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What Your Accountant Needs To File Your Individual Tax Return

Filing a tax return isn’t everybody’s idea of fun. But you must get it right and filed on time. While it can seem like a tedious task, you can choose to use an accountant to file your tax return if you don’t have time to do it yourself, you have complex financial arrangements, or you want to make sure that you’re taking advantage of all of the deductions and credits that you’re eligible for. That means you’re not tied up with tax and are free to spend time on the things you’d rather be doing.

If you choose to use an accountant, they’ll need a variety of information from you to file your tax return. This information will help them determine your taxable income and calculate your tax liability. And, perhaps most importantly, show you how to reduce your tax bill. 

Read on for a comprehensive guide to what your accountant needs from you to file your tax return successfully. From essential documents and financial records to specific details about your income and expenses, we’ll walk you through the key information that will enable your accountant to prepare your taxes accurately, maximise deductions, and minimise your tax liability. 

Information About You and Your Income

Identification information: Your accountant will need your name, address, National Insurance number, and date of birth. They may also need the identification information for your spouse and dependents.

Copy of your most recent tax return: This will help your accountant determine your filing status, income and deductions from previous years, and any credits you may be eligible for.

Wage statements: If you have any employment income on top of your self-employed earnings, you’ll need to provide your accountant with your wage statements from your employer(s). These statements will show your gross income, deductions, and your tax withholding. You’ll also need to provide your P60, or P45 if that employment income ceased during the year, together with your P11d, which outlines any benefits in kind you received from your employment.

Additional income statements: If you have any other sources of income, such as rental income, or investment income, you’ll need to provide your accountant with statements showing this. You must include any bank interest, dividends, and savings interest received during the year (excluding ISAs).  

Particulars of your rental property If you own property, you’ll need to provide your accountant with documents showing your rental income, mortgage interest, property taxes, and all expenses relating to the property. These include statements from your letting agent if you use one. Whilst previously there was mortgage rate relief, since April 2020, all buy-to-let landlords must pay tax on the entirety of their rental income. However, they can receive a tax credit worth 20% of their mortgage interest rates.

Private pension payments: You’ll need to supply details of any pension payments you’ve made in the previous year, as these can give you additional tax relief if you qualify.

Information About Your Business

All sales income: You’ll need to provide all your sales invoices for the year or details outlining your daily takings if, for example, you’re a shop that doesn’t issue invoices. One question we are often asked is whether you need to provide invoices that haven’t yet been paid. The short answer is yes; you must provide all the invoices issued in the given tax year. 

Proof of expenses: If you’re claiming any deductions or credits, you’ll need to provide your accountant with proof of these expenses. This proof could include receipts, invoices, or other documentation.

Bank statements: Providing bank statements for your business allows your accountant to cross-check everything going in and coming out and acts as evidence of these. While you may only have one business bank account, if you have a deposit account or reserve account, make sure to include these statements too.

Business credit card: You might put everything for your business on a business credit card, and you’ll need to give your accountant these statements. If you occasionally use a personal card to pay business expenses, include these with the business-related costs highlighted. 

Loan statements: If you have any business loans, your accountant will need to see the statements. This will mean that the closing balance is included in the accounts correctly and that the correct amount of interest has been included as a deductible expense.

Finance agreements: Provide copies of any new finance agreement contracts signed in the past year. The interest on the payments is tax-deductible, and the asset bought could qualify for the annual investment or other capital allowances.

Petty cash receipts: If your business carries cash, your accountant will need to know how much money is in cash at the end of the year. They need to balance your money, so these records are very important.

Payroll records: Your accountant may operate your payroll, but if not, you’ll need to supply copies of each month’s pay run. This is so your accountant can check to ensure all wage and national insurance amounts are included.

Stock value: If relevant, you must supply a valuation of any stock held at the year-end. This should include information about what it costs, or its value if lower.

Making Tax Digital

In the past, all information was sent to accountants on paper, which, unsurprisingly, was difficult to keep track of. Things would be lost, and a lot of time wasted. Most information can now be supplied online, and as we move closer to Making Tax Digital, you should consider moving to online bookkeeping software. This will automatically organise your records and keep them all in one place. As a result, you won’t need to worry about missing anything, and it also means you can give your accountant access to your online records throughout the year. 

