The UK Spring Budget 2024: The Key Points to Know

The UK Spring Budget 2024: The Key Points to Know

On 6 March, the Chancellor of the Exchequer, Jeremy Hunt has delivered his Spring Budget 2024. The government has focused on “Long Term Growth” in this budget by lowering taxes, more investment and better public services.

After the pandemic and then energy crisis caused by war in Ukraine, the UK economy has faced with financial crisis. To bring the inflation down, the higher interest rates are remained in place. The SMEs are suffering from losses due to the increase in costs. The working-class people are struggling to meet their usual living standard.    

On this budget, the Chancellor focuses on reducing taxes so that people may have extra money to support their living costs. Do you think this budget fulfil our expectation? In this article, I will write some key points of the Spring Budget 2024 and this might help to make your plan.   

The Key Points of Spring Budget 2024

  • NI Contribution Rates: The Class 1 employee NICs will be lowered to 8% from 10% (2p cut) and Class 4 NICs (paid by self-employed) will be reduced by 3p (from 9% to 6%) from 6 April 2024. These deductions will help individuals to have extra money to support their living costs.
  • Child Benefit Charge: The threshold for the high-income child benefit charge will be raised to £60k (currently £50k) from 6 April 2024 and the tapered charge is between £60k and £80k. This is a good step for high income taxpayers. 
  • Non-domiciled Individuals: The government will be introduced a new residence based regime from 6 April 2025 and this will eliminate the current tax regime for non-UK domiciled individuals. This will help to earn additional revenue for the government. 
  • Capital Gains Tax: The higher rate of CGT rates on residential properties will be reduced to 24% from 28% from 6 April 2024 and the lower rate remain at the current rate of 18%. This looks like a good news, but people are expecting more like increase in annual exempt amount
  • Furnished Holiday Lettings: The Furnished Holiday Lettings tax regime will be stopped from April 2025.
  • HMRC Digital Services: The government will improve and simplify HMRC digital services from September 2025 for individual taxpayers seeking to pay tax in instalments.
  • IHT Administrative Reform: From April 2024, The personal representative of estates will no longer need to have commercial loans to pay IHT before applying to obtain a “grant on credit” from HMRC. 
  • VAT Threshold: The VAT registration threshold is increased to £90k from £85k and the deregistration threshold to £88k from 1 April 2024. This change is after 7 years (£85k threshold introduced in April 2017) and this is obviously a good news for micro businesses.  
  • Stamp Duty Land Tax: The multiple dwellings relief will be abolished from 01 June 2024.
  • Regulation of Tax Advisers: A consultation is launched by the government into raising standard in the tax advice market, a fantastic step by the government.

However, I think that the Chancellor could do something more on his budget and some are as follows:

  • A consultation on increasing the personal allowance so that people could have some extra money to support their living costs.
  • Rethinking on dividend tax which was increased in line with the NI raise. However, there are some reductions in NIC but dividend tax is remained the same. Even, the dividend allowance is reducing gradually.
  • There should be a consultation on corporation tax for SMEs and find any possible way to reduce this.
  • The property market is struggling due to the high interest rate and therefore, people are paying extra rent. If there are some schemes for the prospective first-time buyers, it might help. For example, due to the high rent and other day to day expenses, the first-time buyer cannot manage deposit, but their monthly income could support for mortgage eligibility.  

The above is just some key notes of the budget and my thoughts based on my experience. To see the details of the budget, we will recommend looking at the government website. 

We will be happy to help you on accountancy, taxation and business support needs from here at The Stan Lee and please get in touch with us to get our services.

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Top 7 Accounting Tips for Small Businesses

Top 7 Accounting Tips for Small Businesses

Are you in business or about to start a new business venture? All businesses should have accounting processes in place and your business too! We are glad to look after your business accounting needs as qualified accountants. 



As a small business owner, managing your accounting can be a daunting task. However, it is an essential aspect of running a successful business. In this blog, we will provide you with the top seven accounting tips for your small businesses.

  1. Business Structure: If you are about to start your new business or think about restructuring of an existing business, you may need a professional help hand. You can do your business as a sole trader (under your own name) or as a company (under a limited company). Which option is better depending on your circumstances. A precise decision will help you to run and grow your business smoothly.

