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Making Tax Digital - Find Out More

19 - 10 - 2017

You may have heard the phrase “Making Tax Digital” or “MTD” bandied around in the media but what does it actually mean?



Making Tax Digital will have a significant effect on the way in which we are all reporting our income to Her Majesty’s Revenue and Customs (HMRC). So what is it? Instead of filing documents, such as tax returns, accounts etc., annually small businesses and landlords will need to keep and file electronic records on a quarterly basis.

 

In theory this should make everything easier as you will need to keep your records up to date three monthly rather than hunting around for your records once a year. In reality MTD has the potential to create a lot more work for business owners (and their accountants)!

 

The good news is that the original implementation date has been postponed from April 2018 to April 2019 which gives us over 16 months to get ready. The initial April 2019 deadline relates to VAT reporting by all VAT registered businesses with turnover above the VAT threshold. Businesses registered for VAT but with turnover below the VAT threshold can opt in voluntarily if they want to.

 

However we should not be complacent. The current plan is for income tax reporting to be mandatory by April 2020 (29 months away). This means that unincorporated businesses and landlords should already be considering how they are going to comply.

 

Many small businesses believe that MTD will not apply to them. This is not the case. The initial proposals were that MTD would apply to all businesses and in fact was going to be brought in for small businesses first. Currently there are suggestions that there may be some limited exemptions. Less than £10,000 turnover has been suggested as a reasonable exemption in some discussion groups but nothing has yet been agreed.

 

Not a problem, you think, I will simply log into my HMRC portal and file. Unfortunately HMRC will NOT be providing software to log in to as they do with the current Self Assessment system. Filing under MTD will need to be done through commercial software. The commercial software is not currently available as it is still being developed, although some pilot schemes are now being tested.

 

Nevertheless, there are steps that we can all take now to ensure that we are prepared for MTD. This is the time to ensure that our record-keeping processes are timely and accurate. We need to make certain that we understand how and when MTD will apply to us. We need to think about how we will submit the information and consider whether to opt in or to wait for MTD to be mandatory.

 

We have a window of opportunity to get ready for the MTD introduction and we need to make the most of it.

 

If you wish to discuss any of the above and how it may affect you please do not hesitate to get in touch with Foremans LLP on 01244 625 500



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Instant Information

Our tax calculator is speedy. It is designed to give you results as you enter valid data – on the spot, in front of your eyes! We update regularly to make sure it always reflects changes in tax law and practice.

WEEKLY INCOME INFORMATION

Number Of Weeks
Tax Code
Primary Hours
Primary Rate In £
Secondary Hours
Secondary Rate In £
Other Hours
Other Rate In £
Weekly Bonus In £
Total Anticipated
Income For A Week
-
Anticipated Annual
Pre Tax Income
-
NORMAL WEEKLY EXPENSES
Miles Per Week
Other Expenses Per Week
Annual Mileage
-
Mileage Expenses
-
Total Annual Expenses
-
FLAT RATE VAT

Choose the Industry Sector that you work in. Use the drop down menu in the usual way.

The VAT Flat Rate Applied -

WARNINGS

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Get Alerts. The law changes!

RESULTS TABLES

COMPARISON TABLE FOR NET INCOME

BUSINESS STRUCTURE
CORPORATE
SOLE TRADERS
UMBRELLA
AGENCY
Post Tax Weekly Pay
-
-
-
-
Avarage Hourly Take Home Pay
-
-
-
-
Annual Take Home Pay
-
-
-
-
Plus Taxed Holiday Pay Fund Less Higher Rate Dividend Tax
-
-
-
-
Annual Take Home Pay
-
-
-
-

RELATIVE INCOME BY STRUCTURE

BUSINESS STRUCTURE
CORPORATE
SOLE TRADERS
UMBRELLA
AGENCY
Measured against PSC
Measured against PSC
Measured against PSC
Worse off
Weekly by :-
-
-
-
-
Worse Off
Annually by :-
-
-
-
-
Measured against AGENCY
Measured against AGENCY
Measured against AGENCY
Worse off
Weekly by :-
-
-
-
-
Worse Off
Annually by :-
-
-
-
-

