friday 8.30am to 4.30pm

Textphone: 0300 200 3212
Monday to Friday 8am to 5pm

If you’re an employee and earn less than £118 a week

If you’re employed but your earnings are too low to claim SSP, you may be able to claim Universal Credit. You can do this online here.

Don’t delay making a claim for benefits, even if you think you might have been affected by coronavirus.

However, if you are already getting any of these benefits, which are being replaced by Universal Credit:

Housing Benefit
Tax Credits
Income Support
Employment and Support Allowance

and need to make a new claim for Universal Credit because of coronavirus, check with the Citizens Advice Help to Claim service as soon as possible to find out how they might be affected and to get advice about your situation. Making a new claim for Universal Creit could mean that your existing benefits are reduced, so make sure you take advice first.

If you run your own business

The government has said they will fund the costs of Statutory Sick Pay (SSP) for employers with workforces of 250 people or fewer for up to 14 days.

You can also apply to HMRC for a grant to cover up to 80% your employees’ salaries, up to £2,500 a month, providing that you have designated them a 'furloughed worker'.

The government has announced grants and business rates support for small and medium sized business too.

Banks will also be offering loans to small and medium sized businesses under the governments Coronavirus Business Interruption Loan scheme.

If you’re registered for VAT, the government has announced VAT payments due between 20 March 2020 and the end of June 2020 have been deferred. They will need to be paid by the end of the financial year, however.

The government has announced the next Self Assessment tax return payment – due on 31July – has been deffered until January 2021 and you won’t be charged any penalties or interest for late payment during this period.

HMRC has expanded its Time to Pay Scheme if you are struggling financially because of anything to do with coronavirus and you owe outstanding tax.

If you already have missed a payment or are worried you will miss your next payment, call the HMRC Time to Pay helpline on 0800 0159.

If you’re business is struggling from the impact of coronavirus, then you can call Business Debtline on 0800 197 6026.

If you can’t work because you have to look after someone with coronavirus

You are entitled to time off work if you have to help a child or close relative who has coronavirus, has to self-isolate or needs to go into hospital. This person does not have to live with you.

This also applies if you need to take time off to look after children or arrange childcare because their school has been forced to close.

You have no statutory right to pay during this time, but employers might offer support depending on your contract and workplace policies. Talk to your employer to see what they can do to help.

The amounts of time you take off must be reasonable for the situation and you might have to use any unused paid holiday first.

If your partner or relative who lives with you gets coronavirus, or has symptoms, they might be able to claim Statutory Sick Pay (SSP).

If your child’s school has closed

Schools across the UK have closed to everyone apart from for the children of key workers. This might be a difficult time for parents, but there are options available to you.

You are entitled to take time off to care for a dependent child. There are no rules around how much time you can take off and you should talk to your employer about your options.

You might also be able to take time off as holiday leave.

If you’re worried about childcare costs

If your hours have been reduced, your income has gone down, you might be worried about how this will affect any help you get towards childcare costs.

With the lockdown in place and some childcare providers closing temporarily, you might also be concerned if you’ve paid in advance to retain your child’s place, or if your childcare needs have stopped completely.

If you claim through the tax-free childcare scheme, this is usually based on a three-month period, so support will depend on when you next need to report your income.

If you’re getting the childcare costs element of Universal Credit, or getting help through tax credits, the number of hours you’re now working and your income can affect how much help you get towards childcare costs.

If you’re getting free school meals

Schools are making provisions to provide meals and food parcels to everyone who is eligible for free school meals.

How this is happening depends on the school your child is attending and where in the country you live.

If you live in England visit the Gov.uk website.

In Wales visit the Gov.wales website.

In Scotland visit the Mygov.scot website.

In Northern Ireland visit the NI Direct website.

If you’re worried about losing your job

The government grants, which allow your employer to cover up to 80 percent of your salary up to £2,500 a month, should minimise the risk of losing your job. Ask your employer if they could place you on furlough instead of making you redundant, this would mean you could still get 80% of your salary.

Lay-offs and reduced hours

If you’ve been asked to take unpaid leave, and your contract allows you to be unpaid during this period, you might be able to claim Guarantee Pay.

