Pearl Lemon Accountants

Category: Management

Top 10 Cost Management Accounting Firms in the USA
Effective cost management is paramount to sustaining financial health and driving growth in today’s competitive business landscape. Identifying the right firm is crucial, so we’ve compiled a list of the USA’s top 10 cost management accounting firms. These firms stand out for their innovative strategies, exceptional expertise, and commitment to delivering tailored financial solutions.

From advanced analytics to personalised service, these top-tier firms excel in guiding businesses through the complexities of cost management, ensuring maximum profitability and efficiency. Discover how these leading firms can transform your financial operations and provide a strategic edge in today’s market. By partnering with one of these esteemed firms, you can confidently navigate the financial intricacies and set your business on a path to long-term success.

Also explore how our Personal Tax Services can simplify your finances and maximize your savings.

Here is the list of the 10 Best Cost Management Accounting Firms in the USA:
1. Pearl lemon Accountants
2. ‍KPMG LLP
3. Plante Moran
4. CLA (CliftonLarsonAllen)
5. CBIZ ( Mayer Hoffman McCann)
6. JS Morlu
7. Armanino
8. ‍Moss Adams LLP
9. Marcum LLP
10. Ernst & Young
1. Pearl Lemon Accountants

Who We Are:
Pearl Lemon Accountants is all about helping businesses stay on top of their finances with our specialized cost management accounting services. We’re not just number crunchers; we’re your partners in optimizing financial operations and making your money work smarter.

What We Do:
Our range of services is designed to cover all your accounting needs, ensuring your financials are always in great shape:
1. Tax Planning: Say goodbye to tax season stress! We create personalized tax strategies that minimize your liabilities and maximize your savings. We keep up with the latest tax laws to ensure you’re always in compliance and getting the best possible outcomes.
2. Bookkeeping: Keep your financial records accurate and organized with our reliable bookkeeping services. From tracking expenses to managing invoices, we make sure your books are balanced and ready for whatever comes next.
3. Payroll Services: Paying your team should be a breeze. Our payroll services handle everything from salary calculations to tax deductions, so you can focus on what you do best—running your business.
4. Financial Consultancy: Need advice on where to take your business next? Our financial consultancy services provide you with the insights and guidance you need to make smart, informed decisions. We help you plan for growth, manage risks, and improve your bottom line.
5. Cost Management: We excel at helping businesses control costs and boost profitability. Our cost management strategies are tailored to your specific needs, helping you cut unnecessary expenses and improve efficiency.
Why Pearl Lemon Accountants?
We’re dedicated to more than just keeping your books in order—we’re here to help your business thrive. Our team of experienced accountants uses innovative tools and approaches to provide accurate, up-to-date financial data, so you can make decisions with confidence. With Pearl Lemon Accountants, you get a partner who’s committed to your success. Ready to optimize your financial operations? Let’s work together to make it happen!

2. KPMG LLP

KPMG LLP is renowned for its comprehensive cost management and cost accounting services. They focus on enhancing each business dimension, impacting cash production, costs, and working capital. KPMG offers better cash visibility and aligns cash, cost, and working capital strategies with business goals.

Their services include improving working capital efficiency, leveraging analytic tools for margin reporting, and providing management visibility into the impacts of strategic and tactical decisions on profitability. KPMG’s expertise ensures improved financial performance and readiness to seize market opportunities.

3. Plante Moran

Plante Moran is a prominent accounting firm known for its extensive range of services, including cost management and accounting. They specialise in delivering designed solutions that help businesses streamline their operations and optimise costs.

Their services include cost and margin intelligence, financial planning, and strategic consulting. Plante Moran’s team of experts utilises advanced analytics to provide actionable insights, ensuring clients can make informed decisions to enhance profitability.

Their commitment to client success and innovation makes them stand out in cost management accounting.

4. CLA (CliftonLarsonAllen)

CLA (CliftonLarsonAllen) excels in providing designed cost management accounting solutions. Their services encompass financial planning, cost analysis, and strategic consulting to enhance operational efficiency.

CLA leverages advanced technology and analytics to deliver insightful data that helps clients make informed financial decisions. Their approach ensures comprehensive cost control, optimises resources and improves profitability.

With a commitment to client success and a vast network of experienced professionals, CLA is a top contender in cost management accounting.

5. CBIZ (Mayer Hoffman McCann)

CBIZ (Mayer Hoffman McCann) provides a comprehensive suite of accounting and business consulting services. They specialise in cost management, offering financial planning, budgeting, and strategic cost reduction services. CBIZ integrates advanced analytics and technology to deliver precise financial insights and support decision-making.

Known for their personalised client service, they cater to various industries, ensuring designed solutions that enhance operational efficiency and profitability. Their commitment to quality and client satisfaction positions them as cost management accounting leaders.

6. JS Morlu

JS Morlu is a dynamic accounting firm known for its diverse cost management services. They offer outsourced CFO services, accounting system setups, general ledger accounting, and DCAA audit readiness and support.

Their team of experienced professionals uses advanced accounting data analytics to provide actionable insights for improving financial operations. JS Morlu focuses on automating routine tasks to enhance efficiency and accuracy.

Their commitment to personalised service and innovative solutions makes them a trusted partner for businesses seeking effective cost management.

7. Armanino

Armanino offers a comprehensive suite of services, including cost management, financial planning, and strategic consulting. They specialise in providing advanced solutions to enhance operational efficiency and financial performance.

Armanino’s team of experts utilises cutting-edge technology and data analytics to deliver insightful financial strategies. Their services cater to various industries, ensuring customised approaches meet specific business needs.

Known for its commitment to innovation and client success, Armanino remains a top choice for businesses seeking effective cost-management accounting solutions.

8. Moss Adams LLP

Moss Adams LLP offers various cost management services, focusing on financial planning, cost reduction strategies, and operational efficiency. Their expertise spans various industries, providing designed solutions for unique business needs.

Moss Adams utilises advanced data analytics and technology to deliver actionable financial insights. Their comprehensive approach includes risk management, financial consulting, and strategic planning.

With a deep understanding of industry trends and challenges, Moss Adams helps businesses guide financial complexities, making them a reliable partner in cost management accounting.

9. Marcum LLP

Marcum LLP is known for its comprehensive cost management and financial advisory services. They offer many solutions, including tax planning, audit and assurance, and strategic consulting. Marcum’s team employs advanced data analytics to provide deep financial insights, ensuring businesses can optimise their operations and reduce costs effectively.

Their designed services cater to various industries, from healthcare to technology, making them a versatile partner in managing business finances. Marcum’s commitment to client success and innovative approach make them a top choice in cost management accounting.

10. Ernst & Young (EY)

Ernst & Young (EY) is a global cost management accounting services leader. They specialise in financial advisory, audit, tax, and consulting services aimed at improving operational efficiency and reducing costs.

EY leverages advanced technology and data analytics to deliver strategic insights and comprehensive financial solutions. Their approach ensures that businesses can easily guide complex financial landscapes.

EY’s commitment to innovation and excellence makes them a preferred choice for companies looking to optimise their cost management practices.

Why Choose Pearl Lemon Accountants

Choosing Pearl Lemon Accountants for your cost management needs ensures a personalised and effective approach to managing your business finances. Our team of seasoned professionals is dedicated to helping you optimise costs, improve efficiency, and enhance profitability.

We offer specific services, including tax planning, bookkeeping, payroll management, and financial consultancy, designed to meet your unique business requirements. With a focus on innovative strategies and client success, Pearl Lemon Accountants stands out as a leader in the competitive field of cost management accounting.

