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National Insurance

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What is National Insurance?

National Insurance
National Insurance (or NI) is paid by employers, employees and self-employed people. Our National Insurance contributions build up our entitlement to state benefits such as a State Pension or Job Seeker’s Allowance.

HMRC expects National Insurance contributions once you are 16 or older and earn above £157 per week as an employee or are self-employed and making a profit of £6,025 or more per year (figures correct for 2017/18 tax year). Rates and thresholds for National Insurance are set at the start of every tax year and can be found on HMRC’s website.

You have to have a National Insurance number to pay NI contributions. HMRC usually sends out your National Insurance number your 16th birthday. Your National Insurance number is unique to you; it is used to ensure your contributions and tax are recorded to you only.

The type (or Class) of National Insurance you pay depends on how much you earn, whether you are employed or self-employed and whether there are any gaps in your National Insurance contributions to date.

Broadly speaking there are four Classes of National Insurance
  • Class 1 National Insurance is paid by employees earning more than £157 per week. Class 1 NI contributions are deducted from wages by the employer.
  • Class 1A or 1B National Insurance contributions are paid by employers once an employee earns over a certain amount.
  • Class 2 National Insurance is paid by self-employed people earning more than £6,025 per year.
  • Class 3 National Insurance contributions are voluntary. You can choose to pay Class 3 NI if you are self-employed and earn less than £6,025 per year, or you have missed National Insurance contributions in the past and want to ‘top up’.
  • Class 4 National Insurance is paid by self-employed people whose profits exceed £8,164 per year.

How do I pay my National Insurance?

National Insurance is usually paid through your wages, or your Self Assessment Tax Return if you are self-employed. If you are already a Numberworx customer, your dedicated bookkeeper will talk you through your tax position and liability, including National Insurance, as an included part of our service.

Can we help?

If you have any questions regarding your National Insurance contributions, or the class of National Insurance you pay, don’t hesitate to ask.

VAT Threshold

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What is the VAT Threshold?

The VAT Threshold is the maximum VAT taxable turnover a business can earn in a 12-month period before you are legally obliged to register for VAT. The VAT threshold for businesses from April 1 2017 is £85,000.

You can work out your VAT taxable turnover by adding up the value of all the goods and services you sell that are not exempt from VAT. Once your turnover exceeds the VAT threshold in any 12-month period you must register for VAT with HMRC. The 12-month period is not fixed but ‘rolling’, so for example it could be the start of July one year to the end of June the next.

VAT Threshold's explained
Circumstance Threshold
VAT registration More than £85,000
Registration for distance selling into the UK More than £70,000
Registration for bringing goods into the UK from the EU More than £85,000
Deregistration threshold Less than £83,000
Completing simplified EC Sales List £106,500 or less and supplies to EU countries of £11,000 or less

VAT threshold advice

If you are using Numberworx, we will advise you if your rolling turnover is approaching the threshold at which you need to register for VAT. We can also help you decide if it’s worth registering if you are below the threshold.

Ask away!

HMRC usually sets the VAT threshold on 1 April every year. If you have any questions regarding this or any previous tax years’ thresholds, just ask!

Personal Allowance

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What is the Personal Allowance?

Personal Allowance
The Personal Allowance is the amount of tax-free income you are allowed to receive each year. The allowance is reviewed every tax year, but for 2017/18 the basic Personal Allowance is £11,500.

Individuals can earn up to their Personal Allowance (currently £11,500) each year without paying tax. Once you have earned your Personal Allowance, you pay income tax to HMRC on any additional income earned during that tax year.

The income limit for the Personal Allowance is £100,000, which means you are entitled to the full Personal Allowance until you earn £100,000. Beyond that, the allowance reduces by £1 for every £2 you earn. At £123,000, your Personal Allowance is reduced to zero.

The Personal Allowance changes every year and is applied in different ways, depending on your circumstances.

If you are self-employed with no other income, your Personal Allowance is deducted from the profit you declare on the self-assessment tax return you file with HMRC. You pay income tax on the figure that is left over.

If you are employed, your employer will consider your Personal Allowance when working out how much income tax they need to deduct from your wage. Your Personal Allowance is shown in your tax code, which is worked out by HMRC.

Need to know more?

If you are still unsure about your Personal Allowance, the bookkeepers here at Numberworx will be happy to help. Leave your query and one of us will get back to you asap.

Corporation Tax

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What is Corporation Tax?

Corporation Tax
Corporation Tax is a tax on business profits. Limited companies (and some organisations such as clubs and community groups) have to pay Corporation Tax to HMRC every year. Your Company Tax return tells you how much Corporation Tax you need to pay.

When you set up as a Limited Company you need to register with Companies House. After that – and within three months of starting to trade – you need to register for Corporation Tax with HMRC.

Corporation Tax is calculated on a Company’s Tax Return, and Company Tax Returns must be filed within 12 months of the accounting year-end. However, as Corporation Tax must be paid before 9 months and 1 day after the accounting year-end, Tax Returns should ideally be submitted before they are due!

If you are already using Numberworx we can complete your Company Tax Return and let you know how much Corporation Tax you owe HMRC. Your bookkeeper will also be able to advise you on how you could reduce your Corporation Tax liability

What is the ‘accounting year’?

The ‘accounting year’ is the 12-month period covered by your business accounts (not necessarily the tax year). Companies House sets your accounting year when you register, although you can change this date if you wish.

Need help with Corporation Tax?

We’re happy to answer any questions you have regarding Corporation Tax or Company Tax Returns. We will always do our best to help.

P45

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What is a P45?

A P45 is the form an employer gives an employee when he or she leaves their job. A P45 details the salary paid to date in that tax year, the total tax deducted and the final tax code.

Your P45 is important because it contains all the information your next employer will need when you start a new job. With an up to date P45, your new employer will be able to deduct the correct amount of tax from your wages for the rest of the tax year. You will only be given a P45 when you leave your job; otherwise your employer should be giving you a P60 at the end of every tax year.

Ask away!

If you still have questions regarding your P45, we’re here to help