Trading and Property Allowances 2017/2018

New tax-free allowances for trading and property income are available for 2017/18 and later tax years. The allowances, each set at £1,000, mean that trading and/or property income no longer needs to be reported to HMRC where the income is less than £1,000 in the tax year. Where a person has both trading income and property income, he will be entitled to both allowances.

Where trading income or property income is more than £1,000, the profit or loss can be worked out in the usual way or the £1,000 allowance can be deducted rather than deducting actual expenses.

VAT Flat Rate Scheme Changes 01.04.2017

Limited cost traders

The VAT flat rate scheme aims to simplify the tax affairs of smaller businesses by allowing them to work out the VAT that they pay over to HMRC by applying a flat rate percentage to their VAT-inclusive turnover, rather than working out the difference between the VAT that they have charged and the VAT that they have incurred.

Prior to 1 April 2017 the flat rate percentage depended only on the sector in which the business operated. From 1 April onwards it is also necessary to work out whether the business is a ‘limited cost trader’. This is a business that spends less than 2% of its VAT inclusive turnover on relevant goods or one that spends more than 2% of its turnover but less than £1,000 per year on such goods.

For periods of less than one year, the £1,000 figure is proportionately reduced and thus equates to £250 a quarter.

Relevant goods exclude capital expenditure, food or drink for consumption by the business or its employees, vehicles, vehicle parts and fuel (unless the business operates in the transport sector), goods for hire or resale unless that is the business’s main business activity, goods for disposal, such as promotional items, and all services.

A business that meets the definition of a limited cost trader must use a VAT flat rate percentage of 16.5% rather than that for its business sector.

If you use the VAT flat rate scheme, it is advisable to discuss with your tax adviser whether these changes affect you. This is likely to be the case if you supply labour-only services. Your adviser will be able to discuss whether it remains beneficial to stay within the scheme. Businesses making taxable supplies in excess of the VAT registration threshold, set at £85,000 from 1 April 2017, must be registered for VAT.

Marriage Allowance 2017/2018

The marriage allowance allows spouses and civil partners to transfer 10% of their personal allowance to their spouse/civil partner as long as the recipient is not a higher or additional rate taxpayer. For 2017/18 the marriage allowance is £1,150. Claiming the marriage allowance is worthwhile where it would otherwise be wasted. The allowance is worth £230 per couple for 2017/18.

Why your sales forecast is off

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