  1. Keep Accurate Records: Keeping accurate records is one of the most critical accounting tips for small This means keeping track of all financial transactions, including income, expenses, and payments made and received. You can use accounting software to make the process easier, or you can keep track of everything manually. Accurate records will allow you to make informed decisions about your business’s financial health and enable you to file your taxes accurately.

  2. Digital Bookkeeping: Here in the UK, the business accounting and tax are now mostly digitalized. Having your cloud bookkeeping leads to a more accurate and easy process to save your time. It’s efficient and you have access facility from anywhere at any time if you have internet. You can also save your office space. For some taxes, the digital record is now mandatory compliance in the UK and this is know as Making Tax Digital (MTD).

  3. Separate Business and Personal Finances: It is essential to keep your business and personal finances This means having separate bank accounts, credit cards, and accounting records. Mixing personal and business finances can lead to confusion and make it difficult to track your business’s financial health. Additionally, separating your finances can help protect your personal assets if your business is sued or goes bankrupt.

  4. Understand Your Cash: Flow Cash flow is the amount of money coming in and going out of your business. Understanding your cash flow is crucial to managing your business’s finances effectively. You need to know when money is coming in and going out to ensure you have enough money to pay your bills and other expenses. Creating a cash flow statement can help you visualize your cash flow and make better-informed

  5. Stay Up-to-Date on Tax Laws and Regulations: As a small business owner, you are responsible for complying with tax laws and This includes filing your taxes accurately and on time, collecting and remitting sales tax, and keeping records for the required number of years. Staying up-to-date on tax laws and regulations can help you avoid penalties and fines and ensure your business remains in good standing.

  6. Hire a Professional: If you are not comfortable managing your business’s accounting, consider hiring a professional. An accountant or bookkeeper can help you with bookkeeping, tax preparation, and financial While hiring a professional may cost money, it can save you time and help ensure your business’s financial health.

Therefore, managing your small business’s accounting can be a challenge, but by following these accounting tips, you can make the process more manageable. Remember to keep accurate records, separate your business and personal finances, understand your cash flow, stay up-to-date on tax laws and regulations, think about digital bookkeeping, set up business structure and consider hiring a professional. By doing so, you can ensure your business’s financial health and success.

To get support on your small business accounting and tax matters, please get in touch with us at The Stan Lee and here is the link to get a quote from us.

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The Autumn Statement 2023 – Key Points

The Autumn Statement 2023 – Key Points

In the Autumn Statement, Chancellor Jeremy Hunt promised 110 measures to grow the economy. We outline the main points.

The 2023 Autumn Statement was presented against a background of inflation falling from recent peaks. Annual inflation for the last quarter of 2023 is now expected to be 4.8%, against a previously anticipated 2.9%. With recent large price increases now baked in, the government’s 2% target is now forecast to be hit in the first half of 2025, a year later than previously thought.

GDP growth is now forecast to be 0.6% for 2023, compared with the projection last March of a negative 0.2%. For the next four years, it is expected to average 1.6%, so about 0.5% less than previously thought. Cumulative real growth from 2023 to 2027 is now 2.4% lower than predicted in the March forecast.

The OBR expects living standards, as measured by real household disposable income, to be 3.5% lower than pre-pandemic in 2024/25.

Higher inflation, particularly in an environment of fixed tax thresholds, has resulted in a sharp increase in forecast tax receipts. Because departmental and other spending has been largely unchanged in cash terms despite the higher inflation, by 2027/28 that results in real spending cuts of over £19 billion.

