August, 2010

How to Estimate Your Travel Expenses as a Construction Worker

If you work in the construction trade, you are quite often self-employed. This will require you to file a self-assessment form to estimate the tax you owe.

As you calculate your estimated tax, there are a number of expenses that you are entitled to claim. This article will help you properly account for those expenses related to your daily travel so you can minimize the tax you pay and maximize your return.

Types of Travel Expenses

For starters, there are two types of travel expenses. These will need to be accounted for in different sections of your tax return.

• Work-related daily tax expenses

• Work-related overnight travel expenses

Work-Related Daily Tax Expenses

The most common expenses in this category are car expenses. These expenses will be different depending on whether the expenses occurred with a car or with another type of vehicle (e.g. van).

Car Expenses

Where: Section D1 “Work-Related Travel Expenses

What you can claim: All kilometres that you traveled for business

How do you estimate:

The two most common methods of estimating your car expenses are either using the logbook method or estimating your cents per kilometer.

Logbook Method

With this method, you must keep a logbook for your daily mileage, odometer records and all receipts/written proof of car expenses.

NOTE: You can use your odometer records to estimate oil and fuel expenses.

Cents Per Kilometre Method

This may be a good method if you don’t have extensive travel expenses since you can only claim the first 5,000 kilometres traveled. With this method, you will not be required to keep receipts or other written evidence like you would with the logbook method. However, you may be asked to explain how estimated your business travel costs (e.g. a diary or showing a regular pattern of travel to estimate costs).

Non-Car Travel Expenses

Where: Section D2 “ Work-Related Travel Expenses”

You will have to keep all your records pertaining to:

• Fuel and Oil

• Repairs and Service

• Loan Interest (if applicable)

• Lease Payments (if applicable)

• Registration

Since you may use this vehicle for personal use, you will want to keep a journal or logbook to designate between personal and business travel.

Work-Related Overnight Travel Expenses

To list expenses under this category you must have had to travel to a job site and there was no reasonable expectation that you could travel to and from home.

If your travel meets these criteria, you are entitled to travel expenses that include:

• Meals, lodging, and incidental expenses

• Car, air, bus, train, ferry and taxi fares between locations

NOTE: You cannot claim overnight travel expenses if your employer is paying your expenses, if you are incurring travel expenses as a result of your choice not to relocate, or if you take up a temporary residence at the job site.

Other Daily Expenses

Where: Section D2 “Work-Related Travel Expenses”

There are three additional types of travel expenses that require proper record-keeping.

• Parking

• Tolls (bridges and roads)

• Taxi and bus fares (for traveling to job sites)

In addition to your travel expenses there are other expenses you are allowed. Why not take a minute to ask a question. We’ll give you the advice you need.

Tax Code 647L

Everyone that works in the UK is given a tax code. Your tax code takes into account any allowances or expenses that you are entitled to and allows your employer to deduct the corresponding amount of tax from your wages. Sometimes your employer can assign you the wrong tax code and often this results in an overpayment of tax. Any overpayment of tax needs to be claimed back from the Inland Revenue and does not usually happen automatically.

What does Tax Code 647L mean?

If you multiple the number in your tax code by 10, you can calculate the amount of your tax free allowance that has been assigned by your employer to your wages. For example:

Take the number from 647L and multiple by 10: 647 x 10 = £6470

This means that your employer has an amount of £6470 as your tax free allowance, the amount you can earn before you need to pay any tax.  This is the current tax free allowance in the UK and unless cicrumstances are different it is likely that you should have this amount allowance.

How does your tax code work

Your tax code and the allowance that it assigns you, will enable you to receive a portion of your allowance in each pay packet as oppose to receiving it all in one lump sum. This often works well if you are working the whole tax year, but if you stop working part way through the tax year, due to redundancy or leaving the UK for example, you can often overpay tax and therefore be due a rebate.

Are you on the right tax code?