Our commitment to excellence ensures that your financial operations are streamlined and effective, positioning your business for sustainable growth and success.

Achieve Financial Excellence with the Best Cost Management Firms

Partnering with one of the top 10 cost management accounting firms in the USA can transform your business’s financial health. These firms offer innovative strategies, advanced analytics, and personalised services to ensure maximum profitability and efficiency. By leveraging their expertise, you can confidently and precisely navigate the complexities of cost management.

These leading firms provide strategic insights and customised solutions to meet your unique business needs, driving financial success and operational efficiency. Choosing the right partner is crucial for long-term growth and sustainability.

For a truly exceptional experience, consider Pearl Lemon Accountants. Our team is dedicated to delivering bespoke financial solutions tailored to your specific requirements. Contact Pearl Lemon Accountants today and take the first step towards mastering your financial future with our expert guidance and support.
June 8, 2024
Costs or Disbursements Passed to Customers Under VAT Rules

Costs or Disbursements Passed to Customers Under VAT Rules
To provide your services to your customers, your business will incur costs. As you incur these costs, they will eventually be charged back to customers. These payments could be considered ‘disbursements’ for VAT. You do not charge VAT on them when you invoice your customers, nor can you claim the VAT back.
A business may be able to treat payments made to a client on a business’s behalf as ‘disbursements’ under VAT rules. If the business meets the disbursement classification, it does not have to charge VAT, and VAT cannot be reclaimed on those expenses.
In this article, we’ll discuss how your business treats customer-incurred costs in the concept of value-added taxation.
Costs to Exclude as Far as VAT Treatment is Concerned
A disbursement is a payment made by your business on behalf of a client. VAT cannot be claimed on such payments and is not charged when the client is invoiced. In this case, your business merely acts as an agent for the client, not as the ultimate buyer and receiver of the good or service.
It is crucial to justify your disbursements on behalf of your customers. You should exclude costs made or actions taken on your customer’s behalf from the calculation. If the payment was made by the customer, not by you, then the payment is a disbursement. Disbursements are advantageous if neither the supplier nor the customer charges VAT.
What Isn’t a Disbursement?
The fee and expenses incurred by your business to provide goods or services to your customers, such as traveling expenses and postage and package costs, cannot be considered disbursements. Invoicing back your customer must include these incidental costs in the VAT calculation. The cost of travel and phone calls are also examples of incidental costs.
On your invoices, you can itemise such costs or not. These are known as ‘recharges’ if you invoice your customers separately. No matter how much VAT you paid, you have to charge VAT on them.
When You Can and Can’t Claim Back VAT
If VAT was charged on items, you paid for but were not supplied to your client, you can claim the VAT back. Whether you charge your customers for these costs does not matter. Each item you want to claim the VAT back will require a VAT invoice.
Additionally, if your customer is VAT-registered, they may be able to claim a refund for the VAT you charged them.
A VAT-registered supplier may have charged VAT on goods or services you purchased on behalf of a customer. This VAT can’t be claimed if you invoiced your customer without including VAT and treated it as a disbursement for VAT purposes.
Note that a customer with no valid VAT invoice for the goods or services may not be able to claim back VAT.
What Records You Need to Keep for VAT
Keeping proof that you were entitled to leave out disbursements from VAT calculation when you invoiced your customers is necessary if you pass on disbursements and do not charge VAT. These can be in the form of sales orders or invoices.
Moreover, you should be able to prove that you didn’t claim back the VAT on the items you paid for your customers.
Recharge
Keeping a valid VAT receipt or invoice handy is essential to claim back VAT on costs and expenses passed on to your customers as a recharged expense.
Conclusion
There you go! In some cases, a business may be capable of creating payments on the exact amount on their client’s behalf as ‘disbursements’ under VAT regulations. Disbursements are not subject to VAT, and VAT cannot be reclaimed if the business meets this classification.
For a more accurate and reliable accounting and VAT treatment, you may seek guidance from consultancy service practitioners.
Frequently Asked Questions
What does disbursement mean on an invoice?
Disbursements are payments made on behalf of customers when you charge them for them.
Is there a difference between expenses and disbursements?
The term expense refers to spending money on operating a business, whether it is to pay employee salaries, purchase new supplies or equipment, or market the business to increase profits. Disbursements refer to payments made by a company or agent on behalf of a client or person.
Are disbursements income?
It is important to note that disbursements are records of money flowing out of business rather than profits or losses. For example, a company that uses the accrual method of accounting records expenses as they occur, not as soon as they are paid, and records income as soon as it is earned.
What is VAT?
The term “VAT” refers to Value Added Tax, which was introduced in the UK in 1973 as one of the forms of taxes. It is a tax imposed on a certain good, service, or any other taxable supply purchased and sold within the UK that is subject to VAT. Despite its consistency with EU VAT, this system is now distinct from it.
What is the VAT rate?
In the UK, three different tax rates can be charged on goods or services depending on the type.
It is customary to charge a standard rate of 20% on most goods and services. There are certain goods and services that are covered by the reduced rate of 5%, including home energy consumption, children’s car seats, and residential property conversions. The zero rates are applicable to the majority of foods and children’s clothing that is sold in the country.
VAT, however, does not apply to all sales and certain sales are exempt from the VAT regime or are not included in the scope of the VAT regime. It is for this reason that certain types of services, such as insurance, health care, postage stamps, and education are exempt from UK VAT, while statutory fees, goods and services purchased or used outside the UK, and donations to charities are not affected by the VAT laws.
How much is the VAT threshold?
VAT registration is required if your taxable turnover exceeds £85,000. Revenue generated by sales not exempt from VAT is considered to be a taxable turnover. VAT is applicable even to zero-rated turnover.
VAT is not charged on the sale of goods or services if the company does not pass this threshold. They are also not required to register with HM Revenue & Customs (HMRC). Businesses with turnover of more than the threshold must register for VAT with HMRC.
In contrast to a fixed period such as a tax year or calendar year, this turnover threshold is measured on a rolling 12-month basis. This would mean any period from the beginning of June until the end of May, for example.
In unregistered businesses with turnover near the registration limit, it is crucial to pay close attention to this as there are strict deadlines for submitting the registration and charging VAT.
What is the process of registering for VAT?
A sole trader, a partnership, or a company is all subject to VAT in this context.
As soon as the business is registered with HMRC, they will issue a VAT registration certificate confirming that the business is registered with VAT, that its registration date is effective, and that the first VAT return is due on that date.
Voluntary VAT registration is available to businesses with turnovers below the threshold. Voluntary VAT registration can be advantageous in terms of reclaiming VAT on purchases and establishing a more professional image for customers.
In what way do you account for VAT?
As soon as a business is registered, every taxable sale must be subject to the applicable VAT rate. The VAT here is referred to as output tax. Businesses are responsible for reporting and making a VAT payment to HMRC, but they are ultimately responsible for receiving it from their customers.
As part of their input tax reclaim, businesses can reclaim input VAT paid on business purchases. This lowers their output VAT due. It should be noted, however, that there are some items that are not eligible for VAT reimbursements, such as entertainment costs, cars, and purchases used for personal use (for unincorporated businesses).