The following tax-cutting measures were announced:

  • National Insurance – The Chancellor announced a reduction in national insurance rates for employed and self-employed people. Although the thresholds are unchanged, Class 1 primary (Employee) national insurance will be reduced from 12% to 10% from January 2024. That is charged on monthly income between £1,048 and £4,189. From April 2024, Class 4 (profit-related) national insurance for self-employed people has been cut from 9% to 8% on profits between £12,570 and £50,270 and the flat-rate weekly contribution of £3.45 is being scrapped in order to remove the complexity for these workers.
  • Full expensing for Businesses – For companies, the main tax change will only be of real benefit to larger companies. The temporary ‘full expensing’ of capital expenditure was scheduled to end in March 2026. That has now become permanent and allows companies to claim a 100% deduction against taxable profits for the cost of ‘main rate’ fixed asset purchases.
  • Tax Benefits for Freeports and Investment Zones – Three new investment zones were announced to focus on advanced manufacturing in West Midlands, East Midlands and Greater Manchester. These are expected to unlock £3 billion of private sector investment and create 65,000 new jobs. The tax benefits for investment zones and freeports will be extended for a further five years. A further new investment zone was announced in Wales.
  • Tax cut for Hospitality, Retail and Leisure businesses – The 75% discount on business rates for businesses in the hospitality, leisure and retail sectors has been extended for another year.
  • Research and Development – The R&D expenditure credit (RDEC) and the small and medium-sized enterprise (SME) intensive schemes are being merged into one.

Other measures announced included:

  • The main National Living Wage rate will be increased by 9.8% to £11.44 per hour from 1 April 2024 and the age threshold will be reduced by two years to 21.
  • Alcohol duty will be frozen for a further year, up to August 2024.
  • The state pension triple lock will be implemented in full, resulting in an increase in State Pensions of 8.5% from April, and despite rumours to the contrary, Universal Credit and other working-age benefits will rise by 6.7% in line with the September inflation rate. The local housing allowance cap will also be raised to the 30th percentile of local rent levels.
  • The Chancellor announced a set of pension reforms intended to enhance the benefits for those saving for retirement, encourage a more integrated pensions market, and allow pension funds greater flexibility to diversify their investment portfolios. Employees will be able to have contributions paid into a scheme of their own choice, rather than one selected by the employer.
  • Although there are plans to reduce the overall size of the civil service to below pre-pandemic levels, HMRC will be provided with resources to tackle the tax gap, expected to yield an additional £5 billion over the forecast period.
  • The processing of planning applications will be sped up, with local authority fees being refunded where deadlines are not met.
  • £50m in funding was announced for apprenticeship schemes, to boost skills in engineering and other key sectors.
  • Welfare reforms will come into force in the latter part of next year. Individuals who have been unable to secure employment for more than 18 months, but are deemed fit to work, will be required to engage in work experience placements. Benefit claimants who either turn down employment opportunities or fail to collaborate with job centre staff will be required to re-register for benefits, resulting in a temporary suspension of their benefit access. Furthermore, there will be significant changes to the existing guidelines for recipients of benefits based on health conditions that prevent them from working.
  • Other measures were announced to boost housebuilding, including funding for local schemes in Leeds, Coventry and London, and a scheme to mitigate pollution risks intended to unblock the building of 40,000 homes via funding to the Local Nutrient Mitigation Fund.

The Chancellor of the Exchequer labeled the Autumn statement “110 measures to help grow the British economy”. For the full detail on the economic and fiscal policies aimed at addressing the UK’s current challenges click here.

We’ll be happy to explain more of the details and help you start planning a 2024 strategy to overcome your biggest business challenges. Please get in touch with us at The Stan Lee for your accountancy, taxation and business support needs.

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Are loans to directors and employees tax free?

Are loans to directors and employees tax free?

Do you know the rules around director’s loans? If you withdraw money from your company other than for salaries or declared dividends, you should come and talk to us.

If you’re a director then taking out a director’s loan against the cash in your limited company might seem like a sensible thing to do. But the reality is that overdrawn loans to directors can lead to unintended tax consequences if they’re not properly managed.

There are three main impacts:

  1. The loan may result in a taxable benefit-in-kind, if it’s interest-free and greater than £10k – affecting your personal tax payable.
  2. The company may suffer a Section 455 charge if the loan isn’t cleared within 9 months and a day of the year-end.
  3. There’s an income tax (and potentially National Insurance) liability if the loan is written off.

In addition to this, if a company goes into liquidation with a director’s loan due to the company, the liquidators can take action against the director to get the loan repaid. This can include taking bankruptcy proceedings against the director concerned.