At Norwich Accountancy, we offer clients access to and full training on Xero, the online cloud-based accounting software for small and medium-sized businesses.  

All in the timing 

The deadline for sending your online self-assessment tax returns to HMRC and paying any taxes owed is 31st January each year for the previous tax year. So, on the 31st of January 2024, you’ll have submitted all your information for the tax year from the 6th of April 2022 to the 5th of April 2023. 

If you have chosen to use an accountant to file your taxes, getting everything in order well ahead of these deadlines will give you plenty of time to plan for any tax liabilities. If you need help completing your tax return, get in touch or contact us online here. After all, we’re all about tax returns, stress deducted. 

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What is a UTR Number

If you’ve been asked for your UTR number but don’t know what it means, you’re not alone. Perhaps you know it’s the number printed on a bit of paper somewhere at the back of a cupboard and have never given it much thought. Maybe you want to know how it’s used and why. From self-assessment to registering for the Construction Industry Scheme (CIS), your UTR is an important component of our UK tax system. Find out what it is, why you need it, and what to do if you’ve misplaced yours. 

What is a UTR?

A Unique Taxpayer Reference (UTR) number is a 10-digit identification number used by HMRC (now His rather than Her Majesty’s Revenue and Customs) to identify you as a taxpayer. It does what it says on the tin; it acts as a unique identifier for tax purposes and helps HMRC keep track of taxpayers and their tax-related activities. Your UTR number is sometimes called your tax reference.

Why do I need a UTR?

Your UTR number is essential for HMRC to identify and communicate with you regarding tax matters. Whether claiming a tax rebate or filing a Self-Assessment return, your UTR ensures the taxman (or woman) knows who they’re dealing with.

Who needs a UTR? 

If you’re self-employed you must register with HMRC to fulfil your tax obligations. Once registered, you’ll receive a personal UTR number, which you’ll use to file your annual self-assessment tax return. Like your National Insurance number, your UTR stays with you for life.

For those working in the construction industry as subcontractors, you’ll also need a UTR to register for the Construction Industry Scheme (CIS). The CIS deducts money from a subcontractor’s payments and passes it to HMRC. While contractors must register for the scheme, it’s not mandatory for subcontractors. However, if you don’t register deductions are taken at a higher rate.

When setting up a limited company, you’ll receive a company UTR number to register for and pay Corporation Tax.

Where can I find my UTR?

Once you’ve registered for Self Assessment, your UTR will be sent to you by post within 10 days. However, you can also find it in your Personal Tax Account or the HMRC app, and it’s likely to be available there before it arrives by post. 

If you’ve set up a limited company, you must register the company with Companies House. Your company UTR will be posted to your company address within 14 days of registering.

The HMRC app

The HMRC app is a handy tool for keeping track of all your personal taxes. As well as telling you your personal UTR number, you can also use the app to check:

  • Your tax code and National Insurance number
  • Your income and benefits
  • Tax credit information
  • How much self-assessment tax you owe

You can also use the app to:

  • Estimate the tax you need to pay
  • Make a self-assessment payment
  • Track forms and letters sent to HMRC
  • Claim any refunds due
  • Update your address

Download the app here

What if I lose my UTR number?

If you misplace your personal UTR number, don’t worry. You can always retrieve it from your Personal Tax Account, the HMRC app, or on previous tax returns and other HMRC documents. If you have trouble accessing any of these resources, you can use the Government’s Self-Assessment chat function and ask for help. This chat function is a useful resource for anything related to self-assessment, and you can find it here.

If you need a copy of your Corporation Tax UTR, you might find it in your online business tax account or previous letters from HMRC. If those options don’t work, you can ask HMRC to send a copy by post to your company’s registered address. To use the request service, you’ll need your company registration number and your registered company name. 

Both personal and company UTR numbers are vital for HMRC to identify taxpayers and handle tax matters efficiently. Without a UTR, you won’t be able to file your tax returns, and you may find them chasing you once payment deadlines pass. 

Tax comes hand in hand with many codes and acronyms, so we hope you’ve found this article useful and that it’s answered everything you need to know about Unique Taxpayer Reference numbers. As always, if you need to know more, get in touch, and we’ll be happy to help.