July 27, 2022
Claiming My Wife’s Unused Tax Allowance – UK
In the UK, a spouse or civil partner can claim the unused tax allowance of their partner. If you are married, you can do this on your tax return.
The marriage allowance has been in effect since April 6th, 2015. Some couples need to know about the marriage allowance. With this new tax development, you can now lay a claim back four years ago.
In this article, tax allowances and claiming your wife’s unused personal allowance will be discussed thoroughly.
Let’s start!
The Marriage Allowance
If you and your spouse or civil partner meet certain conditions, you could give up some of your allowances to provide a tax credit. Every spouse and civil partner is eligible to receive the marriage allowance. For couples born before 6 April 1935, however, the married couple’s allowance will usually be more beneficial, so you should claim it instead.
If you are married, a wife, or a civil partner, you may transfer £1,260 from your Allowance to them. Marriage Allowance can be applied for free. They can reduce their tax by up to £252 every tax year (6th of April to 5th of April the following year).
A couple can qualify for benefits if one earns less than the other and has an income of up to £12,570. For you to be eligible, you must have an income of between £12,571 and £50,000 (£43,662 in Scotland). If you were eligible for Marriage Allowance since 5 April 2018, you could backdate your claim.
Do I qualify for the Marriage Tax Allowance?
If you meet the following criteria, you may be eligible for Marriage Tax Allowance:
Your relationship is marriage or civil partnership.
The date of your birth or the date of your partner’s birth is after April 5, 1935.
One of you earns less than the personal allowance, and the other one earns more than such personal allowance and up to the basic tax rate.
Consider These Factors Before Applying:
Firstly, you need your own and your partner’s National Insurance numbers. National Insurance numbers cannot be obtained by immigrants who do not intend to work or study in the UK. Marriage Allowance can be applied for by contacting the Income Tax helpline.
They must also verify your identity. Among the following, you can choose two:
An individual’s P60
One of your three most recent pay slips
Details of your UK passport
Credit file information (such as loans, credit cards, or mortgages)
Your most recent Self Assessment tax return (in the last three years)
License for driving in Northern Ireland
Apply online
Marriage Allowance can be applied online in the shortest amount of time. A confirmation email will be sent to you within 24 hours of submitting your application. To apply, head to this link.
Other ways to apply
Marriage Allowance can be applied for in the following ways if you cannot apply online:
You can do so if you’re already registered and submit tax returns through self-assessment. Head to this link if you want to apply through self-assessment.
HMRC can be contacted by writing. You may do it at this link.
Is there a reason I should get a refund?
April 2015 marked the introduction of the marriage allowance. Regardless of whether you transferred the personal allowance at the time, you may be able to do so in 2018/19 and subsequent tax years.
Neither 2015/16, 2016/17, nor 2017/18 tax years are eligible for tax claims. If the recipient of the tax reduction cannot use the allowance AND the person giving it up, you will not receive the full benefit. By doing so, couples can save on taxes.
You can save £252 in taxes by transferring £1,260 from the 2021/22 tax year. Accordingly, £1,250 can be transferred in 2020/21. For the 2019/20 tax year, the personal allowance is $12,500, so £1,250 can be transferred (savings of up to $250). The personal allowance for the 2018/19 tax year was £11,850, meaning £1,190 can be transferred, with a maximum savings of £238.
Claiming of Tax Refund
As part of giving up part of their allowance, the person giving up part of their allowance must make a claim, which may include claims for earlier years.
GOV.UK has an online facility for doing this. A National Insurance number and proof of identity are required. Examples include your P60, payslips, passport, or child benefit. Additionally, you will need your spouse’s or civil partner’s National Insurance number.
For those who cannot claim online, you can contact HMRC at 0300 200 3300 or write to them.
HMRC will refund you for previous years. They will alter the tax codes for you and your spouse or civil partner for the current and future tax years. Moreover, self-employed individuals and those in Self Assessment will file their tax returns along with their marriage allowance.
Warning
Several organisations offer to file your Marriage Allowance claim for you, but they typically charge a fee. You must be on your guard when dealing with some of these organisations because they can behave very unscrupulously. Some commercial organisations may pretend to be HMRC even when they are dealing with one of these commercial organisations.
Time Limits
The deadline for claiming back to 2018/19 is 5 April 2023. You can submit a claim for 2022/23 until 5 April 2027.
Conclusion
Source: HCA Mag
That’s it! Many couples can save money on taxes by knowing about the marriage allowance. The personal allowance can be transferred to £1,260 if married or in a civil partnership. As of 2022-23, this amounts to just over 10% of the basic Personal Allowance of £12,570. In other words, this is the amount of income you don’t have to pay taxes on.
Frequently Asked Questions
Should my partner or I apply for Marriage Tax Allowance?
Marriage Tax Allowance can be applied for online by the lower earner. The HMRC will set up your partner’s tax code or self-assessment tax return if your application is successful and you are the applicant.
In most cases, tax code adjustments take two months to complete.
Can Marriage Tax Allowance be backdated?
Although this has never used to be the case since November 2017, it has been possible to backdate Marriage Tax Allowance. If you and your spouse or partner meet the proper criteria, you can claim back all the taxes you would have paid. There is, however, a four-year limit on how far you can go back. To claim back your tax, give the HMRC Income Tax helpline a call.
Can I cancel my Marriage Tax Allowance?
Yes! By contacting HMRC, you can do so.
Am I eligible to claim the Marriage Tax Allowance if I’m unemployed?
A prerequisite for receiving the Marriage Tax Allowance is that one of you has to be tax-exempt. Those who are unemployed can transfer 10% of their allowance to their partner if they are earning a basic rate taxpayer.
It is also possible for self-employed individuals to claim a marriage tax allowance if one partner earns less than £12,500 and the other between £12,501 and £50,000. A marriage tax allowance will reduce your bill if one of you does self-assessed taxes.
What is the difference between the Marriage Tax Allowance and Married Couple’s Allowance?
A tax incentive called the Marriage Allowance allows a lower earner to transfer $1,250 from their personal tax allowance to a civil partner or spouse.
If one or both spouses were born before April 6th, 1935, they are eligible to receive the Married Couple’s Allowance. Each year, it can reduce a household’s tax bill by anywhere from £345 to £891.50, depending on the household’s upper earner (in civil partnerships or traditionally the husband in a marriage).
July 26, 2022
Tax-Free Allowances in the UK: What am I Entitled to?
Tax allowances are the amount of taxes you are allotted to deduct in the form of standard deductions, itemized deductions, and personal exemptions before calculating your total taxable income. Many factors may alter these allowances, and what is applicable to you depends on your situation.
You may be entitled to some tax relief allowances that reduce the amount of income tax you have to pay. But what is a tax-free allowance in general?
In this article, various tax allowances that you may be entitled to will be discussed. However, you should be aware that not all allowances work similarly!
Let’s start!
Am I Entitled to Tax Allowances?
Generally, you pay income tax only on taxable income exceeding your tax allowances. Although your annual allowance still covers taxable income, you won’t have to pay taxes on that portion if you need to report your income for tax credits or other purposes.
UK personal allowance (and blind person allowance if you qualify) is available to individuals who meet the following criteria:
You are a citizen or resident of the United Kingdom (including Scottish or Welsh taxpayers);
You must be an EEA national;
If you live on the Isle of Man or the Channel Islands;
Previously a resident in the UK but now living overseas for the sake of your health or the health of a family member who resides with you;
If you work for the Crown (or the late spouse or civil partner of the Crown), a territory under Her Majesty’s protection, or are a missionary.
Under the terms of a double taxation agreement, you may also be eligible for a UK personal allowance. You can find more information on GOV.UK in the guidance of form R43.
Tax allowances may not be available to you if you are resident in the UK without being domiciled here and claim the ‘remittance basis’ of taxation.
Personal savings and dividend allowance are also known as nil rates of savings and dividends. It is important to note that these exemptions do not work as tax allowances; they are nil-rate tax bands for certain types of income (for example, dividend income and savings income). The dividend and personal savings allowance are discussed in more detail when discussing income tax rates.
The Personal Allowance
Most residents are entitled to a personal allowance. Taxes are paid on your taxable income, less the personal allowance. It is still taxable even though it isn’t taxed due to the personal allowance.
The personal allowance for 2022/23 is £12,570. The unused portion of your allowance is lost if your income exceeds it. Your spouse or civil partner can receive a tax reduction by giving up part of your allowance. Transferable tax allowance is what is called.
Note that it is impossible to carry any unused personal allowance from one tax year to another!
The Blind Persons Allowance
You can reduce the taxable income you owe by receiving a blind person’s allowance (BPA). A BPA of £2,600 is set for 2022/23. Additional to the personal allowance, you are entitled to this amount of allowance if you are eligible.
Furthermore, you can transfer the BPA to your spouse or civil partner in full (or whatever is left) if you do not earn enough income to use it. To qualify for the BPA, you must meet one of the following qualifications:
In England and Wales, you may be able to claim if you are registered with a local authority as severely sight impaired;
Scots or Northern Irish citizens must have such poor eyesight that they cannot perform eye-related work.
There is no age limit on eligibility for BPA. You are entitled to BPA regardless of your income level. If married or in a civil partnership, you may claim it independently. You must, however, inform HM Revenue & Customs (HMRC) if you are eligible.
Check GOV. The UK for contact information.
Marriage Allowance (Transferable Tax Allowance) – For Married Couples and Civil Partners
Every spouse and civil partner is eligible to receive the marriage allowance. This tax credit will often be more beneficial, however, if either of you was born before 6 April 1935. Certain conditions must be met to give your spouse or civil partner a tax credit from your allowance.
For the tax year 2022/23, the marriage allowance for a spouse or civil partner is £1,260. Generally, it allows them to give up such an amount of one’s allowance for a tax credit of £252 (transferred to the partner) when married or living together. The spouse or civil partner receiving the payment must also not be subject to income tax above the basic rate or, in the case of Scottish taxpayers, the intermediate rate.
In calculating either spouse’s higher income tax rate, you should disregard the dividend nil rate band and consider whether the dividend income would be subject to the upper dividend rate (33.75%) instead.
It is also essential to note that you can backdate your claim to include any tax year since 5th April 2018 that you were eligible for the marriage allowance.
Married Couples Allowance
Your taxable income is not reduced by the married couple’s allowance (MCA) does not reduce your taxable income. Instead, you can use it to calculate how much your tax bill will be reduced. It is only available to marry or civil partnership couples with at least one member born before 6 April 1935.
Relief for Maintenance Payments
Your taxable income is not reduced by maintenance payments relief. Instead, it is used to calculate a reduction in the tax bill.
There is a gradual phase-out of maintenance payments relief. Relief is only available if you meet all the following requirements:
You are divorced, separated, or in a dissolved civil partnership.
The date of your birth, or the date of the birth of your ex-spouse or former civil partner, must be before 6 April 1935.
Court orders require you to pay maintenance.
If you are paying maintenance to your ex-spouse/civil partner or children under 21 years of age.
Your ex-spouse or former civil partner has formed no new civil partnership or marriage.
To qualify for maintenance payments relief, you must pay 10% of your taxable income as maintenance payments.
The maximum relief for 2022/23 is £3,640. Your deduction will be 10%. Therefore, you can deduct £364 from your tax bill.
Conclusion
There you have it! That’s what you might be able to take advantage of in terms of tax-free allowance. Our goal with this UK tax article is for you to learn something new and make the best out of your cash. Always consider this income tax relief concept when you file your tax return! Reading the tax code can also help for self-assessment!
July 26, 2022
How to Stop Emergency Tax