If you are not claiming any company benefits or receiving any special allowances it is likely that you tax code should start with ‘647’ for the current tax year. Without knowing your unique tax situation it is difficult to say if you are on the right tax code. If you are unsure you can contact you local tax office and ask them to supply you with a tax coding notice which will show how they calculated your tax code.

I’m Self-Employed, Do I Need to Register for VAT?


If you’re a self-employed worker, then you know that taxes are your responsibility. In addition to knowing when to file and what type of allowances you may take, there is the issue of knowing whether or not to register for VAT.

This article will help you understand whether or not you must register for VAT.

Registering for VAT may not be mandatory for a self-employed business. Unless you have met the threshold (see: When you must register for VAT below), there are three things you should know before making the decision that’s right for you.

Know your business

If you are registered for VAT, then you have to add this tax to all applicable sales.

By definition, VAT will make these purchases more expensive (by 17.5%) than those that are not VAT-registered. The only other option is to decrease your profit to absorb the price increase.

Neither option may be particularly acceptable.

Know your customers

If your customers are mainly the general public, as opposed to businesses, they will not be registered for VAT.

Therefore having your business registered would not only put you at a price disadvantage as opposed to your competitors who are not registered, but most likely you would lose clients, and by extension profits, by increasing prices.

The good news, is if your customer base is mostly directed at the general public, you can usually avoid VAT altogether.

On the other hand, if your customers are registered for VAT (as is typical if your customers are other businesses), there is no disadvantage since they will be able to reclaim any VAT that you charge.

Know yourself

It’s not terribly difficult to register for VAT. However, there are legal standards associated with VAT. As a business owner, it will be your responsibility to ensure that your accounting records are completed in accordance with these standards.

Also, you’ll have to file every quarter. So if you’re not a person who feels you’ll be diligent or disciplined enough to keep your books in compliance, and you do not want the added expense of having an accountant in your employ, you many opt not to register.

When you must register for VAT

If your turnover is above the annual VAT threshold (currently £70,000), then you must register for VAT.

To be clear, VAT-taxable turnover is a sum of all the goods you’ve sold and services you’ve provided that belong to the group of VAT-taxable.

In the UK the government usually changes the VAT threshold once a year. The changes are announced in the Budget. That’s why you have to check your turnover regularly and see if it doesn’t outstrip the VAT threshold 2010. And if it does – you have to register for VAT.

In case your turnover hasn’t exceeded the threshold yet, but you think it will outstrip it in 30 days, you have to have to register for VAT also.

What is the benefit of registering for VAT?

If you must register, or just think you should be, you should be aware that there is a benefit to VAT registration. You can reclaim VAT on most business purchases. If you’re not registered for VAT, then no reclaim can be made.

Furthermore, if your business is one that will attract a regular refund of VAT, you’ll be offered the chance of receiving your repayment monthly and not quarterly. Unless the sums are considerable (i.e. more than £500 a month), you’re advised to resist monthly VAT Returns because attending to them monthly, rather than quarterly, can become a nuisance.

How do I register for VAT?

The easiest way to register for VAT is to do it online at www.hmrc.gov.uk. Go to the VAT page on the website where there is an online VAT registration service. Alternatively, you can contact your local HMRC office and arrange for an application form to be sent to you.

To inquire about how VAT may affect your business, you can ask a question. We’ll let you know how to arrive at the best solution for your business.


5 Tax Allowances You Can Use If You Are Self Employed


Are you self employed?

If so, there are a number of reliefs, deductions and allowances that you can benefit from in order to reduce the amount of tax that you pay.

Most of the money that you spend in relation to running your business can be deducted in order to work out your business profits (and therefore what tax you will pay).  Whilst there are many different types of expenditure that can be deducted in this way, here are five of the most common.

1. Professional Fees

If your business involves you joining a professional or trade body – for example if you are an accountant – you may be able to deduct the cost of joining a professional association.  You may also be able to deduct the cost of subscriptions to trade or professional journals or publications.

2. Motoring Expenses

If you use a car or van for your business then you can generally deduct the cost of using your vehicle for business purposes.