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Class 2 National Insurance Contributions: What You Need to Know

If you’re self-employed in the UK, you may want to pay Class 2 National Insurance (NI) contributions. You may be wondering why anyone would want to hand over their hard-earned cash if it’s not legally required, but your contributions mean you’re eligible for benefits like State Pension, which we’ll cover in more detail below. 

Who Needs to Pay Class 2 National Insurance?

You’ll need to pay Class 2 NI if your profits from self-employment are above the Lower Profits Limit. For the 2023/24 tax year, the Lower Profits Limit is £12,570. But if your profits are below this amount, for example, you’ve just started out, have returned from maternity leave or perhaps you’ve gone part-time, you don’t need to pay any Class 2 NI contributions.

What Are the Benefits of Paying Class 2 National Insurance?

Whilst Class 2 NI contributions aren’t mandatory, there are lots of good reasons why you should keep them up:

  • The age at which you become eligible for a State Pension depends on what year you were born but as a general rule, it’s currently 66.
  • At some point, you may need and be eligible for benefits, such as unemployment benefits or maternity allowance as long as you’ve been self-employed for 26 weeks in the 66 weeks before your due date.

Paying Voluntary Class 2 National Insurance

Even if your profits are below the Lower Profits Limit, you’re still able to pay voluntary Class 2 NI contributions to make sure that you’re eligible for the State Pension and other benefits should you need them. 

How Much Do You Pay?

Currently, the amount of Class 2 NI you’ll need to pay is fixed at £3.45 per week for the 2023/24 tax year. 

When Do You Pay?

Most self-employed people pay their Class 2 NI contributions through their annual self-assessment tax return.

How to Pay Class 2 National Insurance Contributions

Class 2 NI contributions can be paid online, by phone or by post. To pay online, you’ll need to create an account on the HMRC website. To pay by phone, just call HMRC’s self-assessment helpline. To pay by post, download a payment form from the HMRC website.

More on State Pension

As we mentioned above, one of the biggest benefits of voluntarily keeping your Class 2 NI contributions up to date is being eligible for the State Pension when you reach the right age. 

The State Pension is a government-funded payment to people who have reached retirement age and provides them with an income for the rest of their lives. The amount of State Pension you receive depends on the amount of National Insurance contributions you’ve previously paid. If you don’t have enough ‘qualifying years’, you may not be entitled to the full State Pension when you reach retirement age and will have to fund your living expenses (and the things you like to do) some other way. 

Mortgage matters

Plus, depending on your age, such as if you’re applying when you’re above retirement age, if you don’t have enough of a State Pension then it can affect your ability to get a mortgage. This is because lenders will want to see that you have enough income to meet your mortgage repayments. If your State Pension isn’t enough to cover your monthly payments, you may need another source of income, such as a personal pension or a part-time job.

Lenders will also consider your age when they assess your mortgage application. If you’re coming up to retirement age, they may be more cautious about lending to you and wonder whether you’ll be able to work and earn an income in the future.

Some lenders will ask for confirmation of your Class 2 NI contributions. In these situations, they’ll ask to see your copy of your confirmation and that of HMRC to make sure the details match. If they don’t, it may delay the process.

So, if you’re self-employed, it’s important to understand your Class 2 NI obligations to make sure you’re paying the correct amount and reap the rewards of keeping them up to date when you need them. 

Important point on pensions

If you’ve received any correspondence from HMRC regarding tax amounts stating a figure that’s different to what you’ve been told by your accountant, let them know immediately because it could be linked to the Class 2 State Pension.

We hope this blog has been useful but if you’ve any questions about Class 2 National Insurance, please get in touch.

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VAT Turns 50: Our Review of the Highs and Lows of This Tax in its 50th Year

As the UK’s VAT turns 50, as accountants, we review the highs and lows of this tax in its 50th year.

Value Added Tax (VAT) was introduced in the UK on 1 April 1973 to replace the old purchase tax. It is a consumption tax charged on the sale of goods and services. Over the last half a century, we’ve seen the welcome highs and horrible lows of VAT. So, here are our observations.

VAT highs

You might think that there haven’t been many highs for VAT over the last 50 years but:

  • VAT’s been a very successful tax for the UK government. It’s relatively easy to collect and generates a significant amount of revenue.
  • It’s helped simplify the UK’s tax system. By replacing several other taxes, it’s easier for businesses to calculate and pay their taxes.
  • VAT helped promote cross-border trade. Applying the same tax rate to goods and services sold in different countries makes it easier for businesses to trade internationally.