Introduction

Are you thinking of How to Stop Emergency Tax? Are you tired of paying for it? Through the article, we have described a few simple steps to do it. but did you know…

In times of disaster, the emergency tax system is in force. It’s meant to help taxpayers stricken by natural catastrophes, war, or other unforeseeable occurrences.

“Emergency” has numerous meanings. An unexpected event interrupts usual operations and creates a financial hardship.

Unexpected incidents may cause significant financial difficulty, according to the HMRC. This post will explain how to stop emergency taxes.

Let us begin.

What Is Emergency Tax and Why It Is Important?

It is the taxing of all your profits at a higher rate of tax for a limited time period. It leads to you earning less money than you would otherwise have earned.

In most cases, tax is collected when HMRC does not have the proper or adequate information about you, your income, or your tax obligations.

Because they do not have the information they need, they will be unable to provide you with the right tax code that you should be on – as a result, you will be issued an emergency tax code. The good news, on the other hand, is that it is preventable, and if you do end up being emergency taxed, you will get your money back.

It is necessary to enter your Personal Public Service Number in order to be paid at the appropriate rate while you are on emergency tax (PPSN). If you have provided your PPSN to your employer, you will be subject to emergency taxation under the regular procedures.

Any tax you have overpaid is typically refunded to you in the following year if your tax code is altered throughout the course of the tax year. It is recommended that you file a tax rebate application if you have previously received an emergency tax code but have not been reimbursed.

The concern now is, how can I prevent having to pay emergency tax? When you get your P45 from your previous employment, present it to your new employer as soon as you can. This will help to prevent having to pay emergency tax. This informs your new employer of the amount of tax you paid in your prior work, so that they may report this information to the HM Revenue and Customs.

2 Different Types of Emergency Taxes?

Individuals and corporations might be subjected to emergency taxes under certain circumstances. During times of crisis, they may be utilized to generate additional money. A rise in sales tax is one sort of emergency tax that may be imposed.

Taxes are a complex subject to understand. To aid with the recovery from Hurricane Katrina and other disaster-related activities, the federal government in the United States has placed temporary emergency taxes on people and corporations. A rise in sales tax is one sort of emergency tax that may be imposed. During times of crisis, this might be considered a means of raising finances for specific reasons.

There are two main types of emergency taxes:

Disaster tax:

A catastrophe tax is a temporary tax that is charged to a person or a company to assist the government in covering the expenditures incurred as a result of an emergency situation. They are usually only effective for six months or fewer. Emergency services taxes are often used to minimize emergency services’ costs and assist companies in the aftermath natural catastrophes. They may be used to pay for emergency services and to aid companies in their recovery from natural catastrophes, among other things. According to the IRS, this tax break is only accessible to firms in specific states.

Disaster return:

On the other hand, a disaster refund is a one-time payment given by a person or corporation to compensate them for losses incurred as a result of a qualified catastrophe. A catastrophe return is a legal document that enables people or corporations to recoup their losses after a qualifying calamity. These losses may include but are not limited to financial loss and physical property damage. It is critical to be prepared for a calamity of any kind. In a qualifying catastrophe, the Federal Emergency Management Agency (FEMA) provides a Disaster Return Program that helps people and companies recoup their losses. Consider the following scenario: you seek disaster aid after the next natural calamity. You should consult with an attorney about your choices if you find yourself in this situation.

How To Stop Emergency Tax

A temporary tax credit will be provided in each situation for the first month, with tax deductions increasing in each case from the second month on. The impact of emergency basis tax is that no tax credits are offered after 4 weeks, and tax is paid at a higher rate starting in week 9, regardless of the amount of salary.

You must now get a Tax Credit Certificate for your employer or pension provider in order to avoid paying emergency tax. We’ll show you a few techniques for avoiding the emergency tax in this section.

