Knowledge is power…… and can save tax!

It’s been longer than I’d of liked since my last blog post…..needless to say it’s been a busy period.  During the time since my last blog post there has been a recurring theme. This is that tax is complicated, so it really is worth investing in proper advice when your preparing your tax return.

Of course I would say this, but I thought I would give a couple of examples of where knowledge of the tax system and associated paperwork, has led to me either obtaining refunds or significantly reducing the tax demands issued by HMRC.

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Points from the 2015 Summer Budget…..

HMRC - Copyright SBA Tax & Accountancy LtdDividend taxes to be changed

This could be a big one!!  Until more details are released we won’t know the impact it will have on how small business owners remunerate themselves.

The usual dividend tax credit, which means there is usually no additional tax to pay if you are a basic rate tax payer, will be replaced by new £5,000 tax-free dividend allowance.  The tax rates on dividend is also set to be increased!  It appears the governments plan is to tax those with “significant dividend income” more, although it is unclear what will be deemed as significant?  Those with modest (I presume less than £5,000) will see no change or a cut in the tax paid.

As soon as we have more information on this we will post another blog.


More details on the above dividends tax changes are available and it looks as though dividends within the basic rate band will attract a 7.5% tax liability!!  This means if you take around £28,000 of dividends per year and a £10,600 salary you tax bill will go from around £0 to around £2,000!!!  That is a huge increase, not so good for small businesses!!  When the finer details are known we’ll let you know. 


Corporation Tax

Hooray!!  Corporation tax is set to be cut by 2% by 2020, down to 19% in 2017 and 18% in 2020.  This seems to be a good thing, but I’ll reserve judgement until we see how the dividends tax is going to be changed – it may well be six of one, half a dozen of the other!  Looks like this is a small token to owner managed businesses to compensate for the increase in the dividends tax increases above. Read more


Could childcare save you tax?

Do you have children and pay for some kind of childcare? Did you know that you could pay less tax by utilising the childcare voucher scheme to pay for some, if not all, of your childcare costs? If like me one of your children has started school/preschool, which is not yet state funded, you will be paying for the cost of this childcare out of your after tax income. You may qualify for childcare vouchers which could save you around £300 for every £1,000 you spend on childcare. In a nutshell, the scheme means you pay less tax/NIC and your childcare costs are still paid for. Basic rate tax paying parents can use the vouchers to pay for up to £243 of childcare a month, so for two parents that’s £486 a month! There are a number of things to watch out for though:-

  • An “earnings assessment” needs to be carried out
  • You need to ensure all the relevant paperwork is in place
  • If you are employed you will need to discuss it with your employer
  • There is a sliding scale for those who are higher rate tax payers
  • If you run your own limited company and are not operating this scheme, maybe you should contact a proactive accountant
  • Specific scheme rules apply

If you are an employee, or run your own limited company, you could benefit from childcare vouchers. If your current accountant has not mentioned this to you, perhaps you should get in touch to find out some of the other ways we could help you #keepmoremoney