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Tax Advice

Payment on Account | next one due 31st July. Or is it?

Background

The 2nd payment on account relating to income tax for the tax year 2018/19 is due by 31st July 2019.

For Salonfrog Clients who have our Personal Tax Return bolt-on service, they already know the amount they need to make.

For everyone else, you should check your HMRC tax account (or refer to the Statement of Account HMRC may have sent them).

However, there have been problems with HMRC’s self-assessment system, which means many tax payers have not been requested any payment on account.

Houston, HMRC has an issue…

In January 2019 HMRC’s self-assessment system failed to generate payment on accounts for 2018/19 for some taxpayers. At the start of the year, HMRC worked with Agents (like Salonfrog) to rectify this – but only where either the tax payer or the Agent insisted on payments on account being set up.

However for many, this was not done and the 1st payment (due back in January 2019) was missing, with the 2nd payment (due by 31 July 2019) also not fixed.

So what does this all mean practically?

If you expected to make a payment on account but your Account shows none is due, you do not need to make a payment by 31 July this year. However, this does mean that all of your 2018/19 tax bill will now be due in January 2020 and you should ensure that you budget for this.

HMRC has said it will not create a payment record unless a payment has been made and interest charges could apply; however any payment you do make will be credited against the total liability due by 31 January 2020.

Business Rates for your Salon or Barbershop

Your business rates are based on a valuation of your salon or barbershop and changes are being made.
New legislation is being introduced, depending on where you are in the UK:

England & Wales

Property revaluations are now to be done every 3 years, rather than every 5 years. The next property revaluation will now take place in 2021 rather than 2022.

Scotland

Similar legislation is expected to be replicated in Scotland, likely to take place in 2022.

Good or bad news?

That depends.

Hilary Hall, NHF/NBF chief executive, said:

“Especially for salons in areas where commercial rents are falling, this is good news. Earlier and more frequent revaluations give salons a better chance of business rates more accurately reflecting their current value on the rental market. Of course, the opposite is true for salons in areas where rents are going up.”

According to a recent survey by the NHF/NBF, around two thirds of hair salons, beauty salons and barbershops don’t pay business rates at all because they qualify for small business rates relief (see the section at the bottom).

Larger salons are more likely to pay business rates, which are becoming an increasing financial burden. Almost half (42%) reported that their business rates had gone up when they were last revalued in April 2017, although 13% had seen their rates go down.

Discounts of up to one third are available for businesses with a rateable value of £51,000 or less in 2019-2020 and 2020-21. In the NHF/NBF survey, 41% of salons said they were unaware of this additional relief and many were unsure whether they had to apply for it or whether it would be automatically applied by their local authority.

Business Rates Relief

In England, if your Salon or Barbershop’s rateable value is less than £15,000, you receive a discount to your rates bill.
And if it’s less than £12,000 you can apply to pay no rates.

The rules in Scotland depend on your local council but there are also reliefs available.

More information can be found here:

England: https://www.gov.uk/apply-for-business-rate-relief
Scotland: https://www.mygov.scot/business-rates-relief/

Electric Cars – the most tax efficient car BIK

Electric Cars
If you’re thinking about going for an electric car soon, it is very well worth waiting until after 5th April 2020 and getting your Ltd Company to buy/lease it. Electric cars (with less than 50g/km Co2) will see the benefit in kind (BIK) charge reduce from 16% to 2% for 20-21.

Contact us if you’re thinking about this and we can give you more details.

Mobile phones – a tax free perk

Mobile phones

If your contract is coming up for renewal soon or you’re thinking of upgrading your handset, there is a tax advantage of getting your Ltd Company to do this for you. Mobile phones are a tax-free benefit and the Ltd Co is allowed the costs as a tax deduction.

The contract must be in the name of the Ltd Co though.

Contact us if you’re thinking about this and we can give you more details.

Giving to charity | through your Ltd Co

Most of our Clients make payments to charities directly from their Limited Companies – which is great!

Ltd Companies can get tax relief on these gifts but the relief works differently than for individuals, self-employed sole traders and partnerships.

Your company can claim tax relief as long as the donation meets a number of qualifying conditions, which you can read about here:

https://www.gov.uk/tax-limited-company-gives-to-charity

If you follow the rules, we can then make sure you get the tax relief for these payments.

Tax-Free Childcare

Do your employees know how to apply for Tax-Free Childcare?

Tax-Free Childcare can be used to pay towards the cost of (qualifying):

  • after school clubs.
  • play schemes.
  • holiday clubs.
  • summer camps.

There’s a simple step by step guide parents can use if they want to apply for Tax-Free Childcare, at

https://www.gov.uk/get-tax-free-childcare

It tells them:
• how to find out the childcare support option that’s best for them
• how to check if they’re eligible for Tax-Free Childcare
• how to apply for Tax-Free Childcare

If their application is successful they will get an online childcare account, where they can:
• select a childcare provider
• pay money into their account and receive the government ‘top-up’
• pay their childcare provider

They will need to reconfirm (every 3 months) to check they’re still eligible for Tax-Free Childcare.

You don’t need to do anything, but telling your employees about the step by step guide and where to find it may help them with their childcare costs.

Tax Rates | 2019-20

The new tax year has just started and with it are changes to income tax bands and allowances.

The personal allowance is £11,850 for 2018/19 and increases to £12,500 for 2019/20.

The marriage allowance permits certain couples, where neither pays tax at more than the basic rate, to transfer 10% of their personal allowance to their spouse or civil partner.

English residents
The basic rate of tax is 20%. In 2018/19 the band of income taxable at this rate is £34,500 so that the threshold at which the 40% band applies is £46,350 for those who are entitled to the full personal allowance. In 2019/20 the basic rate band increases to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.

Individuals pay tax at 45% on their income over £150,000.

Scottish residents
The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland to taxpayers resident in the England. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2018/19 and 2019/20 there are five income tax rates which range between 19% and 46%. Scottish taxpayers are entitled to the same personal allowance as individuals in England.

The two higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK residents. For both 2018/19 and 2019/20, the threshold at which the 41% band applies is £43,430 for those who are entitled to the full personal allowance.

Salonfrog interview with Modern Barber Magazine

Salonfrog’s Andrew is interviewed by Modern Barber Magazine for their Apr-Jun 2019 issue, talking about the VAT threshold and how it affects Salon and Barbershop owners.

https://issuu.com/modernbarbermagazine/docs/modernbarber_issue22_issuu

Key Rates April 2019

A one pager showing the key rates which affect Salon/Barbershop owners and how they increase from April 2019.

  • National Minimum Wage/ National Living Wage
  • Statutory Payments
  • Apprenticeship Scheme
  • Pension | Automatic Enrolment
  • Business Rates Relief
  • MTD

https://tinyurl.com/yxnsex6a

Salonfrog interview on the Spring Statement 2019

Salonfrog’s Andrew was interviewed today by Salon Services UK about the implications of the Spring Statement on Salon and Barbershop owners. You can see the full article by clicking below:

https://tinyurl.com/y545qr95

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