You might also be able to claim new-style Jobseekers Allowance and, if you need help with other costs, Universal Credit.

Benefit changes because of coronavirus

The Universal Credit standard allowance and working tax credit basic element will both be increased by up to £1,040 a year for 12 months.

This will be available to new and existing claimants regardless of whether you’re employed, self-employed or a job seeker.

The amount you will get depends on your circumstances including household income and savings. You will not beable to claim Universal credit if you have more than £16,000 in capital.

If you’re self-employed, the minimum income floor for Universal Credit will be temporarily abolished from 6 April 2020, meaning that most self employed people should be able to claim.

The Local Housing Allowance will increase and some people may get more money to cover their housing costs to cover the costs of the bottom 30 percent of rental properties in your area.

If you’re claiming Universal Credit and are not able to work or attend interviews at the jobcentre because of coronavirus, it’s important you contact your work coach by phone or through your online journal as soon as possible.

Covid-19 support for the self-employed

Being self-employed means that you are not entitled to Statutory Sick Pay (SSP).

In last weeks budget the Chancellor of the Exchequer announced that any self-employed person who is affected by Covid-19 or self isolating will be eligable for Employment and Support Allowance (ESA) from day one of sickeness, rather than waiting until day 8.

If you are over 25 and eligable ESA is payable at a rate of £73.10 per week.

More details and how to claim can be found here https://www.gov.uk/employment-support-allowance

Tax Credit Renewals deadline 31 July 2019

The annual tax credit renewal period is now firmly underway. If you claimed tax credits during the 2018/2019 tax year and have not finalised your claim and moved to universal credit, then you should have received your renewal pack by now.

If you were expecting a renewal pack but haven’t received it yet then you should contact HMRC straightaway as something may have gone wrong.

If you receive a reply-required renewal pack – with a red line across the first page and an instruction to ‘reply now’ – then you must complete your renewal declaration by 31 July 2019, otherwise payments will stop.

If your actual income is not known, then an estimate can be given by 31 July 2019 but you must update HMRC with your actual income by 31 January 2020 once your self-assessment tax return has been completed.

If your actual income is more than you estimated then HMRC will ask for any over paid tax credits to be repaid. This can be done in one lump sum payment, or a smaller amount deducted each month from your tax credit payments.

If your actual income turns out to be less than you estimated, then HMRC will pay you the shortfall.

If you have received an auto-renewal pack – which shows the instruction to ‘check now’ – you only need to contact HMRC if there have been any changes to your income or circumstances or there are corrections to make.

Help and information on renewing tax credits is available from HMRC:

On GOV.UK at https://www.gov.uk/browse/benefits/tax-credits;
Using HMRC’s online forum (click on Tax Credits and You);
Through HMRC’s webchat help service; or
By calling the tax credits helpline: 0345 300 3900

Tax Credit renewals can be completed either:

On-line, via the GOV.UK website
Calling HMRC’s tax credits helpline (0345 300 3900 : textphone 0345 300 3909)
By post to:

Tax Credit Office
HM Revenue and Customs
BX9 1LR
United Kingdom

The tax free personal allowance and the marriage allowance

As the 2019/20 tax year, covering the period 6 April 2019 to 5 April 2020, has begun there are a few changes which came into effect from a personal tax perspective. Here we look at two of them - the marriage allowance and the personal allowance.

Marriage Allowance

It is possible for some couples, where one spouse or civil partner’s income is below the personal allowance, to transfer 10% of their personal allowance to their spouse or civil partner. This is only possible if the other spouse or civil partner’s income is taxed at the basic rate, so if you are a high earner, you cannot benefit from this allowance.

The Marriage Allowance can be claimed by contacting HMRC, or by making a claim on your self-assessment tax return. If you have a spouse or civil partner who is earning less than £12,500 per year and have not claimed the marriage allowance before, please get in touch as we may be able to help you claim for the current year and previous years. Getting you a nice tax rebate!

Personal Allowance

The personal allowance has increased with effect from 6th April 2019 to £12,500, an increase of £650 from the 2018/19 tax year (£11,850). This means that for most people living and working in the UK, the first £12,500 of income is tax free. For most basic rate taxpayers this will mean that you are better off by £130 this year.