So, how do you ensure you’re on safe, tax-effective ground when taking out a director’s loan?

The lowdown on director’s loans

What do we mean by a director’s loan account (DLA)? In essence, this loan can be seen as any payment made to you as a director other than payments in respect of:

  • Business expenses
  • Salary
  • Dividends
  • Repayment of amounts owed by the company to the director.

It also includes similar payments to close family members.

If you owe the company more than £10,000 at any time during the year, even if it’s only for one day, then a taxable benefit potentially arises. However, if you’ve paid interest on all amounts owed at any time, regardless of amount, and have done so at at least the HMRC minimum rate (currently 2.25% p.a.) then this taxable benefit won’t arise. It’s normally better for the company to charge interest of at least that minimum rate to prevent the benefit-in-kind charge arising.

The DLA ideally should not be overdrawn by any amount on the last day of the company’s accounting period. If it is overdrawn, unless it’s cleared within 9 months and 1 day a Section 455 charge of 33.75% of the uncleared amount is payable. If the amount is cleared at a later date, the Section 455 charge is repayable by HMRC 9 months and 1 day after the end of the accounting period in which it’s cleared.

Paying back the loan

As you can see, this all gets relatively complex to manage. So, why not pay the loan back just before the period-end and then take out a fresh advance from the company just after?

Two rules restrict that:A. The £5,000 rule – if a repayment of £5k or more is made AND within 30 days of this further advances are taken, the repayment is then offset against the later advance, not the original loan.B. The £15,000 rule – where the amount outstanding is £15,000 or more, and at the time of repayment there was an intention to draw down further sums, the repayment is applied against the subsequent drawdown – this applies even if this takes place more than 30 days ahead.

Exception to A and B: If the repayment is from a source that’s subject to tax (generally a dividend or bonus) then it can be offset against the older debt. So, it’s common to declare a dividend within 9 months and a day after year-end to clear the opening DLA balance and avoid a Section 455 charge, even if other advances had been made.

There are other considerations to think about too:

  • If instead of being repaid, the loan is written off, that will be taxed in the recipient’s hands as dividend income. And it may also be subject to employee and employer National Insurance as if it was payrolled.
  • Writing off the loan will only be sensible when there aren’t profits available to pay a dividend, or not all shareholders have loans being written off.
  • In some limited circumstances National Insurance may not apply.
  • Where a loan exceeds £10,000 it requires prior shareholder approval.

Talk to us about managing your director’s loans

Managing your director’s loans in the most tax effective way is a challenge. As your adviser, we can advise you on the timing of dividend payments to help you eliminate or reduce Section 455 charges. We’ll also help make sure that your record-keeping for advances to directors is comprehensive enough to withstand HMRC scrutiny – always good practice when entering into a loan of any kind.

If you withdraw money from your company other than for salaries or declared dividends, please do come and talk to us and let’s find out how we can support you from here at The Stan Lee.

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Why your accountant is the mentor you didn’t know you needed

Why your accountant is the mentor you didn’t know you needed

A business mentor can provide guidance and support, so you make the right decisions and stay focused on the end goal as a business owner. They can also help you move forward in your career by providing advice and feedback on what steps to take to reach the pinnacle of success.

But have you ever thought of your accountant as a mentor?

Why your accountant is the ideal mentor

Having someone who understands your business journey is incredibly important. You might see an accountant as someone who files your tax returns. But, in fact, we’re experienced business owners, with access to a significant network of other business professionals.

An accountant can be the mentor you didn’t know you needed. No-one knows your business better than us, so we’re perfectly placed to offer you advice, guide your business journey and help you push your skills and capabilities as a business owner.

