NI when employed and self employedI have a full-time job but I also have a small business of my own. Therefore, I pay Class 2 NI contributions. But as I am paying my ‘stamp’ on my employment income, do I have to continue paying Class 2 as well?

Holly, Melksham

Class 2 contributions count towards:

• Incapacity Benefit/Employment and Support Allowance
• Basic State Pension
• Bereavement benefits
• Maternity Allowance

I’m afraid you do have to pay Class 2 NI; despite the fact you are paying Class 1 on your employment income. However, if your profits are deemed to be ‘small’ (currently £5,315), you may be eligible for an exception from paying Class 2 NI.

If you are only liable for Class 2 contributions, you should consider your position carefully before applying for an exception.

If you would like to discuss your personal tax affairs in more detail, please feel free to contact your local TaxAssist Accountant.

We provide tax and accountancy services in Bath and throughout the UK - http://www.taxassist.co.uk

What is a K code?I have just received my tax code from HMRC for 2012/13, and it is a K code. Can you tell me what this means and how it will affect my income?

David, Sunderland

Your tax code shows how much tax-free pay (personal allowance) you are entitled to.

Your personal allowance can be increase by things like the Married Couple’s Allowance and professional allowances/ subscriptions.

But it can also be reduced by taxable income that you receive without any tax taken off it (some state benefits/ pensions etc), taxable company benefits and any unpaid tax you owe from previous years.

If you have been issued with a K code, such adjustments have reduced your tax-free allowance to such an extent, that they are actually more than your personal allowance. Normally, the number in a tax code indicates the amount of income you are entitled to tax-free. However, the number in a K code denotes how much should be added to your gross income, before calculating the tax to be deducted from your pay.

If you would like to discuss your personal tax affairs in more detail, please feel free to contact your local TaxAssist Accountant.

We provide tax and accountancy services in Sunderland and throughout the UK - http://www.taxassist.co.uk

Sole trade or company?Up until recently, I was employed in a fairly well-paid job. However, I have left my job and started my own business. Do I need to set up a company? If not, are there any benefits of doing so now?

Alex, Wimbledon

No, you are not obliged to form a company.

However, business owners often chose to set a company up because they can be a more tax efficient vehicle to trade through. Furthermore, being a company makes the business look established and gives it status. And it gives the shareholders (the owners of a company) assurance that their liability is restricted to their investment in the event the company begins to fail to meet its debts.

Having said that, new businesses often generate losses in their early years of trading. If you believe your business will generate losses initially, you ought to consider remaining unincorporated. This would then allow you to carry back any losses against your employment income. If you form a company to trade through from the outset, any losses made by the company are confined to its affairs and cannot be used against your personal affairs.

Setting up in business can be an exciting but daunting time. If you would like some professional advice from your local TaxAssist Accountant, please feel free to contact us.

We provide tax and accountancy services in Wimbledon and throughout the UK - http://www.taxassist.co.uk

Problems with paying taxI’m self employed and I’ve only just prepared my tax return. As a result, I’ve only just found out that I haven’t put enough aside for my tax liability. What should I do?

Evie, Hampstead

Your balancing payment for 2010/11 and the first payment on account for 2011/12(if applicable) are due by 31 January 2012, together with your tax return.

If you are struggling to pay your tax, you should call HM Revenue & Customs’ (HMRC) Business Payment Support Service (BPSS). HMRC will ask you probing questions about the business and your cashflow, to ascertain why you can’t pay your tax. If they think you genuinely cannot pay your tax they may grant you an extension to settle your taxes in or agree a payment plan. However, they do not reduce the amount outstanding and they will still charge you interest.

Even though you can’t afford to pay your tax, make sure you still file your return before 31 January 2012. Otherwise, you will be charged an automatic penalty of £100.

If you don’t feel confident in negotiating with HMRC, feel free to contact your local TaxAssist Accountant. They would be happy to liaise with HMRC on your behalf.

We provide tax and accountancy services in Swiss Cottage and throughout the UK - http://www.taxassist.co.uk

VAT registrationI have only just prepared my accounts and I now realise that my business exceeded the VAT registration threshold. What happens now?

Amelia, St Albans 

You have to register for VAT if your sales in any twelve month period exceed the VAT registration threshold- currently £73,000. Please note the reference to any twelve month period; not necessarily your business’ year end.

So your first task is to work out the date when your turnover went over the threshold. Using this date, register for VAT with HM Revenue & Customs (HMRC) as soon as possible- which you can do online at www.hmrc.gov.uk or using form VAT1 which is available on the same website.

HMRC will then send you details of your VAT registration. But in the meantime, you should calculate the VAT due on your sales from the date you established above- even though you weren’t VAT registered at the time. However, you will be able to reclaim VAT on some of your business expenses. The net of these figures will need to be paid over to HMRC.

