Top 10 Client Queries During 2021

As we reflect back on 2021, here are our Top 10 client queries we've seen time and again during 2021. You may see certain Covid related themes emerging! 

1. What claim can I make for home office costs?

   Depending on whether you're an employee, self employed or an owner-director, your claim can usually be at least £6 per week up to a market rent charged to your company which is included in your income tax return. 

2. Should I incorporate my sole trader business? How do I incorporate my sole trader business?

   With the increase in dividend tax in 2022 and corporation tax increases in 2023 for many companies, this needs to be revisited. At about £100k to £150k profits you may be better to remain a sole trader, but only if you need to take all the profit out from your company. If not, the tax advantage of spreading your taxable income over several years, is very valuable, particularly if you want to keep your child benefit or tax free personal allowance.

   Often a good way is for you to set up a new company which buys goodwill and other assets from you. At low levels, the goodwill may be taxfree on you. Your company will owe you for these assets which it can repay you tax free when it has the funds. 

3. How does one of us exit our company?

   If your company has accumulated profits and cash and several other criteria are met, your company may be able to buy your fellow shareholder-director's shares and cancel the shares. This means you don't need to find the cash from your personal funds.

4. What tax efficient choices are there to reward my staff? 

   Many and varied from an annual Christmas Party for everyone, annual health care checks, cycle to work arrangements and small gifts under £50, through to granting share options to senior staff. 

5. How do I liquidate my company?

   For some small solvent companies, a simple DIY striking off might be approrpriate, but your company can be resurrected in certain situations. Liquidator fees have become more competitive and may enable you to take more accumulated profits out of your company at a 10% capital gains tax rate, which is better than a 32.5% dividend tax rate but more than the 7.5% dividend tax rate where your total income is under £50k.

6. I don't understand my company's accounts. Would you please take over?

   Recent government grants and loans have focussed minds on the advantage of understanding your accounts at some level. We're seeing quite a few accounts that don't agree to software or make little sense, which when rectified helps business owners see what's going on.

7. What VAT applies to imports and exports? 

   This depends on whether these are goods or services and whether it's B2B or B2C. With more businesses providing online services which reach consumers outside of the UK, it's important to understand that local EU VAT is due and how to register and pay EU VAT.

8. What capital gains tax do I pay on my property sale? 

   This depends on a few factors, mostly whether you've ever lived in the property as your home. If it's never been your home, the entire profit over £12k per owner, after costs of purchase, sale and any capital improvements will be taxed at 18% or 28% or a combination, determined by whether you're a basic rate or higher rate taxpayer when the property gain is added to your income. If it's partly been your home, partly rented, a proportional calculation is required.

9. What pension contributions can I make? Am I claiming enough income tax relief? 

   Broadly, pension contributions are restricted to £40k per year to include all contributions to all schemes by employer and employee. Some unused maximums can be brought forward from previous years but the annual lifetime allowance of £1m must also be considered.

   On the other hand, we often see employee higher rate taxpayers not claiming enough tax relief due to a misunderstanding about how thier pension contributions are paid. Pensions have never been more complicated and many people should take advice from an IFA.

10. What income tax is due when I work abroad for a UK employer?

    If you are resident and working in another country, you're usually required to pay tax in that country. We're seeing some senior staff moving permanently abroad but retaining their UK employment. Their employers are often unclear as to how to deal with local tax systems, instead continuing to pay UK PAYE tax. If this becomes more common it might get more attention from local tax authorities.

As always take advice specific to your situation as different answers are likely to be appropriate to different people and companies.