As a mentor, an accountant will:

  • Expand your knowledge as an entrepreneur – as business owners, we have the knowledge and experience to help you move your business forward. And we can work with you to expand your leadership skills, business thinking and entrepreneurial ideas.
  • Be a shoulder to lean on – we’ll offer 1-2-1 mentoring sessions where we can listen to your unique worries and concerns as a business owner. Having someone on the same page to listen and empathise is vital for your business and your own mental health.
  • Guide the important elements of your business – we’ll help you manage and improve your business strategy, planning and decision-making skills. We’ll also provide the management information systems you need to guide your finances and planning.
  • Keep your finances on track – we’ll show you how to maximise profits, reduce costs, and make better financial decisions. We’ll also help you plan your own personal wealth and tax strategies, so you can achieve your own entrepreneurial goals and lifestyle.
  • Introduce you to a broader business network – we work with hundreds of other business owners across a range of industries. This means we can link you up with other entrepreneurs and founders, so you have a network of other like-minded individuals to connect with. This can be vital when brainstorming and benchmarking, or if you need to talk to someone who understands the specific pain points you’re experiencing.

Having someone to guide your business journey can be invaluable. A business owner must grow and evolve along with their business, and having regular mentoring catch-ups is the ideal way to progress, offload your concerns and look for new inspiration.

If you want to grow as an entrepreneur, please come and talk to us about our mentoring services and how we can guide your business future from here at The Stan Lee.

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Plain English guide to cashflow

Positive cashflow is the beating heart of your business. Dive into our Plain English guide to cashflow and find out how to get in complete control of your cash position. 

Why is cashflow so central to good financial management? Here’s our plain english guide.

What is cashflow?

Cashflow refers to the movement of money into and out of your business over a specific period.

In the most basic terms, cashflow is the process of cash moving out of the business (cash outflows), and cash coming into the business (cash inflows). The ideal scenario is to be in a ‘positive cashflow position’. This means that your inflows outweigh your outflows – i.e. that more cash is coming into the business than is going out.

When you’re cashflow positive, the main benefit is that you have the liquid cash available to fund your daily operations and debt payments etc.

On the flip side, if you’re in a negative cashflow position, this can be a red flag that the business is facing some financial challenges – and that some serious cost-cutting and/or revenue generation is needed.

How does cashflow affect your business?

Not having enough liquid cash is one of the biggest reasons for companies failing. So it’s absolutely vital that you keep on top of your company’s cashflow position.

Five key cashflow areas to focus on will include:

  1. Monitoring your cash inflows and outflows – this means regularly tracking your cash inflows from sales, loans and investments, as well as managing your cash outflows from expenses, purchases and debt repayments.
  2. Managing your account receivables and payables – efficiently managing your customer receipts and supplier payments helps smooth out your inflows and outflows – and delivers stable cashflow that’s easier to predict and manage.
  3. Getting proactive with your budgeting and forecasting – creating realistic cashflow budgets and forecasts helps you predict your future cash position. By anticipating your future cash needs, you can actively plan for potential shortfalls or surpluses.
  4. Being in control of your stock inventory – having excess stock in your warehouse ties up cash. So, it’s a good idea to optimise your inventory levels and to only manufacture/order the items you need on a day-to-day basis.
  5. Investing in your cash reserves – with emergency cash reserves in the bank, you know you have the funds to handle unforeseen cashflow issues or sustain your operations during lean periods. This makes your whole cashflow position more stable.

How can our firm help you with cashflow management?

Positive cashflow is the beating heart of your business. Working with a good adviser helps you keep that cashflow healthy, stable and driving your key goals as a company.

We’ll help you keep accurate records, track your inflows and outflows and deliver the best possible cashflow position for the business.

Get in touch to chat about improving your cashflow and let’s find out how we can help you from here at The Stan Lee.

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Knowing the tax impact of using a company car

Knowing the tax impact of using a company car

Do you know the tax implications of a company car? We can explain the impact of a company car on your benefits in kind (BIK) and company taxable costs.

Having the use of a company car is a great perk. But are you aware of the tax impact of a company car and how having this vehicle may affect your company benefits?

Two of the key tax considerations related to company cars are the benefits in kind (BIK) tax charges incurred by the driver, and the tax deductions which benefit the company. At present, it’s also worth understanding the benefits of running an electric or low-emission vehicle.

Understanding the BIK charges on your company car

The BIK amount you’re taxed on as the driver of a company car is calculated as a percentage of the list price of the vehicle when new. The list price includes delivery charges, optional extras and VAT but not the registration fee or the first year’s vehicle excise duty.