For small businesses, the most common way of using this allowance is to claim a fixed business mileage rate.  This means that you can claim a certain amount for every business mile that you undertake in a tax year, up to a specified limit.  There are published mileage rates for cars and vans, motorcycles and cycles.

3. Capital Expenditure

Capital expenditure is money that you spend improving, creating or buying a business asset that you keep to earn the profits of your business.  Typically, capital expenditure covers the cost of buying assets such as your business premises, computer hardware, machinery, office furniture or a vehicle.

4. Stock

If your business involves sales, the chances are that you will have to spend money on buying stock or raw materials to make your stock.

For example, if you run a bookshop you will have to buy stock (i.e. books).  If you run a cake shop, you will have to buy sugar, flour and butter in order to make your stock.

5. Premises

Costs that you incur in running your business premises can also generally be used as an allowance.  If you have business premises, you can generally deduct the cost of rent, rates, lighting, heating, insurance and repairs.

If you run your business from home, you can also generally deduct the business part of these costs.  The amount you can claim is generally determined by the size of your home and the proportion of it that you use for business purposes.


Three Great Tax Reliefs For Nurses

Do you work as a nurse or midwife?

If so, you might be paying more tax than you need to.  Many nurses and midwives are unaware that there are some specific tax reliefs which you may be entitled to.  Here are three tax reliefs specific to the nursing professions.

Uniform laundry

If you are required to wear a uniform as part of your work and you meet the expense of laundering the uniform yourself, you can claim a deduction for these costs.

The key points to consider are:

  • The clothing has to be ‘recognisably a uniform’
  • You must be required to wear it
  • You must incur the costs of laundry

This deduction is available to all nurses including midwives and nurses of all grades.  It includes nursing assistants, dental nurses, healthcare workers, students and auxiliaries.

Shoes and stockings

As a nurse or midwife, you may have to wear a very specific type or colour of shoes, stockings or socks in your place of work.

Where the wearing of a prescribed style of shoes, socks and/or stockings is obligatory in a hospital, you can also claim a small tax relief for the cost of buying shoes and stockings.

For male nurses, a tax relief for buying socks is also available (if there is a very specific style or colour of socks that is obligatory in your hospital).

Professional subscriptions

If you are a nurse or midwife, you can also claim tax relief on your subscription to your professional body.

If you pay a subscription to be a member of the RCN or NMC then you can claim the cost of this as a ‘professional subscription’.  You can make a claim for the current tax year and, if you have never claimed these reliefs before, you can make a backdated claim for the previous six tax years.

You should contact the NMC or RCN to find out exactly what membership fees you have paid (and therefore what relief you can claim).

The RCN often send you the appropriate tax relief form in your annual membership pack.  Once you have completed these forms they should be sent to your tax office – your payroll department will be able to tell you where this is.

8 Things You Should Know About Married Couples Tax Allowance

The age-related Married Couple’s Allowance is an amount that HM Revenue & Customs (HMRC) take off your tax bill.  Here are eight things you need to know about this tax allowance.

1. If you were married before 5 December 2005, are living together and at least one spouse was born before 6 April 1935, the husband can claim Married Couple’s Allowance.

HMRC reduce your tax bill by 10 per cent of the Married Couple’s Allowance to which you’re entitled. The actual amount depends on the husband’s income.

2. If you are married on or after 5 December 2005 or are in a civil partnership and living together and at least one spouse or partner was born before 6 April 1935, the person with the higher income can claim Married Couple’s Allowance.

HMRC reduce the claimant’s tax bill by 10 per cent of the Married Couple’s Allowance to which he or she is entitled. The actual amount depends on the income of the spouse or civil partner with the higher income.

3. If you are a taxpayer and gift money to a UK charity via the Gift Aid scheme, you should let HMRC know.  This will have the effect of reducing your income when calculating your allowances.