If you have “adjusted net income”, (a technical term and beyond the scope of this article to explore in detail) of more than £100,000, your tax-free personal allowance will be reduced by £1 in every £2. There will be no entitlement to the personal allowance if your "adjusted net income" exceeds £125,000. There are ways to deal with this reduction in the personal allowance for high earners and if you are affected, please get in touch to find out how we can help.

Have you claimed your marriage allowance?

Not made a claim for the marriage allowance? Get in touch now to find out how much you are owed

Make a claim now!

Confusion over Self-assessment July 2019 payments on account

The due date for the second payment on account for 2018/19 income tax self-assessment tax liabilities is 31 July 2019.

HMRC’s self-assessment system has, in some cases, failed to generate the payments on account that are due for 2018/19. If the first payment on account for 2018/19, due in January 2019, was missing from your statement of account then the second payment will also be missing.

HMRC has provided the following update:

“In some of these cases the individual or their agent contacted us and payments on account (POA) for 2018/19 were then set up. For these individuals the second POA for 2018/19 will be due on 31 July 2019 and a statement of account reflecting this will be issued as normal.”

If you do not receive a statement of account in June or July 2019 as the 2018/19 Payments on Account have not been created correctly, HMRC have confirmed that you do not need to do anything about it. There will not be any penalties or interest added for missing the payment, providing that any liability due for 2018/19 is paid in full by 31 January 2020.

If you have received your statement with the POA's correctly added, you will need to make the payment otherwise interest WILL be added.

Bear in mind that if you do not make a payment in July because HMRC has not created the POA’s correctly, you may be facing a larger payment than normal in January, so make sure you budget accordingly as interest will be charged if you pay later than 31 January 2020.

Holiday let landlords could be next to trial MTD

HM Revenue and Customs (HMRC) have been writing to landlords with furnished holiday lets recently, inviting them to take part in the next stage of trials for Making Tax Digital (MTD).

Some commentators have suggested that this means that the next group of businesses to be mandated into MTD, from 2021, will be landlords with furnished holiday let properties.

Landlords selected for the trial will need to find and sign up for MTD-compatible software to keep a digital record of their income and expenses for the 2019/20 financial year. During the trial, landlords will need to submit digital records to HMRC every quarter, along with a final annual summary by 31 January 2021. That is FIVE separate returns to HMRC for a single tax year!

Landlords are not the only ones being encouraged to trial the MTD system for income tax. Sole traders are also being asked to test the software too. VAT registered businesses with turnover in excess of £85,000 are already using the MTD system to file their quarterly VAT returns with HMRC, but MTD for income tax is still in the trial stages.

The Government confirmed earlier this year that it would not mandate MTD for any new taxes or businesses in 2020. The delay was prompted after concerns were raised that the pace of the roll out to small businesses was too fast.

HMRC’s letter to landlords points out that HMRC consider that the improved accuracy and support that digital software provides, and the fact that information is sent directly to HMRC from the software, will reduce the amount of tax lost due to avoidable errors.

Some commentators believe that there are a lot more advantages to landlords in moving to a digital system. Many landlords lose claimable receipts and can struggle to keep their records in good order. By using software to record income and expenses in real-time it will be easier for landlords to monitor the profitability of their rental portfolios and to plan well in advance for the year end tax payments.

I give to charity under Gift Aid, is there anything I need to know about the personal savings allowance and dividend allowance?

If you make regular gifts to charity you may have been relying on the tax paid on your savings and dividends to cover your Gift Aid donations.

If you no longer pay tax on them due to the personal savings allowance and the dividend allowance, but continue to donate to charity under a Gift Aid declaration, the charity will assume the donation has come from someone paying UK tax and claim an amount back from HMRC. You might then be faced with an unexpected bill from HMRC for the amount that the Charity has claimed.

Don’t worry you can cancel your Gift Aid declaration but still donate to your chosen charity. The charity will no longer benefit from the Gift Aid tax claim from HMRC but they will still value your donation. You should also bear this in mind when visiting certain attractions, which may invite you to Gift Aid your ticket entry. You don’t want to spoil a nice day out with an unexpected tax bill!

Category Archives: Personal Tax