HMRC are changing their penalty regime for late submissions of VAT returns.

HMRC are changing their penalty regime for late submissions of VAT returns from VAT periods starting on or after 1 January 2023. There will now be penalties for late submission, even if no VAT is due to HMRC.

The new regime works on a points-based system. For each VAT return you submit late, you will receive one late submission penalty point. The penalty points build up, and once you reach a threshold, you’ll get a £200 penalty, and a further £200 penalty for each subsequent late submission.

For Quarterly VAT returns – its 4 points within 12 months
For Annual VAT returns – its 2 points within 24 months
For Monthly VAT returns – its 5 points within 6 months

You can ‘reset’ your points back to zero if you submit your VAT returns on time (the next 12 months for quarterly, 24 months for annual, and 6 months for monthly).

If you pay your VAT late, there will be penalties depending on how late you are at paying the VAT, as well as interest:

  • Up to 15 days – no penalty
  • 16-30 days – 2%
  • 31 or more days – Another 2%

If you are struggling to pay your VAT, it is highly recommended to set up a payment plan with HMRC, to reduce the penalty period.

HMRC won’t be charging a first late payment penalty for the first year from 1 January 2023 until 31 December 2023 if you pay in full within 30 days of your payment due date.

From 1 January 2023, HMRC will charge late payment interest from the day your payment is overdue to the day your payment is made in full. This is at the Bank of England base rate plus 2.5%.

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If you are interested in learning more about our bookkeeping and accounting services or any aspect of business finance and payments, get in contact with the experienced team at Wellden Turnbull today.

How inaccurate P60s can cause tax issues

For most people, submitting a tax return is not a favourite task. But it’s in everyone’s best interests to avoid errors and remove the risk of being dealt a penalty for submitting an inaccurate claim. Many don’t realise that an inaccurate P60 could lead to tax issues further down the line and even costly penalties. Here’s why accuracy is essential when you’re submitting a tax return and the role a P60 plays in that.

What is a P60?

A P60 is a form detailing how much you’ve earned over the course of the tax year. It also shows how much you’ve paid in National Insurance contributions and Pay As You Earn (PAYE) income tax. The information included in your P60 is taken from your total employment earnings, or total pension, for the current tax year.

Note: The P60 will only show the pension provider if the P60 is from a pension payroll scheme. It will not show how often you pay into your pension.

Your P60 serves as evidence that you’ve paid tax for the year, and how much, but it also provides evidence of your earnings. For this reason, you’ll often be asked to provide a copy of this form when you apply for a mortgage, sign on to a property rental or use another type of financial service.

The importance of checking the figures

As an employee, it’s likely that you’ll assume your P60, P45 and any other forms provided to you by your employer will be accurate. But don’t be fooled. There could be situations where employers issue their staff with inaccurate documents, which could then render the employee’s tax returns incorrect if they have to file a self-assessment return and their taxes are investigated.

If an individual reports the wrong information to HMRC, whether that’s undeclared benefits, earnings or tax deductions, it could result in penalties being issued as a result of carelessness. It might seem unfair that an employee can be penalised for the errors of a business, but in the eyes of HMRC, it’s the taxpayer’s responsibility to check that the figures they’re submitting are accurate.

Why accuracy is important

The accuracy of your tax returns is determined not just by the processes your employer adopts, but also by your own processes. Any business, large or small, whether it’s a team of hundreds or a solo individual, can be subject to an audit, and the more discrepancies there are with your report, the higher the risk of an audit.

By keeping your records as accurate as possible, and supplying any documentation required by HMRC, you can avoid the risk and save yourself the time of having to deal with an investigation which can be stressful. Inaccuracies can mean that businesses miss out on deductions and could end up overpaying, which affects their profits. But there’s also the fact that in submitting your return with accurate figures, you’ll have a better overview of how your business is performing and where it stands financially. This will help you make better, more informed decisions as your company grows.

How to check your P60

It’s always worth double-checking the numbers to ensure they match up with your payslips for the tax year. The tax year runs from 6th April to 5th April, and you’ll be issued a new P60 for each of your jobs/pensions every tax year. Your final payslip for the tax year should include the year-to-date figures which you can check align with your P60. If there are issues or the numbers don’t match, raise it with your employer so it can be amended.

Key takeaways

You shouldn’t assume that the figures included in your P60 are correct, just because they’ve been supplied by your employer. It’s always better to double-check your tax return or have it submitted by a professional who will ensure everything is correct and you’ve filed for the correct deductions and expenses. Submitting your tax return can be a nerve-wracking task, especially if you’re not knowledgeable about what’s required. That’s why it can be worthwhile speaking to a tax professional who will ensure all the figures are correct and minimise the risk of any issues arising.

To find out more or to book the accounting and bookkeeping services of our tax professionals, get in touch with Wellden Turnbull today.

Tax saving ideas for landlords

Being a property landlord can be a stable source of income for many people across the UK, as they provide a service to renters. But earning money from being a landlord is a business like any other, and they are liable to pay tax on any form of income they generate. If you are a UK citizen and you own and rent a property somewhere across the UK, you will have to pay a category of landlord tax; this is unavoidable.