Fixed Data

PAYE

Tax Code L between 0 and 999.
0
Tax Rate
Personal Allowance
£11500.00
0.00%
Lower
£0.00
0.00%
Basic up to
£33500.00
20.00%
Higher above
£33501.00
40.00%

Statutory rates

National Minimum Wage
£7.50
Holiday Pay
10.77%
Mileage Rates
Per Mile
Up to 10,000 miles
£0.45
10,000 miles
£0.25

CIS

Rate
Percentage
Gross
0.00%
Standard
20.00%
Higher
30.00%

Corporation tax

Small Company Tax Rate
19.00%

National insurance

Primary Threshold
£8164.00
Secondary Threshold
£8164.00
Employers NI between PT and UEL
13.80%
Employees NI above UEL
12.00%
Employees NI
2.00%
Class 4 NI between LPL and UPL
9.00%
Class 4 NI above UPL
2.00%
Class 2 NI
£2.85
Annual LEL
£5880.00
Annual UEL / class 4 upper profits
£45000.00
Class 4 Annual lower profits limit
£8164.00
Weekly PT
£157.00
Weekly LEL
£113.00
Weekly UEL
£866.00

UMBRELLA COMPANY

Holiday pay accrual
 
Is Holiday Pay being accrued?
Yes

AGENCY INFORMATION

Agency Uplift Applied
10.00%

Assumptions



General                                                                                                                              

  • The user is over 21 and subject to tax in the UK
  • The user wishes to minimise their tax liability
  • The user is subject to national insurance i.e.he/she is not over retirement age
  • Only current tax rates and limits are applied
  • No tax mitigation payments are made e.g. pension contributions
  • Only 3 digit letter 'L' tax codes shown in the drop down list can be entered 
  • The user does not have a turnover greater than £100,000 where fewer reliefs and or higher taxes may apply

Expenses

  • All miles claimed as expenses are for business use using a personally owned car or van
  • All other expenses claimed are wholly, necessarily and where appropriate exclusively for the benefit of the business

Foremans LLP Charges

  • Foremans fees associated with Limited Company, Sole Trader or Umbrella are as per published rates
  • Foremans current Service Costs are allowed for in all calculations.

Holiday Pay

  • Holiday pay is accumulated week by week by Umbrella or Agency employer but paid out during the year

VAT

  • Limited Company or Sole Trader will be VAT registered
  • Limited Company or Sole Trader will take advantage of Flat rate VAT
  • Flat rate applied includes the benefit of the additional 1% applicable to the first year of VAT registration

Limited Company Conditions

  • One director / one shareholder in a Personal Service Company
  • Director of Personal Service Company elects to vote for 100% dividend after salary, costs and expenses
  • Director's salary is maximum salary to the primary threshold for NI
  • The Limited Company is trading normally i.e it is not subject to IR35 and is not a Managed Service Company

NOTES

  • The Current tax rates are taken from the Fixed Data Table
  • The current Value Added Tax Rate is 20% and is applied to all invoices and expenses as appropriate
  • The Director's Salary is fixed in relation to National Insurance thresholds. Higher Rate Taxpayers should consider the advantages and disadvantages of a larger annual salary or bonus
  • Higher Rate Taxpayers may wish to consider the advantages and disadvantages of shared ownership of their business
  • Users with a tax code other than three digits and letter "L" may telephone or email our Development Department to request a detailed calculation
  • Generally the use of an Umbrella rather than an Agency payroll is only efficient if sufficient weekly expenses are allowable and claimed
  • The expenses claimed under an Umbrella should not prevent the proper operation of National Minimum Wage
“Outstanding and clever tax calculator. I cannot believe this is actually free. We are an umbrella company and we use this calculator all the time”
Dave Wilde, Foremans (UK) Limited
Foremans LLP
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