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Check your End of Tax Year Dividends Using our new reporting tool

The end of the personal tax year is now only couple of weeks away (5th April 2017).

Things to consider at this time include your overall dividend position for the year. Have you declared enough dividends to cover funds taken from the company? Are you aware of the personal tax incurred for these dividends? Should you increase your dividends to make full use of the lower rate tax thresholds?

To help you understand your dividend and personal tax position this year we’ve updated our “Personal Dividend Tax” report (accessed via the link on your dashboard).

Other (non company) Income

To ensure Tempo has the full picture of your personal income, use the new field “Other taxable income”, to record an approximation of any other taxable income you may have had this year (including rental profit, investments and PAYE income not already shown on the report). We’ll keep this figure for future reference as it will affect the tax incurred on your dividends each year.

This field is shown in yellow in the example screen shot below.

 

Your Dividend Tax

An estimation of dividend tax incurred is shown in red just below the “Recalculate” button. This figure is the tax on dividends only, if you have other tax to pay (such as tax on property income, student loans, child benefits etc) then these will be in addition to this figure.

 

Using new ”Dividend Tax Summary” report

Tax on dividends is a little more complex for the 16/17 year than it used to be. We now have a couple of new tax brackets to consider (including a £5K tax free dividend and a lower rate dividend tax of 7.5%).

A key point, if company profits allow, is to ensure you are making full use of the lower rate of dividend tax.

The new report (the bottom half of “Personal Dividend Tax” page) shows the tax thresholds and what scope (if any) you have left for dividends at each threshold.

Read the customised comments just below rates table as this will explain in clear English, the key points for you to consider.

The screen shot below shows an example of an individual who’d benefit from declaring a further £2K dividend to make full use of the lower dividend rate.

Contacting Tempo

Drop us a line via our usual support channels if you’d like to discuss your dividend position; or indeed if you’d like us to ensure dividend records are up to date for the end of the tax year.

VAT Flat Rate Scheme Changes

HMRC have recently announced a change to the VAT flat rate scheme (FRS) which will affect the majority of freelancers.

On the 1st April 2017, a new rate of 16.5% is being introduced for businesses classed as “limited cost traders”.

Full details of the changes have not yet been announced as HMRC’s consultation period has only recently finished.

Which businesses are affected?

“Limited cost traders” are businesses who’s VAT inclusive expenditure on goods is either:

  • Less than 2% of their VAT inclusive turnover in a prescribed accounting period;
    Greater than 2% of their VAT inclusive turnover but less than £1000 per annum (pro rata)
  • Goods, for the purposes of this measure, must be used exclusively for the business (i.e. not including anything partly used for private purpose). HMRC give the example of printer ink and stationery that you use for your office and home!

There are other exclusions too as follows:

  • Capital expenditure;
  • Food or drink for consumption by the flat rate business or its employees;
  • Vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services);
  • Goods acquired with the intention of giving them away or donating them to a third party.

These exclusions have been included in the new rules to prevent businesses buying either low value everyday items or one off purchases to inflate their costs beyond the 2% and avoid the increased rate.

HMRC have said it will support businesses in checking their on-going and perhaps ever-changing status as limited cost traders by introducing an online tool.

What is Tempo doing to help?

We are reviewing which clients require the change to their FRS scheme and indeed who of these will be better off coming off of the FRS. The process will happen later in March, hopefully by then HMRC will have clarified the situation.

Christmas and New Year Opening Hours

Merry Christmas to all of our clients and business partners!

Over the Christmas and New Year period Tempo’s support team will be scaled down. We’ll be here to pick up important emails and phone messages but we may not be able to respond to all queries and calls at the same speed as we usually aim for.

The office will be open on all working days over the period but callers may go through to voice-mail. Please leave a message or call back in the new year when support returns to normal.

Here’s to a great 2016 and looking forward to the new year!

Tempo’s Support Team

Track your Dividend Tax online

Given the significant changes to dividend tax that came into effect in April 2016 it’s even more important to track personal tax liabilities throughout the year.

Click the new link “Personal Dividend Tax” on your dashboard for an overview of the year so far.

Generally speaking, the first £5K of dividends received will be tax free.  Then dividends will be taxed at 7.5% until you are a higher rate tax payer (£43K gross) after which dividends are taxed at 32.5%.   Dividends received at the top rate of tax (£150K+) are taxed at 38.1%.

Dividend tax is calculated on your self assessment tax return filed by Jan 31st each year.

As the tax is a personal liability, it’s important to understand how much should be saved (in a personal savings account) ready for your tax bill.

 

July 31st Deadline – Self Assessment Payments

There’s just over one month remaining before the deadline for making the 2nd payment on account for the 15/16 self assessment tax year.

HMRC is currently issuing letters detailing the payment required, however if you are not sure of your personal situation here are a few things you can do:

  • Check your email from us regarding your self assessment calculation for 14/15.  The subject is “Draft tax return for review”.
  • Review your correspondence from HMRC regarding your self assessment tax statement.
  • Sign up for HMRC online.  A great way to track your personal tax liabilities.
  • Contact support @ tempo if you require us to review your position.

Generally speaking you would only have a payment on account to make if you had a self assessment tax bill of over £1,000 for the 14/15 tax year.