VAT lows

As you’d expects there is a list of lows when it comes to the impact of VAT, such as:

  • VAT can be a complex tax for businesses to comply with. As we’re sure you already know, there are several different rules and regulations that you need to know about and it can be tricky to keep up with changes to the law.
  • It’s a pain for consumers’ pockets. Added VAT on goods and services makes them more expensive, which means they may be more reluctant to spend.

Looking to the future

As we look to the future, VAT will continue to be an important source of revenue for the UK government. However, it’s also likely that the tax will continue to evolve with changes to VAT rates or new rules and regulations.

The UK may adopt a different approach to VAT in the future, for example, moving to a single rate of VAT or adopting a destination-based taxation system.

Only time will tell what the future holds for VAT. However, one thing is for sure, VAT will continue to be a major factor in the UK tax system for many years to come. As accountants, we closely monitor VAT developments and are here to help you understand, and comply with the latest VAT rules and regulations. Get in touch if you’ve got any VAT-related questions.

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A Review of the Government’s Employment Bill Overhaul of Tips & Gratuity Practices for Employers

Good news for those working in hospitality and other industries where employees rely on tips to top up their take home. The UK Government recently passed an Employment Bill that overhauls the tips and gratuity practices for employers. The new law, which won’t come into effect until 2024, makes it illegal for employers to withhold tips from their employees. This means that all tips left by customers, whether paid in cash or by card, must be passed on to the employee in full.

How does the new law protect employees?

The new law is designed to protect workers and make sure they receive the full benefit of their tips. It also provides clarity for businesses so they know whether they’re toeing the line when it comes to tips. 

The new Employment Bill has been welcomed by many, including trade unions and workers’ rights groups. However, some businesses have expressed concerns about how much it will cost them to be compliant and are worried about the potential for the law to be abused.

It remains to be seen how the new law will be implemented and the impact it’ll have on businesses and workers. But it’s a positive step forward in protecting workers’ rights and making sure they receive the full benefit of their tips.

Benefits of the new law

There are several benefits to the new law, including:

  • Increased staff retention. It will help to reduce staff turnover in the hospitality sector, as workers will be more likely to stay in jobs where they know their tips are given out fairly.
  • Increased earnings: It’s estimated the new law will collectively boost earnings for workers by £200 million per year. This will be particularly welcome for the many who’re facing rising living costs.
  • Better transparency. The new law will increase transparency in the tipping process, which could help to prevent fraud and abuse.
  • Improved customer service. Employees paid a fair wage are more motivated and better placed to deliver good customer service. As we know ourselves, a happy team makes for a better business. 

Challenges with the new law

There are a few pitfalls that come with the new law, such as:

  • Increased compliance costs. Businesses will need to put new systems and procedures in place by 2024 to make sure they’re compliant with the law. This could mean spending money and extra work for those behind the scenes. 
  • Potential for abuse. There is a risk some businesses may try to circumvent the law by misclassifying tips as wages, or through other methods to avoid paying tips to their employees.
  • Unclear enforcement. It’s unclear how the law will be enforced, which could leave businesses and workers uncertain about the way forward.

Overall, the Employment Bill is a positive step forward for workers’ rights. But, as well as the benefits, some challenges need addressing to make sure it does what it was designed to do. If you’ve got any questions about the ins and outs of paying your staff or, in particular, payroll then get in touch today. 

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Which Assets Do You Not Pay CGT On?

We not only make sure you pay the right taxes by the right deadlines but help you pay as little tax as possible.  Capital Gains Tax (CGT) is a tax on the profit you make when you sell an asset that has increased in value, but some assets that are exempt from CGT in the UK, including:

  • Your main home. You don’t pay CGT on any gains you make when you sell your main home if you have one home and you’ve lived in it as your main home for all the time you’ve owned it.
  • Personal possessions. You don’t pay CGT on gains you make when you sell personal possessions, like furniture or jewellery, up to your annual exemption of £6000. This means that you don’t pay CGT on gains up to this amount, but you do if you’re lucky enough to be the owner of a Banksy and decide to sell for example.
  • Assets held in an ISA or a SIPP. You don’t pay CGT on gains you make when you sell assets held in an ISA or a SIPP. ISAs and SIPPs are tax-efficient savings and investment accounts.
  • Certain business assets. If you’re self-employed or run a business, you may be able to claim relief from CGT on gains you make when you sell certain business assets, including goodwill and intellectual property.