Because it’s based on the original ‘list price when new’ value, any discounts are ignored, and even for used cars, the original value is retained.

The percentage applied depends on CO2 emissions, and for hybrid vehicles the on-electric range, as you can see in the table below:

Screenshot 2023-07-18 at 3.57.51 PM

It’s worth noting that:

  • Diesel vehicles registered before January 2021 that aren’t RDE2-compliant attract a 4% surcharge on their published BIK rate, up to a maximum total of 37%
  • Where fuel is provided by the company for private mileage, the same percentage is applied to a value of £27,800.

Claiming company benefits against the cost of a company car

Although the driver is taxed on the perk of driving a company car, the company can benefit by claiming deductions for the costs involved in running this vehicle.

All expenses in connection with the operation and maintenance of the car are deductible as trading expenses, including things such as insurance, fuel and maintenance. Capital allowances are also available in respect of the purchase price of the vehicle.

Depending on the vehicle, the capital allowances available are:

  • 100% First Year Allowance – this is only for new zero-emission cars.
  • 18% annual allowance on written-down value – this is for second-hand electric vehicles and all vehicles with emissions between 1 and 50 g/km
  • 6% annual allowance on written-down value for all other new and used vehicles.

Talk to us about the tax implications of company cars

If you’re thinking about investing in a company car, it’s worth considering that there are tax advantages for both the company and the driver in selecting an all-electric vehicle. There are also advantages, to a lesser extent, in opting for a low-emission vehicle.

We can calculate the likely personal BIK tax charge on any vehicle you’re considering buying through your business, as well as advising on the tax and other implications for the company.

Talk to us before purchasing a company car for personal use. The tax charges can be higher than you may expect, so it’s worth considering the BIK impact before you buy.

Get in touch for a chat about your company car plans from us at The Stan Lee.

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Getting your tax affairs in order prior to death

Your tax liabilities don’t end when you pass away. That’s why getting your tax affairs in order prior to death is so helpful for those you leave behind. Here’s what you need to know.

If you’ve always thought that your tax affairs end once you die, then think again. The truth is that the requirement for tax filings doesn’t end with the death of the taxpayer.

There are tax considerations:

  • Up to the date of death
  • For the period of administration, the time between death and the final winding up of the deceased’s estate
  • And the documentation potentially applicable to inheritance tax.
  • What this means is that you could leave complicated tax liabilities behind for your loved ones, family and the executor of your will to sort out.

So, how do you ensure you leave your tax affairs as tidy and manageable as possible?

Understanding end-of-life tax responsibilities for your personal representative

When a taxpayer dies, their personal representative is responsible for completing any outstanding tax returns. There will be one for the current tax year up to the date of death, and possibly one (not normally more, but there can be) for previous tax years.

HM Revenue & Customs (HMRC) has a very clear process for what happens once a taxpayer comes to the end of their life:

  • When HMRC is notified of the taxpayer’s death, any outstanding returns will normally be cancelled and then re-issued, together with one for the current year to the date of death. These returns will be sent to your personal representative.
  • If HMRC has issued a notice to submit a tax return. it must be completed unless they agree to cancel it. But in cases where HMRC already has all the information from their own sources – if, for example, your only income is from employment – they will not normally require a separate tax return to be filed.
  • Any re-issued returns must normally be submitted within 3 months and 7 days to HMRC. The return for the current year is due by the following 31 January. Electronic returns cannot be submitted – they must be in paper form.
Providing the required financial information to HMRC

Following your death, it will be your personal representative (usually the executor of your will) who has to deal with your financial and tax affairs on your behalf

Where a return is required, it will be your personal representative’s responsibility to collate the information that’s required and get your tax return completed and filed with HMRC.