1. Give your employer your PPSN

In order to ensure that your combined social welfare payments are properly documented and that your claim to benefits is safeguarded in the future, you must provide your Personal Public Service Number (PPS number) to your new employer. You may learn more about social insurance by visiting their website (PRSI).

A PPS number should only be requested by an employer if you are truly taking up work with the organization in question. Following your consultation, it will take around 4-5 days for you to get a letter in the mail with your PPS identification number.

In the first month, you are given a tax cut-off point based on the single person tax cut-off point for the rest of the year. If you do not provide your employer with your PPSN, you will be taxed at a higher rate of tax and will not be eligible for tax credits until you do provide your employer with your PPSN.

2. Make sure you are registered for Pay As You Earn (PAYE) in my Account

PAYE is the method used by HM Revenue and Customs (HMRC) to collect income tax and national insurance contributions from employees. If none of your workers is paid more than £120 per week, receives expenses and benefits, has another employment, or receives a pension, you do not need to register for PAYE with the government. Payroll records, on the other hand, must be maintained.

In this way, it assures that an employee’s income tax responsibility (the amount of tax payable) is addressed on an ongoing basis, as long as the income is still being produced. Because of this method of settling taxes, your tax burden for the year is spread out across the whole period of assessment.

If you become jobless or are unable to work due to illness, you may have overpaid your taxes. Learn more about obtaining a tax refund if you are jobless or unable to work due to a medical condition. If your tax credits are inaccurate or if you haven’t claimed tax relief for specific costs, you may have overpaid tax as a result of this.

3. Register your new job with Revenue’s Jobs and Pensions service in myAccount.

Employment and Pensions permit you to register your new employment or private pension with the Internal Revenue Service (IRS). When you register your work or pension, Revenue will issue you a Tax Credit Certificate (TCC), which you may use to claim a tax credit. This will guarantee that the right amount of tax is taken from your employer-sponsored or private pension plan contributions.

Positively, any extra Social Security tax withheld will be reimbursed to you after your tax return for the year has been filed. However, before starting new employment, you will have completed your work with your prior company. This will assist your new employer in processing your tax correctly since they will be able to continue using the PAYE code (also known as a ‘tax code’) that was previously used by your previous employer.

After you’ve registered and received your myAccount password, go to PAYE Services and pick ‘Update Job or Pension Details’ from the drop-down menu. You must add a new job as well as any additional jobs or pensions that you may need.

First and foremost, you must provide Revenue with your new employer’s tax identification number, followed by the date your employment begins and how often you will be paid, and lastly, you must provide Revenue with an estimate of your entire income.

Frequently Asked Questions

Can my employer stop me from having a second job?

From a legal standpoint, there is nothing that prevents an employee from doing a second job. However, it is necessary to take into account the conditions of the employment contract since they may ban an employee from engaging in the secondary activity.

Will my employer know I have a second job?

Answer: Your employers will be aware that you have taken another employment, but you are under no need to disclose where you are working or how much you are making. Two tax codes will be created for you – one for each job (and if you have three jobs, you’ll have three tax codes created as well).

Can you be self-employed and not registered?

All self-employed persons are required to register with the HMRC (HM Revenue & Customs) in order to be able to pay tax on the money they make from their self-employment activities. The HMRC will not automatically register you for benefits if you have registered with them.

Conclusion

In this article, we have discussed the emergency tax scam. This type of scam is done to get quick money from people in need of financial help. They are usually targeted towards the elderly or those in a difficult financial situation.

The article provides ways to avoid this scam. Some ways include using certified tax preparers and talking with your bank about any suspicious activity on your account.

March 7, 2022
Why Am I Paying Emergency Tax

Introduction

When HMRC does not have accurate or adequate information about you, your income, or your tax data, emergency tax is triggered. Because they lack the information they need, the right tax code for you will be unavailable, and you will be assigned an emergency tax code.

When you leave a job, you should be given a P45, which details how much you were paid and how much you’ve been taxed so far this tax year. The P45 will also include your tax code, which your new company will need. If you don’t get a P45 or don’t provide it to your new company, you’ll have to use an emergency tax code until your employer figures out what tax code you should be on.

In this article, we will get to know more about why we are paying emergency taxes and more.

Let’s get started and find out why I’m paying emergency tax.

How to Avoid Paying Emergency Tax?

Emergency tax is a particular type of tax levied on the taxpayer when they need money. It can be levied either by the state or by the federal government. However, it is not always necessary to pay emergency tax, and there are specific ways to avoid it.

Avoiding emergency tax is to make sure that you have a good record of your income for the last three years. Try to make sure that you have enough cash reserves. If these conditions are met, you can start looking into other ways like investing in your own business or selling off your assets with a low value.

There are more to it. You can follow the below-mentioned steps;

1. When it comes to avoiding emergency taxes, the most typical approach to do so is by paying and filing your tax returns on time. The easiest method to prevent an unexpected tax bill or a penalty is paying and filing your taxes on time.

2. By paying less than what you owe, you can avoid the emergency tax if you are in a high-income group. After Hurricane Harvey, many wealthy Americans avoided paying their fair share of taxes, leading to a $2.3 billion gap for the poorest Americans.

3. You may save money on interest by making all your purchases with a credit card. With these, not only can you save money now, but you can put it towards future purchases. This implies that you may pay all of your month’s bills in one go.

4. If you qualify for deductions and credits, you may be able to lower or eliminate your tax burden. The tax code is a maze of complicated rules, so it might be challenging to know which one to take. The Internal Revenue Service (IRS) has compiled a list of possible tax deductions. See if you qualify for these tax deductions to save money on your taxes.

Why is this important?

While operating under the provisions of an emergency tax code, there is a potential that you may pay either too much or too little in taxes. As a result, you are either not receiving as much pay in a month as you should or receiving too much money due to failure to pay sufficient income tax.

HMRC has demanded that you pay them the tax you owe. Your tax code isn’t something your employer is aware of. This information is only known to HMRC.

HMRC’s ability to assess the tax codes of millions of employees makes it easy for an incorrect code to slip through the cracks. This means that HMRC’s system is less secure than it could be inaccurately assessing tax codes.

One out of every ten employees in the United Kingdom is on the erroneous tax code system. For this reason, it is so important to double-check your tax code! With the recent implementation of a new tax code, it’s necessary to double-check how your information will be treated.

What are the Legalities of Emergency Tax?

Emergency tax is a term that refers to taxes that are levied based on an emergency. For example, suppose you are in a car accident and need to get medical attention. In that case, you might have to pay for your medical bills as an emergency tax.

An emergency tax can be paid in cash or by credit card. Suppose you don’t have enough money on hand and need to borrow it. You can open a line of credit with the company that will provide the funds for your emergency tax payment. You can also use your debit card or bank account with sufficient funds.

Because your employer will not have access to this information while you have an emergency tax code. You will be required to pay tax on everything with no allowances as if you had not yet paid any tax in the current tax year.

Many people don’t know about the legalities of paying an emergency tax, and they often end up having problems with their banks when they try to borrow money for their taxes. To avoid these problems, they need to know the laws related to taxes in general.

Conclusion

This article is an introduction to the topic of emergency tax. It provides a brief background of the emergency tax, its purpose, and its implementation. It also gives some tips on how to avoid it in the future. This article concludes that paying an emergency tax can be avoided by being more conscious about your spending habits and being more careful with your money.

FAQ

What does the emergency tax do?

The emergency tax is a temporary tax that was introduced by the Trump administration in order to fund the current spending. The emergency tax will last for one year and will be used to finance military projects, border security, and disaster relief.

