Here are some answers to Frequently Asked Questions.
Why do I need an accountant?
There are many reasons why having a good accountant is so important.
– To help you improve your Cash Flow
– To help you reduce your workload
– To help you manage Growth sustainablity
– To Provide valuable Business Advice
– To help you stay ahead of trends and regulations
Using an accountant will ensure that you do not put yourself at risk to the various HMRC penalties and end up having to pay interest that is charged for late registration, late submission of tax returns and late payments of tax.
How do I register for VAT?
Once you are at the required threshold amount or if you have voluntarily registered for VAT (more on this later) you will need to fill in the VAT registrations forms on the HMRC website. You will then receive a VAT registration number, which you will need to add to any raised invoices and a confirmation certificate.
Do I have to register my business name with Companies House?
If you are operating your freelance business as a sole trader then no. As a sole trader you can choose pretty much any name you like, but once you register the name as a formal business entity there will be some restrictions – so even if you are only setting up as a sole trader now, you might want to register your name straight away, to protect it in the future if you do choose to go limited at a later date. Also, by registering your name you will make your details present at Companies House, which provides credibility and helps to build client confidence.
What is a P35?
A P35 is a yearend return completed by all employers. The P35 is a summary of the deductions made from the employees’ salaries reconciled to the payments made to HMRC during the tax year. Any difference in the reconciliation between the PAYE payments due and actually paid can then be identified. The P35 is completed for each individual tax year and is submitted to HMRC together with the employees P14 (The P14 is similar forms to that of the more well known P60).
The P35 must be submitted to HMRC no later than 19th May after the previous tax year. The P35 can be submitted using the HMRC website, direct from the payroll software or by paper if allowed.
How do I pay tax?
Self Assessment involves completing an online or paper tax return. You tell HMRC about your income and your expenses, which ultimately gives them details of your profit figure, and this is what you will be taxed on. At the same time you can also advise HMRC about any other tax allowances or reliefs.
What are the deadlines for filing your Company Tax Return?
You must file your company tax return- which includes a company tax return form and other supporting documentation- within 12 months of the end of your companies corporation tax accounting period. Your company tax return filing deadline is known to HMRC as your ‘statutory filing date’. If you file your return late your company will be charged an automatic penalty, even if it does not owe any corporation tax.
Am I entitled to a Tax refund?
You are only entitled to a refund from HMRC if you pay too much tax during the tax year. If you are an employee you don’t need to do anything HMRC will contact you but if you are sole trader, you must prepare your tax return to claim any refund for those under CIS. Our job is to help you get every penny that HMRC owes you.
What is inheritance tax?
This is a tax on the Estate of a deceased person.
It is a flat rate tax of 40% which applies on the total value of the Estate after the tax free IHT band of £325,000 is exhausted.
There are numerous exceptions and complications to this general rule, but that is the starting point.
There is no IHT applicable on assets transferred between spouses/civil partners.
Do I need a company bank account?
There is no rule to say that you must, but it’s a sensible step to take. Any money taken from the company by a shareholder (who is also usually a director) is taxable for the shareholder/director. If there is no company bank account, this would mean a tax charge every time the shareholder/director receives payment for a sales invoice into their personal bank account. There is no scope for tax planning, plus the timing of payments to shareholders is very important and without control over this, there would be extra tax to pay.
What is the National Living Wage?
The National Minimum Wage rates from April 2022 are stated below:
- Aged 23 and above (national living wage rate) – an increase from £9.50 per hour
- Aged 21 to 22 – £9.18 per hour
- Aged 18 to 20 – £6.83 per hour
- Aged 16 to 17 – £4.81 per hour
- Apprentices – £4.81 per hour
The new rate will apply to the next pay reference period that begins on or after the date:
- a rate increase begins
- an employee reaches a new age bracket.