If you’re unsure whether an asset you’re selling is exempt from CGT,  we can help you work out whether you have to pay CGT and what you’ll have to pay. 

Extra tips about CGT and assets

Check out these extra tips to help you keep on top of any potential CGT tax liabilities:

  • Keep good records. It’s important to keep good records of all of your assets, including the date you bought them, the amount paid and any improvements you’ve made to them. This helps you calculate the gains when you sell the asset and makes sure you don’t overpay CGT.
  • Report your gains. If you sell a residential home subject to CGT, you must report the gains to HMRC within 60 days.

If you’re unsure about CGT, always seek professional help. We can help you calculate your gains, show you how to report them to HMRC and make sure you’re not paying more than you need to.

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Top Priorities When Preparing for Tax Due Diligence

Tax can seem like one of the most complicated bits of your business and tax due diligence is no different. It’s the process of gathering information about your company’s tax affairs to make sure it’s compliant with current tax laws. It’s also a critical part of any business’s risk management assessment and helps spot and reduce any potential tax risks.

Preparation is always the key when preparing for a company’s tax due diligence. There are some steps you can take to make it more straightforward, such as:  

  • Understand the tax laws. The first step is to understand the relevant company tax laws in the UK. This includes the different types of taxes that businesses are subject to and the rules and regulations governing these taxes.
  • Gather all relevant documentation. Make sure you gather all documentation relating to your company’s tax affairs, including tax returns, invoices, contracts and bank statements.
  • Identify any potential risks. Once you have all the relevant documentation together, take the time to identify any potential risks in your tax affairs, for example, errors on tax returns, unreported income or improper deductions.
  • Take steps to mitigate any risks. Once you’ve spotted any potential risks, do something to stop them. This may involve amending tax returns, paying back unreported income or correcting improper deductions.
  • Have a plan in place. It’s important to have a plan in place in case there’s an audit. Your plan should include who’s responsible for responding to the audit, what documentation you’ll need to provide and how you’ll address any findings.

By following these steps, you can prepare your business for the tax due diligence process in the UK and make sure you’re compliant with the tax laws. If you’re uncomfortable with the tax due diligence process, always seek professional help. We’re here to make the complicated clearer and the overwhelming accessible when it comes to tax, so get in touch with our team today. 

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How to Chase Monies Owed Using Statements of Accounts?

As a business owner, one of the most important things you can do is keep track of your finances. This includes tracking your income and expenses, so knowing exactly what’s coming in and what’s going out, as well as any outstanding debts. One way to do this is by using statements of accounts.

What is a statement of accounts?

A statement of accounts is a document that summarises your financial activity over a period of time. It typically includes information like your income, expenses, assets and liabilities. They can be used to track your cash flow, identify areas where you could save money and make sure you’re paying your bills on time.

If you’re owed money by a customer, you can use a statement of accounts to track the outstanding debt. This will help keep track of the amount of money owed, the date the payment is due and any late fees that may be incurred.

How to use a statement of accounts

There are a few different ways to chase monies owed using a statement of accounts. One way is to send the customer a copy of the statement of accounts and a reminder that payment is due. You could send the customer a letter or email requesting payment. If the customer still doesn’t pay, you may need to take further action, like sending a letter before action to the customer or taking them to court.

Here are our tips for chasing monies owed using a statement of accounts:

  • Be polite and professional at all times.
  • Be clear and concise in your communications.
  • Set a deadline for payment.
  • Follow up if the payment is not received by the deadline.
  • Be prepared to take further action if necessary.

Extra tips for using statements of accounts

Here are a few extra top tips to help you in using statements of accounts to chase debts:

  • Keep good records. Make sure you keep copies of all correspondence with the customer and any other documentation related to the debt. You’ll need this information if you need to take legal action.
  • Be patient. It may take time to collect the debt. Don’t give up if you don’t get paid straight away, and remember it’s better to receive little and often than nothing at all.

Chasing monies owed can be challenging and is rarely any business owner’s favourite part of running a business, but it’s important to take action if you’re not paid. By using statements of accounts and following our tips above, you’ll increase your chances of successfully collecting the debt.