The emergency tax is one of the most controversial measures introduced by the Trump administration. It has been criticized by both Democrats and Republicans as it is seen as a new way of increasing taxes without any legislation being passed through Congress.

How much is the emergency tax?

This is a question that many people ask themselves when they find themselves in a situation where they need to get money as quickly as possible. The answer to this question can be found in the emergency tax section of the IRS website.

The IRS website provides detailed information about how much an emergency tax is, and what kind of emergencies qualify for an emergency tax.

March 2, 2022
Council Tax – Who Pays, Tenant Or Landlord?
Every year, thousands of households in England, Scotland, and Wales will pay council tax. This is a form of taxation, collected by local councils to help pay for services, such as bin collections, maintenance of public spaces, and other public services. However, how much you pay varies according to where you live, and your income. Let’s get to know more by reading the article below.;

What is Council Tax, and What Does it Cover?

Council tax is the primary source of income for local authorities and its importance in the UK’s finances is set to continue growing. In 2017, councils collected £34.5 billion in council tax, with the government taking an additional £3.5 billion.

Council tax is a significant source of revenue for local authorities in the UK. It is expected that the importance of council tax in the UK’s finances will continue to grow in light of Brexit.

Council Tax is made up of three central rates:

Council Tax

Council Tax Reduction

Council Tax Support.

The first two cover the cost of council services, while the last one helps those on low incomes or who have a disability or long-term illness.

Council services are vital to those who live in The UKNorthern Ireland and face the harsh realities of everyday life. These services include social care, housing, welfare benefits, and more. Citizens are entitled to access council services without any financial barriers.

How to Qualify for Council Tax Benefit?

The council tax benefit is an income-based benefit for people who live in England, Scotland, Wales, or Northern Ireland. It is paid to people with a total household income below £16,000. Council tax benefit can reduce bills by up to 75% and is worth £3,500 per year.

Council Tax Benefit (CTB) is a government-funded benefit that helps low-income households pay their council tax bills. The amount you can get depends on your household income and the number of people in your family.

Qualifying for CTB depends on what you earn and how many people live in your household. Households with one person are eligible for up to £735 per year. In comparison, households with 2 or more are eligible for up to £1,125 per year. If you earn less than the qualifying amount, you will not be able to get CTB, but if you earn more, you are a qualified person for CTB.

How to Pay Your Rent and/or Council Tax in Advance?

If you’re about to move into a new home, you may be wondering how to pay your rent in advance. There are a few different ways to do this, including paying rent in advance and paying council tax before it’s due.

You might be one of the millions of people about to move into a new home and wonder how to pay your council tax rent in advance. But there are a few different ways to do this., including paying rent in advance and paying council tax before you move. If you have any reasonable doubts about which way is right for you, it’s always worth getting advice from an advisor.

It’s essential to consider the pros and cons of each option before deciding which one is best for you.

It is possible to pay your council tax in advance through a payment plan in the UK. Suppose you are planning on moving into a property that will be subject to council tax. In that case, we recommend that you contact your local authority beforehand so they can help set up a payment plan for you.

Council tax is one of the most complicated parts of your life, especially if you are a first-time homeowner. If you are in the UK and looking to buy or rent a property that will be subject to council tax, it is worth doing your research before you commit.

The government has established the Universal Credit program to alleviate the financial burden of everyday expenses. With the advent of Universal Credit, benefits such as Child Tax Credit and Working Tax Credit will be replaced, as will income support, Job Seekers Allowance, Employment and Support Allowance, and Housing Benefit.

For those applying for Universal Credit, please keep in mind that they will also be asked whether they need assistance with their council tax payments. There is no need for you to submit a Highland Council – Council Tax Reduction application form if you answer yes to the Department of Work and PensionDWP’s question. You may be sure that the Council will take care of the rest.

To qualify for council tax assistance, you must be unable to receive benefits under the Universal Credit system.

Who Pays Council Tax: Tenant Or Landlord?

There is a lot of confusion over who is responsible for paying Council Tax in England and Wales, even though all residential premises must pay the tax. The occupier is responsible for paying the bill when it comes to Council Tax, although this isn’t always the case.

You must first determine if you are a sole occupant or live in a shared residence. If you live on your own, the Council Tax is a straightforward matter: you pay it. However, there is a hierarchy that must be addressed for individuals who share a home:

All or part of the property is owned by a resident owner-occupier who is either a leasehold or freehold holder.

The terms of leases vary depending on what type of property it is. All properties are either freehold or leasehold. Freehold properties are those where the owner owns their own land and has full rights to it, and the term of a lease is usually 99 years. A leasehold property is one where the owner has limited rights over the land they live on, which they can buy back.

A licensee who is a resident of the property. In this case, they are not a tenant but have been granted permission to reside there.

The term “licensee” is often used to describe the person who has permission to stay in a building or home for an extended period but not long-term. The landlord may grant a licensee permission by granting them a lease, which can be reviewed and rescinded by the landlord.

Any person occupying the property, such as a settler, is considered a resident.

Whether you’re a renter or a homeowner, it’s always good to know the law and your rights. The following is an overview of the legal definitions of residency and who can claim to be a resident.

A person who owns a piece of property ion which no one lives.

It is essential to know the different types of owners and absentee owners. The absentee owner does not live on the property and does not have any interest in it. They are also known as a derelict owner or squatters. On the other hand, an owner can be someone who resides in the property but does not own it outright.

As you would expect in a hierarchical system, the person at the top of the food chain is responsible for paying the Council Tax bill. Each level’s responsibility is split evenly between its occupants if that number equals or more than 1.

Conclusion

If you are struggling to pay your rent and don’t have the money to pay your council tax, it can be good to pay your council tax in advance. If you paid your council tax in advance and forgot about it, you can still claim a reimbursement of the payment.

Renting a house is a popular option for many people, but paying the rent in advance can be challenging. This article will provide some helpful tips for those who want to know how to pay the rent in advance.

Find out the amount you need to pay for you not to have any outstanding debts before your next council tax payment date. This information can be found on your council tax bill or by directly contacting your landlord.
February 14, 2022
SEISS Extended: The Last Round and What You Need to Know Now
Despite the final stage of England’s lockdown lifting measures being pushed back four weeks to July 19, 2021, the self-employed income support scheme (SEISS) is not expected to be extended.

All social constraints in England were supposed to be lifted on June 21st, according to the government’s lockdown roadmap. However, due to the recent increase in Covid cases, this deadline has been delayed until at least July 19, meaning that some workers will continue to lose work opportunities or be unable to work at all.

The fifth SEISS grant, which covers lost earnings from May to September, is currently the last of the financial assistance available to self-employed workers, but applications will not be available until late July. The deadline for the fourth grant was June 1st.

HMRC should contact anyone who is eligible by mid-July to let them know when they can claim, but if you don’t hear anything and believe you are entitled to a reimbursement, you should check the government’s online claims service.

Here, we’ll go over SEISS self-employment assistance and what it could mean for your finances, as well as how to avoid becoming a victim of a scam.

About the Fifth SEISS Grant

The fifth SEISS grant is the government’s final one, and it will be available to apply for starting in late July – the exact date has yet to be determined.

The amount of money you’ll get from this grant will be determined by how much money you’ve lost in turnover. If it has been reduced by 30% or more, you will receive a grant of up to 80% as usual.

The fifth grant will be worth 30% of lost earnings subject to a limit of £2,850 for those whose turnover has been decreased by less than 30%.