So, how does this work in practice?:

  • HMRC will be able to provide details of income from any employment, state and other pensions, as well as any taxable welfare benefits.
  • Banks and building societies should be able to provide values for any interest payments. Dividends on listed shares should be evidenced by dividend vouchers, although the amount paid per share is also publicly available. Dividends on unlisted shares can be confirmed with the company’s accountant if vouchers are not readily available.
  • Any capital assets owned at the date of death go into the deceased person’s estate at the then-market value but are not deemed to have been disposed of by the deceased. Accordingly, these are not required to be reported for capital gains tax purposes. Any assets disposed of prior to death should of course be included in the final tax return.
  • Any tax refund due will be paid to the estate, and the estate is responsible for any tax payable by the deceased.
  • In addition to tax returns up to the date of death, it may also be necessary to complete a return covering any income and capital gains arising during the period of administration – this is the time between the date of death and distribution of assets to the beneficiaries. Where income from interest would result in a tax liability of £100 or less, no return will be required, and the tax-free status of income derived though individual savings accounts (ISAs) is maintained.
  • Where a tax return is required for this period, it will be a Trust and Estate Tax Return, not a normal personal tax return. Often though, HMRC will accept the necessary information less formally, in a written summary.
  • Where any residential property is disposed of from the estate, any capital gains must be reported within 60 days, and tax paid at the same time.
  • The final area of tax following death is in respect of inheritance tax (IHT). That is an area where you should always seek professional advice.
Talk to us about getting your tax affairs in order

Tax administration following death can be confusing, and something your surviving family members will likely find emotionally difficult. We’re always there to help in these circumstances.

Where the size of your estate is likely to exceed the inheritance tax threshold of £325,000 (excluding the residence nil rate band) please talk to us to explore if there is any planning that can be undertaken to reduce your potential IHT exposure.

As your adviser, we can also help you make sure your financial and tax affairs are always in order, and that you have funds put aside to cover your end-of-life tax liabilities.

Get in touch to get your tax affairs in order and let’s find out how we can help from The Stan Lee.

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Are you pursuing a trade, or following a hobby?

Are you pursuing a trade, or following a hobby?

Are you pursuing a hobby, or carrying out a trade? It can be hard to define in some circumstances, so we’ve explained the nine ‘badges of trade’ as used by HMRC. 

Many of us have hobbies that are dear to our heart, whether it’s playing guitar, building a giant model train system or knitting copious numbers of jumpers for our family.

In many cases, it’s pretty clear whether these activities are being carried out in the course of a trade, or are nothing more than a personal hobby. But disputes with HM Revenue & Customs (HMRC) do arise. Are the profitable activities you carry out as part of your niche interest no more than a hobby? Or are the loss-making activities you carry out considered to be a trade, with the losses used to reduce your overall tax bill?

Let’s look at how you prove if this is simply a hobby, or a profit-making trade?

The nine ‘badges of trade’ and what they tell you

There’s not much meaningful guidance in the UK legal statute on what does and what does not constitute a trade or hobby. So, how do you make the differentiation?

One approach has been to consider the ‘badges of trade’. These badges can show the presence or absence of certain aspects that indicate whether a trade does or does not exist.

These nine badges are:

  • Profit-seeking motive: An intention to make a profit supports trading, but by itself is not conclusive.
  • Number of transactions: Systematic and repeated transactions will support ‘trade’.
  • The nature of any asset acquired: Is the asset of such a type or amount that it can only be turned to advantage by a sale? Or did it yield an income or give ‘pride of possession’, for example, a picture for personal enjoyment?
  • Existence of similar transactions: Transactions that are similar to those of an existing trade may themselves be trading.
  • Changes to the asset: Was the asset repaired, modified or improved to make it more easily saleable or saleable at a greater profit?
  • The way the sale was carried out: Was the asset sold in a way that was typical of trading organisations? Alternatively, did it have to be sold to raise cash for an emergency?
  • The source of finance: Was money borrowed to buy the asset? Could the funds only be repaid by selling the asset?
  • Interval of time between purchase and sale: Assets that are the subject of trade will normally, but not always, be sold quickly. Therefore, an intention to resell an asset shortly after purchase will support trading. However, an asset which is to be held indefinitely, is much less likely to be a subject of trade.
  • Method of acquisition: An asset that is acquired by inheritance, or as a gift, is less likely to be the subject of trade.

These badges are not an ‘all or nothing’ indicator. But when considered in the round, they may lead to an overall impression of whether or not a trade is being carried out.

