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Rent A Room Tax Relief

Did you know that you can claim rent a room relief of £4250 per annum when you let out living accommodation in your only or main home?  This could be a long term rental or applied to bed and breakfast or guest house businesses too.  It is important that the room is for living accommodation for genuine lodgers and not used as an office for business purposes. 

You do not need to actually own the home yourself.  You could be subletting a room from a house you rent.

It would be worth doing a calculation to ascertain the most tax efficient way of managing your rental income.  The first option is to offset any relevant expenses incurred in letting the room out against your rental income and paying any income tax on any profit.  The second option is to claim rent a room relief against your income to calculate the profit. You need to be aware that all incidental income needs to be included in the calculation for rent a room relief eg contributions towards utility bills or payment for laundry, meals etc.

In an unusual set of circumstances it is possible to claim more than £4250 per annum per property.  If you have more than one person letting rooms in the house and they are all also living in the house as their main residence then each of these can claim £2125 rent a room relief.

We have many clients for whom we give advice regarding property, rental income etc. and would be happy to provide a fee free 30 minutes with anyone looking for assistance and advice in this area.

 

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Is Your Business Seasonal?

It may be in your interest to change your year end date if your business is seasonal.  

For instance, if you have a gardening company or business supplying marquees, your cashflow would be much better in the summer months than during the winter.  Corporation tax is payable 9 months and 1 day after your period end.  It would be preferable to have a year end of 31st October in these examples so that you don’t have to pay anything until 1st August when you would have more funds available.

Regardless of your year end date, it is always advisable to get your accounts prepared as soon as possible to ensure you know exactly how much tax you need to pay and plan to have these funds available.  Just because you have submitted your accounts promptly doesn’t mean you need to have to pay any sooner.

 

Please take a look at The Bourne Informer which contains lots of interesting handy hints and tips on managing your finances.  You can access this through the link on the Winchester Bourne website.

 

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New Winchester Bourne Ap!

Please take a look at our new ap which has all sorts of interesting facts and figures.

 

Have you checked out our Facebook site and Twitter?  You may be suprised at what

you learn!

 

We love to have your feedback.

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New Method Of Payment

Just to let you know that you can now pay our invoices by credit card!

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Something to Consider if You are a Non-Taxpayer

If you have money invested in shares which pay dividends, you need to be aware that this is paid net of a non-refundable 10% tax credit.  If you are a non-taxpayer it may be worth looking into moving your investment to receive bank or building society interest instead of dividends.  The 20% interest which is deducted by the bank or building society can be claimed back by a non-taxpayer or they can file form R85 which means interest can be paid gross ie with no tax deducted. 

In the current climate the rate of return from bank or building society account is not very high.  You may prefer to stay in stocks and shares which are obviously more risky but have the potential for a greater gain (or loss!).  For the reasons stated above it may be worth choosing stocks in companies that reinvest profits in the business rather than pay them out in dividends.  Be careful to ensure that you utilise your annual capital gains allowance if you have a significant portfolio by selling off shares to keep gains below £10,900 for the tax year 2013/2014. 

 

 

 

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Recovering VAT on Sales Trips

A little extra time spent analysing your business expenses may mean you can to reclaim VAT which otherwise may not have thought you were entitled to.

In most cases you cannot claim the VAT on business entertainment  ie food, drink and hotel accommodation for staff and customers.  However, if you can prove that entertaining overseas customers has a strictly business purpose then the VAT incurred can be claimed back.

HMRC also allows the VAT to be reclaimed if the provision of entertainment is incidental in its provision of subsistence.  The test you have to apply is whether the cost is incurred as a business expense or entertainment. For example, if a salesman travels to meet a UK customer for a business meeting which means they are away from their normal place of work, then VAT pertaining to reasonable costs for their travel, hotel accommodation and meals can be reclaimed.  However, if they take the client out for lunch, only the VAT on their portion of the meal can be claimed as this can be counted as subsistence.  The portion of the meal which relates to the client is treated as purely entertainment and therefore the VAT cannot be reclaimed. 

What this means in practice is that expense claim forms need to detail the purpose of the meeting and who was present, but for some businesses it is well worth the extra effort.

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Capital Gains Tax on Inherited Property

Did you know that the Taxman can claim Capital Gains Tax on inherited property?  Basically this is assessed on any increase in the property value from when it is valued for probate until the person who has inherited it sells. 

Often people include just a rough valuation of the property at the time of probate if the estate is below the nil rate band for inheritance tax, but it is really worth getting a professional to provide a valuation of the estate.  As long as the valuation of the estate remains below £325,000 (£650,000 per couple) it is worth doing as this may lessen the impact of possible capital gains that become payable in the future.

There is a four year window in which a previously submitted value can be reassessed by a professional, however HMRC will resist an upward valuation so it is far better to organise this at the time of probate.

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Company Cars

This month the rules on Company Cars are changing again, so be warned!

 

A tax benefit to companies is that they can claim capital allowances on the cars they buy.  This is calculated based on the CO2  emissions, with the lower the emissions the better the tax benefit.

Previously cars with emission of between 110g/km and 160g/km qualified for the main pool allowance of 18%, but this is changing to those between 95g/km and 130g/km, restricting the choice of cars in this category.

Cars with emissions below 110g/km used to qualify for 100% first year capital allowance, but from April this only applies to cars with 95g/km and below.

 

The changes being implemented also effect the employee.  They are taxed on the Benefit in Kind which is determined by the car’s full cost (excluding road tax and first registration), its CO2 emissions and fuel type.  The last two factors effect the percentage of the car’s value that you pay as tax.  Although diesel cars generally have lower CO2 emissions, the fuel costs more so this is something to consider in these times of rising prices.

For time being, cars with zero emissions will continue to enjoy zero Benefit in Kind, whilst those with emissions of up to 75g/km will continue  to be taxed at 5%. Those with emissions of 76-94g/km will be taxed at 10%.  Those with emissions of 95-215g/km this will increase by 1% up to a maximum of 35%.

 

These rules are due to change again over the next few years so it is something to look at carefully when next looking at your company car options. 

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Changes to Payroll

From April 6th employers are legally obliged to provide HMRC with real time information (RTI) each time a payment is made to an employee.

If you haven’t already, now is a good time to consider outsourcing your payroll function to an approved provider like Winchester Bourne Ltd. This can be more economical than managing the whole process in-house and guarantees full compliance with the new regulations.

If you plan on managing your payroll internally, you must:

  • Update all employee records – All your employee records must be complete and accurate. Full name, date of birth and NI number must be correct and other details including full address and hours worked must also be added, together with details for temporary or casual employees, including those who are paid less than the Lower Earnings Limit.
  • Upgrade payroll software – Ensure that you have the necessary functionality and any upgrades that may be required. Your BACS processing software may also need to be upgraded.
  • Provide staff training – All staff involved in payroll processing should have received training either in-house or from your software provider.

If you need any assistance preparing for RTI please contact Winchester Bourne Ltd.  We would be only too happy to help.

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Self Assessment

 

Hopefully you have had a lovely Easter and didn’t over indulge in chocolate delights!

Well it’s that time of year again.  As the tax year draws to a close on Friday 5th April, why not get ahead of the game and organise your self assessment now?  If you owe tax then you still won’t have to pay anything until next January, but you will be able to plan for it.  On the other hand you may find you are owed a refund which you will receive sooner if you file your return earlier.  With all your documents to hand now it makes it all the easier to find the information required.

 

Please do not hesitate to contact Winchester Bourne to help you.

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