The fourth SEISS grant was worth up to £7,500 and covered up to 80% of monthly average profits in February, March, and April. This is now closed for applications.

How Much Will Self Employed Workers Get This Time?

The majority of your eligibility and grant amount is determined by looking at your 2019-20 tax return to see if your trading profits exceed £50,000 and equal or exceed your non-trading income.

If you’re not eligible based on your 2019-20 tax return, HMRC will look at your tax returns from the previous three years.

To calculate your average three-month income, you’ll need tax returns from all four tax years; if you have a gap in the years you’ve traded, only the most recent tax returns will be used.

To calculate your three-month average income, divide your average annual profit by 12 and multiply by three. Your grant will cover up to 80% of this amount.

Am I SEISS Eligible?

According to the Office for National Statistics (ONS), the United Kingdom currently has 5.02 million self-employed workers, many of whom would have been among the first to feel the effects of the coronavirus outbreak’s restrictions.

To apply for the SEISS fifth round, you must be a self-employed individual or a member of a partnership who meets the following criteria:

In 2019-20 you traded, and intend to trade again in 2020-21.

Have a yearly trading profit of less than £50,000

Self-employment accounts for the majority of your income (50 percent or more).

By midnight on March 2, 2021, you must have filed a tax return for the 2019-20 tax year.

If I Receive SEISS Funds, Will I Have to Pay Them Back?

The money received through the self-employed income support scheme will not be required to be repaid.

However, the Chancellor has previously stated that the taxation of self-employed workers may need to be reconsidered.

The Chancellor has previously stated that the equal level of assistance received by employed and self-employed workers may lead to future questions about whether self-employed workers should pay the same level of National Insurance.

However, as per the 2021 Budget, this is unlikely to happen anytime soon, with Class 4 National Insurance rates remaining unchanged in 2021-22.

Avoiding SEISS Scams

Unfortunately, the coronavirus outbreak has resulted in an increase in all kinds of scams. In fact, according to the City of London Police, they’ve seen a 400% increase in scams as a result of coronavirus-related fraud according to figures they released in March 2021.

Scams involving HMRC have been around for a while, so it’s pretty obvious that fraudsters are trying to take advantage of the self-employed income support scheme.

If you think you are SEISS eligible this round, HMRC will contact you to let you know if you qualify for the scheme. It will send you a link to an online form where you must enter your bank account information. HMRC will then make a payment to you directly into the bank account you specified.

If you’re contacted and told to do something different, you should probably ignore it. You can call HMRC’s helpline or use its webchat services to see if it’s really them contacting you if you want to confirm your suspicions are correct.

You should also be very wary of phone calls claiming to be from HMRC, and read the details of any email correspondence you receive carefully. There are no announced plans for HMRC to ring anyone about their SEISS eligibility, so such calls are almost certainly a scam.

What Other Help is Still Available for Self Employed Workers?

Chancellor Rishi Sunak announced in the Budget on March 3, 2021, that the government would provide an additional £5 billion in funding to businesses that had to close due to the recent lockdowns.

When businesses in the hospitality and leisure sectors, including personal care, are allowed to reopen, the new Restart Grant will provide up to £6,000 to non-essential retail businesses and up to £18,000 to businesses in the hospitality and leisure sectors.

Mr Sunak announced £4.6 billion in new government grants to help businesses during the national lockdown on January 5, 2021.

This includes £9,000 one-time grants for retail, hospitality, and leisure businesses, as well as a £594 million discretionary fund for other affected businesses.

What Is the Recovery Loan Scheme?

You may have also heard of the Recovery Loan Scheme.

The government-backed recovery loan scheme, which was first announced in the Budget on March 3, can be paid out to any companies still trading in the UK that have been impacted by Covid-19.

The government will back up to 80% of the loans, allowing for payouts of up to £10 million.

The loans are intended to assist businesses in getting back on track as lockdown measures are eased, but businesses can decide how to spend the funds.

Businesses can get term loans and asset finance for three months to six years, as well as overdrafts and invoice finance for three months to three years, under the scheme.

There are fees and charges, as well as interest of up to 14.99 percent.

The British Business Bank website lists accredited lenders, but it recommends that business owners first contact their own finance provider to see if they offer the scheme.

Self-employed and in need of an accountant? Pearl Lemon Accounting specialises in helping businesses of all sizes maximise their finances, while also making sense of them all! Contact us today to chat about just how we can help you!

FAQs

What does the SEISS grant extension cover?

The grant covers about 40% of the average trading profits.

Need more detailed information? Feel free to book a call with our experts.

How can I claim the SEISS grant extension?

To claim the SEISS grant, you need to meet certain qualifications.

Mainly, you need to be self-employed, meet the qualification criteria from the original SEISS grant, and be experiencing a low product or service demand due to the Coronavirus (from November 1, 2020, to the claim date) but still be actively trading.
June 20, 2021
2021 Buy to Let Tax Rule Changes Landlords Need to Know

2021 Buy to Let Tax Rule Changes Landlords Need to Know

Do you own – or are you considering investing in – a buy to let property?

In 2021, there are several new buy-to-let tax changes that landlords should be aware of. Some of them are minor, while others may have you rethinking your plans, especially if you haven’t made an investment yet.

Here’s a rundown of what’s been announced – and what to look out for this year – from buy-to-let tax relief to regulatory changes outside of tax.

Buy to Let Mortgages and Tax Relief

Not exactly new, but 2021 is the first full year in which you won’t be able to deduct mortgage interest from rental income. Landlords, will instead get a 20% tax credit on mortgage interest payments.

Landlords used to be able to deduct mortgage interest payments from rental income, but the government announced in 2015 that this would be phased out.

In 2017-18, the amount of tax relief you can claim was reduced to 75%. Then it dropped to only 25% in 2019-20. It’s completely vanished now.

This has been replaced by a 20% tax credit, which isn’t as beneficial for higher-rate and additional-rate taxpayers.

To help mitigate the effect of the new rules, an increasing number of landlords are forming a limited liability company (LLC) when purchasing a new rental property. This is because, rather than the higher individual income tax rates, you will be subject to Corporation Tax rates of 19%.

According to research from estate agent Hamptons, a total of 41,700 new buy-to-let limited companies were formed in 2020, up 23% from 2019. So, should you decide to do so, you’ll be far from alone!

Buy to Let Tax Rates in 2021

For 2020-21, the government increased the capital gains tax exemption. It increased in value from £12,000 to £12,300.

As a result, if you sell a second property, you can earn more money tax-free. However, landlords pay a higher capital gains tax rate: 18% for basic-rate taxpayers and 28% for higher and additional-rate taxpayers.

Capital Gains Tax and Buy to Let Properties

Following a review of the system, a Capital Gains Tax freeze could result in a higher tax burden for landlords when it comes time to sell a property.

The Office for Tax Simplification had previously recommended that the Capital Gains Tax on property be overhauled, which would include lowering the capital gains tax-free allowance and raising capital gains tax to match income tax rates.

While this hasn’t happened yet, it’s something to keep an eye on once the pandemic chaos has passed.

Restricted Private Residence Relief

Since the rules changed in April 2020, this (2021) is the first full year that Private Residence Relief has been restricted.

Private Residence Relief was previously available if you lived in your property before renting it out to tenants. This meant you wouldn’t have to pay any Capital Gains Tax for the time you lived there, plus an additional 18 months after you left. However, under the new rules, this time limit has been reduced to nine months.

Furthermore, the £40,000 lettings relief (which you can get if you rent out a home that was previously your primary residence) will only apply to landlords who share an occupancy with their tenants.