4. You receive 10 per cent of the Married Couple’s Allowance amount, which changes every tax year.

5. To claim Married Couple’s Allowance you should write to or call your tax office.  You will need to provide details of your marriage/civil partnership ceremony and spouse/partner.

6.  If your tax bill is not high enough to use up all of your Married Couple’s Allowance, or if you pay no tax, you can transfer any unused allowance to your spouse or civil partner if they pay tax.  You should use form 575, entitled ‘Notice of transfer of surplus Income Tax allowances’.

7.  If one of you dies, or if you separate or the marriage or civil partnership dissolves, you will get the Married Couple’s Allowance you are due for that tax year.

8.  You are also able to share the minimum Married Couple’s Allowance between you.  Alternatively, if you both agree, you can choose to transfer the whole of the minimum Married Couple’s Allowance to your spouse or civil partner.  You do this by using form 18 entitled ‘Transferring the Married Couple’s Allowance’.

What Tax Expenses Can You Claim For A Home Office?

Do you run your business from home?

With more and more of us working from our home office, small business owners are increasingly finding that they incur expenses to operate their business from home.  Whilst there are a number of tax expenses that can be claimed for running your company from your back room, there are also some items that cannot be claimed.

Here’s our guide to what tax expenses can, and cannot, be claimed.

Tax expenses for a home office

In a nutshell, tax expenses are available for the additional household expenses that you incur when running your business from home.  These include:

  • Gas and electricity costs (for heating/lighting etc)
  • Business telephone calls
  • Use of broadband for business purposes

When calculating what proportion of your electricity or gas bill is the ‘business expense’, you would normally look at the proportion of your home that you use for business.  For example, if you use one of eight rooms to run your business, you would normally claim a tax expense of ‘one eighth’ of your electricity or gas bill.

With regard to mobile telephone and landline calls, you can normally determine what proportion of these calls are business related through an itemised call statement.

Clear demarcation

It is important that you have a clear demarcation between what expenses are incurred for business and personal use.  For example, if you use your broadband for both personal and business use, you must have a clear way of determining what part of that expense is business related.

HMRC also make it extremely clear that you are not entitled to claim tax expenses on domestic expenditure that you might pay.  For example, you cannot claim tax relief on your mortgage repayments or council tax, even if you use your home as an office.

Claiming expenses

There are two ways of claiming tax reliefs for the expenses of working from home:

  • A flat weekly rate (not including business telephone calls)
  • A larger amount if you can show how you calculated the figure

Could You Be Claiming Blind Person’s Tax Allowance?


Are you, or someone you know, registered as a blind person?

There are many different types of tax allowances and tax reliefs available whether you are employed or self-employed.  One little known allowance is Blind Person’s Tax Allowance which helps reduce your tax liability if you are registered as a blind person.

Here is our guide to how this allowance works.

Eligibility

You can claim Blind Person’s Allowance if:

  • You are certified blind
  • You are on a local authority register of blind persons
  • You live in Scotland or Northern Ireland and are unable to perform any work for which eyesight is essential

If you are unable to use up some or all of your Blind Person’s Allowance, you may be able to transfer it to your spouse or civil partner.

There are no age or income restrictions for Blind Person’s Allowance.

Claiming Blind Person’s Tax Allowance

The level of Blind Person’s Allowance generally changes every year.  It is effectively an addition to your Personal Tax Allowance and is added to your personal allowance to increase the point at which you start paying income tax.  The aim of the allowance is to increase the amount of your earnings which are tax free, and therefore to reduce your tax burden.

If you think you are eligible to claim Blind Person’s Allowance, then you should call HMRC immediately to discuss your claim.

Transferring your allowance

If your tax bill is not enough to use up all of your Blind Person’s Tax Allowance, you can request that any unused allowance is transferred to your spouse or civil partner.

You do this by either calling HMRC or by completing form 575 ‘Notice of transfer of surplus Income Tax allowances’.

You should remember that even if you do not pay tax and your spouse or civil partner does, you can still transfer your unused Blind Person’s Allowance to them.