Please note, HMRC may also charge you a penalty for notifying them late.

Dealing with a backdated VAT registration can be difficult and there are particular rules about the VAT you can recover on your expenses. So if you would like some assistance with this, please feel free to contact your local TaxAssist Accountant.

We provide tax and accountancy services in St Albans and throughout the UK - http://www.taxassist.co.uk

Out of work- tax refundsI am a subcontractor and I get 20% tax taken from my receipts by contractors. But I haven’t done any work for the last couple of months. Is there any way I can get some of my tax back now?

Patrick, East Finchley  

No. The only way for you to get your tax back is to wait until the tax year has passed, and then submit your tax return. You should enter all of your income- gross of the tax deducted. Your income tax liability will then be calculated. But all of the tax deducted during the tax year under the CIS scheme, will be offset against your liability.

If there are gaps in your income or it is low, you may be due a refund.

In the long term, you may be eligible to receive your payments gross from contractors. But there are criteria to meet, for example regarding the size, history and make-up of the business.

If you would like to discuss the construction scheme in more detail, please feel free to contact your local TaxAssist Accountant.

We provide tax and accountancy services in East Finchley and throughout the UK - http://www.taxassist.co.uk

HMRC registration for filing tax returnsI have just received my Unique Taxpayer Reference (UTR) number as I need to file a tax return this year. What is the next step to filing my tax return?

Richard, Banbury

2010/11 tax returns may be submitted on paper, but the deadline of 31st October has already passed for paper returns.  Tax returns can now be filed online and the deadline for online filing is 31st January 2012. Any tax returns submitted after this date, will be charged with an automatic filing penalty of £100.

The next step now that you have your Unique Taxpayer Reference (UTR) number is to register for HM Revenue & Customs’ Online Services and obtain an Activation Code. Please note, it can take seven working days to receive your Activation Code, which means you must register by 21st January 2012 in order to obtain your Code in time for the filing deadline of 31st January 2012.  You must also pay any tax owed by 31st January 2012 otherwise interest on the amount owed will be charged on a daily basis until this is settled.

Alternatively, an accountant can file your tax return for you provided they use specific software- even if you haven’t completed the official form to authorise them to deal with your affairs.

Using an accountant can save you tax, stress and time. If you would like to speak with your local TaxAssist Accountant, please feel free to contact us to arrange a meeting.

We provide tax and accountancy services in Banbury and throughout the UK - http://www.taxassist.co.uk

When HM Revenue & Customs (HMRC) notified you of the penalties, the letter should tell you if you have the right to appeal, together with how they arrived at their decision.

If the letter states you can and you want to proceed with an appeal, you must send your appeal to HMRC in writing within 30 days of the date of the decision. HMRC will need the following information from you:

• your business name
• your reference number (as shown on the decision letter)
• the decision/ assessment you are appealing against
• an explanation of what you disagree with and why
• what you think are the correct figures and how you've calculated them (where relevant)

If you would like professional assistance with your appeal, please feel free to contact your local TaxAssist Accountant who would be happy to help.

We provide tax accountancy services in Holborn and throughout the UK. http://www.taxassist.co.uk

Ewan, Gosforth

You must now advise the Tax Credit Office of your actual figures by calling them on the Tax Credit Helpline on 0845 300 3900. Please make sure you have your National insurance number to hand when you call.

You should advise the Tax Credit Office of the actual figures as soon as possible- as the deadline of 31 January 2012 is imminent. If you fail to meet the January deadline, your tax credits won’t stop but the tax credits you receive from 6 April 2012 may not be accurate.

And if you’re overpaid, you may have to pay it back later- and you may even be charged a penalty.

If you would like any assistance with your tax credits, please do not hesitate to contact your local TaxAssist Accountant.

We provide tax accountancy services in Gosforth and throughout the UK. http://www.taxassist.co.uk

Late VAT RegistrationI didn’t realise I should’ve registered for VAT earlier in the year until recently when I was preparing my accounts. I read about a ‘VAT amnesty’ recently- does this apply to me?

Aidan, Ascot 

In July 2011, HM Revenue & Customs launched the VAT Initiative, which was for individuals and businesses that were trading above the VAT registration thresholds but had failed to register. Under the Initiative, traders would face reduced penalties if they came forward.

Sadly, traders wishing to make use of the Initiative should have notified HM Revenue & Customs by 30 September.

Having said that, HM Revenue & Customs encourage traders to come forward and declare any under paid tax, as they will be charged lower penalties than if HM Revenue & Customs catches them first.

If you would like some assistance with VAT registration and the preparation of your VAT returns, please feel free to contact your local TaxAssist Accountant.

We provide tax accountancy services in Ascot and throughout the UK. http://www.taxassist.co.uk