2021 Buy to Let Income Tax Rates

So, what are the rates and bands for individual income tax in 2020-21? The amount you can earn before you have to pay income tax is known as your personal allowance. This is currently £12,500, which is the same as last year.

Last year, the higher rate threshold for rental income was raised to £50,000, at which point you begin paying the higher rate of tax (40%) on your profits. The threshold for the additional rate (45%) remains at £150,000.

The End of the Stamp Duty Holiday

The stamp duty holiday was supposed to end on March 30th, but it was extended until June 30th, 2021.

This will then taper off until the end of September, only applying to the first £250,000.

Home buyers in England and Northern Ireland haven’t had to pay stamp duty on the first £500,000 of their property since July 2020, saving them up to £15,000 on properties at the top end of the threshold.

Landlords and second-home buyers benefited from the suspension as well, but they still had to pay the 3% investor stamp duty surcharge under the old rules.

Furthermore, new HMRC data shows that the housing market is doing well, with a 48.5 percent increase in residential transactions in February 2021 compared to the previous year.

Keep in mind that these rules change often. There are a number of proposals on hold that may affect the buy to let property niche, but as COVID-19 recedes you can expect that they will be revisited and implemented over the next year. That’s why however many buy to let properties you own, it will pay to have an accountant on your side, who can keep up with these changes for you.

It’s just as important to consult with one before you invest in a buy to let, as in addition to helping make sure you get the financial side of things right we can also help you ensure you are getting the most from your property. For example, those buying in an area that could be considered a holiday spot may want to consider a holiday let set up instead, which can, in some cases, be more beneficial from a tax and finances point of view.

Want to learn more? Contact us today.

June 11, 2021
10 Reasons Your Contract May Fail the IR35 Test
10 Common Reasons Your Contract Might Not Pass the IR35 Test

Are you a contractor, or representative of a personal service company trying to keep your contracts outside IR35 and pass the tough IR35 test? If so, this blog post is for you.

If, as an entity we just described, you sign a contract that falls under IR35, you could end up paying a significant amount of extra tax and National Insurance Contributions, either during the contract or later if HMRC investigates you.

Nearly all IR35 issues that could mean your contract is caught could be resolved before they become a problem if you get your contract reviewed for IR35 before signing it and in good time to allow negotiation with the agent or client.

Here are ten things that contractors should look for in their contracts to see if they are IR35 compliant:

Position History

Contractors should attempt to double-check whether the advertised position is for a legitimate contractor or an employee. If the contract is to cover a role that was previously filled by an employee, there’s a good chance that the contract, and the client’s expectations, will be for a worker who shares all of the characteristics of an employee, rather than a genuine contractor working outside of IR35 and on their own dime. Check the background of the contract, or it may fail the IR35 audit.

Past Status Rulings

HMRC may have already left its imprint on the client’s business, having looked into previous contractors in specific roles and ruled that they fall under IR35. The contractors may have moved on to a new role outside of IR35, and the client may have re-advertised for a contractor, but will not want to advertise that the position is within IR35.

Because this type of IR35 trap is difficult to spot, it’s critical that the contractor receives a watertight contract; otherwise, the contractor will fail IR35.

Contract Creation Woes

HMRC has a finely tuned nose for contracts that have been cobbled together from various sources in order to save money on legal fees – this is often an instant IR35 fail. A contractor may get a contract like this past an agent or client (who aren’t subject to the IR35 penalties), but tax inspectors see thousands of documents like this every year and will immediately place a contractor under the IR35 umbrella.

When contractors must draft their own contracts, they should obtain a framework or draft from a reputable source and, at the very least, have it reviewed by an expert before sending it to the agent or client. If they don’t, the contract is likely to fail IR35.

Control Issues

The traditional tests of employment that will place a contractor inside IR35 are supervision and control. Control can be found in contracts under the headings of:

The contract specifies the start and end times.

The contract specifies which days the contractor should work, as well as lunch break times and duration.

Specific clauses stating that the client is in charge of the contractor’s supervision and control.

All of these clauses are common in employment contracts, but they should never appear in a contractor’s business-to-business services contract, as it will most likely fail IR35 tests. True contractors, not the client, decide when and how they work.

Watch Out for Substitution

Another common employment criterion is whether the contractor can provide a replacement. If they truly can and do so on a regular basis, the contract is almost certainly outside of IR35.

However, if there is no right of substitution clause in the contract, or if the client explicitly states in correspondence, such as emails or other records, that the contractor should never consider sending in a substitute, the contract will almost certainly fail IR35.

MOO

Under the contract, is it possible for the contractor to work on projects for multiple clients at the same time, or does the client have the right to veto other contracts? If the contract seems to specify exclusivity, stating x hours per week at y rate on an ongoing basis and requiring the contractor to take whatever work the client throws at them, IR35 is almost certainly violated as it implies MOO is present aka a ‘mutuality of obligation’.

Financial Risk

Regular, guaranteed weekly or monthly work specified in a contract often appears to be more akin to an employee’s wage contract than professional fees paid to a contractor’s service company.

To stay IR35 compliant when project milestones are met, a contractor should issue an invoice. If the client requests a weekly invoice, it should include information about the work done, as well as the hours worked and the rate. Any contract errors must be corrected by the contractor on his or her own time, as stated in the contract.

Equipment Issues

Contractors are frequently required to use the client’s equipment, possibly for reasons of safety and security. If there is a good business reason why the contractor cannot use their own equipment, this is usually not an issue that will cause a contract to fail IR35.

Contractors should, however, buy their own equipment if possible and use it whenever they can; if necessary, a contract clause highlighting this point should be included.

Too Many Organizational Ties

If a contractor becomes so ingrained in a client’s organization that they appear on phone lists, organizational charts, are volunteered to be a fire marshal, or have staff reporting to them, the contract fails IR35.

The contractor should maintain a professional distance from the client’s corporate structure and only take on responsibilities that are not specified as part of the project in their contract when it is industry standard, such as safety responsibilities in construction or offshore work. No matter what their contract says, a contractor can be found to be inside IR35 if they appear to be an integral part of the client’s business.

Implied Intentions

The contract should always state the contract’s and client’s or agency’s intentions. Not stating in the contract that the client and contractor’s intentions are that of a supplier and customer, rather than employee and employer, is not an IR35 fail, but it does not help the contractor’s case when and if HMRC uses the contract to try to prove they are outside of IR35.

The importance of evaluating the IR35 status of every contract before signing it is demonstrated by these common IR35 fail points. HMRC will be looking for evidence that your contract falls within IR35, so make sure you do your homework and don’t give the taxman the proof they need to force you to pay tax as a “disguised employee.”

IR35 has become a highly complex area of employment and tax law after two decades of case law and legal precedents, so you should always seek expert advice. Pearl Lemon Accountants can act as those experts, ensuring that every contract you sign is compliant with IR35 regulations. To learn more, please contact us today.

FAQS

What happens if IR35 catches you?

If IR35 catches you, you must pay NICs (National Insurance Contributions) and income tax.

How do I pass an IR35 assessment?

To pass an IR35 assessment, a few things need to be confirmed.

First, any task changes need to be included in a new contract.

Second, the client is not allowed to provide input or contribute to the overall work at all.

Third, the client cannot determine where the work is done. That is only determined by the task itself or you.

Can a contractor appeal the IR35 determination?

No. If a contractor disagrees with the IR35 determination, they need to bring it up to HMRC if they wish to challenge the decision further.

If you want more specific information, feel free to book a call with our experts!
May 24, 2021