5 Reasons You Should Be Completing A Tax Return


Do you complete a tax return?

There are a number of reasons why HMRC will insist that you complete a tax return.  Here is our guide to five reasons why you should be completing a return, if you are not already.

1. You are self employed

If you are self-employed, you always have to complete a tax return.  This is also true if you are a member of a partnership.

2.  You are a trustee

You will have to complete a tax return if you are:

  • A trustee of certain types of pension scheme
  • A trustee or personal representative
  • Someone who manages the tax affairs of a deceased person

3. Your income from savings, investments or property is above a certain amount

If you do not already complete a tax return, you will have to do so if any of the following criteria is applicable:

  • You have income from property (before deducting allowable expenses) of £10,000 or more
  • You have income from investments and savings of £10,000 or more
  • You have income from property (after deducting allowable expenses) of £2,500 or more
  • You have income from untaxed investments and savings of £2,500 or more
  • You receive income from the estate of a deceased person on which tax remains due
  • You receive settlement or annual income on which tax remains due

4. You owe tax and HMRC cannot claim it through your tax code

Even if you pay tax through PAYE, you may still owe some tax at the end of the year.  In this instance, you will still have to complete a tax return if:

  • You wish to make a direct payment for the tax that you owe and you do not want to pay the tax owed through your tax code
  • HMRC cannot collect the outstanding tax that you owe by changing your tax code.  HMRC will inform you directly if this is the case.

5. You have Capital Gains Tax to pay

Capital Gains Tax is payable on the profits that you make when disposing of assets, such as shares or second homes.  If you have Capital Gains Tax to pay, you will be required to complete a tax return.

For example, if you have sold, given away or otherwise disposed of an asset such as a holiday home or shares, you will need to complete a tax return including the Capital Gains Tax pages.


Donating to Charity – Are You Claiming The Tax Relief?

Do you regularly donate money to charity?

Whatever money you give to charities, there are several ways that you can get tax relief on these gifts. Our guide explains the various ways that you can benefit from tax reliefs for charitable donations.

1. Gift Aid

Gift Aid is a simple way to increase the value of your donation to charities and Community Amateur Sports Clubs (CASC). If you are a UK taxpayer, claiming Gift Aid allows the charity or CASC that you support to reclaim basic rate tax (20 per cent) on your donation.

Charities or CASCs take your donation – which is money that you have already paid tax on – and reclaim the basic rate tax from HMRC on the equivalent ‘gross’ amount, i.e. before basic rate tax was deducted.

For example, basic rate tax is 20 per cent, so this means that if you give £10 to a charity using Gift Aid, your donation is actually worth £12.50 to the charity.

In order to claim Gift Aid, you have to make a Gift Aid declaration. This must include: your full name, your home address, the name of the charity and details of your donation. Most charities have a standard form which you complete when you make your donation.

If you are a higher rate taxpayer you can claim the difference through your tax return or by making a claim by telephone or letter.

2. Giving Assets to Charity

Ordinarily, when you dispose of assets such as land, property or shares, you will pay Capital Gains Tax on any profits that you make.

However, if you gift assets such as shares or land to a charity, you can benefit from both Income Tax Relief and Capital Gains Tax relief.

Similarly, if you sell an asset to a charity for less than its market value, you can also claim tax relief on the difference.

3. Donating directly via your Payroll

If you pay tax through PAYE (Pay As You Earn), Payroll Giving offers an easy way to reduce the cost to you of making regular gifts to charities.

As long as your employer or company/personal pension provider runs a Payroll Giving Scheme, you can simply authorise them to make a charitable donation directly from your wages or pension before deducting any tax.

The charitable donations are made after your National Insurance contributions are calculated but before Income Tax is deducted. This means that you only pay income tax on what is left.

For example, you pay tax at the basic rate of 20 per cent, and authorise a monthly charitable donation of £10. That means you save £2 tax (20 per cent of £10). The actual cost of the donation to you is £8, but the charity receives £10.