Even if it is agreed that a trade exists, HMRC may argue that it’s not being carried out on a commercial basis. If so, this would deny any sideways loss relief (offsetting the losses of one activity against the profits of another for tax purposes).

Talk to us about checking the status of your hobby or trade

With the new trading allowance of £1,000 per annum, any activities you carry out which generate income below £1,000 won’t be required to be reported on your tax return. Because of this, there’s no danger of minor income from hobbies being targeted as trading activities.

The emerging problem is in areas such as crypto assets and day-trading of shares. Depending on the specific circumstances, these can be considered as trading, or generating capital gains and losses, or being outside of taxation altogether.

Where you carry out any activities outside of your mainstream business, talk to us at The Stan Lee so that we can advise you of any potential tax traps and tax benefits that may arise.

Get in touch to talk through your non-business activities and let’s get your best suited fee quote.

Are you pursuing a trade, or following a hobby? Read More »

What should be on a VAT invoice?

Are you VAT-registered? Are you complying with the regulations when sending out VAT invoices and claiming against supplier invoices? We’ll give your invoice process a review to make sure you’re ticking all the boxes

Whether you’re selling or buying, it’s important to make sure that any VAT invoices you issue or receive comply with the strict VAT regulations.

Failing to do so can cause problems both for you and for your customers.

If you reclaim VAT using a defective invoice, HM Revenue & Customs (HMRC) can disallow the claim. HMRC can also charge penalties and interest on any amounts you’ve incorrectly claimed. Equally, your business has an obligation to your customers to send out invoices that meet the regulations and include the right documentation to support their VAT claims.

The three different types of VAT invoice

There are three types of document that can be produced, so it’s important to understand the differences between these three and to use the right type for your business usage.

1. A simplified invoice

The simplified invoice is intended for sales under £250 and keeps the amount of information on the invoice to a minimum. The invoice must include:

  • The seller’s name, address and VAT registration number
  • A unique sequential invoice number
  • The tax-point (usually the date of supply)
  • A description of the goods or services supplied and the applicable VAT rate(s)
  • The total charge including VAT.
2. A full VAT invoice

A full VAT invoice is the standard invoice in most circumstances and is more comprehensive than the simplified invoice. It includes the same fields as the simplified invoice plus:

  • The invoice date (usually the same as the tax point)
  • The customer’s name and address.
  • Whereas the simplified version only requires a VAT-inclusive total, the full version needs to show the amount excluding VAT as well as the total VAT charged.
  • The unit price and quantity of goods must also be shown, together with details of any discounts.
3. A modified VAT invoice

A modified VAT invoice can be issued in respect of retail sales exceeding £250. They contain the same information as a full VAT invoice, and in addition must include the total charged including VAT. In practice, that will be on the full VAT invoice anyway.

Making sure you stick to the regulations

With the choice of three different types of VAT invoice, it’s vital to choose the right type of documentation and to also make sure you adhere exactly to the guidance and regulations.

  • You don’t need to issue a VAT invoice if your customer isn’t VAT-registered, or if all the items charged on the invoice are zero-rated or exempt.
  • You mustn’t issue VAT invoices for goods supplied under the VAT second-hand schemes, and there are special invoices required for supplies under the Margin Scheme, Global Accounting Scheme, Auctioneers Scheme and the Tour Operators Margin Scheme.
  • Invoices should be issued within 30 days of the time of supply, and you must keep copies (electronic copies are acceptable) of all invoices issued, including spoiled ones.
  • Although invoice numbers must be sequential, you can have multiple series in use at the same time.
  • NOTE: quotes and pro-forma invoices are NOT acceptable for claiming VAT.

Helping you keep your VAT procedures in order

As you can see, it’s important to have your own VAT invoices in order and to have proper VAT invoices for any purchases where you are reclaiming VAT charged.

As your adviser, we can check that the invoices you produce comply with VAT regulations, and check more-generally that your VAT procedures are robust.

Get in touch for a review of your VAT procedures and let’s find out how The Stan Lee can help on your VAT affairs

What should be on a VAT invoice? Read More »