It can be easy to be confused by the rules around the taxation of landlords, and it may well be the case that, as a landlord, you are paying too much. Tax advice and management is a really important aspect of being a great landlord, as small changes can be the difference between a healthy profit and just scraping by.

Here we take a look at some important ideas for saving on tax and better tax management for landlords in the UK.

Create a limited company

The first thing to say is that if you want to manage your tax as easily as possible, one option is to form a limited company that you use as a landlord. This can really help by first being able to separate your personal life and finances from those of your landlord finances. But it also has some important tax considerations.

Being a company allows you to offset your expenses against your profit, and it also gives you the option to have someone else manage elements of the property management. It’s a solution that might not be right for everyone, so it is worth discussing it with an accountant experienced in working with landlords.

Understand and make use of tax bands

It is the case that Capital Gains Tax is not usually paid when assets are transferred between spouses. This means that you may well be able to reduce your tax liability by moving some of your assets into the name of your spouse – this could allow you to make use of a lower tax band.

If your spouse’s tax bracket is lower than yours, you may also be able to pay less tax on your rental income as well. And, as long as the property doesn’t have a mortgage and you aren’t taking financial gain from it, you won’t need to pay stamp duty.

Invest in your properties

Landlords are sometimes criticised by tenants for failing to put enough investment into the upkeep of a property. In truth, investing in the properties can be extremely useful from a tax perspective –

not only in terms of renovating and refreshing the property, but also looking into the possibility of extending it.

Of course, it is important to take into account the maximum rental yield you are going to get from a property in the area. Overspending might result in a better tax situation, but you won’t be able to make up for it in terms of the cost of the project.

Consider the possibility of short-term lets

You might be used to managing long-term lets, and this can work for many landlords. But you may not have considered the potential benefits of short-term lets.

One of the major advantages of short-term lets is that it gives you the chance to regularly evaluate the value of the property. That means you can always get a rental yield that is sensible for the area. If you are locked into a long-term contract and the local area rises in popularity, this can mean that you are missing out on income.

Speak to an experienced accountant

Every landlord has different tax needs, and possibly the most valuable thing that you can do is speak to an accountant who has specific experience dealing with landlords and helping them to manage their taxes.

If you are interested in learning more about our bookkeeping and accounting services or any aspect of business finance and payments, get in contact with the experienced team at Wellden Turnbull today.

Mary Harris Smith: the world’s first female Chartered Accountant

You might not be aware that it wasn’t until 1920 that women were allowed to be recognised as Chartered Accountants. The very first woman to take that mantle was Mary Harris Smith; this is her story.

Destined to be a great accountant

Mary Harris Smith was born in 1844 in London, and it was apparent from very early in her life that she was a gifted mathematician. Her father, a clerk to a navy agent and a banker, recognised her abilities and encouraged her. At 16, she was studying with a Master of King’s College School, before taking bookkeeping classes.

In 1887, Mary set up her own accountancy firm trading as a M. Harris Smith, Public Accountant. She had huge success and made a good living. It was said that her reputation was such that she was regularly requested to audit the accounts of organisations.

Her first application

While she had success as an accountant and was living comfortably, she yearned for the status and prestige of being a Chartered Accountant. She first applied for membership in the Institute of Chartered Accounts in England and Wales (ICAEW) in 1891, believing herself to be fully qualified to do so.

She was turned away on the basis that women could not be recognised as Chartered Accountants. This decision unsurprisingly rankled her. In 1895, she was quoted saying “Require of me what you would require of a man and I will fulfil it.”

The successful application

She made multiple further attempts to become a member but was turned down each time. Despite her years of accountancy expertise and stellar reputation, it was against the rules. However, thankfully, change was on the horizon.

The Sex Disqualification (Removal) Act was passed in 1919 which made it illegal for ICAEW to refuse to admit accountants based on their sex. Mary applied to ICAEW again and this time she was recognised as the first female Chartered Accountant.

It clearly meant a lot to Mary to be recognised in this way. She was 75 when she was finally admitted as a Chartered Accountant, and she continued working into the late 1920s until her health started to deteriorate.

Blue plaque

It was in May 2020 that the City of London chose to honour Mary’s life – it was the 100th anniversary of her being accepted by the ICAEW as a Chartered Accountant. A blue plaque was commissioned to be placed in the City – one of just three plaques (out of 182) that celebrate the life of an individual woman.

The plaque will stand at the corner of Queen Victoria Street and Bucklersbury, which is close to where Mary’s office was situated when she was awarded her Chartered status.

A progressive campaigner

As well as being the first female Chartered Accountant, Mary was a vociferous campaigner for progressive women’s rights and feminism. She was a proud supporter of the famous campaign for women’s suffrage and was also involved in movements such as the Society for Promoting the Employment of Women, and the National Union of Women Workers.

Having lived almost her whole life in London, Mary enjoyed retirement in St Leonard’s on Sea in East Sussex and died there in 1934.

We hope you enjoyed learning about Mary Harris Smith, the world’s first female Chartered Accountant. If you are interested in our bookkeeping and accounting services, please don’t hesitate to get in contact with our experienced team today.