If you’re struggling to collect a debt owed, consider using a debt collection agency. Always seek the advice of a professional accountant if you’re unsure how to go about collecting a debt. Our accountants are here to help with a range of tasks – the good, the bad and the ugly.

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How to MAKE sure You’re Not Overpaying on Tax

Getting your head around tax can be overwhelming and you may be tempted to bump it to the bottom of your to-do list. But, as this could mean you end up paying more than you need to, it’s important you take the time to tackle your tax. So, we’ve put together our top tips on making sure you’re not overpaying tax in the UK.

  1. Understand your tax code. This is your personal tax code; the number tells your employer how much tax they need to deduct from your pay. If you’re unsure of your tax code, you’ll find it on your payslip or your personal tax account. Alternatively, contact HM Revenue and Customs (HMRC), and they can tell you.
  2. Claim all your tax breaks. There are lots of well-known and lesser-known tax breaks available for UK taxpayers, such as the personal allowance, the married couple’s allowance and the child tax credit. 
  3. Make use of tax-efficient savings and investments. UK taxpayers may be eligible for certain tax-efficient savings and investments, like ISAs, pensions and National Savings & Investments (NS&I) products. 
  4. Get professional help if you need it. If you’re unsure about anything to do with tax, whether you’re self-employed, employed or the owner of a business, we can help you understand your tax obligations. We can make sure you’re not paying you more than you need to so you’ll have more money to spend on growing your business.

Extra tips to avoid overpaying on your tax

Here are some extra tips that may help you reduce your tax bill:

  • Gift money to charity. Donations by individuals to charity or to community amateur sports clubs (CASCs) are tax free. 
  • Make a pension contribution. Top up your pension fund and get tax relief on your contributions. You’re allowed to save up to £60,000 per year into a personal pension in the UK.
  • Invest in shares. Think about investing in shares through a stocks and shares ISA or a SIPP. These investments can grow over time and potentially provide you with a tax-free income in retirement.
  • Take advantage of tax breaks for businesses. If you’re self-employed or run a business, take advantage of the tax breaks available. These can help reduce your tax bill so you can keep more of your hard-earned money.

As you can see, there are lots of ways to make the most of your money when it comes to reducing the amount of tax you have to hand over. If you’re finding your tax complicated or don’t know what tax breaks might apply to you, for example, get in touch today. 

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Domestic Reverse Charge VAT for Construction Services Explained

Just what the world needs – more types of tax. The Domestic Reverse Charge (DRC) for construction services is a tax change that came into effect on 1 March 2021. The DRC applies to businesses that supply construction services to other businesses, which means they cannot charge VAT on those supplies anymore. Instead, the person or business that has received the construction services is now responsible for accounting for the VAT. So the customer rather than the supplier is liable to account for and pay the VAT to HMRC.

Who does the DRC apply to?

The VAT domestic reverse charge must be used for most supplies of building and construction services and applies to standard and reduced rate VAT services for businesses who are registered for VAT in the UK and reported within the Construction Industry Scheme.

How to comply with DRC

If you’re a supplier of construction services, you not only need to know about the DRC, but make sure you’re on the right side of the law to keep the HMRC happy and avoid incurring a penalty. 

Here are our tips to help you comply with the DRC:

  • Identify your customers. Make sure you know which of your customers are VAT-registered businesses.
  • Check your invoices. Check that your invoices do not include VAT for construction services supplied to VAT-registered businesses.
  • Register for the DRC. If you’re not already registered for the DRC, you must do so. You can register online at GOV.UK.
  • Keep records. Keep records of all the construction services you supply to VAT-registered businesses. They should include the date and value of the supply and the customer’s VAT registration number.

Extra tips for complying with DRC

Here are some more helpful tips if you’re affected by the DRC:

  • Talk to your accountant. If you’re unsure how the DRC will affect your business, talk to your accountant. They’ll be able to help you understand the changes and make sure you’re compliant.
  • Use accounting software. Accounting software helps you to keep track of your VAT transactions and ensures that you’re correctly accounting for the DRC.
  • Be prepared for challenges. The DRC is a complex change, and it may take time for businesses to adjust. Be prepared for some initial challenges, and be patient as you work through them.

By following these tips, you can make sure the transition to the DRC is as smooth as possible and that you’re compliant and keep the HMRC and their fines at bay.

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